PSIA HONDURAS

1. PSIA HONDURAS The possible privatisation of electrical provision: a methodological case Mary Lisbeth Gonzalez José Cuesta London, February 2003

2. Outline Antecedents: What PSIA is and what is not? PSIA in Honduras: process & objectives Methodological proposal Results Lessons Learnt Ownership Where to go from here?

3. Antecedents: PSIA studies WB & IMF initiative with donors and govt’s interests Social impact of economic reforms (PRSP framework) Emphasis on methodology, national ownership, and social/poverty impact Experimental stage Several countries and reforms considered

4. PSIA is not ... An evaluation of public policies an evaluation of the PRSP an economic or sociological study a government commission a closed or approved format

5. PSIA is ... A pilot study proposing a methodology Testing ex-ante & quickly the distributive impact of policies included in the PRSP PSIA explores issues related to institutional development, national capabilities, and ownership A tool intending to provide counterparts with a common language to discuss social implications of a reform

6. PSIA in Honduras A PROPOSAL FOR A MIXED APPROACH Qualitative & quantitative approaches are individually limited A mixed methodology is more appropriate for ex-ante analysis: Qualitative techniques to context, perceptions, & agents’ behaviour Quantitative techniques estimate key social & poverty relations Simulations based on inputs from both quantitative and qualitative techniques

7. Team: 2 int’l consultants & 2 national consultants Total independence on the selection of issue Privatisation of electrical provision Difficult to find national experts on quantitative techniques Coordination in selection of institutionalised PSIA Wide range of alternative topics PSIA in HondurasSelection of team and topic

8. PSIA in Honduras PRIVATISATION OF ELECTRICAL PROVISION Included in PRSP and adjustment programs Obvious social & distributive relevance Exposure & public interest Ideal for ex-ante analysis of multiple scenarios Multiple agents and relations intertwined Replicable to other policies & countries

9. How applicable is a mixed methodology in Honduras? How useful is existing information and how much needs to be generated? How detailed results can we obtain? It is NOT about assessing the electrical sector nor all possible impacts It is NOT about generationg high-scale information It is NOT about forecasting Electrical case on Honduras PSIA

10. Issues Assumpts. Hypotheses Energy consumption patterns and coping strategies Characterisation of possible reforms Distributive consequences Knowledge, stance, perceptions of (not) consumers No dynamic effects Complex behavioural relationships Producer-consumer prices as transmission mechanism Electricity coping strategies Privatisation activates coping strategies differing across socioeconomic groups Pro-poor reforms (subsidies, coverage, social investments) are possible and require efficiency improvements Electrical case on Honduras PSIA

11. PSIA in Honduras QUALITATIVE COMPONENTS: Context of electrical provision in Honduras Previous privatisation experiences in Honduras (water) Case study of a private provider Case study of industrial consumers (maquila) Socio-economic & Electrical Consumption Survey Focal groups across households and key community actors Semi-structured interviews: households, civil society, central govt, municipalities, provider, public sector

12. Qualitative Techniques

13. 6 communities, 144 hhs ‘Energy’ & ‘socio-economic’ criteria for sample selection Random selection of households IS IT WORTHY? Representative? Serious restrictions Consumers are over-represented YES, VALUABLE INPUTS BUT CONCERNS ON REPRESENTATION Socio-economic & electrical consumption survey

14. Socio-economic & electrical consumption survey Clear relation btw poverty and energy provision 47% of households would not change consumption 45% would change, mainly for cooking (84%) Vast knowledge on existing prices and subsidies Different degree of knowledge on the current debate and on quality Neither support nor rejection per se to privatisation but on private monopolies 45% willing to pay more for a better service Mixed provision systems are not favoured

15. Quantitative Techniques Parity purchasing exercise Econometric analyses Household electrical demand (expenditure) Human capital accumulation (health status) Socio-economic behaviour (labour supply) Simulations

16. Quantitative Techniques Demand: OLS with selection correction Estimates on hypothetical expenditure Health: Probit on households with chronic illness Estimates on hypothetical expenditure Labour: OLS on continuous working hours Estimates on hypothetical subsidies

17. Econometric Techniques

18. Econometric Techniques IS IT WORTHY? YES Key relations on poverty Sophisticated tecniques sort out some serious data restrictions But Other key relations unexplored due to information restrictions

19. Simulations Built upon inputs from previous techniques Comparison of existing and alternative scenarios Limited number of key poverty transmissions Prices act as channel on poverty Other possibilities left unexplored

20. Simulations 1. Selection of policy aspects having distributive impacts 2. Creation of scenarios 3. Selection of a transmission channel 4. New coverage, if any 5. Reconstruction of subsidies distribution 6. Reconstruction of consumption distribution 7. Reconstruction of expenditure distribution 8. Comparison of existing and alternative electrical distributions

21. Simulations

22. Simulations ( % Variation wrt Baseline )

23. Simulations Keeping current system without productivity gains requires substantial increases in prices Coverage increases are rather costly Reductions in consumer prices only possible with significant productivity gains This seems the main pro-poor channel Subsidies and social investments have smaller effects (but promising nonetheless)

24. Simulations: Limitations Use of key qualitative inputs is limited Substantial changes to capture magnitude ranges Complex relations (multipliers) and behavioural patterns included rigidly

25. Simulations : Limitations IS IT WORTHY? YES: Direction & magnitude of impacts Discriminate groups (the poor, the rural) Truly a mixed approach BUT: Need to improve quality of inputs Minimise biases

26. A mixed methodology is possible in Honduras Compromises when selecting a policy (topic, emphasis, coverage) Simulations are key in ex-ante studies Quick & cheap research alternatives Independence Information is not centralised and sometimes contradicting Coordinated demands on PSIA Useful to have a clear proposal on the table Still serious time limitations A challenge for local personnel Lessons learnt: Methodology

27. Institutional considerations The existing UNAT & sectoral tables arrangement is satisfactory but overburdened with demands Necessary to consolidate Commitments in the process of analysis & socialisation Technical aspects Fluent communication within current structure

28. Institutional Arrangements Proposal of research unit Personnel, 6 Full dedication to PSIA & PRSP Short-term personnel from key institutions On leave from original institutions Coordinates, prioritises, analyses, socialises Responsible for training of professionals, students & civil society Liason at IFIs

29. Where to go from here? Responsibilities: who does what? Methodology approved Report formatting approved Socialisation mechanisms approved Selection of national personnel Support-seeking from international community

30. Where to go from here? Higher specialisation of current mechanisms More agile resource management More training More knowledge transmission Clearer commitments