ADB’s Role in Power Sector Reforms & Its Accountability Mechanism

1. ADB’s Role in Power Sector Reforms & Its Accountability Mechanism ALNI / Philippines Forum on “Key Union Issues in Napocor Privatization” VIOLETA P. CORRAL September 2009

2. Privatization of Philippine Power Industry • Power privatization is part of the structural adjustment program of the international financial institutions. • Even before the drafting of the Power Bill in mid-1990’s, the government had already embarked on efforts to privatize the industry, through the Build-Operate-Transfer power projects with the Independent Power Producers (IPPs).

3. ADB loans to power sector • 20 loans (US$1.6B) and a partial credit guarantee of JPY 12B to NPC for power generation and transmission projects. • 2 program loans to National Government for power sector restructuring and debt liabilities management (US$300M + $450M). • Partial Credit Guarantee to PSALM (US$500M) • 35 technical assistance grants to power sector for institutional strengthening and various studies (~US$15.5M) • [Source: Zhai Yongping, ADB, Oct 2008]

4. ADB-assisted Power Sector Restructuring & Napocor Privatization (CLOSED) • 1998:Power Sector Restructuring Program • ADB - $300M; JBIC - $300M • 9 policy objectives & 59 conditions tied to ADB loan inc: • Legal framework (EPIRA) • NPC unbundling & privatization • Financed ‘adjustment costs’ inc debt burden, separation payments to NPC employees • 2002:Partial Credit Guarantee (PCG) • on Yen Bonds issued by PSALM for up to US$500M equivalent

5. Restructured Power Industry GENERATION • NPC • NPC IPPs (PSALM) • Priv. IPPs TRANSMISSION DISTRIBUTION (wires) & supply • TRANSCO (formerly NPC) • private utilities (e.g. MERALCO, VECO) • electric coops. SUPPLY CONSUMER • residential • commercial • industrial * aggregator dispatch buy sell WESM Power trading (PEMC) Buy min. 1MW FDC

6. More ADB loans to Power Sector Reforms & Napocor Privatization • 2002: Electricity Market & Transmission Development • Establishment of Wholesale Electricity Spot Market (WESM) to allow privatization of electricity generation companies • 2006: Power Sector Development Program • $450M loan to National Government • Support for continued power reforms, NPC privatization & debt liabilities management • [Closed in June 09] • 2011: Power Sector Development Program (Subprogram) • $200M loan (proposed) • 2012: Power Sector Development Program (Subprogram) • $350M loan (proposed)

7. ADB Loans to Private Sector • Jan 2008: Acquisition and Rehabilitation of Masinloc Coal Fired Thermal Power Plant • $250M loan to AES (Masinloc) • June 2008: Privatization and Rehabilitation of 600-MW Calaca Coal-Fired Thermal Power Plant • $120M loan & $90M Political Risk Guarantee to Calaca HoldCo (Suez) for purchase of Calaca plant (cancelled) • Sep 09: Visayas Base Load Power • Proposed $120M loan to KEPCO-Salcon for construction of 200M coal-fired in Naga (Cebu) • Concerns raised by GLACC, Bishop Navarro

8. ADB-Assisted NAPOCOR privatization Inflicted Harm on Workers & their TU rights • Employees’ (illegal) termination in Feb 2003 • Lower working conditions / contractualization • Non-recognition of unions • No workers’ protection in sale by PSALM of NPC plants • Etc etc >> MAKE ADB ACCOUNTABLE FOR HARM DONE

9. ADB’s Accountability Mechanism • Formerly called ‘inspection’ (Ombudsman function) • Aims to help solve problems and investigate alleged violations of ADB’s own operational policies and procedures • ADB-assisted ‘project affectees’ can file a ‘request’ or ‘complaint’ if they are actually or likely to be adversely affected by ADB-funded projects • Consists of two complementary & related functions • ‘Consultation Phase’ (Problem-solving) • Compliance Review Phase

10. ‘Consultation Phase’ • Focus is not on identification and allocation of blame, but on finding ways to mitigate harm brought about by ADB-assisted projects • ‘Complaint’ should be filed with Office of Special Project Facilitator (SPF) or to Management or any Department of ADB • If deemed ‘eligible’, SPF will implement Course of Action for mutually acceptable solution to complaint • SPF reports to ADB Management • Complainant can walk away if not satisfied with process

11. Compliance Review Panel (CRP) • People who are or likely to be directly, materially and adversely affected by an ADB-assisted project can file a ‘Request’ to investigate non-compliance with ADB’s operational policies and procedures • The conduct of ADB, and NOT other parties (borrowing country, executing agency, borrower, or private project sponsor) is the subject of investigation • CRP makes recommendations to ‘bring ADB project into compliance’ and/or mitigate any harm • CRP reports to ADB Board of Directors

12. Experience of ADB’s Accountability Mechanism: SPF Of 22 complaints since SPF started operations in May 2004: • 8 cases were deemed ‘eligible’ • 12 cases were deemed ‘not eligible’: • 6 - Complainants never addressed problem to Operations Department • 1 - Issues initially raised with SPF have been addressed by government • 1 - Operations Department's efforts to address concerns are underway. • 1 - Complainants are not materially and adversely affected by the project • 1 - Procurement related matters are not eligible for complaints • 1 - Project Completion Report has been approved for the project • 1 - Complaint deemed premature • 2 cases not decided yet (complaints received only in Sep 2009)

13. Most Common Complaints • No Access to Information • No Consultation & Participation • Weak Social Impact Assessment • Non-implementation of ADB’s ‘Safeguard Policies’ • No complaint has been filed to date due to non-compliance with CLS, or by trade unions

14. ADB’s Policy on Info Disclosure • ADB’s Public Communication Policy (2005) • ADB “shall share information with affected people early enough for them to provide meaningful inputs into project design and implementation” • Time Limits for Responses to Requests for Current Information: • ADB must acknowledge receipt of information request within five (5) working days • Within 30 calendar days, ADB must either provide information or otherwise cite reasons as to why they cannot release said information • (copy furnish disclosure@adb.orgwhenever you request for documents from project staff)

15. ADB’s Policies on Consultation and Participation (C&P) • C&P is supported by virtually all of ADB's sector and thematic policies, its business processes, and staff instructions • ADB should hold consultations with key stakeholders, inc trade unions where a ‘labor participation strategy’ should be developed • There should be prior informed consent of stakeholders before any project approval

16. ADB’s “Safeguard Policies” • 3 Safeguard Policies: • Environment • Involuntary Resettlement • Indigenous Peoples • Mandatory that (i) impacts are identified and assessed early in the project cycle; (ii) adverse impacts are avoided, minimized, or mitigated; and (iii) affected people are consulted.

17. No Complaint yet Filed vis CLS, Social Protection • ADB’s 2001 Social Protection Strategy • ADB’s 2006 CLS Handbook • ADB commits to ‘comply with CLS in design and formulation of its loans’ • ‘Formally adopted CLS as part of its 2001 Social Protection Strategy’ • ‘CLS have been an integral part of ADB’s development mission’

19. FOA ‘Checklist’(From: ‘Discussion Points on Freedom of Association & Collective Bargaining’, CLS Handbook, ADB, p. 96) • Are there mechanisms for voluntary collective bargaining? • How many trade unions are registered? • Are there trade unions active in the sector of the economy concerned by the ADB activity? • Does the government or employer put obstacles in the way of organization and collective bargaining? • How many disputes are there relating to freedom of association and collective bargaining? • Have any complaints been made to ILO? • Do collective agreements cover aspects of CLS and, if so, which aspects?

20. … FOA ‘Checklist’ • Are there free and independent workers’ and employers’ organizations at the national level? • Are there tripartite bodies at the national level with representatives from the social partners? If so, are the workers’ and employers’ representatives selected by their own organizations or appointed by a government body? • At the enterprise level are there bipartite arrangements, such as joint worker-management committees, to deal with disputes? Does the disputes procedure follow conventional stages? • Are any such joint structures balanced so that neither mgt nor workers dominate in terms of a majority? • Are worker and employer representatives appointed without outside interference? • Have any worker or employer representatives been penalized for carrying out their activities related to freedom of association and collective bargaining?

21. CONCLUSION • Trade unions can file a test case at ADB’s accountability mechanism if they feel they are actually or likely to be harmed by ADB-assisted projects, as in the case of NAPOCOR privatization & its harmful impacts on NPC workers. • If aim is to mitigate harm brought about by ADB-assisted project, then a ‘Complaint’ can be filed at SPF/Management. • If the focus is to also highlight ADB’s non-compliance with its own policies & procedures in implementation of ADB-assisted project (e.g. Social Protection, CLS, C&P, Info Disclosure, Safeguard Policies, etc), then a ‘Request’ can be filed at CRP/Board. • To bring such a challenge to a huge institution like ADB, solidarity from TU movement & like-minded groups should be mobilized to ensure that ADB does not ignore or take lightly workers’ complaint / request.