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Reforms in Peninsular Malaysia’s Electricity Sector Forum

Reforms in Peninsular Malaysia’s Electricity Sector Forum

2013 December

Professor Darryl Jarivs, Head of Department of Asian and Policy Studies (APS) and Associate Dean (Research and Postgraduate Studies) of Faculty of Liberal Arts and Social Sciences (FLASS), recently addressed an audience of some 200 people at a public forum on ‘Reforms in Peninsular Malaysia’s Electricity Sector’. The forum, held in November in Kuala Lumpur, Malaysia, was chaired by Madam Datuk Loo Took Gee, Secretary General, Ministry of Energy, Green Technology and Water, and designed to provide expert input into the anticipated reform of Malaysia’s energy sector.
Professor Jarvis has a long standing interest in infrastructure provision in Asia, especially Southeast Asia, where his research has focused on reforms in the electricity supply sector, and the spate of privatization initiatives that swept the region over the last few decades. Professor Jarvis notes that many people don’t think about energy sector infrastructure, and take for granted their ability to flick on a light switch, access electricity – and at relatively affordable prices. However, Professor Jarvis notes this is not a reality for millions of people in Asia. In Indonesia, for example, the world’s fourth most populous nation, only 60% of people have access to electricity, while in South Asia this figure is even lower. More significantly, he notes, energy affordability is a huge issue around the region, and has historically placed great stress on the fiscal capacities of national treasuries. Indonesia spends upwards of 8% of its GDP on energy subsidies, while in Malaysia the government outlays almost 24 Billion Ringgit a year (HK$58.51 Billion) to subsidize energy costs to consumers.
Professor Jarvis’ interest in energy infrastructure focuses primarily on the regulatory aspects of energy sector provision. My interest in the energy sector, he notes, was accidental. He recalls a series of trips around the region (Indonesia, the Philippines and China) back in 2006 when I literally got caught in rolling brownouts in Jakarta, Manila and Guangzhou. It was unlucky timing but in my conversations with people about what caused the brownouts many people pointed to poor governance, ineffective public sector management and corruption. It never occurred to me that something as boring as the electricity sector might actually be a site of great political battles, but the more I researched the area the more it became apparent that the sector was at the forefront of privatization initiatives, many sponsored by the World Bank, and with huge financial implications for Asian governments.
Professor Jarvis recalls his astonishment at reviewing the contracts issued by the Indonesian government for the first wave of private ‘independent power producers’ , which had committed a poor developing country to financial obligations of US$130 Billion over a 30 year period, and obligated the government to pay excessive costs for the private production of electricity which it was then obliged to sell on to consumers at highly reduced rates. I recall thinking that the contractual design and regulation of the sector was clearly inadequate.
Professor Jarvis’ research has since maintained a keen focus on the institutional and regulatory aspects of electricity sector governance in Asia. Network infrastructure, he notes, is a practical public policy concern, and it involves massive amounts of money. Getting the institutional and regulatory design right can have very beneficial public and social outcomes, but getting it wrong can do great harm – especially to poor and marginal communities. Professor Jarvis’ interest in the sector has since led him to act as a consultant to the Asian Development Bank on various projects assessing the regulatory and governance outcomes for the energy sector in countries in Asia and the Pacific.