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

ALNI / Philippines Forum onALNI / Philippines Forum on

““Key Union Issues in Key Union Issues in Napocor Privatization”Napocor Privatization”

VIOLETA P. CORRALVIOLETA P. CORRAL September 2009September 2009

Power privatization is part of the structural Power privatization is part of the structural adjustment program of the international adjustment program of the international financial institutions.financial institutions.

Even before the drafting of the Power Bill in Even before the drafting of the Power Bill in mid-1990’s, the government had already mid-1990’s, the government had already embarked on efforts to privatize the industry, embarked on efforts to privatize the industry, through the Build-Operate-Transfer power through the Build-Operate-Transfer power projects with the Independent Power projects with the Independent Power Producers (IPPs).Producers (IPPs).

Privatization of Philippine Power IndustryPrivatization of Philippine Power Industry

ADB loans to power sectorADB 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]

ADB-assisted Power Sector Restructuring & ADB-assisted Power Sector Restructuring & Napocor Privatization (CLOSED)Napocor Privatization (CLOSED)

1998: Power Sector Restructuring Program – ADB - $300M; JBIC - $300MADB - $300M; JBIC - $300M– 9 policy objectives & 59 conditions 9 policy objectives & 59 conditions tied to ADB tied to ADB

loan inc:loan inc:» Legal framework (EPIRA) Legal framework (EPIRA) » NPC unbundling & privatization NPC unbundling & privatization

– Financed Financed ‘adjustment costs’ inc debt burden, ‘adjustment costs’ inc debt burden, separation payments to NPC employeesseparation payments to NPC employees

2002: Partial Credit Guarantee (PCG) – on Yen Bonds issued by PSALM for up to on Yen Bonds issued by PSALM for up to

US$500M equivalentUS$500M equivalent

GENERATION

Restructured Power IndustryRestructured Power Industry

TRANSMISSIONDISTRIBUTION (wires) & supply

CONSUMER

• TRANSCO (formerly NPC)

•NPC

• NPC IPPs (PSALM)

•Priv. IPPs• private utilities (e.g. MERALCO, VECO)

•electric coops.

• residential

• commercial

• industrial

WESMPower trading

(PEMC)

sellBuy

min. 1MW

buy

dispatch

SUPPLY

* aggregator

FDC

More ADB loans to Power Sector Reforms & More ADB loans to Power Sector Reforms & Napocor PrivatizationNapocor Privatization

20022002: : Electricity Market & Transmission DevelopmentElectricity Market & Transmission Development – Establishment of Wholesale Electricity Spot Market (WESM) to to

allow privatization of electricity generation companies allow privatization of electricity generation companies

20062006: Power Sector Development Program: Power Sector Development Program– $450M loan to National Government$450M loan to National Government– Support for continued power reforms, NPC privatization & debt Support for continued power reforms, NPC privatization & debt

liabilities managementliabilities management– [Closed in June 09][Closed in June 09]

20112011: Power Sector Development Program (Subprogram): Power Sector Development Program (Subprogram)– $200M loan (proposed)

20122012: Power Sector Development Program (Subprogram): Power Sector Development Program (Subprogram)– $350M loan (proposed)

ADB Loans to Private SectorADB Loans to Private Sector

Jan 2008Jan 2008: Acquisition and Rehabilitation of Masinloc : Acquisition and Rehabilitation of Masinloc

Coal Fired Thermal Power PlantCoal Fired Thermal Power Plant – $250M loan to AES (Masinloc)

June 2008June 2008: Privatization and Rehabilitation of 600-MW : Privatization and Rehabilitation of 600-MW

Calaca Coal-Fired Thermal Power PlantCalaca Coal-Fired Thermal Power Plant – $120M loan & $90M Political Risk Guarantee to Calaca HoldCo

(Suez) for purchase of Calaca plant (cancelled)

Sep 09Sep 09: Visayas Base Load Power: Visayas Base Load Power– Proposed $120M loan to KEPCO-SalconProposed $120M loan to KEPCO-Salcon for construction of for construction of

200M coal-fired in Naga (Cebu)200M coal-fired in Naga (Cebu)» Concerns raised by GLACC, Bishop NavarroConcerns raised by GLACC, Bishop Navarro

ADB-Assisted NAPOCOR privatization ADB-Assisted NAPOCOR privatization Inflicted Harm on Workers & their TU rightsInflicted Harm on Workers & their TU rights

Employees’ (illegal) termination in Feb 2003Employees’ (illegal) termination in Feb 2003 Lower working conditions / contractualizationLower working conditions / contractualization Non-recognition of unionsNon-recognition of unions No workers’ protection in sale by PSALM of NPC plants No workers’ protection in sale by PSALM of NPC plants Etc etcEtc etc

>> >> MAKE ADB ACCOUNTABLE FOR HARM DONEMAKE ADB ACCOUNTABLE FOR HARM DONE

ADB’s Accountability MechanismADB’s Accountability Mechanism

Formerly called ‘inspection’ (Ombudsman function)Formerly called ‘inspection’ (Ombudsman function)

Aims to help solve problems and investigate alleged violations of ADB’s own operational policies and procedures

ADB-assisted ADB-assisted ‘project affectees’ can file a ‘request’ or ‘project affectees’ can file a ‘request’ or ‘complaint’‘complaint’ if they are if they are actuallyactually or or likelylikely to be to be adversely adversely affected by ADB-funded projectsaffected by ADB-funded projects

Consists of two complementary & related functions Consists of two complementary & related functions – ‘‘Consultation Phase’ (Problem-solving)Consultation Phase’ (Problem-solving)– Compliance Review PhaseCompliance Review Phase

‘‘Consultation Phase’Consultation Phase’

Focus is not on identification and allocation of blame, but on Focus is not on identification and allocation of blame, but on finding ways to mitigate harm finding ways to mitigate harm brought about by ADB-assisted brought about by ADB-assisted projectsprojects

‘‘Complaint’ should be filed with Complaint’ should be filed with Office of Special Project Office of Special Project Facilitator (SPF)Facilitator (SPF) or to Management or any Department of ADB or to Management or any Department of ADB

If deemed ‘eligible’, SPF will implement If deemed ‘eligible’, SPF will implement Course of Action for Course of Action for mutually acceptable solution to complaintmutually acceptable solution to complaint

SPF reports to ADB ManagementSPF reports to ADB Management

Complainant can walk away if not satisfied with processComplainant can walk away if not satisfied with process

Compliance Review Panel (CRP)Compliance Review Panel (CRP)

People who are or likely to be directly, materially and People who are or likely to be directly, materially and adversely affected by an ADB-assisted project can adversely affected by an ADB-assisted project can file a ‘Request’ to investigate non-compliance with file a ‘Request’ to investigate non-compliance with

ADB’s operational policies and proceduresADB’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 CRP makes recommendations to ‘bring ADB project into compliance’ and/or mitigate any harminto compliance’ and/or mitigate any harm

CRP reports to ADB Board of Directors

Experience of ADB’s Experience of ADB’s

Accountability Mechanism: SPFAccountability Mechanism: SPF Of 22 complaints since SPF started operations in May Of 22 complaints since SPF started operations in May

2004:2004: 8 cases were deemed ‘eligible’8 cases were deemed ‘eligible’

12 cases were deemed ‘not eligible’:12 cases were deemed ‘not eligible’:

• 6 - Complainants never addressed problem to Operations Department6 - Complainants never addressed problem to Operations Department• 1 - Issues initially raised with SPF have been addressed by government1 - Issues initially raised with SPF have been addressed by government• 1 - Operations Department's efforts to address concerns are underway.1 - Operations Department's efforts to address concerns are underway.• 1 - Complainants are not materially and adversely affected by the project1 - Complainants are not materially and adversely affected by the project• 1 - Procurement related matters are not eligible for complaints1 - Procurement related matters are not eligible for complaints• 1 - Project Completion Report has been approved for the project1 - Project Completion Report has been approved for the project• 1 - Complaint deemed premature1 - Complaint deemed premature

o 2 cases not decided yet (complaints received only in Sep 2009)2 cases not decided yet (complaints received only in Sep 2009)

Most Common ComplaintsMost Common Complaints

No Access to InformationNo Access to Information No Consultation & ParticipationNo Consultation & Participation Weak Social Impact AssessmentWeak Social Impact Assessment Non-implementation of ADB’s Non-implementation of ADB’s

‘Safeguard Policies’‘Safeguard Policies’

No complaint has been filed to date due No complaint has been filed to date due to non-compliance with CLS, or by trade to non-compliance with CLS, or by trade unionsunions

ADB’s Policy on Info DisclosureADB’s Policy on Info Disclosure

ADB’s Public Communication Policy (2005)ADB’s Public Communication Policy (2005)

ADB “shall share information with affected people early enough ADB “shall share information with affected people early enough for them to provide meaningful inputs into project design and for them to provide meaningful inputs into project design and implementation”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.org whenever you request for documents from project staff)

ADB’s Policies on Consultation and ADB’s Policies on Consultation and Participation (C&P)Participation (C&P)

C&P C&P is supported by virtually all of ADB's sector and is supported by virtually all of ADB's sector and thematic policies, its business processes, and staff thematic policies, its business processes, and staff instructionsinstructions

ADB should hold consultations with key stakeholders, ADB should hold consultations with key stakeholders, inc trade unions where a ‘labor participation strategy’ inc trade unions where a ‘labor participation strategy’ should be developedshould be developed

There should be prior informed consent of There should be prior informed consent of stakeholders before any project approvalstakeholders before any project approval

ADB’s “Safeguard Policies”ADB’s “Safeguard Policies”

3 Safeguard Policies:3 Safeguard Policies:– EnvironmentEnvironment– Involuntary ResettlementInvoluntary Resettlement– Indigenous PeoplesIndigenous Peoples

Mandatory that Mandatory that (i) impacts are identified and (i) impacts are identified and assessed early in the project cycle; (ii) adverse assessed early in the project cycle; (ii) adverse impacts are avoided, minimized, or mitigated; and (iii) impacts are avoided, minimized, or mitigated; and (iii) affected people are consulted.affected people are consulted.

No Complaint yet Filed vis CLS, No Complaint yet Filed vis CLS, Social ProtectionSocial Protection

ADB’s 2001 ADB’s 2001 Social Protection Social Protection StrategyStrategy

ADB’s 2006 ADB’s 2006 CLS HandbookCLS Handbook

– ADB commits to ‘comply with CLS in ADB commits to ‘comply with CLS in design and formulation of its loans’design and formulation of its loans’

– ‘‘Formally adopted CLS as part of its Formally adopted CLS as part of its 2001 2001 Social Protection Strategy’Social Protection Strategy’

– ‘‘CLS have been an integral part of CLS have been an integral part of ADB’s development mission’ADB’s development mission’

FOA ‘Checklist’FOA ‘Checklist’(From: (From: ‘Discussion Points on Freedom of Association & ‘Discussion Points on Freedom of Association &

Collective Bargaining’,Collective Bargaining’, CLS Handbook, ADB, CLS Handbook, ADB, p. 96)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?

… … FOA ‘Checklist’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?

CONCLUSIONCONCLUSION Trade unions can file a test case at ADB’s accountability Trade unions can file a test case at ADB’s accountability

mechanism if they feel they are actually or likely to be harmed by mechanism if they feel they are actually or likely to be harmed by ADB-assisted projects, as in the case of NAPOCOR privatization & ADB-assisted projects, as in the case of NAPOCOR privatization & its harmful impacts on NPC workers.its harmful impacts on NPC workers.

If aim is to mitigate harm brought about by ADB-assisted project, If aim is to mitigate harm brought about by ADB-assisted project, then a ‘Complaint’ can be filed at SPF/Management.then a ‘Complaint’ can be filed at SPF/Management.

If the focus is to also highlight ADB’s non-compliance with its own If the focus is to also highlight ADB’s non-compliance with its own policies & procedures in implementation of ADB-assisted project policies & procedures in implementation of ADB-assisted project (e.g. Social Protection, CLS, C&P, Info Disclosure, Safeguard (e.g. Social Protection, CLS, C&P, Info Disclosure, Safeguard Policies, etc), then a ‘Request’ can be filed at CRP/Board.Policies, etc), then a ‘Request’ can be filed at CRP/Board.

To bring such a challenge to a huge institution like ADB, solidarity To bring such a challenge to a huge institution like ADB, solidarity from TU movement & like-minded groups should be mobilized to from TU movement & like-minded groups should be mobilized to ensure that ADB does not ignore or take lightly workers’ complaint / ensure that ADB does not ignore or take lightly workers’ complaint / request.request.