Foreign investment in the energy sector

Prime Minister Yousuf Raza Gilani assured investors that he met on the sidelines of the World Economic Forum held in Sharm-el-Sheikh, Egypt, that the new government in Islamabad will fully support foreign investors, especially in the energy sector.
The Prime Minister reminded the gathering that it was Benazir Bhutto's government that had actively sought the Independent Power Producers (IPP) to invest in the country and was thereby responsible for providing an additional 4000 to 5000 MW of electricity to the national grid. Nothing has been added since or such has been the PPP refrain.
There is little doubt that the severe energy shortage in the country is seriously impacting on the productivity of the country. It is, therefore imperative for the government to come up with both short and long term measures to meet the ongoing energy crisis.
On an emergency basis the government has already announced a number of measures that would be required, for example, allowing the private sector to enter the field of generation, a continuation of the policy of the past eight years. The other measures, namely, switching off all air-conditioners in the PM house for three hours a day in the morning, using energy saving bulbs as well as forcing shops to close at 9:00 in the evening would prove effective only in so far as there is compliance. In the private sector, it is difficult if not impossible to enforce such measures. Be that as it may, a good start has been made and it is a matter of time when the results would start to kick in, in terms of reduced load shedding and increased productivity.
In the long run, however, the government would have to take other decisions to facilitate energy supply. There is much talk of building dams that would have the capacity to meet our energy needs at minimum cost, but at this stage it would be an extremely unpopular decision to support the building of dams with long gestation periods while not looking at importing energy from energy surplus countries around us. Iran does come to mind, as does energy surplus Central Asian. However there are issues in accessing both possible sources - issues that are related to the United States and its foreign policy goals as well as security concerns associated with Afghanistan and Russia's desire to maintain its regional dominance.
There is little doubt in the world today that ensuring an uninterrupted energy supply at affordable prices is not only critical for the economy of a country but also for the political survival of any government. One has only to look at the two most recent wars that the United States has been involved with in recent times to know the value it places on an uninterrupted cheap supply of energy.
While US adventures in Iraq are attributed by a global public to its focus on ensuring that there is no supply disruption which would negatively impact on the price of oil in the United States; yet some argue, perhaps unfairly, that Afghanistan provides a critical link between the energy surplus Central Asian Republics and the energy deficient South Asia - the raison d'etre of US military intervention in the country.
The fact that the US has been unable to guarantee the supply chain between the Central Asian Republics contiguous to Afghanistan and energy deficient South Asian countries is mainly because of (i) Russia's Gazprom deal to purchase all surplus energy to ensure its regional supremacy over the United States and (ii) the continuing security issues associated with laying any pipeline or transmission line linking Central Asia with South Asia.
This is not to say that the US is not exerting considerable pressure on Pakistani and Indian governments not to purchase energy from Iran - a project that has few hitches other than the price of oil demanded by Iran in the early stages of the proposed project. This bottleneck has been practically resolved in recent weeks and President Musharraf has indicated that he will travel to Iran to finalise the deal. It is to be hoped that the deal does follow through, for it would form the basis of our medium term energy policy as the proposed project would be completed in two to three years time.
President Bush voiced serious concerns over the proposed Iranian pipeline deal to Prime Minister Gilani which implies that Pakistan would have to carefully consider the pros and cons of the deal, especially considering US annoyance against another decision of the newly elected government to hold parleys with the militants in the border areas with Afghanistan. Those who may encourage the government towards an independent foreign policy must remember that US economic and military support for Pakistan is considerable and that multilateral donors can be swayed not to extend loans to a country if powerful donor countries vote against any project.