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PSIA HONDURAS. The possible privatisation of electrical provision: a methodological case Mary Lisbeth Gonzalez José Cuesta London, February 2003. Outline. Antecedents: What PSIA is and what is not ? PSIA in Honduras: process & objectives Methodological proposal Results Lessons Learnt

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PSIA HONDURAS

The possible privatisation of electrical provision:

a methodological case

Mary Lisbeth Gonzalez

José Cuesta

London, February 2003


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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?


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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


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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


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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


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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


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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


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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


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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


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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


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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



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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


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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


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Quantitative Techniques

Parity purchasing exercise

Econometric analyses

Household electrical demand (expenditure)

Human capital accumulation (health status)

Socio-economic behaviour (labour supply)

Simulations


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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



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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


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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


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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




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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)


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Simulations: Limitations

Use of key qualitative inputs is limited

Substantial changes to capture magnitude ranges

Complex relations (multipliers) and behavioural patterns included rigidly


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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


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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


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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


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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


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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


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Where to go from here?

Higher specialisation of current mechanisms

More agile resource management

More training

More knowledge transmission

Clearer commitments


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