Hailey College of Banking & Finance Lahore

Aug 06 - 12, 2007

The regulatory role of the government in any economy cannot be underemphasized. The study of political economy of every segment of the economy is in fact the study of the interrelationships between political and economic institutions and processes. That is, political economists are interested in analyzing and explaining the ways in which various sorts of government affect the allocation of scarce resources in society through their laws and policies as well as the ways in which the nature of the economic system and the behavior of people acting on their economic interests affects the form of government and the kinds of laws and policies that get made. Keeping in view the role of the government, the study of political Economy of Energy sector is a very crucial aspect of the present era.

Pakistan is passing through a tight phase of energy supply. Whatever, is the reason for this crisis, the mother of all seems to be mismanagement on the part of the planning authorities. According to the estimates of the World Bank Pakistan has the potential to generate about 40000 MW power from hydel resources! Also Pakistan is possessing second largest coal reservoirs in the world which is also a cheap source of energy. Other sources of energy available are hydro, oil, gas and air. Then how come the country is facing energy dilemma! The authorities in fact have to deal with many social, political and economic issues while initiating any project in any area or locality. The study, analysis, and policy formulation for the resolution of all such issues collectively may be termed as political economy of energy resource utilization.

The policies that govern energy markets are highly politicized and central to the organization of modern economies. Political and organizational forces often determine actual outcomes in oil, gas, and electricity markets much more than pure economic or technological imperatives. The study of the Political Economy of energy source utilization can therefore be made by segmenting in them following areas:

Political Economy of International Financing Agreements: Pakistan is into heaves of debt trivia. It always has to obtain fresh loans to settle the existing ones. Such loans are also on such terms and pricing that favors only the lenders. They ultimate objective of the loan is only to stimulate the demand of goods of the lender, because most of the time the borrowing country is forced to utilize a significant portion of the debt towards the purchase of some specified products of the lending country. In some cases even when the international agencies agree to finance any of the energy project in the country, the pricing of the units of energy from that project remains so high that it badly hampers the development of key sectors of the country making the loan a nightmare for the country.

Political Economy of Demographic Pattern: Sometimes there are plenty of energy resources available in a particular area of the country but those remain unexplored because a huge population of masses uses such areas for their residences. The political leaders of the country exploit such situations in their favor and resist any attempt from the authorities to utilize such resources. Kala Bagh Dam is the most suitable example of the country. There are also many tribes living in mountain areas, and desert areas. Very ridiculously, they such attempts to explore the resources as infiltration in their privacy. In many instances where the authorities somehow manage to explore such resources, the destruction attacks become very imminent from the concerned tribes.

Political Economy of Geography: There are still areas which are full of energy resources like the areas in North Pakistan. Unfortunately, those areas are very remote and under populated that they have least members in the government set-up, or the public representatives of those areas do not join the government and remain in the opposition. Such situations make the governing members reason out that it is high unpractical to develop logistic infrastructure in that utilize those resources. This also lefts those resources areas unexplored.

Political Economy of Education: Pakistan has one of the lowest rates of literacy in the world. None of the governments has ever chalked out a plan to improve the situation. The reason is that the low literacy rate is in favor of the authorities because the people remain unknown of their inefficiencies. This situation helps no body other than the ineffective policymakers.

Political Economy of Comparative Advantage: The politics behind the concept of comparative advantage really needs to be understood by the authorities of our country. The countries of the developed world develop their own resources even though those are initially costly, to the extent they become cost effective and then to stop the developing countries to mater in that technology they encourage them to buy the products of that technology at a very cheap price by telling them the cost of that technology is very high. The developed world never help developing country in becoming self sufficient in developing technology of energy resource extraction. Rather they only provide them the power plants to utilize the energy resources and look back to them when the life of those plants finishes.