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Regional Cooperation on Energy

South Asia: Regional Cooperation and Integration

South Asia: Regional Cooperation and Integration

Challenges

• In South Asia, the demand for infrastructure, and particularly electricity, is growing rapidly. Improved electricity supply is a key to sustaining economic growth and improving social services.

• Electricity is still not available to about half of the region's 1.5 billion population, especially in rural areas, which adversely affects the efforts to reduce poverty and create better opportunities for all.

• The lack of access to modern forms of energy prolongs the widespread traditional use of biomass, with adverse environmental and health impact.• Electricity services to the connected customers, whether to businesses or households, are often unreliable and of poor quality, coupled with high technical and commercial losses and poor commercial performance of service providers.

• Advancing electricity sector reforms, aimed at improving the efficiency and quality of electricity service, commercial viability of electricity industry, institutional and governance arrangements, accountability of service providers, and investment climate is critical to ensure sustained growth of the sector and optimal development and use of energy resources.

• National energy systems are autarchic, with weak or nonexistent interconnections. There is little cross-border trade in electricity, with the exception of India-Bhutan trade, and none in natural gas.

• Consequently, optimal development of the region's internal energy resources is hampered and access to the significant energy resources in the neighboring countries denied, which increases the cost of energy supply and reduces energy security of the individual countries and of the region as a whole.


Opportunities

• Economic growth creates opportunities to expand access to modern and cleaner energy, especially electricity, to unserved and underserved areas and strengthen performance of the energy utilities.

• Differing resource endowments, development needs, and demand patterns among the countries in the region and its neighborhood create significant opportunities for cooperation and trade in the energy sector and -- eventually -- for creating one of the world's largest integrated energy market.

• Win-win opportunities abound: energy resource-surplus countries (Nepal, Bhutan in the region, Central Asian countries, Iran, Myanmar in the neighborhood) would benefit from energy export-led growth and implementation of large-scale regional projects which otherwise would be infeasible; those with significant energy import needs (India, Pakistan, Sri Lanka, Afghanistan) would enhance energy security, as would the others (Bangladesh) from improving the energy mix.

• All would benefit from reliability support, reserve sharing, cleaner fuels, better investment opportunities and reduced risks for investors, and the associated sharing of knowledge and experience.

• A two-track approach: (i) enhancing energy trade through specific projects, whether bilateral or multilateral; (ii) strengthening regional organizations and institutions, to complement the first track, help enhance mutual trust and confidence, and create conditions for scaling up.

• Some initial regional project opportunities: import of hydropower from Central Asia to Afghanistan and Pakistan; export of hydropower from Nepal to India; electricity interconnections between India and Sri Lanka, and India and Bangladesh; gas imports from Central Asia, Iran, and Myanmar.

• Two regional energy trading hubs initially: the first at the western flank of the region, comprising Afghanistan, Pakistan and north-western India as importing markets, trading with Central and Western Asia; the second at the eastern flank of the region, comprising India (as the main importing market), Nepal, Bhutan, Bangladesh, and Sri Lanka. Both hubs could develop gradually, with India eventually bridging the two hubs into a region-wide integrated market.

• Continued strengthening of the national energy systems, both institutionally and in terms of physical infrastructure, is fundamental for a successful and sustainable regional integration.

• SAARC could play a major role in helping build mutual trust, develop regional institutions and physical infrastructure, and partner with development organizations.


More on Regional Energy Cooperation

- How can South Asia promote energy?

- Development of Electricity Trade in Central Asia - South Asia Region, Second Regional Economic Cooperation Conference on Afghanistan, November 18-19, 2006


Additional Resources

- South Asia: Growth & Regional Integration
South Asia is the least integrated region in the world. Closer integration can be an effective tool in addressing energy shortage, improve connectivity, and promote peace and stability. (Read More »)

- South Asia: Development Data
A wide range of social and economic measures on South Asia, including links to the World Bank's most important online development databases. (Read More »)

- South Asia: Analysis and Research
Compilation of all the World Bank's publications on South Asia, with 'search' options and links to analysis and research on other South Asian countries. (Read More »)

- World Bank Program in South Asia
Launching pad to all information on World Bank activities in Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.(Read More »)




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