Power to the people

Bob Zoellick, the President of the World Bank spoke recently of his experiences in visiting rural electrification in Vietnam "I went out to one of the rural electrification sites (in Vietnam) by helicopter quite far in the mountains, and I just came away with the impression of the criticality of electricity to really give a chance for development. As I recall, in Vietnam, about 98 percent of the public now has access to electricity, and this rural electrification program which we helped develop and implement was a life-changer for people. Particularly, when I saw the women in the rural communities, you can see what a huge difference it makes in terms of the ability to have a water pump so they don’t have to spend hours going to get fresh water. The ability to grind some of their grain, to have electricity so that they and the kids can read at night. They have some TV programs so they openly have access to the outside world."

My thoughts went back to 1998 when we started designing this program in Vietnam.I describe how the program was conceived and developed in my book: "A Passion to build" in some detail but here is an edited excerpt...

“ Rural electrification of Vietnam was not part of my plan when I started working in that country. It was one of those chance issues that creep into one’s life unbeknown and unsought, but soon take over one’s total life’s concentration. So it was with projects that would provide power to the rural people of Vietnam. Little did I realize when I accepted the challenge that it would turn out to be one of the most satisfying aspects of my stay in Vietnam. And it had all come by happenstance.

A new World Bank country director, Andrew Steer, young and ambitious, had just taken over in 1997 and he .. asked me if I would design and implement a rural electrification project. .. I was determined to learn all I could about rural electrification, and I delved enthusiastically into all old Bank studies and projects.

I .. was determined that before we designed the project in Vietnam, our team would visit the villages firsthand to learn from them. That year, we laid out an aggressive program of field visits – every week we would visit a different commune in a different province. During the next year, we visited 30 provinces and over 100 communes, talking to rural households and commune leaders as well as the provincial leadership. We wanted to know what they were willing to pay, what they would use the electricity for, how they wanted the cooperative to be managed etc. These visits became the highlight of my stay in Vietnam. I visited areas that most expatriates had not even heard of and began to learn of the real Vietnam in the rural areas.

These visits became a voyage of discovery. Each commune we traveled to had a different story to tell and a different lesson to teach us. But as we visited these communes – from Vietnam’s northern borders to the southern mangrove swamps, from the fishing communities in the east to the poorest Hmong communes in the central highlands- one thing remained common. The commune office where we were received was almost always a brick room, with either a bust of Ho Chi Minh or a large painting of him. There would be a few cupboards in the room with a few circulars and books. Some of the wealthier communes also had a TV set that was used for the village meetings in the evenings. The secretary of the commune Peoples Committee invariably accompanied the head of the commune, who always came armed with a children’s exercise book in which he noted down all our questions and from which he produced the data regarding his commune.

During these visits, we were to meet some of the most interesting people in the country – a vivacious chairwoman of a PPC in the north who told me that she had shut down all the beer parlors in the cities of her province as one of her first acts to make sure that all men went home after work; another PPC chairman who wanted to make sure that all the communes in his province were electrified and that his own birthplace commune would be the last to be given power; the leader of the women’s artillery corps in the American War who had returned to fishing and whose commune the country had forgotten almost for two decades. There was also an English teacher who had never before met a foreigner and had never heard English spoken before we met him; the chief of a village who would talk only after we had shared rice wine with him from the communal gourd; Joseph, the priest who had been confined to his parish for two years but was not permitted to talk to his parishioners. And then there was the Thai general secretary of Dien Bien Phu province who cheerfully told us that he had five children and was exempt from the national laws on two children because he was from a minority community group, and who then wanted to honor me with a rice bottle laced with the bile of a live bear; the young man in Pac Bo who was so smitten with my wife, who often accompanied me in these sojourns, that he kept wanting to beat me in table tennis while Ena looked on. And also the consternation of Ranjit Lamech from the World Bank, who wanted to set up a dual accounting system in the villages only to find that there was not even a bank in close vicinity and that all finances were kept in a steel trunk in the schoolhouse!

In the north, we went up to the Chinese border and visited the secret hideout of Ho Chi Minh in Pac Bo. In the west, we went onto the Laotian border where the villages were reputed to be the centre of drug running from Myanmar and Thailand. In the central highlands, we visited some of the poorest villages among the Hmong and sipped wine from their communal gourds. It was to be learning experience the likes of which I had never had. While we were planning and designing the rural energy project, we were also learning real lessons from our travels. All these formed a kaleidoscope of our journeys, but they all added up to a picture of a country restless and on the move and wanting to do things

The conventional wisdom on extending electricity access to the rural areas, particularly the poorer ones, was that the biggest constraint was the high connection charges levied by the power companies. The Bank’s “best practices” paper recommends that for increasing rural access, some method needed to be found to reduce the initial connection charges for poorer customers, or there needed to be some availability of credit to spread these costs over some years. In a number of communes that we visited in Vietnam, the situation was somewhat different. .. When asked why more households were not connecting to the existing grid, the answer was a little surprising. The villagers said that they had difficulty in paying the monthly bills with an annual income of only 2 million VND. When asked whether the high connection charges of 0.5 million VND was a major barrier, their reply was that they could afford to pay the initial connection charges. When asked for clarification, the answer came. “Oh! We can pay for the initial connection charge easily by selling a piglet. It is the monthly dues that are a problem! You city people,” he added, “don’t realize that we don’t get monthly wages in the field, but have money in our pockets only when the harvest comes in.”

The prompt collection of power bills from customers in the rural areas has always proven to be a major issue in rural electrification projects around the world. Thus, the ones that were able to successfully tackle these issues elicited particular interest. There were two cases where the managers of the rural cooperatives had solved this problem, each in his own unique way.

The Dai Hai Private Agency was an organization for rural electrification in the southern province of Soc Trang established in 1992 by Mr. Nguyen Duc Thanh, a former teacher…. One of the reasons for its success had been its ability to collect payments for all the electricity sold from all of its customers. When I enquired what the average collection ratio was, Mr. Than told me that in the initial stages, a number of customers delayed paying their bills citing their financial difficulties, but now the collections were a hundred percent. When asked how this was achieved, he said the solution was quite simple - he requested the village priest to read out the names of the defaulters after each monthly mass in the church!

Another prevalent view in the Bank was that most villagers were too poor to pay the high power tariffs that generally needed to be levied to even recover basic operational costs. A similar issue had also been raised in the poorer villages of the Philippines. Father Silva had recounted that during his visits to these villages; he would summon the family and ask them if they wanted electricity. And the answer inevitably was yes, but that they could not afford to pay the monthly dues of about 100- 150 pesos. Whereupon he would ask the head of the household how many beers he drank in a week. The answer would come, “Oh Father! I drink only one can a day.” And each can of beer cost? About 10 pesos. “OK,” Father Silva would reply, “only drink every alternate day and put that money in an empty can every week. By the end of the month, you will have enough money for electricity for your family!”

The one problem that has dogged all efforts at rural electrification has been how to use it for productive uses. Once power came to the village and the households turned to TV programs for education and entertainment, they realized that perhaps there were other uses possible, which could bring in additional income. The productive use of electricity in the rural areas has always been hard to document. So the results of electrification of a rural area in Central Vietnam that led to a major economic improvement provided an interesting example.

Duy Son 2 in Quang Nam province had a cooperative, but had no electricity despite its proximity to the Chop Xoi Mountains and various water streams. .. As a result of his efforts, Mr. Luu Ban, the former head of the cooperative and the man who had dreamed of harnessing the waters for electricity, was awarded the title of “Labor Hero” by the government.

Over the next year, Hung, my operations officer, and I traveled the width and breadth of the country visiting different provinces and talking to commune leadership about what they wanted.

In our visits to the rural areas, a few staff from the national power utility, EVN, often accompanied us. In the early days, most of EVN staff treated these visits with disdain. Rural electrification was a loss maker in the national utility and the more ambitious staff were all busy building new power plants. But then in 1999, things changed. There was a minor rebellion in a commune in northern Vietnam where the villagers had rounded on the communist party officials for their corruption and rent seeking. Word of this slowly leaked to the outside world. The Party officials in Hanoi were grim faced to find that the rebellion had occurred in exactly the same villages where their own revolution had started some decades back. The grievances were the same: rural areas were neglected, promises made were not kept after the elections and ruthless and corrupt officials from the provinces looted the poor. The Party was sufficiently shook up by this development to order a swift reordering of priorities: the rural areas were to be given priority and their demand for electricity, water and medical facilities were to be met on a time bound plan.

The senior management of both EVN and the Ministry of Industry were delighted to inform the Party of their negotiations with the World Bank for a $150 million rural energy project, which would provide electricity to over 700 communes in the country. All of a sudden, our field visits started resembling wedding caravans as more and more senior utility staff joined in our discussions with the rural people. Many of these Hanoi or Danang based staff had never visited any of the rural areas, certainly never having examined in any depth their problems or what could be done about them. For many of them, all of this was a revelation, and they learnt more about their own country with some surprise. ..

By 1998, all these visits and discussions had gradually led us to develop our own model of rural electrification in the Vietnamese context. We all agreed that there would be no give away and that the rural households had to contribute not only to the capital cost of the development, but also in its operation and management. Having formulated the fundamental guidelines for the development of rural electrification in Vietnam, the Bank invited all the communes to participate in the project. To do so, however, they had to agree formally to certain fundamental principles. The choice was theirs, there was to be no compulsion, but every commune and provincial leadership had to provide a letter stating their willingness to abide by these conditions. These were: (a) all investments in the rural electrification project were to be economically viable; (b) there would be cost sharing between all the parties including the consumers, local governments, the national government and the World Bank; (c) the construction would be based on the most cost effective technology; (d) consumers would commit to connect to the network and agree to pay operating charges; (e) there would be no operating subsidies; (f) the local distribution utility would have a legal status with financial controls and (g) the community would accept the responsibility of managing the operations after the completion of construction. In effect, each rural household would have to pay about $20 for the capital costs and about $2 a month for the electricity they utilized. In most communes, more than two thirds of the households agreed to pay the connection charges. The provincial government would provide the land free while the national government would borrow from the Bank at low interest rates. All construction had to follow national specifications and after the completion of the construction, its operation and management would be transferred to the commune electricity cooperative.

.. the Ministry of Industry selected 670 communes to participate in the first part of the project. On this basis, the Bank agreed to provide to the ministry a loan of $150 million. Vietnam signed the loan in mid-2000 and construction work began soon thereafter to provide electricity to about 2 million people.

Vietnam’s first rural energy project progressed with great speed and by the end of 2004, it had connected over 900 communes to the national grid, thus providing electricity to over half a million new households. Not only were these rural households provided electricity in a short period of time, EVN and the Power companies also followed a strategy that provided for local people to participate in the construction and operation of the new systems. The construction contracts were designed to maximize local contracting industry participation even though it meant awarding and supervising over 600 contracts. These small construction contracts created major employment potential and became the foundation of an efficient local construction industry in the districts. After the completion of construction, it was agreed that the communes would help to manage the operation and maintenance of the local distribution grids. The power companies trained a large number of people from the communes, who then became service agents responsible for routine operations and maintenance, as well as commercial activities such as billing and collection. In most communes, two or three persons had by now been trained to perform this function. Thus, the project not only provided electricity to the communes, it also laid the foundation for local employment and management. It also had some other side effects. Mr. Hai, the Minister of Industry, told me that his election as minister was certainly helped by the fact that a large number of communes in his area had received electricity and that he had come to be known in the area as one who could really get things done.

One of the unanswered questions of rural electrification is to what extent it really helps economic development. We needed to measure this with some accuracy and so commissioned a five-year research project with the Institute of Sociology in Hanoi. But even before that, I undertook a travel program to see what I could find empirically on my visits….

I was curious to see what had happened to Tran Thi Hoanh who I recalled had seemed such a shy and unlikely leader of a women’s battalion. We went in search of her in the neighboring village of Ngu Thuy. Her husband greeted us and showed us the photograph we had taken on that day two years ago. I recognized her in the photograph, but wondered if she would remember the foreigner who had showed up one day two years ago at her village to switch on the power in her commune. Hoanh was busy organizing the women in the village, but consented to leave the meeting to come and meet with us. She walked in and greeted us exclaiming that indeed she remembered me from me from that past visit. Over tea I asked her if her life had changed since electricity came to her village and whether she had bought the ice box she told me she planned to buy. She smiled and said that life in the village was now much better and that she was busy organizing the women in her commune. But, no, she had not bought the ice box....

..I was pleased that we were having an impact in rural Vietnam. The word of the success of this project spread far and wide. We had managed to provide electricity to one new commune every day for the past three years!

Vietnam became one of the leading countries in the world to have provided electricity to over 90% of its total population. It had gone from only 50% coverage of households in 1996 to 90% in 2004. As I saw the success of Vietnam’s rural electrification program, I wondered if it were possible to repeat the success of Vietnam in rural electrification in my own country.

In December 2004, I was presented with a medal by the government of Vietnam and EVN for my contribution to the development of the energy sector in Vietnam at a simple but touching ceremony. But even more than this official recognition was a simple gift from one of the power distribution companies. At my farewell reception, Lien presented me with a painting on behalf of his company. It was a beautiful rural landscape and I had merely glanced at it. Then I saw the inscription at the bottom of the painting. It said, “To Dr Anil Malhotra. For helping change the rural landscape of Vietnam.”


This work has now been documented by the World Bank in a must see video