 Good morning, ladies and gentlemen. Welcome to CSIS. I am Andy Kuchins, Director of the Russia and Eurasia Program. I think the emphasis today we would put on Eurasia with this program. We're really delighted to be co-hosting this event with the Asian Development Bank to talk about the energy situation in Afghanistan and Pakistan. And a long time project and dream, the TAPI pipeline, Turkmenistan, Afghanistan, Pakistan, India. This is, of course, a pipeline with a long history, nearly 20 years, as I understand it. And in fact, one of the pioneers who was involved in an earlier iteration of the project, Carlos Buglaroni, the CEO of Breetis, actually has his name up on one of the rooms upstairs. He's a major supporter of CSIS and a board member. And Carlos has regaled me of stories of his travels in Afghanistan back in the 1990s, meeting with various regional leaders to talk about this project. And of course, we all know that the project didn't come off at that time and was sitting on the shelf, I think, for a number of years. But it has reemerged in the last six, seven, eight years. Where would you put the date at, gentlemen? Just to take your pick. Take your pick. Take your pick. And particularly thinking about it is its role in stabilizing Afghanistan. And here at CSIS, myself and several others, and along with Fred Starr at Sice-Kachi, kind of across the street, we got very involved in this in thinking about an economic, a regional economic development strategy for Afghanistan. As a sovietologist myself, or I cut my teeth as a sovietologist, in the 1980s, I knew a lot about the Soviet-Afghan War. But I didn't really get very involved in looking at closely our more recent military adventure in Afghanistan post 9-11 until about the fall of 2009, when the debate was kind of raging in Washington about the Afghan strategy. And we had just completed, or were in the midst of completing several reports tied to the development of the Northern Distribution Network to support our troops in Afghanistan, which led us to start thinking about a regional economic strategy for Afghanistan and to talk about it in terms of a modern Silk Road. But what was so striking to me in those days about the debate, I felt the debate was so narrow. We seemed to be only talking about military security issues. And even in that context, it was counterterrorism or counterinsurgency. And how much should the troop presence be increased? How long should it be there for, et cetera, et cetera? And it was really striking to me that it seemed that the economic side of the equation was underattended to. And whatever success was achieved on the military side, if there wasn't sustainable economic development for Afghanistan, it just seemed clear that the likelihood of that success sticking was not going to be tremendously high. And so of course, the TAPI pipeline was one of the key projects that we were very enthusiastic about and encouraged in a report that we published in June of 2010. It was modestly titled, A Modern Silk Road Strategy, the Key to Success in Afghanistan. And of course, the project has been adopted by the Obama administration as a central piece of their new Silk Road vision for the region and has been insidiously pushing for the development of it. But it's really the Asian Development Bank that has been most active in the region for years through Kerak and other activities, Central Asia Regional Economic Council. Cooperation, excuse me. I've always found that acronym a little bit funny. There's not something in the end that's a noun or more like a different kind of noun. But so it's terrific today that we have three people here to discuss the energy situation in Afghanistan and Pakistan, the role that the TAPI pipeline could play, and then a very informed audience to discuss and about various aspects of commercial viability, technical issues, the role of the security situation, political, et cetera, et cetera. I would just conclude the introductory remarks before turning the floor over to Craig and introducing our other panelists so that the Baku-Tiplisi-Chehan pipeline is and was described as a very, very strategic pipeline. But when I think about TAPI, that is maybe it is the strategic pipeline of the century, potentially. You think about as a spur or a catalyst to help in the development of the very rich gas resources in Turkmenistan. If you think about the key role that it could play or that if it's coming to reality, it would represent for the stabilization of Afghanistan. And then the role that it could play in furthering reconciliation between not just Pakistan and India, but Afghanistan and Pakistan, boy, that would be a big, big, big win, win, win across the board. So let me introduce our panelists this morning. We're going to have a slight change in the order. We're going to lead with Craig Stephenson, who is the ADB's resident representative here in Washington. And he's been here in the Washington office since May of 2013. He has led the North American regional office, Narrow, and its efforts to strengthen collaboration between the ADB and leading policymakers, academic, public, private sector partners, think tanks, capacity building institutions, and multilateral and bilateral development partners, and the raised public awareness of the ADB in the US and Canada. I guess this is part of that, right? He was assigned as country director to the ADB's Thailand resident mission from 2010 to 2013. But before that, he was the team leader in Afghanistan from 2001 to 2004, and again from 2008 and 2010. And he has also assigned as the head Central Asia Regional Economic Cooperation Unit, CARIC, based in Alma T. It comes down from 2005 to 2007. So a lot of experience in the region. After Craig, we will be turning to Aruna Strum, who is the director of the energy division in the Central and West Asia Department of the Asian Development Bank, overseeing a range of ADB's leading lending and non-lending operations in the region, covering Afghanistan, Armenia, Azerbaijan, Georgia, Kazakhstan, the Kyrgyz Republic, Pakistan, Tajikistan, Turkmenistan, and Uzbekistan. And he leads energy sector policy dialogues with these nations and focuses on regional cooperation in the energy sector under the Central Asia, under CARIC. And maybe this is an appropriate time to note that tomorrow morning, we're going to be gathering again with several of the same characters and taking ruthless advantage of Aruna's presence here in Washington to talk about the two-tap interconnection concept and the CASA 1000 project here, same time, same place, tomorrow, OK? And finally, last and hardly not hardly least, is Jim Liston, who is the principal energy specialist in the energy division for Central and West Asia Development. And Jim is an engineer with over 30 years of public and private sector industry experience in developing and developed countries worldwide. He joined the Asian ADB in 2007, where he's worked in the Central Asia and West Asia Department on power sector investment and technical assistance projects. And Jim has developed and implemented domestic and regional projects in all Central Asian countries and in Afghanistan and Pakistan. So for further information on the biographies of our distinguished speakers, please consult the material we've given you. And let me turn the floor over now to Craig. And Craig, thanks again for having the idea to do this meeting this morning, as well as the meeting tomorrow morning. Thanks. Thank you, Andy. And of course, thank you very much to CSIS for hosting this event today. Rune, Jim and I were having a beer last night. And Jim told me that I should open up by talking about ADB. I'm kind of reluctant to do that because you can check our website, adb.org, and get all the information you want. And I got home last night and told my three-year-old daughter, Ziggy, that I was going to see a bunch of people this morning. And what should I tell them? And with a big smile on her face, she said, tell them I love you. So I guess I could tell you that, as Jim suggested, that ADB is an intergovernmental organization, headquartered in Manila, established in 1966. The United States and Japan are the two largest shareholders in ADB, that we provide loans, grants, technical assistance, policy dialogue, and equity to our developing member countries. But instead, I think the message I want to get across this morning is that you should just think of us as the love bank. The love bank. The love bank. And at the risk of getting fired by my management, I better get serious here. I spent nine years of my life living and working in Central Asia and Afghanistan. And I think since the first day I set foot in Kabul, I heard about the TAPI project. And it seemed like such a great idea. And I was never quite clear why it hadn't gotten started a long time ago. That was 2001. I was also struck by virtue of my having lived in Almaty for a while, why certain countries were so energy rich. They had so many resources, Kazakhstan, Turkmenistan, come to mind, Iran. But other countries in the sub-region, Tajikistan, Kyrgyzstan, Pakistan, could be so deprived. And it just seemed to me that the ADB is a regional development bank with some comparative advantage and energy. We've done transmission and distribution projects in pretty much every country where we have operations. Hadn't done more. And fast forward 13 years, things have changed a lot. They've changed in Afghanistan. We've got an entirely new set of relationships in Central Asia that we've been taken care of. And I think we're fortunate today to have with us two people who I've known for a long time who I don't hesitate to say are two of ADB's best and brightest. I've been in meetings with them this week. And when it comes to Afghanistan and Pakistan and the sub-region and TAPI and TUTAP, which the Turkmenistan, Uzbekistan, Tajikistan, Afghanistan, Pakistan initiative, or CASA 1000, I don't think we could have two better speakers representing ADB here with us today. I won't introduce them formally because their information is here in your paperwork. But the last thing I want to say is that ADB has an office in Washington. We're located at 917th Street, just down the street on Farragut Square. We have lots of publications around. You're welcome to visit our office and poke through them. If there's anything that I can do for you, please don't hesitate to let me know. I'll put you in touch with people in ADB who may have the answers, because I probably won't. Aside from that, again, thank you, Andy, for getting us over here today. And I look forward to the discussion that follows. Let me turn now to Jim, who's going to kick off. Good morning, ladies and gentlemen. Thank you, Andrew and Greg, for those introductions and kind words. As I was introduced as a power engineer, you might expect that some of my presentation might dwell on some technical aspects of the Afghan power system or energy system. So I hope you find that somewhat interesting. I'll speak for maybe about 20 minutes on three topics. I'll just give an introduction on Afghanistan. I'll present the summary findings of a master plan that has been conducted. And then I'll go through some regional initiatives. And during the introduction from Andrew, he spoke at length on the TUTAP, of course, a very important initiative. But I'd like to say that there are other equally interesting regional initiatives to do with electricity interconnection. And I'd like to just hit on a couple of those points. So some overview, in case you're not aware fully. So it's 600,000 square kilometers. That's about the size of Texas. Population 30 million, ranks it 40th in the world. So it's a significant country. It's gross national income, $680. Not sure really what that exactly means. If you do PPP, it's obviously a higher figure. In any case, it's probably in about the bottom 10% of the world in terms of wealth. And it's 36% of population is living below the poverty line. So we're talking in a poor country. It's mineral rich, copper, iron, bauxite, gems. There's great potential. This is a country that can really grow. But today these minerals have not been exploited. Energy sources, it's rich in coal and gas. And of course, hydro, 20,000 gigawatts of hydro potential is estimated. And of course, solar and wind. But again, these energy resources have yet to be exploited. And apart from its resources, its location gives it a particularly strategic location or strategic advantage. In that it allows itself to be the transit country, the Silk Road between Central Asia, energy rich Central Asia, and power poor Afghanistan and Pakistan. And I'll speak about that in a moment. Donor support. In the early 2000s, the donors returned to Afghanistan. After 30 years of war, the infrastructure was in a very poor shape. The donors focused initially on emergency generation, these diesel power plants, mainly. But the main supply to Afghanistan was focused on imports. That rather complicated diagram there shows what's called the Northeast power system, referred to as NEPS. And that shows the connection with Turkmenistan, Uzbekistan, and Tajikistan. And these three import points bring power to Kabul. And whereas some years ago, you had one hour per day of electricity in Kabul, today you have 24 hours of electricity. It's quite a success. We have also, we, the donors, have also focused on sector restructuring. So there is now a corporate power utility, DABS, the Afghan-Brezian sharecat. It's a corporate entity, which is operating successfully. And we have focused on capacity building. The donors cover USAID, a significant donor, a World Bank, Islamic Development Bank, KFW from Germany, government of India, and of course, Asian Development Bank. In the energy sector, ADB is the largest donor. Since we processed our first project in 2003, we have invested almost $1 billion in energy alone, representing approximately $100 million per year. That's our investment. Now, what has all this done? And we all hear a lot of negative publicity about the situation in Afghanistan. And at high levels, you can talk about generation and imports and whatever. But to me, the important thing is how many people get electricity? What is your electrification rate? What are you getting supply? Now, when we started, it was around 7% or 7% of the population had access to electricity. And today, 2013, March 2014, you have over 30%. That's over 1 million customers at about 7 or 8 population per customer. That's a significant achievement. I think we can be proud of what has been done. You can see the graph there showing the increase. And any visitor to Afghanistan will notice this, will see this. That's the history. The challenge is to keep this up. So ADB sponsored a technical assistance power sector master plan. The website is shown on this slide there. And for those of you with the energy to go through the 1,000 plus pages, that's where you'll get it all. I'll try to summarize it into this slide here. And today, you have a multi-island system. Actually, you don't have an Afghan power system. You don't have an integrated grid. In fact, you have up to 11 separate electrical islands. They're fed from different countries, Iran, Uzbekistan, Turkmenistan, Tajikistan. And there are islands fed from its own generation. And such an approach of 11 islands, of course, is not being done anywhere else in the world. And that's for good reason. Every country in the since electricity was invented has enjoyed the benefits of economies of scale, build big bar plants, transmit the energy is the cheapest way for now anyway. And Afghanistan has not enjoyed this disadvantage. It's got small, high cost generation where it has generation. Its peak load is 850 megawatts, which is very small, 3,500 gigawatt hours, with 70% of its electricity imported. That's the situation today. Now, by 2032, the master plan recommends the construction of an integrated grid. For all the advantages I just mentioned, it's not quite a circle because the demand does not justify a circle today. It will be a circle. It's a U-shaped grid, as you can see there. And the peak demand and energy consumption will increase five-fold over 20 years. This to bring its energy consumption up to rates consistent with the region of India and Pakistan. So these are not overly ambitious targets. And the energy supply will continue in the short term to be met from imports, but the plan identifies increasing domestic generation. Now, today, in 2011, there is some domestic production. It's a hydro-based country. Its gigawatt hours over the last 10 years has met from its domestic market has been about 1,000, mainly met from hydro. And that's seasonal. That's summer only. So that's a constraint. And thermal, which has been developed by the donors since the early 2000s, is largely diesel. And this is expensive, maybe $0.40, $0.50 per kilowatt hour. So this is not really a long-term solution. And today, you've got, as I said, 70% fed from imports. And of that 70%, the majority is coming from Turkmenistan and Iran, with Turkmenistan coming in third, and Tajikistan fourth. But these latter two are very important for the future. This is a growing source of supply. By 2032, new thermal plants. Obviously, its hydro supply is good, but it's seasonal. So new thermal plants are required. Shivigan gas fire tried to exploit the benefits of the existing gas. Inak coal plant, a private sector coal plant. And Kunar, a big hydro development. So it's forecast that imports will drop to about 30% of total. And the major increase in imports, in fact, are forecast to come from Turkmenistan. Uzbekistan has its own constraints. And Tajikistan is a hydro-rich country. Again, it's summer supply only. The big source of dispatchable supply for Afghanistan is to come from Turkmenistan, which is the regional project, part of the regional project which complements TAPI, which I'll speak about in a moment. And by 2032, electrification rate should reach 86% from the current 30%. So right now, what Rune, what ADB, what I, what we're working on in partnership with our donors, USAID, World Bank, we're focusing to continue the increase on the imports. Particularly Turkmenistan. And to develop the gas, coal, and hydro plants. And to strengthen the domestic grid, which includes transmission to allow the imports. And of course, distribution to continue the electrification rate. Now, there's a particular unusual feature about the Afghan system and its energy planning. It's quite unique in the world. And there's a reason, of course, why it has 11 separate islands. And that's because with its imports coming from four countries, it's not a simple matter of bringing these imports together and supplying a common load because these four countries are not themselves connected. Whereas Turkmenistan and Iran are now connected, Uzbekistan and Tajikistan are not, there is no electrical connection today between those two countries. So when these supplies come to Afghanistan to meet, to supply an integrated grid, requires a special solution. And the solution that has been proposed by the Afghan Power Sector Master Plan is to locate a common hub in the north of the country, which will enable a conversion from AC to DC to AC. For the non-technical people, this is a standard approach to connect asynchronous systems. So for example, here in America, in fact, as I understand it, you do not have a single integrated system. You have three systems, Eastern Interconnect, Western Interconnect, and Texas. But you too are building the Tres Emigos HVDC power plant to allow trade between these separately connected systems. There are many examples. Japan, Georgia exporting to Turkey, where such technology has been used. So it's proposed to build a HVDC project. And in fact, this is part of the ADB current project that we are hoping to bring to our board this year, which would be focused initially on increasing the interconnection with Turkmenistan using this HVDC technology. Now, a particular benefit or an advantage, the spin-off of this approach. So the master plan was designed to meet the Afghan needs, make an integrated grid, bring the imports, build your generation, reduce your reliance on imports, and this is excellent. But then it was noted that for quite a modest increase in the investment in the grid, that in fact, the connection from Afghanistan to Pakistan would allow these three countries, and countries nor such as the Kyrgyz Republic and Kazakhstan, to wheel power through Afghanistan while meeting the Afghan needs. And surplus power over their needs could be supplied to power poor Pakistan. The reference was made to the acronym TUTAP. And of course, every good project needs an acronym, and this project is no exception. And so we call it, from the directly connected countries concerned Turkmenistan, Uzbekistan, Tajikistan, Afghanistan, Pakistan, TUTAP, that we link Central Asia to Afghanistan, meet the Afghan needs, and then they can take advantage of their strategic location and wheel power to Pakistan. So that's the summary there. Turkmenistan, fourth largest gas reserves in the world. Tajikistan, enormous hydro resources. Today it is spilling its summer energy. It doesn't have a market. Uzbekistan, gas and coal, and Kyrgyz again hydro. These four countries wish to, the opportunity, the business opportunity, to export to power poor Asia. This can go through Afghanistan and onto Pakistan. And so this is part of the overriding concept of Kassarim, yet more acronyms, if you forgive me. Central Asia, South Asia, regional electricity market. This initiative has been running for some years now, and there are two projects under implementation right now. One I've mentioned is TUTAP, which is being sponsored by ADB. And again, this week we are speaking to our donor partners to ensure the ongoing development of this project, which is happening today. And Kassar 1000, which is a World Bank-sponsored initiative. And again, this has recently been approved by the World Bank Board. And I'll just show you what these two projects are. But again, this shows the opportunity for Afghanistan to benefit from its strategic location. So there you've got your three countries. So the Tajikistan to Afghanistan, that line exists. It's there today. It's operational right now. Uzbekistan to Afghanistan, that exists. It's today's supplying power to Kabul. Turkmenistan to Afghanistan, that project is financed by ADB. The Turkmen authorities have constructed the line to their border. It's operational. It's constructed today. And under ADB financing, that line will continue into Afghanistan. And as I mentioned, we propose to build a HVDC station to allow the full interconnection of Turkmenistan. They're all meeting at this hub point that I mentioned in the north. It's called Puliqamri. And then Puliqamri to Kabul, that's a project that's under implementation today. In fact, TUTAP by 2018, these three countries supplying Afghanistan will be supplying the Afghan demand. And for a modest, for a small incremental increase, a connection from Kabul to Pakistan, which is 400 kilometers, maybe 200 million, can wheel power through from Central Asia to Pakistan. So it's not only TAPI, there is also TUTAP. Casa 1000 is the World Bank-sponsored initiative. It's more regional in nature. It's focused on taking the hydro surplus from the Kyrgyz Republic and Tajikistan and bringing that summer surplus power to Pakistan. It will. It brings some supply to Afghanistan. The primary purpose of Casa 1000 is to link the hydro-rich Kyrgyz and Tajik regions to power for Pakistan. That project is approved by World Bank Board and is now in the early stages of implementation. So there you've got the two projects. And of course, we are coordinating with our partners, with our donor partners. There's a range of donor partners involved in this initiative. So ensuring the timely coordination and synchronism of the TAPI and Casa initiative and just to kind of put it into a schematic sense. There are the lines going from Uzbek, Kyrgyz, to Pulikomri existing. Turkmenistan to Pulikomri, they can be operational by 2018. The line from Pulikomri down to Kabul also will be operational by 2018. It has 500 KV double-circuit line. This is a significant investment. And then, of course, the Casa 1000, which will match, which will tie in there. And this will bring, this will construct a strong linkage between Central Asia, supplying Afghanistan and Pakistan, and allowing the Central Asian countries to take advantage of their energy resources to meet the energy-deficient power for Afghanistan and Pakistan. I think that brings me to the end of my presentation. Thank you very much. Thanks very much, Jim. Let's turn right now to Runa. Good morning, ladies and gentlemen. It is indeed a pleasure to visit Washington, D.C. It's been quite a few years since we in the energy division visited last time. And the second part of this presentation will focus on Pakistan. Pakistan is a key country in our region, and it is also probably one of the more challenging countries in our region. A little bit of background just to get us into the picture of things. The last five-year GDP average growth rate is about 3%. Foreign currencies reserves are down to 3 billion, which is about a month of imports. We are looking at the domestic debt. One-third of this increase is caused by the power sector. That means that the power crisis in Pakistan is not only a sector crisis, it is a national crisis. Today, 5,000 megawatts short, and this is the summer months in Pakistan, so we are actually looking at somewhere around 7,000 megawatts. The result for the people is in the cities about 10 to 12 hours of load shedding. And out in the rural areas, we're looking about 20 hours of load shedding. You can imagine what will happen to the politicians in Washington, D.C. if these figures existed here. The GDP impact of this shortage is a reduction of 2% of GDP growth. What is interesting here is that Pakistan needs today, due to its demographics, a 7% increase in its GDP just to absorb the new entrance into the labor market. Now, this is kind of a cold hard facts. What does it mean that a number of young people don't get employment? What are the alternatives? Radicalism is the alternative that puts food on the table. So think through this in that perspective of what do people do if they don't get jobs? What are the alternatives? The fiscal subsidies is about $4.8 billion in 2013. Imagine how many schools, hospitals, health care services, social network that could be developed with this kind of money. The payment arrears as they are today are given in the presentation. It is a substantial amount of money. And when we add to this that one third of the population does not have access to electricity, we all understand why there is a limited economic growth in the country. Now, what do we do about this? It doesn't take too much intelligence to actually figure out the facts. The challenge that is ahead of the government of Pakistan, the people of Pakistan, and also as their development partners, is what do we do about this? How can we fix this? There has been a concerted effort by the donor community. We most prominently put through a close-knit group, the Friends of Democratic Pakistan. And we focused on three areas. The Asian Development Bank was the co-chair together with the government of Pakistan. And these three areas was we need to get the costing of the product, the service delivery, so that it doesn't impact the national budget. That means that we need to manage the tariffs. We need to look at the technical performance, the management performance. And then we've got to look at the accountabilities and transparencies, in other words, governance of the sector. So these three pillars has been the basis for looking at and enhancing the energy security and reliability in Pakistan. Pakistan has a very interesting tariff system. There is a regulator, NEPRA. NEPRA does a full cost recovery tariff called a Determined Tariff. Unfortunately, the government says, no, our people cannot recharge this amount at NEPRA, Determines. So then there is a Notified Tariff that is below the Determined Tariff. That means that there is a subsidy requirement. And at the moment that subsidy requirement is about four rupees per kilowatt hour. And that means that the government of Pakistan must find the cash to pay for that subsidy. It also means that every kilowatt hour produced is a deficit kilowatt hour. So the more electricity that is being produced, the more money the government has to pay. This is a very vicious circle, which has led to what is being determined used in Pakistan is the circular debt problem. The subsidies, if we measure them against the GDP, is now about 2%. 1.75% was a few months ago. And the situation has worsened. It's about 2% of GDP. And again, we can think about alternative ways of spending the money. In terms of performance, when a sector doesn't get the cash it requires, maintenance is low, augmentation doesn't take place, and new investments does not take place at the required rate. That means that the losses are relatively high. Here we have put up in terms of the transmission and distribution of about 23%. We should have been here if there is an international comparative figures, we should be around 10% to 12%. So Pakistan has double of the losses compared to the international standards. We also look at the fuel mix in Pakistan. 35% of the generation comes from fuel oil. Fuel oil is expensive. So for the 35% of the fuel mix, actually requires 75% of the money. This is not a good equation. It needs to change. There's no concept of energy conservation. We spend what we can get when we get it. And if we don't have any, we try to find other things to do. It's the attitude that is prevalent. Accountability and transparency. There is little monitoring and enforcement of the licenses given by the regulator. There doesn't seem to be many people being held accountable for mismanagement and poor decision-making in the sector. And the sector information is challenging to interpret as there are political influences in what is being presented and how it is being presented. So the reliability of data is difficult to rely on in terms of investment decisions and also management and operational aspects. Energy sector reforms in Pakistan has been going on for a long time. Started in 1992. There was a set of new laws coming out in 1998. The legal framework is very good. The regulatory framework is very good. The implementation... Well, the grade would be an F in terms of what Pakistan has been able to do so far. The national power targets, policies, all of that, the framework is very... There's nothing wrong with it. But again, the implementation is what is lacking. It is being influenced by too many interest groups rather than the economic interests of the country. Right now, Pakistan is once again under an IMF program. This is, if I remember correctly, the ninth or tenth program they have with the IMF. They have only completed one program so far. So that means there is a bit of a challenge for the government to stay with the requirements and targets that they have agreed with IMF. Now, here we have a problem tree. And I'm not going to go through all the colors and all the boxes and all the interlinkages. It only shows that the main box is the third one from the top, which says energy shortage. And there is a... To illustrate a number of analysis and discussions and due diligence work by a lot of donors and good agencies that have come up with this and have been able to look at cause and effect, look at what needs to be tackled, and the areas that are colored here are what the Asian Development Bank is part of tackling. What are we implementing now? One of the challenges for an educated audience like yourself is how can we convey the knowledge and the information of what we are focusing on? We thought the best way to do so was to tell you about the projects we do and why we do these projects. What we have here is that we have focused on renewable energy. That means in Pakistan, hydro. Hydro is an undervalued asset. The plans, and again, the Water and Power Development Authority in Pakistan has a very good hydro planning department. They have plans for about 55,000 megawatts. Today, 6,500 megawatts are being utilized. What does it take in terms of investments to help? So we are focusing on the renewable energy. We are looking at the transmission sector. One thing is to get sufficient generation, but we need to evacuate the power and we need to get it down to the distribution companies and then the customers. So we are focusing on transmission, distribution, energy efficiency. We have had what we call a CFL bulb project. For $60 million, we have been able to save 1,000 megawatts in terms of the shortage. That's the cheapest way of building a power plant is actually to look at alternative energy efficiency operations, and Pakistan has quite a bit to benefit from in terms of energy efficiency. We are looking at low cost generation. This is a topic that excites the US government quite a bit. The Jamshoro Power Generation Project is a 1,200 megawatt coal-fired power station. If you're looking at energy for all and if you're gonna counter the cost of the import of the oil, we need to look at a generation source that is much, much cheaper. And on the generation plan in Pakistan, coal-fired is the lowest fuel, lowest cost fuel, and hence, ADB is involved in this project. What are we doing going forward? We're focusing on a few programmatic issues. The Energy Sector Reform Program. For those of you who have followed this in Pakistan, that means that we are a subset of the IMF program. We are working with the World Bank and our Japanese colleagues, Jaika. The three of us have negotiated with the government of Pakistan a policy reform and found a set of requirements, a set of tasks that needs to be completed before funds are being provided to the government. And we are doing this in a programmatic approach. That means that the overall program is $1.2 billion. And then we have five sub-programs, one per year. We already did the first one, which was $400 million. And now we have a set of four sub-programs which will come on an annual basis. And there are preset targets and tasks that has to be completed before funds are being changed. The other aspects here is we're looking at more transmission work, more distribution work, and facilitating a system that will be able to capture the additional generation that is now under construction in several places in Pakistan. Looking at the reform program, as I said, we are trying to manage the tariffs and the subsidies. We are trying to target tasks that are required to inform the operational performance. And we are looking at the transparency of amount produced, amount purchased by the distribution companies, and also transparency about the load shedding management operations of the government. All of this is what we want to have on the internet for public display and create a debate about optimal utilization of the power available. Giving you a little detour, about a year ago, Pakistan went through an election process. It is very easy to say that the industry will not get any power, but the domestic sector will get power because where is the vote base? The vote base is the domestic people. So the government makes decisions based on political wishes and concerns rather than the economic one for the country. And we need to change this into what is best for the economy? How does the individual actually get cash in their pockets to spend on food and the necessities for the families? And also what gives economic growth for the government itself? If you do load shedding into the industry, that means that the tax income goes down. So it's a direct impact of how you manage the load shedding on the revenue side of the government budget. These aspects needs to be more streamlined to optimize the benefits for the country and not for individual political parties. At Jamshoro, I talked about looking at cheaper electricity generation. We are also looking at some hydro facilities and to help Pakistan utilize the comparative advantage it has from the high mountains in the north and the water coming down to the end of the system. Indeed, it's a fascinating system that needs to be utilized much more than what it is today. Transmission distribution, I'll just skip through this because we have already talked about it. And energy efficiency is then looking at not wasting the energy that is being produced. It is precious. And be able to use it and optimize the aspects. What I want to do now is that I want to go over to, I think I need help again to get the other presentation up. Here it is. Technology is great when you know how to use it. While we get in the next presentation up on the board, I want to jump a little bit in the sense of what we focus on in our division. Jim went through Afghanistan and also Tuta. And we have another large initiative that we are part of. Andrew mentioned this in the beginning. And I do understand there is a certain amount of fatigue talking about TAPI and the realization of this absolutely fantastic project. Let's go through some facts of TAPI first. And we'll leave the challenges to the little bit later. It starts in Galkanish, which is a gas field in the southern part of Turkmenistan. It goes there to the border of Afghanistan through the southern part of Afghanistan into Balochistan, over to India through the Multan area. And you end up in Fasilika in India. That is TAPI. Why TAPI? Why is this so interesting? First of all, we have a fantastic seller, Turkmenistan, sixth largest proven gas reserves in the world. It is the 16th ranked natural gas producer. These are 2011 figures. And this is basically a landlocked country. And it has gas sales arrangement with Russia in the north and with China in the east. And there is more gas. And obviously, the comparative advantage of Turkmenistan is the gas resource. And a southern sales route will allow Turkmenistan to have diversity in its sales options and then not be in a monopoly situation of the purchasers that is currently in existence. Now, what is on the other side of the equation? The three buyers. Excuse me. The three buyers, Afghanistan has a relatively low requirement. It's basically a transition country. Pakistan is starving for energy, as you just saw. 5,000 megawatt shortage, not enough gas to run the plants that are already in existence. And it can take whatever volume that is available for sale. So we have Pakistan that is starving and India that is in shortage. So India is looking at its fuel mix as well. And it's very interested in the gas. And you see the volumes here in terms of the demand from both Pakistan and India. And basically, we have three buyers that are very keen to buy. So far, the equation looks very good. Now, what about TAPI, the project itself? TAPI starts at the border between Turkmenistan and Afghanistan. The government of Turkmenistan will supply the gas at the border. The TAPI pipeline project will pick it up at the border of Afghanistan and go to the border between Pakistan and India. Gail in India will pick up the gas at the Indian border. When we talk about TAPI, it's a little bit about before Christ and after Christ kind of timelines here. Before the December 2010, we don't count. My own personal experience with TAPI was that I met as a very young ADB officer in 1996. Conoco, that was not Conoco, it was Unical. Unical, who came and visited Manila on talking about this fantastic project. And it has gone through a number of reiterations from then. But the real thing happened in 2010. It was a new spring of TAPI. The four countries was able to get excited about the project and get serious about the project. ADB's role has been as the secretariat of TAPI. That means that we are trying to be the glue between these four countries to work on not only the commercial arrangements, but the relationship between these four countries. It's an absolutely fascinating and challenging task. And we will argue that up to now, we have done a very decent job of it. And it is not easy. And a lot of other interest groups don't understand that we only have one thing and one thing only to offer to these four countries. And that is our credibility and neutrality. They got to trust us. If there is anything in terms of the four countries where we will lose, that is if we lose our credibility. We will guard that credibility like a fort. And we will make sure that our neutrality in the process is being protected. That is not always popular by a number of other institutions and nations, but it's the only way that we can help these four countries realize the project. Looking at the faces, the project has five faces. As I said, the gas pipeline framework agreement was signed in December 2010. And these were with the four heads of states, plus our own president in the Asian Development Bank who witnessed the process. Since then, we will argue that the process has moved forward quite rapidly. And this is definitely contradictory to popular belief. But to be able to take four countries through a high security-concerned area and continue the process, getting to the heads of agreement in April 2011, get to the gas sales and purchase agreements concluded in May 2012. And now the transaction advisor engagement took place in November 2013. So where it says September 2012 on the slide, on the yellow phase three, that is not all concluded. That means that the Asian Development Bank has a second task, and that is to be the transaction advisor to the four countries on this very fascinating project. Jim and myself come from the Central and West Asia Energy Division. We are the secretariat. There is another unit that is the transaction advisory. And this is where we have a bit of a Chinese wall inside ADB because they are doing the commercial transaction advisory for the TAPI Limited Company, whereas we would finance any of the four countries that would request financial support to participate in the project. So there's a distinction there in terms of our roles. Moving on, looking a little bit at the framework, so you understand a little bit better what the TAPI is all about. It is the four countries. We have the intergovernment agreement, the gas pipeline framework agreement between these four countries. The four countries are represented by their minister of petroleum. And we then move on to the commercial aspects of TAPI. And that is the four gas companies. You have Turkmen gas. You have the Afghanistan gas company. You have ISGS from Pakistan and Gail of India. They have their own legal contracts. And it all ends up in the TAPI consortium, which is TAPI Limited, which is the pipeline company. And then, of course, you have the standard contractual agreements. And the red item in the middle of the TAPI consortium is the consortium leader, which is not yet selected. So this is still a selection process to take place. And here, just putting up the host country agreements, the pipeline system rule book, meaning the network codes. And looking at the operational agreements and the transportation agreements, I'll take you back again so you can see that. So there is a set of national interest. It's a corporate interest. And you have TAPI Limited in the middle. This is, we have tried to keep it as simplified as possible and make sure that the legal agreements also are as simple and effective as possible. Looking at the TAPI consortium development, there is a number of things that the state, that each national government has agreed to under the gas pipeline framework agreement. We then have the host country agreements where it spells out very clearly what the governments agreed to. And we then get into the business of overrunning the pipeline. What is next? We are now working, and the operations agreements are basically concluded. The transit fee agreements are finished and negotiated. We are now looking at the third bullet, establishing the TAPI pipeline consortium. And we are in the process of working with the four gas companies to find the consortium leader. We have had one round of, well, we have had one road show where we went to Singapore, New York, London, and Oshkaban and presented the preliminary project to international oil companies, pipeline companies, financial institutions, and sought their help in structuring what we explained the project, number one. Number two, we sought their assistance and picking basically their brains on how we can structure the project in the optimum matter. Parallel to this, the transaction advisory team are now updating feasibility studies and the information memorandum. And there is also discussions of where to incorporate TAPI-limited, of course, looking at issues such as taxes, arbitration, jurisdictions, et cetera, et cetera. The challenges, just to take some of the questions that you will have, security in Afghanistan and Pakistan, pipelines, both oil and gas pipelines have been put through some of the more risky parts of the world. It's nothing new. Here, we have the Afghanistan government saying that they will look after the security of the pipeline on Afghan soil, and there will be an additional security cost, which will be part of the host country agreement. In Pakistan, Pakistan has probably the best repairing skills of bombed gas pipelines in the world. And this comes through experience. Today, when a gas pipeline of Soviet Southern gas get blown up in Balochistan, it takes them less than 24 hours to get the gas back flowing. Absolutely fantastic. They are the peak competence in the world of repairing bombed or blasted gas pipelines. At the same time in Pakistan, there is a number of depleted fields that can be used for storage. And what we have done as a part of our secretarial task is to look at the feasibility of pumping gas down back into the depleted fields, keep it as storage. So if something happens between the Turkmen-Afghanistan border and close to the border between Pakistan and India, then there is an inventory of gas that can be tapped while the pipeline is being repaired. So that, of course, everyone knows carrying inventory is a little bit costly, but that is a small insurance premium to pay for a pipeline of this size. Attracting the consortium head or the consortium leader is a challenge. We have some interesting leads, and we will see how that process moves forward. And again, that's the transaction advisory part of the Asian Development Bank. Financing and credit enhancement, it was very interesting to talk to the financial institutions. They basically don't care if there is orange juice going through the pipeline as long as they get paid. So we need to figure a payment structure that can actually work and make sure that in this risky environment, should there be interruptions that there are fallback mechanisms, credit enhancement, that will be helped. Supplied reliability is linked to the Turkmen operations. Turkmenistan has developed a large facility on the northern part of the Galkanish field that supplies the China pipelines and obviously has gained a lot of experience from that exercise. And we expect that experience to be deployed at the southern part. We're looking, we are a little bit concerned about construction material price volatility. We all know that steel prices move up and down rather rapidly. The interesting part now is that the feasibility study we did in 2008, actually the costing is the same today because of the prices on steel has basically dipped down a little bit. And so that counter the inflation factor. So we are about, I think it is about 7.5 billion for the whole project. That concludes the presentation on Pakistan and TAPI. Jim and myself would be very pleased to respond to inquiries and questions you may have on any of the three presentations. And once again, thank you very much to being with us this morning. Thank you. Jim, Craig, Arun, thank you very much for your presentation, especially Arun and Jim, extremely informative. If I could just start by making a couple of comments myself. I'm not a technical person. I'm not an economist either. I'm trained as a political scientist. Why am I excited about these projects? Because they are, I think, at the epicenter of a very major phenomenon that is taking place. Some of you might have been here in November when we did a presentation on Eurasia reconnecting. And Eurasia was. And we talk about Eurasia. I'm talking about the supercontinent Eurasia, from Europe to Asia, from the Arctic to the Indian Ocean, Halford, MacKinder, big Eurasia, not a synonym for the former Soviet Union or something like that. It's reconnecting. Now, it was connected more than 500 years ago before the advent of C-Trade, which took precedence over the transcontinental so-called Silk Road route, or network of routes that was the Silk Road. And it was a combination of C-Trade and political conflict, which basically disconnected the continent. And 1,000 years ago, as our friend and colleague Fred Starr has argued, really, the epicenter of world trade in ways was and this region itself. So this is, it's very big what's going on. And the potential for the role for Central Asia, South Asia, states around it, the South Caucasus, to be part of this reconnection, are absolutely critical for their economic development, for their sovereignty, for their independence, for their, so they have options and alternatives for trade, for investment. And if you don't have energy production and reliable energy supplies at the center, I mean, you don't really have anything. And it was the Afghans themselves going back to the first iteration of the Afghan National Development Strategy back in 2006, which had the vision in it for this regional economic cooperation strategy. Why? Because if other states are benefiting by the development of Afghan, the Afghan economy, and vice versa, then they'll have mutual buy-in. They'll have stakes in their own economic development. And maybe this can help to unwind some of the long-existing political conflicts, the long-existing distrust that takes place. So this is from a political science standpoint, from an international relations and from a security standpoint. And when you have projects and activities, real-world projects where economic and technical feasibility meet and are facilitated by and demand political cooperation, there is just a huge potential for game-changing kinds of relationships. And on the security side that the room mentioned, I was struck when we started our research on the Northern Distribution Network project. And when we went down to CENTCOM and met with a combination of CENTCOM and TRANSCOM, logistics people, I didn't know anything about logistics before this, but was really struck at that time, all of the non-lethal material that was supporting US forces in Afghanistan, non-lethal materials being over 85% of what supports our forces in theater is transited by commercial carriers. And all of it was going through the Port of Karachi and crossing the AFPAC border at the Torquham and Shaman gates, virtually going through enemy territory, the heart of enemy territory. And at that time, they told me that about one half of 1% of what was being transited along that route was lost, was either bombed or stolen or whatever. There was an attrition rate of only one half of 1%, which as they informed me was actually lower than Bayon County, New Jersey, was the stat they used. There may be other counties in the United States where transit is not as safe as secure as the transit of our materials. And that really set off a light in my head, which rarely happens. It's like, wow, so basically you have people on the border who have become convinced that it is more in their interests to facilitate the safe transit of these materials than to prevent the safe transit of these materials. And that it was in their interest that they were secure. And if that's taking place on the AFPAC border at that time, this was six, seven years ago, imagine if you have, you think of a piece of a critical infrastructure like a pipeline or an electricity grid, generation, grid network that crosses borders and where players on both sides of the borders have it in their economic interests, their personal interests, and they're making decisions about what they do. Am I going to go off into the forest or whatever, become a radical? Or am I somehow going to benefit by what these lines of connectivity that provide power, which provides economic development and opportunities for my family, for my friends, for others. And that's a very, very, very powerful motivation, I think, which can turn the security issue in a different direction. So let me stop there. There are lots of people here with far more expertise than I certainly have, and we want to take advantage of Jim and Rune and Craig. So, sir, please identify yourself and then provide your question or comment. My name is Mahmoud Ayyub. My name is Mahmoud Ayyub. I'm with Centennial Group in Washington. My question is to Rune or to Jim. On the assumption that there is successful good progress in the negotiations of Iran on the nuclear issue with five plus one countries and therefore the Iran-Pakistan gas pipeline goes forward, what would be the implications for TAPI project, especially because the Iran portion of the gas pipeline is already completed and it's the Pakistan side that remains to be completed. Thanks. Thank you very much for that question and it is an interesting aspect of the total energy picture for Pakistan. When we talk about the shortage today, the 5,000, 7,000 megawatts on a daily basis, that is all, that's the difference between the supply facilities and what is the demand within the current power system of Pakistan. If we were to add the unserved demand in Pakistan, the one third of the population that is not on the grid today, plus the economic growth potential that is embedded in the Pakistan economy, they can take as much gas as we can possibly pump into the country. There is no competition between these two pipelines in terms of the utilization and what it will do, the first thing it will do is to replace the very, very expensive fuel oil that Pakistan is purchasing today and having trouble purchasing at favorable rates, they're basically buying spot. And I would say from a technical and non-political aspect, get the Iran pipeline up as soon as possible, pump in the gas, get TAPI up and running as soon as possible, utilize the gas and you have a totally different fuel cost picture in Pakistan that will help the balance of payment and the pressure on the foreign exchange in Pakistan it will allow for, and this is why we think energy is so sexy because it is the lifeline of economic development. It is the core raw material for economic development and therefore to unleash the potential in Pakistan, these bottlenecks must be tackled. And on the next aspect is should Pakistan import too much, if there is such a thing, you have India on the other side who is also in the relatively, I wouldn't say they are desperate for the gas such as Pakistan is, but they can definitely also improve their own fuel balance. So in terms of unleashing the economic potential in the region, all of these could work together. There is no competition. Thank you. Thank you very much. My name is Zia Deladad, energy specialist and former director of operations at the World Bank. My question regards the long-term picture and you presented a tremendous picture of what's going on and projectors into the future, both Jim Liston as well as Rune yourself on the gas as well as the power interconnection. I'm looking at Pakistan and if you look at the energy picture of Pakistan in the longer term, admittedly as the Asian Development Bank has often said the World Bank repeat is this and myself have the same view. The integrated energy planning capabilities of Pakistan which were first rate at one time have degraded and the net result is what you see today exacerbated by the problems that you both pointed out very well. But in the longer term, I think you both know that the resources in Pakistan are actually quite phenomenal and it is even the possibility of shale gas which remains unexplored, but the potential is there. Hydro power, 25,000 megawatts of economically available hydro power today of which only 16% has been utilized and the list goes on. Coal, you know, we're talking about the fifth largest find of coal in the world. So taking the longer picture and all your projects, the ones you are mentioning are long gestation periods and even though there's been a resurrection after 2010, which you quite rightly point out, you still have a long way to go. In that time, I assume and I hope that Pakistan will get its act sorted out and will start developing these tremendous energy resources which it has there. So my question is in the longer term and I'm talking about 10, 15, 20 years from now, would your projects, the three major ones plus the power interconnections, would they be reversible if the flows are required the other way? I agree, there's India there too, which is another major consumer, but again, India is developing its resources too. So are these two way streets, can the power as well as the gas be transported back and forth as the supply and demand changes or are we stuck into one modal pattern because the latter would be, I think not very good planning, but do let me know, thanks. Okay, thank you very much for that and I'll take the first part of it and Jim can supplement in terms of the northern part of your question. When it comes to Pakistan in long term, there is no doubt that hydro is the anchor of electricity supply. You are very familiar with Kalabarg. What is it, no 35 years of debate and discussion, it is the prime project for Pakistan from a technical perspective. Pakistan needs multi-purpose hydro facilities that will cater to number one, flood protection, number two, water storage. The water crisis in Pakistan is as big if not bigger than the power crisis and you need electricity. Some of the larger facilities, when we talk about Kalabarg, we talk about Daimur Basha, we talk about some of the further north projects and not only the pure hydro ones like Bunji, for example, the dream of every hydro power man in the world. So Pakistan's future is tremendously, tremendously positive. The problem is decision-making and implementation. The problem is, and if you go back to Tarbella and Mangla, one constructed in each decade and when Tarbella was built, there was a clear understanding in the planning commission of Pakistan, they need a Tarbella every decade and nothing has happened. And no, Pakistan is in a deficit mode and is trying to play catch up and there's all kinds of credible solutions but they are long-term, medium-term at best. We are trying to also help on the short-term but looking at the future, hydro must be the anchor, shale gas, yes, there is potential, coal is gonna be much more expensive than people think. Tar coal is very difficult, it's a challenge, it is not very easy. Now, should Pakistan in the next generation get into, at the end of that generation, get into a surplus situation, then what are the options? I would argue that instead of trying to reverse it back into Central Asia, I would definitely look at the eastern part of China and look at some transmission facilities going that way. In terms of moving, and I'm talking again away from politics, we are technocrats and we don't operate very much in the political stratosphere but assuming that there is a normalization of relationship between India and Pakistan, I mean the demands in Punjab, for example on both sides of the border, there is tremendous opportunities for even looking at peak load curves and flattening out the peak load curves with supplies from either side of the border. So there are other avenues to go as well, not only looking at the reversing but it should be possible to reverse. Right Jim, you're the engineer. Okay, yeah, thank you. We still are going, yeah. So to answer your question, yes, all the electrical facilities are bidirectional. That's your question number one. Number two, there is an immediate bidirectional opportunity whereas we mentioned that Kyrgyz and Tajik have summer surplus and big exporters in summer. In fact, they're in winter, it's quite a different situation, they're in deficit. And this is recently as 2009, there was a humanitarian crisis in Tajikistan when people were dying because of no electricity, no energy. So with the grid that we presented, in fact Turkmenistan by 2018 would be able to supply the winter deficit into Tajikistan through Afghanistan. That's just an example of the flexibility. And Afghanistan will be a net energy importer and net power importer for the foreseeable future, 10, 20 years. But should it get projects moving, it's got hydro potential and then it has got the opportunity to export winter to Kyrgyz and Tajik and of course summer to Pakistan. So it's flexible design, thank you. Hi, I am Don Ritter, I'm president of the Afghan American Chamber of Commerce, I've been involved in Afghanistan since the Soviets invaded, that may be my fault, but. I want to, I think this was a great presentation by the way. Anyway, the government's change and the politics change and many of the people who you work with change, ADB is that constant and the integrity of ADB, the respect and the credibility as you mentioned is so important. But have you, has ADB made any attempt to engage the respective user communities in these different countries by virtue of their major national chambers of commerce, business associations, because this could be a stabilizing force in terms of the different countries and the impact on changing political elites. Has ADB made that attempt? In terms of Pakistan, we have had an ongoing dialogue with the Chamber of Commerce and both the federal Chamber of Commerce and also the industrial Chamber of Commerce is around. We are focusing on energy efficiency and because in the industrial Chamber of Commerce, there's a lot of the manufacturing companies. The problem is that the industrialists today have not understood that they don't need to add another manufacturing production line to make money. They can actually take out the single speed engine that is in the manufacturing today, replace it by multi-speed motors and the payback period is about somewhere between eight and 12 months and after that everything is gravy. So the issue should be on the focus on the cash rather than they want to increase their sales volume and that has been a big hurdle to come through that there's a mental, a certain attitude change related to energy efficiency and that is true in all societies, not only in Pakistan and Afghanistan or the rest of the 10 countries we operate in. It's also true in Europe, it's true here that an industrialist would like to produce more. They don't look at the efficiency gains that they can have, that's number one. Number two, and let's talk, do some straight talking here as well. For a lot of the industries, they don't pay very much for electricity in these countries. And therefore, it is a fixed cost for them. There is nothing to gain, the meter man comes down and he needs his little envelope and he gets his envelope and he walks away and everyone is happy. What is not happy is the system itself because the system doesn't get the money it requires for maintenance or augmentation, expansions and all of that. So there's an economic problem but at the unit financial level, this is a fixed cost. And if there is a fixed cost then there's no financial incentive for the industrialist to change. And again, here we come back to the third pillar that we put up on the Pakistan presentation which goes on the governance aspect of the sector which is linked to metering, billing and proper tariff mechanisms that are being set in the country. So yes, we are working to answer your question directly. We are working with these associations but we don't see the enthusiasm to tackle the problems because they are liking the subsidies and the subsidies make them more money. And the ones that are supplying the Fortune 500 companies are totally self-sufficient already. They have their own water systems, they have their own power systems. You can actually go inside their compounds, lift it up and place it in any country in the world and they will still be extremely high quality producers of the goods they do. And they are independent. So most of them are not even on the grid anymore because they cannot rely on it because there's two things with grid power for the industrialist. One is that the supply but not only the supply on the hours of the day is also the quality. For those of you that know Pakistan, the textile industry is very big. And the good old textile mechanical machinery could see the 50 hertz drop to 47 hertz and still clunker and work. Today, the new machinery is run by chip technology and as soon as you drop down to 49.5 hertz, they conk out. And that means that you have stop in production, you have to restart and these restarts are very expensive. So the quality of supply is probably as important as the number of hours you have supply. So you have two problems for the industrialist and the ones that can afford it, they go off the grid and they have captive arrangements and then we lose them. So then the debate is not really with them. But there are also business associations in Pakistan that has put together plans for the government to adopt on the power side and we have been working with them on the development of their plans as well. So good interaction in Pakistan, Jim. Yeah, maybe the situation in Afghanistan is a little bit different from Pakistan. First of all, there isn't an industrial base. The demand is domestic and the hunger for power is palpable. When I visit the utility dabs, there's a line of people out there wanting to get connections. People want supply and they will pay the tariff, I mean, maybe it's not quite cost-reflective, but it's 10 cents, but you know, what are in terms of that region, I mean, it's among the highest. And people are really want electricity. So of course, ADB, we have our regulations when we're financing and construction, we are obliged to consult with society organizations and ensuring safeguards and compensation to affect the persons, et cetera. And you know, the huge demand is make the project, get it in there. You know, this is there, this is the message we're getting back from the population. And it translates into Taliban do not blow up the assets. The transmission lines, if you look at that line there, they have been built. It's a simple matter to blow this up, but they don't do it because even Taliban needs some kind of support. And you know, it is so much wanted by the population. The master plan was presented at a public forum, I'd say it was 500 people, power parliamentarians, civil society organization, donors, everybody. And you know, the message, make it happen, build it, get it done. How soon can you do it? How soon can you get connection? So, you know, I mean, it's fantastic opportunity to be working to try to meet that demand that people want and they will pay. Thank you. By the end of the year. Well, I'll be ready to talk about that. Well, the easy answer is that that's a different region. But of course, we have different delineations. No, India, we are very active, have a very large energy program. In my earlier years, I worked in both Madhya Pradesh and Gujarat province. India is very large, as we all know. The World Bank and ADB did a division of labor. We took some states, they took some states. And the issue is the same. You work with the Federation in terms of the industrial as well as the business communities. And the hard part is to convince them to pay the tariff. I mean, let's talk about the basics. You have a service delivery. If you wanted to be permanent 24, 7, 365 days, you got to pay the cost of supply. Gujarat province is a fascinating place. The politicians were very smart and say agriculture zero tariff. Number two, in 1986, the government said, well, let's knock down all the meters for the agriculture because we don't need to know how much they use. Very nice. So when we came in, the state government found themselves faced with a $1 billion a year deficit in the power sector, which took away the whole budget. We meant that the politician couldn't do anything. They were absolutely handcuffed and said, we cannot do this anymore. We need money for our social projects. And we said, fine. The first thing we wanted to do is to look at the classification of customers. Sounds very simple, right? So then you start looking and it's like, oops. Suddenly, 54% of the number of customers are classified as agriculture. I like I have very much. And since he's my body, I classify him as agriculture. He has an industrial concern in his backyard, but he has three rows of potatoes in his front yard. He's agriculture, right? So when you do that, when you start to look at the fundamentals and trying then to work with these people who sits in the federations, it's a bit of a challenge because this is a direct impact, short-term impact on their wallet, but not long-term. So those that understand it and in Gujarat, we were very lucky. The Industrial Chamber of Commerce was a major part in the change to, number one, get the regulator established, get the regulator independent. And what is saving Gujarat is that the farmers, they were not pumping water out of the ground anymore. They were mining water because it was free of charge, right? All the pumps were running free of charge. And what happens when you go far down enough on the water table, what do you find? Salt. So you take the salt water up, put it out on the produce that you're trying. What happens to your harvest? It dies. So suddenly the big farmers realize that we are actually killing our own crops. So we need to stop this. This doesn't work. So in a perverse kind of way, the market mechanism worked, but it was a cost that was way too costly for the provincial government. But there are challenges working with the chambers because the immediate business interest is that subsidies are good, free electricity is even better, and we make more money. So, but the point is, yes, we need to work with them and we need to convince them. So you work on the technical side, you work on the governance side, and you work on the customer and client relationship and understanding. Very important. Thank you. Okay. If I could have one note on that. Some corporate speak. Last year, 18% of ADB's operations were private sector related under our strategy 2020. That's supposed to move up to 50% by 2020, both in terms of value, as well as the number of investments. And as a matter of course, for any private sector operation, we engage with chambers of commerce, business associations, business people, banking associations, what have you. So yes, there's active collaboration. And thank you for your support for ADB over the years, both as a member of Congress and for me in Afghanistan through the Afghan-American Chamber of Commerce. Okay, we're entering the last quarter, so to speak, about 15 minutes left. Lots of questions. We're gonna move to the back of the room. We're gonna collect a couple of questions, comments at a time, okay? Gentlemen, holding the white piece of paper has been waiting patiently for a long time. My name is Farooq Subhan. I'm the president of the Bangladesh Enterprise Institute and the current chair of the South Asian Regional Initiative on Energy Cooperation in South Asia funded by USAID. And I can assure you that a lot of our time and attention has been focused on TAPI and the future of TAPI. I have three questions on TAPI. One is, is there now an agreement on the pricing of the gas both at the start of the pipeline, meaning how much do the Turkmenistan government want and what will be the price of the gas when it reaches India? Number two, have you addressed the, and this was raised by Andrew, the security aspects of the pipeline. Is that a part of ADB's portfolio? Are you leaving this to the governments? And finally, the financing of the pipeline. I think you ended off by saying, if I heard you correctly, roughly $8 billion. Where's this financing coming from and how much progress have you made on the financing of the pipeline? And my final footnote is Bangladesh has formally applied to become a member of TAPI. And my understanding was that we are now on board. Is that correct? Okay, now just for clarification, that was one question, it was one three-part question, because each person is only allowed one question, okay? And no footnotes. Okay, gentlemen, over here in the back of the room, sorry. Yes. Craig Karp, I'm a consultant for the UN Economic Commission for Europe. I want to remark that the Kyrgyz and the Tajiks are very, very eager for the CASA project. And I know there is a tariff gap there. Has the ADB been looking at non-traditional ways to close the tariff gap, including possibly climate change funding? The other panel. Pricing of gas, security of pipeline, financing, and is Bangladesh part of TAPI? TAPIB. And of course, the last question about the question of tariff pricing for CASA. Thank you, Andrew. I'll take the questions from Mr. Farouk on the TAPI. There is an agreement on pricing between Turkmenistan and the three buyers. The price negotiations, we drafted the documents, and then we were thrown out of the room. And they said we will discuss prices among ourselves. And we thought that was absolutely fantastic. We have no reason to be in the room when the countries are making progress. And we have done our job by facilitating them coming together, drafting documents, and their own commercial sense for pluses and minuses. We were very pleased to stay away from those detailed negotiations. What's important for us was that agreement was reached and signed. And I cannot share with you the prices because I actually don't know them. We have, they are not public. The security of the segments inside each sovereign country is the responsibility of the country itself. As I said, ADB has done several security studies, both in Afghanistan and Pakistan. I mentioned Pakistan using the storage facilities of depleted fields. The volumes have been discussed and looked at in terms of what's available and how much it would cost to prepare the fields for storage. And also in Afghanistan, in terms of the approach to the security, the government has said that they will use their paramilitary troops to secure it. And is also expected that there will be some local arrangements that Andrew mentioned in the first place to involve the local communities. The financing, this will probably come across as being a little bit cocky, but it is based on the dialogue we have with the financing community. And that is that money is not a trouble. Money is not a problem. There will be money for this. There will be two things that this will be based on. One, it will be the credit enhancement facilities that are linked to the financing. And also, the excitement of being parted to such a project by the financial institutions have been quite surprising to us when we did the roadshow, as well as individual discussions we have had with the large financial institutions afterwards. So there is a clear appetite in the financing market to participate. But some of the fundamentals that we are working on now will be the platform that they are looking at before they come in with direct financing. On the Bangladesh issue, Bangladesh sent an application to the Asian Development Bank to be part of TAPI. We requested the government of Bangladesh to approach the seller, which is Turkmenistan. And up to date, Bangladesh is not a member of TAPI. So there is no TAPIB yet. Hi, Kyrgyz and Tejik are very keen to expand their markets for their summer surplus. Kyrgyz today exports to Kazakhstan. So it's got a single bar. So it is keen to have a market access to a market to the south. And Tejik has no market. It is spilling the water. So these two countries are big supporters of Kazakhstan. Actually, we also believe they are big supporters of TAP. It being the same technical solution to enable sellers to meet buyers. The commercial discussions are ongoing. ADB is not party to the commercial discussions. This is a World Bank-led initiative. We understand that they are at the advanced stage. The exporters will receive a tariff per kilowatt hour for exports. Added to that is a common transmission charge for which all users will pay. Then there are transit fees for Tejikistan and to be received by Tejikistan and Afghanistan. And the concept is that the landed cost of electricity in Pakistan should be less than the avoided variable operational cost. And all of this indicates a commercially viable project, albeit for five months per year. So the actual figures are the negotiations are going on probably as we speak, but quite imminently. So maybe watch that space and see the conclusion which should be public maybe in the near future. Financing, there is a financing gap between the approved funds and the approximately $1 billion project estimate. And again, this is something that World Bank are negotiating with a number of financing sources. Thank you. I just remind you, tomorrow morning, we will have a lengthier discussion of CASA and TUTAP. And the World Bank representative will be here to talk about that and maybe be able to shed more light. Yes, we'll come up for two questions toward the front right here. And then. Thank you. Bill Jorn is my name. I serve on the board with Don Ritter of the Afghan-American Chamber of Commerce. We blame him for a lot of things, by the way, not the Soviet actions. We're very interested in free market economies and private sector development. So I'm wondering, within the scope of these plans and programs and procurement processes and so forth, what assurances can be made that local companies, such as in Afghanistan, construction, supplies, services, communications, and so forth, will be given a fair shot at the work that will be contracted out. Hi. David Sidney, a former with the State Department, Defense Department. It was interesting, the comment you made about financing. And at the same time, you laid out a pretty bleak picture for cost recovery or income from Pakistan in the energy sector. I'm wondering how you square that. Why are people going to be willing to finance this? If the likelihood of getting real revenue from Pakistan is bleak, at least I took your question to be. Thank you. I'll take the last question, and then we'll come back on the procurement in Afghanistan. Very interesting. Let's see if we can do some economics 101. Right now, go back to the bullet point, where it says 35% of fuel supply or the fuel mix today in Pakistan is fuel oil. It's exceptionally expensive. Therefore, it cost them 75% of the total bill for electricity or the fuel cost. The picture, we need to change it. And when we change that picture, then the difference between the determined tariff and the notified tariff with the government will go. The determined tariff will come down because the fuel source will be cheaper using gas rather than fuel oil. So the requirement for subsidy will be minimized. The subsidy is never paid in Pakistan. So the thing here is to come down and try to get rid of even the concept of a notified tariff by the government, get rid of it, and go by the determined tariff by the regulator. That will only happen in the political space when these figures are as close to each other or hopefully identical or the determined tariff. The new determined tariff is below the old notified tariff. So when you get the cheaper gas, not the cheaper gas, the gas that is cheaper than fuel oil, when you get that fuel mix change, then you will get the impact on the tariff and you get down to a non-subsidized point. And therefore, you have fuel cost recovery. So that is how we square it. And it's very interesting to run some of the small models that we have put together to make sure. And the thing with electricity, it is unit cost-based. And suddenly, when you talk about 100,000 gigawatt hours, then a unit cost-squaring then have massive impact on the subsidy requirements on the national budget. So this has not, as I said in the beginning, the question you raised is not an energy sector question, it's actually a fiscal space question for the government and therefore it's so important to get the fuel mix right in Pakistan. The second, just to add to that, since this is a crucial pillar for us, the pillar number one was tariff, is then to also say coal-fired power is so much cheaper than the imported fuel oil. So you get gas into the equation and hopefully a properly priced gas. And let's not open that can of worms but just leave it there. And then we look at the coal-fired, which is the cheapest possible source right now. And then you have a situation in Pakistan where actually the tariff, that is the determined tariff today can drop down to a level where the notified tariff square and then there's no need for subsidies anymore. Thank you. I can be quick on the Afghan local business opportunities. There is weak capacity in Afghanistan. Of course, bidders, these are open international competitive bidding projects and international companies try to minimize their exposure to security risks in Afghanistan by maximizing their local component. And this is what is happening. Over our projects in the power sector, we find that there is an increasing component of local companies as they build up their capacity. But we do not specify a minimum local component. At this stage, the market is evolving and right now we're trying to get competitive bids. It is improving. In some years ago, it was difficult to get bids at all. So putting restrictions on bidders was going to jeopardize an already difficult situation. But as I said, the situation is improving. There is a growing local capacity, but it's weak. OK, sports fans and music lovers, we're in the two-minute morning now and we're not going to go into sudden death. I care too much about these guys. And as they said, it's the love bank. David, you weren't here at the beginning. Do you see Miss that? Next. Yes, right here. And then the gentleman next to him. And then right here. And then we're going to have to take those three. So can my record world docs? According to the bank maintenance integrity, I assume the bank is beholden, as we all are to a certain extent, to the people who provide our funds. What are those entities? And have they made it difficult for the bank to maintain their integrity in the past? For instance, Afghanistan has promised to secure the pipeline in its territory, but our government seems to insist that American troops be in place to provide that protection. Except by the time the pipeline is built, there will be no American troops. So yes. Jerry Brown, Institute for Economic Stability. Great presentation. Thank you very much. I'm wondering if the folks from the bank have looked at the, if you look at the 30% of people who have electricity in Afghanistan. If you look at offsetting the economies of scale from generation, from big projects, versus getting that electricity to the last mile in some of the places you're going to run through, Farah, Hellman, et cetera, have you compared that in terms of total cost of and cost recovery for distributed models versus kind of traditional, you know, big generation, big transmission, distribution that doesn't work? Rajendra Kumar, I'm a small business and it's an excellent presentation. And this, if completed, would be a boon to all the small industries in India which currently rely on diesel gas for power generation. The question I had was what happens if for some reason the gas is not delivered at the end point? Is there a penalty or how does that work? Okay, I just hit on the Afghan questions. The integrity, let's say you were talking about the integrity of the assets that are built rather than the integrity of the business procurement process. Will the assets remain standing? As I mentioned, country to all concerns and risks. In fact, the assets are not attacked because they are wanted so much that even Taliban do not attack. So in terms of the assets, they have not been, they have been, experience has been very good. Regarding off-grid, we are not looking at a grid supply to the 86% of the population by 2032. This is not viable. We are looking at a one billion dollar series of investments over the next decade and that includes imports and some generation, but a sizable component, maybe 20% of that is for off-grid supply to communities that will not, are not expected to receive grid supply in the medium future and these communities cannot be condemned to darkness. So in consultation, as all our projects are with the government, we are allocating maybe 200 million to off-grid supply, which would be solar, wind, hybrid, local units, thank you. Answering the last question, in terms of penalties for non-supply of gas, if you're talking about a TAPI pipeline, there are commercial terms being drawn up. The concern that we have had has been much more on forced majority events rather than a commercial non-supply. If you look at the supply in the pipelines that Turkmenistan has today, they are quite good. So that history and that experience is not the major concern. The concern has been on forced majority events, which means that the storage in Pakistan is very important, that there is an inventory of gas available, so we don't have, so the ISGS or Suinadan in Pakistan or Gail in India have access to gas, so it makes it uninterruptible for the end customer, very important for us. Ladies and gentlemen, unfortunately, we must conclude this game. The good news is that we have another game tomorrow morning, nine o'clock, same time, same place, same bat channel. We'll be discussing in greater depth, two TAP and CASO 1000. If you've not RSVP to that event, you can do so at rep at csis.org. Speaking of the website, if you somehow didn't quite capture every piece of information that was conveyed today, the presentations by Rune and by Jim will be up on the csis website shortly. And of course, for further information about anything virtually having to do with energy and economic development and love in Central Asia and South Asia, Asia at large, consult the ADB website, the ADB website, particularly the CARIC site, is chock full of all kinds of useful information. So with that, let me thank very much Rune and Jim for their fabulous presentations and thank Craig for co-sponsoring the event and hope to see some of you tomorrow morning. Thank you. Thank you.