The Treasury is about to release a highly critical study of the World Bank's energy lending program concluding that the major part of resources for energy development in the Third World should come from the private sector. It specifically calls on the bank to change practices that it says encourage the displacement of "private efforts."
Existence of teh 63-page Treasury report, which supports the Reagan administration decision to oppose a separate energy "affiliate" for the bank, was revealed in a Washington Post interview with Treasury Secretary Donald T. Regan published July 16. The document formed the basis for the U.S. position on energy development taken at the recent Ottawa economic summit.
The Treasury analysis also says that the demand for energy underlying the bank's current lending program is based on higher levels of economic growth than appear likely in both the industrialized countries and Third World. The report contains four basic conclusions:
Expansion of energy production in the less developed countries (LDCs) can contribute to growth and reduce pressure on world oil markets if done "on an economically sound basis."
As in the past, the bulk of resources for this expansion "must . . . come from the private sector."
The bank's role should be to encourage host contries "to remove impediments and adopt policies which facilitate private investment in energy development."
The bank "can, and should, structure its lending to maximize its 'multiplier' effect on private investment."
The report, prepared by Assistant Secretary Marc Leland, was triggered by the energy affiliate proposal initiated at teh Venice economic summit of 1980 and endorsed by the Carter administration. Opponents in the Reagan administration backed away from a commitment to the affiliate and commissioned Leland's report "to provide a factual basis" for U.S. policy on the World Bank's expansion plans.
According to the report, the bank proposes to increase its lending for energy development in the LDCs from $14 billion in fiscal 1982 to $30 billion in fiscal 1986. The expanded program would be divided 43 percent for electric power, 34 percent for oil and gas exploration, 8 percent for coal, and the balance for wood, alcohol and industrial retrofitting and refineries.
In what amounted to a total rejection of the proposed coal program, the report said that if it were carried out, the bank would create a greater increase in the supply of coal than demand (7.3 million tons versus 3 million tons), "possibly resulting in decreased LDC demand for coal from the U.S. and other exporters."
The report said that there could be significant LDC discoveries in the oil and gas sector, but that the way to realize the potential is through private company investment. The "most significant impediments to expanding private investment" are host government policies -- an area in which the bank could help, the report said.