Challenges in public services delivery

Challenges in public services delivery

Yanuar Nugroho

Clean water, health care and access to energy are the three
most essential of basic human needs, with education perhaps the
fourth. All people are entitled to these things. Yet the reality
is completely different, with people around the world having less
and less access to what are basic human needs.

According to the UN, there are 1.2 billion people worldwide
who live on less than US$1 a day, 113 million children who do not
attend school, 11 million young children who die every year and
more than one billion people who still lack access to safe
drinking water (UNDP, 2002).

It is obvious that these marginalized people should be the
highest priority for public services. Otherwise, the situation
will simply continue to deteriorate.

But public services for many of the world's poor have become
more of a dream than a reality. The agenda of public sector
reform in developing countries is being radically changed within
G-7 governments, the multilateral lending institutions they
control and transnational corporations that influence both
groups. Disappointment with decades of foreign aid has
transformed that agenda into a debate about how -- rather than
whether -- to privatize basic services (CNES, 2002). What is the
argument for privatizing basic services?

The World Bank says, "In low-income countries, poor people
have very limited access to modern infrastructure. In particular,
where state sponsored systems do not reach many people, the only
alternatives for poor citizens are private forms of service
delivery" (World Bank, 2002).

This is a very serious flaw. As most of the poor do not even
receive basic utility services -- like water or electricity --
such a policy will only make matters worse. In other words, it is
no different from allowing poverty to continue for the sake of
"market" principles. Why? Because basic services are commodities
in the eyes of market systems.

Take water, for example. The World Bank predicted in 1998 the
water market could reach $800 billion, revising this projection
to $1 trillion in 1999. It seems that water in the 21st century
will be as valuable as oil was in the 20th. We must take a wider
perspective to understand the motivation behind privatizing
services: international trade in commercial services was valued
at $1.35 trillion in 1999 -- about one-quarter of the global
trade in goods -- up from some $400 billion in 1985 and from $1.2
trillion in 1995. Moreover, services account for 60 percent
(about $210 billion) of annual foreign direct investment, much of
which is connected with the privatization of state entities. How
does this take place?

First, indirectly, rich countries in their role as major
shareholders in International Financial Institutions (IFIs) push
the privatization of services. So-called Structural Adjustment
Programs (SAP) are the toll road for rapidly privatizing
services.

In Indonesia, for example, the government sought budgetary
assistance from the International Monetary Fund in October 1997
and agreed to overall macroeconomic adjustments that were
mandated by the IMF, the World Bank, the Asian Development Bank
and other donors. In exchange for a $46 billion bailout package,
the Indonesian government is required to restore its balance of
payments and implement critical policy reforms, including public
sector expenditure (subsidy cuts), privatization of state-owned
enterprises and the expansion of private sector participation. To
support this, the WB and the ADB have provided loans that are
tied to a number of mandated reforms through an integrated
package of adjustments, as shown in the table below.

Second, directly, the privatization of public services is also
being pushed through bilateral aid programs, especially through
pressure on developing countries in the World Trade Organization
to include their utility sectors in the General Agreement on
Trade in Services (GATS). Particularly under threat from this are
public services -- health care, education, energy, water and
sanitation. GATS sets out rules governing international trade in
all services, never defining what it means by "service". GATS
makes no distinction between public services and those provided
on a for-profit basis. Thus, GATS is both ambitious and
ambiguous.

Although GATS seems to make exceptions for public services,
i.e. those supplied in the exercise of governmental authority,
such as health care, education or utilities, it defines
government services narrowly as any service that is supplied
neither on a commercial basis or in competition with one or more
service suppliers. So, the exception is for the most part
meaningless in practice.

If a government contracts out any part of its public services
or if private companies supply services also provided by the
government, then those services could be ruled by a WTO dispute
panel as not being a government service and thus subject to GATS;
that is, subject to competition from operators from abroad. As a
result, companies can gain access to a wide range of public
services in many countries, particularly utilities (water,
energy, health).

These explanations constitute the main reason that hiding
behind IFIs and governments, transnational companies in developed
countries have extraordinary power to influence poor countries to
open up traditionally government-operated sectors such as water,
energy and transportation for their own benefit.

It is all a fait accompli, there is no other option but say
"yes" to public services privatization in most developing
countries. The decision to privatize, moreover, is not regularly
subject to public discourse. Even elected representatives are
often unaware of detailed plans to reduce or eliminate the role
of government in the provision of basic services.

Up to this point, we might have seen the challenge for the
near future, i.e. whether the provision of public services will
be brutally taken over by private companies, left in government
hands or a combination of the two. Let us look into this matter
further.

First of all, of course, there is no absolute good and bad
inherent in any approach. The public services delivery of the
centralized government has both successes and failures. Thus the
framework for the provision of such services should consider all
stakeholders without exception, i.e. those who have both power
and interests -- public agencies (including donors) as
policymakers, the market (including the private sector) as
providers, and communities as users. The failure to establish any
of these relationships can result in overall failure.

In this light, systemic or institutional reform (as opposed to
mere managerial reform) of public services might be difficult to
achieve for several reasons. First, there is history, politics
and social norms. Second, it changes the power relationship among
the key actors.

Another aspect of the debate over public services is if they
have to be financially self-sustaining. This is by no means a
technical issue. People pay for goods and services through taxes,
rather than -- or in addition to -- direct fees. We might be able
to agree that water or electricity should not blow a large hole
in the national budget. But there are always options between
fiscal chaos and full-cost recovery.

This also applies to education, which is a public good:
society in general is better off because its people are well-
educated. But if that is the case for literacy, it is no less the
case for access to water or electricity, which are critical for
public health and economic productivity.

Thus, solutions for the provision of essential services are
political choices, not technical imperatives. And this is
precisely the arena of struggle. Privatization alone is not
always good, which is also true of government-led public
services.

Certainly, the provision of public services will play a
significant role in building up the nation -- and this will
require our concern and support. Beware, however. Within the
worldwide logic of a "global market" never let "consumers"
replace "citizens", as this would indicate the surrender of our
public sovereignty to market domination.