Essential services in 2003: Who owns (and thus, trades) our life?

Yanuar Nugroho Director The Business Watch Indonesia

Life is a game of power. The powerful rulers have their power not because others want it, but because the former use the latter for their own benefit.

Despite its bright side, globalization, in one or many ways, has been creating the imbalances between the powerful, who benefit from the increasing share of our world economy, and the powerless, who suffer from it. Will the year 2003 become known as the year when these imbalances start to be become more equitable, or get worse?

Around the globe, poverty as a consequence of inequality seems to have been the major problem over the past three decades. But, thanks to the globalization, The World Bank reports that the situation is getting better. According to the Bank, there has been considerable progress in improving human well-being, as measured by human development indicators. Average income per capita (population weighted in 1995 dollars) in developing countries grew from $989 in 1980 to $1,354 in 2000. Infant mortality was cut in half, from 107 per 1,000 live births to 58, as was adult illiteracy, from 47 to 25 (The World Bank, 2002)

At a glance the numbers seem impressive. But wait -- do not be confused by the bombastic, major statistics, because in a micro perspective, the reality is more than bitter to swallow. In a country like Indonesia, the Bank also reports that absolute poverty (those who live on less than $2 a day) was reduced to 13 percent of the population, and only 13 percent of the population above 15 years was illiterate. An improvement? Perhaps, but do not forget: infant mortality is at 41 per 1,000 live births, child malnutrition made up 24 percent of total children under 5 years, and access to improved water sources was only 74 percent of the population (ibid).

Tabel 1

And when we go into the more detail we have to see other shocking facts, especially in the area of the-so-called essential services. Most related services to the poor are seriously neglected. The UNDP reported in 2002 that with two-thirds of the population below the poverty line, people in developing countries lacked access to the basic human needs -- 60 percent lacked basic sanitation, 33 percent had no access to clean water, 20 percent lacked access to health services and 25 percent lacked adequate housing.

Tabel 2

The most basic needs, which include water, healthcare and power (energy) -- among other services (education, banking, tourism & waste management) are all crucial and lacking in most cases here.

One: Water. No doubt, it is increasingly scarce. Fresh water consumption is rising quickly, and the availability of water in some regions is likely to become one of the most pressing issues of the 21st century. One third of the world's people live in countries that are already experiencing moderate to high water shortages. That proportion could (at current population forecasts) rise to half or more in the next 30 years unless institutions change to ensure better conservation and allocation of water. More than a billion people in low- and middle-income countries -- and 50 million people in high-income countries -- lacked access to safe water for drinking, personal hygiene, and domestic use in 1995. The number is not getting better until recently.

In a city like Jakarta, the capital city of Indonesia, for example, only 600,000 (i.e., less than 5 percent) of the city population have access to water supplies from the official water firm (PDAM). Moreover, around 70 percent of the population has to meet their needs for water from low or deep wells and the rest from river (The Jakarta Post, 14/9/02).

Yet, in this situation, the exploitation of usable water does not seem to slow down, let alone stop -- it continues badly, in all countries around the globe. In front of official institutions like The World Bank, the danger sign applies only when the exploitation is environmentally targeted. The Bank reports the worst happened especially in countries where the natural resources were desperately being exploited (The World Bank, 2002).

Tabel 3

But, although the Bank has noted that many "lacked access to safe water", it forgets to address that now many more lack access to affordable water since water exploitation also happens in other forms: commodification -- of course propelled by such policies like privatization -- which make the situation even worse. Fortune magazine predicted that water would be to the 21st century what oil was to the 20th. With annual revenues of the water industry estimated at some US$400 billion, 40 percent of the oil sector and one-third larger than the pharmaceutical sector, water is becoming a very precious tradable commodity that determines the wealth of nations. And the poor will be simply marginalized -- if not forgotten -- by a lack of access to affordable water. It might be noteworthy; in 2003 the price for clean water provided by PDAM (which is set to privatized by then) will increase around 20 percent to 29 percent from its current price starting in January 2003.

Two: Health. Nowadays, more than 11 million young children die every year (from 15 million in 1980), the risk of dying in childbirth is one in 48 in developing world and HIV/AIDS, malaria and other diseases have erased a generation of development gains. Thus, the targets of healthcare provision worldwide, according to the UN, are (1) reducing child mortality and under-five mortality by two-thirds (2) improving maternal health and reducing maternal mortality by three-quarters and (3) combating HIV/AIDS, malaria and other diseases.

Yet, there is a contradictory fact: from 1975 to 1996, 1,223 new genres of medicines were developed, but only 13 genres were intended to cure deprived people from major tropical diseases. In 1998, from the total budget of US$70 billion allocated for research of the giant medicine corporations, only $300 million (0.43 percent) was allocated for AIDS vaccine research and $100 million (0.14 percent) for malaria medicine research. The biggest portion of the production cost was allocated to the research of cosmetics, obesity and other "vanity" drugs. How can this be explained?

The healthcare sector has suffered from the same illness of water which has largely been privatized, but with other -- and yet less provocative-terms, i.e., decentralization of healthcare service. It means, under the GATS (General Agreements on Trade in Services) which is aimed at increasing trade in services, healthcare is considered a trade sector, not a public service -- thus with no goals to improve health or social equity. With decentralization of healthcare, private health providers do not aim to provide health care to society, but health products and procedures to individuals.

As for Indonesia, the National Household Expenditure Survey (Susenas) found that although illness rates rose during the crisis, outpatient visits to health service providers fell by 23 percent (1998) and contacts with public facilities fell most sharply, by 28 percent. Visits to private providers fell as well, compared to the situation before the crisis. The decline in utilization rates for public facilities was larger in rural areas than in cities and seems to have extended a shift in visits from public to private providers which was underway before the crisis -- this reached 10 percent in 1997 (Saadah, et.al., 2000). Meanwhile, recourse to self-care increased, with the share of households receiving no medical treatment when sick highest amongst the poor, i.e., those in the four lowest percentiles of the expenditure distribution (The WB, 2000). Three: Energy, or power sector. In spite of significant increases in electrification in developing countries, over 50 percent of the world's rural population still does not have access to electricity. While on one hand energy is essential for sustainable development, on the other hand the poor are disproportionately affected by lack of access to safe, affordable energy services.

Tabel 4

In Indonesia, while the fuel price will increase by 15 percent in early 2003, the price for household electricity (up to 450VA) will rise by 5 percent to 22 percent at the same time, and electricity prices will increase once every three months from 2 percent to 20 percent each time. This is because the government, in return for its bailout loans, is being asked to carry out IMF structural adjustment reforms, and The World Bank has a policy of gradually withdrawing subsidies from the power sector. What are the arguments?

Energy subsidies, the bulk of which are directed to fossil fuels in both industrial and developing countries, entail economic efficiency losses. But they also have highly deleterious effects on the environment, some reflected in higher economic costs. Subsidies to fossil fuel and nuclear energy in Organization for Economic Cooperation and Development (OECD) countries totals $71 billion annually. The WB then simulates the effects of removing the subsidies -- either for individual countries or the world -- but all find significant environmental benefits in reducing CO2 emissions. And most studies that look at the economic effects also find real GDP gains (The World Bank, 2002).

Tabel 5

Yet, it seems something is forgotten, that to a great extent, subsidies are currently still needed to help poor people in developing countries, even though subsidies of fossil fuels reduces the incentive to develop renewable energy sources. It is true that while dismantling perverse subsidies may be good for society, some groups will lose in the short term. For example, the effects of removing energy subsidies in industrial countries often can involve a significant loss of jobs.

The typical mode of service delivery, centralized public- agency production, has had successes and failures. Thus, it has to be improved. No doubt. However, in this era of globalization, the pendulum seems to swing from one extreme to another. The privatization of public services -- regardless of its names or terms -- looks to have a single logic: establishing a global public service market where public services are treated as commodities, sold and traded freely. Of course, this is another extreme.

Public services would be great if third world governments could deliver to the people, instead privatization seems the best way for it to get done, while corrupt, ineffective governments fail. Thus, it should be funded, managed without corruption and governed orderly -- this is the only direction in forthcoming years for public services policies and management. If not, our res-publica will surrender as it will only be owned and traded by those in the res-privata.

The writer is also a lecturer at Sahid University at Surakarta and a researcher at Uni Sosial Demokrat Jakarta.