Building Partnerships for Aid Effectiveness. 1. Introduction

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1 Building Partnerships for Aid Effectiveness 1. Introduction I would like to begin by expressing my gratitude to the Ugandan National Academy of Sciences for according me the honour of addressing this important conference. I would also like to commend the National Academy for the important contributions it has made to research in the field of public health, notably in the area of malaria control. Improving public health is one of the most critical challenges in Africa today. Africa still lags behind most other regions of the world in key indicators of health status and most African countries are not on course to meet all of the health related Millennium Development Goals (MDGs). Since the start of this century, efforts to boost the volume of aid flows to developing countries have been accompanied by increasing attention devoted to issues of aid effectiveness. Major global resolutions such as the Paris Declaration and the Accra Agenda for Action have enshrined best practice principles for aid effectiveness. In the health sector, the International Health Partnership (IHP+) was launched in 2007 to put these principles into practise; 25 African countries are members of the IHP+. Despite these global initiatives, there remain profound concerns on the part of both aid recipients and aid donors that aid is not as effective as it ought to be. Enhancing aid effectiveness is particular important for the health sector in Africa because aid makes a large contribution to the total quantum of funds allocated to health services. In Uganda, 35 percent of total resources spent on health services originate from the development partners. My aim is this address is to examine what the basic tenets of economics can tell us about how the relationships between the various different actors involved in funding and delivering health services should be structured and what this means for partnerships between governments, aid agencies, civil society organizations (CSOs) and private sector companies. I will focus on the 1

2 relationships and partnerships within developing countries, although I appreciate that important issues also arise which pertain to the relationships at the global level; for example those involving aid agencies, multinational pharmaceutical companies and private philanthropic agencies. 2. The economic characteristics of public goods Any discussion of the optimal modalities for planning and implementing health services must start with an understanding of the economic characteristics of these services. Health services are classic examples of public goods. What defines these services as public goods is that the social marginal costs and benefits of consuming health services differ from the private marginal costs and benefits. An obvious example is the vaccination of children against communicable diseases; another is the control of malaria. Furthermore, consumers, for the most part, lack adequate technical knowledge with which to make informed decisions about the best course of treatment that they should seek or to evaluate the quality of the health services that they receive. For these reasons, the market mechanism does not bring about an optimal allocation of health services. Consequently, a high degree of centralized public planning is unavoidable if public goods such as health services are to be allocated in an efficient manner. That does not mean that the market can play no role in allocating resources in the health sector many health products are sold in the market but it should be a secondary role. The primary responsibility for determining the allocation of resources to the health sector must lie with the government, even if the implementation of health service delivery is decentralized and involves many non government actors. 2

3 3. Challenges for aid effectiveness in the health sector A pertinent characteristic of the health sector in Africa is the multiplicity and diversity of actors involved. The health sector is very fragmented, and its diversity is probably more pronounced than that of any other sector which is a significant recipient of aid. The diversity applies at the global level, where many different donors, both official and private, with different objectives and financing modalities, fund health services in Africa. It also applies at the national level in Africa, where in addition to national governments, there is a very large private sector involvement in delivering health services which includes CSOs such as not-for-profit health providers and health providers who offer services on a purely commercial basis. Many of the CSOs involved in providing health services receive funding from donors and/or subventions from national governments in Africa. Traditional healers also play a role, especially in the rural areas. This diversity and multiplicity of actors in the health service has advantages; for example, the private sector can complement the public health service by widening the scope of health services available to the public. But it also has consequences for the overall efficiency of health services and for aid effectiveness. If all of the diverse actors involved in the health sector operated in an uncoordinated manner, following their own particular priorities, or the priorities of those who fund them, the result would be a very inefficient allocation of resources. Some services would be duplicated, other vital services might not get provided at all, and scarce resources could be misallocated to services which are low on the list of public priorities. There also might be an inefficient geographical distribution of services. There is no feasible way to allocate resources in a decentralised manner, using either market or non market mechanisms, which could avert these problems. Hence it is essential to have a centralized national system for determining strategic priorities and for planning the allocation of resources to best meet these priorities. The more comprehensive is such a national system, in terms of the share of total resources and actors 3

4 which are brought under its umbrella, so that the different actors align their own activities with national priorities in a coordinated manner, the more efficient will be the overall allocation of resources to the health sector. This is not to argue that Government planning is perfect, which it clearly is not. What I am arguing is that the provision of health services will be more efficient and aid to the health sector more effective if all of the actors involved were to support and strengthen national systems for planning health services rather than ignore these systems and act according to their own individual preferences. The fragmentation of the health sector in Africa also impedes the creation of stronger integrated and sustainable national health systems, which are essential for improving public health on the continent. For example, some international donors fund vertical health programs which focus on a single or limited set of communicable diseases. These programs are often successful in terms of their specific objectives but they also often draw scarce national resources, such as professional health staff, out of the public health service because they offer much better remuneration, leaving the public health services seriously short of staff. Weaknesses in public administration are often cited by aid donors as reasons for their setting up of alternative structures, outside of the public health system, for spending their aid. But this is not an efficient long term solution. Instead donors should support efforts to rectify the weaknesses in the administration of national health systems, even if this takes time. The participation of private sector health providers also raises questions about the quality of service provision. Health services often involve externalities, especially in relation to highly communicable diseases and the development of drug resistant pathogens. These externalities are rarely taken into account when consumers make choices about the services they purchase in the market and they may also be ignored by profit motivated service providers. Alongside the need for consumer protection, there is a strong rationale for the public regulation of private health 4

5 providers to mitigate the negative externalities, although there are very practical difficulties with implementing regulation because there are such a large number of private health providers operating in each country. 4. Putting principles into practise I now want to turn to how we can best translate the principles that I have discussed into practical policies which can improve aid effectiveness and the overall efficiency of health service provision in Africa. Integral to this objective is the strengthening of sector wide approaches (SWAps) in the health sector. The motivation for SWAps has often been expressed in terms of aligning the different aid donors funding the health sector with national priorities and national systems, but SWAps can play an equally valuable role in aligning the services provided by the private sector, both commercial and not-for-profit, with national priorities. SWAps can help to promote a culture of mutual accountability among all of the stakeholders in pursuit of a set of shared goals. The SWAp should provide the forum for determining the national strategic objectives for the health sector and an associated coherent set of expenditure priorities which respects the budget constraints faced by the sector. The national ownership of health strategies and the use of national systems are two of the key principles for aid effectiveness stressed by the International Health Partnership that I mentioned at the start of this address. Health sector strategies must also be consistent with broader national development plans because of the need for a coherent intersectoral allocation of resources. The SWAp should be lead by the Health Ministry, but it is important that the private sector should participate in formulating national strategies and identifying priorities, alongside the health sector development partners. For example, in Uganda the strategic priorities are set out in 5

6 the National Health Plan and the Health Sector Strategic Plans, which were prepared under the leadership of the Ministry of Health but involved many other actors outside of Government; universities, CSOs, donor agencies and the private sector. Unfortunately this type of inclusive partnership has not been the case in all countries. A review of health sector SWAps by the Independent Evaluation Group of the World Bank found that there was a failure to include private sector and civil society organizations in planning, reviews and programmes of work and that this failure undermined efforts to improve service coverage and quality. Without the active participation of the stakeholders from the private sector, it is unlikely that they will feel that they have sufficient ownership of the national health strategy and hence they will not have incentives to align their own activities with the strategy. To the fullest extent possible, there should be unified national systems for allocating resources to the health sector. These systems must be focused on the Government budget; hence donors, including private donors, should channel their funds through the budget. Off-budget funding is suboptimal, because there is no mechanism to ensure that the allocation of such funding is aligned with national priorities. Furthermore, health services delivered through off-budget funding modalities are much more vulnerable to catastrophic disruption if the flow of donor funding is interrupted, as has been the case with some of the major vertical funds. Nevertheless, if it is not possible for donors to channel their aid through the national budget they should at least try to ensure that it is spent in a manner which is consistent with national priorities and does not exacerbate the fragmentation of the national health systems. Strengthening national health systems should be a priority. This must be done in a sustainable manner, which requires that sufficient resources are allocated to recurrent expenditures. Budget support is the optimal aid modality for funding national health systems in a sustainable manner, provided that donors are prepared to make long term commitments to support the health sector. 6

7 Finally, the effectiveness of aid cannot be divorced from its predictability in terms of aid disbursements. Recurrent costs dominate the budgets of health services. Moreover, disruption to health services, even when only temporarily, has more damaging consequences for public welfare than disruption to services in any other sector. Because aid makes such an important contribution to the financing of health services in Africa, the stability and predictability of aid flows is paramount. 5. Conclusion The fragmentation of health services in Africa, both in terms of the multiplicity of funding agencies and service providers, presents serious challenges for efforts to improve aid effectiveness and the efficiency of health services. These challenges will only be overcome by building strong partnerships which include all participants in the health sector, including CSOs and the private sector. The foundation for strong, inclusive partnerships is the sector wide approach. Health SWAps should be the vehicle for formulating national health strategies which can command a consensus among all stakeholders and which thereby give these stakeholders the incentives to align their own activities with national priorities. As far as possible aid should be channeled through the national budget, and should be used to strengthen national health systems in a comprehensive and sustainable manner. Aid donors should refrain from setting up and funding alternative structures for delivering services outside of national health systems. Thank you for listening. 7

8 References Handley Geoff; Kizza, Diana and Musisi Albert (2009), How Unpredictable Aid Influences Service Delivery: Uganda Case Study, Overseas Development Institute, London. Government of Uganda (2010), Health Sector Strategic Plan III, 2010/ /15, Kampala. Mills, Anna; Brugha, Ruairi; Hanson, Kara and McPake Barbara, (2002) What can be done about the private health sector in low-income countries? Public Health Reviews, Bulletin of the World Health Organization, 80(4). Vaillancourt, Denise (2009), Do Health Sector-Wide Approaches Achieve Results? Emerging Evidence and Lessons from Six Countries, Independent Evaluation Group Working Paper, 2009/4, World Bank. Walford, Veronica (2007), A review of health sector wide approaches in Africa, hlsp institute, London. World Health Organization (2007), Aid Effectiveness in Health Working Paper no 9, Geneva. 8

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