Public-Private Partnerships in Health and Education: Conceptual Issues and Options. Yidan Wang Asian Development Bank Institute

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1 Paper prepared for Manila Social Policy Forum: The New Social Agenda for East, Southeast, and Central Asia Joint ADB-World Bank Conference 9-12 November 1999 Public-Private Partnerships in Health and Education: Conceptual Issues and Options by Yidan Wang Asian Development Bank Institute I. Introduction For decades, the discourse over public goods has affected significantly the role played by governments in the financing and provision of health and education services. However, in many instances, governments were not able to perform well because they lacked the resources and were often confronted with management problems, all of which resulted in poor and inefficient delivery of services. The role of governments to provide the required services on their own in an effective and efficient way is now being questioned and reassessed at various levels and in different fora. Alternatives have to be found. The possible choices facing policymakers in coming up with appropriate arrangements to provide the required services appear to lie somewhere between different extremes such as the public and the private sector, individuals and communities, profit and non-profit organizations, and centralization and decentralization. Exploring these different mixed arrangements for the delivery of public goods could open up opportunities for generating additional resources and for providing different options for policymakers to choose from for effective service delivery. However, for such arrangements to work, policymakers have to recognize that they will have to deal with a variety of players, all with different sometimes conflicting interests and with organizations that would all have different governance structures. The key challenge for policymakers is how to form effective partnerships among different players in such a way that public goods can be served efficiently, effectively, and equitably. The challenge calls for forming effective partnerships among all players. To this end, it is important to first understand the operation of different players, and their strengths and weaknesses, and based on such understandings, to establish new relationships among them that not only tolerate their differences but also create enabling environments that allow them to contribute more to the good of the general public than they would have achieved individually.

2 This paper discusses concepts and available options for the use of public-private partnerships as an approach for health and education development. It begins by describing some fundamental issues relating to the conceptual framework and the rationale for forming partnerships. It points to the need to understand how different players operate and the potential that exists in using partnership arrangements by bringing all the players together to enhance health and education development. This is followed by the presentation of issues that need to be considered when adopting various combinations of public-private partnerships for the delivery of services. Finally the roles played by governments and international agencies in creating enabling environments for promoting public-private partnerships are discussed. II. Conceptual Framework It is generally recognized that health and education are public goods. Kaul, Grunberg, and Stern (1999) define the main properties of public goods as non-rivalry in consumption and non-excludability. Public goods encompass both pure and impure ones. Few goods are purely public or purely private; most goods possess mixed benefits for both individuals and society as a whole. Health and education seem to fall into the class of impure public goods. Better health and education enhance people s ability to acquire skills, and the work skills enable them to get better-paid jobs, which help improve their living standard. There is a positive correlation between the level of social development and long-term economic growth in that as people become better educated and healthier, productivity rises, social mobility increases, and the economy expands. Health and education for all are thus desirable as they benefit both the individual and society. Challenges in Health and Education The economic and social development of developing countries in Asia is relatively uneven. Therefore, there are different levels of challenges in health and education development. At one level, emerging market economies in the region give rise to demand for alternative and improved services beyond those provided by the public sector. At other levels of economic development, the immediate needs are improved public health and education services in terms of quality and efficiency. Finally, at much lower levels of economic development, the urgent needs are basic health and education particularly for the poor and the disadvantaged. It is worth noting that there are variations in social needs within each country. Irrespective of the different stages of economic development of a country, the private sector would be able to play an important role in providing the required social services. In many countries, the number of commercial enterprises involved in financing and the delivery of health and education services has been on the increase. In Thailand, the government is promoting the private sector to contribute to social development. In the People s Republic of China, the government s open market policy has enhanced the rapid growth of the private sector. The Central Asian Republics and Mongolia are evolving into market-oriented economies that fuel the expansion of the private sector in various sectors of the economy. Parallel to this development and, perhaps with a much longer developmental history, is the role played by non-governmental organizations (NGOs) in providing basic health and education services in many countries in the region. NGOs operate in India, Bangladesh, Philippines and other countries. Working together 2

3 with the public sector, NGOs are making significant contributions in raising health and education standards of many Asian countries 1. The private sector s involvement in the provision of social services complements the public sector in many ways. Private firms provide additional financial resources and respond to the market demand. NGOs provide services to the poor in remote areas, something that the public sector is often found to be incapable of doing. Thus, from both the financial and equity point of view, forming partnerships between the public and private sectors would be advantageous in delivering the required services. Defining Public and Private Sectors There are many ways of defining what is classified as public sector and private sector. In this paper, public sector refers to government institutions and private sector to nongovernment institutions or groupings (see Table 1 below). Table 1: Public and Private Sector - Health and Education Public Sector Private Sector National government Commercial enterprises Provincial/state government Non-governmental organizations (NGOs) District/municipal administrations Voluntary groups Local government institutions Religious groups International agencies Professional organizations Households In general, the public sector includes various government institutions. Depending on the size of the country, government institutions may comprise agencies at the national, provincial or state, municipal, and local levels. In recent years, as decentralization has become more pervasive in many developing countries, more authority and responsibility have been given to the provincial and local governments. These include financing and handling over responsibility for providing social services to local governments, particularly in the areas of basic education and health. Thus local governments now exert greater influence in social development and increasingly, they are playing more important roles in providing social services. Multilateral and bilateral agencies also play crucial roles in social development. The composition of the private sector is complex. The private sector can be categorized into private-for-profit institutions and private not-for-profit organizations. Commercial enterprises essentially belong to the category of profit-oriented organizations, and NGOs and other non-government institutions are examples of not-for-profit organizations. In addition, the private sector includes professional associations and households. The term NGO is broadly defined as a legal entity that is not directly managed by and accountable to the state and as having stated aims that are not explicitly in pursuit of profit maximization (Green, 1987). Included under this definition are the various types of 1 See UNESCO (1999). Currently Asian countries have 75 per cent of the world s one billion illiterates. Also see Brundtland (1999). The health gap between the least developed countries (LDC) and industrial countries (IC) is large. For example, the average life expectancy in LDCs is 52 years and in ICs 78 years; the infant death rate in LDCs was ten times higher than that in ICs in

4 institutions or groupings, such as voluntary institutions, religious groups and communitybased organizations. NGOs in developing countries vary enormously in terms of size, sophistication and expertise. There are international NGOs, government NGOs, and grassroot NGOs. Moreover, the term NGO has culturally specific meanings. In transitional economies such as those from the former Soviet Union, the term refers to all charitable and nonprofit organizations, while in other developing countries, the term NGO refers to organizations that are involved in development (Fisher, 1998). Despite these differences, most NGOs, if not all, target the disadvantaged and those living in underdeveloped areas. Most NGOs rely on external financial resources for their operations; their funding sources come from international organizations, national governments or grants provided by individuals or charitable organizations. Other organizations, such as professional associations and research institutions, also undertake work in the health and education sectors but these are done mostly through contract work financed by governments or other organizations in the private sector. Individual households are essential players in the health and education sectors as they are the sources and the consumers of all public and private social services. Framework for Analysis It is important to understand how public goods can be provided. Figure 1 depicts the relationships among the players in providing health and education services for all. Providers Target Areas Ultimate Goals Profitoriented orgs Market Public Sector Public health and education Health and Education For All The poor NGOs The above figure represents a very simplified framework demonstrating the interactions of many key institutions and groupings in providing health and education services for all. In reality, there could be more categories of players and types of health and education services that need to be provided. However, there are largely three areas of service needs: those served by the market, those served by the public sector, and those of the poor and those located in the hard-to-reach areas. The corresponding providers of services are the for-profit organizations, government institutions, and NGOs. The public goods nature of health and education services suggests that the public sector needs to 4

5 play a major role in coordinating with other players in financing and providing the services. The behavior of the service providers can be explained in two ways. One explanation emphasizes the different goals that different providers of services seek to achieve. The other focuses on their behavior in situations when they have to interact with one another. For example, the goal of for-profit organizations is to maximize profits through market mechanisms. When the market works, a profit-oriented institution would respond to market demands, providing services in those areas where the public sector is found to be inadequate or where the public sector could not provide services up to the required standard, such as in tertiary education and curative health care. Similarly in the case of NGOs, their goal, unlike that of their commercial counterparts, is to target areas that government services could not reach, often in remote and underdeveloped locations. This notion of NGO coverage represents only the current situation and by no means does it suggest that the government should leave it to the NGOs to serve the areas. In the case where different players interact, their behavior is moderated by the actions of other players. For instance, the public sector plays a role in setting policies, in regulation, and in resource allocation which directly affects both the for-profit and the not-for-profit institutions. The private sector, on the other hand, depends on appropriate public policy for profit-making activities and for generating the required resources for its survival. Therefore, it seeks to influence public policies. For example, it might seek policies that would grant them tax exempt status. A recent trend in health and education is that commercial corporations being directly involved in the management of the public sector services. What is not included in the framework are the roles of other organizations and households. Other non-government institutions such as professional bodies, associations and research institutions, which may not be directly involved in the provision of services, play an important role in health and education through such activities as policy research, curriculum development, textbook development, and evaluation activities. These activities affect decisions, quality, and choices of the general public, for-profit organizations, NGOs and households. Individual households, key players and customers that are often forgotten, pay for health and education services provided by either the public or private providers. Their decisions affect themselves as well as the community at large. The nature of multi-player involvement and the interactions among the players point to the necessity of forming partnerships between the public and private sector in order to increase the benefits to the general public. Public and private partnerships are possible and some forms of partnership already exist in many countries. However, the dominant notion of social development is not in favor of partnerships. The idea that public goods can be served by only the public sector created a situation in which the market needs and the disadvantaged fall outside the realm of public goods. This needs to be redefined, a door for cooperation opens wider, and a vision of public goods renewed to include all stakeholders involved in contributing to or benefiting from such goods (Ahmed, 1999). III. What are Public-Private Partnerships? Nature of Partnership 5

6 Partnerships are not ends in themselves. Public-private partnerships are means to achieve the objective of providing pubic goods in health and education. Being a tool for achieving social objectives, partnerships seek to explore and utilize each sector s respective strengths, resources, and to minimize each other s weaknesses. Maintaining public goods requires good quality services to be provided equitably. Given the fact that developing countries face problems on lack of adequate resources, inefficiencies and ineffectiveness in service delivery, efficiency and effectiveness are important criteria for forming effective partnerships. To this end, all players need to come to a common understanding of how public goods are to be provided. This process will help the social sector work better. It should be recognized that the public and private sectors operate under different principles and philosophies. While the public sector is concerned with the entire population, the for-profit organizations, for instance, focus on market needs. Understanding this is to emphasize that partnerships are neither meant to put private funds for public use nor to privatize public responsibilities. Partnerships are systems that encourage each partner to contribute to the common good. In this regard, the private sector needs to consider its social responsibilities and the public sector has to create appropriate legal and regulatory structures and participatory processes for decisionmaking. This implies that public and private partners share both the benefits and responsibilities of social services. Public-private partnerships build on the idea that the private sector can supplement or complement the services provided by the public sector. This is especially true when there is a need for more options and services that are not provided by governments. Forprofit institutions have the advantage of being able to deliver services efficiently. The same is true for NGOs that aim to alleviate poverty and address the needs of underdeveloped areas that are out of the reach or beyond the capacity of governments to serve. Private involvement in financing and provision of services can raise the financial resources and sustainability of social services. In this context, it is in the public sector s interest to form partnerships with the private sector. The goal of providing health and education services for all cannot depend on market mechanisms alone. If access to health and education has to be completely dependent on the ability to pay, as will be the case in a market-oriented system, the equity goal of social services would not be achieved. It is also possible that the private sector may induce overwhelming oversupply of services and harmful cost cutting (Bennett, 1991). Addressing partnerships in a meaningful way means to link the services provided by the public and private sectors to the extent that resources are allocated efficiently. The quality of public goods will be enhanced through competition. The notion of partnerships is to stimulate healthy competition. This being the case, partnerships seek to facilitate the exchange of experience among players rather than to create animosity among them. Indeed, competition and exchange between the public and the private sector will result in more choice and improved services, benefiting the public at large. Partnerships or Privatization? It is useful to differentiate partnerships from privatization. Guislain (1997:10) describes the term privatization as. it refers to the privatization of a public enterprise, whether through divestiture or other techniques. In a narrow sense, privatization implies 6

7 permanent transfer of control, whether as a consequence of a transfer of ownership right from a public agency to one or more private parties or, for example, of a capital increase to which the public sector shareholder has waived its right to subscribe. More generally, Bennett (1991) maintains that privatization involves a range of policies designed to strengthen market forces via-a-via the state. The policy may involve a reduced role of the public sector in the economy and the use of public policy to encourage the private sector to grow. Different from privatization, public-private partnerships aim to promote improvements in financing and provision of services from both the public and private sectors but not to increase the role of one over the other. Rather, partnerships are geared toward improvement of existing services provided by both sectors with an emphasis directed on system efficiency, effectiveness, quality, equity, and accountability. IV. Rationale for Partnerships Forming effective public private partnerships must start with an in-depth understanding of the operations of each player and the potential roles of partnerships in achieving social objectives. It is vital to first understand the contributions of the public as well as the private sector in health and education. Next, the operational principles and the strengths and weaknesses of both sectors need to be analyzed. Lastly, there is a need to understand the role that partnerships can play in enhancing social development. Public and Private Sector Contributions to Health and Education In almost all developing countries, the public sector is confronted with the lack of resources and with the need to raise needed funds for providing an adequate level of health and education services. For this reason, almost all governments have policies to encourage the non-government sector to contribute to health and education. Surprisingly, however, almost all governments neglect to record contributions provided by non-government sources. In the health sector, the contributions of the private sector in Asia in financing health costs are substantial. The share of public and private financing for the health sector in selected Asian countries is given in Table 2. The contributions by the private sector range from 40 to 80 per cent. In Thailand and India, the private sector's share of financing is more than three times that of the public sector. Table 2. Distribution of Public-Private Expenditures for Health in Selected Countries (1990) Percentage of GNP Relative Share Country Total Public Private Public Private Bangladesh India Indonesia Lao PDR Malaysia Nepal People s Republic of China Philippines Sri Lanka

8 Thailand Source: Rosenthal and Newbrander (1997). In the education sector, no accurate data on the distribution of public and private expenditures is available. However, Bray (1996) was able to provide some data showing the share of expenditures in public primary schools borne by households and governments in nine countries in Asia, namely, Cambodia, People's Republic of China, Indonesia, Laos People's Democratic Republic, Mongolia, Myanmar, Philippines, Thailand and Vietnam. Figure 2 below shows the distribution: Figure 2. Expenditures in Public Primary Schools borne by Households and Government Household Government Cambodia China Indonesia Lao PDR Mongolia Myanmar Philippines Thailand Vietnam Source: Bray (1996). As indicated, contributions by households in all countries are significant. Households in Cambodia met three-quarters of the total costs and those in Vietnam about fifty per cent. However, the data is of limited use as no information is given on how these figures were derived. Moreover, it refers to expenditures incurred by households and governments for primary education only. If contributions from other non-government agencies were included for all levels of education, the picture could be very much different. Where contributions from non-government sources are substantial, forming partnerships with all potential players might be the best approach as it could contribute to equitable distribution of all available resources to better meet the needs of the entire population. Understanding the Strengths and Weaknesses of Players The public and private sectors, including commercial enterprises and NGOs, operate under different philosophies and approaches. Each has its own goals to fulfill, its own way of managing, and its own strategy and priorities to pursue. Each has its own strengths and weaknesses, and though they may share the common objective of providing public goods, each has its own distinctive perspectives. 8

9 The Public Sector. In most, if not all, developing countries, the public sector plays a major role in the financing and provision of health and education for all without any price discrimination except for the variations noted earlier. The provision of health and education services as public goods has to be protected, as they could influence significantly economic growth. However, too often because these services are nonexcludable, and in many cases free, the public services are undersupplied. Not only are government resources invariably inadequate but also the quality and efficiency of the services they provide are very often rather poor. The public services are often seen as ineffective in resource allocation and as poor in management. One main reason is that the public sector has to operate within the confines of various rules, regulations and procedures that derive the public sector from managing the services more efficiently. Burdened with bureaucratic procedures, the public sector is often incapable of acting quickly, to adapt to change and, as a result the services provided will deteriorate over time. Additionally, the public sector does not need to compete and thus has no incentive to improve quality particularly in situations where it is the only provider of services. With regard to private for-profit organizations, generally they are perceived to be more efficient and effective in the provision of services and less bureaucratic. This enables them to manage their services effectively and efficiently and to act quickly to adapt to changing conditions. For the most part, this characteristic of the private sector is linked to its goal to make a profit. It needs to ensure efficiency in resource allocation and in management and to be customer-oriented to achieve its goal (Bennett, 1991). To survive in the competitive market, the private sector has to keep its costs low and maintain its reputation high. For example, hospitals and schools run by the private sector tend to have much lower staffing levels and better quality services. Potential problems could arise when the private sector is driven by profit motive. There is a tendency for the for-profit organizations to sometimes sacrifice quality to maximize profit. For example, unlike the public sector, for-profit organizations could discontinue services when facing financial problems. They are also not overly concerned with issues such as equal access. Instead, they tends to avoid services to those whose payment capacity is limited. Moreover, there might be conflicts between the for-profit principle and the value of education. As Altbach (1999) notes, the values of corporations and the marketplace are to some extent at odds with the traditional values attributed to university education. For instance, for-profit institutions may be able to provide special kinds of post-secondary training, but they cannot create universities with traditional academic values, programs and ethos. Furthermore, [H]igher education has a responsibility to maintain meritocratic values at the same time as encouraging social mobility. Academic institutions provide access to culture and undertake social analysis. They bring the benefits of science and technology to society through public programs, continuing education efforts, and by other means. These goals, and the programs to make them possible, are seldom on the agenda of private universities (Altbach, 1999). If private education institutions are to become a part of the education system, special monitoring is needed and due attention has to be paid to their performance. 9

10 An important issue that has largely been overlooked is that not all services provided by the private sector are of reasonable quality and efficiently delivered. For example in Bangladesh, the for-profit sector, which accounts for about two-thirds of the country s health sector expenditures, consists of medical practitioners of whom only 20 per cent received training in recognized institutions and a large number of non-certified practitioners who are self-taught or have gone through only some paramedic training. This second group, together with some pharmacy-owners who provide the most widely accessible health care to the general population at large are the sources of misuse and abuse of drugs, causing undue wastage of health expenditures in the country (Ahmed, 1999). This situation demands that the government plays its role in training, certifying, regulating and bringing about a coordinated and improved system of health care. As noted by Hatry (1989:5) Although often acknowledged by advocates of privatization, the potential problems are sometimes treated much too casually, as if they are easy to overcome and are causing only minor inconveniences Promoting NGOs as partners may have a significant impact on the improvement of equity and access to the poor and those living in underdeveloped areas. Most NGOs, if not all, aim at alleviating poverty and thus focus their activities on impoverished and remote areas. Their roles are much in line with the public sector, and so they often claim to support or complement government programs. In the past decades, NGOs have grown at a rapid pace in areas where the public sector has not made any significant progress in addressing equity (Gaag, 1995). Indeed, governments often seek NGOs as partners where they have financial difficulties such as in Cambodia (Fisher, 1998). Their activities include providing services to the rural and urban poor where government health and education facilities do not exist. One of the noble aims of NGOs is to help solve the basic problems of development and poverty by working with the poor. There is a pervasive belief among NGOs in the superior quality of their interventions compared with those supported and executed by official donors and governments (Riddell and Robinson, 1995:36). Included in the effectiveness of NGOs are their successes in reaching the poor, having the poor participate in their projects, empowering the impoverished, and reducing the costs of intervention. Although more often than not NGOs do perform well as providers of social welfare services, in many instances, their operations lack coordination. Green and Matthias (1995: 319) comment that relying on NGOs has also many inherent problems such as the following:!" NGOs' policies may be inconsistent with those of governments, for example, in relation to family planning. Where this affects service delivery, the NGO may appear to be working in opposition to the state.!" The lack of coordination may lead to unhealthy competition, which result in duplication and wastage.!" NGOs often suffer from management problems as well. They need expertise and the expertise may not be available to them.!" There is a lack of standards to measure NGOs performance. This may lead to a lack of accountability by NGOs to both governments and the community as a whole on aspects relating to finance and service quality. 10

11 It is clear that NGOs play significant roles in social services. However, there have been difficulties in assessing and evaluating the value of their contributions, thus it is an important factor when considering forming partnerships with them. As to households, they play two important roles. First, households determine, to a large extent, the status of health and education. Children s nutrition, preventive healthcare and preschool education all start at the household level. Second, households make choices of services. Depending on their knowledge and information, households may make right or wrong choices for services. Their decisions in turn affect the market and needs. Therefore forming certain types of partnerships with households is necessary. Partnerships and Information Technology There is an intimate link between partnerships and development. The Information Technology (IT), as a core of development, has affected all walks of life and the way institutions interact with one another. More importantly, IT is changing the way countries develop, and the way governments work, collaborate with one another and deliver services. Understanding and recognizing the potentials of IT as a development tool is a starting point toward using it to make positive changes in the social sector. Although it is difficult to foretell the actual impact IT may have on social services, it is becoming clear that IT is changing our traditional values and ways of thinking. In the face of continuing expansion of information and knowledge facilitated by IT, observes Cheng (1999), knowledge is ever inadequate, careers are ever changing, ideas are soon obsolete, and networks are ever renewed. Hence, lifelong learning becomes necessary. The conventional notion of graduation from schools is no longer valid in the IT era. The content and timing of vocational training need to be renewed. The current structure and system for providing health and education services must undergo dramatic changes to meet the needs of social development in the IT era. The rapid growth and utilization of new channels of communication as a result of present day IT has resulted in breaking down hierarchies and bureaucracies and places challenges on the current governance structure. With the Internet, one can gain easy access to all types of information, ranging from health information, drug prices, school information, university courses, to NGO activities, and government programs. An ordinary citizen can now send messages to government officials and provide feedback to politicians, thereby helping governments to be more responsive to meet citizens needs. Internet facilitates communications and linkages that allow for effective exchange of ideas and quick dissemination of information. For example, TeleMedicine, an electronic service provider on health, is available for all, including those in rural settings, to gain information on quality and coverage of health services. The information gained about services will help contribute toward achieving equity, enhancing quality, and improving efficiency. An important challenge is thus how to manage information or communication to improve governance. What type of information is needed for what purpose? How to avoid pitfalls and utilize the opportunities associated with IT? What combination of public and private roles is needed in the face of IT era? Answers to these questions depend on local culture and the situation. The University of Hong Kong, for instance, has allocated 11

12 resources to provide every student with a laptop computer in order to take full advantage of IT. In Thailand, the government uses its web site to publicize the reference prices of all pharmaceutical products so as to inform the public about the actual prices of drugs. The general public would then be able to assess whether their doctors or pharmacies are overcharging them for the medicines. Connecting to the world-wide web is thus a part of a development challenge for governments to enable people to make better decisions. V. Models of Partnerships There is no one model of partnerships for all situations. However, for all partnerships to thrive, they must be established to achieve certain objectives such as to improve quality, efficiency, effectiveness, or equity. Next, the extent of the roles to be played by the public and the private sector will have to be determined in the context of the country where the partnership is to operate in. Some models of partnerships are presented below to demonstrate the different possible combinations of public and private collaboration. The Public Sector Assisting the Private Sector In Thailand, the national policy is to support private sector participation in health and education development. The private sector and NGOs are thus considered valuable contributors to the government s effort in meeting citizen s increasing demand for health and education services. As a consequence of this policy, there have been good experiences of public and private cooperation in both the health and education sectors. A partnership between the Ministry of Public Health and the Phya Thai Group is a case in point. Box 1. Public-Private Partnerships in Health Thailand The Phya Thai Group is a profit-oriented company that provides health and education services for a profit. It operates a chain of hospitals of which three are located in Bangkok and four in the provinces. The Group also runs Rangsit University, Dulwich International College, and an international school that is linked to the College. The Group has formed partnerships with the Ministry of Public Health (MOPH) to operate the hospitals. In forming such partnerships, both the private and public sector benefits as is seen in the case of a partnership established between Rangsit University and MOPH which led to the setting up of the first private medical school in Bangkok. The Phya Thai Group provides the financing for the medical school and dormitories, and MOPH provides clinical training for students at the government s Rajvithi Hospital. Another example that led to a win-win situation for both the public and private sector is the second case of cooperation between the Group and MOPH. The former decided to establish a hospital at the provincial level. Recognizing that it would take considerable time for the private hospital to gain popularity, the Group sought the assistance of MOPH. Together they are establishing a united hospital facility where the public and private hospitals are in the same location. In this way, the private hospital could make use of the public hospital s reputation to get patients and the public hospital could make use of the more modern facilities available in the private hospital. The cooperation has benefited the general public, as it is now able to avail of the better services that were not available in the public hospital. 12

13 Partnerships between the Public and NGOs in Health Development. The Government of Bangladesh, having recognized its limitations in financing and delivery of health services, formulated a national policy to achieve health development through partnerships with the private sector. It formed partnerships with NGOs to enhance health service delivery. What the partnership is able to achieve is described in Box 2. Box 2. NGOs Involvement in the Bangladesh Family Planning Program. Two hundred NGOs of varying sizes were given substantial assistance from international agencies to implement the national family planning program, which covers maternal and child health care as well. Under this program, some 20 million people or 15 per cent of the population benefited. The Bangladesh Rural Advancement Committee (BRAC), the largest NGO in Bangladesh, assumed major responsibilities in child immunization and nutrition. Their activities cover close to 60 per cent of the 86,000 villages in the country. Gonoshasthya Kendra, another NGO, is involved in work on health education, and promotion of community involvement in health and family planning. It operates in 12 locations serving some 600,000 people through various health centers and subclinics which are served by paramedics. Dhaka Community Health Trust, another NGO, is operated by a group of doctors who provide self-sustaining, low-cost and quality health care to the poor. Public-Private Partnerships in Schools There are many examples of private schools that are run with public funding and public schools managed by private organizations. In the People s Republic of China, private education only emerged in the early 1980s. Since then private sector involvement in education has grown rapidly. This resulted in the breakdown of the unitary public school system and poses a challenge to the public education system in the PRC. As a consequence, a mix of public and private funded and managed schools have emerged. 13

14 Box 3: Mix of Public and Private Funded and Managed Schools PRC Case 1. Private Schools with Government Funding Beijing 21 st Century Experimental School is a private school owned by a commercial company. The school was built in partnership with the Haidian District Government with the government providing the land free of cost and the commercial company providing the funds for the construction of the school. Because of the partnership, the school enjoys the support of the government with the latter providing a favorable policy environment for the school to operate in. This type of collaboration is quite popular in PRC. Case 2. Public Schools with Private Management In 1998, the PRC government decided to upgrade poor-quality public schools through the introduction of private sector management styles. While the ownership of the school remains public, they are privately run with the main sources of funding coming from the students tuition and not from government financing. To enable them to compete, the government facilitates the collaboration between them and well-reputed public schools by establishing the former as branches of the latter. The latter has the right to appoint the principal for branch schools. Inter-transfer of teachers was promoted. The branch schools are, however, managed independently. Their management can decide on the hiring of teachers, selection of students and adjusting the school s curriculum. Such reforms which have been ongoing for the past two years have been well received by all so far. Parents are pleased because the reformed schools provide options to those who do not want to send their children to designated schools. Although paying much less than their counterparts in normal private schools, the students could get similar quality education as in normal private schools. The government is pleased with the result so far as this has led to improvements in the quality and efficiency of the public education system. Involvement of Commercial Corporations in the Management of Public Schools. A recent trend in commercial entrepreneur investment in the US involves a paradigm shift in education toward privatization, just like it happened in health many years ago. The new commercial companies, instead of investing in private schools where 10 per cent of students receive their education, are interested in investment in activities related to public education. The US spends $635 billion a year on education but more than 40 per cent of 10-year-olds could not pass a basic reading test; and close to half of the $6,500 spent on each child is to cover expenses on non-instructional services -mostly administration (The Economist, 1999:55). Criticism has been directed at public schools for their poor educational quality and their inefficient management. Some areas of interest in the private sector include testing, coaching, training, preschool education, and education management organizations which have their equivalents in the health maintenance organizations that are specially set up to reduce administrative costs and improve quality. 14

15 Box 4. Private Sector Involvement in the Public School Management USA Sylvan Learning Systems is a company engaged in providing different types of educational service. One of its biggest businesses is in public education, where it won many contracts for management of public schools in 17 states, which provide remedial teaching to disadvantaged children. The Edison Project has provided private management for public schools. It has been in business now for eight years and has fulfilled its promise to keep down costs and to raise standards of the public schools it manages. Source: The Economist (January 16 th -22 nd, 1999). VI. Key Issues in Development of Partnerships For partnerships to work, all players must act in concert and cooperate to meet all the challenges and carry out the operations in accordance with agreed strategies. There will, however, be many constraints that players will have to face in their attempts to build workable and effective partnerships. Governance Workable partnerships require a well-defined governance structure to be established to allow for a proper distribution of responsibilities to all the players. The role of the public sector at different levels (national, provincial, local institutions) has to be made clear as well as the responsibilities of other players such as the for-profit organizations, NGOs, and households if all of them are to serve the needs of society as a whole. However, many developing countries do not have clear legal and policy framework to define the roles and responsibilities of the different players and possible ways of cooperation among them. Accountability Effective partnerships require that arrangements have to be made to ensure all players are held accountable for the delivery of efficient and effective services. The current issues are that the public sector has been singled out for not being accountable for the quality and equitable services it provides. Private for-profit organizations and NGOs also have weaknesses therefore they have to be made accountable for the outcome of the services they deliver, although individually they are responsible to their own organizations for meeting their organization's own goals. Participatory Process For partnerships to work, it is necessary to involve all stakeholders in the planning of any activities as early as possible and as deeply as possible so that it encourages all to assume ownership of the activities in all phases of the cycle of a program. Problems arise when one or more players are excluded at some stages in the process. In India, 15

16 NGOs are reluctant to participate in implementing government programs simply because they are not consulted during the planning stage. They are only requested to participate in the implementation phase of the programs. As a consequence, they often decline participation as they found the contents of the program incompatible with their point of views. Gap Between Public Policy and Treatment Accorded to the Private Sector In many developing countries it is not uncommon for governments to adopt policies to encourage involvement of the private sector in social services, while at the same time, government officials are undermining and hindering the private sector s activities. In many instances, governments act as if they are the only providers and contributions and roles played by other parties do not count. At other times, the governments demonstrate lack of trust and accord inequitable treatment to private providers of social services through introduction of inappropriate rules and regulations. The gap between public policy for encouraging private sector's involvement in providing social services and the actual treatment accorded to them has to be narrowed. VII. The Role of Government for Creating an Enabling Environment Education and health services are classified as public goods, and therefore, it cannot be expected that the market can be left on its own to provide all the solutions to efficiently and effectively deliver the required education and health services. Governments need, at various points in time, to address issues of market failure and to create an enabling environment to allow all parties to become partners for the common good of all. To create an enabling environment, the government has to address the following: Establishing Legal and Regulatory Frameworks A clear legislative framework specifying the roles of the public and private sector, their relationships, and the areas for cooperation are essential for building partnerships. In Mongolia, for example, the government has introduced major reforms in the health sector. The objective of the reforms is to develop efficient partnerships between the public and private sectors through strengthening the role of the private sector in service delivery. To promote the partnerships, the government developed licensing and accreditation mechanisms for medical practitioners, hospitals and health facilities for both the public and private sectors to ensure quality and promote continuous training. In addition, the government introduced quality assurance and total quality management techniques to improve service quality. Ensuring Quality in a Global Marketplace One of the aims of involving the private sector is to improve quality of health and education services. Quality is a point where the private sector also has to pay attention as it directly affects their reputation. To ensure quality, governments need to encourage healthy competition among the public and private providers of services and to help provide training to personnel in both sectors. In the global marketplace, the services have to meet certain standards to secure international recognition. For countries to be competitive international standards have to be adopted and governments should play their role in monitoring and evaluations of the quality of services. In the face of 16

17 information technology, governments also need to consider how to make full use of IT in improving services. Providing a Stable Environment Providing a stable environment is a prerequisite for sustainable partnerships. The private sector takes risks in its activities. This means that if the risk is high, they will not be interested in getting involved. It is thus important for governments to realize that they need to create a stable political and economic environment if they want to promote private sector involvement. To this end, the policy and regulatory framework should be consistent and designed to encourage involvement as well as to promote innovation from the private sector. Promoting Transparency and Accountability People have different needs and prefer to have choices for services. The government's role is to make sure that the needs of all citizens including the poor and the disadvantaged are served. If health and education services are to be made accessible to all, there is a need to ensure accountability and transparency for the providers in serving their clients. This means not only the public sector but also the private sector has to be held accountable for their services. By gathering and disseminating information and making information transparent to the clients of the service providers, the government can increase their accountability. In this way, the clients can make better choices for services, which in turn will promote quality through competition. Ensuring Services to the Poor and the Disadvantaged In many developing countries, a large proportion of the population lives in absolute poverty and cannot afford and has no access to basic health and education services. One of the roles of the government is to overcome this market failure by mobilizing committed partners to deliver such services to the poor and the disadvantaged. The responsibilities of taking care of the poor and the disadvantaged should fall on the government. VIII. Conclusions Forming partnerships between the public and private sectors will bring many benefits as partnerships could help enhance the delivery of public goods more efficiently, effectively and equitably. Through partnerships, additional resources could be mobilized and the respective strengths of the various parties could be tapped for the benefit citizens. However, it has to be recognized that to build effective partnerships, the government must first understand the different philosophies and principles of for-profit organizations and NGOs for the conduct of their activities. The key challenge is to use all their strengths while at the same time recognize their limits so that the common good of all can be served. It is imperative to establish criteria for the formation of effective partnerships. Too often, partnerships exist only in form, and do not contribute to improvements in quality and efficiency. For effective partnerships to be established, it is necessary to be clear on the objective or objectives. There is a need to be clear on whether the partnership is set up to improve quality, raise efficiency or improve equity. The extent of the roles to be played 17

18 by the public and private sector will have to be determined within the culture and values of the society that the partnership is set up to serve. The fact that health and education are generally public goods means that the exclusive reliance on market will not result in social efficiency. Governments need to work closely with all committed players, profit-oriented organizations, NGOs, and international donors to assure that no one is left out in the development process. To this end, an enabling environment needs to be created, an appropriate legal and regulatory framework needs to be developed, and appropriate mechanisms have to be established to control quality, and to ensure transparency and accountability for the delivery of the required services. The increase in the formation of partnerships suggests that the public and private sectors are now working more closely in the provision of health and education services. Public services are no longer owned and managed solely by the public sector. Also financing of the services is increasingly coming from both the public and the private sector. In some set ups, the distinction between the public and the private sector has become blurred because it is difficult to separate financial and other contributions of one from the other. When working effectively together, they are recognized as providing all the necessary inputs for the delivery of health and education services for all. If partnerships could reach such a level, then they could be considered as having achieved the final goal. 18

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