Public versus Private Provision of Public Services

1. Public versus Private Provision of Public Services Philip Gray PSAS Presentation to Poverty Day October 17th 2002

2. Introduction • Public Services and their role in poverty reduction • ‘versus’ is a misnomer – public and private play complementary roles • Policy, regulation and financing roles of public sector • Residual role for public sector service provision?

3. Public Services and Poverty Reduction • Infrastructure - Voices of the Poor, “The lack of basic infrastructure – particularly roads, transportation and water – is seen by the poor as a defining characteristic of poverty” (Narayan, 2000) • Health-care – Public health a key determinant of economic growth • Education – development of human capital and essential pre-requisite for operation in modern economy and society

4. Complexities • Different forms of private participation – service contracts to concessions to sales • Liberalization of service provision • Financing issues – subsidies, user fees, insurance • Externalities and public goods

5. Roles of Public Sector Policy – setting rules Financing – covering externalities and affordability Service Provision Regulation – Monitoring, Enforcing and Updating rules

6. Roles of Public Sector Regulation – Monitoring, Enforcing and Updating rules Policy – setting rules Financing – covering externalities and affordability Service Provision

7. Failures everywhere – what to do? • Market failures – externalities, public goods, information asymmetries – can be solved through mechanisms other than service provision • Public failures – public service provision – poor incentives, soft budget constraints, corruption - see Bureaucrats in Business Middle Ground – Better focus of public sector on policy, regulation and targetted subsidies

8. Examples • ‘Contracting Out’ – Public sector financing of private provision – monopoly with better incentives and regulation (e.g. Cambodia health) • ‘Vouchers’ – Public sector financing of private provision – liberalized sector (e.g. Chile) • ‘Charter Schools’ – Public Provision with choice (e.g. DC education) • Public financing of connections – OBA schemes, eg Peru telecoms, Guatemala power, Paraguay water

9. Cambodia Health Care

10. % of poor people sick in the last month using health facility

11. Change in key indicators