Info Service on Health Issues (December 06/01)
Developing countries face problems in providing social services
countries face problems in providing universal access to services to
their people. This was raised in an expert meeting organised by UNCTAD
which examine water, health, education and telecommunication services.
The report below summarises the meeting’s discussions.
is reproduced with the permission of South-North Development Monitor
(SUNS) # 6146, 22 November 2006.
Trade: UNCTAD meeting
highlights problems in providing social services
By Riaz K Tayob, Geneva, 21 November 2006
Developing countries face
challenges and problems in providing universal access to services to
their people, and these were brought up in an expert meeting on "Universal
Access to Services" organised by UNCTAD last week.
The meeting comprised panels looking at general issues as well as various
sectors, including water, health, education and telecommunication services.
It also had a session on the WTO's General Agreement on Trade in Services
Among the problems highlighted were the adverse effects of user fees
(the imposition of charges and fees to citizens in exchange for public
services, introduced in many countries as part of World Bank-IMF programmes),
the effects of privitisation of services, and the negative effects of
patents and bilateral free trade agreements on access to medicines and
The meeting was opened by Dr. Supachai Panitchpakdi, the Secretary General
of UNCTAD, who said that services accounted for about 20% of world trade,
and was growing annually at about 10% per annum. He said for many developing
countries "it is not just a matter of simply transcribing policies
that have succeeded in more developed countries, rather, home-grown
policies need to be tailor-made to meet national objectives and needs."
Ms. Lakshmi Puri, Director, International Trade, United Nations Conference
on Trade and Development (UNCTAD), said that the meeting should address
which services are critical for Universal Access and what are the spectrum
of options available to countries. The factors relevant in assessing
the choice between public, private or mixed provision in sectors should
also be considered.
She said that there is a need to determine Universal Access and "best
fit" policies based on domestic circumstances. A "one size
fits all" does not offer a workable solution. Good regulations
and private sector involvement, she said, may contribute to Universal
Trade liberalisation, while offering opportunities, requires careful
examination of issues regarding the right to regulate and Domestic Regulation
negotiations. She said, caution is warranted and more research is needed
to improve the evidence base available to governments.
Ms. Puri clarified that the concept of Universal Service refers to a
service provided to each person or household individually, which developed
countries tend to use. Whereas Universal Access is where the service
is accessible to everyone, either individual or collective access. The
term Universality, she said, refers to availability, access and affordability.
There are many examples of essential services and they have equity related
aspects in common. She said that flexibility was needed to adjust Universal
Access goals to economic, social and technological developments. Careful
design was needed for Universal Access pricing and targeting. She recognised
the importance of the public sector in the provision of services while
noting the increased reliance on private provisioning and public private
Universal Access was required to address market failures, provide public/merit
goods and to address equity issues. The role of the government, she
said was to be the provider of services and the regulator. There are
diverse options available to governments including publicly funded services,
Universal Service Obligations, subsidies and micro-finance.
Ms Puri said that there is widespread public provision of essential
services and mentioned that user fees have not been particularly successful
in Sub-Saharan Africa. She pointed out that in many African countries,
the elimination of primary school fees saw an increase in the number
of pupils. User fees have been found to decrease the utilisation of
health services. The World Bank has found that user fee abolition had
resulted in improved access, she said.
Private sector involvement, can take many forms, but no solution is
a panacea. Successful private sector involvement depends on the type
of service, the competitive situation in the industry, the manner of
introducing private involvement and regulatory considerations. Ms. Puri
added that there is a need to be realistic on private involvement and
to have clearly defined Universal Access obligations. She also warned
about the potential for competition to be impeded.
Ms. Cecilia Ugaz, Acting Deputy Director, Human Development Report Office
of the United Nations Development Programme (UNDP) presented some of
the findings of the Human Development Report 2006. She said that on
current trends the Millennium Development Goals (MDGs) will be missed.
Ten billion dollars per year was needed to meet the MDGs. The economic
benefits of meeting them would amount to US$38 billion, with about $15
billion accruing to sub-Saharan Africa.
Ms. Ugaz said water and sanitation suffer chronic under-funding and
account for only 5% of total Overseas Development Assistance and generally
less than 0.5% of GDP. She said that water pricing reflects a perverse
principle, the poorer you are, the more you pay for water. Regarding
sanitation she said that nearly 1.4 billion people without sanitation
live on less than $2 per day.
Ugaz added that regulation is critical to the progressive realisation
of the right to water. Specifically she mentioned that water as a human
right should be legislated, and that the regulatory framework should
be developed and expanded.
During the session on Public and Private Provision, David Hall, Director
Public Services International Research Unit (PSIRU), stated that public
services from mid 19th to mid 20th century were really "public"
in nature, characterised by "municipal socialism" where services
were financed from taxes.
Hall pointed out that empirically, the private sector is no more efficient
than the public sector. He cited a 2004 policy paper of the IMF written
in consultation with the World Bank. In another study comparing various
studies on water in Latin America, Asia, Africa, USA and Europe it was
concluded that a change in ownership showed there was no consistent
difference in performance.
Ms Susan Robertson, University of Bristol, said that, "there has
been an overall decline in public expenditure on education globally."
And while digital technologies offer new opportunities for access, "the
'divide' is still wide."
In the meeting there was a session on universal access to water services.
Mr. Emanuele Lobina, Senior Fellow at the PSIRU, said that in the North,
the public sector had played the predominant role to achieve universal
coverage. In 1897, 82% of the largest cities in the US were served by
municipal operations and at the end of the 20th century "this percentage
was broadly the same and was not expected to change significantly."
Questioning the ideology of the preference for private delivery of water,
he said that at present 90% of provision is still public. The transaction
costs for supplanting the public sector with the private is "unsustainable"
he said, referring in part to the changes required of regulatory regimes.
He also emphasised the successes of international "public-public
partnerships" as an option for improving access, for example cooperation
between the public water agencies of Britain and Malawi. Lobina said
that the "not for profit ethos" allowed for the maximum deployment
Prof. Idor Ridel, the Vice Chair of the UN Human Rights Commission's
Committee for Economic, Social and Cultural Rights drew attention to
the right to health which included the right to water.
He said he felt that a public private partnership approach to a human
right was the "wrong approach." There were several other models
that were much better. On availability, he said, that people should
be entitled to 5 to 20 litres of water per day.
Bolivia's former Vice Minister of Basic Services, Rene Orellana showed
how water privitisation had not worked. He cited the case of the people
demanding that the company Suez who had been granted a water concession
in Bolivia be closed down.
With other private entities, penalties were imposed on them for failing
to meet the terms of the contract. One company's fine amounted to $9
million. Consequently the government has introduced new principles for
water management, including that it should not be a lucrative business
and that income from water must be reinvested in the service.
Mr Xavier Maitrerobert, Senior advisor at Aquafed (an association of
water companies including Suez company) was anxious to see the debate
closed on the right to water. He said that work on this had already
been done in Mexico at the World Water Forum in 2004. He said free water
for everybody was "unrealistic."
Maitrerobert was supportive of the private sector as a means to provide
access. He said cost recovery operations "should be implemented
as far as possible" and added the concept of "sustainable
At question time, a delegate of Bolivia questioned why the World Bank
promoted the privatisation of water. Lobina said that the World Bank
takes a short term approach. He said it was unrealistic that models
that took decades to develop in developed countries can be translated
to the South.
An Argentinian delegate cautioned about guarantees given by the public
sector, especially foreign exchange guarantees, to private operators.
He cautioned further that the public sector should be aware of "predatory"
private sector behaviour. Ms. Stamenka Uvalic-Trumbic, a Section Chief
at UNESCO, said during the session on Universal Access to Education
and Health Services that governments are no longer meeting the rising
demand in education and there is a rise in the provision of private
UNESCO was actively pursuing a policy debate on quality assurance and
accreditation because of the growth in cross-border education. Uvalic-Trumbic
said the private higher education market was estimated at $300 billion
worldwide and growing. The globalisation of education presented both
threats and opportunities.
Ms Esme Chipo Kazarmira of the University of Malawi, said that World
Bank policies on user fees had dramatic impacts on enrolments and universal
access to primary education. User fee increases in some cases resulted
in a 50% decrease in enrolment. When fees were abolished due to changes
in World Bank and donor policies, enrolments increased dramatically.
However, this "big bang" approach also created problems as
schools were unable to cope with the sudden increase in students. Moreover,
parents still had to meet other related school costs and thus "schooling
is not free only fee-free." The number of secondary school completers
was still limited despite increased primary sector enrolment.
Mr. G.K. Chadha, a member of the Prime Minister's Economic Advisory
Council of India said that more than half of rural children belonging
to the poorest group of households stayed away from schools, compared
to 10% of their richer counterparts. Provision of a midday meal for
students has not only increased performance but also enrolment.
Nuria Homedes of the University of Texas said that Universal Access
to healthcare in Latin America was a challenge because of the stark
inequality in the region which has worsened in the last 10 years. Health
reform strategies relied on increasing the role of the private sector.
Overall, subsidies for promoting access were targeted at the demand
for services instead of supply. These reforms have met with limited
success, she said. Systems that have promoted private insurance have
high administrative costs, as much as 30%. In addition, governments
have had difficulties regulating the private sector.
She emphasised that the private sector is not interested in health promotion
and disease prevention.
She added that in Chile the health system is highly inequitable. The
private sector has per capita expenditure double that of the public
sector but covers fewer people. This makes private sector efficiency
In Columbia despite reforms 40% of the population remains uninsured.
Guatamala has contracted out services to NGOs but there are many problems
with supervision and accountability. Costa Rica health cooperatives
are more expensive than the regular system and there is no documented
evidence of increased quality. She added that the public sector had
been weakened because many of its health workers have moved to the better
paying private sector.
Also experiences in Columbia, Chile and Mexico indicate that it is not
advisable to decentralise and privatise health services because this
promotes inequity. Securing solidarity/additional funds cannot redress
the inequality trend. She added that increased autonomy for hospitals
has resulted in increased user fees and discrimination against "expensive
Trade agreements that facilitate the penetration of private insurance
companies contribute to greater segmentation of health systems to the
"detriment of their equity and efficiency."
Chantal Blouin of the North South Institute (Canada) questioned whether
international trade in health services can improve access. She said
that only patients with private or social insurance or high income patients
benefit from access to high quality services offered by foreign establishments.
Blouin says that expansion of private insurance through foreign investment
is "the most inequitable way to finance access to services."
In any event, it is "unlikely that it will have a large scale positive
impact on improving access to basic services."
Lessons in the literature on user fees shows that they reduce access
to services. "In virtually all cases where user fees were increased
or introduced, there was a decrease in service utilisation."
Blouin added that, "there is basically no experiences of developing
countries building a strong regulatory framework to harness the potential
benefits of private insurance."
Concluding, she said that "members who would like to open their
health sector to foreign providers should consider 'experimenting' with
liberalisation outside of GATS before making GATS commitments"
referring to the WTO General Agreement on Trade in Services. Similar
considerations apply to regional and bilateral agreements she said.
This way policy reversal remains easier for governments.
Mr. Pongpisut Jongudomsuk, National Health Security Office, Thailand,
said highlighted the problem of the brain drain, which he said was linked
to the health of the general economy. During the 1997/8 crisis they
experienced a loss of medical doctors which has been recovering together
with the economy.
Eugenio Villar of the World Health Organisation said that in the health
sector, there were a number of "inverse laws." For example,
the 'inverse care law' meant that safe, proven and cheap interventions
are not reaching those in need. He added that protection and safety
of patients are also vital as too many people are worse off after they
have used the health system.
In the interactive session, the impact of patents and of bilateral trade
agreements was discussed. Brazil raised the question how patents affect
the cost of medicines and thus universal access to healthcare.
Referring to FTAs, Villar said that the FTA (between Peru and the US)
would affect the length of the period of patents. The implication is
that the state would have to pay more for medicines, and it would cost
the state $30 to 60 million more per year.
Hormedes said that US companies were not making as much profits at home
and were seeking more profitable foreign markets that are less regulated.
She added that where regional FTA negotiations had failed the US had
pursued bilateral trade deals, as was the case in the ANDEAN region.
Blouin of North-South Institute said that countries should note that
health insurance commitments were covered in the GATS in the category
of financial services and not in the health section.
She said Canada had stated it would not make any commitments in the
health sector and suggested that othercountries look at the reasons
for this position. She added that a cheaper health system was an economic
comparative advantage, which for example gave Canada a competitive advantage
over US auto-makers.
In a session on universal access to telecommunication services, Susan
Schorr of the International Telecommunication Union said that policies
on access in the telecoms sector were focused mainly on fixed lines.
Jorge Bossio of OSIPTEL, the Telecoms Regulator in Peru, said his government
was interested in Universal Access for efficiency reasons (positive
network externalities, solving asymmetric information problems) and
equity reasons (improve access to other basic services and to satisfy
communication needs). Through a tax, one percent of gross incomes received
by final service providers and carriers finances the Universal Access
Ms. Sadhana Dikshit, Department of Telecoms, India, said that the gap
between rural and urban tele-density (i.e. the number of persons with
access to telecom services) was a concern. Urban density in India was
about 48% while rural density was less than 2%.
Universal Service objectives are determined in transparent process with
the regulator. There is a 5% across the board levy on designated revenue
from all operators except value added service providers. There is also
a license fee that is charged. By changing their definition of Universal
service from "basic telecom" services to plain "telecom"
services coverage through mobile has opened up. India has disbursed
about a billion dollars from its Universal Service fund thus far.
Lee Tuthill, Counsellor, Trade in Services, World Trade Organisation,
said that Universal Service is a policy objective that falls within
a Government's right to regulate under the WTO's GATS. She said that
Universal Service obligations are not market access restrictions, as
defined by GATS, but rather form part of domestic regulation.
She said that perhaps there is an "artificial separation"
between domestic regulation and market access restrictions. Tuthill
claimed there was "huge inherent policy flexibility" in the
Telecoms Reference Paper.
Tuthill reminded delegates of Article 8 of the GATS agreement on Monopolies
and Exclusive Providers that she said would "kick in" for
governments, even those which have not introduced competition.
During the interactive dialogue, the TWN representative said that on
interconnection fees, there was something wrong with the regulatory
model when even the EU Commission, with its complex institutions, had
to ask European users to switch off their phones to avoid the excessive
international roaming charges.
He stated that some developing country delegates reported that when
they were negotiating the GSM standards, some companies had insisted
that international calls be routed through the home country, increasing
costs, even though there was no technical requirement for this. The
representative of Vodafone said he supported competition but differed
with the EU Commission's interpretation on international roaming.
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