The debate on the World Bank’s Private Sector Development (PSD) approach has continued since the Bank finalised its strategy in late February.
Two new studies add to the concerns and criticisms raised by a number of NGOs, trade unions and academic commentators (see Bretton Woods Update 26). Meanwhile a leaked IFC document sets out aggressive targets for increasing World Bank Group support for private healthcare.
The International Confederation of Free Trade Unions (ICFTU) complained that the Bank’s private sector strategy may deprive poor people of access to basic services. “The strategy generally ignores the problems of lack of regulatory control over the newly privatized services and the situation of the employees of these services. The proposed financing scheme would favour multinational enterprises as opposed to domestic providers”. It stated that “the Enron collapse, preceded by the fiasco of energy market deregulation in California, graphically demonstrated the downside of allowing large private corporations to dictate market deregulation and privatization. Unfortunately, there is little evidence that such messages have been understood by the international financial institutions, since country-level advice is still rife with admonitions to privatize and deregulate.”
The European Network on Debt and Development (EURODAD), in a new report on the private sector strategy, argues that: “on a rhetorical level the discussion is relatively focused on ‘pro-poor’ arguments and on recognising the role of the state in providing basic services. But when looking at the actual policies, the strategies are less convincing.” Among EURODAD‘s recommendations are that the Bank should positively discriminate in favour of domestic industry and local entrepreneurs, and re-think the granting of guarantees for independent power producers.
Meanwhile internal IFC documents reveal that the Corporation aims to increase its support for private investment in the social sectors to between 4 and 5 per cent of IFC projects in the next few years. The IFC argues that “improving access to, and quality and efficiency of services in the health sector is essential to the growth and strengthening of the middle classes – a key component in increased economic productivity”. The IFC sets out to invest in private healthcare facilities in situations where other investors are reluctant. Through this it hopes to expand the supply of healthcare and also contribute to the building of in-country institutional and systemic capacity. The Corporation argues that many of its client companies “transfer technical expertise to public facilities thus strengthening overall health system capacity in the country”; and that investing in cutting-edge facilities has a demonstration effect on the sector as a whole, reducing the brain drain caused by medical professionals leaving to work in developed countries.
As well as continuing to support market surveys and hospital investments, the IFC aims to increase support for private health insurance, and for investments in the fields of pharmaceuticals, medical devices and biotechnology.
Mike Rowson from Medact commented: “rather than strengthening the private sector, why isn’t the Bank pouring money into the public health systems which have been left devastated by two decades of adjustment programmes? In developing countries, investment in the private sector, far from creating a “demonstration effect”, often leads to an internal brain-drain as health workers flock to better funded private hospitals, leaving the public sector in an even worse state”.
Leaked IFC document on private healthcare available on request from Bretton Woods Project: Topical Briefing on Health and Investing in Private Health Care: Strategic Directions for IFC, March 2002
Private Sector Development – Pro-Poor, Or Merely Poor, Service Delivery? EURODAD, March 2002
Reforming Public Hospitals – Options for Public-Private Partnerships e-discussion