Thursday, August 17, 2017

The contrasting trajectories of infrastructure and welfare sectors in development

Consider how roads were built even thirty years back in countries like India. Government officials would make the project reports and work estimates and get the road approved. Once approved, the local officials would procure materials like bitumen, hire workers, and use government owned machinery to lay the road. One group of officials from the department would do the field execution, another group would do the recording and check measurements, and yet another group would conduct quality control checks. Once constructed, another group of officials from the same department would be entrusted the responsibility of maintenance. As can be imagined, the government incurs the full expenditure for the road on its completion. 

Fast forward to now, and the scene has been transformed beyond recognition. Consultants make detailed project reports and estimates. Once approved, the department tenders the work out to contractors, who have the responsibility of construction to specified standards. The department owns no equipment and supplies nothing. It even outsources quality control and project management responsibilities to consultants. The maintenance responsibility is either bundled with the construction contract or outsourced after construction. What's more, the government even amortises its expenditure by making periodic payouts to the contractor on meeting agreed service levels. 

The department's role is to co-ordinate among a group of private providers. Contract management has replaced execution as the primary responsibility of government. Much the same transformation has happened across infrastructure sectors, including the urban sector. 

It cannot be denied that this transformation has had a very significant impact in the ability of governments to develop massive infrastructure projects, improve the quality of service delivery, lower corruption, and become all round more efficient. 

Now take the example of school education. Thirty years back, governments would construct school buildings, hire teachers, and run schools. The department would develop, print and supply text books; stitch and supply uniforms; run mid-day meal kitchens; buy and make available television and computers with operators; procure teaching material for teachers; and provide trainings on curriculum instruction, leadership, motivation and so on. It would also develop testing instruments, hold examinations, hire data entry operators to collect and consolidate data, and so on. 

Fast forward to now, and virtually nothing has changed. The government continues to do all the same set of activities! Much the same applies to health, nutrition, agriculture, and most other welfare sectors. 

In some sense, this also, at least partially, explains the relative stagnation in service delivery quality in welfare sectors.

In a world of twenty years hence, given very weak state capacity, it is highly unlikely that we would have achieved learning and other outcomes without having catalysed markets that offer services across welfare sectors. Therefore, catalysing markets and the emergence of an eco-system of service providers should be one of the primary objectives of public policy in social sectors in developing countries.

This is not an argument in favour of privatisation but one to leverage complementary strengths. The private or non-government sector is likely to be better at doing engagement intensive activities, which weak state capacity is likely to hinder state from being able to deliver effectively. While schooling and primary health care, being public goods, will have to remain mainly public responsibilities, governments should seek opportunities to leverage private sector strengths where possible. 

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