Public Services Delivery - An Overview on Strategy With Reflections on China VILLARREAL and CAI 2010

8/8/2019 Public Services Delivery - An Overview on Strategy With Reflections on China VILLARREAL and CAI 2010

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Revisited draft

15 November 2010

Basic Considerations regarding the Provision of Public Services, Public

Service System Reform and Fiscal Reform to finance Public Services:

An Overview with some reflections on the case of China1.

Roberto Villarreal and Xinxin Cai2

Abstract

This paper focuses on the importance of public services for economic and socialdevelopment and analyses a variety of challenges faced by the public administrationto foster their delivery. The notion of public services is discussed in non-technicalterms and three broad categories of public services are discussed: State orgovernment services, social services and infrastructure services. While there is someoverlapping among said broad categories, these prove useful to highlight fundamentaldifferences in the nature and characteristics of the specific services typicallycomprised in each one. The paper presents the most common challenges for public

policy regarding each category, in connection with: coverage, quality, costs, socialequity and inclusion, financing and delivery either directly by the public sector orthrough some sorts of partnerships with the private sector or civil societyorganizations. While the discussion applies in general to all countries, many particular bibliographic references to the case of China are included about everyaspect of public service delivery. At the end, some considerations are made about anoverall strategy for the Peoples Republic of China to improve the delivery of publicservices, within the XII five-year national development plan.

Introduction

The Peoples Republic of China has undertaken large reforms over the last decades,mainly about its economy. In a gradual and ordered manner, the Chinese government hasfollowed strategies for opening up, which are progressively transforming the completely Statelead and operated economic system of the third quarter of the twentieth century, into adifferent one in which markets and the private sector play increasingly important roles indetermined productive sectors and geographical regions, while the public sector continues to

1Paper submitted to the conference Transformation of Development Models and Chinas Reform

in the 12th Five-Year Plan Period: A New Starting Point, New Situations and New Challenges,Haikou, Hainan Province, Peoples Republic of China, 30-31 October 2010. The conference was co-organized by the China Institute for Reform and Development (CIRD) and the German TechnicalCooperation Entity (Deutsche Gesellschaft fur Technische Zusammenarbeit, GTZ).

2 The authors work in the Division for Public Administration and Development Management

(DPADM), in the United Nations Department of Economic and Social Affairs (UNDESA). Allcontents of this paper are their sole responsibility and do not necessarily reflect the official views orposition of the secretariat and governing bodies of the United Nations. The authors are grateful toAnni Hataja for preparing summaries of relevant case studies from the United Nations Public ServiceAwards Database (www.unpan.org), Yang Yang for her bibliographic and statistical research, as wellas Haiyan Qian, Director of DPADM, for her support about the preparation of this paper. Usefulcomments on earlier drafts of the paper were received from all of them and from Keping Yao, forwhich the authors are indebted. However, the authors assume total responsibility for the viewsexpressed in the paper and for any remaining errors.


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exert fundamental functions and controls the overall transformation process3. Besides

attaining high growth rates with relatively low inflation4, China has succeeded in loweringpoverty (as measured by the number of people with daily income lower than 1.25 dollars)5.Yet, Chinese and international analysts agree that much remains to be done and, at the sametime that many ongoing public policies need to be continued to maintain these economictrends, additional ones are called for to address growing economic inequalities observable in

the personal and regional distribution of income6

, and to meet the growing demands of

3 The economic reforms and main strategies for development in China have been widely studied anddocumented. For example, see: Chen, Shaohua, et. al. (2001); Dollar, David (2008); Kuijs, Louis, et.al. (2005); Lin, Yifu, et. al. (2008); Lin, Justin Yifu (2010); Lindbeck, Assar (2006); Luo, Xubei, et.al. (2008); Qian, Yingyi (1999); Ravallion, Martin (2009); Stern, Nicholas (2001a, 2001b); WorldBank (1999, 2008); Yusuf, Shahid, et. al. (2006); and Zafar, Ali (2010).

4Real GDP growth was 14.2%, 9.6% and 9.1 % in 2007, 2008 and 2009, respectively. Consumer price

growth was 4.8%, 5.9% and -0.7% in the same years. The global economic and financial crisisexperienced in the past three years affected China less than other countries largely due to effective

domestic stimulus policies. Early in 2010 growth had recovered, close to a 13.5% annual rate, whichhas slightly lowered in the following quarters. Latest estimates from the World Bank forecast a realGDP growth of9.5% in China for 2010, the highest among East Asia countries. Consumer priceinflation observed in July was 3.3% on an annual base. Real wages have grown at very high annualrates: 13.1% in 2007, 10.4% in 2008 and 12.4% in 2009. For the rest of 2010 they are expected toincrease between 10% and 12%. See World Bank (2010).

5Measured by the new international poverty standard of $1.25 per person per day (using2005

Purchasing Power Parity for China), the levels of poverty declined from 85% of the total population in1981 to 27% in 2004. The most recent official estimate of rural poverty in China for 2007 puts thenumber of poor at 14.79 million, or less than 2% of the rural population (NBS, 2008). While there isno official urban poverty line, estimates by others have found poverty levels in urban areas to benegligible using an urban poverty line that is comparable to the official poverty line for rural areas.

These estimates thus suggest that only about 1% of Chinas population is currently in extreme poverty.In other words, extreme poverty, in the sense of not being able to meet the most elementary food andclothing needs, has almost been eliminated in China. () Vulnerability to poverty because of a varietyof income shocks remains widespread. For instance, using the World Bank poverty line, nearly a thirdof Chinas rural population was consumption poor at least once between 2001 and 2004. ()As thepoverty rate has fallen, it has become harder to eliminate the remaining poverty because the remainingpoor are more dispersed. While the incidence and severity of poverty is the highest in westernprovinces, nearly half the poor are dispersed in the rest of China, and likewise, while poverty is themost severe in mountainous and minority areas, more than half the poor are in non-mountainousnon-minority areas. And as poverty levels are reduced, the village-level concentration of poverty tendsto decline. This carries the important implication that as China makes further progress in alleviatingpoverty, the remaining poverty could be expected to be more dispersed thus eroding some of thepotential benefits from area based targeting relative to household-based targeting approaches. See

World bank (2009).

6Over the two decades 1981-2001, income inequality in rural areas, as measured by the Gini

coefficient, increased from 0.25 to approximately 0.37. At the same time, in urban areas, incomeinequality also grew and the Gini coefficient rose from close to 0.19 to approximately 0.32. Thesefigures reflect not only the growth of income inequality both in rural and urban areas, but also the factthat income inequality has persistently been larger in rural areas compared to urban ones. At theaggregate national level, however, these increases in inequality have been magnified due to the evenmore noticeable widening income differences between rural and urban areas. See World Bank (2009).


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diverse population groups for further improvement in the living conditions, as well as forsocial and political change.

This is well recognized by the Chinese authorities and the National development strategies inplace seek to address the existing challenges in a proactive way. The Chinese Premier, WenJiabao, in a widely diffused interview recently granted to a global news network

7,

summarized the principal development aspirations of the country as follows: To let everyonelive a happy life with dignity. To let everyone feel safe and secure. To let the society be onewith equity and justice. And to let everyone have confidence in the future. It is expected thatleadership from the Communist Party will continue to pursue the necessary policies to theseaims, and that institutional and political changes will be prudently followed.

One of the many areas about which Chinese government officials, researchers andpractitioners are actively exploring further possibilities for reform and improvement, is that ofpublic services. The reasons are more than a few. In the first place, still large percentages ofthe population lack access to basic public services, and considerable proportions of the

population perceive that the quality of public services is unsatisfactory. This negativelyaffects not only their living conditions, but also their trust and support for government. In

addition, deficiencies in the provision of public services negatively affect mid- and long-termdevelopment opportunities, for the individuals and households, communities, regions and thecountry as a whole: competitiveness is constrained, as well as the possibilities for human andsocial development. Finally, improvements in public services seem unlikely to be attained bythe mere extension of pro-market or privatization policies, or by the internal reform of PublicService Units

8, but rather appeal to a complex combination of regulatory, public

administration and organizational changes, including the growing participation of citizens andthe private sector, in ways and to extents which are not always clear.

While numerous and good quality studies have been conducted in this regard by qualifiedindividuals and research institutions9, the intellectual debate and the policy making processcontinue to demand additional analyses at the theoretical and empirical levels, including

consideration of experiences and practices from other counties. Proof of this is the inclusionof the section on Provision of Public Goods, Public Service System Reform and the

Public Fiscal Reform, as part of the conference Transformation of Development Modelsand Chinas Reform in the 12th Five-Year Plan Period: A New Starting Point, New

Situations and New Challenges, co-organized by the China Institute for Reform andDevelopment (CIRD) and the German Agency for Technical Cooperation (DeutscheGesellschaft fur Technische Zusammenarbeit, GTZ), to which this paper is submitted.

7 CNN, interview to Wen Jiabao by Fareed Zakaria, 3 October 2010. See:

http://transcripts.cnn.com/TRANSCRIPTS/1010/03/fzgps.01.html

8 Public Service Units is the term often used in the literature to designate the State owned, managed

and operating entities that deliver public services of different types (in Chinese, shiye danwei). See, forexample: Schick, Allen (2004). According to the report World Bank(2005), China has more than onemillion public service units with a total labour force of around 30 million. Nearly half of their fundingis raised through service fees charged to users. Yet, this avenue to increase financial autonomy ofpublic service units does not always result in productivity and quality increases. The report calls formore accountability combined with flexibility, keeping into consideration regional and localconditions. It suggests further decentralization and greater empowerment of service users.

9For instance, see: United Nations Development Program (UNDP) and Chinese Institute for Reform

and Development (CIRD) (2008).


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The objective of this paper is to present a number of considerations deemed of fundamentalimportance for designing and implementing adequate public policies to enhance the provisionof public services in a variety of countries, including China. In particular, the paperdistinguishes three broad classes of services: State or government services, social services andinfrastructure services. For each class, the nature of the respective services is discussed and

comments are made on how these classes of services have been approached in diverse waysover history from the public policy perspective. The typical challenges or problems faced inrespect of each of these classes are discussed and public policies generally adopted toovercome those problems are summarized, including basic considerations on related fiscalissues. The paper also sheds some light on the involvement of non-government actors (the

private sector, citizens and civil society organizations) in the provision of public services, andhighlights that neither privatization nor citizens engagement are a panacea to solve at once alltypes of problems usually observed about the three classes of services mentioned above.Rather, it is recommended that public-private partnerships and citizens engagement beincluded to address well targeted specific challenges about the provision of public services,under the overall strategies determined by the public administration. Along the paper,conceptual arguments are presented and references are made to available literature on public

services in China. In an appendix, some related case studies from diverse countries are brieflyrevisited.

The paper is aimed at practitioners and public policy makers involved in the field of publicservice provision. Essentially, it revisits a wide number of related issues that should be takeninto consideration when designing reforms. It is expected that this paper will complementthose from other participants in the conference just mentioned and, possibly, will contributewith some additional insights to the vast knowledge on the matter already held by Chinese

policy makers and researchers.

The organization of the paper is as follows. Section 1 elaborates on the importance ofservices, in general, to the macro economy and, over the mid- and long-runs, to economic andsocial development. Section 2 contrasts the category of services which are expected to beavailable (that is, physically accessible and economically affordable) to all individuals insimilar or identical conditions, against another category of services about which thatexpectation does not hold. Using these two categories of services as a background, threedifferent families of services are analyzed from the perspectives of economic analysis and

public management: State or government services, social services and infrastructure services.Finally, Section 3 contains some general conclusions and presents some ideas on how severalelements of public policy could be coherently integrated into Chinas national developmentstrategy. In theAppendix, interesting case studies on innovative practices for public servicedelivery are presented.

1. The importance of services

Services consist ofactivities, which directly satisfy a variety of needs of people andbusinesses. Their nature is quite diverse. To mention only a few examples: haircuts,preparation of meals, teaching, child and health care, accounting, technological or scientificresearch, construction, cleaning, waste collection and processing, transportation of people or

products, storage, marketing, financial asset management, transmission of wave or electronicsignals, statistics record keeping, regional planning, water treatment, customs and taxes


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administration, law making, provision of justice, police and defense, protection of the naturalenvironment, etc. Because of their multiplicity, it is impossible to list or enumerate allservices.

These activities are important in many ways. First, some services have big impacts in thequality of life of people, and for this reason individuals and households allocate to them a

considerable amount of their budget. As it can be seen in Table 1, as a proportion ofconsumers expenditures, consumers in China spent on a few key services a large percentageof their income: 12.6% on transportation and communications, 12.1% on education andrecreation, and 7% on healthcare. The sum of these three represented close to one third ofconsumers expenditures. Moreover, expenditure on these services has increased verymarkedly, as it is normally the case in all countries as income growths: the proportion of theconsumers budget allocated to transportation and communication augmented by 7.4 percent

points, and in the cases of healthcare and education the increases were 3.9 and 2.7 percentpoints, respectively.

TABLE 1

CONSUMER EXPENDITURES ON SERVICES IN CHINA, 1995-2008

Expenditure on Services as

Proportion of Private

Consumption in China (%)

1995 2000 2007 2008

Absolute Variation

(1995-2008)

Percent Points

Transportation and

Communication5.18 8.54 13.58 12.60 7.42

Education and Recreation 9.36 13.40 13.29 12.08 2.72

Household Facilities and

Utilities7.44 7.49 6.02 6.15 -1.29

Health 3.11 6.36 6.99 6.99 3.88

Other 3.25 3.44 3.58 3.72 0.47

Source: China Statistical Yearbook (2008, 2009), compiled by National Bureau ofStatistics of China,

China Statistics Press.

In particular, certain services are absolutely essential for human functionings, like improved

water and sanitation. In developed countries, practically the entire population accesses these

services. Unfortunately, in developing countries, not all people do. Table 2 shows that, as of

2008, in Germany the totality of the population had access to improved water and sanitation,

regardless of whether they live in urban or in rural areas. In Canada, the same was also

observed, with only a negligible lower access to improved water in rural areas (99%). In

Turkey and Mexico, access rates ranged between 87% and 100%. In Brazil and South Africa,

these access ratios were noticeably lower, but still reasonably high. Yet, in China, access to


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improved water in rural areas was only 82% and access to improved sanitation in urban areas

was just 58%.

TABLE 2

SOME INDICATORS ON WATER AND SANITATION SERVICES

IN CHINA AND OTHER COUNTRIES, 2008

Water & Sanitation China Brazil Canada Germany India MexicoSouth

AfricaTurkey

Improved sanitation

facilities, urban (% of

urban population with

access) (2008)

58 87 100 100 54 90 84 97

Improved water source,

rural (% of rural

population with access)(2008)

82 8499

1

00 84 87 789

6

Improved water source,

urban (% of urban

population with access)

(2008)

98 99 100 100 96 96 99 100

Sources: Infrastructure, World Bank, http://data.worldbank.org/topic/infrastructure;

Urban Development, World Bank, http://data.worldbank.org/topic/urban-development.

Besides, services are also economically important for employment and income generation forthe population. Due to their large diversity, services comprise activities of variedtechnological complexity, which employ workers of many different skill levels. Thus, someservices are intensive in the use of low-skilled labor and create low-productivity jobs for

people with limited education, while other services demand highly skilled and educatedworkers to perform high-productivity jobs (see Table 3). Thus, the broad family of servicescreates employment for the entire spectrum of the labor force. And, in some types of services,women are more frequently employed than men, providing an interesting opportunity toexpand job creation for females.

In Germany and Canada, in 2006, services like transportation, storage, communications andfinance provided 9% and 11% of total employment, respectively. Social services, likeeducation and healthcare, represented altogether17% and 18% of total employment, in thesame order. And government services, close to 8% and 5%. In both countries, these servicesconstitute more than one third of total employment. In Mexico, the same indicators registered5.6%, 8.1% and 4.8%, respectively, for an aggregate 19.5%; and in Turkey, 6.3%, 6.7% and


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5.5%, in the same order, adding to 18.5%. In China, the same figures recorded 8.4%, 17.2%and 10.7%, a sum of 36.3%, higher than in any of the preceding examples

10.

TABLE 3

EMPLOYMENT IN SERVICES IN CHINA AND OTHER COUNTRIES, 2006

Employment by

sectors as

proportion of

total

employment

(2006)

China

(Millions)

China

(%)

Brazil

(%)

Canada

(%)

Germany

(%)

India

(%)

Mexico

(%)

South

Africa

(%)

Turkey

(%)

Electricity (ISIC

E)3.03 2.52 0.44 0.74 0.85 NA 0.44 0.93 0.42

Transport,

storage andcommunication

(ISIC I)

6.13 5.18 4.55 6.32 5.53 NA 4.74 4.77 5.21

Financial (ISIC

J)3.67 3.24 1.20 4.52 3.53 NA 0.86 10.23 1.07

Government

(ISIC L)12.66 10.74 4.98 5.06 7.70 NA 4.82 18.12 5.49

Education (ISIC

M)15.04 12.65 5.44 7.03 5.85 NA 5.34 NA 4.06

Health (ISIC N) 5.25 4.51 3.54 10.83 11.31 NA 2.75 NA 2.65

Sanitation and

sewage (ISIC O)1.22 1.04 4.25 4.96 5.70 NA 3.25 NA 4.22

Source: International Labour Office http://kilm.ilo.org/KILMnetBeta/default2.asp.

Note: NA means data are not available.

Addendum* ChinaBrazilCanada Germany India Mexico South

Africa

Turkey

Employees,

services, femaleNA 72 88 82 NA 76 78 37

10In the European Union, more than 500 000 enterprises - private, public, mixed-owned enterprises -

provide public services. Altogether they employ more than 64 million people, providing services toabout 500 million Europeans. See CEEP (2010a, 2010b, 2010c).


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(% of female

employment)

(2006)

Employees,

services, male

(% of maleemployment)

(2006)

NA 50 64 56 NA 49 56 51

Source: Labour &Social Protection, World Bank, http://data.worldbank.org/topic/labor-and-social-

rotection.


Moreover, services generate considerable labor income for the workers employed, and capitalincome for the investors who own the respective production facilities or the owners of the

intellectual property rights on some of the technologies utilized. Services also providesignificant public income for the public treasury, from the taxes levied on their production

and delivery. Table 4 presents some figures about the aggregate income generated in severalservices, as a percentage of total national income (Gross National Product, GNP). As it can be

seen, in most countries included in the table, government services range between 14% and21%, and compare to the sum of other services typically provided by the private sector, astransportation, storage, communication and finance

11.

TABLE 4

INCOME GENERATED IN SERVICES IN CHINA AND OTHER COUNTRIES, 2006

Sectoral value-added as proportionof total GDP, 2006 (%)

China* Canada Germany Mexico Brazil Turkey

Transport, storage and

communication (ISIC I)5.89 7.15 5.73 9.17 8.63 15.58

Financial (ISIC G-H) 8.89 14.42 12.17 18.49 19.09 16.74

Government (pub.adm.) 14.21 20.68 20.32 10.76 23.33 13.99

Education 2.92 1.60 NA NA NA NA

Health 1.52 2.10 NA NA NA NA

Water and environment 0.45 0.22 NA NA NA NA

11In the European Union, public services providers contribute directly to more than 26% of the EU 27

GDP. See CEEP (2010a, 2010b, 2010c).


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Sources: National Accounts Main Aggregates Database

http://unstats.un.org/unsd/snaama/resCountry.asp; Statistics Canada: http://www.statcan.gc.ca;

* For the Chinas education, health and water &environment data source is the 2008 China

Statistical Yearbook.

NA means data are not available

Nevertheless, beyond these immediate economic effects on employment and income, certainservices have profound impacts on social and economic development over the mid- and long-runs. Among these, Table 5 summarizes some of the impacts on development stemming fromthe following specific services: electricity, transportation, telecommunications, governmentand public administration, finance, water, health care and education.

TABLE 5

IMPACTS ON SOCIAL AND ECONOMIC DEVELOPMENTFROM SEVERAL SERVICES

SERVICES EFFECTS IMPACTS ON DEVELOPMENT

Electricity Physical power

Mechanization

Peoples gradual liberation from physicalwork (intellectual, cultural andrecreational alternatives)

Higher capital/labor ratios Productivity increases

Transportation

Territorial mobilizationof goods and people

Geographicalinterconnection ofterritory

Rebalancing of local political anddomination structures, greater politicalfreedom

More exchange of knowledge Cross-cultural influences (between

different territories) Extension of markets and more efficient

utilization of economic resources(procurement, marketing)

Productivity increases More effective and fair use of public force

(defense, enforcement of National lawand consolidation of the Nation State)

Telecommunications

Access to information

Social relations

Economic transactions

Coordination amongdevelopment stakeholders

Expansion of social capital More exchange of knowledge Acceleration and multiplication of cross-

cultural influences (between differentterritories)

Multiplication of transactions

Extension of markets Productivity increases

Government andpublic administration

Public governance Provision of public goods

(peace, security, Rule ofLaw, public regulation,protection of humanrights, consumers andenvironmental protection,macroeconomic stability,

Enabling conditions (Rule of Law,administration of Justice, enforcement ofprivate contracts, protection of peoplesrights, macroeconomic stability, etc.)

Enhanced regulation of diverse activitiesto attain the public good (abuses ofmarket power, consumers protection -


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etc.) Delivery of public

services (taxadministration,administration of justice,etc.)

quality and safety-, environment, etc.)

Greater efficiency of public finance(taxes, subsidies, transfers, public debt)

Financial

Matching of diverse needsfrom savers and investors,including resources anddistribution of risks

Easier access to resourcesavailable for investment

Relative standardization offinancial contracts andconvenient

institutionalization offinancial transactions

Increase in safety and protection forsavers, particularly small ones

Channeling of unspent income toborrowers, thus raising effectiveaggregate demand and reducing short-term unemployment

Enhanced allocation of savings (goods forpostponed consumption) to productiveactivities with highest returns (largestratio of transformation of present intofuture goods), thus increase inconsumption and living conditions overtime

Reduction of transactions costs,facilitation of inter-temporal transactionsand increase in productivity

Safe water, sewageand treatment

Better hygenic conditions

Better control overinfectious andtransmittable diseases

Convenient access tonearby facilities

Protection of the naturalenvironment

Short-term effects on time allocation ofhouseholds, and higher productivity,possibly larger labor market participationand increased labor supply (speciallyfrom women), larger incomes andreduced poverty, thus overall Immediateimprovement in living conditions

Lower child mortality, overall healthimprovement, longer lifespan, betterphysical capabilities for people and lower

vulnerability Faster and more efficient accumulation of

human capital More long-term savings Enhanced environmental sustainability,

changes in differential growth of urbanand rural settlements

Long-term impacts on demographicstructure (aging, dependency ratios) andchanges in morbidity (infectious,contagious, degenerative and chronicillnesses)

Health care

Reduced and morecontrolled incidence ofthreats to public health

More effective preventionmeasures against diseases

More effective clinical andtherapeutic interventionsagainst diseases

Improved health, longer lifespan , better

physical capabilities for people and lowervulnerability

Particularly larger benefits for women(improved birth health, better maternalhealth)

Faster and more efficient accumulation ofhuman capital

Increase in labor productivity More long-term savings Long-term impacts on demographic


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structure (aging, dependency ratios) andchanges in morbidity (infectious,contagious, degenerative and chronicillnesses)

Education

More knowledge availableto people in the mid-termand over time

Better reasoning, learning,scientific andtechnological, creative,work, communication andother skills

Empowerment of individuals, better self-esteem, stronger self-determination

Growing acceptance of formal legalinstitutions, better enjoyment of humanrights, enhanced citizenship, moreeffective public governance

Greater awareness and understanding ofsocial, natural and technologicalphenomena, faster social, technical andscientific innovation

Changes in social values and visions,more inclusive economic and socialinstitutions

More care for the environment and thesustainability of human and economic

activities Increased capabilities of individuals,

larger labor productivity

As summarized in the table, it can be stated in general that these services have pronouncedmid- and long-term impacts, which translate into more dynamic development, fastereconomic growth and more rapidly improving living conditions, because they:

y Create better enabling conditions for development, because they bring aboutenhanced social, economic, political, juridical and knowledge settings for humanand material progress over time;

y Facilitate human capital accumulation, stemming from longer, safer, more free,

better informed and more empowered lives; andy Induce more private physical investment, as a result from higher productivity and

competitiveness, better access to inputs and product markets, better access to

finance, enhanced public finance and better provision of public goods, and moreeffective public governance.

Because of all the preceding reasons, services call for particular attention. It is desirable thatservice provision grows fast, and that essential ones reach all the population. The followingsection explores some basic issues which must be considered when designing orimplementing public polices to foster different types of services.

2. Distinguishing different categories and broad families of services

2.1 Public andprivate services

Distinction among services is often done on the basis of their nature and what theyprovide. However, for analytical purposes, particularly connected with public policy makingand implementation, it is proposed here, at the outset, to distinguish services in two broadcategories, from which rather different policy considerations are to be derived:


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i) Services which for cultural, social and political reasons are required to beavailable for all people

12, in reasonably equal conditions.

ii) Services about which it is acceptable on cultural, social and political grounds, thatthese notbe available for all people13 in the same conditions.

The first category (i) corresponds to services from which no person should be excluded. Thesecond one (ii) consists of services that are ordinarily available to only certain segments of the

population (for instance, those groups who have enough income to afford these services, andparticularly in certain geographical areas where these services are accessible).

It would be appropriate to refer to services in categories (i) and (ii), respectively, aspublicservices andprivate services (as it would be appropriate, following the same distinction madein microeconomic analysis between public goods and private goods). In making this contrast,the termspublic andprivate are defined on the basis of the characteristics of the populationwho gets these services, or in other words, the clientele. The notionpublic services, in thissense, refers to those services which go to the entire population or generalpublic, highlightingthat no individual is to be left out. Similarly, the concept ofprivate services, in this

perspective, applies to those other services which are only for some individuals.

However, while such definitions ofpublic andprivate services is acceptable, this paper willremain to use the terms category (i) and category (ii) as defined above, for expository

purposes . The reason for this is to avoid any confusion with services which are produced ormanaged by thepublic sector(public administration entities at any levels of government, and

public service units), and those that are produced by theprivate sector(households, firms,corporations, non-government organizations, etc.). In this case, the terms public and privatedo not refer to the characteristics of the clienteles, but to the type of ownership over the

production entities, that is, whether these are owned by the State or government sector or bythe non-government sector. These alternative use of the termspublic andprivate would leadto very different understandings, since, as it will become clear along this paper, services incategory (i) which could properly be called public services for the reasons discussed before,can in practice be produced and managed by both the public and private sectors, just as wellas services in category (ii), which could be correctly labeled as private services, are in realsituations produced also by both the public and the private sectors.

2.2 Classificationofservices incategories (i) and(ii)

Services which are deemed to be available to the whole population are not alwaysclearly defined. In fact, this set of services has been conceived in different manners alonghistory, and still is defined nowadays in diverse ways across different countries. The next

sections discuss this fact and attempt to throw some light regarding certain fundamental

12The expression all people shall not be taken literally; it is used here in the sense of all people in

the relevant age group. These services belong to what is sometimes called merit goods, indicatingthat, because historically-relative social and political consensus, it is taken that they should beprovided to all. In this later sense, the European Constitution refers to these as services of publicinterest.

13See previous footnote.


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issues, particularly relevant to assess large shifts in terms of public strategies for servicedelivery, taking place in countries around the world.

For exposition purposes, three broad classes of services are highlighted next. First, State orgovernment services. Second, social services. And third, infrastructure services. While it istrue that each of these classes comprises a large variety of specific services which have

features of their own, as well as these classes overlap to some extent in the case of determinedservices, the use of this classification proves useful to underscore key differences amongservices, which lead to rather different public policy considerations.

2.2.1 Stateorgovernment servicesa. Their nature

In all countries, along history, State or government services have essentiallyconstituted category (i). These consist of activities performed by the public administration inconnection with the fundamental functions of the State, and, as such, are made available by

the government apparatus to all the people. Often, these services are closely related with theenforcement ofrights by the State, which accrue to the people for a variety of reasons, such as

presence, nationality, citizenship, and other.

This is the case of services like the following:

y Enacting and enforcing rules for common observance, in a variety of matters(particularly, in modern States, laws and public regulations, enacted through somedeliberative and representative procedures);

y Operating population and civil registries (birth, identity, marriage, death, etc.);

y Protecting humanrights and administeringjustice (in courts, tribunals or specialinstitutions like different types of ombudsmen);

y

Protectingproperty rights (cadastres, commercial registries or special registries forvehicles and other types of property, etc.);

y Maintainingpublic order, peace and security (through public police and armed forcesin general), and so on.

Besides these fundamental State functions, other services have also been part of the family ofState or government services from early history -because they are key for a generalizeddecrease of transactions costs, control of widespread and highly costly externalities, and leadto Nation and State integration-, such as:

y Operating a national monetary system;

y Establishing and enforcing weights and measurements system;

y Maintainingpublic health14 systems, etc.

Evidently, these services have an intrinsicpublic goods character and are naturally included incategory (i). In principle, it seems to be the case that in all countries these services are

provided to all the people and, ideally, in the same conditions. However, in fact, it happensthat in many counties this is not the case, for reasons mentioned next.

14 Public health refers to health conditions of systemic nature existing in a region or countrywide andnot to the health conditions of individuals.


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b. Typical problems regardingState or government servicesThere are a number of frequently observed problems in different countries regarding

State or government services, which make these not available to the entire population in thesame conditions. First, the capacity of the public administration to provide these services may

be quantitatively limited, because of insufficient public budgets. As a consequence, wheneverthese services become relatively scarce, it is usual that formal rationing or curtailing meansare applied (based on Laws or regulations) and sometimes informal schemes (that is to say,ways not considered in the Law) arise to allocate their limited supply among individuals. Thiscan include many forms of corruption, such as deciding on allocation based on politicalconnections, bribes to government officials, etc.

Second, access to State or government services may not be always accessible to people in allparts of the territory. Sometimes, their supply comes only from the central government, andpopulation living outside of the capital, in smaller cities or in rural areas, needs to travel atconsiderable economic, personal and time costs to a few delivery points throughout thecountry.

Third, it is also often the case that the quality of these services is not uniform, due to lack ofstandards, inadequate training of public officials, different degrees of responsiveness ormotivation of said officials, and so on. In these circumstances, quality differentials areordinarily observed across different parts of the States territory, usually with higher quality

being offered in demarcations where people have larger power to influence the publicadministration, though direct political pressures, criticism in the media, personal connections,and so on. Also, individuals with higher incomes can afford more frequently to pay bribes, inorder to motivate public officials to deliver them with better quality services15.

As a result of the problems mentioned before, even though State or government servicesought to be as a matter of principle (de jure) in category (i), scarcity and disparities in qualitymake these services in practice (de facto) not available to all the people in the sameconditions, that is to say, to be delivered as category (ii) services. This is tantamount to aninformal privatization of public services, something that tends to go unnoticed for the

population and many analysts, given the preeminent ideological discourse that these servicesare strictly public.

Last, but not least, at a more basic level, it must be recognized that the average quality ofState or government services may be low and unsatisfactory for their users. Table 6 presents afew examples in this respect, regarding services provided to firms.

TABLE 6

15 Corruption is present to different degrees and assumes diverse forms in most countries. For the latest(2010) international ranking based on the Transparency International index, see:http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results. In a list of countries,China ranked in position 78, after 77 counties with less corruption. For an international analysis ofcorruption in Asia, see: Bhargava, Vinay et. Al. (2004).


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SOME INDICATORS ON STATE OR GOVERNMENT SERVICES IN CHINA AND

OTHER COUNTRIES

State Services for the

Private SectorChina Brazil Canada Germany India Mexico

South

AfricaTurkey

Start-up procedures to

register a business

(number) (2009)

14 16 1 9 13 8 6 6

Time to prepare and pay

taxes (hours) (2009)504 2,600 119 196 271 517 200 223

Time to resolve

insolvency (years) (2009)1.7 4.0 0.8 1.2 7.0 1.8 2.0 3.3

Informal payments to

public officials (% of

firms)

NA9.7

(2009) NA NA

47.5

(2006)

22.6

(2006)

15.1

(2007)

17.7

(2008)

Source: World Bank, http://data.worldbank.org/topic/private-sector.


c. Usual public policies to address these problemsDepending on political cultures and circumstances, governments in some cases openly

admit that these problems exist, and implement a variety of public policy measures. Typical

interventions to this aim include: generating additional public income to pay for a largersupply of services; strengthening financial and administrative controls, to better secure thatexisting budgets are effectively applied to service provision and deviations or inefficiencies inspending do not occur; delegating from central to regional or local authorities some viablefunctions to widen the geographical provision of these services; adopting innovative modes of

delivery -including e-government methods16

-, to further facilitate access to individuals inremote or sparsely populated geographical areas; training of public officials; simplification of

administrative procedures, etc.

In some countries, governments at the national or sub-national (regional, metropolitan, local)levels deny that problems of quality, inefficiency or corruption exist, with respect to State orgovernment services. This is a self-defeating strategy for public officials and political actors,especially when these problems are widespread and before the eyes of large numbers ofcitizens17, as it leads to inaction or failure in implementing effective solutions, plus public

16 SeeHolliday, Ian, et. al. (2004, 2005), for an analysis of e-government services in Hong Kong andChina, respectively. See also Jiang, Min, et. al. (2009). For an international review and comparisons,look at UNDESA (2010).

17 The accelerating use of new media because of the fast development of information andtelecommunication technologies- is also contributing in many countries for individuals to share more


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trust on government is diminished, and a confidence gap widens between authorities and thepopulation served

18. Thus, to overcome these problems, other governments opt instead formaking transparent to service users the regulations and quality standards that ought to beobserved in regard to the provision of these services, and provide service users with ways tocommunicate to the public administration proposals to enhance services19, denounceinefficiencies and low service quality or corruption20, etc. To these aims, information and

communication techniques are increasingly adopted in diverse countries, through e-government and e-participation strategies2

1.

d. Fiscal considerationsThe provision of any of these services is costly and, therefore, the public

administration must secure the necessary resources for it. There are two major considerationsin this regard. First, the magnitude of the costs of these services. And, second, the ways inwhich the public administration is to obtain the necessary resources to pay for these costs.

Service costs

The costs of State and government services consist largely of labor costs, as relativelylittle capital is used for their provision. Unit service costs are affected by wage rates of the

public servants employed in the production of these services, and their productivity. Usually,in an attempt to keep the costs of these services at reasonable low levels, public policiesconcentrate on wage setting for public servants, with relatively less attention to enhancingtheir productivity.

In this context, wage setting is traditionally conducted in many countries within a segmentedlabor-market framework, under the assumption that workers dont move between the publicadministration and the private sector. Thus, wage rates are determined by negotiations

between officials in the public administration who are responsible for human resourcesmanagement (in close consultation and cooperation with political authorities) and publicsector labor union leaders. The rationales followed in negotiations depend mostly on short-term circumstances, including macroeconomic conditions (inflation, fiscal deficit, generalunemployment rate, etc.) and relative political strengths of the government and labor unions

openly their experiences and opinions, thus making more public the issues of low quality andcorruption in State or government services. For information on the uses of internet by Chinese

citizens, see: Guobin, Yang (2003, 2007).

18Pesqu-Cela, Vanesa, et. al. (2009) analyze political distrust on government in rural China and self-

governing organizations.

19In the appendix, several practices are presented from different countries, in relation with ways in

which citizens are engaged by the public administration to improve State or government services.

20 In the interview quoted before, the Chinese premier, Wen Jiabao, also mentioned: I often say thatwe should not only let people have the freedom of speech. We, more importantly, must createconditions to let them criticize the work of the government. And it is only when there is thesupervision and critical oversight from the people that the government will be in a position to do aneven better job and employees of government departments will be the true public servants of thepeople.

21SeeHolliday, Ian, et. al. (2005) and UNDESA (2010).


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at that point in time. However, in countries with more developed labor markets and moremodern public administrations, remunerations to public employees tend to be determined byscales including specific grades and categories, about which wage rates are determined tosome extent looking at efficient rates of return on the human capital typically required for thedifferent grades and categories.

Evidently, the former method provides public sector workers with less certainty about thefuture trends of their wages. This may provoke in the short run higher turnover in the publicsector labor force, and may cause in the longer run adverse selection in public sectoremployment, attracting more frequently individuals with less human capital and lower client-or service-orientation and public entrepreneurship. Besides, if over time wage negotiationsfail to reach adequate remuneration rates, corruption is more likely to arise as publicemployees will seek complementary sources of income from bribes and other corrupt acts.This form of corruption even gets tacitly accepted by managers and authorities in some cases,either because no alternative is perceived to offer reasonable wages to public employees, or

because they obtain in some ways a proportion of the overall income resulting fromcorruption. Along with this, it happens that corruption also extends over time to the filling ofvacancies in the public administration, asking bribes from applicants in order to get the job.

In contrast, the later method, if scales are adequately constructed and adapted over time tocope with inflation and changing labor market conditions, appears to reduce to a considerabledegree many of the problems mentioned above. Moreover, in countries in which auditing,accountability and transparency have been adopted as part of the modernization strategies of

public administration, other measures are also put in place to control or eliminate corruptionin the forms described before, including: mandatory periodical disclosure of personal andfamily assets and liabilities by public sector employees, publication of remuneration scales of

public employees in internet, formal competitive recruitment processes, and so on.

From a different angle, the higher the productivity of the public sector employees whoprovide the State or government services, whatever they wage rates are, the lower the unitcost of these services is. Traditionally, managers of these employees have few or no policyinstruments to stimulate higher productivity. Simplistic straightforward approaches,consisting in setting quantitative output targets per employee over a given period of time, canresult in lowering the quality of services. Linking economic incentives to performanceevaluation is usually not allowed by regulations. Thus, effective measures to enhance

productivity rely mostly on labor training, administrative simplification of procedures for thedelivery of services, and introduction of more efficient technologies, for instance based oninformation and communications technologies (ICT). Training is obviously always adequate,

but its ultimate effects on productivity are interwoven with other labor conditions, such asworkplace climate, promotion and career policies, etc. Simplification of processes for thedelivery of State and government services is normally very effective, particularly when in-

depth reengineering is undertaken and not only marginal continuous improvements. Finally,the introduction of ICT achieves high impacts, especially if well accompanied by labor skillsdevelopment. ICT can be applied for the provision of services in many useful andcomplementary manners: to automate a variety of administrative functions; to better manageinformation; to provide services to remote locations (e-government applications); to enhance


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auditing, monitoring and timely evaluation; to facilitate transparency and engage non-government stakeholders in social auditing, and so on22.

In any case, productivity in the provision of State and government services needs to be lookedat with broad comprehensive approaches. Even though measures like those mentioned beforeare helpful, it must not be overlooked that the public entities of different kinds in charge of

the provision of these services (commonly known as public service units23

), are in many casesimmersed in a web of numerous constraints which negatively affect productivity. Theseinclude: limited budgets, determined exogenously by other government entities, often withvery limited knowledge of the actual operational requirements of each particular publicservice unit; inadequate rules and regulations on human resource management, which do notaddress recruitment, wages, promotions and performance bonuses in adequate fashions;

burdensome rules and regulations on authorizations for investments to expand capacity,procurement, evaluation, etc.; systems of goals settings which focus on use of budgetaryresources and quantitative output measures, with little or no attention to efficiency of

performance, quality of outputs, client-orientation (people-centered service delivery), and soon. And last, but not least, it must be kept in mind that in the majority of cases public serviceunits are local monopolies in the provision of these services, so they do not face any

incentives from competition to perform better.

Thus, while many incremental improvements may be attained to control the costs of State andgovernment services through piecemeal public administration measures, strategies for morein-depth and integral reform of PSU need to be considered. Many countries around the world

perceive pressing demands in this sense, and new paradigms are being elaborated regardingthe transition from public administration to public management24.

Finance

In the case of State and government services, since any individual will potentiallybenefit from them, as a general principle everyone must contribute with resources for theirprovision. So, these services are usually financed from general taxes applicable to the entirepopulation.

The precise forms in which the corresponding tax rules are designed depend on the social andeconomic characteristics of the population, other objectives sought from taxation (beyondcovering for the total service cost, for example, redistributive concerns), and politicalconstraints.

22For a comprehensive discussion and international comparisons on e-government, see UNDESA

(2010). For e-government in China, look at: Holliday, Ian, et. al. (2005). On using ICT to enhancecitizens-government relationships, consult: Seifert, Jeffrey W., et. al. (2009).

23In Chinese language, these are referred to asshiye danwei.See: Schick, Allen (2004) and Zhang,

Chunlin (2005).

24 See: Jing, Jijia (2009a); Knox, Colin et. Al. (2007); Xu, Songtao (2002).


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Even if taxation to this aim were income-neutral (i.e., everyone is taxed in the samepercentage of his income), the provision of State or government services free of service fees25and financed entirely by general taxes, constitutes an intrinsic redistributive mechanism. Thisis because the unit cost of these services is in theory equal for all individuals, while those withhigher (lower) income contribute with larger (smaller) absolute amounts.

On top of this, as some of the State or government services are not necessarily used byeveryone (for instance, the majority of people never in their lifetime use the services of a

public court or ombudsman), it suffices for the State to set an aggregate tax target equivalentto the actuarialcost of provision of these services. As in other contexts characterized byshared contributions to recover actuarial service costs (like insurance, lotteries, etc.), thistends to create incentives for cohesion among contributors to the system.

Thus, State or government services financed by neutral income taxes are to some extentredistributive and cohesive. This is an important element to take into consideration regardingoverall national development strategies. In particular, when for other reasons (discussed

below), strategies see the convenience or need to adopt privatization in other areas ofdevelopment, it becomes even more important that State and government services are

available to all individuals in the same conditions. These services then not only satisfyconcrete immediate needs of the people vis a vis the State or government, but they alsoconstitute an important political instrument for maintaining basic levels of redistribution,equity and cohesion, and a leveled field for all to access and afford the most basic services.

Against this scenario, in countries with marked inequality in the personal distribution ofincome, it makes sense, for distributional equity: to tax proportionately more those individualswith higher incomes (that is to say, to have a progressive income tax), and to apply servicefees which are also progressive to specific State or government services which are typicallyused more intensively by richer people, such as real state registries and specialized courts(like tribunals on financial offenses).

2.2.2 Socialservices

a. Their natureSocial services represent another family of services, essentially different from the one

discussed under section 2.2.1. These include a variety of services related to enhancing thehuman capital of the people (education, labor training, healthcare26, etc.) and their socialcapital (community development, promotion of organizational efforts by civil society groups,etc.), as well as diminishing vulnerability of the entire population or particularly vulnerable

25Since the demand for most State and government services usually exhibits little variation when thecorresponding fees or prices change (i.e., low price elasticity), there is no big need to use service feesas an instrument to avoid excessive demand. This is discussed further in the next sections, with regardto social services and infrastructure services, in which price elasticities may be considerably bigger.

26 A variety of aspects of the healthcare system in China is discussed in Koplan, Jeffrey, et. al. (2005a,2005b). For additional information, see: Eggleston, Karen, et. al. (2008); and Ooi, Elaine and Wee-Ling (2005). The provision of education services and related dilemmas for public and privateproviders is analyzed in Lopez Ramon et. Al. (1998) and Painter, Martin, et. al. (2008).


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groups (diverse types of insurance mechanisms to face different types of risks, such as:unemployment, illness or death of an income provider to a household, work injuries,catastrophic health care costs, wealth loss as a result of a natural disaster, gender violence,etc.).

In contrast to State or government services, which have practically in every case been in

category (i), public policy approaches tosocial services have varied markedly, along history,in all countries. For example, education and healthcare were seen as private services -that is,as pertaining to the category (ii) of services, which are notexpected to be necessarilyavailable to all people in the same conditions- up to the late ninetieth century, even in themost developed countries. Education services for the children of rich families were provided

by private instructors, and paid totally by the families. Similarly, healthcare services weredelivered by private doctors, nurses and birth maids, and also paid entirely by the households.

Public education and healthcare systems, aimed at providing these services to the wholepopulation or entire relevant age groups-, in rather similar conditions, are largely adevelopment of the twentieth century. And, in most developing countries, even if such publiceducation and healthcare systems exist nowadays, their services unfortunately do not reach

yet all the people in equal conditions. Coverage is still very much incomplete and markedquality differentials are noticeable

2728

. Therefore, it is fair to say that education andhealthcare services are undergoing a transition in countries around the world, from category(ii) to category (i), as labeled above. Countries are at very different points of this transition,some still at very early stages, where education and healthcare services, even if provided bysome public sector entities, continue to exhibit characteristics of category (ii)

2930

.

27In the United States of America, for example, public healthcare services and insurance were

introduced since the administration of President Roosevelt, seven decades ago. Yet, in 2010, about 30million Americans did not have access to those services, as several legislative reforms to extendcoverage to those individuals repeatedly faced with political opposition in Congress because it wasconsidered that very large costs and expenditures would result for the public sector. It was only in

2010, under the Obama administration, that a legislative majority approved necessary reforms toextend services provided by the public sector to those people who had chronically remained out of thepublic system.

28UNDP-CIRD (2008) provides data on the disparities in healthcare services between rural and urban

areas in China. In 2006, hospital beds per every 1000 inhabitants in rural and urban were 0.8 and 2.5,respectively. In the same year, the number of medical personnel on average per1000 inhabitants was1.2 and 3.6 in rural and urban areas, respectively. Thus, the urban to rural ratios of both indicatorsreflect that urban areas had on average close to three times more hospital beds and medical personnelthan rural areas, after adjusting for the size of population.

29 UNDP-CIRD (2008) presents data which indicate that in 2002 only one third of the funding for

education services in China came from the government, and the other two thirds were covered by the

people (63%) and social organizations (3.7%). As for healthcare, expenditures by the people declinedgradually, from 59% to 49.3%, while social expenditures rose from 25.6% to 32.6%. These figuresreflect two combined effects. One, the lack of access to public education and health services for widegroups of the population, and their need to acquire these services privately. And, additionally, theeconomic or financial contributions made when charged by public service units for public service fees.In any case, out-of-pocket expenditures on healthcare represented in China, at the end of the lastdecade of the twentieth century, about 60% of total health expenditure, a proportion higher than thatrecorded in many other Asian countries in those years, like Hong Kong, Indonesia, Korea (Republicof), Malaysia, Philippines, Sri Lanka, Taiwan and Thailand.


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Similarly, services to reduce vulnerability of diverse types were absolutely considered asprivate services in the large majority of countries until the mid twentieth century. Only asmall percentage of the entire population would privately buy determined types of insuranceagainst some specific risks. In the case of healthcare insurance, or specifically insuranceagainst catastrophic healthcare expenditures, public systems began to be created in certain

countries only some decades ago. Typically, coverage of these services has remainedcircumscribed to the families of workers in the formal sector. Workers in the informal sector,which in most countries represent between one fourth and up to two thirds of the totalemployed labor force, do not have access to the respective public health insurance systems,and cannot afford either to buy these services from private providers. In most counties, eventoday, social protection mechanisms against unemployment do not exist3

1, and pension

systems are very limited32

. And, in many cases, policy instruments to act upon the occurrenceof natural disasters -to reconstruct public infrastructure, and to assist the individuals, familiesor communities hit by a disaster, particularly if they are in low income groups-, are not wellfunded, regulated and institutionalized33. Thus, once more, it can be said that services to facevulnerability are also undergoing a transition from category (ii) to category (i), in theterminology proposed earlier in this paper34.

The reasons guiding the transition of social services, in general, from category (ii) to category(i) in diverse countries, are not totally clear, and it seems that there has been considerableevolution in thought on this matter over time and across countries. Conservatives could arguethat attaining higher levels of education and healthcare is largely a matter of individual effortand, therefore, these matters belong to the sphere of private affairs. Socialists could state thatnobody should go through life with reasonable education and health, as that would be amongthe most damaging situations mankind could live in comparable to slavery, or perhapsworse-, because it cancels the possibilities for developing inherent human capabilities andcondemns people to live under their natural potential, sometimes in conditions that may beconsidered sub-human. Technocrats could point to the fact that education and health levels of

30In most countries, however, there exist education and healthcare systems operated by public sector

entities. Even if coverage of these is sufficiently wide, these systems coexist with correspondingprivate ones, and people are free to choose for the option offered by public sector entities or fromprivate ones as an alternative. These dual systems exist for several reasons. Firstly, for ideology andvalues sake. Some people prefer to get the respective services from public entities, while others findthat their fundamental freedoms are best preserved when they have a private alternative. Secondly, toaccommodate for different expectations about the quality of services. Indeed, public services in mostcases aim to warranty basic satisfactory quality levels, which are appropriate in technical and costgrounds. Yet, some groups of people, particularly of higher incomes, aspire to higher quality andprefer to obtain the corresponding services from private sources, among which variety is diverse andin some cases it can reach actually higher standards.

31The case of unemployment insurance in China is studied in Vodopivec, Milan, et. al. (2008).

32On pensions, see Piggott, John (2007).

33 See: Brixi, Hanna (2008); Teets, Jessica (2009) and Ying, Sheng (2009).

34 A discussion on vulnerability and public service delivery is presented in Renard, Mary-Franoise, et.al. (2007). According to UNDP-CIRD (2008), in 2006 there were in China only 160 million holders ofmedical insurance, 112 million holders of unemployment insurance, 100 million holders of workplaceinjury insurance and slightly more than 60 million holders of maternity insurance.


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individuals exhibit on average strong correlations with their income level, with people in thehigher (lower) deciles of the personal income distribution having greater (lower) schoolingand life expectancy. It could be further pointed out that this correlation may be due mostly toaffordability, in contexts where there are no effective systems to redistribute opportunities toaccess these services for the disadvantaged through subsidies and grants of different types-.But it could equally be sustained that causality goes the other way around, since more human

capital additional education, more health- results in higher productivity and larger income.And, finally, it can perhaps, more realistically and holistically, be affirmed that causality runsin both directions and social services are consubstantial to development (for reasons like thosesummarized in Table 6), and that it is because of this that social services must be includedwithin the core of national development strategies as category (i) services.

b. Typical problems regarding social servicesDevelopment strategies in countries around the world meet particularly difficult and

big challenges regardingsocial services. The first major challenge is about coverage, or inother words, to make these services available to all people. This implies making socialservices accessible or reachable in the physical or geographical sense, and also affordable in

the economic or financial sense.

Expanding access to social services is far more challenging than in the case of State orgovernment services. The latter are to some extend used by people more sporadically than theformer, which in some cases, like healthcare, need to be accessible on a regular and frequent

basis, and in the case of education, usually on a daily schedule. Also, social services areintrinsically more complex than many State or government services, as the former imply very

personal and close interactions of individuals with the persons who deliver the service(teachers, doctors, paramedics, managers, etc.), while State and government services aredelivered to a considerable extent more in an arm-length fashion.

Increasing geographical coverage of social services may be faced with restrictions regardingresources for physical investment in new delivery points at different locations, lack of skilledindividuals to deliver the services in some regions, or by challenging spatial distribution ofhuman settlements, for instance, in remote and sparsely populated zones. Physical investmentdecisions may additionally be complicated when facilities for the delivery of services exhibitsome minimal efficient scale and, thus, can not be located in all areas alike for example,universities and third level hospitals-, or when targeted populations at certain location mayeventually decrease over time because of demographic changes, including aging and out-migration. To a large degree, these phenomena reflect in the comparative lower coverageratios in rural areas, with respect to urban ones

35.

Yet, physical access is not sufficient to solve all coverage problems, as affordability is another

key issue. This problem shows both in regions or localities where adequate points for socialservice delivery already exist, as in others where supply is inexistent and yet individuals couldnot even afford the services (thus, adding complexity to delegating the provision of services

35As already cited, UNDP-CIRD (2008) data indicate that hospital beds and medical personnel are

roughly three times more numerous in urban than rural areas in China, after adjusting for the size ofpopulation. For an additional analysis of public service reform for the rural sector of China, see Fock,Achim (2007).


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on non-state actors). These challenges are all most frequent in countries and regions withhigher incidence of poverty.

Secondly, important challenges are faced regarding the quality of social services. In manycountries, citizens are not satisfied (and sometimes are markedly frustrated) about the qualityof social services provided by the public sector. And, furthermore, there exist disparities in

quality within and among regions or localities, often in correlation with the capacity of theirinhabitants to politically create pressures on public sector authorities or managers.

Thirdly, as commented in section 2.2.1, shortages in supply or quality differentials manytimes give raise to corruption, as individuals who can do it try to bribe public officials to get

physical access to the services, or to be granted financial support to afford them, or to obtainbetter quality.

And last, but not least, there are also legislative and regulatory challenges, of a twofoldnature: service standards need to be established (with the aim to secure desired quality

parameters, facilitate benchmarking and make more objective evaluations and auditingpossible), and rights need to be defined (to warranty that social services become true

entitlements for all, and not only managerial targets for public service units and supervisingMinistries).

Table 7 provides data from several countries to illustrate how these problems are reflected ondevelopment indicators, as well as on the public administration.

TABLE 7

SOME INDICATORS ON DETERMINED SOCIAL SERVICES

IN CHINA AND OTHER COUNTRIES

Social Development China Brazil Canada Germany India Mexico

South

Africa Turkey

Education

Public spending on

education, total (% of

GDP) (2006)

NA 5.0 4.9 4.4 3.2 4.8 5.4 2.9

Literacy rate, adult total

(% of people ages 15 and

above)

94

(2008)

90

(2006) NA NA

63

(2006)92 (2006)

89

(2008)88 (2006)

*School enrollment,

primary (% gross) (2006)111 NA 99 105 112 112 104 97

School enrollment,

secondary (% gross)

(2006)

72 NA 101 103 55 86 95 82

School enrollment,21 NA NA NA 12 25 NA 35


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tertiary (% gross) (2006)

Health

Health expenditure, total

(% of GDP) (2007)4.3 8.4 10.1 10.4 4.1 5.9 8.6 5.0

Health expenditure, public

(% of total health

expenditure) (2007)

44.7 41.6 70.0 76.9 26.2 45.4 41.4 69.0

Life expectancy at birth,

total (years) (2007)73 72 81 80 63 75 51 72

*Gross enrollment ratio is the ratio of total enrollment, regardless of age, to the population of the age

group that officially corresponds to the level of education shown.

Sources: Education, World Bank, http://data.worldbank.org/topic/education;

Health, World Bank, http://data.worldbank.org/topic/healt.


Social services, properly delivered for the totality of the people, can be a powerful engine forhuman, social and economic development, plus a valuable social and political safety net toaddress vulnerability and strengthen trust and support about State institutions. Theimportance of further developing the human and institutional capacities of the publicadministration to promote the delivery of social services is very large36.

Specific considerations about public policies to face these different challenges are presented

next.

c. Usual public policies to address these problemsImproving physical access to social services poses big challenges in all countries.

Viable solutions are in most cases dependent on particular conditions. In some instances, it ispractical to implement policies to facilitate periodical commuting or travel of individuals tothe nearest service delivery points, rather than establishing costly and inefficient facilities indisperse locations. In other cases, policies go for providing incentives for voluntary relocationof people, to geographical hubs where not only one but most social services can be providedin efficient and sustainable manners. Still, in other cases, alternatives are found in theadoption of new service delivery modes (for example, based on Information and

Telecommunication Technologies, ICT). And, also, solutions can be met by delegating theprovision of specific social services in determined geographical areas to non-state providers,like civil society organizations or the private sector, who may operate in different ways whichcould sometimes be efficient to face particular conditions in certain regions or localities, yet

36 The importance for the government to adopt a citizen-focused approach in the provision of publicgoods and services, in China, is highlighted in Knox, Colin, et.al. (2007).


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following rules and regulations from government when this may be necessary to warrantybasic standards of equity and quality across the territory3738.

The later avenue is generally referred to as public-private partnerships for the provision ofpublic services39. This can in some circumstances facilitate the increase of coverage by bothbringing in capital resources to build additional service points, and by providing operational

and managerial resources. When the public sector lacks resources for investment, or whenthere is limited capacity in the public administration to manage a larger volume of determinedsocial services, partnerships with civil society organizations or the private sector can helpovercome these constraints in the near term. This must be distinguished from privatization ofsocial services, as privatization means that non-state actors can on their own provide theseservices, while public-private partnerships means that those non-state actors deliver theservices on behalf of the state. Under public-private partnerships, government and non-state

partners establish by contracts of different types the responsibilities of the non-state providersof the services (including more or less detailed plans for expanding coverage, standards ofquality with which services are to be delivered, ways in which the government is to pay the

providers, and so on). These contracts are of fundamental importance for the outcomes frompublic-private partnerships, as they must secure incentives for all parties to perform as

expected.

Often, shortcomings of public-private partnerships result because, from the outset, saidcontracts were inadequate. One of the key elements to take into consideration is that theremust be a fine balance between the actions that are to be pursued and the risks to be faced bythe non-state partners, and the remuneration they are to be paid by the government. Mistakescan be made, by which government ends assuming significant risks of non-compliance by thenon-state partners (like not reaching on time the coverage targets or the quality standardsagreed), while over-protecting the investments and returns for the latter (through paymentformulae that do not properly incorporate actual performance, while sovereign warranties aregiven for the non-state partners to obtain financing). In such cases, it may come out that

public finances are burdened with contingent obligations, with relatively less security thatsocial services are to evolve as expected.

To overcome the problems of affordability of determined social services by the poor,mechanisms are called for, to manage subsidies or income transfers to those who can notafford certain social services. In some developing countries, where public finances are veryweak, the issue is delegated to non-state actors, who may be willing to provide assistancefrom civil society or private charities, or which are qualified to be funded by foreign aidagencies. In other developing countries, in which public finance has been strengthen throughtax reforms, this is publicly financed

40. A largely debated aspect of public policy in this

regard is whether support should be targeted directly to poor individuals or households, or to

37 For the case of China, special emphasis on the transition of government, from a direct provider ofpublic services to a public resources coordinator, is given in Jing, Jijia (2009).

38 For a discussion on the participation of civil society organizations in Chinas healthcare servicessee: Gill, Bates, et. al. (2007).

39 See Ho, Paul (2006) for a discussion on public-private partnerships.

40See: Villarreal Roberto (2008b).


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regions where most people are poor, or simply not targeted but granted to all. This issue isfurther discussed in section 2.2.2.dbelow. In any case, effective auditing, transparency andaccountability policies need to be in place to prevent corruption in the management andallocation of resources aimed to assist the poor4

1.

As for ensuring adequate quality in social services, human resources employed in their

provision are crucial. The labor force employed in these services ought to have the necessaryhuman capital. Well educated and trained personnel in the education and healthcare systemsare fundamental to attained good quality outcomes. Yet, many of the problems faced inconnection with human resources in the case of state and government services (for instance,those commented in section 2.2.1.d), are also critical with regard to social services. In

particular, as in some countries public employees in education and healthcare servicesrepresent a large percentage of total public sector employment (see Table 3 again), authoritiesin charge of public finance tend to repress public wages in those activities as a means tomaintain aggregate public expenditures and the public deficit within certain limits. If wagesare managed in this fashion, it is likely that incompatibilities will arise relative to therequirements of human capital in these sectors. As a consequence, labor force turnover may

be high in the short run, and adverse selection may be also a long term problem. Besides,

corruption is more likely to arise as public employees in the education and healthcare systemswill seek complementary sources of income from bribes and other corrupt acts, and if this isnot effectively controlled, corruption also extends over time to the filling of vacancies in theseactivities, with managers and supervisors asking bribes from applicants

42. To prevent these

problems, sound human resource management should prevail. In addition, civil societyorganizations and citizens can also contribute to reduce these problems, for instance throughcivic observatories on education and healthcare services, either at national or local levels, tomonitor the quality of services delivered, the satisfaction of their users, the trends in thehuman capital of employees in these services, the incidence of corruption, and so on43.

Furthermore, to secure adequate quality about specific social services and, specially, tosucceed in narrowing disparities, it is useful to establish service quality standards and to makethese publicly available. With standards in place, determined according to developmentstrategies lead by government, operators of different Public Service Units can be madeeffectively more accountable and evaluation, either by government entities or non-state actors(civil society organizations, private auditors, citizens in general, etc.) is largely facilitated. Inthe absence of standards, citizens engagement to monitor and evaluate the quality of socialservices turns less effective, as appraisals become extremely subjective, given that in suchcase civic evaluation would be done against unspecified and possibly unrealistic- qualitylevels.

41On related matters, see: World Bank (2004).

42 For a discussion on corruption in Asian countries, see: Bhargava, Vinay, et. al. (2004).

43Historical and structural aspects civil society in China are analyzed in: Chamberlain, Heath (1993);Chen, Bin, et. al. (2009); Fishkin, James, et. al. (2010); Lu, Yiyi (2005) and Shu-Yun, Ma (1994). Thefollowing also address participatory responses in China, linked to particular events, including naturaldisasters: Brixi, Hana (2008); Hu, Dan (1998); Ru, Jiang, et. al. (2009); Teets, Jessica (2009) andYing,Sheng (2009).


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In particular, decentralization of social services, from the central or national government toregional and local governments, is also facilitated on the basis of quality standards44. Thespecific degrees of decentralization that could follow, range from delegation in which sub-national governments are to deliver these services in ways fully prescribed by centralauthorities-, to a variety of forms in which sub-national governments have diverse degrees ofautonomy regarding the provision of these services -inter alia to adapt these more closely to

the conditions and needs that prevail in their respective region or locality-, yet honoringindispensable obligations on accountability about the use of public resources decentralized tothem. In any case, quality standards would help to sustain desired quality levels, throughfacilitating relatively objective evaluations from public auditing entities, as from civil societyorganizations and the private sector.

Moreover, on the basis of public standards, and with support of public mechanisms to makesocial services affordable for the poor, government can more easily delegate in some cases the

provision of certain services on civil society organizations and the private sector; that is,through standards, governments can better secure quality when entering into different formsof partnerships with civil society organizations and the private sector

45. Finally, standards are

also useful to make mobility possible for individuals across different service providers, in

ways which make more efficient utilization of infrastructure that is available system-wide,compared to the case in which individuals are authorized to receive services only fromdetermined public service units.

In some countries, governments at the national or sub-national (regional, metropolitan, local)deny that social services are affected by problems of quality, inefficiency or corruption

46. As

commented before, this is a backfiring strategy for public officials and political actors,especially when these problems are widespread and before the eyes of large numbers ofcitizens47, as it leads to inaction or failure in implementing effective solutions, publicconfidence on government is diminished, and a trust gap widens between authorities and the

population served. Thus, to overcome these problems, other governments decide instead tomake

Documents

Public Services Delivery - An Overview on Strategy With Reflections on China VILLARREAL and CAI 2010