wo rld development report · 2017-12-14 · wo rld development report 2004 Making ServicesWork for...

2004world development report

Making ServicesWork for Poor People

01_WDR_FM.qxd 8/14/03 7:10 AM Page i

(c) The International Bank for Reconstruction and Development / The World Bank

01_WDR_FM.qxd 8/14/03 7:11 AM Page ii


A Copublication of the World Bank

and Oxford University Press

2004world development report

Making ServicesWork for Poor People

01_WDR_FM.qxd 8/14/03 7:11 AM Page iii


© 2003 The International Bank for Reconstruction and Development/The World Bank

1818 H Street, N.W.

Washington, D.C. 20433

Telephone 202-473-1000

Internet www.worldbank.org

E-mail [email protected]

All rights reserved.

1 2 3 4 05 04 03

A copublication of the World Bank and Oxford University Press.

Cover and interior design: Susan Brown Schmidler.

Cover photographs, from left to right: Nurse in Rwanda showing a newborn infant; © David Turnley.

A street child in New Delhi drinks water from a tap; © Reuters NewMedia/CORBIS. Children learning

in an elementary school in Myanmar; © Chris Lisle/CORBIS.

This volume is a product of the staff of the World Bank. The findings, interpretations, and conclusions

expressed herein do not necessarily reflect the views of the Board of Executive Directors of the World

Bank or the governments they represent.

The World Bank does not guarantee the accuracy of the data included in this work. The bound-

aries, colors, denominations, and other information shown on any map in this work do not imply any

judgment on the part of the World Bank concerning the legal status of any territory or the endorse-

ment or acceptance of such boundaries.

Rights and PermissionsThe material in this work is copyrighted. Copying and/or transmitting portions or all of this work

without permission may be a violation of applicable law. The World Bank encourages dissemination

of its work and will normally grant permission promptly.

For permission to photocopy or reprint any part of this work, please send a request with complete

information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA,

telephone 978-750-8400, fax 978-750-4470, www.copyright.com.

All other queries on rights and licenses, including subsidiary rights, should be addressed to the

Office of the Publisher, World Bank, 1818 H Street NW, Washington, DC 20433, fax 202-522-2422,

e-mail [email protected].

ISBN 0-8213-5537-6 (clothbound)

ISBN 0-8213-5468-X (paperback)

ISSN 0163-5085

01_WDR_FM.qxd 8/14/03 7:11 AM Page iv


http://www.worldbank.orghttp://www.copyright.com

v

Acknowledgments xiiiAbbreviations and Data Notes xivForeword xv

Overview 1The problem 2The framework of relationships—between clients, providers, and policymakers 6What not to do 10What can be done? 12

1 Services can work for poor people but too often they fail 19Outcomes are substantially worse for poor people 20Affordable access to services is low—especially for poor people 20Quality—a range of failures 22Making services work to improve outcomes 26

spotlight on Progresa 30

2 Governments should make services work 32A public responsibility 32Growth, though essential, is not enough 35More public spending alone is not enough 35Technical adjustments without changes in incentives are not enough 40Understanding what works and why—to improve services 42

spotlight on Kerala and Uttar Pradesh 44

3 The framework for service provision 46An analytical framework: actors and accountabilities 47Why establishing relationships of accountability is so complex 52Successes and failures of the public sector and the market 54From principles to instruments 58Reforming institutions to improve services for poor people will be difficult 60

spotlight on Uganda 62

Contents

01_WDR_FM.qxd 8/14/03 7:12 AM Page v


4 Clients and providers 64When will strengthening the client-producer link matter most? 64Increasing client power through choice 66Increasing consumer power through participation 70Client power in eight sizes 74

spotlight on the Bamako Initiative 76

5 Citizens and politicians 78Citizen voice and political accountability 78The politics of providing public services to poor people 81Beyond the ballot box: citizen initiatives to increase accountability 85Information strategies to strengthen voice 86Decentralization to strengthen voice 89Citizen voice in eight sizes 90

spotlight on the Kecamatan Development Program 92

spotlight on Norway and Estonia 94

6 Policymakers and providers 95Compacts, management, and the “long route” of accountability 95Increasing accountability: separating the policymaker from the provider 98Limits to accountability 99Overcoming the limits 100Provider incentives in eight sizes 106Scaling up, scaling back, and wising up 108

spotlight on Cambodia 109

7 Basic education services 111Common problems of service provision 111For higher-quality systems, strengthen the relationships

of accountability 113Citizens and clients, politicians and policymakers: voice 114Policymakers and organizational providers: compacts 117Organizational and frontline providers: management 124Client power 124Getting reform going 128

spotlight on Educo 131

8 Health and nutrition services 133The health of poor people 134Market failures and government failures 136Strengthening client power 143Strengthening poor citizens’ voice 146

vi WORLD DEVELOPMENT REPORT 2004

01_WDR_FM.qxd 8/14/03 7:12 AM Page vi


Compacts: provider incentives to serve the poor 149Six sizes fit all? 154

spotlight on Costa Rica and Cuba 157

9 Drinking water, sanitation, and electricity 159The state of water and sanitation services 159Infrastructure and the accountability framework

for service delivery 160Urban water networks 164Rural areas: network and non-network systems 171Sanitation 173Electricity 175Moving the reform agenda forward 176

spotlight on Johannesburg 178

10 Public sector underpinnings of service reform 180Strengthening the foundations of government 180Spending wisely 181Decentralizing to improve services 185Making, managing, and implementing good policies 191Curbing corruption in service delivery 195Managing transitions: overcoming reform hurdles 198Evaluating and learning 199

spotlight on Ceará 201

11 Donors and service reform 203Aid and accountability 203Strengthen—don’t weaken—the compact 204Let provider organizations manage 206Increase client power 208Promote voice 209Align aid delivery with service delivery 211Why reforming aid is so difficult 216

Bibliographical Note 218

Endnotes 219

References 228

Selected World Development Indicators 2004 249

Contents vii

01_WDR_FM.qxd 8/14/03 7:13 AM Page vii


Boxes

1 The eight Millennium Development Goals 2

2 Services—a public responsibility 3

3 Spotlight on “spotlights” 16

1.1 Who are “poor people?” 20

1.2 HIV/AIDS is killing teachers 23

1.3 School services for girls are not in high demand in Dhamar Province, Yemen 25

1.1 Determinants of health and education outcomes—within, outside,and across sectors 27–29

2.1 Most governments take responsibility for health and education—often appealing to human rights 34

2.2 The Fast-Track Initiative—providing assistance for credible national education strategies 36

2.3 Why it’s so hard to “cost” the Millennium Development Goals 41

3.1 A glossary for this Report 48

3.2 The many meanings of accountability 51

3.3 Creating conditions of accountability: the police 54

3.4 The “Progressive Era”: creation of modern bureaucracy 55

3.5 Seeking services in Egypt 56

3.6 Health care in Central Asia and the Caucasus: the long and short of it 59

4.1 The private sector is preferred in Andhra Pradesh, India 67

4.2 Bribery in Eastern Europe 68

4.3 Payment and accountability 69

4.4 No blanket policy on user fees 71

5.1 Why are public health and education services so difficult to get to poor people? 82

5.2 The “Curley effect” 83

5.3 Better to build rural schools than to run them well in Pakistan 84

5.4 Follow the public’s money 86

5.5 Down to earth: information technology improves rural service delivery 87

6.1 A good doctor is hard to find 96

6.2 Provider discretion can hurt the poor 97

6.3 Bribery hurts the poor 98

6.4 Learning to regulate 99

6.5 Be careful what you wish for—part 1 100

6.6 Be careful what you wish for—part 2 101

6.7 Incentive pay works for specific health interventions 102

6.8 NGOs can be more flexible than government 104

6.9 Is the GATS a help or a hindrance? 105

7.1 The dismal state of teacher training in Pakistan circa 1990 114

7.2 Test-based accountability—nothing new under the sun 119

7.3 School-based performance awards in Chile 121

7.4 Two large-scale cross-national assessments of learning 122

viii WORLD DEVELOPMENT REPORT 2004

Crate

01_WDR_FM.qxd 8/14/03 7:13 AM Page viii


7.5 Randomized experiments in Busia district, Kenya 123

7.6 School improvement in Cambodia 125

7.7 Alternate routes to basic education in Ethiopia 126

7.8 Education reform and teachers’ unions in Latin America 129

8.1 Ethnicity and health 134

8.2 Making health services work for poor people in the Islamic Republic of Iran 135

8.3 The changing mix of cure and care: who treats what, and where? 139

8.4 Buying results to reach the Millennium Development Goals 142–143

8.5 Vouchers for sex workers in Nicaragua 145

8.6 Making health insurance work for poor people 146

8.7 The government as active purchaser of health outcomes through strategic contracting 149

8.8 The risks of capitation payments 150

8.9 Modulated payments for providers according to income criteria 151

8.10 The human resource crisis in health services 154

8.11 Developing a professional ethos in midwifery 154

9.1 Clientelism in service delivery 163

9.2 Decentralization and the water industry—in history 164

9.3 Trends in private participation: water, sewerage, and electricity 166

9.4 Private participation—in history 167

9.5 Private participation in water and sanitation can save poor people’s lives,and money 168

9.6 Charging for water—in history 170

9.7 Fighting arsenic by listening to rural communities 173

9.8 Are pipes and wires different? 175

10.1 The impact of Argentina’s crisis on health and education services 181

10.2 The case of the missing money: public expenditure tracking surveys 185

10.3 Decentralization as a political imperative: Ethiopia 187

10.4 Many roads to decentralization: Latin America 187

10.5 Building local capacity: the role of the center 191

10.6 “Yes, Minister” 192

10.7 Managing the thorny politics of pro-poor service delivery reforms 198

10.8 Ready for results? 200

11.1 The debate over global funds: Uganda 205

11.2 Social Investment Fund: Jamaica 209

11.3 Donors support democratic governance 210

11.4 Donors support transparent budget processes: Tanzania 211

11.5 Why aid agencies focus on inputs 212

11.6 A case for harmonization in Bolivia 213

11.7 Linking budget support to performance 215

11.8 Pooling knowledge transfers 216

Contents ix

01_WDR_FM.qxd 8/14/03 7:14 AM Page ix


Figures

1 Progress in human development: off track 2

2 More public spending for the rich than for the poor 4

3 Water, water everywhere, nor any drop to drink 5

4 The framework of accountability relationships 6

5 It paid to vote for PRI 7

6 Increased public spending is not enough 11

7 Eight sizes fit all? 14

1.1 Child mortality is substantially higher in poor households 20

1.2 The poor are less likely to start school, more likely to drop out 21

1.3 Water, water everywhere, nor any drop to drink 23

2.1 National income and outcomes are strongly associated, especially in low-income countries 35

2.2 Changes in public spending and outcomes are only weakly related: schooling 37

2.3 Changes in public spending and outcomes are only weakly related: child mortality 37

2.4 The association between outcomes and public spending is weak, when controlling fornational income 38

2.5 Richer people often benefit more from public spending on health and education 39

2.6 The dominant share of recurrent spending on education goes to teachers (selected Sub-Saharan countries) 40

3.1 The relationships of accountability have five features 47

3.2 Key relationships of power 49

4.1 Client power in the service delivery framework 65

4.2 Eight sizes fit all 75

5.1 Voice in the service delivery framework 79

5.2 Democracy’s century 81

5.3 It paid to vote for PRI 85


6.1 Compact and management in the service delivery framework 95


7.1 Poor children: less likely to start school, more likely to drop out 112

7.2 Fifteen-year-olds in Brazil and Mexico perform substantially worse on standardized teststhan students in OECD countries 113

7.3 Increases in test scores per dollar spent on different inputs 116

7.4 School success depends on more than spending per student 120

7.5 Centralized exams have a strong impact on student performance 120

7.6 In Chile, good schools service students from every level of socioeconomic status 121

8.1 Reaching the MDGs in health: accelerate progress 134

8.2 Reaching the MDGs in health: focus on poor households 135

8.3 Poor people use high-impact services less 136

8.4 Richer groups do well in absolute terms 136

8.5a Poor women do not know much about HIV 137

8.5b Husbands say no to contraception 137

x WORLD DEVELOPMENT REPORT 2004

01_WDR_FM.qxd 8/14/03 7:14 AM Page x


8.6 A public responsibility, but private spending matters 137

8.7 The public-private mix differs between poor and rich, and among interventions 138

8.8 Making health services easier to deliver, through standardization and empowerment 140

8.9 Community-managed health services increase utilization and reduce spending 144

8.10 High spending does not ensure more equitable immunization 150

8.11 Citizens exert power on both providers and purchasers 151

8.12 Six sizes fit all 155

9.1 Little progress in access to improved water and sanitation, 1990 and 2000 160

9.2 24-hour water: a pipe dream 160

9.3 Water and sanitation by poorest and richest fifths 161

9.4 Alternative sources of water: poor people pay more 161

9.5 Accountability in infrastructure services 162

10.1 Strengthening public sector foundations for service delivery requires coordinatingmultiple compact relationships 180

10.2 Subnational shares of expenditures vary considerably 186

10.3 Decentralization and the service delivery framework 188

10.4 The anatomy of policy mismanagement at the top 192

10.5 Working to keep citizens educated, healthy, and safe 193

10.6 No straight roads to success: sequencing budget reforms 194

10.7 From weak basics to strong foundations in public sector institutional reforms 195

10.8 Many forces at play in curbing corruption in service delivery 197

11.1 The feedback loop between beneficiaries and donor country taxpayers is broken 204

11.2 Donor fragmentation: on the rise 206

11.3 Bureaucratic quality declines with donor fragmentation in Sub-Saharan Africa 208

Tables

1 Economic growth alone is not enough to reach all the Millennium Development Goals 3

1.1 The nearest school or health center can be quite far 22

1.2 Staff are often absent 24

1.3 Absence rates vary a lot—even in the same country 24

2.1 Public expenditures on health and education: large but varied 33

3.1 Organizational providers take a variety of ownership and organizational structures 50

3.2 Examples of discretionary and transaction-intensive services 53

3.3 Modern institutions took a long time to develop 61

5.1 Pro-poor and clientelist service environments when the average citizen is poor 80

7.1 In Madagascar, at higher levels of education unit costs are much higher and participationof the poor much lower 117

7.2 Schools account for only a small part of variance in student learning outcomes (percent) 118

7.3 Autonomy and outcome in Merida, República Bolivariana de Venezuela,in the mid-1990s 125

8.1 Selected examples of obstacles for the delivery of health and nutrition services to the poor 141

Contents xi

01_WDR_FM.qxd 8/14/03 7:15 AM Page xi


8.2 Affordability remains a problem for the poor 144

8.3 How do we know whether poor people’s voices have been heard? 147

10.1 Fallible markets, fallible governments, or both? 182

10.2 Decentralization is never simple 189

10.3 Walk before you run 196

11.1 So many donors . . . 207

xii WORLD DEVELOPMENT REPORT 2004

01_WDR_FM.qxd 8/14/03 7:15 AM Page xii


This Report has been prepared by a team led by Shantayanan Devarajan and Ritva Reinikka,and comprising Junaid Ahmad, Stephen Commins, Deon Filmer, Jeffrey Hammer, Lant Pritch-ett, Shekhar Shah, and Agnès Soucat, with additional contributions by Nazmul Chaudhury.The team was assisted by Claudio E. Montenegro and Manju Rani. Bruce Ross-Larson andMeta de Coquereaumont were the principal editors. The work was carried out under the gen-eral direction of Nicholas H. Stern.

The team was advised by a panel of experts led by Emmanuel Jimenez and comprisingMartha Ainsworth, Abhijit Banerjee, Timothy Besley, John Briscoe, Anne Case, Luis Crouch,Angus Deaton, David G. de Groot, Anil Deolalikar, Esther Duflo, Vivien Foster, Anne-MarieGoetz, Jonathan D. Halpern, Joel Hellman, Charles Humphreys, R. Mukami Kariuki, ElizabethKing, Michael Kremer, Kenneth Leonard, Maureen Lewis, Benjamin Loevinsohn, Michael Mer-taugh, Allister Moon, Howard Pack, Samuel Paul, Sanjay Pradhan, Michael Walton, and DaleWhittington.

Many others inside and outside the World Bank provided helpful comments, wrote back-ground papers and other contributions, and participated in consultation meetings. These con-tributors and participants are listed in the Bibliographical Note. The Development Data Groupcontributed to the data appendix and was responsible for the Selected World DevelopmentIndicators. Much of the background research was supported by several generous trust fundgrants from the UK Department for International Development, and the Dutch, Finnish andNorwegian Governments.

The team undertook a wide range of consultations for this Report, which included work-shops in Berlin, Brussels, Cairo, Colombo, Dhaka, Geneva, Havana, Helsinki, Kampala, NewDelhi, Paris, Pretoria, Tokyo, Washington D.C., and a series of video conferences with partici-pants from Africa, East and South Asia, Europe, Latin America, and the Middle East. The par-ticipants in these workshops and video conferences included researchers, government officials,and staff of nongovernmental and private-sector organizations.

Rebecca Sugui served as executive assistant to the team; Leila Search as program assistantand technical support; and Endy Shri Djonokusomo and Ofelia Valladolid as team assistants.Evangeline Santo Domingo served as resource management assistant.

Book design, editing, and production were coordinated by the Production Services Unit ofthe World Bank’s Office of the Publisher, under the supervision of Susan Graham and IlmaKramer.

Acknowledgments

xiii

01_WDR_FM.qxd 8/14/03 7:16 AM Page xiii


xiv

ACE Community Education Association (El Salvador)

BCG Bacillus Calmette-GuérinBRAC Bangladesh Rural Advancement CommitteeDAC Development Assistance Committee (OECD)DPT Diphtheria-pertussis-tetanusEduco Educación con Participación de la

Comunidad (Education with theParticipation of Communities, El Salvador)

EPRDF Ethiopia People’s Revolutionary DemocraticFront

GDP Gross domestic productGNI Gross national incomeHIPC Heavily indebted poor countryICRG International Country Risk GuideIDT Impres Desa Tertinggal (Indonesia)KDP Kecamatan Development Program (Indonesia)LICUS Low-income country under stressMKSS Mazdoor Kisan Shakti Sanghathan

(India)

MWSS Metro-Manila Waterworks and Sewerage System

NGO Nongovernmental organizationODA Official development aidOECD Organisation for Economic Co-operation

and DevelopmentPRI Institutional Revolutionary Party (Mexico)Progresa El Programa de Educación, Salud y

Alimentación de México (Education, Health,and Nutrition Program of Mexico)

PRONASOL Programa Nacional de Solidaridad (NationalSolidarity Program of Mexico)

REB Rural electricity boardSIDA Swedish International Development AgencyTIMSS Third International Mathematics and Science

StudyUSAID U.S. Agency for International DevelopmentVERC Village education resource centerWHO World Health OrganizationWSP Water and Sanitation Program

Abbreviations and Data Notes

The countries included in regional and income groupings inthis Report are listed in the Classification of Economies tableat the end of the Selected World Development Indicators.Income classifications are based on GNP per capita; thresh-olds for income classifications in this edition may be foundin the Introduction to Selected World Development Indica-tors. Group averages reported in the figures and tables areunweighted averages of the countries in the group unlessnoted to the contrary.

The use of the word countries to refer to economiesimplies no judgment by the World Bank about the legal or

other status of a territory. The term developing countriesincludes low- and middle-income economies and thus mayinclude economies in transition from central planning, as amatter of convenience. The term developed countries orindustrial countries may be used as matter of convenience todenote the high-income economies.

Dollar figures are current U.S. dollars, unless otherwisespecified. Billion means 1,000 million; trillion means 1,000billion.

Data Notes

Abbreviations

01_WDR_FM.qxd 8/14/03 7:16 AM Page xiv


We enter the new millennium with great hopes. For the first time in human history, we havethe possibility of eradicating global poverty in our lifetime. One hundred and eighty headsof state signed the Millennium Declaration in October 2000, pledging the world to meetingthe Millennium Development Goals by 2015. In Monterrey, Mexico, in the spring of 2002,the world’s nations established a partnership for increasing external assistance, expandingworld trade, and deepening policy and institutional reforms to reach these goals. Foreignaid, which declined during the 1990s, has begun to increase again.

But the first few years of the 21st century bring heightened challenges. HIV/AIDS andother diseases, illiteracy, and unclean water threaten to dash the hopes of millions, possiblybillions, of people that they might escape poverty. Tragically, conflict has undermined devel-opment in many countries. Peace and development go hand in hand. And even as we learnhow to make development assistance more effective, aid continues to be criticized for notbeing effective enough.

This year’s World Development Report, the 26th in the World Bank’s flagship series, helpsto re-ignite and reinforce our hopes by confronting these challenges. Development is notjust about money or even about numerical targets to be achieved by 2015, as important asthose are. It is about people. The WDR focuses on basic services, particularly health, educa-tion, water, and sanitation, seeking ways of making them work for poor people. Too often,services fail poor people. These failures may be less spectacular than financial crises, buttheir effects are continuing and deep nonetheless. The report shows that there are powerfulexamples of services working for poor people. Services work when they include all the peo-ple, when girls are encouraged to go to school, when pupils and parents participate in theschooling process, when communities take charge of their own sanitation. They work whensocieties can curtail corruption—which hurts poor people more than it hurts the betteroff—particularly when it hits basic health services, which poor people need desperately.They work when we take a comprehensive view of development—recognizing that amother’s education will help her baby’s health, that building a road or a bridge will enablechildren to go to school.

Services work especially well when we recognize that resources and their effective use areinseparable. More effective use makes additional resources more productive—and the argu-ment for aid more persuasive. External resources can provide strong support for changes inpolicy and practice that can bring more effective use. This is how we can scale up to achievethe Millennium Development Goals.

To improve service delivery, the WDR recommends institutional changes that willstrengthen relationships of accountability—between policymakers, providers, and citizens.These changes will not come overnight. Solutions must be tailored not to some imaginary“best practice” but to the realities of the country or the town or the village. One size will not

Foreword

xv

01_WDR_FM.qxd 8/14/03 7:17 AM Page xv


xvi WORLD DEVELOPMENT REPORT 2004

fit all. But I am convinced that this new way of thinking about service delivery, and indeedabout development effectiveness, will bear fruit, particularly when matched with adequateresources and a desire to assess what works and what does not, and to decide what must bescaled up and, indeed, what must be scaled down.

In short, this year’s WDR is central to the World Bank’s two-pronged strategy for devel-opment—investing in and empowering people, and improving the climate for investment.Next year’s WDR will focus on the second of these. Together, these reports form part of theWorld Bank’s contribution to meeting the challenge the global community has set foritself—to eradicate poverty in our lifetime.

James D. Wolfensohn

01_WDR_FM.qxd 8/14/03 7:17 AM Page xvi


1

Too often, services fail poorpeople—in access, in quantity, inquality. But the fact that there arestrong examples where services do

work means governments and citizens cando better. How? By putting poor people atthe center of service provision: by enablingthem to monitor and discipline serviceproviders, by amplifying their voice in poli-cymaking, and by strengthening the incen-tives for providers to serve the poor.

Freedom from illness and freedom fromilliteracy—two of the most important wayspoor people can escape poverty—remainelusive to many. To accelerate progress inhuman development, economic growth is,of course, necessary. But it is not enough.Scaling up will require both a substantialincrease in external resources and moreeffective use of all resources, internal andexternal. As resources become more produc-tive, the argument for additional resourcesbecomes more persuasive. And externalresources can provide strong support forchanges in practice and policy to bringabout more effective use. The two are com-plementary—that is the essence of thedevelopment partnership that was cementedin Monterrey in the spring of 2002.

This Report builds an analytical andpractical framework for using resources,whether internal or external, more effec-tively by making services work for poorpeople. We focus on those services thathave the most direct link with humandevelopment—education, health, water,sanitation, and electricity.

Governments and citizens use a varietyof methods of delivering these services—central government provision, contractingout to the private sector and nongovern-mental organizations (NGO)s, decentral-

ization to local governments, communityparticipation, and direct transfers to house-holds. There have been spectacular suc-cesses and miserable failures. Both point tothe need to strengthen accountability inthree key relationships in the service deliv-ery chain: between poor people andproviders, between poor people and policy-makers, and between policymakers andproviders. Foreign-aid donors should rein-force the accountability in these relation-ships, not undermine it.

Increasing poor clients’ choice and partic-ipation in service delivery will help themmonitor and discipline providers. Raisingpoor citizens’ voice, through the ballot boxand widely available information, canincrease their influence with policymakers—and reduce the diversion of public services tothe non-poor for political patronage. Byrewarding the effective delivery of servicesand penalizing the ineffective, policymakerscan get providers to serve poor people better.

Innovating with service delivery arrange-ments will not be enough. Societies shouldlearn from their innovations by systemati-cally evaluating and disseminating informa-tion about what works and what doesn’t.Only then can the innovations be scaled upto improve the lives of poor people aroundthe world.

The challenge is formidable, becausemaking services work for poor peopleinvolves changing not only service deliveryarrangements but also public sector institu-tions. It also involves changing the way muchforeign aid is transferred. As governments,citizens, and donors create incentives forthese changes, they should be selective in theproblems they choose to address. Theyshould be realistic about implementationdifficulties. And they should be patient.

Overview

I go to collect water four times aday, in a 20-litre clay jar. It’s hardwork! . . . I’ve never been to schoolas I have to help my mother withher washing work so we can earnenough money. . . . Our housedoesn’t have a bathroom. . . . If Icould alter my life, I would reallylike to go to school and have moreclothes.

Elma Kassa, a 13-year-old girlfrom Addis Ababa, Ethiopia

02_WDR_Overview.qxd 8/14/03 7:22 AM Page 1


The problemPoverty has many dimensions. In addition tolow income (living on less than $1 a day),illiteracy, ill health, gender inequality, andenvironmental degradation are all aspects ofbeing poor. This is reflected in the Millen-nium Development Goals, the internationalcommunity’s unprecedented agreement onthe goals for reducing poverty (box 1). Themultidimensional nature of poverty is alsoreflected in the World Bank’s two-prongedstrategy for development—investing in peo-ple and improving the investment climate.That five of the eight goals and one of the twoprongs of the strategy for development con-cern health and education signals how centralhuman development is to human welfare.

But progress in human development haslagged behind that in reducing incomepoverty (figure 1). The world as a whole ison track to achieve the first goal—reducingby half the proportion of people living onless than $1 a day—thanks mainly to rapideconomic growth in India and China, wheremany of the world’s poor live.1 But the

world is off track in reaching the goals forprimary education, gender equality, andchild mortality.

To reach all of these goals, economicgrowth is essential. But it will not beenough. The projected growth in per capitaGDP will by itself enable five of the world’ssix developing regions to reach the goal forreducing income poverty (table 1). But thatgrowth will enable only two of the regions toachieve the primary enrollment goal andnone of them to reach the child mortalitygoal. If the economic growth projected forAfrica doubles, the region will reach theincome poverty goal—but still fall short ofthe health and education goals. In Uganda,despite average annual per capita GDPgrowth of 3.9 percent in the past decade,child mortality is stagnating—and onlypartly due to the AIDS epidemic.2

Because growth alone will not be enoughto reach the goals, the international com-munity has committed itself—in a series ofrecent meetings in Monterrey, Doha, andJohannesburg—to greater resource trans-

2 WORLD DEVELOPMENT REPORT 2004

Figure 1 Progress in humandevelopment: off track

Note: Blue line is the trend line to reach theMillenium Development Goal. The red lineshows the actual progress to date.Source: www.developmentgoals.org.

01990 1995 2000 2005 2010 2015

10

20

30Percent

1990 1995 2000 2005

Ratio of girls to boys in primary andsecondary school

80

85

90

95

100Girls as a percent of boys

1990 1995 2000 2005 2010 2015

Under-five mortality rate

0

20

40

60

80

100Deaths per 1,000 live births

People living on less than $1 a day

1990 1995 2000 2005 2010 2015

Primary school completion rate

70

80

90

100Percent

With starting points in 1990, each goal is to bereached by 2015:

1. Eradicate extreme poverty and hunger

Halve the proportion of people living on lessthan one dollar a day.

Halve the proportion of people who suffer fromhunger.

2. Achieve universal primary education

Ensure that boys and girls alike completeprimary schooling.

3. Promote gender equality and empowerwomen

Eliminate gender disparity at all levels of educa-tion.

4. Reduce child mortality

Reduce by two-thirds the under-five mortalityrate.

5. Improve maternal health

Reduce by three-quarters the maternal mortalityratio.

6. Combat HIV/AIDS, malaria, and other diseases

Reverse the spread of HIV/AIDS.

7. Ensure environmental sustainability

Integrate sustainable development into countrypolicies and reverse loss of environmentalresources.

Halve the proportion of people without accessto potable water.

Significantly improve the lives of at least 100 mil-lion slum dwellers.

8. Develop a global partnership fordevelopment

Raise official development assistance.

Expand market access.

B O X 1 The eight Millennium Development Goals

Three points about the Millennium Development Goals: First, to be enduring, success in reaching the goalsmust be based on systemwide reforms to support progress. Second, focusing on these outcomes does notimply focusing on education and health services alone. Health and education outcomes depend on too manyother factors for that to work—everything from parents’ knowledge and behavior, to the ease and safety ofreaching a health clinic or school, or the technology available for producing outcomes (see crate 1.1).Third, incountries that have already achieved universal primary completion or low infant and maternal mortality rates,the spirit of the Millennium Development Goals—time-bound, outcome-based targets to focus strategies—remains important.



http://www.developmentgoals.org

Table 1 Economic growth alone is not enough to reach all the Millennium Development Goals

People living on less than$1 a day Primary school completion rate Under-five mortality

Annual average Target 2015 growth Target 2015 growth Target 2015 growth GDP per capita (percent) alone (percent) (percent) alone (percent) (per 1,000 alone (pergrowth births) 1,000 births)2000–2015*(percent per year)

East Asia 5.4 14 4 100 100 19 26

Europe and Central Asia 3.6 1 1 100 100 15 26

Latin American and the Caribbean 1.8 8 8 100 95 17 30

Middle East and North Africa 1.4 1 1 100 96 25 41

South Asia 3.8 22 15 100 99 43 69

Africa 1.2 24 35 100 56 59 151

*GDP growth projections from World Bank (2003a).Note: Elasticity assumed between growth and poverty is –1.5; primary completion rate is 0.62; under-five mortality is –0.48.Sources: World Bank (2003a), Devarajan (2002).

Overview 3

fers by developed countries and better poli-cies and institutions in developing coun-tries. The level of resource transfers is diffi-cult to calculate precisely. Some estimatesare converging around a figure of $40 bil-lion to $60 billion a year in additional for-eign aid—so long as the money is accompa-nied by policy and institutional reforms toenhance the productivity of domestic andexternal resources.3

Focusing on the human developmentgoals, this Report describes the reforms inservices needed to achieve them. Ensuringbasic health and education outcomes is theresponsibility of the state (box 2). But manygovernments are falling short on their oblig-ation, especially to poor people. In Armeniaand Cambodia, child mortality rates for thepoorest fifth of the population are two tothree times those for the richest fifth. Onlyabout 60 percent of the adolescents in thepoorest fifth of the population in the ArabRepublic of Egypt and Peru have completedprimary school, while all those from therichest fifth have.

To meet this responsibility, governmentsand citizens need to make the services thatcontribute to health and education—water,sanitation, energy, transport, health, and edu-cation—work for poor people. Too often,these services are failing. Sometimes, they arefailing everybody—except the rich, who canopt out of the public system. But at othertimes, they are clearly failing poor people.

Services are failing poor people in four waysHow do we know that these services are fail-ing poor people? First, while governmentsdevote about a third of their budgets tohealth and education, they spend very little ofit on poor people—that is, on the servicespoor people need to improve their health andeducation. Public spending on health andeducation is typically enjoyed by the non-poor (figure 2). In Nepal 46 percent of educa-tion spending accrues to the richest fifth, only11 percent to the poorest. In India the richestfifth receives three times the curative healthcare subsidy of the poorest fifth.4 Eventhough clean water is critical to health out-comes, in Morocco only 11 percent of thepoorest fifth of the population has access to

By financing, providing, or regulating theservices that contribute to health and edu-cation outcomes, governments around theworld demonstrate their responsibility forthe health and education of their people.Why? First, these services are replete withmarket failures—with externalities, as whenan infected child spreads a disease to play-mates or a farmer benefits from aneighbor’s ability to read. So the private sec-tor, left to its devices, will not achieve thelevel of health and education that societydesires. Second, basic health and basic edu-cation are considered fundamental human

rights.The Universal Declaration of HumanRights asserts an individual’s right to “a stan-dard of living adequate for the health andwell-being of himself and of his family,including . . . medical care . . . [and a right toeducation that is] . . . free, at least in the ele-mentary and fundamental stages.” No mat-ter how daunting the problems of deliverymay be, the public sector cannot walk awayfrom health and education.The challenge isto see how the government—in collabora-tion with the private sector, communities,and outside partners—can meet this funda-mental responsibility.

B O X 2 Services—a public responsibility




safe water, while everybody in the richest fifthdoes (figure 3).

Second, even when public spending canbe reallocated toward poor people—say, byshifting to primary schools and clinics—themoney does not always reach the frontlineservice provider. In the early 1990s inUganda the share of nonsalary spending onprimary education that actually reachedprimary schools was 13 percent. This wasthe average: poorer schools received wellbelow the average.5

Third, even if this share is increased—asthe Ugandans have done—teachers must bepresent and effective at their jobs, just as doc-tors and nurses must provide the care thatpatients need. But they are often mired in asystem where the incentives for effective ser-vice delivery are weak, wages may not bepaid, corruption is rife, and political patron-age is a way of life. Highly trained doctors sel-dom wish to serve in remote rural areas.Since those who do serve there are rarelymonitored, the penalties for not being atwork are low. A survey of primary health carefacilities in Bangladesh found the absenteerate among doctors to be 74 percent.6 Whenpresent, some service providers treat poorpeople badly. “They treat us like animals,”says a patient in West Africa.7

By no means do all frontline serviceproviders behave this way. Many, often themajority, are driven by an intrinsic motivationto serve. Be it through professional pride or agenuine commitment to help poor people (orboth), many teachers and health workersdeliver timely, efficient, and courteous ser-vices, often in difficult circumstances—collapsing buildings, overflowing latrines—and with few resources—clinics withoutdrugs, classes without textbooks.8 The chal-lenge is to reinforce this experience—to repli-cate the professional ethics, intrinsic motiva-tion, and other incentives of these providersin the rest of the service work force.

The fourth way services fail poor people isthe lack of demand. Poor people often don’tsend their children to school or take them to aclinic. In Bolivia 60 percent of the childrenwho died before age five had not seen a for-mal provider during the illness culminatingin their death. Sometimes the reason is thepoor quality of the service—missing materi-als, absent workers, abusive treatment. Atother times it is because they are poor. Evenwhen the services are free, many poor ruralfamilies cannot afford the time it takes totravel the nearly 8 kilometers to the nearestprimary school in Mali or the 23 kilometersto the nearest medical facility in Chad.9

0 20Percent

40

Bulgaria1995

Costa Rica1992

Madagascar1993

Cote d’Ivoire1995

ˆ

Bangladesh2000

All health spending

India1995/96

Ecuador1998

Armenia1999

Guinea1994

0 20Percent

40

Primary health

0 20Percent

40

Kenya1992

Romania1994

Morocco1998/99

Brazil 1997(NE&SE)

Mexico1996

All education spending

Cambodia1996/97

Nicaragua1998

Kosovo2000

Nepal1996

0 20Percent

40

Primary education

Percent richestquintile

Percent poorestquintile

Figure 2 More public spending for the rich than for the poorShare of public spending that accrues to the richest and poorest fifths

Source: Compiled from various sources by World Bank staff.



Weak demand can also be due to culturalfactors, notably gender. Some parents refuseto send their daughters to school. Husbandshave been known to prevent their wives fromgoing to clinics—even for deliveries. And thesocial distance between poor people and ser-vice providers (70 percent of nurses and mid-wives in rural Niger had been raised in thecity) is often a deterrent.

Alternative service deliveryarrangementsEnsuring access to basic services such ashealth, education, water, energy, and sanitationis a public responsibility today, but it has notalways been. Nor do governments dischargethis responsibility solely through central-government provision. Throughout historyand around the world, societies have tried dif-ferent arrangements—with mixed results.

• Some governments contract servicesout—to the private sector, to NGOs,even to other public agencies. In theaftermath of a civil war Cambodia in-troduced two forms of contracting forthe delivery of primary health care(“contracting out” whole services and“contracting in” some services). Ran-domly assigning the arrangementsacross 12 districts (to avoid systematicbias), it found that health indicators, aswell as use by the poor, increased most inthe districts contracting out.10 Whetherthis can be scaled up beyond 12 districtsin Cambodia is worth exploring.

• Governments also sell concessions to theprivate sector—in water, transport, elec-tricity—with some very good and somevery bad results. Privatizing water inCartagena, Colombia, improved servicesand access for the poor. A similar sale inTucuman, Argentina, led to riots in thestreets and a reversal of the concession.

• Some societies transfer responsibility(for financing, provision, and regula-tion) to lower tiers of government.Again, the record has varied—withpotentially weaker capacity and greaterpolitical patronage at the local level andthe reduced scope for redistributionsometimes outweighing the benefitsfrom greater local participation. Local-

government delivery of infrastructure inSouth Africa improved service provisionin a short time.11 But decentralizingsocial assistance in Romania weakenedthe ability and incentives of local coun-cils to deliver cash transfers to the poor.12

The program is now being recentralized.

• Responsibility is sometimes transferred tocommunities—or to the clients themselves.El Salvador’s Community-Managed SchoolsProgram (Educo) gives parents’ associationsthe right to hire and fire teachers. That, plusthe monthly visits to the schools by the par-ents’ associations, has reduced teacher—andstudent—absenteeism, improving studentperformance.

• Still other programs transfer resources andresponsibility to the household. Mexico’sEducation, Health, and Nutrition Program(Progresa) gives cash to families if theirchildren are enrolled in school and theyregularly visit a clinic. Numerous evalua-tions of the program show consistentlythat it increased school enrollment (eightpercentage points for girls and five forboys at the secondary level) and improvedchildren’s health (illness among youngchildren fell 20 percent).13

Overview 5

Figure 3 Water, water everywhere, nor any drop todrinkPercent of households who use an improved watersource (selected countries)

Source: World Bank staff.

0 20 40 60 80 100

Uzbekistan 1996

India 1998–99

Brazil 1996

Philippines 1998

Tanzania 1999

Indonesia 1997

Nicaragua 1998

Kazakhstan 1999

Cambodia 2000

Guinea 1999

Morocco 1995

Ethiopia 2000

Poorestfifth

Richestfifth




The framework of relationships—between clients, providers,and policymakersTo help understand the variety of experienceswith traditional and alternative service deliv-ery arrangements, the service delivery chaincan be unbundled into three sets of actors,and the relationships between them exam-ined (figure 4). Poor people—as patients inclinics, students in schools, travelers on buses,consumers of water—are the clients of ser-vices. They have a relationship with the front-line providers, with schoolteachers, doctors,bus drivers, water companies. Poor peoplehave a similar relationship when they buysomething in the market, such as a sandwich(or a samosa, a salteña, a shoo-mai). In acompetitive-market transaction, they get the“service” because they can hold the provideraccountable. That is, the consumer pays theprovider directly; he can observe whether ornot he has received the sandwich; and if he isdissatisfied, he has power over the providerwith repeat business or, in the case of fraud,with legal or social sanctions.

For the services considered here—such ashealth, education, water, electricity, andsanitation—there is no direct accountabilityof the provider to the consumer.Why not? Forvarious good reasons, society has decided thatthe service will be provided not through amarket transaction but through the govern-ment taking responsibility (see box 2). That is,through the “long route” of accountability—by clients as citizens influencing policymak-ers, and policymakers influencing providers.When the relationships along this long routebreak down, service delivery fails (absenteeteachers, leaking water pipes) and humandevelopment outcomes are poor.

Consider the first of the two relationshipsalong the long route—the link between poorpeople and policymakers or politicians (fig-ure 4). Poor people are citizens. In principle,they contribute to defining society’s collectiveobjectives, and they try to control publicaction to achieve those objectives. In practice,this does not always work. Either they areexcluded from the formulation of collectiveobjectives or they cannot influence publicaction because of weaknesses in the electoralsystem. Free public services and “no-show”jobs are handed out as political patronage,with poor people rarely the beneficiaries.

Even if poor people can reach the policy-maker, services will not improve unless thepolicymaker can ensure that the serviceprovider will deliver services to them. InCambodia, policymakers were able to specifythe services required to the NGOs withwhom they contracted. But for many ser-vices, such as student learning or curativecare, the policymaker may not be able tospecify the nature of the service, much lessimpose penalties for underperformance ofthe contract. Teacher and health-workerabsenteeism is often the result.

Given the weaknesses in the long route ofaccountability, service outcomes can beimproved by strengthening the short route—by increasing the client’s power overproviders. School voucher schemes (Colom-bia’s PACES) or scholarships (Bangladesh’sFemale Secondary School Assistance Pro-gram, in which schools receive a grant basedon the number of girls they enroll) enableclients to exert influence over providersthrough choice. El Salvador’s Educo programand Guinea’s revolving drug scheme (whereco-payments inspired villagers to stop theft)are ways for client participation to improveservice provision.14

Turn now to a closer look at the individualrelationships in the service delivery chain—why they break down, how they can bestrengthened.

Citizens and politicians/policymakers—stronger voice Poor citizens have little clout with politicians.In some countries the citizenry has only aweak hold on politicians. Even if there is awell-functioning electoral system, poor peo-

Figure 4 The framework of accountabilityrelationships

Policymakers

Poor people Providers



Overview 7

ple may not be able to influence politiciansabout public services: they may not be wellinformed about the quality of public services(and politicians know this); they may votealong ethnic or ideological lines, placing lessweight on public services when evaluatingpoliticians; or they may not believe the candi-dates who promise better public services—because their term in office is too short todeliver on the promise—and they may voteinstead for candidates who provide readycash and jobs.

As a result, public services often becomethe currency of political patronage and clien-telism. Politicians give “phantom” jobs toteachers and doctors. They build free publicschools and clinics in areas where their sup-porters live. Former Boston mayor JamesCurley strengthened his political base by con-centrating public services in the IrishCatholic areas while denying them to theProtestants, who eventually moved to thesuburbs.15

In 1989 Mexico introduced PRONASOL(Programa Nacional de Solidaridad, orNational Solidarity Program), a poverty alle-viation program that spent 1.2 percent ofGDP annually on water, electricity, nutrition,and education construction in poor commu-nities. Assessments of the six-year programfound that it reduced poverty by only about3 percent. Had the budget been distributedto maximize its impact on poverty, theexpected decline would have been 64 per-cent. It would have been 13 percent evenwith an untargeted, universal proportionaltransfer to the whole population. The reasonbecomes apparent when one examines thepolitical affiliation of communities thatreceived PRONASOL spending. Municipali-ties dominated by the Institutional Revolu-tionary Party (PRI), the party in power,received significantly higher per capita trans-fers than those voting for another party (fig-ure 5).16

Just as a well-functioning democracy doesnot guarantee that poor people will benefitfrom public services, some one-party statesget good health and education outcomes—even among the poor. Cuba has among thebest social indicators in Latin America—at amuch lower income than its peers, such asChile and Costa Rica. China reduced infant

mortality dramatically, and achieved nearlyuniversal primary enrollment. To be sure, inChina, cases during the earliest phase of theoutbreak of severe acute respiratory syn-drome in 2002 were not openly reported—thus making its further spread almostinevitable. And Cubans, who had high levelsof health and education in the 1950s, remainpoor on other dimensions.17

The lesson seems to be that the citizen-policymaker link is working either when citi-zens can hold policymakers accountable forpublic services that benefit the poor or whenthe policymaker cares about the health andeducation of poor people. These politics are“pro-poor.”

What can be done when the politics arenot pro-poor? Societies can still introducevarious intermediate elements to make pub-lic institutions more accountable. Participa-tory budgeting in Porto Allegre, Brazil,started as a means for the citizens to partici-pate in budget formulation and then to holdthe municipal government accountable forexecuting the budget.

Perhaps the most powerful means ofincreasing the voice of poor citizens in poli-cymaking is better information. When thegovernment of Uganda learned that only 13percent of recurrent spending for primaryeducation was arriving in primary schools, itlaunched a monthly newspaper campaign onthe transfer of funds. That campaign galva-nized the populace, inducing the government

01989 1990 1991 1992 1993 1994

PRI

PRD

PAN

Other200

100

300

400

Average expenditures per capita (real 1995 pesos)

Figure 5 It paid to vote for PRIPRONASOL expenditures according to party in municipalgovernment

Note: PRI = Instituational Revolutionary Party; PRD = Party of theDemocratic Revolution; PAN = National Action Party.Source: Estévez, Magaloni, and Diaz-Cayeros (2002).

Policymakers

Poor people



to increase the share going to primary schools(now over 80 percent) and compelling schoolprincipals to post the entire budget on theschoolroom door.

The media can do much to disseminateinformation about public services. Highernewspaper circulation in Indian districts isassociated with better local-government per-formance in distributing food and droughtrelief.18 The more people who can read, thestronger the influence of the media. In Ker-ala, India, this led to a virtuous cycle of liter-acy leading to better public services, whichraised literacy even more.19

But information is not enough. Peoplemust also have the legal, political, and eco-nomic means to press demands against thegovernment. Most citizens in Uttar Pradesh,India, know that government services aredismal, and know that everyone else knowsthat—and yet most do not feel free tocomplain.20

Policymakers and providers—stronger compactsStrengthening poor people’s voice canmake policymakers want to improve ser-vices for the poor. But they still may not beable to. Well-intentioned policymakersoften cannot offer the incentives and do themonitoring to ensure that providers servethe poor. The absenteeism of teachers, therude treatment of patients, and the siphon-ing of pharmaceuticals are symptoms ofthe problem.

Even in the private sector, where theincentives presumably are better aligned, per-formance is not much better—for the samereasons that private markets are not the solu-tion to these problems in the first place. Pri-vate providers fail to reach the very poor.Weak regulation leads to poor-quality healthservices in India’s private sector. Ineffectivelyprivatizing water incites riots in the streets ofCochabamba.

In the former Soviet Union, state andparty control over providers ensured compli-ance with delivery norms for free services.Services worked, and levels of health status,particularly for the poorer Central Asianrepublics, were much higher than for othercountries at their level of income. But thebreakup of the Soviet Union weakened state

control over providers, and health and educa-tion services collapsed.

Solving the problem requires mentally,and sometimes physically, separating thepolicymaker from the provider—and think-ing of the relationship between the two as acompact. The provider agrees to deliver aservice, in return for being rewarded orpenalized depending on performance. Thecompact may be an explicit contract with aprivate or nonprofit organization—orbetween tiers of government, as in Johan-nesburg, South Africa.21 Or it could beimplicit, as in the employment agreementsof civil servants.

Separating the policymaker from theprovider is not easy, for those who benefitfrom the lack of separation may resist it.Teachers’ unions in Uttar Pradesh, India,blocked an attempt to put teacher hiring,firing, and attendance under the control ofthe village panchayat. On the other hand,health professionals in Brazil participated ina national coalition that prepared the planfor health reforms and municipal healthcouncils.22 The separation usually happensbecause of a fiscal crisis (Johannesburg), amajor political change (decentralization inLatin America), or a legacy of history (pub-lic regulation of water providers in theNetherlands).

Even with a separation of policymakerand provider, the compacts cannot be tooexplicit. It is difficult to specify precisely whatthe schoolteacher should do at every point inthe day. Too much specificity can lead toinflexibility. Parisian taxi drivers, to make apoint about excessive regulations, sometimesmeticulously follow the rules in the Code de laroute—slowing traffic in the French capital toa snail’s pace.23

Since the contract cannot be fully speci-fied, policymakers look to other means ofeliciting pro-poor services from providers.One way is to choose providers who have anintrinsic motivation to serve the poor. Astudy of faith-based health care providers inUganda estimates that they work for 28 per-cent less than government and private for-profit staff, and yet provide a significantlyhigher quality of care than the public sec-tor.24 Another way is to increase incentivesto serve the poor or work in underserved


Policymakers

Providers



areas. But one study of Indonesia showsthat it would require multiples of currentpay levels to get doctors to live in WestPapua, for instance (where the vacancy rateis 60 percent).25 A third way is to solicit bidsfor services and use the competition in thebidding process to monitor and disciplineproviders. Many water concessions are man-aged this way. A recent innovation in Mad-hya Pradesh, India, allows NGOs to competefor concessions to primary schools, withpayments conditional on higher test scoresbased on independent measurement.

As with the citizen-politician relationship,a critical element in the policymaker-provider relationship is information. Thepolicymaker can specify a contract based onlyon what he can observe—on what informa-tion is available. There has to be a method formonitoring providers and for having thatinformation reach the policymaker. Newtechnologies, including e-government, canmake this easier.26

So can some ingenious methods usinghuman beings. When Ceará, Brazil, hired acadre of district health workers, the govern-ment sent their names to the applicants whowere not selected, inviting them to report anyproblems with service in the health clinics.More fundamentally, these output-basedincentive schemes require rigorous programevaluation, so that the policymaker knowsand understands what is working and whatisn’t. Evaluation-based information, impor-tant not only for monitoring providers, alsoenables the rest of the world to learn aboutservice delivery.

Clients and providers—morechoices, more participation Given the difficulties in strengthening the longroute of accountability, improving the shortroute—the client-provider relationship—deserves more consideration. There is noquestion that this relationship is broken forhundreds of millions of poor people. Voicesof the Poor and other surveys point to thehelplessness that poor people feel beforeproviders—nurses hitting mothers duringchildbirth, doctors refusing to treat patients ofa lower caste.27 Unlike most private providers,public water companies funded through bud-getary transfers often ignore their customers.

These are but symptoms of the larger prob-lem: many service delivery arrangementsneglect the role of clients, especially poorclients, in making services work better.

Clients can play two roles in strengtheningservice delivery. First, for many services,clients can help tailor the service to theirneeds, since the actual mix cannot be specifiedin advance. In some parts of Pakistan, girls aremore likely to attend school if there is a femaleteacher. The construction of separate latrinesfor girls has had a strong effect on girls’ enroll-ment in primary schools. When the openinghours of health clinics are more convenientfor farmers, visits increase. Second, clients canbe effective monitors of providers, since theyare at the point of service delivery. The majorbenefit of Educo came from the weekly visitsof the community education association toschools. Each additional visit reduced studentabsenteeism (due to teacher absenteeism) by 3percent.28

How can the role of clients in revealingdemand and monitoring providers bestrengthened? By increasing poor people’schoice and participation in service delivery.When clients are given a choice among ser-vice providers, they reveal their demand by“voting with their feet.” Female patients whofeel more comfortable with female doctorscan go to one. The competition created byclient choice also disciplines providers. Adoctor may refuse to treat lower-castepatients, but if he is paid by the number ofpatients seen, he will be concerned when thewaiting room is empty. Reimbursing schoolsbased on the number of students (or femalestudents) they enroll creates implicit compe-tition among schools for students, increasingstudents’ choice.

School voucher programs—as in Ban-gladesh, Chile, Colombia, Côte d’Ivoire, andCzech Republic—are explicitly aimed atimproving education quality by increasingparents’ choices. The evidence on theseschemes is mixed, however. They seem tohave improved student performance amongsome groups. But the effects on the poor areambiguous because universal voucherschemes tend to increase sorting—withricher students concentrating in the privateschools.29 When the voucher is restricted topoor or disadvantaged groups, the effects are

Overview 9

Poor people Providers



better.30 The Colombia program showedlower repetition rates and higher perfor-mance on standardized tests for students par-ticipating in the scheme—with the effect forgirls higher than that for boys.31 Even in net-work systems such as urban water provision,it is possible to give poor communitieschoice—by allowing the poor to approachindependent providers, introducing flexibil-ity in service standards such as lifeline rates,and so on.

When there is no choice of providers,increasing poor people’s participation in ser-vice provision—giving them the ability tomonitor and discipline the provider, forexample—can achieve similar results. Clientscan play the role of monitors since they arepresent at the point of service. But they needto have an incentive to monitor.

In Bangladesh, thanks to reduced importtariffs, households were able to purchasetubewells that tapped ground sources—shal-low aquifers—for drinking water. Unfortu-nately, no one arranged for the monitoring ofwater quality—a public good—so the arsenicin the water went undetected. If the stakes arehigh enough, communities tackle the prob-lem. When the Zambian government intro-duced a road fund financed by a charge ontrucks, truck drivers took turns policing abridge crossing to make sure that overloadedtrucks did not cross. Of course such co-payments or user fees reduce demand—andso should not be used when the demandeffects outweigh the increase in supply, as inprimary education. But for water, electricity,and other services whose benefits are enjoyedmainly by the user, charging for them has theadded benefit of increasing the consumer’sincentive to monitor the provider. Farmers inAndhra Pradesh, India, are finding that, whenthey pay for their water, the irrigation depart-ment becomes more accountable to them. Inthe words of one farmer,“We will never allowthe government to again give us free water.”32

Donors and recipients—strengthening accountability,not undermining itImproving service outcomes for poor peoplerequires strengthening the three relationshipsin the chain—between client and provider,between citizen and policymaker, and

between policymaker and provider. In theirzeal to get services to the poor, donors oftenbypass one or more of these relationships.The typical mode of delivering aid—aproject—is often implemented by a separateunit outside the compact, bypassing the rela-tionship between policymakers and pro-viders. The project is typically financed byearmarked funds subject to donor-mandatedfiduciary requirements. It and other donorinitiatives, including global “funds,” bypassthe citizen-policymaker relationship wherethe budget is concerned. To be sure, when theexisting relationship is dysfunctional, it maybe necessary to go around it. But the caseswhere the benefits outweigh the costs areprobably fewer than imagined.

Recognizing the gap between ends andmeans, some donors and recipients try to useforeign aid to strengthen, not weaken, thelinks in the service delivery chain. Oneapproach is to incorporate donor assistancein the recipient’s budget, shifting to the recip-ient’s accountability system. In Uganda assis-tance from Germany, Ireland, the Nether-lands, Norway, United Kingdom, and theWorld Bank is all part of the country’s bud-get, the outcome of a coordinated and partic-ipatory process.

Another approach is for donors to pooltheir assistance in a single “pot” and to har-monize their fiduciary standards around thatof the rest of the government. The sectorwideapproach to health, education, transport, andother sectors is a step in this direction. Possi-bly the biggest payoff comes when donorshelp generate knowledge—as when donor-financed impact evaluation studies revealwhat works and what doesn’t in service deliv-ery, or when donors pool technical assistanceresources at the retail level, as in the multi-donor Water and Sanitation Program.Knowledge is essential to scaling up servicedelivery. Although it emerges locally, it is aglobal public good—precisely what aid isdesigned to finance.

What not to doThe picture painted so far of the difficulties ingovernment-led service delivery may leadsome to conclude that government shouldgive up and leave everything to the privatesector. That would be wrong. If individuals




are left to their own devices, they will notprovide levels of education and health thatthey collectively desire (see box 2). Not onlyis this true in theory, but in practice nocountry has achieved significant improve-ment in child mortality and primary educa-tion without government involvement. Fur-thermore, as mentioned earlier, privatesector or NGO participation in health, edu-cation, and infrastructure is not withoutproblems—especially in reaching poor peo-ple. The extreme position is clearly notdesirable.

Some aid donors take a variant of the“leave-everything-to-the-private-sector” posi-tion. If government services are performingso badly, they say, why give more aid to thosegovernments? That would be equally wrong.There is now substantial research showingthat aid is productive in countries with goodpolicies and institutions, and those policiesand institutions have recently been improv-ing.33 The reforms detailed in this Report(aimed at recipient countries and aid agen-cies) can make aid even more productive.When policies and institutions are improv-ing, aid should increase, not decrease, to real-ize the mutually shared objective of povertyreduction, as specified in the MillenniumDevelopment Goals.

At the same time, simply increasing publicspending—without seeking improvements inthe efficiency of that spending—is unlikely toreap substantial benefits. The productivity ofpublic spending varies enormously acrosscountries. Ethiopia and Malawi spendroughly the same amount per person on pri-mary education—with very different out-comes. Peru and Thailand spend vastly differ-ent amounts—with similar outcomes.

On average, the relationship betweenpublic spending on health and educationand the outcomes is weak or nonexistent. Asimple scatter plot of spending and out-comes shows a clear line with a significantslope—because richer countries spend moreon health and education and have better out-comes. But controlling for the effect of percapita income, the relationship betweenpublic spending on health and under-fivemortality rates is not statistically significant(figure 6). That is not surprising: most publicspending on health and education goes to

Overview 11

the non-poor, much of it fails to reach thefrontline service provider, and serviceproviders face weak incentives to deliver ser-vices effectively.

Linked to the “simply-increase-public-spending” approach is one that advocates formore foreign aid without accompanyingmeasures to improve the productivity of for-eign aid. This can be just as misleading—andnot just for the same reasons that simplyincreasing public expenditure is misleading.Sometimes the modes of delivering foreignaid, by undermining rather than strengthen-ing service delivery in the recipient country,can reduce the productivity of public spend-ing in the medium run.

Finally, when faced with disappointinghealth and education outcomes, especiallyfor poor people, it is tempting to recom-mend a technical solution that addresses theproximate cause of the problem. Why notgive vitamin A supplements, de-wormschoolchildren, and train teachers better?Why not develop a “minimum package” ofhealth interventions for everybody?Although each intervention is valuable, rec-ommending them alone will not addressthe fundamental institutional problemsthat precluded their adoption in the firstplace.34 Lack of knowledge about the righttechnical solution is probably not the bind-ing constraint. What is needed is a set ofinstitutional arrangements that will give

Figure 6 Increased public spending is not enough

*Public spending and child mortality are given as the percentdeviation from rate predicted by GDP per capita.Note: For the regression line shown, the coefficient is –0.148 andthe t-statistic is 1.45.Source: GDP per capita and public spending data, WorldDevelopment Indicators database; under-5 mortality, UNICEF.

–150 –100 –50 0Per capita public spending on health, 1990s average*

Under-five mortality rate, 2000*

50 100 150–150

–100

–50

0

50

100

150



policymakers, providers, and citizens theincentives to adopt the solution and adapt itto local conditions.

What can be done?The varied experience with traditional andinnovative modes of service delivery clearlyshows that no single solution fits all servicesin all countries. The framework of account-ability relationships explains why. In differ-ent sectors and countries, different relation-ships need strengthening. In education thebiggest payoff may come from strengthen-ing the client-provider link, as with vouch-ers in Colombia or scholarships for girls inBangladesh. But that may not be so inimmunization campaigns.

Furthermore, poor people are oftentrapped in a system of dysfunctional service-delivery relationships. Making just one linkmore effective may not be enough—it mayeven be counterproductive—if there are seri-ous problems elsewhere in the service deliv-ery chain. In water or curative health care,tightening the policymaker-provider linkcould make providers respond more to thedemands of their superiors—and less totheir poor clients. Relying on user groups,often generously funded by donors, mayinhibit the development of genuinely demo-cratic local governments. Finally, countries,and regions within countries, vary enor-mously in the conditions that make serviceinnovations work. A failed state mired inconflict will be overstretched in resourcesand institutional capacity, and able to man-age only certain interventions. Countrieswith high prevalence of HIV/AIDS willrequire short- and long-term adaptations ofthe service delivery systems.

Does this mean there are no generallessons about making services work forpoor people? No. The experience with ser-vice delivery, viewed through the lens ofthis Report, suggests a constellation ofsolutions, each matching various charac-teristics of the service and the country orregion. While no one size fits all, perhapseight sizes do. Even eight may be too few,which is why some of the “sizes” areadjustable, like waistbands.

The eight sizes can be arrived at byanswering a series of questions.

Pro-poor or clientelist politics?How much is the political system in thecountry geared toward pro-poor public ser-vices—and how much does it suffer fromclientelist politics and corruption? This is themost difficult dimension for an outside actor,such as a donor, to address: the recipient ofthe advice may also be the source of the prob-lem. And politics do not change overnight.

Even so, at least three sets of policy instru-ments can be deployed where the politics aremore clientelist than pro-poor.

• First is choosing the level of governmentresponsible for the service. Countries dif-fer in the patronage politics and capabili-ties of different tiers of government—and this should inform the servicedelivery arrangement.

• Second, if politicians are likely to capturethe rents from free public services anddistribute them to their clients, anarrangement that reduces the rents mayleave the poor better off. This mightinclude transparent and publicly knownrules for allocation, such as per-studentgrants to schools, or conditional transfersto households, as in Progresa. In somecases it may include fees to reduce thevalue of the politicians’ distribution deci-sions. India’s power sector was nationallyowned and run because it was a network(and therefore not amenable to head-to-head competition). But the huge rentsfrom providing subsidized electricityhave been diverted to people who are notpoor—all within a parliamentary democ-racy. Reducing those rents by raisingpower tariffs or having the private sectorprovide electricity, even if it violates theprinciples of equity—they are alreadyviolated in the existing system—may bethe only way of improving electricity ser-vices to the poor.

• Third, better information—that makescitizens more aware of the money allo-cated to their services, the actual condi-tions of services, and the behavior ofpolicymakers and providers—can be apowerful force in overcoming clientelistpolitics. The role of a free and vibrantpress and improving the level of publicdiscourse cannot be overstated.


Pro-poor?

no

yes



Homogeneous or heterogeneousclients?The answer to this question depends on theservice. Students with disabilities have specialneeds for quality education but not forimmunization. Heterogeneity is also definedby regional or community preferences.Whether a girl goes to school may depend onwhether there are separate latrines for boysand girls. If that depends on local preferences,the village should have a say in design. Previ-ously homogeneous societies, such as Swedenand Norway, are changing with increasedimmigration. They are giving more discre-tion to local communities in tailoring theeducation system to suit the linguistic abili-ties of their members.

The more that people differ in theirdesires, the greater the benefits from decen-tralizing the decision. In the most extremecase—when individual preferences matter—the appropriate solution will involve individ-ual choices of service (if there is the possibil-ity of competition) and such interventions ascash transfers, vouchers, or capitation pay-ments to schools or medical providers. Ifthere are shared preferences, as in education,or free-rider problems as in sanitation, thecommunity is the correct locus of decision-making. The appropriate policy will theninvolve local-government decisions in adecentralized setting—or depending onpolitical realities, community decisions (asfor social investment funds) and user groups(such as parents in school committees).

Easy or hard to monitor?Services can be distinguished by the difficultyof monitoring service outputs. The difficultydepends on the service and on the institu-tional capacity of government to do the mon-itoring. At one extreme are the services ofteachers in a classroom or doctors in a clinic.Both transactions allow much discretion bythe provider that cannot be observed easily. Adoctor has much more discretion in treatinga patient than an electrician switching on apower grid. And it is difficult to know whenhigh-quality teaching or health care is beingprovided. It may be possible to test students.But test scores tell very little about theteacher’s ability or effort, since they depend atleast as much on students’ socioeconomic

status or parental involvement. More easilymonitored are immunizations and cleanlatrines—all measurable by a quantitative,observable indicator.

Of course it depends on who is doing themonitoring. Parents can observe whether theteacher is in attendance, and what their chil-dren are learning, more easily than some cen-tral education authority. Better managementinformation systems and e-government canmake certain services easier to monitor. Andmonitoring costs can be reduced by judiciouschoice of providers—such as some NGOs,which may be trustworthy without formalmonitoring. In short, the difficulty of moni-toring is not fixed: it can vary over time andwith policies.

Eight sizes fit all Now examine different combinations ofthese characteristics, to see which servicedelivery arrangement would be a good fit—and which would be a misfit (figure 7). To besure, none of the characteristics can be easilydivided into such clean categories, becausecountries and services lie on a continuum.Even so, by dividing the salient characteris-tics, and looking at various combinations, the“eight sizes fit all” approach can be applied tothe considerations spelled out earlier.

Central government financing with con-tracting (1). In a favorable political context,with agreement on what government shoulddo, an easy-to-monitor service such asimmunization could be delivered by thepublic sector, or financed by the public sec-tor and contracted out to the private or non-profit sector, as with primary health centersin Cambodia.35 Infrastructure services couldbe managed by a national utility or providedby the private sector with regulatory over-sight.

Note that the particular configuration inwhich this arrangement will work is special.In the developed countries there is muchdiscussion of a set of reforms, started in NewZealand, that involve greater use of explicitcontracts—either from the government tothe private sector, or from central ministriesto the ministries responsible for specific ser-vices. The New Zealand reforms are justifiedby a well-established public sector ethos,

Overview 13

Pro-poor?

Homogeneous?

yes

no

Homogeneous?

yes

no

no

yes




reasonable management information sys-tems, and supporting institutions, includinglegal systems, to allow contract enforcement.These features increase the “monitorability”of certain services by reducing the gapbetween contracted and realized outcomes.

These preconditions do not exist in manydeveloping countries, so the template of thesereforms cannot be used mechanically.36 Ifthere is no good legal system and the civil ser-vice is subject to bribes (a form of clientelistpolitics), private sector contracts might be amajor source of corruption. In these coun-tries, government should perhaps be evenmore output-oriented—not as a means oftweaking a well-functioning system but as away of getting the system to provide muchgreater improvements in services and gener-ating new information.

Central government provision (2). When theservice is difficult to monitor—explicit con-

tracts are difficult to write or enforce—butthe politics are pro-poor and clients homo-geneous, the traditional, centralized publicsector is the appropriate delivery system.The French education system, which admin-isters a uniform service centrally, is one ofthe best examples.37 But too many countriesfall into the trap of thinking that justbecause the service is difficult to monitor, itmust be delivered by the government. Whenstudents are heterogeneous, when the poli-tics of the country are not geared towardpoor people, government control of theeducation system—with no participation bystudents, parents, or local communities—can leave the poor worse off.

Local government financing with contracting(3). With heterogeneous preferences, localgovernments should be involved in services.When local politics are pro-poor (butnational politics aren’t), local governmentscould be more reliable financiers of services,and vice versa. Easily monitored services suchas water or electricity can be contracted out topublic or private utilities, as in Johannesburg.

Local government (or deconcentrated cen-tral government) provision (4). For difficult-to-monitor services, such as education (forquality), management responsibility mightbe ceded to parent groups when the politicsare conducive, as in the Educo program.Giving clients a choice through vouchersenables them to express their heterogeneouspreferences. And the competition created byclients having a choice may improve servicequality—as with water vouchers in Chile orsanitation vouchers in Bangladesh.

Client power (5, 6, 7, 8). When publiclyfinanced services are subject to capture—thepolitics are not pro-poor—the best thing todo is to strengthen the client’s power asmuch as possible. But that can be difficult.Even means-tested voucher schemes or sub-sidies could be diverted to the non-poor.Transparent, rule-based programs, such asProgresa in Mexico, are needed to make itdifficult to hide middle-class capture.

In services such as water and electricity,governments intervene to regulate monopolyproviders and protect the poor—and not

Figure 7 Eight sizes fit all?

Central governmentfinancing with contracting

1

Central government provision2

Local government financing withcontracting

3

Local government provision4

Client power—experiment withcontracts

5

Client power—experiment withself-monitoring providers

6

Client power—experiment withcommunity control, vouchers

7

Client power—imitate market8

yes

no

Pro-poor?

Homogeneous ?

yes

no

Homogeneous ?

yes

no

no

yes

yes

no

yes

no

yes

no

Easyto

monitor?

Easyto

monitor?

Easyto

monitor?

Easyto

monitor?



because there are significant externalities. Soseparating the policymaker from the provider,and making the provider accountable to theclient through prices, can strengthen clientpower and lead to better results. Poor peoplecan be protected from high prices if chargesrise with use (with an initial, free amount).Allowing small, independent water providersto compete with the local monopoly can alsodiscipline provision and keep prices down.

But prices—without accompanying subsi-dies or transfers to poor people—cannot beused to strengthen client power in educationbecause of the externalities in primary educa-tion. A market-based allocation would not bein society’s interest. The same applies tohealth services with externalities, such asimmunization. In curative health care, theasymmetry of information between clientand provider makes strengthening clientpower problematic. Better information onpreventive care or on how to choose medicalproviders (possibly disseminated by non-profit organizations) can ameliorate theproblem. In extreme ca

wo rld development report · 2017-12-14 · wo rld development report 2004 Making ServicesWork for...

Documents

Transcript of wo rld development report · 2017-12-14 · wo rld development report 2004 Making ServicesWork for...