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Assessing the Risks in the Private Provision of Essential Services

September 1, 2003

Tim Kessler

Abstract: This year, considerable scholarship has been devoted to researching how best to deliver essential services. Private provision is explored in considerable depth in both the UNDP’s 2003 Human Development Report(HDR), entitled “Millennium Development Goals: A Compact among Nations to End Poverty” and theWorld Bank’s forthcoming (2004) World Development Report (WDR), entitled “Making Services Work forPoor People.” Based on a reading of the preliminary WDR draft, it appears that the World Bank is considerably more sanguine about market-based approaches to essential services, especially infrastructure services such as water and electricity, than is the UNDP – or this paper.The two documents present substantially different positions on the question: What is government for? The HDR urges a larger role for government in the direct provision of services, and is circumspect about private provision. “The supposed benefits of privatizing social services are elusive, with inconclusive evidence onefficiency and quality standards in the private relative to the public sector. Meanwhile, examples of market failures in private provisioning abound.” (p. 113) The WDR, in contrast, promotes a government role infacilitating private provision, and provides a number of examples of effective private service delivery tosupport its case.

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