"It is unlikely that East Timor will be able to sustain any of its social programs on its own for many years to come, and will have to rely on foreign aid. The major question is whether that aid will be used to eliminate resource constraints in order to build a free, strong, universal health care system, or will it be diverted to a plethora of foreign agencies and privatization schemes?" James Pfeiffer, Case Western Reserve University in Cleveland, USA

The La'o Hamutuk Bulletin Volume 1, no. 3.
17 November 2000
Issue focus:
Building a National Health System for East Timor
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Health Care and Privatization: Lessons for East Timor from Mozambique

By James Pfeiffer

As a poor nation seeking to rebuild from a devastating conflict, East Timor is not unique. A number of other developing countries, especially in Africa, have recently confronted similar challenges. Their experiences are instructive for those East Timorese and foreign supporters concerned with promoting social justice during this reconstruction period. Mozambique, a former Portuguese colony in southern Africa, provides a valuable case study.

Mozambique, like East Timor, suffers from what foreign consultants often call "resource constraints." According to the recent WHO report on East Timor (see page 12), there is a consensus that health services should be free, but "economic constraints"--present and future--make it very difficult to realize this ideal. For this reason, patient co-payments, private health care and private insurance are options under consideration. At the same time, this scarcity of resources has resulted in insufficient staffing for the emerging health department. As a result, international NGOs are under pressure to fill the gaps in services that the "constrained" health system cannot handle.

The Mozambique experience over the last eight years demonstrates that the promotion of private health care and the channeling aid NGOs have a negative impact on society in two key areas. First, such practices drain resources away from the public sector; and, second, they fragment the programs of the national health system.

Assuming Resource Constraints

The notion that national governments cannot offer free universal health care coverage in developing countries due to insufficient resources has dominated health policy making for the last two decades. But this is a very problematic assumption. Mozambique is one of the poorest countries in the world, so clearly there are real limits to how much the government can spend on programs. The question is, however, how should a country deal with such limits?

After independence in 1975, the Mozambican government established a national primary health care system to reach its poor rural populations. The system was so successful that the World Health Organization cited it as a model for developing countries. A war of destabilization financed by neighboring South Africa, initiated in the early 1980s, however, targeted the health system and its workers. The system continued to function remarkably well under the extreme conditions, but Mozambique had to rely increasingly on external assistance to recover from the economic catastrophe and destruction caused largely by the war. As a result, Mozambique turned to the World Bank and the International Monetary Fund (IMF) to gain access to financing for development projects and to obtain relief from an enormous international debt burden.

As a condition for funding, the World Bank and IMF compelled Mozambique to limit total spending in specific sectors beginning in 1987. They even restricted how much the government could pay its health workers. The government has also had to pay up to US$1 million per day to service its debt to international lenders, thus diverting scarce resources it could have spent on health and education.

The World Bank, the United States Agency for International Development (USAID), and others have cited the intensifying "resource constraints"--creations, in part, of the conditions imposed by the agencies themselves on government spending--as justification for the need for a larger private health sector. These agencies have also channeled funding through international NGOs (construed as private sector charities) to serve populations made vulnerable by reduced government spending, rather than using the funds to strengthen public sector health care. As a consequence of this approach, Mozambique's post-war health sector reconstruction has witnessed the emergence of a for-profit health sector in large towns and cities, and the proliferation of hundreds of poorly coordinated foreign agency health projects scattered throughout the country.

Effects of Privatization

In Mozambique, the emergence of a private health sector has had a negative impact on the public system that serves the poor. As a result of the free market policies that international financial institutions and some bilateral (government to government) donors have pressured Mozambique to adopt, social and economic inequality has dramatically increased. A two-tiered health system has emerged in which poor people continue to seek treatment in the under-funded, understaffed, demoralized state sector while the small group of largely urban, rich elites receive services from increasingly well-endowed private clinics that have emerged in most major cities.

Public system workers become further demoralized when they see how much their private sector colleagues earn. Many poorly-paid government system workers now have to work second jobs in the private sector or treat people in their own homes to survive. Medicines and equipment frequently disappear from the public warehouses and pharmacies, then reappear in private clinics and local markets where they are sold for a profit. Some health workers, including doctors, have abandoned the public sector entirely and work full-time in private clinics. The overall effect has been the continued deterioration in the quality of public sector services and the accumulation of resources in private clinics. The private sector has thus intensified the resource constraints faced by the public system.

At the same time, the initiation of fee payments for many basic services (a practice encouraged by the World Bank and the IMF) within the public sector has produced the predictable decline in the number of people using these services. Research throughout Africa has increasingly shown that experiments in user fees, even with minimal payments, for primary health care services often lead to declining utilization. Thus, the combined emergence of private clinics and fee-for-service in the public services has deepened the marginalization experienced by many of the poor.

Effects of funding through NGOs

Major agencies such as the World Bank and USAID argued that international NGOs could provide many of the community-based health services and education that the government could no longer afford. In addition to substituting for under-funded public services, NGOs, they argued, could often reach poor communities more effectively, compassionately and efficiently than public services. As a result, many bilateral donors channeled much of their health assistance through international NGOs, some of whom implemented projects outside of the national health system. Other donors provided project-specific support to the health service, but under the control of foreign coordinators. By 1995, there were nearly 100 different NGOs and foreign agencies in-country conducting 405 such projects in the health service, nearly all with expensive expatriate staffs and independent administrative systems. The proliferation of projects led to increasing fragmentation of primary health care programs, and loss of Mozambican control over the health sector.

Coordination problems were common in most of Mozambique's provinces. As a result, conflict between international NGOs was frequent and there was often wasteful spending of resources for big projects that were unsustainable once the NGOs left. In one province, three foreign agencies working in the health sector had annual budgets of over US$1 million while the public health system had US$750,000 to cover a population of 1 million. Huge proportions of the foreign agency budgets went to administrative costs, salaries, international staff benefits, and the construction of compounds.

So many problems resulted that all the major health sector donors signed a "Code of Conduct" in 2000 in Maputo. The code emphasizes that donors should channel most aid through the national health service and allocate it in accordance with the national plan. Perhaps this is a recognition of a valuable lesson: a well-funded, centrally-planned national health system, can provide services more efficiently and cost effectively than an uncoordinated mixture of private sector actors.

There are important differences between what emerged in Mozambique in the late 1980s, and what exists currently in East Timor. Already, under the Interim Health Authority, there is a high level of coordination with international NGOs. But constant vigilance is necessary to ensure that this continues.

Learning from Mozambique

There is much for East Timor to learn from Mozambique's experience. First and foremost, East Timor should insist that it will not compromise a vision of free health care for all. Capitulating to the private health care argument will ultimately lead to an impoverished public sector, greater social inequity, and betrayal of the principles of social justice that so many died to achieve.

International NGOs, of course, have a crucial role to play during this period. East Timor desperately needs outside support to construct and maintain the health system that the population deserves. The training needs are huge and NGOs can provide a wide range of technical support to build East Timor's human resources. NGOs can bring dynamic new ideas to primary health care provision that can be integrated into the health system in a systematic and coordinated way. But the Mozambique case demonstrates that using NGOs as substitutes for government services as part of a privatization package will lead to a fragmentation of health programs and diversion of funds from a sustainable national health system. Privatization in the end will benefit a few, while diverting resources from the poor majority. Resisting privatization of health care begins by challenging the assumption that "resource constraints" are a given.

It is unlikely that East Timor will be able to sustain any of its social programs on its own for many years to come, and will have to rely on foreign aid. The major question is whether that aid will be used to eliminate resource constraints in order to build a free, strong, universal health care system, or will it be diverted to a plethora of foreign agencies and privatization schemes?

James Pfeiffer is an assistant professor of anthropology at Case Western Reserve University in Cleveland, USA. He lived in Mozambique for nearly four years conducting research and working for an international NGO in the health sector.

La'o Hamutuk, The East Timor Institute for Reconstruction Monitoring and Analysis
P.O. Box 340, Dili, East Timor (via Darwin, Australia)
Mobile: +61(408)811373; Land phone: +670(390)325-013
Email: lhproject@one.net.au
Website: http://www.etan.org/lh