1.

INTRODUCTION

1.1

Purpose and Objectives

Education inherently serves both public and private interests. It addresses public
interests by preparing the young to assume adult roles that promote civic responsibility,
embrace a common set of economic and political values, and share a common language.
Education serves private interests in promoting individual development, understanding,
and productivity that contribute to adult productivity and well being.
Levin (2001)
The function of this paper is to assist those involved with educational development to
address the pressing issue of greater participation by the private education sector; most
particularly, the paper aims to investigate the role for private education in meeting the
four main challenges that are facing education policy:
(i)
(ii)
(iii)

(iv)

to find sufficient places to meet current and future parental demand for education;
to offer a meaningful and relevant learning experience in all schools both public
and private - which will benefit all students and also have economic and
developmental significance;
to upgrade teaching and learning curricula, teacher qualifications and
performance, physical facilities, equipment, teaching and learning materials,
supervision, minimum standards, regulatory requirements, assessment,
examinations etc within reasonable affordable limits in order to support the
meaningful and relevant learning experience required by students;
to maximize the potential of all available national resources (including private
sector providers) in the most cost-efficient manner in pursuit of these policy
objectives.

This paper argues that education can be perceived as a consumer good and that the
student is the principal consumer through the parents. The key issue for the national
government is to provide the best education in the most cost-effective manner. This will
require the combined efforts of the public and private sectors. The public sector must
decide its role in this partnership (its aims and objectives should be clear and
unambiguous) and the private sector providers of education must also decide on their role
and, as they are providing a public service regulated by the government, they should
negotiate a supportive environment and an equitable basis for the partnership with the
government.
In essence the propositions that provide the framework for the approach are as follows:
(i)

To describe possible new partnerships and an enabling environment in which

responsibilities and functions for the public and private education providers are
complementary;
1

(ii)
(iii)

To suggest specific roles and responsibilities for the private sector within this new
public-private partnership;
To outline the broad parameters that need to be developed for public policy in
response to this increased private education provision, particularly with regard to
financial support and quality control.

1.2

Some Hurdles

There is a very clear division, certainly in academia, and beyond that in the policy
arena. There seems to be a sentiment that you have to be either on the growth side or on
the anti-poverty side of this debate that it is no longer possible to straddle the two. But
promoting growth doesnt necessarily have to come at the expense of the other.
Beddoes (2000)
Over the past two decades there has been an ongoing emotive debate raging between
those proponents that support the benefits of public provision against those experts that
advocate the benefits of "private" or market provision (see Colcough 1996). This debate
shall likely continue to rage until such time as we obtain a genuine test and an objective
evaluation of public-private alternatives on a large enough scale to influence policy
reform. For a number of reasons, however, this present lack of resolution is very
understandable, for some of the reasons presented below.
1.2.1

Difficulty of Definition and Meaning

Definition of Private and Public

The two means of provision - public and private - can be characterized according to the
way that they are managed and financed. In their purest forms, public provision is
managed directly by the government and the expenditures are met by tax revenues while
in private provision revenues are derived from fees and private contributions and the
providers are free to determine the type of their educational services. In fact though there
are few institutions which satisfy either of these criteria. The state usually subsidizes the
private sector through payment of costs incurred in curriculum development, inspection
and teacher training. Conversely, in some countries schools which are nominally owned
and controlled by the government receive substantial non-government funds and are
subject to non-government direction.
One international classification of education (OECD 1990) defined private education as
that provided in institutions managed by private persons but this definition covers a wide
variety of situations. Some private institutions are wholly funded by the state, others are
state aided to a wide extent while others again receive no state aid at all. Further, in any
one country, the situation may vary over time and according to the level or the type of
education.
Even though any simple distinction between the two types masks diversity within each
sector, from a policy point of view the distinction remains useful when assessing
______________________________________________________________
2

expansion of the system. Expansion through the public system implies a direct role for
the government in both finance and school management, whereas expansion through the
private sector implies a more indirect role exercised through selective targeting of public
resources for education within the parameters of a specific legal and regulatory
framework.
Definition of "Private" used in the Discussion Paper
For the purpose of this study schools are defined as "private" if the following criteria
apply:
(i)
(ii)

possession and management lies in the hands of the "owners" or managers in the
case of NGOs or religious institutions;
income and expenditure are the responsibility of the "owners" (i.e. , revenue,
primarily generated from fees, and expenditure, most particularly payment of
salaries and costs of civil works and land purchase, are the concern of the
"owners").

Private education is so varied that it is difficult to classify. The classification in Table 1

below is based on features of ownership, management and funding:
Table 1: Classification of private schools
Type
Community

Religious

Spontaneous

Origin
Some developed from missionary
schools;
The majority emerged when
communities wished to complement
insufficient provision of public
education
Developed for historical reasons, often
appearing before the arrival of public
education
Arose in specific learning conditions to
meet particular demands of the rural
and urban poor

Arose as a result of
diversification/unmet demand;
Usually, but not always, urban based
serving the middle/upper class;
Volume of the fee payment varies
considerably
Source: Adapted from Kitaev 1999
Profit making

Context
These schools are normally registered
by public authorities; regulated under
public legislation and receiving public
subsidies
These schools are normally registered
by public authorities; regulated under
public legislation and receiving public
subsidies
Normally not approved or registered
and they do not receive public funding;
funds accrued from minimal fees levied
by the community
Conformity to registration process
varies; with the higher range of schools
being the most likely candidates for
adherence to the system

______________________________________________________________
3

Definition of Quality
There are two further reasons for pursuing an activist educational policy besides the
attainment of positive social externalities: (i) efficiency obtaining the greatest possible
output from a given amount of expenditure; and (ii) equity political pressures mount for
equal access for the lower income groups (James 1996). Yet the goals of quality,
efficiency, access and quantity conflict in that an increase in quantity or enrolment may
be at variance with the goal of enhancing quality. Indeed this conflict has been
exemplified over the past decade as governments have embarked upon the "Holy Grail"
of Universal Primary Education increased access and quantity but arguably at the
expense of enhanced quality. Thus different stakeholders have differing interpretations
regarding both the production and valuation of educational quality and the trade off
between quality enhancement and access, quantity and cost.
1.2.2

Difficulty of Measurement

The Externalities from Schooling

It is widely argued that basic education should be subsidized on the basis of positive
social externalities. Three such externalities are that: (i) an educated workforce is vital
to a successful democracy; (ii) an educated workforce is critical for the adoption of a
trained workforce; and (iii) widespread education is necessary to reduce crime and social
disruption. Yet it is extremely difficult to quantify the importance of these social benefits
and the central question surely is whether there are externalities associated with education
above the level that parents would choose in a private market (Poterba 1996).
Accessing the Means of Measurement
"Education is a public good to the extent that its effects are consumed collectively by the
society and, at the same time, it is a private good when it directly benefits an individual"
Peano (1996)
This complexity of definition and the difficulty of measuring private benefits to the
individual against public benefits to society at large is further compounded by the fact
that the circumstances facing individual governments vary widely. Hence it is not
possible to identify detailed policy implications which are universally recognizable.
In summary, near universal free primary education, rapid population growth and an
historic limitation on the availability of places within the public sector, have placed
immense demand for expansion and improved quality of provision. This pressure is
currently being released through an expansion of private schools and increase in
community schools enrolments. But actual evidence with regard to the extent of this
demand and the extent that it is being met by the private sector is difficult to ascertain not
least because there are insufficient assessment studies being commissioned and a lack of
education management information systems to record and monitor demand and supply.
______________________________________________________________
4

1.3

An Overview of the Partnership Approach

1.3.1

Some Key Questions

Since the 1980s policy makers have increasingly recognized that the traditional methods
of education finance and management were unable to deliver quality basic education to
all children and that radical changes were needed. Two responses to this excess
demand and the need for enhanced quality of provision have been an increase in
emphasis on participation in education from the private sector and a push for the
establishment of public private partnerships. Yet there is still clearly a need for:
(i)
(ii)
(iii)

(iv)

a detailed assessment of the progress of implementation of projects that entail

development of private sector education (see Annex 3(a) for examples of World
Bank education projects with private sector components);
rigorous debate regarding what measures can be introduced in terms of
tuition/user fees, student loans and income generation;
greater clarity as to what the anticipated impact might be and what precautions are
necessary in order to guarantee the access of low-income families to education if
such measures were introduced. Education has undoubtedly become a marketable
product but what does that entail in terms of implications for equity and
efficiency? And
as the partnership phenomenon takes off, consideration of the tensions and pitfalls
involved. Genuine partnership involves not only different actors uniting to pursue
a common goal, but also mutual respect, transparency, balanced power relations
and the equitable distribution of benefits.

Various forms of partnership certainly exist, but there is a lack of a common analytical
framework for understanding partnerships. How the public and private sectors interact
within the education sector and how such interactions impact upon access to education
and on the quality and relevance of such services are poorly understood. A major aim of
this paper in Chapter 4 is to look at means whereby the respective strengths of the public
and private sectors can be maximized while their weaknesses are minimized. In order to
fully understand the possibilities and conditions for partnership, policymakers need to
have information pertaining to the legal and regulatory frameworks as well as the benefits
and the costs that partnership may involve. To that end, this paper aims to address four
main questions:
(i)
(ii)
(iii)
(iv)

Are partnerships desirable?

What legal, policy and regulatory frameworks are necessary to involve the private
sector effectively?
What are the main constraints to establishing a public-private partnership?
What are the most appropriate roles for the government, the lending agencies and
the private sector in enabling environments that support the partnership approach?

______________________________________________________________
5

1.3.2

Some Key Issues

The current policy message with regard to Public-Private Partnerships as a development

strategy within the education sector can probably best be summed up as follows a
worthwhile strategy that requires further exploration but for which there are still some
serious issues and obstacles to be overcome, such as those outlined in Table 2.
Table 2: Issues and Obstacles to Public-Private Partnership
Issues
The role of government in education
development
Problem:
Education is a public good, hence
exclusive reliance on market or community
initiatives will not result in social
efficiency and equity
Linking partnerships with challenges in
education
Problem:
Current partnerships are not clearly linked
with resolving the challenges faced by the
education sector.
Legal and regulatory framework
Problem:
There is a lack of a well-defined
governance structure allowing for a proper
distribution of responsibilities to all
players:
Issues of trust
Problem:
Lack of trust and mechanisms upon which
to build such trust.
Accountability
Problem:
The public sector as the main provider of
services is not made rigorously accountable
for the quality and equity of its service
provision; while the private sector tends to
feel responsibility primarily for their
organizational goals, be they for profit or
otherwise.

Problems and Needs

Needed:
The creation of an enabling environment;
The establishment of an appropriate mechanism to
control quality;
Development of systems that can ensure that there
is transparency and accountability for the delivery
of the services.
Needed:
Clarity about the objectives;
Sharing of benefits as well as responsibilities;
Transparency in terms of who is doing what with
whom and with what effect.
Needed:
A clear legislative framework specifying the roles
of both sectors, their relationships and the areas of
cooperation;
Definition of the roles of the public sector at the
various levels (central provincial institutional);
Definition of the roles of private for profits and
the NGO/communities.
Needed:
Conduits between the two sides that support
dialogue and ongoing debate (within the private
sector intra or among all its members and inter
between the public sector and the two components
of the private sector, the for and not for profit arms)
Needed:
Means of distributing information with regard to
institutional performance of all secondary schools;
Mechanisms that enable greater involvement of the
parents in a childs education

______________________________________________________________
6

II.

THE PRIVATE EDUCATION MARKET IN DEVELOPING COUNTRIES

There is a range of ways in which the private sector can participate in the education
sector in developing countries. These include the traditional form of private
participation namely the delivery of education services through privately owned
schools and higher education institutions. But there are a number of other ways that the
private sector participates in education in both developed and developing countries.
These include:
-

private sector management and operation of publicly owned schools under

contract to the state (i.e., so-called contract schools);
catering, cleaning, security and recruitment;
providing scholarships or vouchers, whether publicly or privately financed, for
students to attend private schools; and
providing inputs into the educational process, including curriculum materials and
educational building infrastructure such as school buildings.

These different modes of private participation in education are discussed in turn and are
summarised in Table 3. The focus of this section, and the toolkit in general, is on the
delivery, management and financing of education, rather than on the provision of inputs.
Table 3: Summary of Private Participation in Education
Mechanism
Delivery of Education by
Private Providers
Private Operation of Public
Schools
Private Sector Supply of
Inputs into Education
Process

Education Vouchers and

Scholarships

2.1

Private Sector Involvement

Private schools and higher education institutions
Tutorial colleges
Education internet portals
Private tutoring services
Public schools operated by private firms or
organisations under contract to a public agency
Supply textbooks, curriculum and other learning
materials to public and private schools
Build and operate educational infrastructure such as
student hostels
Supply associated services to schools and higher
education institutions, such as school review and
inspection, health care services and canteen services
Governments or private sector
individuals/organisations provide vouchers or
scholarships to students to attend private schools.

Education Delivery by Private Providers

The first, and most common, avenue for private participation in education is through the
delivery of education by private providers. These can include "formal" private schools
and higher education institutions, so-called tutorial colleges that prepare students for
______________________________________________________________
7

national exams, the supply of individual tutoring services or the provision of tuition
through education internet portals, and training colleges (e.g., secretarial, languages and
computer learning.
2.1.1

Size

While it is true that the provision of education in most countries is predominantly public,
private sector participation in education is significant and growing in many countries (see
Annex 3(b) for additional examples collated by EdInvest www.worldbank.org/edinvest).
At some education levels, the private sector dominates the education market. This is
especially true at the secondary and higher education levels. For example, the private
sector makes up:
-

nearly one-fifth of all enrolments (36 percent of secondary school enrolments and
100 percent of professional training enrolments) in Cte dIvoire (EdInvest 1999);
over one-fifth of all enrolments (28 percent of junior secondary enrolments and 77
percent of senior secondary enrolments) in The Gambia (EdInvest 1999)
28 percent of private school enrolments in Cameroon (57 percent of enrolments in
Douala, the financial capital of Cameroon (LaRoque 2000);
75 percent of higher education enrolments in the Philippines; and
57 percent of universities in Argentina (The Economist 2000).

2.1.2

Nature

The private education sectors in developing countries are diverse. Private institutions can
differ along a number of dimensions including the client groups they serve (e.g., rich or
poor), whether they are registered or unregistered, whether they are religious or secular,
whether they are aided or unaided, whether they are for-profit or not-for-profit, and the
quality of tuition and infrastructure. Because of the diverse nature of the private sector, it
is difficult to provide a general description of the private sector in individual countries.
Private schools and higher education institutions may be either aided or unaided. Aided
schools are government subsidised. Unaided schools are not. The latter must finance
their operations entirely out of fee and other non-government revenues. Private schools
in many countries, including China and Ghana, do not provide assistance to private
schools (LaRoque and Jacobsen 2000). However, a number of other countries, in both
the developed and developing world, do provide some assistance to private education
institutions. Often this assistance is less than that provided to public institutions.
The education market in developing countries is characterised by a wide range of types of
education providers. Traditionally, not-for-profit NGOs and churches have played a
significant and pioneering role in the delivery of education. For example, in 1997/98,
religious schools made up 23 percent of the private school market in Senegal and 45
percent of the private market in Cameroon. Religious-affiliated institutions are the
______________________________________________________________
8

driving force behind the rapidly expanding higher education sector in Ghana. Box 1
provides background details pertaining to one such private institution in the Gambia.
Box 1 - The Institute for Continuing Education, Kanifing South,
The Gambia
The Institute for Continuing Education (ICE), located in Kanifing South in
The Gambia, West Africa is a non-exclusive private junior and senior
secondary school catering mostly to low-income students. ICE was
established to meet a gap in senior secondary school provision - at the time
there were only three public or grant-aided senior secondary schools in
Banjul.
ICE is a legal partnership. It was set up by retired public school principals
and has a Board of Directors made up of the five investors who have put
capital into the school. It has financed its expansion through significant
borrowing from a local bank. Annual fees are $US223 in the Senior School
and $US182 in the Junior School. Students also pay other fees on top of that
(eg, examination fees).
There are currently 1,000 students in the senior school and 600 in the junior
school. ICE has the same academic focus as other schools - students write
the same exams as those in other private schools.

Source: LaRoque (1999)

Recent years have seen the emergence of for-profit education providers in developed and
developing countries. These can be sole proprietorships, multi-school chains (where one
proprietor owns several schools) or franchises. There are many examples of such forprofit institutions in developed countries, including Edison Schools, Advantage Schools,
Nobel Learning Communities and the University of Phoenix. There are also increasing
numbers of such institutions in developing countries. Examples include:
-

Centro Escolar University and Far Eastern University in the Philippines, are both
large private higher education institutions listed on the Philippine Stock
Exchange;
Groupe Scolaire Loko in Abidjan, Cte dIvoire is a for-profit company that owns
six educational institutions, with over 10,000 students. These range from schools
offering general secondary education to a school for optometrists and opticians;
there are nine private post-secondary colleges operating in Oman, two of which
are listed on the Muscat Securities Market;
Datus Complex Schools is a for-profit company that owns four secondary schools
in Accra and the Central Region of Ghana;
Groupe Pigier in Abidjan, Cte dIvoire is a franchise of a long-established Paris
firm, offering technical and professional training;

______________________________________________________________
9

South Ocean Schools in China, which operates a chain of boarding schools in

several large provincial Chinese centres; and
One of the largest for-profit providers on a global scale is based in India - NIIT
(The National Institute for Information Technology) - which operates franchises
in some 38 countries worldwide.

2.1.3 Growth
In many developing countries, enrolments in private schools and higher education
institutions are growing quickly. For example:
-

2.2

private school enrolments in The Gambia grew by nearly 50 percent between

1993 and 1996. Over the same period, the number of students at the primary and
junior secondary school levels grew by 40 percent and 120 percent respectively;
the proportion of students at private tertiary institutions in Cte dIvoire grew
from 3 percent to 23 percent 1991/92 and 1995/96. Over that same period, the
proportion of students at private secondary schools in Cte dIvoire grew from 27
percent to over 36 percent;
private school enrolments in Senegal grew by over 75 percent between 1987/88
and 1997/98. Over the same period, enrolments in private primary schools grew
by over 120 percent;
private school enrolments in Ghana rose from 76,865 to 354,787 an increase of
362 percent between 1986/87 and 1996/97. This led to a more than tripling in
the share of private school enrolments from 3.2 percent to 10.9 percent; and
private school enrolments in Cameroon grew by over 15 percent between 1994/95
and 1998/99, above the 10 percent growth rate for public school enrolments.
Contract Schools

The previous section discussed the "traditional" form of private sector participation in
education, where education is delivered by private schools, higher education institutions
or other means. However, private sector involvement in the education sector can go well
beyond this traditional mode of involvement.
One area of increasing private participation is for private firms or organisations to operate
public schools under a management contract with the local school board. These schools
remain publicly owned and publicly funded, but are managed by a private sector operator
in return for a management fee. As part of the contract, the firm or organisation is
generally required to meet specific benchmarks in areas such as school attendance,
student performance and community involvement.
There are a number of examples of "contract schools". Edison Schools is a publicly
listed company that operates over 100 public schools in the United States through
contracts with various local school boards. There are many international variants on the
______________________________________________________________
10

contract school model. These include Transformed Schools which operate in the Haidian
District of Beijing, China, the F y Alegra network of schools in Latin America (see
Box 2) and Sabis Schools, which operates over 20 schools in the Middle East, the United
Kingdom and the United States (LaRoque and Jacobsen 2000).

Box 2 - The F y Alegra Network of Schools

F y Alegra (FyA) was established in Venezuela in 1955 by the
Jesuits, and now has schools in 14 countries, with over 1 million
students and 22,000 staff. FyA schools offer formal education, as
well as technical training ranging from farming to secretarial
skills. The majority of students at these schools are from poor
families. The government provides some funding to FyA schools
- to meet either operating or set-up costs.
Recent evaluations of these schools have suggested that
these schools cost less and have better results than public
schools located in similar neighborhoods.

(Visit http://www.feyalegria.org for additional information)

2.3

Vouchers and Scholarships

Vouchers or scholarships are a fourth way in which the private sector can participate in
the education sector. This participation can be either direct or indirect. First, private
individuals or organisations can participate directly in education by financing vouchers or
scholarships for students to attend private schools. There are a number of examples of
such private financing schemes in the United States. Programmes operated by the CEO
America Foundation and the Childrens Scholarship Fund in the United States are both
examples of private sector financed voucher schemes (of course, even publicly financed
voucher schemes are in reality private as they are financed by taxes and revenues from
the private sector). Second, vouchers or scholarships, whether publicly or privately
financed, can encourage private delivery of education by financing students to attend
private schools and higher education institutions. Vouchers can stimulate the growth of
the private education sector by making private schooling affordable even for those on
low-incomes.
Generally speaking, vouchers are payments that a public entity gives directly to students
that may be redeemed to help offset all or part of the cost of tuition at a school of their
choice. Vouchers come in a variety of forms. They may cover the full cost of tuition at a
school or they may cover only a part - with students paying the rest. The voucher may be
limited to covering all or part of tuition fees only or they may also cover other costs such
as transportation, uniforms, books, etc. Vouchers may be made available to all students
______________________________________________________________
11

or they may be targeted toward specific groups for example, girls in rural areas,
students from poor families, etc. In most cases, vouchers are not paid directly to
students. Rather, parents are given the freedom to choose the school and the school
receives funding in accordance with the number of enrolments.
Box 3 Government Sponsorship of Students in
Private Schools in Cte dIvoire

The number of places available in public schools and training institutions

in Cte dIvoire is insufficient to meet student demand. In addition, gross
and net enrolment ratios are low, even by Sub-Saharan standards.
To help bridge some of the gap in the supply of places, the government has
introduced a programme of sponsoring public students to attend private
institutions. Under the programme, private schools receive a payment for
each public student placed at their institution. The government sponsors
students in lower and upper secondary and in professional and technical
training. Students can be sponsored to attend both religious and secular
schools.
The payment amount varies with the students educational level: US$200
per year for lower secondary students, and $US233 per year for upper
secondary students. The placement of students depends in part of the
educational performance of the school. Only those schools that are
chartered are eligible to take on sponsored students. In 1997 the
government paid out some $US10.3 million to sponsor over 160,000
students at the school level. Over 40 percent of students in private schools
are sponsored under this programme.

A number of developing countries are making use of innovative school financing

mechanisms such as vouchers or subsidies to private schools that are linked to student
enrolments see (see Table 4). These include Indonesia, Senegal and El Salvador and
Cte dIvoire (see Box 3). In the United States, a number of small publicly funded
voucher schemes are operating with Cleveland, Milwaukee and the State of Florida
being the most commonly cited examples. Until recently, New Zealand operated the
Targeted Individual Entitlement scheme, which provided publicly funded vouchers for
poor students to attend private schools. Appendix 4 provides detailed examples of
voucher schemes in the Netherlands and Colombia.
Patrinos and Ariasingam (1997) review World Bank education projects that became
active during 1993 to 1996 and that included demand-side financing components such as
stipends, community financing, targeted bursaries, vouchers, student loans, community
grants, and public assistance to private schools.

______________________________________________________________
12

Table 4 - Voucher and Voucher-like Schemes in Developing countries.

Country
Mechanism
Bangladesh
Stipends for girls to attend public or private schools
Belize
Government partnerships with churches to share costs
Bolivia
Private management (church-based organisation) of public schools
Brazil
Matching grants, capitation grants, scholarships for poor students
Botswana
Matching-grant schemes
Chad
Community financing
Chile
Voucher system for poor students, capitation grants for all students
China
Matching-grant schemes, targeted bursary for poor and minority
children
Colombia
Targeted voucher system
Cte dIvoire
Government sponsorship of students at private institutions
Dominican Republic
Assistance to private schools serving low-income students
El Salvador
School choice for poor
Gambia
Targeted scholarships, capitation grants for all students
Guatemala
Targeted stipends for girls in 13 communities
Ghana
Matching-grant schemes
India
Matching-grant schemes and numerous incentives
Indonesia
Targeted scholarships for junior secondary school students
Jamaica
Student loans
Kenya
Voucher for informal sector workers for short-term skill upgrading
courses
Lesotho
Government partnership with churches to share costs
Mauritius
Matching-grant schemes
Mexico
Targeted bursary for poor and indigenous populations
Myanmar
Community-sponsored schools
Morocco
Scholarships for rural girls
Mozambique
Scholarships for rural girls
Pakistan
Community scholarships, subsidies to private schools serving rural
girls
Senegal
Scholarships for students to attend private and public schools in
Dakar
Tanzania
Matching-grant schemes, targeted bursaries for secondary school
girls
Thailand
Bicycles for poor students in rural areas
Zimbabwe
Per capita grants
Source: Patrinos (2000)

2.4

Supply of Educational Inputs

The private sector may also be involved in education through the supply of educational
inputs used by both public and private schools and higher education institutions. These
include:
the supply of textbooks, curriculum and other learning materials to public and
private schools and higher education institutions;
______________________________________________________________
13

building and operating educational infrastructure such as student hostels; and

the delivery of associated services to schools and higher education institutions,
such as school review and inspections, health care services and canteen services.

There are a number of examples of the private sector supplying inputs and associated
services to schools and higher education institutions. For example, public universities in
China have been directed to contract out non-core services. Many schools allow groups
of local women to provide canteen services for the school. The University of Ghana
(Legon) has made increasing use of the private sector to finance and operate student
hostels.

______________________________________________________________
14

III.

THE ROLE OF GOVERNMENT IN EDUCATION: A CONCEPTUAL

FRAMEWORK

This section provides a brief overview of a conceptual framework for considering the role
of government and the private sector in education. This is particularly important as
context for considering the regulatory framework for private education. The objectives
of governments in education are generally to ensure that:

families with varying financial resources and varying educational needs have access
to education (access or equity concerns);
appropriate quality standards are attained in relation to teaching, the school
environment, child safety, curriculum, and educational outcomes (quality concerns);
sound educational decisions are made and that parents act in the best interests of their
children (agency concerns); and
public resources are carefully used so that the broad social and economic benefits of
having a well educated community are realized (social and economic concerns).

Market imperfections in education may arise because of information asymmetries, capital

market constraints or the existence of externalities (Poterba 1996). However, identifying
a potential role for government where there are possible market imperfections says
nothing about the form that intervention should take, or indeed whether intervention itself
will deliver an outcome superior to that provided by the market.
3.1
Policy Instruments
Governments have a range of policy tools or instruments available to help them meet
these objectives. At a very broad level, there are four principal policy instruments
available to governments:

Funding. Governments can purchase goods and services for people or subsidize a
service or activity. This could include paying living allowances to students,
subsidizing a schools operating expenditures or providing vouchers to students to
attend public and private schools;
Ownership. Governments can own the providers of services. For example,
governments generally own the majority of schools and most universities;
Regulation. Governments can mandate or require firms or individuals to do or not
do certain things. This can include putting in place health and safety requirements for
schools, limiting fees that can be charged by schools and requiring particular
governance structures for schools; and
Information. The provision of information is a policy instrument available to the
government when the private sector does not provide adequate information to allow
for informed consumer choice.

______________________________________________________________
15

The key task for policy makers in designing the regulatory framework is to determine the
best "mix" of policy instruments to use to address any identified market failures. For
example, Box 4 provides three problems and possible responses.
Box 4: Indicative Problems and Responses
Problem
Students cannot borrow to finance their
education because of capital market
imperfections
The poor cannot afford to access education
There is a lack of information available to
consumers in the education market

Appropriate Response
Establish a student loans scheme that would
provide funds to students to finance their
education
Provide targeted assistance to the poor to help
cover the costs of education
Require schools to disclose information to
parents

The key point is that the policy solutions or "regulatory mix" advanced should address
the barriers that must be overcome. Further, the mix of policy instruments used in one
sector might be quite different from that used in another. In some cases, governments
may use only one or two policy instruments. In other cases, they may use all four. This
can be illustrated by comparing two areas of social policy - education and income
support. In education, most governments use all four instruments to help achieve their
objectives - they subsidize schools, they impose mandates on schools and students, they
own schools and they publicize details on performance. Income support policy is
different. There, most governments will use only two instruments to achieve their
objectives they subsidize people to purchase food (by providing welfare benefits) and
they regulate food safety standards. Governments generally do not own the provider of
services - grocery stores or restaurants. Provision is ordinarily carried out by the private
sector.
Regulatory reform is not just about deregulation. It is about regulating better. Its goal is
to achieve the right "regulatory mix." This can involve softening some aspects of the
regulatory framework, but strengthening others. Indeed, less reliance on one policy
instrument may require a strengthening of other instruments to ensure that objectives
continue to be met. For example, allowing greater entry of private education providers
(i.e., moving away from state provision) may require greater reliance on regulation as a
way of maintaining standards.
The funding, ownership and regulatory interventions of government affect the choices of
both students and education institutes about the nature, type and quality of the education
they seek and provide. Poorly designed interventions may reduce overall welfare if they
result in wasted resources or education that does not best meet the needs of students and
can be unfair if they penalize some students and institutions but benefit others.

______________________________________________________________
16

3.2

Ownership

This section sets out common arguments advanced for government ownership of
education institutions, focusing in particular on whether the objectives sought by
ownership can be delivered more effectively through funding and regulatory instruments.
One reason that is often put forward for government provision of education is that profitmaking organizations may put profits ahead of quality and access to services. However,
government ownership is not a necessary instrument to overcome the perceived problems
of profit maximization. Privately owned, non-profit education organizations could
deliver service and access, but are subject to the same problems of productive
inefficiency that characterizes public non-profit provision (James 1991 and 1994).
Another possible rationale is that certain types of education are capital intensive,
requiring a critical mass of investment in land, libraries and classrooms, for example, and
that the private sector is unwilling to make that investment. This might be an historical
explanation for government ownership. Imperfections in financial markets might also
constrain access to capital by the private sector. In addition, other interventions available
to government including loans and guarantees can help address these issues without
requiring government ownership of educational infrastructure.
In other words, the government could provide or guarantee loans to the private education
sector. In some cases, access to capital is restricted because government regulations
(such as limits on profit-making) make financial institutions wary of lending. In these
cases a less restrictive regulatory environment could increase access to private capital and
reduce the need to the state to finance schools by owning the physical infrastructure.
A further explanation for government ownership of schools is the transaction costs facing
a community in responding to an underlying demand for education. Even where a
community wants to have its children educated, it can face hurdles in organizing itself to
obtain a building, hire a teacher and determine what should be taught. The difficulties
are compounded in remote, poor communities.
3.3

Funding

Concerns about access typically stem from the idea that education is costly and that
students and their families may not have the necessary resources to purchase it.
It is well recognized that education is an investment that generates a future stream of
benefits, both monetary and non-monetary, for students. It also confers wider social
benefits. An important policy question arises immediately: what proportion of the overall
costs of education (which also delivers public benefits) should be paid for by the student?
There is considerable disagreement on this point, largely because it is hard to determine
the exact mix of these private and public benefits. However, there is general agreement
that the public benefits are greatest at earlier stages of education and lesser at later stages.
This pattern of benefits suggests that most government funding should be directed at
______________________________________________________________
17

early childhood and primary education. Less government funding should be directed at
the secondary and higher education levels, where students and their parents could be
expected to pay a greater proportion since they benefit more. Yet this pattern is almost
exactly the opposite of how governments actually fund education.
Unlike other investments however, it can be hard for students to borrow privately in order
to fund their education because capital markets require collateral. The imperfections of
capital markets for education therefore create a potential role for the state in overcoming
these imperfections though loans or loan guarantees. There is considerable variation in
the way governments worldwide fund education, and there are a number of significant
issues to be addressed since Government policy on the funding of education can have
profound effects on the decisions of students, as on the decisions and management of
education providers themselves. Box 5 summarizes four of the main questions regarding
expenditure.
Box 5: The principal questions regarding government expenditure
the appropriate level of public funding
whether public funding is targeted or universally available (targeting);
whether public funding is directed at students or institutions (demand side versus
supply side) and
whether public funding is available at public or private institutions (neutrality)
3.3.1

Targeting

The universal provision of funding is generally seen as equitable, but can in fact be
regressive (i.e., unfair to the poor) because students from better off households can "topup" the schools resources through donations or fees. Targeted funding can be directed at
students whose needs are highest by shifting resources from those who are able to
contribute to their own education. If funding is directed only at government institutions,
then students from poor homes are typically denied access to private education, since
private providers must raise their own capital and recoup their investment through fees
that the poor may not be able to afford. The effects of the lack of choice are exacerbated
when public schools offer poor quality schooling.
3.3.2

Demand-Side versus Supply-Side Financing

One of the policy choices government has is whether to link resourcing to schools or to
individual students. Resourcing institutions rather than students provides the government
with a very direct and administratively straightforward mechanism for influencing the
level of resources used in the sector. Resourcing the students, however, has other
desirable effects in that it:

permits precise targeting so that resourcing can more accurately reflect the diversity
of student circumstances;

______________________________________________________________
18

enhances the bargaining power of parents since schools know that failure to deliver
on student needs directly translates into lower resourcing; and
encourages schools to be responsive to the needs of students and accountable to
parents.

Some examples of such mechanisms employed in countries throughout the world are
provided in Table 5.:
Table 5: Selected Demand-Side Financing Examples in Developing Countries
Mechanism

Country Examples

Public stipend/scholarship

Bangladesh, Indonesia, Guatemala, Mozambique, Pakistan

Community financing

Chad, El Salvador, Myanmar, Pakistan

Targeted bursaries

China, Colombia, Mexico, Tanzania

Vouchers

Chile, Colombia, Cte dIvoire, Kenya

Public subsidies to private schools

Belize, Czech Rep., Dominican Rep., Lesotho

Community grants

Bangladesh, Brazil, Pakistan

Matching grants

Botswana, China, India, Tanzania

Source: Vawda (2000)

3.3.3

Neutrality

Another design choice is how different types of provider are resourced. Funding can be
directed at either government institutions only, or at government and private institutions.
Funding directed only at government institutions has a number of drawbacks. In
particular, it:

reduces the choices available to students, especially poor students and implies that
choice is exercised most actively by better-off families;
forces private providers to target students who can afford fees; and
insulates government institutions from private sector competition.

More neutral funding directed at both private and government providers allows a range of
provider types to emerge to meet diverse needs of students, enhances equity by allowing
private providers to serve poorer students and enhances student choice. It can also induce
greater efficiency and quality through competition.

______________________________________________________________
19

3.4

Regulation

The regulatory framework for education sets the overall environment in which parents,
students, teachers, schools, higher educational institutions and the government itself will
operate. It represents, in essence, the rules of the game for the various stakeholders in
the education sector.
Box 6: The Regulatory Framework Defined
The term regulatory framework refers to the set of tools or instruments that the government uses
to influence the actions of individuals and firms involved in the education sector and the actions
of the government itself. The definition includes the rules that govern:
how providers are established;
the level and manner in which providers are resourced;
the taxation and customs treatment of providers;
how providers are governed and managed;
the operational flexibility that providers have;
information disclosure requirements on providers;
regulation of the teacher labor market, including teacher registration and contracting
arrangements; and
the process of review and quality assurance of providers.

Regulation of the quality and content of education is often undertaken by the state. Such
regulation can be seen as arising from a need to protect the interests of students and to
protect the interests of taxpayers where the state owns educational institutions or provides
funding.
Table 6: The Advantages, Disadvantages and Difficulties Inherent in Regulation
Advantages
Allows the government to explicitly
set out the objectives for education
Enables the government to allocate
funding
Allows the government to allocate
rights and obligations
Provides the legal framework for
enforcement

Disadvantages and Difficulties

Unable to address issues of affordability
Unable to ensure that the wider benefits of education are
necessarily attained
Difficulty of obtaining information re inputs (the number
of classrooms, facilities etc) and outputs (quality of
education)
Inability to estimate the compliance costs of regulation

In summary, regulation and rule setting by the government need to be considered with a
view to the following possibilities:
(i)

Rule setting by government may discourage the development of more effective

mechanisms for allocating rights and responsibilities. For instance, in some
situations private agreements between parties might be better suited to creating
mutually beneficial solutions than centralized rule making.

______________________________________________________________
20

(ii)

Regulation might have unintended consequences by altering the incentives facing

schools and parents. For instance, schools may comply with the regulation, but
fail to provide an adequate standard of education for the students.

(iii)

Mandatory regulations may constrain rather than enhance the management and
performance of education since the regulations may prevent educational
institutions from meeting the needs of students in ways that best serve their
interests. Also, they may prevent schools and universities from responding to the
changing needs of students over time.

(iv)

Finally, regulation can have a profound influence on private providers of

education. Even regulation that is apparently neutral between government and
private providers, such as requirements for teacher qualifications and pay, can be
discriminatory where private providers must face market forces from which state
providers are insulated.

The key elements of the Regulatory Framework are provided in Table 7.

______________________________________________________________
21

Table 7 Key Elements of the Regulatory Framework for Private Education

School Year/Hours of Operation
Education Policy

Government education policy objectives

Role of the private sector
Relative roles of central and state/local
government

Governing Legislation

General and private sector

Central and local levels
General and education specific
legislation

Regulatory Authority

Responsible department(s)
Central and local authorities
responsibility
Private sector regulatory authority
Entry and Exit of Providers

Criteria for entry

Status of institutions registered,
chartered, etc
Decision rights i.e. who has right to
apply, who decides
Link between status and funding
Length of approval
Same rules for public/ private
Criteria for exit, powers to close

Flexible/fixed centrally or locally

determined?
Who sets
Length
Same for public/private institutions?
Teachers/Industrial Relations

Employment contract arrangements

Teacher registration/qualification
requirements
Who authorises or registers
Same regulations for public/private
Foreigners
Salary levels
Performance pay
Tenure

Tuition Fees and Other Charges

State and private fee levels

Nature of fee structures (e.g.,
establishment fees, annual fees)
Price controls, legal limits, who limits,
why, how controlled
Differences between tertiary and schools
Curriculum

Compulsory some levels or all

Flexibility to vary?
Other curricula allowed under what
circumstances, foreign curricula allowed
Approval process, if any
Same rules for public/private

______________________________________________________________
22

Assessment/Qualifications

Compulsory Schooling Age

Common exams
State/private run exams
Differences between state/private exams
Other assessment allowed
Qualifications system
Foreign qualifications allowed
Foreign recognition issues
Same qualifications for public/ private
Quality assurance/review

Age of entry to school

Age of exit from school

Student Selection

School zones
Quotas or geographical enrolment
restrictions
How students selected (e.g., exams)

Public Resourcing

Accountability Mechanisms

Cash and in-kind subsidies:

- operating subsidies
- subsidies for teacher salaries
- free or subsidised land and buildings

How institutions are accountable to

students, shareholders, parents,
government
Reporting requirements (educational,
financial)

- free teacher training, curriculum materials,

etc
Differences by level of education
Legal basis for subsidies legislation,
regulation, policy
Public/private differences
Criteria for payment
Timeliness of payments

Taxation/Duties

Student Finance

Broader Investment Environment

Allowances paid to students

Student loan schemes
Voucher and scholarship programmes
Eligibility, assistance levels, criteria
What education levels
Does assistance apply to both foreign and
domestic study

General tax and duty system, including

rates and general tax and duty
exemptions
Education specific tax and duty
exemptions
Tax write-offs for tuition fees for parents

Investment environment (investment

incentives, finance markets, same rules
for foreign versus domestic investors)
Existence of investment promotion
agency
Labour environment (labour regulation,
wage laws, social security arrangements,
immigration policy)
Legal environment (company law, law
of trust/foundations)
Protection for intellectual capital

______________________________________________________________
23

3.5

Information Provision

Information is essential to the functioning of any market. Educational institutions use a

range of mechanisms to assure potential students and employers of past students about
the quality of the education they provide. Parents and potential students have an
incentive to obtain information about the quality of the institution, and potential
employers have an incentive to find out the level of education of potential employees.
The institution also has an incentive to provide information about the quality of the
services it provides in order to attract and retain students.
With large numbers of providers of education services the costs of obtaining information
can be significant. Educational institutions have more and better information about the
quality of their services than students or employers, and so it is cost-effective for them to
signal their quality to potential users of their services.
Educational institutions invest in branding by developing a reputation for providing
educational services of a certain type and quality. Investments in reputation, branding
and goodwill are all means of providing information about the quality of education to
potential buyers, and are common in other areas of professional services. These tangible
activities are proxies for the unobservable quality of the education on offer. Chains of
schools can economize on branding costs.
Independent organizations can provide information about educational service quality as
they do for other services. However, the multidimensional nature of education and the
diverse needs of students may make it difficult to provide a single measure of quality,
such as a star rating system. Nevertheless, private firms do provide comprehensive
information on the quality of higher education in countries such as Canada, the United
States and Australia. However, assembling a comprehensive database for providing this
information can be costly and time-consuming for private providers. There is a potential
role for government in the provision of information to students, parents and employers on
the quality of education providers where the market fails to do so. For example, the
Education Review Office in New Zealand reviews the performance of public and private
schools and provides information to both regulators and the general public.

______________________________________________________________
24

IV.

THE PUBLIC-PRIVATE PARTNERSHIP CONCEPTUAL ISSUES

4.1

Defining the Partnership

"Privatization and the increase of private-public partnerships signal not a decline of one
sector relative to another but rather a reassumption of service responsibilities by local,
community-based entities, acting in concert with the state and with the private sector."
Linder and Rosenau (2000)
Linder (2000) suggests that the public-private partnership movement in the 1980s
endorsed the existence of a clear boundary separating the two sectors. In essence the
partnership was really a derivative of the privatization movement in which public sales,
procurement contracts and divestiture occurred in order to discipline the provision of
services with competitive market pressures.
Two "neo" ideologies have played a central role in defining "a partnership" between the
two sectors: for the liberal, the public-private partnership supports a commitment to the
market as the source of social order, for the conservative an endorsement to the market is
a means whereby public sector responsibility can be devolved and decentralized.
While recognizing that the concept of the partnership itself displays great diversity and it
remains very difficult to provide a specific technical or programmatic definition, the
partnership in this paper is advocated as follows:
-

To be the formation of cooperative relationships between government, profitmaking firms, and non-profit private organizations to fulfill the function of
providing services where the governments are unable to meet an increased
demand;
It is a means of institutionalizing flexible and collaborative arrangements whereby
private and public provision of goods and services are not viewed as merely
competing alternatives locked in interminable conflict;
It is not a means for turning responsibility entirely over to the private sector, but
rather it is a mechanism for enabling critical objectives to be met in collaboration
that could certainly not be met by either partner on their own;
It involves a sharing of responsibility and financial risk for both partners; and
Partnerships are complex organizations and each involves different levels and
types of conflict of interest and different ethical responsibilities.

"Collaborative activities among interested groups, based on a mutual recognition of

respective strengths and weaknesses, working towards common agreed objectives
developed through effective and timely communication."
ADBI (2000)
The partnership therefore exhibits the following characteristics:
______________________________________________________________
25

(i)

(ii)
(iii)

Common objectives the partnership is undertaken for the purpose of

implementing objectives that have been agreed to by the groups involved. These
objectives are developed through a process of communication that is acceptable to
all actors involved; partnership understood here is a joint investment for the
production of a shared value;
Agreement to undertake the activities; and
Activities that build on each others strengths and overcome weaknesses.

4.2

Respective Roles of the Two Sectors

Placement of decision-making authority about education is not solely a matter of

centralization or decentralization; nor is it solely a matter of state power, teacher power
or parental power. The critical issue is achieving the best balance among legitimate, but
competing interests. The best balance will vary from society to society and over time
within a society as contexts, value definitions and priorities change. Negotiating the
terms under which public and private sectors cooperate to provide education in
developing countries is a critical issue.
Before exploring the complementary advantages of both sectors and structures for
effective collaboration, it is necessary to briefly define which roles are best for each
sector. Table 8 offers some indicative roles.
Table 8: Key Indicative Roles for the Respective Sectors
Public Sector
Overcoming market failures
Where needs are likely to go unmet because of
market failure or where social benefits or
services exceed the private benefits
Providing for the poor, rural and under-served
Provision of a safety net for citizens that cannot
pay market prices, either through providing
services directly or by creating incentives for
the private sector to undertake the task
Implementing appropriate regulations to
ensure quality
Setting, monitoring and accrediting standards,
disseminating information to guide choice
Controlling costs
Arguably a necessary task where there is little
competition, no parallel public provision, or
where consumers are poorly informed

Private Sector
Improving quality
In needing to maintain and develop their
businesses, they tend to innovate and transmit
best practice
Improve customer service
Better customer focus an assertion supported
by the number of poor parents that send their
child to a private school even when a public
school is available at lower cost
Improve management standards
Businesses can act as a partner in transferring
important management skills
Developing new services
An essential role where demand is expanding or
the patterns of demand are changing

Traditionally the state has been the main provider of education and occupies a central role
through virtue of (i) its ownership of about two-thirds of the schools and (ii) its legal duty
to set standards and to monitor the effectiveness whereby those standards are maintained
within the sub-sector. Specifically, then, the state has had the following roles:
______________________________________________________________
26

(i)
(ii)
(iii)
(iv)
(v)
(vi)
4.3

To provide physical infrastructure, staff, educational and boarding facilities and

maintenance costs for a range of schools;
To provide a management structure for schools, invariably including a publicly
accountable Board of Governors;
To collect nominal fees for education (e.g., a tuition fee, a boarding fee, a
textbook fee and examination fees);
To set minimum national standards (MNS) of provision and quality;
To inspect schools against the MNS; and
To admit students to schools on the basis of merit determined through a public
examination.
Recognition of other types of partnership

In most of the countries the education sector defies traditional delineation between the
public and the private sectors. The issue cannot simply be settled on the basis of the
ownership of the project or even on the basis of its primary motivation. Instead it is
important to recognize a wide range of interventions and types of stakeholders including
inter alia, government, for profit organizations, community based NGOs, wider public
interest organizations, private citizens, religious organizations, political representatives
and donor organizations.
An additional issue in the public-private partnership debate is that it is not simply the
creation of a new supra partnership arrangement but the recognition that this
partnership is one of many of the existing arrangements and relationships, and the
harmonization of diverse interests. Table 9 provides some examples of these different
partnership arrangements.
Table 9: Examples of five types of different partnership arrangements
Type of Partnership
1. Government
2. For profit
1. NGO
2. For profit
1. Government
2. Community
1. NGO
2. Community

Partner One
Invests resources

Partner Two
Service delivery

Initial capital, capacity building

Service delivery

Invests capital and funds running

expenses
Provides the school and funds the
motivational work

Provides the land

1. Parents
2. The School

School fees, opportunity cost of

childrens time

4.4

Undertakes to change social norms

concerning female mobility and
schooling
Provides education and care

Key Components of a Partnership Arrangement

what partnerships hope to actually achieve matters most. Partnerships are not ends in
themselves. The value of partnerships goes beyond market efficiency and community
______________________________________________________________
27

participation. The use of partnership relies on the judgement of whom to form

partnerships with and how they can best combine their strengths."
ADBI (2000)
This paper has argued that the private sector had developed in response to excess
demand, but that this growth was unregulated and unsupported within the framework of a
strategic framework of public-private partnership. Further, the paper has suggested that
knowledge regarding the private sectors activities is scant and that there is need for
debate and answers by both the government and the lending agencies to the following
question: what is the strategy of the government or lending agencies vis--vis private
sector schools within the different education sub-sectors?
There are a number of options available:
(i)
(ii)
(iii)
(iv)

outlaw them and ensure closure;

continue the common strategy which is to recognize their existence but be explicit
about having little to do with them;
expand the knowledge base with a view to considering greater public-private
engagement;
provide knowledge and financial resource support to the public and private sector
in order to work toward a specific framework for greater participation.

Options (iii) and (iv) support a pro-active policy of engagement, but this engagement
requires a policy stance by the government and/or lending agency as to the degree and
means of enhancing and monitoring the private sectors contribution in the areas of
legislation, finance, standards and equity concerns.
Box 7: Macro issues for a supportive Partnership Strategy:
The following issues must be addressed in support of a proactive supportive strategy:
(i)
(ii)

(iii)

(iv)
(v)

Need to incorporate the main features of the public-private mix into the strategies and
policies of the funding agencies;
Development of work programs that include welldefined targets on establishing the mix
(i.e. design of the new agreement on an Education Development Strategy and a Policy
Investment Framework. These instruments would need to stipulate the percentage of
enrolment expected by the sub sector and, within that, the percentage expected by the
private sector);
Specification of operational plans that detail new forms of joint undertakings, especially
with regard to the negotiation process. (i.e. the Partnership arrangements and
monitoring/reporting procedures that shall be required under the public-private
partnership);
The process of driving the new partnership approach shall possibly require the role of
facilitator, a position probably best played by a funding agency representative;
Appreciation that cultural factors are important in determining how the finance and
management system will develop.

______________________________________________________________
28

4.5

The Three Key Features of a Partnership

"When cost considerations are the main concern, and when externalities are expected to
be limited and a short time frame is in place, public-private policy partnerships may be
appropriate. When one or more of these conditions do not hold, when partnering is
minimalist in form, when accountability is critical, when vulnerable populations are the
policy focus, when cost shifting presents problems, and when societal normative choices
are more important than costs, public-private partnering may not be the best approach to
policy."
Rosenau (2000)
Rosenau (2000) makes the assertions above at the conclusion of her book 'Public-Private
Policy Partnerships'. We now look at such assertions of appropriacy or otherwise
through a brief review of the three main components of the partnership, namely policy,
governance and finance.
4.5.1

Policy

The key question behind the strategy for the public sector is to identify the role of the
government both what the government should do and how it should do it. And the
question should not be whether a particular activity should be carried on in the public or
private sector, but how the two can best complement each other acting as partners in the
development effort.
Stiglitz (1998)
A critical educational alternative whereby public funding explicitly supports the private
sector shall require intense debate on the precise nature of the changes that need to be
made in statutes, regulations and enforcement. Any proposal to change the school laws
or regulations must be measured against a set of core values or principles to ensure that
the changes do not damage the basic intent of the reform - an improvement in student
achievement. Consistent with this basic principle, three additional principles underpin
the intent of any new legislation:
(i)

(iii)

Increasing opportunities in resources for the underserved among regions, districts

and schools;
Increasing opportunities in performance and achievement for the underserved
among different groups of students, especially those correlated with poverty and
gender; and
Targeting investments to improve student and school performance.

4.5.2

Governance

(ii)

"Transition is not a uni-dimensional phenomenon, simplistically suggested by catchwords

such as from state to market, the major public issue is not for or against privatization,
but rather the form of privatization, and what kind of potential beneficiaries there should
be..
Hettne (1994)
______________________________________________________________
29

The driving education issue is raising the levels of student achievement, i.e., setting
standards and teaching students to those standards. Reflecting this student achievement
goal, the education policy and program issues are what curriculum, instruction, incentive,
capacity development, organization and management strategies are required to produce
the determined level of achievement. But what about such issues as access, choice and
diversity and their impact upon the governance and management of this new publicprivate mix? An emphasis on decentralized modes of delivery that focus closer to the
community and the local schools are a key objective but determining the appropriate
modes of delivery again beg difficult questions, such as:
(i)

Decentralization entails getting resources to where they are needed and placing
them in the control of the immediate beneficiaries, but what degree of reliance can
be placed upon non-government organizations, and indeed for profit
organizations, as they utilize these public funds in the delivery of a public
service?

(ii)

If schools are to be accredited for access to public funding on the basis of specific
public benefits, what manner of quality assurance function and monitoring agency
are required?

(iii)

Even within the context of decentralization, central government requires

personnel and machinery to monitor the local governments, but what is the degree
of supportive infrastructure that is required to monitor the local regulatory
system? And, most critically, what are the reasonable and acceptable recurrent
costs that should be expended on supporting this regulatory system?

(iv)

Within the parameters of the partnership, the private sector should have certain
mandated responsibilities for regulating its own membership and, perhaps more
controversially, the opportunity to assist the public sector in monitoring and
assessing performance in the public schools.

4.5.3

Finance

The related finance issues are twofold: (i) What level of funding is required for these
programmatic strategies? And (ii) What is the most appropriate means of linkage between
school finance and the strategies that are needed to accomplish this goal of teaching
students to the agreed level of achievement?
The complex task in turn has two main components:
(i)

it is to determine the level of base spending that is needed to teach the average
student to these national standards; and
(ii)
it is to identify those costs that must be incurred in order to meet the needs that
are additional to the defined average (such as the provision of additional
programs that support those with special education needs and those from low
income families).
______________________________________________________________
30

From a policy perspective, it is clearly necessary for the government to determine both
whether to apply subsidies and at what level (pre primary, primary, secondary or
continuing education). Application of these subsidies should in turn be based on criteria
for successful investment, such as: do they target the able student? Do they target the
poor student? Do they provide an efficient form of investment in terms of the best use of
funds for the achievement of agreed quality outcomes? Do they support the growth of
the private sector in its mission to fill in the required gaps in provision? And crucially, is
there provision of information to parents and students so that the public may measure
whether the respective sectors are performing according to their targets and adhering to
their legitimate roles?
In Box 8 an interesting Case Study is provided from the experience of Malawi and its
secondary education sub sector:
Box 8: Public versus Private What is the Difference?
The aim of the Government of Malawi (GOM) as outlined in the Policy and Investment
Framework is to ensure the provision of secondary education for a minimum of 30% of its
secondary age cohort. Currently the GOM provides support on a variable basis to some 14% of
the age cohort. From figures derived from the MOESCs 2000/2001 budget, the gross annual
subsidy per student in a public school is around Malawi Kwacha 25,500 (US$510) with an
additional recurrent unit annual subsidy of MK 9,500 (US$190) per student per year. Under the
present fiscal structures, the GOM is unable to maintain the existing level of subsidy and it is
looking to introduce cost sharing with parents, in addition to the contribution that parents already
pay for a number of services (the General Purpose Fund, the School Building Fund, school
uniforms, transportation etc).
Private schools account for some 4% of the age cohort and they receive no financial assistance.
Under the Study it was estimated that parents pay a mean fee of some MK 9,500 per annum
(US$190) for private secondary education (this figure was calculated fro a high-side figure of MK
16,500 per year and a low side figure of MK 5,250 per year). There are again additional costs
accruing for such items as textbooks, uniforms and transportation.
With the introduction of cost sharing into publicly funded secondary schools, two significant
issues arise: (i) parents will compare the cost benefits of public and private schools side by side;
and (ii) poor children will become unable to attend either type of school.
Given commitment to Free and Universal Primary Education, it is clear that the GOM will not be
able to fund the targetted provision of 30% of the secondary age cohort. Indeed, it will probably
struggle to expand quantitatively or qualitatively beyond its current 14% provision. With private
provision of 4% and the goal of 30%, there is a shortfall of 12%. The issue therefore becomes
not whether secondary education should be either public or private. Rather the fundamental issue
surely becomes the nature and form of the public/private partnership that must be created in order
that both sectors can contribute efficiently to provide the essential public service of educating the
youth of Malawi.
Source: Kiernan , Latham, Macrae and Reid (2000)

______________________________________________________________
31

4.6

Constraints against Implementation of the Partnership

Constraints against the partnership can be viewed from three perspectives: the
government, the lending agencies and the private entrepreneurs.
4.6.1 From the perspective of the public sector
Political sensibilities. The most insurmountable problem is not even necessarily a lack of
political commitment but rather the wide range of actions needed and the intensely
political nature of the reforms required to create effective service delivery systems under
a partnership arrangement with the private sector. This hazardous political minefield is
exemplified in two ways in this extract from Can Africa Claim the 21st Century?:
"Internal efficiency: Africas unit costs in education are twice as high at the primary
level as in Asia and Latin America, and high teacher salaries relative to GDP per capita
are one of the reasons, yet the publicly employed teachers are a well entrenched set of
interest groups who will oppose building partnership with the private sector.
Allocative efficiency: despite low enrolments rates in both sub sectors, education
spending is skewed toward the secondary and tertiary sub sectors yet, from a political
standpoint, the introduction of tuition fees is a dangerous step. In summary, it is difficult
to envision a situation in which sufficient incentives are forthcoming to encourage a
government to agree voluntarily to the redirection of their resources from institutions to
consumers."
World Bank (2000.)
Need for an overall strategy. Capacity of the government, both within its institutions and
at the policy level, is a constraint, most particularly the lack of capacity to develop and
implement the partnership in a holistic manner. In the early 1980s, for instance, the
Government of Tanzania removed the barriers to the private sector in order to improve
access. The expansion that followed raised the gross enrollment ratio and widened
overall access to secondary education within a relatively short period but there were
negative aspects to the expansion as evidenced by the findings of the study conducted to
analyse the project: "Our study reveals that the expansion has been accompanied by a
decline in access to secondary school among children from disadvantaged backgrounds;
and, at the level of schools, by significant turnover as schools compete for the same pool
of teachers, and a narrowing of public-private sector differences in school effectiveness."
Lassibille, Tan and Sumra (1999)
4.6.2

From the perspective of the lending agency

Reluctance from the Lending Agencies. Even if there was a political commitment from
the public sector, led most probably by the Ministry of Finance, is the Government likely
to receive an adequate response from the lending agencies from whom they will receive
policy advice and an introduction to alternative funding modalities? Why is private
participation in the social sectors not championed more strongly? A number of reasons
______________________________________________________________
32

are posited: lack of resources; lack of a sufficient knowledge base and ideological bias.
The amount of money to be disbursed is either comparable or less than a traditional loan
but it will be more complex to process and regulate and the project manager involved
shall be operating in an unknown area. Further, it is much easier to disburse an
infrastructure loan and remain within the project pipeline strictures through adherence to
well tried mechanisms than to develop and trial an innovatory policy loan, especially a
loan in which there is on-lending from the lending agency and national government to the
private sector.1
Fear of Globalization. It is clearly in the interests of the developing countries to engage
fully with the world through attracting foreign direct investment in education services and
products. In recent years, however, the agenda advocated for developing countries by the
West has supported liberalization through the reduction of barriers without sufficient
concern for local sensibilities. At this juncture it is not known what the advantages or
disadvantages are of such education "consistency" on a global context, but debate on the
issue (as exemplified by Box 9) is certainly timely.
Box 9: Brand Name Schools Closing The Gap in Minority Achievement
When consumers see the big green logo and wait in line for a cup of Starbucks coffee, they
expect a certain consistency and quality. The coffee tastes the same whether you are in Los
Angeles or New York City. While decisions about a childs education are obviously more difficult
than decisions about where to find a good cup of coffee, wouldnt it be nice if parents could rely
on a brand-name like Edison or KIPP Academy and know when they enroll their child that he or
she will receive the same quality education regardless of the location?
Snell (2000)

4.6.3

From the perspective of the private sector

Lack of access to capital. The lack of access to capital is probably the most significant
constraint to any expansion of the private education sector. This lack of capital is caused
in part by the undeveloped and unpredictable nature of the banking sector. Social areas
such as education and health are not a focus for lenders. A resulting reluctance to lend to
the social sector is exacerbated by presiding economic, cultural and attitudinal factors.
Lack of skilled staff. As in the public sector, one of the major constraints to expansion in
the private education sector is the shortage of skilled and qualified teachers. The absence
of both a comprehensive audit of teacher supply and a definitive number of private
schools in operation, make it difficult to assess the shortage with any accuracy. In
discussions with private school managers and visits to school sites, the following
observations are often made: (i) obtaining and retaining staff is a major problem; (ii)
teachers frequently move between schools without warning; (iii) salaries offered are 10%
1

Appendix 3(a) however does provide examples of World Bank Group support of private participation in
education through the provision of support to enabling the environment, on-line lending and alternative
financing and support for demand side financing initiatives such as the provision of public subsidies to
private schools and matching grants.

______________________________________________________________
33

or more above the public sector rate; and (iv) the majority of teachers lacked the requisite
qualifications to teach at the secondary level.
Lack of access to buildings and land. Lack of access to appropriate land and buildings
for schools is a second critical constraint to any expansion of the private sector. There
are often a number of elite schools that have impressive purpose-built facilities, yet the
majority of the private schools have been forced to lease residential and business
facilities (motels, houses, shops or worse) for use as schools. While these do enable
schools to operate, they constrain class sizes, are often not conducive to learning (too
small, too dark, too noisy) and limit the use of innovative teaching practices. In addition,
the absence of long term leases on purpose-built premises increases the risk that students
and teachers will probably have to relocate at some time in the future.
Demand-side impediments. The private sector is reliant upon user fees for its income.
While enrolment rates are obviously rising, low-income families are deterred from
entering into the better, and more expensive, schools due to the costs. Economic growth
is not sufficient to generate incomes that can afford the fees that are charged by the
private sector edupreneurs. The opportunity to access subsidies, therefore, is an
essential ingredient to overcoming access barriers for the poor to the private sector.
Parental awareness. The providers complain of two issues that pertain to parental
awareness: (i) clients are basing their selection of school on fee rates rather than quality
of provision with the result that the beneficiaries, their children, are being regularly
moved with insufficient regard to the need for continuity and stability; and (ii) movement
is often caused by a disregard or an inability on the part of the parents to meet fee
payments; consequently they remove their children without notifying the schools
concerned.
Bureaucratic hurdles. Registration procedures are slow and arduous with the result that
many providers see little alternative but to operate on an unregistered basis or on
provisional certificates. Regulatory requirements are available within the central and
divisional ministries.
Table 10 provides a summary of the Private Sector constraints.

______________________________________________________________
34

Table 10: A Summary of Private Sector Constraints

Institutional
Issues

Legal and
Regulatory
Issues
Constraints on
a PrivatePublic
Partnership

4.7

The responsibilities and roles of the privatepublic sector partnership are

unclear and inadequate;
Central and regional governments lack the requisite institutional capacity to
promote, regulate and monitor equitable development of private sector
education and training provision.
The absence of a coherent and enforceable legal framework for private sector
provision enables illegal operators to thrive;
The lack of private sector associations prevents effective interaction with the
government and hinders any form of self-regulation from within the industry
itself.
The lack of data from institutional suppliers or the marketplace to guide
potential clients and beneficiaries;
The need for greater managerial capacity among educational entrepreneurs;
The chronic absence of access to funding for potential enterprises.

Towards a Conclusion

"The matter will be decided much more on the basis of values and political might than of
evidence of which is 'superior' and the struggle between those who view school
predominantly for their private benefits and those who view schools predominantly for
their public benefits will continue to challenge and modify whatever system is put into
place."
Levin (2000)
This paper has examined how these public-private partnership experiments and
experiences in the context of cost and quality performance, equity, access, and
accountability. A brief summary of findings suggests:
Theory vs. practice. Authentic partnering, in theory, involves close collaboration and the
combination of the strengths of both the private sector (more competitive and efficient)
and the public sector (responsibility with accountability vis--vis society). But
anticipating success or failure in advance of implementing the partnership is difficult and
monitoring partnerships for impact and performance over time is critical.
Cost and quality. Private schools are probably more cost effective than public schools in
producing student achievement (Cox and Jimenez 1991; Jimenez, Lockheed and Paqueo
1991) although Levin (1999) maintains that this cost advantage is lost once the
externalities of monitoring and regulating of private provision are factored in.
Equity and access. Assessments of the performance of partnerships on equity are mixed,
the only clear point perhaps is people's expectation and perception that the public sector
is more equitable. This lack of clarity is further complicated by the question as to whether
or not equity concerns are less of a problem when the partnerships involve public/not for
profit providers rather than public/for profit providers.
______________________________________________________________
35

The vulnerable population. There is currently insufficient evidence to support the case
that the difficulties of vulnerable populations with regard to access and equity are
ameliorated within the private secondary education marketplace. This is a case where
societal values regarding policy should take precedence over a strict cost calculation.
Further, there is consensus that there is vulnerable population for which protective
government measures are necessary.
Regulation. Evidence to date indicates that public-private partnerships do not seem to
reduce regulation since the role of the government has changed to become both a partner
in the provision of services and the monitor of the marketplace. Is Levin (1999) thus
correct in implying that the infrastructure required for monitoring the mix of private and
public providers may be greater than the savings attributed to private schools? How much
regulation is required to assure fair competition between private and public schools?
Accountability. The public-private partnership within the education sector must be
accountable if they are to fulfil their policy objectives successfully since education is an
essential service. Again, however, there is no specific solution to the accountability
challenges, although there is a clear trend that indicates that the partnership must be
structured, with partners receiving specific responsibilities, incentives and resources.
Conflicts of interest. The rationale for embarking upon a partnership is that the two
complement one another and are strengthened through combination. But how can one
best align the interests of private capital (returns on investment - attaining a corporate
goal - anticipating competitive developments - taking risks) and the interests of the public
sector (legislation and regulation- political opinion - minimizing risks and attaining a
social goal)? Again, the trend shows that partnering for a policy goal is most likely to
minimize the conflicts of interest, most particularly when the terms of the partnership are
designed to fulfil public objectives, within the limits of available public resource
constraints (Rosenau 2000).
"There is likely to be greater acceptance of reforms and a greater participation in the
transformation process if there is a sense of equity, of fairness, about the development
process, a sense of ownership derived from participation, and if there has been an effort
at consensus formation."
Stiglitz (1998)
The ideal context for successful partnering. Success in partnering to provide essential
public services requires collaboration as much as competition; but, within the education
sector, competition is paramount as the private and public schools compete for clients.
Debate is required at the highest level of the corporate and public organizational levels to
set out a concrete plan in which there are definitive of lines of responsibility,
specification of achievable goals, incentives for all partners (the public, the government,
the edupreneurs and the lending agencies), and mechanisms for evaluation and
monitoring.
______________________________________________________________
36

V.

CONCLUSION

5.1

The Need for a New Focus

The purpose of this paper has not been to present some fixed truths concerning private
education, public-private partnerships or indeed to provide specific recommendations as
to how to structure any alternative process. It is clearly a country-wide decision based on
national analysis and international comparative analysis to determine whether the policy
for the education sector should either be to increase the share of government resources for
education or to develop a partnership in which cost sharing mechanisms are introduced to
enable more enrolment through the utilization of private sector resources. Further, there
is no one size fits all public-private partnership approach.
Rather, the purpose has been to stress that there is neither universal prescription for
success or for the process itself. In this final section a summary is provided of: (i) the
range of interventions; (ii) the possible options and strategies; (iii) the main constraints
and issues and (iv) ideas for immediate steps forward.
5.1.1

A Range of Interventions

There is no inherent reason why public intervention correlates merely with public
provision, or, similarly, that privatization solely implies the outright sale of public assets
tp private entrepreneurs. Rather there are four different forms of private activity and
public-private partnership offering a range of different types of intervention, such as
those presented in Table 11.
Table 11: Different Types of Intervention
Private financing
- Global funds
- User fees
- Capital markets
- Industry links
Source: Harding (2000)

Private management

Private provision

-.Management contract - Contracting out

- Public procurement
- Service contract
from private
- Lease arrangement
providers
- Concession

Private ownership
- Joint venture
- Build, own and
operate, transfer
- Outright sale

Fiscal constraints, cost escalation and poor performance are propelling the force of the
privatization wave. Governments realize that they cannot finance their current services,
let alone afford the future demands while the customer exhibits growing dissatisfaction
with the service that is presently being delivered. Table 12 highlights the current
situation and how thinking on three traditional government roles - financier, regulator and
provider - is changing.

______________________________________________________________
37

Table 12: Current and New Thinking

Role
Financier
Regulator

Provider

Current action
- Indiscriminate and inefficient
financing
- Skewed and inequitable
- Creating barriers to entry
without enforcing adequate
performance standards on
either public or private
provision
- Responsibility for providing
all services

New thinking
- Targeting for the needy
- Finance goods and services with
substantial externalities
- Regulate providers and service
quality
- Regulate to ameliorate the
consequences of adverse selection
for efficiency and equity
- Responsibility for providing
services when private sector is
unable or unwilling to provide
services

A range of participants is required (non government organizations existing workers and

managers forms of cooperative and organized social grouping - for profit entrepreneurs
international investment) to increase non-public participation in the education sector.
This participation can be manifest through a variety of forms and at different extremes of
intervention:
Management contracts:
Outsourcing:
Financing demand:
Corporatization:

5.1.2

management of the public organizations is transferred to

private hands;
provider organizations procure services from the private
sector;
publicly procuring services from the private sector;
whereby the government becomes the purchaser and the
operational control moves from the government to the
organization.

Constraints and Issues

The five main constraints facing change and some of the chief issues that must be
addressed in order to facilitate reform are summarized in Table 13.

______________________________________________________________
38

Table 13: Main Constraints and Issues

Constraints
Ideological/political

Legal

Ownership and management

Financial

Regulatory

5.2

Issues
- Anti privatization sentiment
- Opposition from vested groups (trade unions - international
institutions - public sector institutions etc)
- Balance between conflicting goals of privatization (e.g.
access versus quality)
- Timing and sequence of the reforms
- Legislation to support reform program
- Development of appropriate forms of new social sector
institutions
- Legislative position to enable pilots before national reform
rollout
- Property rights issues (transfer and/or sale; method of
payment lease arrangements)
- Management (e.g. control responsibility and
accountability autonomy from public intervention)
- Inadequate private capital (underdeveloped capital markets;
underdeveloped credit markets)
- Real cost recovery mechanisms
- Demand side financing (e.g. Scholarships-vouchers etc)
- Cost control
- Accreditation
- Monitoring
- Quality maintenance
- Regulatory capacity against costs of compliance
- Price decontrol

An Immediate Step Forward

This paper has aimed to:

(i)

offer some background on issues that require discussion when the options for an
enhanced role for the private sector or the development of a public-private
partnership are propounded. Most particularly, when such options are proposed
in countries that are faced with the following conundrum:
How can those countries with the lowest rates of enrollment - on public financing
at their current cost levels - access the resources required to simultaneously
sustain their new high enrolment rates in primary while increasing the rate of
ongoing throughput and improving quality for the entire sector?

(ii)

stress the need for a greater degree of analysis and dialogue between the providers
of public and private education services.

______________________________________________________________
39

(iii)

support a call for a culture change and an increased appreciation that

partnerships will require changes within national bureaucracies and national
planning processes. Real partnerships require joint planning and discussion as
well as clear specification of roles and responsibilities for each sector.

Appropriate levels of investment are critical to development and there is increasing

recognition of the developmental challenge presented by the present low secondary
enrolment rates (DfID Policy Framework 1999:15). But there is still, arguably,
insufficient analysis within an overall policy framework at the individual country level
upon which the implications of different policy options can be assessed and decisions
based with regard to the roles and responsibilities of the private sector.
In addition, there is perhaps an insufficient awareness by system reformers and planners
as to the counterproductive role that institutional legacies are having on reform and the
introduction and ongoing implementation of alternative policy options.
In current project development, frameworks are established and tools employed to
provide assessment on key parameters for influencing policy options on secondary
participation, such as: public expenditure on secondary education as a percentage of
GNP; public unit costs of secondary as a percentage of GNP per capita; gross enrolment
rate at secondary and the proportion of the population of secondary school age. Further,
for the purposes of developing an education sector wide approach, debate is held as to
what percentage of gross secondary enrolment is most appropriate given the labor market
and macro development requirements or what are deemed to be the most appropriate and
necessary levels for the pupil teacher ratio.
But there is seemingly a current lack of sufficient debate and analysis at a time when an
increased role is being proposed for the private sector in education. If the main option for
increasing participation is the introduction of private funding and provision, then there
must be:
(i)
(ii)

extensive analysis of the present in-country private practice - its strengths and
weaknesses;
there must be forums and conduits for policy dialogue between the public and
private sectors, and the establishment of mechanisms within the private education
sector that enable views and feedback from all the different types of private
providers and the clients/communities.

Three trends are converging to encourage and enable the private sector to engage in good
corporate citizenship and enhance the public sector's limited resources:
(i)

although there is no single model that can be used as a template, innovative

modes for the financing and delivery of services are tried and abundant (see Box
10 for at the end of this chapter for an interesting example in Burkina Faso);

______________________________________________________________
40

(ii)

there is a discernible shift toward decentralization and localization in decisionmaking and service provision/financing;

(iii)

in many countries, private provision of services is essential because the

government is simply incapable of meeting the present demand.

Imaginative partnerships offer especially exciting potential, as they allow the strengths of
each sector to be harnessed, with public financing and private provision offering the most
extensive scope for development. Partnerships however have been on the agenda for
many years. Leadership is needed, both by the state and lending agencies, to jump start
the process since assuming market mechanisms exist for the task shall merely perpetuate
the present state of inefficiency and inequity. The state must take the lead in the
development of a public-private partnership that comprises the following key ingredients:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)

The development of a common understanding and trust;

The provision of information and marketing to support consumer choice and
confidence;
The need to create a favorable legal and regulatory framework;
Commitment to the public good that includes the state's ability to recover any
windfall profits;
Accountability, monitoring and transparency by both the sectors;
Sharing of resources across the sectors; and
An emphasis on the service end users as clients or customers.

Box 10:

Private Secondary Education Contracting

The Burkina Faso Post-Primary Education Project supports private sector development in
secondary education. The Post-Primary Education Project expands the notion of developing nonpublic secondary education based on three fundamental elements:
(i)
rent/sale of Colleges of General Education (collges denseignement gnral, CEG)
constructed with funds from the IDA credit to private investors;
(ii)
delegation of management of CEGs constructed and equipped with the IDA credit for the
benefit of municipalities and their NGOs; and
(iii)

encouraging the best existing private institutions to construct complementary classrooms.

The Post-Primary Education Project supports the implementation of the Governments strategy.
A specific focus of the project support is to provide incentives to promote expansion of private
sector schools in two large cities (Ouagadougou and Bobo Dioulasso) of the country. This would
be accomplished by providing financial incentives for expansion to private schools. Financial
incentives would be in the form of subsidized, long-term credit.
Source: World Bank (1996))

______________________________________________________________
41