Pressures for market liberalisation and
privatisation have affected the provision of services to livestock
keepers in most developing countries. Some services previously
provided by governments have been reduced or totally withdrawn,
while attempts have been made to encourage private sector
provision in place of the government services. The rationale
underpinning choices about which services to privatise was
introduced by the World Bank in the early 1990s and is founded
in traditional welfare economics, which focuses on 'outcome'
Results of privatisation have been disappointing and there
is increasing recognition that governments must still participate
in the provision of services to the livestock sector. Questions
remain regarding the type or degree of state intervention
that is needed and in what circumstances this need arises.
Services that are important for livestock producers include
the general infrastructure of public services, such as roads
and other transport routes, water and electricity supplies,
telecommunications, education and public health. This last
overlaps with animal health services, which are of more specific
relevance to livestock producers. Animal health services are
conveniently subdivided into curative or clinical services,
preventive services, supply of drugs and vaccines, veterinary
public health aspects, education/extension and research and
development. These last two areas of extension and research
are also relevant for other non-health aspects of animal production.
The provision of livestock services and particularly animal
health services is affected by a number of forms of market
failure. These are (i) failure of competition, (ii) existence
of public goods, (iii) presence of externalities, (iv) presence
of incomplete markets, (v) information asymmetries or failures
and (vi) macroeconomic distortions. Any, or all, of these
causes may limit the private provision of a particular service
to livestock producers and create a need for government intervention.
However, the appropriate level of public sector provision
of a particular service also depends on its contribution to
national goals of economic growth and poverty relief.
Given the prominence of market failure and the politicised
environment surrounding the agricultural sector, a move from
the traditional analysis of the animal healthcare market based
on welfare economics towards one based on the 'public choice'
school of thought, which acknowledges that governments are
not free in their choices but depend on powerful interest
groups, might provide a more suitable approach to the pressing
need of improving service delivery, particularly to poor livestock
keepers. Given that policy-makers' choices and behaviours
cannot be separated from the interests affected by the decisions
taken, the public choice school has a strong focus on 'process'
efficiency, i.e. issues concerning co-ordination and governance.
Taxonomy of Goods and Services
Drawing from the economic literature, three ways exist in
which goods and services have been classified. These 'taxonomies'
can also be applied to the animal health sector and their
examination through the lens of public choice economics may
provide indications as to their relative merit for improving
The first, 'classical', approach to animal health service
classification, taken by the World Bank and other authors,
hinges on the principles of rivalry and excludability. Following
the public choice approach, this viewpoint fails to take into
consideration transaction costs that are likely to hinder
The second taxonomic proposal, based on the level of externalities,
has been labelled as the mixed goods/quasi-public goods approach.
This taxonomic method provides a powerful tool for guiding
decisions on resource allocation at the national level when
economic values can be attached to the externalities. However,
major difficulties exist in measuring the extent of some externalities.
Finally, the third approach relates to the degree of consumption
sharing. This approach focuses on the degree of service sharing
among a defined population. It specifically looks into the
relationship existing between the degree of divisibility of
a good or service and the number of people consuming the latter.
The utility of this perspective lies in the potential for
optimising resource allocation for a determined quantity of
a good or service in relation to the size of the group or
population consuming the good. The last two taxonomic patterns
are innovative in that they include decision making processes
in the analysis and focus on implementation issues.
Conclusions and Recommendations
The economic analysis of animal health services is moving
from an outcome-oriented towards a more process-oriented point
of view. It is increasingly recognised that the animal healthcare
market needs to be viewed in a broader context where political
interference, self-interested behaviour and other transaction
costs are considered. The public choice school's perspective
gives a new approach to the sector's analysis and sheds light
on how to avoid some of the past errors in ongoing and future
Privatisation of animal health services cannot be carried
out in a homogeneous way across countries based on one type
of service classification. Influencing factors such as the
physical, political and institutional contexts need to be
taken into account and there is no standard model applicable.
Governance and the Role of Government
Governments are a key element in governance, harmonising and
facilitating not only the market economy, hence reducing existing
transaction costs, but also in defining overall goals for
the animal healthcare system.
- The role of government should be viewed at a broader level
as coordinator of activities in the animal healthcare sector,
increasing cross-sector collaboration, the aim being not
only to reduce transaction costs, but also, and especially,
to guide current initiatives towards a common goal for animal
- In countries where animal health services have not undergone
privatisation, cost-containment measures should be applied
where possible in order to smooth the transition process
to a privatised animal health market.
- In countries where privatisation of animal health services
has been undertaken, efforts should focus on governance
of the animal health system, i.e. integrating and increasing
the accountability and client-orientation of the different