22. For the purposes of this paper, privatization denotes the process by which governments divest themselves of responsibility for certain functions (in our case the provision of certain livestock services) and transfer to or allow non-government organisations to undertake. Among others, such organisations include private enterprises (firms or individuals) as well as producer organisations (e.g. cooperatives), professional groups or trade associations (for a more comprehensive definition see Rondinelli et al., 1985). Figure 4 below lists some of the factors which could influence privatization to take place.
Fig. 4. Privatization
|
Determinant Factors |
Potential DVS Leverage |
|
- Ideological considerations |
no |
|
- Nature of service |
strong |
|
- Government's regulatory power |
strong |
|
- The level of demand for private services |
weak |
|
- Private financial profitability |
strong |
|
- Government subsidy policy |
varied |
|
- Interest group pressure |
varied |
23. Ideology, in terms of whether private enterprise in particular has a role in major economic activities, is an important factor. Where the political climate encourages active private sector participation, privatization will tend to concentrate more on the transfer of responsibility to private enterprise, although without the exclusion of the other forms mentioned above. In countries with a socialist orientation, governments have generally shown a strong preference for farmer groups which replace private enterprise and take responsibility for providing services (to members). In both situations, the degree of DVS leverage on several of the other factors listed in Figure 4 is contingent on either form of private activity being ideologically supported. However, this choice of ideological support is a factor which decision-makers at DVS level are usually not in a position to influence.
24. The view that potential DVS leverage is strong in defining the nature of the services being considered in a privatization policy is the same as the one advanced under cost recovery. It would be unrealistic to expect wholesale privatization of livestock services. Perhaps the additional point to be made here is that private entrepreneurs being in business for themselves, privatization will also obviate the need for administrative controls of fee collection by government agents (Leonard, 1985).
25. The government's regulatory power relates to its ability to control standards of service and quality of veterinary requisites as well as control connected with public health which are important elements to consider in the process of privatization. This is in addition to the government's possible control to avoid exploitative prices by the private sector. In reference to the first point DVS should be in a particularly strong position to influence the control of standards as they are very closely acquainted with the technical matters of concern to the government. As regards the second point, although the very issue of direct government control of prices for services could be contentious, I suspect that DVS can have greater leverage than is generally believed in influencing the level at which guideline prices for the private sector are established. This has also to be related to their potential monitoring capacity to avoid monopolistic tendencies to develop in the livestock services market.
26. The size of the market for private services, financial profitability and government subsidy policy are somewhat interrelated factors, but potential DVS leverage varies among them. Potential influence on the first is said to be weak because a government action to transfer its responsibility as a service provider of itself does not automatically create a market for private practitioners. On the other hand, charging levels based on realistic costing from practical DVS experience could be made to be sufficiently attractive for private practioners to enter the market - this is related to what was said earlier about DVS ability to establish reasonable levels of private fees or charges.5
5
Where, as Creek (1985) proposes, professional associations are used to undertake contract work on behalf of governments DVS leverage in helping to create such a market can be quite substantial.
27. Government subsidy policy in this case refers to at least three types: subsidies to state-owned enterprises (e.g. government trading parastatals involved in the purchase and distribution of veterinary requisites) which are in competition with the private sector in retail sales to consumers; input price subsidies to individual service recipients; and subsidies to the private sector or to producer groups such as farmers' service cooperatives. In the first case, the private sector is unlikely to be attracted if selling prices of the state enterprises are set too low as to undercut private sales. DVS leverage in influencing price setting in parastatal organizations is unlikely to be strong. As regards input price subsidies to individuals, the same argument as for cost recovery will hold true (i.e. the idea of targetted subsidies) and DVS would have a similar potential leverage because of their intimate knowledge of the clientele. The case of subsidy support to private enterprise is a rather novel approach (as discussed in de Haan and Nissen, 1985), and potential DVS leverage is unlikely to be very strong for some time to come. On the other hand, subsidies to service cooperatives or the like are likely to have some strong backing from governments which hold such groups as viable alternatives to private enterprise as defined earlier. DVS have a potentially important input in making these groups acquire the necessary simple skills to carry out some of the less technically complicated services (e.g. vaccinations).
28. As regards interest groups, the first sign of resistance to the privatization process is likely to come from the veterinary profession itself, particularly if government divestiture means the transfer of responsibility to non-veterinarians. Quite frankly, I wonder if it would be realistic to expect a director of veterinary services to have a potential leverage on convincing his peers on this matter.
