Other things besides profitWhy the private sector in health, education and cultural heritage has a poor image.
Profit is the most motivating incentive ever invented in finance and economics that has led the world economy this far on the development trail. The advanced economies achieved success due to a strong and free foundation of the private economy. Even countries such as China, which initially promoted socialism, realised early the importance of the private sector, and are now challenging the world. However, in Nepal's case, the private sector has not been so efficient, and time and again even gets enmeshed in controversies, especially regarding health and education. Why is this happening in Nepal? The answer lies partially in government policies and the inability to guide this sector in the right direction, and partially in the development of public services in Nepal. When the government fails to provide better health and education and regulate private investment in this area, problems arise.
It could be argued whether health and education are public goods, but that is not important; what is important is the fair distribution of such services. When the private sector handles such services, it becomes unreachable for the majority of the public—only the affluent can afford it. Take the example of private education and health facilities here in Nepal, the cost is very high. In such cases, it drives public sentiments against the private sector. When government services are very poor, the presence of the private sector does more harm than good. So the only solution is for the government to ensure the same level of service or provide even better service to the people.
It is also the government's duty to act as a watchdog and ensure fair competition in the market. But in Nepal, it seems to be just the opposite: We have a plutocratic government. Businesses have a significant influence on government policies for their own benefit no matter how deleterious the decisions are for society and how far the services are from the reach of the general public. We have seen time and again the government's ignorance to pass the National Medical Education Bill. This has hindered the quality of education and put health services out of reach of the people, and showed the government's disinterest in improving public education and services.
When the private sector handles education and health with a motive to generate profit, it actually decreases research and development activities. Profit-hungry private institutions running tertiary level courses in a rented building cannot afford the required investment in research and development for their students and faculties. The irony is that despite such lack of resources among private institutions, their education has been perceived to be better than public education. It is not that the private sector should not be involved in this business. China, for example, with the highest investment in private education, is producing world-class manpower. For higher education, government funding is essential, and it should direct private education along its course with better and strict supervision, support, and if needed, resources.
People also argue that sectors having cultural, historical, archaeological importance should be given to the private sector to handle because their cost-efficient activities reduce government expenditure, increase employment opportunities, and promote tourism and eventually increase economic activities in the country. The government has been doing this by giving old and historical buildings and heritage sites for commercial use. However, what the government is overlooking is the historical cost associated with it. These places are to be preserved not commercialised: Commercialisation does not only reduce the value, it also weakens the archaic structure and aesthetics.
In some sectors of the economy, though the private sector creates employment opportunities and adds some value to the gross domestic product, it comes with huge socio-economic costs. For example, what if we privatise the national army? This would not only reduce the government's expenses significantly but also increase employment. But we all know that this is going to be disastrous for the country from the viewpoints of both security and fair distribution of services. Same with the commercialisation of historical places for private use: It creates some economic activities but reduces the importance and cultural value. What if the government decides to commercialise Narayanhiti Durbar as a star hotel in the name of promoting economic activities? It has more historical importance than the bare economic value it would gain by being commercial property.
We don’t have to go so far as to understand why the private sector is not good in such situations. We can see the disasters caused by the private construction companies that extract sand and stones from natural sources. A recent bill proposed by the government to allow the extraction of sand and stones from Chure for export to India in the name of reducing the trade deficit is a living example of how such decisions are deleterious for both nature and humankind.
Supervision and control
There are still some aspects in any economy that the government can handle better than the private sector. Public goods, particularly—education, health, defence, natural resources, climate issues and preservation of archaeology and cultural heritage. It is not that the private sector should be completely barred from such sectors. No! But the thing is that such services need more supervision and control. The government cannot and should not give these economic sections completely to the private sector, at least in the short run.
This is because the motive for profit when public services are poor would do more harm than good. These sectors are not for making a profit. Their existence is more to help society with minimal return. But, in the long run, when government investment in health and education becomes huge, infrastructure becomes substantial, and services become accessible to every citizen, especially people at the middle and lower-income levels, then the presence of the private sector would start giving dividends to the economy. However, in the case of places of historical significance and natural resources, it is always better for them to be handled by the government.