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As an individual, I agree with the plan as it will provide potential opportunity to the rural communities in PNG. I will solve more issues like bringing to the rural level socio-economic activities.

The The Queen 'Mamohato Memorial Hospital in Lesotho built under a PPP, which is the first of its kind in a low-income country and has been described as opening a new era for private sector involvement in healthcare in developing countries. There have been a number of reports and discussions regarding this project from its inception to today and more will be completed before the end of the 18 year project period. The project is indeed being watched with much interest by a variety of interested parties and its success or otherwise will impact the future of healthcare in many countries. It is therefore critical that the project be fully and openly examined, including the roles of all parties and the any resulting reports be analysed as for any country contemplating such an investment must fully understand all issues including costs over time. The Feachem/Thompson article rightly states that the Boston University report and the Oxfam study are quite divergent in their purpose and conclusions and there is not much they agree on. They do agree that the PPIP hospital has delivered far better services than its dilapidated predecessor, but that financial sustainability is a key challenge that needs to be addressed. A critical issue to be contemplated is what happens at the end of the 18 year project period? What options does the Government truly have and at what cost?

To clarify, both the reports on which Oxfam based its numbers, as well as the report by Boston University were commissioned by the World Bank. I can not comment on the data, analyses or methodology of the report done by the academics to whom David Yates refers, because they have not made this information available for public review. The full Boston University Report containing their analyses is available <a href="http://www.bu.edu/cghd/publication/endline-study-for-queen-‘mamohato-hospital-public-private-partnership/" rel="nofollow">here</a>.

...and surely we (and the World Bank) should be highly allergic to an approach which sucks money away from rural and primary services in order to meet the tertiary care needs of the urban elite.

I agree with all the comments made so far. I also agree that aid and development are complex issues that need careful research to identify problem areas in each recipient countries as recipient countries are different in so many ways; cultural diversity, poor capacity, political culture and movies, etc. had to be better understood. From my practical experience in dealing with aid projects (as a recipient) two important aspects have not been addressed and these were 1) donor requirements for accountability in countries where capacity is poor to very low , reporting was always a problem (as reporting is a requirement for next funding). 2) timing cycle of funding by door agencies often missed the timing of recipient governments fiscal year, so dateline expectations of aid delivery were at odds from the start. 3) the English language (communications mode) used in applications forms were cumbersome, many don't understand, 4) most developing countries lacked project cycle instruments to guide the projects to completion. These were some examples of aid failures experienced first hand. The second point I would like to make is the criticisms in the past about boomerang aid are stories that have some substance, and should be taken notice of. The question is how can AusAid ensure its objectives are not hijacked by bureaucrats in Canberra, their consultant friends, and bureaucrats and political cronies in recipient countries? Perhaps, we should consider channelling aid through the third sector (NGOs) but then again, they would need to build capacities & capabilities to deliver. The next question is how would AusAid deal with fragile or failed states? Secondly, how do we (recipients & donor) deal with corrupt officials and politicians in aid delivery, so it can be effective in those fragile or failed states? My last point is cutting AusAid at a time when China (and India to an extent) have moved "big time" into the Pacific Islands which put AusAid (and NZODA) at the back burners is not wise.

I agree that it'd make more sense to count the grant equivalent of the loan. This is one of the options that the OECD's Development Assistance Committee is considering in its current work on modernising the ODA concept. The DAC is also looking at changing the way that concessionality is measured, which would help to address the issue Robin identified about counting lending on harder terms as aid. There are more details on each of these issues in a recent <a href="http://www.oecd.org/dac/externalfinancingfordevelopment/documentupload/SLM%20Dev%20Fin%20DAC(2014)9.pdf" rel="nofollow">DAC paper</a> [pdf]. If the DAC can reach agreement later this year on some of these recommendations, that could go some way towards reducing the current year-to-year volatility in reported aid figures.

There's an interesting distinction here between the way in which the OECD DAC and China treat concessional loans as ODA. As you've said, the DAC measures the total loan amount, and then subtracts future repayments from future ODA figures. The Chinese Govt measures only the grant element of a concessional loan, so for a $100m concessional loan with a grant element of 30% (as has typically been the case for Eximbank loans in the Pacific), only $30m would be be calculated as ODA. The Chinese method seems to me to be far clearer.

ODA increased?? Or did it really increase? Since 1958 (the origin of ODA), it's interesting to see how the definition and what counts as ODA also changed. The problem with ODA is that the discussion is mostly focused on the total rather than rethinking the model... and this is what academics really like to write about...good old ODA. Not that ODA doesn't count but the world has changed and the need for collective approach is more crucial than ever.

Hi Matt, This is a very good question. I think that discussion on appropriate means of targeting water supply subsidies for low income households deserves an entire blog entry of its own. I agree that a tariff with a lifeline block, if metering was introduced, may not be that effective in South Tarawa because low-income households tend to be large, so may consume greater quantities of drinking water compared with smaller better-off households. Some simple targeting options that have been used in other countries are based on providing differential service options such as communal taps and water kiosks, which allow households to self-select, since better-off households are often unwilling to sacrifice the convenience of a private tap to buy drinking water at a subsidized price.

You are absolutely right that these two reports come to very different conclusions concerning the cost-effectiveness of this PPIP in Lesotho and its broader impact on the efficiency and equity of the overall health system. However your inference that one report is well-researched and impartial whilst the other is a hatchet job, is completely wide of the mark. I know for a fact that the Oxfam report was extremely well researched by university academics and unlike the LeBoHA report it was not funded by one of the major partners in the project. Anyway putting aside issues of impartiality for the time being and agreeing that services at the new hospital are better than the old QEII hospital, the big issue is whether there has been a significant cost-escalation with these new arrangements. The LeBoHA report acknowledges that, contrary to the original promise that the project would be cost-neutral, costs have risen and that the PPIP is now consuming 41.2% of the MoH budget. The Oxfam report though argues that costs have risen much more rapidly to the extent that they are now an unsustainable 51% of the budget and that this is distorting health expenditure away from district-level PHC services. Without access to the actual figures it is difficult for external observers to assess which figures are closest to the truth. However in saying this some of the quotes in the Oxfam report are very telling. In particular this one on page 6: The PPP is ‘eating more than half of the health budget. It is hitting the government hard’. Minister, Government of Lesotho and on page 11: ‘The PPP hospital has had a bad impact on how we’ve allocated resources over the last two years. There are less and less resources for primary health care and district services.’ Senior official from the Lesotho Ministry of Health Also readers may wish to refer to <a href="http://www.theguardian.com/world/2014/apr/07/lesotho-health-budget-private-consortium-hospital" rel="nofollow">this article</a> on the Lesotho PPIP by a journalist from the Guardian Newspaper and also watch the embedded video which contains interviews with stakeholders in Lesotho. As you point out, given these discrepancies, there are clearly major questions to be answered about this project – particularly in terms of whether it has represented good value for money for the limited government health budget. Therefore, as a top priority an extensive, independent evaluation should be conducted of this project, looking at efficiency and equity issues which should include an assessment of the impact on the health system as a whole. Only then will countries like PNG be able to assess whether initiatives like this represent a good investment for the health of their people and their economic development. Rob Yates: www.twitter.com/yates_rob

Hi Allison, I understand, and in general terms, agree with your argument - subsidising all consumers is wasteful and does not benefit those that have no access to an infrastructure service (in this case, water). I've argued the same for electricity in the past. The question I have is: how can low income households be targeted for purposes of subsidisation? It is not simple in countries where there is no social welfare system. In the power sector, lifeline tariffs are used as an approximate targeting mechanism - high income households (with fridges etc) consume more power than low income households, so the utility charges less for consumption below a certain level. But does the same apply for water? I don't imagine that high income households consume a great deal more water than low income households. The lack of meters in Kiribati is obviously another challenge (and presumably would be costly to install). Are you aware of any examples from countries similar to Kiribati where water consumption among low income households has been successfully subsidised (in the absence of social welfare systems, etc)? Matt

This article is misleadingly titled. The high cost is not of 'cheap' water supply and sewerage services it is of 'underfunded' water supply and sewerage services. The problem is that the PUB has too little funding to properly build and maintain the needed services. With adequate funding it could reduce system losses to under 10% and supplement water supply with rain water collection and meet the needs of the community. Likewise it could provide a reticulated sewerage system. If donors were prepared to meet the recurrent costs of service provision rather than only contribute to capital projects South Tarawa could have a water supply and sewerage system to meet its needs and the annual cost would be well less than the estimated economic burden. It may well be that the few better off households in South Tarawa could be charged for the service provided, but that is a different matter than the fundamental problem which is that the PUB is not adequately funded to do its job well. Believing that it can (or even should) expect to meet full operating costs from user charges in South Tarawa is a recipe for failure because funding it that way will always leave it with inadequate income for its requirements.