27th July 1997

For many years now, Sri Lanka has basked in the glory of being one of the few Third World countries to consistently show impressive social indicators. Statistics compiled by multilateral agencies like the United Nations and the World Bank tell us that Sri Lanka is far ahead of most other developing countries in terms of literacy rates, levels of education, mortality rates, medical facilities, etc.

Our officials are also fond of touting Sri Lanka's health care system as a "model" that should be admired and followed. However, a few visits to the National Hospital, some private hospitals in Colombo, and some rural hospitals will reveal that Sri Lanka is far from the model it is made out to be.

The co-existence of public and private providers in the medical system, with little regulation and quality-control, has resulted in a disturbing dichotomy. On one hand, public hospitals have impressive emergency treatment and intensive care capabilities in terms of both equipment and staff. The majority of regular wards, however, are dirty, over-crowded, sparsely equipped, poorly staffed, and above all, badly managed.

At the National Hospital, many wards seem like temporary structures that have, over time, been accepted as permanent. In some cases, the half-walls built around the ward are insufficient to keep out the rain.

On the other hand, most private hospitals do not possess impressive emergency treatment and intensive care capabilities. Many have the same or better equipment but cannot equal the top public hospitals in terms of experienced doctors and nursing staff. Some private intensive care units (ICUs) do not even have doctors present 24 hours a day.

general care provided in the regular wards, however, is far superior to that of public hospitals. Even though the attitude that prevails in private hospitals is completely mercenary, the service is not customer-oriented and rarely matches the price one pays for it. The bill for a day's stay at a private ICU can be higher than the average person's monthly salary.

Many users also observe that private hospitals have a tendency to keep non-critical patients in the ICU and on expensive equipment for longer periods than necessary.

For users of the health care system, there is nothing in between these two options. Even in the country that is supposed to be a "model," one cannot get decent health care at a decent price. The shame of it is that this rot in our hospital system is not due to a lack of qualified doctors and nurses and not due to a lack of basic medical infrastructure. Rather, the rot is due primarily to bad management.

Sri Lanka has a greater number of qualified doctors per capita than most other developing countries. We also have all the other basic resources to build an excellent health care system. The state of both public and private hospitals suggests, however, that some missing element prevents the Sri Lankan health care system from being a true "model."

The crucial, missing element at this point is the management capability required to take these resources and make them work to their maximum potential. We need a few tough, efficient administrators to put the system right - to put it back on track again.

Another reason why our health care system has suffered is that users have not asserted their right to quick, effective, and respectful service. Instead, they have succumbed unquestioningly to a system in which patients are at the mercy of doctors and are not encouraged to ask questions or demand justifications. The concept of patients' rights remains one which is little explored or pursued in Sri Lanka.

For this reason, medical malpractice law suits should be encouraged in Sri Lanka. The threat of such law suits will make doctors more careful, more responsive to patients' needs, and more respectful of patients' rights. In addition, hospitals will also have to be accountable for the treatment and care they provide to patients.

The health care system in any country is a crucial part not only of the economy but also of the welfare system. For many years now, Sri Lankan governments have been resting on the laurels of decades of positive social indicators and have ignored the unpleasant realities of our medical system.

We must make an effort now to overhaul the health care system - in both the public and private sectors - and ensure that both sectors provide quality medical services.

In doing so, we must keep this firmly in mind - the health care system must be built around the patient, not the doctors, nurses, or administrators.

Following are edited excerpts of remarks given by IMF Managing Director Michel Camdessus at the Economic Club of New York in New York

The IMF and the World Bank were founded to help restore economic stability and growth in the aftermath of World War II. Half a century later, they are still working to promote these goals, but in a world that has changed.

In particular, the international economy is now dominated by massive private capital flows that are opening new opportunities for investment, trade and growth to an ever-larger number of countries. Last year was another record year.

Net private capital flows to emerging market economies reached $235 billion - five times the level in 1990. So, one may well ask: do we still need the IMF? In my view, the answer is a clear "yes." It is true that global economic opportunities are increasing, but many countries are not yet able to take advantage of them. Moreover, for countries that do tap private capital markets, the risks have increased.

The market rewards what it sees as sound economic policy and punishes - sometimes resoundingly - what it perceives as policy weakness. Hence, the upside potential for good economic performers is substantial, but the latitude for policy mistakes remain, and the cost of mistakes can be much greater. This is why our 181 member countries are increasingly looking to the IMF to help enhance the stability of the global economic and financial system and increase the prospects for high-quality growth in ways that individual countries are not as well equipped to do. The IMF is called upon to:

* encourage countries - through its policy advice, technical assistance, and, when appropriate, financial support - to pursue the sound economic and financial policies required to attract private capital and thereby expand opportunities for investment, trade, and growth;

* through this emphasis on appropriate policies, reduce the risk of a sudden reversal of capital flows and their potentially destabilizing spillover effects;

* when crises do occur, ensure they are dealt with in ways not detrimental to international prosperity; and

* provide a forum in which members can discuss and learn from each other's policy successes and failures, assess global economic developments, and, to the extent possible, diffuse emerging problems before they become major crises.

The IMF can hardly expect to forestall every crisis, but we do believe that prevention is better than cure. We have thus taken a number of steps both to strengthen the IMF's traditional surveillance over member country policies and to broaden its scope.

* capital account liberalization. The benefits of an open and liberal system of capital movements are widely recognized.

But in order to have full access to private capital, countries have to open their capital accounts. Up to now, the IMF's mandate was practically limited to the current transactions.

Now, the membership agrees that the IMF's charter should be amended to call specifically on the IMF to promote capital account liberalization and to give the IMF appropriate oversight over restrictions on capital movements.

* financial sector soundness. In many countries, poor bank management, weak supervision, and unfavourable macroeconomic conditions have left the banking system in a perilous state.

Moreover, when the banking system is weak, countries are often reluctant to tighten macroeconomic policies when they should, for fear of provoking a banking sector crisis. In these circumstances, a banking crisis is an accident waiting to happen.

From the IMF's perspective, the main emphasis should be on strengthening internal bank management and reinforcing market discipline over banking practices. There is also a clear need to improve bank regulation and supervision.

The IMF has pointed to the need for a set of "best practices" that are internationally recognized and applicable in countries at varying stages of development. We have indicated our readiness to help disseminate these "best practices" through our policy discussions with member countries. Important steps are now being taken in this direction - such as the Basle Committee's "Core Principles for Effective Banking Supervision."

* transparency. Since market perceptions determine where capital will flow, there is now a much higher premium on accurate information about country economic policies and performance.

The IMF is actively encouraging all countries - especially those tapping, or hoping to tap international capital markets - to improve the economic and financial data they provide to the public.

* marginalization. In this era of global markets, countries face a stark choice: either integrate into the international economy or become marginalized from it. This marginalization is not only the source of much human misery, but also a drag on world growth, and increasingly, a threat to peace.

Traditionally, IMF assistance has focused on helping countries correct macroeconomic imbalances, reduce inflation, and undertake the key structural reforms needed to improve efficiency and expand production.

But increasingly, we find that a much broader range of institutional reforms is needed if countries are to establish and maintain private sector confidence, and thereby lay the basis for sustained growth.

These reforms - the "second generation" of structural reform - include a simple, transparent regulatory system, an independent and professional judicial system, and a government that makes cost-effective use of public resources.

The IMF's approach is to focus on those aspects of "good governance" most closely related to our surveillance over macroeconomic policies, such as increasing the transparency of government accounts and encouraging countries to reduce unproductive public expenditure in favour of investments in health, education, and basic infrastructure.

This is where the IMF is heading. Now, I turn to what it takes to get there: the financial support of the IMF's shareholders, especially its largest shareholder, the United States.

The IMF is a financial cooperative. On joining, each member country subscribes a sum of money called its "quota." When a member encounters a need for temporary balance of payments financing and "borrows" from the IMF, it exchanges a certain amount of its own national currency for an equivalent amount of currency of another member in a strong balance of payments position.

The borrowing country pays interest at a floating market rate on the amount of currency it is using, while the country whose currency is being used receives interest. When it comes time to "repay," the country exchanges the hard currency it is using for its own national currency.

For a country - rich or poor - subscribing to a quota increase is like putting money in the bank: it does not reduce net worth or increase the budget deficit. The United States, for example, considers its quota subscription an exchange of assets with the IMF, not a budgetary outlay.

In fact, in many years, the United States has actually made money on its position in the IMF through the interest it receives on other countries' use of dollars and the exchange rate gains it has realized on its SDR-denominated position.The economic history of the world over the last fifty years is marked by many occasions when the United States exercised its leadership to help strengthen the world economy: in successful trade liberalization rounds, in the reduction of the debt crisis, and in the economic transformation of Eastern Europe and the former Soviet Union.

It has been able to accomplish all of this, and at relatively little cost to the U.S. Treasury, in large part because it could work through the IMF and because the IMF itself has maintained its financial strength.

Our membership is now considering an increase in IMF quotas, to ensure that the IMF continues to have the strength and the credibility to fulfill its functions. Americans are well known for their pragmatism.Thus, I am confident that America will continue to recognize the benefits of a strong IMF, see what a miraculously good business it is, and give the IMF its wholehearted support.

- (IMF Survey)

The World Bank announced that it had provided $2.011 billion in loans, credits and guarantees to South Asia during the 1997 Fiscal Year (FY97) which ended June 30 states a press release. The Bank's lending commitments, through 19 projects, included US$1.385 billion from the International Development Association (IDA), the concessionary lending arm of the World Bank, and US$626.5 million in loans from the International Bank for Reconstruction and Development (IBRD).

Disbursements to the Region increased sharply by more than $400 million to total $2.668 billion.

Lending to South Asia in previous years was $3.01 billion in FY96 for 22 projects, $3.25 billion in FY 95 for 19 projects and $2.37 billion in FY94 for 19 projects.

The release states that the Bank's FY97 assistance program aimed to provide high quality services and innovative and efficient programs by working with partners and involving broad community participation. The main prongs of the Bank's strategy focused on helping countries improve their fiscal situation and push ahead with reforms that will increase saving and investment, attract foreign capital and thus increase the region's growth rate in a sustainable manner.

And, because social indicators remain weak, priority was given to complementing the reform effort with programs to assist the region's human development.

Among the projects which make up a sample of lending efforts to the South Asia region for 1997 was a Sri Lanka Energy Services Delivery Project A US$ 24.2 million equivalent IDA credit and a US$5.9 million grant from the Global Environment Facility (GEF) are being provided to improve rural access to electricity.

The project will encourage the use of environmentally - sound renewable energy technologies; reduce long-term demand for electricity through Demand Side Management (DSM); mitigate carbon emissions, and strengthen institutional capacity to deliver energy services through renewable energy and DSM.

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