The poor unprotected

Myriam Vander Stichele
National Committee for International Cooperation and Sustainable Development (NCDO)

Privatisation increased in the 1990s, when the government needed to decrease its debt burden to make the economy competitive and to adopt the EURO. The focus was on making public services cheaper rather than on safeguarding public interests or fulfilling its human rights obligations. Underestimating the need for regulation, supervision and enforcement, the State has abandoned its human rights obligations. The poor, particularly women, have little protection against price increases and unemployment.

Privatisationin different stages[1]

Sincethe 1980s, Dutch governments have used privatisation as a pragmatic instrumentto economise on the state budget and deal with the failures of stateintervention. Privatisation increased in the 1990s, when the government neededto decrease its debt burden to make the economy competitive internationally andto adopt the EURO. Beginning in 1989, essentialand non-essential services, such as telecommunications, electricity, postalservices and the social security system, were privatised. At the same time, thegovernment cut expenditures in many public sectors, including education andhealth.

Privatisationhas been characterised by a two-stage approach, avoiding the radical option ofselling off state assets immediately. During the first phase, state enterprisesare restructured and become independent state-owned companies that graduallybecome a market-driven, profit-making corporation. During the next stage, thegovernment sells all or part of the shareholdings. So far, the government hassold part of the shares of the companies that operate the regular postalservices (TPG Post) and telephone services (KPN), while some local governmentssold shares of local energycompanies. Only cable (television and internet), the “post bank” (thegovernment run postal service that also provides banking services), and extrapension provisions have been fully privatised. The water sector and the railwaysare still fully in government hands.

Regulatoryissues such as universal access for the poor, consumer protection (quality,prices, safety, etc.) and fair competition played a minor role at the start of the privatisation process. When new laws and semi-independentregulatory agencies were established, the government's obligation to respectrights under the international Covenant on Economic, Social and Cultural rightswas neglected. Attention to safeguarding jobs or income was achieved onlybecause of resistance by civil servants’ unions opposed to privatisation.

Somehighly publicised negative experiences, especially with the railways, have givenmany political parties and the public second thoughts and have currently stalledthe drive towards further privatisation. The need for stricter contracts andregulatory bodies to safeguardquality is now well recognised.However, national policy makers did not realise in time that their flexibilityto respond to privatisation has been substantially constrained by the European Union. For instance, no preference can be given to nationalproviders (which is now the case in the health service) or privatised companies,but competition for public procurement needs to be open to all Europeancompanies. The authorities cannot regulate the prices, buildings and operationof privately financed health institutions.[2]EU rules also prevent certain regulations that protect public interests.

Privatisationof water so far halted

Atthe end of the 1990s, the water distribution sector had been restructured intoapproximately 20 independent commercial companies owned by local authorities.However, the majority of policymakers and government members opposed actualprivatisation, arguing that profit-making motives could undermine quality,supply guarantees, sustainable management of water and public access.

However,the government’s decision against privatisation of its own water does notapply to developing countries. One of the companies owned by local government(NUON) has formed a joint venture (CASCAL) with a British company (Biwater) tooperate privatised water systems in different developing countries. Theseoperations have raised concerns about job cuts and universal access. In spite ofcomplaints by the Dutch Minister of Environment, parliamentarians and NGOs, inWTO negotiations on services (GATS), the Netherlands supported the EU's requeststo developing countries to open up the water sectorpermanently to foreign companies without guarantees for universal access andquality. At the same time, the government has been supporting many bilateral andinternational initiatives for sustainable and equitable water distribution. Thegovernment sees a role for the private sector to invest in water access for all,through privatisation or public-private partnerships, provided that thegovernment plays an important role to protect access to water for the poor.

Public-privateco-operation in the health sector[3]

Duringmost of the 1990s, the government not only cut the budget for health servicesbut also introduced market-oriented measures to make hospitals and other healthproviders operate as efficient private companies. The health system wastransformed into a public-private system inwhich private health insurance companies play an intermediary role between thepatients and health providers. Citizens pay these companies fees according totheir income. In addition to a “basic package” of health services, peoplecan pay higher fees for insurance coverage of more or better services, thusending the principle of equal coverage for all.

Thequality of health services delivered by the public-private system is reasonablygood but has been decreasing, while innovation has lagged. Problems of accessand availability plague the health sector: waiting lists (even for life savingoperations), insufficient capacity to deal with emergencies, lack of nurses anddoctors (half a million Dutch people have no family doctor[4]),and little choice in health services. Thus, the State is failing to fulfil itsobligation to provide an essential human right.

Someprivate health insurance companies took measures to improve coordination betweendifferent health services and shorten the time patients have to wait fortreatment, including use of private or even foreign hospitals.

TheState sets standards for private hospitals, requiring a permit, setting pricesand regulating their operation and finances. Private hospitals are not allowedto profit from “regular” care andcomplain that the State harms them financially. Therefore, they specialise in procedures that do not require patients to staylonger than one day.

Thenew Minister of Health declared in September 2002 that there should be much moreroom for the functioning of the market and private clinics. Health practitionershave rejected an increasing role for the private sector, sending patients toforeign clinics, or attracting foreign nurses. Concerns about the potentiallynegative impacts of greater private provision include:


·       damagingpublic service: private health care services focus on highly profitable servicesand rich clients, leaving fewer funds for less profitable services or leavingthem to the public sector;

·       priceincreases by private health services, which are expensive and not subsidised bythe State, make many specialised health services unaffordable for poor people;

·       deterioratingworking conditions and training opportunities due to pressure to cutexpenditures.

Impactof market orientation on education

Primaryand secondary education continues to be financed by the government, but the nationalgovernment has introduced measures to increase standards while maintaining ordecreasing expenses through market orientation, deregulation and autonomy.Together with budget cuts, these measures have led to increasing stress forpersonnel, a lack of teachers, an ageing infrastructure, as well as unequalquality and segregation.[5]

Dueto the poor quality of public education, in recent years non-subsidised private primary and secondary schools have popped up.Although the quality is considered much better, the fees are high. Thistrend towards expensive, high quality private educationis contrary to the Covenant (Art. 13.2.), which strives to provide freeeducation at all levels. One initiative for basic education has been sponsoredby businesses that are interested in teaching children the spirit of enterprise.However, the stability of corporate sponsorship, in which corporations fundschools in exchange for publicity, has yet to be determined.[6]Corporate sponsorship has increasingly allowed the private sector to enter allparts and all levels of education: in 2000/2001, 13% of the schools in primaryeducation and 27% of the schools in advanced education received this kind ofsponsorship.[7]

Conclusion:privatisation and social issues

Inthe processes of privatisation, the authorities have long focused on makingpublic services cheaper rather than on safeguarding public interests orfulfilling its human rights obligations. Policy makers have underestimated theneed for regulation, supervision and enforcement. For instance, ownership ofshares in the privatised companies hasnot given the government the influence necessary to secure public interests[8]:the price increases by the NS train company could not be stopped by the Stateeven though it fully owns the company. Other protections for consumers, citizensand workers, such as regulations and strict contract provisions, have notguaranteed lower prices, better quality or equal access.

Insectors in which the government has kept major control, i.e. health andeducation, budget cuts have resulted in poorer services and, consequently, moreprivate provision. The State has increasingly abandoned its human rightsobligation to provide sufficient and high-quality medical or education servicesto all. Orientation of these sectors towards the market conflicts directly withpublic interest.

Privatisationof anti-poverty policies

Poorpeople have little protection against the gradual increase in prices of someprivatised services (see box). No Dutch law forbids cutting off people fromwater or energy services when they cannot pay the bill. Governmentalpoverty-reduction measures only include subsidies for education and housing.Some private initiatives have shown improved quality but often at high prices,thus limiting access to those who can afford it. The governmental policy tofight poverty by getting people back to work has been privatised but has hadmany implementation problems. Private “reintegration” companies only helpthe most employable people go back to work while leaving out many others.

Women:the vulnerable domestic rearguard

Thelack of availability and quality of privatised (e.g. postal services, “postbank”) and “marketised” (e.g. health, education, trains) services makes itmore time consuming for women to access them and adds to the stress which theyexperience combining working and caretaking roles.[9]On days that children are sent home because of teacher shortages, women are morelikely to leave work. The good privatised services are also expensive; thus,poor women are at a disadvantage. Decreasing job security and more demanding jobrequirements (flexibility, etc.) have not made it easier for women to work inthe basic public services sectors. For instance, 60% of women family doctorsgive up their profession after 5 years, a result of the profession’s highdemands and insufficient resources of doctors and hospitals. Hospitalreorganisations increased the number of managers, mostly men, while those caringfor hospital patients, mostly women, had their jobs cut.


·        Energy

Increased efficiency can hurt consumers. In preparation for full privatisation in the energy sector, many measures have been taken to liberalise electricity production and distribution, but some companies are still owned by local authorities. Privatisation of electricity networks has been put on hold. Corporate measures to increase the efficiency of electricity distribution and face international competition have revealed the following problems:

o       prices for individual consumers have increased more than for business users[10] who can make price deals after liberalisation;

o       customer invoices are sent out late, making it difficult for poor people to spread out costs;

o       quality standards to guarantee electricity delivery, such as less investment in maintenance and security, have decreased;

o       the working conditions and collective bargaining contracts have deteriorated, and jobs are being cut;

o       strategies to compete internationally have not always been profitable. ESSENT and NUON sustained large losses after making expensive acquisitions abroad;

o       expensive advertisements to attract customers might nullify the cost savings of liberalisation;

o       incentives to encourage energy conservation have diminished.

·        Privatised pension funds

Markets do not always guarantee profits. Since the State only provides for a basic pension income, employers and workers contribute to private pension funds. The employers determine their own contribution. The administration of the private funds has been mismanaged. Pension funds invested 46% (June 2002) of their capital in shares in the national and international stock market. After years of enormous gains, the value of shares tumbled, and in 2002 some pension funds could not cover 100% of the pension disbursements. The state supervisor has ordered measures to address the problem, which might result in higher payments for pensions (up to 50%), foregoing wage increases in return for more contributions from employers, or paying out lower disbursements.[11]

·        Telecommunication

Private speculation has public costs. The government privatised all non-mobile telephone services by making the company operate as a private company (KPN) and selling a part of the shares on the stock market. In practice, there is only one private monopoly. The KPN has been praised for achieving more efficiency, innovation of many products, and stable or decreasing prices. However, it has been criticised for installing too much network capacity and pursuing unsuccessful strategies such as expensive acquisitions abroad. The resulting debt almost caused the collapse of the company, which was saved by job cuts, the sale or liquidation of some of its businesses, and a change to customer pre-payment. The government's shareholdership did not prevent KPN from becoming unsustainably indebted and putting the public interest at stake. The telecom sector specific supervisor (OPTA) does not have a mandate to supervise the quality of the services.

·        The national railways

Private mismanagement harms public service. The “privatisation” of the railways is generally seen as a disaster. In fact, all shares of the train company NS have remained in government’s hands, but NS has operated as a private company since 1992. Efforts to introduce competing private train services failed. Because of too few new trains, NS was unable to cope with the increasing number of passengers. Travellers had to cope with late, cancelled and overcrowded trains. Workers did not accept the new efficiency measures that eroded working conditions; strikes worsened the situation. This “private” monopoly was not supervised by a regulator to protect the interests of the consumers. After standards specified in the performance contract were not achieved, the government’s imposition of sanctions did not result in an immediate improvement of service.


[1] See W. Hulsink, “Tides in infrastructure politics? Experiences with privatisation, liberalisation and regulatory reform in the Netherlands”, paper, April 2001.

[2] “Europa remt privatisering zorgstelsel af”, Het Financieele Dagblad, 30 September 2000.

[3] See Sociaal en Cultureel Rapport 2002, by Sociaal Cultureel Planbureau, 2002, pp. 322-326.

[4] “Twaalf tips voor de zorg”, in Elsevier, 22 June 2002

[5] Sociaal en Cultureel Rapport 2002, op.cit., p. 552.

[6] Diedema, “Leren in een sprookje”, in Intermediair, 27 June 2002, p. 19.

[7] F. Adams, H. Beerends, P. Krooneman, “Sponsoring in het onderwijs”, for Regioplan Onderwijs en Arbeidsmarkt BV, 8 October 2001, p. ii.

[8] “Overheid als aandeelhouder weinig zinvol”, in Het Financieele Dagblad, 23 August 2002.

[9] “De veeleisende samenleving”, October 2002.

[10] “Energiemarkt trends: Eindverbruikersprijzen electriciteit”, at

[11] “Spoed geboden: babyboomers gaan met pensione”, in NRC Handelsblad, 1 October 2002.

The author is a researcher at the Centre for Research on Multinational Corporations, (SOMO). This contribution was coordinated by the National Committee for International Cooperation and Sustainable Development (NCDO). Special advice was provided by Alida Smeekes of the European Network Against Poverty and Gerard Oude Engberink, researcher and advisor on social issues to the city of Rotterdam.