In most low and middle income countries the private sector accounts for 60-80% of outpatient care and 40-60% of inpatient care. Yet aid agencies have largely ignored the private sector, severely limiting their impact. This week a small meeting organised by the Centre for Global Development in Europe discussed how attitudes might be changed. Some of those at the meeting (which was held under Chatham House rules) had been running a three day course on the private sector for 30 people from the Department of International Development, showing that attitudes are beginning to change.

The words “private sector” immediately create antibodies, particularly in countries like Britain where health is largely in the public sector, but it’s important to understand what is meant by the private sector. Mostly it’s not big for profit providers but rather a whole variety of informal, small scale providers together with NGOs, faith organisations, pharmacies, distributors, and others. Because of this wide range many have preferred the term the “non-state sector,” but, as was pointed out at the meeting, it is mostly a market—and the words “private sector” help people to remember that.

Why, asked one speaker, have aid agencies including non-governmental ones, concentrated on the public sector and so “missed most of action?” Possible reasons might be that most aid has been government to government, that most people working in aid are “public sector types,” and that it is simpler to provide aid to the public sector rather than try and develop the private sector. Even in the World Bank only one of its 150 health advisers works in the private sector.

A related problem with health development is that almost nobody evaluates “what is left behind” after the development programme has finished. In contrast, food aid has moved on—from sending food in response to a famine to helping develop local markets in food production and distribution. The problem is related because clearly if most health services are provided by the private sector then it is the private sector that must be developed. Indeed, short term programmes around specific diseases may “crowd out” local systems. (“Crowd out” is economist speak, but I’m sure you get the point.) People at the meeting wondered if the fashion for universal healthcare would inevitably oblige aid agencies to help develop the private sector.

Although there has been little aid activity with the private health sector, there has been some—particularly around “social franchising.” “Social franchising,” says a leaflet  from PSI ( a global aid agency), “works by creating a network of healthcare providers that are contractually obligated to deliver specified services in accordance with franchise standards under a common brand.” These providers are usually the local informal providers. Social franchising provides 16% of services for patients with TB in Myanmar, a quarter of family planning services in Pakistan, and some services in many low income countries. The movement is growing, but those at the meeting asked whether those funding the programmes were thinking about the long term.

The fundamental problem for the aid agencies, argued one speaker, is the taboo against the private sector, which in turn leads to a lack of understanding of the private sector, which means that aid agencies are uncertain what to do and how to ensure accountability. Furthermore, developing the private sector is a long term enterprise that if evaluated after five years is almost bound to look like a failure. This is perhaps a problem with all development (and other enterprises), and one speaker suggested that “politicians always make the wrong decisions because they think short term.”

“What should I say to the Secretary of State if she asks me tomorrow what might be done” asked one speaker. Firstly, it was suggested, help strengthen the mechanisms essential for market development—trade and professional organisations, regulation, and capacity to manage contracts. Secondly, encourage programmes like social franchising, but insist that those involved think about market development over the next 10-20 years. Thirdly, promote private investment in hospitals and other health infrastructure and programmes. Fourthly, think long term.

What’s needed, said another speaker, is to promote stewardship, learning, and capacity building. “Let’s move forward,” she said, “and try to make some new mistakes.”

Richard Smith was the editor of the BMJ until 2004 and is director of the United Health Group’s chronic disease initiative.