Dear Shaheena Nisar,
I realise this is Shanta's blog but I am taking the liberty of commenting on your post since it also relates to an earlier post of mine on this blog (I hope that is okay Shanta). I feel that use of "market mechanisms" and "private sector involvement" are different ideas from "cost recovery" and from each other. I meant that water (for example) is a "market friendly" product in sense that price is a sufficient statistic and that one could therefore allow the private sector to take charge of its delivery (or use purchaser-provider splits within government) and either allow them to recover costs directly from the entire population; pay them directly; or give poor people vouchers / direct cash-transfers to help them pay for the water. Health is a lot more complex but potentially if one could use a "managed care" type product design once could argue that price once again is a sufficient statistic and a similar approach could be adopted using conditional cash transfers / insurance arrangements of some type (this is very different from simply doing insurance for hospitalisation and paying hospitals on a fee for service or even a DRG basis). In both these examples therefore there just may be an alternative to the "long-path" and the "longest/impossible path" (changing cultures and mindsets) through the use of "market-like" structures (such as purchaser-provider splits) even with government provision.
From my limited understanding of it, education simply does not fit this neat structure and without "long path" interventions, instruments such as vouchers may produce very distorted supply and consumption patterns and tools such as purchaser-provider splits (contract teachers and such like) would also have the same effect.
I think this distinction is important because it may help sharpen "long" path efforts and focus them only on a few sectors like education and potentially make it easier to make change happen and in a shorter time frame while using other potentially shorter pathways to address accountability / delivery problems in other sectors. Otherwise I worry that we will make no progress at all and the poor (and the rich and the middle class in cases like health) will continue to experience denials of service until the day when all the developing countries acquire the cultures and mindsets of the Scandinavians.