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Anna Diofasi supported the research of Nancy Birdsall and Alan Gelb. Before joining CGD, Diofasi worked as a research assistant at the Georgetown University Initiative on Innovation, Development, and Evaluation where she analyzed the impact of various interventions on maternal health in Kenya. Diofasi previously worked on identifying effective strategies to combat hunger and malnutrition at Humanitas Global and assisted with the implementation of youth education programs in Bolivia as a team leader at International Citizen Service. Diofasi holds a BA from the University of Warwick and a Masters in public policy from Georgetown University.
The World Bank’s new Program for Results (PforR) instrument is only the third financing instrument approved since 1944. The PforR portfolio is expanding rapidly and represents an appreciable part of “results-based” development finance. This paper analyzes the first 35 operations.
The Europeans are struggling with the question—and considering agreeing to effective fines on themselves if they fail to meet targets on formal acceptance of asylum seekers. We don’t agree that refugees, who are sometimes but not always asylum seekers in the countries where they reside, necessarily constitute a burden; the evidence is compelling that countries benefit from immigration, particularly if immigrants are already well-educated, working-age adults, as is the case with most of the Syrians fleeing war at home. Still, there are real economic, security, and political costs of hosting refugees when, as with the Syrians, the arrivals are sudden and substantial.
Given those costs, how should we think about the obligations of potential host countries? Should the question be framed as a moral obligation? Among recipient countries, should the obligation be greater for countries that are geographically closer, or more similar in religious, cultural or other dimensions? But what if they are poorer than other nearby countries where refugees seek respite? And is the obligation of a host country greater if it played some role in generating the conflict that created a refugee problem in the first place?
Developing countries are bearing the greatest “burden”
In the pie chart and table below, we make a start at thinking about these questions. And our calculations throw up some striking and disturbing truths. The pie chart makes clear that developing countries are bearing the greatest “burden.” It also shows the tiny “burden” the United States has so far accepted. As Americans, we are struck by that extremely limited role. It stands in striking contrast to earlier refugee episodes such as Vietnam and Cuba, when the United States accepted refugees in the hundreds of thousands.
The data we collated is presented in the table at the bottom of this blog, and provides more details of our findings. For each country where any Syrian refugees currently reside (whether they are seeking asylum there or not), we show the numbers of those refugees alongside the recipient country’s non-refugee population and its total economic size and current per capita income—and we provide a ratio of refugees to population size and to per capita GDP.
With the sole exception of Germany, with our rough estimate of 500,000 Syrian refugees (see sources and note for the table), the largest numbers of refugees are residing in Turkey, Jordan, Lebanon, Iraq, and Egypt—countries that are near to Syria and share to some extent the language and religion of most Syrians. (Proximity to home makes an eventual return seem more likely, but many of those refugees have been outside Syria for more than two years.) This is not surprising. With the exception of Sweden, these countries also have the highest ratio of refugees to population size—also not surprising.
But what is striking is that the nearby countries with high numbers of refugees by every measure in the table are also the poorest (on the basis of per capita income) of those listed.
Millions left in limbo
To be fair, it is also true that the United States continues to “accept” the largest number of refugees globally. Here, definitions matter. The very large Syrian refugee populations in countries like Germany and Turkey are residing there without permanent status or any certainty about their futures. Syrian refugees currently residing in the United States, like all refugees accepted by the US, have permanent status and a path to citizenship. That’s good, but it's also part of what makes the Syrian refugee crisis a crisis.
Countries like the United States that are ultimately willing to accept refugees on a permanent basis are exceedingly slow in doing so. Of the 10,000 Syrian refugees the US government pledged to resettle by October this year, fewer than 1,800 have arrived in the country thus far. And as months turn into years, millions of Syrian refugees remain outside the United States in limbo, unable to adequately provide for their own families or contribute to their full productive potential where they are – and increasing spending on humanitarian aid that could better be spent helping them settle abroad.
As American citizens and taxpayers (Birdsall and Morris) in a country of immigrants, whose greatness has been forged by immigrants, we find the situation troubling. Surely countries like ours can do better, satisfying security concerns while responding to the clear humanitarian needs presented by this crisis… and ultimately, as we have seen in prior waves of refugees, benefiting from the productivity, talents, and patriotism of our newest citizens.
Table 1. Estimated number of Syrian refugees by select host countries and host country characteristics
Sources: UNHCR, World Bank, Government of Canada, US Dept. of State, Die Welt, Al Jazeera, Voice of America, The Telegraph, The Japan Times
1 Estimated number of Syrian refugees from the ongoing civil war (from 2011 to today) physically residing in the country, regardless of asylum application status as of May 4, 2016. For Turkey, Lebanon, Jordan, Iraq, and Egypt the figures reflect the number of registered Syrian refugees in the country (as per UNHCR). For Sweden, the UK, and France, the figures reflect the number of official Syrian asylum applicants (as per UNHCR), though these are likely to be underestimates. The figures for Germany and Greece are based on government officials’ statements to the media and are above the number of officially registered asylum applicants (279,000 for Germany and 5,600 for Greece). The figures for Russia and Japan come from media reports and reflect the number of estimated asylum applicants in the countries. The rates of approval for both of these countries are reported to be much lower than for the European countries listed. For the US, Canada, and Brazil the figures reflect the number of refugees whose applications have been approved and who have arrived to the country.
The Millennium Challenge Corporation (MCC) was established to provide large-scale grant funding to poor, well-governed countries to support their efforts to reduce poverty and generate economic growth. However, the statutory definition of which countries are “poor” for the purposes of MCC candidacy is inadequate. Based solely on GNI per capita with a rigid graduation threshold, it does not portray a clear picture of broad-based well-being in a country. Using a new, comprehensive country-level dataset of median consumption/income, the authors explore the merits and limitations of such a measure and suggest how it might be applied as an additional determinant of MCC candidacy.
There is growing recognition of the importance of identification for sustainable development. Its role is recognized formally in target 16.9 of the Sustainable Development Goals, which calls for providing “legal identity for all, including through birth registration” by 2030. Identification is also an enabler of many other development targets, from social protection (delivering support) to financial inclusion (opening bank or mobile accounts and establishing a credit record) to women's empowerment.Having a recognized identity is crucial for achieving several development outcomes.
PovcalNet, the World Bank’s global poverty database, provides all kinds of country statistics, including mean income, the share (and number) of the population living in absolute poverty ($1.90), the poverty gap and several measures of income inequality, such as the Gini coefficient. But one thing it doesn’t provide is median income or consumption. The median is a better measure of “typical” well-being than the mean, which is always skewed to the right.
We’ve been waiting for the World Bank to add these medians to its PovcalNet database, but we got impatient and did it ourselves. By manually running a few hundred queries in PovcalNet, we now have (and can share with you) the latest median income/consumption data for 144 countries (using 2011 PPPs — more on our methods below).
By making this data public, we hope to encourage more development professionals to use the median in evaluating individuals’ material well-being in developing (and developed) countries and progress toward broad-based economic growth and shared prosperity. We also hope that wider use of the median will provide an incentive for the World Bank to publish the data in an easily accessible format along with the full distribution, in line with its open data policy.
Why the median?
Average or mean-based measures of income, such as GDP per capita, will always be higher than the median — the value at the midpoint — of that distribution, which is inevitably skewed to the right. So medians convey far better the material well-being of the typical individual in a country and have other advantages including simplicity and durability. The simplicity helps explain why the stagnation of the median wage is so often cited in the US press in the context of middle-class decline as the benefits of growth go to the top. Real median household income has been about $53,000 a year or $48 a day per person for a family of three. That puts median income per person in the US at only just about one-third of average income measured as GNI per capita.
A better example for the development community: the median reflects how much the person at the 50th percentile of the income distribution earns (or spends), giving us a better picture of the well-being of a “typical” individual in a given country. Take Nigeria and Tanzania: in 2010, Nigeria’s GDP per capita (at PPP) was $5,123; Tanzania’s stood at only $2,111. This suggests that Nigerians were more than twice as well off as Tanzanians. Yet, if we compare consumption medians, a different picture emerges: a Nigerian at the middle of the income distribution lived on $1.80 a day, while his or her Tanzanian counterpart had 20 cents more to spend, at $2 a day.
That difference is illustrated in the graph below, with countries plotted left to right according to their GDP and vertically according to their median income or consumption. The highlighted pairs, such as Nigeria and Tanzania, have very different GDPs per capita while sharing similar levels of typical well-being as measured by median income or consumption.
Using PovcalNet to extract the medians: data and very brief methodology
Despite the illustrative power of the median, the development literature still relies largely on GDP (per capita) or sometimes on the marginally more representative GNI (per capita). For the last five years, the data needed to calculate country medians has been available via the World Bank’s PovcalNet database. PovcalNet provides information about poverty and inequality across the globe based on over 800 representative household surveys and 1.2 million households in over 140 economies. It is a treasure trove for scholars, students, and development professionals, but it fails to live up to its full potential in its current format. In one query, one can view average monthly income, the share of the population below a user-determined poverty line, the poverty gap, the Gini index, and other, more obscure measures of poverty and inequality (see the screenshot on Brazil’s data below). But there is no easy way for users to check the median income or consumption for a country or to access a country’s full income distribution. There is also no way to download query results in an easily editable format like a csv or xls file.
A year and a half ago, our colleagues Justin Sandefur and Sarah Dykstra ran 23 million queries through PovcalNet over the course of nine weeks and made the resulting global poverty and income distribution data (using 2005 PPPs) available to the public. We didn’t attempt to repeat their herculean efforts, but we did create a dataset of median income/consumption for all countries available using the recently updated 2011 PPPs. Our median data was obtained in its entirety from the World Bank’s PovcalNet database. We use the latest survey year available and list whether the median is based on consumption or income data. We also note — as PovcalNet does — whether the data is grouped (C or I) or whether it represents unit-record data (c or i). For China, India, and Indonesia values for rural and urban areas are listed separately. The data were collected by manually entering a guesstimate for the given country’s median as the “poverty line,” and revising the guesstimate until the associated headcount was 50 percent. Deviations of up to 1.5 percent in the headcount associated with the median are possible.
Climate change is one of many global problems that pose risks to well-being for everybody in the world – and bigger, scarier, and harder to manage risks for poor people in poor countries. As with non-state terrorism, pandemic diseases, cybercrime, war refugees and microbial resistance to antibiotics, no one country, rich or poor, wants to act alone in dealing with these “global public goods” (in this case bads) since other countries will free-ride on its efforts. Countries have to cooperate; often leadership has to come from one or a few countries or the problem festers.
Some of these goods and bads we refer to as development-relevant global public goods (DR-GPGs). They include the “bads” that arise and persist in poor countries because their people are poor and their institutions are weak: Ebola in West Africa; deforestation in Indonesia. They also include “goods” such as clean energy breakthroughs, new vaccines and AIDS drugs, and new agricultural technologies for use in developing countries that America and other rich countries are well-placed to produce and help finance — but do so less than otherwise because of their public good nature.
1. Invest more at home. Increase public investment in the research, development, and deployment of development-relevant health, energy and agriculture from our rough estimate of $14.6 billion per year to $20 billion by 2020, especially in agriculture and renewable energy in light of a climate-challenged world.
A dollar spent on R&D at home can do as much and often more for the world’s poor as a foreign aid dollar spent abroad. The US is home to world-class research institutions and businesses who lead on innovative applications of new technologies. Scientists at the publicly funded National Institutes of Health (NIH) are at the forefront of developing new vaccines for diseases that claim millions of lives in the developing world like malaria, Ebola, and HIV. US public investment in renewable energy has yielded high returns but it lags behind investments in China and Europe. New technologies developed in the US can be deployed and scaled by a broad range of actors at home and around the world, including developing country governments and private businesses.
2. Increase the share of total US foreign assistance that finances DR-GPGs (e.g. to 20 percent from our current estimate of 10 percent). USAID and MCC could be committing financing to reducing deforestation in Indonesia and Colombia, including in the form of simply paying for verified reduced rates of deforestation. The US could be increasing support for such multilateral programs as the Clean Technology Fund that subsidize the incremental cost of clean energy (See Table 1).
3. Corral other countries in forging a clear mandate for the World Bank and the other multilateral banksto deal with DR-GPGs; the MDBs now work on an ad hoc basis with limited and fragmented grant financing through donor-funded trust funds. The World Bank is particularly well-positioned through its broad-based staff expertise and experience managing global funds and programs (such as the Global Environmental Facility) to coordinate a multi-stakeholder initiative on global public goods. However, only with US leadership and support can such a new mandate become reality.
Finally, the US could lead in calling for all countries to agree on how to define, measure and report annually on their domestic investments in DR-GPGs, and their contributions through their bilateral assistance programs and contributions to multilateral programs to such goods.
Table 1. Examples of potential US DR-GPG investments abroad
DR-GPG generation via investment in one country
Non-country specific DR-GPG investment
Via direct US (bilateral) financing of programs
· US agreement with Indonesia to finance the preservation of its tropical forests
· US contributions to CGIAR that go towards agricultural R&D
Via multilateral agencies/programs
· US contributions to the Clean Technology Fund that go towards developing a solar energy plant in Morocco
· US contributions to the WHO that go towards global infectious disease surveillance
The inclusion of “legal identity for all” as target 16.9 of the SDGs has propelled identity provision and ID programs to the forefront of development discourse. Effective identification is increasingly seen as a crucial step towards the achievement of several other development goals.
In fact, developing countries have been implementing new ID programs at a breakneck speed: the World Bank’s ID4D dataset shows that 26 low- and middle-income countries have started the implementation of a national ID program between 2010 and 2015 (see Figure 1 below). In parallel, biometric technology used for unique identification has been evolving rapidly both in terms of accuracy and (lower) costs.
To provide a (relatively) comprehensive picture of these rapidly changing trends, fast-evolving systems, and mushrooming applications is no easy feat, but we have tried to assemble a rough overview of those ID- and development-related topics that struck us as most relevant in the form of a Preliminary Discussion Paper. This paper serves as a background document for an upcoming CGD book on identification, biometric technology, and development that will offer both an overview of existing ID solutions and guidance for the effective implementation of ID systems.
Figure 1. The evolution of civil registration and identification systems, 1960-2015
The paper begins by briefly discussing the history of ID systems and clarifying the concepts of ‘legal’ and ‘official’ identity. It provides an assessment of who has official identity in the global context, using coverage data for birth registration, voter IDs, and national ID programs. It then explores the different institutional arrangements governing ID systems and the different levels of integration between civil registration, national ID registers, and program registers (electoral, social protection, etc.) in a number of countries. Four ‘frontier’ cases of digital ID are examined in more detail:
India’s Aadhaar unique identification program;
Estonia’s e-ID system, including its pioneering e-residency program;
The UK’s ‘federated approach’ to digital ID, GOV.UK Verify
Privately provided, ‘crowd-sourced’ identities as facilitated by online social- and professional networks.
A separate section illustrates how biometrics have contributed to more effective service delivery in developing countries, drawing on existing CGD publications on the role of biometric technology in cash transfers and its broader contributions to identifying and authenticating individuals in developing countries. Finally, the paper notes the risks and challenges associated with the implementation of ID systems such as data privacy and data protection, exclusion and discrimination, and the pitfalls of wasteful deployment.
This work is very much still in progress. We have started revising the outline of the preliminary discussion paper in preparation of turning it into a book and are in the process of identifying the gaps we still need to fill. We invite you to send us your comments so that we can publish a much-improved final product in a few months’ time.
Rapid advances in digital technology have opened up new possibilities for governments to interact and transact with their citizens. We have followed closely the evolution of biometric technology over the last five years. It has been deployed in the run up to elections to help clean voter rolls in over 35 low- and middle income countries; it has been used to uniquely identify beneficiaries in large health insurance schemes and to track patient visits for TB and HIV treatment; and it has revolutionized the delivery of cash transfers.
These recent developments in identification, combined with rising mobile phone ownership, broadening Internet access, and innovative payment delivery mechanisms, can be harnessed to transform the way states implement poverty-reduction programs and improve the lives of their citizens. Digital payments promise faster, more transparent, and lower-cost delivery for existing cash-based government transfers, and can also transform the way governments deliver subsidies. The difference could mean billions of dollars in savings. In addition to the large monetary benefits, direct digital transfers can also strengthen citizen oversight over government spending, reinforcing democratic processes. At the same time, the number of people with actual and potential access to digital payments is rising sharply: 62 percent of adults now have a financial account, and the number of mobile money accounts is growing by over 100 million per year.
In a new background paper, Dan Radcliffe reviews the evidence on the gains from digital payments and pinpoints four ways in which they can improve development outcomes:
Reducing fuel subsidies while helping the poor: according to recent IMF estimates, regressive pre-tax fuel subsidies cost government and their citizens over $330 billion in 2015 alone. Governments are spending (or foregoing income where sales from national production are below the world price of fuel) the equivalent of 20% of their revenues in several countries, including Iran, Bangladesh, Pakistan, and Cameroon. Turning price-based subsidies into digital payments can help cut the diversion of subsidized products, improve the welfare of the poor, and improve financial inclusion—as Iran’s and India’s experience with moving to direct transfers shows.
Taxing dirty fuels and reimbursing citizens: eliminating fuel subsidies is of course important not only because they are wasteful and regressive, but because fuel consumption carries many negative externalities. These externalities, such as serious harm to human health, need to be taken into account for energy pricing: fuels need to be taxed appropriately to enable governments and their citizens to counter the harmful effects associated with their consumption. If corrective taxes were applied to fossil fuels globally, IMF estimates indicate it would add $2.9 trillion to government revenues. However, a fuel price hike without any compensatory mechanism would likely hurt the poor and would also be politically unsustainable. This is where direct digital payments come in: the public could receive a digital payment so that the poorest customers are protected; in addition, a share (or perhaps all) of the revenue from fuel taxes could be directly delivered back to citizens.
Improving food subsidy programs: delivering food to the poor is an enormous logistical challenge and prone to leakages. The latest figures by the Indian Government show that 54% of subsidized wheat, 48% of subsidized sugar, and 15% of subsidized rice never actually reaches its intended beneficiaries. Physical delivery of food may be necessary in some areas, such as those with severe food insecurity and where food markets are weak or nonexistent, but for the majority of countries (digital) cash transfers deliver the biggest bang for the state’s (or donors’) buck. Giving individuals the freedom to spend on what they need the most delivers better results, while it can also boost local markets and local production.
Boosting government transparency and accountability: digital payments can strengthen the fiscal contract between citizens and the governments. Cash transfers offer the opportunity to introduce ‘tax payments’ at source, whereby a small tax would be levied on government payments. Combined with the use of transparency-enabling technologies that would enable recipients to monitor both the payments received and the ‘taxes’ paid, these transactions could improve accountability and build a fiscal contract between the state and even its poorest citizens.
To what extent these and other potential benefits from digital payments will be realized depend on a number of factors. An estimated 1.5 billion people lack a recognized identity globally; without an identity, they may not be able to open a financial account that would enable digital payment delivery. Governments will also need to have the capacity to uniquely identify beneficiaries to sustain public confidence in government cash transfer systems. Political economy constraints around the introduction of payments and identity technology may delay its implementation. Infrastructure constraints which limit coverage and the speed of implementation could also be a concern in a number of countries.
Upcoming CGD research will offer new ideas on how some of these barriers to implementing digital payment systems can be overcome and will explore the use of digital technology—particularly its role in identification—in achieving development outcomes in more detail.
In the wake of the global financial crisis, the IMF undertook a series of reforms to its lending facilities to manage volatility and help prevent future crises. The reforms included the adoption of two new lending instruments: the Flexible Credit Line (FCL), introduced in 2009, and the Precautionary and Liquidity Line (PLL), introduced in 2011. They are meant to serve as precautionary measures—effectively, as insurance—for member states with a proven track economic record. Yet, the IMF’s precautionary instruments remain underutilized.
In July 2014, the UN’s Open Working Group published its list of 17 sustainable development goals (SDGs) and 169 accompanying targets with the aim of outlining the post-2015 priority areas for international development. While the goals had already been published, the post-2015 development agenda is still very much a work in progress. Last Monday (Jan 19), I watched CGD President Nancy Birdsall speak to the UN about her vision of the sustainable development goals. She had a specific proposal for an additional target that would empower citizens to hold their governments and the international system accountable.
Nancy's remarks begin at 54:38.
While 17 goals might sound like a lot to tackle, (there are only 8 MDGs) they are, in fact, not too many. Rather, their multitude reflects a more inclusive process in the formulation of the post-2015 development agenda. They recognize that development today needs to be less about what poor countries ought to do to catch up and more about what both rich and poor countries can do together to address global challenges. In today’s world of climate change, epidemics, and cross-border terrorism, it is more evident than ever that the actions of those at one side of the world affect the lives of those at the other. The Open Working Group confronted squarely two of our (arguably) biggest global challenges: climate change and inequality. Climate change is an existential threat to all of us, whether rich or poor, though its impact will be the most devastating for the most vulnerable. Inequality, both across countries and within countries erodes accountability, inhibits the forming of global citizenship, and threatens global cooperation to tackle the many cross-border challenges faced by our generation. If globalization is seen as unfair, with its benefits being captured by a global elite, the citizens of the leading and emerging economies will likely see more international collaboration as a threat, not an asset.
The Sustainable Development Goals should focus as much as possible on empowering citizens to demand good government and policies in their own countries and at the international level. In order to make this happen, the targets and the indicators which back up the SDGs should be simple, accessible, and measurable. Every citizen in the world should see the SDGs as a mechanism by which they can hold their own government accountable, hold the UN system and the international governance institutions accountable. Measurable goals and targets enable both citizens to track progress first hand and civil society organizations to bring citizens the information necessary to hold governments to their promises.
Median income or consumption in a country is a good example of a simple and measurable target for the SDGs. The median conveys a great deal of information about poverty and well-being in a country. In many countries (like Lesotho, Malawi, or Zambia) the median is below $1.25 a day – in other words, more than half of the population lives below the international poverty line. The median is also robust and universal: if GDP growth only benefits the elite (the 1% or the 5%), the median will not grow; and the growth of the median remains a salient indicator for even middle-income and high-income countries, where extreme poverty had largely been eliminated.
Thus, every country should decide on a level of median consumption or income to pursue for the future - either as a target (the 170th) or as an indicator for inclusive and sustainable growth(SDG #8) and for reducing inequality within and among countries (SDG #10). Countries could choose the daily median income or consumption they will aim to reach by 2020 and then increase their targets and make new commitments in subsequent five year intervals, depending on what had been accomplished.
The United States has been at the forefront of providing several development-related global public goods, including peace and security via its contributions to international peacekeeping, the monitoring of international sea trade routes, its engagement in forums such as the Financial Action Task Force to stem flows of funding to terrorist organizations, and more. Yet it has not fully capitalized on its comparative advantage in research and development at home that matters especially for the world’s poor, or on its opportunities for globally transformative investments abroad in such areas as clean power and disease surveillance. We propose two areas where the United States should lead on providing even more transformative global public goods.
This paper addresses four misconceptions (or ‘myths’) that have likely played a role in the limited utilization of the IMF’s two precautionary credit lines, the Flexible Credit Line (FCL) and the Precautionary and Liquidity Line (PLL). These myths are 1) too stringent qualification criteria that limit country eligibility; 2) insufficient IMF resources; 3) high costs of precautionary borrowing; and 4) the economic stigma associated with IMF assistance. We show, in fact, that the pool of eligible member states is likely to be seven to eight times larger than the number of current users; that with the 2016 quota reform IMF resources are more than adequate to support a larger precautionary portfolio; that the two IMF credit lines are among the least costly and most advantageous instruments for liquidity support countries have; and that there is no evidence of negative market developments for countries now participating in the precautionary lines.
Some 2.4 billion people lack widely-recognized forms of legal identity. Over 600 million are children whose births have not been registered. How can these people expect to play a productive role – to hold bank accounts, register property, enroll for public services? How can wider access to identity – now recognized for the first time as a development goal in SDG target 16.9 -- help to achieve the SDGs? This was the topic of a panel discussion at CGD on November 3rd that brought together representatives from the World Bank, the US Government, the Government of India, and the Center to discuss what is needed to provide legal identity for all.
Times are changing. As explained by Mahmood Mohieldin, the World Bank President’s Special Envoy to the Post-2015 Process, the old model of “village” identification where everybody knows you and you know everybody is no longer adequate for mobile populations, more sophisticated economies, and governments faced with increasing needs to deliver services efficiently. The working paper co-authored by Alan Gelb of the Center and Mariana Dahan of the World Bank notes that at least 10 SDG targets require accurate identification, including access to social protection, disaster relief, financial access and the ability to register property. With the Data Revolution, digital information is becoming more central for development, and this has to also include the population, so that people can participate and assert rights. In line with growing demand, birth registration rates have increased globally from 58% to 72% in the last 15 years and over 80 countries have introduced new identity programs or are strengthening existing ones. Many, such as India’s Aadhaar ID program, are supported by sophisticated biometric registration and authentication systems.
Yet, not all identity credentials are created equal. In some countries, birth certificates serve as evidence of citizenship, while in others they do not confer any legal status. A national ID may be used for voting or to access health services in some places, while in others, people need to apply for separate pieces of identification to access different services. Poverty and gender remain critical barriers to identification in many developing countries. CGD Senior Fellow Mayra Buvinic, who leads our Gender and Development program pointed out that, while gender differences in birth registration rates are usually small, vulnerable individuals, like unmarried mothers, are less likely to register their children, paving the way for a long-term cycle of exclusion. In some countries, a marriage certificate or the father’s presence is required to register a birth, exacerbating existing social and financial barriers to registration. Identification is important for achieving gender equality but gender equality is also important to achieving the SDG identity target.
What needs to be done? Sometimes there is a need for more resources, including to strengthen processes of vital registration. However, often the priority is to improve the strategic use of resources, including those that are being provided to support a wide range of identity programs for different purposes. In a democracy, said Dharmendra Pradhan, India’s Minister for Petroleum and Natural Gas (in comments on video), subsidies are inevitable. The question is how best to deliver them, so that they reach those entitled to receive them. India’s JAM strategy involves the creation of some 150 million new bank accounts for individuals properly identified through the Aadhaar program, the largest such program in the world with over 920 million enrolled so far. Reform of the system of subsidizing LPG cylinders by shifting from low prices to direct transfers into eligible accounts combines pricing reform with financial inclusion and saves money by eliminating “ghost” consumers. Consumers can now also track the delivery of LPG cylinders, helping to increase transparency in the distribution process.
Development partners are also looking to strengthen cooperation within and across countries. A recent initiative at the World Bank, ID4D, is beginning to put in place a more systematic and strategic approach towards both strengthening registration and identification systems and ensuring that they contribute to more effective development policies and programs. Further progress in this area will need more coordination between development partners as well as the sharing of experiences between developing countries themselves, for example through initiatives such as ID4Africa.
Are there risks? Certainly. One priority is to ensure that identification does not become a barrier to access to services by the poor – in addition to being universal, said Tony Pipa, the US Special Coordinator for the Post 2015 Development Agenda, ID should be free and easy and convenient to obtain. Other risks include those of massive data breaches, such as have been seen in some countries, as well as the misuse of identity data, whether by the state or by private entities. Data security and privacy need to be taken into account when considering the strategic development of an identification system, together with the country context. It is no accident that target SDG 16.9 is embedded in SDG goal 16: “Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels”.
India has embarked on a program using biometric identification to enable a shift from blanket price-based energy subsidies to targeted compensation payments based on actual, individual energy purchases. Shifting to direct compensation can improve efficiency and help eliminate waste and corruption, while protecting the most vulnerable segments of the population from higher prices. If the Direct Benefit Transfer for Liquefied Petroleum Gas (DBTL) were applied across India, it would save India nearly $1 billion a year. Imagine the effect if other countries adopted similar programs.
Thirty-seven million ghost consumers?
The Indian government has long subsidized liquefied petroleum gas (LPG) sales to households while taxing commercial purchases. In this system, LPG cylinders must be purchased from government-licensed distributors who deliver to both domestic and commercial consumers. After exceeding a relatively relaxed 12-cylinder annual cap on purchases for personal use, consumers are required to pay a higher market price, which is still lower than the commercial price. The large gap between the subsidized price and the taxed commercial price has not surprisingly led to a flourishing black market. About one-third of reported domestic consumers — 37 million people — were believed to be “ghost beneficiaries”: buyers and colluding distributors who created fake accounts to get access to subsidies.
UID-based subsidy reform
India’s DBTL scheme relies on the country’s biometric-based Unique Identification (UID) program. The ID program has enrolled over 700 million people to date, making it the largest such initiative in the world. As part of the program, each citizen receives a 12-digit identification number (Aadhaar number) and can be authenticated by fingerprints or iris scans.
India launched the first phase of its DBTL scheme in 2013, encompassing 18 districts with high rates of Aadhaar enrollment. It extended the program to a total of 291 districts (out of 640 in total) before it was put on hold in March 2014. Under the scheme, LPG cylinders were sold at market prices, and households received a subsidy directly into their bank account after each unit purchased. To qualify for the subsidy, each consumer had to provide their unique identification number linked to their bank account.
What happened? Recent research by Prabhat Barnwal finds that fuel demand among individual households decreased by over 11 percent even though there was still a price wedge between market-based consumer and producer prices. These findings were supported by the changes observed after the suspension of the program in March 2014; sales to households reverted to pre-reform levels, while purchases in the nonsubsidized commercial sector decreased, suggesting a rise in black market sales. The black market price of LPG also tracked the reform: prices rose when identification rules became tighter and dropped again as they were relaxed. The direct transfer scheme’s review committee’s report points to similarly striking results: during the program’s brief implementation period over 600,000 illegal LPG purchasers were identified. The program has recently been restarted with some modest modifications.
Payback period for the UID program?
Given the current subsidy of Rs 568 ($9) per cylinder and 1 billion transactions per year, the elimination of a “ghost” subsidy share of 11 percent would represent savings of about Rs 57 billion, or close to $1 billion if the new system were applied across India. This is similar to the estimates of the DBTL review committee, which concluded that the program could save the Indian government about Rs 65 billion a year. The Indian government puts the unit cost of the country’s UID program at about $1.16 per head as of 2015, while the total budget for the project is around $2.2 billion for the period between 2009 and 2017. The costs of the Aadhaar program to date would thus be recouped in little over a year, and the costs of the entire program in around 2 years from savings on the LPG program alone.
Worldwide energy subsidies for petroleum products, electricity, natural gas, and coal are estimated at US$480 billion (in 2011). That’s 0.7 percent of global GDP or 2 percent of total government revenues. If more countries were to take on subsidy reform such as what India has attempted, the benefits to those in need of affordable energy would be huge, and the savings through increased efficiency and better ghostbusting would be immense. Biometrics makes it possible.
 On a post-tax basis—which also factors in the negative externalities from energy consumption—subsidies were much higher at $1.9 trillion; equivalent to 2.5 percent of global GDP or 8 percent of total government revenues.
 Calculating with 250 million total households and based on the gap between sales reported by the Ministry of Petroleum and Natural Gas and census data on the number of LPG user households, as described by Barnwal (2014).