**Box 2:** A Revolution in Public Distribution Systems?

Any transfer program must include two basic elements – unique personal identification to indicate who is eligible for the transfer, and a system for making payments. New biometric and electronic transfer technologies have opened up an option of broadly based, transparency and potentially criteria based transfers that have only been a theoretical possibility up till now, except for high-income regions with small populations like Alaska. Applied well, these may provide important instruments for buttressing state-society relationships in MENA‘s states in a way that meets popular and legitimate objectives while limiting the proneness of human based identify systems to local capture and discrimination. Greater recourse to reformed ―blue-chip‖ transfer programs has the potential to substitute for inefficient fuel, food transfer systems and welfare public employment.

Over 450 million people in developing countries have had their biometric data recorded for a variety of purposes, and over the next five years this number is expected to triple, or even quadruple. In at least eleven countries it has been used to provide the identifier that underpins a transfer program. Some of these programs have been on a relatively small scale, experiments financed by donors with no link to any nation-wide registration system. Others, such as the Watan card issued by the Government of Pakistan, have drawn on national biometric population registries to enable the rapid creation of emergency support. The Watan card program is targeted to 1.5 million flood-affected households and draws on Pakistan‘s National Database & Registration Authority (NADRA) fingerprint database that covers some 96 million citizens. In Nigeria, biometric audits reduced the number of Federal Pensioners from 97,000 to 60,000, a cut of almost 40%. India is now poised to create the largest biometric database in the world. In early 2009, the government announced that they would create a national ID program for its 1.1 billion people, with the goal to enroll 600,000 people in the first five years.

In December 2010 Iran launched a massive program of direct transfers using electronic transfers into bank accounts, as a mechanism to compensate citizens for the removal of huge subsidies on food and fuel. In the first stage of the program, bread prices were tripled and fuel prices increased by a multiple from very low levels of around 7 cents/liter. A total of $15 billion was transferred to 20 million families through payments of $80 per family into bank accounts; this first installment was intended to cushion the increase for two months. Subsidies reached some 60 million people, about 80% of the population, with richer citizens tending to be excluded. In South Africa, pensions and other social payments have been delivered using biometric identification, smartcards and electronic transfers for many years.

|A powerful argument for direct, transparent, transfers is that in their absence many countries are forced into<br>something worse. A particular strength of electronic systems of financial management is that they<br>automatically generate an auditable trail which, in the case of biometric registration and payment|
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|identification, runs all the way to the final recipient. A second argument that a ―transfer-out-tax-back‖ system<br>will improve governance and accountability. The need to tax citizens has been an essential component of the|
|process of state-building; it has both forced states to develop capacity and encouraged demands for<br>accountability to the public for money spent. There are a number of technical issues around the design of|
|such large scale transfers, including incentive effects, whether citizens consume or invest these proceeds,<br>averting volatility in transfer dependent on resource revenues and their operational feasibility and<br>accountability.|

|The deeper political question is whether MENA‘s leadership now has a greater appetite for availing|
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|themselves of the new technologies to meet pressures for greater inclusiveness with sustainability. In the<br>current environment, citizens may be skeptical of nationwide identification systems, suspicious of any<br>program that helps government monitor them in any way. Alternatives have focused on programmatic roll-<br>outs around pensions, demobilization, and disaster relief. The current situation may offer the opportunity to<br>proactively seek to launch credible programs, rather than revert to short term reactions and ad hoc rent<br>dissipation.|

_Source:_ Gelb and Decker (2011) 21