Morocco needs good IT Engineers to reform the Compensation Fund

Morocco needs good IT Engineers to reform the Compensation Fund

By Hamza Mounhi

Morocco World News

Ahmedabad, India, March 2, 2013

For social justice to occur, we need strong aid mechanisms to lift people out from poverty. Morocco has for a long period of time had a blind policy in channeling public aid. Since independence, we have had one dominant mechanism called the “compensation fund”. Its main objective is to subsidize basic consumption products such as sugar, wheat or gasoline.

This year, we surprisingly found out that the mechanism is no longer sustainable. Fiscal resources of the state have reached their limits. Last year more than $5bn from tax payers’ money were dedicated to this fund serving only consumption purposes (in 2002, the figure was more than 10 times less; $340m). According to other figures, 5% of the richest benefit from 20% of the subsidies. The state takes money from all tax payers and gives back a considerable part to the richest.

Everyone agrees that the actual system is neither efficient nor just. It is also very costly. The whole debate nowadays is about reforming this fund. The first underlying question is how to target poor people efficiently.

India has found a part of the answer. In fact, given the high number of people living below poverty line (around 650 million living with less than $2 a day), state support is more than a necessity. The purpose is not only to ensure social justice, but also to avoid unrest and turmoil. Its limited resources have obliged it to find innovative solutions to better cater to the basic needs of population.

In 2010, Nandan Nikelan one of the founders of Infosys, the biggest software company in India resigned from his job to take up a new challenge. Partnering with the Central State, he created the concept of “Aadhaar cards”. The idea is to provide poor people with advanced identification cards that include in addition to basic information (name, family status, address etc.), blood type, income level, finger prints and image of the iris.

The income levels helps to determine accurately who the poor people are. There are many ways through which they could determine the income, one of them is to ask about the level of consumption and the number of household goods acquired during the last year (when was the last time they bought a TV, how many times they take tea per day, what level of education their children have attained, etc.)

Aid channeling comes naturally afterwards. In fact, India has a larger network of shops run by government. They are meant to sell products at lower price to people living below the poverty line. However, these shops were poorly managed before as there was no control on who has access to these products. Now, by equipping each shop with recognition machines, Aadhaar card holders can identify by registering their finger prints and if the results match the information in the data base, they are authorized to buy goods from the shop. Hence, monitoring and auditing the managers of these shops becomes a lot easier.

  More important than the aid aspect, Aadhaar gives relevant information about the consumption profile of a whole component of the society. And with this type of data, the state can allocate subsidizes efficiently. Even private corporations can use this data to conduct their market studies.

For Morocco, the good news is that we had already done the card part. Thanks to RAMED scheme, we know which population to target. We only need to find innovative ways to transfer funds; here we have many examples across the planet. Either through selling subsidized products only to poor people like the Adhaar example or by transferring cash using mobile banking, creating special accounts through micro-finance institutions etc.

In my opinion, this is definitely not the toughest part. However, in the process of this reform we should not forget the middle class and I am happy to see that our government officials are aware of this aspect. Supporting only the lowest category of society will create new poor coming from the middle class, as they will have to pay the real price for all the products and make this effort obsolete.

The task is indeed very challenging.  And here, my opinion would tend toward rethinking our fiscal system to make it more just. In fact, most of middle class population is paying for services it never uses. For example, they send their kids to private schools and when they get sick they go to private clinics and yet they pay taxes for the same.

In a just society, we should pay for things that we get. It is easier said than done, but what pushes my reasoning toward this direction is that  if we are able through technology to give money to a certain category of people for a certain objective, why  can’t we reverse the equation and think of a way to take money from a certain category for certain purposes. This type of measures would drastically reduce the fiscal burden for the middle class and improve significantly its purchasing power.

The task is definitely not a synch. While we should e wish luck for those in charge, we should keep reminding them that failure is not an option.

A final year student at HEC Paris, Hamza El Mounhi is now completing his education in India at the Indian Institute of Management-Ahmedabad.  He is very interested in development issues, focusing mainly on education, healthcare and social entrepreneurship. In his articles, he will bring to us India’s successful innovations in these fields and see to which extent they can present a solution to Morocco’s challenges. He is also a blogger and has been active member of several associations and NGOs. He writes also in French and has his own blog (http://indiaandmorocco.wordpress.com/). Email: hamza.elmounhi@gmail.com

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Join the Conversation. What do you think?

  • Abdellatif Laklida

    It’ s a pleasure reading an such a well structured article written by a young Moroccan concerned with developmental issues. Nevertheless, I have three major challenges that will certainly affect the reform of the compensation fund:
    - absence of a reliable database of the standards of life of the population.
    - the informal sector contributes significantly to the GDP in Morocco, and many citizens with high undeclared incomes would benefit more than others whose income is officially known.
    - the middle class would suffer seriously, which would affect social and political stability as well as economic development.
    - the government might be faced with a larger portion of the population applying for the direct subsidies: e.g. Students beyond 18, people who do not have permanent jobs, people who lose their jobs, families who lose their parents on a daily basis, and the list is long. We have to bear in mind how inefficient and bureaucratic our administration is.
    - prices of all products will increase with a rate higher than the predictions declared by the officials so far as they affect energy, a rate that cannot be covered by the official subsidies suggested so far.
    - CORRUPTION, absence of transparency and of credibility of public policies because of past and present practices.
    A wonderful idea to learn from experiences of other countries,at least at the technical level, but a sincere, well-structured, open dialogue should be initiated as such a decision might have repercussions of extreme importance on the country and on society.

  • Youness Radi

    good stuff…
    the fact of the matter is the Compensation Fund is the only return moroccans get from their taxes .. I am speaking of the middle class and upwards … we don’t get free education , we go to private schools . we don’t get free healthcare , we use our private insurances . we don’t get free infrastructures , highways are expensive . we don’t get good public transportation system …. basically we don’t get anything in return for our taxes if it was not for relatively cheap bread , gas , sugar etc … take that away from us and it is a disaster …

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