www.ifc.org/thoughtleadership NOTE 62 • JAN 2019 Service Performance Guarantees for Public Utilities and Beyond—An Innovation with Potential to Attract Investors to Emerging Markets Emerging market countries require substantial foreign investment for development, economic growth, and poverty alleviation. There are multiple challenges to attracting this investment, however, ranging from political and economic instability to corruption, poor security, and small market size. An additional challenge is inadequate delivery of key services like electricity and other utilities that private firms and investors rely on. Service performance guarantees are a promising approach to addressing this issue. These guarantees enable firms to purchase protection against poor or insufficient service delivery, and they may work particularly well in industrial or export processing zones by ensuring that shortfalls in service delivery are measured, reported, and addressed in a timely manner. For emerging markets, foreign direct investment (FDI) is or infrastructure investments, other types of guarantees are critically important. Beyond providing much-needed capital, common, including partial risk or credit guarantees, credit FDI contributes to productivity growth through managerial enhancements, surety bonds, or simply letters of credit. and technological knowledge transfer. Such benefits are most beneficial to countries with the lowest levels of capital A New Idea: Service Performance Guarantees accumulation and leveraging of technology.1 It is possible to extend available guarantee instruments Unfortunately, these countries face barriers to attracting to encompass a wider range of non-commercial risks, FDI. These include the limitations of small markets, poor and to integrate guarantees more centrally into reform security, and macroeconomic and political instability. and investment programs supported by donors. Service Some of these are entrenched and yield only to incremental performance guarantees, or SPGs, are contracts in improvements in the short term. 2 However, a large volume select economic zones between zone hosts (including of economic literature suggests that there are other barriers governments) and zone operators (manufacturers, traders, that can be more readily addressed with changes in policy and other goods and services providers). Issued as bank or and the deployment of public resources. These include insurance type guarantees, SPGs allow private firms and addressing low quality physical infrastructure, lack of investors to secure protection against poor service delivery financial sector development, and weak institutions.3 by an economic zone’s authority. To help firms mitigate risks inherent in emerging These guarantees trigger pay-outs when service delivery economies, international financial institutions (IFIs) standards fall short of those expected or agreed to. SPGs offer guarantee products such as political risk and credit may work particularly well within export processing zones guarantees. Trade finance guarantees have escalated in the or other defined industrial spaces, and especially in newly aftermath of the 2008–09 global financial crisis, which saw industrializing countries. Donors or other entities can the withdrawal of some prominent private insurers from provide a first-loss guarantee fund to back up the local emerging markets. On transactions that involve real estate authority that is providing the guarantee. 1 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. SPGs could help attract the large infrastructure investments Group plc, Société de Promotion et de Participation pour la badly needed in emerging markets. Their creation would Coopération Economique, and many others. The fact that accompany the broader political risk guarantees necessary these organizations are bilateral or multilateral agencies to bring investors to infrastructure projects. In limited may provide an additional source of comfort to investors settings, SPGs may increase government accountability since, as is the case with the multilateral agencies, the host to investors, and by doing so increase the amount of country will generally be a shareholder of the institution investment and jobs created. For all these reasons, SPGs providing the guarantee, which can be a powerful deterrent can be viewed as a first step toward persuading investors to to government actions that may affect investments. enter an emerging market country. MIGA, the World Bank (IBRD/IDA), and IFC offer different types of guarantee products. For example, non- The Relationship between Service Delivery and FDI commercial risks that MIGA covers under its political In emerging markets, the investment climate often leaves risk insurance include breach of contract, war and much to be desired. While countries differ in many civil disturbance, currency convertibility and transfer ways, assessments of their business climates often note restrictions, and expropriation. The variety of coverages the limitations of small markets, poor security, and may be offered across a variety of projects, including macroeconomic or policy instability. The assessments also public-private partnerships for infrastructure investment, typically flag the high costs and idiosyncratic risks that subject to certain eligibility requirements.7 result from poorly functioning infrastructure, as well as MIGA’s guarantee is a very effective instrument to manage institutions that provide services to business. Business and mitigate non-commercial risks, which are inherent in climate assessments have diagnosed these problems over agreements with government parties. Two examples of non- several years and provided objective measures of some commercial risks that MIGA may cover under its political problems, in addition to investors’ subjective assessments of risk insurance product are: different barriers to their businesses. • Breach of Contract: Protects against losses arising from More objective measures include the World Bank’s Doing the government’s breach or repudiation of a contract Business indicators and quantitative estimates of the with the investor (for example a concession or a power high costs of unpredictable power outages and other purchase agreement). challenges that reduce the profitability of firms.4 Subjective assessments often cite poor power supply, macroeconomic • Non-Honoring of Sovereign Financial Obligations: instability, and poorly functioning services, which in some Protects against losses resulting from a failure of a cases are due to corruption.5 sovereign, sub-sovereign, or state-owned enterprise to make a payment when due under an unconditional and For foreign investors considering investing in a developing irrevocable financial payment obligation or guarantee country, country risk stems not only from the possibility of related to an eligible investment. 8 expropriation of resources or arbitrary changes to the law.6 It also comes from unpredictable service delivery. Therefore, MIGA’s insurance products can be used in a broad range mitigating the risk of poor quality service from public of sectors, including infrastructure and service sectors, utilities and bureaucracies could help emerging markets which involve long-dated assets, government off-take risk, attract more FDI. Doing so requires that improvements in and local currency revenues. However, the data suggest service delivery be funded and realized. Equally important, that manufacturing and agriculture projects, which are in however—especially in the short term—is the need to signal the key job creation sectors in low-income countries, are to investors that the government is committed to bringing not the major direct clients for such guarantees, but show about and sustaining these improvements. significant growth potential.9 Existing Guarantee Mechanisms Political risk guarantees may cover a standard set of risks that typically include non-commercial risks such as currency To reduce risk for investors, guarantees are currently inconvertibility and transfer restriction, expropriation, war, offered by many bilateral and multilateral institutions, terrorism and civil disturbance, and breach of contract. including the Multilateral Investment Guarantee Agency (MIGA), IFC, several regional multilateral development Service performance guarantees could expand the suite of banks, the Overseas Private Investment Corporation, CDC guarantee products offered by the WBG by covering risks 2 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. that existing guarantee products don’t cover; they could be revenue will materialize. A judicial bond will be issued to made available for certain investment structures that are cover a tax obligation that is claimed by tax authorities currently not eligible for coverage under existing products; or but is disputed by the concession holder. These are a few they could supplement existing products by helping expand situations where surety bonds provide sustained assurance the scope of coverage through loss sharing mechanisms. that contractual obligations will be honored. Unfortunately, use and application of surety bonds in emerging markets is Surety Bonds as a product providing a still very limited. And whenever surety bonds are required performance guarantee for Local Enterprises (typically on large contracts where the beneficiary is a government agency or a large non-government organization), One product line providing a kind of performance guarantee small and medium-size construction firms tend to be unable is the surety bond. Such bonds remain strongly underutilized to access the product. Such firms typically lack the expertise, in emerging markets, with the exception of those with strong quality of documentation, and financial strength to qualify ties to markets where surety bonds have a long tradition for the necessary bond, even if the local insurance market (for example, the United States, Germany, and France). offers the product. Surety bonds are used in emerging markets such as Mexico, Brazil, and Colombia, but are less prevalent in Africa and How can Surety Bonds by Used in Emerging Asia (other than China) or where certain market conditions Markets? linked to exports prevail (such as South Korea). However, the companies offering such products are keen to expand Surety bonds, especially when issued by insurers, can their activities to new markets.10  play a useful role in emerging markets, as they can free- up credit and capital that is currently used to provide the Surety bonds are a tripartite agreement between the necessary guarantees. Also, they allow banks to focus operator of a work or project, the sponsor or ultimate on lending for operational work (such as materials and beneficiary of that work or project, and a financial salaries), rather than on contractual guarantees. Developing institution (a bank or insurance company) that guarantees local surety bond platforms could also increase liquidity completion of the work or project. in the construction sector and enable local contractors Surety bonds provide financial protection, either through to participate in major infrastructure projects. This, in an insurance policy or an on-demand Letter-of-Credit turn, could boost employment, as contractors hire local issued by a bank. Both are available to the sponsor of workers, supervisors, architects, and engineers. It could a work or project—often a construction, concession, also drive the growth and formalization of businesses. As infrastructure, or energy/water supply project—and provide small, informal contractors grow larger, they become access to funds in the event of a breach of the work/delivery formal, registered businesses. And already-formal firms contract, concurrent with a default of the operator. Both could be able to bid on large projects. This could be greater guarantees are issued for a similar purpose, but insurance employment of young people, a significant challenge in companies’ additional value is that a) their bonds do not many countries in Sub-Saharan Africa, the Caribbean, and affect the credit limit of the operator, and b) insurers tend the Middle East. to ‘step into the shoes’ of the operator with the goal of completing the work or project rather than just providing Possible Providers of SPGs: Investment Zones funds. Surety bonds can be required for competitive bids, Just as hotels or shopping centers must compete for clients, construction contracts, latent legal obligations (such countries must compete for investors, especially when their as taxes), or anticipated future revenues (for airport industries are not closely tied to a strong natural resource concessions or toll roads). base. Countries, or more likely investment zones within For example, most municipalities and government agencies them, can thus be thought of as ‘investor hotels’ (or hosts). require construction bonds on public works projects, giving And they may have better negotiating positions in terms them financial recourse if the contractor is unable to finish of leverage or purchasing power than is the case with the work for financial and technical reasons. Workers may individuals. benefit from a payment bond that guarantees subcontractors Some countries have particular assets such as attractive and other workers get paid if the contractor defaults. Again, location, low-wage labor, or natural resources. But these under long-duration concession contracts (such as toll roads) may not be enough to attract robust interest from a wide government agencies will be assured that their expected 3 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. range of investors, unless the country or economic zone use of funds than a direct grant or subsidy, as the guarantee is able to offer services (including security services) at would be conditional upon the occurrence of a specific minimum acceptable standards. Like shopping malls, set of events. To cover the backup guarantee, an ‘external countries may also try to attract and retain a few high- reserve’ would be set aside out of the loan amounts. quality ‘anchor’ investors that can deliver externalities and Payouts on the performance contracts that exceeded the enhance a country’s reputation. Costa Rica’s courting of domestic reserve of the SPG would trigger calls on the Intel to gain the attention of other investors is an example.11 external reserve as well as a payment from the development Service performance guarantees can combine the different agency to cover the balance of the SPG. At the end of the elements of service guarantees. Both domestic and foreign prescribed period, any unused balances in the domestic firms would be eligible for these programs and would be and external reserve funds could revert to the country as a offered the opportunity by the government or the authority performance bonus for providing high quality services. managing the economic zone to purchase a contract Many design considerations relating to the structure of guaranteeing the delivery of specified services, at minimum the domestic reserve will be specifiable only in particular standards and for a prescribed period. At the minimum, contexts. For example, it is not possible to decide in guarantees would have to be provided for 12 months. Most advance for all contexts whether the fund should be an guarantors would be reluctant to commit to more than two accounting-level designation, a virtual fund (making the to three years, though a longer period—possibly as long as money paid in as contributions available to fund service 10 years—may be necessary to make it work.12 improvements), or an actual ring-fenced pool of money If offered within an economic zone, the contract could unavailable for spending. be embedded in the rental agreement for the premises or Making SPGs operational land. Drawing on the lessons above, contracts would be standardized rather than customized, except for those The SPG approach aims to strengthen incentives for for the largest firms. Although a form of protection delivering results. At the same time, however, it aims to or risk-transfer, SPGs cannot be implemented on an provide firms with protection against inadequate delivery individual basis, as is the case with political-risk and credit of key services, and to ensure that shortfalls in delivery are guarantees. The costs of SPGs would be prohibitive because measured, reported, and conveyed to a high political level. they would need to insure large numbers of firms and Implementing an SPG begins with understanding the provide payments to cover lapses in service performance biggest impediments to investment. Some of these that could be recurring and relatively small. impediments, such as macroeconomic instability, might The guarantee could potentially cover a range of services. be out of range for consideration. Others, especially in These could include, for example: the speed of processing the area of public services, could be within the scope of duty drawbacks and value added tax rebates as well as of a potential project, and thus benchmarked against other formalities; inspections and permits; the time needed international norms. Projects may already be addressing for port turn-around; and customs clearance at ports or these areas, and these could be pulled together under an airports for products made within a zone. Under certain umbrella private-sector development program that would conditions, it could be feasible to cover the quality and aim for an agreed set of performance standards, together reliability of power supply provided by the zone authority. with systems for monitoring performance. Within a The guarantees would be contractual, legal agreements particular economic zone that already has a management between the service provider—likely the operator of the structure, it might be more practical to pull the service zone—and the firm. standards together. The SPG contracts would be covered by a ‘domestic reserve’ In the first instance, firms within a zone would be offered or pool funded from contributions paid by the firms. This the opportunity to purchase a contract that provided reserve could be part of the lease agreements. The reserve protection against service lapses. To avoid an incentive for or pool could also be backed by a further guarantee providers to prioritize certain firms, it might be better to issued by an agency such as the United States Agency for insure against zone-wide performance, rather than insure International Development’s Development Credit Authority, for the services provided to individual firms. This could which already has authority to issue guarantees to domestic simplify monitoring and reporting. as well as foreign investors. This would be a more efficient 4 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. Compensation to a firm could be subject to two ceilings— zones in China are guaranteed call-backs within a fixed one related to the level of protection purchased, and the period to address their concerns. Ships passing through other to the volume of investment, sales, or exports. This the Panama Canal are guaranteed certain types of benefits is to ensure that firms are not able to profit by betting from the Canal Authority, while firms within the Subic on the performance of the economic zone operator. It is Bay Freeport Zone in the Philippines also enjoy various also necessary to ensure that the reserve fund can cover a types of guarantees by the zone authority. In several suitably large number of firms. Compensation would be states in Australia, both businesses and households are in recognition of poor service; it would not be practical to automatically compensated for loss of power by the utility offer contracts that cover business losses. Payments under provider. PacifiCorp in the United States compensates the program might be structured such that the absence of, customers for power losses according to a predetermined or reduced access to, power for x days results in a payment guarantee structure. And in many countries, authorities of y. If climate events are included (wind, flood, drought), that manage malls offer service guarantees (power, security, indexed triggers are likely to be more efficient. cleanliness) to the merchants located within them. Monitoring would be on a monthly basis, be part of the Of course, the difficulties and risks also need to be performance agreement between government and the considered. The first of these is over-complexity. The ministry responsible for the project, and be reviewed by a approach outlined above will only work if the performance tripartite commission representing government, investors, contracts are reasonably simple and easy to monitor. It might and the donor. Lapses in performance beyond specified be easiest to pilot them in enclaves, particularly in industrial levels would trigger automatic compensatory payments zones, where infrastructure and enabling conditions (for to the covered firms. If firms were in a special economic example one-stop shops) are in place for service delivery. In zone, payments could initially be in the form of rebates on this kind of setting, the zone operator is typically already rents and other service charges. Depending on the contract, offering a package of infrastructure, public services, and extremely poor service delivery could cause payments to streamlined regulation. A service performance guarantee can exceed fees, which would require access to reserve fund. more easily be added to such a package. The World Bank The total liability of that fund would need to be capped at currently has several projects that support such zones, and some level, with a limit set on the term of the guarantee these may provide an entry point. program (10 years, for example). The resources for the Credible and independent monitoring of the service reserve fund would come out of the allocation of assistance indicators is essential, as is their transparent publication. to the country, perhaps as a supplement to the business New technology is increasingly being used by firms in development funding. service sectors to increase efficiency, including monitoring Could SPGs actually work? Benefits and risks the timeliness of service delivery on a real-time basis. For example, India’s huge Aadhaar program, which provides As a complement to an ongoing infrastructure investment unique identity numbers for the country’s residents, collects program, the proposed guarantee program offers several real-time data on individual enrolments that can pinpoint potential benefits. First, it would add credibility to the error-prone operators or defective equipment. With some infrastructure program and serve as a marketing tool for the 50,000 enrolment stations, that program has already country. Without ‘picking winners’ it could play a role in enrolled over 600 million people. Technology continues encouraging investors, especially investors in export-oriented to create new ways to monitor a wide range of services, activities. Second, by emphasizing service delivery results, it including approvals, rebates, power supply, and transit.14 could provide a framework for investment and for building capacity, with a focus on setting standards and monitoring A second risk is that of severe losses due to inadequate results. Third, and perhaps most important, it could escalate implementation of reforms or overly optimistic projections policy dialogue and reform in the country’s investment of service standards. This raises two problems: first, limits climate. Serious performance lapses would be treated as to government capacity, and second, the span of control a breach of contract. The approach would restructure of the entity that is issuing the guarantee. SPGs will lack accountability, placing it on the country’s authorities and the credibility if issued by governments with inadequate multilateral and bilateral donors that support the program.13 capacity, or in countries experiencing political instability. Thus, SPGs are probably not a useful instrument for fragile Examples of service guarantees can be found around and conflict-affected states. the world. Firms located within some export processing 5 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. In addition, the operator of an economic zone cannot be Project Design: Span of Control expected to issue a guarantee covering the performance of a provider, such as a power company, that is outside LOW HIGH the operator’s range of influence or control. Either HIGH Country Credibility to Investors it will be necessary to severely constrain the scope of guarantees, or some arrangement will be needed to ensure joint responsibility for service delivery. A powerful coordination mechanism or steering group will be needed to bring together a zone’s key service Potential providers, which could possibly be done under the aegis for SPG of a country’s president or another senior official. Such an arrangement could greatly benefit such projects, which experience shows can be impeded by special interests or lack of cooperation. The credibility of the issuer and the LOW appropriate bundling of SPGs are both key to the success of the guarantees. These considerations limit the number of countries in which SPGs might be feasible, as well as their scope (Figure FIGURE 1 The potential space for a service performance 1). The approach is not practical in countries with poor or guarantee unstable governance, or those that have little credibility Source: Gelb et al. 2014. with investors. SPGs also may not prove attractive to countries that are already well-established with a broad A fourth risk is fundamental: Will firms come? Will SPGs span of investors. SPGs’ greatest appeal will be in well- convince firms to sign up in large numbers even if the managed countries that seek to broaden investments to SPGs do not cover business losses due to poor service? The a wider range of sectors and those that want to diversify response of firms will, of course, reflect the attractiveness of beyond the extractive sectors. The design of the operation the conditions. But even if just a few firms enroll, some of also requires that the agency issuing the SPG has a span of the SPG’s purposes will still be served. The guarantees will control wide enough to manage the insured risks. force the focus on standards and continuous performance monitoring. Shortfalls that trigger compensation out of A third set of risks is exposure. This could exceed resources the reserve fund supported by the donor will spur policy unless contracts are limited and service level standards are dialogue and even news events. realistic, taking into account improvements expected from the project as well as the additional incentives provided On their own, SPGs cannot substitute for the large by the SPG. Provisions are also needed to cover situations investments in power, transport, and other infrastructure beyond the control of any service provider, such as conflict that may be needed to enable service standards to progress or severe natural disasters. to the point where they are sufficiently developed to be included in an SPG. They also cannot substitute for the Only in truly extreme cases (for example, war or severe large political risk guarantees that are needed to attract natural disasters) would the service standards be waived by investors to such projects. arbitration. These are serious concerns because it is possible to imagine conditions under which SPGs would do harm Conclusion rather than good. For example, suppose the agency issuing the guarantee has no authority to improve the performance Service performance guarantees can be seen as an extension of the services it covers, and the service standards are set of results-based aid. But they provide a different type at an overly optimistic level. Firms ill-suited to operating of accountability—one that is a partnership of donors, under poor service conditions could set up in the economic recipient governments, and their investor clients. This zone, or they could fail to take risk-mitigation measures. contrasts with conventional results-based aid that makes The adverse effects could be loss of productivity, the disbursements to governments conditional on their diversion of aid to firms, and a further loss in the country’s achieving service outputs or outcomes, without a direct link credibility as a destination for private investment. to the clients using the services. 6 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. The design of SPGs can draw on a wide range of ACKNOWLEDGMENTS experience, including how shopping malls and hotels court The authors would like to thank the following colleagues their clients through service guarantees (as understood for their review and suggestions: James Emery, Senior in the service sector), political risk guarantees, citizen Manager, Strategy and Operations, Sector Economics charters, and right-to-service movements. While these and Development Impact, Economics and Private Sector are all very different, they all offer lessons that can be Development, IFC; Paul Antony Barbour, Chief Strategy used to inform the design of SPGs, either as standalone Officer, Multilateral Investment Guarantee Agency (MIGA); instruments or, more likely, as components of productivity- Ivan A. Illescas, Senior Counsel, Legal–Special Operations, related projects and programs that aim to increase private Legal, IFC; Reinhard Reichel, Senior Investment Officer, investment. More work is needed for the detailed design of Corporate Operations Management, Office of Chief such instruments before they can become operational. Operating Officer, IFC; and Thomas Rehermann, Senior Economist, Thought Leadership, Economics and Private ABOUT THE AUTHORS Sector Development, IFC. Vijaya Ramachandran and Alan Gelb are Senior Fellows Additional EM Compass Notes on insurance solutions at the Center for Global Development, Washington, DC. for attracting investments in emerging markets are: (vramachandran@cgdev.org; agelb@cgdev.org) Innovative Insurance to Manage Climate Risks (Note 9), How New Martin Reto Buehler, Principal Insurance Officer, Insurance Data Tools Can Assess Climate Risks (Note 10), How Business and Financial Guarantees, Financial Institutions Group, IFC. Can Insure Against Climate Risks (Note 11), Insurance Options for (mbuehler@ifc.org) Addressing Climate Change (Note 13), How To Make Infrastructure Climate Resilient (Note 14); Crowding-In Capital: How Insurance Companies Can Expand Access to Finance (Note 52). 1 It is important to note the differing ‘absorptive capacities’ of emerging markets, which result in differing levels of contribution of FDI to economic growth. This contribution is generally highest in the poorest countries. Alguacil, A, A. Cuadros, and V. Orts. 2010. “Inward FDI and growth: The role of macroeconomic and institutional environment.” Journal of Policy Modelling, 33 (3). 2 Collier, Paul. 2013. “Aid as a catalyst for pioneer investment.” WIDER Working Paper No. 2013/00. 3 Kinda, Tidiane. 2010. “Investment Climate and FDI in Developing Countries: Firm-Level Evidence.” World Development 38 (4): 498–513. 4 World Bank. 2014. “Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprises.” World Bank Group, Washington, DC. 5 Eifert, Benjamin, Alan Gelb, and Vijaya Ramachandran. 2008. “The Cost of Doing Business in Africa: Evidence from Enterprise Survey Data.” World Development 36 (9): 1531-1546. 6 Asiedu, Elizabeth, Yi Jin, and Nandwa Boaz. 2009. “Does foreign aid mitigate the adverse effect of expropriation risk on foreign direct investment?” Journal of International Economics. 78 (2) 268–275. 7 For an overview of available products see the World Bank Group’s PPPLRC Public-Private-Partnership Legal Resource Center: https://ppp.worldbank. org/public-private-partnership/financing/risk-mitigation-mechanisms-products/guarantee-and-risk-insurance-ifis/guarantee-and-risk-i. 8 MIGA. 2017. “Types of Coverage.” www.miga.org/investment-guarantees/overview/types-of-coverage. 9 Berne Union. 2017. “Strong Growth in New Business for BU members in 2017.” The Bulletin on International Trade, Finance and Investment from the Export Credit and Political Risk Insurance Industry.” Berne Union – Spring Meeting. http://cdn.berneunion.org/assets/Images/6345be17-145a-4695- aaa1-44fa4980b71c.pdf 10 81% of total global surety premium volume of $13 billion is written in advanced markets. Swiss Re. 2014. “Trade credit insurance & surety: taking stock after the financial crisis.” 11 Larrain, Felipe, Luis Lopez-Calva, and Andres Rodriguez-Clare. 2000. “Intel: A Case Study of Foreign Direct Investment in Central America.” Working paper 58, CID, Harvard University, December. 12 The pricing of service performance guarantees is worth exploring. One alternative would be to base the price on relevant quotes from commercial insurers. However, commercially-based SPGs are likely to be unattractive to potential investors; governments and/or donors will likely play a role in providing a subsidy or a backup guarantee. 13 In some instances, business continuity insurance may play a significant role. This is explored in Gelb, Alan, Vijaya Ramachandran, and Alice Rossignol. 2014. “Should Countries Be More Like Shopping Malls? A Proposal for Service Guarantees in Africa.” CGD Policy Paper 047, September 17, 2014. 14 For India’s Aadhaar program see Gelb, Alan and Julia Clark. 2013. “Performance Lessons from India’s Universal Identification Program.” CGD Policy Paper Series, 20, Washington, DC: Center for Global Development. Such monitoring is now commonplace in service firms. United Parcel Service, for example, has made a massive investment in its performance tracking and monitoring systems to enable real-time feedback on distribution and deliveries and optimization of routes. See, for example http://www.wired.com/2013/06/ups-astronomical-math/ 7 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. IFC 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 U.S.A. ifc.org/ThoughtLeadership