THE PROSPECTS OF A BASIC INCOME GRANT FOR IRAN Hamid Tabatabai BIEN 2010 – Sao Paulo – 1 July 2010

Purpose To discuss the following question and answer:  Q: Is Iran going to be BIEN’s utopia? Is this developing, Middle Eastern, Islamic state on the threshold of becoming the first country in the world to provide a basic income grant (BIG) to all its citizens?  A: Only time will tell, but the main ingredients are coming together one by one, almost by default and largely unnoticed. 2

Iran: Some Basic Information  Population: 72 million; two-thirds urban  Per capita income: US$3,500  Significant inequality and poverty  Oil export revenues: $70 billion ($1,000 per capita)  Social protection system: Hybrid of public, semi-public and private programmes providing wide range of assistance to many but missing many too  Cash transfers: Exist under various guises  Of overwhelming importance: Price subsidies 3

Price Subsidies  Subsidised items: Fuel products, some food items, electricity and water  Gasoline: 10 US cents a litre; diesel just 2 cents;...  Annual subsidy bill: $100 billion (mostly on energy)  Subsidy system as inefficient, costly, unfair  Wasteful consumption, pollution, smuggling to neighbouring countries, etc.  Rapidly rising bill  70% going to richest 30% of the population 4

Reforming System of Subsidies  Centrepiece of Economic Reform Plan (June 2008)  Replacing price subsidies with direct cash transfers (CT) to people, econ. sectors, social security system  Gov’t rush to go ahead but two main concerns:  Gov’t dishing out billions in cash before elections  Fear of runaway inflation, social unrest  Gov’t submits bill to parliament, which puts it on hold for a year  Targeting Subsidies Law passed in January

Coverage: Targeting that Wasn’t  Targeting “deciles”: Bottom 7? Only 2?... Maybe 5 as compromise? Back to 7? But...  Identifying targeted population: Application form asking about household (HH) demographics, education, income, car & house ownership, bank loans, etc.!  Response rate: 65% of HHs (end 2008), 85% (now)  HH (mis)classification proving monumental headache, causing widespread discontent  Targeting abandoned (for now!): Entitlement to cash transfers to be universal  But government plea to the well-off: Please abstain! 6

Transfer Amount  No official announcement yet but ballpark figures  Subsidy bill (x ½) / pop.: US$60/person/month  Initially, likely to be around $20-25/person/month  Same amount for all, possibly with extra for those in rural / deprived regions  Well below poverty line  At completion, approaching monthly minimum wage ($300) for a 5-member HH 7

Implementation Modalities  Single application per household still required (not clear what for?)  Transfers through bank account of head of household  Payment deposited every other month  Unconditional  Consideration of household income legally required, but finessed  Start: September 2010  Duration: Five years 8

Prospects of a BIG for Iran (1) On the face of it excellent, almost there, … On the upside:  No new funding required  Affordability: 2-4% versus 30% GDP  Universal entitlement (with voluntary non-participation)  Equal transfer amount (possibly higher for more deprived)  Unconditional  Regular and in principle continuing 9

Prospects of a BIG for Iran (2) But difficulties lie ahead too … On the downside:  No recognition or acknowledgement of BIG  Payment to household head, not individual members  Long-term sustainability uncertain (oil prices, war,...)  No impact evaluations planned  Politics of advocacy: Karrubi precedent; refugees  Limited relevance for other countries 10

Thank you 11