Measuring Disbursement Efficacy of Universal Service Funds: Case Studies from India, Malaysia, Pakistan & Sri Lanka

Have the Universal Service Funds (USFs) of India, Malaysia and Pakistan utilized their resources efficiently and effectively to promote universal connectivity? Is it possible to devise a robust and parsimonious indicator for measuring how efficient the funds have been relative to the stated objectives? USFs are intended to provide connectivity to regions and social groups unserved or underserved by market mechanisms. Financed primarily via industry levies, these funds are often left undisbursed, which is ineffective. By developing metrics to assess performance over time and across countries this paper will assist policymakers design and implement better subsidy mechanisms. 1. What are the laws and policies that govern the USFs in the three countries? What are their objectives? How are they funded? 2. How effective are the USFs in disbursing money that have already entered the Fund? Two measures of disbursement efficacy, an accumulated disbursement rate and a year on year (Y-o-Y) disbursement rate will be devised to measure this. 3. What are the disbursement rates for each country? 4. What policy changes are required to facilitate the disbursement of funds? I. LITERATURE USFs gained popularity in the 1990s as a solution to deficiencies in universal service obligations. There exists literature that addresses alternative sources of funding for USFs. (Serra, 2000; Wellenius, 2000) Today, many countries fund their USFs through industry levies. Musgrave & Musgrave (1989) argue that additional taxes imposed on a particular good or service reduce demand. GSMA in a 64-country study found that over a third of the USFs studied were yet to disburse any of funds collected. The USF gaining statutory status helped expedite disbursements in India (Malik & De Silva, 2005). Yet, disbursement numbers have fallen in recent years. A gap in the literature was identified with regard to measuring the disbursement efficacy USFs. II. PROPOSED METHOD The laws, policies & administrative practices of the USFs will be analyzed. The existing data on the inflows to and outflows from the USFs will be used to calculate disbursement rates in order to measure the disbursement efficacy of the Funds. An accumulated disbursement rate and a Y-o-Y disbursement rate will be calculated. The paper will also identify the projects towards which the disbursed funds have been channeled relative to the stated objectives of the USF. III. DATA SOURCES Data from government sources were used.