Argentina - Social and Fiscal National Identification System Program Project

Document of The World Bank Report No. 19110 AR PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN IN THE AMOUNT OF US$10 MILLION TO THE ARGENTINE REPUBLIC IN SUPPORT OF THE FIRST PHASE OF A SOCIAL AND FISCAL NATIONAL IDENTIFICATION SYSTEM PROGRAM March 31, 1999 Argentina, Chile and Uruguay Country Management Department Poverty Reduction and Economic Management Department Latin America and the Caribbean Regional Office  CURRENCY EQUIVALENTS Currency Unit = Peso Arg. $1 =. US$1 FISCAL YEAR January - December 31 ABBREVIATIONS, ACRONYMS AND GLOSSARY AFIP Federal Public Revenue Administration ANSES National Social Security Administration APL Adaptable Program Loan CAS Country Assistance Strategy CUIL Unique Labor Identification Number CUINTyS Proposed Unique Single Social and Fiscal Identification Number CUIT Unique Tax Identification Number DNI National Identification Number GOA Government of Argentina ISP Information Service Provider INTERNET Inter-networking protocol for transmission of data through packets; universally used. INTRANET An Internet service restricted to a private group. JdJ Ministry of Justice MdT Ministry of Labor PCD Project Concept Document PCU Project Coordination Unit SFE Secretariat of Fiscal Equity in the Office of the Chief of Cabinet of Ministers PPF Project Preparation Facility RNP National Registry of People SDS Secretariat of Social Development SIEMPRO Social Prograin Management System in the Secretariat of Social Development SINTyS Social and Fiscal National Identification System SOE Statement of Expenses VPN Virtual Private Network - a telecommunications network with a closed users group Vice President: Shahid Javed Burki Country Director: Myma L. Alexander Sector Director: Guillermo Perry Task Team Leader: Luis-Jose Mejia  i Argentina Social and Fiscal National Identification System APL CONTENTS A. Project Purpose and Program Development Objective ................................................2 1. Program purpose and program phasing ........................................................ 2 2. Project development objective ........................ ................................ 4 3. Key performance indicators . ............................4; .........................4 B. Strategic Context ........................................................ 4 1. Sector-related CAS goal supported by the project .............................. ................. 4 2. Main sector issues and Government strategy ................................................... 5 3. Sector issues to be addressed by the project and strategic choices .......... ................. 6 4. Program description and performance triggers for subsequent loans ......... ............ 7 C. Project Description Summary ............... .......................................... 8 1. Project components ........................................................ 8 2. Policy and institutional reforms supported by the project ............... ....................... 12 3. Benefits and target population ........................ ................................ 12 4. Institutional and implementation arrangements for phase I .............. ...................... 12 D. Project Rationale ......................................................... 13 1. Project alternatives considered and reasons for rejection .............. ...................... 13 2. Major related projects ........................................................ 14 3. Lessons learned and reflected in the project design ...................... ..................... 14 4. Indicators of Borrower commitment/ownership ........................... ................... 15 5. Value added of Bank support in this project ...................................................... 15 E. Summary Project Analyses ........................................................ 15 1. Economic ........................................................ 15 2. Financial ........................................................ 16 3. Technical ........................................................ 16 4. Institutional ........................................................ 16 5. Social ........................................................ 17 6. Environmental Assessment ........................................................ 17 7. Participatory Approach ........................................................ 17 F. Sustainability and Risks ........................................................ 17 1. Sustainability .......................................... . ............ 17 2. Critical Risks ........................................................ 18 3. Possible controversial aspects ..................... ................................... 18 G. Main Loan Conditions ........................................................ 19 1. Effectiveness Conditions ........................................................ 19 H. Readiness for Implementation ........................................................ 19 I. Compliance with Bank Policies ........................................................ 19  i. Annexes Annex 1. Project Design Summary ........................................................... 20 Annex 2. Project Description .......................................................... 23 Annex 3. Estimated Project Costs .............................. ............................ 25 Annex 4. Procurement and Disbursement Arrangements .................. ........................ 26 Table A. Project Costs by Procurement Arrangements ................. ......................... 28 Table Al. Consultant Selection Arrangements . ................................................... 29 Table B. Thresholds for Procurement Methods and Prior Review .......... .................. 30 Table C. Allocation of Loan Proceeds .......................................................... 30 Annex 5. Project Processing Budget and Schedule . .................................................. 31 Annex 6. Documents in the Project File ........................................................... 32 Annex 7. Application of Lessons Learned .......................................................... 33 Annex 8. Schematic of Internet Service Providers in Argentina ............. ....................... 34 Annex 9. Statement of Loans and Credits .......................................................... 35 Annex 10. Country at a Glance .......................................................... 36  Argentina Social and Fiscal National Identification System APL Project Appraisal Document Latin America and the Caribbean Regional Office Country Management Unit 7 Date: March 31, 1999 Task Team Leader/Task Manager: Luis-Jose Mejia Country Manager/Director: Myrna Alexander Sector Manager/Director: Guillermo Perry Project ID: 55461 Sector: Public Sector Management Program Objective Category: Economic Management Lending Instrument: Adaptable Program Lending Program of Targeted Intervention: No Program Financing Data (US$M) Sources of Financing APL (Phases) Total Cost Government IBRD Phase I (FY 2000-2001) -12 - -----2 ---------10 Phase II (FY 2002-2005) 50 13 37 Phase III (FY 2006-2007) 21 14 7 Program Cost 83 29 54 Project Financing Data [X] Loan For Loans/Credits/Others: Amount (US$m/SDRm): $10 million Proposed terms: [X] Single currency, USD Grace period (years): 5 [X] Variable, Libor-based Years to maturity: 15 Commitment fee: 0.75% Service charge: 0.0% Front-end fee: 1.0% Financing plan (US$m): (first phase) Source Local Foreign Total Government 2.0 2.0 IBRD/IDA 9.6 0.4 10.0 Total 11.6 0.4 12.0 Borrower: Republic of Argentina Responsible agency: Secretariat of Fiscal Equity in the Office of the Chief of the Cabinet of Ministers Estimated program disbursements (Bank 1999 2000 2001 2002 2003 2004 2005 2006 2007 FY/US$M): Annual 2.0 5.0 6.0 13.0 10.0 6.0 5.0 4.0 3.0 Cumulative 2.0 7.0 13.0 26.0 36.0 42.0 47.0 51.0 54.0 Program implementation period: April 1999 - March 2007 Expected effectiveness date: July I", 1999 Expected closing date: September 30, 2001 (Phase I)  2 A. Project Purpose and Program Development Objective 1. Program purpose and program phasing The National Social Security Administration's worker database is the largest concentration of information on contributors and beneficiaries of national programs. By crossing data from this database with those maintained by the provinces (Mendoza initially, with others to follow) and other Federal agencies such as the Social Development Secretariat and the National People Register (RNP), theNational Social Security Administration (ANSES) will be able to improve the quality of their data and make it possible to detect missing or erroneous beneficiaries. For example, by crossing data from the National People Register, ANSES and provincial social program databases, an estimated 50,000 of potential beneficiaries of provincial social programs would identified in the Province of Mendoza , as well as 1,500 cases of social security benefits which are being awarded to dead people. Discretionary pensions are awarded to hardship cases (who are not covered by other social programs) by the Secretariat of Social Development. By cross-checking against other programs, the likelihood of awarding these benefits to non-deserving persons is substantially reduced. Through cross-checking as well, an estimated 20,000 cases of double coverage (national vs. provincial social programs) will be detected inthe first participating province alone. Public Hospitals, subsidized by the provinces, are expected to provide certain services to people covered by private health insurance plans. Through lack of information, these hospitals are not able to bill the appropriate health insurance plan. Savings in one province alone are expected to reach $1.8 million per year. These efficiency gains in service delivery and improved information would make it possible to increase effectiveness through improved targeting and wider coverage of beneficiaries of social programs. Similarly, the Federal Public Revenue Administration's (AFIP) taxpayer database is the largest concentration of taxpayer information in the country. By cross-checking with provincial real estate registries, AFIP will be able to detect an estimated 5-15,000 under-reported tax returns inMendoza alone. Many other ways of identifying tax evasion will be improved through systematic information exchange of this type. The objective of the Social and Fiscal National Identification System (SINTyS) is to improve the efficiency, effectiveness and impact of social services andfiscalprograms through institutionalized information exchange. Vision: Upon completion of the project in eight years, barriers to information exchange among participating agencies will have disappeared as information gathered separately becomes available, when and where needed and legally available, through a shared information exchange network, enabling Government to offer "one-stop" delivery of multiple value-added and more equitable services. Values: SINTyS will be operated with a full commitment to the following values: * Services will be made available equally to all persons eligible for those services * The privacy, dignity and interests of each person will be protected * Information has worth when it is accurate, available and applied to solve problems * Owners of existing data will continue to maintain this ownership 'In Spanish, Sistena de Identifcation National Socialy Tributario. 'In Spanish, Sistema de dentification National Social y Tributario.  3 Operating Principles: * Every institution owns its information, is responsible for its life-cycle management and for defining the access rights to this information. * SINTyS will be a broker of information in that it will provide the normative, organizational framework for the stewardship of the methods and mechanisms for information interchange among the participating agencies. * SINTyS will ensure that participating agencies regulate access to information3. Phased Approach: Demonstration Consensusiin Expansion Infrastructure Building Consolidation Institutionalization Phase I: Demonstration The project will seek demonstrable results over a limited but representative number of institutions and programs. The cultural change required across a large number of institutions demands a progressive, consensus-building approach, with scarce implementation resources concentrating in a first phase in the ownership aspects of the program, and limiting the cost of entry into the system. Phase II: Expansion As the number of participating institutions increases, more formal and efficient exchange mechanisms will be required. This phase will concentrate on building the institutional, legal and technological infrastructure needed. Phase IIl: Consolidation The sustainability of SINTyS will be sought through the institutionalization of the program and continuing innovation in the provision of services. 3In particular, individuals will have the access to their own information, and a mechanism to rectify errors, a right guaranteed by the Argentine ConstifteooL  4 2. Project development objective The object of this project is to identify social and/or fiscal attributes of physical and legal persons in Argentina, through a sustainable information exchange system, aimed at improving the efficiency, effectiveness and impact of social services andfiscalprograms at all levels of government in Argentina. Project Strategy Phase I: Obtain proof of concept and generate critical mass. The concrete demonstration of benefits is key to the achievement of buy-in. Consensus building efforts and discrete activities of clear impact (inverted triangle) will be greatest in the initial stages of the program, as potential participating agencies have to be convinced of the benefits of participation in the program; these efforts would tend to diminish as the benefits become more widely recognized. Phase II: Achieve efficiency and expand the number of participants. Infrastructure Building (rectangle) would be minimal in the initial stages as the program will be utilizing existing infrastructures in order to minimize cost-of-entry to participants. As the number of participants and programs rises, development of an efficient infrastructure becomes critical. Phase III: Achieve effective SINTyS program management, on-going national policy analysis and review and introduction of innovative services. Institutionalization (triangle) would naturally be minimal at the outset and maximum at the end of the project, when sustainability of the program becomes paramount and privatization and outsourcing of services and infrastructure maintenance is introduced. 3. Key performance indicators Overall: Number of agencies using consistent common processes to identify entities and assets Percentage of the population uniquely identified and with family relationship dat For Social Services: Effectiveness: number of identified, entitled beneficiary households previously not receiving services: Efficiency: Number of beneficiary households incorrectly receiving benefits; Savings: amount of incorrect benefits not awarded For Fiscal Programs: Effectiveness: increase in the number of registered taxpayers Efficiency: increase in collections: See Annex I for specific performance indicators. B. Strategic Context 1. Sector-related CAS goal supported by the project Argentina has carried out major reforms in its public enterprises, monetary and fiscal systems, trade and capital policies with significant results. The reform process is now in a critical second phase, focusing on the consolidation of macro-economic stability and the challenge of poverty reduction. Support for these reformns is a principal feature of the update to the Country Assistance Strategy, most recently discussed at the Board on November 10, 1998 in connection with the Special Structural Adjustment and Repurchase Facility Loans. In particular, the CAS underscored the need for reducing Argentina's significant levels of poverty and highly skewed distribution of income, which have been exacerbated by the recent growing unemployment. It  S cited the imperatives of restoring quality social services and instilling greater equity in them. The proposed project, by supporting the development of better information for Government decision makers on social and fiscal programs, is fully supportive of CAS objectives. 2. Main sector issues and Government strategy The Government's strategy has been to strengthen social programs both in terms of levels and of population reached. The Government has pledged to maintain support for strengthening its social sectors. For this purpose, among other activities, the Bank and Government recently agreed on new measures to strengthen the social safety net (Social Protection IV Project, approved in October 1998), supplementing the three on- going operations in this field. Social programs now account for 78 percent of total public expenditures by federal and provincial governments, of which the national budget finances about 60 percent. Social security outlays account for US$19 billion and spending on health and education for another US$6 billion. An additional $4 billion largely goes for provincial housing programs, unemployment insurance and some 40 programs in labor, compensatory education schemes, services for the elderly, community services, nutrition, etc. There is widespread concern about these programs' efficiencies as well as evidence of considerable potential for duplication of benefits, along with indications of fraud, particularly within the extensive system of social programs providing free services. Moreover, the probable attendant wastage of public funds is compounded by the many associated opportunities for tax evasion (in the absence of cross-checking systems), which is calculated to be relatively high in Argentina. The Government has set its sights at obtaining better efficiency in the allocation of funds for the above purposes, i.e. improving the targeting of social programs for the poor, and increasing the equity and efficiency of such programs. Moreover, the Secretariat of Social Development, with other Bank support, has already contracted an external review of its programs to determine if they are being efficiently managed. The authorities appreciate that the improvement of the social programs will not be easy. The Government has therefore established a Social Cabinet in the Chief of Cabinet of Ministers with the aim of improving coordination among the many social program institutions. It also has established a system designed to help change the focus and management of social programs (SIEMPRO). This seeks to improve the accessibility and quality of information to be used for promoting transparency and civil society participation. The Bank's Social Protection IV Project is helping fund technical assistance for this activity. Social Policy |N Social Policy F 0 R T 71 X .$moup,,0 Target Recipents Benefit Recipients N Tag Recipients Benefit Recipients Fig 1:  6 The authorities have concluded that one of the deficiencies is the fundamental absence of reliable data on entitlements, payments and beneficiaries' contributions for some of these programs. The data currently handled and available does not enable the authorities to accurately assess the incidence and impact of social programs-or even to control payments to their beneficiaries. They are even more remote from effectively identifying those needing such assistance. What is basically needed for these purposes is accurate, up to date information on people, legal entities, and their relationships to the programs-and to each other. There are many partial registries in existence and others being created. However, these share information imperfectly, with only meager provisions for cross- checking and verification of information across the disparate registries. There is no single, unified system in place for collaboration among the numerous agencies regarding their beneficiaries, or even for that matter, between their several "identification number" regimes, e.g., National Identification Number (DNI), Unique Tax Identification Number (CUIT), Unique Labor Identification Number (CUIL), etc. Similarly, fiscal programs suffer from lack of information which will link people, entities and assets, thus permitting a decrease in the gap between potential and registered taxpayers, and an increase in the degree of verification of taxpayer returns. Recent studies on evasion in Argentina indicate that it could be as high as 45%, which in the case of the Value Added Tax, represents US$15.7 billion per year. Not only does this greatly curtail the ability of the Federal Government to improve the state of its finances, it leads to a high degree of inequity in the tax system. A i ~~~~~~~~~~~~All Potential Taxpayers 3. Sector issues to be addressed by the project and strategic choices To address this issue, it is necessary to assemble and permit access to data to be used in imnproving the administration of fiscal and social benefit programs through more effective determinations of potential contributors and beneficiaries, of entitlements, payments and contributions. The information assembled will also permit improved policy- and decision-making for program planning, as well as performance monitoring and evaluation. At present, data cannot be thus assembled and used because: * There is not a single consistent process to uniquely identify people, institutions and assets. * Even if a consistent process were to exist, there is no single consistent method for describing links among people, institutions and assets.  7 * Should these links exist, there is incomplete information available on individuals and their assets. If this information existed, it would then be possible to use to qualify individuals for receiving benefits of entitlement programs and for fulfilling their obligations under social and fiscal programs * The above-mentioned limitations necessarily result in ill-designed social and fiscal programs, or programs of very limited scope SINTyS will provide the framework for participating agencies to collaborate in forming and then sustaining a shared information exchange network, from which they would draw upon data they require. The system would entail uniform standard-based methods for the storage and interchange of shared information. For these purposes, the system would use current and emerging Internet technology, using commercial, off-the- shelf software and available telecommunications services. This environment would be highly scalable, sustainable in the face of constantly changing computing and communications technology, and eventually completely transparent to end-users. SINTyS would provide the tools and methods to ensure an agreed level of security of access with adequate controls for protecting the confidentiality of the information being accessed. Furthermore, SINTyS will also ensure that constitutional guarantees for the provisions of privacy and confidentiality of individual information are preserved and protected. 4. Program description and performance triggers for subsequent loans Phase I will demonstrate the benefits obtained through SINTyS, and prepare for the expansion which would take place in phase II. Agencies participating in phase I would be the National Social Security Administration (ANSES), the Federal Public Revenues Administration (AFIP), the National Registry of People (RNP), the Ministry of Justice (MdJ), Ministry of Labor (MdT) and the Secretariat of Social Development (SDS). The Province of Mendoza early expressed an interest in participating in SINTyS and an agreement was formalized to begin Federal-Provincial information exchanges with this province. Mendoza is particularly suited to participating in the early stages of the project, as it has a well developed provincial network and good quality data. Similar agreements, describing the federal and provincial responsibilities for information exchange, including the use of a single identifier, building of the databases, data quality and access, etc., would be entered into with four additional provinces, municipalities or agencies selected to participate in the system during the first phase. Selection criteria would include political willingness to participate, technical feasibility and demonstration of the likelihood of high returns. Phase II is expected to expand the number of programs by participating agencies, to other agencies in the health and education sectors at the Federal, Provincial and Municipal levels, and to a further ten provinces. The basic infrastructure (legal, institutional and technological) will be introduced, requiring retro-fitting of already participating agencies. Phase III will continue this expansion and move towards institutionalization and value-added services. General preconditions for moving from one phase to another are: * Substantial attainment of the indicator targets for the phase * Successful conclusion of enabling activities for the next phase * Agreed detailed plan of action for the next phase * Demonstrated implementation capacity by Government to carry out the next phase. * Policy Committee (or successor) sign-off on all major decisions in the previous phase and on the implementation plan for the next phase. Particular preconditions for Phase II are: * Analysis of the use of local Internet service providers (ISP) completed * Technology model completed * Data coding standards defined 4 See Annex 8for a Schematic of Internet Service Providers in Argentina  8 * Access methodology defined * Security standards defined, including encryption * Data Quality standards and validation methods defined * Design of the institutional framework ready for phase II * Design of the legal framework ready for phase II, in particular privacy of information and confidentiality measures * Design of the architecture for infrastructure ready for phase II * Agreements with a number, satisfactory to the Bank, of further entities to participate in SINTyS The aforementioned agreement with participating organizations would involve understandings with SINTyS on their obligations under the system, the envisaged results and outcome of this participation, and the measures to be taken to help ensure their sustainability. Further, these agreements would specify rules for information sharing and interchange, and provisions for retrofitting the technologies systems' structures and codes in proceeding with Phase II. An additional agreement to be entered into will deal with the requirements for maintaining appropriate quality of system data and accessibility to it. This is likely to entail some mechanism for regular quality checks, whose results would be published and widely disseminated, perhaps monthly. Consideration would be given to removing the eligibility for involvement in SINTyS for any organization whose quality of participation falls below standards. Particular preconditions for Phase III are: - Agencies participating in phase II have taken all measures needed for the sustainability of benefits obtained * Agreements with a number, satisfactory to the Bank, of further entities to participate in SINTyS * Technology model substantially implemented * Data coding standards in use * Access methodology in operation * Security standards complied with * Data Quality standards and validation methods in operation * Institutional framework in place * Legal framework in place, in particular privacy of information and confidentiality measures * Infrastructure deployed * Program Management unit in operation * Legal and financial arrangements for long-term sustainable institutionalization of the system completed. * Agreed policies for on-going supervision, management and operation of the network C. Project description summary 1. Project components The project has five components: two substantive components, through which the benefits of the system will be realized; one enabling component and two management components. The substantive components are composed of a 40-60 relatively independent activities, grouped into sub-components by type. Because of the incremental nature of the first phase, not all activities have been defined. New activities will be selected based on technical feasibility, political willingness to take action, and cost-justification. Component A: Improvement of Social Services This component aims to improve the targeting and delivery of social services in Argentina by a better identification of individuals, entities and relationships. This would be accomplished by facilitating the interchange of information among participating agencies and improving the completeness, accuracy and reliability of agency data through cross-validation. As quantity and  9 quality of information available increases, better targeted social programs can be designed and the delivery of benefits can be controlled effectively. Component B: Improved Fiscal Efficiency This component aims to decrease the number of unregistered potential taxpayers and the level of evasions through incorrect tax returns, increasing voluntary compliance through an increased perception of risk of evasion detection. As in the previous component, this would be accomplished by facilitating the interchange of information from participating agencies and improving the completeness, accuracy and quality of agency data through cross-validation. Component C: Institutional Framework, Infrastructure and Common Services This component will provide the enabling legal and technology infrastructure within a comprehensive institutional framework to address the need for a sustainable, systematic and efficient information interchange environment. It will also provide the certification necessary for the identification of people and legal entities to establish a framework that guarantees information confidentiality and privacy. Existing institutional arrangements and technology will be used, including current data formats and protocols, so as to demonstrate benefits readily and to retain the main purposes of these arrangements. However, for the needs of Phase II, more efficient infrastructure than now exist would be needed, and this would be developed under Phase I. For example, common, not ad-hoc, data coding will be defined for future uses. In connection with the legal infrastructure, global (not individual agency-agency) agreements will be undertaken. Furthermore, activities would be developed to start ensuring data quality and confidentiality, together with their verification through recurrent reviews, to be progressively integrated into on- going functions of the SINTyS system. Component D: Management of the System This component will develop and implement the structure and processes which will be used initially to control the execution of the project and eventually to manage the on-going SINTyS program which will ensure that the benefits from the two substantive components will continue to be derived. This would include inter-jurisdictional coordination and legal agreements. Component E: Project Administration This component will provide the administrative, accounting and other services that will support the execution of the project. The project would finance essential consulting services and equipment (computer and telecommunications) over eight years, divided into three phases: Phase I: Demonstration and Critical Mass (2 years) A limited number of social and fiscal programs at the Federal and Provincial levels will be improved by facilitating basic information exchanges; at this stage, no new technologies and/or methodologies will be introduced. The goal of this phase is primarily to show to potential stakeholders the benefits possible through information exchange, and obtain the participation of a sufficient number of entities to build momentum and consensus for widespread buy-in to the concept and benefits of SINTyS. Phase II: Efficiency and Expansion (4 years) The previous ad hoc, basic information exchanges will be replaced by a systematic methodology, supported by an Internet-enabled technology infrastructure. In this phase, the rules for participation in SINTyS will be defined, the information access rights will be defined and assured, the enabling legal framework put in place, and others. During this phase, a considerable expansion in participating programs in the Federal, Provincial and Municipal levels is expected. The goal of this phase is to institutionalize SINTyS as a sustainable entity.  10 Phase m: Sustainability and Innovation (2 years) Suitable mechanisms for SINTyS' long-term sustainability, analyzed in the previous phase, will be introduced, including cost-recovery options, insertion in the government structure, and others. The goal of this phase is to install the measures making SINTyS as a fully on-going, authoritative, independently functioning mechanism. At the same time, the quantity and quality of information which it will now be possible to access, will permit the design of new and more efficient public sector processes, such as single-window services to the public and improved information for decision- and policy-making.  11 Program Components ~~ ~~~~~ ~~~ - ~~~ - I~~ndicative Costs (US$M . Percentage of Total Costs Component | 1 phase 2Id phase 3r phase 1st phase 2d phase 3d phase Ail phases A. 3 _;419.0 - . 2.7 034.2% . 18% 12.9% 19.0% - .m =;and B. . li3i 31Li_ 3.4 9.0 3.2 28.3% l8% 15.2% 18.8% B. .s, . e _' ' ..... ' ' .. -. -. '. ' .'-. _ | [ ~~~ ~ ~~~~~~~~~2.1 29.0 14.2 17.4%- 58% 67.6% 54.60% 0.2 1.0 0.3 1,6% 2% 1.4% 1.8% 0 _________________.___ 6 .1.6 . 5 5% -32 . 2.4 %o 3.3% - 50.0 21.01.5 12.5% :.X1% . O. 0.1- ..4 0:- 1% 100% 005% 0.70% ~~~~~~ ~~~~12.0 50.0 21.0 100% 100% 100% _100%  12 2. Policy and institutional reformns supported by the project The Social and Fiscal National Identification System (SINTyS) was created on July 13, 1998, with a view to its eventual institutionalization. It will introduce the use of a single national identifier for people and legal entities, based on the three main existing identifiers: the social security identifier (CUIL), the tax administration identifier (CUIT) and the national identifier (DNI). A draft bill for the introduction of the single identifier, called CUINTyS, has been prepared. Other actions supported by the project would include a number of legal framework provisions. There is already in Argentina's Congress a proposed overall confidentiality and privacy of information law, which would fit in very well with SINTyS' needs. It is expected that SINTyS will participate in its regulation. In addition, legal provisions will be needed to govern the interchange of data by participating agencies, the legitimization of SINTyS for facilitating its functioning, oversee its regulation, and to set standards for and conduct verification of its quality and performance. In Phase III, provisions would be made for SINTyS' long term institutionalization. 3 Benefits and target population The project's expected benefits are improved targeting of programs to the socially disadvantaged segments of society; reduction in social expenditures through more efficient delivery of services; increases in social security contributions; increases in revenues due to more efficient and effective tax evasion detection and fraud mitigation; provision of value-added services through the institutional framework and infrastructure, including better information for decision- and policy-making and for program planning. The direct beneficiaries of the project in the first instance would be program managers and govermnent officials in charge of social programs and tax, health, judicial and pension administration at federal and provincial levels, for whom the project would be an instrument to improve the management and effectiveness of their respective programs via better targeting and/or the reduction of fraud and leakage's. The indirect beneficiary of the project is in general the public through fairer tax burdens because of reduced tax evasion and potential future increases in social and other public programs. In particular, beneficiaries would be those who should be covered by social programs but are not. This would have a positive impact in terms of poverty alleviation, although no estimate exists of this potential effect. It should be noted that women and children are likely to account for a significant share of the poor who should qualify for social programs but do not at present receive assistance. 4. Institutional and implementation arrangements for Phase I: Phase I is expected to last 2 years (out of a total of 8). The National Director for the SINTyS project will be the Secretary of Fiscal Equity in the Office of the Chief of Cabinet of Ministers, advised by a Policy Coordination Committee, chaired by the Chief of Cabinet of Ministers and composed of representatives named by the major organizations participating in SINTyS5. The day-to day management of the project would be carried out by the National Director assisted by the 4 managers responsible for respectively, the two substantive components, the project administration component and the infrastructure component (in the first phase, the Component Management of the System will be managed directly by the National Director). The responsibility for the program management component will rest with the National Director. Procurement and accounting would be carried out by an existing project administration unit in ANSES responsible for the administration of the National Pension Administration TA Loan (4131 -AR). Annual Project Action Plans will be agreed every year and revised every six months during supervision missions. Semi-annual progress reports will measure project performance compared with baselines defined before initiation of each key activity. Decree of the National of the Executive Power No. 812 of Ir July 1998.  '3 Initial Project Organization Structure President of Argentina |Office ofthe Chief of Cabinet of Minister Secretariatfor Public Funciio Secretariatfor Fiscal Equ Secretariatfor Strategic Contro Secretariatfor lNational Director: SlNTyS Parliamentary and Institutional Relationships ProjectAdnjtron Mnag n Social Coo FsaCure ovonen D. Project Rationale L.Project alternatives considered and reasonsfor rejection A single long-term investment operation was considered but rejected. The main risk to this operation lies not in technical complexity but in the need to progressively garner support and obtain buy-in by many institutions in many jurisdictions whose combined effort is necessary to achieve sustainable benefits. In addition, there is no information sharing in a systematic way by both inter or intra Federal, Provincial and Municipal Governments, nor is there any existing appropriate mechanism to do so. Changing this will therefore involve a institutional/cultural change, which is best obtained in a flexible and participatory manner, which does not lend itself to rigid preparatory planning. A phased APL provides the needed flexibility, along with suitable exit strategies, for risk containment. Expanding any of the existing agency databases to function as the central database was rejected as an initial premise, as it would introduce a substantial credibility gap which would raise the cost and the time needed to garner support, as well as requiring substantial modification of the primary business processes of the selected institution. The creation of a central database for all programs was also rejected for much the same reasons. In addition, it would introduce early on a substantial technical challenge into what should be a mostly political effort. Concerns about ownership and security of information also made it implausible to attempt the single database approach. Interconnecting existing databases by providing a technical, legal and institutional framework was therefore the only acceptable and viable alternative. In reference to the technical environment, building a government-owned proprietary network would have substantially increased the cost, time and complexity of demonstrating the benefits of information sharing. It might also have introduced a long-term sustainability and efficiency credibility problem. However, the Argentine information technology/telecommunications environment easily permits the extensive use of INTERNET, which is a more evolutionary, less costly and demonstrably scalable environment for providing access to shared information. Furthermnore, by using INTERNET not only do SINTyS participating agencies  14 have easy access to a readily available means of intercommunication, but the expansion of the SINTyS program also will act as a catalyst to the expansion of INTERNET in Argentina. 2. Major related projects Sector issue Project Latest Form 590 Ratings lIP DO More effective financial management Provincial Development I (3280-AR) S S More effective financial management Provincial Development 11 (3877-AR) S S More effective revenue collection Second Tax Administration Project (3460-AR) S S More effective targeting of beneficiaries Promin I (3643-AR) HS HS More effective targeting of beneficiaries Promin 11 (4164-AR) HS S Incomplete data for program evaluation Secondary Education I Project (3794-AR) S S Incomplete data for program evaluation Secondary Education 1I Project (3971-AR) S S Incomplete data for program evaluation Secondary Education III Project (4313-AR) S S More effective health policies and Provincial Health Development Project (3931- S S provincial hospital effectiveness AR) More effective targeting of beneficiaries Social Protection I (3957-AR) S S More effective targeting of beneficiaries Social Protection 11 (4195-AR) S S More effective targeting of beneficiaries Social Protection III (4366-AR) S S More effective targeting of beneficiaries Social Protection IV (4398-AR) HS HS More effective targeting of beneficiaries Social Insurance Reform (4002-AR) HS HS More effective targeting and entitlement National Pension Administration Technical S S criteria, contribution assessments Assistance (4131-AR) More effective targeting of beneficiaries Provincial Reform 11 (4218/20-AR) S S and inefficient revenue collection 3. Lessons learned and reflected in the project design Experience through other Bank projects in cross-checking of information indicated potentially high results by applying this practice to other databases; for example, cross-checking of information on teachers working in multiple schools, under the Provincial Reform II (education component) and in controlling medical absences and health expenditures (health component), resulted in significant savings by detection of fraud and misallocation. Similar cross-checking is being carried out under the Secondary Education Quality Improvement Project. The proposed project builds on these early successes to generalize data exchange across all levels of government in a sustainable manner; it is the first stand-alone Bank project to this effect. The Bank's experience with improvements of large databases, notably tax collections under the Second Tax Administration Project (3460-AR), social security payments under the National Pension Administration Technical Assistance Project (4131-AR), cadastres under the Provincial Development I and 11 (3280-AR) was brought to bear in the project, in particular in the incremental nature of database improvements to be achieved and the need to assure quality and access. The need to build consensus has been explicitly addressed by a phased approach, in which the first phase jointly focuses on demonstrating early wins and increasing the credibility of the program, while at the same time preparing the groundwork for the substantial investment to be made in phase II. This approach also permits the design of an early and inexpensive (both politically and financially) exit strategy (other lessons learnt can be found in Annex 7).  15 4. Indicators of borrower commitment/ownership The Government has demonstrated its commitment by a decree creating the SINTyS. Work has begun with the first participating province, Mendoza, with a formal agreement dated December 2nd, 1998. Other measures of commitment are given by the Decree of the National Executive Power number 1108 dated September 21, 1998 in which all legal asset transactions must identify participants through CUlT, CUIL or CDI; and provides for the creation of a SINTyS Manager within the National Social Security Administration. 5. Value added of Bank support in this project * It would effectively complement the other lines of extensive Bank involvement in the social sectors in Argentina. * The innovative nature of this project (in the use of information and modem technological approach) will benefit from the Bank's familiarity with world-class consultants and practices worldwide. * The Bank's broader perspective encourages a more comprehensive and holistic view of the project's conceptual design, while bringing to bear the lessons of experience and best practices in projects with similar characteristics. * The project's inter-institutional complexity benefits from the Government's established reliance on the Bank's role as an "honest broker" to facilitate working agreements and cooperation among entities generally unaccustomed to working together at technical levels. E. Summary Project Analyses 1. Economic The direct economic benefits of the SINTyS program are difficult to estimate they are entirely dependent on participating agencies using the information provided, and as such is beyond the scope of the project. Nevertheless, a very conservative estimate of expected savings from detection of fraud and misallocations, anticipated tax revenue increases, foreseeable elimination of overlapping or duplicating benefits payments, etc., gives the following: Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 Expected Benefits (US$ millions) Social Component 0 0 16 16 21 31 46 46 46 Fiscal Component 0 0 25 25 50 75 125 125 175 (a) Total Benefits 0 0 41 41 71 106 171 171 221 Financing . l IBRD 2 5 6 13 10 6 5 4 3 GOA 0 2 3 4 4 5 4 4 3 (b) Total Investment 2 7 9 17 14 11 9 8 6 Difference (a-b) -2 -7 32 24 57 95 162 163 215 IRR 244% NPV (4.9