Output-based aid

Output-based aid (OBA) refers to development aid strategies that link the delivery of public services in developing countries to targeted performance-related subsidies. OBA subsidies are offered in transport construction, education, water and sanitation systems, and healthcare among other sectors where positive externalities exceed cost recovery exclusively from private markets.'A continuation of previous Bank policies to reduce the state to a coordination and regulation role, leaving private companies to organise production and service delivery.'allowed the MNC to protect itself against cost increases by passing them on, with the government regulator unable to force the MNC to disclose enough information to judge the reasonableness of the requests.' Output-based aid (OBA) refers to development aid strategies that link the delivery of public services in developing countries to targeted performance-related subsidies. OBA subsidies are offered in transport construction, education, water and sanitation systems, and healthcare among other sectors where positive externalities exceed cost recovery exclusively from private markets. OBA targets individuals who lack the financial means to pay for basic services. It is specifically targeted for individuals in developing countries. The service provider will receive subsidies to replace costs associated with providing the service to people, such as user fees. Individual agents will verify that the service is being delivered and based on the performance of the service-provider, a subsidy will be granted. That is how it is 'performance-based'. OBA generally works through a private firm, or another third party, acting as the service provider. The service provider is responsible for the initial financing of the project and, only after results have been verified, will the firm receive subsidies from a donor. In such schemes, it is the provider who bears the risk of loss, rather than the aid donor, and output-based schemes allow for the tracking of results because of the way they function. Integration of the private sector into aid schemes is common with OBA, since they often provide the initial financing. The World Bank sees OBA as a way to improve aid effectiveness. This differs from traditional aid schemes that will usually focus on the inputs to service providers rather than the outputs. The donor is usually the World Bank, a government or an international organization or philanthropist that is part of the OBA scheme. Subsidies from a donor will generally serve to complement or reduce user fees. The subsidy is paid only after the particular service has been delivered to a community. The subsidies are targeted to poorer individuals, since OBA initiatives are carried out in regions with significant amounts of poverty. In healthcare, vouchers are granted to patients who require medical attention and cannot afford or access it. These vouchers can be taken to hospitals or clinics, whether private or public, and they will be provided with the medical attention they require. The clinic or healthcare professional that provided the medical service will be subsidized for the delivery of the service by a donor. In healthcare, OBA is often implemented by contracting providers in either the public or private sector, sometimes both, and issuing vouchers to people considered at higher risk of disease or in greater need of the health services. Two of the earliest examples of competitive vouchers and fee-for-service contracts in healthcare were implemented in South Korea and Taiwan in the 1960s. In Nicaragua, the Instituto CentroAmericano de la Salud (Central American Health Institute) began voucher programs for reproductive and sexual health services in 1995. New programs for facility-based maternal deliveries in Kenya and Uganda began in 2006 and 2009 respectively. In Mongolia projects to improve rural telecommunications have been undertaken. Existing communication operators bid for subsidy contracts to expand their networks and services to rural areas with poor access to telecommunications. The bidding operators were also aware of the risk associated with the subsidies, since they would only receive funding if certain outcomes had been met. These OBA schemes are meant to provide universal Internet access to the internet.