Countries like India may leapfrog the rich world

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http://www.economist.com/specialreports/displaystory.cfm?story_id=10638184 AS IT becomes clear that getting entrenched rich-country bureaucracies to move towards e-government will be slow and difficult, hopes are turning to poorer countries. Not that their bureaucracies are intrinsically more promising. Even under British colonial rule, Mahatma Gandhi was a severe critic of Indian officialdom. His words of advice are displayed in public offices all over India: Who is a customer? The customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him. He is not an interruption of our work. He is the purpose of it. He is not an outsider in our business, he is part of it. We are not doing him a favour by serving him. He is doing us a favour by giving us an opportunity to do so. Those words have been honoured much more in the breach than the observance. Standards of public administration in India are appalling. Billions of dollars are spent on subsidies and doles. When Rajiv Gandhi was prime minister in the 1980s, he once speculated that 85% of them did not reach their intended target. Nothing much has changed since those days. The current holder of the top job, Manmohan Singh, says the handouts bring “neither equity nor efficiency”. The public school system leaves a third of its pupils illiterate. The public health system does not provide even the most basic cover. Roads in rural areas are barely passable. Cities are choked with unmanaged traffic. The land-records system is in chaos. If you own some vacant land, it is a good idea to paint your name on the fence in large letters to reduce the chance that a huckster will sell it to a third party. Time, money and human potential is wasted on a grand scale. But—slowly—that is changing. The hotbed of e-government in India is the southern state of Andhra Pradesh, which pioneered e-seva, a network of public internet offices where citizens can pay bills online. That may not sound much to be thankful for, but for anyone with memories of the previous system it is a giant step forward. Paying an electricity bill could easily involve a day's wait at a government office where a cross official would demand a bribe for doing his job. The same was true for phone bills, water bills, taxes and all other interactions with government. Often the customer would first have to go to a bank to get a banker's draft and then take it to queue at the payment office. Even a small firm would need an employee whose sole task was to pay bills and deal with other aspects of officialdom. Online bliss Now all this can be done online. Those who have computers and credit cards can go to esevaonline.com, those without can visit an e-seva centre. Although getting a birth certificate or a passport remains pretty difficult (of which more later), at least paying for such things has become easier. Critics say that e-seva has simply put a user-friendly front on a collection of government agencies that remain deeply inefficient. Yet compared with what went before, even this modest improvement has transformed the lives of millions. In Andhra Pradesh, e-seva now processes 110,000 transactions a day, worth 110m rupees ($2.8m). Those numbers are growing by 25% a year. Some 60% of all payments for public services in the state are electronic. “We are moving from in line to online; people want to communicate not commute,” says Suresh Chanda, the state official responsible for e-government. And that is only the start. The state government wants to extend the network of e-seva centres from the current 119 to 4,600 across the state, one for every six villages. The plan is to use existing post offices: these days, chuckles Mr Chanda, they have little to do. None of this involves the state in running anything: e-seva, like most successful providers of public services in India, is outsourced. A private contractor recruits the staff, provides the computers and premises and keeps the customers happy. In return, he receives a small commission on each payment. E-seva also provides other services: you can transfer and collect money through Western Union, for example, or buy railway and cinema tickets. The contract for e-seva has just changed hands after six years. The winner of the tender will be offered incentives to run it even better. If a customer has to wait for 15 minutes, the commission will halve; if the wait is 30 minutes, there is no commission. The next stage will be to widen the scope of the system. A pilot project in early 2008 will allow people to apply for driving licences online instead of queuing. But the most important move is to make the mobile phone, rather than the computer, the platform for payment. This is possible because in some respects banks in India are already streets ahead of their counterparts in richer countries. Passengers arriving at the airport in Hyderabad, the capital of Andhra Pradesh, are greeted by an advertisement for a bank account that allows payments to be authorised by a biometric identifier: a thumbprint. Such systems are convenient for the busy middle classes and those who habitually forget their PINs, but they also have wider application in a country where up to half the population may not be literate (though most are probably numerate). From early 2008, two go-ahead banks will offer e-seva services by “m-banking”. Customers will be able to pay bills by sending an SMS and a security code. The m-word But that is not the only use for mobile phones as computers. A pilot project in Andhra Pradesh that started in mid-2007 aims to improve the mechanism for paying pensions and unemployment benefits to around half a million people in villages in the Karimnagar and Warangal regions of the state. These are arid areas where the main (and usually sole) source of employment is subsistence agriculture. Public services are patchy and roads awful; schools are free but bad; there is basic health care but no nearby hospital. The payments involved are small and 70% of the target population are illiterate. The existing system is both expensive to administer and time-consuming to use. It involves presenting a ration card and an account book at a bank, which may involve several hours' travel to get there and several more hours' queuing. Alternatively, the payments can be disbursed by the local village council. But a large proportion of the money may not reach the intended beneficiaries. Crucially, however, the mobile-phone signal has excellent coverage. The new scheme, the brainchild of the government of Andhra Pradesh, does not require the recipients to travel. Instead, they have smart cards incorporating their fingerprint and photograph. A payment agent, equipped with a terminal, comes round to check the cards and disburse the money. The cheaper version works offline, with data loaded into the terminal. The more expensive kind includes a mobile phone that checks identities against a central database. The payment agent is a trusted local figure who has to be at least semi-literate, and is rewarded with 0.5% of the value of each transaction. The scheme is now metamorphosing into an online bank. In some areas the recipients are able to store some of their money online, withdrawing only as much cash as they need there and then. It is a tiny start—so far some 40,000 cards have been issued—but the potential is clear. E-government is slowly spreading across India, transforming the public's experience of government as it does so. Take railway tickets. Until the deregulation of air travel in the mid-1990s the train was the only sensible way of getting around India, but ticketing became a cesspit of corruption. Ticket clerks routinely hoarded long-distance tickets to create an artificial scarcity and then sold them at a profit. But since 2002, when the railway authorities put the ticketing system online, corruption has virtually disappeared. You go to the website and click on the train you want. The computer tells you what seats are available or how long the waiting list is. You can pay by credit card or reserve a ticket and pick it up at a station. All this has started a process of internal competition that ratchets up the efficiency of every public agency. Other state governments, such as Gujarat, are fast catching up with Andhra Pradesh, which is having to run ever faster to stay ahead. The federal government is getting keener too. It plans to open 100,000 “common service centres”—in effect, stripped-down versions of e-seva—across India by the end of 2008. It has made online tax returns mandatory for companies and introduced legally binding digital signatures (something that many Western countries are still struggling with). The prime minister has also ordered a complete overhaul of the nightmarish process of applying for a passport. This typically requires the applicant to assemble 11 documents (including birth certificate, proof of address and police conduct certificate) and spend at least a day queuing in a crowded and squalid passport office. The document itself can take as long as six months to appear. The only way to speed things up is by handing over a bribe, with a going rate of about 1,000 rupees ($25). Mr Singh has instructed his bureaucrats to cut out the queuing, limit waiting time to 45 minutes and get the passport ready within three working days. The National Institute for Smart Government, which is drawing up the scheme for the government, has spelt out just how difficult this will be. The new system, to be run by a private provider under a $300m, six-year contract, will require a complete reorganisation of the present process. All the work involved in issuing a new passport has been broken down into simple, logical steps, and the new passport offices have been designed down to the smallest detail, such as levels of lighting and ventilation and a “tea-coffee nook”. The scheme is due to start