Robert Klitgaard
Designing and Implementing a
Technology-Driven Public-Private Partnership
Discusión de casos de innovación:
India’s Project Aadhaar
Vijay Sathe’s superb presentation of India’s Project Aadhaar is fascinating and
instructive on many levels. At the policy level, the case invites us to consider the
benefits and costs of a unique national identification number (UID). At the imple-
mentation level, it explores the design and management of public-private partner-
ships and the mobilization of citizen demand for both public and private goods.
Finalmente, the case has a pleasing narrative: the reader is asked to identify with a like-
capaz, publicly motivated polymath, Nandan Nilekani, as he considers his key chal-
lenges after year one. The three levels intertwine.
BENEFITS AND COSTS
In the Indian context, the potential benefits of a fraud-proof unique ID look large.
The “killer app” is a kind of ATM machine in one’s cell phone. Each citizen, incluso
the poorest, could readily access a new, no-frills bank account using a secure, bio-
metrically verified ID number. Such accounts promise benefits in “daily interac-
tions with mobile operators, banks, gas stations, ration providers, NREGA pay-
mentos, pre-natal checkups for women, access to schools for children of migrant
laborers, etc.” The vision is nothing less than a more inclusive and efficient econo-
mi, as well as more effective redistribution.
En particular, the case emphasizes the benefits of using cash transfers enabled
by these new bank accounts instead of the ineffective and fraud-ridden system of
subsidies and targeted aid. Transfer payments to poor citizens make up a signifi-
cant portion of the country’s budget. India’s social protection programs include
subsidized wheat and rice, plus kerosene and sugar in most states (en 2009-2010,
more than US $900 millón). These programs are subject to fraud and leakage, en
part due to manipulation of eligibility cards. Por ejemplo, in the early 2000s,
Robert Klitgaard is a University Professor at Claremont Graduate University and, en
2010 y 2011, the Lee Ka Shing Distinguished Chair Professor, Lee Kuan Yew School
of Public Policy, National University of Singapore.
© 2011 Robert Klitgaard
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Robert Klitgaard
almost 60 percent of targeted subsidized grain did not reach the intended benefi-
ciaries below the poverty line, and the figure was over 90 percent in Bihar.1
If UIDs are less susceptible to corruption and abuse than the usual eligibility
cards, efficiency and equity will be enhanced. But UIDs could enable an even bold-
er step. It is said that India’s 12th Five Year Plan (2012-2017) will propose cash
transfers to those eligible for subsidies for food, fertilizer, and fuel, using Aadhaar-
based identification.
Cash transfers replacing in-kind transfers raise policy issues that go beyond
identity cards. Elementary economics recommends cash transfers over in-kind
transfers. But cash transfers may lead to unintended consequences. In-kind trans-
fers tend to depress the local prices of those goods, while cash transfers raise those
prices. In a recent case in Mexico, Por ejemplo, the price effect of the in-kind trans-
fer was equal to 12 percent of the net benefit, while the price increase caused by the
cash transfer offset the direct transfer by 11 por ciento. “Choosing in-kind rather than
cash transfers in this setting, hence, generates extra indirect transfers to the poor
that are worth 23 percent of the direct transfer itself.”2
Segundo, recipients may use the cash intended for food for other purposes, justo
as some loans for small businesses may be used to finance weddings. Some Latin
American programs aim cash transfers at mothers, on the grounds that men mis-
use the money more frequently. In India, entonces, if cash transfers begin to replace
subsidies for grains, fuels, and energy, one might expect debates to emerge over the
misuse of the cash transfers (celebrations not food, men’s outings not family
expenditures, etc.) and eventually over who in the household should be receiving
the cash.
UIDs may also have noneconomic benefits. The case quotes a social worker
speaking about the effect of UIDs on the disenfranchised poor: “Believe it or not,
these people would like some standing in society where they are recognized.” In
this famously diverse country, with multiple languages and powerful state and
local governments, UIDs could be part of the politics of recognition. Having a UID
might underscore a “superordinate identity” (indio) eso, though not extinguish-
ing other identities (Bihari, dalit, youth, femenino, etc.) could improve intergroup
relations.3
What about the costs? Launching the system is costly, from the design to one
of the largest social marketing programs in Indian history. Maintaining the system
will have costs. Fears are already being expressed about the possible misuse of
UIDs if they become part of the increasingly integrated Indian system of personal
información. In the design of India’s UIDs, new legal protection and information
security are a priority. Ellos, también, carry costs; and they are inevitably insufficient,
some critics will say.
PUBLIC-PRIVATE PARTNERSHIPS
Given these benefits and costs, the Indian government—the newly reelected prime
minister Manmohan Singh and his new almost-cabinet-ranked chairman of the
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Designing and Implementing a Technology-Driven Public-Private Partnership
Unique Identification Authority of India (UIDAI)—decide to move forward. Pero
cómo? Technical and organizational questions intertwine; importantly, no one insti-
tution and indeed no one sector can do it alone.
An interesting feature of both the challenge and the Indian setting is enthusi-
asm for technology. En este caso, two new technologies have appeared that did not
exist ten years ago. One is a micro-ATM machine that combines a mobile phone
with a fingerprint reader. The other is the ability to “de-duplicate” large data-sets,
although the challenge in India will be to move from today’s capabilities to what
will be needed five years from now. Combined, they promise “a new-to-the-world
category of products and services based on the UID.” These products will require
such partners as banks and “business correspondents” who act as agents for banks,
insurance companies, and telecommunications firms; and also for the ministries of
finance, rural development, and eventually health, education, y otros.
These technologies, coupled with Mr. Nilekani as the prestigious champion,
evoke enthusiastic responses from citizens and companies—and, when combined
with the PM’s support, to the quelling of most of the “bureaucratic resistance” of
public-sector partners.
But overcoming resistance is only the beginning. Señor. Nilekani has to persuade
potential partners of the value of the proposition for the country and for each of
a ellos; and he has to integrate the pieces.
In designing public-private-citizen collaboration, one decomposes the tasks,
allots them to suitable institutions according to comparative advantage, y luego
constructs the collaboration so that each partner gains benefits in coin it under-
stands.4
Typically, governments are good at things like defining public purpose, author-
ing and enforcing laws, and having access to tax collections. Businesses are good
at things like creating and marketing products, developing incentive systems, y
having access to international business ideas. Citizens’ groups are good at gaining
trust with constituents, mobilizing demand, and conducting some kinds of infor-
mal screening and enforcement. Governments are particularly suited to pure pub-
lic goods, businesses to pure private goods, and citizens’ groups to common prop-
erty resources.
Big innovations often require all these capabilities and all these kinds of goods.
Por lo tanto, leaders like Mr. Nilekani must pull together government agencies, busi-
ness capabilities of various kinds, and the efforts of citizens and nongovernment
organizaciones. This requires his strategic vision; it also demands a favorable
authorizing environment and considerable skill.
For UIDs, the authorizing environment in India is favorable politically, legally,
and financially. Señor. Nilekani is able to recruit people for UIDAI from both govern-
ment and the private sector. He is able to contract world-class private sector firms
for key functions, including project design. He has the resources to do things
quickly and do them right.
He skillfully emphasizes communication and trust, which are prime ingredi-
ents in successful partnerships. In the first year, Señor. Nilekani has spent most of his
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time forging relationships with government agencies private firms, and partner-
ships across the government-business divide. He likens his efforts to a “road show”
for a startup company, with an added dose of listening and learning. He and
UIDAI, Professor Sathe writes, “worked hard to facilitate such face-to-face dialog
(‘let’s get the right people together in one room’) and create working bonds across
the cultural chasms that separated the institutions that needed to work together.”
The result in year one: Señor. Nilekani has made a promising start to integrating
the many capabilities and the many kinds of “goods” that will be needed to imple-
ment a unique national ID.
MOBILIZING DEMAND
Besides integrating supply, big innovations in government often entail another
challenge: mobilizing demand.
In the case at hand, Señor. Nilekani met early and often with citizens and civic
organizaciones. He and his colleagues planned a remarkable marketing campaign.
Field tests provided tangible evidence to be shared with the public. Branding was
taken seriously, from the name Aadhaar (“foundation”) to the logo. Borrowing
from best practice in private-sector advertising, UIDAI is considering everything
from posters in 15 million retail points to television ads, from utilizing influential
retailers and 150,000 social workers, to celebrity endorsements and creating new
songs.
Extraordinariamente, Señor. Nilekani also set up a kind of competition in the registering
of citizens. Government agencies at the state and local level were not pleased to
learn that private firms, ranging from insurance companies to banks, would also
be certified as registrars. This competition itself would help mobilize citizens’
demand.
NILEKANI FACES YEAR TWO
The case closes in July 2010 with Mr. Nilekani—and by now, that means the read-
er as well—facing the future. What most deserves his attention? What are the key
threats to integrating supply and mobilizing demand?
Guided by experience in other countries, one might advance several sugges-
tions to Mr. Nilekani. Make sure the technology works. Contemplate all the ways
corruption might occur, and take countermeasures. Work even more closely with
civil society organizations. Focus on the killer app for the private sector, and delay
the substitution of cash transfers for in-kind subsidies.
The technology is crucial. Señor. Nilekani needs to make sure that the “killer app”
works—and is known to work. Doubts have been expressed about the technolog-
ical feasibility now of biometric security via cell phones.5 Mr. Nilekani needs to
make sure that the “de-duplication” challenge can be met—or delay national
implementation accordingly. Fortunately, as co-founder of Infosys, Señor. Nilekani is
an expert in this domain.
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Designing and Implementing a Technology-Driven Public-Private Partnership
What may be less natural to Mr. Nilekani is the challenge of corruption. Somos
told about large-scale leakages in the provision of fuel, alimento, and electricity, cual
are associated with fraudulent eligibility cards among other things. We are told that
local land registry officials sometimes disabled the computers brought in to auto-
mate and therefore eliminate what heretofore had been lucrative areas for bribes.
We learn that local politicians may benefit from these corrupt practices. Finalmente,
some of the government agencies resist competition in registering citizens, tal vez
because licenses and permits are often sources of extra-official revenue for those
administering them.
When corruption is widespread, planners must game any new system to ask
where extortion, bribery, and fraud may emerge. Por ejemplo, the corrupt may
seek to undermine the new system. National ID cards have the potential disadvan-
tages of misuse, especially when combined with census data or data from the
National Population Register, ranging from the disclosure of private information
to hackers with identity theft in mind to governments who wish to use private
information to oppress. When contemplating what might go wrong, one must
consider that the bad guys may be members of the UIDAI partnership, for exam-
por ejemplo, government agencies wishing to protect the monopoly power to register peo-
por ejemplo, and agencies, companies, and politicians who benefit from the leakage in the
system of subsidies. Beyond a better legal framework, which is a priority, one has
to contemplate what partners could do to sabotage momentum.
Por ejemplo, consider the understandable concerns about human rights, pri-
vacy, and security. To sabotage UIDs, someone may use privileged access to create
what looks like a systemic vulnerability or breakdown. That may involve a domain
that undermines a disadvantaged group or something that appears to menace
national security. One dramatic breach could undermine the system by convincing
people that the putative benefits do not outweigh the risks.
Protecting against these breaches may overlap another area of priority in year
two: mobilizing demand. In both domains, an even greater involvement of citi-
zens’ groups may pay many dividends.
Primero, civic associations can mobilize demand—women’s groups among
women, farmers’ associations among farmers, Etcétera. Civic associations have
capabilities unavailable in public agencies or private firms. Civic groups can lever-
age preexisting trust and solidarity to convey credible messages about new servic-
es and practices. They can provide moral and material incentives and, sometimes,
aplicación. As part of a public-private partnership, they can help design and
manage local services, particularly when the services need to vary according to
local conditions.
Segundo, civic associations may be used to combat inefficiency and corruption.
Por ejemplo, citizens’ groups can help assess the competitive process of registra-
ción. Professor Sathe notes a key role for “third parties”: “UIDAI would provide
training materials so that when the resident stood in line to apply for the UID, ambos
the enrollment agency and the operator would have been certified by UIDAI, con
independent third parties auditing the process and re-rating the agencies to ensure
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adherence to standards and data integrity.” Civil society organizations can help
monitor a changeover from subsidized food, fuel, and energy to direct cash trans-
fers, when this is attempted. Fortunately, India has pioneering expertise in feed-
back mechanisms from citizens to government, in fact in Mr. Nilekani’s home
town of Bangalore.6 Mr. Nilekani might spend even more time in year two work-
ing with citizens’ groups to mobilize demand and to provide feedback on vulner-
ability and performance.
A final suggestion concerns strategic focus. Some advocates of UIDs envision
the replacement of subsidies with cash payments. But though the potential gains
are large, this is also a domain where resistance could be severe, from public agen-
cies with vested interests, from the corrupt, and possibly from poverty experts who
note potentially negative side effects. Recall that the “killer app” is about banking.
The mini-ATM in a cell phone will have fewer opponents and many more allies
than the project of replacing the subsidy system with cash transfers. In the spirit
of the marketing tsunami where success breeds success, Señor. Nilekani might keep
his focus in year two on no-frills bank accounts accessible through cell phones.
This case study presents a remarkable example of the interplay between tech-
nology and public-private partnerships. It is an instance of a broader drama play-
ing out across many countries, where technological breakthroughs promise new
ways to provide public goods and new access to private goods and markets, semejante
as credit. The obstacles are indeed technical. But they are also challenges of leader-
ship and management. How should innovators assess the needed institutional
inputs and design sustainable public-private collaboration? How should they
implement complicated institutional arrangements, with an eye to early successes
that build momentum and, unfortunately, also an awareness of willful obstruction
and the reactions of the corrupt? How should they mobilize citizens and civic asso-
ciations to mobilize demand and give feedback about performance? In all these
areas, the world will have much to learn from India; and as Aadhaar moves for-
ward, perhaps some learning may also go in the other direction.
1 Banco mundial, Social Protection for a Changing India, volumen. 1 (Washington: El Banco Mundial, 2011),
9.
2 j. METRO. Cunha, GRAMO. De Giorgi, and S. Jayachandran, “The Price Effects of Cash Versus In-Kind
Transfers” (Universidad Stanford, 2010): 3; http://www.stanford.edu/~degiorgi/pal.pdf
3 R. D. Putnam, “E Pluribus Unum: Diversity and Community in the Twenty-first Century. El
2006 Johan Skytte Prize Lecture,” Scandinavian Political Studies 30, No. 2 (2007): 137–74; GRAMO. A.
Akerlof and R. mi. Kranton, Identity Economics: How Our Identities Shape Our Work, Wages, y
Well-being (Princeton: Prensa de la Universidad de Princeton, 2010).
4 R. Klitgaard and G. F. Treverton, “Assessing Partnerships: New Forms of Collaboration,” in
Collaboration: Using Networks and Partnerships, ed. j. METRO. Kaminsky and T. j. Burlin (Lanham, Maryland:
Rowman & Littlefield, 2004): 21-60.
5 j. A. Pope and D. Bartmann, “Securing Online Transactions with Biometric Methods,"
International Journal of Electronic Marketing and Retailing, 3 (2010): 132-144.
6 S. Pablo, Holding the State to Account: Citizen Monitoring in Action (Bangalore: Books for Change,
2002); and more generally the Public Affairs Centre of Bangalore.
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