Ex-Banker Directs Task Force To Reform Bangalore

R. A. Hettinga rah@shipwright.com
Wed, 26 Mar 2003 18:29:34 -0500

Chewy bits for the irony, and acronym, overloaded...



The Wall Street Journal

March 26, 2003 5:19 p.m. EST 

FEER(4/3) Ex-Banker Directs Task Force To Reform Bangalore 

(From The Far Eastern Economic Review)

  By Madhavi Swamy in Bangalore 

PEOPLE THOUGHT Ramesh Ramanathan naive, if not crazy, when the then-34-year-old Citibank managing director gave up his lucrative job in London to return to his home town of Bangalore three years ago, so he could "give back" to his community. "Till then, the only 'crazy' thing I'd ever done was to marry the out-of-caste girl I fell in love with," jokes Ramanathan, who hails from a conservative, middle-class background. 

With his perfectly groomed hair and well-manicured nails, Ramanathan just may herald the new breed of social reformer in India: the well-travelled, white-collar professional who wonders why his home town can't be as clean and efficient as Singapore. When India can produce world-class CEOs, software companies and engineers, why not world-class cities? 

Despite claims to being India's Silicon Valley, Bangalore suffers from routine power cuts, potholed roads and other ailments common to all the big cities in India. Previous attempts to upgrade the city's facilities, such as the privatization of the airport, were mired in bureaucratic wrangling and never took off. 

Once back in India, Ramanathan initially struggled to figure out how a novice like himself could make a difference. As luck would have it, at around the same time Bangalore's corporate leaders, including Nandan Nilekani, CEO of software-developer Infosys, announced the formation of the Bangalore Agenda Task Force, or BATF. Its objective was to increase government efficiency by applying corporate best practices, such as managing for results. While the BATF received its mandate from the city government, it was to be privately funded. 

Capitalizing on an opportunity to put his knowledge to good use, Ramanathan got in touch with Nilekani, with whom he was already acquainted through previous business dealings. Realizing that "in the corporate sector, the finance department always provides the impetus for change," Ramanathan proposed using his financial knowledge to modernize the financial-management systems of the local government. 

"A good accounting system is like good plumbing," says Ramanathan. "Open the tap any time, and you have free flow of information." Under his direction, the Bangalore municipal corporation moved from a "cash system" to a "fund-based accounting system," or FBAS. The primary drawback of the former system, used by most governments worldwide, is that it accounts for receipts and payments on a cash basis only, while ignoring amounts receivable and payable. Not only does this obscure the true financial state of the government, but it also imposes considerable limitations on financial planning. 

The FBAS is an accrual system of accounting in conformity with standards prescribed by the Government Accounting Standards Bureau in the United States. For example, the FBAS keeps track of the municipality's assets and liabilities overlooked by the cash system -- and has reduced the information-flow cycle time from 48 days to 48 hours. Furthermore, many of these assets can be securitized or monetized, facilitating access to capital markets. 

It took $375,000, provided entirely by the BATF, and 34 months to implement the new financial-management system. Gaining the confidence and the cooperation of the city's bureaucrats was no easy task. Yet the costs were negligible when one considers that almost $50 billion a year is spent by India's urban local bodies in a manner that has little accountability. 

Ramanathan believes that the government is no different from a publicly held corporation. Taxpaying citizens are stakeholders in the government, and as such they have a right to information. But the challenge is to transform passive stakeholders to active stockholders. "After instituting supply side reforms, the next step was to rally the demand side." 

In 2001, Ramanathan launched a citizen's movement called "Janaagraha", or "the life force of the people." Janaagraha is funded entirely by the Ramanathan foundation, which was set up by Ramanathan and his wife with their own capital. 

The primary objective of the organization, which projects itself as a platform for ideas, is to mobilize communities in the name of decentralization and participatory democracy. Ramanathan points to the success of participatory budgeting in Prto Allegre, Brazil, as the source of his inspiration. "Unlike representative democracy where citizens elect a representative and sit back, participatory democracy calls for greater engagement." 

The movement oversees a three-pronged campaign: the public record of operations and finance, or Proof; Ward Works; and urban-poverty, in which groups of slum-dwellers are trained to collectively manage their finances. Under the guidance of Proof, the municipal government of Bangalore now puts out a quarterly financial statement, "just like any private-sector company," says Ramanathan proudly. "The next step is to develop performance indicators to improve our ability to gauge the effectiveness of the government." 

Meanwhile, the Ward Works campaign encourages citizens to come together at the local neighbourhood level and, together with their ward council members, decide upon the municipal budget. Under this scheme, a percentage of the local tax citizens pay goes back to their neighbourhood and is spent on improvements prioritized by the citizens themselves. 

In a private-sector-style initiative, Ramanathan has used the marketing savvy of Janaagraha's volunteers to capture the imagination of the public. High-profile businessmen and local celebrities have endorsed Janaagraha in a series of advertisements in an unprecedented mobilization of Bangalore's middle classes. Residents in upmarket neighbourhoods now meet with their ward councillor to resolve practical problems like garbage collection, effectively doing the work of the municipal corporation themselves. 

Janaagraha is run entirely by "professional volunteers," a term coined to refer to volunteers who are unpaid but still held accountable. Its message of "practical patriotism" and Ramanathan's management style appeal greatly to professionals long on abilities and the desire to contribute, but short on spare time. "Even if you give two hours a week, you can have an impact," he says. Adds Swapna Kazmi, a former software engineer and now a full-time volunteer in charge of Janaagraha's IT systems, "Our organization is very process oriented, which is what makes it so much more effective than most non-governmental organizations." 

Computerization of the government's accounts and the demand for greater disclosure have fostered transparency in government. The success of this experiment has created the political will to modernize the administration in other parts of the state. For example, the government has computerized rural land records, greatly reducing corruption. 

Ramanathan theorizes that because Bangalore has been an incubator for top-notch companies run on the same lines as any Fortune 500 company, its residents and officials alike are very receptive to private-sector management techniques. "Bangaloreans have seen the efficacy of U.S.-style shareholder-run corporations, and of course Bangalore is primarily a white-collar, middle-class city whose residents have experienced first hand the benefits of working in such companies." 

Ramanathan sees his mission as filling in the vacuum between the proponents and opponents of globalization. "I've experimented with private-sector concepts to decentralize administration and put power back into the people's hands," he says. "A side benefit of this is the building up of social capital through the formation of citizens' associations. In India social capital has heretofore existed primarily on caste lines, so this is particularly important. But the ultimate test is whether this model is scalable on a state or national level." 

Ask Ramanathan about the difficulties he must have faced dealing with India's notoriously corrupt bureaucrats, and you will receive an unflaggingly positive, if a tad evasive, answer. Ramanathan's philosophy is not one of confrontation but of co-option. He will tell you that the government is full of well-meaning bureaucrats, who are waiting to have their do-gooder instincts unleashed. Says T.S. Prasad, a human-resources professional who manages Janaagraha's volunteers, "Ramanathan's positive outlook has made it so much easier to collaborate with government officials." In a society where most professionals feel alienated from the government, Ramanathan has made it incumbent upon himself to prove otherwise. 

R. A. Hettinga <mailto: rah@ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
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