Digitalization main challenge for policy makers: how to think across boxes
Updated: Jan 28, 2021
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In 2021, ‘a year ago’ seems to refer to another era. This is because the world is undergoing big and rapid shifts. In one hand, measures such as social distancing, lockdowns and travel restrictions, have increased societies’ dependencies on digital technologies with teleworking, e-commerce, or distance learning. In another hand, the emergence and evolution of new technologies and their application into digital services are rapidly transforming entire sectors, business models and jobs.
During such unprecedented times, governments have had, and still have, to make difficult choices: finding the right balance between protecting lives and salvaging the economic activity to prevent a social and economic crisis in addition to the continuing sanitary crisis. Consequently, while they are still heavily mobilized to combat the pandemic, governments shall prepare long-term plans to exit the crisis management, transit towards the recovery mode and build a sustainable and resilient economy.
"Based on the experience of past epidemics, investment is likely to remain weak for several years following the COVID-19 pandemic, but it is possible that renewed investment in digital technologies will spur productivity gains in some sectors.
A supportive policy environment will be key to laying the groundwork for an investment rebound in emerging markets and developing economies. [1]"
Global Economic Prospects, January 2021, WBG
In this context, policy makers face a pressing need to design a holistic, integrated, tailor-made and actionable National Digital Transformation Strategy (“NDTS”) that shapes the way digital technologies and applications will transform their economy, their nation and their country’s stance in the global digital marketplaces.
Figure 1 : Building a sustainable and resilient economy and society: the role of the NDTS and a digital development body
Because of the interrelations (see simplified representation in Figure1) between the stakeholders driving the digitalization of the economy and the society, the preparation, the implementation and the maintenance of the NDTS require a novel governance model based on a cross-sectoral and public-private collaboration. The OECD acknowledges that the engagement with stakeholders, including officials from different levels of the government and also non-government stakeholders, at an early stage of the strategy development is a key element to good policy making[2]. In 2019, 24 out of 33 surveyed OECD countries had multiple public and private stakeholders contributing to the national digital strategy governance[3].
Determining the role of the public and private sectors in the country's digital transformation, assessing the country's stance in the global digital trade and identifying the enablers to build a sustainable and resilient digital economy, are essential to the preparation of the NDTS. Although governments may choose to address specific issues by developing distinct strategies focused on AI, Blockchain or Cybersecurity for example, the versatile and overarching nature of the digital ecosystem calls for a holistic and integrated overall policy that shall contemplate the big picture before being disaggregated into more focused subsequent policies and initiatives.
In addition, careful considerations shall be given to the investment strategy, by evaluating potential opportunities for FDI or public-private co-financing through vehicles like PPP. As such, the NDTS should also tackle the investment in digital infrastructure, in digital firms and in digital adoption by firms across all industries.
Consequently, the NDTS shall address the following questions (see Figure 2):
To which extent the government shall intervene in the digitalization of the economy and society?
What is the role of the government?
The government is a key user of digital services and applications (see Figure 2).
Creating a smart government is an important step to achieve a smart society. In some cases, the public sector is slower than the private sector to adopt new technologies, that is why some countries have first focused their NDTS into creating an e-Government and into undertaking social initiatives such as providing digital public services and supporting the development of digital skills.
But e-Government is not the only application of the digital transformation to the public sector. Smart cities, e-Education, next generation care and mobility are other sectoral applications and use cases that are driven by the public sector. Instead of being fully financed by public funding, they can materialize through innovative vehicles such as Public Private Partnerships.
What is the role of the private sector?
The private sector, in particular large and international corporations, is leading the digitalization of the industries and services. This is because digital services and applications not only transform businesses models but also contribute to massively increase productivity. One could therefore think that the private sector does not really need to be covered in a NDTS since it already has diverse and very important incentives to carry out its digital journey.
Yet policy makers shall carefully consider the following points:
Ensure that appropriate measures are put in place to remove any barrier to the industry's digitalization. For example, in 2020, skills gaps in the labour market were the first perceived barriers to the adoption of new technologies for 55.4% of the companies surveyed by the World Economic Forum [4]. The other main barriers were the inability to attract specialized talents (46.7%), the skills gaps among the organization’s leadership (41.%) and the lack of flexibility of the regulatory framework (33%).
Support the small and medium/one person enterprises (“SM/OPE”) as they face more barriers than large enterprises to go digital. SM/OPE do not necessarily have the resources nor the knowledge to start their transformation. The Singapore Digital Office[5] is a great example on how governments may accompany SM/OPEs in their digital journey.
What is the country’s stance in the global digital marketplaces?
One of the main characteristics of the digital world is to be borderless. Consequently, policy makers shall also draw a clear picture of the country’s expected position, as a digital resources user and producer, at regional and international levels. In other words, this means that governments shall define the desired mix between being an importer, an exporter, or a transit agent of digital resources and digitally enabled outputs.
For example, countries with high demand for digital services are being wooed by major players such as cloud providers to establish their datacenters and points of presence there. On the contrary, countries which home demand is more limited, need to consider other ways to attract such players, by for instance:
Providing skilled and competitive workforce
Ensuring the diversity and affordability of the international routes.
Positioning the country as a gateway to access broader demand segments (this may be achieved by solving issues related to data sovereignty and cross border data)
Defining the international dimension of a country’s digital transformation requires to identify the relevant channels to achieve regional and international collaboration. Such collaboration may materialize through sectoral MoU and trade agreements, common initiatives to increase the security of the cyber domain, new and more diverse submarines routes, regional regulatory initiatives to govern the storage, the transfer and use of the data or the regulation of digital platforms for instance.
In addition to the above, policy makers shall determine what are the main enablers to achieve the desired objectives, and which measures shall be put in place to strengthen such enablers?
The main points to be addressed are:
Is the digital infrastructure ready in terms of availability, affordability, robustness and scalability?
How to promote and support the development, innovation and adoption of emerging technologies?
How the regulatory framework and governance shall be updated to adapt to the pervasively and cross-sectoral application of digital technologies and services? How to migrate towards a collaborative regulatory model and efficiently use approaches such as regulatory sandboxes, self-regulation, or co-regulation to encourage innovation, support the deployment of new and emerging technologies and incentivize investment?
How to develop local talents and create a pipeline of skilled workforce that will thrive in the digital labour market? How to close the usage gap and empower everyone with the appropriate mix of skills?
Figure 2: The NDTS is at the cross roads of the government’s national and international vision and the digital economy enablers
To answer these questions, collaboration is needed within governments and with a wide range of stakeholder groups, such as businesses (major and small players), civil society, the Internet technical community and trade unions.
The preparation, the implementation and the maintenance of the NDTS requires a novel tailor-made governance model based on cross sectoral and public-private collaboration. The same applies to the digital regulatory framework. Can policy makers hit two birds with one stone?
International ICT institutions [6] are unanimous: the next generation of ICT regulation, ie. the fifth generation regulation (“G5”) will make sector specific regulators work together. This is because silo-style (ie. sector specific) regulation does not apply to the digital world. Rather than leaving the question of how to achieve the collaborative regulation for later, governments may set its foundation while preparing the NDTS, with the Build, Entrust and Empower (“BEE”) approach (see Figure 3).
Figure 3: A Build, Entrust and Empower approach to design the NDTS and achieve the long term digital economy’s objectives
BUILD the foundation for NDTS and collaborative governance
The first step of the BEE consists of gathering representatives from relevant government bodies (e.g. ministries, sector regulatory bodies, economic and investment boards) to form a Digital Strategy Unit (“DSU”) led by a Chairing Committee of the highest levels of the government. The DSU members will not only work together, but also ensure the knowledge sharing and the capacity building within their original organization.
The mission of the DSU is to lay the foundation to prepare the NDTS and the migration towards a collaborative governance. In addition to prepare the scope of work and start the engagement with private stakeholders, the DSU shall assess the costs and evaluate the co-financing options. In the EU for instance, 48% of the national initiatives reported in the 2018 EU Digital Transformation Scoreboard [7] were co-financed with both public and private funding in equal amount (and the industry exceeded the public funds in 16% for these initiatives).
ENTRUST with the preparation of the NDTS and the collaborative regulatory governance model
After few months of operation, the DSU shall ultimately be extended to a more organized structure, the Digital Strategy Office (“DSO”), which is entrusted with the preparation of the NDTS and the plan to achieve a collaborative regulation across different sectors. The idea is to leverage all the knowledge sharing and consultation with the stakeholders to not only set the country’s digital vision but also to shape the G5 regulatory framework.
EMPOWER with the monitoring of the NDTS and the implementation of a collaborative regulation
Finally, after the NDTS is issued, governments shall empower a digital body, in the Figure 3 referred to as the Digital Development Body (“DDB”), which shall be responsible for:
the monitoring of the implementation of the NDTS Action Plan and subsequent initiatives. The DDB would not be responsible for implementing all the diverse initiatives set in the NDTS and subsequent policies, but would rather coordinate closely with the responsible entities to monitor the progress, to provide all the required support and to set fit for purpose reporting mechanisms and feedback loops;
the implementation and monitoring of the regulation to ensure that regulated entities are complying with the rules and that the rules themselves are achieving their intended purpose.
Ideally, the DDB shall oversee, in cooperation with other regulators, competition matters, data privacy and protection, cybersecurity, AI ethics and provide an appropriate regulatory response to emerging technologies such as Iot, Blockchain. Its purpose is to promote greater innovation and incentivize investment.
In order to facilitate the bridge with other government bodies, the resources (staff and intelligence) that were built and developed within the relevant bodies during the BUILD step, shall ultimately be shared and/or transferred to the DDB.
In conclusion
The covid-19 pandemic is likely to leave scars in the global economy for the next coming years. As investments are globally shrinking, policy makers shall now set the groundwork to strengthen the economic drivers of growth and ultimately build a sustainable and resilient economy.
A comprehensive and integrated National Digital Transformation Strategy prepared and put in motion by highest level of the government, in cooperation with public and private stakeholders is a key milestone to shape the way digital technologies and service will transform the economy, the society and country’s stance in the global digital marketplaces.
This whitepaper is part of a broader series that will tackle all the key aspects of building a resilient and sustainable digital economy. To name a few: benchmark of best practices for digital policy practices, how to achieve a e-Government and smart public services, the role of the digital infrastructure, arising competition issues in the digital platforms markets and more to come.
The present whitepaper is addressed to policy makers but more broadly to any actor of the digital economy: businesses, civil society, trade unions, Internet technical community or digital services users.
Any comments or suggestions may be shared on DigiConomy.info.
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References:
[1] Global Economic Prospects, January 2021, Box 3.2 Impact of COVID-19 on investment: Deep, persistent, and broad based, World Bank Group
[2] Going Digital: Shaping Policies, Improving Lives, 209, Box 9.1 The multi-stakeholder model: a key to good policy making in the digital age, OECD [3] Digital Economy Outlook, 2020 edition, Table 2.2. National digital strategy governance, OECD
[4] Future of Jobs Survey, 2020 edition, Chapter 2 Forecasts for Labour Market Evolution in 2020-2025, Figure 26, World Economic Forum
[5] https://www.imda.gov.sg/infocomm-media-landscape/SG-Digital-Office
[6] Global ICT Regulatory Outlook 2020 edition, Chapter 1: The need for collaboration and metrics – and a new benchmark, ITU Digital Regulatory Handbook, 2020 edition, Chapter 1. Regulatory governance and independence, ITU and the World Bank co publication Digital Transformation: Powering the Great Reset, July 2020, World Economic Forum, Digital Economy Outlook, 2020 edition, Chapter 1. Going digital: An integrated approach to policy making in the digital age, OECD
[7] Digital Transformation Scoreboard 2018 edition, Source of funding, European Commission