Digital accelerator: Revving up govt in Asia

November 6, 2018 02:00 AM Vitor Gaspar and Chang Yong Rhee


Even in countries where digitalization is in its infancy, initiatives are on the rise. Digitalization can improve public service delivery 

Asia’s digital revolution shows no signs of slowing down. From e-commerce giants like China’s Alibaba and Japan’s Rakuten to ride-hailing, and digital payment tech startups, like Indonesia’s Go-Jek and India’s Paytm, and the widespread use of industrial robots for manufacturing, digitalization is changing the way the region’s businesses operate.

It is also transforming the way governments operate. Thanks to digitalization, policy makers have greater access to timely and accurate data. With better information, governments can design and implement better policies, such as improving tax compliance and the efficiency of government spending.

Indeed, Asia’s governments’ use of digital technologies in public finance management is directly transforming the lives of millions of people. But to fully reap the digital dividend, policy makers will need comprehensive policy actions on multiple fronts.

Benefits from eGovernment
Critically, digitalization can make governments fairer and more efficient. India’s experience with theAadhaar— the world’s largest biometric identification system that provides a unique 12-digit ID number for 1.2 billion residents in India—is a case in point.

The identification system links to various social programs, including subsidies on liquefied petroleum gas. In 2013, the government-linked Aadhaar beneficiaries’ numbers to the liquefied petroleum gas program, which helped prevent claims from ghost beneficiaries or multiple claims. In addition, the government transferred subsidies directly to the Aadhaar-linked bank accounts, bypassing dealers and improving its support of the poor.

eGovernment can only work if people have access to it 
Additionally, the Philippines’ digital registry—Listahanan—serves as a gateway for as many as 52 social programs, ranging from cash transfers to emergency assistance, with 75 percent of the population registered. In Indonesia, digital social registries appear to have also helped expand the coverage of conditional cash transfer programs. Even in countries where digitalization is in its infancy, initiatives are on the rise. Digitalization can improve public service delivery. For instance, Bangladesh uses smart water meters  to monitor water quality. Digital initiatives can also help in public financial management—for example, Bhutan’s e-tool has helped standardize project appraisal and selection for public investment.

The benefits go beyond spending. On the revenue side, e-filing, e-payments, and e-customs initiatives in tax administration are common in Singapore, Malaysia, Vietnam, Indonesia, and Thailand, and are paying off. In Malaysia, ongoing efforts in e-filing and e-payments have reduced compliance time by 30 percent.

Challenges of going digital
These digital initiatives bring large gains to governments, but there are also critical challenges to address without delay.

First, the popularity and necessity of digital technologies across the region mean that more people are at risk of cyberattacks. Hackers have used their digital skills to steal private information and disrupt government functions. A digital world is also a target-rich environment for fraudsters, including in cryptocurrency exchanges.

Second, digitalization of the economy could, in principle, reduce tax revenues. For example, instead of staying in hotels that charge a tax, tourists may use digital platforms to stay in private homes. These small-business transactions may fall below the thresholds for taxation—resulting in loss of revenue for the government. The digital economy also makes it easier for tax avoiders to move profits abroad, out of reach of tax authorities.

Third, more than half of those without access to the internet live in Asia. While broadband subscriptions have increased in the region, there is a widening gap between leaders and their less advanced peers. For example, less than one percent of Myanmar’s inhabitants have access to fixed broadband networks compared to over 25 percent in Singapore. eGovernment can only work if people have access to it.

Finally, some countries have leaped ahead, while others are far behind. Korea, Singapore, Japan, and Malaysia, rank in the world’s top ten of digital government. India outperforms advanced economies, on average, while China, Sri Lanka, Indonesia, and Thailand outperform their emerging market peers.

At the same time, small islands and fragile states have struggled to make significant advances in eGovernment. In Myanmar, Tuvalu, and the Marshall Islands, digitalization still needs a boost. Ongoing applications of digitalization in the region, far-reaching and diverse, show such a boost is possible.

Overcoming digital roadblocks will require shifting gears
The good news is that the right policies can help governments prevent fraud and cyber attacks, as well as boost digitalization benefits. Singapore and Malaysia for example, have established agencies to oversee cyber security strategy and operations.

Finally, some countries have leaped ahead, while others are far behind. Korea, Singapore, Japan, and Malaysia, rank in the world’s top ten of digital government. India outperforms advanced economies, on average, while China, Sri Lanka, Indonesia, and Thailand outperform their emerging market peers.

At the same time, small islands and fragile states have struggled to make significant advances in eGovernment. In Myanmar, Tuvalu, and the Marshall Islands, digitalization still needs a boost. Ongoing applications of digitalization in the region, far-reaching and diverse, show such a boost is possible.

Overcoming digital roadblocks will require shifting gears
The good news is that the right policies can help governments prevent fraud and cyber attacks, as well as boost digitalization benefits. Singapore and Malaysia for example, have established agencies to oversee cyber security strategy and operations.

 www.imf.org  



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