Resetting the state for the post-COVID digital age

By Carlos Santiso, Director for Digital Innovation in Government of the Development Bank of Latin America and Member of the Global Future Council on Transparency and Anticorruption of the World Economic Forum

This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.

glob-digital-colorsIn Brazil and elsewhere, the coronavirus crisis is accelerating the digital transformation of governments and govtech start-ups are becoming unexpected allies in the race to digital resilience.

Press reset and fast forward

The COVID-19 crisis is putting our global digital resilience to the test. It has revealed the importance of a country’s digital infrastructure as the backbone of the economy, not just as an enabler of the tech economy. Digitally advanced governments, such as Estonia, have been able to put their entire bureaucracies in remote mode in a matter of days, without major disruption. And some early evidence even suggests that their productivity increased during lockdown.

With the crisis, the costs of not going digital have largely surpassed the risks of doing so. Countries and cities lagging behind have realised the necessity to boost their digital resilience and accelerate their digital transformation. Spain, for example, adopted an ambitious plan to inject 70 billion euro into in its digital transformation over the next five years, with a Digital Spain 2025 agenda comprising 10 priorities and 48 measures. In the case of Brazil, the country was already taking steps towards the digital transformation of its public sector before the COVID-19 crisis hit. The crisis is accelerating this transformation. 

The great accelerator

Long before the crisis hit, the data-driven digital revolution has been challenging governments to modernise and become more agile, open and responsive. Progress has nevertheless been uneven, hindered by a variety of factors, from political resistance to budget constraints. Going digital requires the sort of whole-of government reforms that need political muscle and long-term vision to break-up traditional data silos within bureaucracies, jealous to preserve their power. In bureaucracies, information is power. Now, information has become ubiquitous and governing data, a critical challenge.

Cutting red tape will be central to the recovery. Many governments are fast-tracking regulatory simplification and administrative streamlining to reboot hard-hit economic sectors. Digitalisation is resetting the relationship between states and citizens, a Copernican revolution for our rule-based bureaucracies.

Last April, the Brazilian federal government updated its digital government strategy for the next two years. Its stated aim is to cut bureaucracy costs that hinder competitiveness and to generalise digital services to reduce human interaction, which have been one of the sources of both corruption and infection under the COVID-19 crisis. This de-bureaucratisation agenda figured prominently in President Jair Bolsonaro’s state of the union address earlier this year, emphasising the competitive benefits of going digital. Since January 2019, the federal government has digitalised 768 services, representing US$440 million in savings. In the biannual index of the maturity of digital government released last July by the United Nations, Brazil ranks 4th in the region (yet 54th in the world), and amongst the top 20 in the world for digital public services.

The COVID-19 crisis is tearing down many of the barriers and allowing reformers to fast forward critical reforms, such as a universal digital identity, secured digital signatures, agile digital payments, and interoperability platforms to share information across government agencies. The crisis has convinced every one of the digital imperative.  “The crisis is not questioning the direction to travel,” says Luis Felipe Monteiro, Brazil’s secretary for digital government; “it is boosting it.”

Investing in digital  

 The crisis is also accelerating the demand for government digital services by citizens until recently reluctant to use them. Only 5 percent of Latin-Americans were using government digital services before the COVID-19 crisis. After months of confinement, people have grown more used to accessing public services and government transactions online. Digital natives expect better services, in terms of the quality and speed, as well as governments’ ability to simplify their lives and anticipate their needs. Even before the COVID-19 crisis, social discontent throughout Latin America in late 2019 reflected the crisis of trust in government rooted in poor public services and pervasive corruption. New challenges are now adding to these older problems, but the demands for better government will remain.

As a result, government spending on technology is set to increase even further in the next few years. However, government tech procurement remains incredibly cumbersome, risk-averse and at odds with the pace of digital transformation, largely unfit for purpose in the digital age. At the same time, digital government is making government cheaper, as well as faster, simpler and more transparent. In Brazil, a country that issues 764 regulations per day, the labyrinth of bureaucracy costs between 1.45% and 2.76% of GDP, according to recent estimates. The Ministry of Economy expects that digitalisation could save the government up to US$60 million per year.

Putting the state in start-up mode

“People are expecting governments that are more agile and able to experiment with new ways of doing things. Bureaucracies, too, are developing greater appetite for innovation, steered by society’s demand to fix bureaucratic dysfunction” reckons Bruna Santos, executive director of the Brazilian National School of Government. As governments’ tech budgets are set to expand, bureaucracies must be able to test digital solutions before scaling them up.

In this context, “govtech start-ups offer the kind of public-private partnerships for innovation that are needed,” says Letícia Piccolotto, founder of BrazilLab, a leading govtech accelerator. Govtechs are a new brand of tech-based and data-driven start-ups, that use data intelligence, digital technologies, and innovative methodologies to provide services to solve public problems, increasing efficiency and transparency in the provision of public services. Governments can catalyse tech innovation and digital entrepreneurship through their procurement power and, at the same time, foster new growth markets for local start-ups and scale-ups.

Govtech ecosystems are still maturing, but their growth potential is significant in a post-COVID-19 world that will be even more digital. We developed a maturity index of the region’s govtech ecosystems. Along with Chile, Brazil ranks ahead of the game, with scope for improvement, however. The Brazilian govtech ecosystem is still maturing but its growth potential is promising. The Brazilian federal government is promoting this momentum, simplifying bureaucracy for start-ups and making its procurement rules more flexible to purchase govtech innovations.

The coronavirus crisis is making it crystal clear that the future of bureaucracy is digital. The crisis compels government bureaucracies “to innovate, streamline, and flatten hierarchies as never before,” says Patricia Paskov of the World Bank, and by doing so will not only improve public management today, “but also build its resilience for tomorrow.”

As Winston Churchill put it: “Never let a good crisis go to waste”. Putting the state in start-up mode will nevertheless require new ways of doing business in government and new forms of public-private partnerships to accelerate innovation. In this resetting of the state, govtech start-ups are becoming governments’ unexpected allies in the race to digital resilience. In Brazil and elsewhere, govtech may well hold the key to curbing corruption and rebuilding trust between citizen and the state in the post-COVID era.