“Even regional governments may not have embraced digital capabilities and are lacking the abilities to support digital economies. All these mean that Southeast Asian economies are not realizing the full potential of digital.”
The Three Goals Every Digital Government Should Aspire To
Reading Time: 7:30 minutes
By U Chee Lioy — Public Sector Industry Lead at SAP Southeast Asia
Southeast Asia’s digital buzz not enough
A wave of digitization across sectors in Southeast Asia is creating an upsurge of excitement regarding digital economies.
Companies such as Grab, Go-Jek, Lazada and VNG Corporation have caught our attention with their steadily increasing digital offerings and growth. Central banks in the region have announced impending digital bank guidelines and licenses which seem to affirm the region’s rapid digital progress. The Southeast Asian populace have also continued to embrace digital and social and mobile, driving high double-digit growth in digital activities.
But while Southeast Asia has pockets producing tech unicorns, such digital development is not uniform within countries. Remote villages still lack access to quality education. Far-flung areas need adequate health technologies. Smaller businesses are not harnessing digital technologies in the way the technopreneurs, large MNCs or even typical citizens have. Even regional governments may not have embraced digital capabilities and are lacking the abilities to support digital economies. All these mean that Southeast Asian economies are not realizing the full potential of digital .
Digital-ready governments: The three goals
To reap the full benefits of digital economies, critical foundations first need to be in place.
When Grab or Lazada launched digital businesses, these digital disruptors and others caused many large incumbent businesses to see the need for digital change to at least maintain their relevancy. But smaller businesses do not have the ability to morph at will. Governments will need to lead, provide and ensure that the right policies, people and systems are in place before such businesses can transform to continue contributing to the .
To create thriving economies that attract investment, along with booming MNCs and prospering smaller businesses that generate high value jobs for productive citizens, governments must lead and address these critical areas to support the development of the digital economy:
- Whole of Government HR and Finance
- Smart Cities
The first area: Whole of Government HR and Finance
To realize the ambitions of digital economies, governments must first equip public servants to be digitally ready, innovative, competent and engaged via a comprehensive talent management framework and HR services. Finance governance and administration also need to be enhanced due to the huge investment as well as the increasing demand for transparency.
To achieve that, a whole-of-government (WoG) approach to free up time spent on duplicative work and repetitive administrative tasks is crucial. Work which bloat organizational costs and expose agencies to errors, plus restrict public servants from more productive and value-added activities.
A WoG approach towards the consolidation of HR and Finance support functions allows agencies to streamline repetitive tasks, achieve new efficiencies, maximize economies of scale and slash sizable costs associated with acquisition overhead, technology upgrades and maintenance. It is a crucial step towards an efficient and effective public sector. One that can then create the right infrastructure to reap the full benefits digital economies offer.
Examples of governments who have started and are reaping the rewards include:
- Singapore’s VITAL. Launched in 2006, the agency today serves over 100 public sector organizations and more than 90,000 public officers. Its suite of services includes finance, human resources, payroll and claims, learning and development and travel management. The agency is known to have save over US$1 million, or a resounding 78% savings in travel insurance premiums for the whole of government just five years after its inception.
- Australia’s federal government. Its shared services initiative saw it transiting 73 agencies into six shared services hubs. The hubs – located in the Australian Taxation Office, Department of Foreign Affairs and Trade, Department of Human Services, Department of Industry, Innovation and Science, Treasury, and the Department of Finance – serve around 30 agencies. Today it has clawed back A$72 million from its shared services push with another A$17 million savings expected next year.
By rationalizing and digitizing HR and Finance support functions across the public sector, these government have hacked off a whole lot of complexity. And gained a new level of agility as well as budget to help citizens and businesses capture opportunities in the digital age.
The second area: Smart cities
Urbanization and pressures to remain economically robust are making smart cities a need more than a want for countries in the region. This need is compounded if countries want to realize the full potential of digital economies.
Major cities in Southeast Asia are burdened with aging infrastructure, traffic congestion and pollution as a result of increasing urbanization. To improve citizen’s lives, foster economic growth and attract new investment, businesses and talent, many have turned to smart innovations. From Internet-of-Things (IoT) sensors to blockchain, machine learning to mobile, and analytics to in-memory data platforms, these have the capacity to transform service delivery across city domains – including digital government services, transportation, energy and resources, education and healthcare.
In a recent report, McKinsey highlighted the real quality-of-live improvements Southeast Asia can gain with smart cities:
- 2 – 1.5 million new jobs. Equivalent to 20–30% of the workforce in Jakarta, Bangkok, Manila
- 6 – 8 million man-years saved in commuting time. Two times more than Singapore’s workforce spends commuting
- $9 – 16 billion savings on the cost of living. Equivalent to two to four times Brunei’s total household expenditure
- 4,900–5,000 unnatural deaths averted annually. Equivalent to 50% of Malaysia’s yearly total
- 260k–270k Kilotons of GHG emissions avoided. Equal to the total emissions produced by Laos
That’s quite remarkable if you think about it!
And it is very laudable that the ASEAN leaders established the ASEAN Smart Cities Network (ASCN) during the 32nd ASEAN Summit last year for cities to work towards the common goal of smart and sustainable development.
Not long ago, governments took the lead on most smart city projects. Today, public sector organizations increasingly partner with enterprises from key industries to contribute expertise and technology. Companies are more and more motivated to collaborate with governments to create the best possible future cities because they operate in urban areas. In fact, ASCN has to date developed 33 partnerships with the private sector to catalyze bankable projects and secure funding and support.
I quoted two smart city cases from China in my previous blog, “A Down-to-Earth Approach to Digital Government and Smart Cities”. The country has done very well in this aspect, with almost 500 smart cities today. Have a look if you’re interested in those examples.
The third area: Taxation
Tax administrations play an important role in realizing the full potential of digital economies as growth and tax revenue are directly related. Strong and fair tax systems are also essential to public trust in government which has a direct impact on economic stability and growth. An effective tax administration raises the revenue to fund public services for the country while securing the trust of the taxpayers. An efficient one does so with reliability, transparency and cost-effectiveness.
Many tax administrations presently collect enough tax revenue to run government as usual. But tax evasion, under-compliance and an under-optimized taxpayer base means lesser than ideal revenue for public services and possibly the overburdening and alienation of some groups of taxpayers.
In today’s data-rich world, data-driven innovations offer intelligent insights to transform tax administrations into next-generation ones capable of increasing tax revenue, decreasing taxpayers’ burdens while optimizing operations. For example, digital services with omnichannel availability allow on-time filing and payment which reduces tax debt and enhance citizen satisfaction. New technologies actively managing compliance risks and determining effective interventions improve compliance across the spectrum of taxpayers. These new solutions also reduce administrative burden while facilitating interagency cooperation – an important aspect as organizations such as OECD urge standardized processes and coherent international tax principles to promote economic efficiency and global welfare.
The results digital tax administrations have achieved thus far are outstanding:
- Queensland’s Office of State Revenue (OSR) – the first public sector organization worldwide to apply SAP Leonardo’s machine learning technology in tax and revenue management – evaluates 187 million records by machine learning and now predicts taxpayers at risk of default with 71% accuracy. (The accuracy will increase as more data sources are added.) Its proactive service delivery model allows OSR to establish a “customer-of-one” model by identifying risk and creating a targeted response based on taxpayer behavior. It can also analyze which intervention strategies have been most effective to reduce the number of debtors.
- Mexico achieved a 38% increase in tax revenues without an increase in headline corporate tax rate by going digital.
- Brazil saw a 42% increase over plan for 2017 audit and penalties collected after implementing a series of new digital reporting requirements.
A bright future: Tackle the key areas now
The fact is, there is a real potential for a future where digitization enables the breakdown of walls in hospitals and classrooms across Southeast Asia – where telehealth and quality education are offered in the most far-flung areas via remote technologies and other innovations. A future where rural areas benefit from the convenience and value of ecommerce. A future where large and smaller businesses find it both profitable and purposeful to provide these services.
But for this vision to become a reality, governments will need to become digital-ready themselves. They must start by ensuring that the right foundations are in place and addressing the three goals: Whole of Government HR and Finance, Smart Cities and Taxation.
The future looks bright if we do.