The Digital Accelerator: Revving Up Government in Asia

IMF Blog, September 26, 2018

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Asia’s digital revolution is reshaping businesses and government operations across the region.
Authors: Vitor Gaspar, Chang Yong Rhee. Date: September 26, 2018.
Examples cited: Alibaba, Rakuten, Go-Jek, Paytm, and widespread industrial robot use for manufacturing.

Digitalization gives policymakers greater access to timely and accurate data, enabling better policy design and implementation.
India’s Aadhaar:
- Provides a unique 12-digit ID number for 1.2 billion residents in India.
- Linked to social programs, including liquefied petroleum gas subsidies.
- In 2013, linking Aadhaar to the liquefied petroleum gas program helped prevent claims from ghost beneficiaries or multiple claims.
- Subsidies transferred directly to Aadhaar-linked bank accounts, bypassing dealers and improving support for the poor.
Philippines’ Listahanan:
- Digital registry serves as a gateway for as many as 52 social programs.
- 75 percent of the population registered.
Indonesia:
- Digital social registries have helped expand the coverage of conditional cash transfer programs.
Other public service and public financial management uses:
- Bangladesh uses smart water meters to monitor water quality.
- Bhutan’s e-tool has helped standardize project appraisal and selection for public investment.
Revenue-side digitalization:
- e-filing, e-payments, and e-customs initiatives are common in Singapore, Malaysia, Vietnam, Indonesia, and Thailand.
- In Malaysia, ongoing efforts in e-filing and e-payments have reduced compliance time by 30 percent.

Cybersecurity and fraud:
- Increased use of digital technologies raises risks of cyberattacks; hackers can steal private information and disrupt government functions.
- Digital environments are target-rich for fraudsters, including in cryptocurrency exchanges.
Tax base and revenue risks:
- Digitalization can reduce tax revenues when services shift to small-scale transactions (e.g., tourists using private homes instead of taxed hotels) that fall below tax thresholds.
- The digital economy can facilitate profit shifting abroad, out of reach of tax authorities.
Digital access gaps:
- More than half of those without access to the internet live in Asia.
- Broadband subscriptions have increased, but a widening gap exists between leaders and less advanced peers.
- Less than one percent of Myanmar’s inhabitants have access to fixed broadband networks compared to over 25 percent in Singapore.
- eGovernment depends on population access to digital services.
Uneven progress across countries:
- Korea, Singapore, Japan, and Malaysia rank in the world’s top ten of digital government.
- India outperforms advanced economies, on average.
- China, Sri Lanka, Indonesia, and Thailand outperform their emerging market peers.
- Small islands and fragile states (e.g., Myanmar, Tuvalu, the Marshall Islands) have struggled to make significant advances in eGovernment.

Strengthen cybersecurity:
- Establish agencies to oversee cybersecurity strategy and operations (examples: Singapore and Malaysia).
Protect tax revenues and monitor digital impacts:
- Governments should monitor how digitalization affects revenues and consider policy responses.
- If digitalization shifts services to smaller firms below tax thresholds, governments may choose to revisit current thresholds and change them to tax similar activities.
Leverage digitalization to improve tax collection:
- Digital tools can make it easier to collect data on financial transactions and improve tax collection.
- Closing half the distance to the digitalization frontier could bring in more than one percentage point of GDP of value added tax revenue in ASEAN economies.
Expand digital access and infrastructure:
- Countries with unreliable internet access should enable early investments in digital infrastructure, like broadband technology, to ensure inclusion and to reap the benefits of digitalization.
Build fiscal institutions:
- All countries need to build fiscal institutions to manage design, planning, budgeting, and implementation of digitalization policies.

With comprehensive policy actions on multiple fronts, Asian economies can continue to drive the digital revolution and extend the digital frontier for themselves and other government innovators worldwide.

The Digital Accelerator: Revving Up Government in Asia — Vitor Gaspar, Chang Yong Rhee (September 26, 2018).