Why Invest in Govtech Now?

GovTech is emerging as a new approach that is changing the way government works. But often, the term is thrown around as a buzzword without really explaining what it means.

For the Development Bank of Latin America (CAF), GovTech is the ecosystem in which governments collaborate with startups and other actors that use data intelligence, digital technologies, and innovative methodologies to provide products and services to solve public problems.

This definition aims to advance the global understanding of Govtech, from referring only to a specific business sector, product or activity, to one where all the actors and their interactions are recognised as necessary to create public value.

More fundamentally, the ecosystem and its start-ups represent a new form of public-private-partnerships for absorbing digital and data-related innovation in government to increase the effectiveness, efficiency and transparency in the provision of public services as shown in the examples below.

Who are the players disrupting this field?

Our research on policy, funding and the overall state of Govtech in Latin America gives evidence that these ecosystems and its participants are already showing the impact of GovTech, especially in cities. This is where impact matters the most because its where citizens interact directly with their governments, and where most of the estimated trillion-dollar value of Govtech can be generated by 2025:

• Value for money. Various Argentinian municipalities are using Munidigital, real-time data and cloud-based systems to improve public services such as public works georeferentiation, appointment scheduling with government institutions, and citizen complaints. In municipalities such as La Rioja, there are over 700% returns on investment, $2.3 million dollars in citizen savings and reductions of more than 160 tons of CO2 emissions. In Brazil, through its Target platform, Facilit is helping state and local governments improve their strategic planning and delivery capabilities through data-based performance management systems.
• Fiscal gains. In the city of Guadalajara, Mexico, the government created its own GovTech spinoff Visor Urbano as a mechanism to bring data and technology into urban planning. Just by digitising the cadaster, which is a comprehensive land recording register, there is an estimated increase in tax revenue of over 20%. In Brazil, Gove, a technology platform launched in 2017, is changing the way small and medium-sized cities raise taxes. By 2018, it generated an average saving of 6% of the city budget in the 10 cities using the platform.
• Economic growth. In a number of municipalities and states of Argentina, Brazil, Chile and Mexico OS.City is using blockchain, artificial intelligence and data to provide better public services. While achieving internationalisation as a government-focused SME.
• Citizen participation. In Colombia, Dasigno has implemented a tool to give voice to promote citizen participation and increase communication with their majors and elected representatives.

With their products and services, these businesses are showing what the future of government might look like. But even so, they are just a sample of the vast amount of GovTech startups and scale-ups emerging in the region to solve policy problems in almost any sector, from health and migration to discrimination and tourism.

What are the key policy enablers?

Today, the majority of the pieces of the GovTech puzzle are in place.

The next step is to work towards putting them together in coherent and overarching GovTech policies. Many governments in Latin America, at the national and local levels, are increasingly paying attention, with Colombia emerging as one of the frontrunners.

From our ongoing research, these next-generation policies should address 5 key levers to achieve success:

1. Public policy. Governments will benefit from surveying and analysing which areas of government are exploring GovTech solutions, with the objective of bringing them a single authority or coordination body. The key to success will be to build multidisciplinary teams for effective delivery. Singapore is a shining example of how GovTech can be adopted as a government sector in itself. In this process, oversight agencies have an important role to play to enable innovation and allow civil servants to experiment in risk-averse bureaucracies.

2. Investing in start-ups. Govtech is a cost-effective investment for governments. Structuring public funds and creating catalytic programs for GovTech start-ups has been a successful way of growing the ecosystem in the UK and Israel. These investments can come from new sources, as well as from the consolidation of existing channels, mainly digital economy and entrepreneurship promotion initiatives. Private investors in digital start-ups are also venturing into the GovTech space.

3. Data infrastructures. Data is the lifeblood of tech-driven innovation. To have high quality, valuable data assets, governments must build data infrastructures with a clear idea of how they will be generated, managed and used, both in terms of open government data, and data collaborations with other sectors.

4. Spaces for innovation. Designing and implementing mechanisms to catalyse, validate and scale new ideas is key for the GovTech ecosystem. Public Challenge Programs and Public-Private Innovation Labs can support Govtech solutions, from inside and outside government. Governments around the world — in Britain, Portugal, Denmark, Poland and most recently Lithuania — are launching Govtech catalyst programs. France is incubating state start-ups embedded in public agencies.

5. Public procurement. This is the hardest nut to crack for public procurement to become an enabler of innovation. Public procurement for innovation has become a trend in many governments wishing to equalise the playing field for start-ups and scale-ups wishing to work with government, but without the legal, administrative and financial muscle to follow traditional processes. In Spain, sectorial trusts have enabled both spaces for innovation, and alternative buying mechanisms for innovative technologies. In Latin America, Colombia, Chile and Brazil are testing promising approaches.

Governments across the Americas have the opportunity to embrace the GovTech paradigm as part of their evolution towards a smarter public sector.

By taking down this road, they can counter declining trust in institutions and deliver on people’s expectations of more agile public services. Interestingly, municipal and city governments are proving particularly enthusiastic in testing GovTech solutions.

As Johnny Hugill, a researcher at Public, notes, “today, there are very few policy priorities as important as ensuring that government is adopting the right technologies — and the right processes to make the most of those technologies”.

As he emphasises, “the most effective governments will be the ones that can best embrace innovation and new ways of working”.

It is now up to Latin America to prove it can live up to that challenge.

 

This opinion article was written by Carlos Santiso and Enrique Zapata, respectively director and principal specialist of the Digital Innovation in Government Department at CAF, Development Bank of Latin America