COVID-19 (Coronavirus) Policy Response to Accelerating Digital Transformation While Bridging the Digital Divide in Russia

1. CHALLENGES
2. WHAT RUSSIA HAS DONE TO CONFRONT THESE CHALLENGES
3. WHAT ARE OTHER COUNTRIES DOING?
4. WHAT MORE COULD BE DONE?
5. RISKS AND PITFALLS TO AVOID

CHALLENGES

Uneven digital access hinders economic and social resilience in a pandemic outbreak. As Russia strives to become a global digital leader through breakthrough technology innovation, investment in a national broadband infrastructure, a focus on scientific research, agile legislative and policy frameworks, and a competitive cybersecurity industry, certain structural weaknesses need to be addressed to accelerate the country’s digital leap. An unsettled digital policy framework, a digital divide between rural and urban areas, inadequate digital skills, restricted access to capital markets, and a lack of an open innovation culture constrain Russia’s ability to achieve a fundamental technological breakthrough in the near term. In times of crisis such as the COVID-19 pandemic, these limitations hinder digital resilience and widen digital divide.

Traditional Russian industry is generally lagging in digital adoption. In key industrial sectors such as mining, manufacturing, transport, and agriculture, with the exception of a few big players, Russia is behind global leaders, threatening not only its competitive advantage but also the economic and social well-being of the population, especially in the wake of the COVID-19 crisis. Nevertheless, despite the challenges the private sector is facing, some enterprise leaders are pioneering digital technologies and competing with foreign players in information and communications technology (ICT), education, and finance.

Proper use of data highlights the challenges associated with data management. Digital technologies improve overall welfare and can reduce poverty, but without complementary policies, many benefits can go unrealized and inequality can increase. The COVID-19 pandemic has focused the government’s attention on key issues, such as the use of early warning and tracking systems, the use of surveillance technologies to counter the spread of the virus, the low levels of digitalization of many sectors, the effectiveness of non-digital emergency response protocols, and so on. The digital response to the current crisis has highlighted the fundamental issue of data management. Globally, adopting clear data policy guidelines has become a priority, and Russia is now focusing on this effort. Although data have become an essential resource for delivering digital dividends expressed in terms of economic growth, job creation, and social inclusion, the rapid and unmanaged growth of digital data has significant downsides and risks of unbalanced digital adoption of government, business and population throughout the country. The unrestricted growth of digital monopolies, the loss of privacy, identity theft, increased surveillance, the use of data as a behavior enforcement mechanism of social control, disinformation and fake news, and data manipulation and weaponization are all serious threats on a personal, community, regional, national, and global level. Governments therefore need to set policies to ensure that data flow freely and fairly through the digital economy and that all stakeholder interests in the use of data, such as privacy, access, fair use, and security, are protected.

Despite its size and potential, Russia is a relatively small player in the global data economy. In 2019, Russia reached up to 95 million internet users. This was more than any other European country, but its ranking in the integration of technology into the business component of the International Digital Economy and Society Index was lower than all of the European Union (EU) countries, just above Brazil and Turkey. In most regions, there is limited to no understanding of working with data, and the advantages and challenges associated with processing and analyzing data. During a pandemic, these issues may turn into an unbalanced development of the digital economy via lack of IT specialists, unequal access to digital services and fragmented integration of digital technologies across the country.Russia recently adopted the National Digital Economy Program, the National Data Management System Concept, and the Artificial Intelligence Strategy, which point to Russia’s aspiration to be a digital leader. A clear, agile, and comprehensive data policy is key to achieving this goal.

Digital government is being affected by the low digitalization of services and the lack of data-driven solutions, especially in the context of smart cities and digital regions. The lack of interoperability across different levels of government at the federal, regional, and municipal levels has resulted in disparities in the use of digital technologies. Today, few local self-government organizations are in line with national digitization requirements. This persistent federal-regional-municipal divide is negatively affecting the speed of digital transformation in Russia. The magnitude of the challenge is evident in a large number of municipalities, including municipal districts, urban districts, and urban and rural settlements. Most municipalities do not have enough funds to finance digitization projects and rely on regional and federal contributions. Russia is also behind Organisation for Economic Co-operation and Development (OECD) countries in digitizing its databases. For example, civil registries were supposed to be fully digitized by 2015, but the process has not been completed. It is crucial to develop a working governance model to overcome these structural challenges and enforce interoperability requirements in order to bridge the digital divide. Other challenges include data redundancy and the loss of sensitive data records, such as land surveys and civil property registration. The outbreak of COVID-2019 escalated these ‘digital challenges’, increasing the risk of negative scenario that may result in an increased inequality across regional authorities in terms of digital adoption. The ability of the government to maintain the reliability of its standard services, as well as to quickly develop and launch new emergency and support services required by the global pandemic, is critical to maintaining stability. Online engagement initiatives led by governments can help people cope with the crisis and improve the government’s response. The launch of fully digital, data-driven government services, as well as private sector digital solutions for public services, should be accelerated in Russia.

Top 10 Russian Regions of Government Bodies with a Data Transfer Rate of at least 2 Mbit/s

Bottom 10 Russian Regions of Government Bodies with a Data Transfer Rate of at least 2 Mbit/s

Source: Rosstat.

The COVID-19 crisis has highlighted the importance of leveraging digital technologies to ensure a rapid, agile, and effective response to both the pandemic as it unfolds and the economic recovery in its aftermath. The current crisis should be seen as an opportunity to bridge the digital divide among regions by increasing broadband access, to create incentives to adopt digital technologies across all key government, industry, and service sectors, and to promote a stronger digital culture across the population. Otherwise the digital divide may reflect inequalities in access and barriers to productive use. Many areas simply remain unconnected. Even when a region is connected to the internet, access may not be simple.

Top 10 Russian Regions with the Highest Level of Internet Access from Home Computer, %

Bottom 10 Russian Regions with the Lowest Level of Internet Access from Home Computer, %

Source: Rosstat.

WHAT RUSSIA HAS DONE TO CONFRONT THESE CHALLENGES

The growing focus on digital transformation in Russia is a national priority

In the past decade, Russia has focused on developing broadband internet access and built a strong digital infrastructure characterized by a competitive telecommunications market, high rates of mobile penetration, affordable broadband, and a high level of cybersecurity. This infrastructure has enabled the growth of strong domestic and localized digital platforms and can now be used to launch 4.5 and 5G mobile networks to create a more efficiently distributed network of data centers, develop local companies in the data analytics space, and accelerate the use of emerging technologies such as the Internet of Things (IoT), artificial intelligence (AI), robotics, and blockchain. Investment in a globally competitive secure infrastructure to support the growth of a digital economy remains a top priority, as emphasized in the May 2018 Presidential Decree and the Digital Economy National Program. To ensure digital resilience, current initiatives are focused on responding to the COVID-19 outbreak and provisioning the population with the necessary online services. For example, the platform all.online (все.онлайн) integrates swift information on up to 500 services “for a comfortable life in self-isolation.” It includes free online courses, trainings to increase digital literacy, life-hacks, tools for remote business management, and more.

The importance of a data-driven economy is recognized at the federal level

President Vladimir Putin approved a Decree on the National Strategy for the Development of Artificial Intelligence 2020-2030 on October 10, 2019. In general terms, the accelerated development of Al aims to support national priorities, including scientific research, increase the availability of data and computing resources, and improve Al-focused education and training systems. For the government itself, the announcement of the National Data Management System (NDMS) concept is another major step toward a data-driven economy. The NDMS strives to “feed” the Al engines of the future by providing the consistent organization, management, and governance of all available (government) data sources. The project faces significant implementation challenges as it aims to consolidate all existing data. Russia has also adopted several other data-related laws, for example, on a sovereign internet and data localization, which attracted both support and criticism.

Russia moves to the next phase of digital government maturity

In the development of digital government, Russia has achieved some success in recent years, most notably an increase in the number of digital state and municipal services using the e-government infrastructure and an increase in the number of registered users (over 100 million users as of November 2019) of the Unified Public Services Portal. The impact of digital government implementation has been felt by citizen and corporate users alike, and 74 percent of citizens have reported particularly high levels of user satisfaction.  In some regions, however, this figure is below 40 percent, as in the Republic of Mari-El and Magadan Oblast. Disparities still exist in the use of digital technologies at the federal, regional, and municipal levels of government, with only 10 percent of local self-government organizations in line with national digitization requirements.

WHAT ARE OTHER COUNTRIES DOING?

China boosts the digital economy.

World Bank studies show that countries that couple investment in cutting-edge technologies with strong leadership, a favorable business environment, a creative workforce, and the ability to foster a culture of innovation can reap digital dividends in the form of faster growth, enhanced jobs creation, and better services. Change is often driven by the public sector. For example, the Chinese government plays an active role as a supporter, investor, developer, and consumer of digital technologies. It initially gave digital players space to experiment before enacting official regulation. Now the Chinese government plays an active role in building world-class infrastructure to support digitization across Chinese regions, eliminating the digital divide. As of March 2020, China had reached up to 903 million Internet users, more than the EU and the United States combined. Recognizing that the nation’s vast population and diverse industry mix can generate very large volumes of data and drive demand for innovation, China’s biggest tech companies are making significant research and development investments in AI. By way of example, during the COVID-19 outbreak, China showed quick results by collaborating with the largest internet companies, such as Baidu, Tencent, and Alibaba, using their “superapps,” AI, drones, and robots to control the pandemic’s spread. These actions did, however, raise privacy and cybersecurity concerns.

U.S. data strategy is building a culture that values data and promotes public use.

Governments in most advanced economies recognize the importance of developing a comprehensive data policy, and the data-driven economy is gaining wide acceptance. For instance, the United States has set out a federal data strategy that sees federal data as both a strategic asset and a valuable national resource that is: enabling the government to carry out its mission and programs effectively; providing the public with knowledge of the government, society, economy, and environment—past, present, and future; and providing a means to maintain and enhance the performance of the nation’s economy, public health, and welfare.

The EU is ensuring cross-border and cross-domain data exchanges between European public administrations.

The European Commission established Joinup, a collaborative platform that gathers interoperability solutions and good practices and allows others to share and reuse them across European regions. Joinup is a single access point of up to 3,000 interoperability solutions for public administrations that is included in the collections of more than 40 standardization bodies, public administrations, and open source software repositories. It contains a catalogue where users can find and download already developed interoperability solutions (software, specification, data models), which are described using the Asset Description Metadata Schema (ADMS). It provides freely reusable software under an open source license. The platform allows developers to learn from best practices and experiences and collaborate with others. It also facilitates communication and collaboration on common projects between public administrations, IT professionals, and academia.

WHAT MORE COULD BE DONE?

Prioritize data and data analytics for data-driven government. Recognize high-quality data as a strategic reusable national asset and apply common data governance structures and data management principles. Commit to open data to increase public sector transparency.

Move to the next stage of maturity in digital development. To do so, a significant transformation of the current e-government architecture will be required, including the enforcement of interoperability, the reengineering of administrative processes and an emphasis on the use of national databases, the sharing of digital services by local governments, and the provision of proactive digital government platform services for direct citizen and business interactions.

The government should keep its data localization policies under review. It should consider that greater clarity and transparency could be given to where data is located and how data-driven companies are held accountable for the use of the data that they collect.

Facilitate the continuity of business services. For example, Singapore’s telecommunications regulator, IMDA, is supporting the business community, and the needs of small and medium enterprises in particular. It has put together a suite of technology solutions for remote working, visitor management, and productivity improvement, with industry leaders offering promotional packages and free trials of enterprise grade solutions.

Strengthen the digital innovation ecosystem. Encourage venture capital investments and crowdfunding of innovative start-ups. Create sandboxes to enable high-tech companies to experiment within a well-defined space and duration without fear of breaking laws and with safeguards to limit the consequences of failure and maintain the stability of the technology-enabled systems.

Increase the affordability of the internet by cutting the cost of broadband access. This measure may require compensation to telecom companies and internet providers.

Provide access to hardware (including routers) for low-income families to keep them connected from home.

Develop digital skills for the population and facilitate remote learning. The measure may include simple and user-friendly guidance on how to conduct an activity online (e.g., paying taxes); this could build on the experience of the very successful Financial Literacy Project supported by the World Bank over many years.

Consider a wider data and Al literacy program, including a focus on the skills needs of industrial workers during “the Fourth Industrial Revolution.”

Facilitate integrated data sharing. In Italy, for example, mobile carriers have offered authorities aggregated data to monitor people’s movements as a way to assist with the enforcement of the country’s national lockdown period.

Facilitate the increased data capacity, speed, and load of telecom networks. In India, for example, ACT Fibernet has announced an upgrade to 300 Mbps speed for users. Within Kerala, the state government asked internet service providers to increase internet speed by 30–40 percent of the present capacity, which they have agreed to do. Antel in Uruguay has announced extra data for pre-paid and post-paid mobile services, as well as extra data for fixed data services.

Consider the creation of “data pools” with partners, such as other members of the Eurasian Economic Union. This could both facilitate the development of Al solutions and encourage other regional digital initiatives, while serving as a defense against other countries’ localization policies.

The country needs to encourage and support companies in adopting digital tools for remote work and training.

RISKS AND PITFALLS TO AVOID

The rapid emergence of new disruptive technologies creates new challenges for global digital leaders, followers, and late adopters alike. The risks of disruption inherent in new technologies add many layers of complexity to government policy making. The role of government becomes an increasingly difficult balancing act between protecting the fundamental interests of the country and its constituents on the one hand, and harnessing emerging technologies to ensure national competitiveness and accelerate economic growth on the other.

Policy makers should prepare for the next wave of AI growth. Concerns about ethics, morality, values, the potential risks of labor disruption due to automation, algorithmic bias, privacy, and security have all been identified as fundamental issues that, if not handled properly, may cause serious economic and social disruption. These concerns have already been highlighted by COVID-19, as tracking people’s movements to prevent contagion has raised privacy and ethical issues that need to be addressed by policy makers.

The government should continue to take a strong leadership role in crisis response, digital transformation, and data policy making. This should include focusing on the use of digital technologies to address the evolving needs of the population across the country and bridging the digital divide between large urban centers and the more remote and less populated regions, districts, and municipalities, where regional and local government should take a much more active role in implementing digital transformation initiatives.

It is important to create mechanisms that support the private sector in encouraging competition in the digital space. Government-led public sector digitization needs to be supported by vibrant private sector innovation that has thus far been slow to develop. It has been hindered by a lack of relevant knowledge and management experience among enterprise managers and employees, as well as a lack of competitive pressure due to the high degree of market consolidation in key sectors and the high barriers to entry for new players across the country.

Policy makers should focus on reversing the brain drain and retaining talent. COVID-19 has clearly demonstrated that in times of crisis, a country needs all of its best people to come together to pull through the hard times and to manage the recovery  process. Special measures should thus be designed to prevent a further brain drain from Russia. Policy makers should focus on reversing this trend and retaining talent, as well as attracting the best and brightest back to the country.

Last Updated: Jun 15, 2020