Municipalities in Germany are anticipating a push towards digitalisation due to the coronavirus crisis. In an interview, economist Johannes Steinbrecher discusses the results of the KfW Municipal Panel 2020. He expects benefits from technological solutions.
About Mr Steinbrecher
Johannes Steinbrecher is a Senior Economist at KfW. Together with Stephan Brand, he is supervising the KfW Municipal Panel 2020.
What impact has the coronavirus crisis had on the digitalisation of municipalities?
JOHANNES STEINBRECHER: The KfW Municipal Panel 2020 shows that digitalisation has emerged as a winner in the pandemic. Over the last few years there has been a lot of talk about technological transformation, but relatively little has actually happened in this area. When it came down to it, municipalities often invested in other areas such as schools or roads instead. That is likely to change. 91 per cent of treasurers surveyed in April 2020, after the pandemic had broken out, believe that digitalisation is being boosted by the crisis.
But digitalisation costs money too, and cities and communities have seen a drop in income due to the economic upheaval. Can digitalisation assert itself in times of declining investment?
In any case, it has risen on municipalities' priority list. And yes: expenditure on social matters, for instance, will increase due to the consequences of the coronavirus crisis. However, the Federal Government's stimulus package is helping. However, what we have been seeing in the KfW Municipal Panel for years is the gap between municipalities which are in a strong financial position and those which are financially weaker. Cities and communities which are in a better position invest more per resident in digitalisation and other areas than municipalities which are subject to budgetary supervision.
But isn't it precisely those municipalities which have the greatest need for action in this area?
Digitalisation could really relieve some of the burdens on municipalities experiencing financial difficulty. For instance, it could be used to free up staff who are needed more elsewhere. In the KfW Municipal Panel 2020 on the topic of digitalisation, we asked questions about six main areas: hardware and software provision, processes, expertise, staff, financial resources and IT security. Municipalities which are in a weak position financially are significantly more likely to have problems in five or even all six of these areas than those which are financially secure.
Looking at a common issue of the future, is the coronavirus crisis widening the gap between rich and poor municipalities when it comes to digitalisation?
That is a risk. Secure municipalities can invest beyond what is necessary and are in a different league when it comes to attracting residents and businesses. Factors like efficient administration and interfaces for businesses are essential issues when it comes to choosing a location. Municipalities which are not in a position to invest to the same extent will experience problems.
Interview continues under the infographics.
Source: KfW Municipal Panel 2020, supplementary survey on the impacts of the coronavirus crisis conducted by the German Institute for Urban Affairs in April 2020. The survey was conducted among 443 participants of the KfW Municipal Panel main survey, of which 200 responded.
KfW Municipal Panel
Municipalities were surveyed by the German Institute for Urban Affairs on behalf of KfW for the first time in 2009 to gain an overview of their financial position, investment activities and financing conditions. The KfW Municipal Panel has since been published annually and established itself as a source of reference in economic-policy debate.Learn more
Following the German Federal Online Access Act, services provided by public bodies and authorities must be accessible online by 2020. Will the pandemic affect this goal?
That is impossible to answer because we don't know how the coronavirus crisis will evolve. One thing has become clear: people who said before the pandemic that we don't need digitalisation at municipal level have now changed their mind. The crisis has certainly got rid of the strategic dilemma around this.
The importance of the topic is universally recognised?
As the size of a city increases, the perceived relevance of digitalisation increases too. Small municipalities just don't have as many applications for technological solutions and many municipalities in Germany are relatively small. The debate can also still be really technical. There is a lot of talk about hardware and software, but less about the possibilities offered by open data, about data protection and about smart government.
What do municipalities expect from digitalisation?
The results of our survey show that more efficient administration comes in first place, followed by better resource management, with a cost-saving element. Greater proximity to citizens and better public services are mentioned third, and finally, respondents hope to create a better framework for municipal action within national and state politics.
Published on KfW Stories 15 June 2020.