ŠAVŠ/TAČR Digital Czechia in a Digital Europe

ELECTRONIC PUBLICATION CREATED BY

BOOK PASSAU • BERLIN • PRAGUE

SCIENCE & NEW MEDIA

Digital Czechia in Digital Europe

Michal Bokša Jiřina Bokšová Josef Horák Karel Pavlica Jiří Strouhal Stanislav Šaroch

Digital Czechia in Digital Europe

Research team – MICHAL BOKŠA, MPhil.

doc. Ing. JIŘINA BOKŠOVÁ, Ph.D. Ing. JOSEF HORÁK, Ph.D. doc. PhDr. KAREL PAVLICA, Ph.D. prof. Ing. JIŘÍ STROUHAL, Ph.D. prof. Ing. STANISLAV ŠAROCH, Ph.D.

Project no. TL01000147 “New challenges of e-Government in the European context for increasing the competitiveness of the Czech Republic” is co-financed by state funds from the Technology Agency of the Czech Republic within the Programme ÉTA. All rights reserved. No part of this printed or electronic publication may be reproduced and distributed in printed, electronic or other form without the prior written consent of the publisher.

Contact – tacr@savs.cz

The original version was written in the Czech language. The publication was translated by Ryan Ainsley Scott.

© ŠKODA AUTO VYSOKÁ ŠKOLA o.p.s. 2020

Bibliographic information published by the Deutsche Nationalbibliothek The Deutsche Nationalbibliothek lists this publication in the Deutsche National- bibliografie; detailed bibliographic data are available on the Internet at http://dnb.dnb.de.

© 2020 rw&w Science & New Media Passau-Berlin-Prague, an international publishing project of SüdOst Service GmbH, Am Steinfeld 4, 94065 Waldkirchen, Bayern/Germany

ISBN – 978-3-946915-30-0 (electronic) ISBN – 978-3-946915-29-4 (print)

Table of Contents

FOREWORD

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EXECUTIVE SUMMARIES

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01 DIGITALIZATION OF PUBLIC ADMINISTRATION AND SERVICES

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35

Digitalization Process and Prerequisites for Success

02 DEVELOPMENT OF DIGITAL SKILLS AND ADDRESSING THE SHORTAGE OF ICT SPECIALISTS

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52

Development of Digital and ICT Skills

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Addressing the Lack of ICT Specialists

03 ELECTRONIC INVOICING AND ITS USE IN EUROPEAN UNION MEMBER STATES

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04DIGITALIZATION OF SMALL AND MEDIUM-SIZED ENTERPRISES IN THE CZECH REPUBLIC

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Building the Environment for Digitalization Processes

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Financing and Support of Digitalization Changes

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Gulf Between Has Yet to Emerge

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Not All Digitalization is Digitalization

05 REGULATION OF E-GOVERNMENT IN THE EUROPEAN UNION

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Approaches to the Regulation of e-Government: to Centralize or Decentralize?

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97

Decentralized Approaches

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Centralized Approaches

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Priority Objectives of e-Government in Selected European Countries

06 SUPPORTING STARTUPS AS A WAY TO DIGITALIZATION

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Supporting Business in the European Union

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Recommended EU Member States Favorable for Establishing a Startup

07 CYBERSPACE AND CYBER SECURITY IN THE CZECH REPUBLIC

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142

Trends and Threats

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Ensuring Cooperation between the Private and Public Sector

146

Specific Threats and Specific Aims

148

Costs and Economic Management

150

Focusing on Processes

SUMMARY

155

AUTHORS

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Foreword Modern economics very often poses the question of how to solve the so- called middle-income trap. This phenomenon, first described by Indermit Gill and Homi Kharas, indicates a situation in which a country’s economic growth is slowing significantly after reaching the middle-income threshold. This deceleration results in a “trap” that prevents the economy from further transforming and consequently moving up into the group of high-income countries. The common denominator among these types of economies has been the continuous effort to find a new model of economic growth. Yet the European Bank for Reconstruction and Development (EBRD), which has long been concerned with this phenomenon, notes that no generally valid blueprint to solving the Middle-Income Trap has been found so far. However, the emerging concepts of digitalization and e-government, which are also associated with revolutionary concepts such as Industry 4.0, Dark Factories, Internet of Things, Health 4.0 or Smart Cities, could break the supposed middle-income trap. The indisputable advantage of digitalization technologies and e-government is also grounded in the fact that their effective implementation and use are in no way tied to the size of the economy. Therefore, even small and medium-sized countries can very easily establish themselves in these segments where they become pioneers on the world stage. The expected higher rate of economic growth is then presumed mainly through gains such as higher automation and optimization of production processes, easier user communication between the citizen and the state, a more successful fight against financial fraud, more efficient redistribution of social assistance, or higher state savings. Although the Czech Republic has significantly increased its efforts in the field of digitalization and e-government in recent years, it is still falling behind its European counterparts in many respects. This study was undertaken with the aim of creating a comprehensive set of recommendations based on current “best practices”, especially in other European countries. The basic point was to select such recommendations that best match the Czech social and economic milieu and thus have the potential to be effectively implemented. The introductory article by Jiřina Bokšová and Michal Bokša focuses on effective ways of digitalizing public administration and services. In doing so, it defines the optimal procedure for such digitalization and the conditions that should be created for effective e-government. At the same time, the authors identify areas that the public administration should avoid when introducing digitalization technologies.

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In his article Development of Digital Skills and Addressing the Shortage of ICT Professionals, Karel Pavlica discusses two types of strategies. The first focuses on educating and disseminating ICT skills to the general public. His research is mainly aimed at addressing the issues surrounding citizens currently or potentially threatened by digital exclusion. The second part opens up the topic of ensuring a sufficient number of expert ICT specialists. The author focuses primarily on the identification of encouraging concepts and proven approaches from United Kingdom, Ireland and Denmark. Josef Horák, building upon the initial definition of the term electronic invoicing (e-invoice), compares the current state of e-invoices in the European context, especially their implementation in individual countries of the European Union. In doing so, he focuses on the use of e-invoices as part of B2G (Business to Government) and B2B (Business to Business) transactions. At the same time, Horák also addresses issues relating to the problems faced by the current system of e-invoices in the Czech Republic, which need to be upgraded in the coming years. In the next article, Michal Bokša and Stanislav Šaroch focus on the digitalization of small and medium-sized enterprises (SMEs), seeking “best practices” especially in countries where the industrial-processing industry is numerically prominent (with the main focus on the automotive industry). It is precisely these countries that are very close to the Czech milieu in economic terms, so they often face similar problems. In this respect, their analysis is based primarily on the Germany’s current “best practices”, which are very closely intertwined with the Czech economy. In light of the Czech Republic’s current period of progressive centralization of its digitalization efforts, Jiří Strouhal’s article summarizes the degree of centralization and decentralization across European countries. It discusses the advantages and disadvantages of both centralized structures (e.g. Finland, United Kingdom and Austria) and those that are highly decentralized (e.g. Denmark, Sweden and Luxembourg). Its conclusion provides a list of priority goals of e-government in several selected countries. Besides the study of e-invoice, an additional article focusing on effective support for startups was researched by Josef Horák. It evaluates startups within the European context and thus provides an in-depth comparison at the level of individual countries of the European Union. Horák specifies different programs and procedures supporting startups and how these programs and procedures led to their development and optimal support. The United Kingdom, Sweden, Germany, Ireland and Spain were the main sources of “best practices” for this section. The final article by Michal Bokša discusses cyber security. In it, the author summarizes the current trends and economic impacts of cybercrime, focusing

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on the recommendations that the Czech Republic should implement in order to best prevent cyber threats. In this section, the United Kingdom and Estonia primarily serve as the main source of information and current “best practices”, though some inspiration was drawn from Sweden and Norway. This publication was created as part of the research project no. TL01000147 “New challenges of e-Government in the European context for increasing the competitiveness of the Czech Republic”, which is co-financed by state funds from the Technology Agency of the Czech Republic within the Programme ÉTA. The overall result of this publication is a summary of recommendations for the effective implementation of digital processes in several key areas. The research team of the ŠKODA AUTO University is convinced that the Czech Republic has many prerequisites and opportunities to successfully manage the ongoing digital transformation found in developed countries and thus to develop its economic potential. Our publication should be seen as one of the tools contributing to the fulfilment of this goal.

In Mladá Boleslav, 1 st September 2020 Michal Bokša on behalf of the project research team

Executive Summaries

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Digitalization of Public Administration and Services Jiřina Bokšová & Michal Bokša With regard to the digitalization of public administration and services, the CzechRepublic (CR) lags significantly behind other states of the EuropeanUnion (EU). Out of the total 28 Member States, the Czech Republic ranked 22nd in the category of digitalization of public administration in 2018. Furthermore, it ranked 27th out of 28 in the ranking of the use of e-services offered by public administration. Although recent years have seen a breakthrough thanks to the projects e-Identity Card and the Citizen’s Portal, the digitalization of public administration and services remains significantly undeveloped in comparison with other EU Member States. If the digitalization of public administration and services is to be successful, it must target both the end user (an individual or legal entity) and the provider (the state, government offices and bureaucracy). According to the European Union, the digitalization of the public sector can reduce the administrative costs of communication between the state and the citizen by 15% to 20%. Better access to data also enables more efficient tax collection, a more effective fight against financial fraud and the better allocation of social assistance and benefits. However, this potential is not always successfully achieved. Often even large and costly digitalization projects are not able to provide almost any added value or higher efficiency to official procedures. Similarly, newly created digitalization processes were often unable to replace the original administrative procedures, which led to the existence of two analogous and parallel systems. A prerequisite for successful digitalization of public administration is to prioritize the target user. The user interface of public services must be intuitive, easy to navigate and fully integrated across government institutions. This factor often becomes the distinguishing feature between successful and unsuccessful digitalization. One of the most common mistakes is to create digitalized processes to correspond to and accommodate public administration. Regular collection of information, for example, in the form of questionnaires and the subsequent data analysis should thus become routine, at least in the initial years after the launch of digital services. All data should be processed in an annual report that would identify which areas of digitalization are rated the worst from the end users’ points of view and need to be more user-friendly or otherwise optimized.

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Another prerequisite for successful digitalization is the comprehensive replacement of current official procedures with processes that are more efficient and will be based on digital technologies. Very often, however, the digitalization of public administration is more associated with the mere ICT automation of currently existing processes, in an effort to transfer physical questionnaires and forms online. This creates nothing more than a digitalizing illusion or façade, which on the outside only overlaps the same bureaucratic procedures and processes. A common problem of even optimally set transformation processes is the reluctance or inability of internal bureaucratic structures to implement changes. If a more comprehensive transformation of processes within public administration and services is to take place, and not only to the ICT automation of currently applied processes, investment in the ongoing training of civil servants in the field of ICT is a prerequisite. If the Czech Republic aims to increase its citizens’ interest in online services, it must primarily focus more on the quality of the services offered in this way instead of only the quantity itself. Along with citizens’ satisfaction with the services already offered, it also creates a strong demand for further expansion of the digitalization of public administration and services. The digitalization strategy should thus identify services that are (1) of the greatest interest to its own citizens and (2) services that are the most time-consuming from the point of view of civil servants. Such a pragmatically focused identification of services is a characteristic feature of successful digitalization processes at the European level (see United Kingdom, France, Germany and Norway). In order to increase citizens’ interest in using digital public administration services, financial incentives that motivate citizens to use them should also be included. Such incentives can take various forms, though one of the options would undoubtedly be, for example, a significant percentage reduction in the price of a given service where the citizen decides to arrange or fill out forms online. The Czech Republic could thus take advantage of the fact that the sensitivity of the domestic population to price differences is significantly higher than the average of other markets. A frequent shortcoming of the digitalization of public administration and services is the excessive concentration on individual contact points between the citizen and the government offices, instead of focusing on the digitalization of the whole process. The digitalization of a specific service must mean that the whole process from start to finish is digitalized from the end user’s point of view and fully accessible through an online interface. User satisfaction with digitalized public administration and services decreases significantly when the user is forced to communicate with the authorities by telephone or in person at any point in the whole process.

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Although in many respects the Czech Republic has yet to draw level with its European counterparts in digitalization of public administration and services (whether in terms of the number of people using the services or the quantity and quality of services offered), it should not focus solely on closing the gap but should also factor in the developments that digitalization will continue to take. Therefore, with the development of online platforms (e.g. the Citizen’s Portal), it is necessary to simultaneously create user-friendly versions for smartphones or tablets. This should ensure that communication with the government offices is possible at virtually any time and that the necessary forms can be completed from anywhere. Similarly, more emphasis should be placed on developing systems/online platforms for digitalized public administration and services that are proactive and not just reactive. In the first phase of successful digitalization, platforms should be created that will allow the end user (an individual or legal entity) to communicate with authorities easily, intuitively and effectively. The second phase, which some European countries are already developing in a targeted way, is to create platforms that will be proactive, i.e. they will initiate communication with natural persons and legal entities themselves. The current development of digitalized services suggests that demand for such interactively set-up platforms will increase significantly in the medium to long term. The advantages of such systems are particularly evident in areas such as e-health. Finally, when creating digitalization processes, the public administration should purposefully strive to involve as many interest groups from the private sector as possible. In doing so, the aim should be to continuously and systematically build a network and database of all potential institutions and organizations that are at least to some extent stakeholders in the digitalization process. The ability to plan, coordinate and implement projects together with the private sector is the key to their digital success in many European countries (see, for example, Austria). A detailed list of recommendations for the Czech Republic in this area is found on pages 45 and 46.

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Development of Digital Skills and Addressing the Shortage of ICT Specialists Karel Pavlica The development of digital skills and provision of a sufficient number of ICT professionals are problems faced by all European Union countries. The aim of this study is to identify and characterize successful/promising strategies and procedures in both of these problem areas and to find concepts and recommendations for the Czech Republic appropriate to its situation and economy. Let us first address the issue of developing digital and ICT skills. While the Ministries of Education of various countries of the European Union, including the Czech Republic, systematically implement new technologies and further introduce subjects or fields primarily focused on ICT at primary, secondary and tertiary education institutions, adult education remains somewhat peripheral. Yet, from a practical consideration, it is precisely members of specific groups of adults (people over the age of 50, people on low incomes, existing workers in businesses undergoing and/or preparing for digitalization, people with disabilities, etc.) who are most at risk of digital exclusion. With regard to the necessary development of digital skills in different groups of the adult population, the active use of the existing network of local libraries (or other community centers) is proving successful in several countries (United Kingdom, Ireland, Estonia and the Netherlands). Such places are easily accessible and, provided they are equipped with modern technology, enable the potential training of thousands of citizens free of charge. Two procedures then suggest an answer to the question of how to provide education in digital skills to a large number of adults at a personal level. The first of these are foundations and projects (often supported by the European Social Fund), which train hundreds of volunteer trainers free of charge and/or for a small fee (Digital Championships Network in the United Kingdom) or offer and provide adult training itself for free or at an affordable cost (Estonian Look@World Foundation, Irish Springboard + Initiative). The second, oftenparallel, approach is the government-sponsored involvement of large ICT companies in the development of digital skills. For example, in the United Kingdom, Microsoft has launched a program to train 30,000 “public” trainers with a wide range of digital skills by 2020, and Google offers a free five- hour digital skills course to anyone interested. In the same country, non-ICT

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companies also participate in adult education – e.g. the Digital Eagles project started by BARCLAYS Bank, which includes training sessions at local libraries and other community centers (see above). Virtually all European Union countries face a shortage of ICT professionals, both in terms of current and future needs of their economies. Although various recruitment agencies have responded promptly to the demand for ICT professionals, it is clear that they cannot solve the systemic problem. Among the responses of the governments of European Union countries, we identified three strategies that could be adopted in the Czech Republic as well. The first approach is a supportive visa/permit policy. For example, the United Kingdom has succeeded in attracting top ICT professionals from around the world to the country through an initiative called Tech Nation Visa, which offers work visas valid for up to 5 years and 4 months. A similar approach is used in Ireland (with a plan to provide up to 2,000 work permits per year) and in the Netherlands. These initiatives are usually accompanied by an (international) promotional campaign disseminated through participation in foreign career and labor markets, the Internet, etc. The second effective strategy is to focus on the training and education of ICT professionals from a country’s own internal pool. For example, since 2014, the Irish government has been providing funding to universities on a regular basis each year to open 1,250 new ICT education positions. The results for 2018 suggest that the internal student “base” is able to “produce” approximately 1,000 new ICT professionals per year. A third stimulus project that combined the acquisition of ICT experts from internal and external sources was launched in Denmark in 2018. This is the so-called digital hub (Digital Hub Denmark), which should bring together government institutions (Ministry of Industry, Ministry of Education and Ministry of Foreign Affairs), private companies, researchers, digital entrepreneurs and Danish students to develop new digital products, services and business models. A detailed list of recommendations for the Czech Republic in this area is found on pages 59 and 60.

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Electronic Invoicing and its Use in European Union Member States Josef Horák

Electronic invoicing is an important tool that ensures the secure and fast transmission of an invoice between two participating entities. The benefits of electronic invoicing lie mainly in increased transparency of economic operations, better recovery of receivables, reduction of printing costs and the costs of subsequent distribution of invoices in their physical form. The absolutely fundamental importance of electronic invoicing is evident in the case of the implementation of public contracts, in which this method of electronic transmission of the invoice radically increases the transparency of all public procurements done. The electronic invoice must always be prepared only in a structured data format in accordance with Directive 2014/55/EU of the European Parliament and of the Council on electronic invoicing in public procurement. A prerequisite for the flawless operation of electronic invoicing is the creation of an electronic platform that will ensure fast, efficient and above all secure data transfer between the supplier and the customer. Within the European Union, this data transfer in relation to B2G is ensured either by 1) a state institution; 2) a private business entity that has been selected by state authorities to ensure data transfer, or 3) a combination where users are free to choose between a public or private provider. The research showed that as of mid-January 2019, electronic invoicing was regulated by legislation in 20 countries of the European Union and the EEA (65% share in the entire sample). As of the stated date, electronic invoicing was not regulated in 10 countries (Bulgaria, Finland, Greece, Hungary, Ireland, Luxembourg, Malta, Poland, Slovakia and the United Kingdom). In comparing members of the Visegrád Group V4 (Czech Republic, Slovakia, Poland and Hungary), it was evident that as of 15th January 2019, only the Czech Republic was ready to meet the requirements of Directive 2014/55/EU of the European Parliament and of the Council on electronic invoicing in public procurement. The other V4 countries were not using B2G electronic invoicing at that time. Companies carrying out public contracts had to issue electronic invoices in only 18 countries from the European Union or the EEA (58% share of the

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surveyed sample). In the 12 countries analyzed (39% share of the surveyed sample), there was no obligation to issue invoices to state institutions in electronic form. Eighty percent (80%) of the data transfer was provided and guaranteed exclusively by a state institution. Specifically, it meant 16 countries from among the analyzed sample. In the case of Norway and Iceland (10% share of the analyzed sample of countries that actively used B2G electronic invoicing), electronic data transfer was handled only through a private company. In these countries, public authorities have relinquished all the administrative work related to electronic data transmission entirely to private entities. A certain compromise can be seen in Sweden or the Netherlands (10% share of the analyzed sample of countries that actively used electronic invoicing in the B2G relationship), where companies have a choice in ensuring the transfer of data between private or public platforms. In the Czech Republic, mandatory electronic invoicing is regulated by legislation only at the level of B2G. Unfortunately, the fact is that no legislative regulation is in place that would require mandatory electronic invoicing between business entities (B2B). In the case of business entities, such legislation would enable a more efficient collection of tax liability, especially for corporate income tax, value added tax and excise duty. In addition, this instrument could reduce the risk of secondary insolvency by motivating debtors to repay their liabilities on time in pre-arranged terms. Within the European Union, Italy has become a pioneer in mandatory B2B electronic invoicing. Since 2019, all businesses must use the Sistema di Interscambio (SDI) portal for mutual invoicing. Similar efforts are being made by Greece, which anticipates that businesses operating in Greece would submit all invoices electronically from 2020 via a portal that will allow online monitoring of business transactions by state institutions. A detailed list of recommendations for the Czech Republic in this area is found on pages 73 and 74.

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Digitalization of Small and Medium-sized Enterprises in the Czech Republic Michal Bokša & Stanislav Šaroch Small and medium-sized enterprises (SMEs) are the core of the European and Czech economy. With the advent of new technologies and revolutionary concepts such as Industry 4.0, Smart Factories, the Internet of Things and Cloud computing, a need has arisen to ensure the effective digitalization of said enterprises. Failure to adapt to these recent trends would reduce the efficiency and competitiveness of the businesses. Therefore, the goal of the Czech Republic must be to ensure that SMEs have easy access to digitalization processes so that these processes are accessible and at the same time that a general awareness of them circulates among SMEs. Although the Czech Republic has managed to build several successful research centers in recent years, their establishment and development is highly decentralized and sometimes unsystematic. For many SMEs, a disparate network for research and innovation support can mean very unequal access to digitalization centers and consultation.The CzechRepublic needs to create and build amore structured and systematic form of support for the digitalization of SMEs. Instead of building a completely new support network, it would be appropriate to build on existing regional innovation centers (Innovation Centers, Technology Centers, BICs, etc.) and expand their portfolio centrally with digitalization programs. In addition to advisory activities, the centers should also aim to further promote digitalization through organized workshops, demonstration events and training courses. The effort should also be to involve and connect as many local actors as possible (state and public institutions, non-profit sector, chambers of commerce and private sector) because, in the case of digital transformation, such connection becomes an important innovation multiplier. A key aspect in the digitalization of SMEs is, above all, the degree of standardization. This very lack of digital standardization templates and the issues related to the financial return of SMEs is what hampers digitalization. The Czech Republic should therefore follow the German example and create easily transferable e-standardization templates for different sectors, which are tailored to companies according to their field. A fully digitalized economy can only be created if individual digitalization processes are interconnected. To this end, the Czech Republic should create various platforms for financing or co-financing

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SMEs in the digitalization process based on foreign models. In order to avoid duplication, such projects should then be managed at a central level. At present, the Czech Republic trails far behind the infrastructure, financial instruments and advisory network of its European counterparts. Nevertheless, this deficit has so far not impacted significantly on the competitiveness of Czech SMEs. It can be assumed that the main reason for this is the current favorable economic situation in which the Czech Republic finds itself. With the gradual slowdown of the Czech economy and the coming recession, SMEs will strive much more intensively for potential competitive advantages, increasing production efficiency and the overall optimization of production and the provision of their services. Thus, in the coming years, the Czech Republic must systematically strive to create a similar advisory-digitalization network that will be able to support the efficiency of Czech SMEs in times of economic recession. The goal must be to create such a system before a recession strikes. Therefore, it can be anticipated that the next economic recession will be a key turning point for the Czech Republic in terms of digitalization. The Czech economy, and especially SMEs, should emerge from this recession even more digitalized than when they entered. The inability of the Czech Republic to build an effective network that would enable such a transformation during the economic contraction and help support it could become a key problem for the domestic economy and the competitiveness of our companies during the future boom. A common mistake in the SME digitalization process is the negative perception of the whole process itself, which is defined as a process to increase efficiency, reduce costs or modernize the interface for communication with the target customer. As a result, the potential of digitalization to create, for example, new business models or services that could not exist in practice until then is neglected. Yet it is these changes that have the greatest potential, above all, to become revolutionary breakthroughs. European surveys show that the most common digitalization project (54% of companies) was updating corporate information technology, i.e. the purchase and installation of new hardware and software. The second most common digitalization project (52% of companies) was the modernization of the user interface (most cases involving the modernization of websites) or systems for communicationwith suppliers. (NB: this category also includes onlinemarketing and work with social networks.) The third most common type of digitalization projects (38% of companies) was the development of ICT expertise – it usually involved the training of employees or company management. A digitalization project focusing on the overall reorganization of the course of work operations only appears in fourth place (29% of companies), despite the fact that this type

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of project is a characteristic feature of a higher level of digitalization that can fundamentally reform or modify the business model. In order to significantly strengthen the competitiveness of domestic SMEs, the Czech Republic should not only strive to create the infrastructure and financial background for the development of digitalization, but it should also strive to set up a system to encourage SMEs to implement higher-level digital projects as much as possible. Website modernization, presence on social platforms, upgrading of ICT systems or a better interface for communication with suppliers are undoubtedly favorable steps, but in the long run this simpler type of digitalization may seem to be quite insufficient. Therefore, in an effort to digitalize SMEs, the Czech Republic should not only take into account how many Czech SMEs implement digitalization projects, but it should also seriously consider the types of digitalization projects that are implemented. At the same time, preference must undoubtedly be given to the aforementioned higher-level digitalization projects – i.e. such projects that are more complex and impact more profoundly on the functioning and overall structure of the company that adopts them. In creating incentives for digitalization, the Czech Republic could, for example, apply the method of progressive favoritismbased on the principle: the more complex the digitalization project (or possibly more such projects) individual SMEs decide to implement, the greater the financial support (whether in the form of direct co-financing, grant or financial relief ) it may receive. Finally, the SME digitalization support system should provide a more pronounced level of support to smaller firms, which usually have a higher degree of financial constraint due to lower turnover. A very similar principle undoubtedly applies to the distinction between the sectors in which SMEs operate. This applies with regard to the fact that, in particular, the financial level of complexity of the implementation of digitalization projects differs significantly within different sectors. Therefore, the level of possible financial support must necessarily reflect such a fact. A detailed list of recommendations for the Czech Republic in this area is found on pages 89 and 90.

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Regulation of e-Government in the European Union Jiří Strouhal The basic element of e-Government is the development of the use of ICT to increase efficiency in public administration activities. These activities include the performance of executive activities, the provision of services, access to public administration information, and the participation of citizens and various organizations in joint governance. Lastly, e-Government is expected to have the potential to reduce costs and improve the quality of public services. According to the country ranking for the 2018 period, the Nordic countries (i.e. Denmark, Sweden and Finland) are among the three most successful. Even on these distinct winners’ podiums, it is not clear whether a centralized or a decentralized approach is to be preferred. In Denmark, there is a largely decentralized model implemented through the Ministry of Finance, the Agency for Digitisation, the Ministry of Industry, Business, and Financial Affairs and the Ministry of Climate, Energy and Utilities. Given the number of ministries responsible, the role of the coordinator, the Agency for Digitisation, is crucial. In Finland, the Ministry of Finance (in the field of public sector ICT) and the Ministry of Transport and Communications are involved; in Sweden, it is the Ministry of Infrastructure. The decentralized approach can also be traced in the following jurisdictions: Luxembourg (Ministry for Digitalisation, Government IT Centre, Ministry of State, Ministry of the Economy, Ministry of Finance, Ministry of Higher Education and Research), Estonia (Ministry of Economic Affairs and Communication, Government CIO Office, Estonian Association of Information Technology and Telecommunication, e-Estonia Council). The advantage of decentralized models can be seen above all as a better knowledge of the issue at professional levels rather than at the senior governing body. However, it is necessary that the delegated departments have sufficient delegated powers from above. On the contrary, a clear disadvantage of decentralized models is the higher number of qualified staff in individual fragmented positions and the clear need for quality coordination of decisions with national strategic plans in the field of e-Government. In all the other countries analyzed (the Netherlands, Ireland, the United Kingdom, Belgium, Austria, Malta and Lithuania), a single ministry is in charge of e-government. Overall, it is not possible to generalize about a clear preference for the ministerial portfolio, although the responsibility of the Ministries of Finance, Interior and Industry, or the government office itself,

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tend to dominate. The main advantage of centralization is the high degree of coordination and concentration of functions in the hands of a single body. The disadvantages of centralized approaches are considered to be the problem of transferring information from the application parts to the central management level (either the possible lack of necessary information or their specific delay). Given that this concerns the centralization of e-Government, it can be assumed from the very beginning that there is an effort to eliminate this critical point through appropriate system settings. Within the framework of strategic and effective management, a centralized solution seems to be a more suitable option from the above-mentioned applications. It ensures that duplication of positions can be eliminated, thus enabling significant savings for the state budget. A detailed list of recommendations for the Czech Republic in this area is found on pages 117 and 118.

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Supporting Startups as a Way to Digitalization Josef Horák The aim of the presented study was to identify possibilities and recommendations on the basis of which it would be possible to streamline government support for startups in the Czech Republic. The basis for this study was the “best practices” of selected EU Member States. A startup is a business plan whose main goal is to satisfy market demand through unique and innovative solutions that allow investors to achieve high profitability compared to the usual business plan implemented in the field of small and medium-sized enterprises. Although this form of business is also very risky and many business plans or intentions may not always succeed, there are a number of important business entities that were first created as startups and in a very short time grew into national or multinational corporations (Uber, Lime, Spotify, Minecraft, Candy Crash, Fishbrain, etc.). Due to the high business risk, startups face limited access in the area of external financing through their own or external sources. These entities do not have the possibility to obtain a short-term or long-term bank loan or to finance their activities through an initial public option (IPO). Unfortunately, if the founders do not have a sufficient amount of their own funds or do not find a creditworthy investor, it may happen that a number of potentially viable startups will never see the light of day as it is impossible to secure funds to start their business activities. The European Union recognizes the high potential in the field of startups. For this reason, it seeks to effectively support them through various programs and activities (eg COSME program, European Union Structural Funds, Enterprise Europe Network Startup, Europe Road Show and European SME Week). The analysis reveals that all EU Member States have signed up to support startups on their territory; however, there are significant differences between them in the quality and scope of support provided, not only in financial terms but also in terms of legislation. At the same time, there are significant differences in consulting activities (accelerators or incubators), which is provided to startups through government institutions. The main goal of supporting startups from the perspective of the European Union is to increase economic growth in individual member states of the European Union and at the same time create new jobs that will lead to a reduction in unemployment in the union. An equally important reason is the

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fact that new successful business entities bring with them the potential for higher collection of direct and indirect taxes to the budget of Member States and thus directly to the budget of the European Union. Startups aremost oftenestablished incountries inwhich1) all the infrastructure necessary for the activities of startups is available; 2) there are financial resources for the existence and development of startups; 3) effective government support is provided; 4) there are effective tax incentives; 5) support is provided in the field of consulting (incubators and/or accelerators), etc. Legislation in the field of establishment and operation of business entities (administrative obstacles, tax burden, digitalization of state services, average time of founding a business corporation, etc.) In terms of the attractiveness of founding startups, this study analyzes TOP 5 countries in the EU member states, including the United Kingdom, Sweden, Germany, Ireland and Spain. It was found that there is above-average government support in these countries compared to other EU Member States. This support consists mainly in 1) active support of startups; 2) providing loans to viable startups (loans are either interest-free or bear interest at a reasonable interest rate); 3) dynamic activities of accelerators and incubators operated by government institutions; 4) reduction of the tax burden for all business entities or exclusively for startups; 5) streamlining the visa policy for the provision of qualified ICT professionals from third countries; 6) ensuring adequate social support for the founders of the startup in the event that the business plan is not successful; 7) securing investment in improving and expanding broadband internet; 8) promoting co-working; 9) ensuring more efficient drawing of funds to support startups from European Union funds; 10) ensuring cooperation between universities and business entities. A detailed list of recommendations for the Czech Republic in this area is found on pages 134 to 136.

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Cyberspace and Cyber Security in the Czech Republic Michal Bokša Current cyber threats and attacks are growing at breakneck speed. In many cases, national security depends on the infrastructure and resources provided or owned by the private sector. The primary task must be to create an effective platform for cooperation and protection of domestic strategic industries – defense, finance/banking, telecommunications, logistics, energy and healthcare/ pharmaceuticals. Especially following the example of the United Kingdom, the Czech Republic should also apply centralized government monitoring in these strategic sectors to ensure that private entities actually implement the necessary measures to protect key systems and data. A mainstream educational web portal should be simultaneously created. It would provide information on cyber threats and potential solutions. The platform, which should aim to raise awareness of this issue and provide information and recommendations toCzech companies and individuals, would further strengthen the Czech Republic’s additional resilience against cyber threats. According to the recommendations of the American think institute American Enterprise Institute, a portal could be created between the private and public sectors, which would monitor cyber threats practically in real time. This arrangement would provide immediate and reciprocal information about ongoing cyberattacks. Regardless of the perpetrator of the cyberattack, attacks are occurring in the present period more and more frequently, involving an increasing segment of society. The increased availability of tools/software that enable cyberattacks and their relative decline in complexity of use also play an important role in this. It can be assumed that this trend will continue, and cybercrime will become a more widespread phenomenon. However, most cyberattacks are easy to prevent. An estimated 80% of currently successful cyberattacks can be averted by regular updates of antivirus software. An important feature, therefore, is to set up a consistent monitoring mechanism to ensure that mandatory security software updates in strategic sectors are complied with without exception. A mistake on the part of a person, the so-called human factor, is the cause of cyber security breaches in 95% of cases. Regular awareness raising of the correct handling of the computer and annual retraining should become a common educational practice of government employees.

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In cooperation with the private sector, the Czech Republic should not underestimate the role of domestic startups and other small and medium- sized enterprises (SMEs). It is these types of companies that often generate new solutions and innovations. The United Kingdom, which decided to invest approximately CZK 19.5 billion in the National Cyber Security Program between 2011 and 2015, decided that at least 25% of the value of all contracts awarded during this period and of this amount must be reserved for SMEs. Cyber security can often be compromised due to the acquisition of inadequate protection systems. The phenomenon of incorrect acquisitions is very often linked to the acquisition staff who are in charge of the area but are not familiar enough with cyber security to select the appropriate products. Therefore, in matters related to cyber security, the public administration should always seek internal expert opinion when procuring ICT products. In addition, it is necessary to ensure that suppliers of ICT products for public administration comply with strict security measures, as there is a (legitimate) concern that the compromise of purchased products could already take place at the supplier. The public administration should not only require a higher level of security for suppliers of ICT products, but it should also actively carry out monitoring. At the same time, the responsibility for possible failures must be clearly defined. Public administrations must also focus on retaining talented individuals in the field of cyber security. For this reason, it must be able to provide financial rewards and benefits so that jobs in the public sector are also able to attract new ICT specialists. By tying key positions for cyber security with pay tables (including the possibility for the public administration of traditional remuneration), it is not sufficient to ensure sufficiently qualified staff due to the inability of such an evaluation to compete with wages in the private sphere. If the state aims to increase the supply of ICT expertise at the national level in the long term, it must significantly strengthen 1) the level of ICT research and 2) education, especially in bachelor’s and master’s fields. One of the main points must be the coordination of investment in education, both from public and private sources, in order to prevent unnecessary duplication. At the same time, there must be a connection between university education focused on cyber security and institutions that deal with this issue at the state level in real life (e.g. cybercrime authorities or digital forensic analysis). The mere creation of a university cyber security program on campus without a deeper connection proves to be a significantly insufficient solution. Cyber security is gradually becoming an economic interest of the Czech Republic. In the event that the Czech Republic would not be able to ensure quality protection of data and information, it is highly probable that some investors will be discouraged from operations in the Czech Republic. Therefore, certain targeted cyberattacks could bear, in addition to direct costs, indirect

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costs, such as reputational costs, which could have an adverse effect on the Czech economy in the medium term. The Czech Republic should strive to create a system of tax relief and financial incentives in order to create an environment so that cyber security companies can more easily establish and expand. There should also be projects in which such companies would provide government employees (especially those working in the ICT sectors) with professional training, internships or expert programs focused on cyber threats. Last but not least, the Czech Republic should provide financial support or relief to strategically important companies that decide to increase their cyber security. When providing cyber security, especially with regard to public institutions and ministries, it is necessary to proceed primarily in the form of protection of key functions. There is often a strong emphasis on securing the systems and information they contain. However, it is more important to preserve the ability of institutions to perform their basic functions during and immediately after a cyberattack. In segments such as healthcare, social assistance, security, etc., such disruption of functions would have very disruptive effects on the running of society. In defining and providing cyber security, state institutions must, in the first phase, primarily identify the basic functions that are key to the functioning of society and which these institutions must be able to perform under any conditions. In the second phase, it is necessary to identify the infrastructure and processes that are necessary to perform such functions. Only in the third phase is it necessary to propose measures that will focus primarily on the protection of this infrastructure. Said protection of the processes and functions of state institutions, rather than the mere protection of internal systems as such, should be the basic building block of the cyber security of the Czech Republic. Finally, key institutions and bodies must have a system of alternative solutions in case of disruption of the basic functions of ICT infrastructure and public administration services. A detailed list of recommendations for the Czech Republic in this area is found on pages 151 to 152.