Ekonom: Czechia has a chance for digital transformation. But it cannot be stifled by a flood of regulations

The digital revolution is a necessity for Czechia, without it the modernization of the economy is not possible. However, the path to it is dotted with various administrative points, so it is not easy to move along it quickly.


They relate to various forms of e‑commerce and platforms for dealing with products, there are changes in the copyright legislation, which are currently being transferred from a general European directive into a binding Czech law. "There will also be a second package of European data regulation, i.e. the Data Act and the Digital Governance Act, or the Digital Services and Digital Markets Act," Ján Kuklinca from the law firm Deloitte Legal told the weekly Ekonom. 

Prudent handling of data is a priority for the EU, and the other two listed standards will also be essential. The Digital Services Act sets out many new conditions and obligations for businesses. According to Sylvie Sobolová of the Kocián Šolc Balaštík law firm, the Digital Markets Act is aimed at the world's largest digital players and will ensure a level playing field on the market. The European Union is also preparing a regulation on artificial intelligence AI Act, a cyber security directive NIS2 and the legal framework for health data protection. At the same time, at home and especially in the European Union, the debate continues as to how far regulation can go without stifling digitization and the entire business. Czech entrepreneurs are concerned about the new regulations. "Regulation should not undermine the ability of companies to create new products, services and business models and to reach new customers," points out Milena Jabůrková, Vice President of the Confederation of Industry of the Czech Republic. In addition, according to attorney Kuklinca, overly strict regulations could push business into the gray zone and complicate the situation by forcing the introduction of unnecessarily complex and user-unfriendly electronic technologies. Jabůrková therefore demands from the government a clear concept of what the laws are supposed to achieve in the digital world. "We must also be able to create effective coalitions in Europe so that technology regulation does ensure a safe and responsible environment, but without unnecessary administrative burdens that stifle innovation," she adds.


Digital transformation is one of the priorities of the current government. "This is a process on which we all have to work together - citizens, businesses, the state together with non-profit organizations and the academic community," Vice-PM for Digitization and Minister for Regional Development Ivan Bartoš told the Ekonom weekly. He sees it as a condition of an educated, competitive, and resilient society.

The authorities now face a difficult decision – Czechia lags behind the most electronically advanced states by approximately ten years. In fact, the corporate scene did not pick up the biggest delay, especially large companies are doing quite well. The main obstacle is the digitization of the public sphere. Meaning the (in)ability to communicate with the authorities online. An example is the Netherlands or Estonia: in this country it is possible to accomplish everything online except getting married. Setting up a company via computer takes only five minutes.

"We cannot afford to continue falling behind other countries. Companies must innovate and be able to stand up to global competition. Even citizens should have the opportunity to fully develop their digital competences in order to withstand the growing demands of the market. And a data-driven state will remove unnecessary bureaucracy and improve communication with citizens and companies," reminds Bartoš. Digitization is modeled by both technological progress and the above-mentioned legislation, and not only the strictly regulatory one, but also the one that opens the way forward. In this context, Ivan Bartoš lists domestic laws establishing a digital agency. Attorney Kuklinca agrees that sections requiring paperwork and documentation should disappear from the "old" laws. They are holding back the transition to digital communication with the authorities, and this also applies to the Labor Code. Fragmentation and divided politics among ministries and authorities have been impeding progress for years. For example, it slowed down transposition of EU legislation on copyright in the digital environment. Only two years ago, after many delays, the Act on the Right to Digital Services was approved. Still, there is a real risk that the goal of the right to online communication with the state will not be fully reached by the set year 2025. According to Marten Kaevats, a former advisor to the Estonian government on digitalization, building a digital society is not a short-term issue. Even as politicians change positions, the transformation must continue. “It takes having a good plan which everyone understands. A plan they trust regardless of political views," Kaevats told Ekonom.


The technologies necessary for the state to move quickly in this direction have long existed in the Czech Republic. “Unfortunately, they are not set up to be easy to use for an average person. This is probably going to sound weird coming from an IT guy, but one of our problems is that we are too intoxicated with technology and don't think much about how to make it all usable for people. The data box is a great thing, I got a copy of my birth certificate from a coffee shop in Sofia. But I can't imagine that my mother, who is retired, would be able to do the same," Ondřej Krajíček, chief developer of Y Soft, explained to Ekonom, upset. According to him, during the transformation of the Czech Republic, it is necessary to finally start treating state administration as a real service. “Then you start to think that the measure of success is not the number of apps and web portals, but the number of people who use online opportunities successfully and regularly. At the same time, we have to realize that it is not only about accessibility and simplicity for citizens, but also for officials, who are also customers in this case. We just have to make it as simple as a door handle,” he says. Only when we achieve such simplicity we can move towards the fact that the public administration does not want any data from a person more than once. 

But such a vision is not enough for entrepreneurs. According to them, past and present government officials have a narrow perspective when it comes to digitization. They mainly look at it through things related to the digitalization of public administration, while companies also have other problems than dysfunctional e-government. the Confederation of Industry of the Czech Republic supports the creation of such digital legislation that will eliminate a specific problem, rather than creation of a blanket, one-size-fits-all regulation. Regulations have to be tailored based on a careful evaluation of the impacts on society, citizens, businesses and the competitiveness of European economies," reminds Confederation Vice-President Jabůrková. Before it is too late,, she encourages to take advantage of the Czech Presidency of the EU, because now is the time when the regulations for the data economy, the cloud or artificial intelligence are being created. At the same time, global context cannot be forgotten. Rules valid worldwide not only help to develop new technologies, innovations and start-ups, but also increase their export potential. "In order for the Czech unicorn to make a living on global markets, it has to have global sales. The less a company has to focus on adapting the product to different rules in different world markets, the more time it can invest in innovative technologies that will help it succeed," Krajíček from Y Soft explains the position of large emerging companies. He agrees, too, that excessive regulation harms digitization; after all, he sees it as one of the causes of Europe's technological lag in the world. "Projects that use artificial intelligence to achieve breakthrough innovations in the production and storage of energy, in agriculture, material sciences, urban planning, construction or medicine, should be the ones we should support in every possible way these days," he emphasizes.


Similarly, the Confederation of Industry considers artificial intelligence and its future use  to be a key issue.. and is concerned that the upcoming European regulations will slow down the development of artificial intelligence and their applications on the old continent., Most of the current software and applications using statistical and knowledge-based approaches to data analysis would fall under the proposed directive, even though they have little impact on individuals -for example, in asset and liability management modeling for the banking sector or company scoring. "It is about whether the principle of regulation of high-risk can be maintained. Otherwise, there is a risk that companies developing AI will have to report everything and will have to bear much larger burden than before. This will increase the risk that innovation in this area will take place elsewhere than in Europe," the Confederation warns in a statement to the Ekonom weekly. Krajíček also highlights the danger of specialists leaving. "If you get five times higher salary in the US for the same position than in Western Europe and a work visa to go with it, I really wouldn't be surprised if you left," he notes. 

Another thing is the cloud. Together with the European Commission, France is pushing for cloud to be owned only by EU companies. However, according to the Confederation of Industry, this is a purely political measure that has nothing to do with cyber security and could easily result in a trade war between Western countries. There are also doubts about the intention to expand data sharing. The Confederation of Industry does not agree to the introduction of mandatory data sharing between companies or providing data to the public sector. The original owner would then lose control over what happens to the highly sensitive data and could lose a competitive advantage. Therefore, if data sharing should take place, then only based on a contract and clearly defined parameters.

In addition, entrepreneurs warn against restrictions on international data transfers and advocate for a deeper cooperation between the EU and the US. "The main topic is the new agreement on transfers. Long-term uncertainty and the transfer of responsibility to companies make the handling of personal data complicated and increase costs," emphasizes the Confederation of Industry of the Czech Republic. In the eyes of business people, it is equally necessary to develop digital partnerships both with the USA as well as with Japan, Canada, South Korea and other countries. The Confederation’s formulation follows: "If the EU does not act as a cooperative stakeholder, we will not move anywhere and Europe will remain alone with its legislation."

At the corporate level, such cooperation takes place. For example, the multinational company Amazon will contribute to the modernization of the Czech Republic. "Next year, we will open an automated robotic dispatch center in Kojetín. In the future, we plan to bring fast and affordable broadband to the Czech Republic using a low-orbit satellite network. This will allow for a better connection in more remote areas," said Lucy Croninová, the company's Vice-President for Public Policy in the EU, at the digitization conference of the American Chamber of Commerce in the Czech Republic.

Everything will have an impact on people's livelihoods. "Populists claim that digitization and advances in automation will put people out of work. However, the opposite is true. The only way to keep jobs in our country is the application of new technologies. If we don't keep up with the world in this, our only advantage remains cheap labor. In such a case, however, there is always another country where people are just as skilled, but even cheaper," warns Krajíček. There is a consensus that the Czechia cannot do without a thorough digital transformation, which opens the discussion on how to go about it. According to Kuklinca from Deloitte Legal, the state finds it difficult to attract real IT experts to its ranks, and the coordination of the proposed solution is sluggish, because there is still a lack of a comprehensive unifying concept.


The original article was published in Czech by the Ekonom weekly.



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