FT: Ukraine already looking to postwar digital future

The Financial Times (FT) reveals the details behind Ukraine’s idea to sell a piece of digital innovation in its opinion piece. Caliber.Az reprints the article.

This week Mykhailo Fedorov, the youthful T-shirt-wearing vice-prime minister of Ukraine, delivered a passionate speech to a packed audience (opens a new window) in Washington.

But unlike most Ukrainian delegations, he was not pleading for more aid. Instead, he had an idea to sell: a piece of digital innovation, known as DIIA (opens a new window), short for “state and I”. And investors should take note.

Three years ago, the digital ministry headed by Fedorov launched an app to enable citizens to perform private sector and government services on their phones.

Initially, it looked like a modest tool to “fight corruption and turn Ukraine into a digital state”, as Fedorov says. During the Covid-19 pandemic, for instance, the app let Ukrainians verify their vaccination status.

But its use has mushroomed to a startling degree. The app is installed on 70 per cent of all Ukrainian phones and 19mn citizens, about half the population, regularly access the 100-odd services found on it.

These include tools that give citizens the world’s first digital passport, enable them to get digital driving licences, organise construction permits, register new babies, pay taxes, make digital signatures and do banking.

More recently, features have been added that teach Ukrainians how to fly drones (and shoot them down), receive refugee payments, report the activities of Russian troops and apply for reconstruction funds when bombs destroy their homes.

Indeed, the app is so effective that the US Agency for International Development, which funded part of its development with the British government, is working with Kyiv to export it. Estonia, for instance, is importing the DIIA code — which is striking since the Baltic state is itself a tech pioneer. USAID is now working with Zambia, Kosovo and Colombia for them to import the code too.

“DIIA is Ukraine’s best-kept secret — we should all envy it,” Samantha Power, USAID head, tells me. Indeed, she suspects officials in America’s own “municipal and federal government” could also learn from the innovation, given the low levels of government digitisation in the US.

This is striking — for several reasons. For one thing, DIIA provides yet another sign of Ukraine’s resilience. The fact that Kyiv has expanded the app in a war and defended it from cyber hacks is impressive.

But this is just one instance of frenetic public and commercial digital activity in Ukraine, Power says. The sector grew 5 per cent in 2022 amid record digital exports (albeit from a low base). This happened even as overall economic output fell by a devastating 30 per cent that year.

Second, DIIA also shows that we now live in an age of “reverse innovation”, to cite a phrase sometimes tossed around tech circles. In the 20th century, western governments and companies typically assumed that brilliant innovations started in the West and were then bestowed upon poorer countries.

But that assumption was undermined when M-Pesa, one of the world’s first mobile money platforms, emerged in Kenya and was then copied elsewhere. Tech innovations have subsequently flooded out of China, also to be emulated around the world. This might also happen with DIIA, given that it makes government not only more efficient, but more accountable and transparent, too.

“The legacy of the Soviet Union was corruption — if you wanted to apply for a construction permit or change a car registration, you had to pay an official. But DIIA removes that,” says Fedorov.

Power echoes this: “We [in America] have given around $15bn cash to the Ukrainian government, and I don’t think we could have done that without DIIA [because] this would have been untraceable in a prior regime and the Ukrainian government was famously corrupt.”

But now, she says, “there is a digital trail going directly into the bank accounts” to track money flows, backed by geolocation tools.

Third, DIIA also highlights one possible path for Ukraine’s future. The country’s prewar economy was dominated by agriculture and heavy industry. But government officials now see tech’s potential as a key pillar, and dream of modelling themselves on Israel.

After all, they say, Israel has previously shown that hostile neighbours need not impede growth — or at least not if massive defence investments are used to foster entrepreneurial civilian businesses, backed by a diaspora. Since Ukraine also has hordes of tech-savvy citizens, a diaspora and an increasingly entrepreneurial culture, officials in Kyiv are eager to tell potential foreign investors that it is the next “start-up” nation.

A cynic might retort this sounds wildly premature while the war rages on. After all, Ukraine is struggling to get the weapons it needs to win. And while financial institutions such as JPMorgan and BlackRock have already signalled their readiness to help with reconstruction (and Visa and Google have supported DIIA with grants), inward investment (unsurprisingly) is low.

This is unlikely to change while conflict lasts. But, if nothing else, DIIA shows that necessity is the mother of invention — and that Ukraine has the ability to surprise on the upside. Non-Ukrainians should remember that — for military and civilian reasons alike.