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Vera Demary / Barbara Engels IW News 25. February 2016

Digital Business Location: Slow catch up

Germany is far from being the leading European nation in digitization. In a recent ranking of the European Commission, Germany occupies rank 9 of the 28 member states. Compared to last year the Federal Republic, however, has caught up: Especially companies now take advantage of digitization.

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Digitization offers many opportunities for citizens and businesses alike – in Germany, however, they are often neglected. This shows this year's Digital Economy and Society Index (DESI), which the European Commission has published today (Thursday). Germany, though being the strongest economic power in the EU, only achieved the 9th place in the digitization ranking (previous year: rank 10). Denmark, The Netherlands and Sweden lead the ranking.

The good news: German companies have caught up significantly. Many companies increasingly share data and information online – German enterprises made significant progress in Electronic Information Sharing and are now ranking first in Europe.

Also, e-commerce plays an increasingly important role. Nearly a quarter of small and medium-sized enterprises in Germany sell their products and services online – the EU average is 16 percent.

In digital infrastructure, by contrast, Germany is lagging behind. The uptake of fast broadband services is still below EU average, as are digital public services. In the latter area, Germany is ranked 18 out of 28. The low level of digitization of the administration has severe consequences for companies: They would massively benefit from an acceleration of bureaucracy. In Estonia, a pioneer in the field of digital administration, it takes around 20 minutes to register a new company. In Germany, days can pass.

The DESI Index, which was first published in 2015, provides snapshots of connectivity (availability of fast and cheap broadband connections), digital skills, and the use of online services. In addition, the development of digital technology (e-commerce, cloud services), and of the digital public services are accounted for. Overall, more than 30 indicators are taken into account.

The index also shows that there are still large digital gaps between the individual EU countries. In order to establish a digital single market, these gaps need to be closed quickly. Only this way, Europe might finally catch up with the leading digital nations USA, Japan and South Korea.

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