OECD warns ‘institutional incoherence’ is undermining members’ digital ambitions
Report identifies five challenges to digital transformation and a “common thread” of a lack of join up across individual initiatives, policy instruments and digital components
The Organisation for Economic Co-operation and Development (OECD) said in its first digital government outlook report that member states risked falling short of their service modernisation goals if key capability gaps remained unaddressed.
The aim of the OECD Digital Government Outlook was to assess and measure the progress members states and accession candidates had made towards digital transformation and identify areas for improvement.
OECD’s assessment built on the results of its 2025 Digital Government Index and the Open, Useful, and Re-usable Data Index.
Read more: Korea, Australia and Portugal ranked top for digital government
While OECD countries had made “real progress in building digital foundations in government”, the outlook said five key challenges showed “why the gap between ambition and institutional performance persists, and why closing it requires more than adding new components to an already crowded landscape”.
The five challenges included “data systems that cannot be shared, infrastructure that is built but not adopted, investments that are approved but not evaluated, AI that is deployed but not governed, and services that are designed but not connected”.
A “common thread” among all five was that while governments possessed “individual initiatives, policy instruments [and] digital components”, many lacked “the institutional coherence to make these elements reinforce each other”, OECD said.
Describing each challenge as “a symptom of the same underlying condition”, it said: “Weak data foundations undermine interoperability; fragmented infrastructure limits service integration; rigid investment systems slow the iteration needed to close capability gaps; and without trust mechanisms, AI cannot scale.”
Strategic approach to data established, but longer-term planning needed
Throughout its assessment, OECD offered examples of the kind of institutional incoherence it said continued to hold governments back. These included several gaps between countries’ preliminary steps towards digital transformation and their follow-through.
It praised OECD governments for taking a more strategic approach to data governance in the public sector, for example, noting that 94% had a public-sector data strategy, and 62% had put in place “mechanisms to monitor results”.
But the outlook warned that “the gap between ambition and execution” in many countries meant that “data strategies risk functioning more as policy statements than as operational tools”.
It said that member states’ public-sector data strategies tended to be focused on “improving internal performance and service delivery”, rather than “systemic objectives”, such as cross-border interoperability and “more forward-looking goals”.
Sixty-eight percent of OECD countries were found to include digital goals related to cross-border services, while 74% were found to address “strengthening policy evaluation and monitoring”. According to the report, this suggested that while data strategies were increasingly focused on internal reform, their potential to support “longer-term planning, cross-border interoperability and evidence-based governance is not yet fully realised”.
Government-issued guidance around data sharing standards were also noted to be common across OECD countries. Thirty out of 36 countries (83%) were found to have provided such guidance within the public sector, while 27 of 36 (75%) provided similar guidance with external entities.
Yet, formal standards for evaluating data quality were less common. The outlook found that only 64% of OECD countries reported on data quality, revealing a pattern that showed countries had not yet taken “more systematic approaches to assessing and improving data quality”.
In conclusion, the outlook warned: “Poor data quality limits how reliably data can be reused across institutions.”
Read more: UK launches National Data Library with early years kickstarter project
Adopting and governing AI: guardrails without enablers stifling innovation
Artificial intelligence was also revealed in the report to have become more widespread throughout the OECD. The technology was identified in “at least one area of government” in 97% of member states, though was found to be most common in internal processes and public services.
Less common was the use of AI in policymaking and oversight. The reported commented that while such applications were “higher-stakes”, and so required better data quality, transparency and assurance, delayed adoption in these and other areas risked “missed opportunities to enhance services, improve efficiency and strengthen evidence-informed policymaking”.
“Strong guardrails without strong enablers can fuel risk-aversion and stall innovation,” it said, adding:
“Public administrations… need to pursue AI in ways that reinforce the public interest, uphold rights and ensure societal benefits to distinguish government use of AI from private sector incentives.”
Stressing the importance of AI guardrails, it said that while all OECD members now had guardrails “in at least one form”, only 39% made pre-deployment risk assessments a requirement. A third had internal review committees meanwhile, and just under a third were found to conduct “post-deployment audits”.
The outlook identified in its findings a recurring theme, which was that governance instruments must be “actively implemented, continuously maintained, and integrated into day-to-day decision making” to progress AI maturity and digital resilience.
Agentic AI was meanwhile described as a key accelerator of the shift from “isolated service improvements” to “system-wide change”. The report said that the technology could assemble “information across systems, [complete] routine steps within defined limits and [prompt] users ahead of key deadlines or life events”.
However, it warned that strong foundations were necessary to realising its potential. Such foundations would require a combination of “interoperable systems, trusted digital identity, clear records of automated actions, and meaningful points at which user can review, challenge or override what the system has done”.
Read more: OECD urges governments to take ‘high-benefit, low-risk’ approach to AI
Digital Identity: arrangements made, but mandates limited
According to the report, most OECD countries had successfully created an arrangement for governing digital identity, though the technology’s integration across services, as well as its uptake, remained “uneven”. It stressed that all members states bar one (Slovak Republic) had “a designated government body responsible for setting the strategic direction” for the service.
Though this progress marked “an important shift away from fragmented, project-based efforts” towards one of more coherence and “long-term stewardship”, the report highlighted variability among member states.
For example, a quarter of members limited their mandates to the public sector. By doing so, the report said that digital identity was treated “primarily as a tool for accessing government services”, reducing it to “administrative infrastructure”. By contrast, nearly three quarters (72%) “extend the mandate to the broader digital economy”, making digital identity “a driver of digital trust, economic participation and innovation”.
Uptake of digital identity among OECD populations also varied. In nine countries (Belgium, Chile, Denmark, Finland, Iceland, Korea, the Netherlands, Norway and Sweden), more than 90% of citizens used the technology, while in a further 25 countries, use ranged from 90% and 50% of the population. In the other 12, fewer than half used digital identity.
The report concluded that such gaps showed that “making digital identity available across services is necessary but not sufficient”.
“Sustained effort is also needed to build user trust, design and develop systems that are easy to use, address barriers for people who struggle with digital services, and ensure that high-quality non-digital channels remain available, so no one is left behind.”
Read more: MPs urge UK government to rebuild trust following digital ID launch ‘fiasco’
Digital skills among officials critical, and critically lacking
Describing digitally skilled public servants as “critical” to functioning digital government, the report said that efforts to expand training and recruitment were also “necessary but not sufficient”.
Governments would need workforce plans that developed what the outlook called “cross-disciplinary skills, combining policy, service design, data and technology [and that] create career pathways attractive enough to retain talent over time”.
It added meanwhile that only six OECD countries had a dedicated strategy for developing digital skills among civil servants and insisted that a more strategic approach to digital talent was “a basic condition for turning digital investment into lasting public value”.
Though governments were found to be increasingly aware of capability gaps (72% had conducted digital skills-needs assessments), their training and recruitment efforts remained “fragmented and disconnected from long-term workforce planning”. Importantly, the outlook found that only 17% of OECD countries had a dedicated public-sector digital skills strategy.
It said finally that public servants who “understand both the policy intent and the technical realities of digital systems” would be in the best position to help their organisations close the gap between “digital foundations” and “digital performance”.
Upcoming webinar: How to build transformation capability at every level of government – 5 November
Building the case for investment and securing funding
The outlook said that as public sector spending on digital technologies had grown, as had “the importance of governing investments in ways that maximise value and avoid inefficiencies”.
Its Digital Government Index (DGI) from 2025 showed that OECD countries had made “strong progress” in identifying needs as well as “building the case for investment and securing funding”.
However, beyond what the report called “the early stages” of this cycle, governments often missed “important capabilities…once delivery starts”.
It added: “Many governments lack flexible funding that can be adjusted as work progresses, clear decision points to decide whether to continue or change courses, procurement approaches suited to modern digital delivery, and regular reviews that examine what is working and why.”
This lack of flexible funding meant that governments often struggled to adapt to the pace of technological change, making it harder for them to demonstrate proper use of public money.
The outlook said however that most OECD countries had strengthened both “the mandate and role of digital government authorities to manage digital investments”, giving a few notable examples.
Read more: UK outlines methods to quantify benefits of digital investment in government
New Zealand’s government chief digital officer Paul James had, for instance, strengthened “cross-government oversight of digital spending to reduce duplication and improve value for money”.
The secretariat of digital government within Chile’s ministry of finance meanwhile had played “a central role in coordinating and financing digital government initiatives, aligning funding decisions with the broader State Modernisation Agenda”.
Finally, the government of South Korea was said by the report to have used legal mandates to give its ministry of the interior and safety “binding authority over project selection, prioritisation and management through its E-Government Project Support Programme”.
About Jack Aldane
Jack is a British journalist, cartoonist and podcaster. He graduated from Heythrop College London in 2009 with a BA in philosophy, before living and working in China for three years as a freelance reporter. After training in financial journalism at City University from 2013 to 2014, Jack worked at Bloomberg and Thomson Reuters before moving into editing magazines on global trade and development finance. Shortly after editing opinion writing for UnHerd, he joined the independent think tank ResPublica, where he led a media campaign to change the health and safety requirements around asbestos in UK public buildings. As host and producer of The Booking Club podcast – a conversation series featuring prominent authors and commentators at their favourite restaurants – Jack continues to engage today’s most distinguished thinkers on the biggest problems pertaining to ideology and power in the 21st century. He joined Global Government Forum as its Senior Staff Writer and Community Co-ordinator in 2021.
Related Posts
