Like any government infrastructure project, e-government can be done in phases and the costs of implementation will depend on current infrastructure availability, supplier and user capabilities, and mode of service delivery (whether through the Internet or through telephone hotlines and one-stop shops). The more complicated and sophisticated the kind of services the government wants to offer, the more expensive it is.
Governments should focus on small, self-financing or outsourced projects. Because e-government projects must be financially sustainable, there must be a revenue/ cost-reduction model in place from the beginning. Smaller projects with a clear revenue-generation strategy and minimal initial investment are the most likely to be sustainable over the long term. For instance, Web sites are one of the easiest and cheapest ways to achieve high impact e-government with a minimum of investment.
e-Government projects are, more often than not, long-term endeavors, requiring large capital infusion in software, hardware, infrastructure and training. A viable financing plan should not only pay for the immediate needs to jumpstart e-government; it must also consider its long-term financing options for the sustainability of the project.
There are various business models for funding e-government projects, and the private sector plays a critical role in these. Under partnership arrangements, the private sector builds, finances and operates public infrastructure such as roads and airports, recovering costs through user charges. Various financing schemes exist—from soft and development assistance loans from donor/multilateral aid agencies to partnerships and outsourcing deals with private third party vendors under special financing schemes (e.g., the Build-Operate-Transfer or BOT scheme) that can minimize the initial cost to government.
BOT and its variants are usually the favored financing models/arrangements for government projects that require large and immediate financing from the private sector. Under BOT, the private sector designs, finances, builds, and operates the facility over the life of the contract. At the end of this period, ownership reverts to the government. A variation of this is the Build-Transfer-Operate (BTO) model, under which title transfers to the government when construction is completed. Finally, with Build-Own-Operate (BOO) arrangements, the private sector retains permanent ownership and operates the facility on contract. 
Cooperation, rather than competition, with the private sector can facilitate effective e-government. Government can encourage private sector investment by complementing and supporting private sector efforts rather than duplicating them. The key to e-government is to improve citizen access to service delivery, not further expand the role of government. Government should not attempt to create products and services where public-private partnerships or private service providers can adequately provide these products and services more efficiently and effectively. 
- Box 15. E-Government Financing Through BOT: Malysia’s National e-Procurement System
e-Perolehan is a US$71 million secure electronic marketplace and e-procurement service that enables the government of Malaysia to purchase goods and services over the Internet. This service, launched in July 1999, enables end-to-end transactions, from direct purchase to request for tender and request for quotation to awarding of bids. The project is to be completed in three phases over a period of 8 years, with development and nationwide roll-out within 34 months, involving 4,288 government purchasing centers, 35,000 suppliers and roughly 350,000 products.
e-Perolehan is financed through a build-operate-transfer scheme involving Commerce Dot Com Sdn. Bhd., an electronic commerce joint venture company between Puncak Semangat Sdn. Bhd. and NTT Data Corporation. Commerce Dot Com Sdn. Bhd. will undertake the total financing of the project in exchange for exclusive service operator rights to the Malaysian supplier community. Suppliers can host their products and prices online free of charge, reducing their overhead costs. On the other hand, government benefits from a more streamlined procurement process. Other government departments throughout the country will be able to access the pricing information online. A minimum e-Perolehan transaction fee of 0.8%, and a maximum of RM9,600 (approximately US$2526.32) will be charged when a sale transpires. Through e-Perolehan, transaction costs are reduced from US$250 per transaction to an average of US$17. Commerce Dot Com Sdn. Bhd. estimates that the return on investment (ROI) will be around 15%-20% annually. It also expects to recover its investments in the third year of operation, with a revenue of RM 50-100 million (approximately US$13.158-26.316 million) annually. 
In addition, to spur SME development and increase competition the Malaysian Government installed in 2001 a network of telecenters nationwide to enable smaller-sized suppliers to trade online with all government procurement centers. The telecenters, located in all state and district capitals, will help non-IT savvy suppliers perform online transactions such as submitting registration applications, providing catalog details or simply getting connected to the Internet. Suppliers will save up to 50% in registration costs by using the system. 
Any sound e-government policy must consider a citizen-centered approach. This means that e-government should be an end-user or demand-driven service.
However, many citizens do not use e-government for several reasons, among these unfamiliarity with ICT, lack of access, lack of training, and concerns about privacy and security of information.
While e-government may provide ease and convenience in the delivery of public services, and offer innovative government services, none of these will prompt citizen use unless the concerns mentioned above are first addressed.
- Box 16. Citizen-Centered E-Government: Singapore’s eCitizen Help Centers
Singapore’s eCitizen portal averages 3.1 million hits a month, a marked improvement from 200,000 hits a month when it was first launched in 1999. How did a developed country of 4 million citizens exponentially expand online public usage in less than three years’ time?To ensure ubiquitous access to government e-services, Singapore established a network of eCitizen Help Centers since November 2001. These centers are equipped with Internet kiosks that give free access to the Internet to citizens. There are helpers to assist those who are not proficient with the Internet. To date, there are 24 eCitizen Help Centers strategically located near Community Development Councils (which function as a specific district’s local administration handling community programs and social assistance services delegated from the ministries) and Community Centers (community clubs that organize cultural, educational and social/recreational activities to promote racial harmony and social cohesion). 
Security generally refers to the protection of information system assets and control of access to information. Security policies and strategies are context- and information-specific.
Privacy refers to the right for information attributed to an individual (also called “nominal information”) to be treated with an appropriate level of protection. Information privacy protection laws are often put in place to regulate this.
Protecting the privacy of citizens and assuring them that their personal information will not be compromised is critical in e-government because this is the key to user trust. Without this assurance, no one will be prompted to use e-government services.
- Box 17. E-Government and Privacy: Japan’s National ID System
In August this year, local governments across Japan began feeding basic information on their citizens into a central database as part of a new resident registration network, despite complaints about the system from privacy advocates and refusal to participate by some municipalities.
Under the new system, everybody who lives in Japan will be issued an 11-digit identification number that can be used in many dealings with local government. It replaces a system under which people had to produce resident certificates to prove where they lived each time they dealt with local government and which required people to go through time-consuming procedures each time they moved.
Information such as the person’s name, date of birth, sex and address will be included in each person’s file and all data will be stored in a centrally-run government server. The system aims to make life easier for both citizens and local municipalities and goes under the name Jumin Kihon Daicho Network, or Juki-Net for short. City halls all over Japan will have access to the database, making dealing with the government as simple as turning up with your ID number.
However, this ease of access is ringing alarm bells across Japan.
When the Juki-Net idea was first floated in 1999, the government promised that new data privacy and protection legislation would be in place by the time the system went into operation. However, some of the bills associated with this are still in the Diet, Japan’s parliament. Many argue that until these laws are in place, the system should not be launched. Others contend that the problem with this system is the numbering of each individual.
Fearing that the privacy of their citizens may be at risk, some local municipalities are refusing to connect to the system.
The reaction from privacy advocates is perhaps expected but the refusal of some cities to join Juki-Net has come as an embarrassment to the government, which sees the system as a key part of its E-Japan scheme. E-Japan is an ambitious program that aims to make Japan the world’s most advanced IT nation by 2005. One of its key goals is online delivery of many government services, a service for which a centralized database of people living in Japan would be essential.
The proposed law forbids the use of the identification numbers by anyone apart from the bureaucracy and imposes duties on civil servants to keep information confidential and prevent information leakage to outside sources.