Over the past two decades, this former Soviet-controlled nation has quietly become one of the most tech-savvy countries on earth. Estonia is the 79th smallest country in the world by population but holds the world record in startups per person. The country teaches every kid how to code and nearly all government services are conducted online. But it wasn’t always this way. Here are the inspiring and informing article in context of “Estonia – World’s most tech savvy country & takeaways for Leaders”.
REBOOTING FROM ZERO
In the 1930s, Estonia boasted nearly the same living standards and GDP per capita as Finland, its northern neighbour. Less than 10 years later, that would all be over. The Soviet annexation of Estonia in 1940 crippled the country’s economy.By the time the country regained its independence in 1991, Estonia had one-ninth of Finland’s GDP and four times its infant mortality rate.
The country had to reboot from practically zero. Each citizen was given the equivalent of just 10 euros, or $10.60 to start their new life under independent Estonia.
In that sense, Estonia was a startup, and one that happened to blossom during the tech and internet boom of the 1990s. As a result, the country was never burdened by old, legacy technologies and could build up using only the internet.
THE UTOPIAN WORLD
As early as 1994, Estonia became the first country to institute a flat-tax. Today, 95% of residents declare their taxes online and can do so in typically under five minutes.
Recently, Estonia’s former Prime Minister TaaviRõivas earned loud cheers on The Daily Show when he described to host Trevor Noah how he had filed his taxes on his iPad during a few idle minutes in the Luxembourg Airport. He says that during nearly three years as Prime Minister the only time he signed his name in ink was in ceremonial guest books. Theoretically, he says, the government could issue an online order to send troops into battle. “I never signed any law physically,” he says. “Never.”
Former Estoninan President Toomas Hendrik Ilves, grew up in New Jersey, where his passion for technology blossomed. “I was one of the very few people who were put into a math program when I was 13,” Ilves said during an interview. “I learned to program, and I worked as a programmer in college. This is one of the reasons I was drawn to technology and its implications.
For the people who do laws and policy, very often the last time they took math was in grade school. They don’t really follow these things and it is all kind of mystical to them. Where Estonia has done much better than other countries is that policy and IT are not at opposite extremes. There is a willingness here to solve problems and approach issues in a way that is technologically friendly. Also there is a constantly revolving door of top talent between entrepreneurship and government in our country, which has helped close the divide between the two worlds. It’s not uncommon for top entrepreneurs to become civil servants, and vice versa. “
In 1998, he led a program in Estonia, to equip every classroom with computers and internet access. Ever since, e-Estonia has blossomed. In 2000, the government declared internet access a human right. It also passed a landmark law making digital signatures legally binding and equivalent to physical signatures.
Since in Estonia, no one is required to sign with a pen, there is no need for paper documents to pay taxes, open a bank account, obtain a mortgage, pick up a prescription, or perform most of life’s other tasks, other than marrying and divorcing. A company can be established in just about 20 minutes, with no need to visit the tax board or the Social Security agencys. Everything is online.
The country also instituted a cutting-edge X-Road technology platform to help organize, manage and share private and public data between government institutions. This system allowed Estonia to institute online voting in 2005, becoming the first country to ever do so.When current Estonian President Kersti Kaljulaid was asked where she voted in last November’s elections, which brought her to power, she responded, “From my computer at home.”
Similarly, the country went from having no land registry to creating a paperless one.
These innovations laid the groundwork for Estonia’s first major success story: Skype.
THE INFLICTION POINT
When home grown Skype was sold to eBay in 2005 for $2.6 billion, it triggered a windfall. Suddenly, its four young founders had come up with something that became a worldwide phenomenon. As the Skype founders became rock stars, a new generation of young Estonians flocked to try their hand at tech. Today, high-tech industries now make up about 15% of Estonia’s total GDP.
There are an estimated 350 Estonian startups, including well-known companies such as Playtech, of the largest online gambling software companies, Fitsme, an online fitting room for clothing retailers, Starship, a delivery robot, and TransferWise.
Healthcare in Estonia is equally High-tech. Estonia recently signed a deal with its neighbour, Finland, allowing the countries to recognize each other’s digital ID cards. Now, for example, Finns and Estonians can visit doctors in the other country and automatically call up their medical records—all stored online.
The Electronic Health Record of Estonia is a nationwide system started in 2008 that integrates data from Estonia’s different healthcare providers to create a common record for each patient. Estonians can access their records at any time. For doctors it’s a powerful tool, especially in an emergency. For government, it means any ministry can compile statistical health data or track disease epidemics in real time.
However, despite its success, Estonia remains one of the European Union’s poorest nations, and unemployment remains an ongoing issue, although it has significantly come down. There are a host of other challenges. For one Estonia faces concern from investors over its geopolitical relationship with Russia under President Vladimir Putin.
It seems inevitable that Russia would sooner or later collide with its pint-size former territory, which, aside from becoming a major tech hub, had rushed to join both NATO and the EU after the Soviet collapse.
For instance, when in 2007 Estonia’s government decided to move a World War II memorial statue of a Soviet soldier from central Tallinn to a nearby war cemetery, pro-Russian demonstrators burned barricades and looted stores in days of rioting. Then Estonia’s banks, its Parliament, and several public services suddenly went off-line, in one of the biggest-ever distributed denial-of-service attacks to hit a country.
The country survived and built up its cyber security to among the best in the world – using the blockchain technology, which allowed its engineers to strengthen its encrypted data and let Estonians verify at any time that their information had not been tampered with.
WORKING FOR A SECURE WORLD
Estonians are now required to use two-step verification for many online tasks. These and other security measures, say Estonians, make their system as close to unbreakable as possible. (The U.S. State Department said last year that cybercrime “does not represent a major threat” in Estonia.) They contrast it, for example, to Edward Snowden’s hacking into the NSA, which he continued over 18 months. “No Snowden can crack this system,” boasts President Kaljulaid.
(Acknowledging Estonia’s supremacy in dealing with cyber attacks, the only NATO-accredited cyber defense center opened in Tallinn in 2008.)
Those who created Estonia’s system say they believe the arguments raging in the U.S. over data privacy are largely misplaced. The focus should instead be to give people control over who accesses their data, by using blockchain technology. “The real issue is data integrity. We Estonians, for instance, would be aghast to have our medical records in paper folders in doctors’ offices. We would never know who has looked at our data,” an Estonian says. “Blockchain solves the issue of trust.”
That said, the 2007 cyberattack still haunts Estonia. So this year Estonia will open the world’s first “data embassy” in Luxembourg—a storage building to house an entire backup of Estonia’s data that will enjoy the same sovereign rights as a regular embassy but be able to reboot the country remotely, in case of another attack.
THE WAY FORWARD
Another issue which Estonia grapples with is slow population growth. And since it has little means for attracting masses of immigrants to its icy Northern European landscape, it has come up with a quirky idea—another of its firsts in the world: offering people virtual residency.
To implement this ambitious idea, Estonia’s first e-residency cards rolled out in December 2014. The microchips inside them are identical to Estonians’ digital ID cards. But come without citizens’ rights, like voting or public pensions, and there is no obligation to pay taxes in Estonia. This is no tax haven: Estonia requires that e-residents pay their taxes to whatever country they owe them. But for a fee of 145 euros (about $154) e-residents can register companies in Estonia, no matter where they live, gaining automatic access to the EU’s giant common market—about 440 million once Britain leaves the union.
Of about 18,000 e-residents so far, about 1,400 have formed companies in Estonia. On average, each of those companies spends roughly 55 euros (about $58) a month on accounting and office administration in Estonia.The entire team working on the e-Residency initiative today is just 16 people.
TRUST AND TRANSPARENCY
The main reason for Estonia’s success in the digital transformation lies in trust. Sometime back, a group of scientists in Estonia discovered a theoretical security flaw in the chip of the digital identity card which could affect a large amount (~700 000) of the national ID-cards. To make matters worse, this incident appeared just a few months before the local government elections — the time when anything will be turned political.
However, the Estonian government officials still went public immediately to announce the flaw. Estonians understand that every innovative digital system fails from time to time, but when it happens, it should not destroy the fundamentals.
Besides trust, another crucial feature of the Estonian digital infrastructure is its transparency — as an Estonian citizen (or an e-Resident) you can always log in to your personal government side interface and see who has enquired information about you — a police officer, a doctor you visited earlier, or a tax official. And if you don’t like who has been snooping, you can click to report the data intrusion. A civil servant then has to justify it.
SIMPLICITY: A WAY OF LIFE
Another thing that Estonia has got right is ‘Simplicity’. Make the tax and legal system simple, make the country an easy place to live in, and investments and talent will follow.
The key to building a leading digital nation is to set meaningful and tangible goals. Can you register a business in less than 18 minutes? Can you complete your tax return in five minutes? Do our politicians approve laws using just their smartphone? If the answer is no, you still have a long way to go.