20 September 2019
Estonian Prime Minister Jüri Ratas speaks at the Tallinn Digital Summit on Sept. 29. Photo: Xinhua
Estonian Prime Minister Jüri Ratas speaks at the Tallinn Digital Summit on Sept. 29. Photo: Xinhua

How Estonia is pursuing its digital ambitions

In the age of the internet, basically everything can be “virtualized”, including a state.

In fact, nowadays, the idea of “virtualized countries” is no longer beyond the realm of possibility. And one European country is already working aggressively to realize that, i.e. the tiny Baltic state of Estonia.

As a small former Soviet republic with a population of just about one million, Estonia has always remained highly alert to any sign of renewed Russian aggression ever since it gained independence in 1991.

In order to counter possible Russian expansion, Tallinn has gone to great lengths to make sure it won’t be annexed by Moscow ever again, such as aligning itself with the West, as well as joining the European Union (EU) and NATO.

However, apart from that, Estonia has also come up with some innovative ideas to boost its international presence and enhance its national identity, such as by transforming itself into an “electronized country”.

Today, Estonia has become a byword for “digitalized state”.

Right from the start in the early 1990s, Estonia aspired to become a “smart” country by fully applying digital technologies to its infrastructure projects.

On the other hand, the Estonian government has also attached great importance to the use of the internet, and declared in 2000 that “access to the internet” is a fundamental human right.

Since then, the administration in Tallinn has been working aggressively to enhance the internet penetration rate across the country, including its rural areas, as well as develop online government services.

Its efforts have paid off: the Estonian government has claimed that its people now enjoy access to 99 percent of government services online.

In 2001, the Estonian government pioneered the use of the “smart” identification document by issuing the “2048-bit encryption” identity cards to its people, through which they could cast their votes in local elections online.

Yet Tallinn’s efforts to become a “digitized country” didn’t stop there. Recently, the Estonian administration has taken one step further by becoming the first country in the world to launch the so-called e-Residency program, under which it will issue digital IDs to foreigners anywhere in the world, so that they can become “virtual residents” of Estonia without having to live in the country.

The program allows “e-residents” to start their own companies or take part in business ventures in Estonia under the EU framework and have access to local government and banking services through the internet. As Tallinn has claimed, the e-Residency program enables foreigners around the world to become Estonian residents without actually having to set foot in the country at all.

According to the Estonian immigration service, so far it has received online applications for e-Residency from people from 138 countries.

Nevertheless, there is actually a catch there: even if you have become an Estonian “e-resident”, you are still not officially an Estonian citizen and are therefore not entitled to the country’s social security benefits.

It is because rather than providing a pathway to real Estonian citizenship, the program is actually intended as a measure to attract foreign investment and encourage foreign investors to establish their companies in Estonia so as to boost government tax revenues and explore new clients for the Estonian banking and service industries.

Given that, in a sense, there is actually not much difference between applying for Estonian e-Residency and setting up an offshore company in any of the tax havens.

Shortly after the Brexit referendum, the Estonian government launched a “how-to-stay-in-EU” website that promoted its e-Residency program among British business owners, through which, it said, they could continue to have free access to the EU market in the days ahead.

However, in order to become real Estonian citizens, they still have to reside in the country for at least 183 days over a 12-month period, which means at the end of the day, there is still no shortcut when it comes to acquiring real citizenship.

In the meantime, Tallinn has also put forward the idea of “estcoin”, i.e. a state-sponsored version of bitcoin to be used as a medium of transactions for its e-Residents. However, the idea was dampened by President of the European Central Bank Mario Draghi since Estonia is a eurozone member, and therefore it has no authority to issue its own currency, not even virtual ones.

Yet even so, the ideas of e-Residency and estcoin proposed by the tiny Baltic state have opened up a lot of new possibilities and unlocked people’s imagination.

And perhaps within a few decades, these ideas might turn conventional wisdom about “nationality” and “citizenship” on its head.

This article appeared in the Hong Kong Economic Journal on Oct. 13

Translation by Alan Lee

[Chinese version 中文版]

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Associate professor and director of Global Studies Programme, Faculty of Social Science, at the Chinese University of Hong Kong; Lead Writer (Global) at the Hong Kong Economic Journal