Estonia: Digital powerhouse offering e-residency to non-nationals

Ask anyone what the most digitally advanced country in the world is and it’s a safe bet that they’ll say either the US or China, followed by Japan or even the UK. Not many would think of a tiny northern European country in the former Soviet Block, but Estonia is a decade ahead of other developed countries in terms of technological advancement.

Because of this, Estonian residents enjoy a range of benefits. All residents are issued an ID card that offers access to around 4,000 services – allowing them to manage their finances, register businesses, pay parking tickets, order prescriptions and even vote – entirely online.

With a population of only 1.3 million, Estonia’s forward-looking approach to digital technology is partly due to its small size. As Siim Sikkut, digital policy adviser for Estonia, told the Guardian in 2014: “Estonian government and society have always understood that as small economy, we have to be open to the world – especially in trade and investment.”

It’s in this context that Estonia has become the first ever country to offer e-residency permits to any world citizen.

Benefits of an e-identity

As a government-issued digital identity, the program allows non-Estonians access to Estonian services such as company registration, banking, payment processing and taxation.

The benefits of this are that any entrepreneur or freelancer running a “location-independent international business” can enjoy low startup and maintenance costs; 0% income tax until distributions are made; minimal bureaucracy; and inclusion in the EU’s legal framework – all whilst remotely administrating their businesses from anywhere in the world.

However, as advantageous as this is – as well as groundbreaking – the concept of a government-issued digital identity has come under much scrutiny in the past, with many expressing concerns over its security and others seeing it as a threat to personal privacy.

Ensuring data-security

The Estonian government ensures security of its citizen and e-resident database by using a government-run technology infrastructure called the X-Road. Launched in the 1990s, the X-Road is not a centralized database; rather, it links public and private databases to the country’s digital services. As such, it has no central gateway or hub. The network therefore remains safer because information is kept on separate servers.

So far the system hasn’t experienced any major data breach. However, in 2009, Estonian web servers were subject to sustained attacks for weeks when huge amounts of traffic, instigated by infected machines, overwhelmed the country’s systems. Although this wasn’t due to a security gap or glitch in the system, attacks of this sort can be a major inconvenience … or worse.

During a speech in October 2014, Andrus Ansip, Estonia’s former prime minister and current vice president for the digital single market at the European Commission, said: “We have to protect everyone’s privacy, trust is a basic principle. If people can’t trust e-services, they will never use them.”

Estonian residents are given peace of mind in the form of 2048-bit public key encryption on all ID cards. In addition to this, Estonians have complete control over their personal data, with full transparency over who has accessed their information available in their online portal. If individuals see activities that they do not like or did not authorize, they can report these activities to the data ombudsman, who is then required to justify the intrusion. 

The economic benefits of an e-society

One reason why Estonia is one of the most successful e-societies is historical. After the collapse of the Soviet Union in the 1990s, the newly independent nation found itself in the position where it desperately needed to modernize.

Lack of physical infrastructure and a small population meant that the Estonian government turned to the internet, embedding digital solutions into the foundations of the country’s infrastructure. Estonia’s growth as an independent state is therefore entwined with the digital revolution; its citizens are very open to digital technology; and the Estonian government is not tasked with convincing a population of sceptics on the benefits of an e-identity.

When looking at Estonia’s track record, it would be hard to argue that this open attitude to technological progress doesn’t have significant economic and social benefits — Estonia is notably the least corrupt and most prosperous of all the post-Soviet countries.

Taking Estonian services international by becoming the first country to extend e-identities to non-nationals is only the next step in ensuring a prosperous future. By creating an electronic diaspora that now has a stake in the country’s progress, Estonia is cleverly shoring up its future in the complicated digital and economic landscape.

Author , ESET

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