e-Estonia: How this EU country runs its government like a startup

Tucked into a tiny corner of northeastern Europe, Estonia is emerging as an unlikely model for governments around the world on how to use the Internet to reimagine what it means to be a country in the digital age.

It’s a surprise because Estonia only has a population of 1.3 million people, and it gained its independence from the former Soviet Union less than three decades ago. But under its sweeping e-Estonia initiative, the government has become an incubator of pioneering ideas about digital citizenship, security, virtual business, and education.

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According to Kaspar Korjus, one of the key players in the Estonian digital revolution, the country’s small size, short modern history, and isolation have become advantages in allowing them the freedom to rethink the notion of nationhood.

In a country where the prime minister is 36 years old, there is not a lot of time spent clinging to the past or old habits.

“The new generation is running the Estonian government,” Korjus said in an interview by phone. “And that’s why the government is quick and agile. People understand the digital world. You don’t have to explain it.”

Korjus is just 27 years old himself, and is now overseeing the latest program that has come to epitomize the Estonian revolution’s ambitions: e-Residency.

The idea grew out of some initiatives a few years ago by the government to think ambitiously about Estonia’s future and how to kick-start its economy. One notion that bubbled up: How could the country attract 10 million new residents by 2025?

Of course, it’s unlikely that many people would ever move to Estonia. But what if they didn’t have to move? This began a chain of thinking that led to the e-Residency program. Korjus, who was working at Swedish startup TeliaSonera, was recruited to develop the e-Residency program.

By the time Korjus got involved, Estonia had already spent almost two decades laying the groundwork for the program. A few years after winning its independence, the country essentially had to start building an entire national IT infrastructure from scratch.

The culmination of these initial efforts came in 2002, when the government decided to issue all citizens a national identification card with a chip that uses 2048-bit public key encryption. The card can be used by residents across the Estonian government as definitive identification.

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So what can they do with it? It’s their national health card, it can be used to log on to their bank accounts, it allows digital signatures of documents, residents can use it to vote from home online in elections, or access their medical records. Oh, and they can start a business online in just minutes, pay their taxes in less than five minutes, and plug their private businesses into the platform to verify transactions.

With e-Residency, the idea was then to take this national service and make it available to the whole world. At the beginning, however, Korjus and his handful of developers didn’t really have a sense of who outside Estonia might want to do such a thing, or why. They just decided to build something and see what happened.

“We didn’t know for whom were doing this for, or what the value proposition was for Estonia,” he said. “We knew broadly that people were moving around a lot, and that re-establishing your identity in each country and doing transactions across borders could be a lot of work.”

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The process to sign up is remarkably simple, and only takes a few minutes. Within a few months of launching, there were 2,000 e-residents. Now there are 10,000.

“It just validates there is this need,” he said.

Korjus said they are seeing people who want to start Internet companies use the system to set up their businesses in Estonia, which allows them to manage it from anywhere in the world. They are also seeing companies using it to launch operations in Europe, which can often be an unwieldy process of setting up separate subsidiaries and accounts in each country.

So far, e-residents have set up about 500 companies in Estonia. They not only pay taxes in Estonia, but they also drive business to banks, legal firms, and other supporting services. While he can’t quite put a price on that in terms of economic impact yet, the services are also attracting companies like PayPal’s Braintree, which is using the system to facilitate payments.

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There are limits. People who become e-residents cannot vote in Estonia, and they can’t use the residency as a travel document. Korjus is also clear that companies created through the program get no tax breaks. The country is not intending to create a tax haven. Instead, it wants the attraction to be the convenience and efficiency.

Indeed, that was what appealed to San Francisco-based Stampery, which announced earlier this month that it would use the e-Residency program with its blockchain-based certification and authentication services.

“Our mission is to enable our users to generate accurate, reliable and irrefutable proof of the existence and integrity of all their files and digital communications,” said Daniele Levi, CEO of Stampery, in a statement. “This partnership with the Estonian e-Residency program is the first of its kind in the world and will make life easier for business men and women around the world.”

Korjus believes this is just the beginning for Estonia, which would seem to have cleared a path for other governments to follow. It will take time for others to catch up. But once they do, Korjus said the benefits for citizens will be enormous.

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“It takes years and years before you have social acceptance of these things,” Korjus said. “But I think in 20 years, people will look back and find it difficult to believe that we once did all these things on paper.”