What’s so great about Estonia’s e-Residency programme?

By on 24/03/2016
Kaspar Korjus, Estonia's e-Residency programme director

Estonia’s e-Residency programme has attracted global attention – and other countries may soon follow suit. Winnie Agbonlahor catches a glimpse of a future in which nations compete to offer people a form of virtual citizenship

The Baltic nation of Estonia, where 1.3m people live in a corner of the Baltic coast, doesn’t hit the global headlines very often – but in the specialist IT and digital media, the country has a profile out of all proportion to its tiny size. For ‘E-Estonia’ has attracted the attention of countless media outlets: the government has an ambitious and radical digital programme, and Estonians can carry out a huge range of interactions – including voting, declaring and paying taxes, reporting crimes and opening a business – without ever stepping away from their laptops.

For more than a year now, the government has been making some of these services available to foreigners via its ‘e-Residency’ scheme. Anyone in the world can apply to become an e-resident of Estonia: applicants are fingerprinted and background checked by the Estonian state, and those approved are issued with an electronic ID card and four-digit ‘PIN’ that provides secure digital identification. They can then access a range of Estonian government services, including opening a business; digitally signing documents and contracts; declaring and paying Estonian taxes; and completing online banking transactions. The government is also working towards enabling Estonians and e-residents to open bank accounts without having to physically attend the bank.

In January, the government announced that demand for e-residency was so high that it would be scaling up the programme – and doubling the application fees from €50 (US$ 54.50) to €100 (US$109). By then, about 8,000 people around the world were registered as e-residents, says e-Residency programme director Kaspar Korjus, and about 200 applications are coming in every week.

So what’s so attractive about e-Residency status? For Estonia, the benefit is economic: The more e-residents use services provided by Estonian companies, the further these companies’ reach. “It boosts the Estonian economy as Estonian service providers can offer their services not only to the 1.3m people who reside in Estonia, but internationally,” Korjus says.

Michael Tegos, a technology reporter from Singapore, explains that the main draw for overseas entrepreneurs based outside Europe “is being able to establish a company in an EU country, giving [you] easier access to the continent.” Moreover, Estonia’s tax framework is “very friendly to businesses: there is no company income tax, and companies are only taxed on distributed profits, ie. dividends the company pays to shareholders,” he writes, adding that “there isn’t even a need to have a physical address in the country, so an entrepreneur can literally run [his/her] Estonian company from anywhere in the world.”

Yet Korjus argues that still bigger benefits lie ahead: soon, private companies will be able to use e-Residency’s identity assurance services to confirm who they’re dealing with, enabling them to deal in restricted or regulated services and products without carrying out time-consuming identity checks. Many financial services businesses, for example, could benefit: integrating with e-Residency would provide a “simple and cost-effective way to comply with ‘know your customer’ regulations, while quickly scaling in international markets and saving money by partially outsourcing infrastructure costs,” says Korjus.

The more private companies that accept e-Residency’s ID services, Korjus adds, the more attractive e-Residency status will become for entrepreneurs and businesses. Already, NASDAQ has announced that it wants to use the e-Residency electronic identity system to offer shareholders of companies listed on its Tallinn Stock Exchange the opportunity to vote in shareholder meetings remotely via the internet. This, a NASDAQ spokesman tells Global Government Forum, is a world-first. The new e-voting will be part of a pilot due to be launched by the summer.

“Estonia’s robust information society and forward-thinking, coupled with the agility its size affords, creates a unique opportunity to premiere the e-voting pilot in Estonia,” says Hans-Ole Jochumsen, president of NASDAQ. “We’re excited to see the development of this project over the coming months, and look forward to working closely with the government of Estonia to set a transformative example of the future of governance.”

Optimized-e-res-id-card

The Estonian Digital Identity Card, issued by Estonia’s E-residency programme

Another private sector company embracing Estonia’s e-Residency systems is the eResNetwork: a business networking and communications platform which authenticates every participant using the e-Residency system. “By identifying every user, you always know who you are communicating with as well as the real source of information,” the organisation’s website states. The network is the first private sector company fully dependent on the Estonian e-residency initiative.

Other digital companies which use the e-Residency programme to authenticate and identify users include Teleport.org, a website offering information on the best places to live and work; Fundwise, which “aims to be the first business crowdfunding platform with secure authentication and digital signing”; and Funderbeam, a new digital service aimed at investors. Estonian e-Residency “is the most exciting secure method available today, and will work great as we ramp up the marketplace,” says Funderbeam founder and CEO Kaidi Ruusalepp.

As businesses like these begin to use e-Residency ID verification, says Korjus, the growing range of applications will stimulate demand for the status. By 2025, he wants there to be 10m e-residents around the world – and Estonia is expanding the service to handle more applications, in more locations.

Currently, applicants can pick up their ID cards at 38 Estonian embassies and consulates in 34 countries; but this number will “be increased to many hundreds of new locations,” Korjus says. The processing time will also be shortened, he adds: when the programme was first launched it took three months to get the ID card, but “we decreased that to one month, and the goal now is to get it down to three weeks.” If the card is picked up from Estonia, the process can be completed within just ten days, Korjus adds.

Korjus will also hire more people into his team, which currently comprises just seven civil servants. And he intends to start promoting the status: “So far, we haven’t even started to do any marketing,” he says, adding that the plan is to become “much more proactive” in that field.

 

Optimized-kaspar korjus profile pic

An example of Kaspar Korjus’s e-residency profile picture

Other countries are now trying to catch up with the concept, Korjus says. Governments which are “seriously considering offering e-residency are Singapore, the Netherlands, Latvia, Lithuania, Belarus and Finland, as well as Japan.”

It’s only a matter of time before Estonia has competition in this emerging market of virtual citizens, Korjus believes. But he’s confident that his country will come out on top: it’s determined to ensure that its “business environment is the best and most accessible in the world – and then all the world’s companies will run through this.”

For such a tiny nation, this sounds ambitious; but Korjus is confident that it’s also realistic. “It’s possible,” he says. “Take Skype, for example. We use it because it’s the best. I don’t see why in the public sector we should start using the second best if it’s possible to use the best service.”

For up to date government news and international best practice follow us on Twitter @globegov

See also:

Estonia doubles e-Residency fee to cope with growing demand

Heiki Loot, Government of Estonia: Exclusive Interview

About Winnie Agbonlahor

Winnie is news editor of Global Government Forum. She previously reported for Civil Service World - the trade magazine for senior UK government officials. Originally from Germany, Winnie first came to the UK in 2006 to study a BA in Journalism & Russian at the University of Sheffield. She is bilingual in English and German, and, after spending an academic year abroad in Russia and reporting for the Moscow Times, Winnie also speaks Russian fluently.

Leave a Reply

Your email address will not be published. Required fields are marked *