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Welcoming the digital residents

Estonia
01.09.2016-estonia-digital-residents-590.jpg

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Kushtrim Xhlaki is from a country that doesn’t officially exist. His native Kosovo, though recognized as independent by over 100 countries, including the United States, is still considered by others to be part of Serbia. It is, therefore, not a member of the United Nations and is excluded from the International Organization for Standardization (ISO) list of countries.

Not having a spot on this list has radical consequences on the internet, because it is used, by default, by many companies in their country drop-down menus for things like credit-card transactions. Trying to buy something online? You will be asked what country you’re in. For Kosovars, the shopping spree often ends there.

But Xhlaki didn’t want to buy a sweater from Amazon; he wanted to start a tech company. Unable to do business over the internet because of his ISO problem, the only option was to incorporate elsewhere. Setting up shop in a place like Macedonia, Lithuania or Albania would have meant a lot of travel, expense and time – and vulnerability to the political tides of a country not his own – but at least he would have been able to get paid.

And then the small Baltic nation of Estonia started testing a programme that would disrupt the boundaries of online commerce.

Estonia is one of the most digitally advanced countries in the world; each resident has a verified online identity with which their interactions with the state can be handled over the internet. Taxes, for example, are calculated by the government and paid with a few clicks of the mouse. Voting is similarly straightforward.

No borders

In 2014, this country of approx­imately 1.2 million wanted to increase the size of its economy. With the birth rate in decline, the government had a radical thought: why not try to grow the population digitally?

‘When you have a digital society that really functions, then there is no point to having borders on the internet,’ says Kaspar Korjus, Managing Director of the Estonian government’s e-Residency programme. ‘We can offer to foreigners the same product we offer to Estonians.’

Without being certain of exactly how the new programme would work, the Estonian government set up a simple launch page for something it called ‘e-Residency’. Within the first 20 hours of the page being live, over 4,000 people had registered.

‘Then we realized that there was much bigger potential,’ says Korjus.

After submitting an application that requires an in-person visit to an Estonian embassy, e-Residents receive a digital ID with which they can open Estonian bank accounts, set up Estonian companies, and digitally sign documents remotely over the internet.

For Estonia, the programme brings in new customers for local industries that support entrepreneurship, like the financial services sector, and generates good publicity by promoting the country’s start-up scene. Estonia does not generate income by taxing e-Residents, who pay corporate taxes in their countries of physical residence.

For Kosovars like Xhlaki, this service was a game changer. Where before it was difficult to use basic online tools like PayPal, with e-Residency Xhlaki says he ‘can participate in the whole digital euro market, rather than dealing with different currencies, travelling to neighbouring countries, and opening legal entities for each in order just to receive money from customers’.

Freedom from geography

Outside of Europe, the e-Residency programme is having a similar effect. Abed Bukhari is from Nablus, Palestine. Not only does his country not officially exist, its territory is subject to intense financial and import/export regulation.

Bukhari wanted to start marketing a device he and his friends had developed that translated information from touch screens into braille. They created it after watching a blind colleague struggle to keep up with his studies at university because of limited access to braille materials. It was clear that to start a business, the team would need to be based elsewhere.

‘There were no tools at all,’ Bukhari says. ‘I always had problems with customs saying: “These units are not allowed to enter.”’

With the birth rate in decline, the government had a radical thought: why not try to grow the population digitally?

Bukhari heard about the Estonian programme and realized it would allow him to start a company based in the European Union and to manage it remotely from wherever he needed to go to manufacture his product. For him, the issue was getting to an Estonian embassy to apply.

‘Visas were always my problem,’ he says.

After about six months, he completed the application process and got his ID card. He now runs his company from China and is working on his next product: a device to help blind people identify liquids.

‘If I had a company in Palestine, I couldn’t do anything at all,’ he says.

For its part, Estonia is still figuring things out, but digital residency, even in its infancy, is disrupting the very notion of a ‘country’ by removing geography from the economic equation.

If geography becomes less relevant to economic life, it could also become less relevant to political life. Toby Stone, founder of identit.ee, an innovation programme focused on e-Residency and e-identity, runs events around the world that explore such possibilities.

‘If e-Residency works,’ Stone says, ‘it may well be one day that there are three million e-Residents and two million Estonians, and the three million turn around and say: “We want to vote in the next election.”’

The Estonian government is, for now, okay with that uncertainty.

‘We have developed this [programme] as a government start-up, in the sense that... we didn’t know in the beginning why we were doing it, or to whom we were doing it,’ Korjus says.

Though it has gained more of a sense of the programme’s users and their demands over time, Estonia continues to learn and adjust to new developments, as any start-up must. Nevertheless, e-Residency has already shown that what is possible online has the potential to upend pre-internet economic and political structures.

As a digitally savvy government, Korjus says, ‘You don’t need to serve only your own citizens and get wealth like that. You can actually serve, internationally, everybody... That changes the role of the nation-state.’

Haley Joelle Ott is an independent journalist based in London.

New Internationalist issue 495 magazine cover This article is from the September 2016 issue of New Internationalist.
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