Estonia - Europe's unexpected Silicon Valley

Tom Wright
clock • 6 min read

Now famed for its innovation, Estonia's reputation for embracing technology can be traced back to its breakaway from the Soviet Union

I don't think I'm alone in being surprised to hear Estonia dubbed ‘the Silicon Valley of Europe'. This is, after all, a country renowned for wife-carrying - a competitive sport in which men race against each other while carrying their wives, with the victor winning their wife's weight in beer or cheese (the choice is theirs).

However despite only governing itself since breaking away from the Soviet Union in 1991 (it had a spell of independence from 1917 - 1940), Estonia now has the highest start-up-to-population ratio in all of Europe.

But its technology success is as much to do with common sense as it is to do with innovation.

While relatively large geographically - with a bigger territory than the likes of the Netherlands, Switzerland or Belgium - in 1991 Estonia found itself short of a resource critical to its economic growth - people. It had a population of just over 1.5 million in a space of over 45,000 square kilometres. By comparison, the population of London in 1991 was just under seven million, in 1,500 square kilometres.

The sheer lack of people in the country in 1991 left Estonia facing the difficult challenge of filling vacancies. It found itself faced with two options - find more people, or get people to service themselves.

Initially, it chose the latter - as explained by Taavi Kotka at NetApp's recent partner event in the Estonian capital of Tallinn (pictured).

Kotka made his name when he sold his shares in his software company in 2012. Following this he went on to work for the Estonian government as advisor in a number of capacities, notably leading the revolutionary e-Estonia project (more on this later).

"When we broke away from the Soviet Union in 1991 it was clear for the private sector, and also the public sector, that there were not enough people to serve other people," he told an audience of NetApp partners.

"We couldn't have a bank office in every small town, or we couldn't have a government officer in every town - it was impossible.

"So the private sector, and after that it was the public sector, started to push people towards self-service.

"They had different self-service portals, ATMs, countrywide internet - all this was built because [they had to say] ‘do it yourself'."

It is this process, started in 1991, that was the catalyst for propelling Estonia to such established innovation status.

Fast forwarding to 2017, Estonia now has an entire ecosystem of digital records for every one of its citizens. Absolutely everything - from bank transactions, to medical records - can be found for every person on the government's online portal, in the form of a logbook, which anyone can access.

The nationwide digital system that Estonia has created means information can easily be shared around organisations across the private and public sectors - to the point where 99.5 per cent of the Estonian government's services are digital (marriage licensing being one of the few remaining paper-based services).

The system is built on "digital names", Kotka explained, which are unique ID numbers assigned to every citizen - much in the same way that we have a national insurance number in the UK.

But, unlike in the UK, this unique identifying number virtually takes the place of a citizen's name. It acts as a digital signature on the logs of each citizen to connect their records together on the portal.

This process would not be possible without the unique IDs, Kotka explained. Without having a unique identifier there is no way to join up the records of a person automatically. Imagine trying to do it solely based on a person's name.

But other countries in Europe - Kokta regularly singled out the UK and Germany - are stopping themselves embracing this kind of digital society, much to his amusement.

"Everything that is below Denmark [geographically], for the Nordic people, is Stone Age," he quipped.

"I have been in the UK [government offices] and they say ‘there will never be unique identifiers in the United Kingdom'. Good. Well you will never enter the information society.

"Why? Because you can't connect data. If you want to have taxes available at a single click, or if you want to view health records [nationwide], you need to connect data. You can't if you don't have unique identifiers.

"Nordic people have understood that. They've understood that it's not something secret. It is actually a digital name, and as you're not ashamed of your physical name, why should you be ashamed of your digital name?"

Similarly, Kotka asked, why is everyone in the UK so manically opposed to the government seeing their data?

For those Estonians concerned about who can access their data, strict regulations are in place. Residents can see who has accessed their data, and if a person cannot provide a legitimate reason for why they have viewed a citizen's records, the punishment can be as severe as jail time.

What if the systems are hacked? Estonia have that covered to. The data is dispersed around the world so that in the event of a cybersecurity attack the data is easily recovered and restored. Estonia is also close to opening the world's first data embassy in Luxembourg. Like a physical embassy, it will have diplomatic immunity and will not be accessible to anyone other than Estonia. The embassy is pencilled in to launch at the end of this year.

Welcome to e-Estonia

The nationwide database was Estonia's response to the second option I mentioned earlier (getting people to service themselves). They're now addressing the first (get more people), with the launch of the world's first e-country.

The e-Estonia scheme was launched in 2014 and allows foreign citizens to become e-citizens of Estonia. Successful applicants are given the same unique identifier as Estonia residents, have the same access to the government's online portal and records, can use the online banking system and even register a company for business. Essentially, the e-citizenships gives a foreigner the same benefits as an actual resident, other than physical residency in the country - growing the country's economy.

The scheme saw its awareness boosted dramatically when the UK voted to leave the European Union, as a way of UK companies 'basing' themselves in an EU member state.

Estonia currently has around 20,000 e-residents and proposes to have 10 million by 2025. By way of comparison, its population was just over 1.3 million in 2015.

In essence, Estonia has brought itself to the forefront of innovation by logically and rationally addressing the problems it faced when it started its post-Soviet life.

At time when the Prime Minister and tech firms are constantly bickering about encryption and data privacy, itcould act as timely reminder of how things could be, if you have a little trust.

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