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Estonia Seeks to Digitally Transform the EU

17 July 2017   (0 Comments)
Posted by: Heather Smith
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As it assumes the bloc’s six-month presidency, tiny country wants to export its expertise in a digital single market

Estonia has installed a video projection dome at European Union headquarters in Brussels to mark the launch this month of what it calls its six-month ‘digital presidency of the EU.’ PHOTO: JOHN THYS/AGENCE FRANCE-PRESSE/GETTY IMAGES

In a parallel world, the U.K. would have been embarking this month on its six-month stint in the rotating presidency of the European Union. It would have been an opportunity to set the bloc’s agenda and push the other 27 member states to adopt reforms to make the EU more dynamic and attuned to British interests. 

But history took a different route and that task has instead fallen upon Estonia, whose turn was brought forward six months after the U.K. pulled out following the Brexit vote. It is a mark of how disengaged from the EU the British state had already become that London appeared to have done nothing to prepare for the presidency before the June 2016 referendum, according to Estonian officials. But Estonia was never going to squander its chance: the most pro-EU of all member states has a very clear agenda.

Its plan centers on driving forward Europe’s digital single market, drawing on Estonia’s remarkable transformation in just 25 years from a former Soviet republic into Europe’s undisputed digital leader. Key to this transformation was the country’s decision at the end of the 1990s to embrace e-citizenship, in which the government provides every citizen with a secure digital identity that can be used to access thousands of public and private services.

The country has evolved over time into a remarkable digital ecosystem. The only transactions the government won’t let you do online are marry, divorce and buy a house. The e-economy has bought substantial economic benefits. A fundamental principle is that the government should never ask you the same question twice, your answer being held securely in one place where it can be accessed by other databases but only with your permission. 

The resulting security, transparency and efficiency has propelled Estonia to the top of many international surveys for the quality of its business environment. It has also delivered high degrees of trust in the state: Tax-compliance rates are among the highest in the EU, helped by a simple, flat-tax system—another accident of Estonia’s transition. The country’s flourishing IT cluster, which has played key roles in major European success stories such as Skype and Transferwise, now accounts for 7% of gross domestic product and offers wages comparable to those of neighboring Finland.

Now Estonia wants to export its e-citizen revolution to the rest of Europe and the world. One goal is to attract businesses to locate in Estonia. Two years ago, it launched an e-residency program that has so far attracted more than 3,000 businesses and 20,000 individuals to acquire an Estonian digital identity, allowing them to access e-services. 

But the country’s greater aim is to persuade the rest of the EU to replicate its digital transformation at a national and European scale. It wants the bloc to establish an EU-wide right of “free movement of data” to stand alongside the rights of free movement of goods, services, capital and people. The government argues that providing an EU-wide means for citizens and companies to establish their identities and transfer data across borders isn’t only vital to the EU’s economic fortunes, but also essential if governments are to continue to deliver services in a world of changing work patterns and increased labor mobility.

Of course, such a radical agenda is bound to face hurdles. Many EU governments are reluctant to fully embrace digital services because of anxieties about data security. Estonian officials counter that their systems have withstood recent viruses that have affected computer systems world-wide. They say the blockchain algorithms upon which their digital identities are based effectively can’t be hacked. Having lived under the shadow of the Soviet KGB, Estonians are sensitive to civil-liberties concerns, yet many believe their data to be more secure—and access to it more transparent—than under paper-based systems or where information is held on multiple websites. Some governments in what Estonians call “Old Europe” also complain that a major digital transformation is too difficult in large countries—to which Estonians reply that this depends on how reforms are delivered.

What Estonians fear most is that the EU digital agenda will be hijacked by vested interests and bureaucrats, leading to new regulations that would undermine their model. The EU has already run into fierce resistance as it tries to create a single digital market by outlawing so-called geo-blocking, which allows web-based companies to limit access to services by country. 

Naturally, Estonians are deeply disappointed that their traditional free-market ally, the U.K., will no longer be fully engaged alongside them in the battles that lie ahead. On the other hand, they note that Brexit is likely to oblige many British firms to set up EU subsidiaries to ensure continued frictionless access to the single market. Perhaps some will consider Estonian e-residency. 

Article Source:

Article By:  Simon Nixon, The Wall Street Journal