A small innovation of technology and a revolution on the global market, the system of Estonian e-Residency, also called “Eesti-residency*”, surprised by its avant-garde aspect but now attracts companies from all over the world. Edward Lucas, a British writer and security specialist, journalist for The Economist, The Daily Mail & The Times was the first person in the world to obtain the status of e-Resident in Estonia and the world; a great honour after covering central and eastern European affairs since 1986.
E-Residency represents the right to live virtually in Estonia. The latter means that regardless of one’s nationality and physical residency, one can be legally recognized to be virtually based in Estonia. Therefore, for the creation and hold of this permit, it is not required to live or be physically in Estonia, as it can be requested remotely. At first glance, the advantages of this development might not be obvious despite the broad range of benefits it actually brings, especially for foreign companies and investors.
In 2014, Estonia became the first country to offer e-Residency, at first to Estonian people and afterwards to foreigners. The reason why the government now issues a digital identity and status which provides access to Estonia’s business environment seems to be part of a wider governmental approach to boost the economy and open up the country. Such an innovation paves the way for entrepreneurs from all over the world to establish their company in Estonia, with several benefits coming along, such as low tax rates and the simple fact that every bureaucratic task can be done online.
On the official website of the Republic of Estonia, the process of creating an E-company looks enticing as it highlights the benefits of integrating “the new digital nation” into the broader Estonian society. The website emphasises that using e-Residency is the way to register an European Union (EU) company online, faster and easier than it usually is in any European country. Moreover, the website puts forward the idea that this process goes 100% online and is therefore, manageable from anywhere. But how does it work exactly and how can this small revolution be as viable as it seems to be?
In order to answer these questions and get a better understanding of the reliability and relevance of e-Residency, Edward Lucas agreed to answer my questions. Lucas never actually founded any company in Estonia, nor was he interested in becoming a businessman in the country. At first, there was not yet an infrastructure for foreigners to remotely establish a business as an e-Resident. And then, as Lucas says, his desire to be more politically engaged in the Untied Kingdom started to grow after he became Estonia’s 0001 e-Resident. Circumstantially, his twenty-five-year long attachment to Estonia gifted him with the newly created e-Residency which led him to start spreading the concept internationally.
When Estonia launched its E-citizenship project in 2014, the use of technologies and the development of public services began to evolve strongly. The launch of new platforms such as the telecommunications software Skype in 2003, for instance, was at the time a first digital Estonian revolution. Being the first Western journalist based in Tallinn, Lucas emphasised his desire to support Estonia’s development as he has always felt close to the country. Moreover, he wrote a special report on E-government, especially focusing on the importance of digital signature, and largely emphasising the revolutionary aspect that E-Estonia brings up.
Furthermore, Lucas portrays the process of getting an Estonia E-ID as “very advantageous” since it gives access to the EU, thus to the European Single Market and its multiple benefits. As he says, “It gives the right to be, although not physically, a legal person in Estonia” which he portrayed as a large asset, especially in such a globalised world. Indeed, although it is beneficial for foreigners, it is also advantageous for Estonia as a country. By being established in Estonia, companies contribute to the tax revenue of the country, creating an economic flow which the state needs to be able to maintain its development. The simplicity and transparency of this, as Lucas qualifies it, democratic system is also appealing. Although not considered as a tax haven, Estonia allows more profits to be created as the corporation taxes are low. Indeed, the profit made with re-invested earned money is not taxed, creating an extremely attractive combo.
Although Lucas is aware that nothing is ever completely safe with computing, as he accentuates “It is always safer to keep money in a country where politicians are not corrupt”. However, he adds that e-Residency still needs development in order to comply with our modern lifestyle, for instance, he suggests, “there is a need for a decentralised ID card which could be possibly available on digital devices”. However, he highlights that Estonia is a legitimate state in having put forward a transparent system.
Nevertheless, it should not go unnoticed that Estonia still suffers from its geographical location: located next to Russia, international entrepreneurs might be scared of devoting their money and trust to a country which is nowadays at the gates of a major global conflict. Together with this, Lucas mentions that Estonia suffers from international competition. Indeed, although it was the first country to establish e-Residency and, as of today, counts over 16.000 companies registered in its system, other states such as Portugal or Azerbaijan have also developed this idea with success. Indeed, entrepreneurs benefit from the very advantageous tax system. According to Lucas, Estonia missed the boat by not promoting its new invention more seriously and more internationally. In order to catch-up, he suggested that, if digitalization was to be spread more in other aspects of life than business, then Estonia would have the most attractive features of digital residency, for instance, in developing a system of digital signature. Furthermore, Estonia largely benefits from the good reputation gifted by its chair in the EU when it comes to matters of security and transparency. Not surprisingly, this potentially helps Estonia develop as an innovative and economic power despite its imposed geographical circumstances.
In conclusion, Edward Lucas has seen, in both Estonia and its development of e-Residency, a major achievement as well as a revolution in terms of being a digital nation. He mentions that he would definitely acquire his e-Residency again if he did not already have it, as it means a lot for him. However, he regrets that Estonia did not have more ambition in the pursuit of this project, although he does not doubt that it will be catching up on global development. As he jokes “I am happy to have this extra thing in my pocket which would be ideally on my phone” referring to his involvement in the digitalization development in Estonia. As a country combining digital development and rapid growth, Estonia does not seem to have said its last word. It can still aim for competition and improvement, and it will certainly not end the race of digital development with a chocolate medal.
*Eesti stands for ‘Estonia’ in Estonian