Saturday, 6 June 2015

How Estonia Set the Pace on the Way to Digital Government I FT

This is an interesting article recently published in the Financial Times.

When Ivar Tallo was due to return to Estonia after working abroad for the UN, his wife needed a job. After two hours sitting at their kitchen table in Geneva, they had created a graphic-design company for her from scratch, with no agents, lawyers, meetings or pieces of paper involved.

The ease of establishing a business is just one of the attractions of Estonia’s digitised governance system, in which citizens bank, vote, park, sign contracts and pay taxes with clicks of the mouse or taps on their mobile phone screen.

In May, the country became the first in the world to offer a secure digital identity to non-Estonians anywhere on the planet by acquiring “e-residency” status, enabling them to register a company online, perform e-banking transactions, make international payments, declare taxes online and sign documents digitally.

For more than two decades, the former nations of the Soviet Union have grown accustomed to taking lessons from the west about how to run their economies, governments and societies. But now the boot is on the other foot — at least in this small Baltic state which is putting the internet at the heart of commerce, governance and politics.

“When the Soviet Union collapsed and we won our independence, we wanted to be like the west but we didn’t know exactly how you do things. So we did it our own way and it was a bit different,” says Mr Tallo, the founder of Estonia’s e-Governance Academy and a roving ambassador for the country’s digital experiment.

This historical accident, which left Estonia without any banks, meant it had to establish new systems with new people and technologies, enabling the country to leapfrog nations with established back-office systems for finance and government.

With a stated ambition to become as renowned for its digital services as Switzerland is for banking, e-governance is a foreign policy goal for the country of 1.3m people.

“This is pure logic, not just some empty aspiration,” says Mr Tallo. “Government is mostly about communication, so if communication has changed then governments will change also. It is going to happen anyway — it is just a question of whether we can shape it.”

Whether requesting a visa or registering for maternity leave, electronic authentication is sufficient to authorise any state service. Business deals and transactions are also concluded with a digital signature.

Estonia’s e-residency scheme is eye-catching but still largely “decorative”, Mr Tallo says. Far more substantive is the interest in other EU nations in the way public and private sectors in the country exchange data and interact with each other to provide services efficiently.

The system relies on a secure digital identity. An authentication certificate is embedded in a chip in each citizen’s electronic ID card with an accompanying pin number, and also in their mobile phone’s SIM card, creating a unique digital signature.

But technology is not enough — there must also be a high level of trust in the system among its users. With electronic banking available since 1996, Estonians have had almost 20 years of trusting their money to the digital sphere, making it easier to extend it into other areas, such as taxes and ultimately elections.

When the country introduced internet voting in 2005, only 2 per cent of the electorate opted to cast their vote online, but at this year’s general election it was closer to 32 per cent.

“By raising the level of trust in society in general, it changes the climate of doing business,” says Mr Tallo. “And that lowers transaction costs, which raises GDP growth.”
Estonians have used their digital signatures 218m times since the scheme’s inception in 2002, with no serious breach of security so far. Indeed, the US National Security Agency, at the centre of spying accusations since Edward Snowden’s revelations last year, is unhappy that it cannot eavesdrop on communications, Mr Tallo says.

But with so much crucial information in the cloud, there are inevitable concerns about vulnerability to cyber attack and fraud. Last year, researchers claimed the electronic voting system was flawed, and the opposition Centre Party has campaigned against it.

“Yes, there have been moments when people hesitated, and there have been problems with data protection,” says Mr Tallo. To strengthen confidence that information is not misused, people can check their own data online and ask who has accessed it and why.

There are glitches. Journalist Raimo Poom at the Eesti Päevaleht daily expressed his frustration on Twitter last month when two browsers refused to authorise a payment. It felt like things were going back to the 1990s, he said.

But the direction of travel in Europe is clear, and Estonia is positioning itself as a trendsetter. The UK signed a memorandum of understanding with Estonia two years ago to share expertise on digital governance, while Brussels is looking closely at what it can learn.

“Being digital is a way of overcoming the handicap of smallness,” says Mr Tallo. “It has a genuine appeal. We have found a lot of people trying to emulate us and we are very happy about that.”