e-Estonia: The Paperless Government

Anzelika writes*

Estonia has become a global model for e-government, having created a secure, transparent and efficient digital platform, where both businesses and citizens can access necessary governmental services online.

Estonia is a small Baltic country located in Northern Europe. Gaining independence from the Soviet Union just under 30 years ago, Estonia has emerged to be one of the wealthiest countries in the world. Between the years 2001 and 2007, Estonia showed one of the highest GDP growth rates in Europe [pdf], currently is number 30 out of 189 countries in Human Development Index and (ranks higher in Economic Freedom than the United States or the Netherlands.

Estonia’s economic success can, in part, be attributed to its innovative way of governing society. Estonia has been able to build the world’s first paperless government – e-Estonia.  Today 99 percent of all Estonian state services can be accessed online, 98 percent of Estonian citizens have an electronic ID card, and more than 45 percent of the population use internet voting. Estonia has further introduced what has been termed as e-Residency. It is a transnational digital identity that can be used by anyone in the world to get access to Estonia’s digital technologies, including legal or accounting services, and the entrance to the EU business environment. This makes Estonia one of the most advanced digital societies in the world, and it comes with its benefits.

For example, moving government services online has dramatically reduced corruption. The problem of corruption was of particular concern back in 1994, when e-Estonia was first introduced. By moving essential state services online, it has meant that interaction between government officials and citizens has dramatically reduced, eliminating most bribery. This issue still plagues many of the post-Soviet countries.

Further, the ease of starting a business online together with the e-Residency program has allowed Estonia to become Europe’s leading startup hub. Estonia currently has 31 startups per 100,000, which ranks 6 times higher than the EU average. Companies such as Skype and TransferWise have emerged in the tiny Baltic State. Not only do these startups contribute to Estonia’s economic growth, the favourable economic climate for businesses has also attracted significant levels of FDI to the country.

As governments around the world seek to improve their economies, they should look towards the small Baltic state that can serve as a blueprint for the effectiveness of a digital society. As the Estonian MEP Marina Kaljurand has stressed: “if used properly, digital solutions can be essential drivers for economic growth and equity.”

Bottom line: Estonia has been able to successfully create e-government, which in part has helped the country emerge as one of the most advanced economies of the world.

* Please help my Economic Growth & Development students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

2 thoughts on “e-Estonia: The Paperless Government”

  1. Hey Anzelika,

    Your post about Estonia and its digital economy raises several questions about development in post-Soviet countries. Estonia’s success story seems almost too simple to be true. This country’s success is once again proof of the importance of path dependency—thinking for the future, not only for the present. The former member countries of the communist block often make the headlines of news announcing negative achievements.  However, Estonia has outranked leading European countries in various fields—with an impressive economic growth in 2011. Compared to other countries in the region similar in history and land resources, Estonia quickly adopted radical reforms after the collapse of the Soviet Union. Bright, young minds contributed to reshaping the country’s institutions from the ground, embracing market forces at incredible rates.
    It would be very interesting to analyse more in-depth the differences between the three Baltic states and what led to each current development level. Estonia focused on technology, introducing low taxes for private investors, thus facilitating foreign direct investment. Can Estonia’s progress be solely explained by the right political decisions taken right after the fall of the Soviet Union?
    Another interesting angle would be to look at how past informal communist institutions disappeared from society in such a quick manner. Did the rapid introduction of market forces simply vanquish old communist practices? 

    1. Hi Daria!

      Indeed, Estonias success cannot just be linked to its policy decisions after the fall of the Soviet Union. However, the radical approach to reforms is often attributed to Estonias economic success. For example, unlike Latvia and Lithuania, Estonia quickly introduced a flat tax rate that has provided a favourable economic climate for businesses and foreign direct investment. Further, Estonia introduced a tight monetary policy that effectively helped curb inflation rates. As soon as 1994, Estonia was named the ‘shining star from the Baltics.’

      There are, of course, other reasons that have helped Estonia advance quicker than its Baltic neighbours. One of the common explanations is geography. Estonia is both geographically and culturally closer to the Scandinavian countries. After the fall of the Soviet Union, it was in the interest of Scandinavian countries to integrate Estonia into the Western market. Scandinavian countries also formed the largest share of FDI flows to the country.

      Lastly, although the Baltic states have many similar characteristics – such as demography, population size, their historical past with the Soviet Union- they differ in others. One of such differences is the types of industries that the Baltic countries inherited from their Soviet past. Latvia and Lithuania had a higher amount of large, outdated industries that were difficult to remove due to vested social interests. This slowed the reformation time.

      Most of my research has focused on policy decisions that were made by Estonia, Latvia and Lithuania following the fall of USSR. However, it would be intriguing to see what other factors have put these countries on different paths of development. As you state, it would be interesting to look at how informal communist institutions have disappeared and whether that has played a role in the progress of the Baltic countries. Thank you for the good suggestion! 🙂

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