Kaspar Korjus
Thirty-six years ago, American writer and futurist Alvin Toffler wrote his famous The Third Wave, outlining the inevitable transition from a “Second Wave,” characterized by an industrial society, to a “Third Wave,” characterized by what he calls the “Information Age.” The Information Age, as Toffler described, is defined by the shift from traditional industry that the Industrial Revolution brought through industrialization, to an economy based on computerization or digital revolution.
Though written years ago, we can clearly see Toffler’s predictions come to life today, through the digitalization of our lives and the globalization of business. And yet, archaic “industrial society” systems of personal identification, economic transactions and business registration still fiercely limit the opportunities of governments and the citizens they serve.
In today’s digital world, a global economy defined by state borders and the citizenship of its participants no longer makes sense. Many small companies have a desire to market their goods and services across continents, small countries seek larger consumer populations, digital nomads roam the world freely and one business transaction can involve a contract signed by people located in multiple countries.
Individuals who want and need to participate in this global economy require a secure way to verify themselves online, run a business from anywhere in the world and trade in multiple markets freely. Governments must be up to the task of providing digitally oriented services for these individuals or risk becoming obsolete — “increasingly out of date, unable to cope with today’s complexities,” as Toffler phrased it.
When Estonia regained its independence in 1991 from the Soviet Union, it immediately identified the difficulty of physically serving a small population spread across a large territory (Estonia has a bigger geographic footprint than the Netherlands or Switzerland). It is not realistic to put a bank branch in every small town, or have a full-service government office in each village. As a result, both the private and public sectors decided to bet on the development of digital solutions and e-services.
The country also recognized that in order to compete economically as a small country in a new digital world, it needed to seek a competitive advantage by fostering a business climate that produced innovative technology. One of the ways Estonia was able to successfully achieve this goal and produce companies such as Skype was for the government to offer technology-driven services that empowered the innovation taking place in the private sector. Today, 25 years since independence, Estonia has one of the most developed national digital infrastructures in the world.
The Estonian government has put digitalization at the center of public services, including digital ID cards for all residents, online voting and the online submission of tax returns, which takes two minutes to complete on average. In 2015, more than 800 institutions offered around 1,500 public e-services in Estonia. As an Estonian citizen, I use my digital identity to log in to government services and digitally sign any contract, meaning that I can feel closely connected to the country as a citizen even when I am not physically in the country.
In 2015, the Estonian government took its Government as a Service approach to another level by opening up its digital ID program to people around the world, regardless of their citizenship. This experiment of expanding digital government services beyond the boarders of the nation-state and providing access to people internationally that may otherwise be digitally or financially excluded from the global economy resulted in the establishment of the Estonian e-Residency program.
Just a year since launching into beta, the program has grown Estonia’s economy like immigration never could — enabling people around the world to register an Estonian company online within a day, open an Estonian bank account, have access to payment service providers and digitally sign documents and contracts.
As of May 2016, 558 new companies have been created by e-Residents, and 1,150 e-Residents use e-Residency to administer their company. The more people and companies engaged with the Estonian business environment, the more clients there are for Estonian companies. For example, when an e-Resident establishes a company, that company will likely start using the services offered by Estonian companies, like banking, payment services, accounting support, legal advice, asset management, investment advice, etc.
As Estonia’s experience demonstrates, establishing what is essentially a state-run app store can redefine how governments around the world interact with people, and vice-versa. The Information Technology & Innovation Foundation, an American think tank headed by Robert Atkinson, recently released a report highlighting the positive effects, as well as barriers to government, of embracing digital infrastructure and taking advantage of the economic opportunities that come along with it. Atkinson and his team list the effects of such an initiative as:
- Capacity expansion: increased use of both existing and new infrastructures
- Time savings and convenience: reduce congestion, simplify operations and enable more informed decision making
- Cost savings: minimize waste, boost efficiency and create more flexibility in the provision of key services
- Improved reliability: reduce unpredictability and interruptions in the provision of key services
- Enhanced safety: improve resiliency to threats and interruptions
Atkinson concluded that, “Information technology is creating a smart world — from smart enterprises to smart schools to smart cities. It’s time for societies to accelerate the creation of smart infrastructure.” He goes on to say, “But without a clear and articulate goal of transforming traditional infrastructure into digital infrastructure, and the associated policies needed to do that, this needed transition will lag.” I couldn’t agree more, and this has certainly been something the Estonian experience confirms.
We are now firmly in Toffler’s “Third Wave,” a future where individuals can conduct business in a digital world in which physical location matters little. Now is the time for governments to stop dragging their feet and fighting progress. It’s time for entrepreneurs and capable developers to gather their efforts to help digital government programs reach their full potential.
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