e-Residency and the New Knowledge Economy

Could digital citizenship unlock a new knowledge economy? Xische traveled to Estonia to learn about the baltic nation’s visionary e-residency program and what it could mean for the UAE.

By Xische Editorial, June 4, 2019

Source: Visual Generation/ Shutterstock

Source: Visual Generation/Shutterstock

The key to a powerful knowledge economy is people. But do you need great people to be in one physical space in order to build a top-notch knowledge economy? Given the evolving nature of work in the digital age, more and more people are working remotely. They connect to their office with little more than a laptop and a smartphone. So maybe the answer is no.  

Always abreast of the latest trends on a national level, the small Baltic nation of Estonia has taken this idea to a radical conclusion. The country launched the world’s first e-Residency programme in 2014 with the goal of 10 million e-residents by 2025. The programme is revolutionary in its simplicity. Building on Estonia’s established digital economy, e-Residency allows entrepreneurs from around the world to set up of a digital business in the country without the need to be physically present.

With a government-issued digital identity and status, digital entrepreneurs can run a business from anywhere in the world. From freelancers to established entrepreneurs and digital nomads, the e-Residency allows people to operate an online European Union-registered company from anywhere. According to Ott Vatter, the managing director of the e-Residency programme, its primary benefit is that e-residents have the ability to establish and manage a paperless EU company designed for global business.

Since its inception, according to a recent white paper produced by the government, approximately 50,000 people have applied for e-Residency from 165 countries and territories, and the primary reason has been the desire to establish an Estonian company .

What’s even more telling (and critical to the building of knowledge economies in other places) is just how much e-residents contribute to Estonia itself. According to Vatter, e-Residency companies “contribute more to Estonia just in direct taxation than the cost of delivering the e-Residency programme. However, by far the largest contribution to Estonia comes from these companies when they conduct business with other Estonian companies. Almost all of them invest in business services from Estonia and many of them seek out other ways in which Estonians can help grow their companies globally. There’s no obligation for them to do this (beyond a requirement to appoint a local contact person for the purposes of accountability) and there never will be, but e-residents recognise the value of establishing deeper connections in Estonia and we are happy to help them do so.”

Estonia is unique in that many of the foundations of the e-Residency programme were already in place for Estonian citizens. Investing in a complex digital infrastructure, Estonian citizens and residents can conduct most of their lives online. They can sign and access virtually all government services online using their unique Estonian digital identity, a system that was established in 2002. Having moved all essential services online and to specially created blockchains, it was easy for Estonia to offer access to their digital services. Thus, the e-Residency scheme was relatively straightforward for Estonia, while it might pose many more challenges for another country.

Xische had the pleasure of experiencing some of the fruits of the e-Residency project and other Estonian digital innovations at the Latitude59 event in Tallinn last month. That a small Baltic country such as Estonia can attract pioneers from around the globe to set up digital businesses in the country is a testament to the changing nature of knowledge economies.

Knowledge economies need people to thrive, grow, and innovate but those people don’t all need to be located in one geographic space. Estonia’s approach to value creation by constructing a knowledge economy recognizes this fact. By investing in the right infrastructure at home, the country has created a digital platform that knows no boundaries. As other countries move to adapt this model, we will come to understand just how ahead of its time Estonia is. The future is now.