01 Dec 2015
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Estonia, Incorporated

The tiny Baltic country wants to become a Delaware for the world
by Francis Storrs

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Illustration by Peter and Maria Hoey

In June, Aman Kumar (MBA 2014) was appointed the first-ever special advisor to the CIO of the Republic of Estonia. Kumar has a day job, too, working in the New York office of enterprise software giant SAP’s chief executive, so there’s some juggling required when he needs to travel to Estonia or attend a session of the UN General Assembly across town. The payoff? A chance to chart the digital future of an entire country.

In April, Estonia became the first country in the world to offer e-Residency, a transnational digital identity that lets anyone establish a company online in Estonia and administer it securely from anywhere in the world. E-Residents can conduct all their banking online, declare taxes online, and digitally sign documents via a smart ID card. That means entrepreneurs need no longer be limited by their local geography and bureaucracy, and can gain access to the European Union market along the way. “On the level of administrative and operational simplicity alone, this is a winner,” says Kumar, an American who had never been to Estonia before this project but is now an e-Resident. “More pertinently, for any company looking to expand into Europe, this becomes the de facto best way to go about it.”

Digital residency has an audience beyond Europe: Kumar presented the project to former Florida governor Jeb Bush during the GOP presidential candidate’s trip to Estonia in June. (Photo courtesy of SAP)

Although e-Residents aren’t granted any of the rights of Estonian citizens, they do have access to many of the services that make running a business so simple there. “The whole thing works because Estonia is one of the most advanced e-governments on the planet,” Kumar says. The government offers some 600 e-services to its citizens and 2,400 to businesses, and residents conduct 99 percent of their business transactions online—a connectedness so deep that it has earned the country the nickname “e-Estonia.”

In a way, Estonia is looking to become a new-and-improved, global Delaware—where it famously takes less than an hour to start a business. (Estonia has it beat at 18 minutes and 3 seconds, a Guinness World Record.) Companies run from Estonia don’t need resident directors, and bookkeeping is straightforward because banks can calculate tax liability for their customers. “This is about returning clarity, sanity, and peace of mind to the business world,” Kumar says.

Estonia has high expectations for its program, believing e-Residency can put it on the economic map: The country of 1.3 million citizens hopes to get to 10 million e-Residents by 2025. Five months in, more than 5,000 people had received their ID cards, though those numbers came mainly during a beta period, when applicants were required to travel to Estonia. Now, prospective e-Residents apply on the initiative’s website in just minutes and, after a background check, pick up the physical ID card (with a smart chip for security) and card reader (that authenticates it) at any of the more than 40 Estonian embassies worldwide.

Perhaps even more ambitious is the idea that Estonia’s efforts point toward a time when an entrepreneur can be a citizen of one country, a physical resident of another, and a digital resident of a third—that’s the future of a true global economy, Kumar says. “It’s an extraordinary experiment Estonia is trying. If you take some of the largest themes in the world—technology, globalization, entrepreneurship, and national sovereignty—this is at the intersection of all of them.”

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