Estonia might be a country that you’ve only hear about on the Eurovision Song Contest...
If you are one of the few people who actually watch that.
But the reality is Estonia is a pioneering country in many fields, some might even call
it the Silicon Valley of Europe.
Companies like Skype and TransferWise were both created here.
This is surprising given that just 30 years ago, this country was part of the Soviet Union.
In fact, geographically Estonia’s situation is far from ideal.
Their weather there is pretty terrible and they have fewer than three hours of daylight
in some winter months.
Plus, they have a never-ending demographic crisis that seems almost impossible to resolve.
Unlike most countries, the female population of Estonia is significantly higher than the
male population.
This means, people find it harder to find a partner and have children.
This is why every year Estonia maintains a course of population reduction.
And yet, despite all of this, Estonia is still the most technologically modern country in
all of Europe.
In fact, it is the only nation where the access to internet is recognized in the Constitution.
But what makes Estonia get into our Countries Hall of Fame is the so-called E-RESIDENCY.
This means: any person, no matter where are they from, can fill a form and become a virtual
citizen of the country.
But what does this really mean?
Today, we are going to explain you this, but before we get into that, let´s look back
at their history.
TITLE: THE FIRST VICTIMS OF VLADIMIR PUTIN
In 1991, Estonia got its independence from the Soviet Union.
Yes, other countries like Belarus or Ukraine did at the same time.
But in those cases, their new democratically elected governments had a strong influence
from the former communist elite.
Estonia was different.
Their first democratic Prime Minister, Mart Laar, formed a cabinet with an average age
of 30 years old.
These where young people with new ideas and who had no debts with the Soviet old guard.
This is how Estonia opened their economy to the international market.
They adopted a capitalist system and a fairly unique political system that would become
well known for its minimalism.
Actually, this is the word that defines Estonia better than any other: MINIMALISM.
Even their flag is a simplistic representation of their traditional landscape.
Even their taxation follows a so-called “flat rate tax system.”
What does this mean?
Well, here everyone pays the same percentage of tax, no matter how much do they earn.
In this case, their income tax is just 20%.
With these policies, it´s easy to understand why they quickly attracted foreign investments,
especially from Finland and other Scandinavian countries.
Nonetheless, this was not enough to grow at the rate they wanted.
At the beginning of the 90s, just half of the population had phones in their homes.
Further the infrastructure, built during the Soviet era, were far from acceptable.
And as you can imagine, this is not a great set up for a country wanting economic recovery.
Since they had no money to build physical roads, they decided to invest what they had
in virtual roads: the country's telecommunications.
And, 15 years later, Estonia was the first country on Earth to implement an electronic
voting system.
But hold on a second because all these reforms didn´t come for free.
During these 15 years of forward progress, the Russian minority that used to rule over
Estonia became politically isolated.
This is why in 2007, the Kremlin, with Putin in office, decided to act.
This is how the first cyber attack in history was organized.
And yes, a cyber attack on a government that relied heavily on a digital infrastructure
became a big deal.
During the attack, Estonia lost their administration - which meant even the hospitals couldn’t
function.
This is why, since that day, NATO has based their cyber-security headquarters in Tallinn,
the Estonian capital.
But that was not the end of Estonia’s problems…
TITLE: THE FINANCIAL CRISIS
Two years later, in 2009, the financial crisis struck the Estonian economy hard, which was
especially exposed because of it’s significant foreign investment.
All of a sudden, the government had no money.
Plus, this was the time when they were supposed to adopt the Euro as their currency.
So, even if they wanted to switch, they didn’t have the money to set up a new currency in
the country.
So they had two options: cut spending or raise taxes dramatically.
Unlike other countries like Spain, Estonia took the first option.
In a matter of months the Government fired over 10,000 workers, which was a third of
their entire staff.
Politicians lowered their salaries and froze all state investments, including many construction
projects.
All of these budget cuts caused the Estonian GDP to fall 14% that year.
To make a comparison, the US, at their worst moment, saw their GDP fall just 8%.
Nonetheless, after going through a terrible 2009, Estonia started to recover immediately.
Since they didn’t raise taxes and their business policies were quite flexible, many
of those who lost their jobs started their own companies.
Now, let´s take a look at their unemployment chart…
Between 2008 and 2009, Estonia went from a 4% unemployment rate to a 19% rate.
At the time, this was the highest rate in all of Europe, even bigger than Spain or Greece.
However, in just two years, they cut this figure in half.
And now, they have a admirable 6%.
The same goes for their salaries.
Today, a person who works in Tallinn is making more money than most people in Southern Europe.
In summary: Estonia is a model for other countries to follow.
And now we’re going to have a look to see what they key aspects were that made this
country quite so successful.
TITLE: DIGITAL ADMINISTRATION
Estonia pioneered the creation of the “digital ID card.”
Now many other countries are copying this model… but it’s never been quite as successful
as the original.
The reason is that the ID card is actually useful.
For instance, during the elections, any citizen can take this card, connect it to a computer
and vote no matter where they are.
There is no need for registration.
This is particularly convenient if you are on holiday or if you live in another country.
Every expat knows the hassle of voting while abroad - waiting at the embassy to cast a
ballot.
Further, there have been many elections where the votes coming in from abroad get lost…
In Estonia you can use your ID card to do any kind of paperwork with the government…
including paying taxes.
And forget about those long forms that other tax authorities insist you fill out.
In Estonia, you can everything using your mobile phone in a matter of minutes.
In fact the government has access to the banks, so they can easily find out your income.
This happens in every other country, including the US.
The only difference is that in Estonia, they think it’s stupid to ask the same question
twice.
So you simply go over your citizen profile, confirm all the data, and pay in one click.
But hold on a minute because the best is yet to come...
Imagine that one government official wants to spy on personal data.
Well, then you will get a notification on the control panel of your government profile.
You can even see, exactly who the person is who is looking at your information and even
request an explanation on why is he or she doing that.
This means, Estonia has way more transparency and privacy controls than any other democracy.
But if you still think this is not enough, here it comes the thing that puts Estonia
over the top...
TITLE: ESTONIAN E-RESIDENCY
We have all heard about big companies that place their fiscal headquarters in Panama
or Luxembourg.
However, this kind of tax structure is almost impossible for an SME or a freelancer.
Well, in Estonia they realized that they needed new citizens.
As I said, the country faces a demographic crisis and their weather sucks.
This is why in 2014 they decided to offer their cutting-edge administration to the whole
world, no matter where a person comes from.
And now you might wonder: why is this useful?
Of course, this is not the equivalent to a citizenship visa and you can’t use it as
a passport.
But it is a digital identity issued by an European Government, and it helps if you want
to make international transactions or open a bank account in Estonia.
Something that might be useful if you are watching this video from a place like Ukraine
or Venezuela.
This virtual card also makes it even easier for you to start a company in Estonia without
moving there or doing a lot of complex paper work.
OK, now I can hear you now saying…
Estonia is a fiscal haven, right?
Well, sorry, but no...
Corporate tax in Estonia is about 20%, which is the same as they pay in Finland for example.
What Estonia offers are two things: rule of law and simplicity.
Maybe you think that’s too little to offer?
But, they have already had over 10,000 people register - in just two years.
Among them, there is the Japanese Prime Minister, Shinzo Abe.
In other words, Estonia has invented a brand new concept: the “liquid citizenship.”
And now here is our question for you: Do you think other countries will follow this model?
There will be a time where everyone chooses Estonia citizenship?
You can leave your answer in the comments below.
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