E-residency creator: It is Estonia’s soft power

Siim Sikkut. Photo: Tairo Lutter

December will mark the passing of five years from when Siim Sikkut, Taavi Kotka and Ruth Annus started e-residency. It has become one of Estonia’s primary calling cards by now. People who might have never come here otherwise have created over 10,000 companies that employ over 1,700 Estonian residents. Deputy Chancellor of the Ministry of Economic Affairs and Communications Siim Sikkut explained what e-residency has given Estonia.

How different is the e-residency program today from what you imagined at first as one of its creators?

Very different. The initial logic was something else. We already had foreign investors and partners in Estonia and wanted to make doing business with them simpler. It used to be that we could do everything digitally in Estonia, while we needed a whole parallel paper trail for a foreign shareholder for example.

Then Taavi Kotka saw that perhaps there could be more. That perhaps we should try and build bigger and offer the Estonian business environment to the entire world.

We started working on the idea and were soon convinced that there was demand. Looking at the figures five years on, benefits to the economy have been greater than we dared dream at first.

How much greater?

The initial development plan proposed having 10,000 e-residents by 2020. We have over 62,000 today.

Didn’t the development plan aim for 10 million e-Estonians by 2025.

Only journalists keep track of that target. (Laughs.) I remember an Eesti Ekspress graph showing whether we were on track. No, that was never the real goal. Rather it was a call to arms to make Estonia that big.

By how much has e-residency-generated revenue exceeded expectations?

We could not set an economic target five years ago. We just wanted revenue to be bigger than expenses.

We should have fresh data by the time of the project anniversary, but we’re talking about some €31 million. Expenses have totaled perhaps one-third of that. We can see e-residency paying off in spades if only in the state budget context.

But there is a lot here that cannot be directly counted in euros, such as the boon e-residency has delivered to the reputation of e-Estonia and the country in general.

Where is that benefit reflected?

There was a moment when we realized we were doing something big. It was in October of 2014 when we launched our landing page, simply announcing that Estonia was planning to introduce a thing called e-residency. People could sign up for the newsletter by providing their email address. Our servers crashed after 24 hours because of overwhelming interest.

Did Estonia’s reputation as an e-state help matters?

These two things went together perfectly. Looking at Estonia’s reputation and coverage in the world in 2014-2016, we see that e-residency has taken it to a whole new level. I can confidently say that e-residency has taken Estonia’s reputation to the next level, especially in business and tech circles, for those who invest and create companies and for talent that wants to come work in Estonia. It is not just some bubble but contributes to the economy in very real terms. Plus, what we’ve seen in terms of soft power.

What does that mean?

E-residency has been noticed in diplomatic or cultural circles. It has caused excitement, made Estonia look better. While decisions of whether to station NATO troops here are likely not made based on e-residency, it supports things like that indirectly. The soft power side of it has exceeded our expectations. Estonia’s e-residents make up a community interested in Estonia, our circle of friends in the world. This should be knowingly empowered and managed to have them spread faith in Estonia so to speak.

How many experiments akin to e-residency can we find in the world? Or is it still exclusively an Estonian thing?

There are beginnings elsewhere. We are a few years ahead of the curve. Dubai recently launched a much narrower but similar program, offering companies a virtual services environment.

Azerbaijan has an m-residency or mobile identity program.

The Lithuanians have been planning it for some time but have not launched yet.

There are attempters.

Estonian banks have found themselves embroiled in money laundering scandals lately. How often have e-residents been involved?

There have been no problems of money laundering or any other kind with e-residents. There are always a few bad apples, among citizens, e-residents and non-residents. But we cannot say e-residents pose a money laundering risk. Background checks make e-residents the safest kind of non-residents.

The e-residency community is much safer than whichever other group of non-residents. Considering the background checks in place, the data we have on them and the fact that it will remain in our registers.

Where are most e-residents from?

The top five countries start with Finland and Russia. They were also the first as business is more intertwined between neighboring countries and e-residency makes it easier still. It also constitutes access to the European market for Russians, which is the same reason why the top five also includes Ukraine. It is one of the main motivators behind applying for e-residency – to be trusted on the European common market. The U.K. that is also in our top five is increasingly falling into that category.

Interestingly enough, Germany is also in the top five. Starting and especially running companies is so complicated in terms of the red tape involved that it is easier for them to create a company in Estonia and use it to do business in Europe.

What are the greatest challenges for e-residency today?

The greatest challenge is being able to grow fast enough. The interest and the opportunity it presents for Estonia is much greater than what we can service today. We have pursued brilliant cooperation between state agencies; e-residency would not exist without the interior affairs ministry, the Police and Border Guard Board or the foreign ministry. It has not been a solo act of the economy ministry. It is a joint venture and one that could definitely move faster. Building and maintaining that pace is a challenge, including ensuring a flexible and growing budget for that end.