Taavi Kotka, Estonia’s administration and society are largely digitalized. Why has Estonia adopted this digital approach so thoroughly?
We began to take the first steps to digital identities around 2000. Back then, the Internet was less than ten years old for public use. People weren’t as afraid as they are now. But on the other hand, there weren’t too many positive examples to copy either. So, we had to risk taking a new route.
But why was digitalization so important for Estonia?
Digitalization started even earlier. Estonia is bigger than Switzerland or the Netherlands but we are only 1.3 million people. So, the density outside of our capital is four people per square kilometer. The private sector realized first that you can’t have a bank office in every village. It’s not efficient. That’s why the private sector heavily started to push people to self-service on the Internet. Economic efficiency was the trigger. And you have to bear in mind: After becoming independent again in 1991, we had to start from scratch. There wasn’t enough money in our economy, so we had to be efficient. We had the real pain to digitalize.
And the private sector was the driver.
Yes. It said we have to do Internet banking, we have to do mobile ID, and we have to implement the digital signature. It has to be machine to machine. When our government noticed that an Internet bank was being accepted by society, e-government followed and that led to our digital society as we know it today.
But it’s also vulnerable. In 2007, Estonia suffered an attack on its system. How did you respond to it?
We learned a lot and we understood our abilities. We also understood that our decentralized architecture is actually the best defense against these kinds of attacks.
How does it work?
We have a once-only policy. That means that every ministry collects only the data that it needs. If it needs more data, they have to take it from the original source. One ministry has the information the other one cannot collect. And even if they hack one system, it doesn’t mean that the rest will be exposed immediately. But cyber incidents have happened and they will happen. If they happen, we will only lose a fraction of the data, not all of it.
In return, that means each authority automatically obtains the data of another agency, provided that it needs the information.
They have access if they have a legal right. The concept is that every ministry department in Estonia takes care of their own data and only their own data. Everybody just works on a need basis. We also believe that if doctors can see your whole health record, your past treatments, your prescriptions, it actually leads to better health care.
For a little more than four years, foreigners have been able to take advantage of your digital society and administration by acquiring digital citizenship, the country’s e-residency. What nationalities have grasped the opportunity to get your e-residency so far?
140 different nationalities. Number one is Finland because they’re our neighbors and many Finns have property here, so it’s easier for them to manage their property. Russians also rank high, like Germans. That was actually a surprise to us. Our product was meant to be for Turkish people or Serbs, for somebody who’s outside of the euro zone and the European Union. With the Germans, we realized that bureaucracy is a problem to them. They don’t like hassle.
So governments need to acknowledge the possibilities of digitalization and use them?
Yes. And they can use digitalization to answer economically important questions. I mean you are from Germany. So how many people are living in Germany? It’s a simple question.
Do you know exactly? Do you need census data or can you just rely on your database like we do? My point is that if you are only able to solve very simple questions like how many people live in Germany then your digitalization level might be okay.
But you doubt that it’s okay.
Of course I do. Let’s say a certain region loses people and companies in Germany. How could it be changed? Maybe you issue a special tax benefit or some extra funds. Then, you have to check if it works out. If it’s not the right solution, you need to quickly adapt another model! Digitalization with all the collected and combined data helps you. That’s the future and that’s why I’m worried. I’m not worried about Germany today, I’m actually worried about Germany tomorrow. If Germany doesn’t become more efficient with its adoption of digital society and e-government, we are all doomed, since nothing happens without you in the European Union.
“If we are not able to provide easy to use, hassle-free solutions to our companies, to our youngsters, they will start using the services elsewhere and over the Internet.”
That’s not a good prospect.
The Germans understand that a car needs to be built properly unless it will be a mess later on. The same is true with digital society. The Chinese are doing it very properly. The same in India. If the others don’t follow, they will just be left behind. Yes, Germany is doing great from the industrial point of view: automation, robotics, AI are perfect. But a digital society is so much more. It’s the private sector working together with the government to provide the best services to the people. If we are not able to provide easy to use, hassle-free solutions to our companies, to our youngsters, they will start using the services elsewhere and over the Internet. That’s the problem.
So you think China can do great things.
I see that many things they do are actually reasonable. For example, to persuade people to give up certain habits that negatively affect their health. I don’t like the Orwell style in China, but don’t get me wrong. Even in the West, you are already in 1984. You can’t move in Berlin, London or Los Angeles without getting spotted. The amount of digital traces you leave behind is enormous. The question is how the society adopts that kind of new situation. In China, they have to approve everything that the party says and sometimes I think it’s too aggressive. In the Nordics, we still have a say.
You once mentioned that digitalization must be tied to amusement. What do you mean by amusement?
It’s one of the steps McKinsey asked me to define. One of the steps needed for a digital society. You have to continuously amuse your people. Then, they will start to demand more. For example, we needed e-residency not only because of e-residency but to keep people understanding, “Oh, there is something new coming up from e-government because everything is done.” E-signature done, e-prescriptions done, hospitalization data done, financial sector working with the government done. So, give me something else. We are continuously after new amusement.
Innovations get accepted more easily if they amuse you?
Yes. And they have to make things more convenient. Like our latest innovation. If you have a company and your business doesn’t involve any cash, you don’t need to do a report to the tax authority and customs. You say, please access my bank account, please read all the lines, you see where there is a salary and you see where there is a payment. So, self-complete my tax declaration. And when you have a small business, you don’t need an accountant anymore!
Sounds good. Thanks a lot for this insightful conversation.
Read the second part of the interview in our customer magazine ESSENTIAL. Taavi Kotka explains why every Estonian has a digital identifier, why Estonia’s citizens place great trust in the collection and combination of data, and what Estonia’s data embassy in Luxembourg is all about. He also delves into e-residency as a promising business model. ESSENTIAL magazine appears in May 2019.
He became Estonia’s first Chief Information Officer (CIO) in 2013. Until 2017, he oversaw the country’s development as an advanced digital nation. Kotka was named European CIO of the Year in 2014. He was also special advisor to the European Commission on European Digital Single Market.
Now, he is back in the private sector with his fellow engineers in: ProudEngineers.com.