The end of the nation state as we know it, or a gimmick to draw foreign investment?
Estonia recently became the world’s first country to offer “e-residency’’ when Edward Lucas, an Economist magazine editor and long-time Estophile, was issued an identity card by this Baltic nation of 1.4 million. The Estonian government hopes many will follow Mr. Lucas’ lead – and in the process, perhaps invest a few euros.
E-residency allows people from anywhere in the world to apply to become virtual residents of Estonia. The e-residency card is not a travel document, and confers none of the rights and obligations of citizenship or residency. Rather, its benefits are primarily about making it easier to do business in Estonia.
Those granted an e-residency ID gain access to Estonia’s highly automated and accessible government and banking system. E-residents will be able to sign legal documents with digital signatures, which is especially appealing to foreigners who reside abroad but do business in Estonia. The plan targets entrepreneurs, investors, and research specialists.
“Estonia has been a pioneer of e-services for a long time and we can provide good case studies of building a successful digital society,” says Siret Schutting, who is spearheading the e-residency effort for Enterprise Estonia, a government agency. “E-residency makes it simple to bring your business here and makes life easier for those who already live or have significant connections in Estonia, but do not qualify or wish to qualify as residents or citizens.”
The application for e-residency is accompanied by a 50 euro fee and a background check. It doesn't incur any special tax obligations on the holder.
Aside from merely attracting investment, there is some hope that the scheme can help offset the decline of Estonia’s population. A history of occupation has resulted in a large Estonian diaspora. E-residency can at least in a symbolic way bring these Estonians back in touch with the motherland, with the notion that some may come back to stay.
“We see it as a chance to build a virtual community, a country without borders,” Ms. Schutting says.
But what will it change?
The real focus, however, is on growing the Estonian economy.
Virtual residents could help fill the gap left by younger Estonians who seek better economic opportunities and warmer climes overseas, taking their businesses with them. The Estonian Ministry of Economic Affairs and Communications, which is overseeing the e-residency program, has announced a goal of ten million virtual residents by 2025, with the attendant economic benefits of new companies founded and more foreign investment. If this ambitious target is met, the application fees alone would reach 500 million euros.
Some, including Karsten Staehr, professor of international and public finance at Tallinn University of Technology, are skeptical that Estonia will benefit from e-residents. “From what I can tell, nobody has a clear picture of the effects of the new program,” he says.
“The main issue is that e-residence is essentially an identification method; the e-resident does not have the rights or obligations that ordinary residents have," Professor Staehr points out. "If an e-resident does not pay back his loan according to the e-signed contract, the Estonian bank cannot use Estonian laws to recoup the money, but must use the laws of the country in which the person is resident.”
And although any would-be e-resident will undergo a background check, there's also the risk of dirty money looking for a clean home.
“It cannot be ruled out that e-residence will be abused – whitewashing of money, tax fraud, multiple identities – and this is acknowledged by the authorities,” Staehr adds.
Still, the Estonian government sees a rosier picture. “E-residency is definitely the wave of the future,” Ms. Schutting says.