Estonia e-residency program is offsetting demographic time bomb

Estonia’s
Prime Minister Juri Ratas arrives at an European Union leaders
summit in Brussels, Belgium, on June 28, 2018.
Eva Plevier/Reuters

• Estonia and several other Eastern European countries face
  economic problems due to a demographic time bomb caused by
  falling birth rates.
• Unlike neighboring nations, Estonia has offset some of these
  pressures through its e-residency program.
• E-residents receive digital ID cards that allow them to
  access Estonian bank accounts and run virtual businesses. 
• Although the program was temporarily frozen last year due to
  security concerns, it remains popular.

Several
Eastern European countries are plagued by demographic time
bombs — a
shortage of working people due to an
aging population,
low birth rates, and insufficient economic growth. The
nations are losing citizens to countries with greater job
opportunities, and their birth rates remain too low to counteract
the trend. 

Estonia, one of the countries grappling with a demographic time
bomb, may have found a solution to offset its economic problems.
The country’s “e-residency”
program, which launched in 2014, is growing at a faster rate than
Estonia’s population,
Quartz reported. 

Anyone in the world can pay a $118 fee to apply for Estonian
e-residency, which comes with a government-issued digital ID.
Recipients can access Estonian bank accounts and operate virtual
businesses in the country, but the program does not provide legal
residency or citizenship. For example, e-residents can’t reside
permanently in Estonia, and they can’t buy real estate
without proof of sufficient income in the country.

E-residency is just one example of Estonia’s emphasis on
digitization. The country’s government stores all of its records
on computer servers, chief information Siim Sikkut told
the International Monetary Fund. Sikkut said electronic options
increase bureaucratic efficiency and save money for the Estonian
government. Estonian citizens can also vote online, which allows
them to change their vote after first submitting it.

In Estonia, legal residents age 15 and older get
electronic ID cards, and hospitals issue digital birth
certificates for babies. 

While the e-residency program is popular, it has experienced some
issues since its launch. In November 2017, the Estonian
government temporarily froze
all digital ID cards after discovering a major security flaw that
could have enabled identity theft.

Nevertheless, many prominent figures around the world are signing
up for e-residency. Japanese Prime Minister Shinzo Abe, German
Chancellor Angela Merkel, and The Daily Show host Trevor Noah
have all become e-residents. On Tuesday, Pope Francis
became one, too.

Estonia’s e-residency program includes roughly 45,000 people,
which is small compared to the country’s population of 1.3
million. Sikkut, however, has said the number of e-residents has
a noticeable benefit for the country.

The e-residents do not bring in tax revenue directly, but
domestic businesses that provide financial services to
e-residents help boost Estonia’s economy. With a shortage of
young people keeping Estonia from reversing the demographic time
bomb, e-residency could help bridge the financial gap.