Malaysia can learn from Estonia’s quantum leap into the digital economy

Estonia shows that a small size and population should not be an impediment

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Tallin, the capital of Estonia, during a visit in 2011 - BENEDICT LOPEZ/ALIRAN

Rarely noticed on the map is Estonia, which lies in north-east Europe.

The country faces the Gulf of Finland in the north, the Baltic Sea in the west and Russia in the east.

To Estonia’s south lies Latvia, which is just above Lithuania, the three nations known as the Baltic states.

Tiny Estonia has a population of around 1.4 million, but the nation has punched above its weight. Today, the country has carved a niche as a digital society, drawing the attention of world leaders, academics and venture capitalists.

From a relatively poor country at independence in 1991, after the collapse of the Soviet Union, Estonia has progressed towards a digital economy.

To offer its people more efficient services and to transform its economy, the country set its sights on becoming a digital economy.

Three decades on, Estonia’s achievements speak for themselves. Excessive bureaucracy today is a thing of the past. In ‘e-Estonia’, a paperless digital and tech-savvy society has emerged: people file their taxes, perform bank transfers, vote in elections and collect prescriptions online. Anyone can also register a business within 20 minutes by checking important company details, property and legal matters online.

All these activities can be quickly carried out at home or in the office using a secure state-issued Estonian identity card. No more wasting time in long queues, which have vanished from offices in the bureaucracy.

Estonia is also home to Skype, which was launched in 2003. This innovation had a contagion effect in spurring a new generation of entrepreneurs whose ambitions transcend the country’s borders. In 2011, Microsoft acquired Skype for $8.5bn (RM35bn).

Estonia is well ahead in business start-ups compared to other European nations. It wasn’t plain sailing. Along the way, it had to tackle new tech challenges such as privacy concerns over data collection, artificial intelligence and cyber threats.

Estonia today prides itself on a generation of grown-ups who know they can communicate digitally after having gone through an e-school system. Ordinary people can even interact with a doctor through an e-health network.

Education was key in bringing about this transformation. Estonia pledged to put computers in every classroom, and by 2000, every school in the country was online. The government also offered free computer training for 10% of the adult population. Not surprisingly, the number of Estonians using the internet soared from 29% in 2000 to 91% in 2016.

Estonia’s e-Residency is another feature in its push towards a digital society. This innovative initiative allows individuals to start businesses in the country without actually residing in it. Companies benefit from the program as they can use Estonia as a springboard to penetrate the EU and reap the benefits of a single continent-wide market.Over 50,000 people from around the world have applied for e-Residency since it was launched in 2014.

From e-Residency, Estonia launched a visa for digital nomads for those who work around the world. Through this policy, the nation aims to draw talented employees and entrepreneurs who can drive the economy forward. The country’s pull factors include an efficient public sector, negligible corruption, political stability, a business-friendly tax system and an educated, tech-savvy workforce. These have propelled the nation’s digital economy.

Estonia is currently home to seven universities and 17 other professional higher education institutions. Globally renowned companies have invested in five key sectors of the Estonian economy: IT, transport and logistics services, shared services, industrial machinery and metalworking, and electronics.

More than half of Estonian workers are fluent in one or more foreign languages and its IT education is well known. The country has become a regional market leader in IT shared services.

In the machinery and metalworking sector, Estonia offers a dynamic, internationally focused, mechanical engineering ecosystem, top-notch accessibility, high-quality skills, competitive costs and low inflation. Nearly 1,400 companies employing over 20,000 people are in the machinery and metalworking sector.

Most international organisations continue to rank Estonia, an active EU member, favourably. In 2020, it was ranked first in the international tax competitive index, tenth in economic freedom, 14th in cross-border trading, 13th in ease of doing business, and second in internet freedom (only surpassed by Iceland). The country also has a highly developed telecoms network.

Within just over 20 years, Estonia has become one of the most wired and technologically advanced nations in the world – the hallmark of a successful digital society. The recognition that internet access is a human rights has boosted the development of lightning-fast broadband speeds across the nation.

Digital services are today deeply embedded in the daily lives of the Estonian people and their organisations. No wonder the nation is often referred to as “e-Estonia”.

Lessons to be learnt from Estonia:

  • If tiny Estonia, a poor former satellite state of the then-Soviet Union, can make a quantum leap, then there is no reason other countries cannot emulate it. It shows that a small size and population should not deter a country from moving up
  • Never dwell in self-pity and allow a traumatic past to impede the journey to a brighter future
  • Political stability and pragmatic policies are key ingredients of success, contributing towards overall development
  • Practise meritocracy, as it ensures that talent is nurtured and used productively
  • Always look forward, be innovative and think creatively to move out of the shackles of poverty
  • Where there is a will, there is a way

Estonia offers invaluable lessons for Malaysia on how to make a quantum leap into the digital era.

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Benedict Lopez was director of the Malaysian Investment Development Authority in Stockholm and economics counsellor at the Malaysian embassy there in 2010-2014. He covered all five Nordic countries in the course of his work. A pragmatic optimist and now an Aliran member, he believes Malaysia can provide its people with the same benefits and privileges found in the Nordic countries - not a far-fetched dream but one that he hopes will be realised in his lifetime
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