Estonia: The Baltic Tiger – Inspiration for an Independent Digital Scotland

A headline theme of our Digital Nation campaign is the inspiring story of E-Estonia, and how Scotland may emulate their success.

Lesley Riddoch and filmmaker Charlie Stuart traveled to Estonia in late February 2020 to make a film about this story, about one of the most recent small north European states to become independent.

Tiny Estonia (pop similar to Wales) sees itself as a forgotten Nordic nation, sharing its language, forest and bog-covered topography and Baltic location with Finland.

And it’s widely regarded as Europe’s Digital Tiger economy, performing an incredible transformation from terrible poverty in the wake of reestablishing independence just 30 years ago.

Another function of E-Estonia’s holistic digital nation approach is that it also results in high-growth tech businesses: A country 1/5 the size of Scotland has produced nine ‘unicorns’, startups valued at more than a $ billion.

Thirty years ago, Estonia became the latest small European nation to declare independence. Faced with terrible winters, they struggled to even find petrol for ambulances and the supermarket shelves were empty. But today, Estonia is one of the most successful small countries in the EU. How did they do it?

Video Summary

The Estonian people were preparing themselves for independence all their lives, and they actually planned a lot of this transformation ahead since they had a firm belief that they would become independent.

A wave of young people took over dismantling everything. So they said those people who have been working for the Soviet Union and have been supporting this kind of things have to leave now. They need to clean the entire state.

And by cleaning the state, it means everything. The first years were tough for this new Baltic nation. They literally had nothing on the shelves of grocery stores in Tallinn or elsewhere in Estonia. They were in a very difficult situation. But Estonia embraced the new digital world, and in just 20 years, its GDP has increased fivefold. It’s nothing short of extraordinary. This transition happened within a generation. The Estonians have adopted their independence day as the 24th of February. It’s a holiday, everyone gathers together on this day.

Estonia first proclaimed independence in 1918 after two centuries of Russian rule, but soon the country was occupied, first by the Soviets, then the Nazis, then the Soviets again, who ruled for almost 50 years. In March 1949, 20000 people were deported, most to Siberia by the KGB. Two thirds were women and children under the age of 16.

In 1986, there was a seismic shift at the Kremlin. President Gorbachev introduced Glasnost to modernize and refresh the communist bloc. But in the Baltic states, the newfound political freedom gave the chance for dreams of nationhood to be rekindled. The Estonian people were preparing themselves for independence, all their lives through whole time in Soviet Union and then especially, intensely, during those three years they had the singing revolution, they were prepared.

Throughout the years of repression, huge singing events continued, the choirs were a symbol of Estonia’s unique culture. As freedom can’t be achieved by only movements, they not only were singing and shouting and streets, but they were undertaking hard legislative work too. In August 1989, the movements of Estonia, Latvia and Lithuania combined to form a 400 mile chain of two million people demonstrating their unity for freedom. This was to catch media’s attention to pressurize Gorbachev. After all this, Estonia got its independence.

Estonia set up its own currency pegged to the Deutschmark, but the country had traded almost exclusively with Russia and so the economy collapsed. It was a government in crisis from the start. In 1993, in the midst of a Baltic winter with daytime temperatures below minus 10, the state coffers are empty, businesses face bankruptcy, pensions might not be paid.

There was a struggle to find petrol for ambulances and the shops were empty. Mart Laar became the first formally elected prime minister at the age of just 32. The unemployment rate was 40-50%. No countries were buying anything from Estonia as their production was really bad. The changes were really very, very harsh because they didn’t have money. People were patient, expecting that the country will grow up, will improve. And after this harsh time, there will be better times. The Estonians people had hope that Estonia will again flourish someday.

Very soon help and investment came from Nordic neighbors. There was were even food and clothing parcels from abroad. Very quickly, Estonia began to grow as Europe’s newest democracy. It was a society shaped by a new generation without baggage from the communist era, with new ideas and a blank canvas.

E-Estonia

Estonia’s main claim to fame today is the Digital Economy. Estonian education has fueled 20 years of digital innovation, 90 percent of schools deliver subjects using digital technology by choice, not compulsion, and 70 percent of kindergartens have access to robotics. Scottish education was once the envy of the world. Now a different small country is turning educational heads.

The education system has spawned a nation of digital entrepreneurs and innovators. Three Estonian engineers have built Skype with almost 700 million worldwide users.

In Estonia, everyone must have a digital ID. This is a compulsary document for absolutely every person who lives in Estonia. The citizens of Estonia use this smart electronical id card as their driving license also. They also get discounts from various shops by using this id card. This card is also essential for medical care because they need this card at hospitals and health care centre for their medical prescriptions.

This card is also used by the citizens for tax payment system. With the aid of this card it takes only one minute in order to declare citizens’ taxes. The citizens of Estonia have a great faith on their state law authority as they provide their all information of themselves to one institution. Only one percent of entire state budget is used in order to keep up the system. The citizens’ get back two percent of their GDP by using this one single solution.

It took three years after independence for the last Russian military to leave. Now, Estonia has an army of its own and an international peacekeeping role. It has 3000 full time soldiers with 20000 in reserve and the support of its Nato Family since it joined in 2004. Joining the NATO has cultural, economic, social and mostly political consequences on Estonia.

In Estonia 2/3 of the population live in the traditional country. They tried to keep alive their cultural heritage even when they were part of the Soviet Union. The country celebrates its traditions and identity big time.

The country has been criticized for a flat tax regime that leaves the well off paying the same as the lowest earners, just 20 percent. And corporations can skip tax altogether if they reinvest. One man well-placed to make international comparisons is the Estonian TV journalist Johannes Tralla, he is a former EU correspondent.

According to him oligarchy does not exist in the Estonia every taxi driver here is an entrepreneur and the low tax system is really beneficial for the citizens. In Estonia there is no dramatic class gap in society. The taxation framework in Estonia is really appreciable in the whole Europe.

Inspiration for Scotland

Another video shares a short case study of E-Estonia from Freethink, interviewing Toomas Hendrik Ilves, President of Estonia from 2006 – 2016, telling the compelling story of the global success of Estonia as a digital nation leader, boasting the most advanced digital government in the world.

Ilves recalls how Estonia faced massive economic challenges upon achieving the restoration of independence in 1991, a time that soon saw the emergence of the Internet.

Toomas realized the opportunity was that Estonia was no further behind than any other country in this field, and so began pioneering their adoption, with all schools being online by 1998 and the framework for E-Estonia in place by the early 2000’s.

Fast forward to today and Estonia now enjoys an entirely digital society – Via a single digital identity everything except weddings and real estate can be transacted online, including voting.

Not only is it a convenience but it’s also the foundation for a prosperous and healthy society. Being entirely digital has meant Estonia has continued uninterrupted during Covid-19, and their ‘E-Residency’ program has contributed €14m to its economy.

A keynote theme is that size and money isn’t the essential ingredient for success.

Toomas now lives in the heart of Silicon Valley in the USA, and despite their vast wealth and being surrounded by the behemoth tech giants like Apple, Google and Facebook, American digital government is surprisingly poor. Processes are still paper-based, requiring photocopies be taken to government offices, whereas Estonians can file taxes in only six clicks in two or three minutes.

Scotland, a similarly sized small nation and with an unparalleled history of invention, absolutely could emulate Estonia and achieve and enjoy an equally advanced digital nation.

As SNP leaders like Martin Docherty, Doug Chapman and Angus Robertson have written for The National, Scotland’s opportunity is to emulate the Baltic nation one fifth the size of Scotland but that has achieved the staggering accomplishment of becoming the world’s leading digital nation, following their own independence.

Writing for The Herald the SNP’s Spokesperson for SME and Innovation Douglas Chapman issues a rallying cry for Scotland to emulate the similarly sized digital nation exemplar, highlighting how their entirely online society has meant they could adapt easily to the challenges of Covid-19.

“Estonia dared to dream and took that leap of faith; Scotland should be next.”