After Estonia regained its independence from the Soviet Union in 1991, it was left with very little. With no legacy to dismantle, it had complete freedom to build the ideal government administration and business infrastructure from the ground up. But its chequered history also had a massive influence on the nation's mindset. As Taavet Hinrikus, Skype's first employee and the co-founder of TransferWise explained to me, "If I had to sum up the Estonian mindset in three words, we are pragmatic, resilient and entrepreneurial. It's a powerful equation."

Driving licences, donor cards, Medicare cards and student IDs are a thing of the past, all subsumed into one electronic ID card issued to all Estonian residents aged 15 or over. The card has two encrypted PIN codes – one for authentication and one for authorising signatures and payments. But many citizens have ditched the physical card altogether and have opted for a mobile-ID-enabled SIM card, meaning they can access banking, healthcare, education and other systems, and affix a signature straight from their phone.

It is staggering that in more than a decade, with over 367 million authentications made between the ID cards and mobile phones, no security breaches have been reported. Prime Minister Taavi Röivas, in an interview with The Huffington Post earlier this year, said the introduction of the digital identity alone saves the country 2 per cent of its annual GDP.

Australia's antiquated system

Recently I applied for a childcare rebate form. Our digital public services experience (and not just for rebates) is, to put it mildly, antiquated and painful. The Centrelink platform, supposedly a one-stop shop for e-government services, reportedly costs more than $3 billion a year to administer. It was given $60.5 million in this year's budget to progress tranche one of the Welfare Payments Infrastructure Transformation Program under the Department of Human Services. I never thought I would repeat words used by Sarah Palin but this is like "putting lipstick on a pig".

It's not that the 1980s-style Centrelink and Human Services websites that are broken; it's our enormous and fragmented bureaucratic government system that is not designed for the digital world. Changing the interface is a waste of time unless the backbone of components needed to make it function optimally, from basics such as electronic signatures to an integrated data system, is in place.

The e-Estonia digital society is made possible largely because of the development of a digital information platform. In 2001, X-Road was launched – an open, decentralised system that enables public and private service databases to seamlessly and securely link together. In 2003, 0.6 million service requests were made over X-Road. In 2013, that had jumped to a staggering 287 million. In 2014, more than 2000 services across sectors were handled by one information portal, eesti.ee.

A single health card


Consider the Electronic Health Record, a nationwide system started in 2008 that integrates data from Estonia's different healthcare providers to create a common record for each patient. Estonians can access their records at any time. For doctors it's a powerful tool, especially in an emergency. For government, it means any ministry can compile statistical health data or track disease epidemics in real time.

Other countries have made attempts to launch similar national electronic ID cards but the results have been criticised for high costs and low public acceptance. For instance, Britain spent £257 million ($370 million) of a planned £4.5 billion on a national ID scheme before the coalition government scrapped it on taking office in 2010. The Brits feared data blunders but what it really boiled down to was they didn't like the idea of being snooped on.

The Estonians do not regard their ID card system as a threat to civil liberties, but as a way to save time, money and make life easier. Critically, citizens own and fully control their data, not the institutions using the platform. At any moment, they can see who, from a doctor to a policeman, has been viewing their records. And if they don't like who has been snooping, they can click to report the data intrusion. A civil servant then has to justify it. The power reversal has important social and psychological effects – the system feels as if it is designed and controlled by the citizens.

Security risks

But e-Estonia is by no means immune to threats and major security risks. Starting on April 27, 2009, devastating cyber attacks, reportedly linked (although it was never proven) to the Russian Federation, repeatedly swamped the country's online systems with external requests. Media, banks, business and government websites were shut down. The X-Road infrastructure was not damaged but the full-scale attack did lead the government to look at having a complete virtual back-up system. Incredibly, the event made it push digital leadership further and harder.

On December 1, 2014, it launched a world-first experiment that allowed non-citizens who were not in Estonia to access the country's e-services and conduct business online. Within six months, 3000 applications were received from 88 countries for an "e-residency". The process takes four steps and a month to complete, and costs $75.

There are now 1800 people with an e-resident smart ID card, a number projected to reach 10 million by 2025. It does not grant citizenship nor function as a travel document, but it is still attractive to entrepreneurs who can establish a company online, open a bank account and digitally sign contracts; long-stay visitors who want the same public services as locals; investors who want to manage equity or real estate online; and those who simply like the idea that e-residency represents.

The aim is simple. How do you take a country with a minute population and create a big impact on the world? You digitally expand by evolving the concept of national identity.

Simplicity the key

I have read government digital strategy blueprints and they typically miss one thing that Estonia gets in spades: simplicity. Make the tax and legal system simple, make the country an easy place to live in, and investments and talent will follow. The key to building a leading digital nation is to set meaningful and tangible goals. Can you register a business in less than 18 minutes? Can you complete your tax return in five minutes? Do our politicians approve laws using just their smartphone? If the answer is no, we are behind a country with a population one-20th the size of ours.

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