How digital residency is helping foreign businesses survive

Covid-19 has created a real appetite for borderless working and entrepreneurship across the world, and digital residency may well become a silver bullet for economic recovery.

The uptake of digital tools by governments has steadily increased over the last two decades, with digital strategies coming to play a central role in any new manifesto.

In fact in 2019, the European Commission reported that all 27 European Union (EU) member states had implemented e-government strategies at some point since 2008. During the Covid-19 pandemic, McKinsey reported that digital offerings from enterprises had progressed by the equivalent of seven years in a matter of months, and governments have felt some of these effects, too.

Contrary to what you might think, these strategies are not all about being the first country to invent something spectacular, or even about being the first to roll out next-generation technology like 5G.

Much of these digital roadmaps are simply about utilising tech to make life easier for citizens and businesses.

In Estonia, we were one of the first to make significant investments into exploring which technologies could transform our society such as cross-border business platforms; since then we’ve become world leaders in e-governance and are helping other nations wake up to the benefits of adopting the same model.

The road to digital for most states does of course require them to tackle significant bureaucratic challenges, and this has been somewhat of a deterrent. Any government must seek to address accessibility, public digital dexterity, and increasing cyber threats, as well as potentially widespread scepticism and privacy concerns.

Bringing people together

However, European nations have come a long way from launching online tax returns and government websites, and have come to realise the monetary value in creating new digital revenue streams. They’re also realising that technology, as well as the challenges that come with it, can bring people together.

Tackling issues such as cyber crime and internet access, for example, have become matters of national (and international) concern, and considerable amounts of time and money are being poured into addressing them.

In 2020, The European Commission and the High Representative of the Union for Foreign Affairs and Security Policy presented a new EU Cybersecurity Strategy focused on building collective capabilities to ensure international security and stability in cyberspace. In 2021, the commission has promised to invest a massive 14.7 billion euros in creating a greener and more digital Europe.

The private sector is also doing its bit to tackle these issues, with new companies such as Vistalworks (which keeps online shoppers safe from criminal sellers and illicit trade) demonstrating how cross-border collaboration can support in these international efforts to reduce cyber crime in the public sector.

The digital world is giving us more reasons to cooperate with one another, and the sector benefiting the most is business. E-governance – that is, the use of IT for delivering government services – holds the key to dramatically streamlining processes including registering and running a business.

A recent whitepaper from the International Monetary Fund (IMF) actually supports the hypothesis that e-governance may be a useful tool in stimulating foreign direct investment.

The study, looking at 178 countries studies (both advanced and developing) from 2003-2018, found that: e-government can facilitate FDI inflows in the host country through cost and time reductions and associated efficiency gains; e-government makes governments more inclusive, effective, accountable, and transparent, whilst simultaneously reducing corruption; e-government increases information and knowledge about investment opportunities in the targeted host countries.

Estonia’s digital society

In Estonia, we have known this for a long time. Here, 99 per cent of state services are done online, from voting to registering the birth of a child. Our digital society and more specifically, our digital residency programme, is also offering a lifeline to businesses that were founded by foreign nationals, giving them the chance to run their location-independent company completely virtually from Estonia and within the EU.

New Estonian/EU-based companies founded by e-residents of Estonia have turned over approximately five billion euros, and digital residency works in two ways: companies can utilise the programmes and bring money home to spend (at home) but they also generate money for foreign governments.

The fact that several countries internationally are working on developing similar cross-border business platforms is testament to the growth of its perceived value.

Digital residency creates invaluable opportunities for entrepreneurs. For individuals with an innovative, competitive idea, accessing a huge community of like-minded start-up founders and other remote entrepreneurs, as well as a whole new market can be the difference between success and failure. We have seen how having access to the EU without needing to move there gives entrepreneurs a chance to make a real go of things – it helps them make money where the money is.

The pandemic has created a real appetite for borderless working and entrepreneurship across the world, and digital residency may well become a silver bullet for economic recovery within the European Economic Area (EEA).

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