Envying Estonia's Digital Government

The only reason more countries aren't adopting Estonia's e-government system is the absence of political will.

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Photographer: Scott Eells/Bloomberg via Getty Images

The most striking thing about Estonia's e-government system isn't the way it allows anyone to file taxes, vote, or receive a medical prescription, all in a matter of minutes and from a single website. The technology behind it is smart, but not magical. The real surprise is that more countries have yet to build similar systems of their own.

Estonia started planning a move to digital government in 1997. By 2001, the shape of the future system was outlined in a master's thesis written by Arne Ansper, a programmer working for a small Tallinn company called Cybernetica. He had the idea of building a distributed system, in which government departments and private companies could engage in secure peer-to-peer information exchange. 

"The part that is unique to us but that is now being copied," Estonian President Toomas Hendrik Ilves told me yesterday, "is the distributed data exchange layer, which is an enterprise service bus." Terminology like that was the last thing I'd expected to hear from a politician without an engineering background (Ilves is a psychologist by training), but Ilves sped on: "We did that because we were too poor. We couldn’t have a central server because it would have cost us too much, and then we ended up with this model that we call X-Road."

In plain English, X-Road -- which was developed, like other key features of the Estonian e-government, by Cybernetica, which only employs 100 people -- is a system that routes queries between independent computer systems. Because the systems are based on different technologies, each needs an "adapter" to be able to send and receive information in the format used by X-Road. And in order to protect the sensitive data being exchanged, each also uses its own secure server for encryption.

Here's what the basic architecture looks like:

Screen Shot 2015-03-04 at 15.08.23

The distributed nature of the system makes it inherently more secure than if it had been centralized. The architecture also makes it possible to use legacy systems and databases in the public and private sector, some of which have existed since Soviet times. Plus, the system has been cheap. "All maintenance cost, salaries, investments together are around 50-60 million euros ($56-67 million), honestly," Taavi Kotka, the undersecretary for information technology at Estonia's economy and communications ministry, told me.

That figure is almost unbelievable. Russia's e-government program, which is not even close to the Estonian one in terms of functionality, cost more than $90 million last year alone. Kazakhstan has spent about $150 million on its own program so far, with lackluster results. Cybernetica chief executive Oliver Vaartnou, however, confirmed Kotka's estimate.

The other key element of the Estonian system has been mandatory use of digital identification. Every Estonian citizen now carries an identity card with a chip that makes it possible to sign documents electronically. The concept is appealing in terms of convenience, but privacy advocates deem it scary. Those in English-speaking countries have made an especially big fuss. "‘Oh, we’ll never have an ID system' -- we get that from the Americans, we get it from the British, the Canadians, the Australians and the New Zealanders," Ilves says, and adds sarcastically: "They also happen to be, for probably no reason, also the countries of the ‘five eyes'" -- a group of allies who have agreed to share intelligence information. Vaartnou tells me Estonians don't share those countries' paranoia. "In a society where everything is online, there is fundamental trust," he says.

(That's not to suggest Estonians aren't aware of the dangers of government intrusion. "About half the queries in the system are made by police," Vaartnou told me. "But police have been criminally punished for looking up people without a clear reason.")

On the government services portal, which, according to Kotka, handles access to 3,000 services, citizens can see who has recently accessed the data they've registered. ("My family inherited some land, and once I noticed some real estate agents had been looking at those land plots in the government register," Vaartnou recalls. "I could have called them up and asked them why they were doing that.") And private businesses have become avid users of the system, too. Banks, for example, access some of the open tax and property data to review loan applications. Utility and telecom companies also make customer data available through the system, and so do doctors (you can even view your X-rays if you have the right software).

Estonians trust their e-government so much that they even use it to vote. About 170,000 people did so during last Sunday's parliamentary elections. Vaartnou says the voting system, developed by Cybernetica, immediately separates the so-called digital ballots from the votes, so the latter can't be traced to individual citizens. There have been some allegations of electoral fraud, but only from fringe politicians. It's true that most Estonians still aren't voting online, but Kotka says that's because casting a paper ballot is a tradition that still carries some symbolic weight. 

Because of its distributed nature, the Estonian e-government system is infinitely scalable. And because Estonia designed the basic framework, other countries should be able to build their own versions even more quickly and efficiently. So far, however, only a few countries have taken steps toward doing so. According to Vaartnou, Azerbaijan and Namibia have decided to adopt the Estonian model and engaged his company to help, and Japan has expressed preliminary interest. Neighboring Finland has agreed to extend the Estonian system to its territory, earmarking 120 million euros to the program. But that's as far as Estonia's remarkable experiment has spread.

Obviously, any government that decides to adopt the Estonian framework will still face technological obstacles because each of its agencies will need to put its data online and develop an adapter to use the X-road equivalent. That's not, however, a major technological problem. "The problem is not in the scalability, technically, the problem is the political will of countries to do it," Ilves says. "The political will here existed."

That will depends on trust -- that of citizens in their country's system of government, and that of politicians and bureaucrats in the power and benevolence of technology. "Radical reforms need time and discipline," Kotka told me. "I think one of the main reasons behind Estonian e-success is that politicians have actually trusted engineers all the time. For example, making the ID-card mandatory was a bold decision for politicians, but they listened to engineers who said it only works if it is mandatory. Finland has the same ID card system as we do, but they failed, because they didn’t have the guts to make a radical decision."

If a big country like the U.S., Russia or Germany created the same kind of user-friendly system for itself, the benefits would be immense. Systems like the Obamacare exchanges wouldn't need to be built because insurance companies would already have access to the data they need. Russia, struggling with low oil prices, could safely get rid of most of its army of bureaucrats (102 people for every 10,000 residents). And I certainly wouldn't mind filing my German income tax declaration in five minutes, the way Estonians do from pre-filled forms available on the government portal, instead of spending hours on it and hiring a tax consultant as most Germans do.

This, however, would also have to be a world where both politicians and the societies they govern would be able to put aside irrational fears and prejudices in favor of common sense. Estonians, and now Finns, too, have been able to do that, and that's making their lives perceptibly easier. Ask an Estonian about e-government, and almost anyone will proudly pull out their chip ID-card and offer a demonstration. That should be every government's dream.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.