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President Kersti Kaljulaid: ‘Estonia offers more transparency and less bureaucracy!’

Estonia has a competitive advantage because our society is digital

18 min read
© Atko Januson

As Estonia took over the Presidency of the Council of the European Union on July 1st, the President of the Republic says in an interview with Life in Estonia that despite the fact that Estonia is a relatively well-off country, everyone needs to work harder to promote its urban environment, general greenness, and lack of hierarchies.

When you became President in October 2016, you said you were eager to hear ‘what people have to say’, and indeed, you have been going to places and meeting and speaking to a good proportion of the people. What has been the most surprising thing to hear/see?

I always feel great gratitude if I manage to touch upon a nerve that really matters to the people who might feel that not enough attention has been paid to their issues, which tend to be not so beautiful. Social cohesion issues, questions that relate to handicapped people or to people who have somehow faced violence in society etc.

We are a relatively well-off country and we have to help those who have had a bad draw in this life, be it through their personal history in the family or a handicap. We seriously need to think how we could help those people better and I’m trying to focus minds on this.

I’ve also noticed that people working in the Estonian public sector ask me to come and talk to them about general public sector management issues. And this is something that I really like to do. Seems a bit like management consultancy, and indeed, it is.

  © Atko Januson

In your opening speech for the Latitude 59 Conference this spring you reflected on the future of remote work and how in 20 years time countries will be competing for talent just like big companies do these days. What is it that Estonia has to offer that other countries would find hard to compete with and how should we better take advantage of this opportunity?

I also touched upon this at the Brussels Forum and in GLOBSEC. I seriously believe that we need to start thinking more ahead instead of trying to adapt the current social model to the changes we know today. If we all agree that industrial job market is changing – or altogether disappearing – we need to adapt as states. And indeed, instead of discussing who gets the Starbucks taxes, we should consider the option that most people do not need to physically be in Estonia. Or they are in Estonia but work for five different countries at the same time in different sectors and, in addition, reap some rewards from allowing other people to use their property somewhere? Who gets the taxes? My understanding is that it needs to be a contract between a sovereign state and its citizens or the people who want to use this state as their security provider – they do not necessarily need to be citizens. To provide them with a safe dock where they pay their taxes and where they expect to get social and educational services and the general protection a government provides to its citizens and habitants. It’s more and more of a personal choice, not necessarily related to where you live.

Estonia has a competitive advantage because our society is digital. Our citizens can relate to the state from afar. And yet – I’ve also asked this question from our public sector leaders –, let’s imagine that the private sector is not demanding the workforce to be in Estonia as there are lots of jobs where you can follow what is going on on the screen. If you wish, you can check the temperature and humidity of a food warehouse from the Mediterranean. I’ve asked the public sector: are you ready if those people who have these monitoring jobs are needed by both the public and the private sector? If you do not offer the possibility to work from the Mediterranean, you are simply losing out. You cannot hire these people because they simply want their geographical freedom. And if it’s possible to check on the potatoes and cabbages from a distance, it also has to be possible to check the border from a distance. Are you ready for it? When will you be ready? These are the questions we need to discuss – in Estonia, in Europe, and globally.

So it makes sense that the public sector will follow the private?

Not necessarily. Since the public sector normally offers slightly lower salaries, it can, of course, jump the boat and do it quicker. But a problem would arise if they are slower. Then they would lose out on the job market.

But I don’t see it as a competition. It’s rather a trend in the society which we don’t fully understand but we know is happening. And we should try to think a little bit ahead of the curve. If we don’t, we’ll lose out to some other country that is allowing a lot more flexibility in the social system. If you ignore it, you’ll actually lose tax revenue as well because people simply opt out of the system at the age when they are already earning decent salaries but do not yet have so many demands on the social security systems.

Right now it’s only the pension system that penalizes opting out and then opting back in. You’ll lose if you say that you have to work our way or we don’t want your taxes. ‘Our way’ being 5 days a week, 12 months a year for 30 years, then retiring. This no longer matches the understanding of what worklife is. It will solve a lot of problems, like balancing work and family because you simply have a lot more flexibility in the system. But it will create new problems if we do not adapt.

You also mentioned that in 20 years’ time, Räpina – a small town in South-Eastern Estonia – will be a place where people will want to live. 

Yes, this comes directly from the fact that it does no longer matter where we live. Therefore you’ll choose calm, green, nice places. The late economics professor, Andres Arrak, who just recently passed away, has said that Estonians are very rich in the sense that they can walk around their house. Not too many people in Europe really can. This will be a real asset quite soon when people no longer need to gather in towns. Yes, there are the people who are afraid of frogs and insects as they are already of the second or third generation used to urban infrastructure so they wouldn’t seek anything elsewhere. But particularly in Estonia, as well as elsewhere in the Nordic region, we have many people who would never come to densely populated urban areas if they could afford to live somewhere else. So indeed, I believe that in 20 years time lots more people will use this freedom.

Why should, say, an Indian entrepreneur go for Estonian e-Residency instead of registering his company in any of the well-known tax havens and open an account in Estonian bank instead of a Swiss one?

I always emphasize that this is no tax haven. On the contrary: it’s the most transparent regime so far as declaring your income and paying your taxes is concerned. Because in digital society things move from one computer system to another and cross-checking is really easy, so one cannot tell different things to different parts of the Estonian state. It’s simply not possible.

Our e-Residency offers a transparent way to do business, based in the EU, without taking any of the reputational risks, while being fully operational in the rest of Europe because you’ll already be registered in the EU. Of course, you’ll still have to abide by all the rules and regulations which relate to, let’s say, consumer protection or licensing issues. But this is normal: we need to make sure that the services and goods provided to people are of good quality and are safe. Having less bureaucracy and more transparency is something which enterprises also value. Less bureaucracy is in itself a very democratic value, because, as we know, big businesses have their own way of managing big bureaucracies, but it’s the small people and small businesses who cannot manage that.

  © Atko Januson

As Estonia is undertaking the task of EU Council Presidency for the first time ever, how can we help/soften and overcome the EU’s challenges and not just fill in the spot but actually make a difference among the bigger countries?

We already have made a big difference by being small, flexible and not having any hierarchies at all. We did not hesitate to take over half a year earlier (because of Brexit – ed.). We knew we could do it and we can. We obviously stand out in and our partners expect us to take care of all things digital. It’s interesting to see how digital issues, horizontal in different policy areas, have come to our table. There is, of course, the question of the Fifth Freedom – digital freedom – and there are special directives which we hope to promote as well. But in all other policy areas we also see these elements come up.

We have a reputation of understanding society differently. We also have a reputation for already having a generation living in the internet, therefore we get slightly better at cyber-hygiene.

While dealing with all of those digital issues during our Presidency, it’s extremely important to deliver the message that while every society will be digital, it will still be a different society. Estonian society is digital in one particular way and Finnish in another because the state is culture and this culture will be preserved while becoming digital. It’s not about seeking unification or harmonization in any way; every country will go its own way. And this is where we encourage the countries to adopt the view that we know – that in cyberspace there are also risks and there are crooks but we don’t want to abandon that space and lose out just as we do not abandon our streets. We do not want governments to be unable to use the technological space just because there are risks. We just need to teach our populations to be cyber-hygienic.

I feel for people who are not used to the internet environment because it’s very different from when we started to use the internet. The highest risk was a virus for which you had forgotten to download Kaspersky or some other anti-virus system. Now it’s the Internet of Things (IoT) which other people need to join, it’s a totally different issue. So we need to be sensitive about the problems and the questions people ask, but based on our digital experience, we may have a little more insight on how to answer those questions.

Using the term cyber-hygiene definitely sounds a lot less harsh than cyber-security and is already a big step forward in educating people. 

I was actually astonished when I started to read all the briefs about cyber-security. They are very military in their wording and they have to be because a lot of the understanding we have about cyber-hygiene comes from the military sphere. Those risks are related to critical infrastructure that needs to be protected as we protect our society and our state’s integrity. But we need to translate all this into civil spillovers, and here the EU will be very well positioned to do so. We will provide our experience. We do drive on highways but we take precautions; similarly, we use the internet but need to be cautious.

Besides the digital EU, we also have a much higher overarching aim: breaking the ice of negativity about the EU. First of all, we ourselves are an example of coherent government communication about the EU. We never said that Brussels is very good from one view point but really bothering us from another. Therefore the popularity of the EU has not suffered.

We believe that it’s time that we looked at the hard facts about the EU, all 27 countries together. We see that the EU has not failed us, neither in values nor in technical aspects. The Euro-area went into crises, came out stronger, despite the fact that there are still some things that need to be done. The same applies to Schengen: we are quickly building the opportunities to check who is in and who is out, solving the problems with which the Schengen-area was born. There is now a clear political window of opportunity to solve those issues for which there previously was no democratic demand. We can see that during those crises the EU has not withdrawn but it has advanced.

We can also see that when it has really been critical to decide quickly – be it the sanctions against Russia because of Crimean annexation or Article 50 – the EU has reacted very quickly and adequately.

The same applies to all of our freedoms and values. They have not had to withdraw during the crises. Let’s say this loud and clear and. While we are talking Brexit, we also need to talk about what the EU has enabled governments to do. We need to be very honest about what the EU does and what it does not do because of all the redistributional aspects. The member state governments need to take responsibility.

This is something that I would personally very much like to see at the next conference of think tanks discussing the EU – instead of saying that the EU is in crises, in disarray, they would look at the hard facts showing that the EU has not failed. It’s largely a communicational issue, partially also the EU bodies themselves might have been making more promises than they have been able to deliver considering their mandate, like creating jobs through cohesion policy. The EU is an enabler and the principle of solidarity is the most important, but so is the principle of subsidiarity – they should not overpromise what Brussels can do.

  © Atko Januson

Maybe one of the reasons why the EU is still so popular among Estonians is the fact that in this budget period we are still one of the gaining members? 

That is not true. If you look around in Europe among the net receivers, the picture is not unified about what people or even the governments think about Brussels. So it does not matter: it’s not about the money, it’s definitely about the values. About the safe and prosperous environment that the EU has been providing Estonians with.

We have also been very honest about it. We have said that we joined the EU for security and prosperity, and not for subsidies. This was never among the messages delivered to the people.

You started your career in academia but opted out of it, yet keeping strong ties to your Alma Mater via its board seat. How do we turn the tide in the ‘brain drain’ and make Estonian universities appealing locations for research?

We are actually very much attracting the academic talent. Interestingly enough we are teaching much more of that talent than we ever have. It’s amazing what’s going on in Tartu University, for example. It is an attractive place to work because the technology in the laboratories is relatively new and good. It’s not without the help of the foreign lecturers and scientists with which Tartu University has risen considerably in the rankings over the past few years.

Similarly, if we look at the recent Human Development Report, it says that we are losing workforce in the low-paid, low-skilled portion of society. Those who come here are actually well educated and come for the jobs in high-added value sectors. This is actually a very good sign. We have an attractive environment and I believe that is because of our urban environment, general greenness of our country, the space we have, and the ever-lowering rates of bureaucracy.

If everything is so great, shouldn’t we just sit back, relax and not work so hard?

Of course we should work harder. Our everyday job is to relentlessly promote what we have here, and indeed, the EU Council Presidency will again focus attention on what Estonia has to offer. I’m sure that similar to the period when we joined the Euro-area, the number of tourists from other European countries went up rapidly.

Also, to promote our economic cohesion with our neighbours. I like the saying that previously it was the language that connected us with Finns, now it’s the only thing that separates us, because economies, infrastructure, everything is connected anyway. But we also need connections to Central Europe – Rail Baltic, energy connections to European markets. All of those we still need to develop.

You mentioned Rail Baltic, a railway connecting the Baltics to Central Europe, as a thing that is surely going to happen. Shouldn’t we wait with this project until a new technology, like the Hyperloop, comes along?

Hyperloop will not be used for transporting goods. First of all, we don’t even know if this technology is workable at all. I still haven’t seen a monkey go in one end and come out the other, still healthy, happy and doing well. This is something we do not actually have yet.

But what we do have is clogged highways, we have sea transport where not all environmental costs are internalized into the transport cost and time-wise it is not as reliable as roads and railways are. We don’t want to lay more asphalt on the continent in order to make the highways more efficient in car transportation. I’m sure there will be more taxes which will try to push cargo onto the railways. So I’m quite certain that the cargo transfer through Rail Baltic will be on a really high level. If there is an infrastructure option, people tend to use it.

Having worked for the European Court of Auditors, based in Luxembourg, where your primary role was to check if the budget of the EU has been implemented correctly, in that EU funds have been spent legally and with sound management. Now, as the President of the Republic of Estonia, you have to be more of an inspiring leader as well as a ‘moral compass’. How difficult has it been to bridge those two different roles?

It’s not that different at all because an auditor is a supportive function for better management and frankly speaking, the Estonian President is also very much a supportive function for better management of the country. What you need to do is to ask the right questions and point out the right trends. So I have not found that I have had to change my attitude much.

If in 20 years time people look back at the Kaljulaid Presidency, by what would you like to be remembered? 

If you had asked Toomas Hendrik Ilves ten and a half years ago what his legacy was going to be, he would not have been able to give you the correct answer. So I leave it to the other people and the latest stages to think what I have managed to contribute to this country. All I can say now is that I’m contributing in earnest from the beginning until the end of my period in this office.

As the President, you must have some personal goals that you are working towards…

I cannot say that I have set any particular objectives to achieve. I see where there are issues in the society and I try to help solve them. On the other hand, I do not have an executive role here so they cannot be goals as such. The only goals or principles that I have are the same ones I already mentioned at my inauguration, and I mean this: whenever there is a discussion about the security of our state, our freedoms or when I sense that those who are weaker are not treated well in society I will never fail to speak up; and I will abide by these principles for all of those five years.

Source: Life in Estonia

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