How to become a successful ‘tech-nation’ from scratch

Skype is one of the success stories from Estonia, the home nation of other firms like TransferWise. [SAM AZGOR]

This article is part of our special report Mobile World Congress 2016.

Amid global concerns about economic growth, countries without natural resources like Estonia or Israel have converted technology into their main source of prosperity.

The Mobile World Congress held in Barcelona this week (22-25 February) offered tech giants like Samsung, Huawei and Nokia a global stage to showcase their latest gadgets and innovations.

But among the hundreds of stands with colourful devices, robots and crowds of people queued up to try out the virtual reality experience, others have brought to Barcelona something more discrete but far more desirable: the entrepreneurial spirit of a nation.

In Europe, digital has become a synonym for Estonia thanks to the impressive technological development seen there over the last 25 years.

“After we became independent in 1992, we had limited resources and a small population (1.3 million). Providing services for the citizens was challenging,” says Anna Piperal, managing director of the e-Estonia showroom.

Today, the country is frequently cited as an example of how governments can deal with the downsides of the so-called sharing economy or how to support their local companies without too much bureaucracy.

The country’s tax authorities are working with Uber to find solutions for the completion and submission of tax returns for partners of the company.

But above all, the robust ICT sector of the nation (6.8% of the economy) has benefitted from the full digitalisation of government. Local companies have developed the wide range of services offered by the public sector (e-health, smart grids, e-tax etc). This cooperative model has made Estonia a global reference in e-government and has given their companies valuable experience and has exported it to other nations like Finland, Moldova or Azerbaijan.

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The backbone of the digitalisation of the public administration has been the electronic ID system, seen as the most advanced of its kind in the world. Thanks to this system, introduced almost fifteen years ago, Estonians have developed a close relationship with digital services, which is one of the secrets of the country’s success, Piperal explained.

“People really use the electronic services, also thanks to the high internet literacy and the good public infrastructure of Estonia,” she commented.

Today, 99% of tax returns are filed electronically and they take only three minutes to fill out. 98% of medicines are also prescribed electronically.

In 2005, Estonia became the first country to introduce internet voting in nationwide elections and in 2014, it was also the first nation to offer e-residency to foreign companies operating in the country (750,000 firms are already registered).

Technology as an ally

Small countries with scarce natural resources often find innovation is the only solution to survive. Israel, for its part, also proved that entrepreneurship was key to become a thriving economy in the middle of a less developed region.

“For security reasons, we have to develop a lot of technologies,” said Michael Admon, director of the Hi-Tech department of the Israel Export Institute.

Since the early 1960s, Israel has built up considerable know-how and developed a robust link between academia, research centres and industry. It also has a high level of investment in R&D ― number two in the world only after South Korea (4.1% of GDP last year). Taken together, all these factors explain why the country pioneered key technologies such as the USB disk, digital printing or, more recently, gesture control.

What is the recipe for this success? “The unique combination of well developed technology and a think-out-of-the-box approach,” Admon said.

This creative thinking has been nurtured for decades by governments since the early stages of the school system. Besides, Israel is a country where “nobody is afraid of failing, because you may lose money but you will gain a lot of experience,” Admon commented.

As Estonia and Israel claim to have two of the most important startup communities in the world, their envoys recommended other European nations also support entrepreneurship.

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“Youngsters in Europe are more reluctant to be entrepreneurs,” Admon said. In his view, governments must do something to reverse this, for example, by introducing tax incentives or fostering entrepreneurship during school years.

“Education is still a barrier for the penetration of more digital services across Europe,” Piperal added.

Israel and Estonia are members of the Digital 5 group, a network of nations united to strengthen the digital economy and share best practices. The United Kingdom, South Korea and New Zealand are also members of this group.

The members support a list of actions, including the adoption of open-source software or teaching children to code.

Estonia and Israel attended the Mobile World Congress held in Barcelona on 22-25 February, bringing some of the most sucessful startups and small firms of their economies.

The two countries register positive economic figures. Estonia is expected to grow by 2.1% this year, its unemployment level is only 6.3% and its debt figure is below the 10% of GDP. Meanwhile, Israel is expected to grow above 3% over the next two years. Only around 5% of the Israeli population is jobless and the debt figure is around 67% of GDP.

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