Estonia: From Iron Curtain Obscurity to Wired Wonderland

TALLINN, Estonia (AP) — A crumpled piece of paper taped on the locked door of a bank branch at 125 Parnu Street provides the evidence: Closed.

It’s a common sight along this capital’s streets. But it’s not a sign of financial calamity.

Banking is actually booming in this former Soviet republic — via the Internet. The number of Estonians who bank online soared from zero in 1997 to 700,000 this year. That’s half the country’s 1.4 million people.

From Tallinn to Tartu, scores of bank branches have closed, forsaken by cybersavvy Estonians. Nearly all businesses, from one-man shops to utilities, interact with banks in cyberspace.

The rapid embrace of online banking is but one example of the remarkable tech transformation of this Baltic nation where most people didn’t even have a phone when Soviet control ended in 1991.

Estonia has the most advanced information infrastructure of any formerly communist eastern European state.

Dubbed E-Stonia by some, the country ranked No. 8 out of 82 countries in putting the Net to practical use in a recent World Economic Forum report. The country ranked No. 2 in Internet banking and third in e-government.

Last month, the government launched a one-stop home page for online state services. Estonians can use it to digitally sign government forms or legally binding contracts with other people.

The government also set up a site called “Today, I’m Deciding” to let citizens offer their own opinions on legislation. It’s got a chat room where they can debate the merits of bills or offer up legislation of their own.

One suggestion offered on the site, which is continually monitored by a Webmaster in the prime minister’s office, called for easing restrictions on carrying swords in public.

Student fraternities, which use ceremonial swords in college rituals, proposed the change and left hundreds of online messages in support. The campaign succeeded.

Estonia’s progress is especially impressive considering its condition at the time of the Soviet collapse, when you could count the number of modern personal computers on two hands, said technology consultant Linnar Viik.

That relative backwardness proved an unexpected benefit. Estonia leapfrogged countries wedded to older technologies.

Many Estonians who now rely on wireless phones never had a landline phone. And most who now use the Internet to pay bills have never used a Western-style checkbook.

About 70% of Estonians own mobile phones — about the same as the European Union average. Some 40% of Estonians have a home computer with online access. In business, online access is over 80%.

Estonia’s second-largest bank recently began a service that lets people use mobile phones as debit cards at restaurants, hotels and gas stations.

When Estonia was behind the Iron Curtain, young people groped desperately — perhaps by reading a rare Western magazine smuggled across the border — to connect with the outside world, to tap into fashion or music trends.

Now youngsters dress in the latest hip-hop garb and are as tuned in to pop fads as youths in Los Angeles or Sydney.

Part of the technology revolution can be attributed to Estonians’ famously taciturn but curious nature.

“If a Frenchman loves to sip wine with his friends and a German enjoys his beer, then an Estonian likes to sit behind his computer on a dark evening, surfing the Net and at the same time talking on his mobile phone,” Estonian communications executive Toomas Somera once said.

A flood of investors from Nordic countries, who now own all of Estonia’s banks, most of its media and scores of other leading companies, also helped.

“When the bulk of investors coming to your country already see the Internet as a fundamental aspect of doing business, that culture becomes ingrained, and it snowballs,” Viik said.

Swedish software developer Niklas Zennstrom tapped three young Estonian programmers in 2000 to write what is now the Internet’s most downloaded program, file-sharing Kazaa.

“In many ways, like online banking, Estonia is now more advanced than Sweden,” said Zennstrom, who later sold Kazaa but still subcontracts programmers in Estonia.

Yet the technology push has not helped Estonia overcome all lingering Soviet-era social problems. For example, some farmers still can’t afford basic equipment and use horses to hedge fuel costs.


The government kick-started the high-tech drive by setting up 500 public computer centers across the country. The centers are found in cities but also on tiny Baltic Sea islands and inside converted barns in desolate forests.

If any country can be said to be approaching the so-called “paperless society” paradigm, Estonia could be it.

The government saves as much as $200,000 in paper and copying costs a year by sending documents from ministry to ministry electronically, said Arvo Ott, head of the Informatics Department at the Economics Ministry. Intelligence and military documents are still handled the old-fashioned way.


Cabinet sessions, held in a Spartan room that looks out over the cobblestone streets of Tallinn’s 14th-century old town, are all held online, with leaders huddled over screens and making comments through sleek silver PCs — as traveling ministers log on from abroad.

When the Cabinet approves a policy or bill, the decision is posted almost instantaneously on the government’s Web site.

“All these ministers sit there with no papers in front of them — most coming into the room with no documents, not even briefcases,” explained Daniel Vaarik, a former government spokesman.

If ministers oppose a law, they type in their reservations for colleagues to see. If no one is opposed, the prime minister quickly calls for unanimous consent and moves on.

“Cabinet meetings used to take between four and 12 hours,” said Tex Vertmann, the prime minister’s chief technology adviser. “Today, they take between 10 minutes and an hour.”
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