International Herald Tribune

September 14, 2004

 

Thomas Fuller

 

TALLINN, Estonia The government promotes this Baltic nation as E-stonia, and it has a point.

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There is e-banking: Nearly half of all bank customers in Estonia avoid trips to the teller by managing their money online. There is e-government: Cabinet meetings are almost paperless, with each minister following the agenda on a flat-screen monitor. And there is e-commerce: Ordinary citizens can use mobile phones to pay for parking or a bouquet of flowers, or to transfer money to a friend.

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Only 14 years ago, the "E" in Estonia could have stood for East Bloc. Visitors here today can still spot signs of the country's Soviet past in the Communist-style apartment complexes, some of them abandoned and falling apart, and a sprinkling of old Russian cars. But Estonia is hoping that by becoming a laboratory of innovative technology projects, it can erase the legacy of its Communist past.

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It is off to a good start. Software well-known elsewhere is written here. Both Kazaa, the file-swapping program that allows users to download music, games or other files, and Skype, the Internet phone service, were developed by a group of programmers in Estonia under the guidance of Niklas Zennstrom, a Swedish entrepreneur.

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"There are definitely a lot of programming projects going on," said Jaan Tallinn, a senior developer for Skype.

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Low cost is a factor. Tallinn estimates that programmers in Estonia make an average of E1,000 to E1,300 a month, about $1,225 to $1,600.

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But wage levels are not the only attraction of Estonia's programmers. Zennstrom was recently quoted as saying that "in terms of technical expertise, I have never found anywhere better."

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Among Estonia's innovations is its parking system. About 25,000 people use their mobile phones to pay for parking, said Tonu Grunberg, executive vice president of EMT, Estonia's largest mobile phone company.

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A user sends a text message to the phone number of the parking authority, and the fee is added to his or her phone bill. The system was invented here, and EMT is now seeking to export it.

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The technology department at Eesti Uhispank, the country's second-largest bank, has taken mobile technology one step further. The bank allows customers to transfer money to each other with their mobile phones, a service intended partly to allow plumbers or electricians to collect fees directly from customers. The service began this year, and 30,000 people have signed up to use it.

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Estonia, with 65 mobile phone subscriptions per 100 people, according to the International Telecommunication Union, has a similar mobile phone penetration to France (69) but is well behind its northern neighbor, Finland (90), yet well ahead of Russia (12).

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Government ministers and technology experts in Estonia offer a range of explanations as to why a Baltic country with a population of about 1.3 million has so quickly adopted computing and mobile communications projects.

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"Estonia is a small country," said the foreign minister, Kristiina Ojuland. "You can do things in a small country fast if you have political will."

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Jaan Kaplinski, a poet and former member of Parliament, said Estonia owes much of its progress in Internet adoption and technology to its proximity to Finland.

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"The two success stories of Eastern Europe are located nearby rich countries," Kaplinski said.

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Slovenia, the wealthiest Central European country to enter the European Union in May, is near Austria and Italy, he pointed out.

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Estonia, which also entered the EU in May along with nine other countries, is near Helsinki and Sweden and has cultural and business links with both.

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"There is a sometimes desperate wish to modernize, to put our house in order," Kaplinski said. Information technology "is a very strong symbol of modernity."

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Others say Estonia benefits from its dismal climate.

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"It's dark and cold, so what do you do? Just sit behind your computer and think of great, beautiful stuff," said Tallinn, the Skype programmer, who noted that the same impulse was evident in Finland.

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To get young people interested in the Internet, Estonia has put computers in classrooms, established Internet centers in rural areas and placed wireless hot spots in cities and towns across the country. Many other countries have hot spots, which are areas that provide wireless Internet signals, but in Estonia the access is free.

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Tallinn, the Skype programmer, compares access to personal computers now with Soviet times.

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"In the late '80s, you could buy two houses for one PC," he said. "They were ridiculously expensive."

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Last year, Estonia reported 33 Internet users for every 100 people, according to the International Telecommunication Union. This ration is more than Ireland (31), Spain (24), Poland (23), Hungary (16) and Greece (15), but it is less than France (37), Germany (47) or Sweden (57).

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To get older workers online, the government teamed up in 2001 with banks and telecommunications companies to offer free lessons on how to use the Internet, a program called Look@world that trained 100,000 people, more than one of every 10 adults in the country.

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"It was directed mainly at blue-collar workers and older people," said Jaan Tamm, director of technology at Eesti Uhispank.

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The bank also helped pay to install computers and Internet connections in libraries, cultural centers and post offices around the country.

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The investments have paid off, Tamm said. More than half of Uhispank's 600,000 customers bank online, and the figure is much higher among what Tamm calls "active" customers: About 80 percent of them use e-banking.

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The bank has saved millions of euros by closing half of its branches; it now has 64 left. One sign of Estonia's transformation into a nation of online bankers: It skipped a system of bank checks; residents use a credit card or cash.

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As for government, paperless meetings have been a time-saver, said Tex Vertmann, a government technology adviser.

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Cabinet meetings used to take a minimum of two hours "and sometimes seven or eight hours," he said.

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Now, with each minister following the meeting on his or her flat-screen monitor, the average cabinet meeting lasts 45 minutes, Vertmann said.

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But ministers also meet separately - without computers - to hash things out on Thursday afternoons.

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"The actual debates will take place in that meeting," Vertmann said.

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Even in E-stonia, ministers take an eye break from their computer screens.