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President Kersti Kaljulaid’s keynote speech at the Federation of German Industries annual meeting in Berlin

03.06.2019

Dear friends,

I am very happy to be back here in Germany talking once again about digital change, the digital transformation of societies. I know you already had a taste of Estonia this afternoon, but I would like to start with a little bit of history formation: how Estonia created its digital society.

I have to go back to the beginning of this century. It is very important to note that Estonia at that point was by no means a technology creating nation. It is a nation of 1.3 million people and was classed as low-middle income at that point. So, Estonia has not created and, at that point, was not creating any cutting-edge technology.

Where was then the Estonian disruptive innovation, if not in technology itself? Actually, it was in the process of bringing businesses and the government together to help all people, young and old, benefit from these technological developments invented by others. This was a smart move to create a legal space which would allow digital identity to be born. And for 18 years now, Estonians have had a digital identity. We use it to sign and time stamp contracts, all kinds of private contracts, public contracts and applications, query the registries and simply send encrypted e-mails. This function is also open for Estonian e-residents, by the way.

The technology we use is KSI – Keyless Signature Infrastructure, and it has the functionality of a blockchain, but since it originates from the beginning of the century, it is simpler and therefore uses less resources. Both private and public developers from day one have been using the same platform. And do you know why? Because our government realised that if we only have one or two services and if people would only sign in once a year and maybe three times the following year or when social services are added maybe then time a year, this would not be enough to disrupt the society and make people really use their digital IDs. Paying taxes online was by the way our first digital serve, because nobody wants to see the taxman; at least people did not have to see the taxman when they started to pay their taxes, they could do it online.

So, after being nudged by the private sector, because the private sector was very much involved in these discussions when we created our digital ID, we opened our system to all companies who wanted to use this digital ID as an app store in our terms. Of course, we did not say app store then because app stores did not exist. But the Estonian digital ecosystem already existed.

And so, people started to develop services, also from the private sector. It is very important to notice that nowadays you hear very often that companies are multinational and digital IDs are national, and these two somehow do not match. But you cannot create services on the digital ID backbone because they would be national only. This is totally wrong. Estonian banks are not Estonian banks. Our banks are fully Scandinavian. Yet they were very interested in using this digital ID as government provided and guaranteed safe identification in Estonia. It was a sandbox exercise for them – they could see it as a test place. And they used it despite the fact that in Sweden or in Denmark, of course, these systems did not exist at the time. But they came along because they realised that they can develop services in Estonia, be involved in a digitally disrupted society and save costs because Estonia is a country the size of the Netherlands with one million people. Do you think that the banks really, really wanted to have a branch in every village or even in a smaller town in Estonia? No, of course they did not. So, they dreamt that in 15 years’ time we will have 99% of transactions online. And this dream realised. They made huge savings.

Together, the Estonian private sector and public sector made huge savings from this exercise. And, I have to say, since you are business people here – business invested as well. The government took reputational risk by establishing the digital ID and then the legal system which supported its security and its use. But the private sector took a lot of financial risks. I admit that the risk was low because, as I demonstrated, it was kind of a no-brainer and they saved later on. But they did invest. For example, some people asked: how do you get retired people onboard for digital services? It is simple! Retired people are very penny-picking people, they don’t like to waste money at all. So, if you offer your online services to them for free, they are online in a flash I can tell you. It happened.

You see, Estonian innovation was not in technology. Germany, by and large, remains a much better place to create new technologies than Estonia was at that point, but what we did do was using our private sector – already at that time considered normal – in the public sector. And this was the Estonian innovation which has now made Estonia a tech nation.

Of course, it seems kind of boring or planned – how come no new technology development? But think about the analogue world. I mean, what exactly did change your life or your wife’s life more? Was it a washing machine or a rocket landing on the moon? Simple. I think you know the answer. So, there is nothing new in digital.

With the current and persistent digital advantage that Estonia has, we are now turning into technology front-runners. GuardTime, an Estonian enterprise, is working on post-quantum ID when most states still struggle with making the pre-quantum ID mainstream in their system. I understand here in Germany you also have your digital ID. You have not yet seen this change of minds, a nudge towards the private sector to give up their less secure online banking identities for a state-guaranteed digital ID which is good enough to qualify the EU EIDAS system. An advertisement for a German ID here – it takes a political leadership to make sure that digital public services all develop on the same backbone, and I admit it is a bigger exercise, of course, in Germany than it could ever be in Estonia. But anyway, if you do not achieve this convergence of the services onto the same platform, which is the EIDAS-supporting digital ID of the German state, then you will not see your digital ID acquire the functions of a universal passport in the digital world, which it is.

Digital ID is a passport in the digital world. You would not go to any office without your passport and accept acting and transacting with those people whom you don’t know and who don’t know you. Yet, in the digital world, people tend to use nicknames and act and transact based on that. And then, what governments do normally, the governments normally tend to blame the Internet companies for the weaknesses of their identification systems allowing anonymity. I am sorry to say, technology is a private domain, but legal space which guarantees digital ID as a passport, this is the government’s job. No one can delegate this to the private sector. Governments need to make sure that digital IDs will gain enough traction in the society to turn into digital passports.

It is hard work to do this, but I think that without it Europe will not be as connected as we hoped it would be, and it will be an economic hindrance because I am warning you – in Africa, the operation SmartAfrica is thinking of having continent-wide digital IDs. They are looking to leapfrog on us and I am sorry to say, but right now I think that they are very likely in succeeding before we in Europe are able to get a general digital market, which will actually be supported by all of our IDs which do work together with the European Union EIDAS system.

I can tell you when you will know that your society is disrupted digitally. It is the first time your digital ecosystem malfunctions badly, your people will not say okay, I will go to the office and do this on paper. Our people, when we had to re-vamp some of our IDs in the office of the Police and Border Guard because there was an international chip provider who had failed to guarantee the security of their product, were very, very angry because they had to queue for a half an hour or an hour in the police office once in their lifetime. I mean, if in Estonia, let’s say, the car registration system or driver’s license renewal system is down for half a day – it is a catastrophe! It is almost a riot!

And you can see, at this point you realise that you are now on Mars, you are not on planet Earth anymore. And this, I can tell you, is a desirable place to be. Why? Because once you are past this post, the system becomes citizen-driven. How? I can explain to you.

A couple of years ago, people started to notice that private companies do not ask them to apply for new services anymore. They tried to surround them with offers for new services, just online, from their profiles or their former contracts. People started asking the government this question: Look, in Estonia, we have universal child support and the government usually knows when somebody has had a baby because in the hospital, while registering this baby, the digital ID for the baby is already being created in the background, and the parents now attach, online of course, not by going to the town hall or anywhere, a name to this baby. The government knows that there is a new baby and since we have universal child support, they know that this baby is entitled to child support. And, of course, since the parents are tax payers, they know their bank account number. And now the Estonian people ask: “Why on earth do I have to log on and apply? You can do this based on the information that you already have.”

But what is now crucial in that the government can take a step back and tell its people: Yes, I am fine. These are called pro-active services. These are algorithms getting ready to decide about you and doing something to you. I admit that it is extremely positive if we talk about paying something to somebody. This is fine. But still, people, we have to adapt our legal space so that you will now agree that different algorithms put together information about you and make a payment because, in the first phase of digital Estonia, the government promised people that it will not put together the information it has to get the profile of the people.

It is the government’s promise on digital safety. The government has promised that the data the people have given to the government will not be used without their knowledge and without their agreement. And frankly speaking, we can guarantee this. I am sure that all the governments tell you that nobody reads your records, which they have, but since they are on paper, the government is unable to control this. The Estonian government can control it because everybody who gets into the system to read somebody’s information has to sign in, and everybody whose data have been checked gets a personal notification that somebody has been reading their documents. So, personally, I am sure who was the last person to read my medical notes than you here in this room are. You cannot be assured, I can .. Digital is simply safer.

With the citizen-driven system we can now be sure that when there are more and more narrow AI developments, be they only algorithms reacting and acting, well, doing something to people or be they physical representations of narrow AI, which means some kind of robots, our people are ready to see that this is coming into use. This continues our positive spiral, and I can be here talking to Germans and every other nation saying please, please, catch up with us, we want you to catch up with us because since we already have a citizen-driven system, you probably will take quite a long time to catch up with us, but we need you to catch up with us because you know, Estonia is a tiny country and we export everything we do. And it is extremely boring when at the border everything returns to paper.

Of course, many companies have been worried about the European security regulations for the Internet and data safety, etc. because they are worried that their governments would over-regulate. We all know what this gold-plating is. It’s that the European Union makes a perfectly normal directive and then the civil servants in the individual countries kind of overdo it to make sure that this directive is fulfilled or simply create something very cumbersome or difficult to follow.

It cannot happen in Estonia when it comes to digital and data safety. And do you know, why? Because most governments will be regulating for this weird thing which is called the private sector. The Estonian government, when taking these kinds of requirements into account, is regulating itself. We have thousands of services online, each and every one needs to run not more cumbersomely but as easily as before when we have applied the European legislation on data safety and the protection of personal data. The Estonian government cannot make the system complicated – it would tie itself into knots, which tells quite a lot about how we now sustain this advantage as well. It is the true personal experience of the public sector.

And with this, of course, we have created something very dangerous. Estonian people do not accept their government being in any way retarded or backwards. Estonian people demand their government to be as good as the private sector. And what does that do to the public sector and the parliament and everybody else? We realised that we keep performing this miracle. We need to be on the lookout, on the horizon, for new technologies in order to quickly create the legally permissive space for these technologies. Because only if we are the first in, can we get it cheaply. This is what we learned from digital Estonia, this is what we learned from the Estonian Genome Foundation. If you are the first in, you do get it cheaply. Everybody else will pay a lot. We are constantly scanning the horizon, we are constantly ready to legislate in such a way that new technologies, simply new ideas, will find a home in Estonia. For example, we were the first to legislate for Über and other this kind of peer-to-peer services. We have already legislated for driverless systems, like delivery robots in the streets of Tallinn, in our traffic code. We had to because they are walking around in Tallinn.

And there, we stumbled on a new problem, which we are now looking to solve, but we do not know yet how. I think we all will have to tackle this problem quite quickly nowadays, which is this: We have a delivery robot, and it has some characteristics, for example, it will not cross the pedestrian crossing when it sees a car. People with animistic instincts, because this robot looks very cute, very nice, like a dog, they try to let it cross the street. But it would not go. So, we had to broadcast to the whole of Estonia: “Please, drivers, don’t let it pass. Drive safely. It will go afterwards.” You are laughing, but I am not laughing. I am the president of a country which is thinking that next year we might have two different types. Am I to keep training my people to be ready to interact with all kinds of AI with a physical presence in our society? Or are we getting somewhere to the situation in which people would know what to expect and what not to expect from this kind of machinery?

I know of course that the most rational thing would be to wait for the European Union to develop a common standard and only then move forward. But frankly speaking, had Estonia waited for the data system to develop a common European digital ID system, we would not have digital Estonia today. And even worse – we would not have the European system either because there would not have been Estonia, the digital Estonia, which would have made impossible it for the political decision-makers to say, this is not possible. Estonia was possible, hence the whole of Europe benefits from this now.

So, I warn you – we will move forward with our legal sandbox, our legally permissive environment for all new technologies to come. Although it is not a warning, it is a warning for the public side, but it is an invitation for the private side. If you have something interesting which would like to run around free in Estonia, among people and help people, let’s say, take care of the elderly parents or something like this – come to us, we will legislate it so that everybody is protected – the people, your technology, your investment and also the whole public digital environment which Estonia has been able to create.

Thank you very much for listening!