Syndicate: Steven Carlson: City by City: Tallinn, EE

[Syndicate admin <syndicate@v2.nl>]

From: "Steven Carlson" <steve@noweurope.com>

nowEurope: City by City
A city-by-city look at who's building the European Internet
Friday, August 10, 2001
http://nowEurope.com


FIRST GLANCE
     Fighting above its weight

BIRD'S EYE VIEW
     Pick a number, any number

ON THE GROUND
     CV-Online -- Still getting the jump
     Privador -- Accidental business
     Microlink -- No crown without profits
     Vemis -- Wireless and moneyless

WHERE'S THE MONEY?
     Rain Lohmus -- The Midas touch

AD VALUE
     AdDirekt -- Biding time in a thin market

THE GURU
     The prime minister's guru

ACKOWLEDGEMENTS
      We value reader tips and contacts


__________________________________________________________________
FIRST GLANCE
Fighting above its weight

   It lacks the bulk and bustle of Budapest or Warsaw, but
   Tallinn, like most eastern European capitals, still has that
   breathless feel of a city being reborn.

   The little Old Town, a fairy tale maze of cobblestones and
   well-preserved late-Medieval architecture, bubbles with new
   cafes and restaurants. And not only the tourism industry has
   blossomed. Other investments have gone into a wide variety of
   sectors--everything from hi-tech and heavy industry to
   brewing and retail.

   While other former Soviet Bloc states have pulled in billions
   from North America and the larger EU countries, especially
   Germany, Estonia has thrived on Scandinavian and Finnish
   investment. Tallinn is, in effect, a satellite of Helsinki,
   which lies just 80 km across the Bay of Finland.

   It may be that proximity that has created one advantage over
   its eastern European neighbors. Not only has Tallinn received
   multinational corporate investment, but it has also been
   inundated by Finnish entrepreneurs, providing small business
   models and inspiration to their Estonian cousins. German and
   Austrian entrepreneurs simply have not shown the same
   enthusiasm for entering Polish, Czech or Hungarian markets,
   and those countries have suffered for it.

   Another plus: In the early 1990s newly independent Estonia
   jettisoned not only Soviet rule but also the corpus of Soviet
   administration, creating a legal structure and agencies for
   executing it largely from scratch. The period of
   under-regulation and sparse bureaucracy that followed allowed
   for an explosion of small business activity. That transition
   could also have proven dangerous, but, remarkably, Estonia
   has emerged politically and socially stable, largely
   law-abiding and free of the crippling levels of corruption
   and organized crime that haunt much of the former Soviet
   Union.

   With just 1.5 million people, Estonia will never be a
   powerful market. But a testing ground for new services and
   products? Yes. An outsourcing haven with an open economy and
   a cheap and educated workforce? You bet. A source of
   innovators and bold entrepreneurs? Just keep reading.

__________________________________________________________________
BIRD'S EYE VIEW
Pick a number, any number

   Let's face it, statistics on internet penetration are often
   quite useless. Even surveys using the same definition of
   internet "access" find curiously disparate results. Thus the
   importance of comparing results from several surveys across
   several countries.

   Unfortunately, there aren't many that include Estonia.

   The only recent one found by nowEurope was conducted in 36
   countries in March and April by TNS Interactive. It reports
   that 29% of adults in Estonia are online, an excellent result
   among eastern European countries but fairly mediocre compared
   to most in western Europe.

   The Estonian government, on the other hand, reports internet
   penetration at 38%. The difference can be attributed to the
   latter figure's inclusion of children, as all school children
   in Estonia have internet access.

   Estonia, in fact, claims not only that 100% of its schools and
   government offices are connected, but that 80% of businesses
   have access as well. And if that's anywhere near to being
   accurate, then Estonians have, indeed, moved ahead of most
   western European countries in preparing for widespread, and
   value-creating use of the internet.

   More verifiable, Estonians have taken up mobile telephony with
   gusto. The government reports that 40% of the population hold
   mobile phones. The country seems to have benefited not only by
   adopting Scandinavia's enthusiasm for wireless, but has also
   gotten the typical boost from wireless' arrival before a modern
   and comprehensive fixed-line infrastructure was built.

<http://www.emarketer.com>
<http://www.tnsofres.com>


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eMarketer -- the world's leading provider of Internet statistics
- makes sense of all the numbers and provides a realistic
overview of the Internet marketplace. <http://www.emarketer.com>
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

__________________________________________________________________
ON THE GROUND

   CV-Online -- Still getting the jump

   It's a typical story. A purely web-based company gets a jump on
   the traditional players in its sector by grabbing the first
   wave of online customers. But, eventually, the grown-ups invest
   in technology and, with their experience and power, run past
   the new economy kids.

   Looking for an exception?

   Jurgen Tamm, 28, started CV-Online, a web-based recruitment
   firm while still a student in 1997, along with Juri Kaljundi
   and Rondel Min, each 26.

   By advertising at the Technical University and partnering with
   Estonia's busiest portals, the company began building a solid
   database of job seekers. Attracting employers to the service
   took longer, but business eventually took off as internet
   penetration and awareness soared in Estonia in 1998-99.

   By the end of 1999, CV-Online had revenues of USD 45,000 a
   month and was solidly in the black. Tamm and team knew it was
   time to expand.

   In February 2000, they raised USD 350,000, half of that from
   Esther Dysen. ("It's like a magic word," says Tamm. "You say
   'Esther Dysen' and doors just open.") CV-Online then opened
   operations in Riga (Latvia), Prague, Budapest, Warsaw, Vilnius
   (Lithuania) and Moscow in the next five months. With expansion
   on track, they raised EUR 1.5 million more in February 2001,
   including money from 3i subsidiary 3TS Venture Partners, and
   added an office in Bucharest.

   The group now has 200,000 registered users. Projected revenues
   for 2001 are USD 2.3 million. Employers can select a range of
   services, from posting job ads and performing a one-time search
   of the database, to continual access via subscription.

   But now is when the big boys should steamroll in, right? Not in
   central Europe and, apparently, not in recruiting. The dot-com
   crash has prevented Monster.com from rolling out in the region.
   And the traditional recruiting firms, many of whom have a
   strong presence in the region (including Monster's parent TMP
   Worldwide)? Says Tamm, "They are moving very slowly in taking
   up technology."

   That has given CV-Online time not only to extend their
   technological advantage, but also close the gap in providing
   traditional services. So, rather than being muscled out,
   they're muscling in. "Basicly, we're evolving into a
   traditional recruiting company built on technology," Tamm says.

   They've also hired a CEO with management experience on the
   traditional side of the industry, Scotsman Norie Sinclaire, who
   is CV-Online's elder statesman at 34.

   In the meantime, CV-Online has 18 people working full time on
   product development. In September, in fact, they plan to
   introduce an ASP-based product called Selector. It's designed
   to make recruitment faster and more effective by providing
   tools for profile specification, candidate sourcing, automatic
   ranking, pre-screening, testing, interviewing, short-listing
   and candidate communication, as well as storing strong
   candidates for future projects. Annual subscriptions will sell
   for USD 12,000-15,000.

   Finally, the group is moving to tap the demand for IT and tech
   workers in western Europe. The company will soon launch
   CV-Europe, a database of CVs in English (others are in the
   local language, though searches can be done in English) of job
   seekers from across central Europe.

   In the long run, Tamm confesses that he and his pals will
   probably cash out from CV-Online when their investors exit,
   either through a strategic buyout or an IPO. That's not right
   around the corner, but Tamm says he'll be eager to try
   something else. "We've made one good example of what
   entrepreneurs here can do. Why not prove to the world that we
   can do it again."

   No word on what that might be, but it'll be worth watching.

<http://www.cv.ee>


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   Privador -- Accidental business

   We all know that scientists from the former Soviet Bloc can be
   impressively skilled, and dirt cheap. What they generally are
   not, however, is entrepreneurial.

   Sometimes, however, opportunity knocks and someone answers the
   door.

   The group that eventually became Privador, first came together
   when the Estonian Academy of Science's Institute of Cybernetics
   formed its Division of Infosecurity in 1992, headed by Tarvi
   Martens. By 1996, the institute no longer existed. But the
   Infosecurity division had been so busy with government
   contracts, it carried on as a small private company,
   Cybernetica.

   The company served just about every sizeable government agency
   with a computer network and a security need, and not only with
   fundamental services. Marten's team developed products that
   were sometimes better than much more expensive western
   solutions. In 1995, before the term "virtual private network"
   (VPN) had entered the popular lexicon, Cybernetica had its own
   version. The Estonian Foreign Ministry uses it today to connect
   all its embassies within a highly secure, low maintenance
   network.

   Cybernetica's reputation slowly grew throughout the Baltics,
   attracting more interest from the private sector. Finally, last
   year, the company relaunched itself as Privador. "We didn't aim
   to be entrepreneurs," says CFO Indrek Kasela. "But we were so
   successful in this market, it was absurd not to bring it to a
   wider market."

   So far so good. The company needed and raised a relatively
   small amount of money (USD 240,000) that went into marketing
   and product development. Privador is on target in the current
   fiscal year to hit EUR 1 million in revenues, with losses of
   around USD 175,000. Revenues should ramp up next year, with
   partners now selling Privador products in Germany, France,
   Italy and the Benelux countries. The company is also looking
   into forming a joint venture in Japan.

   In addition to the VPN, secure e-mail and firewall products,
   Privador also has a package of products for creating,
   maintaining and verifying digitally signed documents, including
   time-stamping and electronic notary services. The time-stamping
   product incorporates an innovative concept that Privador has
   patented in the US. It links digitally signed documents in a
   recorded sequence, in case the absolute time (the real time and
   date) is incorrectly recorded--accidentally or purposely.

   Of course, Privador continues to keep getting work from the
   government. In fact, it will provide the public key
   infrastructure necessary for the government's 2003 rollout of
   digital ID cards (see LAW & ORDER).

   But the company is banking mostly on the belief that corporate
   spending on electronic security will leap dramatically. Kasela
   points to a study by market researcher Gartner predicting
   average corporate spending on information security will jump
   ten-fold by 2011.

   Privador is moving out of cozy little Estonia, where
   connections have helped as much as talent. But if such a
   prediction comes true, there'll be plenty of demand. And
   Privador, with its costs so far below western European
   players', should be able to cash in.

<http://www.privador.com/index2.phtml>
<http://www4.gartner.com/Init>


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   Microlink -- no crown without profits

   Allan Martinson, head of Estonia's Microlink, is the would-be
   king of IT and new media in the Baltics. Unfortunately, the
   empire he commands is piling up red ink at an alarming rate.

   Martinson, 34, rose to prominence with Baltic News Service, a
   company he helped found while still a computer science student
   in Moscow in 1990. Now it's the largest news service in the
   Baltics. Along the way, he also became a board member at
   Microlink, then chiefly a PC assembly and sales company.

   In 1998, Microlink made him CEO to oversee the company's merger
   with Astrodata, Estonia's second largest IT company. Since
   then, Martinson has captained an aggressive drive to expand and
   diversify Microlink.

   Today the Microlink group includes 28 companies with projected
   consolidated revenues of more than USD 50 million for fiscal
   year 2001 (ending June 30). Its subsidiaries include the
   leading computer sellers in Estonia and Latvia, the leading web
   portals across the Baltics (Delfi), Estonia's top systems
   integrator and the leading ISP in all three Baltic markets.

   But Microlink is bleeding money. Though PC sales are bringing
   in profits, the group posted losses of USD 2.4 million, almost
   half of that from Delfi alone, in fiscal year 2000. And there's
   more of the same this year, with Delfi piling up USD 840,000 in
   losses in the first nine months of fiscal 2001.

   What's gone wrong? Defli marketing chief Allan Sombri says,
   nothing. He insists the company is on track for profits come
   2003, and has simply been in an expensive expansion phase. "It
   was chaos. Now we're putting the mess in order and cutting the
   foggy costs."

   But Delfi needs new means for creating revenues. So far, it
   relies mostly on advertising (60% of Delfi's revenues), with
   some curious practices, at that. Banner advertisers pay a daily
   rate, instead of a per impression rate. Other revenues come
   through deals with commercial content providers, including
   online real estate, travel and auction services. But Delfi,
   like other portals, will have to add more of these, finding new
   ways of coaxing its customers to spend and not just gaze at
   banner ads.

   Otherwise, Martinson might never get his crown.

<http://www.microlink.com>
<http://www.delfi.ee>


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   Vemis -- Wireless and moneyless

   When Uku Kuut and his wife Katri Ristal first moved outside
   Tallinn, in 1992, the waiting list for getting a telephone was,
   at least in theory, 25 years long.

   Kuut then set out on a determined quest to find a way of
   connecting Estonia's unwired masses, knowing that a business
   opportunity lay in the solution. Soon after, Estonia's telecom
   monopoly was privatized and jumped on the same path.

   Like Kuut, Eesti Telecom decided laying copper was too
   expensive and looked to wireless ideas. What they settled on,
   to the delight of those who just wanted phones, and to the
   frustration of those who wanted to surf the net or transmit
   data, was to put residential "fixed" phones onto local GSM
   loops. That, of course, means 9.6 Kbps.

   Kuut found something different: the open access wireless
   frequency at 2.4 GHz, capable of carrying data at the
   rocket-fast rate of 11 Mbps. A subscriber would need only an
   on-site transmitter/receiver wired to whatever devices needed
   to be online, including telephones and computers. That was the
   starting point of Vemis, of which Vistral is now CEO, with Kuut
   acting from its advisory board.

   Vemis's pilot projects were built for Estonia's two largest
   ISPs in 1998-2000. The company then began selling directly to
   residential and commercial clients. In 2000, Vemis applied for
   and won a license to provide the same service on a 3.5 MHz
   frequency that was less prone to interference and covers a
   wider radius from one antenna.

   All this might have been enough to sign on loads of customers,
   including companies looking for the fat pipe and residential
   customers whose only other option is GSM-speed phones.

   But Vemis has two problems. Eesti Telecom have introduced ADSL
   service that, at 256 Kbps, is still not nearly as fast as
   Vemis' service, but comes at the low-ball price of USD 35 per
   month. That has forced Vemis to lower their price. But since
   Vemis has to buy USD 700 worth of equipment for every customer,
   it badly needs financing before it can sign up waiting
   customers.

   Which brings us to the second problem: Vemis is having trouble
   raising funds. "We could add 10 residential customers a day if
   we had the funding," says Ristal.

   The lack of funding is frustrating not only because Estonians
   have signaled their desire for the service, but, says Kuut,
   because the technology could prove successful elsewhere,
   especially in the Third World, where telecoms rarely lay new
   copper and companies have even more difficulty getting
   affordable broadband access.

   But Vemis has another trick up their sleeve that might sway
   investors. Kuut has used a combination of the 3.5 and 2.4 GHz
   frequencies to create what he calls "hot spots." They are
   always-on wireless zones with a radius of about 300 meters.

   With a transmitter/receiver that slots into a laptop, palmtop
   or PDA (and the software, of course), the device has instant
   broadband access to the web as soon as it enters a hot spot
   without any need to log on. Gone would be the days of looking
   up out-of-town access numbers and wondering what bandwidth you
   might get.

   Vemis has built three pilot hot spots in Tallinn already,
   covering the airport and two hotels.

   Eventually, Kuut sees hot spots converging with GPRS and UMTS
   mobile phone networks. Companies could sign one contract with a
   service provider, allowing their employees wireless broadband
   access whenever they are inside a hotspot--including, perhaps,
   at the office--but also access to the network via mobile phone
   or wireless modem when outside the hot spots.

   Now where are those investors?

<http://www.vemis.net>

__________________________________________________________________
WHERE'S THE MONEY?
Rain Lohmus--the Midas touch

   Study Rain Lohmus' c.v. and you can read the history of banking
   in post-Soviet Estonia. These days he's turning his Midas touch
   to tech-targeted venture capital, which is good news for
   Estonia's under-funded technology start-ups.

   In 1989, at the tender age of 23, Lohmus became one of the
   first employees at Estonia's new central bank. Two years later
   he led a small group that founded Hansabank as a subsidiary of
   the larger Tartu Kommertsbank.

   With interest rates artificially low in the banking sector at
   the time, Lohmus eschewed lending, pouring the bank's scant
   capital instead into the foreign currency market, betting
   heavily against the Russian rouble. The rouble's collapse in
   late 1991 not only made Hansabank a fortune, but also damaged
   or bankrupted all of Estonia's traditional banks, including
   Tartu. Lohmus and company then reorganized Hansa as an
   independent bank in January 1992, picked up Tartu's biggest
   clients and moved aggressively into the suddenly empty lending
   market.

   Three more prosperous years, one public offering and a few
   acquisitions later, Hansabank had become the largest bank in
   the Baltics. In 1998, the founding group sold a controlling
   stake to Swedbank, making Lohmus one of the richest men in
   Estonia. But it also made him bored, as Swedbank shifted
   Hansabank toward retail banking. So, in 1999, Lohmus left to
   found an investment bank--Lohmus, Haavel & Viisemann--with
   Tonis Haavel and Andres Viisemann.

   In addition to performing traditional corporate financing
   activity, LHV has jumped into venture capital. In 1999 LHV
   invested directly into oast.ee, Estonia's first internet
   auction site and CV-Online, an online recruitment firm (see ON
   THE GROUND). Later that year, LHV gathered USD 4 million to
   form a four-year closed fund, New Economy Ventures.

   The going has, however, been slow. This year, LHV has returned
   15% of the fund's capital uninvested. Still, LHV is optimistic
   and looks to start afresh with a new fund now in the works.

   The slump in international markets, says Lohmus, has hurt the
   local financing scene by limiting exit strategies, but
   otherwise has not done much damage. Almost no foreign investors
   had been interested in the Baltics, anyway. So, there has been
   no flight of capital.

   Where does the money come from, then? Local entrepreneurs made
   good, says Lohmus. Since Estonia's independence, the lack of
   government bureaucracy has favored business and the creation of
   wealth. "It's relatively easy to do business. Generally the
   government doesn't stop you," Lohmus says.

   Since Estonia's traditional banks faltered in the early 1990s,
   successful entrepreneurs have filled a big gap in the financing
   picture. "There still aren't many strong institutional lenders,
   but the entrepreneurs have a strong network" and do a lot of
   investing, Lohmus says.

   And now Lohmus is doing his part to give that network more
   formal avenues of investment, especially into technology.

   That won't make raising funds a cake walk for technology
   start-ups, even with other players, like the Baltic Small
   Equity Fund targetting hi-tech as well. But given Estonia's
   size, and the proportionately small sums such companies need,
   LHV will likely make an impact. Especially if Lohmas' Midas
   touch continues.


<http://www.lhv.ee>
<http://www.hansa.ee/en/>
<http://www.bsef.ee/eng/>


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AD VALUE
AdDirekt -- Biding time in a thin market

   Estonia impresses in so many areas related to communications
   technology and the internet. But online advertising is not one
   of them.

   Brave then, indeed, are two Americans, Eric Kwitel, 39, and
   Chuck Czepyha, 36, who run AdDirekt, a consultantcy for online
   advertising and marketing. They are beginning to see signs of
   life in the market, with banner clients like Pougeaut, Fiat,
   Scanda Hotels and Estonian Airlines. But, confesses Kwitel, "If
   anything, we're a bit early."

   AdDirekt launched last year with a banner ad network,
   co-branded with Doubleclick and running off Doubleclick's
   servers. AdDirekt now also can execute email marketing
   campaigns and offer advice in planning online strategies.

   The first problem is Estonia's population--just 1.5 million
   people. Online spending is also very low as a proportion of
   total advertising spending, not even reaching 2% in 2000. And
   where money is spent online, it is often done so unwisely and
   without much help from the beneficiaries, like ad agencies and
   websites.

   Many portals, including Estonia's No. 1 site Delfi, don't
   redirect ads from outside servers, either because they cannot,
   or do not know it is possible. Consider also that Estonia has
   no independent auditing of web traffic, so advertisers rely
   solely on the site operators to tell them how many views their
   ads receive. Small wonder, then, the market is stuck using day
   rates, instead of a cost per impression.

   Typical costs for those that do use CPMs are about $8 per CPM.
   But that is squeezed drastically by some of the few bigger
   spenders, who exploit the relatively unsophisticated operators
   to get rates sometimes down to $2 per CPM.

   "The websites, for the most part, are not created by media
   companies," says Kwitel. Often site operators are pure techies
   and don't have the experience to negotiate with banks and
   telcos. So, they just take what they are offered. "There's a
   lot online, but they still don't understand marketing," he
   sighs.

   Then why are these two Americans banging their heads against
   walls in Tallinn? "It's getting a little bit better all the
   time," Kwitel says.

   And Czepyha adds, "In a way, we're safe here." The market, he
   says, is too small for bigger players to move in and start
   throwing around money. And with just a four-man operation in a
   small, undistinguished office space, they're keeping their
   costs very low. "We're probably the leanest online company in
   Estonia," says Kwitel.

   The pair seem resolved to stick it out until Estonia's
   promising embrace of the internet makes its inevitable impact
   in the media market. Then they'll be well placed to grow a
   little bit fatter.

<http://www.addirekt.com>


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__________________________________________________________________
LAW & ORDER (and THE GURU)
The prime minister's guru

   At 36, Linnar Viik is responsible for guiding one of the
   world's most ambitious national plans for embracing digital
   communication.

   The founder of one of Estonia's first ISPs, Viik sold his
   shares in 1999 to be a house-husband, taking care of his now
   two-year-old son. Today, he works from home as an advisor to
   Estonian Prime Minister Mart Laar. In that role, he is the
   driving force behind an effort to make tiny Estonia the most
   connected country on Earth.

   Already, the plan is delivering savings and improving
   government services. But it is also guided by a vision and
   understanding of information technology and its ability to
   bolster democracy that, in the long haul, may produce the
   biggest dividends.

   In truth, Estonia is seizing upon a set of opportunities that
   make its e-mission a lot easier than in most countries. First,
   it's small. With a population of only 1.5 million, a decisive
   central government can roll things out quickly. Second, it
   achieved independence only 10 years ago, and in doing so
   discarded much of the previous (Soviet) administrative
   structure.

   Starting from scratch brings a chance to create, as opposed to
   tinkering with a flawed inheritance. That applies equally to
   everything from building physical infrastructure to setting the
   tone and philosophy of government. "It was very much a tabula
   rasa," says Viik.

   From the start, IT strategy was centralized. All government
   agencies were expected to implement progressive directives from
   the prime minister's office on adopting technology. For
   example, email was quickly established as dominant method of
   communication throughout the government, from the Border Guard
   to the Ministry of Finance.

   Then came Tiger Leap, the initiative to connect every Estonian
   school, no matter how small or isolated, to the internet. Tiger
   Leap takes much of the credit for the fact that 85% of
   Estonians aged 15-29 have online access. And the program isn't
   stopping there. The program is now pushing schools to make use
   of what's out there, urging the adoption of more and more
   online curriculum, especially interactive educational content.

   More recently, Estonia's cabinet has gone paperless. Since last
   August, all drafting of legislation within and among ministries
   is prepared electronically. Proposed laws or decrees are
   discussed in the cabinet room in front of computer monitors.
   Traveling ministers can access the system remotely and
   participate with an audio hook-up. Approved bills are forwarded
   to parliament electronically where they are, alas, still
   printed on paper.

   According to Viik, savings in A4 paper costs alone will pay for
   the technical costs of the system by October of this year. And
   that doesn't count other benefits.

   Like transparency. On average, it takes less than 90 seconds
   for any cabinet decision--being already in electronic form--to
   make it to the government's website from the time the gavel
   drops in the cabinet room. And thanks to Estonia's liberal
   public information statutes, the process of excluding
   government decisions from the public record, according to Viik,
   is difficult and, itself, relatively transparent.

   The government is also working to establish a virtual
   marketplace that will consolidate mundane government purchasing
   needs and eventually allow private sector buyers to join in.

   Further from the center, numerous government agencies are
   putting more and more information and services online. Already,
   any government form imaginable can be downloaded
   electronically, though only a few can be filled out and filed
   back electronically.

   But the tax office is getting there. Last year, 36,000
   Estonians (12% of all those obliged) filed their tax forms
   online. Companies can also file VAT declarations online.

   What's next? Internet access is about 38%, according to the
   government, but the growth rate has slowed. So, the government
   has backed a new, privately-funded plan called "Look @ the
   World" with the ambitious goal of achieving 74% penetration
   (who knows where this figure comes from) within three years.
   Seven major Estonian companies, led by banks, telecoms and
   computer makers, have donated USD 14 million to finance public
   internet access facilities, pay for training and educational
   projects and cut costs on equipment purchases for small
   businesses and families.

   Finally, there is the plan to issue digital ID cards to every
   resident of Estonia beginning next year. Under the legislation
   making its way towards parliament now, only identity
   information found on a passport will be stored on the card, but
   it will enable several other neat tricks.

   Holders will use it to apply a digital signature to electronic
   documents, make electronic transactions more secure and obtain
   or grant access to information about themselves stored in any
   public registry (for example, to give a doctor access to
   personal medical records).

   Some observers are already arguing this raises the specter of
   Big Brother, but the reality may be quite different. Estonia's
   government is not planning to collect any information on
   citizens it doesn't already collect. And by digitizing and
   consolidating it, authorities can more easily control access.

   Today, innumerable government workers have discreet access to
   many a confidential paper file, be it criminal, medical or
   financial records. But Estonia's digital depositories will
   automatically detect any access (excluding the most savvy
   hacker's) and record whether it was authorized or not. A data
   protection agency will be charged with making random checks and
   investigating complaints.

   Far from raising an undemocratic bogeymen, in fact, Estonia's
   e-drive is rooted in an impressive understanding of
   technology's place in creating transparency and bolstering
   democracy. Look no further than Viik's three official areas of
   expertise. After internet issues and research and development
   there is this: civil society. That's right, the hi-tech guru
   has a mandate to whisper in the prime minister's ear his
   philosophy on bringing power to the people.

   Says Viik, "It's always been a triple goal. IT is a tool for
   making public administration more efficient. It's a tool for
   business to be competitive on a global scale, and it's a tool
   for society.

   "The generation that is now 15-29 years old, in 20 years will
   play a major role in government and business. And the way that
   generation gathers information and communicates, the way they
   will approach openness and transparency will be radically
   different from the current generation."

   Perhaps here it's important to make one thing clear. It is not
   technology, but the attitude of exploiting technology to
   achieve greater openness that can deliver higher quality
   democracy to Estonia. Meanwhile, there is Singapore, another
   small country aiming to be No. 1 in e-government and in public
   connectivity. And it has a lot more money to make it happen.
   But it is also ruled by an autocracy obsessed with controlling
   information.

   So, who is really leading the way, Estonia or Singapore?

<http://www.esis.ee/index_eng.html>
   (European Survey of Information Society)
<http://www.riik.ee/en/valitsus/> (government site)


__________________________________________________________________
ACKNOWLEDGEMENTS

   nowEurope would like to thank the following people for their
   assistance in making this issue possible:

   Illimar Matus of the Baltic Small Equity Fund

__________________________________________________________________
MASTHEAD


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