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Data economy in Estonia and public-private collaboration

Last year the European Data Market Study announced that the value of the data economy in the European Union was to exceed 300 billion euro by the end of 2018 with a 12% growth rate[1]. In fact, the European Data Market Monitoring Tool states, that the data economy value on GDP in Estonia is the highest in the European Union[2]. While there are ongoing discussions about the definition of data and the digital economy, the study assumes that data economy[3] involves the „generation, collection, storage, processing, distribution, analysis elaboration, delivery, and exploitation of data enabled by digital technologies“.[4]

X-Road facilitates the data economy in Estonia

Talking about the data economy in Estonia we cannot get past the X-Road, an open-source data exchange layer operated by the Information System Authority. The X-Road has been the backbone of the Estonian digital society for 18 years. I always like to emphasise to my delegations that the X-Road is pretty much a large set of regulations and contracts between its members, which are executed via peer-to-peer encrypted tunnels over the internet. All of the transactions – and there are over 900 million every year – are based on some bilateral agreement between two or more entities, that have agreed to exchange data for a specific purpose. The X-Road is used for both transactions between public sector agencies and transactions to and from private sector organizations.

Every single transaction also has an economic value attached to it, as it represents some kind of procedure that is part of a bigger partly automated business or administrative logic. While we cannot say exactly what the value of each transaction is, we can roughly estimate the general savings of the X-Road for Estonia: 1407 working years every year.

How it works in real life

I want to share two examples of how businesses use citizen data from the Population Register via the X-Road.

  1. While registering a SMART ID account with SK ID Solutions, the provider asks the Estonian Population Register based on my personal identifier, whether an individual with that identifier is registered. The answer tells SK whether they can actually open a Smart ID account in my name because they get a legally binding response.
  2. Since 2012 residents of Tallinn can use public transportation for free. The company Ridango AS in partnership with the city of Tallinn operates the ticketing machines and thus needs to know whether validated tickets actually are registered to a person who is officially residing in Tallinn. Based on their agreement with the Population Register, Ridango can query the zip code of the ticket user’s main place of residence, which is enough information to determine if the user of the ticket is entitled to free public transport.

Seen individually these two transactions seem negligible, but in the wider context, they have far-reaching economic, security, efficiency and convenience implications for businesses and citizens. Also, with each access to any dataset both companies actually leave a trace behind, which I as a citizen can afterwards see and hold the source of the query accountable for. This makes me an educated citizen, who can transparently track and trace what happens to his data.

To cut a long story short, in times of a growing data economy, Estonia relies on a centrally run digital infrastructure that is used by both public and private sector. Just like roads, railroad tracks and airports are for the traditional economy. Dreaming big now as a citizen in the 21st century, isn’t that the kind of framework that we would globally need for the exchange of confidential data and its potential monetization in the coming days of AI?

[1] Giorgio Micheletti, Cristina Pepato (IDC), Deliverable D2.6 Second Interim Report, 2019, pg. 10, last accessed 03.09.2019.
[2] The European Data Market Monitoring Tool, Data Economy Value on GDP by Member State, last accessed 03.09.2019.
[3] International Monetary Fund, Measuring the digital economy, 2018, pg. 2, last accessed 03.09.2019.
[4] Giorgio Micheletti, Cristina Pepato (IDC), Deliverable D2.6 Second Interim Report, 2019, pg. 88, last accessed 03.09.2019.

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