By Globalization Partners
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Remote work has been around for decades, and iterations of the model have presented themselves as employers make adjustments to suit their teams, geographies, and evolving employee expectations. The latest evolution that’s turning heads? E-residency programs.
Although far from being a novel concept – they have been around since 2014 – e-residency programs help democratize opportunities and act as a conduit to equalize global expansion opportunities for all.
Although e-residency programs are in their infancy stage across Europe, some wonder if the programs can take root and attract entrepreneurs and companies alike in Asia-Pacific (APAC). With a widening skills gap, shrinking labor force, and an ageing population in some APAC countries, can such programs also provide business leaders and entrepreneurs a solution for the mounting talent war?
With high-profilers like Pope Francis and Bill Gates participating as honorary residents, there’s no doubt that e-residency programs are gaining traction. But what exactly are these programs?
What are e-residency programs?
E-residency programs allow entrepreneurs and founders to open and run a company digitally, within days, regardless of location.
This means residents can open a business banking account, conduct e-banking activities, partner with payment service providers, declare taxes, and sign documents digitally without being physically present in the country where they hold that e-residency status.
Such programs cater perfectly to the growing digital nomad population – currently estimated at 35 million – consumed with wanderlust and a desire to be location-independent. According to the latest report by Airbnb, the number of long term stays (at least 28 nights) nearly doubled from 14 percent in 2019 to 24 percent in 2021. Fifty-five percent of these individuals said they were either working or studying throughout their stay.
As nomadic culture takes root, entrepreneurs and founders can launch their business online through such programs as they travel through different countries for medium-term stays and remote work.
An important caveat to note, however, is such programs do not provide actual physical citizenship, tax residency, or the right to travel to the country in which an individual is an e-resident.
Estonia, a pioneering force
Estonia remains the true architect of e-residency programs. The tiny northern European country has already amassed an impressive 83,248 e-residents from 170 different countries and houses a growing herd of unicorns – there are currently seven.
Since its inception in 2014, Estonia’s e-residents founded 17,000 companies that generate a combined turnover of EUR€3.68 billion and EUR€54 million in tax revenue for the Estonian government.
Estonia also benefited from Brexit, which saw over 4,000 United Kingdom-based companies apply for e-residency. The recent British influx seems a likely suspect for tax revenue meeting a 60 percent increment over the past year.
With over 1.32 million people, Estonia’s e-residency program is a powerful tool to generate economic growth and healthy foreign direct investment (FDI) inflows. Beyond that, entrepreneurs and founders are afforded direct entry into European markets as they launch companies and make valuable connections within the region. The program can also augment local workforces with a limitless talent pool.
Other regions that entrepreneurs and founders can look to
As a leading information technology (IT) outsourcing destination, Ukraine hopes to leverage e-residency as a means to maintain its comparative advantage in the IT sector. Ukraine’s digital transformation ministry expects the program to amass 3,000 e-residents and generate US$1.5 million by 2022.
The ministry also projects that the majority of applicants will be IT specialists from Asia-Pacific and Eastern Europe. With over 2,500 e-residents, mainly from Pakistan and India, Ukraine is already setting itself up as a prime IT hub and capturing the interests of quickly expanding startups.
Lithuania is another country that startups should have their sights on. Having launched an e-residency program only this year, Lithuania expects to emulate Estonia’s current e-residency model by 2022.
Will e-residency programs take root in Asia-Pacific?
Although there is mounting interest in e-residency programs and a growing number of e-residents from China, India, and Japan, to name a few, Asia-Pacific currently doesn’t have any e-residency programs of its own.
One reason is the pivotal role that digital infrastructure and legal and policy frameworks play in allowing individuals to enjoy the full impact of such opportunities.
For example, the foundation of Estonia’s success was laid out decades prior with early digital adoption. The country introduced e-banking as early as 1996 and incorporated e-tax services, e-signatures, and digital IDs shortly after. Today, 99.6 percent of bank transactions in Estonia are done electronically, and over 96.3 percent of the population declares income electronically.
Although there are several digitally advanced economies like Japan, South Korea, and Singapore, more must be done before developing nations across Asia-Pacific can launch such programs of their own. Governments must improve physical communication infrastructures and foster a productive policy environment for individuals and companies alike.
“I think many nations will be able to roll out a program. They’ll be able to define it. They’ll be able to announce it, and they’ll probably be able to enroll some interest. But will it be effective? Will it scale? Will it provide for the promise?” asked Charles Ferguson, General Manager of Asia-Pacific at Globalization Partners.
Today, digitization helps economies transform international trade by overcoming barriers like transport and logistics costs. While global trade can lose momentum, cross-border data flow continues to expand swiftly.
Singapore, a top contender for fast-growing companies
Which Asia-Pacific country can create an e-residency program that’s successful enough to provide companies with a gateway into its digital infrastructure and policies to enable them to conduct business seamlessly?
To Ferguson, the answer is simple. “If anybody in the Asia-Pacific is going to crack the code, it’s going to be Singapore. Singapore has a far more compliant, interwoven, and interdependent government than many of its neighbors. And its brand is based on trust, compliance, and transparency,” explained Ferguson.
In fact, Estonia recently appointed Singapore as the latest pickup point destination for e-residents to collect their documents because it remains a hotbed for innovation, talent, and digital nomads.
In September, the two countries signed a new Memorandum of Understanding (MOU), allowing greater market access, increased collaboration between startups, and expertise sharing for cybersecurity policies – a move that signals Singapore’s burgeoning criticality as the region’s top business hub.
A solid digital infrastructure that companies can rely on
Singapore continues to make strides in its digital framework, ranking first globally as a location for startup talent and fiber-to-home penetration and first in Asia for digital readiness.
Singapore’s Infocomm Media Development Authority (IMDA) remains dedicated to establishing the city-state as a leading digital economy by prioritizing research and innovation, physical and digital infrastructure, governance, policies, and standards – critical features that allow companies to thrive, innovate, and grow
This is evident through Singapore Personal Access (Singpass), a trusted digital identity and a platform that bridges access to over 460 government and private sector services. Similarly, during the Covid-19 pandemic, the country created TraceTogether and SafeEntry, national digital check-in systems facilitating quick contact tracing efforts.
“Logistics, blockchain, and fintech rely almost exclusively on digital transformation and digital transmission of data, and are becoming a nexus point here in Singapore. Therefore, it doesn’t stretch the imagination too far to think the government, with the smart nation initiatives, could create a service oriented not only to physical residents but to virtual residents too,” said Ferguson.
Learn how we can help you grow in Asia-Pacific
For now, the success of e-residency programs is limited to only a handful of countries. And while such programs are highly effective in generating a solid foothold in a new region, they do not provide services relating to compliant hiring, risk-free international growth, in-country HR specialists, or compliant payroll management.
Still, growth in Asia-Pacific remains unparalleled, and there are plenty of opportunities for companies to tap into. With supportive government structures, high digital penetration, and sound policies, fast-growing startups should get a head start against the competition by setting up a base in the region.
Work with Globalization Partners, a global employment platform that simplifies international growth by making it easy for companies to hire anyone, anywhere, within minutes, and without setting up subsidiaries. We can help onboard your employees, and take care of payroll, taxes, and HR-related matters.
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