The Next Big Thing

‘Easier to ship wine than buy an MP3’ across borders in Europe: EU falling behind in tech race as Chinese start-ups rise to top, says Estonian leader

With 6 of world's top 20 start-ups now Chinese, Ilves hails country's rapidly developing ecosystem, says Europe risks missing next technological wave due to red tape, data-privacy concerns

PUBLISHED : Wednesday, 11 November, 2015, 8:06pm
UPDATED : Thursday, 12 November, 2015, 4:43am

Chinese start-ups have quickly assumed some leading roles on the world stage by positioning themselves on the cutting-edge of technological innovation, but US firms still dominate global business, Estonian President Toomas Hendrik Ilves said on Wednesday.

“Among the world’s 20 largest start-ups nowadays, 14 are American and the rest are Chinese,” said Ilves, a former journalist who ascended to the presidency in 2006.

He made the comments in neighbouring Finland at SLUSH, Europe’s largest start-up conference, which is taking place this week in the Finnish capital of Helsinki.

Our technology advances, according to Moore’s Law ... But the legal system [in the EU] does not.
Toomas Hendrik Ilves

"Of course, all start-up companies want to be big," he said.

“But I think our [European Union] legislation hasn’t caught up with the technological reality,” he added.

Ilves was referring to policy issues like different tax regimes, controversial new “safe harbour” rules aimed at improving data protection, and the EU’s lack of a single digital market.

“It’s easier to ship a bottle of wine from Portugal to the north of Finland than buy an MP3 across borders,” he joked during a panel discussion.

Ilves also took the opportunity to air his grievances against some legislation in EU countries that retards technological innovation. He described this as anachronistic and said it threatens to hamper start-ups by damaging the business climate.

READ MORE: Six reasons for Finland’s record start-up success: Clash of Clans maker Supercell reveals all

Estonia is famous for its “e-society” strategy, which aims to make the government more efficient by making its operations more transparent. It also allows citizens to access public services more easily online.

He said the country is relatively open to new advances, whereas some other nations show resistance not because they are against change but due to financial issues.

Ilves pointed to the controversy surrounding car-hailing app developer Uber as an example, and said many governments opposed Uber’s rise more for tax reasons than anything else.

He also praised the business and investment culture in the United States. In Silicon Valley especially, start-ups tend to have a much easier time raising money and, later, cashing out than in other regions or markets.

From a financial perspective, this made it more attractive for start-ups from Estonia and other parts of Europe to relocate to the US after they had reached a certain size, he said, adding that many companies in Europe remain hamstrung by legal restrictions.

“Our technology advances, according to Moore’s Law,” he said of Estonia.

“But the legal system [in the EU] does not.”

He was referring to the oft-quoted observation by Intel founder Gordon Moore in 1965 about accelerating tech growth. Moore said the number of transistors per square inch on integrated circuits had doubled every year since the integrated circuit was invented, and forecast such exponential growth would continue.

Ilves expressed particular disdain for the EU’s new safe harbour framework.

The European Court of Justice ruled last month against the pre-existing EU-US safe harbour agreement, much to the delight of critics of America’s data-collection policies.

The benchmark case effectively puts EU citizens back in the driving seat by proclaiming that their personal data cannot be assumed to be stored in compliance with law when processed by a US firm.

READ MORE: Facebook barred from sending EU citizens’ data to US after top court quashes transatlantic data agreement

Moreover, Ilves said that with greater connectivity, smart cars and the rise of the so-called “Internet of Things” - where smart gadgets “speak” to each other without any need for human input - it will become even more challenging for people to drive across Europe’s borders due to the framework’s tougher restrictions on data protection.

Estonia was ranked the best “e-government” by the United Nations in 2013. It has consistently been rated, by Wired and other respected industry magazines, among the world’s most advanced nations in terms of ease of access to public services, and for how easily its people can embrace new technology to raise their standard of living.