Tallinn. As Indonesia and the European Union edge toward signing their long-awaited Comprehensive Economic Partnership Agreement (CEPA), a parallel pathway into Europe’s single market is quietly gaining traction: Estonia’s digital state.

For Indonesian entrepreneurs, Estonia’s e-residency program offers something the trade pact cannot yet deliver: immediate, frictionless access to the EU’s business ecosystem. The scheme allows foreigners to establish and run an EU-based company entirely online, without ever setting foot in the Baltic state.

“Coming from a small country, the question was how to become bigger,” said Mariin Ratnik, Estonia’s deputy minister for economic and development affairs, during a luncheon with Indonesian journalists in Tallinn on Monday. “We built a digital system domestically, and then asked: why not share it with the world?”

The answer is a platform that now links over 137,000 e-residents worldwide. Indonesians remain a modest but growing cohort, with 205 digital residents and 41 companies registered in Estonia. 

CEPA, expected to be signed as early as May after nearly a decade of negotiations, promises to eliminate tariffs on more than 98% of traded goods. Bilateral trade already reached $30.4 billion in 2024, with Indonesia posting a $4.4 billion surplus. Still, the agreement’s full benefits may take years to materialize, with entry into force targeted for 2027.

E-residency, by contrast, operates in the present tense. It allows Indonesian freelancers, startups, and even established firms to invoice European clients, access EU payment systems, and operate under a familiar regulatory framework, all without waiting for tariff schedules to be phased out.

The appeal is particularly strong in services trade, where physical distance matters less but regulatory access remains critical. “Indonesia is far for us, and Estonia is far for you,” Ratnik said, adding that distance becomes less relevant when the system is digital.

Taxation, however, remains complicated. Registering a company in Estonia does not automatically shift tax obligations there. Firms are typically taxed where income is generated or where management is based.

Estonia, for its part, is cautious. Applicants undergo background checks, and authorities stress the need for close cooperation with partner governments to prevent misuse. “We don’t want the platform to be misused,” Ratnik said.