Estonian Machine Building, Metal Working, and Apparatus Industry on the Threshold of European Union...

Estonian Machine Building, Metal Working, and Apparatus Industry on

the Threshold of European Union

Dr. Jüri Riives

EESTI MASINATÖÖSTUSE LIITFEDERATION OF ESTONIAN ENGINEERING INDUSTRIES

Estonia from the Outside


2003 World Economic Freedom Index

1. Hong Kong

2. Singapore

3. New Zealand

6. Estonia

6. United States

9. United Kingdom

11. Finland

19. Germany

29. Lithuania

33. Latvia

35. Czech Republic

44. Hungary

The Global Competitiveness Report

1. United States

2. Finland

3. Taiwan

4. Singapore

5. Sweden

26. Estonia

28. Slovenia

29. Hungary

36. Lithuania

40. Czech Republic

44. Latvia

51. Poland

Foreign Trade Characteristics


Export Of which re-export after inward processing

% Import Of which importation for inward processing

%

1995 1.2 0.28 23.2 1.8 0.27 15.6

1996 1.4 0.31 23.0 2.2 0.30 13.5

1997 1.9 0.50 26.7 3.1 0.47 15.1

1998 2.2 0.72 31.8 3.5 0.65 18.5

1999 2.2 0.73 32.6 3.2 0.70 21.6

2000 3.4 1.51 43.8 4.6 1.43 31.0

2001 3.7 1.41 38.0 4.8 1.19 24.8

Estonian Foreign Trade 1995-2001, special trade method (billion EUR)

Source: Statistical Office of Estonia (http://www.stat.ee)

Country of destination 2000 (%) 2001(%)

1. Finland 32.4 33.9

2. Sweden 20.5 14.0

3. Latvia 7.0 6.9

4. Germany 8.5 6.9

5. United Kingdom 4.4 4.2

6. Denmark 3.4 3.5

7. Lithuania 2.8 3.0

8. Norway 2.4 2.8

9. Netherlands 2.5 2.8

10. Russia 2.4 2.8

Export (by country, %)Country of destination 2000 (%) 2001(%)

1. Finland 27.5 18.1

2. Germany 9.6 11.0

3. Sweden 9.9 9.2

4. China 3.6 ´8.7

5. Russia 8.5 8.1

6. Japan 6.1 4.5

7. Italy 2.9 3.3

8. Lithuania 1.6 2.6

9. Denmark 2.5 2.5

10. Netherlands 2.1 2.5

Import (by country, %)

Competitiveness of Engineering Industries


Export percentages in engineering industries by activity fields in 2000-2001

Activity field Export importance,

2000

Export importance,

2001 IV Quarter

Chemistry 11.3% 6.8%

Production of building materials 3.6% 2.7%

Production of foodstuffs, drinks, tobacco 12.8% 12.0%

Wood processing, production of furniture

and paper

29.1% 27.3%

Textile industry 13.0% 18.1%

Machine and apparatus building 24.2% 24.3%

Other activities 4.7% 8.8%

Source: Statistical Office of Estonia

General Description of Machine Building, Metal Working, and Apparatus Industry

Sector


22.3% Sector importance in engineering industries

26% Export importance in the sector

1200 Number of companies in the sector

20 000 Number of employees in the sector

670 mln Euro Turnover per year

450 000 tons Steel supply required per year

Distribution of Activities by Location


Tallinn and North-Estonia 55%

Nord-East Estonia 7%

South-Estonia 17%

Central-Estonia 10%

West-Estonia 11%

Estonian Machine, Metal and Apparatus Building Industry – What Kind We Are?


Distribution of the companies of the sector according to the number of workers (by

EMTAK)

up to 4 workers

20%

5-19 workers37%20-49

workers25%

50 and more workers

18%

Distribution of the companies of the sector according to the turn-over (by

EMTAK)

Turn-over up to 1 mln

29%

Turn-over more than 100 mln

2%

Turn-over 50-100 mln

4%Turn-over 10-50 mln22%

Turn-over 1-10 mln43%

Source: Krediidiinfo

Structure of Machine, Metal, and Apparatus Building Industry


Capital split

Foreign7%

Estonian84%

Estonian/Foreign9%

Source: Estonian Office of Statistics Source: Results of Research

Shares of various branches in the sector (on the basis of financial indices)

Machine building industry

32%

Metal industry37%

Apparatus building and electronics

31%

Positive Factors Promoting the Business

• Good general education system

• Well educated persons

• English (foreign) language competence

• Good communications

• Well developed infrastructure

• Entrepreneurial know-how

• Materials available

– Estonian Chamber of Commerce and Industry

– Tallinn Enterprise Board

– Estonian Trade Promotion Agency

– Federation of Estonian Engineering Industry

• Government support


Labour Costs in Engineering and Electronics Industry


Total labour costs in engineering and electronics industry, 2000

0

5

10

15

20

25

30

Germ

any

Japa

n

Switzer

land

USA

Norway

Denm

ark

Sweden

Belgium

Nethe

rland

s

Spain

Finlan

d

United

Kin

gdom

Austri

aIta

ly

Franc

e

Irelan

d

Portu

gal

Estonia

eu

ro/h

ou

r

Salary offers in November, 2001

Gross wage (EUR/month) Estonia

Managing director 1500 – 3400

Financial manager 1400 – 2200

Chief accountant 500 – 1500

Specialist 500 – 1400

Salesman 350 – 700

Secretary 300 – 575

Source: MET

Main Sales Arguments and Threats in Machine, Metal, and Apparatus Building

Industry


Sales Arguments Threats

1. Good quality of products

2. Accuracy of order fulfilling

3. Short delivery time and flexible reaction to the customer’s demands

4. Cost of the product

5. Price/quality ratio

6. Reliability

1. Increase of product cost due to more expensive resources

materials energy salaries

2. Increase of labour costs is higher than growth of productivity

3. Restricted number of qualified workforce can not allow development of the branch

4. Low profit margin

5. Insufficient knowledge about export markets

6. Often the level of the graduates can’t satisfy the needs of nowadays production

Main Goals Towards Competitive Production


Productivity

Productivity is the definition ofcompetitiveness

Networking and Clusters

Successful clusters involve avariety of related industries,

suppliers and institutions, includinguniversities, R&D organizations, all

located at the same region

Innovation

The concept of National InnovationSystem has emerged from thewish to compare national styles

and patterns in policy making andinstitutionals setting for policy

making

Human ResourcesDevelopment

Knowledge and creativeness, thatcreate competitive advantage,

belong to human being. Anorganization's success depends on

how well it is capable to exploitcreativity of its employees

Average Labour Productivity and Labour Costs Productivity Index 1996-2002


1995 = 100%

Machine Building

108

150

217295

85 98120 129

0

100

200

300

1996 1998 2000 2002

Average labour productivity index (%)

Average labour costs productivity index (%)

Apparatus Industry

105

143167

193

105125

161 164

0

100

200

300

1996 1998 2000 2002

Average labour productivity index (%)

Average labour costs productivity index (%)

Estonian Employees Qualification System


Resources

PeopleMoneyTime

Professional councilsWorking groups

Professional qualification commitees

Examination commiteesExamination centres

Experts

Award of professionalqualifications

Training

Mapping of proffessionsWorking out and

modernization of occupational requirements

Professional certificate

Curriculum

Professional standard

Arrival of “Good Estonian Thing” to the World


Reputation advantages

Arrival of Good EstonianThing to the World

Company's good reputation

Quality

Flexible production

Presence of ISO 9001:2000certificate

Product's technical recordsand "CE"

Employees havingcertificates of

professional qualification

Good price/quality ratio advantages

Short delivery timesObservance of delivery times

Product certificates Process certificates

Estonian Machine Building, Metal Working, and Apparatus Industry on the Threshold of European Union...

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