Why good things happen in Estonia?

Piret TreibergHead of Enterprise DivisionEconomic Development Department

2015 Nov 16th Minsk

(Map & location)

• Area: 45 227 km2

• Population: 1,3 million

• GDP: 14 860 € (per capita 2014)

• GDP growth: 2.1% (2014)

• Exports: 85% of GDP (2014)

• Member of EU, Eurozone, OECD, NATO and Schengen

• Credit ratings: Fitch A+; S&P AA-; Moody’s A1

At the Heart of the Baltic Sea

Basic principles of economic policy

Macroeconomic framework

• Liberal trade and price policy

• No restrictions to the free movement of capital

• Balanced budget of central government (also

the lowest public sector debt in Europe)

• Conservative foreign borrowing policy

• Simple and proportional tax system, no tax on

reinvested capital

Reforms 1991

I the reforms were comprehensive, encompassing both micro- and macroeconomic policies.

II the reformers went further than anywhere else in the world by implementing the free market principles.

III the most important policies of the whole reform package were implemented in a very short time-frame between 1992 and 1994.

The most important aspects of these reforms took place in the areas of monetary, fiscal and trade policies, as well as in the rule of law– particularly the rules governing property rights.

Role of foreign direct investments The role of foreign investments was particularly

crucial in the process of privatization of companies

There are no restrictions for the foreign investors, importers and other foreign firms to invest in Estonia.

Foreign investors have always been treated equally with domestic investors in Estonia

In the beginning of 2000’s, Estonian economy was growing fast, showing numbers in double digits.

2008

In the beginning of 2000’s, Estonian economy was growing fast, showing numbers in double digits.

What happened in 2008 was that significant export markets disappeared and the domestic housing bubble deflated.

The GDP shrank by 3.6 percent in 2008 and 13.9 percent in 2009 in Estonia

It was the third-deepest recession in the EU.

The unemployment rate reached almost 20 percent in spring of 2010.

World economic crises 2008-2010Significant export markets disappeared and the domestic housing bubble deflated.

The GDP shrank by 3.6 percent in 2008 and 13.9 percent in 2009 in Estonia

It was the third-deepest recession in the EU.

The unemployment rate reached almost 20 percent in spring of 2010.

Estonia had kept the public sector debt low during the boom years. The Estonian governments fiscal policies have always been conservative – even today public debt of Estonia remains at around 10.4 percent of GDP (2014) - one of the lowest in the world.

Throughout the boom years the government had run constant budget surpluses and built up emergency reserves.That also helped to respond to the crisis without any external assistance. Throughout the crisis Estonian government still had more reserves than debt. The reserves were 11, 6 % of GDP in 2009 and 12 % of GDP in 2010.

According to OECD Economic Survey, strong recovery from the crisis has benefited from structural strengths of the Estonian economy:

flexible labor force,

business friendly regulation,

well capitalized financial institutions,

a successful transition from the currency board to euro area membership,

and sustained credibility of fiscal policy

Recovery from economic crisis

Estonia is one of the most successful countries in in the world in attracting FDI

Enterprise policy in Estonia

Evolution of Estonian enterprise policy

2004-2006 2007-2013 2014-2020

Enterprise infrastructure and staff training

Machinery and equipment; technological innovaton

PeopleSmart entrepreneurshipNew business models

Targets of Enterprise Growth Strategy 2020

VALUE ADDED Productivity per

employee 80% EU average (currently

72)

BUSINESS

MODEL (Share of young innovativ

e enterprises, early

phase investme

nts)

R&D Private sector R&D

expenses 2% GDP

(currently 0,86)

ENVIRONME

NT (Doing Busines

s 15)

EXPORT Estonian share in

world trade 0,11% (currently 0,096)

Product development

Productivity

Export

New businesses

Skills and knowledge

Key areas

Diagnostics + councelling

Financial instruments

Grants

Opportunities for enterprises:

• guarantees with state guarantee• loans• venture capital• credit insurance

Financial instruments

Creating the action plan

Diagnostics

Training

Coaching

The compa

ny applie

s EAS is taking contact

Prelimenary

diagnostics

Prelimenary diagnostics

Loans

Up to 2 week

Grants

Guarantees

Services

Lon

g t

erm

acti

on

pla

n

ExecutionUp to 6 month

Up to 3 years

Development plan program

Export

Trainings

Export plan

Market research

How to find clients

E-marketing

Export of the services

Market specific seminars

Advisory services

Inquiries

Market information

Export readiness

Market overviews

Export advisers in our foreign offices

Associated export advisers abroad*

Business opportunities

„Sourcing“ service

Trade missions

Matchmaking events

Export partner search

National stands on International trade fairs

Target markets

Neighboring markets

Finland

Russia

The next circle

Sweden

Norwey

Danmark

Nederland

Germany

France

UK

Distant markets

China

Japan

100 km 1 000 km

10 000 km

Technological development centres R & D activities based on the wishes and needs of

entrepreneurs

R & D of technological development centres and development activities of the organization of technological development centres, marketing activities of technological development centres, etc.Clusters

Carrying out development activities of cluster to contribute to the increasing of production effectiveness, development or improvement of products, services and processes, and thus achieving higher added value.

Carrying out joint marketing activities with a wider networking of the cluster and involvement of new partners.

Start-up Estonia

Training and development programs introduced in pre-start-up stages:

Programs for developing start-up skills and knowledge

Programs for establishing start-ups and achieving investor readiness

Support of accelerators in start-up stages

E-Estonia

e-Banking

Digital Signature

Land Register

Business RegisterID-Ticket

e-PoliceState

Portal i-

Voting

e-Health

e-Pension Account

Tax and Customs Board Customer Self Service

Portalse-Invoice

e-School

Good example: e-annual year report

Full electronic procedure 2010

To reduce administrative burdens and provide simple and transparent business environment

Administrative burden was reduced 29,7% (4.6 mln EUR)

World Summit Award 2013

Future

10 mln e-Estonians for 2025

ID-card with digital signature for foreigners

Possibility to use Estonian e-services globally

Data Embassy

Real time economy

Additional information

• Estonian Entrepreneurship Growth Strategy 2014-2020

http://kasvustrateegia.mkm.ee/index_eng.html

• Estonian Ministry of Economic Affairs and Communicatoin

http://www.mkm.ee/en/objectives-activities/economic-development/entrepreneurship-and-innovation

E- Estonia

https://e-estonia.com/

Thank You!

Piret Treibergpiret.treiberg@mkm.ee