Five years ago, Estonia set itself a goal-of-decade to improve competitiveness. Half way, the aims have largely been reached while the weightiest – raising labour productivity to 80 of EU average – may remain a dream without radical steps taken.
«Estonia 2020» vision begs extra guts
We are talking about «Eesti 2020» – a national development plan to improve Estonia’s international competitiveness as first tackled by Andrus Ansip’s third government in 2011. The vague-named document is basically nothing but a vision for Estonian macroeconomy, obligatory for all governments.
According to interim report by Government Office, 17 of the 11 goals have been reached or are going according to schedule; with six, the state is lagging behind or even backslidden.
Estonia has shown best development in employment and education. For instance: among those aged 20-64, employment rate has risen to 73.3 percent from the post-recession 66.4 percent in 2011. This is just some few percent under goal set for 2020. In the opinion of some, the share of highly-educated among those aged 30-34 has actually overgrown – exceeding the 2020 aim by 3.7 percent.
This is not enough to ensure happiness, however, as economy and social aspects are way behind the prescribed tempo.
Message to next government
Pursuant to plan, productivity of Estonia’s working people ought by now to have risen to 73 percent of EU average. It is at 70. The percentage of those living in relative poverty ought to have been lower by a percent, but it rose by one. Thus: Estonians seem to be working hard and getting educated while productivity won’t grow and poverty won’t give way.
As already underlined by National Audit Office, by simply allotting money to entrepreneurship the government will never increase competitiveness. Thus far, governments have invested into increase of Estonia’s export volumes by pumping state and EU subsidies into the economy. Even so, as shown by economy ministry analysis last year, export volume and added value at enterprises thus supported had grown just as much as at those that were not.
What’s more: the support money will within this financing period shrink to €90,1m – from about €330m. Something needs to change.
The interim report containing 150 proposals is essentially nothing by a message by officials, analysts and entrepreneurs to the next coalition on how to ensure Estonia’s success.
The Government Office vice strategic director Märt Loite will not deny that the report was purposefully timed to pre-election days. «Surely, there are things insufficiently discussed. Like tax policy,» he said.
The roots of the issue go to the shrinking population. Over the next five years, the ranks of those aged 20–64 will, according to Statistical Office, thin by 44,000. In order to maintain the critical level of about 600,000 employed, we’d already need an 80 percent employment level. To crawl out of the hole, we will need to learn how to work more effectively and expensively – and fast. Otherwise, we’ll need to bring in extra hands.
Immigrants and innovation
To have foreign labour brought in, the government is expected to take huge strides. Thus, Estonia might develop a talents policy including finding the foreign talents, adjustment programme, and support services. An option could be tax incentives for incoming labour force, such as exemption of social tax for a set period.
Also, during the upcoming five years, the state might develop training programmes for the sectors neediest when it comes to specialists – enabling during 1.5 years max to train the minimal amount of employees.
Estonian education must do away with the option to expel problem pupils. Costs for research and development should never drop below 2 percent of GDP. Research might attract private sector money, but for that higher education must become much more professional (applied). When that happens, Estonian enterprises may break into new markets such as NATO and European Space Agency.
State pressure is eagerly expected regarding innovation. For instance: the report suggests that the proportion of public procurements supporting innovation be raised to 3 percent of all by 2020.
- Last year, World Economic Forum (WEF) placed Estonia as 29th from among 144. International Institute for Management Development (IMD) had us 30th among 60.
- As Estonia’s strongest points, they cited effectiveness of labour market and quality of education. Meanwhile, Estonia is very poor when it comes to infrastructure, development of business activity and market size.