National Audit Office dissatisfied with governmental efforts to develop economy

Photo: Mihkel Maripuu

The chronic ills of Estonian economy have been overshadowed by positiveness of macroeconomic indicators but haven't gone anywhere, Auditor General Alar Karis writes in annual report.

«The knot of the problems has rather been pulled tighter, not loosened. The machinery of Estonian economy isn’t working the best possible way, and in order to solve the problems the efforts of one or two ministries are not enough,» explained Mr Karis.

A key knot as assessed by Mr Karis is linked to the functioning of labour market and to productivity while the population is shrinking.

«The problem is that Estonian economy is yet to experience the changes which would offer a larger part of Estonian labour force such jobs where more added value could be created. Equally, a problem is in that the skills of lots of Estonian employees may not be sufficient to work on mid- and high-tech jobs,» added Mr Karis.

Mr Karis said that in this the government has promised to bring major changes, to break down walls between various agencies and to thereby make governing more effective, but they have not reached too far with actions.

As a positive, Mr Karis notes the government has indeed embraced in its action plan many of the suggestions by National Audit Office the past couple of years. Plus the continually conservative approach to increase of state budget spending, and the striving towards fighting the needless bureaucracy in issues related to governance.   

As chief risks to development in Estonia, the audit office points out the low productivity and structural problems on labour market. The office reprimands the government that their economic and business policy isn’t expediently shaping labour market demand; the selected domains of favoured growth development may not be the best for Estonia; clarity is lacking regarding which labour force, and how, should be trained to substantially improve productivity. Also, the office says that the government is doing too little and too late in enhancing regional business and jobs creation.

The report also underlines insufficiency of governmental information to direct labour force offer; predicting needed labour force has for years been underestimated and the government’s active labour market measures are unable to bring solutions to structural problems thereof; skills and knowhow of the unemployed do not correspond to labour market needs; services offered by the Töötukassa (unemployment insurance fund) do not substantially invest into increased qualification of the jobless; no effectual solution has been found for regional unemployment problems.

National Audit office advises

• Improve cohesiveness of economic, educational, labour, regional and migration policy so the ministries would have a similar and complete overview of problems;
• Agree about in which domain, how many and which jobs should disappear, emerge or be reshaped in Estonia;  
• Compile a labour force needs prognosis to provide the needed information to effectively shape economic, educational and labour market measures;
• By state reform, create for local governments the prerequisites for developing regional business;
• Change regional action plans into instruments that actually direct governmental policy options and financing decisions;
• Carry out educational policy measures meant for those who drop out of schools, the young unemployed, and the groups in greatest need of lifelong learning;
• Develop labour market services specifically for solving structural problems on labour market;
• Execute state migration policy in a way that it would maximally support Estonian economic growth.