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Why good things happen in Estonia? Piret Treiberg Head of Enterprise Division Economic Development Department 2015 Nov 16th Minsk (Map & location) At the Heart of the Baltic Sea • 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 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 2008-2010 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. 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. Recovery from economic crisis 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 Estonia is one of the most successful countries in in the world in attracting FDI Enterprise policy in Estonia Evolution of Estonian enterprise policy Enterprise infrastructure and staff training 2004-2006 Machinery and equipment; technological innovaton 2007-2013 People Smart entrepreneurship New business models 2014-2020 Targets of Enterprise Growth Strategy 2020 R&D Private sector R&D expenses 2% GDP (currently 0,86) BUSINESS MODEL (Share of young innovative enterprises, early phase investments) VALUE ADDED Productivity per employee 80% EU average (currently 72) ENVIRONM ENT (Doing Business 15) EXPORT Estonian share in world trade 0,11% (currently 0,096) Key areas Product development Productivity Export Diagnostics + councelling Financial instruments New businesses Grants Skills and knowledge Financial instruments Opportunities for enterprises: • • • • guarantees with state guarantee loans venture capital credit insurance The compa ny applies Diagnosti cs EAS is taking contact Prelimenary diagnostics Prelimenary diagnostics Up to 2 week Coachi ng Trainin g Long term action plan Development plan program Services Grants Guarantee s Loans Creating the action plan Execution Up to 6 month Up to 3 years Export Trainings Advisory services Business opportunities Export plan Inquiries „Sourcing“ service Market research Market information Trade missions How to find clients Export readiness Matchmaking events E-marketing Market overviews Export partner search Export of the services Export advisers in our foreign offices National stands on International trade fairs Market specific seminars Associated export advisers abroad* Target markets 100 km Neighboring markets 1 000 km The next circle 10 000 km Distant markets Finland Sweden China Russia Norwey Japan Danmark Nederland Germany France UK 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 prestart-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 Business Register e-Banking Tax and Customs Board ID-Ticket Customer Self Service Portals e-Invoice e-School e-Pension Account Digital Signature e-Police State Portal i-Voting Land Register e-Health 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/economicdevelopment/entrepreneurship-and-innovation E- Estonia https://e-estonia.com/ Thank You! Piret Treiberg [email protected]