Remarks by Foreign Minister Kristiina Ojuland at the European Business Summit
Brussels, June 7, 2002
TRANSFORMING ESTONIA
Excellencies,
Ladies and Gentlemen
I Bold reformer
Estonia is known for its radical reforms. The keywords in our success have been openness and prudent economic policies. Price liberalization, flat taxation, rapid privatisation and a liberal trade regime brought about early macroeconomic stabilization in the middle of 1990s and the creation of a favourable environment for economic development. Estonia managed to make the right decisions without delays and it paid off.
Estonia's currency – the kroon is almost ten years old. Its exchange rate with the German mark, now the euro, remains fixed. We aim to maintain the currency board arrangement until Estonia will join the EMU.
Our financial policy has to remain conservative, we want to maintain the balanced budget policy and conservative borrowing activities of the government sector.
There are many different ways to analyse the economic environment, but in general they all show that Estonia is today a good place to do business. The International Institute for Management Development world competitiveness index ranks Estonia 21st, The World Economic Forum Current Competitiveness Index 27th, The Heritage Foundation and Wall Street Journal Index of Economic Freedom even 4th.
According to the World Bank, we are close to the end of the transitional period. But it is not the end of transformation. Our GDP per capita, however, is still 38 per cent of the EU-s and so we have to find ways to catch up. We still have to find ways to reduce red tape and especially on the level of the local government.
Estonia aims to complete EU accession negotiations by the end of 2002 and to be ready to become a member of the Union in 2004. With these aims in mind, we are looking for economic policies that will assure us rapid development as a member of the Union. It is clear that as part of a large single market we will be able to compensate the small size of our own market. Yet at the same time Estonian enterprises will need to make substantial investments in order to meet European standards. We will need to move towards more regulated markets.
II Export oriented
Foreign economic relations have served as an engine for the development of Estonia’s economy. Economic growth has to a great extent been based on the rapid growth of exports, which has been supported by liberal trade policies and open current account transactions. We found out that to open economy is the right way to compensate the small size of Estonian market. Estonian exports of goods and services are twice the size of our GDP and this is one of the highest ratios in Europe.
Estonia has re-organized its foreign trade structure: 70 per cent of exports are bound for the European Union, more than 10 per cent to EU candidate countries and less than 10 per cent to the CIS countries. Nordic countries play very important role in our foreign economic relations, but today we can see many multinational companies establishing themselves in Estonia.
III Private initiative
Achieving a high level of investments has also been an important component in our success. This is closely connected to the successful privatisation process. Estonia adopted the German Treuhand model according to which enterprises enterprises were sold by international tender to a core investor.
Economic recovery has also been accompanied by a marked shift of industry from the public to the private sector. Today the private sector generates more than 75% of the country’s GDP. Last year we closed down our Privatisation Agency, because the mass privatisation is done and there are very few enterprises in the state ownership now.
Estonia has used several radical schemes of public-private partnership. One of the good examples is the IT College in Tallinn.
Estonia has one of the highest accumulated foreign direct investment levels per capita in Central and Eastern Europe. A significant part of the profits from FDI in Estonia is reinvested and it shows that companies have long-term interests in Estonia.
Having such an important role of private sector in our economy the government is aimed to promote co-operative labour relations. We have a practice of tripartite negotiations together with employers and trade unions and as a result very stabile labour relations.
IV Estonian answers to the new challenges
A small and open economy has to be very flexible, so we have to ensure that our society is oriented towards changes. Today the government must create the conditions for building a modern knowledge-based economy by supporting small and medium sized businesses and especially in innovative areas. Enterprise Estonia is an institution to support the invention of new technologies, foreign investment in Estonia, exports and tourism. So there is one place to get answers to many different questions. It has representatives in several European countries.
Estonia has to concentrate on five main priority areas to ensure stable and sustainable growth:
Serious efforts to modernise education by investing into all levels and forms of education. Our labour force is still relatively cheap and well-qualified, but to ensure ability to answer new challenges we have to improve all levels and fields of education, ensure that people raise their qualifications throughout their whole career. Many young Estonians study abroad and we have more foreign students in Estonia every year. So our people obtain abilities to work with people from different countries and cultures.
Heavily invest into infrastructure to ensure that in addition to telecom and IT services it reaches the average level of the EU. Our roads are still poor, railway connections to south not in use very much and so on. So we have to invest heavily into the Via Baltica highway and I hope that soon there will be Rail Baltica project on the way too.
Strong support to our priority areas in science and technology - IT, biotechnology and new materials. There are two scientific parks in Estonia which have many interesting ideas for new products and technologies.
Keeping our nature clean and using resources with care- Estonia has big resources of fresh water, forests and wetlands. It means good conditions to live, for tourism and for production units which need a clean environment.
Development of tourism and recreational services, transit operations and other activities where we can use our geography, flexible use of regional co-operation in different forms around the Baltic Sea. In modern economy we can talk about variable geography co-operation- in some areas we have Estonian- Finnish- Swedish, in some Baltic, in some Nordic-Baltic, in some we work closely with the Russian North-West. Estonia is ready to meet all of these challenges and make use of the new opportunities that they provide. Positively transforming - this is the message today.
Thank You
TRANSFORMING ESTONIA
Excellencies,
Ladies and Gentlemen
I Bold reformer
Estonia is known for its radical reforms. The keywords in our success have been openness and prudent economic policies. Price liberalization, flat taxation, rapid privatisation and a liberal trade regime brought about early macroeconomic stabilization in the middle of 1990s and the creation of a favourable environment for economic development. Estonia managed to make the right decisions without delays and it paid off.
Estonia's currency – the kroon is almost ten years old. Its exchange rate with the German mark, now the euro, remains fixed. We aim to maintain the currency board arrangement until Estonia will join the EMU.
Our financial policy has to remain conservative, we want to maintain the balanced budget policy and conservative borrowing activities of the government sector.
There are many different ways to analyse the economic environment, but in general they all show that Estonia is today a good place to do business. The International Institute for Management Development world competitiveness index ranks Estonia 21st, The World Economic Forum Current Competitiveness Index 27th, The Heritage Foundation and Wall Street Journal Index of Economic Freedom even 4th.
According to the World Bank, we are close to the end of the transitional period. But it is not the end of transformation. Our GDP per capita, however, is still 38 per cent of the EU-s and so we have to find ways to catch up. We still have to find ways to reduce red tape and especially on the level of the local government.
Estonia aims to complete EU accession negotiations by the end of 2002 and to be ready to become a member of the Union in 2004. With these aims in mind, we are looking for economic policies that will assure us rapid development as a member of the Union. It is clear that as part of a large single market we will be able to compensate the small size of our own market. Yet at the same time Estonian enterprises will need to make substantial investments in order to meet European standards. We will need to move towards more regulated markets.
II Export oriented
Foreign economic relations have served as an engine for the development of Estonia’s economy. Economic growth has to a great extent been based on the rapid growth of exports, which has been supported by liberal trade policies and open current account transactions. We found out that to open economy is the right way to compensate the small size of Estonian market. Estonian exports of goods and services are twice the size of our GDP and this is one of the highest ratios in Europe.
Estonia has re-organized its foreign trade structure: 70 per cent of exports are bound for the European Union, more than 10 per cent to EU candidate countries and less than 10 per cent to the CIS countries. Nordic countries play very important role in our foreign economic relations, but today we can see many multinational companies establishing themselves in Estonia.
III Private initiative
Achieving a high level of investments has also been an important component in our success. This is closely connected to the successful privatisation process. Estonia adopted the German Treuhand model according to which enterprises enterprises were sold by international tender to a core investor.
Economic recovery has also been accompanied by a marked shift of industry from the public to the private sector. Today the private sector generates more than 75% of the country’s GDP. Last year we closed down our Privatisation Agency, because the mass privatisation is done and there are very few enterprises in the state ownership now.
Estonia has used several radical schemes of public-private partnership. One of the good examples is the IT College in Tallinn.
Estonia has one of the highest accumulated foreign direct investment levels per capita in Central and Eastern Europe. A significant part of the profits from FDI in Estonia is reinvested and it shows that companies have long-term interests in Estonia.
Having such an important role of private sector in our economy the government is aimed to promote co-operative labour relations. We have a practice of tripartite negotiations together with employers and trade unions and as a result very stabile labour relations.
IV Estonian answers to the new challenges
A small and open economy has to be very flexible, so we have to ensure that our society is oriented towards changes. Today the government must create the conditions for building a modern knowledge-based economy by supporting small and medium sized businesses and especially in innovative areas. Enterprise Estonia is an institution to support the invention of new technologies, foreign investment in Estonia, exports and tourism. So there is one place to get answers to many different questions. It has representatives in several European countries.
Estonia has to concentrate on five main priority areas to ensure stable and sustainable growth:
Serious efforts to modernise education by investing into all levels and forms of education. Our labour force is still relatively cheap and well-qualified, but to ensure ability to answer new challenges we have to improve all levels and fields of education, ensure that people raise their qualifications throughout their whole career. Many young Estonians study abroad and we have more foreign students in Estonia every year. So our people obtain abilities to work with people from different countries and cultures.
Heavily invest into infrastructure to ensure that in addition to telecom and IT services it reaches the average level of the EU. Our roads are still poor, railway connections to south not in use very much and so on. So we have to invest heavily into the Via Baltica highway and I hope that soon there will be Rail Baltica project on the way too.
Strong support to our priority areas in science and technology - IT, biotechnology and new materials. There are two scientific parks in Estonia which have many interesting ideas for new products and technologies.
Keeping our nature clean and using resources with care- Estonia has big resources of fresh water, forests and wetlands. It means good conditions to live, for tourism and for production units which need a clean environment.
Development of tourism and recreational services, transit operations and other activities where we can use our geography, flexible use of regional co-operation in different forms around the Baltic Sea. In modern economy we can talk about variable geography co-operation- in some areas we have Estonian- Finnish- Swedish, in some Baltic, in some Nordic-Baltic, in some we work closely with the Russian North-West. Estonia is ready to meet all of these challenges and make use of the new opportunities that they provide. Positively transforming - this is the message today.
Thank You
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