Why good things happen in Estonia? Piret Treiberg Head of Enterprise Division Economic Development Department 2015 Nov 16 th Minsk

(Map & location) Area: km2Area: km2 Population: 1,3 millionPopulation: 1,3 million GDP: € (per capita 2014) GDP growth: 2.1% (2014) Exports: 85% of GDP (2014) Member of EU, Eurozone, OECD, NATO and SchengenMember 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 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 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 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 Enterprise infrastructure and staff training Machinery and equipment; technological innovaton People Smart entrepreneurship New business models

Targets of Enterprise Growth Strategy 2020 VALUE ADDED Productivity per employee 80% EU average (currently 72) BUSINESS MODEL ( Share of young innovative enterprises, early phase investments) R&D Private sector R&D expenses 2% GDP (currently 0,86 ) ENVIRONM ENT (Doing Business 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 Diagnosti cs Trainin g Coachi ng The compa ny applies EAS is taking contact Prelimenary diagnostics Loans Up to 2 week Grants Guarantee s Services Long term action plan Execution Up to 6 monthUp 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 km1 000 km 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 Register ID-Ticket e-Police State Portal i-Voting e-Health e-Pension Account Tax and Customs Board Customer Self Service Portals e-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 Estonian Ministry of Economic Affairs and Communicatoin development/entrepreneurship-and-innovation E- Estonia

Thank You! Piret Treiberg