A seminar at Eesti Pank sought the formula for success for a small country with an open economy



Economies are cyclical and there is always one doing better and another doing worse, but it is important to invest and carry out reforms in difficult times as well so as to be more competitive in the future. A public seminar on competitiveness at Eesti Pank heard that businesses do not just expect simple handouts from the state, as a greater priority for them is friendly and constructive attitude.

Governor of Eesti Pank Madis Müller described in his opening address what is understood by competitiveness, and discussed the reasons why the Estonian economy has been performing worse than those in other European Union countries of late. He said that exports from Estonia continuing to decline is a dangerous sign. It raises the question of whether Estonia should just hope that demand will recover in the markets that Estonia exports to and that this will bring growth to the Estonian economy, or whether Estonia should look for additional ways to become more competitive.

Meri Obstbaum, Head of Forecasting at Suomen Pankki, the Finnish central bank, described how competitiveness in Finland had waxed and waned, and has long been in the doldrums since the fall of Nokia and the financial crisis. Companies have adapted slowly to the changed circumstances. A clear success factor over time has been the importance of research and development work and education, and investment has continued in that area even during the times of economic difficulties. This has created the prerequisites for the emergence of industries with high added value. Looking ahead, however, the shortage of skilled labor risks becoming one of the main factors weakening the growth potential of the Finnish economy in the coming decades. This is because the working age population is shrinking and negative trends education. It is necessary to consider how to better motivate people to gain the skills needed and to make it easier to import skilled labour, as the quality of human capital is a prerequisite for both domestic innovation and technology transfer from abroad. The only success strategy for a small country at the European periphery can be to compete in production that has high value added and demands high skill levels, she said.

The subsequent discussion group considered first the changes in the international environment and how they affected the outlook for Estonian companies. Director of European Union Affairs at the Government Office of Estonia Klen Jäärats observed that a great deal depends on how Russia’s war in Ukraine ends. Head of the Foresight Centre Tea Danilov also identified the impact of the war among the main trends, as it has pushed countries to group themselves into different camps, and she then highlighted the green transition, which has led to a lot of redistribution and a lot of new opportunities for those who can react fastest. Head of the international cooperation and funding office at Enterprise Estonia and KredEx Joonas Vänto said that investors remain highly interested in investing in Estonia even in the current difficult climate. Extra attention should be paid to ensuring that electricity is sufficiently available.

The second discussion group was for businesses to give their assessment of the circumstances. The participants were Ain Hanschmidt, CEO of ASi Infortar, which is a major owner of Tallink and Eesti Gaas; Agur Jõgi, board member and Chief Technology Officer at Pipedrive; Sirli Männiksaar, CEO at Ericsson Eesti; and Alo Tamm, managing director of Harmet OÜ. Their companies see solutions for growing the Estonian economy in closer cooperation between the private sector and the state, including in education and development of the skills needed, and in applying the results of research work commercially. It would be sensible for the state to have a long-term business plan and a stable environment in which important decisions are not made overnight. The companies also consider it important to underline to foreign investors that Estonia is a member of NATO and that there will be no war here.

View the seminar photos on the Eesti Pank's Flickr account. (Photos: Arno Mikkor).

Additional information:
Hanna Jürgenson
Communications Specialist
Eesti Pank
5692 0930
Email: [email protected]
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