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Snapshots on Estonian economic development and innovation potential

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Snapshots on Estonian economic development and innovation potential

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  1. Snapshots on Estonianeconomicdevelopment and innovationpotential Ain Aaviksoo, MD MPH Praxis Centre for Policy Studies Member of Executive Board November 22, 2010

  2. Challengesin 2003 aspointedoutby Praxis • In order toraise the competitivenessof the economyitiscrucialtoobtain the highestpossibleriseinproductivityin the industrialsectoras the technologydrivenrisein the productivityofagricultural and servicessectorscanonlybemuchmorelimited. • The specialisationof the Estonianindustry on labour and resourceintensivefieldsindicatesanimminentthreatof a lock-into a lowincomelevel. • M Tiits, R Kattel, T Kalvet, R Kaarli. „Competitiveness and FutureOutlooksof the EstonianEconomy“. Research and DevelopmentCouncil (2003)

  3. Labourproductivity & real wagegrowthhasnotbeen the strongest side of Estonia(%, yearlyperiodiccomparison) Source: M of Financial Affairs, 2009 Source: Eurostat

  4. Unemploymentisashighasitcanbe... Source: Statistics Estonia

  5. The worstisover, but ... Nominal GDP by quarter Source: Statistics Estonia (2010)

  6. Estonian enterprises are relativelyinnovative Source: Statistics Estonia (2010)

  7. R&D investmentstructurein EU countries (2008 orlatest) Source: Eurostat

  8. R&D employees are increasinginenterprisesector

  9. Tax policy – 2 recent projectsby Praxis • Feasibility of zero tax rate on corporate retained earnings. (by MoF) • Results to be published very soon • The analysis of tax measures to promote research and development activities in Estonia. (MoEA&C; Praxis + KPMG)

  10. Fiscalpolicy and publicfinance - recommendations • Most of the tax burden is on consuption (slightly regressive) and labour (slightly progressive). • Tax burden on corporate income is the lowest in EU. • Real estate or motor vehicle tax - should be discussed. • Tax incentives for education and R&D are advised since they have proven to be efficient. • Fiscal policy and public finance are very procyclical, i.e. little or no macroeconomic stabilisation. Discussion is needed.

  11. HighlightsfromHumanDevelopmentReport • Main strategicchallengeiseducation: • Highproportionofuniversity-leveleducated • Inefficientfinancingofuniversities • Increasing, yetstilllowlifelonglearningparticipation(10% in EE vs 30% in DEN) • Earlysocio-economicsegregationand unequalaccesstohighereducation • Too manytoo smallmunicipalitieshindereducational reform – no politicalwillinsighttochangeit Estonia is different! Source: H Vitsur in “Estonian Human Development Report 2009”

  12. Moreinformation ain.aaviksoo@praxis.ee annika.uudelepp@praxis.ee www.praxis.ee • Comingin 2011 • Election programmes’ feasibilityevaluation • Sustainabilityofsocialsecuritysystems • Praxis endowmentfundestablished Thankyou!