Economic development

As Estonia has limited quantities of tradable natural resources, added value and export provided by entrepreneurship will ensure the sustainability of the country.


The entrepreneurship indicators of Estonia place us into the same category with for example Scandinavian countries. However, compared to them, one of the main problems that we experience is low added value per employee – in 2013, the respective indicator for Estonia was approximately 70% of the European Union average.

It is important to consider that the number of people in the labour market is decreasing and this places our entrepreneurs in a situation where better results need to be achieved with less people. If we want to become more competitive, the following changes must be achieved in Estonia’s economic development:

  • Education of the labour force must better match the requirements of entrepreneurs 
  • Exports must be increased
  • Knowledge-based entrepreneurship must increase
  • Internationalisation must be enhanced and foreign investments are to be involved for that purpose
  • Establishment of a favourable climate for the birth of new, innovative start-up enterprises

 

Economic development and entrepreneurship

The Ministry of Economic Affairs and Communications, with its partners, has developed the "Estonian Entrepreneurship Growth Strategy 2014–2020", which is used as the basis to devise the activities for the upcoming European Union financing period.

 

Areas

Development opportunities for the economy are consistently analysed at the Ministry of Economic Affairs and Communications, high value is attached to innovation.

Entrepreneurship and innovation

We need to contribute strongly to innovation in technology and product development to enhance the productivity and added value in Estonian entrepreneurship. Co-operation between entrepreneurs and research institutions is important.
Further information » 

Economic analysis

There are more than 60,000 operating enterprises in Estonia; the number of enterprises with 250 employees and more is only about 150. Economic analysis will give us an overview of economic indicators, labour market forecasts and sector-based studies.
Further information »

 

Economic situation
 

Estonia’s economy is small, yet open and flexible.
 

The internal market of a country with less than 1.3 million inhabitants is too small for many enterprises and, therefore, they look for foreign markets. In 2014, export contributed approximately 90% of Estonia’s GDP and the volume of imported goods and services, used for production, investments or consumption, was largely the same.

Great openness also means that Estonian economy is susceptible to changes in external environment and economy and labour market have experienced major fluctuations over a short period of time.

However, as we look at economic development, Estonia has progressed, relatively fast, towards the developed European Union countries, although the backlog is still notable: according to Eurostat, the GDP per capita adjusted by purchase power was 47% of the respective European Union average in 2001 and had grown to 73% by 2013. The same picture can be drawn about productivity in Estonia. We aim to take our productivity to a level equivalent to 80% of the respective European Union average by 2020.

The OECD review of Estonian economy provides an overview of our most important economic indicators. Conjuncture studies characterise the current situation by both consumers and entrepreneurs.

Economic environment and administrative burden
 

Entrepreneurship in general is shaped by an economic environment that will determine how simple, convenient, clear and transparent the processes for entrepreneurs are in planning to pursue business interests here.

As the circumstances change, we have to respond by adjusting our policies and aim at reducing the burden on entrepreneurs. Therefore, as we consider every new legislative initiative, we must assess the accompanying economic influences, above all, the administrative burden.

We have created an administrative burden assessment calculator to simplify the evaluation process.

Most important economic environment topics:

  • Reducing the reporting requirements imposed on entrepreneurs
  • Simplifying the process for applying for and granting building permits
  • Improving the protection available to investors
  • Speeding up insolvency proceedings
  • Further compaction and improving the efficiency of the common European market
 

Estonian Entrepreneurship Growth Strategy 2014–2020

 

Entrepreneurship growth strategy will be the basis for shaping our entrepreneurship policy until 2020.
 

The main purpose of the strategy is to increase the productivity of Estonian entrepreneurs to 80 per cent of the respective European Union average. The entrepreneurship growth strategy has two strategic focuses:

  • ​Activity areas with major potential (the so-called growth areas) 
    Policy development will focus on giving preference to areas characterised by high growth potential, considering the specialisation of Estonian economy and research, development potentials and the developments in Europe and elsewhere that have the strongest effect on these areas.
  • Enterprises with major potential 
    The policy will rely upon customer analysis conducted by Enterprise Estonia showing that the exports and added value of Estonia are influenced, most strongly, by three groups of enterprises: large customer, so-called key customers and growth customers.

The growth strategy will focus on four topics:

  • Business model
  • Development and production
  • Sales and marketing
  • Competitive position

 

Results of the strategy:

  • The Estonian population is entrepreneurial and enterprises are ambitious
  • Estonian enterprises efficiently produce products with high added value and offer innovative services
  • Estonian enterprises export actively
  • Enterprises rate Estonia highly as a business environment

Implementation plan of the strategy
 

The Ministry of Economic Affairs and Communications will prepare an implementation plan of the strategy every year, which is to be endorsed by the Government. This plan will describe planned activities together with indicators, budgets and accountable entities. A report on the completion of the previous implementation plan will be submitted to the Government with each new implementation plan.

 

State enterprises

 

Enterprises that are characterised by participation of the state are mostly involved in the provision of services of strategic importance.
 

In 2015, the Republic of Estonia is holding an interest in 32 trading companies. 25 of these were solely owned by the state. The largest number of trading companies is operating in the administrative area of the Ministry of Economic Affairs and Communications – 18, in total.

The management of companies with state participation is divided between seven ministries and one participation is controlled by the State Forest Management Centre. 

In 2013, the consolidated shareholder equity in companies with state participation was about 3 billion euros, while the EBITDA was 654 million euros and net profit totalled 360 million euros.

In 2013, approximately 15,600 people worked in companies with state participation.

 

Partners and enterpreneurship regulation
 

The Ministry of Economic Affairs and Communications devises and implements its policies in close co-operation with the following partners:

  • Enterprise Estonia (EE)
    Priority intermediate body and the main support for both Estonian enterprises and foreign investors within business support context.
    Enterprise Estonia »

  • Network of county development centres
    Supports and advises regional and starting enterprises.
    Network of country development centres »

  • Foundation KredEx
    Offers support to entrepreneurs to ensure access to capital. Offers loans, loan guarantees and venture capital investments. Export guarantees are issued by KredEx Krediidikindlustuse AS.
    Foundation KredEx »
    KredEx Credit Insurance Ltd. »

  • Estonian Development Fund
    The main functions of the Development Fund include development monitoring and the implementation of smart specialisation, together with investments.
    Estonian Development Fund »

The Ministry works together with the following enterpreneurship organisations:

     

    International relations
     

    Estonia takes an active role in the working groups of the European Union, OECD and WTO that shape entrepreneurship policies.

    • The European Union
      The most important issues for the purposes of the European Union are the development of an entrepreneurship-friendly operating environment, improving the functioning of the internal market and more extensive development and implementation of e-solutions at the European Union level. Estonia wants to achieve a common and simple legal space in Europe that contributes to entrepreneurship.
      EL »

      OECD
      The main value of the Organisation for Economic Co-operation and Development (OECD) for Estonia includes good economic policy experiences and knowledge. Estonia will contribute to different OECD reports with adequate information about the local entrepreneurship environment and economic indicators.
      OECD »

    WTO
    Estonia pursues the interest of abolishment of barriers on trade and market liberalisation in the World Trade Organisation.
    WTO »


    The most important European initiatives that lend a focus to shaping Estonian entrepreneurship policy:

    • Start by thinking small
      The initiative will lay down the basic principles, objectives and activities for small enterprises both at European Union and member state level.
    • Entrepreneurship 2020
      The operational programme plans measures for cultivating entrepreneurship among people in Europe.
       
     

    OECD guidelines and surveillance
     
     

    The administrative contact point of the OECD in Estonia (NCP Estonia) introduces the organisation’s guidelines for global responsible business and observes the compliance of the guidelines with national and international law.

     

    The guidelines represent a part of the OECD Declaration on International Investment and Multinational Enterprises, which aims at improving the international investment climate and encouraging multinational enterprises to contribute to social and environmental spheres.

    NCP Estonia offers assistance to international enterprises in Estonia and Estonian enterprises abroad, by feeling the need to promote socially responsible behaviour.

    NCP Estonia’s contact information:
    E-mail: ncp-estonia [at] mkm.ee

    The Ministry of Social Affairs, Ministry of the Environment, Ministry of Foreign Affairs, EE Investment Agency and representatives of trade unions and business circles are also involved in the work of NCP Estonia. Non-profit organisations participate in the work of the contact point via informal contacts and submit proposals with respect to the different aspects of foreign investments and guidelines.

    The Estonian Trade Union Confederation, the Estonian Employers Confederation and the Chamber of Trade and Industry of the Republic of Estonia help to distribute information about compliance with the OECD guidelines, events organised by the national contact point and developments in international investments.