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The President of the Republic Address at the opening of the Estonia's Successful Development Forum Hotel Radisson SAS, Tallinn November 25, 200425.11.2004
Honourable participants of the Forum!
After the accession of Estonia to the European Union and NATO many discussions have been focusing on finding possible keywords, which should characterize our activities in our new stage of development We talk ever more often about strategic planning. We see that now we are more experienced and willing to assure that our everyday choices would lead us to meaningful and responsible decisions.
We have made choices, which have created a foundation for quick economic growth. But in order to maintain a rapid and stable economic growth it is necessary to continuously enhance the quality of production factors - labour force, capital and technologies, and to develop up-to-date institutions. Unfortunately, I see here several problems
Looking to the future we have to admit that in about ten years the labour force in Estonia is going to decrease. One of the population prognoses shows that in 50 years time we would have 400 thousand people working instead of current number of 600 thousand. Such a decline would be a result of low natural increase rate, and in recent years our politicians have started to deal with this problem more seriously.
But in addition to higher birth rate, also better employment and the quality of labour force are essential. If the employment rate in Estonia were at the same level it is in the USA, we would have 70 thousand workers more. The population of Narva is the same size. Estonia has resources to enhance employment rate, first of all by involving passive members of the labour market. The policy designers have already voiced out the necessary keywords: active labour market policy, training and retraining systems and closer cooperation with employers. Herewith I would like to stress also the importance of health care and education. The development of Estonian economy depends first of all on healthy, skilful and motivated workers. Only a systematic approach can bring success.
At the same time, we are threatened by the outflow of labour force. It is not difficult to understand both human and scientific reasons of such outflow. Can we say that difference in knowledge and skills is the reason for the wage disparity of bus drivers in Estonia and Finland? Can small Estonia offer work and development opportunities to top scientists and entrepreneurs?
Once again we see how important is balanced and open development of Estonia. To be able to offer self-realisation to top people we need a solid base at home and existence of a good international cooperation network. In some areas or districts the problems are so deep that it seems like we are, so to say, extinguishing fire. We have to admit that good results could be reached only if the applied measures originate from an integral strategy.
Now I would like to talk about another production factor - capital.
For years Estonian economy has been hungry for capital. Soviet-time enterprises were amortized or we failed to find market for their products. Economic reforms gave Estonia a lead for involving foreign direct investments and opening of international financial market for us. Foreign investments have been beneficial for Estonian economy: studies show that enterprises with foreign capital participation have bigger turnover, higher profits and higher salaries. As a rule they can use better technologies and enjoy better access to market.
We hope that foreign investors would come with new technologies and establish new enterprises. But wishes alone are not sufficient - what we need is a clear vision and active role of the state, for example, in advertising Estonia but also in creating necessary infrastructure.
Lately also Äripäev is writing not about foreigners founding new enterprises in Estonia but about a new wave of buying up of already existing enterprises. Should we be happy about this? Charging by the media information, native enterprises are not a renewable resource, which we can sustainably sell to foreigners while very few new successful enterprises emerge.
We need more domestic capital for development in Estonia. We can involve more domestic capital provided that we save more and are more enterprising. Estonia's current account deficit reflects not so much small export volumes but insufficient saving. At the very beginning of our independence people were readily investing their little savings into private undertakings, as paid employees earned considerably less than small private entrepreneurs. Today that difference is less profound. We should put the entrepreneurial spirit as a value to a higher place.
Talking of technology as a production factor, I would like to choose innovation as a keyword. Innovation is not a catchword used just today; people have been innovative for centuries. Only the scope of innovation process and the importance attached to it at the political level has been different.
In Estonia's current development stage, innovation is gaining ever more important role. More often we hear our opinion leaders saying that we should not limit innovation only to research institutions and high technology, as it is equally important also in the branches of industry and service with high employment and export capacity.
Innovations used by our enterprises are not very radical and are mainly limited to acquiring new machinery and equipment in order to offer new products and services. Estonia has gathered international recognition for using information technology in banking, governance and in other areas. Use of computers has become a norm for our enterprises.
Certainly, there is more potential for implementation of information and other high technology, especially when enterprises would seek for innovative solutions together. That way it is possible to enhance the competitiveness of an enterprise and at the same time to create new clusters of enterprises and even new branches of industry. We can find a good example from Finland how a resource-based branch of production developed into a branch of production with high technology level, when potentials of wood processing industry, engineering industry and information technology were joined to establish a production of world-level wood processing machines.
In addition to product innovation also process innovation is important, especially for small and medium sized enterprises. I hope that the entrepreneurs in their every-day work will ever more perceive the need to improve their production process. The success would be bigger, provided that the entrepreneurs as well as those who design and coordinate research and development activities and innovation policy at the state level, and those making financing decision, were well acquainted with development of those processes worldwide.
Ladies and gentlemen,
What would Estonia look like in 2020? The population would be about 5 percent smaller than it is now. The number of workers would stay approximately at the same level - about 600 thousand. Probably, by that time we would be as prosperous as the developed European countries are at present.
This is a positive scenario. We do not reach such results sitting idle. As a prerequisite to this we need to have higher birth rate, improved public health and longer life expectancy. Another important prerequisite is that the outflow of labour force from Estonia would stop. Employment rate has to increase up to 70 percent, which means that seven persons of working age out of ten are employed instead of six.
The economic growth should exceed the average in the EU by 3 percent. Introduction of new technology would be a prerequisite for this, in addition to maximum employment of work force. We can say that the technological level of Estonia in 2020 should be similar to the technological level in Sweden or Finland today; the skills of workers and efficiency of job management should be at least as good as in Sweden or Finland. Another prerequisite for rapid growth is that the managers of enterprises, either local or from abroad, were smart.
Dear listeners,
I brought out only some of directions towards which we should move. Naturally, each of us can define our own very concrete tasks that would then support the achievement of general goals. Even if it seems that there is a lot of time till 2020, already today we have to make many important choices in our thoughts as well as in our deeds. Our folk wisdom tells us "never put off till tomorrow what you can do today".
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