Transcript Challenges in 2003 as pointed out by Praxis

Snapshots on Estonian economic
development and innovation potential
Ain Aaviksoo, MD MPH
Praxis Centre for Policy Studies
Member of Executive Board
November 22, 2010
Challenges in 2003
as pointed out by Praxis
• In order to raise the competitiveness of
the economy it is crucial to obtain the
highest possible rise in productivity in
the industrial sector as the technology
driven rise in the productivity of
agricultural and services sectors can only
be much more limited.
• The specialisation of the Estonian
industry on labour and resource intensive
fields indicates an imminent threat of a
lock-in to a low income level.
M Tiits, R Kattel, T Kalvet, R Kaarli. „Competitiveness and
Future Outlooks of the Estonian Economy“. Research and
Development Council (2003)
Labour productivity & real wage growth has not
been the strongest side of Estonia
(%, yearly periodic comparison)
Source: M of Financial Affairs, 2009
Source: Eurostat
Unemployment is as high as it can be...
Source: Statistics Estonia
The worst is over, but ...
Nominal GDP by quarter
Source: Statistics Estonia (2010)
Estonian enterprises are
relatively innovative
Source: Statistics Estonia (2010)
R&D investment structure in EU
countries (2008 or latest)
4
3,5
3
2,5
2
1,5
1
0,5
0
BE
BG
CZ
DK
DE
EE
IE
GR
Government sector
Source: Eurostat
ES
FR
IT
CY
LV
Higher education sector
LT
LU
HU
MT
NL
Business enterprise sector
AT
PL
PT
RO
SI
SK
FI
SE
Private non-profit sector
7
UK
R&D employees are increasing in
enterprise sector
R&D employees (1998-2007)
6,000
5,000
Higher education
sector
4,000
State sector
3,000
Non-profit private
sector
2,000
Enterprise sector
1,000
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Tax policy – 2 recent projects by 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)
Fiscal policy and public finance 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.
Highlights from
Human Development Report
Main strategic challenge is
education:
Estonia is different! - High proportion of universitylevel educated
- Inefficient financing of
universities
- Increasing, yet still low lifelong
learning participation
(10% in EE vs 30% in DEN)
- Early socio-economic
segregation and unequal access
to higher education
- Too many too small
municipalities hinder educational
Source: H Vitsur in “Estonian Human Development Report 2009”
reform – no political will in sight to
change it
More information
[email protected]
[email protected]
www.praxis.ee
• Coming in 2011
– Election programmes’ feasibility evaluation
– Sustainability of social security systems
– Praxis endowment fund established