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Ott Pärna/Postimees E24: To paraphrase a classic, one might say that a spectre is haunting the world - the spectre of crisis. In the case of Estonia's economy, the spectre might be considered perfect because of the combination of multiple concurrent and adverse factors.

We might find ourselves in the current predicament partly because of the global financial and economic crisis, but first and foremost due to the fact that our economy is falling behind. Our competitiveness already faded away during the growth phase when we were trading in the internal market at unreasonably high prices financed by cheap loans.

Now with credit taps turned off it is difficult to switch to exports at the same price level. Besides, export markets are in decline because of the global downturn, which will further aggravate access to external markets.

The underlying structural weakness of our economy is our focus on economic sectors and activities that offer few possibilities for significant value added. It is not true that our labour is too expensive. Instead, we are too expensive for the uncomplicated work that we do. In other words, we have to think about creating more sophisticated jobs, products and businesses.

In the current crisis situation, we have to act on a new level and in a different way. Our goal is to break the crisis and lay the foundations for new growth. Passive cutbacks and quiet adaptation alone do not secure us a place among the winners - we need effective action! The euro, too, is a necessary milestone, but it should not serve as an argument for brushing aside our pre-crisis problems. During the crisis, a golden rule applies: it's not the big that eat the small, it's the fast that eat the slow!

The three pillars to rely on in order to  break the crisis are capital, exports and people backed up by effective action on the part of the government. Since the crisis requires a flexible and swift approach, we might learn a lesson from Singapore that makes use of the Statutory Boards as a striking fist for taking care of important matters.

In order to attract foreign capital, we have to specify the areas where we want to see foreign investments most urgently - so that investments would underpin structural changes - and draw up incentive packages for investors. We also have to cut taxes on dividends.

For negotiations with foreign corporations and successful engagement of investments we need a high-level figurehead . It could be worthwhile mobilising the currently diffused national resources targeted at external trade, including nation branding, under his/her command. For instance, in the United Kingdom, Prince Andrew, the Duke of York, serves as the country's Special Representative for International Trade and Investment (see http://www.thedukeofyork.org/).

For the purpose of activating domestic capital, we have to provide incentives for channelling private savings into the economy by exempting securities investments from income tax.

Now that assets are cheap we have to do everything in our power to keep local venture and private equity companies capitalised since they promote future -looking companies. Hence it is reasonable to make groundbreaking  investments into such companies by using public and semi-public resources.

For example, venture capital investments in the United States accounted for just 0.2 per cent of the GDP while the total turnover of the companies within their portfolio amounted to 17.6 per cent of the GDP (2.3 trillion dollars). We should also contemplate allowing local pension funds to invest more into the local market, including into unlisted companies (for example, Finland has already done that).

In the short term, significant growth in export revenues is attainable only through present-day exporters. Since the 50 largest exporters account for nearly a half of the exports (the next 50 additionally contributing slightly over 10 per cent), they require a personal approach. We have to ask them directly what could the government do to support their growth? While in good times our economy attracted 90 billion kroons a year, now just a third of that remains. Therefore we must focus on the economic areas that allow us to increase the inflow of external resources really quickly.

Money and new machinery are important, however, new growth will be spurred by good people and their ideas. Therefore, our biggest deficit in pursuit of new sustainable growth is talented people who are familiar with the opportunities that the world has to offer. We need to become an attractive place for talent.

The crisis is a unique period when many talented people are on the move in the world. We have to find a way to bring them to Estonian companies who have a real shortfall of  international business competence.

We also have to launch the programme promoted by president Ilves and call home bright Estonian minds currently studying and working abroad. And we have to be decisive and eventually internationalise our higher education for the benefit of our own smart young people as well as the young generation of the neighbouring countries - the future entrepreneurs, engineers and the Estonian elite.

Besides cultivating and attracting talents in different areas, we have to systematically empower the existing workforce (including managers) and encourage entrepreneurship. The new era is characterised by the situation where as much as 6 per cent of the unemployed are former managers, 13 per cent are specialists and 40 per cent skilled workers.

In any case we must encourage start-up small companies  in every possible way. We could even contemplate a new remuneration for start-up entrepreneurs, something along the lines of maternity pay so as to offer an opportunity to have a try at entrepreneurship with less risk involved - e.g. in the course of 3-6 months, provided a business plan is submitted.

When times are tough the government should send out a message that an entrepreneur exempt from taxes in the start-up phase is preferable to an unemployed person receiving social benefits! Also, one should not underestimate the role of local and personal initiative in shaping an environment which nurtures entrepreneurship. Such activities include My Estonia workshops, local co-operation networks, creative and knowledge-intensive cities initiatives, etc.

Estonia could be a cool  and innovative small country that has decided to emerge from the crisis as a tiger of southern Scandinavia  - clearly differentiating itself from others. In order to achieve that we will have to make choices and decisions and act swiftly and effectively. Sleeping tigers catch no prey.

The article has been based on a respective White Paper drawn up by the Development Fund. View it and send in your comments at www.arengufond.ee!