Press releases

Ott Pärna, CEO of the Estonian Development Fund, writes that Estonia is in a sufficiently good state to break free from the role of Scandinavia’s small brother. We could become an important international hub around the Baltic sea and Scandinavia and for that purpose we have to find our own growth areas like the film industry in Hollywood and the design industry in South Korea. 

We are currently in an interesting situation in Estonia in regard to setting new meaningful objectives. On the one hand, we are located in the periphery of the European Union and next to Russia; on the other hand, we are part of the Nordic region, a region where most of the newest technologies in Europe are developed, where financial discipline is good and which is likely to become for example together with Germany and Holland a new growth hub in Europe. It is ours to decide how important a role Estonia will play in all this.

We have overcome the crisis but still remain as “South Finland”. Currently, the highest level of our economy is to be a good service provider for Scandinavia but not an equal partner. However, we do not want to remain Scandinavia’s little brother. There are several countries in the world where almost half of their population of working age earn their living abroad and where the local economy enlivens once a year during the time of year-end celebrations when they come home to visit.

We are like a three-pronged fork: we have ambitious economic and social objectives, and we have good macroeconomic and budgetary policies, strong institutions, low levels of corruption and a state functioning based on the rule of law; at the same time, the complexity, strategic role and internationality of our businesses is very low. For example, the productivity of our exporting electronics industry is ten per cent of that in Sweden, the monthly average wages in our processing industry is considerably – below one thousand euro – and the largest portion of our exports is generated by around one hundred companies of which two thirds are controlled by foreign investors. Although the latter is not a bad thing, the complexity of the work they perform here is not decided here and it depends on how good the people we have here are.

How we emerge from this situation is one of the most important future issues for Estonia. A universal model does not exist on what to apply. OECD has made a very appropriate proposal in connection with state governance in Estonia in this year’s report, saying that Estonia has to tailor its development solutions itself.

To become a partner that is taken seriously in Scandinavia, we have to become a place where interesting and globally important things happen. The synonym for characterising hubs is energy and the key word is a fostering social and physical infrastructure. It is easier to become a hub for historic trading centres (e.g. London, Amsterdam and Hong Kong) or culturally and enterprisingly active regions (San Francisco, Copenhagen and Mumbai).

Hubs are attractive to a wide range of ambitious doers and world citizens. They include students and professors, businessmen and investors, persons involved in culture, physicians and scientists, architects and developers, professionals and bankers, conference and business tourists, but also marathon runners, shoppers and back-packers. Surveys have shown that a majority of very mobile employees choose their place of employment by the location, not the organisation or company. This is why modern-wise businesses choose their location by the region where their future employees would like to live. So, the film industry is concentrated in Hollywood, the design industry of the East and Southeast Asia in South Korea, etc. In this way, Estonia in future should become a hub for its own growth areas.

Now then, the area around the Baltic Sea needs a much more global and differently thinking hub but this will not develop by itself. Tallinn is a unique city where the largest cruise ships land almost in the centre of the city bringing tens of thousands of affluent clients to us every week without any special invitation. Presently, the height of our capacity is to sell them amber in the harbour kiosks. In ten, but why not already in five years, tourists from faraway countries should disembark their ship to go straight into a musical theatre, opera theatre, conference centre, top hotel, department store or casino. We have the clients today but as a country or a city we do not make a good sale, if expressed in the words of a businessman.

There are five perspectives from which to develop more specific solutions that can be highlighted based on the world’s experience, expert opinions and foresight of the Estonian Development Fund. 

Firstly, there is experimental economic policy where for example instead of following a precise recipe the private and public sectors learn and experiment together. In order to find solutions for the exports of financial intermediation services for Estonia, we have launched FinanceEstonia.eu as a cooperative effort together with the private sector. This is a cooperative and voluntary platform of the private and public sector with more than 20 members to date, the objective of which is to introduce Estonian financial services and related support services to the international arena, to attract more international headquarters into Estonia, etc. The financial intermediation sector in Estonia accounts for around four per cent of the GDP of domestic market, which is quite optimal. We have still enough space for growth in this relatively high added value sector in regard to export markets, i.e. supporting our own companies in their effort to go to the world and developing it as a separate economic sector. We are about to launch a similar initiative called MedicineEstonia with the aim of developing the export of medical services, products and technologies.

There are several business areas in Estonia where by combining the knowledge and ambitions of the private and public sectors new competitive advantages can be found and very specific things can be made happen. The mentioned sector may be green economy, international trade and logistics but also agriculture and processing industry, to mention more traditional sectors. No matter in which area we want to become an important doer in the Baltic Sea region, we need a circle of partners from more distant markets. We have to be able to bring new quality and cooperative relations into this area.

Secondly, strategic growth areas. The general business environment has been quite well tuned in Estonia, meaning that it is hard to offer new universal arguments. In this respect, an effort to help a small country to the top resembles the task of the clocksmith who has to deal with a whole system comprising small details that have to function together. I mainly consider these details to be human capital, education and science, negotiation time of countries top leaders and state’s cooperative relations.

I have been often asked whether Estonia should set black and white sector focuses. My general opinion is still that it should not. Estonia is too small and the number of companies involved in one sector is too small to set very important educational and other priorities.

I also doubt the wisdom of prioritising the development of a narrow selection of basic technologies because it is very unlikely that we are able, according to the probability theory, to surpass countries that are 10, 100 and 1,000 times larger than we are in that our solution would make a scientific and business breakthrough in the world. This does not mean that we should not deal with basic technologies because this is the basis of world level science and higher education, and there are also some technologies witch are cross-disciplinary like ICT.

 The growth areas in this respect are a symbiosis of the global demand and megatrends, the technological capacity of the country, the economic realities and ambitions at individual, company and state level. One example from the world is the clean tech and sustainable energy that have become one of the main investment targets of venture capitalists. The green industry offers growth opportunities for the processing industry, service industry and IT business in Estonia.

Similar opportunities are born from the wellness and health care economy that offer challenges that call for solutions in almost every sector of the economy. In principle, more than a half of Europeans are presently ready to consume health care services in a foreign country whereas only four per cent have actually done so. By 2050, more than half of the population of Finland and Sweden will be older than 65 years who in addition to medical services are active participants in the employment market and are sufficiently prosperous to use wellness and health care services. Why should Estonia not become a regional health care centre, or so-called HUB, which was one of the most ambitious visions that was developed from the export foresight projects of health care services by the Estonian Development Fund.

The third perspective involves the structural changes policy, which is in essence a set of different steps serving a common objective of updating the economy and moving towards business areas and functions that produce higher added value. The structural changes policy has four facets that all need attention:  firstly, modern businesses are becoming more complex in the value chain; secondly, modern businesses move into more intricate sectors based on their experience (e.g. from oil shale to oil shale chemistry, from wood to forest machinery and forest chemistry); thirdly, the import of business areas and companies that provide higher added value through foreign investments; fourthly, the development of new and globally ambitious start-up companies from scratch, which is the function of the Development Fund today as a venture capital fund and in which Estonia has quite good success stories from all over the world to tell.

In the latter case the key issue for us is to figure out what to do to provide an environment where such companies could grow in Estonia and to ensure that their number is five or ten times larger than today. To that end, on the one hand, we need more business angles and capitalised venture capital funds; on the other hand, our smallness causes us to take a look abroad and attract strong start-up companies from there. Estonia already has a set of arguments to become the Start-Up Nation in this region but this requires at least ten years of continuous work – it has taken more than 50 years to build Silicon Valley.

The above introduces the fourth important topic, which is the cross-sectorial talent policy. The development trends in the world force us to believe that the global competition for quality employees – the war for talents – will become even more intensive. In such a situation, the educational system is not the sole place where one can seek solutions for the lack of labour force because faster and more flexible ways, such as the application of selective immigration policy, must be found.

The Estonian Development Fund came to similar conclusions in connection with the foresight of the usage of IT in increasing the competitiveness of the economy. We lack about 20,000 IT specialists on the employment market compared to the Nordic countries if we want to have a similar proportion to them in each sector of economy as in the Nordic countries. However fact is that less than four hundred students of IT specialities graduate every year.

We have to increase the volume, internalization and in certain areas the quality of IT education. Secondly, international interdisciplinary programmes must be initiated in the most important application areas of IT, such as energy, healthcare, logistics, etc., where around half of the students and professors participating are from outside Estonia. In the name of the new academic generations, we have to send our best students to the world’s leading IT universities and programmes to study. Fourthly, we have to find a way to solve the lack of IT specialists with selective immigration.

In order for our companies to develop and to ensure that we do not lose in the global talent rally, we need an integrated talent policy across policies areas and better-targeted talent pool management. We promise that the talent foresight launched by the Estonian Development Fund will prove necessary background information for Estonian national talent policy.

The fifth important topic is the understanding of the world’s development trends. Our success in the world directly depends on how much we know about the world. How well we understand the inevitable processes taking place in the world. I dare say that regardless of the bleak backdrop of the world economy and the future of the euro area there are many bright colours or trends in the world that are both challenges and great opportunities for fast companies and smart countries. In order to offer all Estonians a more structured overview of the plethora of opportunities in the world, the foresight team of the Estonian Development Fund leads the trends blog www.fututuba.ee. The blog introduces fresh surveys and stories on future workplaces, sprouting business opportunities, the future of energy sector, green economy, aging, distant markets, urbanisation, novel governance methods, foreign investments, consumption, migration, and more.

Now, the moment for Estonia has arrived and we just have to seize it. The world and Europe are experiencing several systemic crises and have to resolve many erroneous calculations and mistakes made in the past. Estonia on the contrary is in a quite good state to make a determined change of the league in the vortex of the changing world.
Let's do it! 

Article was published in newspaper "Postimees"  (in Estonian) on 23-rd of September, 2011 and it is based on the speech given by Ott Pärna to the Estonian Parliament (22-nd of September, 2011).

At the Development Fund Supervisory Board meeting today the Fund's Supervisory Board members elected Raivo Vare to be Chairman.

Raivo Vare is also a member of the Supervisory Board of the Estonian Cooperation Assembly and actively participated as an expert and practitioner in the elaboration of the Development Fund's "white paper to the Riigikogu".

According to Raivo Vare, it is important that Estonia comes out of the crisis stronger. "For creating these spaces, it is necessary to work on a whole package direction of activities which ensures the state and economy success. The Development Fund has consistently and continually given its strong contribution here as well as planning strategic activities and investing into progressive technological projects. I am certain that the Estonian state continues to support such kind of activities in that direction in spite of current lightning activities derived from the crisis," commented the Development Fund's new Chairman of the Supervisory Board.

The Development Fund CEO is Ott Pärna. In addition to Raivo Vare, the Development Fund's supervisory Board consists of  the Director of the Estonian Institute for Future Studies, Erik Terk, who is also the Development Fund's Deputy Chairman

of the Supervisory Board; the Chairman of the Supervisory Board of the Bank of Estonia, Jaan Männik; the Rector of the Tallinn University of Technology, Peep Sürje; the Rector of the University of Tartu, Alar Karis; Riigikogu member Mart Laar; Minister of Finance, Jürgen Ligi and Minister of Economic Affairs and Communication, Juhan Parts.

Further information: Raivo Vare, mob: +372 503 0900

Press release by SmartPOST, the Development Fund's portfolio company

SmartPOST set about to build a network of self-servicing ‘post offices' in the summer of 2008. The web of self-servicing automatic parcel terminals now covering the whole of Estonia has been designed to service mainly the clients of mail order catalogues and Internet vendors. The equipment based on cutting-edge technologies allows customers to receive the products that they have ordered fast and conveniently.

Likewise, modern technology also provides an opportunity to offer a more favourable alternative to the services of the national postal company Eesti Post. A client who has ordered goods will receive a code via a text message on his or her cell phone and via an e-mail. When this code is entered into the parcel terminal's computer, the client will be able to collect the merchandise. Parcel terminals have been installed in shopping centres across Estonia so as to spare the clients the trouble of having to spend extra time on collecting the goods that they have ordered.

So far 31 parcel terminals have been installed and SmartPOST's network is available in all counties. The network has been tested and pilot projects have been successfully carried out and currently all companies have the opportunity to hook up with the service over the Internet at the following address: www.smartpost.ee/eteenindus.

The respective video presentation can be viewed here:

Smartpost OÜ is a logistics company which aims to make the delivery of goods purchased from distant selling companies, i.e. mainly on the Internet or by mail as fast and convenient as possible.

Further information:

Indrek Oolup
Chairman of the Board, SmartPOST OÜ, mob 5056222

On December 11, the Development Fund organises the EST_IT@2018 conference to discuss the future prospects (up to 2018) of using Estonian information and communication technologies (ICT).

The forum is to be held at the Swissôtel Tallinn conference centre and is expected to attract over 140 Estonian opinion leaders. The Development Fund introduces the outcome of the EST_IT@2018 foresight project and discussions focus on ICT prospects in the most relevant fields of use highlighted in the foresight project: education, medicine, industry, energy, financial services and ensuring the security of the ICT systems.

The conference also offers insights into global ICT trends and developments in Estonia together with an overview of our sectoral opportunities and threats. The participants will also contribute to creating an IT vision for Estonia.

According to Marek Tiits, Economy Expert of the Development Fund, the number of computers and Internet connections compared to other countries served as a gauge for IT success in the 1990s. Today, it is much more relevant to ask how IT could further support Estonia's social and economic development.

"The key is simple! The biggest changes in Estonia are expected to occur in education, medicine, energy and industry. Meanwhile IT enables to make things much more comfortable in these areas both here and elsewhere in the world. Why not do it?" Tiits said.

The main speaker, Associate Editor and economic commentator at the British newspaper The Independent, Hamish McRae, is to introduce global trends in the ICT area.

Tiits will also speak about the outcome of the EST_IT@2018 foresight project. The second part of the conference has been earmarked for discussions in six workshops where experts reveal future visions for the fields of IT use.

 1. Education: Janar Holm, Secretary-General, Estonian Ministry of Education and Research; Ene Tammeoru, Head of Estonian e-Learning Development Centre

2. Health care: Madis Tiik, Estonian eHealth Foundation, Member of the Management Board; Kristjan Port, Tallinn University, Institute of Health Sciences and Sports, Director

3. Industry: Jüri Riives, Federation of Estonian Engineering Industry, Chairman of the Board; Kalle Kuusik, Enics Estonia, Chairman of the Board

4. Energetics: Tarmo Mere, Eesti Energia, Distribution network, Director; Jaan Järvik, Tallinn University of Technology, Professor of Power Engineering

5. Financial services: Andrus Alber, NASDAQ OMX Tallinn Stock Exchange, Chairman of the Management Board; Tõnu Grünberg, EMT, Executive Vice President in charge of Development and Technology

6. ICT security: Ülo Jaaksoo, Cybernetica AS, Chairman of the Board and Margus Vaino, Santa Monica Networks AS, Member of the Board

The objective of the workshops is to identify potential sectoral development visions and resultant risks and opportunities for the Estonian information and communication technology sector.

Additional information about the conference can be seen on the Development Fund Events webpage here.

The EST_IT@2018 foresight project can be seen here.

Further information:

Ott Pärna, CEO, Estonian Development Fund, Tel: 616 1100
info[A]arengufond.ee 

Kristjan Rebane, Information Society Expert, Estonian Development Fund Tel: 616 1063 kristjan.rebane[A]arengufond.ee

The industry forum held at the Swissôtel Tallinn conference centre in the context of the Development Fund's foresight project ‘Industry Engines 2018' ended with the conclusion that the industry showing the largest growth potential in a 10-year perspective represented environmental and energy products as well as health and welfare products.

According to the Development Fund Economy Expert, Siim Sikkut, development opportunities can be found in almost all industries. "But the areas with the greatest probability of fast growth represent environment and energy as well as health and welfare products. Meanwhile, it is possible to operate successfully in nearly all areas, if we manage to move on from today's production-based industry," Sikkut said. The forum concluded that there are currently three principal ways of increasing the value within the industry:

• Moving from simple production towards product development services 
• Manufacturing products with higher value added 
• Striving towards becoming a brand holder

Ära märgiti ka sihtturgude olulisus, kus eristub samuti kolm keskset võimalust:

• Saturated but rich markets in ‘old' Europe 
• Fast-growing Eastern European and CIS markets 
• Far away and currently exotic markets with large growth potential

"Companies that advance towards increased value added, particularly in faster-growing business areas, can become industry engines. Meanwhile, brand holders, product developers and subcontractors have equally good opportunities. We also have to contemplate which markets would be the best for our value added products. Such markets are mostly unknown to us today," Siim Sikkut explained the opportunities for creating industry engines.

The Industry Forum videocasts can be downloaded here and presentation material and discussions can be downloaded here siit.

Some 150 shapers of the future of Estonia's industry representing both the business and the public sector took part in the industry forum. Presentations were made by Richard K. Lester, Professor of Massachusetts Institute of Technology (MIT) and one of the leading industry development researchers, Antti Herlin, Chairman of the Board of Directors of KONE Corporation, a major Finnish company, Joe Harford, head of a high-level working group that advised the Irish government, and Siim Sikkut, Economy Expert at the Development Fund.

"Industry Engines 2018" is a foresight project focusing on the future of the manufacturing industry in Estonia. The objectives of the project include identifying the growth possibilities for Estonia's industry in the globalising world in the next 10 years and defining the steps needed to utilise these possibilities within the next 3-5 years. In other words, the Development Fund is looking for engines that could drive Estonia's industry into the future and in the future.

A final report will be produced in February 2009 providing guidelines for exploiting the growth opportunities of Estonia's industry in the global context.

Further information:

Siim Sikkut
Economy Expert, Estonian Development Fund,
Tel: 616 1065,
siim.sikkut[A]arengufond.ee

•  Estonia has dropped to 32^nd position in the Global Competitiveness Report while continuing to lead among the new European Union member states. 

•  Estonia's situation has not improved as regards several competitiveness indicators (e.g. innovation, infrastructure), meanwhile we have yielded positions in areas were we have been traditionally strong (e.g. macroeconomic stability).

•  Above all, Estonia lags behind the world's most competitive countries in the area of business sophistication.

According to the most recent report by the World Economic Forum, Estonia ranks 32^nd among the countries of the world as regards competitiveness. Compared to 2007, Estonia has dropped 5 places. The United States continues to be the most competitive country in the world, followed by Switzerland, Denmark, Sweden, Singapore and Finland.

Estonia still ranks first among the new European Union member states. "So far Estonia stood out primarily with good macroeconomic indicators," said Kitty Kubo, the Head of Foresight of the Estonian Development Fund, when presenting the report. As these indicators have deteriorated considerably in Estonia during the past year, it has also affected the ranking. Corporate competitiveness is being undermined by fast inflation. "Meanwhile, other competitiveness indicators have not significantly improved," Kubo added. Besides statistics, business leaders also are polled when compiling the list.

"Compared to the most competitive countries in the world, Estonia is mostly lagging behind in the field of business sophistication," Siim Sikkut, Estonian Development Fund Economy Expert, underlined. Simply put, business sophistication indicates what kind of work companies do and how they do it. The more sophisticated business activities are the largest slices in international value chains they take and the highest value added they produce.

The World Economic Forum has been issuing the World Competitiveness Report since 1979.  Its partners in Estonia for the purpose of the report are the Estonian Development Fund and the Estonian Institute of Economic Research.

Please click here to open the official press release and the materials regarding the report by the World Economic Forum.

Further information:

Marje Josing, Director, Estonian Institute of Economic Research, Tel: 646 6439

Kitty Kubo, Head of Foresight, Development Fund, Tel: 616 1061

Siim Sikkut, Economy Expert, Development Fund, Tel: 616 1065