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Estonian state managing and and development is competitive economy

Why "Ambition is a choice"?

The economic pact and the call "Ambition is a choice" were launched by business organisations at a time when the Estonian economy has been in recession for more than two years and the state budget for 2023 was below budget. Tensions have grown in society as there are not enough resources to finance all the country's development needs.

The money to run the Estonian state and provide public services comes from business - our people go to work, do business and pay payroll and income tax, and VAT on the consumption of goods and services.

Consumption and labour taxes account for 85% of national revenues.

The amount of these taxes that will be paid into the common budget depends on how high wages local companies can pay. This, in turn, depends on how competitive companies and the economic area are.

If we want to build an Estonian state that cares and thrives, it is time to take a collective step towards relaunching the smart economy. If the economy does not start to grow, it will not be possible to meet society's growing expectations - teachers' salaries cannot be increased, health services and pensions cannot be provided, funding for culture and education cannot grow.

The Economic Compact is a call for businesses and business organisations, as well as businesses, governments and policy makers, to focus together on economic development and take the next steps to achieve it.

There is no better moment to adapt to change. The best time to take the next step is now. All you need is the courage and the will to get started.

Ambition is a choice.

What change needs to be triggered

Ambitious

Innovative

Sustainable

Exporting

Ready to cooperate

Ambitious

Innovative

Sustainable

Exporting

Ready to cooperate

Economic change must be done together

The Estonian Economic Agreement

Ambition is a choice

We are signing the Estonian Economic Pact with the goal of an ambitious, innovative and collaborative economy by 2035 to ensure the vitality and development of Estonia.

Social agreement is necessary because Estonia's economy, the country's development capacity and the well-being of its people have stagnated, and we need a clear strategic focus for a new leap forward. Both the private sector and the country need to make ambitious choices to kick-start economic change.

1. The Parties affirm that the sustainability of the Estonian state is based on a competitive economy, which ensures an increase in incomes of working people and business income, and thus an increase in tax revenues necessary for the development of the state.

2. We understand that big changes do not happen overnight, which is why we are making the development of a higher value-added economy a top priority for Estonian governments over the next decade.

3 Ensuring Estonia's development is not just a task for the state, but a social agreement and an agenda, where ambition is set by both private and public actors and everyone takes the next step.

As a result of our joint steps, we are moving more firmly towards the goal of increasing the productivity of Estonian companies to 110% of the European average, as set out in the Estonia 2035 strategy.

The next step for businesses

As an ambitious, innovative and collaborative company, the aim is to increase competitiveness through innovative products and services that increase added value and export volumes.

The country's next step

The goal of an ambitious and innovative Estonian economy at the national level is a competitive business environment that fosters structural change towards value-added growth.

FOOTNOTE and CO-OPERATION are the key factors for the implementation of the agreement.

The parties take responsibility for keeping focus and working together to achieve the objectives. The partners will lead the implementation of change and monitor progress towards the targets set.

Everyone take the next step!

The EPA aims to

1.

Be a framework for political parties and governments and elections

2.

Choosing a focus from the Estonia 2035 vision

3.

Bringing public and private sectors together to work towards a common goal

5 steps for the private sector

The hallmark of an ambitious, innovative and collaborative company is an increase in international competitiveness through innovative and sustainable products and services that increase added value and export volumes.

Overall measure: Enterprise value added per employee. Target value: 10% annual growth in value added per employee.

Innovation performance measure: Assessment of the innovation performance of a company based on ISO 56002 or the standard-based model innotrepp.ee.

Each company chooses the steps and metrics that are right for it to meet the target:

1.Raising the ambition to develop innovative products and services

a. Develop differentiated products and services for export and increase the share of innovative, higher value-added products and services in total turnover by 10% per year.

2.Raising the ambition of innovation investment

a. We invest in new technologies and companies with higher added value potential.

b. Fulfilling our role in the Estonian Science Leap and allocating at least 2% of turnover, or at least €1 million for larger companies, to R&D every year.

3.Raising the ambition of export volume and scope.

a. We will increase our company's export ambition beyond our home market and neighbouring countries, with the aim of increasing exports by 10% per year or above the industry average.

4.Increase the efficiency and level of processes

a. We are developing the digitalisation and automation of the business with the aim of increasing labour productivity by 10% per year.

5.Improving the quality of leadership and cooperation

a. We are building a culture of innovation and improving the quality of management. 

b. We will work more boldly with universities, partners and other businesses to develop new products and services.

8 steps for the country

The hallmark of an ambitious and innovative Estonian economy at the national level is a competitive business environment that fosters structural change towards value-added growth.

To achieve the target, the country will focus on three steps to bring about ambitious change and five steps to ensure the basic conditions for economic competitiveness.

Steps to unleash the ambition of a higher value-added economy

Overall indicator: European Innovation Scoreboard ranking Target: Estonia becomes an innovation leader by 2035 (2022: moderate innovator).

1.Ensure public investment in innovation and R&D activities

a. We will increase national research and innovation policy investment to the level of 1.5% of GDP.

b. Dedicate 0.2% of GDP to private R&D through public subsidies and tax incentives, in line with the OECD average (Estonia 2020: 0.06%).

2.Ensure access to capital for higher value-added investments and Estonia's attractiveness for foreign investment.

a. Ensure access to capital. Access to capital of the European Central Bank survey at least 50% of companies have access to capital. estimate that access to external finance is not a problem (Estonia 2023: 18% of entrepreneurs).

b. Increase Estonia's attractiveness as an investment environment. Estonia ranks 6th in the EU or the most attractive investment environment in Eastern Europe in terms of foreign direct investment (Estonia 2022: 8th place).

3.Ensure the necessary measures for the export of goods and services with higher added value.

a. We will increase the volume of exports of Estonian goods and services by 10% per year, including higher value-added exports.

b. Ensure high-quality and modern infrastructure for the export of goods and services, including road, rail, air and digital connectivity.

Basic conditions for economic competitiveness

Overall metric: ranking in the IMD Global Competitiveness Ranking Target: Estonia will be in the TOP15 by 2030 and in the TOP10 by 2035 (rank 26 in 2022).

4.Maintain a simple, stable and competitive tax environment.

a. Keeping the tax burden up to 34% of GDP, which is the hallmark of an optimal and competitive tax structure.

b. Maintain long-term investment security and. TAX Foundation's international competitiveness ranking of the tax system.s ranking.

5.Ensure the availability of highly skilled workers and the national education needs in line with the needs of economic development.

a. Facilitate the recruitment of foreign workers to cover labour shortages in OSKA projected areas, and make it easier for Estonia to recruit foreign workers. OECD Talent attractiveness indexs TOP10 (currently 21st out of 38 countries).

b.Ensure investment to increase the number of engineers and R&D staff in the private sector. Target: 4.53 employees per 1000 inhabitants (2022: 2.23 employees per 1000 inhabitants.).

 

6.Ensure the availability of competitively priced energy, which is a prerequisite for bringing production to higher added value levels.

a. We guarantee security of supply and the same final energy price as the Nordic region.

7.Reduce bureaucracy that hampers competitiveness and increase the efficiency of the public sector.

a. We will reduce the time taken by the state and municipalities to decide on planning and permits. three times.

b. We will reduce the reporting burden on businesses by 50% through automation, digitisation and smarter use of data.

8.We will implement the European Green Deal in a way that supports the competitiveness of Estonian businesses.

a. We will ensure that Estonian regulations do not go beyond those of the European Union and do not impose restrictions that undermine competitiveness.

b. The state supports the creation, development and deployment of environmentally friendly technologies through incentives and sustainable public procurement.

Parties to the Economic Agreement

Presentation of proposals for an economic agreement at the Windward Flight conference

14 March 2024

Spokespersons for the Economic Agreement

Supporters of the EPA and the next step

The economic pact "Ambition is a Choice" was born in 2024 under the leadership of the Confederation of Estonian Employers, in cooperation with researchers, companies, professional associations and the public sector.

Support the economic pact

Everyone take the next step!

Support the economic pact and let us know what's next for your business