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Kai Realo: Estonia's loss of competitiveness says economy must be put in focus

The continuing deteriorating competitiveness of the Estonian economy and the ongoing economic downturn speak of the fact that we as a country must focus on strengthening the competitiveness of the economy, emphasises Kai Realo, chairwoman of the council of the Estonian Employers' Confederation . This can only happen through cooperation between the state and businesses.
For the second year in a row, Estonia fell in the IMD competitiveness rankings and retreated seven places in a year to 33rd place and among the mid-groups of developed economies. At the same time, Latvia rose six places and Lithuania two places.
This means that Estonia faces several dozen countries that are more attractive to investors and have a business-friendly, investment-attracting and job-creating economy. However, lost competitiveness and declining entrepreneurship mean loss of income and development opportunities for society as a whole, as the lion's share of state tax receipts are related to taxes on labour and consumption and depend on jobs and wages. If a country wants to invest in the necessary areas – such as security, health, education – only a developing and growing economy can finance it on a lasting basis.
Entrepreneurs have talked about this at length. However, despite the recession in its third year and the country's chronic lack of money in many areas, the business sector has not felt that entrepreneurship that sustains society is also important for politicians – the suffocating bureaucracy is growing, the endless tax confusion continues, laws change at times and seemingly involving overnight, and the impact on business is not sufficiently considered in decisions.
Competitiveness does not arise or persist overnight
For example, this spring, business associations proposed to Estonian political parties to conclude a social agreement between themselves in the form of an economic agreement and focus on increasing the competitiveness of the economy in the coming years. Both entrepreneurs and the state would do the next necessary steps for development on their part.
The aim of the steps, formulated as a result of cooperation between the public sector, researchers and companies, is clear – the competitiveness of the business environment must be turned to growth and as a priority across governments. The reception for the call has unfortunately been rather lukewarm on the part of politicians.
Although economic growth is done by companies, a competitive economic environment does not arise overnight and does not persist on its own, this requires decisive steps from both companies and the shapers of the economic space.
Entrepreneurs must do their own and the state's part
Entrepreneurs can contribute to increasing the added value they offer – invest in innovation and the development of innovative products and services, increase the volume of exports and the number of export destinations, and digitize and automate, as well as increase the quality of management. The importance of governance was especially emphasized by the associations representing the companies here.
However, the state's move is to maintain a competitive business environment and support the structural change of the economy towards greater added value. The prerequisite for this is a stable and competitive tax environment, workers with the necessary skills in the labor market and reasonably priced energy.
The state can also decisively reduce bureaucracy, increase the efficiency of the public sector and implement the green transition in such a way that it increases the competitiveness of companies. In addition, the state can invest in innovation and research and development, ensure the necessary measures for the export of goods and services with higher added value, as well as the availability of capital.
The desire for change comes from ambition
The management of the state is not only about national defense and social guarantees. The country's economy must also be managed, and this must be done not only through austerity and taxes, but by essentially managing conscious change. The desire to change begins first and foremost with the will and ambition to do otherwise, and this ambition can and must be chosen. It is not enough to wait for the end of the recession or to continue what we have done so far, because it has brought us into the present and other countries, including our neighbours, have moved away from the front. As a small and open economy, we cannot afford it because we do not have the mineral resources to keep our economy alive even if there is no will and knowledge at the level of governance of the country.
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