Estonia: Focusing on competitiveness and growth
During the 2007-2013 period, Estonia was one of the top ranked countries for EU funds absorption. Panorama Magazine speaks to Minister of Finance, Mr Sven Sester, about how Estonia has benefitted from cohesion policy and the country’s priorities for the new programming period.
▶ Apart from the excellent financial process, what have been the main achievements of cohesion policy for Estonia?
The Structural Funds have had a great impact on Estonia’s development. The main focus has been on boosting the growth of our economy by encouraging export and innovation and modernising our basic infrastructure in different areas. EU funding has triggered a doubling of the number of exporting enterprises and export turnover.
However, the effects of EU funding are not limited to statistics and economic figures. They are tangible in every-day life and visible all across the country. The road you drive on, the rail service you use, your access to clean drinking water, internet that flows into your home, the e-services that enable you to interact with the state in a few clicks instead of hours – EU investments have made Estonia a better place for both businesses and people.
We put significant emphasis on our digital agenda and EU funding has contributed to turning Estonia into one of the most advanced e-societies of the world by supporting the development of infrastructure, networks and applications for online services. As a result, 77 % of Estonians use the Internet and citizens routinely use e-services for e-elections, e-taxes, e-police, e-healthcare, e-banking and e-school.
We also know that in addition to infrastructure and businesses we must invest in our people and EU funds continue to play a very crucial role in our labor market, educational and social reforms. For example, we have modernised 90% of vocational schools to meet the needs of today’s economy.
Estonia was struck hard by the economic and financial crisis, but the availability of EU funds and the possibility to quickly redesign support schemes helped the economy adapt and recover.
▶ What are the main lessons learned? How did they affect the programming for the period 2014-2020?
Based on experience we agreed on two main principles for 2014-2020: ESI Funds are one-off leverage, and a focus on achieving results. The aim cannot be just to spend money and to have a low error rate. Use of funds should bring about a structural shift in development, increasing the efficiency, effectiveness or quality in an area, sector or industry, and leading to positive long-term impacts (e.g. initiation and implementation of structural reforms and key projects).
We are satisfied that cohesion policy is now closely linked with Europe 2020, country-specific recommendations and the fiscally responsible behavior of Member States.
▶ What is the investment strategy for the ERDF, Cohesion Fund and ESF for 2014-2020? What are the expected results?
We firmly believe that all EU funds and national funds must be planned together in an integrated manner for EU and national objectives.
The strategic focus is contributing to the Europe 2020 objectives – and its national counterpart, ‘Estonia 2020’. In the programming phase Estonia paid a lot of attention to analysing our development needs for the next 7-10 years and not just in areas eligible for EU support, but for the country as a whole – since EU support is not something separate, but one important source of funding along with national public funding. Also, we used the possibility to have only one operational programme instead of the former three to improve coordination between national authorities and different funds, thereby ensuring an integrated and efficient use of the EU funds.
Our approach is very much driven by the expectation that the investments from cohesion policy must improve our competitiveness and contribute to economic development.
About one third of the funds will be used in the area of the knowledge-intensive and internationally competitive economy. We are creating opportunities for entrepreneurs and R&D institutions to develop new and innovative products and services, to grow and access new export markets. The productivity of our SMEs should increase by 40 % and the number of exporting enterprises should grow by 25 %.
One third will be invested in education, employment and social inclusion. The main objective will be to ensure better qualifications of the working age population and to increase their competitiveness in the labor market.
The last third will be invested in basic infrastructure – multimodality in transport, ICT connections and energy efficiency.
▶ Estonia has used financial instruments in the area of enterprise support and energy efficiency in housing during 2007-2013. Moreover, Estonia is planning to increase the share of financial instruments and widen the areas of usage. Based on experience, what are the advantages of using financial instruments in cohesion policy?
As public budgets are under increasing financial pressure, Estonia considers financial instruments as an important way to reduce that pressure and to ensure long-term sustainability in supporting different policy areas. We want to facilitate development, not to foster aid dependency. Grants are not always the most sustainable way of increasing the competitiveness of beneficiaries, or the state in general.
Estonia has the highest number of start-ups per capita in Europe – this testifies to how easy it is to start a business in Estonia. In order to keep them growing in Estonia, we saw the positive impact of creating the Baltic Innovation Fund with other Baltic countries and investing the resources returned from EU financial instruments. This shows how using financial instruments can have a real multiplying effect and a revolving impact on the economy.
Investments from the ESI Funds via financial instruments are expected to at least double compared to 2007-2013, which is also the target discussed at EU level. Greater volumes of capital will be made available to enterprises and a new strand involving support to enhance resource efficiency in enterprises is envisaged. We will also continue monitoring other areas and explore further possibilities of using additional financial instruments during the financial period.