Estonia maintains R&D spending levels

TALLINN - In 2009 the ratio of research and development (R&D) expenditures to the gross domestic product (called the intensity of the R&D) reached the unprecedented level of 1.42 percent, despite an actual decrease of those expenditures, according to Statistics Estonia data, reports news agency LETA. The statistical somersault was enabled by the economic crisis causing a 16 percent falloff of GDP in 2009 compared to 2008. The expenditure on R&D decreased from 3.2 billion kroons (205.1 million euros) in 2008 to 3.1 billion kroons in 2009, or only by 5 percent. As a result, the R&D intensity was lifted from 1.29 percent to 1.42 percent. For comparison: in 2008 this indicator equalled 3.73 percent in Finland, 1.43 percent in Ireland, 1.35 percent in Spain and 1.03 percent in Russia, with the EU mean reaching 1.90 percent.

In general, the organizations performing R&D are divided into two groups: non-profit institutional sectors (higher education, government and private non-profit sectors) and the business enterprise sector. In analyzing the data it became apparent that, under the shadow of the expenditure decrease, a clear increase took place, as the decrease was brought about by saving and cutting of the labor costs.

Compared to 2008, in non-profit institutional sectors the number of R&D personnel increased from 6,598 to 6,782, and the working time spent on R&D, from 3,241 man-years to 3,507. At the same time the labor costs remained almost on the same level, implying a 6 percent fall of those costs per working year. That fall was even higher than the 5 percent decrease measured for the whole of Estonia. In total the expenditure in those sectors slumped by 140 million kroons evenly spread across current expenses and investments.

The R&D expenditure in the business enterprise sector remained practically at the level of 2008. A couple of circumstances can explain this. Firstly, 75 percent of the R&D expenditure can be attributed to only 58 enterprises (the total number of enterprises declaring such expenditures was limited to a few hundred). The main activity of the mentioned 58 firms mostly belonged to the list of activities of high-tech manufacturing or knowledge intensive services, which were less affected by the economic crisis. Secondly, some enterprises remembered the words of wisdom, declaring that innovativeness (including product development) is the best remedy to deal with economic recession.
There was also a rise in the business enterprise sector in the number of R&D personnel (from 3,023 to 3,122) and in man-years devoted to R&D (from 1,845 to 1,924). Unlike with the non-profit sectors, the labor costs per working year even grew, by 2 percent.

No substantial changes happened in the structure of R&D financing: still half of the expenditure is financed by government, two fifths by enterprises and one tenth by foreign sources. Nevertheless, the government financing decreased in 2009 compared to 2008, by 7 percent, descending to 1.5 billion kroons, and that of enterprises by 8 percent, to the 1.2 billion kroons level. Here it is important to mention that the European Union funds mediated by the state budget are counted as government-sourced.