Estonia's competitiveness clear from yearbook

  • 2001-10-18
  • Kairi Kurm
TALLINN - Estonia ranks 22nd among 49 countries surveyed in this year's World Competitiveness Yearbook, which is published by the International Institute for Management Development based in Lausanne, Switzerland. The survey's aim is to inform potential investors and local authorities alike on a country's international competitiveness.

First place goes to the United States, followed by Singapore and Finland. Rounding up the survey, at the bottom, are Indonesia, Venezuela and Poland. Russia comes in at number 45. In this survey Estonia leads such economically developed countries as Spain, France, Japan and Korea. Estonia's competitiveness is 40 percent that of the U.S. level.

"Estonia's 22nd place is a good and significant message to foreign investors and promotes recognition of the country's economic policy," said Leev Kuum, researcher at the Estonian Institute of Economic Research, the publisher's partner in Estonia. According to Kuum, a total of 286 criteria were taken into account in the study, two-thirds of which consisted of statistical data, and the rest, the so called soft data, gathered through a survey that was carried out among 100 of Estonia's top managers. "The competitiveness reflects first and foremost the country's ability to sell its products abroad," said Kuum. He said that the research took into account the country's small size and can thus be considered "a product balancing science and the arts."

Estonia's biggest strengths, as brought out in the survey, are its high level of services' exports, well developed foreign trade, a large share of women in the labor market (48 percent), low internal and national debt and a high level of annual labor productivity increases. The other pros mentioned include the country's low prices and a large share of foreign direct investments. At the same time, Estonian citizens are among the most literate of the 49 nations surveyed, placing second after Slovakia, with only a 0.2 percent illiteracy rate. India, which holds the last position in this category, has an illiteracy rate of 47 percent.

The country's negatives are, its inefficient use of energy, a lack of qualified labor, including engineers and management, and low labor productivity. The businessmen questioned found that it was difficult to hire foreign labor and to get export credits and insurance. Estonia ranked in the last position regarding its huge foreign trade deficit, as a percentage of its GDP, and in 45th position with its high state budget deficit, which totals 4.7 percent of its 1999 GDP.

"Part of the information used in the survey derives from 1999," said Marje Josing, director of the Estonian Institute of Economic Research. "We hope that Estonia's position will improve next year because the exports in 2000 were quite good," she said.

Raul Malmstein, deputy secretary general at the Ministry of Economic Affairs, said that the state's average expenditures on research and development, which equal 0.75 percent of the GDP, have to be increased to the European average of 1.8 percent within three to four years. He said that the share of the private sector's research expenditures, which is 0.15 percent of the GDP today, should outstrip the state's spending in the future. "Estonian companies depend on foreign outsourcing and are thus not interested in further developments or in increasing their productivity," said Malmstein. "The other problem is the country's low awareness abroad. A product advertised as 'made in Estonia' does not entice a consumer to reach for it. Estonia's brand identity project should improve this and help bring tourists to Estonia and boost our exports."

According to Malmstein, the proportion of private companies to population is two times less in Estonia than in the European Union, where there are 51 companies per 1,000 people.

The 49 countries surveyed in the book are not the most succesful among the world's total of 220 but are the ones with the most interesting economies, said Josing. The survey did not cover Latvia or Lithuania. Estonia was included in this yearbook for the first time thanks to the efforts of the former head of the state-run Estonian Investment Agency, Agu Remmelg, said Josing. The International Institute for Management Development is one of the most well-known business colleges in the world, staffed with some 50 professors and spending 20 percent of its budget on research.