According to a study requested by the Ministry of Economic Affairs and Communications, Enterprise Estonia and the Ministry of Foreign Affairs, even though the COVID-19 crisis in 2020 brought a sharp decrease in the export of both goods and services, in recent years the Estonian economy and exports have adapted relatively well to the new more challenging economic circumstances.
“This crisis year has been difficult for all Estonian companies, but we are delighted to see that in the last quarter of the past year the export of goods increased substantially. Our entrepreneurs have managed to successfully adapt to the new circumstances, which shows our economy’s prevailing strength,” stated Andres Sutt, the Minister of Entrepreneurship and Information Technology. The minister said that the export of transportation and travel services have suffered the most due to the restrictions related to COVID-19, although in general the Estonian economy and exports have adapted quite well.
Although according to the study, most companies believe that product quality, efficient working arrangements and flexibility in introducing new products remains a significant competitive advantage for them, the labour productivity of Estonia’s several key exporting industries is still 2-3 times lower than the corresponding indicators in both Finland and Sweden. According to Sutt, the companies that will benefit from the crisis are the ones that engage in development and improve their productivity.
“The lack of skilled workers is a continuous problem for Estonian companies and it impedes economic development as well as recovery from the crisis,” he explained. “Retraining people, using additional skilled labour and making both engineering as well as vocational education more popular can help mitigate labour shortage and unemployment and increase potential economic growth.” The minister states that Enterprise Estonia offers various supportive measures to increase companies’ motivation to create and implement research-intensive and innovative technologies. “Growth opportunities linked to the green turn will in the coming years also contribute significantly to more efficient business organisation as well as profit growth,” he added. “Only about a fifth of Estonian companies currently place emphasis on this topic.”
For all the sectors in the study, the most recommended markets to enter in the future are Swedish, German, Finnish and Norwegian markets. “Even though more distant markets like Japan, China or the United States of America are less represented, their relative importance is on the rise. Either way, in order to mitigate risks, it is sensible to keep the selection of export destinations broad,” said Peeter Raudsepp, Chairman of the Management Board of Enterprise Estonia.
The study established that the main impairments in developing exports are considered to be the regulatory obstacles related to technical requirements, which are a significant problem in manufacturing. In addition to the requirements in third countries, EU-wide regulations also cause confusion, because some of them are only applied by a few member states or sometimes there are technical regulations for entrepreneurs in one specific member state which are not required in others.
Entrepreneurs have the highest levels of awareness of Enterprise Estonia’s support measures in regards to state support measures. “These include activities that are specifically aimed at supporting exports, like growth programmes, export training, developing contacts, exhibition stands at trade fairs as well as a few indirect support measures which help with developing a business model or product development,” said Raudsepp.
He says that the study establishes that Enterprise Estonia is on the right path in regard to supporting companies. “Besides activities addressing exports directly, innovative product development as well as research and development are becoming more important – this is essential so that we can get out of price competition and move forward towards more complex product groups,” he explained.
The objective of the study was to chart the factors that support and hinder the competitive level of Estonian exporters and also examine if and how those factors have varied throughout recent years. Policy recommendations were developed in accordance with the results of the study in order to increase the competitive level of Estonian exporters.
This study was requested by Enterprise Estonia, the Ministry of Economic Affairs and Communications, the Ministry of Foreign Affairs and it was carried out by Ernst & Young Baltic AS and Policy Lab OÜ.
Get acquainted with the study on the Ministry of Economic Affairs and Communications website (in Estonian) at Eesti ekspordiuuring (mkm.ee).
The project is co-financed by the European Union Regional Development Fund