Ucimo od drugih: Estonia’s Success Story

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http://www.tol.org/client/article/22511 ... rsion.html

Estonia’s Success Story: The Short Version
Words of wisdom from a few who helped make Estonia the high-tech and debt-free stronghold of Eastern Europe.
by Martin Ehl

29 June 2011

Colleagues and friends think I am a Polophile. But during my visit to Estonia last week I realized that, if anything, I am an Estonophile, even though I am able to say only “cheers” and “thank you” in Estonian.

Allow me to present for your consideration a few views of Estonians whom I have met. The following quotations should illustrate why this country has an efficient system of electronic public administration, should not be scared of rising interest rates for state bonds because it does not release any, and features a public debt of only 6.5 percent of gross domestic product.

“The public is against borrowing money against the future of our children. Voters understand that managing the state without debt is essential and they appreciate that” –
Prime Minister Andrus Ansip, explaining the reason why he was re-elected in March. He thereby became the first Estonian prime minister to defend his seat since the country regained its independence in 1991.

“Ninety-four-and-a-half percent of people filed their tax returns electronically. The Estonian tax office is probably the only one in the world that does not collect money but pays it out” – Peeter Luikmel, an economist from the Estonian National Bank. He was explaining the law that obligates the state to pay within five working days any overpaid taxes owed to those who submit the form electronically.

“Estonians use their common sense when it comes to the economy, in contrast to some nations in Southern Europe” – Finance Minister Jurgen Ligi.

“I am evaluated according to whether I finish a task or not, not according to the hours that I am present in the office. Thanks to e-government I can work evenings” – Maria Varton, a project manager at the Economy Ministry and the mother of three small children.

“It takes 18 minutes to establish a new company with the help of the electronic system of public administration. There were competitions when somebody did it in 15” – Indrek Vimberg, head of ICT Demo Center, a showcase for Estonian high tech.

“We have splendid technicians and designers, but the problem is marketing and presentation. In addition, it’s still a handicap for a company to have its origin or base in a post-communist country. Sometimes I have the feeling that it’s enough to have an address in San Francisco and interest in your company rapidly increases” – Tonu Runnel, founder and head of the website-building company Edicy.

“We hope that Nokia will go bankrupt and more skilled IT people will come here from Finland” – the manager of an expanding Estonian IT company, complaining about the lack of qualified employees.

“Estonians hardly use credit cards” – Vimberg, explaining Estonians’ reluctance to go into debt.

“At the beginning we didn’t have time to ask the government for support – we preferred to just do business. It is better to focus on business and acquire a few customers and money from them, rather than rely on the government” – Martti Paju, sales manager at the software company Erply, speaking about the possibility of drawing government support for newly established small companies.

“This year 24 percent of voters used the electronic voting system” – Vimberg, of ICT Demo Center.

“Business relations with Russia are the best in the last 20 years. In political relations there is some space for improvement” – Prime Minister Ansip.

“After 1990 a young generation grew up without any knowledge of Russian. They are trying to catch up but it is a problem for them when they look for a job” – journalist Toomas Toomsalu on relations between Estonian-speakers and the native Russian-speakers who make up 20 percent of the population.

“It is difficult to say how we survived. But we are here and we are happy” – Ansip on how it was possible that the Estonians survived thousands of years of foreign supremacy and established their first national state only in 1918.

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Source: http://www.bbc.co.uk/news/business-15197943

How Estonia has avoided EU's economic problems

It currently has the fastest economic growth in the EU, so what is Estonia doing right when other nations are in so much financial trouble?

Eva-Maria Ounapuu is enjoying Estonia's boom.

She set up organic cosmetics company JOIK four years ago, turning her candle-making hobby into a business.

She received EU grants for machinery and marketing help, but says the Estonian government's business-friendly agenda helped too: "It has been quite easy.

"There was no problem with regulations and even finding places to sell has gone quite smoothly.

"You can report your taxes online so you don't waste valuable time on forms and things. We don't owe our growth to the government but they haven't put any obstacles in our way."

JOIK now employs four people and has moved to bigger premises. It has an annual turnover of 250,000 euros and is starting to export to neighbouring Baltic countries

It is a similar story for Estonia as a whole, as the country has come a long way since it joined the EU in 2004.

An initial influx of credit led to a construction boom and soaring house prices, but the bubble burst in 2008 and when the country found itself in the financial doldrums, it was forced to smarten up its act.

Labour laws were liberalised, the retirement age increased and public spending cut. But taxes stayed low to encourage business; trendy entrepreneurs were born.

Estonia's GDP grew by 8.5% in the first quarter of the year, the fastest growth of any EU economy. One of the biggest growth areas is technology.

Skype the online software used by 200m people every month to make free or cheap video and phone calls over the internet, has its development office on the outskirts of Tallinn.

The software was invented in Tallinn by a Dane, a Swede and four Estonians.

Sten Tankivi, head of Skype in Estonia says: "You can view the country of Estonia itself as a start-up. It regained independence just 20 years ago and generally the society or culture here has very little hierarchy.

"It's very small and nimble and that sort of environment is very positive for entrepreneurship."

In January Estonia joined the euro. The resultant currency stability, along with those low corporate taxes (zero on reinvested profits), have made this tiny nation of 1.3m a very attractive investment. Exports are soaring and are up 53% on last year. This summer they reached the 1bn euro mark for the first time.

But 70% of exports go to other EU countries and growth is steadily declining in its two major export markets, Finland and Sweden.

So how fragile is Estonia's economy?

It is still a net recipient of EU money but its contribution to the European Financial Stability Facility means membership is decreasingly profitable. Its 2bn euro contribution represents a third of the government's annual budget.

"We were invited to the wedding party but it turned out to be a funeral," says Andres Arrak, from the Estonian Entrepreneurship University of Applied Science.

"We've had lots of money from the EU.

"We've renovated churches and roads. But now we're being asked to put money in to improve mistakes made in the past in Greece and other eurozone countries.

"It makes no sense. We should be investing in Estonia's future."

But Estonia's Prime Minister Andrus Ansip remains confident its growth will continue: "Of course we all have to be worried but our banking sector is doing well, our commercial banks are well capitalised and have quite remarkable reserves.

"State finances are in the best shape of any in the European Union because we still have 12% GDP reserves.

"So yes, of course we understand what the credit crisis means, but in Estonia it's not a hot topic for us."

Mr Ansip admits he has a hard task explaining why Estonia, the poor Eastern cousin, fresh out of troubled times itself, should bail out its richer Southern cousins.

But support for the EU is unwavering among young Estonians relaxing over a glass of wine in one of Tallinn's fashionable new bars, Museum Lounge.

Memories of Soviet occupation, which only ended 20 years ago, are still fresh among the younger generation.

Ali is a school teacher who says she fully supports Estonia's contribution to the Greek bailout.

"I don't even understand what the discussion is about. We've been receiving a lot of money from the EU so now it's a good thing that finally we're in a position to help someone else. I think it's only fair."

Museum Lounge manager, Argo, agrees. "Estonia is looking West now, only West," he says.

And Estonia is willing to pay the price.