Commissioned by the Estonian Agency for Business and Innovation and compiled by the Estonian Economic Research Institute (EKI), the latest Competitiveness Yearbook is based on data from the 2021 results of the Global Competitiveness Ranking of IMD, according to a press release.
The Global Competitiveness Ranking illustrates how countries create and maintain a competitive economic environment.
“Estonia stands out positively in the categories of awards (14th) and business legislation (17th), and our high-level education system has moved up three places in the index and now occupies 14th place,” said Sigrid Harjo, board member of the Estonian Business and Innovation Agency.
The good results of the Program for International Student Assessment (PISA) tests (4th), the high public sector expenditure on education as a percentage of GDP (9th), the compliance of primary and secondary education with demands of a competitive economy (15th) as well as many Estonian students studying abroad (15th).
The country’s business law ranking was positively influenced by factors such as ease of starting a business (3rd), number of newly started businesses (2nd), conducting the business start-up process in three stages (6th) and the median business establishment time at 3.5. days (6th).
Estonia also ranked 18th for government work efficiency, a category that takes into account the balance of the state budget, tax levels, level of development of state institutions , commercial legislation as well as the social framework.
The biggest jump was seen in the Estonian national economy category, where highlighted strengths included a relatively small decline in GDP of 2.9% in the first year of the COVID-19 crisis ( 14th), the acceleration of capital investment growth to 19% (1st) as well as an increase in the share of capital investment to 31% of GDP (5th).
Weaknesses in investments, research and manpower
Estonia’s lowest rankings are in the foreign investment (45th), research infrastructure (42nd) and labor market (40th) categories.
“As far as foreign investment is concerned, Estonia’s weaknesses are above all absolute indicators, in which Estonia is among the last due to the small size of our country,” Harjo commented.
The low position of the labor market factor in Estonia was due to insufficient availability of skilled labor (62nd), shortage of labor (61st) as well as lack of senior management competent and financial specialists (both 57th).
Weaknesses in the country’s research infrastructure include lack of published research papers (58th), low volume of research and development costs (55th), lack of patent applications (55th) as well as low number research and development employees in commercial enterprises. businesses (53rd).
The most competitive country in 2021 was Switzerland (instead of 3rd in 2020), followed by Sweden (instead of 6th), Denmark (instead of 2nd), the Netherlands (instead of 4th) and of Singapore (instead of the 1st). Among Estonia’s neighboring countries, Finland moved up two places in the rankings to 11th place, Lithuania one place to 30th place and Latvia three places to 38th place overall.
According to EKI’s economic experts, the lack of skilled labor has been the biggest obstacle to Estonia’s development over the past decades, which was also confirmed by the latest IMD survey. The Estonian Agency for Business and Innovation helps companies solve this problem through its Work in Estonia program, the agency noted.
Other key issues Estonia faced last year, cited by experts, were the lack of innovation as well as the lack of international competitiveness. Confidence in the government’s economic policy has increased dramatically, but as inflation rises and various professions experience vastly different wage growth, rising income inequality has become a problem.
Commenting on the new 2021 yearbook, EKI Director Marje Josing said Estonia’s competitiveness is particularly important in these complex and challenging times for the global economy.
“In 2020, the world was hit by the COVID-19 pandemic, which rocked countries’ economies and supply chains,” Josing said. “In such circumstances, these countries do best when the whole economic environment – including legislation, infrastructure and government activities – allows companies to be flexible and innovative and to compete with entrepreneurs from other countries. It is very important for a small country to be able to continue and develop the export of goods and services even in difficult economic conditions.”
More than 250 criteria taken into account in the rankings
The methodology developed by IMD to assess the international competitiveness of countries has found wide international recognition, the Estonian Agency for Business and Innovation said.
A total of 255 criteria are taken into account in the calculation of the countries’ competitiveness ratings, of which 163 are statistical, i.e. quantitative, and 92 are data collected from business leaders via a survey, c ie evaluative.
Click on here (PDF in Estonian) to read the new Estonian Competitiveness Yearbook 2021.
Click on here to read IMD’s latest full Global Competitiveness Ranking report for Estonia.