In brief

In the aftermath of the global economic crisis of 2007-08, the Estonian government began to reassess its competitiveness strategy in order to rebuild the country's economy. In 2010, as the EU announced Europe 2020 – a bid to promote growth across the continent – the Estonian government saw an opportunity to draft "a strategy to improve competitiveness by focusing on achieving higher productivity and employment levels". Its purpose was to ensure that Estonia hit the targets that EU had set out in its Europe 2020 plan.

In 2006, the Estonian prime minister Andrus Ansip set up a Strategy Unit within the Government Office to develop Estonia 2020. The Unit put the finishing touches to the strategy in 2011, identifying 18 broad challenges consisting of nearly 300 initiatives, well above the number required by the EU.

Today, two years before the 2020 deadline, Estonia has already reached its 25 percent target for renewable energy and expects to reach its target of reducing greenhouse emissions by 2 percent from their 2005 levels. The country is also closing in on many of its other targets, such as those for employment and tertiary education.

The challenge

After its independence from the Soviet Union in 1991, Estonia's economy grew rapidly – until the 2007-08 global financial crisis. This revealed the country's "heavy reliance on industries that generated little value added. As the financial crisis deepened, the country’s [GDP] shrank by 5 percent, and in 2009, by another 14 percent."[1]

In addition, Estonia’s productivity and long-term growth were in danger, as the country’s population was ageing and declining in number.[2] “From 2000 to 2012, the country’s permanent population fell by 5.5 percent to 1,294,236, and the percentage younger than 18 years of age fell to 15 percent from 18 percent ... According to government projections, by 2030 the country’s working-age population would fall by 100,000.”[3]

The initiative

In order for the Estonian government to address the problems of the country’s declining economy and population, it needed a central strategy for improving competitiveness by focusing on achieving higher productivity and employment levels.[4] When, in 2010, the EU announced Europe 2020, a bid to create “a different type of growth that is smarter, more sustainable and more inclusive”,[5] the Estonian government saw the opportunity to strengthen its own strategy process and refine its priorities.

Europe 2020 was the successor to the Lisbon strategy, whose aim had been to make the EU the world's most competitive economy. "The EU’s 'headline targets' included an employment rate of 75 percent for working-age people, investment of 3 percent of GDP in research and development, a reduction of greenhouse gas emissions and ... a reduction of 20 million in the number of people at risk of poverty.”[6]

The Estonian government tasked its Strategy Unit to draft a competitiveness plan that would enable it to meet or, in some respects, exceed the requirements of Europe 2020. The plan was called Estonia 2020, a national reform programme which sets out the country’s goals for improving competitiveness along with the activities needed to achieve these goals.[7]

Estonia 2020 includes the following targets:

  • Increasing employment levels to 76 percent
  • Growing the gross domestic expenditure on research and development to 3 percent
  • Emitting 11 percent less greenhouse gas compared to 2005 levels
  • Increasing the share of renewable energy from renewable sources to 25 percent
  • Increasing energy efficiency to 6.5Mtoe
  • Reducing the education and training dropout rate to 9.5 percent
  • Raising the proportion of people obtaining a tertiary educational attainment to 40 percent.[8]

These targets were aligned with the targets for Europe 2020, in that they were the same or higher than was required for EU countries as a whole. In addition to the categories defined by the EU, Estonia decided to tailor its strategy to reflect its own particular situation. It added targets in areas such as public health by introducing policies to decrease the level of alcohol consumption (see Measurement below) and raising the productivity per employee from the current 65 percent to 80 percent of the EU average.

The final action plan contained almost 300 initiatives grouped under 18 major challenges to Estonia’s competitiveness, “ranging from 'bringing labour qualification into conformity with the needs of the contemporary labour market' to 'reducing the general resource and energy intensity of the economy'. The report also proposed policy responses and identified potential targets.”[9]

The public impact

The EU’s publication, Country Report Estonia 2016, assessed Estonia’s economy in the light of the European Commission’s Annual Growth Survey. It found that Estonia had made good progress in reaching its national targets under the Europe 2020 Strategy in the following areas:

  1. The labour market – employment rates in Estonia were above the EU average, and unemployment was low (it fell from 16.7 percent in 2010 to 5.8 percent in 2017).[10]
  2. Tertiary education – more than 30 percent of the population had gained degrees at tertiary level
  3. Reducing greenhouse gas emissionsEstonia is expected to reach its target of minus 2 percent (compared to 2005) by 2020
  4. Renewable energy – the renewable energy share in Estonia was 26.5 percent in 2014, already above its 2020 target of 25 percent.[11]

At the time of the review, though, Estonia had made less progress in other policy areas. “More effort is needed in reducing early school leaving, increasing R&D investment, improving energy efficiency and reducing the [number of those] at risk of poverty.”[12] Since then, the Estonian government has published an action plan for Estonia 2020 for the period 2017-2020, showing that it had increased its levels of investment, especially in education and employment.[13]

Estonia has also made some progress in R&D investment, granting EUR54.1 million in 2016 towards the construction or reconstruction of seven research and study buildings. It allocated a further EUR67.4 million to "content activities", such as “implementing structural changes in universities, activities aimed at increasing the efficiency and quality of study and research work, improvement of the quality of doctoral studies, activities aimed at increasing international competitiveness and strengthening the cooperation between R&D institutions, higher educational establishments and businesses."[14]

Estonia made further efforts to improve its energy efficiency. It invested EUR102 million in 2016 for 1,238 apartments (86,883.10 m2) to improve the energy efficiency of apartment buildings, and EUR1,473,595 in a project for the "renovation of distance heating boilers and fuel replacement" and the "construction of local heating solutions to replace distance heating".[15]

Written by Linnéa Larsson

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What did and didn't work

All cases in our Public Impact Observatory have been evaluated for performance against the elements of our Public Impact Fundamentals.

Legitimacy

Stakeholder Engagement Good

Government ministries were extensively engaged in the Estonia 2020 strategy development process from the beginning, as it offered a new approach to overcoming the challenge of coordination.[16] “They planned to organise numerous working groups through which participants could provide feedback and brainstorm policy initiatives. In addition, the core team invited a representative from the Ministry of Finance to all discussions. The Strategy Unit would then engage the ministries and other stakeholders in conversations to deepen the analysis and to frame policy responses.”[17]

As part of the work to identify the challenges and quantitative targets, the Strategy Unit convened a session with about 50 stakeholders from across government, civil society, and academia in 2010. When the strategy draft was ready the following year, the Strategy Unit organised 13 separate workshops for 160 participants in order to get feedback on the draft and help formulate concrete initiatives for an accompanying action plan.[18]

Although the consultation with policy and industry experts was effective, there was less effort to consult Estonian citizens as a whole or the minority Russian speakers as a separate interest group. Consultation with the general public was attempted online via a government portal, which published a draft of the strategy. The opinions of the few citizens who submitted responses were considered in the Strategy Unit’s subsequent action plan workshops, but interest and engagement was relatively low.[19]

Political Commitment Good

Andrus Ansip was prime minister during the development of Estonia 2020. He was first elected in 2005 and twice re-elected, in 2007 and 2011, before resigning in 2014. He set up the Strategy Unit within the Government Office in 2006, demonstrating the strong political backing for the initiative from his Reform Party.

However, the Reform Party’s coalition partners changed three times during Prime Minister Ansip’s time in office. This created problems for the development of Estonia 2020, as the Government Office needed buy-in from ministers from other coalition parties, so that they would lend their support and cooperation during the strategy development process.[20]

To avoid losing political support for Estonia 2020 after the 2007 and 2011 elections, the Strategy Unit made sure that the new coalition agreement included targets matching those of Estonia 2020. They also met with new ministers to keep the strategy in line with the government’s political agenda.[21]

Public Confidence N/A

Consultation and communication with the public during the development of the strategy was limited (see also Stakeholder Engagement above), so it is unclear whether the general public was supportive of the programme or not.[22] The Strategy Unit aimed to engage and consult the general public by asking for comments on the draft strategy on the government's online participation portal, osale.ee.[23] However, this approach did not generate much engagement, and there were relatively few responses from Estonian citizens.[24]

Policy

Clear Objectives Strong

The main objectives for Estonia 2020 were well defined: to achieve greater productivity and to restore the high employment rate that had obtained before the economic crisis.[25] The specific targets for Estonia 2020 for sectors such as employment and the environment were clearly stated in the European Commission’s "Europe 2020 targets: statistics and indicators for Estonia" (see The Initiative above).[26] Estonia’s 2020 target for reducing poverty relates only to the EU’s subcategory, "people at risk of poverty after social transfers", where "social transfers" refers to those benefits provided by national or local governments and is set at 15 percent of the population.[27]

Estonia shaped its 2020 strategy with the country's own situation in mind. For example, it was decided that “increasing healthy life expectancy by improving health-related behaviour and continuing to work towards reducing accidents”[28] should be noted as a national priority. Further, a specific target was set to raise productivity per employee to 80 percent of the EU average by 2020.

After these additions, the action plan contained almost 300 initiatives, set out under 18 major challenges.[29] “The draft outlined 18 major challenges to Estonian competitiveness, ranging from 'bringing labour qualification into conformity with the needs of the contemporary labour market' to 'reducing the general resource and energy intensity of the economy'. The report also proposed policy responses and identified potential targets.”[30]

Evidence Strong

The Strategy Unit drafted an initial 2020 Challenges Report, based on evidence from the EU (from Eurostat, in particular), the OECD, the World Health Organization, and national thinktanks.[31] It examined each policy area within the strategy and compared it with EU and OECD benchmarks in order to identify Estonia’s country-specific challenges. Where existing indicators were lacking – as in estimating Estonia’s share of world trade – the Strategy Unit consulted experts in business and trade.

Participants in the stakeholder consultation workshops received detailed factsheets before the meetings. “For example, a factsheet about the potential contribution of information and communications technology to the economy listed the relevant ministries ..., outlined measures to strengthen the sector that had been successful or unsuccessful to date, detailed the main financial trends of 2008 to 2010, and forecast growth in relevant sectors for 2011 to 2013. The factsheet also included current statistical indicators such as numbers of companies in different sectors, numbers of employees, total revenue, share of GDP, and rate of growth in recent years."[32]

Feasibility Fair

In 2014, Estonia received a EUR4.9 billion investment package called the Operational Programme for Cohesion Policy Funds 2014-2020. It was a multi-fund programme, bringing together investments from the European Regional Development Fund, the European Social Fund, and the Cohesion Fund. It aimed to contribute to the delivery of the EU's strategy for smart, sustainable and inclusive growth and to the achievement of economic, social and territorial cohesion. The EU contributed EUR3.5 billion of this package.[33] “Those EUR4.9 billion will enable the country to address some of its most pressing challenges with concrete projects. It will drive research and innovation, improve international transport connections, reform the education network, and assist the growth and internationalisation of SMEs [small and medium-sized enterprises].”[34]

A proportion of the EU funds were earmarked for operation and implementation, implying that there were also fiscal resources available to support the administration of the strategy:

  • EUR108.5 million (3.1 percent) of the EU funds was allocated to “enhancing institutional capacity to ensure a smart provision of public services through e-government services, to increase the competence of central and local governments, and to improve the policymaking processes”
  • EUR119 million (3.4 percent) was allocated to “technical assistance to ensure effective implementation”.[35]

Although Estonia received substantial funding from the European Commission, the feasibility of Estonia 2020 was still challenging, due to its large number of goals – 18 broad challenges and nearly 300 action plan initiatives.[36] Estonia had gone above and beyond the targets set by the EU and added their own nation-specific goals. It meant that the goals were tailored to their own particular needs, but it also significantly increased the work that had to be done within a limited time.

Action

Management Good

The strategy development for Estonia 2020 was led by the Strategy Unit within the Government Office. The Unit’s director was Keit Kasemets – formerly a deputy director of Estonia’s EU Secretariat – who had played a leading role in developing the action plans for Estonia’s EU Lisbon Strategy for growth and jobs.  The Unit was well equipped to manage the strategy development, as it had eight members of staff with both public and private sector experience in relevant policy areas.[37] Each of the eight members serving under Kasemets was responsible for a different policy area, such as macroeconomic policy, resources and environment, labour market and education, and economic affairs.[38]

The Strategy Unit managed the liaison between the prime minister, the cabinet and the parliamentary committees during its development of the strategy and also oversaw its implementation.[39] Ministers were included in the planning process as a way to increase ministerial ownership of implementation. However, the Strategy Unit did not have formal powers to instruct ministries, which made it difficult to enforce implementation of the Estonia 2020 priorities.[40]

The responsibilities for the different initiatives are outlined in the Estonia 2020 action plan.[41] This action plan is updated annually by the strategy team and is based on discussions with members of the inter-ministerial working group, who – in turn – receive feedback from stakeholders.[42]

Before 2014, it was a challenge for the Unit's management to obtain timely information from ministries in order to update the action plan, as there was no mandatory schedule for submitting reports to the strategy team. "In 2014, the Ministry of Finance ... worked to revise those rules so that ministries would have to issue their reports by the beginning of March", in time for the annual budget discussions in April.[43]

This change made it easier to manage the implementation process, as it enabled the government to make more informed decisions about which policies should be further prioritised and which should be revised. However, as previously noted, the strategy teams’ lack of formal powers to keep the ministries focused on Estonia 2020 priorities was still an issue, and weakened their ability to manage the process.[44]

Measurement Strong

The European Commission – and Eurostat in particular – regularly monitor Estonia’s progress against Europe 2020 targets.[45] Eurostat was involved in the process of defining the indicators, and now monitors the headline targets under nine indicators. Its role is to:

  • Ensure there is statistical support for the strategy
  • Provide methodological support in developing the indicators
  • Liaise with other European Commission directorate-generals, in particular on the definition and choice of indicators to support the strategy
  • Produce and supply the relevant statistical data
  • Ensure high-quality standards for data – which are guaranteed through a Code of Practice which applies to the European Statistical System, a legal framework, and a communication on the quality of the statistics.[46]

These measures were used to inform the policy by identifying areas that needed greater impetus. For example, the Estonian government put more investment into education and labour policy for 2017-2020, after these were highlighted by the EU as areas that were "in need of more effort" (see also Public Impact above).[47][48]

A further example of Estonia’s willingness to adapt its policy over time as more information became available relates to its public health measures. These were identified in the original strategy analysis, but specific measures related to alcohol, tobacco and nutrition were not included as part of the workforce health initiatives in the first action plan.[49] However, the following year’s action plan included outline health measures, and the Ministry of Social Affairs published green papers on alcohol and tobacco policy in 2014.[50][51]

The focus on the health implications of alcohol arose largely because "Estonia had one of the highest alcohol consumption rates in the EU. A 2011 study by the World Health Organization based on 2005 data showed that Estonians drank an average of 15.57 litres of alcohol per capita per year – more than double the world average of 6.1 litres".[52] Section 4.10 of the Green Paper on Alcohol Policy, "Monitoring and evaluation of implementation, efficacy of alcohol consumption, and impacts on health and alcohol policy", sets out the measurement approach:

  • “An annual analysis of alcohol use and excessive alcohol-related damage, and consolidating and publishing the information as the Alcohol Yearbook
  • "Regular conduct of market, consumption, and health implication studies by ensuring consistency in research methodologies ...
  • "Annual workgroup that includes the representatives of parties [involve in forming the] alcohol policy to evaluate the operation of the policy.”[53]

The monitoring of the impact of the tobacco policy uses a format similar to the Alcohol Yearbook, and was detailed in the Green Paper on Tobacco Policy.[54]

Alignment Fair

Despite efforts to increase cooperation between stakeholders by assigning to a dedicated Strategy Unit the task of managing Estonia 2020, there was insufficient alignment across the different ministries. “Ministries continued to pursue their own independent agendas. Kasemets and his team had to find new ways to forge agreements."[55]

Immediately after the 2011 election, towards the end of the development process, the Strategy Unit worked hard to ensure that incoming cabinet ministers consulted them regularly, with the aim of improving the coordination of planning and spending priorities. “'It was a big effort in the past two months,' Kasemets said. But for the first time in Estonia, all of the planning for the competitiveness strategy, the government’s coalition agreement, and the state budget took place simultaneously in order to align policies with budget realities and create a realistic framework for implementation."[56]

Bibliography

Commission staff working document, Country Report Estonia 2016, Including an In-Depth Review on the prevention and correction of macroeconomic imbalances, 26 February 2016, European Union

Estonia 2020 Action Plan 2017-2020, 27 April 2017 

Europe 2020 in a Nutshell, 13 May 2013, Delegation of the European Union to Iceland, accessed 1 March 2018

Europe to invest over €3.5 billion in Estonia to boost its economy, Press release, 10 December 2014, European Commission (accessed 19 April 2018)

Estonia, Europe 2020 targets: statistics and indicators for Estonia, European Commission (accessed 26 April 2018)

Government Office summarises Estonia's competitiveness, 6 January 2015, Kristiina Tiimus, News, Republic of Estonia Government office

Green Paper on Alcohol Policy, 2014, Ministry of Social Affairs

Green Paper on Tobacco Policy, 2014, Ministry of Social Affairs

Improving consultation and cooperation to create a national strategy: drafting Estonia 2020, Elena Lesley, May 2014, Innovations for Successful Societies, Princeton University

Lisbon Strategy for Growth and Jobs – towards a green and innovative economy, 2009,  European Commission (accessed 26 April 2018)

National Reform Programme “Estonia 2020”, Republic of Estonia Government Office website (accessed 1 March 2018)

Operational Programme for Cohesion Policy Funding 2014-2020, Estonia, 2014, European Commission (accessed 26 April 2018)

Osale.ee (accessed 19 April 2018)

Smarter, greener, more inclusive? Indicators to support the Europe 2020 Strategy: 2016 edition, 2016, eurostat

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