Minister Palo introduces Estonian IT companies to Japan
Entrepreneurship and IT Minister Urve Palo (SDE) attended an event in Tokyo on Monday aimed at bringing Japanese and Estonian companies together that work on solutions for the Internet of things (IoT).
“We have a lot to learn from Japan, and we have also a lot to give. The Japanese see Estonia as a highly-developed IT country, and they particularly value our experience developing complex cyber solutions,” Palo said.
The minister added that Japan would host the 2020 Olympics, and that Japanese interest in Estonia’s smart solutions was constantly growing. “We can help them with many issues, and they are also interested in that,” she said.
Ott Jalakas, founder of the Lingvist language leanring application, who is accompanying Palo to Japan, said that high-level visits were the best way for Estonian entrepreneurs to get contracts in Japan. “We got many new and good contacts today we can work with,” Jalakas said.
Head of Cybexer Technologies, Lauri Almann, said commenting on the visit that this kind of support by the state was invaluable. “Introducing one’s company with a minister means that every offer has more weight,” Almann said.
During the visit, Palo also met with Parliamentary Vice-Minister of Economy, Trade and Industry Toshinao Nakagawa, its Deputy Director-General Yoshiaki Takeuchi, and Mitsubishi CEO Osamu Masuko.
The business delegation accompanying Palo includes deputy secretary general of the Ministry of Economic Affairs and Communications, Viljar Lubi, foreign representative of Enterprise Estonia in Japan, Kosaku Yamaguchi, coordinator of foreign relations at Enterprise Estonia, Krista Mihkelsaar, as well as representatives of the Estonian embassy in Japan, and IT companies Cybernetica AS, Transferwise, RealSystems, Star Cloud, Funderbeam, Lingvist/Rakuten, Codeborne OÜ, Cybexer Technologies, Smart Load Solutions, and Playground.
Estonia's GDP grew 1.6 percent in 2016
According to fresh data released by Statistics Estonia on Tuesday, Estonia's gross domestic product (GDP) increased 1.6 percent year over year in 2016.
In 2016, Estonia's GDP at current prices was €20.9 billion.
The year was characterized by a slow but steady growth of the GDP. In the year's different quarters, the increase in value added in the trade, information and communication as well as transportation sectors influenced the growth of the Estonian economy the most. In the last three years, transportation had slowed the economy the most, with its decline continuing in the first quarter of 2016 as well. From the second quarter onward, however, transportation contributed positively to GDP growth at real prices.
In 2016, more than half of economic activities influenced the economy positively. Information and communication contributed to the increase of the GDP the most due to strong growth in software development services. The growth of the value added of trade was highest in the comparison of the last four years primarily due to stable growth in retail and wholesale trade. Although the value added of the largest Estonian sector, manufacturing, decreased in the first quarter, the value added increased 0.8 percent in total last year.
In 2016, net taxes on products influenced the Estonian economy positively. Receipts from value added and excise taxes grew, while payments of subsidies increased as well.
Following a decline in 2015, the real exports of goods and services increased by 3.6 percent in 2016, including the exports of services by 4.9 percent. The real imports of goods and services increased by 4.9 percent. The exports of goods and services were mainly affected by increased exports of electrical equipment, wood and products of wood as well as electronic equipment. The imports of goods and services were affected by the increase in imports of motor vehicles, base metals, pharmaceutical products and chemicals. The impact of the exports and imports of the remaining commodity groups was modest. Net exports, i.e. the difference between exports and imports, was positive in 2016. The share of net exports in the GDP was 4 percent, remaining unchanged compared to 2015.
Domestic demand increased 2.6 percent in 2016, affected primarily by increased household consumption expenditures. The increase in household final consumption expenditures was caused mostly by an increase in expenditures on transportation, food and recreation. In addition, general government and non-profit institutions' final consumption expenditures increased as well. Real gross fixed capital formation decreased 2.8 percent mainly due to fewer investments in buildings and structures by businesses and in equipment and machinery by the government sector. Domestic demand grew faster than the GDP. The total final consumption expenditures, gross fixed capital formation and changes in inventories was smaller than the GDP by output method, totaling 97.7 percent of the GDP.
In 2016, the GDP grew faster than the number of hours worked and persons employed, indicating that labor productivity per employee increased by 1.4 percent and labor productivity per hour worked increased by 1.2 percent. At the same time, labor costs related to GDP production have increased, with the unit labor cost growing 4.2 percent compared to 2015.
Estonia's GDP at current prices was €5.6 billion in the fourth quarter of 2016, indicating a growth of 2.7 percent compared to the fourth quarter of the previous year.
In the fourth quarter, the seasonally and working-day adjusted GDP increased by 1.9 percent compared to the previous quarter and by 2.8 percent compared to the fourth quarter of 2015.
The GDP in the last quarter of 2016 was driven the most by an increase of value added in the information and communication sector due to an increase in software development services. Furthermore, the value added in trade, transportation, energy, administrative and support service sectors as well as in manufacturing and construction also provided significant support for economic growth. Compared to recent years, more economic activities contributed positively to GDP growth.
Contributions to fourth-quarter GDP growth
In the fourth quarter, the number of persons employed and hours worked decreased, however the GDP increased. Thus, compared to the same quarter of the previous year, labor productivity both per employee and per hour worked increased. Unit labor cost also increased 2.5 percent in the final quarter of 2016.
After decreasing in the third quarter, domestic demand grew 3.7 percent in real terms in the fourth quarter of 2016 compared to the same period during the previous year. Domestic demand was mainly affected by enterprises' increased inventories of goods and increased final consumption expenditures. In the fourth quarter, real gross fixed capital formation fell 5.5 percent mainly due to a decrease of investments in buildings and structures by the business sector. At the same time, investments of enterprises in equipment and machinery increased. For all other sectors, gross fixed capital formation grew compared to the previous year.
In the final quarter of 2016, the real exports of goods and services increased 2.7 percent and the real imports of goods and services by 2.4 percent compared to fourth-quarter figures from the previous year.. The exports of goods and services grew due to an increase in the exports of electronic equipment, mineral products and wood and products of wood, while the imports thereof were affected positively by other transport equipment and base metals. The share of net exports in the GDP was 3.3 percent.
Kazakh business interested in Estonian shale oil plant technology
Viru Keemia Grupp (VKG) has begun negotiations for the implementation of shale oil plant technology in Kazakhstan.
Representatives of Kazakh business On-Olzha have expressed interest in the Petroter oil refining technology utilized by three VKG oil plants.
On-Olzha owns a large coal quarry whose output is delivered to Kazakhstan, Russian, Uzbekistan and Kyrgyzstan.
According to On-Olzha director Marat Nabijev, the Estonian-developed technology was of particular interest due to its efficacy. "The fact that it is possible to utilize mineral resources so effectively in the production of both oil and inexpensive electricity interested us a great deal," said Nabijev. "VKG is at a very good level in terms of technological development; I can confirm this as I have studied this subject throughout the world."
Oil shale, of which the country has an 5-6 billion tons according to different estimates, has recently begun to receive more attention in Kazakhstan. By comparison, Estonia's oil shale reserves total approximately one billion tons.
The director of On-Olzha, however, said that they were not planning on discussing the oil shale industry. "Every businessman must focus on that which is their trump card," Nabijev said. "We have a quarry with enough coal to last a hundred years and we will focus on that."
Commission: Estonia has one of best performing labor markets in EU
The European Commission said in its annual analysis published on Wednesday that while Estonia has one of the best performing labor markets in the EU, certain factors might reduce the country's competitive ability.
According to the Commission, Estonia's fiscal position remains strong, with a budget in surplus and negligible government debt. Some weakening of Estonia's fiscal position is expected in 2018, however, as the government which took office last fall intends to implement a more expansionary budgetary policy.
Estonia has one of the best performing labor markets in the EU, the analysis found, but its declining working-age population is a challenge. The Estonian labor market is characterized by its flexibility, high participation and employment rates as well as low unemployment. At the same time, aging combined with prolonged low fertility rates are set to shrink the working-age population over the next decade, which will contribute to the ongoing tightening of the labor market, creating a continued upward pressure on wage growth. This poses a risk for businesses' profitability, competitiveness and overall long-term economic growth, the Commission said.
However, ongoing labor market reforms are expected to boost labor supply and prevent excessive wage growth. The entry into force of Estonia's work ability reform is bringing work-incapacity pensioners back to the labor market. This increased labor supply is expected to slow wage growth. Labor supply will benefit from further ongoing reforms, creating further incentives to work, reducing the gender pay gap and providing more accessible childcare. Also, the ongoing local government reform is projected to make labor market activation policies more effective, as local social services are made more efficient. Finally, labor and skills shortages are expected to decrease, as measures are being taken to address them. Notably, constraints on economic immigration have recently been relaxed.
The Estonian economy is well integrated with its Nordic neighbors and the euro area, but its foreign direct investment remains below the long-term average.
The Commission also said that Estonia's industry remains dominated by traditional sectors with low research and development intensity.
Some progress, challenges remain
Overall, Estonia made some progress in addressing the 2016 country-specific recommendations. On the labor market and social policy issues, some progress was made in providing high-quality local social services, including by adopting and implementing local government reform. Limited progress was made on adopting and implementing measures to reduce the gender pay gap, however. Some progress was made in promoting private investment in research, development and innovation, including by strengthening cooperation between academia and businesses.
Inequality, relative poverty and social exclusion continued increasing gradually, and health outcomes remain significant challenges. Inequality has increased in recent years and is now well above EU averages, the Commission said.
Estonia has further improved its business environment, but challenges remain in a few areas. Estonia is running several projects to reduce the regulatory burden, bureaucracy and overlapping functions of different public bodies, but a continuing lack of national rules for transferring companies' registered offices into and out of Estonia weakens the business environment. Furthermore, lengthy insolvency procedures and inadequately protected minority shareholders' rights in corporate governance remain institutional barriers to investment.
State to provide €110 million in support to industrial sector businesses
The Ministry of the Environment will provide a total of €110 million in support to businesses in five industrial sectors through the Environmental Investment Centre (KIK).
The first round of support will involve businesses in the food processing, wood, mining, paper and cellulose and mineral materials processing sectors.
The goal of resource-efficient investments in these sectors is to achieve a more efficient use of resources, i.e. lower-cost manufacturing processs, which will increase businesses' economic performance as well as increase their competitiveness.
In subsequent support rounds, the goal will be to broaden the pool of support recipients.
The applicaton process for resource-efficient investments is a multi-step one. First, competent auditors will conduct a thorough analysis of resource use at the company requesting support, after which its specific investment needs and the amount of support it is to receive will be determined.
The €110 million earmarked for this support scheme will be distributed over the next four years, beginning with €25 million in the first round, which will open for applications next Monday and last through the end of the year.
Businesses may apply for up to €2 million of support each in this round; an additional €7,500 will go to the support the conducting of a resource efficiency analysis at the business.