Innovation and Innovation Policy in Estonia
Innovation and Innovation Policy in Estonia 
Overview of Innovation Policy
The latter half of 2008 and the first months of 2009 were characterized by a sharply deepening economic crisis in Estonia. To a large extent the crisis is a natural spill-over from the global recession, but to some extent the situation contains some Estonia-specific elements. This latter aspect needs to be addressed in this context. According to the most recent figures from Statistics Estonia, the drop in GDP from IV quarter 2007 to IV quarter 2008 was 9.7%. Industrial production was down 30% in February 2009, year-on-year. Therefore, there is no question that the situation is extraordinary and that several measures imposed are triggered by these developments.
In a response to the worsening situation, the government in February announced a further 6.8 %-cut in the budget. Thus, total cuts in comparison with the 2008-budget now reach 10%. So far, the innovation sector as a whole seems to have escaped big cuts, albeit the Tiger Leap Foundation, promoting ICT education in schools, will experience cuts reaching almost 30%. The Estonian Development Fund faces reductions in excess of 68%. However, this is partially a budgetary measure, because the surplus from the previous year is not included. The Ministry of Economic Affairs and Communications faces total cuts of 6.4%, which however mainly affect road construction. Enterprise Estonia, the enterprise development agency, will see its revenues decrease by 4% and the Estonian Information Technology Foundation with 5% (a foundation promoting the education of qualified ICT specialists and the use of ICT throughout society). However, a worrying tendency worth mentioning is that today, 6% of the unemployed in Estonia are former directors, 13% are specialist and 40% other former employees in knowledge-intensive sectors.[1] Thus, so far the crisis seems to have hit the knowledge sector particularly hard.
Beginning in 2006, foreign capital became easily accessible in Estonia, especially due to the very strong presence of Swedish banks. The influx of large amounts of capital probably hampered the adjustment process of the export industry towards knowledge-intensive production. Instead, financial services and real estate development increased dramatically in economic importance. This development is, inter alia, reflected in figures for extramural R&D expenditure: In 2004, extramural R&D expenditure for the secondary sector was EEK 61 million and for the tertiary sector EEK 13.5 million. In 2006 the corresponding figures were EEK 47 million and EEK 90 million. Thus, in 2006 the tertiary sector overtook the secondary sector for the first time in terms of extramural expenditure for R&D. These figures should be viewed as anecdotal, but nevertheless they illustrate a tendency.
A number of policy measures have been created or redesigned in order to counteract the impact of the present crisis. A case in point is the technology support for industrial enterprises, a programme launched in 2008 but amended in March 2009 in order to match changing needs. Requirements for ambitious growth plans were replaced by “realistic” goals, while simultaneously almost 60% of the overall programme budget (expected to last until 2013) will be used in 2009.
Other similar programmes – i.e. aimed at increased added value in industry - launched recently are the cluster development programme, the innovation voucher programme, and a support programme to involve innovation staff in Estonian companies. These measures point all in the same direction, namely that one of the fundamental problems of the Estonian economy is the insufficient added value in manufacturing, which has become increasingly obvious when the financial and real estate sectors have faced something close to a meltdown.
The most recent figures show that in February 2009, total exports were down 26% year-on-year, while imports were down 35%. These figures, although alarming, indicate nevertheless a movement towards a more stable balance of payments. It should perhaps be recalled that Estonia has ran a significant current account deficit for years, mainly due to imbalances between exports and imports, which has been counterweighted by capital inflows, which now have come to a halt. Thus, there is a need to curb imports and increase exports. In the winter and spring of 2009, the Estonian government allocated a total of EEK 6.1 billion to export promotion (EUR 0.4 billion), mainly as credit guarantees and loans, but also providing new capital to existing export promoting measures. These measures are nevertheless not directly targeted at innovative enterprises. Instead the explicit aim is to strengthen the macroeconomic situation.
In brief, at present focus in Estonia lies on quick responses to the crisis, although it has to be stressed that there is political commitment to avoid serious damage on innovation policy.
| Annual Country Reports |
 Country report 2008 for Estonia
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| Country report 2007 for Estonia
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| Country Report 2006 for Estonia
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| Country Report 2005 for Estonia
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| Country Report Estonia September 2004
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| Estonia - Trend Chart Country Report, September 2003
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| Estonia - Trend Chart Country Report, March 2003
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| Estonia - Trend Chart Country Report, October 2002
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| Estonia - Trend Chart Theme-specific Country Report, May 2002
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| Estonia - Trend Chart Country Report, November 2001
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| Estonia Trend Chart Country report June 2001
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| Estonia Trend Chart Country Report Dec 2000
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| Estonia Trend Chart Country Report May 2000
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| Innovation News |
 Estonian mannequin robot wins Silicon Valley competition |
| Latest TrendChart Deliverables |
| Workshop Briefing Estonia 13_2006 |
| Workshop Briefing Estonia 11_2006 |
| Workshop Briefing Estonia 10_2006 |
| Workshop Briefing Estonia 9_2005 |
| Workshop Briefing Estonia 7_2005 |
| New Support Measures |
| EE 57 Supporting the investments of infrastructure of test and semi-industrial laboratories |
| EE 55 business incubator programm |
| EE 54 Competence Centres |
| EE 39 The Centres of Excellence of the Estonian Science Programme |
| EE 52 Researcher mobility programme MOBILITAS |
Who Is Who
Senior Official(s) for Estonia
Mihkel Randrüüt
Correspondents for Estonia
Katrin Mannik
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Innovation Performance
Performance in Innovation Scoreboard 2008Find Out More
List of relevant websites
