MAGISTER MANAJEMEN UNIVERSITAS INDONESIA

ERWINSYAH | 1006793403

Estonia in Transition 1. How has Estonia substantially improved its competitiveness, and performed so well compared to most other transition countries? How was Estonia able to advance so rapidly? The Estonia business environment had improved during the 1990s. On an overall measure of business environment quality, calculated by the Global Competitiveness Report, the country was rated the highest of all the transition countries, slightly ahead of Slovenia and Hungary. Education: The literacy rate in Estonia was 100%, with a state system offering good education for all in 9 + 3 year education system. Today's education in Estonia is divided into general, vocational and hobby education. The education system is based on four levels which include the pre-school, basic, secondary and higher education. A wide network of schools and supporting educational institutions has been established. The Estonian educational system consists of state, municipal, public and private educational institutions. There are currently 589 schools in Estonia. Technology: The Estonia Information Technology College was Infrastructure: Energy infrastructure was being modernized. from the European Bank for Reconstruction and established in Tallinn in September 1999. Utilities had been privatized in the late 1990s and foreign capital (mostly Development, EBRD) and direct investments had led to a modern system for energy generation, transmission and distribution. Financial Markets: As in most of the transition economies, banks played the dominant role in Estonias financial markets, with other financial institutions quite underdeveloped.

Trade: In 2001, 57% of Estonias imports came from EU countries

and 69% of exports went to he EU countries and 69% of exports went to the EU area, the highest among the Baltic Rim countries, in 2000, telecommunications accounted for 24% of exports, forest products for 12%, textiles/apparel for 11%, materials/metals for 10%, and food/beverage for 9.5%. Estonias leading trading partners. Estonia has had a market economy since the end of 1990s and one of the highest per capita income levels in Eastern Europe. Proximity to the Scandinavian markets, location between the East and West, competitive cost structure and high-skill labor force have been the major Estonian comparative advantages in the beginning of the 2000s. Tallinn as the largest city has emerged as a financial centre and the Tallinn Stock Exchange joined recently with the OMX system. The current government has pursued relatively sound fiscal policies, resulting in balanced budgets and low public debt. Foreign Direct Investment: Estonia had attracted more FDI per capita than any other Baltic country during the 1990s. Foreign multinationals in Estonia accounted for the majority of the countrys exports. Economy: The Estonian economy was developing a number of emerging clusters, typically built around the countrys traditional industrial sectors. Estonian clusters were becoming integrated with some of the stronger clusters in the Nordic region. The Estonian economy clusters is food processing, logistics, forest product, textiles and apparel, automotive components, telecommunications, and information technology. Resources: Although Estonia is in general resource-poor, the land still offers a large variety of smaller resources. The country has large oil shale and limestone deposits, along with forests which cover 50.6% of the land.[131] In addition to oil shale and limestone, Estonia also has large reserves of phosphorite, pitchblende and granite which are not mined or mined extensively at the moment. Significant quantities of rare earth oxides are found in tailings accumulated from 50 years of uranium ore, shale and loparite

mining at Sillame. Due to the rising prices of rare earths, extraction of these oxides has become economically viable. The country currently exports around 3000 tonnes per annum, representing around 2 percent of world production. In recent years a public debate has been raised in the terms of whether Estonia should build a nuclear power plant in order to secure the energy production after the closure of old units in the Narva Power Plants if they are not reconstructed by the year 2016. 2. Compare Estonias success with that of Chile. What are the similarities? What are the differences? The similarities: Chile and Estonia have a strong economic growth The differences: Chile has a long success history in wine making industry, while Estonia has a long history in IT and telecommunication. 3. What are the issues facing Estonia in 2002? Among the Baltic economies, Estonia at 35th loses some ground for the second year in a row, largely because of a deteriorating macroeconomic environment following the economic crisis. Nevertheless, the country continues to be characterized by efficient institutions, well-functioning markets, and strong uptake of new technologies. The share of current and future EU member states in Estonias export is about 81%. In 1994-2001 Estonias export to the European Union increased on the average 25% per annum. Their exports to the European Union have steadily grown quicker than imports from the European Union. It means that they have been steadily increasing their market share in the European Union - although it is small. The export structure also characterizes their competitiveness - exported goods reflect changes that have taken place in the economy. Estonian traditional export items are timber, textile and foodstuffs, but also, for example, parts and components of electric motors, cables, mobile phones, antennae and the like. Estonia exports not only goods but also services - primarily transport and travel services - also computer and IT

services and the volume of these services has been increasing rapidly during the last three years. The FDI inflow that has reached the 9 billion kroon level in recent years proves our competitive position in the Baltic Sea region as well as a broader region. Equal distribution of investments between the main sectors of economy is an indication of the balanced economic development (in 2001, for example, manufacturing industry - 20%, transport and communications - 23%, wholesale and retail trade 14%). It is also important to note that the FDI inflow was not contingent on the privatization of former SOEs. And finally, Estonias competitiveness is demonstrated by the yield of investments made and reinvesting of substantial part of annual profits which in 2001 amounted to 3,8 billion kroons. The readiness of Estonian economy for the integration with the European economic system is demonstrated especially well by such key sectors of our economy as the financial and telecommunication sectors. Here we talk about the complete opening of the market to domestic and foreign competition, strong state supervision and integration corporations. The issues that facing Estonia in 2002 is that the country was sometimes used as a test market for new technologies by companies such as Ericsson and Nokia. The nations IT and telecommunications clusters where the fastest growing among the Baltic Countries. 4. What leaders? The Estonia financial markets, as in most of the transition economies, bank played the dominant role in Estonias financial institutions quite underdeveloped. In my opinion, the Estonia government needs to balance the development between bank and other financial institution in financial market. Beside that, defend the competitive advance or high technology in all sectors. recommendations would you make to Estonias of Estonian enterprises in the big multinational

Estonia government also needs to vast the export area to get more powerful trade. In spite of strong economic growth, unemployment remained at 13% and young people had difficulties finding jobs or accessing professional training. Personnel shortages existed in some sectors due to limited geographical and professional mobility. I propose to Estonian leaders that the government need to increase the foreign direct investment more, build a branch office in a broad, so its mean that open new jobs field.