Analysis of the FICE 2024 conference: Challenges and opportunities for foreign companies in Estonia

On April 17, CAdFE representatives attended the FICE conference entitled “Do foreign companies want to stay in Estonia?”.
The conference focused on the findings of FICE’s executive survey, which is based on responses from a large number of foreign investors and FICE members. The survey aimed to provide an overview of investment trends in Estonia for the year 2023, including growth, salaries, as well as information on future investment projects and concerns regarding Estonia’s economic growth.

The FICE 2024 Executive Report highlights both the promise and the challenges facing the Estonian economy.
Based on information from business leaders, the report offers a comprehensive overview of current sentiments, revealing a mixture of optimism and apprehension.

Positive outlook :

Despite the uncertainties, a significant proportion of respondents (38%) anticipate economic expansion over the coming year. Encouragingly, 54% anticipate an increase in revenues over the same period, with the technology and IT sectors leading this growth in the coming years.

Upcoming challenges :

However, despite these optimistic projections, several obstacles threaten to hold back Estonia’s progress. Rising inflation has eroded companies’ competitiveness vis-à-vis major trading partners, affecting almost half of respondents (47%). Despite the significant challenges posed by rising labor costs and shortages, 28% plan to increase their workforce over the next 6 months.

Political uncertainty:

One of the most pressing problems highlighted by the survey was increased unpredictability in policy-making.
The lack of regulatory stability and dialogue between the public and private sectors has exacerbated uncertainty for businesses. Almost half of respondents (47.8%) expressed dissatisfaction with the Estonian government’s responsiveness to their concerns, particularly with regard to recent tax increases and corporate tax reforms.

Regional disparities and the education system :

Another critical challenge mentioned in the report isthe pronounced regional economic disparities within Estonia . While the capital region prospers, other regions lag behind, exacerbating socio-economic divisions.
In addition, insufficient investment in research and development (R&D) and shortcomings in the education system are also hampering Estonia’s growth potential.

Recommendations for growth :

Faced with these challenges, the survey puts forward a number of recommendations for decision-makers to foster sustainable economic growth:

– Strengthening vocational education: Focusing on vocational education and strengthening links between industries to effectively address skills shortages.

– Attracting skilled labor: Relax regulations and visa quotas to attract skilled labor, reduce labor shortages and promote innovation.

– Improved dialogue: Foster better dialogue between the public and private sectors to ensure responsive policy-making and regulatory stability.

– Increased R&D spending: Prioritize investment in R&D to stimulate innovation and the transition to higher value-added sectors, strengthening Estonia’s competitiveness on the world stage.

Conclusion:

While the Estonian economy shows resilience and growth potential, addressing the challenges highlighted in FICE’s executive report is crucial to long-term prosperity . By heeding these recommendations and fostering collaboration between stakeholders, Estonia can navigate through uncertainties and chart a course towards sustainable, inclusive economic development.

First Panel: Do foreign companies want to stay in Estonia?

The conference was followed by a panel discussion, the first taking the title of the executive inquiry and examining the lessons to be learned.
Moderated by Kris Leinatamm, the panel featured perspectives from Tiit Riisalo, Minister of Economic Affairs and Information Technology; Sirli Männiksaar, Director of Ericsson Estonia and Chairman of the Board; Karsten Staehr, Professor of Macroeconomics at TalTech; and Dr. Scott Levy, CEO of BlueMount Capital (UK) Ltd.

Navigating economic challenges:

One of the main concerns raised at the panel was the challenge posed by high inflation rates, particularly in the manufacturing sector. Rising energy and electricity prices have led to uncertainty and depressed economic forecasts.
Karsten Staehr stressed the need for a sensible fiscal policy, arguing for a relatively flat tax system and progressive income taxation. He emphasized the untapped potential for redistribution and urged a careful balance between spending and taxation.

Communication and governance :

Dr. Scott Levy stressed the importance of effective communication between government and business. He stressed that companies focus on their business, not lobbying, and called for a pragmatic approach to politics.
Estonia’s accessible political landscape, characterized by a small public service, was highlighted as a positive aspect facilitating communication between policymakers and business.

Predictability and investment climate:

Sirli Männiksaar stressed the importance of predictability for companies operating in Estonia. Despite concerns, she highlighted the significant investment in research and development, with the aim of doubling the economy in the next ten years.
She emphasized the ease of doing business in Estonia, citing low bureaucracy and a favorable environment.

Attractiveness of Estonia :

Minister Riisalo challenged perceptions of economic stagnation, pointing to tangible growth and development in various sectors. He acknowledged the existing challenges, but remained optimistic about Estonia’s investment potential. Sirli Männiksaar echoed this sentiment, citing Ericsson’s substantial investment in research and development in Estonia and the country’s appeal for quality of life.

Bridging the skills gap:

Karsten Staehr stressed the need to close the skills gap in Estonia, advocating training programs and improvements to the education system. Dr. Scott Levy praised Estonia’s pool of educated, English-speaking young talent, positioning it as a competitive advantage over other countries. However, he also stressed the importance of bridging the gap between the education system and business needs through internships and practical training.

3. Chamber of the Year Award 2024

On this occasion, FICE presented the Chamber of the Year 2024 award on the basis of each chamber’s participation in the survey in proportion to its size.
Thanks to the unwavering commitment of its members, CAdFE was elected Chamber of the Year 2024, the fruit of a two-year commitment by its members and executive board! A significant award for the future French Chamber of Commerce and Industry in Estonia.
Violaine Champetier de Ribes received the award from FICE President Peter Thomsen.

4. “What do foreign companies need to thrive in Estonia?”

The second panel discussion focused on the vital and provocative question: “What does it take for foreign companies to thrive in Estonia?” With a distinguished panel of speakers and informative exchanges, the session offered valuable insights into the challenges and opportunities shaping the Estonian business landscape.
The second panel, with speakers including Lenno Uusküla, chief economist at Luminor Estonia and associate professor of macroeconomics at the University of Tartu, David Clark, venture capital partner at Tera Ventures, and Edmund Smolarek, head of the Möhring Group and CEO of Balti Spoon OÜ, discussed “What foreign companies in Estonia need to thrive”, with Bart Cosijn, FICE secretary and founder of the Estonian Dialogue Academy, moderating the discussion.

Lenno Uusküla highlighted an urgent problem: the shortage of qualified personnel, insisting that among the various challenges, this aspect is often overlooked.

Edmund Smolarek echoed a sense of resilience, emphasizing the need to overcome obstacles.
He illustrated his point by referring to the difficulty of finding electricians despite employing 296 people, necessitating recruitment from other regions.

David Clark praised Estonia’s low bureaucracy and called for increased investment in both start-ups and manufacturing.

Mr. Smolarek stressed the importance of maintaining a balance between start-ups and manufacturing sectors.

However, Lenno Uusküla warned against complacency, noting that rising prices were prompting some to leave Estonia.
The discussion also highlighted the importance of manufacturing, with Edmund Smolarek pointing out that it contributes around 15% of Estonia’s GDP, with two-thirds of production destined for export.
What’s more, the manufacturing sector employs over 120,000 people!

The panelists collectively highlighted the importance of collaboration, sustainability and innovation in the success of foreign companies in Estonia, offering a multifaceted perspective on navigating the evolving business landscape.

Conclusion:

The FICE conference explored Estonia’s economic landscape, highlighting both opportunities and challenges. Insights from FICE’s executive survey report highlighted the need to address issues such as rising inflation, political uncertainty and regional disparities . Panel discussions also highlighted the importance of collaboration, innovation and bridging the skills gap for sustainable growth. Overall, the conference provided valuable information and strategies for navigating Estonia’s evolving business environment. On this occasion, it should be noted that CAdFE was awarded the prestigious prize for Best Chamber of the Year. If you’d like to work with Estonia’s leading foreign chamber of commerce, join us! Discover the activities and opportunities offered by CAdFE, Estonia’s recognized beacon of excellence in the development of international business relations.

Florent Angibaud – Communications intern at CAdFE

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Accelerate your business thanks to the 1st private network of French companies in 94 countries: 119 chambers | 33,000 companies | 4,000 events | 300 committees | 1,200 exclusive advantages

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