State budget strategy 2014-2017
Tallinn, 25/04/2013
TABLE OF CONTENTS
INTRODUCTION ...... 4 PRIORITIES OF THE GOVERNMENT OF THE REPUBLIC...... 6 SECTORAL POLICY GOALS ...... 7 Economic Environment ...... 7 Family and Population Policy ...... 8 Education ...... 10 Labour Market and Social Security ...... 13 Public Health ...... 16 Energy ...... 17 Transport ...... 19 Information Society ...... 21 Internal Security ...... 22 Culture ...... 24 Sport ...... 26 The Estonian Language ...... 27 Integration ...... 28 Environment ...... 29 Rural and Regional Development ...... 31 Foreign Policy ...... 33 Defence and Security Policy...... 35 Governance and Civic Society ...... 36 FISCAL FRAMEWORK ...... 38 Objectives of the Fiscal Policy of the Government of the Republic ...... 38 Budgetary position of the general government ...... 39 Tax Policies, Tax Burden and Tax Expenditure ...... 57 General Government Debt Burden and Reserves ...... 62 SUMMARY ...... 65 APPENDICES ...... 66 Appendix 1. Ministry of Finance, Economic Forecast of Spring 2013 ...... 66 Appendix 2. Implementation of National Strategic Reference Framework 2007-2013...... 68 Appendix 3. Usage of EU funds for 2014-2020 ...... 71 Appendix 4. Financial plan under the State Budgetary Strategy 2014-2017 by areas of government ...... 77
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Appendix 5. Indicator time series ...... 84 Appendix 6. Use of revenues from EU scheme for greenhouse gas emission allowance trading in 2013-2020 ...... 106 Appendix 7 Comparison of Estonia with other EU member states (figures) ...... 109
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INTRODUCTION Essence of State Budget Strategy The objective of the State Budget Strategy is to ensure medium-term fiscal sustainability and to enhance the effectiveness of the government in steering national and sectoral policies. The first document to serve as a budget strategy was drawn up in 2000. Two years later, the State Budget Act1 introduced the annual obligation to prepare a budget strategy to be approved by the Government of the Republic, at the proposal of the Minister for Finance, no later than seven months before the beginning of the next fiscal year. The current State Budget Strategy is updated each spring by specifying the plans for the next three years and setting objectives for the fourth year. This will ensure that medium-term plans are constantly adjusted to changes in the economy, fiscal environment and sectoral operating environment. The budget strategy includes budgetary policies, priorities of the Government of the Republic, an analysis of the economic environment and a forecast of economic development, including income forecasts and other information necessary for financial management. Implementation and Updating of State Budget Policy The State Budget Policy is implemented via organisation-based development and action plans. According to the directive of the Minister for Finance on drafting the state budget, constitutional institutions, the Government Office and ministries shall submit draft budgets to the Ministry of Finance for the following year, i.e. action plans and financial plans for the first year of the development plans. Drawing on the summer economic forecast, the Ministry of Finance first analyses the drafts and resolves possible disputes and then submits a draft budget along with an explanatory memorandum to the Government of the Republic for approval. The Riigikogu begins a proceeding of the draft budget no later than three months before the start of the budgetary year. Upon entry into force of the State Budget Act, the Government of the Republic approves the State Budget Action Plan and a supplementary budgetary nomenclature. Each year, ministries and governmental institutions add another year to their organisation-based development plans, thereby ensuring a four-year outlook in strategic planning. The supplements are based on the current State Budget Strategy. Discussions with the Prime Minister and the relevant ministers will be held before the minister in charge may approve the updated development plan. As a rule, development plans are submitted to the Ministry of Finance no later than by 1 March. This State Budget Strategy serves as a basis for preparing organisation-based development plans and the State Budget Strategy for years 2015–2018. Monitoring State Budget Strategy At the end of each budget year, each governmental institution will prepare annual accounts and submit report on the implementation of the state budget to the Ministry of Finance a. The Ministry of Finance will prepare a report on the implementation of the state budget; the Government of the Republic will approve the report as a part of the state financial statements included in the state annual accounts. Overviews of the implementation of state budget revenue, the use of budgetary instruments and the situation in the economy and general government sector are regularly prepared and published during the current budget year2. An overview of the progress made towards the achievement of budgetary objectives set out in the “State Budget Strategy for 2013-2016” is provided in the chapter on fiscal framework. The implementation of sectoral policy objectives and priorities is described in the chapter on sectoral policies, and the levels of indicators in the state budget strategy in recent years are detailed in Appendix 5. A more detailed overview of the implementation of the goals set out in this document is provided in the State Budget Strategy for 2015-2018.
1 State Budget Act of Estonia, Estonian version at https://www.riigiteataja.ee/ert/act.jsp?id=13164364. 2 Monthly economic reviews by the Ministry of Finance, http://www.fin.ee/index.php?id=619. 4
Preparation of State Budget Strategy 2014–2017 On 18 December 2012, the Ministry of Finance and the Government Office sent a joint letter to ministries and constitutional institutions, asking to update strategic documents in 2013. The joint letter included, inter alia, the rationale for preparing the State Budget Strategy 2014-2017. The State Budget Strategy 2014–2017 was prepared in coordination and material consistency with the updating of the Government of the Republic Action Plan and the National Reform Programme “Estonia 2020”. The analysis of the current situation regarding sectoral policies was also updated in cooperation with the ministries. In accordance with the regulation of the Government of the Republic, “Types of strategic development plans and procedure for their preparation, supplementation, implementation, assessment and reporting”3 , the ministries developed organisation-based development plans for the years 2014–2017 and submitted these along with financial plans to the Ministry of Finance by 1 March. The information received from the ministries by the joint letter was used as input for preparing the economic forecast4, stability programme and the State Budget Strategy. In January and February, prior to discussions in the Government, the Ministry of Finance and the Government Office arranged joint meetings to discuss the Government of the Republic Action Plan, the challenges related to “Estonia 2020” and the Budget Strategy. All ministries were involved in the discussions. The results of the discussions are reflected in the Budget Strategy, the Action Plan of the Government and the competitiveness plan. One objective of the meetings was to achieve greater consistency between the organisation-based development plans and the State Budget Strategy. Negotiations on the Budget Strategy were held at the level of officials in March; in April, cabinet meetings were held to discuss economic and fiscal policy objectives as well as budget priorities. “State Budget Strategy 2014–2017” was submitted to the ministries for approval on 19 April. The State Budget Strategy was submitted to the Government of the Republic for approval on 25 April 2013. The document will be introduced to the commissions of the Riigikogu. Inclusion of partners in preparation of the State Budget Strategy 2014-2017 The State Budget Strategy is based on the development plans of the ministries’ areas of government, i.e. organisation-based and sectoral development plans prepared in accordance with the regulation of the Government of the Republic “Types of strategic development plans and the procedure for their preparation, supplementation, implementation, assessment and reporting”, as well as with the strategic planning manual of the Ministry of Finance. The participation of partners in the preparation of the development plans is organised by the responsible ministries. According to the regulation, the relevant interested persons and authorities are included in the preparation of the development plans of the area of government and sectoral development plans; the regulation does not, however, specify how the responsible ministries should organise their inclusion. The Government has also provided the persons preparing the development plans with guidelines on good practice of inclusion. Structure of State Budget Strategy 2014–2017 This State Budget Strategy comprises three chapters. The first part of the document describes the priorities of the Government of the Republic. The second part describes the current situation and objectives of as well as the most important changes in sectoral policies. The third part describes the economic and fiscal policy objectives and priorities of the Government of the Republic as well as the fiscal framework of the public sector for the following four years. Appendices to the document include the main indicators of the economic forecast prepared by the Ministry of Finance in spring 2013, the implementation of the strategy for using EU Structural Funds 2007–2013, the plan for the use of EU funds in 2014-2020, the plan for the use of revenues from the EU scheme for greenhouse gas emission allowance trading in 2013-2020 and the changes in the levels of indicators over recent years.
3 Types of strategic development plans and the procedure for their preparation, supplementation, implementation, assessment and reporting . Estonian version at https://www.riigiteataja.ee/ert/act.jsp?id=12790098. 4 http://www.fin.ee/economic-forecasts. 5
PRIORITIES OF THE GOVERNMENT OF THE REPUBLIC In order to assess its activities, the Government, which took office on 6 April 2011, has set itself goals in 18 policy areas as well as performance indicators to measure the achievement of these goals and target levels for the indicators, seven of which are government priorities.5. State Budget Strategy6 defines their target levels until the years 2017 and 2020, similarly to other indicators. The priorities of the Government of the Republic are: Achieving a general government budget surplus.7 Positive population growth (the population of Estonia must become a growing population).8 Increase of productivity to 73% of the EU average by 2015.9 The targets for 2014, 2017 and 2020 are 72%, 75.4% and 80%, respectively. The achievement of the pre-crisis level of employment by 2020. For this purpose, the employment target for 2015 is 72% in the age group 20–64;10 The targets for 2014, 2017 and 2020 are 71.5%, 73.5% and 76%, respectively. Reduction of the share of young adults, in the 18-24 age group, with basic education or less and not in further education or training to 11% by 2015;11 The targets for 2014, 2017 and 2020 are 11%, below 10% and also below 10%, respectively. Increasing healthy life expectancy (57.1 years for men and 62 years for women by 2015).12 The healthy life expectancy targets for 2014 are 56.7 years for men and 61.5 years for women. The targets for 2017 are 58.1 years for men and 63.1 years for women; targets for 2020 are 60.0 years for men and 65.0 years for women. Keeping greenhouse gas emissions at the level of 2010 (or below 20 million tons per year).13 The same targets have been set for the years 2014, 2017 and 2020.
5 The most important priorities of the Government for 2015 were disclosed by the Prime Minister in his address to the Riigikogu concerning the formation of the government, delivered on 5 April 2011. 6 Chapter “Sectoral policy goals”. 7 Chapter “Objectives of the Fiscal Policy of the Government of the Republic”. 8 Policy area “Family and population policy”. 9 Policy area “Economic environment“. 10 Policy area “Labour market and social security”. 11 Policy area “Education”. 12 Policy area “Public health”. 13 Policy area “Environment and Energy”. 6
SECTORAL POLICY GOALS This chapter provides an overview of the current situation in policy areas, the goals of sectoral policies as well as the indicators and their target levels for achieving the goals.14 and their target levels. This chapter also outlines the most significant changes contributing to the achievement of the objectives. An overview of the levels of the indicators in previous years is provided in Appendix 5. Economic Environment After the restoration of independence, the pace of Estonian real convergence has been remarkable, rapidly converging to the EU average. In 2011, the Estonian GDP per capita was 67% of the EU27 average. Economic growth in Estonia was rapid, reaching as much as 8.3% in 2011. Estonia’s economic growth slowed down in 2012 due to the deterioration of the external environment, dropping to 3.2% compared to the previous year and constituting EUR 17.0 billion in current prices. The growth was mainly spurred by a strong increase in domestic demand. In 2011, labour productivity was 68%, which was less than in 2010 (69.4%). One of the reasons was an increase in employment and contribution to rapid growth, which the companies’ profits could not keep pace with. Labour productivity was below the EU27 average partially because of the unfavourable structure of the economy and the low capitalisation ratio of manufacturing industries. The regulatory environment in Estonia is one of the most flexible and business-friendly in the world. According to the World Bank’s comparative analysis of the business environments of different countries, “Doing Business” (the report examines the simplicity of doing business in a given country), Estonia ranks 21 among 185 countries, having dropped by two positions compared to the previous year.15 As regards regional competition, Estonia continues to hold a high position among the EU member states, ranking 7th. Estonia stands out among other EU member states due to the openness of its economy. Estonian exports have grown significantly in recent years, partly owing to belonging to the same supply chain as the Scandinavian countries, in which Estonian companies act as subcontractors to our Nordic neighbours. According to the WTO, Estonian exports constituted 0.099% of total world exports in 2011, increasing by more than 30% in a year. The export of Estonian goods constituted 0.092% and the export of Estonian services constituted 0.130% of total world trade. Estonia stands clearly out among other Central and Eastern Europe countries with its balanced budget policy. In the years after independence, a significant goal of the Estonian budget policy has been to keep the medium-term budget position of the general government balanced or in surplus, if possible, which, in turn, is expressed in the low level of government debt. In 2010, Estonia and Sweden were the only EU countries to have a positive budgetary position (Estonia had a surplus of 0.2% and Sweden 0.3% of GDP). Three countries had a surplus in 2011: Hungary 4.3%, Estonia 1.1% and Sweden 0.4% of GDP. The average budgetary position of EU countries was -4.4% of GDP. According to the preliminary data for 2012, Estonia’s government deficit was 0.2%. General government debt in 2011 was 6.1% of GDP. In 2011, the average price level increased by 1.6% to 77.9% of the EU27 average. Sector objectives: 1. Estonia is a competitive and reliable economic environment. 2. The budget policy is sustainable and balances the macro economy.
14 The following abbreviations are used for the ministries responsible for the indicators that describe the achievement of the goals: MoER – Ministry of Education and Research, MoJ – Ministry of Justice, MoD – Ministry of Defence, MoE – Ministry of Environment, MoC – Ministry of Culture, MoEAC – Ministry of Economic Affairs and Communications, MoA – Ministry of Agriculture, MoF – Ministry of Finance, MoIA – Ministry of Internal Affairs (Minister for Internal Affairs), MoIA reg. – Ministry of Internal Affairs (Minister for Regional Affairs), MoSA – Ministry of Social Affairs and MoFA – Ministry of Foreign Affairs. 15 The World Bank Group has retrospectively adjusted the values of the report “Doing Business”: for 2009, 24 was replaced by 17; for 2010, 17 was replaced by 18 and for 2011, 24 was replaced by 19. 7
Indicator Base Target Target Target Target Target level level level level level level 2016 2017 2020 2014 2015
Labour productivity per employed person, % of EU average 68 Source: Eurostat 72 73 73.6 75.4 80 (2011) Responsible authorities: MoEAC (MoER, MoSA, MoIA reg., MoA) Proportion of Estonian export in world trade, % Source: World Trade 0.099 Organization 0.098 0.100 0.102 0.104 0.110 (2011) Responsible authorities: MoEAC (MoER, MoIA reg., MoA) Estonia’s ranking in the World Bank report “Doing Business” 21st 18th 17th 16th ≤15th ≤15th Source: The World Bank position position position position position position Group (2011) Responsible authorities: MoEAC (MoF, MoJ) Budget position of general government, % of GDP 1 >0.1 >0.5 >0.9 >0.9 >1 Source: Ministry of Finance (2011) Responsible authority: MoF Most significant changes: Development of a support programme for growth companies based on smart specialisation. Simplification and improved targeting of entrepreneurship grants to increase competitiveness. Family and Population Policy With a population of 1,286,540 (preliminary data, including migration, as of 1 January 2013)16 Estonia is characterised by a declining and ageing population. According to preliminary data, 14,054 persons were born and 15,514 died in 2012; 4,416 people immigrated to Estonia and 10,871 left the country. From the perspective of children and family policy, it is worrying that the number of underage population (or children aged between 0 and 17) is decreasing: at the beginning of 1990, the total number of children aged between 0 and 17 was nearly 416,000; in 2012, it was only about 246,300.17. According to the forecasts, the population of Estonia may decrease to 1.17 million people by 2060.18. Natural population change continued to be negative in 2011 and 2012 (the only exception among recent years was 2010) and the increasing birth rate (in order for the population of Estonia to become a growing population) is one of the priorities of the Government of the Republic. The population’s
16 Statistics Estonia 17 Statistics Estonia 18 Eurostat News Release 80/2011, 8 June 2011 8 reproduction fecundity (or total fertility coefficient) in Estonia is lower than the EU average and needs to be increased significantly in order to ensure reproduction of the population (1.52 in 2011; the replacement rate is 2.1). Since many inhabitants of Estonia point to the lack of economic security as one of the main reasons for not having more children,19it is necessary to improve the well-being and quality of the life of families in order to ensure the sustainability of the country as a whole. Special attention must be paid to the prevention and reduction of poverty and the inequality of children. The rate of relative poverty, reflecting the efficiency of social policy and social exclusion, indicated that in 2011, 17% of children aged between 0 and 17 lived in poverty. The rate of the relative poverty of children decreased in comparison to 2010 and is somewhat lower than among the total population (17.5%). In 2011, the rate of relative poverty was highest among single parent households (32.6%) and households with three or more children (21.2%). Financial supports and the accessibility of labour market services and social services have an important role in mitigating poverty and reducing inequality. In 2011, social transfers20 (including pensions and family allowances) reduced the poverty of Estonian children by 14.4 percentage points or nearly 46%;21monetary benefits and allowances alone are not, however, sufficient to lift families out of poverty; they also need support in the form of services.22 Therefore, it is important to develop services that help to combine work, family and private life with the well-being of children. An important aspect of combining family, work and private life and also reducing, indirectly, poverty is the availability of childcare. Unfortunately, the current system of offering preschool education and childcare is not always sufficiently flexible, versatile, available or affordable in order to meet the needs of parents and children. In 201023 , for example, the percentage of children aged 0–2 attending formal childcare was 21% (EU average: 28%); in the 3-6 age group this percentage was 92%, which indicates that there is a need for additional childcare facilities for children under 3 years of age (the Barcelona Strategy of 2002 set the objective to offer childcare facilities to at least 33% of children under 3 years of age and at least 90% of children at the age of 3 and older). Sector objective: Estonians are a growing nation and the well-being and quality of life of children and families has increased. Indicator Base Target Target Target Target Target level level level level level level 2014 2015 2016 2017 2020
Natural population growth Negative - Source: Statistics Estonia 565 Positive Positive Positive Positive Positive Responsible authorities: (2011) MoSA (MoER, MoEAC, MoIA, MoJ, MoA) Total fertility rate Source: Statistics Estonia 1.52 1.70 1.71 1.72 1.74 1.77 Responsible authorities: (2011) MoSA (MoER, MoEAC, MoIA, MoJ, MoA) Percentage of children 21 32 33 33 34 35 attending formal
19 Factors influencing birth rates in Estonia. Office of the Minister for Population, 2008. 20 Social transfers are benefits paid to households under collective social security plans, by the state or local government in order to mitigate various risks. 21 Statistics Estonia. 22 Children and Estonian Society. RISC survey on value orientations. Appendix to the Estonian national report. TNS Emor, 2006. 23 Eurostat. 9 childcare in the 0–2 and (0-2 yrs) (0–2 yrs) (0–2 yrs) (0–2 yrs) (0–2 yrs) (0–2 yrs) 3–6 age groups, % 92 92 92 92 92 92 Source: Eurostat (EU- SILC). (3–6 yrs) (3–6 yrs) (3–6 yrs) (3-6 yrs) (3-6 yrs) (3-6 yrs) Responsible authorities: (2010) MoSA (MoER) Number of children removed from their families / percentage in 454 the 0–17 age group, % children / Decreasin Decreasin Decreasin Decreasin Decreasin Source: Ministry of Social 0.19% g g g g g Affairs, Statistics Estonia (2011) Responsible authority: MoSA Rate of relative poverty among children aged 0– 17, % 17.0 Source: Statistics Estonia, 18.0 17.0 17.0 16.8 16.5 Estonian Social Survey (2011) Responsible authorities: MoSA (MoJ, MoIA) Most significant changes: The implementation of the Child Protection Act 2013 and the introduction of a cross- sectoral child protection system. The development of the concept of children’s mental health services and early intervention as well as the development of preventive intervention. The development of a comprehensive substitute care system. The system promotes a family- centred approach, favouring guardian families, fostering, adoption and substitute home service. The development and implementation of parenting programmes with proven efficiency in order to prevent child-associated risks and to support parenthood. The implementation of the measures included in the green paper on family allowances and services to be prepared in 2013-2014. Improved accessibility of childcare services and support services enabling normal children and children with disabilities to attend childcare facilities. The development of a diagnostics and response system in order to prevent and identify cases of child abuse and to help victims. Education Different sizes of different generations have an impact on educational institutions, which, in turn, affects the accessibility of high quality education. Over the past ten years, the number of school age children has decreased by about 40% and urbanisation has reduced the number of pupils in many rural schools.24 Therefore, many municipalities are facing the task of reorganising their school networks, which means discontinuing the provision of education at certain levels, rather than closing schools. The network of general education schools in Estonia was established in the period when the annual birth rate was about one quarter higher than in 2010. The quality indicators of the Estonian education system are rather good, in general, but the characteristics required by today’s society and economy – creativity, initiative and problem-solving abilities – need to be improved. A positive step forward is the turnaround of the past few years in the
24 Estonian Human Resource Report. 2010 10 number of students who have dropped out from daytime general education at the lower secondary level. Over the last decade, the number of people with higher education has increased by 8%; 34% of 20 year olds and older people have higher education. Despite the fact that the number of people who have obtained a doctoral degree is growing, the growth is not in line with the set target. Unfortunately, too many of the working age population 25 have only lower secondary or secondary education (in 2011 - 31.1%) and no professional qualification which reduces their competitiveness in the labour market. It is positive that the participation of adults in lifelong education has improved year on year and is currently above the EU27 average.26 The main area of concern is the big share of young people in the 18–24 age group who have lower secondary education or below and are currently not studying; in this regard, we are at the EU average level (14.1% in 2010). According to the data from 2012, the share of such young people dropped to 10.5%. The share of young teachers in schools of general education27 has continuously decreased since the 2005-2006 academic year and this affects the quality and sustainability of education in Estonia. In the 2008-2009 and 2011-2012 academic years, the share of young teachers in the total number of teaching staff fell from 11.4% to 10.3%. This academic year, the level of the previous year was maintained; therefore, improving the position of teachers in society continues to be an important challenge. Despite the highest growth rates in Europe, business research and development (R&D) investments in Estonia are still below the EU average and national strategic objectives because of the country’s low starting level. Similarly to other new member states, the contribution of the Estonian business sector to total R&D expenses is relatively small, falling below the EU average (61.5%). The development of human resources and infrastructure has also contributed to the increase in the volume and quality of R&D. In 2000–2009, the number of full-time researchers and engineers increased by 61.8%. The number of researchers in the business sector increased by almost five times in ten years and constituted 30% of all full-time researchers and engineers in 2010. The number of researchers has increased at a slower pace than the volume of R&D expenditure, but this was expected, given the initial level. In 1998, the level of R&D funding per researcher was about 15 times below the EU average. Sector objectives: 1. Estonia provides high-quality and available education, which takes into account the needs of students and society. 2. Estonia features high-quality and sustainable R&D, research-intensive economy.
Indicator Base Target Target Target Target Target level level level level level level 2014 2015 2016 2017 2020
Participation in preschool education (from 4 years old to school age), % 94.2% Source: Ministry of 95 95 95 95 95 Education and Research (2011) Responsible authorities: MoER (MoSA, MoIA reg.) Proportion of young adults in 10.5 the 18–24 age group with 11 11 10.5 <10 <10 (2012)
25 (25-64 years old) 26 Eurostat, Participation in lifelong learning 2010 http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tsiem080&plugin=1. 27 The number of young teachers, i.e. 30 years old and younger, 11 lower secondary education or less and not in further education or training, % Source: Ministry of Education and Research Responsible authorities: MoER (MoJ, MoSA, MoIA reg.) Percentage of young teachers (up to 30 years) in general education schools, % 10.3 Source: Ministry of 12.5 12.5 12.5 12.5 12.5 Education and Research (2012) Responsible authorities: MoER (MoIA reg.) Percentage of people with tertiary education in the 30– 34 age group, % 39.2 40 40 40 40 40 Source: Statistics Estonia (2012) Responsible authorities: MoER (MoEAC) Participation of adults (25– 64 age group) in lifelong learning* 12,9 14 15 15 15 20 Source: Statistics Estonia (2012) Responsible authorities: MoER (MoSA, MoEAC) Gross domestic expenditure on research and development (GERD), including business 2.41 / enterprise research and 1.93/ 2.0/ 2.2/ 2.4/ 3/ development (BERD), 1.52 0.96 1.0 1.2 1.4 2 percentage of GDP (2011) Source: Statistics Estonia Responsible authorities: MoER (MoEAC) Number of full-time researchers and engineers 4512 Source: Statistics Estonia 5000 5200 5400 5521 - (2011) Responsible authorities: MoER Most significant changes: Restructuring and unification of the Estonian general education schools’ network (especially the upper secondary schools’ network) in order to ensure high quality education and sufficient choices in each secondary school. Clear definition of duties and working time of teachers, the establishment of a motivating salary system that takes into account the results of their work, modernisation of teachers’
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training and the aligning of it with the requirements of the study programmes for lower and upper secondary education, organisation of in-service training for teachers, and provision of methodological guidance and teaching equipment in order to ensure that the teaching profession is developed in a sustainable and professional manner. The implementation of the principles of inclusive education in mainstream schools and the implementation of the concept of the organisation of studies for educational special needs pupils. Implementation of professional education reform and curricula reform. Implementation of higher education reform along with a comprehensive solution for study benefits. Development of smart specialisation measures to promote research and development and innovation. Implementation of higher education reform and research organisation reform, including the development of the priority areas for research institutions and higher education institutions. Ensuring joint use of infrastructure and its openness to other research institutions, companies and to international cooperation.
Labour Market and Social Security In 2012, the labour market showed signs of recovery and the employment rate (in 20-64 age group) reached 71.7%. The unemployment rate dropped to 10.2% (in 15-74 age group)28 after 2010, when the unemployment rate was at its highest level since the restoration of independence (16.9% in 2010 and 12.5% in 2011) and the employment rate was the lowest (66.4% in 2010 and 70.1% in 2011). Reducing youth unemployment remains an important challenge for Estonia. By 2010, the youth unemployment rate increased to 32.9%, which is significantly higher than the EU average (21.1%), but then decreased rapidly in 2011 to 22.3%. The youth unemployment rate continued to decrease in 2012; the year's average was 20.9%. Estonia is committed to decreasing the unemployment rate of young people (15-24 years) to 10% by 2020. While the economic crisis pushed up the number of the long-term unemployed and the discouraged as well as increased the risk of poverty, in recent years, the long-term unemployment rate has been on a declining trend, at 7.7% in 2010, 7.0% in 2011 and dropping to 5.5% in 2012. The goal is to reduce the long-term unemployment rate to 2.5% by 2020. Estonia continues to be one of those EU member states where the employees’ awareness of employment issues and both individual and collective employment relationships is low 29, the working environment is less safe and flexible work forms are used less. In 2010, the working environment in Estonia involved a health risk to 38.5% of employees; the European average is 24.2%.30 In 2011, part- time employees constituted 10.6% of all employed people (15-74 years) and in 2012, their share was 10.4%, which is significantly below the European average (the EU27 average in 2012 was 19.9%). The share of fixed-term employees was 3.7% in 2012, which is more than three times less than the EU average (the EU27 average was 13.7%). Remote employment is also relatively uncommon. In 2011, only 6.1% of those in paid employment worked remotely; in 2012, the share of remote employees was 7.1%. 53% of them worked remotely less than a quarter of their working time. The distribution of income and the social situation of the population are characterised by the rate of relative poverty31 – the central dimension of social exclusion. Although unemployment has decreased
28 Statistics Estonia 29 Employment Contract Survey 2013, Praxis Centre for Political Studies; Analysis of employment disputes 2013, University of Tartu; Survey of employment relationships at state and local authorities 2011, Praxis Centre for Political Studies, University of Tartu; Collective employment relationships, Estonian Center for Applied Research. 30 European study on working conditions, 2010 31 The rate of relative poverty indicates the ratio of households in society with income below the relative poverty threshold. The relative poverty threshold is 60% of the median equalised yearly disposable income per household member. 13 in recent years and the population’s incomes have increased, the share of people living in relative poverty has not changed and has remained at the level of 2010 (17.5%). It is important to ensure an increase in incomes and an improvement in the quality of life and social security, by offering needs-based benefits and services as well as opportunities to age actively and with dignity. In 2012, the average monthly pension was 276.6 euros and the average monthly old-age pension was 312.9 euros32. Although the minimum wage in Estonia is among the lowest in the EU, it has, after remaining at the same level for four years, increased for two years in a row - from 278.02 euros in 2010 to 290 euros in 2011 and to 320 euros in 2013, which is the highest in the Baltic Countries33. The average gross wage in Estonia was 839 euros in 2011 (net: 672 euros)34. In 2011, salaries and wages increased more than prices and real salary35 went up by 0.4%. According to the preliminary statistical data from 2012, the average gross wage was 880 euros36. The average monthly gross disbursement for the entire year 2012 was 680 euros (636 euros in 2011) and the median disbursement was 535 euros37 (in 2011 498 euros).
People with disabilities constitute, as in other EU member states, a significant proportion of the population of Estonia. People with a degree of disability constitute 10.0% of the total population of Estonia (133,847 people as of the beginning of 2012)38. According to the Estonian National Social Insurance Board, the number of people who have applied for an allowance for permanent incapacity for work has also grown. While there were 71,400 recipients of pensions for incapacity for work as recently as in 2008, by the end of 2012 their number exceeded 94,000. In order to promote the inclusion of disabled person in society, education and employment, it is important to change the environment to make it accessible both physically and substantially, to improve the accessibility of services and to reorganise the system of incapacity benefits.
In Estonia, gender segregation in the labour market is one of the highest in the EU, both by occupations (30.7% while the EU average is 25.4%) and by sectors of the economy (25.7%; the EU average is 19.5%)39. Segregation continues to be one of the main reasons for the gender pay gap, which is the largest in the EU. According to Eurostat, the difference between women’s and men’s average hourly wages was 27.3% in 2011 (the estimated EU average is 16.2%). Women’s lower wages result in lower benefits and pensions which, in turn, affects their ability to make ends meet and is one of the reasons for children falling into poverty, especially in single parent households headed by women. Sector objective: Ensuring an increase in incomes and an improvement in the quality of life and social security. Indicator Base level Target Target Target Target Target level level level level level 2014 2015 2016 2017 2020
Rate of relative poverty (before and after social 40.1/17.5 transfers), % 40.5 / 40.1 / 40.1 / 39.8 / 38.6 / (2011) 16.7 16.5 16.5 16.2 15.0 Source: Statistics Estonia; Estonian Social Survey
32 Statistics Estonia 33 Eurostat 34 Statistics Estonia 35 Tax and Customs Board. Press release of 22 February 2013. 36 Statistics Estonia 37 Tax and Customs Board. The quarterly disbursement statistics disclosed by the Tax and Customs Board include wages and other taxable income declared by employers in Annex 1 to the tax return form TSD under code 01. These data do not include redundancy payments. It should be noted that the data from Statistics Estonia and from the Tax and Customs Board are not comparable. 38 Ministry of Social Affairs, 2012 39 European Commission, 2011 data (not published yet) 14
Responsible authorities: MoSA (MoEAC, MoER, MoIA, MoA) Employment rate in the 20–64 age group, % Source: Statistics Estonia, 71.7 Estonian Employment 71.5 72 72.8 73.5 76.0 Survey (2012) Responsible authorities: MoSA (MoEAC, MoER, MoIA, MoA) Youth unemployment rate in the 15–24 age group, % Source: Statistics Estonia, Estonian Employment 20.9 17 15 14 13 10 Survey (2012) Responsible authorities: MoSA (MoEAC, MoER, MoIA, MoA) Percentage of unemployed people in the 15–24 age group, %
Source: Statistics Estonia, 8.5 Estonian Employment 6.8 6.2 5.7 5.2 4.0 Survey (2012) Responsible authorities: MoSA (MoEAC, MoER, MoIA, MoA) Long-term unemployment rate, % Source: Statistics Estonia, Estonian Employment 5.5 4.4 4.0 3.7 3.4 2.5 Survey 2012) Responsible authorities: MoSA (MoEAC, MoER, MoIA, MoA) Most significant changes: In the forthcoming period, we will focus primarily on young people, the long-term unemployed and the elderly, in order to enhance the impact of the labour market policy. An important new initiative is a joint programme, to be developed in cooperation between MoSA and MoER, to reduce youth unemployment and to bring the skills of unqualified job seekers in line with the requirements of the labour market. The implementation of an employability scheme reform, new assessment and support systems related to permanent incapacity for work and an occupational accident insurance system based on private insurance, including occupational health and safety reform and its implementation. The shaping of informed behaviour to improve the quality of work life, to promote collective employment relationships, to use knowledge based flexible work forms, to change the attitudes in society toward an older workforce, working in old age and employees with health issues. Improving the availability of needs-based welfare services and ensuring their high quality and sustainability by continuing the organisation of the welfare services network and the 15
development of special welfare trends, the reorganisation of state social welfare institutions and the construction of new family-type homes for children in substitute care. Updating and developing information systems in order to ensure the availability of public services and to provide comprehensive solutions for meeting people’s needs. The implementation of the principles of the UN Convention on the Rights of Persons with Disabilities according to the strategy of protection of the rights of disabled people, the development of which should be completed in 2013. The transposition of the directive on victims of crime and the implementation of amendments to legislation arising from the transposition. In order to reduce gender inequality and to promote equality, the action plan to reduce the gender pay gap will be implemented and measures will be taken to improve awareness and gender mainstreaming; services will be developed and implemented to reduce violence against women and to help the victims of human trafficking. Public Health To ensure the vitality and productivity of the population of Estonia, it is important to increase the healthy life expectancy and the average life expectancy of the inhabitants of Estonia. Although the average life expectancy has increased over the last 15 years, it is still below the EU average. Although the life expectancy has increased in Estonia in recent years and is now the highest in the Baltic Countries, it is still lower than in most EU countries. The life expectancy gap between women and men remains very big: in 2011, the difference was slightly less than ten years in favour of women. The average life expectancy of the population of Estonia puts the country in a significantly lower position in the global Human Development Index – Estonia ranked 34th in 201040. Estonia’s healthy life expectancy figures were among the lowest in the EU (7.9 years below the EU average for men and 4.5 years for women in 2011). The healthy (without limitations) life expectancy for children born in 2011 is lower than for children born in 2009 and 2010 although in the period 2004–2009, the healthy life expectancy increased rapidly.41. Increasing the healthy life expectancy is one of the priorities for the Government of the Republic. The main reasons for health loss in Estonia are cardiovascular diseases (37%) and tumour diseases (15%).42. The number of years of life lost due to premature deaths has decreased since 2000 for both men and women; however, the percentage of years of life lost due to illness has increased consistently. One of the biggest areas of concern in our society is people’s unhealthy lifestyle – excessive consumption of alcohol, smoking, insufficient physical activity and lack of attention to healthy diet. Drugs and the spread of drug abuse and HIV continue to be a problem and a source of danger to human health and life expectancy. The biggest challenges in the area of health are the availability and quality of health services and the sustainability of financing health services. Similarly to the rest of Europe, demographic and technological developments increase pressure on social expenditures. Due to the working age population moving to bigger towns or their suburbs, the availability of health services, including the availability of first contact care in smaller towns and rural areas, is becoming increasingly problematic. Another important risk factor in ensuring the availability and quality of health services is a decrease in the number of health workers, observed in recent years. The hospital network reform also needs to be continued. Sector objective: Healthy life expectancy of Estonian people has increased.
40 Estonian Human Development Report 2010/2011. Estonian Cooperation Body 2011. 41 Statistics Estonia. 42 Lai T, Köhler K. “Eesti rahvastiku tervisekaotus” (health loss in the population of Estonia), Ministry of Social Affairs, 2009 16
Indicator Base level Target Target Target Target Target level level level level level 2014 2015 2016 2017 2020
Life expectancy (separately for men and women), years men 71.16 men 72.1 men 72.5 men 73.0 men 73.5 men 75.0 Source: Statistics Estonia women women women women women women Responsible authorities: 81.09 81.8 82.2 82.5 82.9 84.0 MoSA (MoC, MoEAC, MoER, (2011) MoIA REG., MoA, MoJ, MoE) Healthy (without limitations) life expectancy at birth (separately for men 53.9 men and women), years men 56.7 men 57.1 men 57.5 men 58.1 men 60.0 women women women women women women Source: Statistics Estonia 57.7 61.5 62.0 62.5 63.1 65.0 (2011) Responsible authorities: MoSA (MoC, MoEAC, MoER, MoIA REG., MoA, MoJ, MoE) Most significant changes: The implementation of start-up support and other incentives for young doctors in order to ensure sufficient medical staff outside bigger towns. The updating of the hospital network development objectives, the promotion of first contact care by the standardisation of the necessary infrastructure and the promotion of the optimal development of a hospital network that provides cutting-edge specialist care. The development of dietary recommendations (green paper on healthy eating) and the implementation of the relevant actions. The implementation of the measures specified in the green paper on alcohol and tobacco (including the development of counselling services for people who wish to give up smoking and the treatment of alcoholics as well as the implementation of pilot measures). In order to reduce the number of premature deaths, a cross-sectoral action plan, a more efficient fight against HIV and a prevention and control system for infectious diseases are required. Energy It is important to ensure energy security for Estonia with the lowest possible energy price for consumers and the smallest possible impact on the Estonian environment. The share of domestic energy continues to be big in Estonia – in 2011, Estonia’s energy dependency rate43 was 11.7%. Estonia is one of the few member states with continuously decreasing energy dependency; in 2011, Estonia ranked second only to Denmark among EU member states in energy independency44. The energy intensity of the Estonian economy (i.e. the amount of primary energy per unit of GDP) is increasing and we continue to be one of the countries with high energy intensity, ranking second among the EU member states (data from 2010). The Estonian energy sector is one of the most CO2- intensive energy sectors in the EU, due to to the use of oil shale, electricity exports and the cold climate (ranked 6th in 2010).45. Therefore, we need to increase energy efficiency in order to reduce greenhouse gas emissions to the agreed levels and to save resources. Most of the Estonian electrical energy is based on oil shale; its efficiency is low, it imposes a heavy load on the environment and is geographically concentrated. The EU Emissions Trading System was launched in 2013 based on a new
43 Eurostat. Energy dependency rate shows the proportion of energy that an economy must import to meet its energy requirement. It is calculated as net energy imports divided by gross inland energy consumption. 44 Eurostat. 45 Eurostat. 17 approach that is likely to increase the price of emissions allowed by the scheme, which means that the expenses for businesses and consumers will increase, unless energy intensity decreases. The share of renewable energy in the final energy consumption was 25.7%46 in 2011 and the Estonian target of 25% for 2020 has been achieved. The extent of development of renewable energy sources should ensure that the target for 2020 is met. It is important to keep in mind that the renewable energy support should ease the burden on consumer tariffs that have significantly increased in the past few years. It is equally important to pay attention to measures that reduce final energy consumption. While final consumption decreased due to a decline in economic activities during the years of the economic crisis, we now face the challenge of avoiding an increase in energy consumption. There is energy saving potential in almost every sector, including households, industry, transportation and the public sector. Sector objective: Energy security for Estonia is ensured by the lowest possible energy price for consumers and the least possible impact on the Estonian environment. Indicator Base Target Target Target Target Target level level level level level level 2014 2015 2016 2017 2020
Total greenhouse gas emissions (without land use, land-use change and forestry sector (LULUCF)) (in million tonnes of CO2 21.18 equivalent) 20 20 20 20 20 (2011) Source: Ministry of the Environment Responsible authorities: MoE (MoEAC, MoA) Share of renewable energy in final energy consumption, including transport fuels, % 25.7/0.2 23/2.5 23.6/5 24/5 24/7 25/10 Source: Eurostat (2011) Responsible authority: MoEAC Final Energy Consumption, PJ 115 Source: Statistics Estonia 118 118 118 118 118 (2011) Responsible authority: MoEAC Power cuts in Estonia under normal conditions that would affect more than 10,000 consumers over 0 more than 2 hours 0 0 0 0 0 (2011) Source: MoEAC Responsible authorities: MoEAC
46 Eurostat. 18
Most significant changes: Creating opportunities for additional connections to the electrical systems of the neighbouring countries, the development of decentralised power production, and connection and renovation of networks. The establishment of preconditions for connecting the Estonian electricity networks with the synchronous grid of continental Europe. Increasing the efficiency of energy supply by organising the district heating sector, promoting combined heat and power plants and reducing the use of fossil fuels. Increasing the use of alternative fuels by developing infrastructure and promoting vehicles powered by alternative fuels. Increasing energy savings and the share of renewable energy by investing in increasing the energy efficiency of buildings, introducing energy efficient solutions and raising awareness. Transport Good transport connections are essential to the competitiveness of the Estonian economy - the movement of persons and goods in Estonia and between Estonia and the rest of the world should be available, fast and safe. Particular attention has been paid to improving the quality of infrastructure and to increasing safety. This was enabled by an increased payment of fuel excise duties and by EU structural funds. The condition of the road surface of the main motorways has improved due to investments and the average age of road surfaces on main motorways is about 13 years (however, the average age of road surfaces of non-priority roads is 21 years and on basic roads nearly 25 years), most of the state-owned small harbours have been reconstructed and a large part of the railway network have been renovated to allow trains to travel at 120 km/h. Works on the Rail Baltic project, which requires significant investment, are being continued in order to develop railway transport. Despite the fact that allocations to public transport have grown faster than GDP, it has not increased the share of public transport users and the target of 30% of all working people has not been achieved. The share of public transport users has constantly declined, reaching 22% in 2011. There are some positive trends - investments in railway transport have started to bear fruit and in 2012, the number of trips by diesel trains reached a record high over the last decade. Therefore, we may hope that the number of public transport users will soon increase in line with the number of train passengers. Tallinn and Harju County (public bus lines and AS Elektriraudtee (electric train operator)) introduced a common public transport pass - an important step towards creating a common system. In 2012, new buses started operating on the county lines in Ida-Virumaa (north-eastern Estonia), which improved the quality of the public service. Harju County will introduce new buses in early 2013. An important achievement was a decrease in the number of traffic fatalities. 89 people died in traffic accidents in 2012 (143 in 2009), which is within the limit set initially in the traffic safety programme for 2015. Therefore, a new, more ambitious goal was set in the traffic safety programme for 2015 - no more than 75 traffic fatalities. To ensure traffic safety, continuous efforts are required to reduce the number of people who have died and are injured in traffic accidents in a situation where the main problem are the road users’ attitudes (regarding alcohol consumption and driving) and traffic behaviour (especially non-motorised road users). Estonia has successfully developed a transport infrastructure servicing transit; tight competition between logistics and transport companies has raised the quality of their services to a level comparable to that in Finland and now constitute powerful transport potential. The Port of Tallinn bought a new icebreaker in 2012 in order to ensure seamless functioning of the transit corridor through Estonia. The construction of the first ferry to operate on lines connecting islands with the mainland was completed within the shipbuilding programme. Despite improved connection and large investments made over the past decade, satisfaction with the transport system is low compared to other EU member states. Airport capacity and flight safety have improved; however, the current number of air connections is not sufficient and this is one of the greatest factors decreasing the relative satisfaction with transport in Estonia. Connection between larger roads and railways as well as between international harbours and the airport is still an area of concern.
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Another challenge is preventing the negative effects of rapid urban sprawl and solving any problems by, inter alia, the comprehensive planning of transportation and infrastructure. Sector objective: Movement of people and goods in Estonia as well as between Estonia and the rest of the world is available, fast and safe. Indicator Base level Target Target Target Target Target level level level level level 2014 2015 2016 2017 2020
Number of traffic fatalities, three year average47 Source: Estonian Road 89 <80 <75 <70 <65 <50 Administration (2010-2012) Responsible authorities: MoEAC, (MoIA) Managers’ assessment of the Estonian transport system (road, railway, air and water 4.5 transport; on a 7-point 4.6 4.6 4.7 4.7 4.9 scale)48. Source: World (2012) Economic Forum Responsible authority: MoEAC Percentage of public transport users among employed persons, % 22.2 (2011) Source: Estonian Employment 27 30 30 30 30 Survey Responsible authorities: MoEAC Increase in road traffic, three In 2011, the year average average increase in Source: Estonian Road road traffic below below below below below Administration; Statistics was -4.0% economic economic economic economic economic Estonia and growth growth growth growth growth Responsible authorities: economic MoEAC, (MoIA) growth was - 0.8%. Most significant changes: Continuing large transport infrastructure projects. Joint venture Rail Baltic is launched in order to ensure comprehensive management of the construction of a transport infrastructure of European importance. Increasing the volume of regular public services on railways (in the middle of 2013, new rolling stock is being taken into use on electric railways and in 2014 on all railways). Making the use of public transport and non-motorised transport modes more convenient and popular (besides railway projects, the renovation of tram lines in Tallinn, buying of new buses,
47 Intermediate levels of the indicator have been streamlined: 2014 <75 replaced by <80 and 2016 <75 replaced by <70. 48 The indicator replaced the indicator “Increased satisfaction with transport system (infrastructure organisation)” as agreed a year ago 20
building of new cycle lanes, implementation of a common transport pass system in Tallinn and Harju county, etc.). Reducing the negative side effects of transport on the environment (including the electric mobility programme and the promotion of environmentally friendly buses). Preparation of transport action plan for 2014-2020 in 2013. Information Society According to Eurostat, the availability of public e-services for the population is fairly good in most member states. While the availability of selected service categories is 100% in eight member states, the respective indicator for Estonia was 89.6% in 2010. 50% of the Estonian population use electronic channels to communicate with the government – this is above the EU27 average (41%). In the EU, about 89% of the services offered to businesses are available via electronic channels; in 16 member states (including Estonia), 100% of such services are electronic. Businesses use these services more actively than private persons; on average, 76% of EU businesses use electronic channels to communicate with the government, while in Estonia the share of such businesses is 80%. Improving the interoperability and interaction of various information systems used to provide public services is challenging – although many modern and well-functioning information systems have been developed and implemented to ensure the basic functioning of state and municipal government institutions, they are not always integrated. While the Estonian situation regarding the use of public e-services and the Internet is above the EU average, the broadband infrastructure characteristics fall significantly below the EU average. Estonia needs to increase broadband speed and ensure its availability in rural areas, where people, institutions and businesses often lack the opportunities to use electronic communications and services offered by the information society on similar grounds as the inhabitants and businesses in densely populated areas. Sector objective: A living and working environment, which values time and convenience, has been created for people and businesses with the help of modern and versatile opportunities provided by ICT.
Policy area Base level Target Target Target Target Target level level level level level 2014 2015 2016 2017 2020
Share of internet users in the 16–74 age group Source: 78.4 Increasing Increasing Increasing Increasing Increasing Statistics Estonia (2012) share share share share share Responsible authority: MoEAC Share of fast broadband connection (percentage of download speed of over 100 Mbps 2.7 Increasing Increasing Increasing Increasing Increasing among fixed (2011) share share share share share internet connection) Source: Digital Agenda Scoreboard
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Responsible authority: MoEAC Satisfaction of people with government- provided e- services (percentage of 80.6 Increasing Increasing Increasing Increasing Increasing those who have (2012) share share share share share used e-services) Source: Statistics Estonia Responsible authority: MoEAC Satisfaction of businesses with government- provided e- services (percentage of 96.4 Increasing Increasing Increasing Increasing Increasing those who have (2012) share share share share share used e-services) Source: Statistics Estonia Responsible authority: MoEAC Most significant changes: Supporting the development of fast electronic networks. Improving the quality of public (e-)services. Internal Security In Estonia, economic activities and the economically active population are concentrated in larger towns, which also means the concentration of crime in larger towns. The best example is North Estonia - a major part of capital is concentrated in Tallinn and its surroundings and therefore, the majority of criminal offences are also committed in this region. While the total number of criminal offences registered in 2011 was 42,567, half of these, or 20,558 offences, were registered in Harju county (including 16,933 offences committed in Tallinn). In 2012, a total of 40,816 criminal offences were reported in Estonia, 20,685 of them in Harju County (including 17,022 in Tallinn). The number of registered crimes has been decreasing since the new Penal Code was enforced. In 2012, 29% less crimes were registered in Estonia compared to 2003 and 4% less than in 2011. The decrease observed over the last year occurred mainly on account of criminal offences against property; the number of thefts decreased by 7% and the number of robberies by 13%. The number of physical abuse cases fell by 10%. 8% of the total population fell victim to crime in 2012. The number of people who died from unnatural causes in 2012 decreased by 6.72% compared to the previous year. The number of people who died from unnatural causes in 2012 decreased as follows: fire fatalities (-19), traffic fatalities (-14), killed as a result of an attack (-8), drowning (-8), occupational fatalities (-5) and suicides (-19). The number of drug related fatalities increased compared to 2011 (+28). The number people who died from overdose increased by 21.21% compared to 2011, from 132 to 160, reaching an all-time high. The majority of people who died in 2012 from unnatural causes either committed suicide (199) or died from overdose (160). The time limits of legal proceedings are long and the reputation of the country was damaged by the recent corruption cases; according to the Corruption Perceptions Index of Transparency International,
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Estonia had the same score in 2012 as in 201149, yet dropped by three positions in the ranking of countries. Sector objective: To ensure greater safety of persons and property and to maintain constitutional order, internal peace and stability. Indicator Base Target Target Target Target Target level level level level level level 2014 2015 2016 2017 2020
Number of registered crimes Source: Ministry of 40,816 Below Below Below Below Below Justice (2012) 40,000 39,000 39,000 38,000 38,000 Responsible authorities: MoJ (MoIA) Number of people who died from50 unnatural causes 625 Source: Ministry of 508 480 453 428 385 Internal Affairs (2012) Responsible authorities: MoIA (MoSA, MoEAC) Corruption Perceptions Index of Transparency International51 64 Source: Ministry of 65 >65 66 67 67 Justice (2012) Responsible authorities: MoJ (MoIA) Proportion of victims of crime among residents52 Source: Ministry of 8 Less than Less than Less than Less than Less than Justice (2012) 10 10 10 9 8 Responsible authorities: MoJ (MoIA) Average estimated 197 150 100 100 100 100 time-limits of proceedings 185 110 100 100 100 100
49 Transparency International, 2011 http://cpi.transparency.org/cpi2011/results/#CountryResults. 50 Fire fatalities, traffic fatalities, drowning, killed in an attack, drug-related deaths, suicides, occupational fatalities. 51 Since 2012, the assessment system was changed from a 10-point to a 100-point scale. 52 9% of residents have fallen victim to crime over the past 12 months 23
- civil matters 406 300 250 200 200 200 - administrative matters 58 58 58 58 58 58 - general days days days days days days proceedings in (2012) criminal matters - misdemeanour matters Source: Ministry of Justice Responsible authority: MoJ Most significant changes: Updating information systems and developing registries to ensure quick assistance and availability of services. Continuing structural reforms, including prison reform and the development of a unified national rescue centre. Shortening the duration of court proceedings and the development of forensics. More efficient detection of serious hidden crimes. Greater involvement of volunteers and the development of the principles of protection of order at community level. Intensifying preventive activities in order to reduce risk behaviour and the number of deaths from unnatural causes. Continuing activities to detect and prevent illegal immigration. Development of capacity to detect pollution and decontaminate polluted areas. Further development of the environment that meets the Schengen Area requirements. Connection of shore bases. Organisation of the strategic planning of internal security. Exercising impact-specific supervision. Culture In the field of culture, it is important to ensure a versatile cultural life and the preservation and mediation of cultural heritage by supporting fine arts and promoting Estonian culture. The number of people participating in culture is increasing. Estonia continues to have a strong theatre culture.53. In 2012, the number of visits to the theatre reached a record high in recent years: a total of 1.12 million54 people. Although the number of visits to museums had been declining for some time, in 2011 the trend reversed and 2.67 million people visited different museums (24% more than in 2010). The number of people engaged in hobbies related to folk culture is important from the perspective of preserving folk culture. Compared to 2011, the number of such people has increased and so has the number of groups participating in song and dance festivals, who have received activity support from the government. As at the beginning of 2013, the number of protected cultural monuments was 26,57355. The protection of architectural heritage56 continues to be a challenge for the National Heritage Board because 27.8% of architectural monuments were, unfortunately, in a very bad or deteriorated state in 2012. The preservation of cultural heritage is partly difficult because of the state of storage facilities. Changes in lifestyle, including entertainment preferences, have led to a general decline in reading, which is reflected in a decline in book lending in public libraries. The number of
53 Eurobarometer survey “European Cultural Values 2007”. 54 Final and official data will be provided at the end of April. 55 The national database of the national registry of cultural monuments is accessible on the web at http://www.muinas.ee. 56 Architectural heritage includes buildings, settlements and other man-made clusters with architectural, cultural or environmental value regardless of the period, including the Soviet and contemporary times. 24 lendings is not, however, an accurate indicator because it also depends on the distribution of e-books (e-book lendings are not included in the data), on the movement of people, the standard of living, etc. Sector objective: To ensure the viability of the Estonian cultural space in order to preserve and develop Estonian nation and culture. Indicator Base level Target Target Target Target Target level level level level level 2014 2015 2016 2017 2020
The number of visits to the theatre and the number of 1 million productions that have received visits (2011) support from the Ministry of 0.95 1 1 1 1 Culture 464 400 400 400 465 465 Source: Ministry of Culture theatrical productions Responsible authorities: MoC (2011) (MoEAC) The number of visits to museums, in millions 2.67 Source: Statistics Estonia (2011) 2.3 2.4 2.4 3 3 Responsible authorities: MoC (MoER, MoIA reg., MoEAC) Number of lendings from public libraries (million) 57 11.96 Source: Statistics Estonia 12.2 12.3 12.3 11.5 10 (2011) Responsible authorities: MoC (MoER, MoIA reg., MoEAC) Number of people practicing folk culture 84,810 Source: Ministry of Culture 84,500 85,000 85,000 85,000 85,000 (2012) Responsible authorities: MoC (MoER, MoIA reg., MoEAC) The share of architectural monuments that are deteriorated or in a bad state, %58 27.8 30 29 29 25 25 Source: Ministry of Culture (2012) Responsible authorities: MoC (MoER, MoIA reg., MoEAC)
Most significant changes:
57 The target levels of the indicator have been considerably adjusted compared with the previous period of the development plan based on an analysis of the trends in the area. Target levels for organisation-based development plan: 2013 – 11.9; 2014 – 11.9; 2015 – 11.9; 2016 – 11.9. 58 In 2011, the National Heritage Board completed the inspection of architectural monuments and, as a result of the inspection, the indicator values were significantly adjusted. The data used previously were from reviews that included the inspection of only part of architectural monuments. 25
Fully operational Estonian Film Institute; more resources to film production; the production of children’s and youth films. Creating favourable conditions for the creative industry Organising the year of music in 2015. Modernisation of the operational environment for theatres. Organisational restructuring of museums and the Kanut conservation centre. Modernisation of the operational environment for museums and making expositions more attractive. Sport The promotion of public health requires an environment that promotes physical activity and a supporting infrastructure. The availability of sports facilities has improved in recent years but the current number of local activity and sports facilities does not fully meet the needs of society. The share of people in the total population who are actively engaged in recreational activities, which had increased continuously since 2004, declined slightly in 2012 (35.6%) (30.4% in 2004; 36.3% in 2010).59. More than half of the people visiting sports clubs were young people and the trend is increasing - some 77.6 thousand young people under 19 years old attended sports clubs regularly, constituting nearly 28%60of the relevant age group. The developments in the field of world-class sport were also positive: In 2012, Estonian athletes won a total of 126 medals for individual and team achievements at the Olympic Games and World and European championships, of which 23 were won at the Olympic Games61, including one silver and one bronze medal at the London Olympic Games. The challenges of developing sports and improving the population’s health behaviour by increasing the share of people engaged in physical exercise include the wider integration of sports with other domains, enhancing the capacity of local authorities to develop sports in regions, mitigating the negative impact of athletes and coaches losing prestige and restoring the good reputation of sports. Sector objective: An environment that promotes physical activity and a supporting infrastructure will have been created. Indicator Base Target Target Target Target Target level level level level level level 2014 2015 2016 2017 2020
The proportion of people regularly engaged in sports in the 16–64 age group, % Source: National Institute for 35.6 42 45 45 45 53 Health Development (Health (2012) behaviour among the Estonian adult population) Responsible authorities: MoC The proportion of young people (up to 19 years of age) going to sports clubs in the entire age 26.0 group, % 26 26.5 26.5 27.0 30.0 (2011) Source: Estonian Sports Register Responsible authorities: MoC Most significant changes:
59 National Institute for Health Development. Health behaviour among the Estonian adult population, 2012 60 Estonian Sports Register 61 Estonian Sports Register 26
The promotion and development of sports through the organisation and development of state funding; the establishment of long-term goals in sports; the development of a professional system of coaches; the development of the Estonian Sports Register. Supporting international championships; the implementation of an anti-doping programme and a system of health control for athletes in cooperation with the Ministry of Social Affairs. The Estonian Language In order to preserve the Estonian nation, it is important to ensure the continuity and development of the Estonian language. During the period 1990–2010, the number of people speaking Estonian as their native language decreased by 5%. During the same period, the percentage of Estonian-speaking people of the whole population has increased from 61% to 69% by 2012 – this means that there are more62 people of ethnicities who can speak Estonian and their average level of language skills has improved. Since the number of people with Estonian as their native language has decreased and the number of people speaking Estonian as a foreign language is increasing, it is important to ensure high-quality Estonian language teaching for both groups. The quality of teaching Estonian in general education schools may be measured by the results of the final examinations of upper secondary schools; these results have gradually improved over recent years. The results of final examinations of lower secondary schools have shown improvement over the last couple of years. However, the unsatisfactory functional language skills among both the pupils of general education schools63 and first year university students64is an increasing problem that requires further focus for developing the active and passive language skills required in everyday life. In upper secondary schools that have Russian as the language of instruction, the transition to teaching subjects in Estonian is entering its final phase. As the number of graduates from upper secondary and vocational schools is decreasing, there are also fewer students taking the exam (8,661 in 2012; 9,594 in 2011; 10,025 in 2010). Schools that have a language of instruction other than Estonian mainly recognise the need to learn Estonian as a means of communication; as a result, there is more openness to and interest in the Estonian language and culture among nearly a third of the final year pupils of upper secondary schools. An increasingly bigger number of Russian-language upper secondary schools enrol at Estonian universities, which increases their opportunities to participate actively in society. Sector objective: To ensure the preservation and development of the Estonian language in all aspects of life. Indicator Base Target Target Target Target Target level level level level level level 2014 2015 2016 2017 2020
Native language skill (since 2014: skill in Estonian) of young people who have completed upper secondary education (average result of the final 62.8 examination), points (maximum 100). 65 (2012) >58 >58 >58 >58 >58 Source: Ministry of Education and
Research Responsible authorities: MoER (MoC, MoIA reg.) Percentage of people who have passed 53.3% Estonian language examinations (levels 55 55 55 55 55 A2 to C1), % (2012)
62 Estonian Labour Force Survey. 63 PISA 2009. 64 The University of Tartu Survey 2010. 65 The exam was divided in two parts 27
Source: Ministry of Education and Research Responsible authorities: MoER (MoC, MoIA reg.) Most significant changes: Launching transition to internationally recognised foreign language state examinations (in Russian, German and French) in 2014. Implementation of a language learning programme. Continuing and extending the language immersion programme. Integration Increasing the coherence of society and the inclusion of people from different language and cultural backgrounds in society is becoming increasingly important from the perspective of stability, economic growth and well-being. Estonian society is diverse both culturally and in terms of legal status: Estonia is home to 190 ethnic groups other than Estonians; they constitute about 31% of the total population. Immigrants form 22% of the total population and 15.6% of them are not Estonian citizens. The number of new immigrants, i.e. refugees, returnees, foreign workers and foreign students, is growing and these people need support to adjust to society and to enter the labour market. It is also important that Estonian society and citizens show tolerance to those groups, which requires information actions. Estonia and Latvia stand out among other EU member states by the large percentage of residents whose citizenship is either Russian or undefined.66. Although the proportion of Estonian residents with undefined citizenship has gradually decreased67, their average age is increasing and their ability to pass the Estonian language examination is decreasing, which makes it more difficult for them to apply for citizenship. The problems arise in several aspects, since unemployment is higher among the Russian-speaking population, mainly due to their geographical location, level of education and knowledge of the official language68. The native language of about 90,000 residents of Estonia is other than Estonian and this is often the main reason for their unemployability because they have no information about opportunities and are not open to alternatives. While it is important to support residents with native languages other than Estonian in learning Estonian and obtaining information, it is not easy because Russian-speaking residents tend to consume and trust Russian media channels.69. The priority target group are non- integrated permanent residents, the highly qualified foreign workforce and their family members as well as post-graduate foreign students. The activities designed to integrate these people increase the competitiveness of human capital and improve the accessibility of services, as well as ensure equal opportunities for inhabitants of different regions to participate in working and social life. Sector objective: Equal opportunities to participate in society for every resident of Estonia regardless of their ethnic nationality and native language will be ensured. Indicator Base Target level Target Target Target Target level level level level level 2014 2015 2016 2017 2020
Number of residents with 91,514 undefined citizenship (2012) 90,000 89,700 87,000 85,500 81,500 Source: Population Register
66 Eurostat. 67 Population register. 68 EIM 2011. 69 The 2010 Monitoring of the Integration Plan. 28
Responsible authorities: MoC (MoIA) The share of Russian- speaking residents who 2014 is the watch / listen to Estonian beginning of a Public Broadcasting new period of (including Radio 4, 58 the Integration ETV/ETV2), % 63 (2012) Strategy, the Source: Ministry of current Culture indicator will be discontinued Responsible authorities: MoC (MoIA) Most significant changes: Organisation of various events celebrating the cultural diversity of Estonia (including during the 100th anniversary of the Republic of Estonia) The greatest challenge is the preparation for the new period of the Integration Strategy and the related activities: language learning, adjustment programmes, support for activities of ethnic minorities, activities to support tolerance in society and support of naturalisation process. Environment The preservation of a clean and naturally diverse environment requires resource efficiency. In order to promote resource efficiency, it is important to move towards an economy that is based on, inter alia, waste reuse, recycling and close-to-zero waste residues. In 2011, waste reuse increased to 55%.70 On the other hand, the share of oil shale waste in the overall waste production has not materially decreased since the possibilities for its reuse are still being researched. This has an adverse effect on the total waste reuse rate.71. Between 2006 and 2010, the amounts of untreated and treated sewage water were roughly equal in Estonia72, while the amount of sewage water that required treatment decreased from 2009 to 2011. The general state of groundwater, the main source of drinking water in Estonia, can be considered good. In 2012, 87% of consumers received drinking water conforming to the relevant standards from public water supplies. The rest of the population obtained their water from individual bore wells and dug wells. 73 The use of natural resources continues to increase. The productivity of natural resources varies significantly across the EU member states74: only a few of them have succeeded in separating their economic growth from resource usage, and nine member states (Estonia among them) have barely shown any signs of separating economic growth and resource usage. This means that Estonia needs to focus on more efficient and economical resource usage75. Besides the environmental infrastructure (in particular clean drinking water supply, wastewater treatment and the disposal of consumer and industry waste), more attention is being paid to renewable energy, green transport and the green economy. In the transition to a resource efficient economy, it is important to not only mitigate the impact of climate change but also to adapt to it. This requires the adoption of a cross-sectoral approach based on the resilience and resistance of ecosystems, the protection of habitats and biodiversity and on ecosystem services.
70 Statistics Estonia. 71 Estonian Environment Information Centre (EEIC), http://www.keskkonnainfo.ee. 72 Statistics Estonia. 73 Ministry of the Environment 74 Communication “The Sixth Community Environment Action Programme Final Assesment”. European Commission, 2011. 75 “European Competitiveness Report 2011”. European Commission, 2011. 29
A significant part of Estonia’s territory comes under protected or designated area: 18.1% (in 2011) of land and 27.4% of marine areas76. However, the fragmentation and destruction of populations and habitats of important species continues to be an area of concern: about a half of habitat types and species are in an inadequate or bad condition. Sector objective: Shaping a responsible attitude towards nature and preserving a clean and biodiverse environment for the people of Estonia. Indicator Base Target Target Target Target Target level level level level level level 2014 2015 2016 2017 2020
Response capacity to a marine pollution incident within 24 hours, km² 1.8 Source: Ministry of Internal 1.8 1.8 1.8 1.8 1.8 (2012) Affairs Responsible authorities: MoIA (MoEAC, MoE) Total greenhouse gas emissions (without land use, land-use change and forestry sector (LULUCF)) (in million tonnes of CO equivalent). 21.18 2 20 20 20 20 20 Source: Ministry of the (2011) Environment Responsible authorities: MoE (MoEAC, MoA) Share of consumers who receive drinking water conforming to the relevant standards from public water supplies, % 87 95 100 100 100 100 (2012) Source: Ministry of the Environment Responsible authorities: MoE (MoSA) Proportion of waste recycling of total waste, % 55 Source: Ministry of the 37 37 39 40 (2011) Environment Responsible authorities: MoE Protection of biodiversity and natural resources (proportion of protected areas compared 18.1 At least At least At least At least At least to total land area), % (2012) 18 18 18 18 18 Source: Ministry of the Environment
76 National Spatial Plan. Estonia 2030+. 30
Responsible authorities: MoE Percentage of functioning wastewater collection and treatment systems in agglomerations with a population equivalent of more 72 95 100 100 100 100 than 2,000 (2011) Source: Ministry of the Environment Responsible authorities: MoE Most significant changes: The development of a new strategy for the oil shale sector up to 2030. The development of a new strategy for the waste management in 2014–2020. The development and initial implementation of ecosystem services assessment policies. The assessment of ground water resources and an inventory of polluted area with the aim of cleaning them up. The updating of environmental monitoring measures and increased monitoring of living nature. Rural and Regional Development According to the Population Register data, 41.7% of the population of Estonia lived in Harju County at the beginning of 2012. The developments so far indicate that by 2015, about 43% of the population of Estonia will be living in Harju County. The only other region besides Harju County with a growing population is Tartu County. Regional differences in economic growth have somewhat diminished in recent years but more active and productive economic activities are still concentrated in the region of the capital and in bigger towns; therefore, the contribution of other regions to GDP remains rather modest. Regional differences in business activity have increased in recent years. The economy of Estonian regions is undergoing a second significant structural change since the transition period of the 1990s - the share of primary sector is clearly decreasing and the share of secondary and tertiary sectors is increasing in the employment structure of Estonian counties. By 2011, about 50% of all employees in Viljandi and Järva counties and more than 70% in Tartu, Harju and Hiiu counties worked in the tertiary sector. The proportion of jobs in secondary industry is biggest in Ida Viru county (about 43%) and in the primary industry it is biggest in Jõgeva, Järva, Rapla, Viljandi and Lääne-Viru counties (more than 10%). The rate of employment has been growing since 2011. In 2011, the lowest rate of employment (49%) was in Jõgeva county. Regional differences in the employment rate have slightly decreased since 2008 (from 1.5 to 1.3 times in 2011). Due to the increased mobility of people, differences in the standard of living and incomes in different regions have somewhat converged. Regional differences in salaries are still significant, yet proportionally, the differences have decreased in recent years. The incomes of salaried employees in Harju County, which is the county with the highest average income, have decreased, compared with the Estonian average, from 116% in the period 2005-2010 to 112%. At the same time, incomes in counties with the lowest average income have moved closer to the Estonian average (in Ida-Viru county as much as by 8%). Due to unfavourable demographic processes, the number of new employees entering the labour market is smaller than a few years ago across Estonia and the dependency burden is increasing. In 2012, the most favourable labour market potential was in Tartu County where, taking into account the current age composition of the population, a more or less equal number of people are expected to enter and leave the labour market in the coming decade. In all other counties, the labour market is expected to decrease over the next 10 years and the decrease is expected to be fastest in West and Northeast Estonia (30-43% more people leaving the labour market).
31
The development capacity (including the capacity to self-finance investments) of local governments is uneven. An analysis of the development capacity of local governments suggests that the administrative and development capacity of smaller local governments is weak. In many cases, the problem is that the development priorities of local governments are short-term and conventional. The state must stimulate, within its regional policy, structural changes and the introduction of innovative and non- standard solutions. Development activities at county level are limited and these activities are not sufficiently systematically funded from the state budget (this issue has also been highlighted by OECD77). To improve the situation, local governments need to enhance cooperation (in particular, in promoting the business environment and employment) and the legal framework of regional development needs to be updated. It is important to ensure more efficient achievement of the regional policy objectives through other sectoral policies. On 30 August 2012, the Government of the Republic adopted the national development plan “Estonia 2030+”; the main objectives of the plan are to ensure the opportunities for spatial development, spatial balancing of development and better spatial connection of Estonia to Europe. The plan focuses on three main domains - transport, settlement structure and energy. In order to implement the national plan, new regional (county) planning will be launched in 2013. Various thematic plans are being prepared in counties: Harju and Rapla counties continue the preparation of the Via Baltica road project; four counties (Lääne, Hiiu, Pärnu and Saare counties) are preparing thematic plans concerning wind energy, and a planning procedure has been initiated to determine the location of the Rail Baltic railway line, etc. Sector objectives: 1. Comprehensive and regionally balanced development, taking into account the development potential and specific nature of regions. 2. Increased quality of life and more well-paid jobs in rural areas.
Indicator Base level Target Target Target Target Target level level level level level 2014 2015 2016 2017 2020
Employment rates in rural areas (15–64 age group), % Source: Statistics Estonia 64.5 62 63 63 63 64 Responsible authorities: (2012) MoIA reg., (MoA, MoEAC, MoSA) An increase in the net value added per annual labour unit (compared with the previous year) in 18.4 agriculture, % 16,376 3.0 2.8 3.0 3.0 3.0 Source: FADN78 €/LU(2011) Responsible authorities: MoA, (MoIA reg., MoEAC) Most significant changes:
77 “Public Governance Reviews. Estonia. Towards a Single Government Approach. Assessment and Recommendations” (OECD, 2011) 78 FADN – Farm Accountancy Data Network. 32
The completion of the implementation of EU structural fund measures and programmes for 2007- 2013 and the implementation of EU structural fund measures and programmes for 2014-2020. The preparation of the Estonian regional development strategy for 2014-2020. The updating of planning legislation. The implementation of national planning, coordination of the preparation regional and thematic plans and the development of the methodology of marine planning. Foreign Policy One of the prevailing goals in ensuring the international status of Estonia is to integrate into various international organisations and promote the interests of Estonia through these organisations. As of now, Estonia has become a member of nearly all the international organisations that it has targeted. In order to increase the influence and to improve the reputation of Estonia, we have to increase the visibility of Estonia in international organisations and to create the possibilities to have a say in these organisations by achieving the appointment of our representatives to important positions. Estonia was elected a member of the UN Human Rights Council for the period 2013-2015. Estonia is a candidate for a non-permanent seat in the UN Security Council in 2020. Estonia is cooperating both within the UN and bilaterally with many countries to enhance its chances to become a member of the UN Security Council. Estonia is the coordinator of NB8 in 2014 and will hold the presidency of the Council of the Baltic Sea States in 2014-2015. Estonia is represented in all capitals of the permanent members of the UN Security Council and in most of the NATO and EU member states. A significant foreign policy objective is to facilitate the global movement of Estonian citizens; therefore, the Government continues to expand visa-free travel opportunities. At the beginning of 2013, Estonian citizens were able to travel without a visa to 85 countries or territories, besides the EU and EEA member states. At the same time, it is also important to ensure that foreigners who need a visa to travel to Estonia can obtain it with minimum hassle and time. The size of Estonia and its limited resources limit the number of foreign representations; therefore, visa representation agreements have been and continue to be signed with other EU member states. Other EU member states represent Estonia in issuing Schengen visas in 92 countries. Cooperation with businesses and business organisations has strengthened in terms of promoting foreign investments and finding new markets for Estonian companies. Currently, Estonia is represented in all its important economic partners, and Enterprise Estonia has ten representations in nine countries. A more systematic approach has been taken to development cooperation and humanitarian aid as a means of foreign and security policy; Estonia has not yet reached the EU target level for 2010 (0.17% of GNP) but it expects to reach the target level by 2015. Therefore, Estonia will expand its development cooperation and activities in the field of providing humanitarian aid and continue to promote democratic values and human rights. The understanding of the importance of development cooperation has improved and the involvement of the public and the contribution of volunteers to development cooperation have increased. Sector objective: Increasing the international influence of Estonia and promoting democracy and security in the world. Indicator Base level Target Target Target Target Target level level level level level 2014 2015 2016 2017 2020
The capacity to respond to and process the requests from Estonian 645 Increasin Increasin Increasin Increasin Increasin businesses concerning (2012) g level g level g level g level g level business and economy/ No of requests per
33 year79 Source: Ministry of Foreign Affairs Responsible authority: MoFA No of experts participating in international civil No more No more No more missions 20 Increasin than Sustaine than than Source: Ministry of (2012) g 30 d level 30 30 Foreign Affairs experts experts experts Responsible authority: MoFA Estonia represented in 33 embassies, 7 foreign countries permanent representations, Source: Ministry of 4 consulates Foreign Affairs general, 1 Expandi Expandi Expandi Expandi Expandi Responsible authority: chancery, 1 ng ng ng ng ng MoFA special mission, 158 honorary consuls (as at January 2013) Readiness to provide 300,000 consular services and 177,895 visa visa assistance80 applications applicati Sustaine Sustaine Sustaine Sustaine Source: Ministry of 67,460 consular ons, d level d level d level d level Foreign Affairs acts 120,000 consular Responsible authority: (2012) acts MoFA The share of GNP allocated to development cooperation and 0.11% humanitarian aid (% of 0.156% 0.17% 0.18% 0.19% GNP) of GNP - of GNP of GNP of GNP of GNP Source: Ministry of (2012) Foreign Affairs Responsible authority: MoFA
Most significant changes:
79 The indicator should be changed in the new action plan of the Government from 2015, in order to describe better the essence of business diplomacy and its benefits to businesses. 80 The number of visa applications and consular acts was significantly bigger than forecasted in 2012 and therefore, the indicator was amended, on the proposal of the Ministry of Foreign Affairs, and set at “sustained level”. 34
Coordinator of the Nordic-Baltic Cooperation in 2014 and presidency of the Council of the Baltic Sea States from 2014 to 2015. Expanded development cooperation and humanitarian aid The development of the foreign representations’ network Defence and Security Policy Estonia’s military defence strategy is based on primary self-defence and collective defence under NATO. The development of military defence is directed towards the pre-emption of military threats and, if applicable, the combating thereof. One example of sharing responsibility between NATO members is the financial contribution to defence expenditure. By its contribution (% of GDP) to defence costs over recent years, Estonia is among the upper third of the 28 NATO member states.81. The usability target shows the mobility of the Defence Forces of Estonia and their capacity to contribute to military operations82. In 2009-2012, about 250 troops were participating in military operations at all times. Considering the size of the army, about 11.3% of the total land forces have been deployable on a sustained basis. In connection with a change in the profile in 2012, Estonia’s participation in foreign missions and its coefficient of deployment capacity dropped to 9.1% of the total land forces. In 2009-2012, the average deployment capacity of the land forces was 32%. The objective is to increase the deployment capacity of the land forces to 47% by 2020. In order to ensure fair contribution to NATO collective defence, the member states must ensure that 10% of the national land forces are deployable on a sustainable basis. The training and staffing of reserve units with rapid and sustainable deployment capability and their participation in foreign operations will continue in the coming years. Estonia has ensured early warning and control of the national air space as well as readiness for launching and implementing a collective defence operation and host-nation support to allied forces. Air and sea surveillance capability is being developed. The existing weaponry (e.g. anti-tank weapons) and weapon systems (e.g. mine hunting systems) are being modernised and new weapons are being acquired (e.g. combat machinery for infantry). The management structure of the Defence Forces is being reorganised. The Estonian Defence Forces are being staffed by professional military personnel and reservists. Maintaining and recruiting personnel is a challenge. In 2012, the balance of active servicemen was positive. The Estonian Defence League is a voluntary, militarily organised and armed national defence organisation that carries out military training and operates in the area of government of the Ministry of Defence. As of the end of 2012, the number of its members had increased by about 1,000 people compared with 2011. The increasing number of members demonstrates the increasing popularity of the National Defence and its special organisations; this is important from the perspective of voluntary national defence. Sector objective: The development of primary self-defence, participation in collective security and support for civil authorities. Indicator Base Target Target Target Target Target level level level level level level 2014 2015 2016 2017 2020
Mobility of defence forces: proportion of deployable units in 32 / 9.1 the army, % / proportion of 35 / 10 37 / 10 39 / 10 41 / 10 47 / 10 sustainably deployable units in (2012) the army, %
81 Action Report of Government of Republic 2007–2010, Government Office 2011. 82 The usability target for forces shows the readiness of forces to participate in foreign operations and be involved in NATO operations. The number of units deployable and units deployable on a sustainable basis is calculated according to nationally approved principles agreed with NATO. 35
Source: Ministry of Defence Responsible authority: MoD Proportion of defence expenditure in GDP, % 2 2 2 2 2 2 Source: Ministry of Defence (2012) Responsible authority: MoD Total number of members of the Defence League and its special organisations 22,508 24,000 24,750 25,500 26,250 28,500 (2012) Source: Ministry of Defence Responsible authority: MoD Most significant changes: The development of armoured manoeuvre capability of infantry based on combat machinery will be started. Anti-tank weaponry, minehunting systems and indirect fire capacity will be modernised. Air surveillance radar system will be updated, including acquiring a new medium-range 3D radar. The management structure of the Defence Forces is being reorganised, – the Army Headquarters and the Headquarters of the Estonian Defence Forces will be merged and the Air Force Headquarters and Navy Headquarters will be merged. Regional commands will be reorganised and territorial defence will be transferred to the Defence League. The support command, a centre for support services, the procurement department and ICT development and an administration unit will be established. Remuneration of servicemen in line with the nature of the service will be ensured (the salary fund will be increased by 18.7% in 2013) and veteran policy measures will be implemented. Governance and Civic Society Cooperation between different levels and units is a prerequisite to coherent and efficient governance. The changes in the economic situation and decreased budget resources have created a need to provide services efficiently. The most dominant problems in governance are the fragmented activities of ministries and their lack of cooperation in pursuing common central goals. In addition, the effects analysis is rarely used in decision-making and planning and the implementation of policies.83. Local governments have varying development and management capacities. Their current lack of regional cooperation combined with the regional fragmentation of Estonia is an increasing hindrance to developing several areas of life and providing public services. The role of charity both in increasing social capital and as a direct socio-economic contribution to the development of the state is growing and charity constitutes a significant part of GDP. There is still room for development in the third sector; the most pressing problems are the organisations’ capacity to provide services, their operational capability and economic viability. However, citizens’ associations have gained power and skills, which have increased their capacity to earn income, provide public and societal services, start up social enterprises, etc. Citizens’ associations that participate in shaping politics increasingly feel their significant role in finding the best solutions to the challenges society is facing, and in improving the preparation procedures and quality of legislation and policy documents. While 24% of local municipalities, 31% of county governments and 17% of ministry officials cooperate with citizens’ associations84, there are no criteria established for assessing the quality of inclusion.
83 http://valitsus.ee/UserFiles/valitsus/et/riigikantselei/uldinfo/2012-2015%20arengukava.pdf. 84Research report “Institutionalization of Civic Initiative in Estonia 2009/2010”. Civil Society Research and Development, Tallinn University, 2010. 36
Sector objectives: 1. The improvement of uniformity in governance by providing public services based on customer needs more efficiently; better and more efficient shaping and implementation of policies. 2. The promotion of civic initiative and participatory democracy in the cooperation with citizens’ groups and public authorities.
Indicator Base level Target Target Target Target Target level level level level level 2014 2015 2016 2017 2020
A study on residents’ assessment on the availability and quality of local public services85 ------Source: Enterprise Estonia Responsible authorities: MoIA reg. (MoEAC) Government effectiveness86 36.64 Retain Retain Retain Retain Retain Source: Institute for points, position position position position position Management Development 4th position in top in top in top in top in top Responsible authority: five five five five five Government Office (2012) Non-institutional socio- political participation rate of the population, % Source: European Social 5 Sustaine Increasi 7 8 9 Survey, Institutionalisation of (2010) d level ng level Civic Initiative in Estonia Responsible authority: MoIA reg. Most significant changes: Centralisation of web pages of governmental institutions into one single government portal. On-going centralisation of support services. Preparations for Estonia’s Presidency of the Council of the European Union. More efficient involvement of the civic society via the better availability of IT solutions. Improved quality of financial management of the state, which guarantees a more accurate and operational overview of the state’s receivables, liabilities and investment needs. In the preparation phase of decision-making and policy planning, more attention will be paid to preparing effects analyses. Statistics will cover civic society in a more comprehensive way. The cooperation mechanisms of local governments will be strengthened and the regulation of pooling will be improved. Improving the quality of public (e-)services.
85 conducted in 2009 was a single study. The survey method will be changed and, from 2013, the survey will be conducted on a continuous basis; therefore, the base and target levels cannot be determined. The target is improved assessment by residents. 86 Total points and Estonia’s ranking among EU member states for six indicators in the International Institute for Management Development (IMD) competitiveness survey: management of public financial resources, legal barriers to business competitiveness, flexibility of government policies towards changes, implementation of government decisions, transparency of government policies, bureaucracy as a hindrance to business. 37
FISCAL FRAMEWORK Budget strategy and its fiscal framework are based on the economic forecast of the Ministry of Finance from spring 2013; this forecast is available on the web page of the Ministry of Finance.87. The main indicators of the economic forecast are presented in Appendix 1. The budget policy of the following four years will be conservative, with budget expenses planned according to resources.
Objectives of the Fiscal Policy of the Government of the Republic The main objective of the Government’s fiscal policy is to support macroeconomic stability via the flexibility and efficiency of markets and to manage the risks that threaten the balanced development of the economy. The medium-term budgetary objective (MTO) of the Government is a general government structural surplus that meets the requirements of the Maastricht Treaty and the Stability and Growth Pact. The Government’s objective is to guarantee a sustainable budget policy that ensures macroeconomic balance. The goal is to make budget policy decisions that support maximum macroeconomic stability, manage the risks that threaten the balanced development of the economy, and improve the economy’s growth potential and increase employment. The existence of adequate reserves and flexibility in the budget for making changes in the structure of revenue and expenditure must be guaranteed in order to cope with future economic downturns. Budget policy decisions are made simultaneously (i.e. only in the budget (strategy) process), decisions are sustainable (the long-term impact of the decisions is considered) and take account of sector policies and the activities of the other levels of the general government as much as possible; and all sources of financing (European Union grants, proceeds from sales of greenhouse gas emission quotas, etc., in addition to tax revenue) are uniformly regarded.
Budgetary position of general government The Government will continue with a strict fiscal policy and its medium-term objective (MTO) is the general government structural surplus.88 This objective is in line with the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. Planning the budget position with a surplus helps guarantee the long-term sustainability of the budget. Estonia managed to achieve its MTO until the global economic crisis, but in 200889 the budgetary position of general government fell into a structural deficit. Since 2009, Estonian general government is in structural surplus again and the MTO is therefore met. The budgetary position of 2013 will be slightly worse, yet still in a structural surplus (0.3% of GDP). A decrease in structural surplus compared with 2012 will result in a decrease in unemployment insurance premium. The structurally adjusted budgetary position will once again be in a growing surplus in the coming years. The objective is to increase the general government structurally adjusted surplus to 1.0% of GDP by 2016. The general government nominal budget surplus will be attained in 2015, which will make it possible to replenish the reserves that decreased during the recession. No positive supplementary budgets will be prepared during the year and any extra tax revenue received into the budget will be placed into reserves.
Tax-burden objective To return the tax burden to the level it was at prior to the recession by reducing labour-related taxes. The tax burden in 2013 will decrease by 0.4% compared with the previous year, to 32.9% of GDP. This year, a reduction in the unemployment insurance premium will have an alleviating effect on the tax
87http://www.fin.ee/majandusprognoosid. 88 The surplus target was set in Convergence Programme 2007. The Convergence Programmes of 2005 and 2006 set the objective to achieve a balanced budget. 89 Due to later reassessments, structural deficit was also identified in 2006 and 2007. 38 burden, yet an increase in excise duties on alcohol and tobacco will have an opposite effect. In the period 2014-2017, the tax burden is technically reduced by higher contributions by the state to the mandatory funded pensions fund on behalf of those people who continued to make payments to the pension fund. One of the tax policy changes that reduce the tax burden is a reduction in the income tax rate to 20% from 2015. The tax burden will be increased by an increase in excise duties on alcohol and tobacco, with effect from 2014. In 2013-2017, tax revenues will increase on average by 1.1% per year slower than the nominal GDP and the tax burden will decrease to 31.4% of GDP by 2017. Future developments will be discussed in more detail in the chapter on tax policy, tax burden and tax revenues.
Budgetary position of the general government The general government covers public sector entities that are financed mainly via mandatory payments made by entities belonging to other sectors, and whose main activity is the redistribution of national income (so-called non-market producers). The general government in Estonia consists of three sectors: central government, local governments and social security funds. In 2012, the budgetary position of the general government plunged from a surplus enjoyed in the two post-crisis years to a deficit of 46 million euros or 0.3% of GDP. The central government and local governments ended the year with a deficit of 0.7% and 0.2% of GDP, respectively; social security funds in a surplus of 0.7% of GDP. The deficit and weaker result compared with 2011 were mainly due to the active use of the revenues from the emissions trading of earlier years (expenditures exceeded revenue by 172 million euros). According to the budget, the deficit in 2013 will amount to 0.5% of GDP. The deficit is attributed mainly to central government, the main reason being investments that exceed the revenue from emissions trading in 2012. The budgetary position is also weakened by a reduction in the unemployment insurance premium. In 2014, the budgetary position of the general government will be balanced again and a surplus is expected from 2015 and reaching 0.8% of GDP by 2017. The Government’s ambition is to maintain the structurally adjusted budget surplus achieved since 2010 throughout the forecast period and to increase the surplus to 1% of GDP by 2016. In 2014, the Government is planning to achieve a nominal balance, which means a structural surplus of 0.7% of GDP. Table 1 Budgetary position objective of the general government for 2013–2017 2013 2014 2015 2016 2017
Structurally adjusted budgetary position 0.3 0.7 0.7 1.0 1.0 of general government (% of GDP) Budgetary position of general government -0.5 0.0 0.2 0.7 0.8 (% of GDP) State budget -0.6 0.0 0.0 0.5 0.7 incl. state pension insurance -1.8 -2.0 -2.1 -2.1 -2.0 Other central government 0.0 -0.2 -0.1 0.0 -0.1 Social security funds 0.3 0.3 0.4 0.4 0.4 Local governments -0.2 -0.2 -0.2 -0.2 -0.2 Budgetary position of general government -95 -9 32 155 187 (mln euros) State budget -110 -7 5 104 165 incl. state pension insurance -325 -388 -439 -457 -474 Other central government -7 -34 -16 5 -30 Social security funds 54 64 76 81 90 Local governments -31 -32 -32 -35 -39 Source: Ministry of Finance.
39
Figure 1 Budgetary position of the general government
mln euros % GDP 600 4 400 3 2 200 1 0 0 -200 -1 -2 -400 -3 -600 -4 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014* 2016* Central government Social security funds Local governments General government (right axis) Source: Statistics Estonia, Ministry of Finance.
Cyclically adjusted position of general government budget The method used by the Ministry of Finance to estimate the maximum possible gross domestic product (or the potential GDP90) is the production function method91. The use of this method indicated that from 2005 to 2007 the GDP of Estonia increased considerably faster than it should have, considering the resources existing in the economy at the time, which created significant imbalances. The economic growth that could be considered manageable for the economy of Estonia before the crisis was about 6%, but it actually reached 10% at times. The growth was based on the rapid inflow of foreign funds as well as the overall optimism of local economic agents, which made domestic demand considerably bigger than total production and income. This excessive demand resulted in a scale of the economy (or GDP gap92) that was up to 12% larger than usual in 2007, which was accompanied by accelerating inflation, a strong deterioration of the trade balance and tension from the excessively intense and inefficient use of resources in the economy, which brought along an increase in their prices. Demand for consumer and investment goods decreased sharply as the uncertainty that started to appear at the height of the boom continued to increase. The global financial crisis that started in autumn 2008 magnified the economic downturn caused by the cyclical behaviour of the economy even further. Global demand also decreased considerably as a result of the financial crisis and caused the scale of foreign trade to decrease by up to one third. The negative GDP gap of Estonia increased to almost 11% of GDP in 2009 as a result. When the economic cycle went into reverse and after rapid growth in 2011, the negative GDP gap has decreased quickly; according to the Ministry of Finance, it was less than 2% of the potential GDP in 2012. By 2015-2016, the GDP gap should be closed. As the recent financial crisis and its aftermaths have been considerably more serious than the usual cyclical volatility of the economy, it is likely that countries lost some of their production potential in the course of the crisis. The growth potential of the Estonian economy in the next few years will also be lower than before the crisis due to the same reasons. The estimates93 of the cyclically adjusted position of Estonia’s general government budget found on the basis of the GDP gap indicate that the fiscal policy of Estonia is countercyclical from 2012 to 2013 in
90 Potential GDP – maximum GDP using the existing production input (workforce, capital, productivity/skills) without causing excess pressure for price increase. Potential economic growth – change over time of potential GDP. Depends on changes in production inputs. 91 Further information on the GDP gap and cyclically adjusted budget position may be found in Appendix 3 to the Estonian Convergence Programme of May 2004. 92 GDP gap (output gap) – the difference between actual and potential GDP. 93 According to the methodology renewed by the European Commission, the semi-elasticity applied to compute the cyclical component of the budget balance was 0.3 in the case of Estonia - the same as the previously used income elasticity (see also http://ec.europa.eu/economy_finance/publications/economic_paper/2013/pdf/ecp478_en.pdf). 40 the conditions of a negative GDP gap (the GDP level is lower than the potential level). In 2014-2015, the GDP level will remain lower than the potential level but the fiscal policy will become stricter – the cyclically adjusted budgetary position will start improving – which is why the fiscal policy will become procyclical. In 2016-2017, the GDP gap will close and become positive and the budgetary policy will become stricter. The budgetary policy in 2016-2017 will be countercyclical. It should be kept in mind, however, that the impact of the change in the use of external funds must also be assessed in addition to the change in the budgetary position when a final assessment of the fiscal policy is given. Since the external funds are neutral with regard to the budgetary position – revenue always equals expenditure –, an increase in the use of funds, for example, is not reflected in the changes that occur in the budgetary position. It does, however, provide some extra stimulation to economic activities and is countercyclical in its nature. Table 2 Cyclically adjusted budgetary position, 2012–2017 (% of GDP) 2001– 2012 2013* 2014* 2015* 2016* 2017* 2011
1. Real GDP growth (%) 3.8 3.2 3.0 3.6 3.5 3.5 3.5 2. Budgetary position of the - -0.3 -0.5 0,0 0.2 0,7 0,8 general government 3. Interest payments - 0.2 0.2 0.2 0.2 0.2 0.3 4. Potential real GDP growth (%) 4.0 3.2 3.0 3.6 3.5 3.5 3.5 4.a Contribution of capital to 2.8 potential growth (%) 1.7 1.7 1.7 1.8 1.8 1.9 4.b Contribution of labour to 0.6 potential growth (%) 0.7 0.7 0.7 0.6 0.4 0 4.c Contribution of productivity to 0.8 potential growth (%) 0.2 0.4 0.7 0.9 1.1 1.2 5. GDP gap (output gap) 1.1 -1.7 -1.3 -0.6 -0.2 0.1 0.4 6. Cyclical budget component - -0.5 -0.4 -0.2 -0.1 0.0 0.1 7. Cyclically adjusted budgetary - position 0.2 -0.1 0.1 0.2 0,7 0,7 8. Cyclically adjusted primary - 0.4 0.0 0.3 0.4 0,9 0,9 position 9. Fiscal policy position - Counter Counter Pro- Pro- Counter Counter -cyclical -cyclical cyclical cyclical -cyclical -cyclical Source: Ministry of Finance, Statistics Estonia. Figure 2 Development of potential GDP and GDP gap (%) 15 12 9 6 3 0 -3 -6 -9 -12 -15 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013* 2014* 2015* 2016*2017*
GDP gap (% of potential GDP) Real GDP growth Potential GDP growth
Source: Ministry of Finance, Statistics Estonia.
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Structural position of general government budget The structural budgetary position of general government is calculated by removing not only the impact of the economic cycle but also one-off and temporary factors, which may distort the budgetary position, from the nominal position. The measures that have a significant impact on the budget but whose significant impact on the cyclically adjusted budgetary position is temporary and non-recurring (on the scale of at least 0.1% of GDP) are called one-off and temporary measures. Although the general principles on the basis of which the impact of a measure is classified as temporary have been defined, the consideration of each specific case is decided separately. The Government’s objective is to achieve by 2014 nominal balance of the government sector budgetary position, conforming to structural surplus of 0.7% of GDP. The goal is to achieve a general government structural surplus of 0.7% of GDP in 2015 and 1% of GDP in 2016-2017. Despite the fact that the nominal budgetary position deteriorated considerably in 2012, it was caused mainly by one- off factors (investments related to the sale of AAUs), which had no impact on the structural budgetary position. The one-off measures that influence the budgetary position of general government are listed in Table 3. The total amount of one-off measures in 2012 was -0.9% of GDP. Revenues from emissions trade are smaller than the related investments. Added to this are the dividends of state-owned companies, which exceed the usual dividend and net profit ratio, and income tax. Other one-off measures in 2013 are the dividends of state-owned companies and the negative balance of AAUs. An increase in the equity capital of Estonian Air is added and the total impact of these measures is -0.5% of GDP. The investments associated with sales of AAUs will continue until 2015 and, from 2014, the impact of the funded pension compensation mechanism will be added. The impact on the budgetary position will decrease to -0.3 or -0.4% of GDP.
Table 3 One-off measures and their impact, 2012–2017 (mln euros) 2012 2013 2014 2015 2016 2017 * * * * *
Revenue from sales of Assigned Amount Units (AAU) 20 11 Expenses of Assigned Amount Units (AAU) -190 -74 -47 -22 Dividends of Eesti Energia and Tallinna Sadam that 26 37 exceed the usual dividend and net profit ratio, and income tax, totalling at least 0.1% of GDP Increasing the equity capital of Estonian Air -58 2+6 and 3+6 second pension pillar contributions -61 -66 -72 -78 Total, mln euros -145 -84 -108 -88 -72 -78 Total, % of GDP -0.9 -0.5 -0.6 -0.4 -0.3 -0.3 Source: Ministry of Finance.
Table 4 Structurally adjusted budgetary position, 2012–2017 (% of GDP)
2012 2013* 2014* 2015* 2016* 2017*
1. Cyclically adjusted budgetary position 0.2 -0.1 0.1 0.2 0.7 0.7 2. One-off measures -0.9 -0.5 -0.6 -0.4 -0.3 -0.3 3. Structurally adjusted budgetary position 1.1 0.3 0.7 0.7 1.0 1.0 Source: Ministry of Finance, Statistics Estonia.
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Budgetary Position of the Central Government The biggest part of central government, which comprises about three-fourths of general government, is agencies financed from the state budget (constitutional institutions and ministries with their areas of government). The central government also includes foundations established by the state (hospitals and the Environmental Investment Centre have the biggest impact), companies that mainly provide services to the state (e.g. AS Riigi Kinnisvara) and institutions governed by public law (e.g. universities, Estonian Public Broadcasting). Figure 3 Revenue, expenditure and budgetary position of central government
mln euros % GDP 6000 3
4000 2
2000 1
0 0
-2000 -1
-4000 -2
-6000 -3 1996 1998 2000 2002 2004 2006 2008 2010 Revenue Expenditure Budgetary position (right axis)
Source: Statistics Estonia. The tax revenue of the state budget, which is the most sensitive to economic development, comprises the biggest part of the central government's revenue. This is why the biggest part of the budget deficit comes from the state budget when the economic cycle is in a phase of decline. Therefore, the state budget contributed the most to the budgetary surplus during the pre-crisis years. Non-tax revenue, which mainly consists of external support received from the European Union, also comprises a large part of the central government’s revenue in addition to tax revenue. The majority of the central government’s expenditure consists of state budget expenditure, about one- third94 of which are social security expenses (incl. state pension insurance). These expenses are followed by expenditure on economy (incl. agriculture and road construction) and health (allocation to the Estonian Health Insurance Fund). The remaining budgetary position of central government is the aggregate amount of foundations, commercial undertakings and agencies governed by public law. Large investments, which exceed the revenue of the current year, are one of the main factors that influence the budgetary position. The impact on the budgetary position is negative, irrespective of whether they are financed from the reserves collected in previous years or with loans.
Table 5 Position of the central government 2013* 2014* 2015* 2016* 2017*
Revenues of the central government 5263 5322 5402 5645 6113 Expenditure of the central government 5379 5363 5413 5535 5978 Position (mln euros) -117 -41 -12 109 135 Position (% of GDP) -0.6% -0.2% -0.1% 0.5% 0.6% Source: Ministry of Finance, Statistics Estonia.
94 Based on State Budget 2013. 43
Position of the state budget
State budget revenues The state budget revenues will increase annually during the entire period 2014–2017. By 2017, the revenues will increase by about 1,395 million euros (18.1%) compared to 2013. The improving economic environment increases the share of tax revenues in total revenues; the share of non-tax revenue decreases, inter alia, due to the shrinking volume of external funds (a temporary decrease due to the launch of the new EU financial perspective) and proceeds from the sales of Assigned Amount Units. Figure 4 Volume and growth of state budget revenues (mln euros, %)
9 000 30%
8 000 25% 7 000
6 000 20%
5 000 15% 4 000
3 000 10%
2 000 5% 1 000
0 0% 2001 2003 2005 2007 2009 2011 2013* 2015* 2017*
Tax revenue (excl. transferable taxes) Non-tax revenue Growth compared to previous year
Source: Ministry of Finance, Statistics Estonia. During the budget strategy period (2014–2017), the tax revenue (without transferable taxes) is expected to show average annual growth of 5.6%. Social tax, VAT and excise duties will constitute the largest part of tax revenues. During 2014–2017, social tax receipts will annually increase by 6.4% on average; the forecasted receipt in 2017 is about 2,430 million euros. Tax revenues are influenced mainly by increasing average wages because employment is expected to remain at the same level in 2014-2017. Reducing the income tax rate to 20% in 2015 will have an important effect on tax revenue, decreasing income tax revenues from both natural and legal persons compared with the situation where the income tax would remain at 21%. For the aforementioned period, receipt of VAT will increase on average by 5.5% a year and the forecasted receipt in 2017 is about 1,990 million euros. The VAT forecast is based on a three- component model of final consumption used extensively in EU, according to which the receipt of VAT for the following periods depends on the growth in private consumption, general government investments and general government spending. In 2014-2017, the receipt of excise duties will annually increase by 4.2% on average; the forecasted receipt in 2017 is about 958 million euros. The receipt of fuel excise constitutes the largest proportion of excise duties. This will be positively influenced by the reform of the fiscal marking of liquid fuel taking effect in 2014. The receipt of tobacco excise duty is pushed up by a 10% increase in the excise duty in 2014.
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Figure 5 Comparison of revenues (without transferable taxes) planned in State Budget Strategy 2013– 2017 and in the previous state budget strategy (million euros) 8000
7000
6000
5000
4000
3000
2000
1000 6 424 6 640 6 555 6 725 6 753 6 785 7 068 7 132 7 719 0 2013* 2014* 2015* 2016*
State Budget Strategy 2013-2016 State Budget Strategy 2014-2017 Source: Ministry of Finance.
For each coming budget year, the forecasted state budget revenue is expected to increase compared with the previous state budget strategy. This increase can be attributed to both the increasing tax receipt because of the improving economic environment and the predicted receipt of external funds in 2013-2014. Changes in tax policies that influence tax receipt and tax incentives that have a negative impact on the receipt of revenues into state budget are described in the chapter on tax policy, tax burden and tax expenditures. The volume of non-tax revenues depends most on external funds; on average, these constitute about 55-69% of all non-tax revenues in 2014–2017. The volume of external funds is largest in 2014 and will decrease thereafter due to the end of the EU 2007–2013 programming period and its replacement with the 2014-2020 programming period, and will start to increase again in 2017. Financial revenues (in particular proprietary income) will increase from 2014. The sales of goods and services and other income will not increase significantly.
State budget expenses According to the spring 2013 forecast prepared by the Ministry of Finance, Estonia’s annual nominal economic growth will be between 6.4 and 6.8% in the period 2013-2017. Real economic growth is expected to be between 3.0 and 3.6%. According to the forecast, state budget expenses will also increase, although more slowly than GDP growth. This in turn will decrease the share of state budget expenses in the total economy - while real expenses constituted 44% of GDP in 2012, this indicator is expected to drop to 38% by 2016. Although the more rapid increase in total state budget expenses is partially inhibited by changing external support programming periods, the referred developments are in line with the economic theory, according to which the state’s contribution to total economy should increase in periods of decline and decrease in periods of growth. As the state budget will also include transferable expenditures from 2013, the actual total expenses of previous years have been adjusted accordingly to make the data comparable. According to the forecast, the total expenses of four years or in the period 2014-2017 will be 33 billion euros. Compared with the previous strategy (2013-2016), total expenses will increase by 2.4 billion euros or 7.9%. This means that in the period 2014-2017, expenses will increase about 5% per year compared with the previous state budget strategy. The biggest share of expenses is related to the labour market and social security, public health and education. An important part of expenses is related to governance and civic society, family and population policy, internal security, transport, defence, rural and regional development and culture.
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Figure 6 State budget expenses 2006-2017 (million €)
Source: Ministry of Finance Since the current external support financing period will end in 2013 and a new period will begin in 2014, it will have an impact on the financing structure of state budget expenses. This means that less intensive use of support during the initial years of the programming period 2014-2020 will not compensate for the rapid decline in support due to the end of period 2007-2013. As a result, the share of external support in financing the state budget expenses will decrease from 13.4% in 2012 to 7.9% in 2015. From 2015, the share of external support in total expenses should increase again and the share of state revenues decrease accordingly. One of the Government’s priorities is to use the external funds of the period 2007-2013 as purposefully and early as possible in order to contribute to stimulating the economy and creating jobs. An overview of implementation of the strategy for using structural funds may be found in Appendix 2. The same is valid for the use of the new period of EU 2014-2020 funds and the planning of the funds of the new period under the EU emissions trading scheme. Figure 7 Share of external funds (without revenues from emissions trading) in financing total expenses in 2007-2017 (million €)
Source: Ministry of Finance
When considering budget expenses from the point of view of flexibility, it seems that the situation is worsening because the share of available funds is decreasing. This means that the budget expenses depending on revenues and related to the enforcement of applicable legislation continue to increase. While in 2012 and 2013, non-fixed expenses constituted slightly more than one quarter of total budget expenses, the share of available funds will drop below one fourth by 2017 (see Figure 8).
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Figure 8 Fixed and non-fixed expenses in state budget 2012-2017
Source: Ministry of Finance About 60% of the budget tax revenues will be allocated to legally revenue-dependent expenses. The largest of them are social tax (tied to pension and health insurance), fuel excise duty (75% tied to the financing of road management), receipts from the gambling tax (coverage for project-based funding in the field of culture, education and regional matters) and pollution tax (partially tied to funding environmental projects). As the economy improves, the funding and budget proportion of those sectors increases. Table 6 Share of policy areas in total budget, % Policy area Total, mln euros 33,173 Competitive economic environment 1.7 Family and Population Policy 4.4 Education 10.1 Labour Market and Social Security 38.0 Public Health 15.6 Energy 0.3 Transport 4.3 Information Society 0.4 Internal Security 5.3 Culture, incl. sport, the Estonian language, 2.5 integration Environment 3.2 Rural and Regional Development 5.1 Foreign Policy 0.9 Defence and Security Policy 5.7 Governance and Civic Society 2.6
A more detailed financing plan of the State Budget Strategy 2014-2017 is provided in Appendix 4.
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Table 7 General government expenditure by government functions (COFOG) (% of GDP) COFOG 2009 2010 2011 2013* 2016* code
1. General public services 1 3.4 3.1 3.2 3.2 2.8 2. Defence 2 2.3 1.8 1.6 2.0 2.0 3. Public order and safety 3 2.3 2.3 2.1 2.2 1.7 4. Economic affairs 4 5.3 4.4 4.6 4.5 3.6 5. Environmental protection 5 1.1 -0.2 -0.3 0.7 0.3 6. Housing and community amenities 6 0.1 0.5 0.6 1.5 0.0 7. Health care 7 5.6 5.3 5.1 5.3 5.1 8. Recreation, culture and religion 8 2.4 2.1 1.9 1.7 1.5 9. Education 9 7.2 6.8 6.5 6.3 4.9 10. Social protection 10 15.8 14.6 13.1 12.6 12.1 11. Total general government TE 45.5 40.7 38.3 39.9 34.1 expenditure Sources: Statistics Estonia, Ministry of Finance. The nominal expenditures of 2013 and 2016 will not decrease. In the period 2013-2016, GDP will increase quicker than the state budget and, therefore, the share of government expenditure in GDP will decrease. One of the reasons for decreasing expenditures is the change of EU programming periods. The peak of using the funds of 2014-2020 is after 2017.
Management and labour costs The amount used from the state budget to cover operating expenses decreased by 16% in 2009 due to the economic crisis. Since the decline in total expenditures was significantly smaller or 4%, the share of operating costs in total expenditures also declined. Operating expenses were also kept at the same level in the following two years (2010 and 2011) and, therefore, the share of operating expenses in total expenditure dropped to 14.6%. According to forecasts, the share of operating expenses will continue to increase until 2014, in which year 15.7% or 1.24 billion euros will be allocated from the state budget to operating expenses. In 2014-2017, operating expenses are expected to increase only marginally (see Figure 9) Figure 9 Operating expenses compared with total expenditure
Source: Ministry of Finance
Looking at the division of operating expenses between labour and management costs, we can see that according to the forecast, the volume of management costs is almost equal to those of labour. While in 2009-2011 management costs constituted 42-44% of operating costs, from 2014, management costs should be almost equal to labour costs or constitute nearly half of total operating costs. A reason why management costs increase faster than labour costs is an increase in defence expenses. 48
Figure 10 Division of operating expenses between labour and management costs
Source: Ministry of Finance
Figure 11 Average number of full-time equivalent employees in budgetary state agencies and changes compared with previous year; change in the number of employed people compared with previous year
Source: Ministry of Finance
The average gross wages in Estonia in 2012 was 880 euros (calculated on the basis of four quarters), which was 5% higher than in 2011. Although the purchasing power of wages increased also, it has not reached the level of 2008 yet and, therefore, employee expectations of wage increases are great and pressure for pay rises is increasing. Wages differ significantly by areas of activity and, therefore, the competition pressure from wage levels on areas of government is also different. According to Statistics Estonia, the highest paid jobs are in the ITC and financial sectors. According to the preliminary data from the financial statements’ information system of the Ministry of Finance, the number of full-time equivalent employees in central government in 2012 was approximately 55,000 (55,200 in 2011) and the average gross wages were 1,015 euros (964 euros in 2011). Therefore, the number of employees in central government has remained at the same level as in 2011 but labour costs have increased in order to ensure competitive salaries. The ratio of the average wages in central government to the Estonian average has remained at the same level (1.15 Estonian average) over the past two years, which means that central government wages have not lost in competitiveness and the changes have been in line with those in the Estonian wages market. Despite the fact that labour costs have increased, their share in GDP has remained at 6% in the past three years.
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Conclusions: The situation differs by areas of government and by areas of activity. Since the price of a labour unit is increasing due to wage pressure, we should be careful when creating additional jobs because filling the jobs will be increasingly difficult. More attention should be paid to making work processes more efficient in order to manage with the same number of employees. Wage pressure is increasing and so is the need for centralised wage policy for budgetary state agencies. The competitiveness of wages in budgetary state agencies has stopped deteriorating and the competitiveness of wages in 2012 remained at the same level as in 2011.
Investments Figure 12 Investments of general government (mln euros)
Source: Ministry of Finance The investments of general government include investments made by state agencies, rural municipalities and city governments, Riigi Kinnisvara Aktsiaselts (RKAS) and the investments made on account of revenues from emissions trading. This does not include the investments of the state, local governments and public organisations. The volume of investments increased in 2011 by a third, from 739 million euro to 1,009 million euros on account of projects financed from external funds. The high level of investments will be maintained until the end of 2013 by using external funds and revenues from emissions trading. A sharp increase in 2011-2013 is related to increased payments at the end of the EU external support period. The main part of the revenues from emissions trading were used in 2012; 183 million euros were allocated to improving the energy efficiency of buildings. The level of investments of local governments increased in 2012 by more than 60% due to the abolishment of loan limits. In the period 2008-2012, the investments of the general government constituted 11-14% of total revenues. Due to the change of foreign support programming periods, the share of investments will decrease sharply to 7-8% of total expenditures from 2014 and will remain at the same level until 2017. An estimated 582 million euros of the funds of the new EU structural funds programming period will be allocated to investments in 2014-2017. Up to 18% of total funds from the period will be
50 presumably used during the first four years (an indicative amount being 3.2 billion euros) because launching projects requires extensive preparation. In the mid-term, the structure of state investments will change, the investments of state offices will decrease and the share of investments made through RKAS will increase in line with the state’s real estate strategy. The investments of general government are compared to other EU member states on Figure 13. Figure 13 Investments of general government in 2011, % of GDP
Source: Eurostat Social and healthcare expenditures By 2017, the share of social and healthcare expenditure will constitute 46% of the total state budget expenditure. Figure 14 Social and healthcare expenditures in 2009-2017
Source: Ministry of Finance
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Table 8 Social and healthcare expenditures in 2009-2017 2009 2010 2011 2012 2013 2014 2015 2016 2017 Social and healthcare 2,791 2,748 3,002 3,274 3,430 3,509 3,725 3,911 4,032 expenditures (bln euros) % of state budget 44% 43% 42% 44% 45% 44% 46% 47% 46% Source: Ministry of Finance
The state pension insurance expenditure will increase by 329 million euros (23%) compared to 2013. Special pensions will increase by 10 million euros (32%). The reform of special pensions will continue under the leadership of the Ministry of Social Affairs.
Due to the increasing receipt of social tax, the health insurance budget will increase by 224 million euros by 2017, resulting in a 29% increase in the revenues of the Health Insurance Fund..
Figure 15 Expenses related to people with disabilities, 2009-2017
Source: Ministry of Finance
Table 9 Expenses related to people with disabilities, 2009-2017 million € 2009 2010 2011 2012 2013 2014 2015 2016 2017 Pension for incapacity for 163 174 192 208 230 256 278 302 328 work Social benefits paid to 45 45 49 60 66 62 67 73 80 people with disabilities Other expenses related to 25 26 28 30 33 33 33 33 33 people with disabilities Total expenses related to 232 245 270 293 324 344 376 407 466 permanent incapacity for work and people with disabilities Number of persons 74,600 80,900 90,400 95,700 100,900 106,300 109,700 113,300 116,600 receiving pensions for incapacity for work Source: Ministry of Finance The fastest growing social expenses are those related to permanent incapacity for work and people with disabilities - €142 million (43.9%) compared with 2013. Pensions for incapacity for work constitute a major part (75.8%) of these expenses. By 2017, the number of persons receiving a pension for incapacity for work will have grown by 22,522 persons (22.7%) compared with 2013 and by 47,151 persons (63.2%) compared with 2009. The budget for monthly benefits paid to people with disabilities will increase to €14 million (21.2%), amounting to €79.8 million by the end of the strategy period. The reform of capacity for work will continue in the period 2014-2017. One of the objectives of
52 the reform is to help people with health disorders to enter the labour market, by assessing their capacity for work and providing active labour market services. In comparison with 2013, additional funds will be allocated to other social expenses in 2014-2017, including: State-paid social tax for receivers of social benefits in special circumstances will increase by 8.7 million euros (13%), mainly due to the increasing number of persons receiving a pension for incapacity for work and the increasing minimum wage; The budget for parental benefits will increase over the next four years by €29.1 million (17%), reaching €199.8 million by 2017. The increase in expenses is driven by an increase in average wages and improvement of the employment situation. Family benefits will increase by €17.4 million (16.8%), mainly due to increased support for the third and each following child (effective from the 2nd quarter of 2013) and the new, needs- based family benefits. The state’s contribution to the mandatory funded pension will increase by €127.9 million (72%) and allocations to the pension fund by €6.6 million (157.5%). The increase in allocations is related to the parental pension to be introduced from 2013. As of 2013, leave for fathers was reintroduced, resulting in extra costs of approximately €5.5 million per year.
Position of other central government In regard to other units in the central government, the budgetary position of the general government is most of all influenced by large hospitals (SA Põhja-Eesti Regionaalhaigla ja SA Tartu Ülikooli Kliinikum) and universities (University of Tartu, Tallinn University of Technology). Other central government agencies have a mainly negative effect on the budgetary position of the general government (-0.2% of GDP), mainly due to investments made by other central government units.
Budgetary Position of Local Governments Local governments (a total of 226) have an important role in the performance of public sector functions. They all perform the same functions irrespective of their size – the maintenance of schools, nursery schools, community cultural centres, museums, sports facilities, nursing homes and health authorities; the provision of social welfare and social services; welfare of the elderly; youth work; housing and utility management; water supply and sewerage; environmental maintenance; waste management; territorial planning; public transport in municipalities, towns and cities; and maintenance of streets and roads in municipalities, towns and cities. The total amount of their expenses in 2012 on cash basis was 1,487 million euros. Operating expenses constituted 64% of this amount. Figure 16 Division of expenses related to the main activities and investments of local government units in 2012, by areas of activity
Culture Other General 4% 12% goverance Economy (incl. 9% housing and utilities) 24% Social Education protection 43% 8%
Source: Ministry of Finance.
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The budgets of local governments are independent, which means that they are responsible for preparing the budgets. A major part of the revenues of local authorities comes from personal income tax and support from the state budget. Figure 17 Breakdown of the revenues of local governments in 2012
Other support received 13% Support fund Income tax 16% 47% Equalisation fund 5% Other own income 19%
Source: Ministry of Finance.
All local government units had an obligation to prepare a budget strategy for the period 2013-2016 by November 2012. The income and expenditures foreseen in the strategy are conservative. For example, the expected receipt of personal income tax is 0.18 billion euros less than forecasted by the Ministry of Finance. Labour costs are expected to increase by 2.7% per year on average, which is significantly less than the forecasted increase in average wages (6.1% in a year on average). The expenses will likely be adjusted upwards due to pressure to increase wages. Local governments have also been rather conservative in planning investments for the period 2014-2016. As a result, a surplus is not expected until 2014. This will provide a buffer for increasing expenses in the relevant budgetary year. The division of expenses by areas of activity is mainly influenced by changes in investments. Local government units have taken a “wait and see” position as to the investments until it is clear which actions will receive external funding. Table 10 Expenses of local government units (excluding investment transactions) by areas of activity (million €) Sector objective: 2012 2013* 2014* 2015* 2016* 01 General public 125,999,979 136,753,857 134,289,223 134,766,521 137,355,875 services 02 National defence 10,616 12,622 12,673 12,729 12,785 03 Public order and 4,972,986 5,128,745 5,429,834 5,530,501 5,727,684 safety 04 Economy 230,105,506 245,955,580 212,175,281 209,756,790 209,770,023 05 Environmental 44,444,478 47,401,471 36,837,778 37,156,022 37,194,647 protection 06 Housing and 107,369,583 101,544,012 84,854,468 77,708,232 73,109,323 community amenities 07 Health care 10,223,308 8,818,503 9,526,527 9,344,178 9,890,490 08 Recreation, culture 166,349,787 168,047,315 162,992,667 171,809,802 169,535,574 and religion
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09 Education 614,150,322 618,595,957 615,979,283 627,224,718 634,920,270 10 Social protection 123,073,764 135,371,365 131,069,143 137,427,676 140,986,712 TOTAL 1,426,700,329 1,467,629,426 1,393,166,878 1,410,782,169 1,418,503,382 Source: Ministry of Finance. The accrual deficit of local government units amounted to 39 million euros in 2012. According to the forecast of the Ministry of Finance, local government units will also be in deficit in the period 2013– 2017. To cover the deficit, liabilities will be increased. The data from the budgets of local governments and their budget implementation are available in monthly reports.95 Table 11 Cash-based aggregate aggregated indicators of local governments (mln euros) Revenue and 2012 2013* 2014* 2015* 2016* 2017* balance Revenue 1,418 1,434 1,467 1,509 1,569 1,630 - Income tax 665 721 771 822 875 931 - Equalisation fund 72 74 75 75 76 76 BUDGETARY -39 -31 -32 -32 -35 -39 BALANCE Source: Ministry of Finance. In order to reduce the tax burden of homeowners, land under dwelling (up to 1,500m2 in high-density areas and up to 2 ha in low-density areas) was exempted from land tax. A decrease in the budgetary revenues of local governments is compensated for by increasing the income tax rate by 0.17 percentage points in 2013 and by extra 0.30 percentage points in 2014.
Budgetary Position of Social Security Funds The Estonian Health Insurance Fund and the Unemployment Insurance Fund belong to the sector of social security funds. In Estonia, the national pension insurance system belongs to central government. Table 12 Forecast of the budgetary position of social security funds, 2012–2017 2012 Budget 2013* 2014* 2015* 2016* 2017* for 2013
Social security funds (million 121 64 54 64 76 81 90 euros) Social security funds (% of 0.7 0.4 0.3 0.3 0.4 0.4 0.4 GDP) * forecast The health insurance part of social tax forms about 99% of the revenue of the Estonian Health Insurance Fund. Health services (prevention of diseases, primary and specialised medical care, nursing care and dental treatment) constitute the biggest part of the compensation guaranteed to insured persons. These services are followed by compensation for medication and sick leave.
95 http://www.fin.ee/index.php?id=11182 55
Figure 18 Breakdown of expenditures of the Estonian Health Insurance Fund, 2012 Other monetary Health promotion 0% Other expenses benefits Operating costs of 2% 1% Health Insurance Fund Sick leave 1% compensation 11% Compensation for medication 13%
Health care services 72%
In 2011, the budget of the Estonian Health Insurance Fund ended up in a surplus of about 13 million euros, mainly due to the collection of more social tax and smaller than forecasted expenditure (especially sick leave compensation). Due to expenses being smaller than planned in 2012, the deficit was also smaller than expected - approximately 2 million euros. The deficit expected for 2013 is influenced by the increase in the level of expenses (mainly the expenses of specialised medical care and medication subject to compensation). Thanks to (potentially temporary) spending cuts in 2013, the effect of the medical personnel collective bargaining agreement, signed at the end of 2012, will be seen in 2014 when the budget deficit is expected to increase. Table 13 Aggregate indicators of the Estonian Health Insurance Fund (mln euros)** 2009 2010 2011 2012 2013* 2014* 2015* 2016* 2017*
Total revenue 730.5 694.4 735.1 781.9 829.6 886.9 940.7 999.1 1,062.1 incl. social tax 718.0 685.9 725.6 776.9 824.3 880.7 933.3 990.2 1,050.8 Total expenditure 771.2 700.3 725.5 780.9 (841.4) 902.7 959.9 1,025.8 1,091.4 Budgetary position -40.6 -1.2 13.0 -2.0 -11.8 -15.8 -19.3 -26.7 -29.4 * forecast ** Budgetary position in 2009-2011 according to data from Statistics Estonia. Budgetary position in 2012 according to data from the Ministry of Finance. Expenditures in 2013-2017 according to the specified forecast of the Ministry of Finance regarding the Health Insurance Fund. Forecast of revenues in 2013-2017 according to the Ministry of Finance’s spring 2013 economic forecast. Unemployment insurance benefits comprise the biggest part of the expenditure of the Unemployment Insurance Fund. The length of the period in which these benefits are paid increased to 360 days in 2011. In 2012, the number of persons receiving the benefit decreased threefold compared with 2009 when the number of such persons was the highest. The declining trend is forecasted to continue throughout the budget strategy period both regarding the recipients of the benefits and the total number of unemployed persons; therefore, the expenses of the Unemployment Insurance Fund are expected to decrease.
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Figure 19 Breakdown of expenditure of the Unemployment Insurance Fund, 2013 Operating expenses Unemployment of the allowance Unemployment 5% Insurance Fund Unemployment 10% insurance benefits 30% Labour market Redundancy services payment 28% 7% Social tax 17%
Insolvency benefit 3%
Similarly to 2011, the Unemployment Insurance Fund finished 2012 with a surplus of 121.1 million euros, which resulted from the high rate of unemployment insurance premiums and the decrease in the number of the recipients of the benefit. This year’s budgetary position of the Unemployment Insurance Fund is influenced positively by decreased expenses but the rate of unemployment insurance premium has also decreased from the beginning of the year (to 2% and 1%, respectively) and the expected budget surplus is approximately 65 million euros. Budget surplus will be increasing over the coming years, almost reaching the level of 2012 by 2017. Table 14 Aggregate indicators of the Unemployment Insurance Fund (mln euros)*** 2009 2010 2011 2012 2013* 2014* 2015* 2016* 2017*
Total revenue 159.6 238.4 249.7 249.3 163.9 176.1 187.5 199.6 212.3 - unemployment 115.0 179.0 194.4 211.0 161.5 173.5 184.4 196.0 208.2 insurance premium Total expenditure 209.3 157.3 116.4 126.4 99.1 96.8 93.0 92.8 93.7 - benefits** 139.0 76.0 44.6 50.2 46.5 43.7 41.7 41.2 40.3 Budgetary position -53.3 83.5 133.3 121.1 64.8 79.3 94.5 106.7 118.6 * forecast ** Unemployment insurance benefit, insurance benefit in the case of redundancy and employer’s insolvency benefit. ** Budgetary position in 2009-2011 according to the data from Statistics Estonia; 2012 according to the annual accounts of the Unemployment Insurance Fund. The principles of financing the services were changed in order to guarantee the sustainability of labour market services and the ability to react quickly and flexibly to changes on the labour market, which means that from 2012 the provision of services will mainly be financed by unemployment insurance premiums. The Unemployment Insurance Fund will not use external targeted financing in 2013.
Tax Policies, Tax Burden and Tax Expenditure One of the tax policy goals of the Government is to shift the tax burden from the taxation of income to the taxation of consumption, use of natural resources and pollution of the environment by refocusing taxes partially. At the same time, the system will be kept stable, simple and transparent with as few exceptions and differences as possible. According to Eurostat, the tax burden in Estonia in 2011 was 33.0% of GDP, which is significantly smaller than the weighted average of both EU27 and the euro area (see Figure 20). Of Central and East European countries, Slovenia, Hungary and Czech Republic have the bigger tax burden. The goal is to return the tax burden by 2017 to the level it was before the recession, by reducing labour-related taxes.
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The tax burden of 2013 is expected to be 32.9% of GDP. This year, a reduction in the unemployment insurance premium will have an alleviating effect on the tax burden, yet an increase in excise duties on alcohol and tobacco will have an opposite effect. In the period 2014–2017, the tax burden is reduced by higher contributions by the state to mandatory funded pensions fund on behalf of those people who continued to make payments to the pension fund. One of the tax policy changes that reduces the tax burden is a reduction in the income tax rate to 20% from 2015. The tax burden will be increased by an increase in excise duties on alcohol and tobacco, with effect from 2014. In 2013-2017, tax revenues will increase on average by 1.1% slower than nominal GDP; the tax burden will decrease to 31.4% of GDP by 2017. Figure 20 Tax burden in the European Union in 2011 (% of GDP) 50
40,1 40,8 40 33,0
30
20
10
0
…
€
E
SI
FI
IT
IE
PL ES SE
PT
LT FR
SK
LV
BE
LU
CZ CY
AT
EE
NL
BG
GR
RO
DE
UK
MT HU DK Source: Eurostat.
Higher taxation of consumption and environment exploitation Environmental taxes96, which form a part of consumption taxes, constitute 8.5% of all taxes levied in 2013, exceeding the European average (6.2% in 2010) by more than two per cent. The share of environmental taxes has been on the increase since 1995, reflecting in part the need to bring excise duties into line with the minimum rates of the European Union as well as the government’s policy to finance the reduction of personal income tax by increasing consumption and environmental taxes. By 2017, the share of environmental taxes will decrease to 7.8%, mainly due to deceleration in the growth of fuel excise duty. It is possible that the existing tax rates will be changed within the scope of the green tax reform.
Reducing differences in taxation Tax incentives that diverge from their original objective and have therefore become unjustified will be critically inspected and abandoned. Each tax incentive will be analysed to ascertain whether it is proportional to the goal to be achieved, whether it meets the expectations and needs of society, and whether trying to achieve this goal via the tax incentive is the most expedient approach. If necessary, the incentive will be implemented for a specific period of time, which makes it possible to analyse the effectiveness of the incentive in the achievement of the goal and to decide, on the basis of the analysis, whether the incentive should be extended.
96 Environmental taxes are those levied on energy (fuel and electricity excise duties), transport (heavy vehicle tax, vehicle registration fee, boat tax) and pollution (pollution charge, fee for the special use of water, package excise duty, fee for the right of fishery). 58
Changes in taxes Figure 21 Development of tax burden in Estonia (% of GDP) A. Tax burden B. Tax revenue (%)
38 100%
36 80% 60% 34 40% 32 20%
30 0% 1995 1998 2001 2004 2007 2010 2013* 2016* 28 1995 1998 2001 2004 2007 2010 2013* 2016* Labour taxes Capital taxes Consumption taxes
Sources: Ministry of Finance, Eurostat.
Table 15 Main tax policy changes in 2013 and 201497 Entry into Impact 2013 Impact 2014 force million € % of GDP million € % of GDP Changes in taxes -37.4 -0.21 -57.7 -0.10 1. Increasing alcohol excise by 5% 1 Jan 2013, 9.6 0.05 24.0 0.12 1 Jan 2014 2. Increasing tobacco excise by 6% 1 Jan 2013, 6.0 0.04 13.4 0.07 1 Jan 2014 3. Increasing excise duty on oil shale 1 Jan 2013 0.7 0.00 0.7 0.00 used for heat generation (€0.3/GJ) 4. Reducing the rate of unemployment 1 Jan 2013 -53.7 -0.30% -57.5 -0.29 insurance premium from 4.2% to 3.0% (2.0% and 1.0%) 5. Increasing the share of personal 1 Jan 2013, -10.3* -0.06 -12.9* -0.07 income tax in the revenues of local 1 Jan 2014 governments by 0.17% in 2013 and by 0.03% in 2014 * impact on state budget revenues Source: Ministry of Finance. Table 16 Impact of fiscal policy decisions on general government revenue 2012 2012 2013* 2014* 2015* 2016* 2017* million % of % of % of % of % of % of € GDP GDP GDP GDP GDP GDP
General government 6,839.4 40.2 39.4 37.3 35,3 34.8 35.4 revenue General government revenue taking into 35.5 account the revenue policy measures
97 Impact compared with the situation where the rates of 31 December 2012 still apply. 59
Tax expenditure The tax expenditure contained in the state budget of Estonia for 2012 and 2013 are described below. The value of tax expenditure is calculated by using the revenue foregone method and cash basis accounting data, and for each tax expenditure provision, the delay between the implementation of the provision and its actual application is taken into account. Only the so-called first round effects of the establishment of tax expenditure have been estimated. For example, if an increased basic exemption is established, only the direct impact of the implementation of the provision has been assessed. However, the assessment does not include the fact that natural persons have more money in the case of increased basic exemption and more VAT is received if they use this money for consumption. The aggregate impact of the establishment of tax expenditure is regarded in the case of tax expenditure that is directly and clearly related to other taxes, e.g. the tax expenditure arising from the Alcohol, Tobacco, Fuel and Electricity Excise Duty Acts influence the receipt of VAT to the extent of the final consumption rate. The different behavioural effects and budget restrictions have not been taken into account in the evaluation of tax expenditure due to the implementation of the method of revenue to be lost, e.g. it has been assumed that the consumption of goods and services is unit elastic (the relative change in quantity is the same as the relative change in price). In assessing the value of tax expenditure, it is important to understand that each individual provision of tax expenditure has been evaluated separately without considering the confluence of different provisions, which means that whilst finding the aggregate amount of tax expenditure by adding up different provisions is incorrect, it does make it possible to assess the level and trends of the established tax expenditure. The tax expenditure that has a significant impact on the receipt of state budget revenue is contained in three different legal acts – the Income Tax Act, the Value Added Tax Act and the Alcohol, Tobacco, Fuel and Electricity Excise Duty Acts. In the case of the Value Added Tax Act98 (VATA), the provisions through which the consumption of certain goods or services is promoted with the implementation of a lower tax rate can be regarded as tax expenditure or significant deviations from the pursued tax system. In the case of the Income Tax Act99 (ITA), the provisions through which entrepreneurs operating in certain areas of activity, natural persons or families of certain type and natural persons that incur certain expenses or consumer certain services are supported with increased basic exemptions can be regarded as tax expenditure or significant deviations from the pursued tax system. In the case of the ITA, it is assumed that the basic exemption to be subtracted from a resident natural person’s income earned in the taxation period, which is established pursuant to Section 23, is a part of the pursued tax system (and not tax expenditure). In the case of the Alcohol, Tobacco, Fuel and Electricity Excise Duty Acts100 (ATFEEDA), the provisions through which entrepreneurs operating in certain areas of activity or the production of certain goods are supported with lower excise duty rates or excise duty exemptions can be regarded as tax expenditure or significant deviations from the pursued tax system.
98 The Value Added Tax Act, Estonian versionhttps://www.riigiteataja.ee/akt/125102012017. 99 The Income Tax Act, Estonian version https://www.riigiteataja.ee/akt/129122012031. 100 The Alcohol, Tobacco, Fuel and Electricity Excise Duty Acts, Estonian versions https://www.riigiteataja.ee/akt/120122012004. 60
Table 17 Tax expenditure in state budget from 2013–2014 (mln euros)101 (mln €) Tax expenditure Provision Government 2013 2014 function102 1. 9% VAT on books, workbooks and periodicals VATA, Clauses 15 9 8.6 9.1 (2) 1) and 15 (2) 3) 2. 9% VAT on medicines and medical devices VATA, Cl. 15 (2) 7 29.5 31.0 2) 3. 9% VAT on accommodation services VATA, Cl. 15 (2) 8 17.8 18.7 4) 4. Increased basic exemption from the first / second / 10 25.6 26.5 ITA Sec. 23¹ third child 5. Increased basic exemption in the event of pension 10 126.2 132.5 ITA Sec. 23² 6. Increased basic exception in the case of 10 0.2 0.2 ITA Sec. 23³ compensation for accident at work or occupational disease 7. Deduction of housing loan interest 6 18.0 17.5 ITA Sec. 25 8. Deduction of training expenses 9 15.0 15.8 ITA Sec. 26 9. Gifts and donations 8 0.6 0.7 ITA Subsection 27(1) 10. Insurance premiums and acquisition of pension 10 6.6 7.1 ITA Sec. 28 fund units 11. Increased basic exemption of self-employed 4 2.8 2.8 ITA Subsection persons upon the sale of agricultural produce or timber 32(4) 12. 50% excise duty rate for independent small ATFEEDA 4 0.1 0.1 breweries subsection 46(1) 13. Lower excise duty rate on diesel fuel for specific ATFEEDA 4 57.7 41.2 purposes and on light heating oil Subsection 66 (7) 14. Exemption of fishermen from fuel excise duty 4 1.11 1.1 ATFEEDA Cl. 27(1) 22²) 15. Electricity used for chemical reduction and in ATFEEDA Cl. 4 0.78 0.80 electrolytic, metallurgic and mineralogical processes 27(1) 24), Sec. 284) 16. Electricity and fuel used to produce electricity and ATFEEDA Cl. 4 7.11 7.28 electricity used to maintain the ability to produce 27(1) 282) electricity 17. Electricity which forms, on average, more than 50% ATFEEDA Cl. 4 0.01 0.01 of the cost price of a product 27(1) 285) 18. Fuel used for mineralogical processes ATFEEDA Cl. 4 1.21 1.23 27(1) 282) 19. Natural gas used for the purpose of operating the ATFEEDA Cl. 4 0.01 0.01 natural gas network 27(1) 286) TOTAL 319.0 313. 6 Source: Ministry of Finance. The receipt of the state budgets for 2013 and 2014 is influenced by 20 different tax expenditure provisions in the Value Added Tax Act, the Income Tax Act and the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act. The total scope of the main tax expenditure in 2013 comprises 319.0 million euros or 1.8% of GDP. Additional basic exemption for pensions, more favourable rate of excise duty on diesel fuel for specific purposes and on light heating oil, and lower VAT rates for medicines
101 Tax expenditure assessments have only been calculated for the provisions that are included in tax regulations as of 1 January 2013. 102 Government functions: 1. general public services; 2. defence; 3. public order and safety; 4. economic affairs; 5. environmental protection; 6. housing and community amenities; 7. health; 8. recreation, culture and religion; 9. education; 10. social protection. 61 and medical devices remain the largest types of tax expenditure. The volume of the three largest types of tax expenditure constitutes 66.9% of the total tax expenditure in 2013. In 2014, tax expenditure will decrease by 1.7% or to 313.6 million euros. This is due to the reform of the fiscal marking of fuel that will replace the excise duty incentive by direct payments. In order to analyse the dynamics of tax expenditure according to government functions, the government function with which each specific type of tax expenditure is associated is determined for each tax expenditure provision. Table 17 demonstrates that six of the ten government functions (economic affairs; housing and community amenities; health; recreation, culture and religion; education; social protection) are supported via tax expenditure in the period 2013-2014. The government functions that form the biggest share in 2013 are social protection (158.6 million euros or about 49.7% of tax expenditure), economic affairs (70.8 million euros or 22.2%) and healthcare (29.5 million euros or 9.2%). The tax expenditure that falls into the remaining government functions comprises 60.1 million euros or 18.8% of total tax expenditure. Tax expenditure may also be regarded as a share of the receipt of the relevant tax. In the case of value added tax, tax expenditure (items 1–3 in the table) comprises 55.9 million euros in 2013, which is 3.5% of the total VAT received. The relevant tax expenditure (items 4–11 in the table) comprises 169.5 million euros or 57.4% of the personal income tax received into the state budget and the same share in the case of fuel excise duty (items 12–19 in the table) is 57.5 million euros or 7.1%.
General Government Debt Burden and Reserves
General government debt The main goal of Estonia’s fiscal policy since the restoration of independence has been to keep the budgetary position of general government over the medium term in balance or, if possible, in a surplus, which has become expressed in the low debt burden of the state. The general government debt of Estonia in 2012 amounted to 10.1% of GDP, which is 3.9 percentage points more than in 2011. The main reasons for the government debt increasing were an increase in loans received from the European Financial Stability Fund (EFSF)103 and the use of the credit from the European Investment Bank to co-finance structural funds. The central government debt (including the funds received from EFSF) comprised 1,159 million euros and the debt of local governments 564 million euros of the total general government debt. Without the funds of the EFSF, which amounted to 355 million euros in 2012, the central government debt was 804 million euros or 4.7% of GDP. The general government debt can be expected to increase to 10.2% of GDP in 2013 as a result of the EFSF’s impact. The impact of EFSF will continue to increase in 2014, although other debt components will decrease more and, since 2014, the central government debt will start to decrease, amounting to 8.3% of GDP in 2017. When considering the debt without the EFSF impact, it will already start to decrease in 2013, as the financing needs are met by using liquid financial assets and the existing loans are repaid. In 2017, the central government debt, without the EFSF impact, will be 3.0% of GDP (5.2% of GDP together with the EFSF impact). According to the forecast, the deficit of local governments will be covered from external funds during the entire medium-term period and the nominal amount of debt will increase. However, the loan burden of local governments as a share of GDP will drop by 0.2% to 3.1% of GDP by 2017 compared with this year.
103 According to the methodology used to calculate the general government debt, the loans issued by the EFSF are partially reflected in the debt burden of Estonia since the state joined this facility. 62
Table 18 Change in general government debt burden in 2012 31 December 2011 31 December 2012 Change million € % of GDP million € % of GDP % of GDP
General government 996.3 6.2 1,723.5 10.1 3.9 Domestic debt 603.8 3.8 617.7 3.6 -0.2 External debt 392.5 2.5 1,105.8 6.5 4.0 Central government 520.9 3.3 1,241.9 7.3 4.0 Domestic debt 262.6 1.7 253.8 1.5 -0.2 External debt 258.3 1.6 988.1 5.8 4.2 Local governments 538.8 3.4 564.0 3.3 -0.1 Domestic debt 404.6 2.5 446.3 2.6 0.1 External debt 134.2 0.8 117.7 0.7 -0.1 Social security funds 0.1 0.0 0.0 0.0 0.0 Domestic debt 0.1 0.0 0.0 0.0 0.0 External debt 0.0 0.0 0.0 0.0 0.0
Table 19 General government debt burden, 2012–2017 (% of GDP) 2012 2013* 2014* 2015* 2016* 2017*
1. Total debt 10.1 10.2 9.9 9.3 8.8 8.3 2. Change in debt burden 3.9 0.0 -0.3 -0.6 -0.5 -0.5 Contribution to change in debt burden:
3. Impact of EFSF 2.1 2.5 2.6 2.5 2.3 2.2 4. Primary budgetary position -0.1 -0.4 0.1 0.4 0,9 1.1 5. Interest payments 0.2 0.2 0.2 0.2 0.2 0.3 6. Other factors influencing the debt (SFA) 4.1 0.2 0.3 0.2 0.8 0.8 Estimated interest rate of general government debt (%) 2.0 2.2 2.5 3.0 3.6 4.3 Source: Ministry of Finance, Statistics Estonia.
Figure 22 Development of debt burden in 2003-2017 (% of GDP) A. General government debt B. Other factors influencing general government debt
5,0 12,0 4,0 10,0 3,0 8,0 2,0 6,0 1,0 0,0 4,0 -1,0 2,0 -2,0 0,0 -3,0 2003 2005 2007 2009 2011 2013* 2015* 2017* 2006 2008 2010 2012 2014* 2016* EFSF Local governments Other factors influencing general government debt Central government (excl. EFSF)
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C. Repayment of central government loans D. Central government104 average interest rate of central government debt
120 7 6 80 5 4 3 40 2 1 0 0 2003 2006 2009 2012 2015* 2001 2003 2005 2007 2009 2011
Loan repayments (mln euros) Average interest rate as at the end of the year (%)
Source: Ministry of Finance, Statistics Estonia, Eurostat.
General government reserves and net position At the end of 2012, the general government reserves constituted 1,723 million euros or 10.1% of GDP. Due to the state budget deficit and investments that need to be financed, the reserves are expected to decrease and comprise 6.1% of GDP by the end of 2015. Thereafter, the amount of reserves will start to increase again, amounting to 6.8% of GDP by the end of 2017. While both the general government debt and the reserves comprised, as a percentage of GDP, 10.1% of GDP in 2012, the nominal debt of the general government was slightly bigger than the amount of reserves and net assets of previous years became net liabilities, comprising 0.004% of GDP. The net debt is forecasted to increase in the two coming years, comprising 3.6% of GDP by the end of 2014. Thereafter, the net debt will start to decrease, falling to 1.5% of GDP by the end of 2017. Without the EFSF impact, the general government reserves will exceed the debt and net assets will amount to 0.7% of GDP by 2017. Figure 23 Liquid assets, debt burden and net position of general government, 2006–2017 (% of GDP)
12 10,1% 6,8%
7 Reserves
2
-0,004% -3 -1,5% -3,6%
Debt -8 8,3% -13 10,1% 2006 2007 2008 2009 2010 2011 2012 2013* 2014* 2015* 2016* 2017* Central government (debt) Central government (reserves) Social insurance funds (reserves) Local governments (debt) Local governments (reserves) EFSF (debt) Net assets (+)/debt(-)
Source: Ministry of Finance, Statistics Estonia.
104 Central government without foundations and legal persons governed by public law. 64
SUMMARY The updated State Budget Strategy is based on the economic forecast of the Ministry of Finance from spring 2013, the Programme of the governing coalition of the Pro Patria and Res Publica Union and the Estonian Reform Party, organisation-based development plans of Estonian ministries and implementation reports of sectoral development plans. Together with the State Budget Strategy, the Stability Programme 2013 was prepared. The Government’s objective is to guarantee a sustainable budget policy that ensures macroeconomic balance. The goal is to make budget policy decisions that support macroeconomic stability, manage the risks that threaten the balanced development of the economy, and improve the economy’s growth potential and increase employment. The existence of adequate reserves and flexibility in the budget for making changes in the structure of revenue and expenditure must be guaranteed in order to cope with future economic downturns. Budget policy decisions are made simultaneously and the decisions are sustainable, taking into account, as much as possible, sectoral policies and the activities of the other levels of the general government and treating uniformly all sources of financing. The Government will continue with a strict fiscal policy and its medium-term objective is the general government structural surplus. Planning the budget position with a surplus helps guarantee the long- term sustainability of the budget. The objective is to increase the general government structurally adjusted surplus to 1.0% of GDP by 2016. If this objective is achieved, the general government nominal budget surplus will be attained by 2015, which will make it possible to restore the reserves that had decreased during the recession. No positive supplementary budgets will be prepared during the year and any extra tax revenue received into the budget will be placed into reserves. The objective of the Government is to return the tax burden to the pre-recession level by reducing labour-related taxes. In the period 2014-2017, the tax burden is technically reduced by higher contributions by the state to the mandatory funded pensions fund on behalf of those people who continued to make payments to the pension fund. One of the tax policy changes that reduces the tax burden is reducing the income tax rate to 20% from 2015. In 2013-2017, tax revenues will increase on average by 1.1% per year slower than the nominal GDP and the tax burden will decrease to 31.4% of GDP by 2017. The priorities of the Government of the Republic for the coming years are as follows: Achieving a general government budget surplus. Positive population growth (the population of Estonia must become a growing population). Increase of productivity to 73% of the EU average by 2015. The targets of 2014, 2017 and 2020 are 72%, 75.4% and 80%, respectively. Achieving the pre-crisis level of employment by 2020. For this purpose, the employment target for 2015 is 72% in the age group 20–64; The targets for 2014, 2017 and 2020 are 71.5%, 73.5% and 76%, respectively. Reducing the share of young adults, in the 18-24 age group, with basic education or less and not in further education or training, to 11% by 2015. The target for 2014 is 11% and the target for 2017 and 2020 is less than 10%. Increasing healthy life expectancy (57.1 years for men and 62 years for women by 2015). The healthy life expectancy targets for 2014 are 56.7 years for men and 61.5 years for women. The targets for 2017 are 58.1 years for men and 63.1 years for women; targets for 2020 are 60.0 years for men and 65.0 years for women. Keeping greenhouse gas emissions at the level of 2010 (or below 20 million tons per year). The same target has been set for the years 2014, 2017 and 2020. The annual state budget strategy implementation plans or state budgets will be based on these objectives.
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APPENDICES
Appendix 1. Ministry of Finance, Economic Forecast of Spring 2013
2002 2012 2013 2014 2015 2016 2017 - * * * * * 2011 Main economic indicators (%) 1. Real GDP growth 4.1 3.2 3.0 3.6 3.5 3.5 3.5 2. Nominal GDP growth 9.1 6.6 6.6 6.8 6.6 6.5 6.4 2a. Nominal GDP (bln euros) 17.0 18.1 19.4 20.6 22.0 23.4 2b. Nominal GNP (bln euros) 16.0 17.1 18.2 19.4 20.7 22.0 3. GDP deflator 4.7 3.2 3.5 3.1 3.0 2.9 2.8 4. Consumer price index 4.1 3.9 3.4 2.8 2.8 2.8 2.7 5. Harmonised index of consumer 4.2 4.2 3.6 2.9 2.9 2.9 2.8 prices 6. Employment (15–74 age group, in 611.7 624.4 626.3 628.8 628.8 628.8 628.8 thousands) 7. Employment growth 0.6 2.5 0.3 0.4 0.0 0.0 0.0 8. Labour productivity growth (based 3.5 1.1 2.7 3.2 3.5 3.5 3.5 on employment) 9. Unemployment rate 9.7 10.2 8.9 8.3 7.8 7.4 6.8 10. Average wage (euros) 884 937 997 1,059 1,122 1,189 11. Real wage growth 4.9 1.9 2.5 3.5 3.3 3.1 3.2 11a. Nominal wage growth 9.2 5.9 6.0 6.4 6.2 6.0 6.0 12. Investments and inventories (% of 30.3 27.6 27.9 28.3 28.8 29.8 30.6 GDP) 13. Domestic savings (% of GDP) 22.7 26.4 26.4 26.5 26.4 26.6 27.0 14. Current account (% of GDP) -7.5 -1.2 -1.5 -1.8 -2.4 -3.2 -3.6 Sources of growth 15. Private consumption expenditure 3.9 4.5 3.8 3.8 4.3 3.6 3.6 16. General government final 2.9 4.0 0.8 0.2 0.2 0.2 0.2 consumption expenditure 17. Total capital investment in fixed 6.1 20.9 5.2 5.8 6.1 7.2 7.2 assets 18. Change of inventories (% of GDP) 1.5 2.6 2.6 2.6 2.6 2.7 2.6 19. Domestic demand 4.7 7.6 3.6 3.5 4.0 4.0 3.9 20. Export of goods and services 9.1 5.6 4.5 6.0 6.5 6.8 6.8 21. Import of goods and services 8.2 9.1 5.1 5.9 7.0 7.2 7.2 Contribution to GDP growth 22. Domestic demand (excluding 4.1 7.6 3.4 3.5 3.8 3.8 3.9 inventories) 23. Change in inventories 0.1 -0.4 0 0 0 0 0
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2002 2012 2013 2014 2015 2016 2017 - * * * * * 2011 24. Balance of goods and services 0 -2.9 -0.5 0.1 -0.5 -0.4 -0.4 Added value growth 25. Primary sector 1.6 13.1 2.1 3.0 2.0 2.2 1.8 26. Manufacturing 4.7 -2.4 5.1 5.7 5.3 5.0 4.8 27. Construction 5.3 14.3 4.0 4.6 4.4 4.2 4.0 28. Other services 3.2 3.3 2.4 2.8 2.9 3.0 3.1 * forecast Contribution to GDP growth indicates the shares of specific sectors in economic growth. This is calculated by multiplying growth in the area by its share in GDP. The sum of the contributions of different sectors amounts to economic growth (the slight difference can be attributed to a statistical error – the part of GDP that cannot be divided between the areas). Source: Ministry of Finance, Statistics Estonia, Bank of Estonia. Forecast published by the Ministry of Finance on 4 April 2013.
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Appendix 2. Implementation of National Strategic Reference Framework 2007- 2013. State Budget Strategy 2007–2010 included the preparation and approval of a sub-strategy called “National Strategic Reference Framework 2007–2013” (hereinafter NSRF) which defined the general objectives, indicators and priorities for 2007–2013 for the targeted development of sectors eligible for EU structural assistance. The general purpose of using the structural funds specified in NSRF is fast sustainable development; the three objectives of NSRF are: competitiveness of economy, increased social coherence and more sustainable use of the environment. Impact indicators were established for the three objectives. In addition, NSRF includes six priority areas and their objectives. NSRF forms an integral part of the annually renewed state budget strategy. This part includes all sectors potentially eligible and all activities that pursue the same objectives – i.e. it is an overall overview of sectors related to using EU structural assistance. This ensures a more comprehensive approach to planning the development of these sectors. The six priorities of NSRF will be implemented, based on this State Budget Strategy for 2014–2017, via the following policy areas and their objectives:
Priority of the National Strategic Implementation within the State Budget Strategy 2014– Reference Framework 2017 (policy areas) 2007–2013
1) Educated and active population o Policy area “Family and population policy” o Policy area “Education” o Policy area “Labour market and social security” o Policy area “Public health” o Policy area “The Estonian language” o Policy area “Integration” 2) Improved R&D capacity, innovative o Policy area “Economic environment” mentality and productivity of the enterprises o Policy area “Education” 3) Better connection opportunities o Policy area “Transport” o Policy area “Information society” o Policy area “Governance and civic society” 4) Sustainable use of the environment o Policy area “Environment” o Policy area “Energy” o Policy area “Domestic security” 5) Comprehensive and balanced development o Policy area “Environment” of regions o Policy area “Rural and regional development” o Policy area “Economic environment” o Policy area “Transport” o Policy area “Information society” o Policy area “Culture” o Policy area “Sport” o Policy area “Governance and civic society” 6) Increased administrative capacity o Policy area “Governance and civic society”
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The strategies, including the activities financed from structural funds, are implemented through three sectoral operational programmes. The operational programmes define the activities for the implementation of the strategy financed from structural funds and the amount of financing, including the amounts from various funds. Estonia’s operational programmes are the following: - Human resources development operational programme (includes all activities financed by the European Social Fund); - Human environment development operational programme (includes activities financed by the European Regional Development Fund and the Cohesion Fund); - Economic environment development operational programme (includes activities financed by the European Regional Development Fund and the Cohesion Fund); The three operational programmes for the implementation of NSRF include a total of 16 priority areas, technical support, sub-objectives and indicators. Each priority area includes relevant measures, objectives and activities. Within monitoring the use of structural funds, a monitoring report is prepared annually for each operational programme, highlighting sectoral developments and trends, the situation of achieving the objectives of the operational programme, financial indicators, substantial indicators (output and performance indicators) and their analysis as well as any issues or risks related to the implementation, findings of inspections and audits and summaries of assessments.105 In 2009 and 2012, strategic reports on the use of structural funds were prepared in accordance with Council Regulation (EC) No 1083/2006; these reports serve as interim reports on the implementation of NSRF, reporting on the implementation and use of structural funds from the perspective of NSRF. The strategic report of 2012 included the results achieved by the end of 2011 and also more recent information, if available, including information on obligations and payments as of 30 June 2012. According to the report, the use of structural funds has supported the socio-economic of Estonia and strengthened the competitiveness of the country. The assisted activities have supported the progress towards the achievement of the objectives, alleviated the negative effects of the economic crisis, e.g. curbed unemployment (in 2007-2011, 80% of the costs of active labour market measures were financed from external funds) and promoted business.106 In order to alleviate the effects of the economic crisis and to enhance business activities, some 17 million euros were allocated to the transport and business sectors in 2009 and in December 2009, an additional sum of 41.5 million euros was allocated to the business sector, by taking funds from the energy sector and using them to support businesses and to increase employment, increasing support to industrial businesses for technology investments, R&D and export marketing. In a situation of capital shortage, these decisions helped to stimulate the economy, continue to implement structural funds and to provide opportunities that the market could not offer. For that purpose, proposals for amendments to the operational programmes were submitted to the European Commission; the proposals were approved in the summer of 2011. As of the end of 2012, 59.36% of the 3.4 billion euros of the period were paid to the recipients and 91.25% of the projects were approved. The following supported changes may be highlighted among the achievements of the programming period: - Structural funds were used to develop the infrastructure of vocational educational institutions (investments were made in 91% of schools), educational institutions for educational special needs pupils and youth centres as well as information and counselling centres and hobby schools. The participation of adults in lifelong education has improved year on year and is
105 http://www.struktuurifondid.ee/struktuuritoetuse-kasutamise-aastaulevaated/ 106 http://www.struktuurifondid.ee/public/statistika/Strateegiline_aruanne_2012_13_12_seisuga_rtf_pdf.pdf 69
currently above the EU27 average.107 While in 2006, the relevant indicator was 6.5%, in 2011, the share of adults participating in lifelong learning was 12% (i.e. 87,100 persons), which is the best result so far and will exceed the target by 2013. - 17,060.5 m2 of floor area (buildings) used by research and development institutions were modernised, of that 9,217 m2 used by higher educational institutions. The structural funds have been used to increase the number of researchers and top specialists, improve the employees’ management and professional knowledge and skills, open doctoral schools and implement various mobility and training programmes. In 2011, the number of cooperation projects of businesses and research institutions funded from structural funds was 201 - 309.2% of the target. The number of full-time researchers and engineers has increased significantly during the period, reaching 4,512 in 2011 (the number of full-time researchers and engineers per 1,000 increased to 7.41). The proportion of R&D expenditures in GDP increased to 2.4% in 2011, exceeding the EU average (2.03) for the first time.108. In 2011, 384.5 million euros were spent on research and development activities - nearly one third more than in the previous year, whereas private sector expenditures doubled. - The availability and/or quality of the water supply and sewerage services have improved. In 2011, 81% of consumers received drinking water conforming to the relevant standards from public water supplies. Drinking water conforming to the relevant standards was ensured in larger settlements mainly with the help of EU structural funds. - 26 non-conforming non-hazardous waste disposal sites, 2 oil shale industry waste disposal sites and one oil shale power industry waste disposal site are being reorganised and 8 waste management stations/centres will be constructed. - The development of the healthcare infrastructure was mainly financed from the ERDF funds - 90% of total investments (The North Estonia Medical Centre (PERH), Tartu University Hospital, Ida-Viru Central Hospital). - In order to develop the transport infrastructure, investments are being made into road, railway, marine and air transport infrastructure to improve connection possibilities and the safety and reliability of the transport system. Structural funds are also being used to finance the reconstruction of the Ülemiste crossing, which should remove one of the biggest bottlenecks in the traffic of Tallinn. Significant investments are also being made into the passenger rail service, including the reconstruction of railway sections, passenger platforms and the overhead lines system in the area surrounding Tallinn; all outdated electric trains will be replaced. The first new electric train arrived in Estonia at the end of 2012 and is currently being test run. The remainder of the new trains will arrive in 2014; the project received 67.58 million euros from the Cohesion Fund. - In the period 2007-2013, a total of 2,000 km of broadband communication lines have been constructed with the help of structural funds and EARDF funds (within the Estonian Rural Development Plan 2007-2013); Enterprise Estonia is planning to organise another round of applications. Connection possibilities were created for about 60,000 households (135,000 persons), 14,000 businesses and 500 public agencies. Based on the above and as indicated by the monitoring of the use of structural funds and assessments carried out by independent experts, we are approaching the ambitious targets of NSRF although the achievement of all targets is not likely due to external factors, in particular the economic crisis and international developments.
107 Eurostat, participation in Lifelong Learning 2010 108 According to data from Statistics Estonia. In the Eurostat database, the ratio of R&D expenditures to GDP was initially slightly smaller - 2.37%; the final data will be published on the Eurostat website in late summer 2013. 70
Appendix 3. Usage of EU funds for 2014-2020 Since 2010, Estonia has made preparations for the next EU Multiannual Financial Framework, beginning in 2014. The objectives of the new period were established in 2012. In 2013, drafts for planning documents (partnership contract between Estonia and the EU regarding use of resources from five funds, Structural Assistance Implementation Programme, Estonian Rural Development Plan, Fisheries and Maritime Affairs Implementation Programme) will be prepared and agreed with the European Commission. At the same time, work has begun to adjust the EU funds implementation system for the new programming period in order to be prepared by the beginning of 2014 to use the assistance expediently and efficiently.
EU funds will be used to achieve five national objectives:
1. Estonia provides high-quality and available education, which takes into account the needs of students and society. EU funds will be used to co-finance the implementation of the following changes: . Restructuring and unification of the Estonian general education schools’ network (especially the upper secondary schools’ network) in order to ensure high quality education and sufficient choices in each upper secondary school. . Implementation of the principle of inclusive education. Modernising teacher training and bringing it into line with the requirements of the upper secondary school curriculum and providing schools with modern study aids.
2. High employment and high-quality working life EU funds will be used to co-finance the implementation of the following changes: . The provision of active labour market measures to young people, the long-term unemployed and the elderly. The development of a joint programme of MoSA and MoER, designed to reduce youth unemployment and to bring the skills of unqualified job seekers into line with the requirements of the labour market. . The implementation of an employability scheme reform, new assessment and support systems related to permanent incapacity for work. . Improving the availability of needs-based welfare services and ensuring their high quality and sustainability by continuing the organisation of the welfare services network and the reorganisation of state social welfare institutions. . The implementation of the principles of the UN Convention on the Rights of Persons with Disabilities according to the strategy of protection of the rights of disabled people, the development of which should be completed in 2013. . Improving first contact care by the standardisation of the necessary infrastructure and the promotion of the optimal development of a hospital network that provides cutting- edge specialist care. . Improving the accessibility of childcare services and support services enabling children (including those with disabilities) to attend childcare facilities in order to reduce the childcare burden of their parents and to reduce the gap in employment.
3. Knowledge intensive and internationally competitive economy EU funds will be used to co-finance the implementation of the following changes: . The development of smart specialisation measures to promote research and development as well as innovation and the development of growth companies. . Simplification and improved targeting of entrepreneurship grants to increase competitiveness. . Ensuring joint use of infrastructure and its openness to other research institutions, companies and to international cooperation. . Implementation of higher education reform and research organisation reform, including the development of the priority areas for research institutions and higher education institutions. . Creating favourable conditions for the creative industry
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4. Clean and diverse natural environment and efficient use of natural resources EU funds will be used to co-finance the implementation of the following changes: . Promoting resource efficiency in companies. . Continuing investing into the modernisation of water infrastructure. . Increasing the efficiency of energy supply by reorganising the disrict heating sector. . Increasing the use of alternative fuels. . Increasing energy savings and the share of renewable energy by investing into increasing the energy efficiency of buildings, introducing energy efficient solutions and raising awareness. . Development of the capacity to detect pollution.
5. Sustainable connections and travel possibilities that meet the needs of people and support businesses EU funds will be used to co-finance the implementation of the following changes: . Integration of different modes of transport. . Development of railway transport. . Implementation of transport infrastructure projects. . Development of a new generation broadband infrastructure. . Development of an ICT infrastructure in order to extend the use of e-services.
In addition, the administrative capacity of the state will be increased in order to support the achievement of the objectives. EU funds will be used to co-finance the implementation of the following changes: . Improving the availability and quality of public services by smarter and more multifunctional organisation. . Development of more inclusive and knowledge based policy making. . Increasing central, regional and local administrative capacity.
EU funds are planned to use to finance five national objectives by 93% or with 3.185 billion euros109, the remaining 7% is the performance reserve required by the European Commission.
The following table includes the measures financed from EU funds and the planned amounts110 The State Budget Strategy to support the objectives of policy areas.
Measures of the cohesion policy funds and the Agricultural Fund Responsible Initial volume for Rural Development in the policy areas of the State Budget ministry112 of EU support Strategy 2014-2017 in the period 2014-2020 111 (93%) 1. Competitive economic environment 445,173,750
109 3.2% of the funds from the Cohesion Fund is planned to use for technical assistance. 110 Includes measures financed from four EU funds - ERDF, European Social Fund, Cohesion Fund and EAFRD. The table does not include the funds of the European Maritime and Fisheries Fund because it has not reached the stage of planning measures. 111 The volumes of support for measures “Natura 2000 support for agricultural land”, “Natura 2000 support for private forest land”, and the sub-measures of measure “Agricultural environmental support” as well as measure “Support for animal well-being” specified in the draft rural development plan will be agreed between the Ministry of Agriculture, Ministry of the Environment and the Ministry of Finance before the draft is submitted to the European Commission. The volume of undecided ranges is approximately 5 million euros. The rate and budget of support provided under “Natura 2000 support for agricultural land” and “Natura 2000 support for private forest land” may not exceed the level of 2013. The division of support under the rural development plan will be finalised upon the approval of the development plan in autumn 2013. 112 The implementing agencies final beneficiaries of the measures are provisional and not agreed yet; they will be appointed before the start of the implementation in accordance with the Structural Aid Act. 72
Measures of the cohesion policy funds and the Agricultural Fund Responsible Initial volume for Rural Development in the policy areas of the State Budget ministry112 of EU support Strategy 2014-2017 in the period 2014-2020 111 (93%) Tailored solution for the development of enterprises - a complex MoEAC 45,000,000 measure to improve the development activity of enterprises, to help them enter export markets and improve their management capacity Improving access to capital MoEAC 166,500,000 Growth areas (ICT + health + resources) MoEAC 90,000,000 Improving cooperation between businesses and research MoEAC 20,000,000 institutions Supporting events and attractions of international interest MoEAC 63,500,000 Managing the demand of tourism and product development MoEAC 27,423,750 Supporting new enterprises with ambitious business models, MoEAC 32,750,000 including increasing the awareness of business and improving the operating environment and financing opportunities 2. Family and Population Policy 39,083,000 Development of childcare services and support services for MoSA 39,083,000 children with disabilities in order to reduce the care burden 3. Education 684,468,994 Increasing the international competitiveness of Estonian R&D MoER 167,460,000 and participation in European research initiatives Development of the network of educational institutions and MoER 204,824,112 youth work institutions Development of the network of educational institutions and MoER 57,075,000 youth work institutions (higher education) Training of adults who have low or outdated qualifications or no MoER 32,045,000 qualifications Supporting the employment readiness of young people and MoER 14,033,500 reducing the impact of poverty by improving the availability of youth work services Increasing the local socio-economic impact of the R&D and MoER 80,775,000 innovation system and smart specialisation Standardisation and improving the accessibility of support MoER 29,688,410 services Provision of up to date learning materials and aid MoER 34,297,500 Training of teachers, school heads, support specialists and youth MoER 20,920,472 workers Connecting learning with the needs of the labour market MoER 43,350,000 4. Labour Market and Social Security 310,689,594 EURES MoSA 680,000 Development of social welfare infrastructure; adjusting the MoSA 57,800,000 human environment to the needs of people with disabilities Increasing the employment rate of persons with low MoSA 32,259,543 qualifications Social welfare measures supporting employment MoSA 33,779,595 Labour market measures to prevent and reduce youth MoSA 17,095,832 unemployment Development and implementation of the employability scheme MoSA 169,074,624 5. Public Health 141,061,072 Ensuring the availability and quality of health services in order to MoSA 131,775,000 increase the number of people remaining employed and returning to the labour market Reducing risk behaviour and promoting healthy choices MoSA 8,669,822
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Measures of the cohesion policy funds and the Agricultural Fund Responsible Initial volume for Rural Development in the policy areas of the State Budget ministry112 of EU support Strategy 2014-2017 in the period 2014-2020 111 (93%) Ensuring needs-based integrated public e-services in the field of MoSA 161,250 healthcare 6. Energy 232,290,000 Increasing the use of alternative fuels in transport (biogas) MoEAC 9,000,000 Effective production and transfer of thermal energy MoEAC 78,000,000 Increasing energy savings and the share of renewable energy MoEAC 43,000,000 Achieving energy efficiency in the housing sector MoEAC 102,290,000 7. Transport 447,350,000 Integration of different modes of transport. MoEAC 12,750,000 Development of national and international connections (railway) MoEAC 85,000,000 Development of national and international connections (excl. MoEAC 349,600,000 railway) 8. Information Society 180,975,000 Improving digital literacy MoEAC 7,225,000 Smart services infrastructure and fast internet supporting its MoEAC 51,750,000 development (1) Smart services infrastructure and fast internet supporting its MoEAC 39,000,000 development (2) Provision of public services MoEAC 83,000,000 9. Internal Security 31,815,500 Risk management related to climate change, including preventing MoIA 30,183,500 emergencies Implementing proof-based preventive services in the area of MoIA 1,632,000 government of MoIA 10. Culture 0 11. Sport 0 12. The Estonian Language 0 13. Integration 18,275,000 Key persons from the perspective of the development of Estonia MoIA 8,500,000 (top specialists, researchers, creative persons and their families) have adapted (and adapt faster) to Estonian society and participate actively in the labour market and society as a whole Creating opportunities for immigrants and non-integrated MoC 8,500,000 permanent residents to adapt to society and to participate more actively in the labour market Supporting the adaption of foreign students to Estonian society MoIA 1,275,000 14. Environment 389,020,000 Innovative technologies to support environmental protection and MoE 131,285,000 resource efficiency in the sectors of waste management and water supply in order to reduce soil and air pollution Preserving and increasing natural diversity to promote balanced MoE 48,000,000 regional development and nature tourism Improvement and rehabilitation of landscapes MoE 41,000,000 Increasing pollution control capacity MoIA 20,400,000 Improving the condition of water bodies and limiting the diffuse MoE 4,335,000 load Development of water management infrastructure MoE 144,000,000 15. Rural and Regional Development 863,149,100 Community-led local development MoIA 7,875,000 Sustainable development of urban areas (childcare, traffic MoIA 90,000,000
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Measures of the cohesion policy funds and the Agricultural Fund Responsible Initial volume for Rural Development in the policy areas of the State Budget ministry112 of EU support Strategy 2014-2017 in the period 2014-2020 111 (93%) environment, urban environment)113 Development of regional entrepreneurship and business MoIA 138,528,500 environment; connections and services within functional areas Knowledge transfer and information MoA 3,278,250 Supporting counselling services MoA 4,603,500 Cooperation (R&D, short delivery chain, EIP, clusters) MoA 17,437,500 Investments to ensure the efficiency of agricultural undertakings MoA 111,600,000 Development and maintenance of agricultural and forest MoA 38,362,500 management Start-up support to young agricultural producers MoA 17,437,500 Participation in quality programmes and promotion of products MoA 697,500 produced within quality programmes Investments into the processing and marketing agricultural MoA 52,312,500 products Establishing producer groups MoA 4,185,000 Natura 2000 support for agricultural land114 MoA 4,882,500 Natura 2000 support for private forest land MoA 19,530,000 Agricultural environmental support MoA 123,057,833 - incl. support for environmentally friendly management MoA 83,700,000 - incl. support for keeping animals of vulnerable species MoA 5,207,535 - incl. support for cultivating indigenous plants MoA 406,643 - incl. support for maintaining semi-natural biotic MoA 21,971,250 community - incl. support for regional soil protection MoA 9,067,500 - incl. support for environmentally friendly gardening MoA 2,704,905 Organic farming MoA 59,287,500 Support for animal well-being MoA 8,183,768 Improving the economic and ecological viability of forests MoA 6,975,000 Investments to make the economic activities in rural regions MoA 31,387,500 more diverse towards non-agricultural activity Processing and marketing of forest products MoA 4,533,750 Community-led local development - LEADER MoA 65,286,000 Obligations carried over MoA 8,370,000 Financial instrument115 MoA 45,337,500
113 The division of amounts to support measures “Sustainable development of urban areas” and “Development of regional businesses and business environment, connections and services within functional areas” will be specified and agreed between the Ministry of Finance and Ministry of Internal Affairs as soon as the required minimal volume of financing of urban measures is established in the course of consultations with the European Commission. The amount of EU funds to support these two measures will not change and precisely 5% of the ERDF funds is planned for allocation to the sustainable development of urban areas.
114 According to discussions held by the government on 23 April, the volumes of support for measures “Natura 2000 support for agricultural land”, “Natura 2000 support for private forest land”, and the sub-measures of measure “Agricultural environmental support” as well as measure “Support for animal well-being” specified in the draft rural development plan will be agreed between the Ministry of Agriculture, Ministry of the Environment and the Ministry of Finance before the draft is submitted to the European Commission. The volume of undecided ranges is approximately 5 million euros. The division of support under the rural development plan must be agreed on the approval of the development plan by the Government of the Republic, at the latest. 115 Financial instrument is proportionally included in the funds for achieving the objectives of competitiveness, food delivery chain and agricultural business and local initiative. 75
Measures of the cohesion policy funds and the Agricultural Fund Responsible Initial volume for Rural Development in the policy areas of the State Budget ministry112 of EU support Strategy 2014-2017 in the period 2014-2020 111 (93%) 16. Foreign Policy 0 17. Defence and Security Policy 0 18. Governance and Civic Society 28,784,091 Improving the quality of policy making. MoF/Government 9,703,172 Office Improving the state’s capacity through the development of MoF 19,080,919 human resources and institutional capacity Total 3,812,135,100
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Appendix 4. Financial plan under the State Budgetary Strategy 2014-2017 by areas of government
2014 reference 2015 reference 2016 reference 2017 reference amount amount amount amount Total financial plan 7,895,985,081 8,018,548,779 8,389,411,553 8,869,302,307 Taxes transferable to local 1,140,314,271 1,214,144,138 1,289,736,740 1,367,157,723 governments *2014 + co-financing of external 16,198,457 37,796,399 93,444,213 114,946,427 support *2014 + co-financing of technical 524,118 1,222,941 2,523,529 2,523,529 support of external funds *2014 + external support 106,219,067 247,844,489 515,095,845 664,970,925 *2014 + technical support of 2,970,000 6,930,000 14,300,000 14,300,000 external funds TOTAL (fixed investments of 6,605,603,257 6,465,362,366 6,376,267,310 6,637,937,355 RKAS, expenditures depending on revenues, other expenditures on account of state revenues) Fixed investments of RKAS 35,868,393 37,293,908 22,931,234 51,600,000 Expenditures depending on 965,991,872 549,857,418 270,246,438 278,521,580 revenues Other expenditures on account 5,603,742,991 5,878,211,040 6,083,089,638 6,307,815,775 of state revenues Co-financing of external support 45,011,107 23,051,448 3,464,547 3,097,085 by the state Self-financing of external support 1,066,554 357,904 0 0 by the state Expenditures related to rates 723,258,260 753,581,560 776,515,394 796,285,878 arising from legislation International obligations 227,354,306 245,435,848 254,029,594 253,690,707 National obligations 18,871,163 22,251,899 25,943,232 33,365,613 Other expenditures not specified 1,690,642,348 1,739,327,001 1,765,699,832 1,791,650,114 above Government Office 23,896,457 25,185,773 22,097,051 22,239,000 Reference amount to be 23,896,457 25,185,773 22,097,051 22,239,000 established Expenditures related to rates 13,374,203 14,663,520 13,400,951 13,542,900 arising from legislation International obligations 145,420 145,420 145,420 145,420 National obligations 2,189,194 2,195,282 369,127 369,127 Other expenditures not specified 8,187,640 8,181,551 8,181,553 8,181,553 above Office of the President 4,230,017 3,827,098 3,830,914 3,830,914 expenditures depending on 27,482 27,482 27,482 27,482 revenues Reference amount to be 4,202,535 3,799,616 3,803,432 3,803,432
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2014 reference 2015 reference 2016 reference 2017 reference amount amount amount amount established Expenditures related to rates 220,447 220,867 224,670 224,670 arising from legislation National obligations 599 260 273 273 Other expenditures not specified 3,981,489 3,578,489 3,578,489 3,578,489 above National Audit Office 4,923,027 4,911,230 4,919,520 4,919,520 fixed investments of RKAS 60,000 0 0 0 Reference amount to be 4,863,027 4,911,230 4,919,520 4,919,520 established Expenditures related to rates 425,458 474,620 484,238 484,238 arising from legislation International obligations 320,438 320,438 320,438 320,438 National obligations 4,495 3,535 2,207 2,207 Other expenditures not specified 4,112,636 4,112,637 4,112,637 4,112,637 above Chancellor of Justice 2,069,989 2,073,616 2,100,136 2,100,095 Reference amount to be 2,069,989 2,073,616 2,100,136 2,100,095 established Expenditures related to rates 35,500 36,600 63,120 63,120 arising from legislation International obligations 1,750 1,750 1,750 1,750 National obligations 3,115 934 1,298 1,257 Other expenditures not specified 2,029,624 2,034,332 2,033,968 2,033,968 above Supreme Court 5,212,101 5,329,343 5,379,909 5,379,909 expenditures depending on 7,500 7,500 7,500 7,500 revenues Reference amount to be 5,204,601 5,321,843 5,372,409 5,372,409 established Expenditures related to rates 2,148,193 2,268,157 2,321,137 2,321,137 arising from legislation International obligations 12,782 12,782 12,782 12,782 National obligations 8,448 5,726 3,312 3,312 Other expenditures not specified 3,035,178 3,035,178 3,035,178 3,035,178 above Government Office 5,527,010 5,908,693 6,422,668 6,860,093 *2014 + external support 266,002 620,671 1,083,711 1,477,788 *2014 + co-financing of external 29,260 68,274 119,208 162,557 support expenditures depending on 0 0 0 0 revenues Reference amount to be 5,231,748 5,219,748 5,219,748 5,219,748
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2014 reference 2015 reference 2016 reference 2017 reference amount amount amount amount established National obligations 48,145 48,145 48,145 48,145 Other expenditures not specified 5,183,603 5,171,603 5,171,603 5,171,603 above Ministry of Education and 729,233,270 701,597,364 672,603,243 697,330,798 Research fixed investments of RKAS 2,982,595 13,315,949 2,723,928 0 *2014 + external support 18,455,418 43,062,642 75,188,739 102,530,099 *2014 + co-financing of external 2,030,096 4,736,891 8,270,761 11,278,311 support expenditures depending on 152,148,131 66,629,807 14,102,562 12,417,395 revenues Reference amount to be 553,617,030 573,852,076 572,317,252 571,104,993 established Co-financing of external support 8,154,308 273,386 164,515 43,901 by the state Receipts from gambling tax 2,616,504 2,687,863 2,759,222 2,842,475 International obligations 758,100 786,508 786,508 786,508 National obligations 465,474 352,242 259,931 205,822 Education support for local 201,596,776 205,330,689 203,458,501 203,458,501 governments Other expenditures not specified 339,223,868 363,619,388 364,086,575 362,965,786 above Ministry of Justice 122,213,636 119,843,412 125,273,017 167,413,043 fixed investments of RKAS 1,919,741 0 6,278,658 48,504,000 expenditures depending on 6,493,233 5,607,418 4,466,293 4,177,622 revenues Reference amount to be 113,800,662 114,235,994 114,528,066 114,731,421 established Co-financing of external support 304,043 229,489 35,295 0 by the state Expenditures related to rates 15,609,572 15,991,961 16,914,329 17,522,860 arising from legislation International obligations 869,488 1,097,283 1,299,132 958,442 National obligations 187,889 114,508 64,833 35,642 Other expenditures not specified 96,829,670 96,802,753 96,214,477 96,214,477 above Ministry of Defence 387,222,640 412,950,640 441,868,080 470,231,300 expenditures depending on 10,000 10,500 1,886,500 1,887,500 revenues Reference amount to be 387,212,640 412,940,140 439,981,580 468,343,800 established Expenditures related to rates 11,730,799 12,381,985 13,075,213 13,798,120 arising from legislation
79
2014 reference 2015 reference 2016 reference 2017 reference amount amount amount amount International obligations 7,040,904 7,040,904 7,040,904 7,040,904 National obligations 308,766 262,880 220,671 187,570 Other expenditures not specified 368,132,171 393,254,371 419,644,792 447,317,206 above Ministry of the Environment 279,223,081 169,093,125 93,108,296 109,086,869 fixed investments of RKAS 84,948 0 0 0 *2014 + external support 9,952,740 23,223,060 40,548,200 55,293,000 *2014 + co-financing of external 1,094,801 2,554,537 4,460,302 6,082,230 support expenditures depending on 220,653,363 96,409,828 1,251,387 863,232 revenues Expenditures from the revenue of 400,000 1,000,000 1,000,000 1,000,000 emissions trading of the new period transferable taxes 990,000 990,000 990,000 990,000 Reference amount to be 46,047,229 44,915,700 44,858,407 44,858,407 established Co-financing of external support 395,888 395,888 395,888 395,888 by the state Self-financing of external support 0 0 0 0 by the state International obligations 849,894 849,894 849,894 849,894 National obligations 112,780 88,983 70,690 70,690 Other expenditures not specified 44,688,667 43,580,935 43,541,935 43,541,935 above Ministry of Culture 169,954,764 179,440,882 174,430,552 164,007,538 fixed investments of RKAS 10,445,726 18,844,603 11,351,914 0 *2014 + external support 229,500 535,500 935,000 1,275,000 *2014 + co-financing of external 25,245 58,905 102,850 140,250 support expenditures depending on 13,087,153 11,782,305 11,203,207 10,887,483 revenues Reference amount to be 146,167,140 148,219,569 150,837,581 151,704,805 established Co-financing of external support 424,427 105,223 18,171 18,171 by the state Expenditures related to rates 547,920 547,920 547,920 547,920 arising from legislation International obligations 382,552 385,902 389,600 389,600 National obligations 166,272 166,272 166,272 166,272 Other expenditures not specified 117,375,749 118,535,626 120,021,586 120,044,253 above Ministry of Economic Affairs 480,275,775 463,290,085 493,930,302 551,590,573 and Communications 80
2014 reference 2015 reference 2016 reference 2017 reference amount amount amount amount *2014 + external support 35,256,296 82,264,691 143,636,763 195,868,313 *2014 + co-financing of external 3,878,193 9,049,116 15,800,044 21,545,514 support expenditures depending on 126,283,239 51,787,259 2,248,466 1,852,412 revenues Expenditures from the revenue of 0 6,000,000 20,200,000 19,850,000 emissions trading of the new period Reference amount to be 314,858,047 314,189,019 312,045,030 312,474,334 established Co-financing of external support 2,999,846 351,176 174,146 110,568 by the state Expenditures related to rates 170,630,067 170,630,067 170,630,067 170,630,067 arising from legislation International obligations 2,056,260 2,058,260 2,058,260 2,058,260 National obligations 45,152 27,371 17,452 10,334 Other expenditures not specified 139,126,722 141,122,145 139,165,105 139,665,105 above incl. support schemes for fuel with 15,600,000 16,100,000 16,700,000 17,200,000 fiscal marking Ministry of Agriculture 342,852,197 271,003,839 404,076,572 445,881,359 fixed investments of RKAS 196,000 68,000 0 0 *2014 + external support 20,213,550 47,164,950 164,703,000 187,162,500 *2014 + co-financing of external 6,737,850 15,721,650 54,901,000 62,387,500 support expenditures depending on 246,673,545 148,821,943 142,744,264 154,573,051 revenues transferable taxes 800,000 850,000 850,000 880,000 Reference amount to be 68,231,252 58,377,296 40,878,308 40,878,308 established Co-financing of external support 27,948,093 18,812,551 1,693,908 1,693,908 by the state Self-financing of external support 1,066,554 357,904 0 0 by the state International obligations 348,069 348,069 348,069 348,069 National obligations 76,521 53,975 31,534 31,534 Other expenditures not specified 38,792,015 38,804,797 38,804,797 38,804,797 above Ministry of Finance 561,217,612 597,441,026 633,688,976 663,919,011 *2014 + external support 425,646 993,174 1,734,114 2,364,700 *2014 + co-financing of external 46,821 109,249 190,752 260,117 support expenditures depending on 4,483,030 4,246,165 4,269,455 4,305,030 revenues
81
2014 reference 2015 reference 2016 reference 2017 reference amount amount amount amount Reference amount to be 556,262,115 592,092,438 627,494,655 656,989,164 established Co-financing of external support 486,315 486,315 486,315 486,315 by the state expenditures depending on 277,117,000 297,417,000 318,617,000 340,417,000 revenues Expenditures related to rates 3,111,300 2,811,300 2,711,300 2,711,300 arising from legislation International obligations 197,059,927 208,999,727 217,348,837 217,348,837 National obligations 14,580,496 18,471,019 24,424,126 32,118,634 Other expenditures not specified 63,907,077 63,907,077 63,907,077 63,907,077 above Ministry of Internal Affairs 304,352,837 284,801,663 282,720,185 285,832,900 (security) fixed investments of RKAS 16,078,462 3,906,011 2,576,734 3,096,000 *2014 + external support 1,673,744 3,905,402 6,818,955 9,298,575 *2014 + co-financing of external 184,112 429,594 750,085 1,022,843 support expenditures depending on 21,170,013 13,603,246 9,296,873 9,285,233 revenues Reference amount to be 265,246,507 262,957,411 263,277,538 263,130,249 established Co-financing of external support 1,632,191 870,499 101,093 101,093 by the state Expenditures related to rates 17,664,546 18,750,570 20,000,360 19,999,832 arising from legislation International obligations 48,845 49,855 88,056 88,584 National obligations 560,000 390,000 240,000 100,000 Other expenditures not specified 245,340,925 242,896,487 242,848,029 242,840,740 above Ministry of Internal Affairs 146,163,203 140,130,563 102,062,380 111,463,003 (regional) *2014 + external support 6,493,662 15,151,878 26,455,660 36,075,900 *2014 + co-financing of external 714,303 1,666,707 2,910,123 3,968,349 support expenditures depending on 112,023,187 96,835,419 46,883,684 45,516,941 revenues Reference amount to be 26,932,051 26,476,559 25,812,913 25,901,813 established Co-financing of external support 1,361,289 862,796 96,150 96,150 by the state Receipts from gambling tax 2,794,000 2,870,200 2,946,400 3,035,300 International obligations 83,240 84,513 85,401 86,676 Other expenditures not specified 22,342,008 22,307,536 22,333,448 22,332,173
82
2014 reference 2015 reference 2016 reference 2017 reference amount amount amount amount above Ministry of Social Affairs 3,104,572,518 3,310,253,875 3,476,674,109 3,665,828,708 fixed investments of RKAS 4,100,921 1,159,345 0 0 *2014 + external support 13,252,509 30,922,521 53,991,703 73,625,050 *2014 + co-financing of external 1,457,776 3,401,477 5,939,087 8,098,755 support expenditures depending on 62,836,096 53,992,646 31,762,865 32,624,799 revenues Reference amount to be 3,022,925,216 3,220,777,886 3,384,980,453 3,551,480,104 established Local government social benefits 31,356,169 36,656,169 36,656,169 36,656,169 incl. subsistence benefit 23,000,000 23,000,000 23,000,000 23,000,000 incl. needs-based child benefit 5,200,000 10,500,000 10,500,000 10,500,000 Receipts from gambling tax 3,466,276 3,561,000 3,655,346 3,765,636 expenditures of the Estonian 880,701,064 933,271,456 990,185,241 1,050,772,786 Health Insurance Fund incl. state pension insurance 1,469,467,730 1,582,778,863 1,668,311,614 1,757,086,407 expenditures Co-financing of external support 1,304,707 664,125 299,066 151,091 by the state Expenditures related to rates 486,623,135 513,666,873 535,004,969 553,302,595 arising from legislation International obligations 358,312 365,344 365,344 365,344 National obligations 85,169 55,691 15,125 7,943 Other expenditures not specified 149,562,654 149,758,365 150,487,579 149,372,133 above Ministry of Foreign Affairs 57,070,645 62,761,026 62,661,459 62,660,074 expenditures depending on 95,900 95,900 95,900 95,900 revenues Reference amount to be 56,974,745 62,665,126 62,565,559 62,564,174 established Expenditures related to rates 1,137,120 1,137,120 1,137,120 1,137,120 arising from legislation International obligations 17,018,325 22,889,199 22,889,199 22,889,199 National obligations 28,648 15,076 8,236 6,851 Other expenditures not specified 38,790,652 38,623,731 38,531,004 38,531,004 above * EU 2014-2020 funds, including technical support (based on the proposal of the Ministry of Finance - 93%), the expenditure will be discussed and specified in the process of preparing the budget The remaining expenditures (not marked by an asterisk) are based on the reference amounts of 2014-2017 arising from the spring economic forecast.
83
Appendix 5. Indicator time series
Economic Environment
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
Labour productivity per employed person, % of EU average 62.4 66.7 65.8 65.1 68.4 68 71 72 73 73.6 75.4 80 Source: Eurostat Proportion of Estonian exports in world trade, % 0.089 0.089 0.088 0.084 0.085 0.099 0.097 0.098 0.1 0.102 0.104 0.11 Source: World Trade Organization Estonia’s ranking in the World Bank report “Doing 18th 21st 17th 22nd 17th 18th 19th 19th 18th 17th 16th ≤15th ≤15th Business”116 positi positi position position position position position position position position position position position Source: The World Bank on on Group Budget position of general government, % of GDP117 2.4 2.4 -2.9 -2 0.2 1.2 -0.3 >-0.7 >0.1 >0.5 >0.9 >0.9 >1 Source: Ministry of Finance
116 Adjusted data. Estonia’s ranking has been retrospectively adjusted for 2007 and for each year between 2009 and 2011. 117 Indicator values are retrospectively adjusted according to the receipt of additional data. The data in this table are presented according to the spring forecast of 2013. 84
Family and Population Policy
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
Natural population growth - -2,439 -1,634 -647 -318 35 -565 1,460 Positive Positive Positive Positive Positive Positive Source: Statistics Estonia 118 Total fertility rate 1.55 1.64 1.66 1.63 1.64 1.52 1.68 1.70 1.71 1.72 1.74 1.77 Source: Statistics Estonia Percentage of children attending formal childcare 19 15 16 25 21 31 32 33 33 34 35 in the 0–2 and 3–6 age (0-2) (0-2) (0-2) (0-2) (0-2) (0-2) (0-2) (0-2) (0-2) (0-2) (0-2) groups, % 85 86 87 92 92 92 92 92 92 92 92 Source: Eurostat (3-6) (3-6) (3-6) (3-6) (3-6) (3-6) (3-6) (3-6) (3-6) (3-6) (3-6) (EU-SILC). Number of children 664 460 removed from their 654 543 585 454 De- De- families / percentage in the childr childre childre childre De- De- De- De- childre childre creasin creasin 0–17 age group, % en n n n creasing creasing creasing creasing n n g g Source: Ministry of Social 0.25 0.21 0.24 0.19 0.27 0.19 Affairs, Statistics Estonia Rate of relative poverty among children aged 0–17, % 18.2 17.1 20.6 17.3 19.5 17 18 18 17 17 16.8 16.5 Source: Statistics Estonia, Estonian Social Survey
118 Statistics Estonia preliminary data on births and deaths. 85
Education
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
Participation in preschool education (from 4 years old to school age), % 88.2 90.0 95.9 94.7 93.8 94.2 95 95 95 95 95 95 Source: Ministry of Education and Research Proportion of young adults in the 18–24 age group with lower secondary education or less and not in further education or 14.3 14.6 14.3 14.3 11.7 10.8 10.5 11.5 11 11 10.5 <10 <10 training, % Source: Ministry of Education and Research Percentage of young teachers (up to 30 years) in general education schools, % 12.5 12.2 11.4 11.2 10.5 10.3 10.3 12.5 12.5 12.5 12.5 12.5 12.5 Source: Ministry of Education and Research Percentage of people with tertiary education in the 30–34 age group, % 32.5 33.3 34.0 35.7 39.7 40.2 39.2 40 40 40 40 40 40 Source: Statistics Estonia Participation of adults (25– 6.5 7.0 9.8 10.6 10.9 12 12.9 13.5 14 15 15 15 20 64 age group) in lifelong
86
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020 learning Source: Statistics Estonia Gross domestic expenditure on research and development (GERD), including business 1.13 1.08 1.28 1.43 1.63 2.41 1.85 1.93 2 2.2 2.4 3 enterprise research and 0.5 0.51 0.55 0.64 0.82 1.52 0.92 0.96 1 1.2 1.4 2 development (BERD), percentage of GDP Source: Statistics Estonia Number of full-time researchers and engineers 3,513 3,690 3,979 4,314 4,078 4, 512 4,800 5, 000 5, 200 5, 400 5, 521 - Source: Statistics Estonia
Labour Market and Social Security
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
Rate of relative poverty (before and after social 37.4 36.3 37.5 40.8 41.1 40.1 41.2 40.5 40.1 40.1 39.8 38.6 transfers), % 19.4 19.5 19.7 15.8 17.5 17.5 16.9 16.7 16.5 16.5 16.2 15 Source: Statistics Estonia; Estonian Social Survey Employment rate in the 20–64 age group, % 75.5 76.4 76.6 69.5 66.4 70.1 71.7 71 71.5 72 72.8 73.5 76 Source: Statistics Estonia, 87
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020 Estonian Employment Survey Youth unemployment rate in the 15–24 age group, % 12 10 12 27.5 32.9 22.3 20.9 20 17 15 14 13 10 Source: Statistics Estonia, Estonian Employment Survey Percentage of unemployed people in the 15–24 age group, % 4.3 3.8 4.9 10.9 12.4 8.9 8.5 7.8 6.8 6.2 5.7 5.2 4 Source: Statistics Estonia, Estonian Employment Survey Long-term unemployment rate, % Source: Statistics Estonia, 2.8 2.3 1.7 3.8 7.7 7.1 5.5 5 4.4 4 3.7 3.4 2.5 Estonian Employment Survey
Public Health
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
Life expectancy men men men men men men men men men 73 men men 75 (separately for men and 67.36 67.13 68.59 69.84 70.62 71.16 71.6 72.1 72.5 women 73.5 women
88
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020 women), years 82.5 84 women women women women women wome women women women women Source: Statistics Estonia 78.45 78.73 79.23 80.07 80.52 n 81.5 81.8 82.2 82.9 81.09 Healthy (without limitations) life men men men men men men men men men men men men 60 expectancy at birth 49.7 49.6 52.7 54.8 54.1 53.9 56.3 56.7 57.1 57.5 58.1 (separately for men and women women women women women women wome women women women women women women), years 65 53.9 54.7 57.2 59 58.1 n 57.7 61 61.5 62 62.5 63.1 Source: Statistics Estonia
Energy
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
Total greenhouse gas emissions (without land use, land-use change and forestry sector (LULUCF)) (in million 18 21.1 19.6 16.3 20 21.17119 20 20 20 20 20 20 tonnes of CO2 equivalent) Source: Ministry of the Environment Share of renewable 16.1 17.1 18.9 23 24.3 22.8 23 23.6 24 24 25 energy in final energy
119 Ministry of the Environment 89
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020 consumption, including 0.2 0.2 0.2 0.2 0.2 2.5 2.5 5 5 7 10 transport fuels, % Source: Eurostat Final Energy No Consumption, PJ more 117 129 122 113 119 115 118 118 118 118 118 Source: Statistics than in Estonia 2010 Power cuts in Estonia under normal conditions that would affect more than 10,000 2 0 0 0 0 0 0 0 consumers over more than 2 hours Source: MoEAC
Transport
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
Number of traffic fatalities, three year average 181 190 177 143 104 93 89 <75120 <80 <75 <70 <65 <50 Source: Estonian Road Administration
120 State Budget Strategy 2013-2016 target level, the intermediate levels of the indicator have been streamlined: 2014 <75 replaced by <80 and 2016 <75 replaced by <70. 90
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020 Assessment of managers of the Estonian transport system (road, railway, air and water transport; x x x x x 4.5 4.5 4.5 4.6 4.6 4.7 4.7 4.9 on a 7-point scale) Source: World Economic Forum Percentage of public transport users among employed persons, % 27.5 26.3 24.3 22.8 22.3 22.2 25 27 30 30 30 30 Source: Estonian Employment Survey Increase in road traffic, 8.3% 8.5% 5.4% -0.3% -5.6% -4% three year average (averag (averag (averag (averag (averag (averag below below below below below e e e e e e below Source: Estonian Road econom econom econom econom econom econom econom econom econom econom econom economi Administration; ic ic ic ic ic ic ic ic ic ic ic c growth Statistics Estonia growth growth growth growth growth growth growth growth growth growth growth 8.4%) 8.8%) 4.5%) -3.6%) -5%) -0.8%)
Information Society
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
Share of internet users in Increa- Increa- Increa- Increa- Increa- Increa- 61.2 63.6 66.2 71.2 74.1 76.5 78.4 the 16-74 age group, % sing sing sing sing sing sing
91
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020 share share share share share share Source: Statistics Estonia Share of fast broadband connection (percentage of download speed of over 100 Mbps among Increa- Increa- Increa- Increa- Increa- Increa- fixed internet x x x x x 2.7 sing sing sing sing sing sing connection) share share share share share share Source: Digital Agenda Scoreboard Satisfaction of people with government- provided e-services Increa- Increa- Increa- Increa- Increa- Increa- (percentage of those who x x 59 x x 78 80.6 sing sing sing sing sing sing have used e-services) share share share share share share Source: Statistics Estonia Satisfaction of businesses with government- provided e-services Increa- Increa- Increa- Increa- Increa- Increa- (percentage of those who x x 90 x x 94 96.4 sing sing sing sing sing sing have used e-services) share share share share share share Source: RISO
92
Internal Security
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
Number of registered crimes Below Below Below Below Below Below 51,834 50,375 50,977 48,359 48,340 42,567 40,816 Source: Ministry of 40,000 40,000 39,000 39,000 38,000 38,000 Justice Number of people who died from121 unnatural causes 887 885 746 734 645 670 625 508 480 453 428 385 Source: Ministry of Internal Affairs Corruption Perceptions Index of Transparency International122 6.7 6.5 6.6 6.6 6.5 6.4 64 64 65 >65 66 67 67 Source: Ministry of Justice Percentage of residents who have fallen victim to crime over the past Less Less Less Less Less Less x x 13 12 12 9 8 12 months than 10 than 10 than 10 than 10 than 9 than 8 Source: Ministry of Justice Average duration of proceedings in criminal,
121 Fire fatalities, traffic fatalities, drowning, killed in an attack, drug-related deaths, suicides, occupational fatalities. 122 Since 2012, the assessment system was changed from a 10-point to a 100-point scale. 93
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020 civil, misdemeanour and administrative matters, days Source: Ministry of Justice Civil matters 271 309 243 206 197 206 197 160 150 100 100 100 100 Administrative 211 180 132 130 138 165 185 120 110 100 100 100 100 matters Criminal matters in general 593 667 515 451 426 385 406 300 300 250 200 200 200
proceedings Misdemeanour 103 121 81 75 133 88 58 58 58 58 58 58 58 matters
Culture
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
The number of visits (mln) to theatre and the number of productions that have received 0.92 1.02 0.98 0.87 0.9 1.008 0.9 0.95 1 1 1 1 support from the 406 414 400 401 417 464 400 400 400 400 465 465 Ministry of Culture Source: Statistics Estonia
94
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020 The number of visits to museums, in millions 1.88 1.91 2.06 2.23 2.15 2.67 2.3 2.3 2.4 2.4 3 3 Source: Statistics Estonia Number of lendings from public libraries (million)123 10.72 10.44 11.28 12.1 12.06 12.32 12.1 12.2 12.3 12.3 11.5 10 Source: Statistics Estonia Number of people engaged in folk culture x x 73,079 76,543 83,790 83,487 84,810 84,500 84,500 85,000 85,000 85,000 85,000 Source: Statistics Estonia The share of architectural monuments that are deteriorated or in a bad 25 25 25 22 22 30.2 27.8 30.2 30 29 29 25 25 state, %124 Source: Ministry of Culture
123 The target levels of the indicator have been considerably adjusted compared with the previous period of the development plan, based on an analysis of the trends in the area. Target levels for organisation-based development plan: 2013 – 11.9; 2014 – 11.9; 2015 – 11.9; 2016 – 11.9. 124 In 2011, the National Heritage Board completed the inspection of architectural monuments and, as a result of the inspection, the indicator values were significantly adjusted. The data used previously were from reviews that included the inspection of only part of architectural monuments. 95
Sport
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
The proportion of people regularly engaged in sports in the 16–64 age group, %
Source: National 30.4 x 34.7 x 36.3 x 35.6 40 42 45 45 45 53 Institute for Health Development (Health behaviour among the Estonian adult population) The proportion of young people (up to 19 years of age) going to sports clubs in the 24 23.9 24 24.1125 24.3 26 25.5 26 26.5 26.5 27 30 entire age group, % Source: Estonian Sports Register
125 Only data from Statistics Estonia were used for 2009 Since 2010, the number of young people engaged in sports is based on data from the Estonian Sports Register (www.spordiregister.ee) and the number of people in the age group is based on data from Statistics Estonia (www.stat.ee). 96
The Estonian Language
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
Native language skill (since 2014: skill in Estonian) of young people who have completed upper secondary education 55.8 56.5 57.7 58.7 58.6 59.2 62.8126 >58 >58 >58 >58 >58 >58 (average result of the final examination), points (maximum 100). Source: Ministry of Education and Research Percentage of people who have passed Estonian language examinations (levels A2 52.5 49.2 39.6 49.2 53.0 51 52.3 55 55 55 55 55 55 to C1), % Source: Ministry of Education and Research
126 The exam was divided in two parts 97
Integration
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
Number of residents with undefined 112, 105,5 100,9 citizenship127 118,990 97,379 94,317 91,449 91,000 90,000 89,700 87,000 85,500 81,500 242 32 01 Source: Population Register The share of Russian- speaking residents who watch / listen to Estonian Public Broadcasting (including 59 59 58 58 60 63 Radio 4, ETV/ETV2), %128 Source: Ministry of Culture
Environment
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
Response capacity to a marine pollution 0.6 0.6 0.6 0.6 0.6 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 incident within 24
127 As of 1 January of the year following the year concerned 128 2012 is the beginning of a new period of Integration Strategy; the current indicator will be discontinued 98
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020 hours, km² Source: Ministry of Internal Affairs Total greenhouse gas emissions (without land use, land-use change and forestry sector (LULUCF)) (in million 18 21.1 19.6 16.3 20 21.17129 20 20 20 20 20 20 tonnes of CO2 equivalent). Source: Ministry of the Environment Share of consumers who receive drinking water conforming to the relevant standards from public water supplies, 65 65 70 72 72 81 87 90 95 100 100 100 100 % Source: Ministry of the Environment Proportion of waste recycling in total waste, % 37 32 30 28 37 55 37 37 37 39 40 ? Source: Ministry of the Environment Protection of 18.2 17.9 17.9 18 18.1 18.1 18.1 At least At least At least At least At least At least
129 Preliminary data from the Ministry of the Environment 99
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020 biodiversity and natural the level 18 18 18 18 18 resources (proportion of 2010 of protected areas compared to total land area), % Source: Ministry of the Environment Percentage of functioning wastewater collection and treatment systems in agglomerations with a x x x 78 74 72 90 95 100 100 100 100 population equivalent of more than 2,000 Source: Ministry of the Environment
Rural and Regional Development
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
Employment rates in rural areas (15–64 age group), % 63.3 64.3 64.7 59.1 57.7 62.8 64.5 62 62 63 63 63 64 Source: Statistics Estonia An increase in the net 61.43 -24.4 -19.3 69.4 18.4 3.1 3 2.8 3 3 3
100
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020 value added per annual 8,295 13,391 10,117 8,166 13,830 16,376 labour unit (compared with the previous year) in agriculture, % / net value added, €/ALU Source: FADN130
Foreign Policy
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level 2013 level 2014 level 2015 level 2016 level 2017 level 2020
The capacity to respond to and process requests from Estonian businesses Increasing Increasing Increasing Increasing Increasing Increasing concerning business 954 295 242 746 593 389 645 and economy/ No of level level level level level level requests per year131 Source: Ministry of Foreign Affairs No of experts No more No more No more participating in Sustained than 6 12 20 20 22 20 20 Increasing Increasing than than international civil level more than missions 30 30 30
130 FADN – Farm Accountancy Data Network. 131 The indicator should be changed in the new action plan of the Government from 2015, in order to describe better the essence of business diplomacy and its benefits to businesses. 101
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level 2013 level 2014 level 2015 level 2016 level 2017 level 2020 Source: Ministry of Foreign Affairs Estonia represented in foreign countries
Source: Ministry of Foreign Affairs Embassies 29 29 29 32 32 33 33 Permanent representations 6 6 6 6 6 7 7 with international organisations Extended Extended Extended Extended Extended Extended General consulates 3 3 3 2 3 4 4 Chancelleries 1 3 3 1 1 1 1 Special missions 0 1 1 1 1 1 1 Honorary consuls 99 101 108 125 139 145 158 Readiness to provide consular services and 129, 101, 96,0 112, 121, 146, 177, assistance132 - number 249 161 58 883 288 395 895 300,000 of visa applications / Sustained Sustained Sustained Sustained Sustained consular acts 30,9 37,3 50, 67,4 level level level level 120,000 level 24,6 33,9 35,0 00 90 123 60 Source: Ministry of 92 49 54 Foreign Affairs The share of GNP 0.09 0.08 0.1 0.1 0.1 0.12 0.11 0.14 0.156 0.17 0.18 0.19 - allocated to
132 The number of visa applications and consular acts was significantly bigger than forecasted in 2012 and, therefore, the indicator was amended, at the proposal of the Ministry of Foreign Affairs, and set at “sustained level”. 102
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level 2013 level 2014 level 2015 level 2016 level 2017 level 2020 development cooperation and humanitarian aid (% of GNP) Source: Ministry of Foreign Affairs
Defence and Security Policy
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
Mobility of defence forces: proportion of deployable units in the army, %133 / proportion of sustainably 20.4 / 18.6 / 30.7 / 31.1 / 34.5 / 32.4 / 32 / 34 / 35 / 37 / 39 / 41 / 47 / deployable units in the 40 8.5 10.8 11.3 11.3 9.3 9.1 10 10 10 10 10 10 army, % Source: Ministry of Defence Proportion of defence expenditure in GDP, % 1.41 1.59 1.81 1.86 1.87 1.74 2 2 2 2 2 2 2 Source: Ministry of Defence Total number of 18,846 18,858 18,986 19,623 20,972 21,526 22,508 23,300 24,000 24,750 25,500 26,250 28,500 members of the Defence
133 The method of accounting was changed in 2008 103
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020 League and its special organisations134 Source: Ministry of Defence
Governance and Civic Society
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020
A study on residents’ assessment of the availability and quality Sustain Sustain Increasi Increasi Increasi of local public 3.64 3.64 services135 ed level ed level ng level ng level ng level Source: Enterprise Estonia Government 35.77 34.80 32.06 23.72 34.05 36.15 36.64 The The The The The The effectiveness136 points points points points points points points position position position position position position in the in the in the top in the in the in the Source: Institute for and 5th and 5th and 5th and 9th and 4th and 4th , 4th top five top five five is top five top five top five Management position position position position position position positi
134 The figures related to youth organisations changed due to the introduction of a new reporting format in 2009. From 2009, the figure does not include youth leaders of the Defence League and Naiskodukaitse (women’s voluntary defence organisation) and the number of youth leaders who lead both the Kodutütred (girls’ organisation) and the Noored Kotkad (boys’ organisation) has been divided by two in order to ensure that each person is taken into account only once. 135 Value on a 5-point scale. The survey of 2008/2009 was an ad hoc survey. A new method will be used from 2013. 136 Total points and Estonia’s ranking among EU member states for six indicators in the International Institute for Management Development (IMD) competitiveness survey: management of public financial resources, legal barriers to business competitiveness, flexibility of government policies towards changes, implementation of government decisions, transparency of government policies, bureaucracy as a hindrance to business. 104
Indicator 2006 2007 2008 2009 2010 2011 2012 Target Target Target Target Target Target level level level level level level 2013 2014 2015 2016 2017 2020 Development on is is retained is is is retaine retaine retaine retained retained d d d Non-institutional socio- political participation rate of the population, % Sustain Increasi x x x x 5 x x 7 8 9 Source: European Social ed level ng level Survey, Institutionalisation of Civic Initiative in Estonia137
137 The survey is conducted every second year. 105
Appendix 6. Use of revenues from EU scheme for greenhouse gas emission allowance trading in 2013-2020 In order to achieve the objectives of the international climate policy, the European Union has established a new greenhouse gas emissions allowance (hereinafter “EUA”) trading scheme for the period 2012-2020. Within the scheme, member states must auction138 all EUAs that are not allocated free of charge to stationary sources of pollution in accordance with Articles 3e, 10a and 10c of Directive 2003/87/EC.
EUAs auctioned in Estonia in 2013-2017 and the expected revenue based on the basic scenario of the Ministry of Finance economic forecast of spring 2013 are the following:
2013 2014 2015 2016 2017 Total Auctioned 4,314,732 100,133 1,750,118 6,062,073 6,954,246 19,181,302 amount (data from MoE), excluding free of charge electricity (EUA) Revenue forecast 17,258,928 801,064 14,000,944 42,434,511 41,725,476 116,220,923 (€)
In accordance with Article 10 of Directive 2009/29/EC139 , at least 50% of the revenues generated from the auctioning should be used to achieve the following overall objectives: 1) to encourage a shift to low-emission and public forms of transport; 2) to develop renewable energies and to contribute to increasing energy efficiency; 3)to finance research and development in energy efficiency and clean technologies in the sectors covered by the European Parliament and council Directive 2009/29/EC; 4) to improve energy efficiency and ensure energy savings; 5)to cover the administrative expenses of the management of the EU emissions trading scheme; 6)to fund research and development as well as demonstration projects for reducing emissions and for adaptation to climate change; to contribute to the Global Energy Efficiency and Renewable Energy Fund and to the Adaptation Fund; 7) to adapt to climate change; 8) to participate in Estonian and European initiatives within the framework of the European Strategic Energy Technology Plan and the European Technology Platforms; to participate in the planning of climate change mitigation and energy policies as well in the monitoring of the effectiveness of these policies; 9)measures to avoid deforestation and increase afforestation and reforestation in developing countries that have ratified the international agreement on climate change, including meeting Estonia’s international financing obligations; 10) forestry sequestration.
The climate related measures designed to achieve these objectives form a part of the State Budget Strategy, based on national objectives and the objectives of sectoral development plans.
138 The procedure for auctioning is defined in Commission Regulation (EU) No 1031/2010, which specifies the timing, administration and other aspects of auctioning. 139 The directive is found on: http://eur- lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:140:0063:0087:et:PDF 106
The synergy between these measures and the measures to be funded from the EU period 2014- 2020 resources and from other national and external funds is taken into account. These expenditures depend on revenues, i.e. the funds can be used depending on actual revenues. The need for state aid approval is assessed for each measure and in the event state aid is required, the authority responsible for the implementation of the measure will apply for such approval.
The forecast of revenues generated from EUA auctioning is updated at least twice a year when the Ministry of Finance is preparing its economic forecast. If necessary, the list of measures to be funded by the revenues from auctioning is also updated. The EU climate change objectives are implemented during the budget strategy period through energy and environmental protection policies.
Depending on whether the European Commission’s proposal for the temporary removal of EUAs to be auctioned in 2014-2015 in order to achieve the objectives of EU climate policy is enforced or not, two alternative lists of measures to be funded by the revenues generated from auctioning are proposed.
Option1: presuming that the European Commission’s proposal for temporary removal of 900 million EUAs to be auctioned in 2014-2015 is enforced (basic scenario of the Ministry of Finance spring 2013 economic forecast):
Measures in the State Budget Strategy 2014-2017 policy areas to be Preliminary funded by the revenues from greenhouse gas emissions allowance amount of trading system in 2013-2020 (million €) funding
Policy area, measure 2013 2014 2015 2016 2017 Total 2018- 2020 Revenue forecast 17.300 0.800 14.001 42.435 41.725 116.261 161.919 6. Energy 49.731 61.819 Energy saving measures 8.650 0.000 0.000 0.000 0.000 8.650 10.000 in apartment buildings Increasing the use of 0.000 0.000 2.500 15.000 0.000 17.500 25.400 alternative fuels in transport (biogas) Promoting energy 0.000 0.000 2.500 3.218 17.863 23.581 26.419 efficiency of public sector buildings Micro solutions for 0.000 0.000 1.000 2.000 2.000 5.000 0.000 renewable energy 14.Environmental 3.400 12.140 protection Estonia’s contribution to 0.000 0.400 1.000 1.000 1.000 3.400 3.000 international climate change cooperation Managing the risk of 0.000 0.000 0.000 0.000 0.000 0.000 7.000 flooding Pilot projects designed to 0.000 0.000 0.000 0.000 0.000 0.000 9.140 implement the climate policy objectives
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Implementing the 8.650 0.400 7.001 21.218 20.863 58.131 80.960 climate policy objectives, total:
Option 2: presuming that the European Commission’s proposal for temporary removal of 900 million EUAs to be auctioned in 2014-2015 is not enforced (additional scenario of the Ministry of Finance spring 2013 economic forecast):
Measures in the State Budget Strategy 2014-2017 policy areas to be Preliminary funded by the revenues from the greenhouse gas emissions amount of allowance trading system in 2013-2020 (million €) funding
Policy area, measure 2013 2014 2015 2016 2017 Total 2018- 2020 Revenue forecast 21.574 20.069 26.541 30.31 34.771 133.265 134.933 6. Energy 62.633 55.089 Energy saving measures 10.000 9.822 0.000 0.000 0.000 19.822 0.000 in apartment buildings Increasing the use of 0.000 0.000 5.635 6.078 7.193 18.906 23.995 alternative fuels in transport (biogas) Promoting energy 0.000 0.000 5.635 6.078 7.193 18.906 26.095 efficiency of public sector buildings Micro solutions for 0.000 0.000 1.000 2.000 2.000 5.000 0.000 renewable energy 14. Environmental 4.000 12.378 protection Estonia’s contribution 0.787 0.213 1.000 1.000 1.000 4.000 3.000 to international climate change cooperation Managing the risk of 0.000 0.000 0.000 0.000 0.000 0.000 7.000 flooding Pilot projects designed 0.000 0.000 0.000 0.000 0.000 0.000 7.377 to implement the climate policy objectives Implementing the 10.787 10.035 13.271 15.155 17.386 66.633 67.467 climate policy objectives, total:
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Appendix 7 Comparison of Estonia with other EU member states (figures)
Figure 24 Main macroeconomic indicators (%) A. GDP per capita in purchasing power parities in 2011 (EU27=100) 160
120 100
80 67
40
0 LU NL IE AT SE DK BE DE FI UK EA FR IT EL27 ES CY MT SI CS GR PT SK EE HU LT PL LV RO BG B. Economic growth in 2012 and 2003-2012 6 3,7 4 2 0 -2 sk pl lt ee lv bg ro cz lu se cy si ie mt at fi uk be es de eu27 hu nl fr ea17 dk gr it pt -4 -6 -8 Average economic growth 2003-2012 Economic growth 2012
C. Labour productivity - GDP by working hours PPS 2011 (EU27=100) 140 120 113,4 100 100 80 58,4 60 40 20 0 lu nl fr ie de dk sw at ea17 fi es uk it eu27 cy si sk gr mt cz pt hu ee lt pl lv bg ro
D. Price level in comparison with the EU27 average in 2011 (EU27=100) 150 125 104 100 100 78 75 50 25 0 dk se fi lu ie be fr nl at it ea de uk eu27 es el cy pt si mt ee cz lv sk lt hu ro pl bg
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E. Employment rate (persons aged 15-64) in 2012 80,0
70,0 67,1 64,1 63,8
60,0
50,0
40,0 nl sw de dk at uk fi ee cz lu cy eu27 si fr ea17 lv lt be pt pl sk ro mt bg ie hu it es gr
Sources: Eurostat, Statistics Estonia, Ministry of Finance. Figure 25 Fiscal position of general government (% of GDP) A. Budgetary position of general government in 2012 2,0 -0,3 -4,0 -10,6 0,0 -2,0 -4,0 -6,0 -8,0 -10,0 -12,0 de ee se bg lu lv hu fi at it ro lt mt pl be eu27 nl si dk sk cz fr cy uk po ir gr es
B. General government debt in 2012 140,0 120,0 100,0 85,3 80,0 60,0 40,0 10,1 20,0 0,0 ee bg lu ro se lv lt cz dk sk fi si pl nl mt at hu de es eu27 cy uk fr be ir
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Figure 26 General government revenue and expenditure (% of GDP) A. Estonian general government revenue compared to other EU member states in 2012 60
50 45,4 40,2 40
30
20
10
0 lt sk ro ir bg lv es pl cy cz ee mt po lu uk gr si de eu27 nl hu it at be se fr fi dk
B. Estonian general government expenditure compared to other EU member states in 2012
70
60 49,4 50 40,5 40
30
20
10
0 bg lt ro lv sk ee ir pl lu mt cz de cy es po hu uk si eu27 nl it at se gr be fi fr dk
Sources: Eurostat.
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