ENLARGEMENT: THE NEW FACE OF THE EU
Estonia
Estonia-EU Relations
Diplomatic relations between the EU Member States and Estonia began at the end of August 1991. In December of that year, a Phare Framework Agreement and the first Financing Memorandum were signed. Since then a Trade and Economic Co-operation Agreement was signed in May 1992 and entered into force in March 1993.
The next major piece of legislation between the European Community and Estonia was the Europe Agreement. This was signed in June 1995 and ratified by Estonia in August 1995. Estonia applied for EU membership on 28 November 1995 and in turn the Commission adopted a favourable opinion on 16 July 1997 from which it concluded that accession negotiations could start.
The European Council gave the go-ahead for the launch of accession negotiations at the Luxembourg Summit on 13 December 1997. The Accession Conference between Estonia and the EU was opened under the UK Presidency in Brussels on 31 March 1998. The accession negotiations were concluded at the Copenhagen European Council on 13 December 2002. The Accession Treaty with Estonia was signed on April 2003 at the Athens European Council with a view to full EU membership on 1 May 2004.
Progress of Estonia towards accession
Year / The European Commission states…July 1997 / …that Estonia had made good progress with industrial restructuring and the adoption of EU industrial legislation. Provided that current efforts and foreign capital inflows were continued, only very limited problems need be expected for industrial competitiveness in the medium term, which should not be an obstacle to full participation in the enlarged EU market.
November 1998 / …that progress had been made in industrial policy, particularly with regard to competitiveness policy. Efforts needed to be made to implement EU-compatible quality systems, however. SMEs were considered a priority in Estonian economic policy.
October 1999 / …that industrial development was continuing. Having completed the privatisation of the manufacturing sector, Estonia had started work on restructuring and on enhancing its competitiveness. SMEs were playing a very important part here, as they constituted 99% of the country's businesses.
November 2000 / …that Estonia had taken steps towards adopting a realistic industrial policy, but still had to make an effort to adopt an industrial policy which was distinct from its general economic policy. It continued to encourage foreign investment, and was sustaining the process of privatisation and industrial restructuring. Policy on SMEs placed particular emphasis on business development in less developed and mono-industrial regions.
November 2001 / …that Estonia was continuing to make progress in drawing up industrial policy-related measures. The main efforts have been recorded in the areas of innovation policy, encouraging foreign investment and privatisation of the industrial sector. With regard to SMEs, the general policy was still being implemented whilst access to finance and the business environment had been improved.
General Evaluation of Enterprise Policy
Industrial development entered a new phase in 1999. The main economic and structural reforms are over (privatisation in the manufacturing sector is complete), and the need to further reorient industrial exports towards western markets in the aftermath of the Russian crisis makes it essential to enhance competitiveness.
Emphasis is now being put on training and re-training, innovation, the introduction of information technologies, and the development of quality infrastructure. These principles have been reflected in a document, 'The main principles of industrial policy', which was adopted in February 1999, and are part of the National Development Plan.
Technological innovation and development measures have been promoted since October 1999. A national quality policy has also been adopted and programmes relating to quality have been launched.
As a consequence of the Russian crisis, the restructuring process has speeded up and industry awareness of some competitiveness gaps has increased. Indeed enterprises that were dependent on exports to the New Independent States (NIS) and/or that were relying too much on the competitive advantage of cheap labour, have lost important market share and faced difficulties in finding new outlets. Mostly as a result of the weakening of these companies, a series of mergers occurred in the food, forest-based and light industries.
Now that privatisation is virtually complete in the industrial sector, upgrading infrastructure and supporting the implementation of retraining programmes remain the most important challenges to develop an environment that could continue to be attractive for investors. Most of the manufacturing sector has been privatised. Foreign direct investment is mainly directed towards the Tallinn region, neglecting the eastern part of the country, an imbalance that needs to be taken into account by industrial policy.
Almost 99% of enterprises in Estonia are small or medium-sized. The share of small and medium-sized enterprises is largest in wholesale and retail activities, and they are the main source of new jobs. A specific policy for SMEs needs to be adopted, and actions relating to the business environment need to be extended. SMEs must continue their efforts to gain access to finance and to hire skilled labour.
The Community definition of SMEs is not an integral part of Estonian law but is applied in practice. Estonia is participating in the Third Multiannual EU Programme for SMEs. The SMEs Development Plan was adopted in April 2000. The business aid system has been changed by the creation of the Business and Housing Loans Guarantee Foundation, which will promote entrepreneurship. A statistical database on SMEs was created in February 2000 and two Euro Info Centres have been opened.
Needs to be improved…
- Progress needs to be made in the energy sector.
- An overall industrial policy needs to be drawn up.
- The compatibility of the aid schemes with the Community acquis needs to be analysed.
- The administrative capacity for implementing industrial policy is in place, but coordination between the governmental bodies and the competent ministries needs to be further improved.