No. 19




The Structure of the Processing Industry is Out of Date

18 June 2009


RiTo No. 19, 2009

  • Kaarel Kilvits

    Professor of Economic Policy, Tallinn University of Technology

Estonia’s internal market is small and for this reason, the primary source of Estonian economic growth is export – meaning sales success in the world’s marketplace.

Compared to branches of the processing industry aimed at the internal market, the sectors oriented at export are withstanding the global recession in 2008 quite well. In order to be successful in global competition and develop in a sustainable manner, Estonia requires much faster export growth and structural improvement. The possibilities for this exist, as the increased supply of workforce stemming from the recession opens the way to a forced flowering of the processing industry’s export sector and a sudden increase in export. This, of course, requires extensive retraining and in-service training. In fact money has not disappeared anywhere and investors continue to court good ideas and companies. It is important to support changes, not the current outdated structure of the processing industry. Thus an attempt should be made to make maximum use of the geographical reshuffle that is taking place in production – primarily through foreign direct investments and subcontracting. This gives Estonia a real opportunity to move upwards in the existing value chains by developing products, technology and sales, and to enter more profitable value chains, raising value added and profitability.

Full article in Estonian