Tõnis Palts' 10 commandments for ending the crisis
19.11.2009, 10:04Tõnis Palts, businessman and member of the supervisory council of Estonian central bank, is proposing an action plan with 10 specific steps to be taken for reviving the Estonian economy. It was published in today's Eesti Päevaleht.
Most recent (televised) economic debates tend to end with a roundtable of men in suits and ties saying something like this: "Estonian economy must be restructured", "Estonia must stop subcontracting and start selling end products," etc. Who specifically would do it and how? This is not the time for slogans, it is time to make and implement decisions. I believe that now that the crisis has bottomed it is impossible to replace the slogan on making Estonia one of the five richest nations with a strong action plan and start putting it into practice.
The following is my vision of such an action plan. It has 10 items which, if implemented, would put things moving in the right direction and ensure that Estonia will be competitive not only one, but several generations.
The first four measures crate jobs and remove factors that are restricting the development of construction, money or energy markets.
1. Actively create jobs where it is realistic and reasonable. Focus on forestry and increase the interest of private forest owners in making their forest assets useful. Forests can be used during the times of crisis since this is a renewable resource. Better empty areas in forests than empty villages.
2. Stop making the crisis worse by taxes and money. A case in point is the housing programme of the City of Tallinn that is extending the property crisis with taxpayer money. The money that the current city government spends on this expensive project could be used for much better purposes and for building infrastructure for which there is need. The City of Tallinn should also make better use of its funds which today are destroying our economic policy moral.
3. Take advantage of Finland's proximity and help Estonians commute for work in Finland, for instance by paying compensations to parents who work from Monday to Friday in Finland and return to Estonia for the weekend. Fund more Finnish language studies. Wages in South Finland today are 3 times higher than in Estonia, while unemployment is twice lower. Finland needs Estonian employees since it wants to put its own economy on track. Attract more Finnish jobs and tourists into Estonia. Advertise Tallinn as an attractive location for head offices of Finnish companies. Attract more Finnish tourists into Estonia, reduce alcohol excise duty and give tax breaks to hotels and catering establishments.
4. Make the state and state companies more efficient, cut managment costs and make them leaner like private companies. List minority holdings in state enterprises to revive the stock market. Merge infrastructure divisions of Port of Tallinn with Eesti Raudtee. Stop blocking the administrative reform (this one was for the PM).
5. Make job creation and new economy the main criteria in assessing EU aid projects. Stop using EU aid for boosting imports or transferring jobs outside Estonia. Make it impossible for losing bidders to block large tenders by dragging them through courts.
6. Rapidly improve relations with Russia. Set up a special taskforce at Enterprise Estonia for coordinating communication with Russian businesses and trade organizations. Think, before you spit into the soul of Russians (to PM: Peeter the Great was not a robber and crook in the 18th century context). Estonia has a strong brand in Russia and we must not restrict flow of our goods into Russia, transit trade nor incoming tourism from Russia. Issue Russians Estonian visas faster than to Finland. Support expansion of Russian credit institutions in Estonia on their way into Western Europe.
7. Strengthen tax policy that supports investments and efficiency. Tax consumption more and efficiency less. Don't tax dividends paid by subsidiaries to parent companies and tax private income received on one's bank account only after it has been taken into use. Money on bank accounts is good for the economy. Lower overall taxation.
8. Make sure Estonia switches to euro as soon as possible. Make meeting Maastricht criteria norm, not exception. Reduce defence spending and social costs. Cap parental pay and pensions (until the budget is balanced). If possible, pay pensioners more than today. Develop the Baltic Way into the Euro Way.
9. Attract foreign investments into Estonia. Favour large foreign investments with tax breaks, free land or free training.
10. Support culture and creative arts. Make Estonia attractive to talented people. Make Estonia a fun place to live. Increase the budget ofthe Ministry of Culture and foster the development of alternative culture.