EMCC European Monitoring Centre on Change

Estonia: ERM comparative analytical report on Public support instruments to support self-employment and job creation in one-person and micro enterprises

  • Observatory: EMCC
  • Topic:
  • Published on: 12 January 2012



About
Country:
Estonia
Author:
Kirsti Nurmela
Institution:

Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

There are several measures implemented to support self-employment or hiring employees. However, these are mostly targeted at companies in general rather than the self-employed or micro enterprises in specific. Also, the measures are often with implicit impact in terms of job creation (e.g. supporting growth). In principle, three broad measures can be outlined: supporting entrepreneurship and entrepreneurial culture in Estonia, improving access to finance and supporting growth to foreign markets. These measures are described in more detail in the current report.

QUESTIONNAIRE

Part 1: Overall policy context

This section aims at giving a brief overview of the general development and status quo of the policy discussion and thereof resulting instruments, measures or initiatives in the field of fostering self-employment and job creation in one-person and micro enterprises (less than 10 employees). Focus is mainly on the developments during the last decade, that is before the global recession. In addition we are asking for your indication of change of policy focus since the recession.

1. General policy approach in the area of self-employment, one-person and micro enterprises at the national level


1.1. Has there been a policy focus/debate on the specific challenges facing entrepreneurship as tool for job creation before the global recession? If so, since when and for how long?

Table 1: Presence of policy focus/debate on entrepreneurship as facilitation for job creation before the crisis
 

Yes, continuously since xx? (Please indicate year)

Yes, on and off in the last 10 years

(Please indicate ‘X’ where it applies)

Yes, has been in focus, but since xx it is no longer part of the policy focus (Please indicate year)

No, it has never had policy focus before the recession

(Please indicate ‘X’ where it applies)

Self-employment

2000

     
Hiring the first employee      

x

Hiring additional employees/creating additional jobs in micro enterprises  

x*

   

* In terms of hiring additional employees/creating additional jobs in micro enterprises, the focus has been on expansion and growth of enterprises which also supports the creation of new jobs. However, the link is rather implicit.


1.2. What is the main focus in policy documents or strategies in relation to public or social partner based support instruments for fostering self-employment or job creation in one-person and micro enterprises? (Please indicate ‘X’, multiple answers possible)

Table 2: Main focus in the policy documents or strategies
 

Entrepreneurship (Business development in general)

Job creation (Employment)

Growth (Competitiveness)

Others (please specify)

Self-employment

X

X

   
Hiring the first employee

n.a.

n.a.

n.a.

n.a.

Hiring additional employees/creating additional jobs in micro enterprises  

X*

X

 

*The measures are not directly targeted at micro enterprises, but rather on companies in general.


1.3. Please elaborate on the answer given above (with a focus on those developments aimed at employment creation and growth) and indicate if the financial recession has caused a change of focus:

Table 3: The policy content and significance of the financial recession
Self-employment
Elaboration of content (please describe and also indicate whether it is treated explicitly/implicitly)

Job creation through self-employment is mainly supported by business start-up subsidies targeted at both potential entrepreneurs in general as well as unemployed in specific. Measures have also concentrated on access to start-up capital and raising entrepreneurial knowledge and culture in schools at different levels as well as population in more general.

Change due to the financial recession

Please tick:

Yes: □

No: x

 
Hiring the first employee
Elaboration of content (please describe and also indicate whether it is treated explicitly/implicitly)

n.a.

Change due to the financial recession

Please tick:

Yes: □

No: x

 
Hiring additional employees/creating additional jobs in micro enterprises
Elaboration of content (please describe and also indicate whether it is treated explicitly/implicitly)

Measures to support hiring additional employees/creating additional jobs are mainly targeted at companies in general and therefore these also cover micro enterprises. Specific measures for micro enterprises have not been introduced.

Measures to directly support job creation are targeted at hiring unemployed people in enterprises – wage subsidies by the Unemployment Insurance Fund.

Other measures concentrate on supporting growth in enterprises through improving access to finance, counselling activities to support growth and increasing productivity and raising awareness of entrepreneurs of the financing opportunities that are available.

Change due to the financial recession

Please tick:

Yes: x

No: □

In the recession, the access to wage subsidy measure was increased by widening eligibility for the measure as well as raising the number of wage subsidies. Since 1 January 2010, employers can apply for wage subsidy in case hiring a person who has been registered as unemployed for at least 6 months (the limit was 12 months earlier). In case of young unemployed (aged 16-24), unemployment period must reach at least 3 months (instead of the earlier 6 months). Also, since 2010 wage subsidy is also extended to persons employed under fixed-term contracts for at least 6 months (earlier only open-ended contracts were eligible). Since 2011 the initial situation has been restored and persons unemployed for at least 12 months are eligible again (6 months in case of young unemployed). Although, extension to fixed-term contracts has remained unchanged. Also, the number of new wage subsidy cases has decreased slightly in 2011, although there are still more cases than in 2009.

In terms of supporting growth, crisis measures have also been introduced. Since the main problem for companies in recession was access to financial resources, crisis measures concentrated on these issues (e.g. loan guarantees, favourable loan conditions, export guarantees). The target group for these measures was exporting companies. According to the estimates of Ministry of Economic Affairs and Communications, the measures have supported the creation of 900 new jobs and maintaining an additional 17,000 jobs. However, there is no assessment on the number of micro enterprises that took up these crisis measures.

2. Disincentives for self-employment and job creation

The following two questions will investigate whether there has been a change in the political agenda which has forced new political initiatives that may result in disincentives for job creation and business development (e.g. considerations regarding public budget).


2.1 Have public measures (e.g. with the aim to increase public revenue or cut public spending) led to disincentives for self-employment or job creation in one-person or micro enterprises before the financial recession? (Please briefly describe the major developments/initiatives (max. 300 words)

According to a 2008 research on Development opportunities of SMEs (4565 Kb, PDF), it has been indicated by SMEs that the barriers to further development are mainly in high tax burden for companies (mentioned by 41% of companies) and burdensome legislation and too much bureaucracy (39%). The latter is problematic as a result of high number of changes in legislation and new regulations that impact enterprises. This is especially problematic to smaller SMEs who mostly do not have specially qualified staff to deal with legislative questions. Other problems are not directly related to public disincentives: delays in receiving payments and shortage of qualified staff.

High tax burden has been mentioned as a problem for SMEs through years – the same research has also been conducted in 2002 and 2005.


2.2 Have public measures (e.g. with the aim to increase public revenue or cut public spending) led to disincentives for self-employment or job creation in one-person or micro enterprises as a result of the financial recession? (Please describe – max. 300 words)

A more recent Eurobarometer survey on Entrepreneurship in EU and beyond (6803 Kb, PDF) has indicated that the highest perceived barrier to setting up a business in Estonia is lack of available financial support (71% of Estonian respondents agree). Compared to 2007 results, the share has increased in most of the countries. At the same time, this research does not turn special attention to the issue of tax burden which has been mentioned as a barrier in earlier Estonian surveys.

However, government measures in the crisis also reflect turning most attention to access to finance. Earlier research on SME developments indicates that access to finance as a barrier to development reduced in economic growth period. Thus, it might be expected that this issue has increased for entrepreneurs in the crisis again.

3. Representation of/lobbying for self-employed and micro enterprises


Are self-employed and micro enterprises in your national context explicitly or implicitly (e.g. entrepreneurs or SMEs in general) represented by the following types of organisations (e.g. for lobbying, defending their interest etc.)?

Table 4: Representation of self-employed and micro enterprises
 

Self-employed

Micro enterprises

Employers’ organisations

No

Yes, implicitly

Estonian Employers’ Confederation; members can be employers and employer organisations

Employees’ organisation

No

No (trade unions of micro enterprises can be members of different sectoral trade union organisations; there is no specific employees’ organisation for micro enterprises)

Not-for-profit organisations

Yes, implicitly

Estonian Association of SMEs representing SMEs and self-employed

Estonian Chamber of Commerce and Industry; all entrepreneurs are accepted as members, including self-employed

Yes, implicitly

Estonian Association of SMEs representing SMEs and self-employed

Estonian Chamber of Commerce and Industry; all entrepreneurs are accepted as members, including self-employed

Others

No

No

Part 2: Identification and description of relevant recent support instruments

The following section asks for the identification of public or social partner based support instruments initiated during or after the recent economic crisis (that is, 2008 onwards). These measures might have, but must not necessarily have been triggered by the recession. Measures may also have been initiated earlier, but changed in order to adapt to the recession or other recent developments. Rather than a comprehensive list of all instruments available at national, regional or local level, the most important, most innovative, most interesting and most effective tools are to be described. Thereof, a selection of up to three ‘Good Practices’ to be described in more detail is to be made.

1. Selection of region(s) when total coverage of the entire regional and local level is too comprehensive

When providing the brief overview and the three ‘Good Practices’ in this section of the questionnaire, measures and instruments at national level have to be included. We would in addition ask you to include regional and local level initiatives where relevant. Nonetheless, a complete coverage of regional and local levels may not be possible for all countries (e.g. because of a high degree of decentralisation resulting in a wide range of respective measures characterised by considerably heterogeneity). At the same time, it can be assumed that for instruments targeting at supporting self-employment and the creation of employment in one-person and micro enterprises the local administrative level is of considerable importance. If so, such measures will be designed to fit to the local characteristics and needs, resulting in a wide variety of different approaches. In this case, one or few local areas or regions may be selected to be covered in this report. Details on the selection are given in table 5.

Table 5: Administrative level/region(s) covered for the following research (max. 50 words per region)

Administrative level relevant for the rest of the questionnaire

National level

If a specific regional/local are is selected, please provide the following information

Name of region

n.a.

Motivation for selecting this region

n.a.

n.a.

Facts about the region e.g.

- Geographic location

- No. of inhabitants

- Business structure (sector, size)

- Labour market

- Specific characteristics if applicable

n.a.

2. Brief overview of recent instruments to foster self-employment or job creation in one-person and micro enterprises


2.1. Please provide a brief description (max. 800 words) of public or social partner based instruments recently initiated (2008 onwards) to support self-employment and job creation in one-person or micro enterprises.

Measures covered by the European Employment Observatory Review on self-employment 2010, European Commission, Directorate-General for Employment, Social Affairs and Equal Opportunities are to be omitted to avoid duplication (see Part 3 of this questionnaire).

Table 6: List of recent instruments

Title

Ettevõtlusõpe erinevatel hariduse astmetel; Entrepreneurship training at different educational levels

Aim/objective

The aim is to develop entrepreneurial culture in Estonia and introducing this as one basic skill among youth. The aim is also to encourage taking up entrepreneurship among adult population through increasing knowledge and skills in the area.

Description of support

Introducing and developing teaching materials for entrepreneurship, developing entrepreneurial and innovation knowledge and attitudes among teachers and other educational staff through training activities and providing additional information.

Creation of an entrepreneurship think tank which aims at combining partners and introducing an action plan for more effective training on entrepreneurship in general education and vocational schools.

Target group

Youth (including students), teachers at different educational levels

Initiator and other actors involved

Enterprise Estonia (a public institution promoting business and regional development in Estonia), Estonian Chamber of Commerce and Industry (regarding the think tank on entrepreneurship)

Duration (please also indicate whether the measures has been initiated due to the recession)

The measure is not initiated specifically due to the recession. These specific activities are implemented over 2007-2013 in the framework of the Entrepreneurship Strategy 2007-2013

Title

Tugipakett eksportivatele ettevõtetele; Support package for exporting companies

Aim/objective

The aim is to improve access to financial instruments in the economic recession for exporting companies. The largest barrier to further development is poor access to financial instruments. The problem has increased considerably in the recession.

Description of support

One measure is raising the capacity of the business loan guarantee provided by KredEx. This will help provide additional loans, which would not be issued without the guarantee by KredEx or would be issued on a considerably stricter terms.

Also, a new flexible equity loan will be provided by KredEx. The target group are enterprises who are not able to provide self-financing at the extent required by the bank. Third, it has been decided to allocate additional finance from both the state budget and KredEx to provide credit to private banks at a more favourable interest rate to increase their finance for granting loans to companies.

In addition, one measure aims at providing large-scale export guarantees. For that purpose a new private insurance body will be created under KredEx and the limit of guarantees provided will be raised.

Target group

Exporting companies. The share of exports in total turnover should be at least 20%. Companies from agriculture, hunting, forestry, fishing, real estate, financial or the public sector are excluded.

Initiator and other actors involved

Ministry of Economic Affairs and Communications , Kredex (public institution providing financing possibilities for companies)

Duration (please also indicate whether the measures has been initiated due to the recession)

This measure is specifically targeted at tackling the recession. The measure was introduced in 2009. An estimated 1,300 companies should be supported from this support package (so specific end date implemented).

Title

Ekspordi arendamise toetus, Export development grant

Aim/objective

The aim is to increase the competitiveness of Estonian companies in foreign markets. The measure aims at raising export-related turnover of Estonian companies and the share of products and services with high added value. Also the number of exporting companies is expected to increase.

Description of support

The subsidy is available for 1-2 year marketing projects that aim to take the products or services of the company to new markets outside Estonia. Supported activities include for instance preparing samples and advertising materials, visiting the markets targeted for exporting purposes, organising marketing events etc.

Target group

Exporting companies (already active companies as well as starting companies)

Initiator and other actors involved

Enterprise Estonia

Duration (please also indicate whether the measures has been initiated due to the recession)

The measure is implemented during 2008-2013 in the framework of the EU Regional Development Fund. The measure is not initiated specifically due to the recession.

Title

Palgatoetus, Wage subsidy

Aim/objective

The aim is to support creating new jobs in companies specifically for the long-term unemployed people

Description of support

Wage subsidy is financial support to companies who employ a person who has been unemployed for at least 1 year (6 months in case of young people aged 16-24). The support covers 50% of the gross wage paid to the person but not more than the minimum wage (€278.02 per month).

Target group

Companies who are employing people who are long-term unemployed

Initiator and other actors involved

Unemployment Insurance Fund

Duration (please also indicate whether the measures has been initiated due to the recession)

The measure has been implemented since 2006. Some changes were introduced since 1 January 2010 in order to further support creation of jobs during the crisis. Since 2011, the initial conditions of the measure have been restored.

Other measures to support growth in Estonian companies include product development grant for SMEs, programme for supporting marketing and participation in foreign trade fairs, technology investments for manufacturing companies, innovation measure for small companies. Start-up loan is a measure to support entrepreneurship, including taking up self-employment. Since 2010 a new measure has been introduced in order to support large-scale investments in smaller regions with the aim to create new jobs in rural areas. However, companies are not supported directly in this case. Still, the aim is to support the creation of around 1,000 new jobs.


2.2. In-depth description of ‘Good Practices’

Please choose up to three examples from the above list that can be considered as ‘Good Practice’ (e.g. because of their effectiveness, innovative character or beneficial cooperation among different stakeholders) and describe them in detail.

Table 7: Description of ‘Good Practice’ examples of recent support instruments

Name of the programme/instrument

Ettevõtlusõpe erinevatel hariduse astmetel; Entrepreneurship training at different educational levels

Is the instrument explicitly addressing any of the following:

Self-employment

Hiring the first employee

Hiring additional employees/creating additional jobs in micro enterprises

Please ‘X’ and/or describe if relevant

x

   

Operational level

Local

Regional

National

Please ‘X’ and/or describe if relevant

   

x

Rationale/motivation for the instrument

(please describe)

For the better adaptation of youth to working life, it is necessary to support the development of certain basic skills (e.g. creativity, entrepreneurial attitudes) among youth in addition to factual knowledge. Also, according to previous research results, for 49% of the Estonian working-age population, lack of knowledge and skills are perceived as the main barrier for taking up entrepreneurship. It has also been referred that just 10% of students graduating from upper secondary school have received entrepreneurship training within their curricula. Thus, one important aspect to increase taking up entrepreneurship among the population is to raise the necessary knowledge and skills.

Purpose and aims for the instrument (please describe)

The aim is to develop entrepreneurial culture in Estonia and introducing this as one basic skill among youth. The aim is also to encourage taking up entrepreneurship among adult population through increasing knowledge and skills in the area.

Initiator
Please ‘X’    
Other stakeholders actively involved in implementation (please name them and describe their roles)

Ministry of Economic Affairs and Communications – development of the measure in the framework of the Entrepreneurship Strategy 2007-2013

Enterprise Estonia – implementation of some specific activities (e.g. financing of projects to raise entrepreneurship-related knowledge among the population, mainly targeted at youth)

Ministry of Education and Research – development of the measure in terms of education curricula.

Target groups        
Please describe the target groups (sector, age, level of education, gender)

Youth (including students), teachers at different educational levels

Funding        
Please describe the funding of the instrument/programme (national and European sources, budget available)

During 2007-2013 the measures to raise awareness regarding entrepreneurship are planned to be financed at the extent of € 4.8 million. The measures are financed from the EU Structural Funds (European Social Fund) and government co-financing.

Activities    
Please describe the activities of the programme or institutional initiative as detailed as possible

Different activities to reach the planned aims include introducing and developing teaching materials for entrepreneurship, developing entrepreneurial and innovation knowledge and attitudes among teachers and other educational staff through training activities and providing additional information.

Creation of and entrepreneurship think tank which aims at combining partners and introducing an action plan for more effective training on entrepreneurship in general education and vocational schools.

Results (Effectiveness)      
Please describe the results e.g. number of beneficiaries, advised enterprises

Based on the 2009 implementation report of the Entrepreneurship Strategy 2009-2013, a renewed teaching material for youth was published. However, no further measures have been implemented in this respect (e.g. introducing new tutoring materials for youth). Projects to raise knowledge of entrepreneurship in cooperation with educational workers have been initiated. The number of persons affected by these projects will be clear after the successful implementation of the projects.

Challenges in order to reach the objectives e.g. for the organisation offering the instrument, the entrepreneurs (Please describe); and if available how these have been overcome

One of the challenges regarding the measures to raise knowledge on entrepreneurship among youth is the cooperation of different parties related to youth and policies targeted at youth. For this purpose, a think tank on entrepreneurship training has been created that aims to combine different partners to develop an action plan for introducing entrepreneurship training in schools. Different stakeholders include ministries, organisations representing enterprises, educational institutions, youth organisations etc. These activities are coordinated by the Estonian Chamber of Commerce and Industry.

Assessments of the effectiveness e.g. investments made in order to reach the objectives of the programme (outcome vs. investment) (Please base this assessment on evaluations when possible)

There is no cost-benefit assessment available regarding these measures.

Outcomes (Efficiency)  
Increasing self-employment, growth and employment e.g. number of start-up and/or jobs created etc. (please describe, preferably based on evaluations, otherwise on experts’ assessment)

It is not possible to directly measure impact on new start-ups as a result of these measures. However, the measure could be considered as a good practice since the activities are targeted at youth in schools to raise awareness and familiarise the Estonian population at a young age with entrepreneurship as a precondition for higher business activity in the future. Thus the impact on the number of start-up initiatives is not explicit. Instead, the number of participants in these activities will be measured. Also, as a more long-term effect, the readiness of Estonian population to take up entrepreneurship could be measured.

Please provide link to evaluation documents if possible

There is no evaluation available of these measures.

Example 2: Wage subsidy

Name of the programme/instrument

Palgatoetus, Wage subsidy

Is the instrument explicitly addressing any of the following:

Self-employment

Hiring the first employee

Hiring additional employees/creating additional jobs in micro enterprises

Please ‘X’ and/or describe if relevant

   

x

Operational level

Local

Regional

National

Please ‘X’ and/or describe if relevant

   

x

Rationale/motivation for the instrument

(please describe)

Wage subsidy as a labour market measure has been implemented already in 2006 with the introduction of the Labour Market Services and Benefits Act. However, as a result of the economic recession and the severe impact this had on Estonian labour market and the rapid increase of unemployment, it was decided to increase investment in the measure in order to support creation of more jobs in a situation where employers find it difficult to create new jobs. As a result, eligibility for the measure was widened and persons who are unemployed for at least 6 months were eligible (previously, 12 month unemployment was required). Also, the measure was widened to the creation of temporary jobs as well. Previously, only open-ended contracts had to be concluded.

The changes were introduced in 2010 and the initial conditions were restored since January 2011 (except for the eligibility of temporary jobs which remained into effect).

Purpose and aims for the instrument (please describe)

The aim is to support employment of people who are long-term unemployed through creating new jobs. For that purpose, employers who create jobs for long-term unemployed are supported.

Initiator
Please ‘X’      
Other stakeholders actively involved in implementation (please name them and describe their roles)

Ministry of Social Affairs – development

Unemployment Insurance Fund – implementation

Target groups        
Please describe the target groups (sector, age, level of education, gender)

All employers are eligible for the measure, no matter the size of the company. Wage subsidy is not available to government institutions and the institutions subordinated to these (except for government commercial institutions).

In terms of the target group of the jobs that are created, persons unemployed for at least 12 months are eligible (6 months in case of young unemployed aged 16-24). During 2010, as a result of the recession, the measure was available for persons unemployed at least 6 months (3 months in case of young unemployed).

Funding        
Please describe the funding of the instrument/programme (national and European sources, budget available)

In 2009, expenses on wage subsidy reached EEK 1.3 million (about €83,000). In 2010, the expenses increased to EEK 136.4 million (about €8.7 million) as a result of wider implementation of the measure. The measure is financed both from the state budget as well as European Social Fund (ESF).

Activities    
Please describe the activities of the programme or institutional initiative as detailed as possible

The wage subsidy is paid to the employer at the extent of 50% of the gross wage paid to the employee, but no more than the minimum wage (i.e. € 278.02 per month). The subsidy is paid to the employer for six months in case a person is employed under open-ended employment contract. In case of fixed-term contracts, subsidy is paid for half of the duration of employment relationship but no more than 6 months.

Results (Effectiveness)      
Please describe the results e.g. number of beneficiaries, advised enterprises

According to 2010 data, when the measure was widened, 10,772 persons were employed through the wage subsidy measure. There is no information available on the number of companies that received the benefits.

It has been assessed by the Unemployment Insurance Fund that the share of contracts that were ended before the eligibility to the subsidy expired was small. In the second half of 2010, a total of 1,062 contracts were ended before the planned data of which 56% were requested by the employee and the other 44% at mutual agreement.

Challenges in order to reach the objectives e.g. for the organisation offering the instrument, the entrepreneurs (Please describe); and if available how these have been overcome

One of the largest challenges regarding the implementation of the measure is the possible misuse of the subsidy by some employers. This might include dismissal of regular employees to replace them with subsidised workers or using the measure to create jobs that would have been created without the measure as well. As pointed out already in 2003 by Leetmaa et al, introduction of tools to monitor the use of the measure would be necessary. Also, the extensive use of the measure should only be temporary rather than a long-term approach.

Indeed, the risk of misuse has been downsized by using the measure at a large scale only on a temporary basis. The measure with more beneficial conditions was only in effect during 2010. The initial conditions were restored from the beginning of 2011. However, there is no assessment published on the potential extent of such misuse.

Assessments of the effectiveness e.g. investments made in order to reach the objectives of the programme (outcome vs. investment) (Please base this assessment on evaluations when possible)

There is no cost-benefit assessment available on the measure. However, effectiveness is also dependant on the sustainability of the measure, i.e. in this case whether the jobs that were created also last for a longer period of time rather than the 6 months when the subsidy was paid to employers. According to the Unemployment Insurance Fund, it is too early to assess the results of 2010 in this respect. It will be possible to assess whether the jobs created were still there after one year of implementing the measure, in the second half of 2011 when all the data is declared at Tax and Customs Board.

Outcomes (Efficiency)  
Increasing self-employment, growth and employment e.g. number of start-up and/or jobs created etc. (please describe, preferably based on evaluations, otherwise on experts’ assessment)

The outcome of the measure is increased employment, i.e. in 2010 10,722 persons were employed in the framework of the measure.

Please provide link to evaluation documents if possible

Leetmaa, R., Võrk, A., Eamets, R., Sõstra, K. Aktiivse tööpoliitika tulemuslikkuse analüüs Eestis. [Effectiveness of active labour market policies in Estonia]. PRAXIS Center for Policy Studies. Tallinn, 2003. Available in Estonian (summary in English): http://www.praxis.ee/fileadmin/tarmo/Publikatsioonid/ATP_28nov.pdf

Example 3: Support package for exporting companies

Name of the programme/instrument

Tugipakett eksportivatele ettevõtetele; Support package for exporting companies

Is the instrument explicitly addressing any of the following:

Self-employment

Hiring the first employee

Hiring additional employees/creating additional jobs in micro enterprises

Please ‘X’ and/or describe if relevant

   

x

Operational level

Local

Regional

National

Please ‘X’ and/or describe if relevant

   

x

Rationale/motivation for the instrument

(please describe)

It has been referred that the share of companies for whom access to capital is the largest barrier to development reduced during economic growth period (from 34% in 2002 to 21% in 2005) but increased again considerably in the recession. This is also referred as the main barrier to creating a company by potential entrepreneurs.

Access to financial instruments is the most problematic for potential new entrepreneurs and new enterprises compared to the average among SMEs. Very small (micro) enterprises have been also brought out as facing problems in including investments to support their activities. Small companies mostly use self-financing and the companies to take loans the least are micro companies.

Thus, it is necessary to support access to financial instruments for the companies, specifically in the recession. The companies targeted with the measure are exporting companies as the companies with highest potential to support future growth in the economy.

Purpose and aims for the instrument (please describe)

The aim is to improve access to financial instruments in the economic recession for exporting companies. This is to tackle one of the largest perceived barriers to company development: poor access to financial instruments.

Initiator
Please ‘X’      
Other stakeholders actively involved in implementation (please name them and describe their roles)

Ministry of Economic Affairs and Communications – development

Kredex - implementation

Target groups        
Please describe the target groups (sector, age, level of education, gender)

Exporting companies. The share of exports in total turnover should be at least 20%. Companies from agriculture, hunting, forestry, fishing, real estate, financial or the public sector are excluded. Support is provided only to sustainable companies, assessing this case-by-case.

Funding        
Please describe the funding of the instrument/programme (national and European sources, budget available)

The total extent of support package reaches EEK 6.1 billion (about € 390 million) of which EEK 1.7 billion is publicly financed. Financing of the measure is divided between the state budget (12%), European Regional Development Fund (82%) and Kredex (6%).

Activities    
Please describe the activities of the programme or institutional initiative as detailed as possible

The package includes five individual measures for Estonian exporting companies. The maximum amount of loan per one company is EEK 30 million (€1.9 million). This measure is specifically targeted at tackling the recession as the withdrawal of the state support was planned already when the package was introduced.

The planned measures include raising the capacity of the business loan guarantee provided by KredEx. This will help provide additional loans, which would not be issued without the guarantee by KredEx or would be issued on considerably stricter terms. Also, the size limit to companies eligible for this measures are lost, enabling access to the measure for large companies (i.e. more than 250 employees) as well.

Secondly, a new flexible equity loan will be provided by KredEx. The target group are enterprises that are not able to provide self-financing at the extent required by the bank.

Third, it has been decided to allocate additional finance from both the state budget and KredEx to provide credit to private banks at a more favourable interest rate to increase their finance for granting loans to companies.

As the fourth measure, additional finance will be allocated to provide a specific project-based loan at more favourable conditions to banks to enable them finance specific projects. Currently, lack of long-term loan has a negative impact on the implementation of large-scale investment projects. The target group for this measure is described as a medium-sized exporting company, which has sufficient social and economic impact.

The final measure aims at providing large-scale export guarantees. For that purpose a new private insurance body was created under KredEx and the limit of guarantees provided will be raised.

Results (Effectiveness)      
Please describe the results e.g. number of beneficiaries, advised enterprises

As at 30 September 2010, the companies that have most actively taken up the measures within the support package are those in wood and metal industries. Companies in these sectors have considerably raised exports recently. According to the information from the Ministry of Economic Affairs and Communications, the measures have supported maintaining around 17,000 jobs and creation of 900 new jobs. A total of 565 enterprises have been supported with these measures in the total extent of € 268 million.

Challenges in order to reach the objectives e.g. for the organisation offering the instrument, the entrepreneurs (Please describe); and if available how these have been overcome

As the measures have been introduced fairly recently, there has been no official evaluation of their effects published. There has been some criticism on the implementation of the support package, i.e. several companies pointed out that the measures should have been introduced earlier as delaying the measures could run some companies into further difficulties. By 2011, all of the measures have been implemented. However, some of them were delayed until 2010. Namely, creation of the new private insurance body for providing large-scale export guarantees started work in July 2010.

Assessments of the effectiveness e.g. investments made in order to reach the objectives of the programme (outcome vs. investment) (Please base this assessment on evaluations when possible)

There is no cost-benefit assessment available on the measure.

Outcomes (Efficiency)  
Increasing self-employment, growth and employment e.g. number of start-up and/or jobs created etc. (please describe, preferably based on evaluations, otherwise on experts’ assessment)

The outcomes of the measures are growth and creation of new jobs. For instance, it is expected that this measure will provide easier access for the companies to loans, which will in turn support employers in continuing with their business activities and making easier investments into reorganisation of production. Thus, a direct impact on maintaining and creation of jobs and supporting the exit from the current recession is expected.

As at September 2010 it was assessed that around 900 new jobs were created with the measure.

Please provide link to evaluation documents if possible

There are no evaluations available for this measure.

Part 3: Annex: Update on recent self-employment study

The recent European Employment Observatory Review on self-employment 2010, European Commission, Directorate-General for Employment, Social Affairs and Equal Opportunities provides insight into support instruments for self-employment. To avoid duplication of this information, we ask you as National Correspondent to omit these measures already covered in your research (Part 2 of this questionnaire), and only update or add any additional details or measures that exceed the information already provided in this report.

Table 8: Additional information on specific instruments to the EEO national report on self-employment:

Title of the instrument

Business start-up subsidy to the unemployed

Additional information

An assessment on the implementation of the measure has been published – Evaluation of Business Start-up Subsidy, Work Practice and Coaching for Working Life (1,114 Kb, PDF). It was concluded that the monitoring of the implementation of the measure should be improved in terms of the indicators monitored.

It was pointed out that the terms of distributing the subsidy are generally satisfactory but some of the conditions are not exactly clear. There are also some difficulties regarding the application process for non-Estonians due to language skills issues. It was also pointed out that the availability of business basic training courses is poor for potential applicants. Also, there is a clear necessity for accountancy, legal and marketing training courses while beneficiaries are less interested in professional training courses which are currently available.

In terms of impact, it was pointed out that the main problems impeding achievement of results in entrepreneurship tend to be an excessive optimism, unrealistic planning, lack of financial resources and insufficient knowledge in marketing. In order to improve the likelihood of success of the subsidy, it would be important to provide career counselling services to the potential applicants.

Title of the instrument

Start-up grant by Enterprise Estonia

Additional information

The size of the start-up grant has been increased up to € 7,000 while the requirement for self-financing has remained unchanged at 20%.

Table 9: Please add any other comments to the EEO national report on self-employment:

Table 10: Please indicate ‘X’ if you have no additional information to the EEO national report on self-employment:

Please indicate ‘X’ if you have no additional information to provide

 

Commentary

The measures introduced for creating new jobs or facilitating self-employment are mostly not explicit in terms of their impact. Instead, there are a number of measures targeted at the processes which should lead to increased take-up rate of self-employment and creation of new jobs. One of the problems regarding the assessment of the measures is the lack of information on the number of micro companies taking up the measures described. Also, in most of the cases there is no evaluation available. Some of the measures are fairly new while the lack of regular implementation of evaluations is also problematic.

Kirsti Nurmela, PRAXIS Center for Policy Studies



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