The Republic of Estonia - 100 Years of Innovation by Észt Intézet

THE REPUBLIC OF ESTONIA 100 YEARS OF INNOVATION Edited by Anne Tamm and Ágnes Tolnai

Estonian Institute in Hungary 2019

Edited by Anne Tamm and Ágnes Tolnai Authors: Péter Csillik, Anna Forgács, Krisztián Manzinger, Anne Tamm, Ágnes Tolnai Reviewers: Zsolt Becsey, András Bereczki, Zsolt Enyedi, József Fülöp, Marju Ilves, Zsuzsanna Kinczler, Juhan Kivirähk, Lea Kreinin, Judit Nagy, Tiina Rüütmaa, Orsolya Nádor, Joosep Tens, Tünde Tiborcz-Tóth, Melinda Víghné-Szabó

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, except for the inclusion of brief quotations in a review, without prior permission in writing from the publisher. ISBN 978-615-80945-1-1 Estonian Institute in Hungary H-1055 Budapest, Falk Miksa u. 22.

Tamm Anne – Tolnai Ágnes (szerk.): Észt Köztársaság – 100 év innováció. Magyarországi Észt Intézet, Budapest, 2019. Available: http://www.esztorszag.hu/hir/uj-tanulmanykotet-esztorszag .

Table of Contents

Ágnes Tolnai and Anne Tamm: Introduction: The 100th Anniversary of the Republic of Estonia - Perspectives on the EU Presidency in 2017 .. 1 Péter Csillik and Anna Forgács: On Estonia’s Economic Performance and Competitiveness over the Period of 2000-2018 ............................. 33 Krisztián Manzinger: Social Cohesion for Parallel Societies? – Integrating Estonia’s Russian-speaking Population ............................ 75 Agnes Tolnai: Estonia’s Competitiveness in Global Trade Relations 126 Authors ................................................................................................ 157

iii

100 Years of Innovation

Ágnes Tolnai and Anne Tamm Introduction: The 100th Anniversary of the Republic of Estonia - Perspectives on the EU Presidency in 2017

This volume is dedicated to the 100th Anniversary of the Republic of Estonia, and it contains the presentations of a conference held on that occasion at the Károli Gáspár University of the Reformed Church in Hungary on 23 November 2018.1 The title of the conference was The Republic of Estonia – 100 Years of Innovation. At the moment of writing this introduction, Estonia is preparing for two elections, the national as well as European parliamentary elections, due in 2019. In the summer of 2019, Tallinn will be the place of the largest song festival ever in the history of Estonia.

See the links to the conference programme at (http://www.kre.hu/btk/index.php/1070eszt-koztarsasag-100-ev-innovacio.html, http://www.kre.hu/btk/index.php/1084-esztkoztarsasag-100-ev-innovacio-konferencia.html) accessed 30 January 2019.

100 Years of Innovation

The conference addressed a number of economic, social, political, historical, cultural, literary, and linguistic aspects of Estonia, aiming at showcasing the innovative nature of the policies, decisions, and even literary streams in order to see if any of them are applicable or comparable to the situation in Hungary and its history. This volume has a Hungarian-language counterpart, where the more historical, cultural and language related topics, and also aspects that are more closely related to comparable Hungarian ones have been gathered. This introduction provides an overview on both volumes in English, as they represent one conceptual whole, even if the present volume discusses mainly economic, legal, and social topics that characterize the current state of affairs in Estonia. In the current volume, we show that at present, Estonia is an innovator of the Union, providing outstanding opportunities for start-ups and service sector giants. Estonian per capita GDP was 70% of that of Hungary in the 1980s, but by 2016 it was 107% of the Hungarian value. This volume discusses the social consequences of the Soviet occupation, while the Hungarian counterpart provides more details on the challenges as well as opportunities provided by the nature of the modern times. After the independence of 1991, Estonia could change its legislation on citizenship and language policy, among many other political and cultural matters. The volume in Hungarian is designed to give more in-depth studies; examples include studies on the history of 2

100 Years of Innovation

the minority law and the current constitution, on teaching Estonian to migrants as well as on convening the largest song festival of all times in Estonia. Recently, however, Estonia presided the EU, and this introduction to the volume wishes to provide a short evaluation of the period of presidency before introducing the individual topics of the volume.

The Presidency of the Council of the European Union is always held by one of the Member States of the European Union. The rotation of membership takes place twice a year. The current Member State Presidency is generally working closely with the previous two Member States who were holding the Presidency, forming a cooperating trio. The Presidency is responsible for preparing and organizing the meetings of the European Council, as well as coordinating formal and informal consultations. Estonia received this opportunityâ&#x20AC;&#x201D;somewhat unprepared because of rescheduling that was due to Brexitâ&#x20AC;&#x201D;between July and December 2017 instead of its centenary year, 2018. Let us briefly recall the times that characterized the situation during the Estonian Presidency. During the year 2017, a number of events occurred, bringing about the challenges of the functioning, world politics, and operability of the European Union. Firstly, the Brexit talks were still in a somewhat more benign phase, with 3

100 Years of Innovation

some hope for a better outcome. Secondly, the illegal immigration at the borders of the Union, especially on the Balkan Peninsula and the maritime routes caused problems. Thirdly, in the light of the new challenges posed by the changing international economic environment, the competitiveness of EU Member States and enterprises within and outside the Union decreased, with a less than 2% growth rate of the euro zone. Relationships with Turkey became more complicated after the 2016 coup. In addition, the Comprehensive Economic and Trade Agreement with Canada (CETA) entered into force. Those times also witnessed the tax avoidance policy for digital businesses. Finally, Donald Trump became President of the United States, which meant a different US foreign policy, including economic policy, towards Europe. What is the Estonian EU Presidency in numbers? - 27 EU meetings in Tallinn, including the Tallinn Digital Summit - 10 informal ministerial meetings - 10 high-level conferences to represent the Member States - 226 expert meetings - 20 events related to the European Parliament or to various aspects of its work - preparing and negotiating 337 EU-wide proposals that were under discussion during the Presidency.

100 Years of Innovation

The EU Presidency requires much preparation and activities, as well as sophisticated diplomacy from all Member States. In the six months of an EU Presidency term, the diplomats and politicians of the Member State holding the post are responsible for coordinating the common efforts of the EU and ensuring the success of negotiations, in close cooperation with the leaders, staff, and members of the Commission, as well as the Council and Parliament. In the presidency program, Estonia identified four priority areas for action. The first area involved steps towards an open and innovative European economy, the second entailed the European defense policy, the third dealt with digitization, and, in this context, the free flow of data within the EU, and the final area involved the issue of sustainability. The presidency program was adopted by the government on 29 June 2017.2 In the Estonian presidency program, the issue of digitization was considered a priority. Although it appeared as a separate item in the presidency program, it was also strongly evident in the other three areas. Since the 2008 crisis, changes in the international economic environment have accelerated. Therefore, in the area of an open and innovative economy, the Estonian presidency program highlighted the

Programme of the Estonian Presidency of the Council of the European Union. 1 July 2017 â&#x20AC;&#x201C; 31 December2017. https://www.eu2017.ee/node/3062.html

100 Years of Innovation

need to increase the adaptability of Member Statesâ&#x20AC;&#x2122; economies and to remove existing barriers standing in the way of the internal market. In the Maastricht Treaty, the then Member States committed themselves to the total elimination of obstacles in the way of the four freedoms (i.e., free movement of goods and services, capital and labor), but constant changes created newer obstacles. In the area of digital economy, therefore, the Estonian program supported the use of digital technologies to simplify the administrative burden on businesses. However, this endeavour has fallen victim to national interests, since the parliamentary resolution needed to move forward was adopted only a few weeks before the end of the presidency. Despite the setbacks, another agenda point related to digital economy, the taxation of digital commerce, has booked progress. If we take into account the characteristics of taxation, the system of corporate taxes supporting economic growth, the fairly poor history of the common tax policy so far, the result certainly speaks for itself. One of the major problems of the digital economy is corporate tax. The EU wants to tax the income of digital enterprises located within EU member states and wants to do so on an income base, not profit base. The dialogue launched at the Digital Summit in Tallinn in September 2017 led to a proposal from the European Commission in March 2018 for a directive on equitable taxation in the digital economy.

100 Years of Innovation

In the field of defense and security policy, the issue of cooperation at EU level in the world of cyberattacks is self-explanatory. Illegal immigration has posed serious challenges to the Schengen system. The issues of more efficient links between the information systems of Member States, and the modernization of the Schengen Information System were included in the program. One of the successes of the Estonian Presidency was the committeeâ&#x20AC;&#x2122;s proposal to the Parliament to link the Member Statesâ&#x20AC;&#x2122; police, judicial, asylum and immigration databases. However, success had been overshadowed by the thick defence walls set up by the individual Member States, implementing the Dublin Regulation on the European Common Asylum System3. Diplomacy was unable to overcome these obstacles. Already in the first month of the presidency, significant progress was made in digital development. On 18 July 2017, the ministers of the Member States signed the 5G Declaration in Tallinn. The statement was the forerunner of the 5G Roadmap, adopted on 4 December 2017. In their December statement, the ministers of the Member States reached an agreement on the harmonization, technical use, and allocation of

Council Regulation (EC) No 343/2003 of 18 February 2003 laying down the conditions and procedure for determining the Member State responsible for examining an asylum application lodged in one of the Member States by a third-country national. OJ L 50, 25.2.2003, p. 1-10, Special Edition in English Chapter 19 Volume 006 P. 109 - 118.

100 Years of Innovation

technological developments to telecommunication operators. that are necessary for the introduction of new technology. With a higher bandwidth than previous 4G technology, connecting not only users but network devices, it brings significant digital benefits to the regions that are capable of first-time development.4 The Estonian presidency program devoted a separate chapter to digitization, the main issues of which were discussed at the Digital Summit on 29 September 2017 in Tallinn. The EU-wide meeting on digital developments that took place between 2018-2025, in addition to bringing together the Heads of State or Governments, diplomats and experts of the Member States, also enabled the host, Estonia, to showcase its success in e-administration and e-economy. The competitiveness of the economy was regarded as a top priority. Among other issues, electronic development opportunities were discussed, aiming at reducing the bureaucratic burden on businesses. Also, the free flow of data

Qatar was the first in the world to use this technology in commercial relations in 2016. In Hungary, the network was tested in 2018, and it is in use since June. (Nokia and Ooredoo Qatar demonstrates 10 Gpbs of extreme broadband speed and 1-millisecond latency of 5G technology. Nokia, Press Release, December 15, 2016. / nokia-andooredoo-qatar-demonstrate-10-gpbs-extreme-speed-and-1-millisecond-latency-of-5gtechnology; Sten Hankewitz: The World's First 5G Phone Call Made in Tallinn. Estonian World, June 28, 2018, http://estonianworld.com/technology/the-worlds-first5g-phone-call-made-in-tallinn/; Létrehozták Magyarország első 5G-s kapcsolatát, Portfolio.hu, 2018. július 2. https://www.portfolio.hu/vallalatok/it/letrehoztakmagyarorszag-elso-5g-s-kapcsolatat.290630.html )

100 Years of Innovation

between Member States was targeted. These two issues constitute the foundations of the Digital Single Market. Member State leaders have agreed that the development and widespread use of digital technology is a clear priority for Europe. According to Estonia’s Prime Minister Jüri Ratas: “We should make Europe a leader in cybersecurity by 2025, in order to ensure the trust, confidence, and protection of our citizens, consumers and enterprises online and to enable a free and law-governed internet.”5 However, the Estonian Presidency has not only made progress on issues relating to digitization. It has achieved significant results in a number of areas, where it has been possible to make substantial progress in harmonizing the interests of EU Member States compared to previous negotiating points. The 2018 EU budget negotiations were successful. A more flexible budget that follows the changes in the international economic environment more than before, simplifying the rules for the use of EU funds is all about improving the competitiveness of the European economy. The political agreement with Parliament on this issue is a clear success of the Estonian Presidency. Related to the budget issue, the program included the implementation of the agreement on the Conclusions of the Prime Minister of Estonia Jüri Ratas after the Tallinn Digital Summit. Estonian Presidency of the Council of the European Union, 06/10/2017. https://www.eu2017.ee/news/insights/conclusions-after-tallinn-digital-summit. 5

100 Years of Innovation

establishment of a European Public Prosecutor’s Office for the use of EU funds and VAT crimes. All of these plans were successfully achieved during the presidency; more specifically, the Council Regulation 2017/1939 of 12 October 20176 created the previously mentioned Office.7 The Estonian EU Presidency was successful in concluding the first phase of the Brexit negotiations and in diminishing disagreements between supporters and opponents of the negotiations. However, an unexpected turn in the negotiation of Posted Workers Directive occurred in the half-year of the Estonian EU Presidency. It was frozen due to conflicting interests of old and new Members States. Although full agreement had not been concluded, the Parties took significant steps towards reaching agreement in the parliamentary phase. The promulgation of the European Pillar of Social Rights on 17 November 2017 was also preceded by serious diplomatic work that came to fruition during the Estonian EU Presidency. 8

Council Regulation (EU) 2017/1939 of 12 October 2017 implementing enhanced cooperation on the establishment of the European Public Prosecutor’s Office (‘the EPPO’). OJ L 283, 31.10.2017, p. 1–71 7 The political agreement between the Member States on the establishment of a European Public Prosecutor’s Office was established on 8 June 2017 already. Nonparticipants that are able to join at a later stage are the UK, Ireland, Poland, Hungary and Sweden. 8 The Committee presented its proposal on 26 April 2017, which was announced at the Göteborg Social Summit on 17 November 2017 by Jean-Claude Juncker, Chairman of

100 Years of Innovation

During the half-year of its presidency, Estonia was trying to devote attention to digitization in all areas. However, e-commerce and data traffic, issues that are relevant for supporting early-stage businesses, did not receive satisfactory attention from the viewpoint of Estonia. For digital businesses, it would have been a major achievement if the free flow of data was included in the bilateral trade agreements. Instead, antidumping proceedings against Chinese goods stood in the limelight and dominated the negotiations during Estoniaâ&#x20AC;&#x2122;s Presidency. The program of the Estonian Presidency of the Council tried to outline the tasks that needed to be solved by the European Union. However, due to differences in views and interests between Member States, the halfyear time frame was not sufficient to make progress in all areas. The Estonian EU Presidency drew the EUâ&#x20AC;&#x2122;s attention to the importance of digitization and established the fact that discussing and dealing with digitization is a European priority. The present volume presents some aspects of the modern Estonian society and economy. The following paragraphs of the introduction present the topics and the authors of both volumes, the Hungarian and the

the Committee. On behalf of the Committee, President Jean-Claude Junker, on behalf of the Parliament, President Antonio Tajani, and on behalf of the Council, Prime Minister JĂźri Ratas noted the EU document on equal opportunities and access to employment, decent (humane) working conditions, social inclusion, and social protection.

100 Years of Innovation

English one, in a nutshell. The Hungarian-language (counter)part presents thus more in-depth historical, cultural and language related topics, or aspects of Estonia and its culture that are more closely related to or comparable with the correspondent Hungarian ones. The reason for providing an English-language overview of the Hungarian papers and authors is, on the one hand, that the two volumes and the event series were designed to form a coherent whole. The Hungarian papers provide valuable detail on the articles designed for the English volume but, on the other hand, they are more comparative and bound to the bilateral relationships of the two cultures and countries in their nature. With some guidance in English, and with the help of modern translation methods, it is not difficult to extract the necessary further information for the interested reader. Note that in order to facilitate easy access, the papers are presented in the alphabetical order of the names of the authors in both volumes, and the present introduction ties them together thematically. While in the English volume, we would like to honour the centenary of Estonia from the viewpoint of Hungary, presenting the international readership with the works of the professors and researchers of the Károli Gáspár University of the Reformed Church in Hungary on this topic, we have designed the Hungarian in a more culturally relevant, spiritual way. This is so in order to reflect the mission of the Károli Gáspár University of the Reformed Church in Hungary in Hungarian-speaking regions. Our 12

100 Years of Innovation

goal is to devote a part of the Hungarian volume to deeper currents that connect the two countries and cultures. We feature two prominent figures in the intellectual environment of the two countries, an Estonian in Hungary and vice versa, a Hungarian in Estonia. Therefore, on the other hand, the Hungarian volume features an obituary in the memory of Mai Bereczki (née Kiisk), the most prominent local Estonian intellectual in Hungary for the past decades. Unfortunately, she passed away on the very year of the Estonian centenary. On the other hand, the Hungarian volume comprises a recollection of Annika Laats about her Hungarian (Transcarpathian) roots and Calvinist upbringing. Annika Laats serves currently as a minister in the Harju-Risti congregation, and she is one of the most lauded and appreciated public figures in Estonia. The volumes discuss a number of economic, social, political, historical, cultural and linguistic aspects of Estonia, aiming at showing the innovative nature of the policies and decisions in Estonia in the hope that some of them are applicable or comparable to the situation in Hungary. The paper by Péter Csillik and Anna Forgács, titled “On Estonia’s economic performance and competitiveness over the period of 2000-2018”, describes Estonia, as a “relatively poor area in the ‘80-s, which has emerged as a trustworthy, not corrupt, diligent, frugal, forward-looking, non-Balkan, post-socialist country, with a relatively young population, currently converging to approximately the half (56%) 13

100 Years of Innovation

of Germany’s average per capita GDP level of the period of 1985-2016.” The authors argue that “Estonia aimed – in the majority of years - at having budget surplus and so keeping its public debt low, meanwhile attracting foreign capital, so that the foreign direct investment inflow would cover the deficit of the current account balance.” The authors add a comparative aspect, discussing that “Estonia’s competitiveness indicators after 2010 were on the top of the post-socialist countries’, while Hungary is found in the second half of the field. Estonian per capita GDP in 1980 was 70% of that of Hungary, by 2016 it is 107% of the Hungarian value, which let us assume that during the last 37 years – indeed with large oscillation – it improved by 37% point.” The authors, Péter Csillik Ph.D is Associate Professor at Károli Gáspár University of the Reformed Church in Hungary, Faculty of Law, Institute of Economics and Management Sciences, and Anna Forgács Ph.D, is Associate Professor and Vice-Dean of Education at Budapest Business School University of Applied Sciences, Institute of Management and Human Resources, Department of Entrepreneurship and Human Resources. As a consequence of the Estonian decision to innovate and to invest in economic security, Estonia has become a poster boy of competitiveness. Ágnes Tolnai examines the aspects of competitiveness of Estonia in her paper titled “Estonia’s competitiveness in global trade relations”. In her 14

100 Years of Innovation

article, she points out that “a few decades ago, small countries like Estonia have emerged as supplier or assembler partners of big economies. The core economic fuel of EU enlargement process was the new business opportunity, especially merchandise trade facilities of the Eastern side of the continent.” She discusses that “[n]owadays, Estonia is not a supporter or a simple market of EU-15, but an innovator of the Union providing outstanding opportunities for start-ups and service sector giants.” The aim of her study is “to place Estonia on EU market examining the Member Country’s economic achievement after EU accession through the lens of competitiveness.” She goes on to explain that “[c]ompetitiveness indexes comparing with other trade indexes are quite complex and comprehensive to give an insight into economic relations. As there are many indexes measuring competitiveness, the study focuses on the Index of Revealed Comparative Advantages (RCA) that is able to measure post-trade effects. Using RCA, the study points out the present and future fuels of Estonia’s economy.” Ágnes Tolnai PhD is Educational Consultant at Károli Gáspár University of the Reformed Church in Hungary. She has authored books and articles on international economic affairs and economic aspects of labour migration.

The development of the Estonian economy and various advantageous decisions and results are discussed in the Hungarian volume. Estonia is 15

100 Years of Innovation

compared with Hungary by Zsolt László Becsey, PhD, who also teaches at Károli Gáspár University of the Reformed Church of Hungary. Former MEP, State Minister for Foreign Economics of Hungary, Deputy State Secretary for Transport, Deputy Head of Mission in Brussels during the accession talks of Hungary to the EU. The title of his article (in the Hungarian volume) is “Estonia's economic development and accession attempts to the European Union - in the light of the Hungarian aspirations”. He argues that, since its independence, Estonia has been highly integrated into Western economic and security systems. Essentially, Estonia has given up its independent monetary policy since its independence, because it tied the exchange rate of its currency to the German mark and then to the euro, considerably facilitating its accession to the EU. In terms of quantity and quality, the country is catching up according to Becsey, since it is now above 70% of the EU average, although it started from a very low level. Becsey acknowledges that it is true that after the crisis and euro zone membership, the catching-up momentum stopped. Fiscal policy is very disciplined, and great importance is attached to modernization. Economic and public administration have achieved outstanding results in digitization. Estonia has obtained the most innovative ratings in the European Union among the post-socialist countries, the R&D spending as a share of GDP exceeding the post-socialist average. Its relations with Hungary are close 16

100 Years of Innovation

despite no significant working capital investment in each other’s countries. Bilateral trade is also very high compared to the size of the country, even if Hungarian export to Estonia is not high. In the study, Becsey relies primarily on the data and statistics of the European Union, and in many areas, he highlights the essence of Estonian processes in the light of European and Hungarian results. The English-language volume discusses the social consequences of the Soviet occupation, the boon as well as burden of the combination of the historical past and modern times. After the independence of 1991, Estonia could change its legislation and citizenship and language policy. Various social problems and their solutions are presented by Krisztián Manzinger in his paper titled “Social Cohesion for Parallel Societies? – Integrating

Estonia’s

Russian-speaking

Population”.

Manzinger

discusses the social consequences of the Soviet occupation, reasoning that “in order to ‘minimize’ them after the independence of 1991, Estonia implemented a restrictive legislation on citizenship and language. The decades since then have seen a growth of Estonian knowledge among Russian-speakers and the naturalization of many non-Estonian speaking residents; however, these processes have slowed down.” He argues that “[a] change of paradigm seems to be inevitable not only for strengthening the social cohesion on Estonian territory, but also because of the reanimation of the expansive Russian foreign policy which several times 17

100 Years of Innovation

has used Russian ‘compatriots’ in the neighboring countries as pretexts for involvement.” He suggests that “[a] framework providing respect for the language and culture of the minorities and ensuring the territorial integrity and sovereignty of Estonia at the same time, could pave the way for a secure and prosperous country for all.” Krisztián Manzinger Ph.D. is Assistant Professor of the Faculty of Law at the Károli Gáspár University of the Reformed Church in Hungary since 2010. Between 2008 and 2010, he was desk officer and head of unit in the National Assembly of Hungary. Between 2010 and 2011, he served as Third Secretary in Bucuresti at the Embassy of Hungary to Romania and, between 2012 and 2014, head of unit in Budapest, at the Ministry of Foreign Affairs. Since 2014, he is Second Secretary in Brussels at the Permanent Representation of Hungary to the EU. He has authored various articles on regional and European minority issues. The paper of Zsolt Szabó, part of the Hungarian volume, has the title “Constitution and legislation in Estonia: trends and innovations”. Szabó discusses that “Estonia, during its 100 years of independence walked on a way similar to other countries of the post-socialist region: sovereignty after WWI, dependence and soviet regime after WWII, democratic development after 1990. During the 100 years, four constitutions followed one another, interrupted by Soviet dictatorship.” However, he argues “[t]he current constitution follows the European trends, being 18

100 Years of Innovation

based on separation of powers and rule of law, however, there also differences and Estonian characteristic features in state building and constitution.” Szabó also takes a comparative perspective. His paper characterizes the Estonian history of constitution-making compared to other countries, especially Hungary. He examines the Estonian parliament as the central constitutional organ in theory and practice, compared to the Hungarian National Assembly: “Estonia, like Hungary chose the German model of state structure: strong parliament, stable government, weak (representative) president. In contrast to Hungary, the German-like separate constitutional court model was not implemented, instead, the Supreme Court and the Legal Chancellor has duties to protect the constitution and fundamental rights.” Szabó details his overview: “The parliament of Estonia (Riigikogu) is a unicameral legislature, which is often ruled by coalition agreements, due to the proportional electoral system. For a short while, the parliament has two chambers. Like in Hungary, since the change of the socialist regime, governments could fill their full period.” Zsolt Szabó, PhD, is Associate Professor of constitutional law at Károli Gápsár University of the Reformed Church, senior research fellow at National University of the Public Service, Bolyai fellow at Hungarian Academy of Sciences. His main research fields include comparative parliamentary studies and legislation.

100 Years of Innovation

Returning to the topic of minority legislation, the history of Estonia has produced an interesting basis for minority legislation, with a constitution at the beginning of the 20th century that was profoundly innovative in its time. This is detailed in the paper in the Hungarian volume by András Bereczki, PhD, who is Honorary Consul General of the Republic of Estonia. While being acting president of the HungarianEstonian Society, he is also historian, teaching at the Finno-Ugric Department of the Eötvös Loránd University. His paper has the title “The minority policy of interwar Estonia”, and it takes the reader a hundred years back to history. Bereczki writes: “Having become independent at the end of World War I, Estonia was a homogenous nation-state, at least in comparison to the countries of East-Central Europe. Beginning with the declaration of independence, laws and statutes were passed that served to win the trust of the minorities. The Constitution of 1920 guaranteed the freedom to determine one’s nationality, the right to establish cultural autonomies for minorities and, furthermore, the right of national minorities to use their language in state institutions and local governments. At the time of its accession to the League of Nations in 1921 Estonia declared under international law that it would defend national minorities. The law on the cultural autonomy of minorities was passed in 1925, and with it the principle of self-determination of national minorities could be realized for the first time in the world. The Germans 20

100 Years of Innovation

and Jews of Estonia availed themselves of the opportunity to set up cultural autonomies.” He admits that “[n]ationalist currents made their influence felt in Estonia as well, but Estonian nationalism did not become aggressive. Interwar Estonian nationality policy as a whole created the conditions for preserving minority culture and identity, but the year of 1939 brought dramatic changes in the fate of minorities.” One solution to the social and cultural problems and challenges sketched in Manzinger’s paper is better language instruction language. The Hungarian volume contains a paper on how language teaching, in addition to Russians, is important in the context of migrants as well. This is an area where mutual exchange of skills and knowledge would be fruitful in Hungary and Estonia. There are certainly good practices that can be adopted from Estonian innovations in language teaching. Teaching migrants and the teaching methods in Estonia is the topic of Ágnes Kollár, whose study focuses on the new teaching materials which are used during language courses organized for immigrants. The aim of her paper is to introduce some good practices, which could be adopted from the Estonian language teaching methods to the Hungarian situation. Ágnes Kollár successfully defended her thesis on this topic in 2019 at the Faculty of Humanities at the Károli Gáspár University of the Reformed Church in Hungary. Her study is based on her study trip to Tartu and Tallinn that took place in April 2018. 21

100 Years of Innovation

The times that Bereczki is writing about were characterized by innovation on the literary arena as well, which can be compared to those initiated by Nyugat in Hungary. The article of Tímea Takács is titled “Modernity of Literature and Polemics Between Generations in the Estonian and Hungarian Literature in the First Half of the 20th Century”, and the interested reader can find it in the volume that features the articles of the conference in Hungarian. The article mainly focuses on the literary history of the Estonian modernity of literature. Its aim is to give a short overview of the different literary circles (Noor Eesti, Siuru and Tarapita) and their activities that determined the later direction and development of the Estonian literature. By referring to some parallel phenomena between the Estonian and Hungarian literary history in the given period, the text tries to bring the different cultural issues and personalities closer to the reader. Takács finds it worth emphasizing that in the 1920s-1930s, the polemics of generations arose and were dealt with greater attention in the literature of Estonia as well as Hungary. She writes: “The members of the younger generation were born at the turn of the century and grew up during World War I. The basis of the modern language and literature were created by the former generation and that triggered the questions of how it is possible to say anything after the World War I, or where the direction after the previous achievements is, 22

100 Years of Innovation

and if it is possible to create anything original at all.” She sets out to explore “[t]o what extent [..] the tradition determine[s] you, and tradition or the individual talent matters more?” Tímea Takács has graduated from the Károli Gáspár University of the Reformed Church in Hungary, where she studied English, Hungarian and Hungarian as the second language. She has worked as a secondary school teacher for five years. Currently, as a student of the Modernity of Literature Doctoral School at Eötvös Loránd University, she is conducting research on the theme of György Sárközi’s oeuvre and besides, she is working as a programme officer at the TEMPUS foundation. She has studied Estonian culture and literature for seven years, starting with her teacher assistant scholarship period in Tallinn. The Estophilus scholarship in 2017 made it possible for her to research the Estonian literature in the period between 1900-1945. She started learning Estonian at the department of ELTE, at Tallinn University, and in Tartu summer school. She is continuing at the Estonian language course of Anne Tamm at the Károli Gáspár University of the Reformed Church in Hungary. As far as literature is concerned, the Estonian children’s literature is rather special in its innovative depiction of ordinary life and everyday— this is what yet another graduation thesis in 2018, defended at the Pedagogy Faculty, claims. Mariann Nagy, now holding a diploma in pedagogy from the Károli Gáspár University of the Reformed Church in 23

100 Years of Innovation

Hungary, is the author of the Hungarian-language article “Estonian children’s literature: the emergence and depiction of everyday life in the Estonian children’s literature”. The article features two interviews that Mariann Nagy conducted with prominent Estonian authors, Andrus Kivirähk (an author whose books have been translated into Hungarian as well) and Ilmar Tomusk (who won a prestigious children’s literature prize in 2018). Another topic that ties with Mariann Nagy’s depiction of the innovative way of describing the everyday life in literature, is Lilla Dóra Kövesdi’s paper in the Hungarian language volume is called “On the Changing of Significance of the Festive Occasions and Memorial Days in the Estonian SSR and Hungary Between 1970 and 1989”. She describes her project as follows: “The number of projects and papers studying the Soviet times are progressively growing in Estonia and in Hungary. Studies are frequently focusing more on labor and work and everyday life. It is edifying to study holidays and memorial days since these enable the members of a society to get away from everyday life, in addition they serve many functions. Festive occasions can bring communities together and these are opportunities to remember the past for a nation or for a certain group of people. The main aim of this paper is to show the main changes in significance and ways of celebrations of holidays and memorial days in the Estonian SSR and in Hungary between 24

100 Years of Innovation

1970 and 1989 paying particular attention to the main differences. In my paper I would like to address the following issue: how can a society celebrate and spend their holidays when leisure time and celebrations are determined by the socialist ideology?” Lilla Dóra Kövesdi is a PhD student at the Eötvös Loránd University, Faculty of Humanities, Doctoral Studies in Folklore and Literature of Uralic People. Research topic: Estonian culture. One celebration that was recognized as the most important national event that was allowed in the Soviet times was the Song Festivals. This is the topic of Zsuzsanna Kinczler’s article in the Hungarian counterpart of the present volume. The short study summarizes the roots and the achievements of the commitment to music of the Estonian nation, preparing for the 2019 occasion of the 150th anniversary of the first Song Festival. Zsuzsanna Kinczler, DLA, is a church musician and music teacher. She is Associate Professor at the Károli Gáspár University of the Reformed Church in Hungary, teaching music pedagogy at the Church Music department. She is all set to travel to Estonia this summer, to sing in the giant chorus at the beginning of July 2019! Probably the best-known composer of religious classical music of our times is Arvo Pärt. Born in 1935 in Paide, Estonia, Pärt has consistently been noted as the most performed living composer by the classical music event database Bachtrack. On the evening of the centenary anniversary 25

100 Years of Innovation

at the Károli Gáspár University of the Reformed Church in Hungary, the conference participants could enjoy a concert featuring works from Pärt spanning over several of his creative periods, performed by the Estonian Philharmonic Chamber Choir and the Tallinn Chamber Orchestra at the Liszt Academy of Music in Budapest.9 József Fülöp’s contribution in the Hungarian volume discusses the many sides of the œuvre of Arvo Pärt. József Fülöp is Assistant Professor at the Károli Gáspár University of the Reformed Church in Hungary, the Department of German Language and Literature and the Department of General Humanities, and he also teaches at the Department of Religious Music at the Ferenc Liszt Academy of Music. His paper demonstrates, after a brief introduction to the Estonian composer’s work and life, the latest monographic approaches to Pärt’s œuvre written in English and German: Paul Hillier’s standard work entitled Arvo Pärt (1997), Oliver Kautny’s Arvo Pärt zwischen Ost und West (2002) based on readerresponse criticism, Peter J. Schmelz’s substantial analysis of Soviet avantgarde music during the Khrushchev “thaw” (Such Freedom, if only Musical, 2009), The Cambridge Companion to Arvo Pärt (2012) edited by Andrew Shenton, and Peter C. Bouteneff’s theological study Arvo

See https://kultuur.err.ee/881827/mulje-lisztist-lisztini accessed 30 January 2019.

100 Years of Innovation

Pärt: Out of Silence (2015). Two further, mainly intrinsic (‘werkimmanent’) analyses are more closely examined. The coherent and well-balanced Die Johannespassion von Arvo Pärt (2015) is dedicated to a single composition. The team of writers, Beate Kowalski and Michaela C. Hastetter deal with the composer’s compositional style called ‘tintinnabuli’, the theological aspects and structure of the Passio, moreover with his spiritual relationship with Archimandrite Sophrony. Kevin C. Karnes’ Tabula Rasa (2017) is also focused on a single and groundbreaking piece. Karnes reveals Pärt’s development of tinntinabuli, the Soviet and international reception of the iconic Tabula rasa (1977), a double concerto for two violins, prepared piano and strings as well as its exciting cultural context. Venturing further from the past and present traditions, there are two papers in the Hungarian volume that are truly concerned with the two languages and cultures in tight interaction with each other: Tünde Tiborcz-Tóth’s paper is titled “Language interference production corpus of a Hungarian–Estonian bilingual child”, and Nóra Benedek’s paper has the title “100 years of Estonian-Hungarian cultural relations”. Tünde Tiborcz-Tóth’s corpus of texts is described in “Language interference production corpus of a Hungarian–Estonian bilingual child”, contains 22 items with norm violation(s) in the sentence. The speaker was a Hungarian–Estonian bilingual child with consecutive 27

100 Years of Innovation

language acquisition. She discusses the child’s stages and several typical representations of the differences (‘norm violations’) from the target language standards. The study is related to another corpus, which contains the data of non-target like language use of Hungarian-learning Estonian adults. Tünde Tiborcz-Tóth, Ph.D. was at the time of submitting the manuscript Associate Professor (University of Pannonia, Veszprém, Hungary), and now she is Lecturer of Hungarian in Hankuk University, South Korea. She has worked as a researcher and lecturer of literature studies and online publishing in the ’90s at the JATE (Szeged) and ELTE (Budapest) Universities. She was a co-founder of the legendary BIÖP – Center for Digital Humanities at the ELTE University (Budapest) in 1997, and a co-editor of the online critical edition of Bálint Balassi’s poetical works in 1998. Between 2009 and 2017 she lived six years in Estonia and worked as a lecturer of Hungarian at the University of Tartu, and later as the director of the Hungarian Institute in Tallinn. She received her Ph.D. in literature studies in 2000 (ELTE University, Budapest) and in linguistics in 2018 at the University of Pécs, Hungary. Last but not least, we report the symbolically most valuable contribution to the centenary of Estonia for the Hungarian volume, Nóra Benedek’s “100 years of Estonian-Hungarian cultural relations”. Benedek describes her research as follows: “During the last 100 year the relationships between Estonia and Hungary have been existing in various 28

100 Years of Innovation

forms and contexts. Sometimes the similar background and intention, other times the different circumstances and motivations helped the relations to stay alive, to change, to improve constantly as well as to adapt always to the current opportunities. The analysis is carried out using historical source material and interviews with people who took part actively in the relationships. The cultural relations between the two countries since 1918 and their directions and results are discussed in this paper. Which were the ways and opportunities that helped or hindered the relations to stay alive and recreate themselves?” Nóra Benedek, follows the Doctoral Studies, Folklore and Literature of Uralic People at the Eötvös Loránd University, Faculty of Humanities. Her research topic is the Hungarian-Estonian relations in the 20th century, especially the cultural relations during the Soviet times. In 2012, she was awarded a Master’s Degree with the grade with Honors and the professional qualification of Philologist in Finno-Ugric Studies. The Republic of Estonia 100 Years of Innovation, conference and workshop dedicated to the 100th Anniversary of the Republic of Estonia featured presentations from Estonia as well: Renate Pajusalu, Helle Metslang, Reili Argus, Heete Sahkai, Piia Taremaa, and Natalia Vaiss. Three exhibitions were held: a poster presentation session on Estonian Linguistics and the Estonian Mother Tongue Society at the Károli Gáspár University of the Reformed Church in Hungary, Reviczky 4 building, 29

100 Years of Innovation

starting on 23 November 2018, and at the Research Institute for Linguistics, the Hungarian Academy of Sciences, starting on 27 November 2018. The Institute of Estonia in Budapest provided an exhibition on Estonian history for display in the Reviczky 4 building. The links gathered at the end of the introduction give an overview of other activities and writings around the event. 10 Last but not least, this volume is peer-reviewed. We would like to express our heartfelt thanks to (in the alphabetical order) Zsolt Becsey, András Bereczki, Zsolt Enyedi, József Fülöp, Marju Ilves, Zsuzsanna Kinczler, Juhan Kivirähk, Lea Kreinin, Judit Nagy, Tiina Rüütmaa, Orsolya Nádor, Joosep Tens, Tünde Tiborcz-Tóth, Melinda VíghnéSzabó, who acted as the peer-reviewers of the papers in the two related volumes. The reviewers of the English volume are highlighted with bold. Márton Velenczei has done professionally much of the very humble but essential job of editing the format of the works, and Emily Kovács has corrected the English and various style matters (both are currently

See https://kultuur.err.ee/881827/mulje-lisztist-lisztini, accessed 30 January 2019. The overall scientific and cultural event was supported by the research support grant of Károli Gáspár University of the Reformed Church in Hungary, 20623B800 “MONDÉSZT”, and publication also thanks the joint research mobility projects under the Agreement on Scientific Cooperation between the Estonian Academy of Sciences and the Hungarian Academy of Sciences, titled “Morphosyntactic and phonological aspects of Finno-Ugric languages” and “Contact-induced change in Finno-Ugric languages”.

100 Years of Innovation

students of the Károli Gáspár University of the Reformed Church in Hungary). The warmest thanks go to the overall reviewer of the two volumes, Melinda Víghné-Szabó. We are grateful to the Faculty of Humanities of the University for hosting and financing one of the events that led to the publication of this volume. Many thanks go to the RIL HAS for hosting another event and for inviting and housing the invited guests form Estonia. The vice director of Ludwig Muzeum, Krisztina Szipőcs, has invited all guests to a guided tour at her exhibition titled Related by Sister Languages, which connected modern Estonian and Hungarian art. The Estonian National Radio has published our account of the music event (many thanks to Epp Alatalu for inviting the contribution). We are grateful to the Estonian Institute in Estonia for providing an exhibition on the Estonian History for the event held at Károli. The Mother Tongue Society and the Institute of the Estonian Language, represented by Helle Metslang and Heete Sahkai, were kind to provide posters on various aspects of the Estonian language, for which we are thankful. Many thanks are due to the team of the Faculty of Humanities and Social Sciences at the Károli Gáspár University of the Reformed Church in Hungary, including students of Estonian, Valeria Fedorova, Gergely Nagy, and Tímea Takács as well as the students of Estonian and the media team of the University for helping

100 Years of Innovation

organize the event, and last but not least, the Dean of the Faculty of Humanities, Enikő Sepsi, for hosting and opening the event. The Estonian guests summarized the event at Károli, “Täna on küll uhke ja hää eestlane olla” – ‘Today, one can indeed feel proud to be an Estonian’, echoing a line of a patriotic song that was popularly sung on the Song Festival in 1988 that defined the times of regaining factual independence, Eestlane olla on uhke ja hää ‘One can be proud of being an Estonian’. We hope that the present volume, holding a number of studies by the faculty members of the Károli Gáspár University of the Reformed Church in Hungary, is a welcome contribution on Estonian studies. We wish a happy 100 years birthday to the Republic of Estonia from the Károli Gáspár University of the Reformed Church in Hungary!

100 Years of Innovation

Péter Csillik and Anna Forgács On Estonia’s Economic Performance and Competitiveness over the Period of 2000-2018

ABSTRACT Estonia, which was relatively poor in the ‘80-s, is a trustworthy, free of corruption, diligent, economical, forward-looking, non-Balkan, postsocialist country, with a relatively young population, currently converging to approximately the half (56%) of Germany’s average per capita GDP level of the period of 1985-2016. Estonia has maintained – in the majority of years – budget surplus and has consequently kept its public debt low, meanwhile has attracted foreign direct investment, so that the FDI inflow counterbalanced the deficit of the current account balance. Estonia’s competitiveness indicators after 2010 were on the top of the list of post-socialist countries’, while Hungary is positioned in the second half in this field. Estonian per capita GDP in 1980 reached 70% of that of Hungary, by 2016 it moved to 107% of the Hungarian figure, which let us assume that during the last 37 years – indeed with large oscillation – this small country improved by 37% point in light of the Hungarian convergence. 33

100 Years of Innovation

ABSZTRAKT Észtország, amely a 80-as években még szegény volt, ma megbízható, korrupciómentes, szorgalmas, takarékos, előre tekintő, nem balkáni, poszt-szocialista ország, viszonylag fiatal népességgel és jelenleg az 1985-2016 közötti időszak átlagos egy főre jutó német GDP-jének valamivel több, mint feléhez, 56%-ához közelít. Észtország a vizsgált időszak éveinek többségében költségvetési többletet ért el és ezáltal az államháztartás adósságát alacsonyan tartotta, miközben vonzotta a külföldi tőkét úgy, hogy a nettó működőtőke beáramlás értéke meghaladta

folyó

fizetési

mérleg

deficitjét.

Észtország

versenyképességi mutatói alapján a 2010 utáni években megelőzte összes európai poszt-szocialista versenytársát, míg Magyarország a mezőny második felébe került. Észtország egy főre jutó GDP értéke 1980-ban a magyarnak 70%-án állt, 2016-ra ez az arány 107% lett, azaz 37 év alatt, nagy kilengések mellett, összesen 37% pontot javult a magyarokhoz képest.

INTRODUCTION Hungarian economists have been keenly interested in the performance of the Estonian economy: this is well illustrated by the number of papers dealing with Estonia and published in Közgazdasági Szemle (henceforth, KSZ; see Figure 1). Figure 1 does not contain data on the year 2014, 34

100 Years of Innovation

because this year was the 10th anniversary of EU enlargement. In 2014, sixteen papers published in KSZ mentioned Estonia. While all of the Estonia-related approximately 140 studies contained noticeable assessments on Estonian economy, few attempts were made to explore all aspects of the Estonian economic performance. Our paper has aimed at amending the image with the assistance of twenty important studies on the subject.

Figure 1. Number of articles dealing with Estonia, published in KSZ 12 y = -0,038x2 + 152,55x - 153179 R² = 0,6122

10 8 6

4 2 0 1990

1995

2000

2005

Source: Közgazdasági Szemle

2010

2015

2020

100 Years of Innovation

ESTONIA COMPARED TO THE POST-SOCIALIST EUROPEAN COUNTRIES Before presenting our findings on Estonia’s competitiveness, first we compare the post-socialist European countries to Germany, using Maddison’s per capita GDP data of 1985 and 2016 (a change from 1985 to 2016). Table 1. points out why the post socialist European countries were divided in two groups.

Figure 2. Per capita GDP in post–socialist European countries in 1985 and the variation from 1985 to 2016 40% 30% y = -72%x + 39% R² = 91%

20% 10% 0% -10% -20%

y = -65%x + 18% R² = 99%

-30% 0%

20%

40%

60%

Source: Maddison

80%

100%

100 Years of Innovation

Table 1. Per capita GDP rates of some countries, compared to Germanyâ&#x20AC;&#x2122;s value in 1985 and the level of change in % point 1985â&#x20AC;&#x201C;2016

Country

Slovenia Czech Republic Slovakia Latvia Hungary Lithuania Romania Estonia Poland Croatia Montenegro Bulgaria Serbia Albania Bosnia-Herzegovina Source: Maddison

1985

89 86 67 58 51 53 32 46 35 75 65 55 38 17 11

Change in percentage 198519852016Non2016Balkan Balkan countries countries -28 -20 -10 -8 0 3 8 10 21 -29 -26 -17 -8 7 12

It is true for both country groups, that compared to Germany, the more underdeveloped a country was in 1985, the faster the country developed, and the less a country was lagging behind, the more it opened the gap. 37

100 Years of Innovation

On the right edge of Figure 1, on the lower trendline we can find the six Balkan countries: Albania, Bulgaria and post-Yugoslavian countries except Slovenia. Those six countries are fitting tight to the trendline (y=18% - 65% x starting situation), showing the variation of the percentage of countries’ backwardness in per capita GDP compared to 2016 Germany’s data. In case a country reached 28% of Germany’s per capita GDP in 1985, then it will be the same in 2016, because the trend equation for zero would be 18/65=0,28 (28%). Among the Balkan states only BosniaHerzegovina and Albania get closer to Germany. The backwardness of the other four Balkan countries has been growing. There was no war in Bulgaria, its backwardness still grew by 17% point compared to Germany in this period. Probably, in the case of Croatia, Serbia and Montenegro, the explanation is not the war but the “Balkan influence”. Similar to the Balkan countries, the other post-socialist countries are on a linear trend as well (r2=91%), Romania and Slovenia not forming part of Balkan country group. Countries that were at 54% (39/72=54) of Germany in 1985, have kept this level. Neither Hungary (51%) nor Lithuania (53%) approached Germany during the last three decades. The backwardness of Slovenia, Czech Republic, Slovakia and Latvia has been growing over the period of 1985-2016. The three converging countries are Romania, Poland and Estonia. 38

100 Years of Innovation

Despite of its great backwardness, Romania improved by 8% only, perhaps because of the “Balkan magnet” pulling it back, while Poland starting from almost the same level, improved by 21% point. The outstanding performance of Poland can be explained by the low basis; Poland was almost insolvent in the ‘80s. The starting GDP level of Estonia was between Poland and Lithuania; Estonia could improve by 10% point. We will make an attempt to prove that the Balkan-effect cannot be explained by corruption. If Transparency International’s CPI is compared to the per capita GDP level in 2016, then post-socialist countries form three groups. A relation between corruption and per capita GDP can be detected in case of 10 countries. Four countries (Slovenia, Lithuania, Latvia and Poland) show lower CPI – similarly to the per capita GDP level. Estonia has a very high CPI level (71) – the higher the better – compared to its per capita GDP. If fitted to the trend-line, the group of 10 countries would show 51 points of CPI level, while that of four countries 61. Cieslik and Goczek assessed that using World Banks indicators of the control of corruption, a lack of corruption was found both to have a positive and statistical impact on the growth rate of real per capita GDP and to increase investment ratio. Therefore, the empirical results suggest that corruption directly hinders economic growth by hampering investment. If international investors are sufficiently diversified, they 39

100 Years of Innovation

will have no reason to invest in countries with relatively high level of corruption risk. (Cieslik and Goczek, 201811) Being corrupt or corruption free can be detected by observing the SME’s default risk. There are no European post-socialist countries with low financial risk. High level risk countries are those where risk-reducing measures are necessary: Estonia, Lithuania, Slovakia, Latvia and Poland. Countries with extreme high-risk level are those where immediate riskreducing steps are needed: Hungary, the Czech Republic, Slovenia, Romania, Serbia, Bulgaria, Croatia, Bosnia-Herzegovina.Győri (2018)12 According to Muraközy, legitimacy is an indirect indicator of confidence. The acceptance of the government or that of social system is influenced by the efficiency and institutional pillars of legitimacy. (Laki, 2013 13)

Andrzej Cieslik, Lukas Goczek (2018) Control of corruption, international investment, and economic growth – Evidence from panel data; World Development 103 (2018) 323-335 12 Győri Ágnes: Kis- és középvállalkozások pénzügyi sérülékenysége, Közgazdasági Szemle, LXV. évf., 2018. március (240—258.),(Financial vulnerability among Hungarian small and medium-sized enterprises) 13 Laki Mihály: A bizalmatlanság hálójában. A magyar beteg. Közgazdasági Szemle LX. évf., 2013. december (1397—1401.), KönyvismertetésLászló Muraközy, ed.: A bizalmatlanság hálójában. A magyar beteg (In the net of uncertainty. The Hungarian patient)

100 Years of Innovation

Figure 3. Per capita GDP and CPI 2016-2017 75 70 y = 26%x + 45% R² = 88%

65 60 55 50

y = 39%x + 29% R² = 87%

45 40

35 20%

30%

40%

50%

60%

2017CPI

kor

Lineáris (2017CPI)

70%

Lineáris (kor)

Source: CPI (TI) and Maddison

The experience of the last three decades shows that post-socialist Balkan countries tend to have approximately quarter of Germany’s income level, while non-Balkan countries are at the half of the German income level. Estonia is on the non-Balkan countries’ trend, but exceeds it by 4% point, partly due to the high (good) CPI level. 41

100 Years of Innovation

Institutions reflect peoples’ or the invader’s principal values (the latter is in the period of 1949–1989) such as confidence, jealousy or respect of rules impacting the state of a country where it stands for. In the case of the Balkan countries (from below like Albania, or from above like Croatia) as predestined by their institutions, an attempt to reach the quarter of all-time Germany’s development rate is detected. In case the society experiences significant shifts in their values and the new institutions strengthen, things can go to another direction. In case of countries placed on the line, they would not grow – in our prediction – in the same way as they used to between 1985 and 2016, but, while their own values and their institutions that reflect their culture remain the same, the question is what will be the value of their steady state compared to all-time Germany’s development. In short: where will be the horizontal 0 intersected by the downgrade line. According to Figure 2, an assumption can be made. If we compare the Balkan and non-Balkan countries non-parallel lines, we can calculate their intersections (horizontally: 300%, vertically: -177%). If we consider this relation as general, then we can cross a line through any coutry’s line, which will intersect the (300; -177) point and with the help of the intersection of the horizontal 0 it can be detected, where will its steady state be.

100 Years of Innovation

Letâ&#x20AC;&#x2122;s continue the analysis with the post-socialist countries and Germanyâ&#x20AC;&#x2122;s ageing index.

Table 2. Ageing index in Germany and in European post-socialist countries, 2016 Country Germany Bulgaria Serbia Croatia Lithuania Latvia Hungary Slovenia Czech Republic Estonia Romania Poland Slovakia Montenegro Albania

Index 159,0 146,4 131,6 131,6 129,4 128,8 126,1 124,1 119,0 118,4 112,1 106,1 94,2 76,7 72,9

Source: CSO

100 Years of Innovation

Table 3. Employment rate aged 15–64, 2000–2016 average Country Croatia Poland Hungary Bulgaria Slovakia Romania Lihuania Latvia Slovenia Estonia Czech Republic

Employment rate 55,8 57,2 57,8 57,9 59,5 59,7 62,4 63,1 65,1 66,0 66,4

Source: CSO

Germany has the highest ageing index (population over 65 / population below 14), followed by three Balkan countries, but Albania and Montenegro are found at the bottom of the chart, meaning they are the least ageing countries. Those countries, which are converging at least by 5% to Germany’s economic development level (whether they are Balkan states or not) are Albania, Poland, Romania, and Estonia; they are all not to be considered as ageing countries, although we do not have any data on Bosnia. Compared to the first figure it can be stated, that countries with ageing index value over 120 are not converging upward, but even those with ageing index below 120 are not all upward converging. If we examine the employment rate over the period 2000–2016, it shows that 44

100 Years of Innovation

Estonia is part of the leading group, owning the second-best employment rate aged 15–64. In 2003, following the Czech Republic, Estonia was the second regarding the employment rate of 15–64 year olds, and first in employing 55–64 year olds. In 2000 only Romania showed a lower social expenditure rate, and poverty risk of employed was the second highest after Romania. (Frigyesi–Kapolyi, 200514) As conclusion and presumption Estonia, which was poor at its starting point – as it will be apparent - is a trustworthy, diligent, non-Balkan type, post-socialist country, with a relatively young population, currently converging to more than half of Germany’s 1985–2016 development level. After examining corruption, ageing and employment rate, we continue our survey with the disposable capital stock, export activity and ability of attraction of foreign direct investment of the Estonian economy. The annual average growth of gross fixed capital formation is an important factor as well, between 2000–2016 the average annual rate was 6,6%, being one of the highest among the examined countries, significantly exceeding the annual economic growth rate. Estonia was on an investment and export-oriented path, during the period of 2000–2016.

Frigyesi Veronika — Kapolyi László: Szociálpolitika az Európai Unióban (Welfare policy in the European Union). Közgazdasági Szemle LII. évf., 2005. március (289 – 305.) 14

100 Years of Innovation

Table 4. Gross fixed capital formation volume change- ESA2010, 2000â&#x20AC;&#x201C; 2016 average (percent) Country Volume change Serbia 7,5 Bulgaria 7,4 Estonia 6,6 Lithuania 6,2 Latvia 6,2 Poland 3,8 Croatia 3,2 Czech Republic 3,1 Slovakia 2,8 Hungary 1,2 Slovenia 0,2 Source: CSO

Table 5. Volume indices of exports growth, 2002â&#x20AC;&#x201C;2016 average (percentage change) Country Indices Slovakia 10,4 Latvia 9,9 Lithuania 9,2 Poland 8,9 Romania 8,5 Estonia 8,0 Bulgaria 7,8 Czech Republic 7,7 Slovenia 6,8 Hungary 6,5 Croatia 5,3 Source: CSO 46

100 Years of Innovation

Solely the information about the average annual growth rate of the volume of export 2002-2016 is not enough, because if export/GDP rate is already high, it is not necessary to grow by a higher rate than the GDP. Export concentration is of high importance. In 2000, Estonia already showed a high export concentration (11,7%) ranked after Latvia, but ahead of Hungary, Romania, Bulgaria, Slovenia, Czech Republic in this order. (Soós, 200215) The international specialization of the Estonian agricultural trade was contradictoryduring the period 1992-2000, applying a given indicator it showed a contraction, applying another indicator it showed growth. Fertő-Hubbard (2005).16 We must also consider other indicators such as not heavily aged population, high employment rate, dynamic growth of fixed assets and the volume of export, low level of corruption for an all-in-all favorable picture. The Estonian general government balance is highly informative. During the last 17 years, Estonia was the only post-socialist country with averagely positive general government balance. If the government expenditures to GDP ratio of countries is compared in 2005, Romania Soós Károly Attila: Az átmeneti gazdaságok EU-exportja nemzetközi összehasonlításban, 1993–2000 Közgazdasági Szemle: XLIX. évf., 2002. december (10631080). International comparison of EU exports by transitional economies, 19932000 16 Fertő Imre — Hubbard Lionel J. Az agrárkereskedelem dinamikája – A csatlakozó országok esete. Közgazdasági Szemle LII. évf., 2005. január (24 –38.), Tanulmány. The dynamics of agri-food trade patterns - the accession countries case Study 15

100 Years of Innovation

and Lithuania performed better than Estonia, whereas regarding the social expenditures, Latvia as well performed better among the 10 postsocialist countries (the lower hw better). ( Juhász, 201017) Between 2004 and 2011 Estonia had the lowest, Hungary the second lowest ratio of government subsidy compared to GDP in the category of subsidies allocated for not crisis management purposes granted to corporations. (Kállay, 201418). In Estonia the entire social security contribution is paid by the employer. The corporate tax rate base in Estonia is calculated by deducting the invested amount from the total income. (Erdős, 201419) The averagely positive balance was probably supported by the low level of government debt proportional to GDP, as Estonia did not have the burden of a high net interest payment in the primary balance. The Estonian economic is not suffering from high level of public debt (6,7%), while Lithuania and Latvia, wining their independence in the same time with Estonia, have reached a 26–28% level of public debt in a short time.

Juhász Réka Posztszocialista fejlődési pályák. Közgazdasági Szemle LVII. évf., 2010. március (222–240.) Tanulmány (Post-socialist development paths. A study) 18 Kállay László: Állami támogatások és gazdasági teljesítmény Közgazdasági Szemle LXI. évf., 2014. március (279—298.), Tanulmány (State aid in the Hungary and its impact on economy). 19 Erdős Tibor Az adózás, a hatékonyság és a gazdasági növekedés kapcsolatának néhány elméleti problémája Közgazdasági Szemle LXI. évf., 2014. június (1 –76.), KÜLÖNSZÁM 2014. JÚNIUS (Some Theoretical Problems between Taxation, Efficiency and Economic Growth). 17

100 Years of Innovation

Estonia, which was poor in 1985, at the starting year of our examination is a trustworthy, diligent, economical, forward-looking nonBalkan type, post-socialist country, with a relatively young population, currently converging to approximately to the good half (56%) of the Germanyâ&#x20AC;&#x2122;s 1985-2016 average per capita GDP level.

Table 6. Balance of general government- ESA2010. 2000â&#x20AC;&#x201C;2016 average (as percent of GDP) Country Estonia Bulgaria Latvia Serbia Lithuania Czech Republic Romania Slovenia Croatia Poland Slovakia Hungary

Balance 0,50 -0,63 -2,44 -2,49 -2,76 -3,06 -3,32 -3,88 -3,89 -4,26 -4,47 -4,71

Source: CSO

100 Years of Innovation

Table 7. General government gross debt as percent of GDP–ESA2010, 2000–2016 average Country Estonia Latvia Lithuania Bulgaria Czech Republic Slovenia Slovakia Poland Croatia Hungary Serbia

% 6,7 25,9 28,0 29,7 32,7 42,2 43,1 47,8 50,3 68,1 68,7

Source: CSO

By the end of 2011, the inflation rate rose to 6%, and Estonia witnessed a very significant decrease of wages in nominal terms. From 2004 to 2007, the real interest rate remained strongly negative. The overspending of the private sector was so high that even along with budgatery surplus the current account balance rose to 15% of the GDP. The Currency Board simulated the conditions of times following the introduction of the Euro. Neményi-Obláth (2012)20 Laaser, Reiljan and Schrader proved that Neményi Judit — Oblath Gábor: Az euró bevezetésének újragondolása. Közgazdasági Szemle LIX. évf., 2012. június (569—684.) Tanulmány. (Rethinking Hungary’s prospective adoption of the Euro. A study.) 20

100 Years of Innovation

Estonia is a Non-Balassa-Samuelson case. (Laaser, Reiljan and Schrader 199821) Estonia aimed – in the majority of these post-crisis years – at having budget surplus, while keeping its public debt low, meanwhile remaining attractive for foreign capital, so that the foreign direct investment inflow would cover the deficit of the current account balance.

Table 8. Balance of current account, as percent of GDP, 2000–2016 average Country Slovenia Czech Republic Poland Croatia Hungary Slovakia Lithuania Estonia Romania Latvia Bulgaria

% 0,39 -2,56 -2,81 -2,83 -2,90 -3,08 -3,26 -5,11 -5,67 -5,89 -6,14

Source: CSO

Laaser, Claus – Friedrich; Reiljan, Janno; Schrader, Klaus (2015): Some empirical findings on the structural development of the Estonian economy, Kiel Working Paper, No.1998, Kiel Institute for World Economy (IfW), Kiel 21

100 Years of Innovation

Table 9. Balance of current account â&#x20AC;&#x201C; BPM6 and Foreign direct investment (million USD), 2000-2016 average CAB -2 127 -3 364 -679 -1 236 -14 024 -1 310 -1 349 -2 588 -7 407 -1 983 218

Bulgaria Czech Republic Estonia Croatia Poland Latvia Lithuania Hungary Romania Slovakia Slovenia

FDI 3 456 5 642 1 156 2 018 10 823 765 787 3 343 4748 2 488 633

Source: CSO

For Estonia, the average current account balance for the period of 2000-2017 showed an annual deficit of 5% to the GDP. It is hard to interpret this raw data. If we compare it with the foreign direct investment (in USD) it allows us to check if it counterbalances the deficit of the current account balance. In Estonia the average annual net inflows of foreign direct investment was 1156 million USD over the period 20002016, significantly exceeding the deficit of the current account balance (679 million USD). According to the volume-based indicator (IFIGDP) and its ownership-related element (GEQGDP) of the international financial integration, Estoniaâ&#x20AC;&#x2122;s financial integration was outstandingly 52

100 Years of Innovation

rapid between 1995 and 2004, opposite to the V4 countries, the other Baltic countries, and Romania, Bulgaria, Slovenia. Gács (2012)22

Figure 4. Foreign direct investment related to current account balance (million USD) 2000–2016 average in different post-socialist countries 12 000 10 000 8 000 6 000 4 000 2 000

2 000

-2 000

-4 000

-6 000

-8 000

-10 000

-12 000

-14 000

-16 000

Source: CSO

Gács János: A gazdasági globalizáció számokban Közgazdasági Szemle LIV. évf., 2007. november (960–973.), Tanulmány (Economic globalization in figures, Study). 22

100 Years of Innovation

Table 10. Increase of consumer prices (percentage change on previous year) 2000â&#x20AC;&#x201C;2016 average Country Czech Republic Slovenia Lithuania Croatia Poland Estonia Slovakia Serbia Latvia Bulgaria Hungary Romania Source: CSO

% 2,1 2,4 2,4 2,4 2,7 3,5 3,6 3,7 3,8 4,3 4,6 10,7

100 Years of Innovation

Table 11. Volume indices of the growth of GDP, 2000â&#x20AC;&#x201C;2016 average (percentage change on previous year) Country Lithuania Slovakia Latvia Estonia Romania Bulgaria Poland Serbia Czech Republic Hungary Slovenia Croatia

% 4,16 3,92 3,90 3,85 3,76 3,66 3,62 3,37 2,75 2,14 2,12 1,75

Source: CSO

The average inflation rate Estonia witnessed in the course of the past 17 years was 3,5%, fitting the average rate of the post-socialist countries. Estonia by the Currency Board reached an inflation rate higher than the EU average, similarly, the Czech Republic reached the EU average inflation rate, but by floating exchange rate regime. A very similar result was achieved by Poland using crawling peg first and free-floating system later. Hungary also achieved it by implementing crawling peg within a tight exchange rate. Over the period of 1993â&#x20AC;&#x201C;1999, in the era of the Currency board, the real exchange rate has strengthened by more than 55

100 Years of Innovation

100%, wages were relatively law compared to the qualification of the labor force, and the foreign direct investment inflow during the years 1996-1998 covered almost the whole current account deficit which amounted to the 10% of GDP. (Szapáry, 200023) In the period 2000–2017 as well, the Baltic countries were on top, only Slovakia could compete with them. The Estonian economic growth rate – approximately 3,9% – can be considered impressive.

THE ESTONIAN-HUNGARIAN RACE FOR COMPETITIVENESS The competitiveness and the productivity of the Estonian economy seems stronger from all aspects then the average results of its postsocialist competitors. The successful Baltic model of crisis management is explained by specific factors such as a) economic policy mix; b) radical internal devaluation; c) social environment accepting the high price of devaluation. For this reason, the Baltic model can not be adopted to other European countries. (Meisel, 201424)

Szapáry György 20. Az árfolyamrendszer kiválasztása az átmenet országaiban az EMU-csatlakozás előtt Közgazdasági Szemle XLVII. évf., 2000. december (951 –961.), Európai Unió (Choice of exchange-rate regime in transition countries before joining the EMU) 24 Meisel Sándor A válságkezelés balti modellje (2014. március) MTA Közgazdasági – és Regionális Tudományi Kutatóközpont Világgazdasági Intézet. Műhelytanulmányok 101(Baltic model of crises management) 23

100 Years of Innovation

We will examine the per capita GDP of Estonia and Hungary between 2000-2016 using the following table and figure.

Table 12. Per capita GDP (GK dollar), 1980-2016 Year Estonia Hungary Year Estonia Hungary 15345 15684 1980 10721 1999 12636 15453 16386 1981 11030 2000 14074 16019 17043 1982 11351 2001 15060 15878 17861 1983 11659 2002 16077 16326 18598 1984 11873 2003 17378 15954 19573 1985 11788 2004 18582 16301 20471 1986 12020 2005 20441 16581 21293 1987 12042 2006 22674 17108 21422 1988 12587 2007 24542 16797 21650 1989 13382 2008 23275 15716 20261 1990 12291 2009 19886 13847 20444 1991 11117 2010 20382 9726 13423 20886 1992 2011 21997 9131 13357 20631 1993 2012 23026 9175 13764 21126 1994 2013 23436 9951 13989 22040 1995 2014 24146 10636 14014 22788 1996 2015 24493 12027 14507 23279 1997 2016 24857 12643 15154 1998 Source: Maddison

100 Years of Innovation

Figure 5. Estonian and Hungarian per capita GDP (GK dollar), 1980â&#x20AC;&#x201C; 2016 25000 23000 21000 19000 17000 15000 13000 11000 9000 7000 5000 1975

1980

1985

1990

1995

Estonia

2000

2005

2010

2015

2020

Hungary

Source: Maddison

The Estonian per capita GDP in 1980 was lower than that of Hungary. During the upcoming decade (1980-1989) both countriesâ&#x20AC;&#x2122; per capita GDP was growing, the Estonian yearly average growth rate reached 2,5%, the Hungarian 1%. The transformation crisis has hit the Estonian economy harder, the GDP contracted by 32% (bottom) in Estonia, and 22% in Hungary. In the next one and a half decade, at the new peak the Estonian 58

100 Years of Innovation

economy was 268% of the bottom, for Hungary the same number is 162%. The new bottom in 2009 also meant a bigger fall for the Estonian economy, it has felt by 19% in two years, while the Hungarian has felt by 9,4% only in one year. A strong pressure for households’ and nonfinancial corporations’ debt reduction was observed among the following EU countries: Cyprus, Spain, Ireland, Portugal, Estonia, Latvia, Sweden and the UK (Halpern-Obláth, 2014)25) In 2009 the two economies were at the same level. In 2016, compared to 2009 the Estonian economy has grown by 25% while the Hungarian one has grown only by 15%. In 1980 the Estonian GDP per capita value amounted to 70% of the Hungarian, the same in 2017 was 107%. Shortly: in 37 years, the Estonian economy has improved by 37% point compared to the Hungarian one, which means a yearly 1% improvement. It is easy to list those elements in which the Estonians were noticeably over performing Hungary. In 2016, for Estonia the ageing index was 118,4% while in Hungary it was 126,1%. The number of live-births per 1000 inhabitants was on average 10,6 in Estonia and 9,4 in Hungary between 2000-2016. (Regarding this indicator, Hungarian performed the worst and Estonia performed the best among post-socialist countries). The natural

Halpern László — Oblath Gábor: A gazdasági stagnálás "színe" és fonákja. Közgazdasági Szemle LXI. évf., 2014. július-augusztus (757–800. o.), Tanulmány. The bright" and gloomy side of economic stagnation 25

100 Years of Innovation

population decline per 1000 inhabitants was on average 3,6 in Hungary and 1,8 in Estonia over the 2000-2016 period. The average female life expectancy was 78 years in Hungary and 79,6 in Estonia for the period of 2000-2016. This number is affected by several factors, for example at the seaside air pollution is lower than in a plain surrounded by high mountains. In the EU, regarding the share of renewing energy in the final energy consumption, Estonia’s 25,8% value was exceeded by only 5 countries (Sweden, Finland, Denmark, Austria and Latvia) Sebestyénné (2016)26 However, this confirms the fact that the Estonian life expectancy is higher than the Hungarian one. The average number of doctors for 100.000 inhabitants was on average 323 in Estonia, for Hungary it was 304. This number requests further considerations, as after 2000 the Estonians were hardly richer than Hungarians, but Estonians have used their resources differently. There are significant differences in terms of the higher education as well, Estonia outperforms Hungary. While Hungary is at the bottom of the list, Estonia together with other Baltic countries are placed on the top. The ratio of the overeducated labour force in Estonia was the highest (78,9%) among 25 European countries in the middle of the 2000’s

Sebestyénné Szép Tekla: Energetikai konvergencia az Energia 2020 stratégia tükrében Közgazdasági Szemle LXIII. évf., 2016. május (564 –587.), Műhely Energy convergence in the light of the Energy 2020 strategy 26

100 Years of Innovation

(Galasi, 200927). Among the V4 countries, the Baltic countries, Romania, Bulgaria, Slovenia, it is Estonia that has the highest rate (40,7%) of population employed in educational organizations. Those organizations can be characterized by the strong autonomy of employees, the important role of learning and problem-solving ability, the complexity of working processes unlike lean, Taylorian and traditional organization). (Csizmadia-Illéssy-Makó, 200828). Over the period 2000-2016 on average the per capita R&D expenditure in purchasing power standard at constant prices (of 2005) was 187 USD in Estonia, and 157 USD in Hungary. “After the incomplete stabilization of economic environment, the structure of Estonian manufacturing sector is without any doubt better and more effective, than before: 1) technological level is higher; 2) organization of work is more perfect; 3) value added and productivity is higher; 4) position in value chain is better and 5) maybe also the value chain itself is the latest and better. But the problem is that there are fewer jobs in the new structure of manufacturing than before the crisis”.

Galasi Péter A túl- és az alulképzés bérhozama 25 európai országban Közgazdasági Szemle LVI. évf., 2009. március (197 –215.), Tanulmány Returns for over-education and under-education for 25 European countries 28 Csizmadia Péter — Illéssy Miklós — Makó Csaba:A munkahelyi innovációk és a termelési paradigmaváltás kapcsolata Közgazdasági Szemle LV. évf., 2008. december (1075–1093.), Tanulmány (The relation of work-place innovations and the change of production paradigm. A study) 27

100 Years of Innovation

(Kilvits, 201429) At the beginning of the 2010’s, only Slovenia could exceed Estonia in terms of the EU innovation performance composite index and the GERD/GDP indicator. (Csuka-Török, 201430). The share of innovative corporations was the highest in Estonia in 2008. (Papanek, 201031) In terms of the employment rate (2000-2016) Estonia performed at 66% while the same for Hungary was 57,8%. In reverse the unemployment rate for Hungary was only 7,8%, while for Estonia it was 9,8%. Among EU member states, Estonia along with seven advanced economies showed a high ratio of youngers amongst unemployed in 2012 than in 2000. Artner (2013)32 The lower Hungarian unemployment rate can be explained by the fact, that the Estonian economy has developed 29

Kaarel Kilvits Restructuring of Estonian Manufacture under Global Financial and Economic Crisis, 6th International Scientific Conference on Economic and Social development and 3rf Eastern European ESD Conference: Business Continuity, Vienna 24–25 April, 2014 30 Csuka Gyöngyi — Török Ádám: Magyarország a nemzetközi innovációs versenyben az EU-csatlakozás után Közgazdasági Szemle LXI. évf., 2014. április (509 –526.), Tanulmány (Hungary’s relative R+D+I performance in the EU - 10 years after its accession. A study) 31 Papanek Gábor: A gyorsan növekvő magyar kis- és középvállalatok a gazdaság motorjai. Közgazdasági Szemle LVII. évf., 2010. április (354–370.), Szemle. (Rapidly growing small and medium-sized firms as the driving force behind the Hungarian economy) 32 Artner Annamária: A fiatalok munkanélküliségének kérdéséhez Európa példáján keresztül Közgazdasági Szemle LX. évf., 2013. december (1370 –1392.), Szemle. (Contribution to the problem of the youth unemployment through the example of Europe)

100 Years of Innovation

with larger oscillations, than the Hungarian. The standard deviation per average in terms of GDP per capita was 16,8% for Estonia, while for Hungary it was only 9,4%. Estonian economy has grown at a higher rate and with higher oscillation than the Hungarian economy, so when recession was deeper more people could have remained unemployed.

Table 13. Live birth rate, 2000â&#x20AC;&#x201C;2016 average (per thousand inhabitants) Country Estonia Slovakia Czech Republic Romania Poland Latvia Slovenia Lithuana Serbia Croatia Bulgaria Hungary Source: CSO

Rate 10,6 10,3 10,2 10,1 10,0 9,9 9,8 9,7 9,7 9,6 9,4 9,4

100 Years of Innovation

Table 14. Students in tertiary education, 2013–2015 average (as percentage of total population) Country Romania Hungary Slovakia Croatia Bulgaria Czech Republic Slovenia Latvia Estonia Poland Lithuania

% 2,9 3,4 3,6 3,9 3,9 3,9 4,5 4,5 4,6 4,7 5,1

Source: Maddison The WEF (World Economic Forum – K. Schváb) uses a seven-grade scale for measuring competitiveness, where higher points mean higher competitiveness. (See Table 15.) The 7th pillar (out of 12) of the measuring system is the labour market efficiency. For 2011–2012, the value of this pillarwas4,38 for Hungary, and 0,53 higher (4,91) for Estonia. In 2015–2016 the Hungarian labour market efficiency has decreased to 4,15, while the Estonian efficiency was measured higher by 0,85 (5,00). The WEF’s system has received a lot of criticism because of being sometimes subjective, and because of their measures reflecting 64

100 Years of Innovation

only a few people’s view. However, at the end of our paper it is worthwhile to present some of its results. The first column shows Hungary’s values in 2011–12 and in 2015–16 on a scale of 7, in 12+1 dimensions or pillars which are measuring the institutions, infrastructure, macro-economic environment, health and primary education, higher education, the efficiency of goods-, labourand financial market, technological readiness, market size, business sophistication and innovation and also global competitiveness index. Positive values indicate better performing countries compared to Hungary, negative values show that the given country performs worse than Hungary. In terms of market size Estonia is smaller than Hungary’s. Hungary being at the same level of development but having a 7,5–8 times larger population size. Those negative numbers can be seen in the second column. Inside the column everywhere else we find positive values, meaning that in all other fields Estonia is performing better than Hungary in terms of WEF competitiveness. In 2011–12 out of 11 competitors 7 was less competitive than Hungary (last row of Table 15). By 2015–16 Hungary was only ahead of Croatia, Serbia and Slovakia, 4 years prior to that it was still ahead of Romania, Bulgaria, Slovenia and Latvia. Estonia, the Czech Republic, Lithuania and Poland were preforming better in WEF competitiveness ranking than Hungary both times, respectively. According to Ausland, the first economic policy needed was a radical and 65

100 Years of Innovation

early derogation on trade and prices, which was pioneered by Estonia. All three Baltic countries carried out a rigorous macroeconomic stabilization. Estonia and Lithuania established formal Currency Boards with fix exchange rate in 1992. Carrying out radical expenditure cuts aimed at the balance budget. In 1994, Estonia minimized its taxes and introduced a flat income tax. The Baltic countries carried out early and fast privatization, Estonia adopted East-German model of privatization through sales via a strong privatization agency. Ausland (2015)33

Aslaund, Anders (2015): Why Have the Baltic Tigers Been So Successful? CESifo Forum, ISSN 2190-717X, Vol. 16. 4, pp. 3-8

100 Years of Innovation

Table 15. WEF GCI and values of the pillars for 12 countries (2011-12 and 2015-16) Czech Hungary Estonia Republic Lithuania Poland Latvia Instituitons

2015-2016 2011-2012

Infrastructure

2015-2016 2011-2012

Macroeconomic environment

2015-2016

Health, primary education

2015-2016

Higher education

2011-2012

2011-2012 2015-2016 2011-2012

Goods market efficiency

2015-2016

Labor market efficiency

2015-2016

2011-2012

Financial market 2015-2016 efficiency 2011-2012 Technological readiness Market size

2015-2016 2011-2012 2015-2016 2011-2012

Business sofistication Innovation

2015-2016 2011-2012 2015-2016 2011-2012

Global Competitiveness Index

2015-2016 2011-2012

3,52 3,79 4,51 4,52 4,94 4,77 5,71 5,81 4,56 4,66 4,29 4,32 4,15 4,38 3,93 4,15 4,60 4,55 4,32 4,24 3,70 3,88 3,44 3,62 4,25 4,36

1,51 1,20 0,37 0,19 1,21 0,94 0,63 0,44 0,94 0,49 0,64 0,42 0,85 0,53 0,69 0,36 0,72 0,40 -1,23 -1,36 0,56 0,26 0,58 0,19 0,49 0,26

0,56 -0,14 0,19 0,35 1,03 0,40 0,60 0,10 0,53 0,29 0,34 0,26 0,29 0,24 0,69 0,16 0,84 0,26 0,14 0,24 0,79 0,60 0,35 0,15 0,44 0,16

0,59 0,15 0,17 0,12 0,62 -0,06 0,48 0,18 0,79 0,42 0,35 -0,07 0,20 0,14 0,06 -0,29 1,03 0,14 -0,71 -0,78 0,61 0,34 0,29 -0,19 0,30 0,05

0,55 0,38 -0,21 -0,66 0,17 -0,06 0,44 0,25 0,49 0,28 0,22 0,04 -0,04 0,10 0,33 0,46 0,18 -0,38 0,83 0,84 0,39 0,33 -0,12 -0,39 0,25 0,10

0,66 0,08 -0,04 -0,40 0,62 -0,31 0,47 0,13 0,49 0,18 0,35 -0,04 0,57 0,20 0,46 0,02 0,70 -0,30 -1,08 -1,19 0,36 -0,14 -0,12 -0,41 0,21 -0,12

Source: WEF 67

Slovakia Slovenia Bulgaria Romania Serbia Croatia

-0,10 -0,32 -0,22 -0,30 0,27 0,16 0,30 0,23 0,05 -0,17 0,15 0,04 -0,25 0,09 0,48 0,29 0,04 -0,01 -0,29 -0,26 0,37 0,25 -0,15 -0,71 -0,08 -0,17

0,41 0,29 0,29 0,28 -0,49 0,58 0,73 0,45 0,84 0,50 0,22 0,06 -0,15 -0,38 -1,08 -0,53 0,54 0,21 -0,93 -0,80 0,45 0,56 0,38 -0,07 0,04 -0,06

-0,13 -0,47 -0,51 -0,91 0,00 0,36 0,26 -0,01 -0,08 -0,50 0,07 -0,24 0,08 0,11 0,05 -0,16 0,28 -0,44 -0,41 -0,44 -0,07 -0,34 -0,34 -0,68 0,07 -0,20

0,14 -0,29 -0,89 -1,16 0,50 -0,25 -0,22 -0,09 -0,02 -0,25 -0,01 -0,36 -0,02 -0,29 0,12 -0,23 0,04 -0,79 0,25 0,15 0,01 -0,32 -0,20 -0,71 0,08 -0,29

-0,28 -0,63 -0,63 -0,86 -1,34 -0,28 0,16 0,01 -0,30 -0,68 -0,54 -0,82 -0,43 -0,45 -0,70 -0,41 -0,13 -0,93 -0,63 -0,63 -0,56 -0,72 -0,54 -0,72 -0,36 -0,49

0,11 -0,20 0,08 0,20 -0,75 -0,01 0,14 0,15 0,05 -0,25 -0,24 -0,51 -0,32 -0,50 -0,34 -0,28 0,05 -0,05 -0,73 -0,67 0,04 -0,31 -0,31 -0,53 -0,18 -0,28

100 Years of Innovation

Regarding the capital between 2000-2016 Estonia performed the largest growth in gross fixed capital formation (yearly 6,6%). The Hungarian rate was less than one fifth of that (yearly 1,2%). Possibly the better technology, the higher employment rate and the more educated work force could contribute to the achievement, that Estonian volume of export has increased by a yearly 8% rate between 2000-2016, while for Hungary it was only 6,5%. The quick growth of export assumes quick growth of import as well and the negative current account balance can be financed by foreign direct investment inflows. For the years 2000-2016, the yearly average foreign direct investment inflow to Hungary was 3343 million USD. If during this period the Hungarian and the Estonian GDP per capita would have been the same, and also the attraction of foreign direct investments (direct investments/GDP) would have been the same for both country, then foreign direct investment inflow to Estonia – whose population is 7,5–8 times smaller – would have been approximately 13% of the Hungarian (435 million USD). Instead Estonia witnessed 2,66 times more (1156/435 = 2,66) FDI inflows which means that the attraction of FDI by Estonia is 2,66 times stronger compared to Hungary. In fact, 30% of the net capital inflow was enough to cover current account deficit. In Hungary, the FDI inflow was only 29% higher than the current account deficit. The Estonian government did not take the 68

100 Years of Innovation

capital away from the private sector, the general government budget balance usually remained positive, while the gross public debt to GDP remained one-digit (7%). The Hungarian public debt (2000â&#x20AC;&#x201C;16) was 10 times higher; during one and a half decade the deficit (yearly 4,7) was significantly higher than the preferable upper limit (3%). To sum up, between 2000â&#x20AC;&#x201C;16 Estonia has grown faster (3,85% vs. 2,14%) and realized smaller inflation rate (3,5% vs 4,6%) than Hungary. If Hungary is looking for a country which could serve as a model to be followed for a better performance, the best target would be (B)Estonia.

CONCLUSION The 100-year old Estonia regained independence practically 30 years ago. During the short period of the past 30 years, Estonia has set an example for other countries by high growth rate, competitiveness and by being free of corruption, probably the former is determined by the later.

100 Years of Innovation

REFERENCES Artner Annamária: A fiatalok munkanélküliségének kérdéséhez Európa példáján keresztül Közgazdasági Szemle LX. évf., 2013. december (1370–1392.), Szemle. (Contribution to the problem of the youth unemployment through the example of Europe.) Aslaund, Anders (2015): Why Have the Baltic Tigers Been So Successful? CESifo Forum, ISSN 2190-717X, Vol. 16. 4, pp. 3–8. Cieslik, Andrzej — Goczek, Lukas (2018) Control of corruption, international investment, and economic growth – Evidence from panel data; World Development 103 (2018) 323–335. Transparency International Corruption Perception Indexes https://www.transparency.org/research/cpi/overview (downloaded 31 March, 2018) Csizmadia Péter — Illéssy Miklós — Makó Csaba: A munkahelyi innovációk és a termelési paradigmaváltás kapcsolata Közgazdasági Szemle LV. évf., 2008. december (1075–1093.) (The relation between the working place innovations and the change of production paradigm.) Csuka Gyöngyi — Török Ádám: Magyarország a nemzetközi innovációs versenyben az EU-csatlakozás után Közgazdasági Szemle LXI. évf., 2014. április (509–526.), Tanulmány Hungary s relative R+D+I performance in the EU – 10 years after its accession.

100 Years of Innovation

Erdős Tibor Az adózás, a hatékonyság és a gazdasági növekedés kapcsolatának néhány elméleti problémája Közgazdasági Szemle LXI. évf., 2014. június (1–76.), KÜLÖNSZÁM 2014. JÚNIUS Some Theoretical Problems with the Relation between Taxation, Efficiency and Economic Growth. Fertő Imre — Hubbard Lionel J. Az agrárkereskedelem dinamikája A csatlakozó országok esete. Közgazdasági Szemle LII. évf., 2005. január (24–38.), Tanulmány. The dynamics of agri-food trade patterns – the accession countries case study. Frigyesi Veronika — Kapolyi László: Szociálpolitika az Európai Unióban Közgazdasági szemle LII. évf., 2005. március (289—305) Welfare policy in the European Union LII. évf., Gács János: A gazdasági globalizáció számokban Közgazdasági Szemle LIV. évf., 2007. november (960—973.), Tanulmány Economic globalization in figures. Galasi Péter A túl- és az alulképzés bérhozama 25 európai országban Közgazdasági Szemle LVI. évf., 2009. március (197–215.), Tanulmány Returns for over-education and under-education for 25 European countries. Győri Ágnes: Kis- és középvállalkozások pénzügyi sérülékenysége. Közgazdasági Szemle LXV. évf., 2018. március (240–258.), Tanulmány.

100 Years of Innovation

Financial vulnerability among Hungarian small and medium-sized enterprises. Halpern László — Oblath Gábor: A gazdasági stagnálás "színe" és fonákja. Közgazdasági Szemle LXI. évf., 2014. július-augusztus (757– 800). Tanulmány. The bright and gloomy side of economic stagnation. Juhász Réka: Posztszocialista fejlődési pályák. Közgazdasági Szemle LVII. évf., 2010. március (222–240). Tanulmány Post-socialist development paths. Kállay László: Állami támogatások és gazdasági teljesítmény LXI. évf., 2014. március (279–298.), Tanulmány An overdose of state aid in the Hungarian economy. Kilvits, Kaarel: Restructuring of Estonian Manufacture under Global Financial and Economic Crisis, 6th International Scientific Conference on Economic and Social development and 3rf Eastern European ESD Conference: Business Continuity, Vienna, 24–25 April, 2014 Központi Statisztikai Hivatal STADAT táblák Central Statistical Office Tables (STADAT) http://www.ksh.hu/engstadat?lang=en (downloaded 4 April,2018) Laaser, Claus - Friedrich; Reiljan, Janno; Schrader, Klaus (2015): Some empirical findings on the structural development of the Estonian economy, Kiel Working Paper, No.1998, Kiel Institute for World Economy (IfW), Kiel. 72

100 Years of Innovation

Laki Mihály: A bizalmatlanság hálójában. A magyar beteg. Közgazdasági Szemle LX. évf., 2013. december (1397–1401)., Könyvismertetés László Muraközy, ed.: A bizalmatlanság hálójában. A magyar beteg (In the net of uncertainty. The Hungarian patient). Meisel Sándor A válságkezelés balti modellje (2014. március) MTA Közgazdasági

–

és

Regionális

Tudományi

Kutatóközpont

Világgazdasági Intézet. Műhelytanulmányok 101 (The Baltic model of crises management). Maddisson Project Database 2018 https://www.rug.nl/ggdc/historicaldevelopment/maddison/releases/mad dison-project-database-2018 (downloaded, 11 March 2018) Neményi

Judit

—

Oblath

Gábor:

euró

bevezetésének

újragondolása. Közgazdasági Szemle LIX. évf., 2012. június (569–684.) Reorientation of Hungary’s prospective accession to the eurozone.) Papanek Gábor: A gyorsan növekvő magyar kis- és középvállalatok a gazdaság motorjai. Közgazdasági Szemle LVII. évf., 2010. április (354– 370.), Szemle. Rapidly growing small and medium-sized firms as the driving force behind the Hungarian economy. Sebestyénné Szép Tekla: Energetikai konvergencia az Energia 2020 stratégia tükrében Közgazdasági Szemle LXIII. évf., 2016. május (564– 587.), Műhely Energy convergence in the light of the Energy 2020 strategy. 73

100 Years of Innovation

Soós Károly Attila: Az átmeneti gazdaságok EU-exportja nemzetközi összehasonlításban, 1993-2000 Közgazdasági Szemle: XLIX. évf., 2002. december (1063–1080). (International comparison of EU exports by transitional economies, 1993-2000.) Szapáry György 20. Az árfolyamrendszer kiválasztása az átmenet országaiban az EMU-csatlakozás előtt Közgazdasági Szemle XLVII. évf., 2000. december (951–961.), Európai Unió (Choice of exchange rate regime in transition countries before joining the EMU) World

Economic

Forum

Competitiveness

Dataset

http://reports.weforum.org/global-competitiveness-report-2015-2016/ (downloaded 15 September, 2017)

100 Years of Innovation

Krisztián Manzinger Social Cohesion for Parallel Societies? – Integrating Estonia’s Russian-speaking Population

ABSTRACT After the independence of 1991, Estonia implemented a restrictive legislation on citizenship and language in order to ‘minimize’ the social consequences of the Soviet occupation. The decades since then have seen a growth of Estonian knowledge among Russian-speakers and the naturalization of many non-Estonian speaking residents; however, these processes have slowed down. A change of paradigm seems to be inevitable, not only for strengthening the social cohesion on Estonian territory, but also because of the resurrection of the expansive Russian foreign policy that has used Russian ‘compatriots’ in the neighboring countries several times as pretexts for involvement. A framework providing respect for the language and culture of the minorities that simultaneously ensures the territorial integrity and sovereignty of Estonia could pave the way for a secure and prosperous country for all.

100 Years of Innovation

ABSZTRAKT 1991-es függetlenségét követően Észtország az állampolgárság és a nyelvpolitika tekintetében erősen korlátozó jellegű szabályozást alkotott a szovjet megszállás társadalmi következményeinek “csökkentése” céljával. A következő évtizedekben az ennek okául szolgáló törekvéseit részleges siker koronázta: nőtt az orosz nyelvűek észttudása, illetve emelkedett az állampolgárok száma. Az elmúlt években azonban ezek a folyamatok lelassultak. A társadalmi kohézió növelése, illetve Oroszország “külhoni oroszok érdekeire” hivatkozással észtországi ügyekbe való beavatkozási lehetőségének csökkentése érdekében ezért olyan paradigmaváltás látszik szükségesnek, amely egyszerre képes garantálni a kisebbségek nyelvének és kultúrájának, valamint az ország területi integritásának és szuverenitásának tiszteletben tartását. Ez lehet a legmegfelelőbb eszköze egy minden érintett számára erősebb és még prosperálóbb Észtország megteremtésének.

100 Years of Innovation

In the context of state-building and changing ethnic composition, there are many European countries struggling with different degrees of parallel societies.34 However, the case of Estonia is almost unique.35 In the present paper, we intend to examine the reasons and the consequences of this uniqueness concerning the social integration of the Russianspeakers. In order to do this, first general overviews on Estonian history, on the Estonian-Russian bilateral relations, and on the situation of the Russianspeakers in Estonia will be provided. After that, the crucial spheres of legislation will be examined in terms of social integration, with a special accent on citizenship, language, and minority rights. Finally, before concluding, the particular case of the Russian-speakers inhabited town of Narva will be presented. The article argues that a change of paradigmď&#x201A;žthe content of which shall be agreed by Estonia and its Russian-speaking peopleď&#x201A;žis necessary to enhance social integration. Such a turn could lead to a strengthened

The term, referring to segregated social structures within a single society, was introduced by the German sociologist Wilhelm Heitmeyer into the debate about migration and social integration in the early 1990s. 35 Probably, Latvia or Northern Ireland could be similar, as in both countries there was an administration, the Soviet and the British respectively, which intentionally colonized people to change the ethnic composition.

100 Years of Innovation

society, which is of outmost importance for Estonia, also considering its geopolitical situation.

E-ESTONIA The northernmost Baltic state is at the crossroads of history, subjugated for instance to Danish, Swedish, German and Russian rule during the previous centuries; each having serious impact on todayâ&#x20AC;&#x2122;s society. Estonia has also long been a multi-ethnic country; however, the Soviet occupation marked a change. Before the 1940s, there was a clear Estonian majority, 88 percent in 1934, with small minorities speaking their own languages: Germans, Swedes, Jews, and Russians. Some of them, especially the Baltic Germans, played an important social role: since the Middle Ages until the early 20th century they controlled, and their language dominated, the administration, justice, the Lutheran church,36 and the economy. Jews were killed during the first half year of the Nazi occupation in 1941, Swedes left for Sweden before the second Soviet invasion in 1944, and Germans either left for Germany or were exiled by the Soviet 36

Despite Estonia being historically a Lutheran Protestant nation, according to the census of 2011, the major religion in the country is Orthodoxy with 16 percent among the population aged 15 and older, being followed by Lutheranism to which 10 percent of the population adheres. 54 percent of the population does not feel affiliated with any religion. PHC 2011: Over a quarter of the population are affiliated with a particular religion (29 April, 2013) https://www.stat.ee/65352?parent_id=39113

100 Years of Innovation

authorities. On the other hand, between 1945 and 1950, some 240,000 people were transferred from other parts of the Soviet Union to Estonia, and in a second wave between 1961 and 1970, another 91,000 people arrived.37 Due to these changes, instead of having a strong Estonian majority with several small minority groups, by 1989, the country was not only made up from two big communities, the Estonians, and the Russian-speaking non-Estonians, but the share of first- and secondgeneration immigrants almost equaled with the share of non-Estonians, 36 and 38 percent, respectively.38 After the second independence of 1991,39 a new process of nationbuilding started in which the re-establishment of the national identity and ensuring the proper and, to the highest extent, infiltration-free administration immediately became priorities. The policies intending the strengthening of the Estonian-ness of the country will be presented later, what is to be stressed here is the importance of the technological advance. Estonia, the ‘Silicon Valley of the North’, has not been only the home of

Cristoph Pan, Die Minderheitenrechte in Estland, in Cristoph Pan–Beate Sibylle Pfeil, Minderheitenrechte in Europa: Handbuch der europäischen Volksgruppen Band 2., Wien, SpringerWienNewYork, 2006, 129. 38 Raija Pini Kemppainen–Scott Ellis Ferrin–Steven J. Hite–Sterling C. Hilton, Sociocultural Aspects of Russian-Speaking Parents’ Choice of Language of Instruction for Their Children in Estonia,. Comparative Education Review Vol. 52, No. 1, February, 2008, 96. 39 Estonia became independent for the first time in 1918.

100 Years of Innovation

Skype and to further start-ups, but also the world’s most advanced esociety and administration. In the building of these, the Soviet legacy of advanced degrees in engineering and computer science played a crucial role. Another unforgettable contribution of the Eastern neighbor was the world’s first cyberattack after the removal of the Bronze soldier, during the so-called Bronze Night in Tallinn in 2007. 40 This event revealed the weak points of the system, and led to the amelioration of the entire eGovernance structure.41 Today, technological advance is not only a matter of national pride within the country, but also a source of international admiration. After

independence,

Estonia

became

member

Western

organizations, such as the EU and the NATO, which created a safe and stable environment. Preceding the vote on conformation as Estonia’s Prime Minister, on 21 November 2016, Jüri Ratas mentioned the

In April 2007, the Government of Estonia started the final preparations for the relocation of the Bronze Soldier, the ‘Monument to the Liberators of Tallinn’, considered by many Estonians a symbol of Soviet occupation and repression. Disagreement over the relocation led to protests and riots lasting for two nights, during which an ethnic Russian protester was killed. The statue eventually was placed at the Cemetery of the Estonian Defence Forces in Tallinn. Four men were accused of organizing the riots; however, all of them were acquitted later. In 2009, a “Bronze Night law” was passed, which reinforced the penalties, improved and refined the laws relating to the distribution of national secrets, actions against the state, and encouraging or participating in riots. 41 Estonia, the land of e-everything (14 September, 2015) http://www.technologist.eu/the-land-of-e-everything/

100 Years of Innovation

population crisis in his speechthe population has decreased from 1.56 million in 1989, to 1.32 million in 2018as well as stagnating economy, growing inequality, and the security situation as the country’s four biggest challenges.42 We might add the defects of the social integration of many residents belonging to the Russian-speaking community to these four challenges. The problems of the Russian speakers’ social integration, however, are linked to the security of the country, since the security challenges mentioned by the Prime Minister practically refer to Russia. This is how the internal deficiency might turn into external provocation.

RUSSIA AND ESTONIA The Russian-speakers’ question in Estonia is an important component of the Estonian-Russian bilateral relations, especially since after the inward-looking 1990s, with Vladimir Putin in power, Russia’s foreign policy turned towards the offensive again. Putin’s declaration in 2005, on the unjust break-up of the Soviet Union, “a major geopolitical disaster of the century” leaving “tens of millions of our co-citizens and co-patriots outside Russian territory” marked the beginning of a new era.43 The Jüri Ratas confirmed prime minister (November 21, 2016) https://news.err.ee/119781/juri-ratas-confirmed-prime-minister 43 Annual Address to the Federal Assembly of the Russian Federation (25 April 2005) http://en.kremlin.ru/events/president/transcripts/22931 42

100 Years of Innovation

military invasion in Georgia in 2008 and the events in Ukraine since 2014 have shown the implementation of this new approach. In his ‘Crimean’ speech44 in 2014, President Putin talked overtly about the ‘Russian world’ for the first time. The ‘Russian world’ is an integrative category not only for Russian citizens but also for ethnic Russians abroad, as well as former Soviet citizens and their descendants, whose rights have to be protected by Russia.45 This is what Estonia has had first-hand experience with several times since 1991. For instance, on 29 December 2017, the Russian ambassador to Estonia expressed his regrets that Tallinn had not agreed to allow “to organize voting [for the 2018 Russian Presidential elections] in a number

On 18 March 2014, Russian President Vladimir Putin blamed the ‘Bolsheviks’ and Nikita Khrushchev for giving the historical South of Russia and Crimea, respectively, to Ukraine and talked about a Russian nation divided by borders, the Russian land of Crimea and the Russian city of Sevastopol. He blamed Ukraine for depriving Russians of their historical memory and forcing assimilation, which made the country a bad neighbour, especially after the Maidan in February 2014. As Crimea and Sevastopol were threatened by the new administration of Ukraine, they turned to Russia to protect their rights and lives, and Russia could not have turned his back on their plea. Putin also mentioned the possibility of an inacceptable event of Sevastopol becoming a NATO base as something clearly contrary to Russia’s very interests and the vast popular support of Russia protecting Russians’ interests in other countries as reason for the state to act. Address by President of the Russian Federation (18 March 2014) http://en.kremlin.ru/events/president/news/page/248 45 Andrei Piontkovsky, Putin’s Concept of the ‘Russian World’ Threatens All Territories with a Russian Population (24 March 2015) https://www.hudson.org/research/11165-andrei-piontkovsky-putin-s-concept-of-therussian-world-threatens-all-territories-with-a-russian-population44

100 Years of Innovation

of ‘our cities’ where ‘our compatriots’ reside”.46 Or preceding this event, during the Bronze Night in 2007, when it became obvious that Russia has influence not only on the elder generations that had been Soviet citizens but also on the youngsters, born and raised in Estonia. The State Council of the Soviet Union recognized Estonia’s independence on 6 September 1991, two weeks after its declaration. The bilateral relations did not start well after Estonia denied automatic citizenship from those considered migrants, i.e. arriving during the Soviet occupation. Due to the tensions, Russia delayed significantly the withdrawal of its troops from Estonia, until as late as 31 August 1994; however, in July 1992, the Commission on Security and Cooperation in Europethe predecessor of the Organization for Security and Cooperation in Europe, OSCEcalled on Moscow to withdraw troops, as did the United States’ Senate in 1992 and 1993. Estonia and Russia still lack a border treaty; however, there is a general view that Russia is more willing to accept the existence of an Estonian nation than that of Ukraine or Belorussia, for example. Despite this, there were news lately, that

Estonia’s Russian citizens can vote in elections in Tallinn, Tartu, Narva (30 December 2017) https://news.err.ee/651393/estonia-s-russian-citizens-can-vote-in-elections-intallinn-tartu-narva 46

100 Years of Innovation

Russia’s Chief Prosecutor’s Office was examining the legality of the recognition of the independence of the Baltic States in 1991.47 The ongoing severing of the international relations between Russia and the Western world makes it less likely for Estonia to deal with its eastern neighbor. The political strategies adopted in the previous years in Russia describe the NATO as a threat for the Russian national security: the Military Doctrine of the Russian Federation in December 2014, or the Information Security Doctrine in December 2016. The Development of an Information Society for 2017-2030 emphasizes the protection and spread of traditional Russian spiritual and moral values, which is to be viewed in the actual context of the goals and actions of the Russian state’s leadership. Obviously, these strategies represent a challenge for the NATO and the EU, as well as to their members, such as Estonia. As Estonia clearly devoted itself to the Western political and economic orientation after 1991, Russia has limited tools to influence the course of the events in the Baltic country. The Russian Orthodox Church48 and the

Russia examines 1991 recognition of Baltic independence (30 June 2015) http://www.bbc.com/news/world-europe-33325842 48 The Orthodox community is divided in Estonia. Firstly, there is the Estonian Orthodox Church of the Moscow Patriarchate, a semi-autonomous Church in the canonical jurisdiction of the Patriarchate of Moscow, recognized by Estonia in 2002, which comprises the majority of the believers. Secondly, there is the Estonian Apostolic Orthodox Church, with the official name “the Orthodox Church of Estonia” under the Estonian law, which is the legal successor to the pre–World War II Estonian Orthodox

100 Years of Innovation

Russian World Foundation49 constitute the main soft-power institutions that could help fulfilling Russian foreign policy goals. This is especially so given the fact that, after re-gaining independence, trade relations with the West were restored: in 2016, less than 10 percent of foreign trade was with Russia. The main import from Russia constituted of raw materials,50 while the export was mostly manufactured goods. 51 While the economic levers that Russia can pull to pressurize Estonia undoubtedly exist, due to its relatively small significance, economy is not a sufficient means for Russia to achieve its goals.52 The main challenges for Estonia are, therefore, the military dominance of Russia and the presence of Russianspeaking inhabitants in Estonia.53 However, we should not forget that

Church and which is under canonical subordination to the Ecumenical Patriarchate of Constantinople. 49 The Russian World (Russkiy Mir), created in 2007, is a government-funded organization aimed at promoting the Russian language cooperating with the Russian Orthodox Church. Russkiy Mir reconnects the Russian diaspora with its homeland through cultural and social programs, exchanges and assistance in relocation. https://russkiymir.ru/en/fund/. The Russian World has four offices in Estonia: in Tallinn, Narva, Tartu and Pärnu. 50 What does Russia export to Estonia? (2016) https://atlas.media.mit.edu/en/visualize/tree_map/hs92/export/rus/est/show/2016/ 51 What does Russia import from Estonia? (2016) https://atlas.media.mit.edu/en/visualize/tree_map/hs92/import/rus/est/show/2016/ 52 Henrik Praks, Hybrid or Not: Deterring and Defeating Russia’s Ways of Warfare in the Baltics – the Case of Estonia, Research Division–NATO Defense College, No. 124, 2015, 3. https://www.icds.ee/fileadmin/media/icds.ee/failid/Henrik_Praks__Deterring_and_Defeating_Russia_s_Ways_of_Warfare_in_the_Baltics.pdf 53 Praks, Hybrid, 12. Corruption is mentioned here as a source of Russian influence, but as this topic falls out of the scope of the present paper, it is not discussed further here.

100 Years of Innovation

through pensions and social benefits to Russian citizens, Russia can still exercise considerable influence on the daily life in some segments of the society. ESTONIA’S RUSSIAN-SPEAKERS According to the census of 2011, 68.7 percent of Estonia’s population is ethnic Estonian and 24.7 percent is Russian,54 regardless of the citizenship.55 A small part of the Russian-speakers, around 5,000 people, has been living in the country for more than a century: they are the Old Russians, the descendants of the Old Believers leaving Russia in the 18th century. They got citizenship by law, they live mainly in settlements around the Lake Peipus, and their language skills are characterized by extensive bilingualism.56 See the details in: Emmet Tuohy, Cinema Vérité : Corruption Scandals and Russian Influence in the Baltic, International Centre for Defence and Security Estonia (2015), https://icds.ee/wp-content/uploads/2014/Emmet_Tuohy__Corruption_Scandals_and_Russian_Influence_in_the_Baltic.pdf 54 29.6 percent of the population declared Russian as native tongue. Thomas Schneider, Demographic Trends in Estonia, Konrad Adenauer Stiftung,(January 2013), p. 2, http://www.kas.de/wf/doc/kas_33565-1522-1-30.pdf?130313053247 The numbers represent 1 percent increase and 1 percent decrease, respectively, compared to the census of 2000. 55 Between 2000 and 2011, the Estonian citizens’ share increased from 80 percent to 85 percent; the share of those with undetermined citizenship decreased from 12.4 percent to 6.5 percent, whereas the share of foreign citizens increased from 6.9 percent to 8.1 percent. 56 Anna Verschik, The language situation in Estonia. in: Journal of Baltic Studies, Vol. 36, Issue 3. (2005), 287.

100 Years of Innovation

Map 1. Russian-speakers in Estonia in 2011

Source: https://economics.rabobank.com/publications/2014/april/country-reportestonia/ A much bigger part of the Russian-speaking people belongs to those whom personally or via their ancestors were settled in Estonia during the Soviet period. They were mainly workers, police, military personnel, and family members, but not only: the strengthening of the position of the Russian culture and language in Estonia, which became a priority after 1945, was carried out primarily with Leningrad-graduated professors

100 Years of Innovation

instead of the ‘politically unreliable’ Estonians and local Russians.57 As many arriving were settled in closed cities58 or newly built neighborhoods, they became effectively ghettoizedterritorially, culturally, economically, and politicallyalready under the Soviet regime. Estonians see the Soviet occupation as an illegal and artificial separation from the Western world and the “continuation of the Russian imperial expansion wrapped in the form of Soviet socialism”.59 Russian speakers settling during that period are, therefore, labelled as “illegal immigrant settlers or people guilty of illegal colonization”60 whose presence is similar to that of the post-colonial situation.61 Although the Estonian sensitivity is understandable, the vast majority of the international community does not share this approach: settlers were

Maxim Waldstein, Russifying Estonia? Iurii Lotman and the Politics of Language and Culture in Soviet Estonia, in: Kritika: Explorations in Russian and Eurasian History, Vol. 8. Issue 3. (Summer 2007), 566–567. 58 A settlement with special (restricted) residency authorization. 59 Waldstein, Russifying, 570. 60 Vello Pettai, Applying Kymlicka’s Models to Estonia and Latvia, in Will Kymlicka– Magda Opalski (eds.), Can Liberal Pluralism be Exported? Western Political Theory and Ethnic Relations in Eastern Europe, Oxford: Oxford University Press, 2001, 265. Further terms used by Estonians were the muulased (people belonging to elsewhere), mitte-eeslased (non-Estonians) and mittekodanikud (non-citizens). Maarja Siiner, Planning language practice: A sociolinguistic analysis of language policy in postCommunist Estonia. Language Policy (2006/5), 171. 61 Paul Jordan, The Modern Fairy Tale: Nation Branding, Nation Identity and the Eurovision Song Contest in Estonia, University of Tartu Press, 2014, 20.

100 Years of Innovation

moving within the recognized borders of a single country, the former Soviet Union.62 It is also true, however, that the expulsion of this kind of population is not unknown. For instance, after Turkey’s retreat from the Balkan or France’s withdrawal from Algeria many Turks and French (pieds-noirs) were forced to leave the newly independent states although the territories were integral parts of the respective states.63 One feature of outstanding importance in Estonia is that not all settlers were ethnic Russians. However, due to the diglossia or asymmetrical bilingualism applied in the Soviet Union, in the state government, transport, military, industry, public safety, and security, only Russian was allowed for official use.64 Because of this and the above-mentioned ghettoization, the Russian became their lingua franca, not the Estonian, the titular language of the Estonian Soviet Socialist Republic (ESSR).

According to the UN Charter the ethnic Russians had a right to settle freely in any Soviet republic, as the international community and most countries recognized the boundaries of the Soviet Union. Will Kymlicka, Western Political Theory and Ethnic Relations, in. Will Kymlicka–Magda Opalski (eds.), Can Liberal Pluralism be Exported? Western Political Theory and Ethnic Relations in Eastern Europe, Oxford: Oxford University Press, 2001, 77–78. 63 There is a difference, however: all pied noirs were forced to leave Algeria in 1962, while many Turks were able to stay in some of the Balkan countries after these countries achieved independence. 64 Boriss Cilevičs, Language Legislation in the Baltic States, In: Matthias Koenig–Paul de Guchteneire, Democracy and Human Rights in Multicultural Societies (Ashgate, 2007), 167.

100 Years of Innovation

Paradoxically, the Russification of the simultaneously non-Russian and non-Western minorities continued after Estonia’s independence, although approximately 190 ethnic groups officially dwell in Estonia today65. This has been the consequence of Tallinn’s focus on the creation of an ethnically homogenous nation-state, dividing the society into ‘Estonians’ and ‘Russians’ instead of supporting the preservation and reestablishment of the different minorities’ ethnic consciousness that would be distinct from Russian-ness.66 As Russian-speakers in Estonia do not consider themselves a migrant community, their language habits differ from those who live in overseas Russian communities.67 The reluctance of many Russian-speakers to learn Estonian is also the consequence of their view on the ‘limited usefulness’ or ‘low market value’ of the language of a small nation, imposed on them in their home. That is the reason why, for instance, there are salespersons in Tallinn who are more willing to learn Finnish to serve tourists than Estonian, the titular language.68

BUILDING A NATION-STATE IN MIDST OF INTERNATIONAL ATTENTION 65

Cultural diversity http://www.kul.ee/en/activities/cultural-diversity Aleksandr Aidarov–Wolfgang Drechsler, Estonian Russification of non-Russian ethnic minorities in Estonia? in. Trames Vol. 17. Issue 2. (2013), 104. 67 On this topic, see Irina Dubinina–Maria Polinsky, Russians in the U.S., https://scholar.harvard.edu/files/mpolinsky/files/irina_dubinina_polinsky.pdf 68 Verschik, The language, 290. 66

100 Years of Innovation

There were more actors in addition to Russia who tried to influence the course of integration-related events in Estonia after 1991. As the Baltic states were eager to re-establish the links to Western political, economic and military alliances after becoming independent, they had to fulfil several criteria to prove their democratic transition. Quite naturally, this resulted in some degree of interference in the Baltic policies on, for instance, the Russian-speaking people. European organizations were not, and have not been strong enough or willing to, decisively determine minority policies in any state. Their focus has been on fostering the provision of a minimum level of recognition of and protection for minorities, as well as the strengthening of the stability of the countries. This is why the OSCE did nothing to stop Estonia from closing down Russian-language schools and institutions in the 1990s, but demanded for citizenship for the Russian minority.69 Additionally, the High Commissioner on National Minorities, backed by the Council of Europe, has exerted considerable pressure on the Estonian central authorities to make them reconsider the Law on Aliens, a major cause of dissatisfaction for the Russian minority.70

Will Kymlicka, Reply and Conclusion, in. Will Kymlickaâ&#x20AC;&#x201C;Magda Opalski (eds.), Can Liberal Pluralism be Exported? Western Political Theory and Ethnic Relations in Eastern Europe, Oxford: Oxford University Press, 2001, 378. 70 Boris Tsilevich, New Democracies in the Old Worldâ&#x20AC;&#x201C;International Legal Instruments and Institutions, in. Will Kymlickaâ&#x20AC;&#x201C;Magda Opalski (eds.), Can Liberal Pluralism be

100 Years of Innovation

Later on, the accession to the EU has influenced the integration-related activities of Estonia.71 For example, the Phare programme aimed at the acquisition of medium-level knowledge of Estonian necessary for further educational and career requirements for graduates of non-Estonian secondary schools by means of language camps and family exchanges.72

Citizenship The newly independent state’s administration had to respond to the situation of the undesired change of the population, whereby almost a third of the residents could not either speak Estonian or were not part of the Estonian society. The decision to make was between the “imagined community”, converging those sharing the same identity and the sense of belonging together,73 and the political community comprising every inhabitant regardless of ethnicity.74 The debate was ongoing when the Communist coup of August 1991 failed in Moscow; occurring in a time,

Exported? Western Political Theory and Ethnic Relations in Eastern Europe, Oxford: Oxford University Press, 2001, 78. 71 Juhan Kivirähk, Integrating Estonia’s Russian-speaking Population: Findings of National Defense Opinion Surveys. Tallinn: International Centre for Defence and Security, December 2014, 5. 72 Verschik, The language, 303. 73 Benedict Anderson, Imagined Communities–Reflections on the Origin and Spread of Nationalism, London, New York: Verso, 2006, 6–7. 74 Pål Kolstø, Nation-building and ethnic integration in post-Soviet societies: an investigation of Latvia and Kazakstan, Boulder: Westview Press, 1999, 1.

100 Years of Innovation

when all Estonians wanted independence, but only one-third of the Russian-speakers living in the ESSR supported the idea.75 In that context, the Estonian Citizens’ Committees (Eesti Kodanike Komiteed), a nonpartisan political movement, managed to institutionalize one of their most important legalistic political principles, the limitation of the Estonian citizenship to those who had held that before 1940, together with their descendants. The will of keeping outside of the polity those connected to the anti-independence forces or simply seen as unreliable for the state resulted in not adopting a carte blanche citizenship law, i.e. automatic citizenship for permanent residents,76 and linking proficiency in Estonian to citizenship. The main pieces of legislation had their predecessors in the first Estonian Republic, between 1918 and 1940. For example, naturalization was connected to language proficiency then, too; the restriction was eased only in 1938, when Estonia waived the language requirement for those who lived in the country for over 10 years.77 The current law on nationality is from 1995; however, it has been subject to several modifications, the last one was implemented in January 2015. Then, people over 65 were exempted from the written part of the Estonian

Kivirähk, Integrating, 4. Kivirähk, Integrating, 4. 77 Kivirähk, Integrating, 27. 75 76

100 Years of Innovation

language exam, minors were permitted to hold multiple citizenship temporarily,78 while automatic citizenship was granted to new-borns of stateless parents, and to minors below 15 born to stateless parents on the territory of Estonia.79 With these changes, the elimination of statelessness seems to be a matter of time; however, there are still open questions connected to citizenship. Lack of citizenship means several restrictions: non-citizens are barred from participating in national elections, holding public office, joining a political party, or being employed in the public sector.80 Since 1992, they have been allowed to vote on local elections; however, they have no word in national or European elections. This was questioned by three MEPs81 in 2016, who addressed a petition to the European Parliament pointing out that despite the seats are allocated proportionately to the permanently resident population of a Member States, some residents are not allowed to vote.82 The lack of Estonian citizenship also refrains in economic

In general, multiple citizenship is not allowed in Estonia. Parlt approves amendments to simplify acquisition of citizenship (21 January 2015) https://news.postimees.ee/3064073/parlt-approves-amendments-to-simplifyacquisition-of-citizenship 80 David J. Trimbachâ&#x20AC;&#x201C;Shannon Oâ&#x20AC;&#x2122;Lear, Russians in Estonia: Is Narva the next Crimea. in: Eurasian Geography and Economics, Vol. 56, Issue 5. (2015), 499. 81 Members of the European Parliament. 82 The fight for voting rights of stateless persons in Estonia and Latvia (27 July 2016) https://www.statelessness.eu/blog/fight-voting-rights-stateless-persons-estonia-andlatvia 79

100 Years of Innovation

terms: unemployment among non-citizens is higher than among citizens83 and is particularly high in the Ida-Viru county, where many Russian citizens and stateless people live. Despite the amendments, as of 2015, still approximately 6 percent of the population, 85,000 people were non-citizen, however, in a sharp decrease from the 12.4 percent in 2000. The problem, however, still keeps worrying the international community. In October 2016, the Committee of Ministers of the Council of Europe called on Estonia to continue its efforts to facilitate access to citizenship for long-term residents.84 The question of statelessness also appeared in the UN in 2017, which has been bringing a global campaign to end all statelessness by 2024.85

Language regulation The other barrier used to exclude Russian-speakers from the polity was language. Estonian has long created a border between different parts of the population. During the Soviet times, it replaced the non-existent political frontier between Russia and Estonia within Estonia, separating 83

Employment rate at highest for 20 years (November 14, 2017) https://www.stat.ee/news-release-2017-119 84 Resolution CM/ResCMN(2016)15 https://search.coe.int/cm/Pages/result_details.aspx?ObjectId=09000016806b37fb 85 Itâ&#x20AC;&#x2122;s Time to End Child Statelessness in Estonia (17 January 2017) https://www.hrw.org/news/2017/01/17/its-time-end-child-statelessness-estonia

100 Years of Innovation

Estonians from the rest of the residents of the ESSR who were generally unable to speak it. In 1989, only 12% of non-Estonians was proficient in the titular language of the ESSR, whichtogether with the increase of non-Estonian populationcaused a widespread fear among Estonians about the very existence of the language and the nation.86 The independence, therefore, led to an activist language policy, aiming not solely the protection but also the promotion of Estonian, and the domination of native-speakers within the national institutions. The activist language policy was also a reflection to the challenges of globalization87 and the expression of a new geopolitical orientation.88 All the language acts, those of 1989,89 1995 and 2011, as well as the Constitution of 1992 declared Estonian the only official language. The predecessor of the current regulation was the language policy of the first republic, aiming then the strengthening of the position of the Estonian at the expense of the former official German and Russian, and to impose

Jordan, The Modern, 19. Siiner, Planning, 164–166. 88 Cilevičs, Language, 179–180. 89 Despite declaring Estonian the official language of Estonia, then within the Soviet Union, the mainly symbolic and declarative law’s main goal was to ensure EstonianRussian bilingualism among holders of certain occupations. Verschik, The language, 300–301. 87

100 Years of Innovation

the standard language on the population speaking regional dialects of Estonian.90 Language issues are regulated by over 400 laws and lower legal and normative acts; while language policy is carried out by numerous state agencies working together with the chief executive body, the Ministry of Education and Research. The body responsible for the enforcement of the Language Act of 2011 is the Language Inspectorate, which has wide powers, including checking the level of language proficiency of employees, recommending termination of employment contracts of employees or civil servants whose Estonian language proficiency does not meet the required standard, and as of 1 January 2015, to impose fines on employers. The language policy has been the source of many tensions. Russianspeakers generally see language requirements for citizenship, and language tests demanded of people in certain positions, e.g. teachers, doctors, police and service sector personnel as deprivation of their basic rights.91 Estonians consider the legal situation as a proper framework for treating Russian-speakers ‘metics’ or ‘long-term residents excluded from

Verschik, The language, 285–286. Even under the Soviet occupation, in 1961, a Republican Committee for Correct Language Usage (Vabariiklik Õigekeelsuse komisjon) was created to support the written standard and counteract the importation of lexical items from Russian. Verschik, The language, 286. 91 Siiner, Planning, 173.

100 Years of Innovation

the polis’ and not national minorities or members of the society.92 Language policy is highly sensitive also in the foreign policy. For instance, Estonia has not become a party to the European Charter for Regional or Minority Languages due to the fear that that would mean the official recognition of Russian what eventually could lead to bilingualism on Estonian territory.93 Since the independence, the knowledge of Estonian has significantly risen: in 1991, 18 percent of the non-Estonians spoke Estonian,94 in 2000, 44 percent,95 and in 2013, 75 percent.96 Nevertheless, Russian is still an asset and remained widely spoken: in 2011, approximately 545,000 people, 41.5 percent of the non-Russian speakers spoke the language,97 which means that approximately 928,000 people or 70.6 percent of the total population of Estonia still speak Russian. In addition, according to

Pettai, Applying, 264–266. Snežana Trifunovska, Challenges of 1998-2008: Ratifying the Charter, The case of the Baltic states. in: Minority Language Protection in Europe: Into a New Decade, Regional or minority languages, No. 8. Strasbourg: Council of Europe Publishing, 2010, 73. 94 Siiner, Planning, 168. 95 Verschik, The language, 295. 96 Martin Ehala, Russian Minority in Estonia after Crimea. In: Aspen Review Central Europe No. 2. 2014, 46. 97 Ethnic nationality. Mother tongue and command of foreign languages. Dialects http://pub.stat.ee/pxweb.2001/I_Databas/Population_census/PHC2011/01Demographic_and_ethno_cultur al_characteristics/04Ethnic_nationality_Languages_Dialects/04Ethnic_nationality_La nguages_Dialects.asp 93

100 Years of Innovation

self-declaration, almost 90 percent of the Estonians use Russian to a lesser or greater extent when communicating with Russian-speaking coworkers or clients, while only 40 percent of non-Estonians use Estonian in similar situations.98 Due to the state efforts, knowledge of Estonian has been increasing among Russian-speakers. However, the ghettoized situation of these communities creates a lack of opportunity in using Estonian on a daily basis. The government keeps on fostering language learning. For instance, those who take a successful language exam required for obtaining citizenship could apply for a refund for the language training fee, up to 384 euros.99 Nevertheless, a social change is highly needed; easing expectations to a grammatically correct Estonian, and focusing on the promotion of the possibility of speaking the language could foster a more inclusive society with more awareness towards multiculturalism and multilingualism.100

Siiner, Planning, 179. Comments of the Government of Estonia on the fourth opinion of the Advisory Committee on the implementation of the Framework Convention for the Protection of National Minorities in Estonia (2015) 2. https://rm.coe.int/168047d01a 100 Siiner, Planning, 181â&#x20AC;&#x201C;182. 99

100 Years of Innovation

Minority rights Between the two World Wars, Estonia had a lauded framework for protecting minorities; however, the change of the ethnic composition of the state limited that generosity after 1991. At present, the legal framework is narrow; moreover, its implementation is also not assured completely. Furthermore, as minority rights apply only to citizens, a large number of the Russian-speakers simply have no minority protection in Estonia.101 Estonia is a monolingual state; however, Article 51, paragraph 2 of the Constitution provides the right to use the minority language in contacts with the local public administration. However, a threshold of 50 percent is required, which â&#x20AC;&#x153;is prohibitively high, does not correspond to the standards established in this area and is not compatible with the Framework Conventionâ&#x20AC;?. Furthermore, it applies only to the Russian minority in practice, and only in case of the local authoritiesâ&#x20AC;&#x2122; willingness.102 According to the Law on Cultural Autonomy of National Minorities, adopted in 1993, based on the legislation of 1925, cultural autonomy bodies can be elected by citizens registered as members of the relevant 101

Verschik, The language, 301. Fourth Opinion on Estonia adopted on 19 March 2015 by the Advisory Committee on the Framework Convention for the Protection of National Minorities, points 64 and 65. https://rm.coe.int/168047d0e5 102

100

100 Years of Innovation

minority group, if the community numbers over 3,000 people. The law expressively allows the German, Russian, Swedish, Jewish and since 2003, the Ingrian-Finnish minorities to elect their cultural autonomy bodies.103 Ethnic Ukrainian and Belarusian citizens, whose number is well above 3,000,104 have never been protected by the law, while the establishment of the Russian Cultural Council has been blocked by the Estonian court for years.105 The use of minority place names is also restricted by a lawthe Place Names Act of 2004. Topographical indications in minority languages may be introduced either on the request of the local authority with the agreement of the Minister of Interior Affairs or, in a simplified procedure “within the territory of a settlement of which the majority of the residents were non-Estonian speakers as of 27 September 1939”(!).106 The regulation not only impedes placing bilingual inscriptions where significant Russian minority lives today, but it has also not been fully

103

The German, Swedish and Jewish minorities no longer meet the numerical criteria. On 1 January 2017, 23,000 and 12,000 among the residents. Population by ethnic nationality, 1 January, years https://www.stat.ee/34278 105 Currently there are Ingrian-Finnish and the Swedish autonomy bodies. http://www.kul.ee/et/vahemusrahvuste-kultuuriautonoomia 106 Article 6, paragraph 6 of the Place Names Act. https://www.riigiteataja.ee/en/eli/512112013009/consolide 104

101

100 Years of Innovation

applied in the case of old minorities, i.e. the Swedish and Old Believer Russian communities.107

SOCIAL INTEGRATION The existence of parallel societies is not the result of the Estonian legislation, but the continuation of what existed there before 1991. After independence, the Estonian-speakers born in the 1960s became the winners’ generation,108 while the Russian-speakers had different choices. They could have tried to integrate into the Estonian state, emigrate, or secure themselves in their enclaves with creating parallel structures to maintain their identity and language.109 Those who chose the first two options were numerous but by far not the majority of the population. Between 1992 and 1996, 88,712 people were naturalized as Estonian citizens, while approximately 27,500 people, mostly retired military personnel and their families, left for Russia.110 The two groups made up

107

Fourth Opinion, points 71, 72, and 73. Kivirähk, Integrating, 17. 109 George Schöpflin, Liberal Pluralism and Post-Communism, in Will Kymlicka– Magda Opalski (eds.), Can Liberal Pluralism be Exported? Western Political Theory and Ethnic Relations in Eastern Europe, Oxford: Oxford University Press, 2001, 122. 110 Paul Goble, Another Defeat for Putin’s ‘Russian World’ – Very Few Russians in Estonia Want to Leave (6 February 2015) http://windowoneurasia2.blogspot.be/2015/02/another-defeat-for-putins-russianworld.html 108

102

100 Years of Innovation

close to eight percent of the population and a third of the Russianspeakers. Emigration and naturalization continued after the peaks of the first half of the 1990s; however, the pace has slowed down. The highest number of naturalizations, 22,773, took place in 1996. Since 2008, the numbers of naturalized vary between 898 in 2015 and 1,772 in 2016.111 In 2017, 797 people became Estonian citizens; 558 of them were previously stateless, and 177 Russian citizens; the two groups represent 92.2 percent of the total number of naturalized.112 By the early 2000s, the number of emigrants declined to around one thousand a year, while in 2011, for the first time, the number of incoming Russians exceeded that of those leaving for Russia. The decrease has been continuing, and in 2013 and 2014 together, only 37 moved to the eastern neighbour.113 Integration, embodied for instance in the state program Integration in Estonian Society 2000-2007, first meant the re-establishment of an Estonian-language environmentď&#x201A;žalso for Russian speakers who were 111

https://www.politsei.ee/dotAsset/61217.pdf Nearly 800 people granted Estonian citizenship in 2017 (28 December 2017) https://news.err.ee/651158/nearly-800-people-granted-estonian-citizenship-in-2017 113 The decline has materialized despite the Russian state program of Resettlement of Compatriots, created by a Decree of the Russian President in 2006, to encourage compatriots to move to Russian regions where economic, demographic and other reasons require new forces for regional development. The Program of Resettlement of Compatriots to the Russian Federation http://pereselenie.moscow/en/help/resettlementprogram.html 112

103

100 Years of Innovation

not expected to give up their home language and individual Russian heritage114with the clear aim of reducing the number of Russianlanguage institutions.115 However, due to the isolation of many Russianspeakers, it was unrealistic, especially since there was no real opportunity for using Estonian.116 Schools have not been appropriate tools for creating Russian-Estonian bilingualism in the Russian language enclaves; however, the Law of Basic and Secondary Education, amended in 1997, required the shift of the language of instruction in the upper grades of Russian-medium schools to Estonian.117 Despite the fact that, at present, 60 percent of the curriculum is taught in Estonian,118 there is a lack of qualified teachers, leading to closing down some secondary school classes in Tallinn and Narva.119 Additionally, there is a lack of the teaching manuals and, above all, of interactions in Estonian for those living in the enclaves. The language shiftconsidered too fast even by those with mixed Russian-Estonian

114

Siiner, Planning, 174. Kymlicka, Western, 78. 116 Siiner, Planning, 180. 117 The legislation does not concern private schools. 118 Estonian literature, music, civic education, history and the geography of Estonia are compulsorily taught in Estonian, while in order to meet the 60 percent elective courses are also added. 119 Maarja Siiner, Decentralisation and language policy: local municipalities’ role in language education policies. Insights from Denmark and Estonia, in. Journal of Multilingual and Multicultural Development Vol. 35, Issue 6. (2014), 613. 115

104

100 Years of Innovation

identity supporting bilingual education120not only created the feeling of discrimination and humiliation for some,121 but due to the deficiencies mentioned, has not enhanced the chances of breaking the social separation for the future generations. There are also voices according to which the too strong focus on Estonian is a mistake impeding integration.122 The Bronze Night in 2007 was a visible warning, when Russia managed to instrumentalize its ‘compatriots’ to undermine societal integration and to maintain a sense of grievance and marginalization.123 In 2011, according to the Estonian Integration Monitoring, half of the Russian-speakersmainly

those

with

‘undefined’

Russian

citizenshipbelonged to the “relatively unintegrated” and the “unintegrated” categories, and only 21 percent and 14 percent to the “successfully integrated” and “Russian-speaking Estonian patriot” 120

Maie Soll–Sander Salvet–Anu Masso, Changes in Language Policy in Estonia: SelfDescriptions of Russian-Speaking Students. in: Trames Vol. 19. Issue 3. (2015), 242. 121 Fourth Opinion, point 7. 122 „[R]egrettably, no steps were taken to expand opportunities for bilingual education with the aim of increasing opportunities for contacts between the majority and the minority communities. In fact, policies implemented in the recent years perpetuate the division between Estonian and Russian language schools.” „[T]he main, if not exclusive, focus of the successive strategies remained the promotion of proficiency in the Estonian language as the main tool for integration (…).” Fourth Opinion, points 13, 43. 123 Andres Kasekamp, Why Narva is not next, Estonian Foreign Policy Institute Paper Series no. 21 (May 2015), 3., http://www.evi.ee/wp-content/uploads/2015/05/EVImottepaber21_mai15.pdf

105

100 Years of Innovation

categories, respectively.124 According to a survey from 2013, in the mental triangle of 1) citizen identity, 2) language proficiency, and 3) social participation, the Russian-speakers of Ida-Viru county125 accounted for more than half of the least integrated 26 percent of the Russian-speaking population of Estonia, and none of them belonged to the most integrated category. Similarly, a third of the least integrated Russian-speakers lived in Tallinn, equaling a fifth of the Russianspeaking community of the Estonian capital.126 When asked about security preferences, the opinions also diverge significantly: NATO is perceived as one of the three main security guarantees for 78 percent of the Estonian-speakers but only for 41 percent of the non-Estonianspeakers. In contrast, good relations with Russia is mentioned only by 18 percent of the Estonian-speakers and 53 percent of the non-Estonian speakers as one of the three main security guarantees.127 Kivirähk, Integrating, 8. Where Russian-speakers made up more than 70 percent of the population on 1 January 2017. Population by sex, ethnic nationality and county http://pub.stat.ee/pxweb.2001/Dialog/varval.asp?ma=PO0222&path=../I_Databas/Population/01Populatio n_indicators_and_composition/04Population_figure_and_composition/&lang=1 126 A Study of Social Groups in Integration, Tallinn: Institute of International and Social Studies at Tallinn University, 2013, 10. http://www.tlu.ee/UserFiles/Rahvusvaheliste%20ja%20Sotsiaaluuringute%20Instituut /Repositoorium/2013/SummpCpAbj5gB1.pdf 127 Kivirähk, Integrating, 14. However, this might also be a generational question as in 2014, ten years after Estonia’s accession to NATO, 72 percent of the under-20 Russianspeakers were in in favour of NATO membership, while the share was under 40 percent among those over 50. Ibid. 17. 124 125

106

100 Years of Innovation

The current Strategy of â&#x20AC;&#x153;Integrating Estonia 2020,â&#x20AC;? approved in December 2014, maintains the focus on Estonian as the main tool for integration, but also emphasizes equal access to work, education and culture, as well as intercultural contacts among different segments of society, regardless of their linguistic or cultural background.128 Nevertheless, minorities were not included in the elaboration of the strategy beyond the cultural sphere.129 The implementation is to be helped by the establishment of Estonian Language Houses in Narva and Tallinn. Estonian Language Houses organize free Estonian language courses, develop educational and methodological materials, among others, to help people whose native language is other than Estonian to learn and practice the language and to participate in Estonian culture.130 In general, consultation has long been a problem in Estonia; however, at a local level there are consultative bodies, mainly at those administrative units where the share of non-Estonian speakers is considerable.131 The situation at the national level is different: in the

128

Fourth Opinion, point 4. Fourth Opinion, point 9. 130 The Establishment of Estonian Language Houses https://www.kul.ee/en/activities/cultural-diversity/establishment-estonian-languagehouses 131 For instance, the Roundtable of National Cultural Societies organized by the IdaViru County Governor (since 1994), the Tallinn Home Peace Forum organized by Tallinn City Government (since 2007), the Roundtable of National Minority Organisations organized by PĂ¤rnu City Government (since 2008), or the Co-ordination 129

107

100 Years of Innovation

absence of any genuine consultative bodies, the law containing provisions allowing for national minorities to have their interests represented in officially recognized structures by democratically elected representatives, remains a dead letter.132 Previously, national fora existed; there were a Presidential Roundtable of National Minorities between 1993 and 2008, and an Estonian Cooperation Assembly between 2009 and 2011.133 The only forum currently existing is the National Minorities Cultural Advisory Council (NMCAC), under the aegis of the Ministry of Culture, focusing on cultural projects rather than the drafting and approving long-term policies, programs and legislation affecting minorities in a broader sense.134 Not only in the world of fake news, but media generally merits attention. After the Soviet regime collapsed, media went private in Estonia, and the legislation limited foreign capital to under 50 percent. Russian-speakers turned to Russian TV-s and re-transmitted programs

Council of National Minorities organized by Narva City Government. Fourth Opinion, point 96. 132 Fourth Opinion, points 38 and 39. 133 Acting President Kersti Kaljulaid has no such an advisory body; however, there are ethnic Russian members in her institutions. https://president.ee/en/president/institutions/index.html 134 Fourth Opinion, point 95. The current 40 members of the NMCAC were nominated for a 5 years term in November 2017. http://www.kul.ee/et/tegevused/kultuurilinemitmekesisus/rahvusvahemuste-kultuurinoukoda

108

100 Years of Innovation

from Russia available on satellites,135 due to insufficient Estonian knowledge. They were also unsatisfied with the disproportionate representation of minorities and the one-sided picture the Estonian media depicted Russiapresenting that only as a source of conflict.136 The First Baltic Channel (Pervij Baltijskij Kanal, PBK) has become the main Russian media, available in all Baltic States,137 and it is not impartial.138 To tackle the challenge, in September 2015, Estonia launched the ETV+, a Russian-language channel to provide quality content service to Estonia’s Russian- and Estonian-speakers alike.139 The Baltic States were also among the first sources who warned the EU to take countermeasures against Russian media falsifications.

Andres Jõesaar–Salme Rannu–Maria Jufereva, Media for Minorities: Russian Language Media in Estonia 1990-2012. in: Media transformations, Vol. 9. (2013), 127. 136 A Study, 15. 137 PBK re-transmits the Russian government controlled commercial TV channel ORT completed with daily newscast produced locally in the Baltic States. Jõesaar–Rannu– Jufereva Media, 133–134. 138 For instance, in October 2014, the PBK was temporarily blocked by Lithuania due to running unbalanced coverage of the Ukraine crisis. Russian-language First Baltic Channel most fined TV station in Latvia last year (27 April 2015) https://www.baltictimes.com/russianlanguage_first_baltic_channel_most_fined_tv_station_in_latvia_last_year/ 139 Darja Saar: ETV+ not a propaganda channel competing with Putin (December 29, 2017), https://news.err.ee/651361/darja-saar-etv-not-a-propaganda-channelcompeting-with-putin According to editor-in-chief Darja Saar, providing real-time Estonian-language captioning for all live television broadcasts, required by the Language Act, constitutes the main problem, which impedes a wiser spending of the 50,000 euros necessary. 135

109

100 Years of Innovation

Politics also have a role in integration. The interest of the Russianspeakers has long been represented by the Centre Party, which, however, after the Bronze Night, was boycotted by the other Estonian parties. 140 In 2016 and 2017, under the leadership of acting Prime Minister Ratas, the Centre Party, while making part of the governing coalition, was able to put an end to the general negative perception. Now, the party is keen on keeping the support of the Russian-speakers, but it also has opened up towards ethnic Estonians. Despite the problems, Russian-speakers have developed connections to Estonia and are more willing to live there than to move to Russia. 141 There are also notable good examples for integration. For instance, the Minister of Health and Labour between 2015 and 2018, and the incumbent leader of the Estonian Social Democratic Party, Jevgeni Ossinovski, born in a Russian-speaking family in Ida-Viru county in 1986, has become an example of successful integration. Should the awareness about the needs of the Russian community continue, it might have not only a stabilizing effect on Estonian politics but could also contribute to the strengthening Estoniaâ&#x20AC;&#x2122;s security by

140

The party was and has not been a Russian party; however, Estonian-speaking voters left it when in 2007, under Edgar Savisaarâ&#x20AC;&#x2122;s leadership, they failed to condemn openly the events of the Bronze Night. 141 In Estonia, life is good, maybe too good, for ethnic Russians (16 February 2015) https://qz.com/344521/in-estonia-life-is-good-maybe-too-good-for-ethnic-russians/

110

100 Years of Innovation

bringing the communities closer.142 This perception was reflected in the speech of Prime Minister Ratas in February 2018, in Tartu, when speaking on the centenary of Estonia. He said that “linguistic and cultural origin may set us apart, but patriotism, having Estonia as our shared home, is what unites us”, stressing that there is no other way than “overcoming the mentality of differentiating between ‘us’ and ‘them’.”143 NARVA—CAN IT FREEZE? The easternmost and the third most populous town of Estonia, ‘the NATO’s Russian city’,144 is of 83 percent Russian-speaking, with a share of ethnic Estonians less than 4 percent.145 Not only the high percentage of Russian-speakers merits attention, but also the share of non-Estonian citizens: on 1 January 2017, Estonian citizens made up only 48 percent

142

Opinion digest: Three key moments in Estonian politics in 2017 (1 January 2018) https://news.err.ee/651652/opinion-digest-three-key-moments-in-estonian-politics-in2017 143 Speech of Prime Minister Jüri Ratas before the centenary of the Republic of Estonia, 22.02.18 https://www.valitsus.ee/en/news/speech-prime-minister-juri-ratascentenary-republic-estonia-220218 144 The NATO’s Russian city (25 June 2015) http://www.bbc.com/news/magazine33258667 The second largest Latvian town, Daugavpils is also of Russian-speaking majority, whom form a 53 percent of the population. 145 More than 50 percent of the population was ethnic Estonian in 1934, while the proportions changed dramatically following the Soviet authorities’ decision in 1947 to settle the town with Russian-speakers instead of letting the former inhabitants return.

111

100 Years of Innovation

of the population;146 however, this amounts to a considerable increase from the 30 percent in 1998.147 The question of Narva comes into focus due to the similarities with certain regions in Russia’s ‘near neighbourhood’, such as Transnistria, Abkhazia or Crimea. In those areas, the high percentage of ethnic Russians or Russian citizens, and the low degree of social integration have turned into a flammable mixture, or even (a frozen) conflict. After the illegal148 occupation of Crimea, especially in the context of the ‘Crimean speech’, many feared that a similar scenario could unfold in the Baltics, as the protection of Russophones was the pretext for Russian involvement in South Ossetia in 2008, and in Crimea in 2014. The distinctiveness of Narva within Estonia became visible immediately after the independence. In July 1993, Narva and the nearby Russian-speaking Sillamäe voted in an unrecognized referendum for a 146

Russian citizens made up 36 percent of the population and aliens, another 14 percent. Narva in figures 2016, 4, http://narva.ee/en/left_block/narva_in_figures/page:3543 In 2008, 45 percent of the population was Estonian citizens and 34 percent Russian, with similar ethnic composition than??[please specify, ok if in Hungarian] in 2017. Narva in figures 2007, 10–11, http://narva.ee/en/left_block/narva_in_figures/page:3543 147 Pål Kolstø, Minority Rights Regime in Post-Communist Societies, in. Will Kymlicka – Magda Opalski (eds.), Can Liberal Pluralism be Exported? Western Political Theory and Ethnic Relations in Eastern Europe, Oxford: Oxford University Press, 2001, 210. 148 According to the non-binding UN General Assembly Resolution 68/262, supported by 100 member states, adopted on 27 March 2014, which called the 16 March 2014 referendum held in autonomous Crimea invalid. https://www.un.org/press/en/2014/ga11493.doc.htm

112

100 Years of Innovation

national-territorial autonomy with a turnout of 54 and 60 percent respectively, and a support of 95 percent. Estonia rejected their pledge, similarly to the general approach of the Central European states at that time, and since then.149 In the 2000s, Narva requested the implementation of Article 11 of the Language Act from the Ministry of Education and Science. More specifically, Narva asked for allowing the use of Russian in the internal communication of the city administration. The minister rejected the request arguing that minority rightsď&#x201A;žsuch as co-official language useď&#x201A;žare granted to Estonian citizens only, and a minority language can be used solely in addition to the Estonian not instead of it.150 As Russian-speakers do not form a single group in Estonia, the inhabitants of Narva also have a more complex identity than Russianness.151 On the one hand, they feel alienated by Estonia, a state unwilling to respect their identity. On the other hand, due to personal experiences

149

In those years, Yugoslavia revoked the autonomy of Vojvodina and Kosovo, Georgia from Abkhazia and Ossetia and Azerbaijan from Nagorno-Karabakh. Other states rejected the minority claims for autonomy: among others, Kazakhstan rejected the autonomy for ethnic Russians in the North, Ukraine for any territories with the exception of Crimea, Lithuania for the ethnic Poles, Macedonia for the Albaniandominated Western Macedonia, Slovakia, and Romania for the ethnic Hungarians. 150 Siiner, Planning, 169. 151 David J Trimbach, Lost in Conflation: The Estonian City of Narva and Its RussianSpeakers, (9 May 2016), https://www.fpri.org/article/2016/05/lost-conflation-estoniancity-narva-russian-speakers/

113

100 Years of Innovation

and connections to Ivangorod,152 which belongs to Russia, they are aware of the economic, social and political differences between Estonia and Russia. These features have led to a special Narva identity confined to the town, beyond the geographical borders of which there are “Estonia” and “Russia”.153 Nevertheless, ambiguities of the deeper layers of identity became obvious in the early period of the Ukrainian crisis unfolding since 2014. For instance, an incident occurred on 9 May 2015, when the flag of the People’s Republic of Donetsk (DNR) was publicly waved, and some Narvans, also loyal ones to Estonia, showed support for the Russian occupation of Crimea.154 On the other hand, numerous locals attended the Estonian national military parade held in Narva on 24 February 2015, and the city officials declined the request of their partner town, Donetsk, now in the pro-Russian separatists controlled East Ukraine, to support their cause.155

152

Ivangorod, part of Narva between 1649 and 1945 under Swedish, Russian, and Estonian sovereignties alike, was separated by the Soviet administration in 1945. Despite the Schengen border between the two towns, the relationships are still lively. 153 Andrey Makarychev–Alexandr Yatsyk, Russia-EU borderlands after the Ukraine Crisis–The case of Narva. In: Gerhard Besier–Katarzyna Stokłosa, Neighbourhood Perceptions of the Ukraine Crisis. Routledge, 2016, 110–112. 154 Makarychev–Yatsyk, Russia-EU, 108. 155 Luke Coffey, Why Narva is probably not next on Russia’s list (20 April 2015) http://www.aljazeera.com/indepth/opinion/2015/04/narva-russia-list150414121342078.html

114

100 Years of Innovation

The security fear, however, is linked to the consciousness that Russia’s interest is not territorial expansion but dividing the West by undermining the NATO and the EU. Sending outsiders or “little green men” into Narva to ignite trouble could leave the NATO in a dilemma, the so-called “Narva paradox”.156 As the Russian military doctrine foresees the ‘deescalation’ of conflicts by nuclear means, i.e. threatening to carry out a limited tactical strike, the NATO should provide a credible deterrence to turn the question whether the NATO allies would be willing to die for Narva, into the one whether Putin is willing to die for Narva.157 Deterrence is particularly important taking into account the strength of the available Russian military force and the fact that the US would not be able to protect the Baltic countries even if all US and NATO troops stationed in Europe were dispatched there.158 However, pre-positioned military equipment in the Baltics could form a credible deterrent.159 The importance of the city has been recognized by the current head of state as well. At the end of August and the beginning of September 2018,

156

According to the Russian political commentator Andrey Piontkovsky, the Narva paradox is described as Putin’s ability, by one single move, to make the entire West face an unthinkable choice—humiliating capitulation and marginalization, or a nuclear war with someone who lives in a different reality. Makarychev–Yatsyk, Russia-EU, 107. 157 Kasekamp, Why, 3–4. 158 Makarychev–Yatsyk, Russia-EU,107. 159 Eerik Marmei–Gabriel White, European Deterrence Initiative—Bolstering the Defence of the Baltic States. Tallinn: International Centre for Defence and Security, 2017, 4.

115

100 Years of Innovation

President of the Estonian Republic, Kersti Kaljulaid, moved her office to Narva, which she will do again in November for another two weeks.160 During her first period of relocation, she intended to show her work to the locals and to get in contact with them. To achieve this, among other activities, she allowed locals to spectate the ceremony of newly arrived foreign ambassadors presenting their credentials to her.161

CONCLUSIONS Resolving problems related to the co-existence of different ethnicities within a single country is never an easy task, especially if the groups are numerous, geographically concentrated, and they have historically problematic relations with unresolved disputes. The Estonian-Russian relationships have all these characteristics within Estonia as well as at the international level. The multiply unbalanced nature of the relations makes resolving issues, such as integration of the Russian-speakers into the Estonian society and placing them within the framework of the Estonian-Russian bilateral relations an extremely challenging task. Especially in the context of a more offensive foreign policy of Russia 160

President Kersti Kaljulaid starting first work week in Narva on Tuesday (28 August 2018), https://news.err.ee/856785/president-kersti-kaljulaid-starting-first-work-weekin-narva-on-tuesday, 161 President invites Narva residents to spectate at ambassadorial ceremony (3 September 2018), https://news.err.ee/858360/president-invites-narva-residents-tospectate-at-ambassadorial-ceremony,

116

100 Years of Innovation

seeing the â&#x20AC;&#x153;protection of the interests of the compatriotsâ&#x20AC;? a legitimate reasoning for involvement. Unable to recognize its position as a post-colonial state, Estonia decided to limit the polity and by the legislation on citizenship to force residents not speaking Estonian to make their choice: learn it or leave the country. After almost three decades, however, with the sequential amendments of this law, Estonia is now on the way of getting rid of one of the main international concerns formulated against it: statelessness. Yet, even with the elimination of statelessness, the social integration of the Russian-speakers, especially that of the Russian citizens, will not be solved. In addition, many Russian-speakers will not feel more attached to Estonia, a country that has turned their educational institutions into bilingual, and that is attaching minority rights in 2018 to individual permits or ethnic proportions of the year 1939. There is a rationale in this approach from the Estonian point of view: denying the factual consequences of the unlawful Soviet occupation and the colonization applied by the authorities. However, Russian-speakers living in Estonia are in a growing number born and raised in the country and not first-generation emigrants. This gradually means that although there is a country they could call their kin-state, as the time is passing by and personal experiences gather about the differences between Estonia and Russia, connections to the kin-state are getting weaker. Therefore, if 117

100 Years of Innovation

not integrated into the society, these Russian-speaking communities could both cause and face with serious problems in the future. There are good examples of integration, but they are not sufficient enough in number. To tackle this, a solution is needed, fostered mainly from the side of Estonia but also the elected representatives of the Russian-speaking people have to do their part. As many of the Russianspeakers are still living in ‘unbroken’ linguistic and cultural enclaves, in a country with a rapidly declining population without any hope to ‘rebalance’ ethnic proportions, the only way to social inclusion is paying attention to and giving some degree of recognition of distinctiveness. Without teachers and proper opportunities to use Estonian, the language skills of the Russian-speakers will not improve. This would mean the continuation of their social exclusion and the continued reduction of social, economic and political opportunities. Without language rights and efforts to convince them that knowing Estonian is their interest, the Russian-speakers in their enclaves will remain alienated or at least distanced from Estonia. Of course, Russian-speakers naturalized and granted minority rights could create a substantial challenge for Estonia, especially in the border region of Ida-Viru. Increased minority rights might lead to increased demands for a community constituting over 20 percent of the population, living in concentrated areas. They might ask for territorial 118

100 Years of Innovation

arrangementseven with the respect of the territorial integrity of the stateand language rights on equal footing in their enclaves at least. Such demands certainly would be far too much for Estonia, taking into consideration

the

general

perception

illegal

colonization,

andespecially after Crimeathe role Russia has been playing in ‘protecting the interests of compatriots’ living in the neighbouring countries. Therefore, a solution is desired which creates a balance between the interests of Estonia, and its Russian-speakers: which guarantees the sovereignty and territorial integrity of Estonia, and the linguistic and cultural rights of the Russian-speakers at the same time. This should mean the strengthening of the already existing, yet not widely enough spread and deeply rooted Estonian Russian identity, probably in a similar way to the existing Finland Swedish and Belgian German ones. Nevertheless, on contrary to those examples, even in the case of an Estonian Russian identity prevails, due to historical reasons, the creation of any regional self-governance, which contributed to settling the tensions in Finland and Belgium, is not likely in Estonia. This restriction, however, shall not exclude finding a mutually acceptable solution. Were the Russian-speakers more integrated into the Estonian society, Estonia would become stronger and more resilient, and the chances of a Russian interference would decrease. 119

100 Years of Innovation

REFERENCES Aidarov, Aleksandr–Wolfgang Drechsler, “Estonian Russification of non-Russian ethnic minorities in Estonia?” in. Trames Vol. 17. Issue 2, 2013 Anderson, Benedict, Imagined Communities–Reflections on the Origin and Spread of Nationalism, London, New York: Verso, 2006 Cilevičs, Boriss, Language Legislation in the Baltic States, In: Matthias Koenig–Paul de Guchteneire, Democracy and Human Rights in Multicultural Societies, Ashgate, 2007 Dubinina,

Irina–Maria

Polinsky,

Russians

the

U.S.,

https://scholar.harvard.edu/files/mpolinsky/files/irina_dubinina_polinsk y.pdf Ehala, Martin, Russian Minority in Estonia after Crimea. In: Aspen Review Central Europe No. 2, 2014 Goble, Paul, Another Defeat for Putin’s ‘Russian World’ – Very Few Russians

Estonia

Want

Leave,

2015,

http://windowoneurasia2.blogspot.be/2015/02/another-defeat-forputins-russian-world.html Jordan, Paul: The Modern Fairy Tale: Nation Branding, Nation Identity and the Eurovision Song Contest in Estonia, University of Tartu Press, 2014

120

100 Years of Innovation

Jõesaar,

Andres–Salme

Rannu–Maria

Jufereva,

“Media

for

Minorities: Russian Language Media in Estonia 1990-2012.” in: Media transformations, Vol. 9. (2013) Kasekamp, Andres, Why Narva is not next, Estonian Foreign Policy Institute

Paper

Series

no.

21,

2015,

http://www.evi.ee/wp-

content/uploads/2015/05/EVI-mottepaber21_mai15.pdf Kemppainen, Raija Pini–Scott Ellis Ferrin–Steven J. Hite–Sterling C. Hilton, “Sociocultural Aspects of Russian-Speaking Parents’ Choice of Language of Instruction for Their Children in Estonia.” in: Comparative Education Review Vol. 52, No. 1, February 2008 Kivirähk, Juhan, Integrating Estonia’s Russian-speaking Population: Findings of National Defense Opinion Surveys. Tallinn: International Centre for Defence and Security, December 2014 Kolstø, Pål, Nation-building and ethnic integration in post-Soviet societies: an investigation of Latvia and Kazakstan, Boulder: Westview Press, 1999 Kolstø, Pål, Minority Rights Regime in Post-Communist Societies, in. Will Kymlicka – Magda Opalski (eds.), Can Liberal Pluralism be Exported? Western Political Theory and Ethnic Relations in Eastern Europe, Oxford: Oxford University Press, 2001 Kymlicka, Will, Reply and Conclusion, in. Will Kymlicka–Magda Opalski (eds.), Can Liberal Pluralism be Exported? Western Political 121

100 Years of Innovation

Theory and Ethnic Relations in Eastern Europe, Oxford: Oxford University Press, 2001 Kymlicka, Will, Western Political Theory and Ethnic Relations, in. Will Kymlicka–Magda Opalski (eds.), Can Liberal Pluralism be Exported? Western Political Theory and Ethnic Relations in Eastern Europe, Oxford: Oxford University Press, 2001 Makarychev, Andrey–Alexandr Yatsyk, Russia-EU borderlands after the Ukraine Crisis–The case of Narva. In: Gerhard Besier–Katarzyna Stokłosa, Neighbourhood Perceptions of the Ukraine Crisis. Routledge, 2016 Marmei, Eerik–Gabriel White, European Deterrence Initiative– Bolstering the Defence of the Baltic States. Tallinn: International Centre for Defence and Security, 2017 Pan, Cristoph, Die Minderheitenrechte in Estland, in Cristoph Pan– Beate Sibylle Pfeil, Minderheitenrechte in Europa: Handbuch der europäischen Volksgruppen Band 2., Wien, SpringerWienNewYork, 2006 Pettai, Vello, Applying Kymlicka’s Models to Estonia and Latvia, In: Will Kymlicka–Magda Opalski (eds.), Can Liberal Pluralism be Exported? Western Political Theory and Ethnic Relations in Eastern Europe, Oxford: Oxford University Press, 2001

122

100 Years of Innovation

Praks, Henrik, Hybrid or Not: Deterring and Defeating Russia’s Ways of Warfare in the Baltics – the Case of Estonia, Research Division– NATO

Defense

College,

No.

124,

2015

https://www.icds.ee/fileadmin/media/icds.ee/failid/Henrik_Praks__Deterring_and_Defeating_Russia_s_Ways_of_Warfare_in_the_Baltics .pdf Schneider, Thomas, Demographic Trends in Estonia, January 2013, http://www.kas.de/wf/doc/kas_33565-1522-1-30.pdf?130313053247 Schöpflin, George, Liberal Pluralism and Post-Communism, in. Will Kymlicka–Magda Opalski (eds.), Can Liberal Pluralism be Exported? Western Political Theory and Ethnic Relations in Eastern Europe, Oxford: Oxford University Press, 2001 Siiner, Maarja, “Planning language practice: A sociolinguistic analysis of language policy in post-Communist Estonia.” in: Language Policy 2006/5 Siiner, Maarja, Decentralisation and language policy: local municipalities’ role in language education policies. Insights from Denmark and Estonia, in. Journal of Multilingual and Multicultural Development Vol. 35, Iss. 6, 2014 Soll, Maie–Sander Salvet–Anu Masso, “Changes in Language Policy in Estonia: Self-Descriptions of Russian-Speaking Students.” in: Trames Vol. 19. Issue 3, 2015 123

100 Years of Innovation

Tsilevich, Boris, New Democracies in the Old World–International Legal Instruments and Institutions, in. Will Kymlicka–Magda Opalski (eds.), Can Liberal Pluralism be Exported? Western Political Theory and Ethnic Relations in Eastern Europe, Oxford: Oxford University Press, 2001 Trimbach, David J.–Shannon O’Lear, “Russians in Estonia: Is Narva the next Crimea.” in: Eurasian Geography and Economics, Vol. 56, Issue 5, 2015 Trimbach, David J, Lost in Conflation: The Estonian City of Narva and

Its

Russian-Speakers,

May

2016),

https://www.fpri.org/article/2016/05/lost-conflation-estonian-citynarva-russian-speakers/ Trifunovska, Snežana, “Challenges of 1998-2008: Ratifying the Charter, The case of the Baltic states.” in: Minority Language Protection in Europe: Into a New Decade, Regional or minority languages, No. 8. Strasbourg: Council of Europe Publishing, 2010 Tuohy, Emmet, Cinema Vérité : Corruption Scandals and Russian Influence

the

Baltic,

2015

https://www.icds.ee/fileadmin/media/icds.ee/failid/Emmet_Tuohy__Corruption_Scandals_and_Russian_Influence_in_the_Baltic.pdf Verschik, Anna, “The language situation in Estonia.” in: Journal of Baltic Studies, Vol. 36, Issue 3, 2005 124

100 Years of Innovation

Waldstein, Maxim, â&#x20AC;&#x153;Russifying Estonia? Iurii Lotman and the Politics of Language and Culture in Soviet Estonia.â&#x20AC;? in: Kritika: Explorations in Russian and Eurasian History, Vol. 8. Issue 3, Summer 2007

Online documents Comments of the Government of Estonia on the fourth opinion of the Advisory Committee on the implementation of the Framework Convention for the Protection of National Minorities in Estonia (2015) 2. https://rm.coe.int/168047d01a Fourth Opinion on Estonia adopted on 19 March 2015 by the Advisory Committee on the Framework Convention for the Protection of National Minorities, https://rm.coe.int/168047d0e5 Resolution CM/ResCMN(2016)15 https://search.coe.int/cm/Pages/result_details.aspx?ObjectId=09000016 806b37fb A Study of Social Groups in Integration, Tallinn: Institute of International and Social Studies at Tallinn University, 2013, http://www.tlu.ee/UserFiles/Rahvusvaheliste%20ja%20Sotsiaaluuringut e%20Instituut/Repositoorium/2013/SummpCpAbj5gB1.pdf

125

100 Years of Innovation

Agnes Tolnai Estoniaâ&#x20AC;&#x2122;s Competitiveness in Global Trade Relations

ABSTRACT A few decades ago, small countries like Estonia have emerged as supplier or assembler partners of big economies. The core economic fuel of EU enlargement process was the new business opportunity, especially merchandise trade facilities of the Eastern side of the continent. Nowadays Estonia is not a supporter or a simple market of EU-15, but an innovator of the Union providing outstanding opportunities for startups and service sector giants. The aim of the study is to place Estonia on EU market examining the Member Countryâ&#x20AC;&#x2122;s economic achievement after EU accession through the lens of competitiveness. Competitiveness indexes comparing with other trade indexes are quite complex and comprehensive to give an insight into economic relations. As there are many indexes measuring competitiveness, the study focuses on the Index of Revealed Comparative Advantages (RCA) that is able to measure post-trade effects. Using RCA, the study points out the present and future fuels of Estoniaâ&#x20AC;&#x2122;s economy. 126

100 Years of Innovation

ABSZTRAKT Pár évtizede az olyan kis gazdaságok, mint Észtország a nagy gazdaságok beszállító vagy összeszerelő gazdaságai voltak. Az EU bővítési köreinek egyik fő mozgatórugója a keletebbi országokban rejlő, még kihasználatlan gazdasági potenciál volt. Napjainkban Észtország már nem egy kiszolgáló-beszállító gazdaság vagy az EU-15 egyszerű piaca, hanem az unió egyik innovációs központja, ami kiváló lehetőségeket teremt a start-upoknak és a szolgáltatószektor óriásainak. A tanulmány célja Észtország unión belüli helyzetének feltárása a tagállam gazdasági teljesítményének és az uniós csatlakozás óta megváltozó versenyképességének elemzésével. A versenyképességi indexek más kereskedelmi indexekhez viszonyítva átfogóbb képet mutatnak a gazdasági kapcsolatok jellegéről. Számos index méri különböző szempontok alapján az egyes gazdaságok versenyképességét, a tanulmány azonban a post-állapotokat is mérő feltárt komparatív előnyök indexét figyeli, hogy áttekintse az észt gazdaság jelenlegi és jövőbeni potenciálját.

127

100 Years of Innovation

INTRODUCTION Estonia with population of 1.3 million is a leading country of egovernance, e-administration. Potentials of online administration are important factors of international competitiveness providing adequate environment for start-ups and other enterprises. E-stonia, as a country of digital revolution is able to reduce the transaction cost of companies making economic circumstances favourable for them. However, these potentials are measured in so called Global Competitiveness Index (GCI) examined by Peter Csillik before. Global competitiveness can be calculated in many forms. Present study focuses on international trade patterns of the country. For this reason, instead of GCI, I use another index to point out the foreign trade potentials of the country. Estoniaâ&#x20AC;&#x2122;s external trade achievements will be measured by the index of Revealed Comparative Advantages (RCA), which is able to calculate trade relations in a more complex way combining all the aspects effect on foreign trade relations. As a Member State of the European Union, Estonia benefits from the gains of economic union, as a Member State of Euro zone the advantages of the monetary union. These benefits are presented and realized in in foreign trade activity, however, weaknesses and disadvantages have strong impact on export and import relations of this small open economy, too. 128

100 Years of Innovation

In Estonia's trade, the external trade effects of Economic and Monetary Union should be examined together with the trade relations with non-EU Member States. As a small open economy, the country has to answer the EU’s and global trade trends. Examining the effects of accession to the European Union in 2004, the financial and economic crises of 2008 and Russia’s ban on EU Member States’

import

commodities

2014,

general,

comprehensive

competitiveness indexes cannot be applied. Nevertheless, as the index of revealed comparative advantages focuses on post-trade export data, it is suitable to point out the strong and weak points of the economy.162 Summarizing, the aim of the study is to use the revealed comparative advantage model answering the questions on Estonia’s export structure and point out the imbalances.

ECONOMIC ACTIVITY Estonia’s foreign trade activity has several milestones in the last 15 years. The EU accession has provided full access to the market of the European Economic Area since 2004. New trade opportunities boosted

162

I use the comprehensive data collection of International Trade Centre (ITC) as a United Nations family organization accessible via https://www.trademap.org/Index.aspx. ITC provide data on Harmonized Commodity Description and Coding Systems till 6 digit. As the aim of the study is to point out the main points of external trade of the country, I use the 2 digit commodity groups.

129

100 Years of Innovation

the export and import activity. Import increased by 30% in 2006 and by more than 15% in 2007, while export showed an average 18% rise. Four years after EU accession, the global financial and economic recession had a serious impact on foreign trade; both export and import activity reduced dramatically in 2009. Parallel with the recovery of European markets, Estoniaâ&#x20AC;&#x2122;s export and import started to increase and presented a moderate rise for 2013.

Graph 1 Change of export and import (%) 50,00% 40,00% 30,00% 20,00% 10,00% 0,00%

-10,00% -20,00% -30,00% -40,00% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Import

Source: ITC, 2018. 130

Export

100 Years of Innovation

However, in the summer of 2014, the EU sanctions against Russia and the Russian ban on EU agricultural products indicated a new downturn of Estonian foreign trade. Both export and import reduced by 20% compared to previous year’s achievement. It has to be mentioned, that this decline was higher than EU’s average export drop (17.8%). Export activity to Russia declined more in Estonia than EU average rate of 2015.163 Recovery has started only in 2016.

Russia’s and the EU’s sanctions: economic and trade effects, compliance and the way forward. European Parliament, Directorate-General for External Policies, Policy Department, October 2017, 6-10. 163

131

100 Years of Innovation

Graph 2 Changes against the previous year in export to Russia 40% 30% 20% 10% 0% -10%

2013

2014

2015

2016

-20% -30% -40% -50% Estonia

European Union

Source: ITC, 2018.

After accessing full membership, EU market relations has been getting stronger. However, Russia has remained one of the main markets of Estonian products and services. One year after EU accession, the import of Germanyâ&#x20AC;&#x2122;s good and services succeeded only by one per cent the Russian one. The third most important import market was Finland. Ten years later Russia was also the second most important import market. (Graph 3) 132

100 Years of Innovation

Graph 3 Estonia’s main import partners in 2005 and 2015 60% 50% 40%

30% 20% 10% 0% Germany Russian Finland Federation

Sweden

2005

China

Lithuania

Other

2015

Source: ITC, 2018. The top 5 import products provide almost the half of Estonia’s import. The structure of import shows the typical signs of assembly economy, while mineral fuels and oils import highlights the transit role of the country. Till 2012, the Russian fuel and oil export found port via Estonia that made profitable years for rail transport services export.164 That increased both the import and the export side of these products.

The Estonian Economy – What happened to Estonia’s export? Swedbank Macro Research, Stockholm, 10 March, 2014, 6. https://www.swedbankresearch.com/english/estonian_economy/2014/mars/index.csp 164

133

100 Years of Innovation

Table 1 Main import products 2005 Electrical machinery and equipment and parts thereof Mineral fuels, mineral oils and products of their distillation Machinery Vehicles Transport Source: ITC, 2018.

2009 Mineral fuels, mineral oils and 16,43% products of their distillation Electrical machinery and 8,52% equipment and parts thereof 8,26% Machinery

2016 Electrical machinery 15,45% and equipment and parts thereof

7,62% Vehicles 7,17% Transport

134

13,80%

8,42% Machinery

7,98%

6,35% Vehicles Mineral fuels, mineral oils and 6,11% products of their distillation 5,87% Transport

7,66% 7,41% 6,71%

100 Years of Innovation

After EU accession, electrical machinery import gave one sixth of the total import what was halved by the recession in 2009. After recovery, electrical machinery has become the leading import product again by almost 14% of total import. The export side shows the same result. In the field of export, Estonia’s most important partners are Sweden and Finland. Russia was only on the third place both in 2005 and in 2015. The six main export partners give almost the two-third of Estonia’s export. Graph 4 Estonia’s main export partners in 2005 and 2015

2005

2015

Source: ITC, 2018.

135

Other

Lithuania

Germany

Latvia

Russian Federation

Sweden

Finland

45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

100 Years of Innovation

Similarly to import, Estoniaâ&#x20AC;&#x2122;s leading export commodity is electrical machinery by around 15% of total export. The recession of 2008 sent it to the 3rd place and halved like on the import side. Services like transport and travel are on the second and third place. Services are strong and important part of export activity. Travel, transport and business services are the most important income generators of the tertiary sector.

136

100 Years of Innovation

Table 2 Main export products 2005

2009 Mineral fuels, mineral oils and 11,46% products of their distillation

2016 Electrical machinery and equipment and parts thereof

14,51%

Electrical machinery and equipment and parts thereof

15,63%

Transport

10,93%

Transport

11,09%

Transport

8,71%

8,29%

Electrical machinery and equipment and parts thereof

8,09%

Travel

7,65%

7,41%

Travel

7,24%

Wood and articles of wood

6,67%

5,17%

Vehicles

6,02%

Other business services

6,08%

Travel Wood and articles of wood Mineral fuels, mineral oils and products of their distillation Source: ITC, 2018.

137

100 Years of Innovation

Estonia’s main trading partners are more competitive economies than herself. Their market share has been increasing. It could both open new export facilities and create a strong competition situation for Estonia’s export products. However, the positive net export toward the German or the Chinese market cannot be explainded as a consequences of the import needs of assembly industry. Graph 5 Estonia’s net export by trading partner (2005-2016) (thousand USD) 2000000 1500000 1000000 500000 0 -500000 -1000000 -1500000 -2000000 Finland

Sweden

Latvia

Russian Germany Lithuania Federation

Source: ITC, 2018. 138

China

100 Years of Innovation

The trade structure also should be examined. Dividing Estoniaâ&#x20AC;&#x2122;s external trade into goods and services, the picture would look more nuanced. Graph 6 Estoniaâ&#x20AC;&#x2122;s net export (million EUR) 2000 1500 1000 500 0 -500 -1000 -1500 -2000

-2500

goods

services

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

-3000

goods and services

Source: Eesti Rank, 2017

The net export of goods is negative continuously, while that of services is always positive. Since 2009, the positive net export of services is able 139

100 Years of Innovation

to overcome the negative net export of goods turning total net export positive. Graph 7 shows the rate of trade in services and in goods as a percentage of total trade. It points out that merchandise trade is more significant, even though services produce positive trade results. Negative net export of merchandise trade has strong impact on overall net export of the country.

Graph 7 Share of goods and services in total export 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Services

Source: ITC, 2018. 140

Goods

100 Years of Innovation

The negative net export is a crucial problem of the Estonian economy. As a small economy, it has to face questions like effective use of factors of productions, the lack of resources and the problem of growth. Import is essential for small economies that can provide few internal resources as the base of export production. The export-led import also negatively affects their net export. Moreover, internal demand is more important factor in boosting GDP than of external trade.165 The continuous labour income growth generates private consumption, while foreign direct investment increases the need for investment goods. Therefore, both kinds of growth create more and more import needs. The main export goods (electrical machinery and equipment, including mobile communications equipment) also have import needs, mainly from China. Countries with negative balance of trade endanger the effective use of factors of production. If the net export is negative in those goods or services they have revealed comparative advantages in. Hence, the competitiveness of export products also has to be examined and analyse the export and import market of that goods or services.

165

Urmas Sepp: Factors of Trade-Deficit Convergence in Estonia. Working Papers of Eesti Pank, No.1, Tallinn, 1999.; Economic Forecast of the Ministry of Finance of Estonia. Summer, 2016. Rahandusministeerium, Tallinn, 2016; Estoniaâ&#x20AC;&#x2122;s Balance of Payments for 2011. Eesti Pank, Tallinn, 2012.

141

100 Years of Innovation

MEASURING COMPETITIVENESS Estonia’s external trade is quite diverse, and the international market price of her main export commodities has strong influence on the value of total export. International market position and export capability are influenced by many factors, both economic and political ones. Trade barriers or geopolitical interests could strengthen or weaken the export activity of a country. There are many examples from sanctions to embargos, or trade wars for this phenomenon. Nevertheless, sanctions can be twofold. For example, the sanctions of the European Union against Russia and the Russian answer seriously harmed the Estonian export. Because both economic and political factors make influences on the country’s trade capability, David Ricardo’s theory on comparative advantages or the Hecksher-Ohlin model is not able to measure comprehensively the effects of soft tools or take into account exactly all kinds of circumstances in trade relations. On the other hand, these theories assume the effective use of factors of production. Thus, if the effective use of factors of productions is true, these economic rules are valid. In the case of a country where economy is so complex (member of a monetary union, sanctions against her export commodities etc.), the effective use of factors of production has to be examined to see whether 142

100 Years of Innovation

external trade policy takes into account macroeconomic principles and economic circumstances. The further analysis of Estonia’s export structure will be based on a method could highlight the principles of trade ability. For this analysis the required indicators has to incorporate measurable and nonmeasurable macroeconomic and political factors, too.

REVEALED COMPARATIVE ADVANTAGES The export structure of a certain country could be influenced by both economic and political circumstances. David Ricardo’s comparative advantage theory states that the countries worth to export commodities they have comparative advantage in. The base of the theory is the effective use of factors of production; so, if a country use her factors of production effectively, than it exports products has advantage in compared with other countries. From other point of view, the key is comparing. Countries’ achievements are not absolute numbers. As they compete with each other, their achievements can be compared to others. Ricardo’s theory focuses only on factors of productions what are measurable, but does not incorporate factors that also effect on export capability of a country, i.e. trade barriers (especially red tape), development of infrastructure, geopolitical situation or the effect of policies. For this reason, the appropriate model has this comparative view 143

100 Years of Innovation

being combined with the soft or non-price factors. The theory of revealed comparative advantages is suitable for the analyses. This basis of the model was introduced by Liesner, who used posttrade data to calculate comparative advantages of the United Kingdom on the market of the European Common Market.166 Balassaâ&#x20AC;&#x2122;s assumption167 was that export activity of a country in a certain commodity shows the international potential to sell that commodity in the global market. The export ability of that product incorporates how the country can overcome trade barriers. Measuring revealed comparative advantage (RCA) helps assess a countryâ&#x20AC;&#x2122;s export potential. The RCA indicates whether a country is in the process of extending the products in which it has a trade potential. Analysing the value of export, RCA uses post-trade data. This post-trade data incorporates all the trade barriers the product has to face with on the global market (i.e., red tape, regional trade agreements, exchange rate). The price also points out the value of the product. In this way, using posttrade data to calculate international competitiveness, RCA is able to

166

Liesner, H.H.: The European Common Market and British Industry. The Economic Journal, Vol. 68, 1958, 302-316 167 Balassa, Bela, (1977), 'Revealed' Comparative Advantage Revisited: An Analysis of Relative Export Shares of the Industrial Countries, 1953-1971, The Manchester School of Economic & Social Studies, 45, issue 4, 327-344.; Balassa, B. 1965. Trade liberalisation and revealed comparative advantage. The Manchester School, 33(2), (1965) 99â&#x20AC;&#x201C;123.

144

100 Years of Innovation

measure the market success of a certain product. Using export data also can help to understand the ratio and weight of that product/country in regional or global market. Export activity covers all costs of production, export support activity of the state, trade costs, red tapes, trade barriers from the part of trade partners, exchange rates and international trade and (geo)political circumstances. Export and share in global export show together the potential of global economy to by a certain commodity and the ability of countries to sell this commodity. Nevertheless, high export value or volume can increase RCA, while this rise can be derived from any market distortion. For this reason, RCA shows rather the competitiveness of a country than of comparative advantages. To the point, as RCA uses post-trade data, all kinds of trade barriers are taken into account. These facts incorporate all the political and economic circumstances a product has to face with on the global market, in the international trade competition. RCA can also provide useful information about potential trade prospects with new partners. Countries with similar RCA profiles are unlikely to have high bilateral trade intensities unless intra-industry trade is involved. RCA, if estimated at high levels of product disaggregation,

145

100 Years of Innovation

can focus attention on other non-traditional products that might be successfully exported. The RCA index of country i for product j is measured by the productâ&#x20AC;&#x2122;s share in the countryâ&#x20AC;&#x2122;s exports in relation to its share in world trade:

đ?&#x2018;&#x2026;đ??śđ??´đ?&#x2018;&#x2013;đ?&#x2018;&#x2014; =

đ??¸đ?&#x2018;&#x2039;đ?&#x2018;&#x2013;đ?&#x2018;&#x2014; / EXđ?&#x2018;&#x2013; đ??¸đ?&#x2018;&#x2039;đ?&#x2018;&#x2014;đ?&#x2018;¤ / EXđ?&#x2018;¤

where EXij is the productâ&#x20AC;&#x2122;s value in countryâ&#x20AC;&#x2122;s export, EXi is the total export of the country, EXjw is the productâ&#x20AC;&#x2122;s value in world export, EXw is the total world export. If RCA>1, the comparative advantage is revealed, and it implies that the country has a revealed comparative disadvantage in the product. Letâ&#x20AC;&#x2122;s examine the revealed comparative advantages index of commodities that give almost half of Estoniaâ&#x20AC;&#x2122;s export!

146

100 Years of Innovation

Graph 8 RCA of main export commodities (2005-2016) 12 11 10 9 8 7 6 5 4 3 2 1 0 Transport

Travel

Other business services

Mineral Wood and Electrical Vehicles fuels/oils articles of machinery wood and equipment

Source: Authorâ&#x20AC;&#x2122;s calculation using export data of ITC, 2018.

The RCA of transport, travel, other business services, wood and articles of wood and electrical machinery and equipment are more than 1, so Estonia has revealed comparative advantage in these products goods and services. Wood and articles of wood commodity group has the 147

100 Years of Innovation

highest RCA, the revealed competitive advantage is clear. However, RCA of mineral fuels and oils and electrical machinery and equipment commodity groups are lower than 1. Before Russia has turned the fuel and oil export to her own ports, the export of that commodity was between 5% and 10%. While the RCA is always lower than 1, the electrical machinery and equipment commodity group is the most important giving around 15% of the total export. Thus, Estonia has no revealed comparative advantage in her most important export commodity group. Post-trade data show, that Estonia takes part successfully in international trade and uses factors of production effectively. Estonia can adapt trade restrictions, political and geopolitical conditions well. However, it is worth to examine other export commodities as well.

Graph 9 RCA and export share of manufacturing services, constructions and furniture commodity groups

148

100 Years of Innovation

9,0 8,0 7,0 6,0 5,0 4,0 3,0 2,0 1,0 0,0

6% 5% 4% 3% 2% 1%

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

Manufacturing services on physical inputs owned by others RCA Construction RCA Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings; ... RCA Manufacturing services on physical inputs owned by others EX% Construction EX% Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings; ... EX%

Source: Authorâ&#x20AC;&#x2122;s calculation using export data of ITC, 2018.

However, there are groups of export products where RCA is much higher than of main export products, yet their share is actually smaller in total exports. For these goods and services, RCA is high in global trading conditions, as well.

149

100 Years of Innovation

However, the ongoing change, the not balanced value shows that global economic changes have a significant impact on the exports of the small open economy. After the EU accession, the extremely high RCA in manufacturing services dropped significantly and fell below 2 after the 2008 crisis. It is worth to examine the RCA and export share of manufacturing services and electrical machinery and equipment commodity groups. These two export products are in close relations, as the assembly activity has two part. As assembly industry is an outsourced activity, so, the company that provides manufacturing services does not own output. High RCA of manufacturing services points out the importance of this kind of manufacturing services in Estoniaâ&#x20AC;&#x2122;s export activity. Other services like construction, fell back much lower after the crises. Contrary to manufacturing services and construction, furniture export had a significant RCA and export share between 2005 and 2016. Neither the crises after 2008, not the 2014 Russian trade bans had a considerable impact on furniture export. Both its volume and export share exceeds the other two high RCA groups. Its markets are stable being the second most important import market of the Finnish economy by 20% of total furniture import. Since the furniture export targeted EU markets, the Russian bans of 2014 had less impact on this commodity; and its export share continued to increase strengthening the RCA as well. 150

100 Years of Innovation

RCA of most main export commodities are above 1, but there are some where high RCA accompanies with negative net export. As Table 3 shows, in the case of mineral fuels and oils, the net export is negative, but RCA is always below 1. As this commodity is a transit good, the negative net export and low RCA is evident. However, transportation as service is essential to transport Russian mineral fuel and oil to Estonian ports, thus RCA of transport services is above 2, and the net export of this service has an ongoing positive value. The situation is the same for vehicles. To boost and support transport capacity, vehicles import is essential for the economy. This causes a negative value. Moreover, the negative net export coexists with RCA below 1. In those two cases, the negative net export goes with RCA between 0 and 1, so as the effective use of factors of production is questionable if we do not take into account the potential links among goods and services.

151

100 Years of Innovation

Table 3 Revealed comparative advantages (RCA), export share (EX%) and net export (NEX) of main export commodities

Transport

Travel Other business services Mineral fuels, mineral oils and products of their distillation Wood and articles of wood Electrical machinery and equipment and parts thereof Vehicles

RCA EX% NEX RCA EX% NEX RCA EX% NEX

2005 2,973 10,93% + 1,931 8,29% + 1,235 3,65% +

2006 3,006 10,93% + 1,759 7,38% + 1,303 4,05% +

2007 2,997 11,28% + 1,501 6,30% + 1,467 4,75% +

2008 2,519 10,80% + 1,287 6,15% + 1,554 5,67% +

2009 2,666 11,09% + 1,325 7,24% + 1,375 5,83% +

2010 2,626 10,62% + 1,231 6,07% + 1,260 4,64% +

2011 2,452 9,15% + 1,135 5,28% + 1,050 3,97% +

2012 2,382 9,05% + 1,083 5,13% + 1,069 4,21% +

2013 2,392 8,98% + 1,330 6,58% + 1,083 4,43% +

2014 2,345 9,60% + 1,435 7,39% + 1,080 4,96% +

2015 2,349 9,73% + 1,312 7,25% + 1,041 5,17% +

2016 2,172 8,71% + 1,356 7,65% + 1,201 6,08% +

RCA

0,472

0,963

0,800

0,589

1,020

0,934

0,889

0,830

0,549

0,627

0,915

0,802

EX%

5,17%

11,31%

8,89%

8,41%

11,46%

11,56%

12,84%

12,31%

7,62%

7,93%

7,82%

5,82%

NEX

RCA EX% NEX RCA EX%

9,394 7,41% + 1,438 15,63%

8,863 6,64% + 1,244 13,72%

9,462 6,83% + 0,908 9,54%

9,163 5,46% + 1,007 9,75%

9,011 5,22% + 0,795 8,09%

10,743 6,00% + 1,098 11,33%

10,211 5,43% + 1,521 14,42%

9,558 4,97% + 1,454 13,75%

10,322 5,70% + 1,430 13,94%

10,384 6,00% + 1,488 14,74%

11,010 6,45% + 1,322 14,34%

10,860 6,67% + 1,306 14,51%

NEX

RCA EX% NEX

0,543 3,85% -

0,612 4,16% -

0,759 5,22% -

0,860 5,38% -

+ 1,118 6,02% +

Source: Authorâ&#x20AC;&#x2122;s calculation using export data of ITC, 2018.

152

0,662 3,77% -

0,577 3,27% -

0,508 2,90% -

0,586 3,35% -

0,620 3,60% -

0,600 3,73% -

0,606 3,94% -

100 Years of Innovation

SUMMARY Small open economies like Estonia face huge challenges in the international market. The lack of resources, factors of productions increases their import, while the prices of their export commodities are influenced by big and powerful economies or regional integrations. They have to use all the opportunities of regional and international trade to use their factors of production in the most appropriate way, thus competitiveness is essential for them. Estoniaâ&#x20AC;&#x2122;s GDP growth will be fueled by the increase of internal demand more than export. This change will have an effect on the import and the net export as well. As a small economy, Estonia has to boost import to supply export production, too. The countryâ&#x20AC;&#x2122;s development and economic growth boost the import. According to net export and RCA data, Estonia is able to adapt well to economic and financial changes in its region and the European Union. All major changes of this region and in the European Union have an impact on Estoniaâ&#x20AC;&#x2122;s external trade. The economic downturn or recovery of its main trading partners will change the Estonian economic indicators more than that of its trade partners; yet, Estonia is able to achieve a positive trade change in a short time.

153

100 Years of Innovation

REFERENCES 2017 OECD Economic Surveys of Estonia. Organization of Economic Cooperation

and

Development,

Paris,

September

2017.

http://www.oecd.org/eco/surveys/economic-survey-estonia.htm Béla Balassa: 'Revealed' Comparative Advantage Revisited: An Analysis of Relative Export Shares of the Industrial Countries, 19531971, The Manchester School of Economic & Social Studies, 45 (1977), issue 4, 327-344 Béla Balassa: Trade liberalisation and revealed comparative advantage. The Manchester School, 33(2), (1965) 99–123. Economic Forecast of the Ministry of Finance of Estonia. Summer, 2016. Rahandusministeerium, Tallinn, 2016. Estonia’s Balance of Payments for 2011. Eesti Pank, Tallinn, 2012., Estonia’s Balance of Payments for 2016. Eesti Pank, Tallinn, 2017. Estonia’s Balance of Payments for 2011. Eesti Pank, Tallinn, 2012. https://www.eestipank.ee/en/publications/series/balance-of-paymentsinternational-investment-position/balance-of-payments-yearbook Estonia’s Balance of Payments for 2016. Eesti Pank, Tallinn, 2017. https://www.eestipank.ee/en/publications/series/balance-of-paymentsinternational-investment-position/balance-of-payments-yearbook

154

100 Years of Innovation

Estonian Competitiveness Report 2017. Eesti Pank, Tallinn, 2017. https://www.eestipank.ee/en/publications/estonian-competitivenessreport H.H. Liesner: The European Common Market and British Industry. The Economic Journal, Vol. 68, 1958, 302-316 International

Trade

Centre

(ITC):

Trade

map.

https://www.trademap.org/Index.aspx Overview of The Estonian Economy 2013. Ministry of Economic Affairs and Communications-Ministry of Finance, Tallinn, 2014. Russia’s and the EU’s sanctions: economic and trade effects, compliance and the way forward. European Parliament, DirectorateGeneral for External Policies, Policy Department, October 2017. http://www.europarl.europa.eu/thinktank/en/document.html?reference= EXPO_STU(2017)603847 The Estonian Economy – What happened to Estonia’s export? Swedbank Macro Research, Stockholm, 10 March, 2014, 6. https://www.swedbankresearch.com/english/estonian_economy/2014/mars/index.csp Thomas L. Vollrath: A Theoretical Evaluation of Alternative Trade Intensity Measures of Revealed Comparative Advantage. Weltwirtschaftliches Archiv, Bd. 127, H. 2 (1991), 265-280

155

100 Years of Innovation

Urmas Sepp: Factors of Trade-Deficit Convergence in Estonia. Working

Papers

Eesti

Pank,

No.1,

Tallinn,

1999.

https://www.eestipank.ee/en/publication/working-papers/1999/11999urmas-sepp-factors-trade-deficit-convergence-estonia-analysis-basedpropensity-import

156

100 Years of Innovation

Authors Péter Csillik Ph.D, Associate Professor, Károli Gáspár University of the Reformed Church in Hungary, Faculty of Law, Institute of Economics and Management, csillik.peter@kre.hu Anna Forgács Ph.D., Associate Professor, Vice-Dean of Educational Affairs, Budapest Business School, University of Applied Sciences, Faculty of International Management and Business, Department of International Trade and Logistics Management, Forgacs.Anna@unibge.hu Krisztián Manzinger Ph.D., Senior Lecturer, Károli Gáspár University of the Reformed Church in Hungary, Faculty of Law, Department of International and European Union Law, manzinger.krisztian@kre.hu Anne Tamm, Ph.D., habil., Associate Professor, Károli Gáspár University of the Reformed Church in Hungary, Faculty of Humanities and Social Sciences, Institute of German and Netherlandic Studies, Department of Netherlandic Studies, tamm.anne@kre.hu Ágnes Tolnai Ph.D., Educational Consultant, Károli Gáspár University of the Reformed Church in Hungary, Research Institute of Church and Society, tolnai.agnes@kre.hu

157