The Estonian Economic Miracle

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  • Good morning ladies and gentleman! Thank you for coming. Before we start we would like to introdouce ouselves. My name is Janika Jaago and this is my co-presenter Helis Lipping. We are here today to talk about the Estonian economic miracle. Our presentation is based on an article by the honorable Mart Laar, which was published by the heritage foundation on august 7th 2007. We are going to look at three main areas: First i will talk about the situation in Estonia in the beginning of the 1990s. After that We will both focus on the reforms implemented in Estonia after the end of communism and finally Helis will talk about the essence of the Estonian economic miracle. Our presentation will take around 15 minutes and if you have any questions, we will be more than happy to answer them at the end of our presentation.
  • The Estonian Economic Miracle

    1. 1. Helis Lipping, Janika jaago
    2. 2. <ul><li>1918 Independ a nce </li></ul><ul><li>Standards of living in the 1930s </li></ul><ul><li>1940 Soviet Union->communism->50 years of occupation </li></ul><ul><li>Standards of living by the 1980s </li></ul>
    3. 3. <ul><li>1992->A chaos </li></ul><ul><li>Russian ruble had no value </li></ul><ul><li>Wages fell by 45 % </li></ul><ul><li>Price inflation more than 1000% </li></ul><ul><li>Fuel prises rose more than 10 000% </li></ul><ul><li>Dependant on Russia </li></ul><ul><li>1992 Democratic elections </li></ul>
    4. 4. <ul><li>M acroeconomic stability </li></ul><ul><li>Monetary reform in 1992 </li></ul><ul><li>Balancing the budget </li></ul><ul><li>Start working or die out! </li></ul><ul><li>First great results by 1993 </li></ul><ul><li>Time to move to second stage of reforms. </li></ul>
    5. 5. <ul><li>Changing attitudes -> Openness </li></ul><ul><li>Foreign investments and foster competition </li></ul><ul><li>Estonia - Free trade zone </li></ul><ul><li>No distinction between local domestic investment and foreign investment </li></ul><ul><li>Democracy and civil society </li></ul>
    6. 6. <ul><li>Economic space must be regulated by laws </li></ul><ul><li>Rule of Law </li></ul><ul><li>Fighting corruption </li></ul><ul><li>Reform legislation & effective and transparent administration </li></ul><ul><li>Bank reform </li></ul><ul><li>No state banks -> clear demands of private banks </li></ul>
    7. 7. <ul><li>Privatization </li></ul><ul><li>Goal -> get the economy on the road of changes </li></ul><ul><li>New property laws </li></ul><ul><li>First laws in early 1992 </li></ul><ul><li>Privatization vouchers </li></ul><ul><li>Nationalized land was returned to legal owners </li></ul><ul><li>Estonia’s Treuhand </li></ul>
    8. 8. <ul><li>Movement from the traditional tax system to a new and radical system </li></ul><ul><li>Tax system = simple, inexpensive to apply, transparent, understandable for everyone </li></ul><ul><li>Broad tax base </li></ul><ul><li>L ow tax rates </li></ul><ul><li>January 1st, 1994 Flat rate personal income tax </li></ul>
    9. 9. <ul><li>Tax administration started to work more effectively </li></ul><ul><li>Tax complience increased </li></ul><ul><li>State tax revenues started to increas rapidly </li></ul>
    10. 10. <ul><li>New enterprises </li></ul><ul><li>1992 -> ~2000 enterprises </li></ul><ul><li>1994 -> ~70 000 enterprises </li></ul><ul><li>Flat tax rates also in Lithuania, Latvia, Russia(!) </li></ul><ul><li>Flat- rate countries revenues and budgets are in better shape </li></ul>
    11. 11. <ul><li>Radical successful reforms in 15 years since 1992 </li></ul><ul><li>By 2007 Estonia ranked 12th in the index of Economic freedom </li></ul><ul><li>Estonia is catching up to average European livind standards faster than anybody expected </li></ul>

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