This small nation’s ICT sector intends to grow tenfold in the next ten years Based on earlier analysis, we can presume Estonia’s future prosperity will come from the tenfold growth of the ICT sector in the next ten years.
T
he ICT sector and its importance for Estonia is ever increasing. It has been the most important aspect of Estonia’s economic growth over the last decade. The ICT sector has brought an amazing 30% growth in added value to the total economy. There were more than 6000 companies operating in the ICT sector in 2019. Estonia is Europe’s fastest growing nation when it comes to establishing technology companies. The growth of our startup companies has been stable at 20–30% for over five years, whether measured by revenue, the number of employees or investments.
Technology companies are providing the most significant increase According to the data from the Estonian Founders Society, the total turnover of Estonian technology companies in 2020 is one billion dollars – equal to the size of the Estonian agricultural sector. That billion indicates the amount of money clients all over the world have paid for the goods and services provided by our companies. “Both sectors are serious industries, but the noticeable difference
comes from the speed of growth,” they said. “Agriculture was still as large as it is now a few years ago, but startup companies back then were less than half the current size.” The second factor is the specific nature of the technology sector, where a few smart employees can create a huge amount of value. The 6300 employees or 1% of Estonia’s total workforce in the technology sector make up 2-3% of Estonia’s total economy. The Estonian Founders Society members state that this is the perfect model for a small nation where there is always a shortage of workers – the more prosperity we can cultivate with fewer workers, the better. Estonian startup companies are world-renowned. In 2020, they were able to raise a record number of 450 million euros from both domestic and foreign investors.
The balance of trade is (meur) increasingly more positive It is quite evident when looking at the export and import numbers how the ICT sector is beneficial for our economy and our country. Export
2014
2016
2018
2020
514,7
612,1
916,5
1286,6
Import
292,1
316
469,3
585,9
Balance
222,6
296,2
447,2
700,8
Source: Statistics Estonia
The ICT sector’s significance has increased considerably We can see considerable growth in three main indicators when compared to 2010. Only gross profit was lower in 2020 compared to 2010. Average number of persons employed Revenue, in thousands (euros)
2010
2012
2014
2016
2018
2020
15 585
18 858
21 356
21 635
25 727
31 561
2 082 736 3 303 465 3 685 956 3 458 874 3 519 520 4 193 434
Gross profit (-loss), in thousands (euros)
220 391
208 024
176 919
125 107
138 502
188 518
Net added value, in thousands (euros)
504 352
598 055
655 426
683 329
877 685 1 191 697
Source: Statistics Estonia
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The movement is towards a higher added value In the study entitled “Overview of the ICT sector economy, vocational and higher education and research and development activities, 2020” (IKT valdkonna majanduse, kutseja kõrghariduse ning teadus- ja arendustegevuse ülevaade, 2020) it shows that the sector has been on an upward trend for a while, but there has also been a decline in some parameters. The Education and Youth Board of Estonia commissioned a study which stated that the subsector of programming still has the most positive development, where turnover, export capabilities, added value as well as revenue have all rapidly increased. There are a few noticeable interesting developments in the ICT manufacturing subsector when compared to 2016 and 2017 – turnover has greatly decreased because there has been less foreign demand. However, it is still noticeable that despite the decline in turnover, added value and revenue in the ICT manufacturing sector has increased greatly. It is an extremely interesting change and the conductors of this study are glad to report that we are moving in a positive direction – producing higher added value products should be the objective for every company. Researchers have observed during their examined period that ICT sector companies have seen their added value grow. The growth has been significant when compared to 2012 – 64% in total, while the added value in programming has nearly doubled. Value added per employee has also grown (7% in 2018), as have the number of employees (5%) and overall wages (13%), which has brought along a situation where company profits have decelerated. The most qualified ICT sector companies are mostly large enterprises with between 100–249 employees and an average salary of 2578 euros a month, which is 31% higher than the average salary in that field. Estonian Centre of Excellence in ICT Research
