Role of Ict

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The role of ICT related foreign direct investment in economic development in small catching-up economies: implications for Estonian competitiveness strategy Marek Tiits, Archimedes Foundation Deliverable of the Work Package 7

Internal draft 30 June 2005

Motivation and expected outcomes of current line of policy research Estonia, similarly to many other member states as well as the EU-25 as the whole, is currently undergoing careful rethinking of the scenarios for longer term socioeconomic development and the respective strategy options. Very much in-line with the EU’s Lisbon Strategy, broad in innovation policy with it’s implications for education, employment, science and technology policy as well as all other areas of public policy, has to be seen as the very core of the policy process. The historic experience over the last few hundred years demonstrates vividly, that in small economies foreign investment bringing about rapid technological, managerial and social change have always been the very the key driver in catching-up process. Therefore, as highlighted in the Estonian latest R&D and innovation policy review, produced by the Secretariat of the Estonian R&D Council for the Government of the Republic, integration of well targeted FDI strategy into broader development strategy is absolutely crucial.1 Both current and prospective future developments in ICT sector are of special importance in this context, as more than the half of productivity increase in OECD countries has derived in recent years from the ICTs and the related organisational and social change. Therefore, current line of research of the IST eVikings II project, seeks to draw lessons from - the historic industrialisation paths of European small countries as well as more recent success of FDI based industrialisation strategies in Ireland, Singapore, etc. - the recent trends in IST R&DI and industrial investment in OECD countries and - the future IST related development scenarios from European Commission, ISTAG, NSF, various Asian governments, etc. providing thereby input to the policy thinking for: - the Foreign Investor Service with Enterprise Estonia,2 - the forthcoming Estonian R&D and innovation strategy 2007-2013, - the national development plan and state budget strategy 2007-2013, In order to maximise the relevance of the efforts and smooth take-up of the results, the main conclusions of this line of research are communicated, as a part of the on-going research, directly to the key policy-makers from key ministries and executive agencies, such as Ministry of Economic Affairs and Communications, Ministry of Education and Research, Ministry of Finance, as well as foreign investment arm of Enterprise Estonia, but also to the central bank, etc. Also publication of the results in the Journal of the Estonian Parliament (RiTo) is sought, contributing thereby to the R&DI and economic policy discussion at the parliamentary level.

1

Marek Tiits, Rainer Kattel, Tarmo Kalvet and Rein Kaarli, Competitiveness and future outlooks of the Estonian economy, The State Chancellery of the Republic of Estonia, Tallinn 2003, http://www.riigikantselei.ee/failid/RTDI_in_Estonia_2003.pdf . 2 Enterprise Estonia is an agency under the Ministry of Economic Affairs and Communications, http://www.investinestonia.com

MUSTAND 20. september 2005

Tehnoloogiamahukad välisinvesteeringud ja majandusarengu strateegia väikeriigis Marek Tiits, marek@ibs.ee*

Sisukord 1. Lühikokkuvõte ...........................................................................................................2 2. Sissejuhatus................................................................................................................3 3. Tehnoloogiline areng ja majandustegevuste globaalne ümberpaiknemine ...............4 4. Väikeriigid globaalsetes tootmisvõrgustikes .............................................................7 5. Eesti atraktiivsus välisinvesteeringute...
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