According to the principle of risk-spreading, it would still be better to support research and development activities on quite a broad basis. •  The economic analyses by the central bank consistently emphasise that in order to obtain financial capital required for development, Estonia must remain attractive in the eyes of foreign investors also in the future. However, in order to boost the country's competitiveness it would be a good idea to adopt a more carefully planned system of investments into human capital and set up a framework for financing innovation. •  There are many possibilities to do that. Firstly, large companies could train their own staff. This would require strong public secondary education, diploma studies, and postgraduate studies, and not necessarily public vocational education. (There are examples of such an approach primarily in the IT and telecommunications areas.) •  The second possibility is state-commissioned education. Since investments into human capital promote innovation and bring about other positive effects, state investments into the area are justified as the private sector invests less than is socially optimal. Estonia is quite progressive in that field - we spend 6-7% of the GDP on education, which is more than in other transition countries and similar to the respective levels in Finland and Sweden. •  Even though state-controlled development of human capital requires increased spendings from the national budget, it is relevant that some of the expenditure will be later recovered through additional receipts since rising productivity and employment boost tax revenues.
But this task can only be performed in cooperation with the Government and other constitutional institutions. Today we can acknowledge that regardless of the fact that both the central bank and other state institutions employ Estonians who are known as great individualists, our cooperation in the field of economic policy has been smooth and yielded results. •  Five years ago I also spoke about the essential developments and necessary reforms facing Estonia. Today, many structural reforms under discussion at the time have been successfully launched, including the pension system reform, which has given a completely new dimension to the saving patterns of the Estonians. As regards the changes that the financial system was facing, my anniversary speech mentioned the plans to set up a universal financial supervisory body, which has also successfully materialised. Today we have a banking sector that is very up-to-date and successful on the international banking scene as well. •  According to the World Economic Forum, Estonia is the most competitive country today among the new European Union member states with its competitiveness index of 4.64 points. With this score Estonia is also ahead of four ‘old’ member states (Spain - 4.47, Italy - 4.38, Portugal - 4.25, and Greece - 4.00), while narrowly falling behind Ireland (4.69). Our open market economy, development of the information society and the financial sector  BIS Review 26/2004  1  as well as the quality of our business environment have been considered Estonia's strongest areas.