position of the commission services on the development of...

Position of the Commission Services on the development of Partnership Agreement and programmes in ESTONIA for the period 2014-2020

Ref. Ares(2012)1283813 - 30/10/2012

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Table of Contents

INTRODUCTION............................................................................................................... 3

1. MAIN CHALLENGES ................................................................................................... 4

2. PRIORITIES FOR FUNDING....................................................................................... 9

2.1 Strengthening private research and creating an innovation-friendly business environment ........................................................................................ 9

2.2 Upgrading infrastructure ..................................................................................... 10

2.3 Skilled labour force, better education, high employment and inclusive society.............................................................................................................. 10

2.4 Environment-friendly and resource-efficient economy ...................................... 10

3. SUCCESS FACTORS FOR EFFECTIVE DELIVERY ............................................. 14

4. PRIORITIES FOR EUROPEAN TERRITORIAL COOPERATION ......................... 15

ANNEX ............................................................................................................................. 17

A. ARRANGEMENTS FOR EFFECTIVE PROGRAMMING AND DELIVERY ............................................................................................................... 17

B. ASSESSMENT OF FUNDING NEEDS IN RELATION TO THEMATIC OBJECTIVES ........................................................................................................... 19

C. ADMINISTRATIVE ARRANGEMENTS .......................................................... 41

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INTRODUCTION

The European Union (EU) faces the daunting challenge of emerging from the crisis and putting economies back on a sustainable growth path. The exit strategy entails restoring sound public finances, growth-enhancing structural reforms and targeted investments for growth and jobs. For the latter, the CSF funds1 can make an important contribution to sustainable growth, employment and competitiveness and increase the convergence of less developed Member States and regions with the rest of the Union.

To ensure that the CSF funds deliver long-lasting economic and social impacts, the Commission has proposed a new approach to the use of the funds in its proposal for the 2014-2020 Multiannual Financial Framework2. Strong alignment with policy priorities of the Europe 2020 agenda, macroeconomic and ex-ante conditionality, thematic concentration and performance incentives are expected to result in more effective spending. It is an approach that underlines the need for strong prioritisation and results and away from a culture of entitlement. The CSF funds will thus provide an important source of public investment and serve as a catalyst for growth and jobs by leveraging physical and human capital investment while they serve as an effective means to support the implementation of the Country Specific Recommendations (CSRs) issued in the context of the European Semester. This approach is in line with the European Council's call of 29 June 2012 regarding the use of the Union's budget3.

CSF Funds should aim at jointly fostering competitiveness and convergence, by setting the right country-specific investment priorities. A general refocus of spending towards research and innovation (R&I), support to small and medium-sized enterprises (SMEs), quality education and training, inclusive labour markets fostering quality employment and social cohesion, delivering the highest productivity gains, mainstreaming of climate change objectives and shifting to a resource-efficient low carbon economy is necessary. In order to do so, planning and implementation of CSF funds have to break through artificial bureaucratic boundaries in the next programming period and develop a strong integrated approach for mobilizing synergies and achieving optimal impact both within countries and across borders. The Europe 2020 objectives must be mainstreamed across the different CSF Funds, each of them bringing their contribution to smart, sustainable and inclusive growth. Moreover, CSF Funds have a key role to play in supporting financial instruments that can leverage private investment and thus multiply the effects of public finance. In short, we need a carefully targeted and results oriented use of CSF funds that maximises their combined impact.

The purpose of this position paper is to set out the framework for dialogue between the Commission services and Estonia on the preparation of the Partnership Agreement and Programmes which will start in autumn 2012. The paper sets out the key country specific challenges and presents the Commission Services' preliminary views on the main funding priorities in Estonia for growth enhancing public expenditure. It calls for optimizing the use of CSF Funds by establishing a strong link to productivity and competitiveness enhancing reforms, leveraging private resources and boosting potential high growth sectors, while emphasizing the need to preserve solidarity within the Union 1The EU funds covered by the Common Strategic Framework (CSF), i.e. the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund (CF), the European Agricultural Fund for Rural Development (EAFRD) and the European Maritime and Fisheries Fund (EMFF) 2 COM (2011) 500 final, COM (2011) 398 final and COM (2012) 388 final. 3 Conclusions of the European Council of 29th June 2012 (EUCO 76/12), http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/131388.pdf

http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/131388.pdf

http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/131388.pdf

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and ensuring the sustainable use of natural resources for future generations. There is also a need to concentrate future EU spending on priority areas to maximise the results to be obtained, rather than spreading funding too thinly. EU funding should also be used to fund EU level priorities and to ensure that Estonia can draw full benefits from its EU membership. Therefore the Commission' services propose to group and limit EU funding to the key challenges outlined in this position paper. National public spending cannot only be used to co-finance but also to finance investments which are complementary and linked to EU funded projects in particular at regional and local level. The starting point of the Commission’s services considerations are the assessment of Estonia’s progress towards its Europe 2020 targets in its Staff Working Document on the 2012 National Reform Programme (NRP) and Stability Programme4, underpinned by the country-specific recommendations addressed by the Council on 10 July 2012, and country-specific development challenges. The position paper takes account of the lessons learnt during the 2007-2013 programming period and the Commission's legislative proposals for 2014-2020.

In a context of fiscal discipline, this position paper encourages Estonia and its regions to develop and implement medium-term strategies capable of facing the challenges ahead, notably globalisation, while helping preserve the European social model. Moreover, it provides for a flexible framework for Estonia and its regions to react and refocus European, national and local resources on creating growth and employment so that fiscal sustainability and growth-friendly policies go hand-in-hand, also dealing with structural and institutional problems in Estonia and its regions and across its national borders in its territorial and geographical context, including as per the EU Strategy for the Baltic Sea Region (EUSBSR), in order to have maximum impact.

Finally it invites Estonia to exploit to the maximum potential synergies between the CSF Funds and with other sources of EU funding in a strategic and integrated approach.

1. MAIN CHALLENGES

Estonia's Gross Domestic Product (GDP) per capita was 64% of the EU average in 2010. Estonia's goal is to achieve rapid growth in productivity through products and services with greater capital intensity and higher value added (increase in productivity per employed person compared to EU average from 64% in 2010 to 80% by 2020). Another key goal of Estonia is to return to the high employment rate before the crisis period by increasing the rate from 66.7% to 76% by 2020. Estonia should attempt to reach these goals in a more sustainable way than previously, when economic growth was almost exclusively based on non-tradable sectors and domestic demand. The measures envisaged in the present Position Paper should help strengthen the tradable sectors and hence lead to a net-exports-driven economic growth.

Although weak global demand may result in moderate export growth figures in 2012, domestic demand continues to be solid. A growth rate of real GDP is expected to be at 1.6 % in 2012 (2011 7.6 %). Output growth is foreseen to rebound to 3.8 % in 2013. After a substantial recovery of the labour market in 2011 (from 16.9% in 2010 to 12.5% in 2011), the unemployment rate is expected to decrease at a slower pace to 11.6 % in 2012 and 10.5 % in 2013. Structural unemployment poses a challenge. Inflation is

4 Relevant documents are available on Europe2020 website: http://ec.europa.eu/europe2020/making-it-happen/country-specific-recommendations/index_en.htm

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expected to slow down to 3.9 % in 2012 (2011 5.1 %) and 3.4 % in 2013. Public finances are under some pressure due to weaker economic growth and significant investment obligations.

The country has managed to achieve a sizable budget surplus and nearly halve its high unemployment level thanks to the robust economic growth until late 2011, and to engage resolutely in higher education reform and to invest significantly in energy efficiency policies. Notwithstanding these major achievements, reform efforts appear insufficient: competitiveness is still hampered by a relatively weak innovation system and skills mismatches. Low investment in transport and energy infrastructure at both domestic and cross-border level restrains the mobility of goods and factors of production. Unemployment is still high and may stabilise at this level for some time. Energy intensity is among the highest in EU, and there are gaps in relation to the environmental acquis.

Estonia comprises a single NUTS25 region. Most economic development takes place in North Estonia, especially around Tallinn. Employment and income indicators in North Estonia exceed the national average. The economic and labour market problems are most acute in North-East Estonia, where, for instance, unemployment stood at 21.4 % in 2010. Given the distinct regional variations and their widening in the current programming period in Estonia, the country is invited to consider setting out how it intends to deal with regional disparities.

Despite general economic progress there are serious structural challenges that need to be addressed to make the Estonian economy smarter, more sustainable and more inclusive. The analysis of Estonia's progress towards meeting its national 2020 targets shows gaps in almost all areas and in particular in terms of its research and innovation spending and employment rate. Estonia is encouraged to continue working towards attaining its national 2020 targets.

Europe 2020 headline targets Current situation in

Estonia National 2020 target in

the NRP

3 % of expenditure on research and development (R&D)

1.42 % of GDP in 2009, 1.63 % in 2010 (0.81 % public, 0.82 % private)

3 %

20 % greenhouse gas (GHG) emissions reduction compared to 19906

+6 % (2010 non-ETSemissions compared to 2005)

Based on current policies, it could reach +12 % in 2020, compared to 2005

+11 %

(nationally binding target for non-ETS sectors7 compared to 2005)

20 % of energy from renewables 23 % in 2009, 24 % in 2010

(Eurostat)

25 % in 2020

(RES8 Directive target)

20 % increase in energy efficiency [368 Mtoe (million tonnes of oil equivalent) of

GIC9 = 6.07 Mtoe (2010) Primary Energy Savings

5 NUTS = Nomenclature of territorial units for statistics 6 30% if the conditions are right 7 Sectors not subject to the existing EU Emission Trading Scheme 8 RES = renewable energy sources

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primary energy savings] (Final Energy Consumption = 2.90 Mtoe

in 2010)

= 0.75 Mtoe10

(Final Energy Consumption = 2.90 in

2020)

75 % of the population aged 20-64 should be employed

66.4 % in 2010, 70.1 % in 2011

76 %

The share of early school-leavers should be under 10 %

13.9 % in 2009, 11.6 % in 2010, 10.9 in 2011

9.5 %

At least 40 % of 30-34-year olds should have completed tertiary education

35.9 % in 2009, 40 % in 2010

40 %

Reducing the number of people at risk of poverty or exclusion by 20 million in the EU(compared with 2008 levels)

17.5 % in 2010, 58 000 people in 2009

15 %

This is reflected in the CSRs adopted by the Council on 10 July 2012. The CSRs called for prioritisation and internationalisation of the R&I systems, enhanced cooperation between business and academia; development of cross-border connections; better linking of education to the needs of the labour market, improving access for low-skilled to lifelong learning, increasing the participation of the young and the long-term unemployed in the labour market; and enhancing resource-efficient economy.

Therefore Estonia’s most pressing challenges are related to strengthening private research and creating an innovation-friendly business environment; upgrading infrastructure; skilled labour force, high employment and inclusive society; as well as environment-friendly and resource-efficient economy, which are interrelated.

Insufficient participation of private sector in research and innovation and inadequate competitiveness of SMEs Estonia ranks slightly below the EU average in the 2011 Innovation Union Scoreboard. The country's research and innovation system is fragmented and there is lack of clarity in its areas of scientific and technological specialisation. Estonia's R&D intensity target is achievable, but only if business R&D grows significantly and more R&D-intensive foreign direct investment will flow in. The knowledge intensive part of the private sector is undeveloped, only about 10% of Estonian companies are active in R&I; cooperation between businesses and academia continues to be weak; and there is an insufficient supply of skilled staff. An innovation framework detached from the real economy could hamper productivity growth and thus affect the country's medium and long-run competitiveness.

Estonia´s SME sector is bouncing back, but the adverse effects of the recession on employment and production will be long lasting. As domestic demand increases, maintaining external balances requires improvements in competitiveness to foster exports. Estonia has made some progress in developing programmes aimed at enhancing that of SMEs. However, a 2010 report by the State Audit Office, cited by OECD

9 Gross inland consumption of primary energy excluding non-energy uses

10 In primary energy savings compared to national business-as-usual scenario; this means keeping the final energy consumption constant by 2020 at the level of 2010 (123.1121.3 PJ) despite economic growth.

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economic surveys: Estonia 201111, argues that enterprise support is inflexible and fragmented, benefiting only a few companies and support policies have not been focused on whether the distributed funds have created any permanent development benefits. In addition, a 2011 evaluation report to the Ministry of Economic Affairs and Communications12 held that Estonian enterprise policy 2007-2013 lacks a clear focus on 'growth of companies', which could increase productivity. Access to finance remains tight. Estonian SMEs exceed the EU average on the available indicators measuring internationalisation, but there is room for improvement. The full potential of information and communication technologies (ICT) for innovation and SME competitiveness is not exploited. For instance, take-up of e-commerce is low.

Insufficient infrastructure endowment Given Estonia's geographical position transport and transit as well as energy networks are key factors in the country's economy. Inadequate investment in essential network infrastructure, nationally, across borders, and within the region overall, hampers the preconditions for growth.

Apart from low international accessibility of Estonia in terms of rail, road, maritime and the Trans-European Transport Network (TEN-T) core network (in particular, north-south infrastructure is missing, including the Baltic-Adriatic Corridor), the coverage of transport infrastructure is generally adequate. However, their condition is often weak13. The quality of road and rail is insufficient, intermodal connection points and enhancing integrated logistics and tracking systems are lacking. Especially the links between ports and railways should be improved. The interoperability of transport systems and infrastructure/logistics hubs remains a concern. Tallinn airport passenger terminal is about to reach its capacity. There are shortcomings in the public transportation system. Development of regional transport system is fragmented. The fleet of passenger cars is particularly CO2 (carbon dioxide) intensive and the modal share of road transport is growing. Passenger transport by rail is very low.

Estonia's energy distribution network is outdated and needs improvements.

Skills mismatch, high unemployment of vulnerable groups and low-skilled people, varying capacity of local governments in providing public services One of the main challenges for Estonia is insufficient supply of competent human capital. As one third of the labour force has no professional education, the available skills and qualifications do not match the labour market needs. Persistent scarcity of skilled labour, even during the crisis, combined with high long-term and youth unemployment clearly points to weaknesses in education and labour market policies. In addition, a relatively high share of early school leavers contributes to the skills mismatch problem.

In recent years, the quality of education has been improved markedly at all levels; however, there is scope to align the educational outcomes more to labour market needs. The lack of skilled human resources hampers Estonian efforts to increase the R&I investments and to attract further foreign direct investments. The structure of higher education does not fully respond to the needs of current and potential growth sectors. The 11 Organisation for Economic Co-operation and Development (OECD) (2011), OECD Economic Surveys: Estonia 2011, OECD

Publishing. 12 Karin Männik, Michal Miedzinski and Alasdair Reid. Evaluation framework for innovation and enterprise support policies in

Estonia. Tallinn 2011 p. 19. 13 The World Bank Global Logistics Performance Index ranks Estonia 43rd, with its weakest point being infrastructure..

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participation in lifelong learning has increased over the recent years, but the participation rates for the low-skilled and older people still remain very low.

Although employment has increased rapidly after the peak of the economic crisis (from 66.7% in 2010 to 71.8% in the second quarter of 2012) the high unemployment rate for youth and low-skilled as well as persistently high long-term unemployment constitute a concern. High structural unemployment is at the risk of persisting due to skills mismatches and low coverage of active labour market policy measures (ALMP). Financing of ALMPs continues to increase, but as a share of GDP it is still at a very low level with a low participation rate, resulting in low effectiveness of ALMP.

The negative demographic trend caused by low birth rate and ageing population pose a considerable challenge for Estonia to ensure an adequate labour supply in longer term. In addition, the low life-expectancy and less healthy life years compared to EU average lead to premature loss of labour force.

The effectiveness and availability of social services is not sufficient for tackling the social consequences of the crisis and supporting the integration of the most vulnerable groups to the labour market. Furthermore, the quality and availability of public services provided at local government level varies. In addition, the current division of responsibilities between the central government and the local municipalities in the context of public services is not always clear and results in fragmented service provision and inefficiency.

High energy intensity and gaps in relation to EU environmental targets Estonia is expected to over-achieve its emission reduction target. However, support should focus not only on the targets for 2020, but also on the long-term decarbonisation target for 2050. Estonia features one of the highest energy intensities per capita in the EU, partly as a result of a production structure concentrated on energy-intensive sectors and industries and low energy efficiency performance at sector level, in particular with regard to industry, transport and households. Heating networks feature significant heat losses. Further efforts are needed to reduce the energy bill. Estonia is well on track towards the overall RES target. The importance of shale oil as energy source emphasises the need to diversify energy supply by developing more efficient and less polluting energy sources.

Estonia is lagging behind on the 10% binding RES target for transport14. Transport is one of the main sources of CO2 emissions and the largest source of NOx (nitrogen oxides). Because of the ongoing shift of passenger transport from public transport to private cars and of freight transport from rail to road, the energy intensity of the transport sector and the ensuing greenhouse gas emissions are expected to grow, unless a structural change in modal share of different modes is achieved.

The waste management situation of the country is not optimal. Estonia is among the 10 worst performing Member States in this regard. The country is unlikely to meet the 2020 recycling targets for municipal waste without creating the infrastructure required for waste management. Estonia is also not yet fully compliant with obligations and targets of the Waste Directive.

14 In 2009 and 2010 only 0.2% of energy in transport came from RES in Estonia.

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Estonia is making efforts to improve the implementation of the Waste Water Directive, but by the end of 2009, was still lagging behind regarding compliance. Less than half of the agglomerations were in compliance with the main obligations in the directive. As for drinking water, finalisation of the Cohesion Fund project to construct the Narva central water treatment plant in 2015 is expected to contribute notably to compliance with the Directive, but distance remains to ensuring that drinking water meets EU standards (the level of compliance of small water suppliers reaches 50%).

Estonia lacks a comprehensive long-term climate change adaptation strategy. Moreover, preservation of natural resources and in particular protecting biodiversity is a continuing challenge. The sustainable use of marine resources, including prevention of overfishing, is important for the further development of the country's blue economy.

2. PRIORITIES FOR FUNDING

The CSF Funds will be one of the most important instruments to tackle the main development challenges for Estonia and to implement the Europe 2020 strategy. Each fund should give priority, when relevant, to policy areas addressed in the CSRs and in the national reform programmes. For rural development and fisheries, priorities for funding will also contribute to supporting the Common Agricultural (CAP) and Common Fisheries Policies (CFP). Targeted funding should harness growth in Estonia's blue economy, in line with the National Development Plan "Estonian Maritime Policy until 2020". To this end the intervention from the CSF Funds needs to be concentrated on a limited number of priorities. Experience shows that thematic concentration allows for an increase in effectiveness of public interventions by reaching a critical mass with a real impact on the socio-economic situation of a country and its regions. Prioritisation is of particular importance in times of fiscal consolidation.

Four complementary and mutually reinforcing funding priorities are proposed hereunder in line with country-specific challenges15. They reflect the importance of funding needs and potential contribution to growth and jobs. There is no ranking in the presentation of the funding priorities.

These are the priorities the Commission' services would like to be co-financed in Estonia for the next programming period 2014-20. Sufficient flexibility is built into the new programming architecture to respond to new challenges and unexpected events, which allow for reprogramming on justified grounds.

2.1 Strengthening private research and creating an innovation-friendly business environment To foster prioritisation and internationalisation of the R&I systems, Estonia should develop an R&I strategy for smart specialisation that would identify knowledge-intensive sectors that could push the country up on the international value chain and give access to wider markets. The strategy could concentrate public resources on a more limited number of fields of science and technology that reflect Estonia’s strengths, as identified by international benchmarking. This could ensure that the CSF Funds are used more efficiently, creating synergies between public and private investments and EU, national and regional policies. The options for integration and co-development of R&I strategies

15 The thematic objectives in the proposed regulations and their link to the funding areas are outlined in Annex I.

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in the Baltic Sea region will require sufficient attention16 and strong policy to optimise the synergetic and complementary benefits of cooperation, including with neighbouring countries and macro-region. The relative share of investments from the CSF Funds in R&D and innovation should stay at least at the same level as in 2007-2013. Private investment should increase.

Enhance private research, development and innovation activities Priority should be given to strengthening private research, development and innovation activities. To achieve this, it is imperative to have a business and policy climate that favours private investment. Enhanced measures appear necessary to support the creation and development of fast-growing innovative firms as well as to attract existing SMEs to get engaged with R&D work in order to move up in value chain and to gain competitiveness. Cooperation between business and academia should be enhanced both nationally and internationally. Enterprises could be encouraged to take up research output, particularly for boosting the productivity of existing industries. In order to improve the supply of skilled human capital there is a need to develop innovation culture and skills in universities, as well as to put in place the right incentives and training schemes for researchers from the public sector to engage in cooperation with industry.

Match trans-national, national and regional R&I provision to business demand

Creation of an innovation-friendly business environment requires matching trans-national, national and regional R&I provision to business demand. It should consider supporting from basic research to technological and applied research, pilot lines or early product validation as well as an effective technological transfer from research centres to businesses (by improving infrastructure, quality and market orientation of public research). It is important to ensure the efficient use of CSF Funds through synergies with Horizon 2020 activities. It will in turn help Estonia to make R&I perspectives more evident in a broader range of policy fields including, inter alia, energy, low-carbon economy, marine and maritime sectors, ICT and transport. Estonia needs to move towards more technology-intensive and resource efficient sources of growth. Some sectors, such as creative services, may nevertheless expect enhancement of their non-technological innovation capacity. Investment in ICT products, services and applications should focus on the use of ICT-based innovations to tackle key societal challenges to drive the modernisation of public administration.

Strengthen SMEs' competitiveness and facilitate their access to finance and internationalisation, including in agriculture and fisheries

EU support for SMEs needs to be more targeted, concentrating on enhancing their competitiveness and growth performance. A further shift from grant-based to financial instruments is expected. Enhancing the competitiveness of SMEs should focus on investments leading to innovation and thus expansion of business activities, production of innovative outputs and productivity increase in sectors where a competitive advantage in line with smart specialisation may be achieved. A wider range of SMEs should be engaged in moving up in the value chain and increasing productivity than at present. SMEs access to finance needs to be improved. Development of tools to support internationalisation of SMEs is important. ICT-potential should be used to achieve productivity gains, new business models and cost gains in SMEs. Further reduction of administrative burden for enterprises could help contain domestic price pressures and

16 Innovation in the Baltic Sea region. Technopolis. April 2011.

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ensure competitiveness. The Estonian business sector would benefit from intensified cooperation with neighbouring countries on removing hindrances to the internal market, including improved cooperation in the customs and tax area, under the EUSBSR, as well as the development of clusters.

2.2 Upgrading infrastructure

Provision of key transport and energy links are vital for connecting Estonia's regions with each other and with neighbouring countries and Central Europe. Well-functioning and well-connected network infrastructure reduces isolation and boosts the economy by stimulating trade and development, opening new markets and encouraging companies to invest. It is expected that relative share of investment in this funding area will remain approximately at the same level as in 2007-2013.

Improve essential transport links, including moving ahead with the Baltic-Adriatic Corridor, a key railway project to implement the EU Strategy for Baltic Sea region

Investments need to focus on increasing Estonia's international accessibility and accessibility of peripheral regions, development of intermodal transport network as well as development of interoperable and intelligent transport systems. The focus of investments should shift towards more sustainable and environment-friendly modes of transport in order to help Estonia to reduce its GHG emissions and meet the 10% binding RES target for transport.

A close coordination mechanism with the Connecting Europe Facility (CEF) has to be set up; financial priority should be given to the railway sector, and specifically on completing the TEN-T Core Railway Network. Estonia needs to move ahead with the 'Rail Baltica' project, evolving towards the Baltic-Adriatic Corridor, which would connect the EU main networks with north-eastern Europe with an unbroken north-south link. For road transport the first priority is to complete the system of motorways and expressways with due attention to improving accessibility of peripheral regions.

Develop energy distribution networks

Investments in smart grids are a tool to reduce network losses, increase the reliability of the grid and allow large amounts of variable renewable power to be connected to the grid. Investment is proposed to be focused on developing smart distribution systems at low voltage levels.

2.3 Skilled labour force, better education, high employment and inclusive society

CSF funds should contribute to job-rich growth and the positive impact on employment and human capital of all investments by CSF funds should be maximised. The investments should be concentrated on the most important challenges in education and the labour market policy area aimed at achieving maximal support to the implementation of the CSRs. As many challenges identified with the CSRs concern human resources issues, investments in human capital should have a higher share of CSF funds compared to 2007-2013.

Increase the quality and labour market relevance of education and upgrade the skills and competences of the workforce

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Priority should be given to good quality and equally accessible education and training system with the objective to prevent and reduce early school leaving. It is important to ensure the labour market relevance of education and training at all levels.

The access to early-childhood education needs to be enhanced. The childcare opportunities including the infrastructure investments for children below 3 years of age should be extended.

For reducing early school leaving the investments should support the implementation of the corresponding national strategy. In order to achieve better results an early school leaving tracking mechanism needs to be established and supported. Also, an integrated and functioning career services system is needed with the aim to support educational choices of young people, prevent early school leaving and support labour market adaptation of adults. Established early intervention schemes and individualised educational, psychological and social assistance for pupils at risk of drop-out both in general education and vocational education and training (VET) should contribute to achieving the targets for early school leaving.

Given the decreasing number of school-age young people and with the aim to improve the quality of general upper-secondary education and increase the efficiency of financing, rationalising of gymnasiums network is needed. This would contribute to reducing the number of school drop-outs.

For improving the matching of available skills and labour market needs, the focus should be put on re-skilling and up-skilling the labour force, enhancing access to lifelong learning and providing the people with labour market relevant competencies. With the aim to considerably upgrade the skills level of labour force, training opportunities for low-skilled adults and people not having any professional qualification should be created in formal educational establishments (VET centres). The study programmes in vocational education and teachers' quality should be further aligned to real needs of the businesses. The training offered by training providers needs to correspond to labour market needs and lead to employment.

In addition, the provision of career services should be extended to all people in working age and the coverage of career counselling should be increased with particular focus on young people.

In higher education, a shift from social sciences to engineering would create the basis that could support the creation of innovation culture in Estonia. A higher degree of openness and internationalisation is needed in higher education to better respond to the skills need of potential growing sectors and RDI. With a view to demographic changes the participation of older people in education and training activities need to be fostered.

Increase labour market participation through improved employment, social inclusion and efficient public services For facilitating access to employment for unemployed and inactive people the CSF funding should focus on increasing the coverage and effectiveness of ALMP measures. The measures should be target-group tailored and focused to those target groups which are difficult-to-integrate with particular attention to young, low-skilled and long-term unemployed. For more vulnerable groups and inactive people the support should be provided in close cooperation with local municipalities i.e. integrated measures of ALMP and social assistance.

For a sustainable integration of young people to the labour market, it is relevant to allow them to gain more work-based experiences in enterprises and extend the apprenticeship

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and traineeship measures. In order to facilitate the transition of youth from education to labour market, integrated measures including training, counselling, apprenticeships, ALMP and personalised assistance should be launched.

A particular focus should be given to reducing the inactivity of labour force caused by long-term sickness, incapability to work, disability or care-taking obligations. In addition, targeted labour market rehabilitation services need to be developed and made available to better support the labour market integration of inactive labour force. Active inclusion measures should focus on those target groups furthest away from labour market who have been on social assistance for a longer period. Furthermore, there is a need to enforce activation measures for the groups especially affected by poverty. In this context, the administrative capacity of local governments in providing high quality public services needs to be increased. Furthermore, equal availability and better targeting of social services across regions should be ensured to increase the effectiveness of social services.

Availability of jobs and job creation is the key for increasing employment. For promoting self-employment, entrepreneurship and business creation it is important to focus on integrated business start-up measures and introduce appropriate financial instruments. Better access to business support services and finance has to be provided for micro-entrepreneurs and self-employed. It is also needed to extend the integrated entrepreneurship training and business mentoring for unemployed and other vulnerable groups.

As a response to the demographic trends more attention is needed to improve public health policies and create better conditions for older people to stay longer and healthier at the labour market. Support to healthy ageing and health and safety at work should be provided by improving the availability of illness-preventive services and more extensive use of flexible working arrangements for older people. It is also important to design specific work-related training schemes and appropriate ALMP measures for older people and improving access to them.

2.4 Environment-friendly and resource-efficient economy Sustainable and efficient use of resources improves competitiveness and provides job opportunities while protecting nature. The relative share of CSF funding for this area is nevertheless expected to decrease in comparison with 2007-2013. The investment gap in the field of environment is no longer as large as in the past, and low-carbon economy is being funded also from other sources than CSF funds.

Shift to an energy efficient, low-carbon economy

Priority should be given to increasing energy efficiency in the building sector with existing public and private buildings, as they have the biggest potential for energy savings in Estonia. The energy efficiency measures which are also in a great need of development are those of companies, including recovery of industrial waste heat and upgrading to high-efficiency combined heat and power generation (CHP). Renewable energy use (including offshore marine and wind energy) should be fostered, including through networking of good practice, upgraded infrastructure and legislation. The RES with highest potential are wind and sustainable use of biomass.

Address the remaining gaps in the compliance with the acquis and the binding EU targets in the field of environment (transport related air pollution, waste hierarchy, waste water, drinking water)

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Given the need to achieve a structural change in modal share of different means of transport, key actions for the CSF funds should include investment in actions to reduce transport-related air pollution, in particular retrofit on replacement programmes for bus fleets, incentive schemes for cleaner transport, improved public transport infrastructure and promotion of alternative forms of transport. Attention should be paid to renewable energy use in transport.

Without a radical and in depth change in waste management, Estonia will not be able to meet most of the EU's legally binding objectives and targets while missing opportunities to create new economic activities and jobs. The CSF funds should be allocated in priority to the first steps of the waste hierarchy (prevention, re-use and recycling).

Given the gaps in achieving compliance with the waste water and drinking water directives, the CSF Funds should invest in completing the requirements of the environmental acquis. The aspects beyond compliance, such as efficiency in the water system or reduction of the leakage rate, should be dealt with in the context of the pricing policy.

A national climate change strategy has yet to be developed, but as Estonia has applied to the Norway Fund for the development of such strategy, and as it would be logical that the Fund continued to support actions to be developed under one of its own projects, normally the CSF Funds do not need to intervene.

Further environmental protection in agricultural, fisheries and maritime sectors

Further intervention in agricultural sector will be required to safeguard biodiversity and high nature value sites with a particular focus on supporting sustainable management of semi-natural areas.

Investments in fisheries and maritime sectors should bring about a sustainable use of natural resources and sustainable economic development at sea and in coastal areas in line with the National Development Plan "Estonian Maritime Policy 2012-2020" and the Blue Growth Initiative17 on an ecosystem-based approach.

3. SUCCESS FACTORS FOR EFFECTIVE DELIVERY

Together with financial consolidation structural reforms play a key role in enhancing the overall efficiency thereby the growth potential of the Estonian economy. They are also key condition for the successful implementation of the CSF Funds which can only have optimal impact, if an appropriate policy, legal and administrative framework is in place. Therefore the new Common Provisions Regulation will set out ex-ante conditionalities which are preconditions relating to the effective and efficient use of EU Funds which should be fulfilled by the time a programme is approved. The Commission will formally examine the consistency and adequacy of the information provided by Estonia in the framework of its assessment of the Partnership Agreement and programmes.

17 Commission Communication on Blue Growth opportunities for marine and maritime sustainable growth of 13 September 2012

COM (2012) 494 final.

15

Where ex-ante conditionalities are not fulfilled by the time of submitting the Partnership Agreement to the Commission, Estonia will need to lay down a series of actions to be taken at national and regional level and a timetable for implementing them. All ex-ante conditionalities need to be fulfilled by the deadline agreed and at the latest within two years of the adoption of the Partnership Agreement or by 31 December 2016.

Based on experience from the current programming period and the CSRs the Commission' services have identified a number of ex-ante conditionalities critical for successful implementation of the above funding priorities. The Estonian authorities need to take actions to fulfil the pre-conditions for successful spending in each of these areas before the start of the next programming period.

• develop a R&I strategy for smart specialisation for Estonia, including a chapter for digital growth.18 The strategy should provide a coherent framework for focused investments and support from the CSF Funds and leverage private R&I expenditure.

• develop an evidence-based and comprehensive national transport plan outlining the necessary policy priorities and prospective reforms. The strategy should include a mature project pipeline, including prioritisation according to sustainability and arrangements for further enhancement of the governance for all the governing and implementation bodies involved.

• develop a strategic plan for aquaculture, improve data collection for fisheries management and implement the Union control, inspection and enforcement system through a smooth shift from direct to shared management.

4. PRIORITIES FOR EUROPEAN TERRITORIAL COOPERATION

Effective solutions in many areas of development require a cooperative approach to challenges and experiences that looks across the borders to share experiences and to carry out convergent/coordinated/joint activities. Estonia would benefit from cooperation through the European Territorial Cooperation as well as the mainstream programmes, notably in the context of the EUSBSR, in particular in the following areas:

• strengthening research, technological development and innovation (efficiency of research infrastructure in the Baltic Sea Region);

• enhancing the competitiveness of SMEs, the agricultural sector and the fisheries and aquaculture sector;

• protecting the environment (e.g, water management) and promoting resource efficiency;

• improving connectivity and supporting green infrastructure; • sustainable economic development at sea and in coastal areas: Marine knowledge,

maritime spatial planning and integrated coastal zone management and integrated maritime surveillance, as well as sustainable growth and jobs in the maritime economy, including cleaner fuels in the Baltic Sea, in synergy with the CEF.

• climate change mitigation and adaptation

18 The recommendations of the international peer review (ERAC Peer Review of the Estonian Research and Innovation System.

Expert Group report 2012); the evaluations of R&D and higher education measures (Interim evaluation. Technopolis, Praxis. IBS 2011) and of enterprise support policies (Katrin Jaaksoo, Meelis Kitsing, Karel Lember, Tanel Rebane. Tallinn 2012); as well as Digital Agenda Scoreboard data will provide some key orientations for this work.

16

Estonia is asked to outline its plans in the Partnership Agreement and the programmes on how it intends to respond to its strategic coordination and cooperation needs and contribute to the implementation of the priorities of the EUSBSR.

The use of European Grouping of Territorial Cooperation when planning and implementing cooperation approaches across borders or in wider regional contexts should be considered, and utilised as appropriate.

17

ANNEX

The annex contains the arrangements for effective programming and delivery, assessment of funding needs in relation to thematic objectives and assessment of specific aspects of administrative capacities.

A. ARRANGEMENTS FOR EFFECTIVE PROGRAMMING AND DELIVERY

Structure of programmes The proposed 2014-20 legislation for the CSF Funds offers additional flexibility to set up programmes in each Member State to best match their institutional set-up. Cooperation at all levels is key to achieving quality of spending. Annex I of the Commission's amended proposal for the Common Provisions Regulation includes elements of the Common Strategic Framework19 and sets out different options for integrated approaches to programming, to achieve coordination and synergies during implementation, which Member States are encouraged to explore. Please note that this Annex I to the CPR does not cover the entire CSF (e.g. the key actions-indicative actions of high European added value are to be part of a delegated act). The most suitable architecture will have to be developed in partnership with stakeholders in Estonia and in negotiations with the Commission. Coordination, complementarity and synergy It is essential that Managing Authorities (MAs) and all ministries work together in the preparation, implementation, monitoring and evaluation of the Partnership Agreement and programmes. In the current period the Ministry of Finance acts as the MA, Certifying Authority and Audit Authority for the three Operational Programmes (OPs) covering ERDF, CF and ESF. In addition, each OP has had a so-called leading Ministry to coordinate monitoring and reporting at OP level. The arrangement may have caused responsibilities to diffuse somewhat and it calls for strengthening the driving and coordination role of the MA. Enhanced positioning of the MA would enable it to give more attention to solving delays and bottlenecks in the implementation. Appropriate concentration of resources would make possible notable reduction of the number of second level Intermediate Bodies from the current 12. This would allow centralisation of certain functions and concentration of capacities required for performing them, reduce the need for coordination and controls, and contribute to solving problems in relation to separation of obligations. There is also scope for reducing the number of departments (within the MA) fulfilling the tasks of the MA, simplifying monitoring arrangements, as well as ensuring appropriate separation of duties. The present set of 120 measures for the ERDF, CF and ESF and much greater number of implementation schemes calls for rationalisation of the system for the purpose of effective implementation in the new period.

19 COM(2012) 496 final. 11.9.2012.

18

Whilst full integration of CSF Funds in the national budget provides a more comprehensive budgetary structure, the pre-allocation of the total available amount between the different ministries, without conditionality related to their performance in the utilisation of the budgetary envelope given to them, has created rigidity hampering the effectiveness and efficiency of implementation. For the next period, the implementation would benefit if a new system of budgetary allocation was put in place. In setting up the programmes, synergy should be sought not only between the five CSF Funds but also with other EU policies such as climate action and EU instruments such as Erasmus for All, the Asylum and Migration Fund, Horizon 2020 (including Marie Sklodowska-Curie Actions regarding the training for researchers), the programme for the competitiveness of enterprises and SMEs (COSME), the European Institute of Innovation and Technology and its Knowledge Innovation Communities through a closer integration of the Knowledge Triangle, Programme for Social Change and Innovation, the LIFE programme, the Connecting Europe Facility and the Creative Europe Programme. A coordinated approach should be ensured also as regards financial instruments. In Estonia, it is recommended that the ERDF funds already invested in financial instruments20 in 2007-13 (given their revolving nature) as well as the instruments of the Estonian Development Fund, the Baltic Investment Fund and the instruments set up at EU level are taken into consideration in the market analysis for financial instruments, and in the determination of the amount to be allocated in financial instruments as part of the 2014-20 envelope. Finally, any preferential treatment of market participants in connection with financial instruments should be limited to the minimum necessary in order to trigger financing. With respect to credit export financing provided by Kredex, support will need to comply with specific State aid rules on aid to certain export-related activities as well as with any other relevant EU-legislation. Taking into account the amount of funding expected from the Community level, the strategy for the CSF Funds should be fully integrated with the national development strategy. It will also be necessary to assure coherence with actions financed from the other external financing sources than the EU instruments. Due consideration should be given to readiness to absorb the funding in different areas of investment (policy objectives should be set along with real means) and where Estonia can benefit from joining forces with other countries, notably in the framework of the EUSBSR. The key principle of sound financial management remains the basis for the development of management and control systems in the next programming period. All funding shall be in accordance with EU state aid rules and should be limited to the minimum necessary. Funding should address real market failures and distortions of competition should be limited to the minimum. Support to fish catching sector should contribute to an effective reduction in fishing capacity. Integrated Territorial Investments (ITI) in cohesion policy allow the implementation of parts of programmes in a cross-cutting manner and can provide flexibility below the programme level to implement integrated actions. Where this mechanism is selected, Estonia should define for each ITI an appropriate governance structure and in particular

20 Managed by the Credit and Export Guarantee Fund KredEx.

19

designate a management body. Allocations should be defined in the programmes for the ITI. The Partnership Agreement should set out the contribution to the integrated approach for territorial development, including – where appropriate – a planned integrated approach to sustainable urban development. It should identify the cities where sustainable urban development strategies will be implemented or the principles established for their identification. Community-led Local Development (CLLD) offers an integrated bottom-up approach in response to complex territorial and local challenges through the involvement of local communities. Estonia is invited to explain its approach as regards CLLD across the CSF Funds indicating the main challenges, objectives and priorities, the type of territories, the role of local action groups and of different CSF Funds and coordination mechanisms, as well as the budget it intends to provide for CLLD in fisheries-dependent areas. Estonia should also indicate the way preparatory support will be made available for local actors.

B. ASSESSMENT OF FUNDING NEEDS IN RELATION TO THEMATIC OBJECTIVES

The following sections present the Commission Services' view on priorities for CSF Funds for Estonia. They have been developed on the basis of the Commission' services in depth country analysis21 and selected from the 11 thematic objectives, which stem from the Commission proposal for the Common Provisions Regulation22 for CSF Funds adopted by the Commission on 6 October 2011. These 11 thematic objectives translate the Europe 2020 strategy into operational objectives to be supported by the CSF Funds.

The 11 thematic objectives are common for cohesion, rural development and the maritime and fisheries policies; they ensure that interventions under these policies are aligned towards the achievement of joint objectives, those of Europe 2020. They provide a menu of possible funding objectives for the whole of the EU. According to each Member State's specific situation a more focussed selection is then made in agreement with the national authorities. The challenges and funding areas for Estonia correspond to the following thematic objectives:

Funding priorities Related thematic objectives Strengthening private research and creating an innovation-friendly business environment

Strengthening research, technological development and innovation Enhancing the competitiveness of small and medium-sized enterprises, the agricultural sector (for the EAFRD) and the fisheries and aquaculture sector (for the EMFF) Enhancing access to, and use and quality of, information and communication technologies (ICT products, services and applications)

Upgrading infrastructure Promoting sustainable transport and removing bottlenecks in key network infrastructure Supporting the shift towards a low-carbon economy in all sectors (network infrastructure)

21 Ref to 2012 SWD for Estonia 22 COM(2011)615 final/2; http://ec.europa.eu/regional_policy/what/future/proposals_2014_2020_en.cfm#1

20

Skilled labour force, high employment and inclusive society

Promoting employment and supporting labour mobility Promoting social inclusion and combating poverty Investing in education, skills and life-long learning Enhancing institutional capacity and ensuring an efficient public administration

Environment-friendly and resource-efficient economy

Supporting the shift towards a low-carbon economy in all sectors (except network infrastructure) Protecting the environment and promoting resource efficiency Promoting climate change adaptation, risk prevention and management

FUNDING PRIORITY: STRENGTHENING PRIVATE RESEARCH AND CREATING AN INNOVATION-FRIENDLY BUSINESS ENVIRONMENT

The objectives of the funding priority "Strengthening private research and creating an innovation-friendly business environment" will be achieved primarily by thematic objectives 'Strengthening research, technological development and innovation' and 'Enhancing the competitiveness of small and medium-sized enterprises, the agricultural sector (for the EAFRD) and the fisheries and aquaculture sector (for the EMFF)' as well as thematic objective 'Enhancing access to, and use and quality of, information and communication technologies'.

Thematic objective: Strengthening research, technological development and innovation

Europe 2020 headline target Current situation National 2020 target in the NRP

3 % of expenditure on research and development


3 %


66.4 % in 2010, 70.1 % in 2011

76 %

From Country-specific Recommendation n. 3 of 2012: Link training and education more effectively to the needs of the labour market, and enhance cooperation between businesses and academia. Foster prioritisation and internationalisation of the research and innovation systems.

From Country-specific Recommendation n. 4 of 2012: Improve energy efficiency. Foster renewable energy use.

For this thematic objective the funding priority translates into the following priorities and specific objectives reflecting country specific challenges to be supported by the CSF funds: 1. Enhancing research and innovation infrastructure (R&I) and capacities to develop R&I excellence and promoting centres of competence, in particular those of European interest

21

• Invest into research infrastructure supporting the innovation fields as identified in the smart specialisation strategy. Enhance open and shared use of research infrastructure.

• Improve the quality of research centres in Estonia to develop R&I excellence and promoting centres of competence in order to increase their ability to undertake collaborative projects with businesses and foreign research centres to stimulate co-inventions in line with the related national roadmap adopted in the European Strategy Forum of Research Infrastructures (ESFRI) context.

• Support Joint Programming Initiatives as well as participation in or capacity building for Public-public partnerships under Horizon 2020 (ERA-NETs and Article 185 initiatives) to which Estonia is committed to participate.

2. Promoting business R&I investment, product and service development, technology transfer, social innovation and public service applications, demand simulation, networking, clusters and open innovation through smart specialisation

• Support the creation and development of fast-growing innovative firms and encourage a wider range of companies than at present to innovate, to develop new products or improve the production technologies for new products, among others in the sectors of the blue economy in line with the objectives of the Blue Growth initiative23.

• Develop incentives for research collaboration between large domestic or foreign companies with innovative start-ups and SMEs.

• Commercialisation of research output should be strengthened. Universities could be given incentives to promote an efficient technology transfer to the market. Facilitate industry-academia mobility of researchers. Facilitate cooperation between SMEs and research sector by further developing instruments such as innovation vouchers (demand stimulation).

• Focus on fewer and stronger clusters. The cluster organisation's possibilities to finance and initiate projects with enterprises not yet having RDI activities should be enhanced.

• Promote and scale up social and non-technological innovations and innovations in creative sectors with incubators, hubs, platforms and networks. Promote innovation in the public sector, including awards and inducement prices, and open access to scientific information.

• Parallel to research-based innovation, sectors such as the service sector should seek opportunities to develop business models and products with customers, including businesses based on intangible assets (e.g. intellectual property rights).

3. Supporting technological and applied research, pilot lines, early product validation actions, advanced manufacturing capabilities and first production in Key Enabling Technologies (KET) and diffusion of general purpose technologies

• Support innovation, in particular in SMEs, by supporting applied research, proof-of concept and investing in pilot lines and early product validation actions

23 Blue Growth is a long-term strategy to unlock the potential of Europe's oceans, seas and coasts, COM(2012) 494 final identified a

number of promising areas including blue energy, maritime, coastal and cruise tourism, marine mineral resources, blue biotechnology, and aquaculture that could deliver sustainable growth and jobs in the blue economy.

22

including advanced manufacturing capabilities and first production in KET and diffusion of general purpose technologies, while minimising projects involving pure technology transfer from abroad and replacement of production lines/facilities.

• Development of smart grids as well as intelligent and innovative transport systems aiming to enhance intermodal integration of freight logistics and passenger transport, in order to reap the full potential of major infrastructure investments, such as the Baltic-Adriatic Corridor.

• Support product and service innovations identified under European Innovation Partnerships (EIP) and Knowledge Innovation Centres (KICs) linked to the European Institute of Technology.

Assuring performance of investments by CSF Funds under this thematic objective requires meeting the relevant ex ante conditionalities. In addition, the following general considerations would improve governance and delivery:

- Improve thematic targeting of funding i.e. identify knowledge-intensive sectors that could push the country up on the international value chain and give access to wider markets and concentrate public resources on a more limited number of fields of science and technology that reflect Estonia's strengths, as identified by international benchmarking.

- Reduce the number of measures in comparison with the present period. Improve sequencing of operational implementation of measures. Consider trans-national as well as national perspectives. Optimise the synergetic and complementary benefits of cooperation, including with neighbouring countries and macro-region. Complementary efforts are also needed to optimise the return on investment on infrastructure investments already made.

- Ensure the efficient use of CSF Funds in line with the priorities identified in the ERA Communication adopted by the Commission on 17 July 201224 and through synergies with Horizon 2020 activities. It will in turn help Estonia to make research and innovation perspectives more evident in a broader range of policy fields. Investments in RDI are a means to address societal challenges.

- Strengthen business and policy climate that favours private investment. Promote steady foreign direct investment inflows.

- Investments in energy research and innovation should be aligned with the Strategic Energy Technology Plan (SET Plan).

- Incentivise and ensure sufficient funding for undertaking public procurement of innovation in the key public sector areas (social innovation and public sector applications such as health, e-government, low carbon buildings and energy and resource efficiency) using the whole spectrum of tools offered under the EU procurement rules.

- Improved access to skilled staff is a key condition for achieving better results. More emphasis is needed on supporting international cooperation for researchers, PhDs and students and attracting talent to Estonia. Develop innovation culture and skills in universities, as well as put in place the right incentives and training schemes for researchers from the public sector to engage in cooperation with industry.

24 COM(2012) 392 final

23

- Improve governance of the R&I system for more active RDI policy coordination.

- Aim to sustain the long-term benefits of the investment, appropriate target-setting, monitoring of progress and impact assessment will be important to this effect.

Actions under this thematic objective may contribute, if relevant, to related interventions identified under all other thematic objectives.

Thematic objective: Enhancing the competitiveness of small and medium-sized enterprises, the agricultural sector (for the EAFRD) and the fisheries and aquaculture sector (for the EMFF)




3 %


66.4 % in 2010, 70.1 % in 2011

76 %

From Country-specific Recommendation n. 3 of 2012: Link training and education more effectively to the needs of the labour market, and enhance cooperation between businesses and academia. Foster prioritisation and internationalisation of the research and innovation systems.

From Country-specific Recommendation n. 4 of 2012: Improve energy efficiency. Foster renewable energy use.

For this thematic objective the funding priority translates into the following priorities and specific objectives reflecting country specific challenges to be supported by the CSF funds: 1. Promoting entrepreneurship, in particular by facilitating the economic exploitation of new ideas and fostering the creation of new firms

• In addition to supporting high growth companies and start-ups, attract and help the rest of existing SMEs to get engaged in moving up in the value chain and increasing their productivity.

• Encourage enterprises to take up research output, particularly for boosting the productivity of existing industries. Universities could be given incentives to promote an efficient technology transfer to the market.

• Support entrepreneurship, new technology-based companies in particular, including the provision of start-up capital, business plans support, mentoring, ideas fairs and awards.

• Give better access to SMEs to financing through financial instrument schemes. Ensure availability of tailor-made offer for innovative, high-growth companies, including loans and guarantees, equity funding for early stage and growth investments, bridge financing and incentives for venture capital development.

• Support business advisory services, in particular for raising innovation management capacity, intellectual property rights, investor readiness, innovation vouchers, audits and technology transfer and foresight.

24

• Enhance second chance conditions for entrepreneurs.

2. Developing new business models for SMEs, in particular for internationalisation

• Support new business models and marketing organisation for SMEs in particular for internationalisation and increase participation in programmes for global competitiveness.

• Promote Estonian SMEs among potential investors. In particular, contacts with foreign 'business angels' associations could be developed and their activities within Estonia coordinated.

• Supporting the development of eco-innovations, including in marine and maritime sectors, and resource efficiency in SMEs and their access to eco-markets.

• Supporting the development of SMEs in emerging areas such as creative and cultural industries, and innovative services reflecting new societal demands or products and services linked to ageing population, care and health, and the low-carbon economy.

• Intensify cooperation with neighbouring counties on removing hindrances to the internal market, including improved cooperation in the customs and tax area, under the EUSBSR, as well as the development of clusters.


- Funding should address real market failures and distortions of competition should be limited to the minimum.

- Further reduce the administrative burden for enterprises, especially permits and licences, but also costs to start up a company.

- Extend transposition of the late payments directive to all transactions involving public authorities, businesses, banks and individuals.

Actions under this thematic objective may contribute, if relevant, to related interventions identified under thematic objectives aimed at R&I, ICT, low-carbon economy, environment, and human capital development.25

Thematic objective: Enhancing access to, and use and quality of, information and communication technologies




3 %


66.4 % in 2010, 70.1 % in 2011

76 %

From Country-specific recommendation n. 1 of 2012: Continue enhancing the efficiency 25 Thematic objectives 1, 2, 4, 6, 8, 9 and 10 according to the draft Regulation.

25

of public spending

From Country-specific recommendation n. 4 of 2012: Improve energy efficiency. Foster renewable energy use.

For this thematic objective the funding priority translates into the following priorities and specific objectives reflecting country specific challenges to be supported by the CSF funds: 1. Developing ICT products and services, e-commerce and enhancing demand for ICT

• Use ICT potential to achieve productivity gains, new business models and cost gains in SMEs.

• Promote ICT research infrastructure and develop further e-infrastructure, including e-infrastructure for the free movement of knowledge supporting e-Science in the Baltic Sea Region to ensure Estonia's inclusion in the digital European Research Area.

• Boost e-commerce & digital entrepreneurship.

• Enhance cloud computing deployment and access to content –especially scientific and public sector data; and the Internet of the Future by integrating it into the basic functions and processes of existing infrastructures, including networked business processes.

• Support new methods and technologies for delivering education content and digitisation of cultural heritage; applications and services for health & ageing; and green ICT.

2. Strengthening ICT-applications for e-government, e-learning, e-inclusion and e-health

• Focus on the use of ICT-based innovations to tackle key societal challenges, for instance energy efficiency (smart buildings, smart grids, smart lighting, smart transport).

• Use ICT potential to achieve productivity gains, new service models and cost-efficiency in the public sector.

• Improve ICT services and applications for e-government, including for public procurement, secure transactions and access to public information. Encourage creation, production and distribution of digital cultural content and cultural heritage.

• Enhance ICT-enabled services for promoting e-skills, digital literacy, e-learning policies, ageing and social inclusion, as well as ICT applications addressing health (including the planned e-prescription and electronic patient record).


- Ensure synergies with investments by the CEF and other transnational initiatives, in particular while planning demand stimulation activities.

- It will be equally important to coordinate with other external financing sources and State Funding.

26

- Given the persistent lack of highly qualified ICT specialists and engineers, actions aimed at assuring competent staff will be an important element to complement investments related to ICT.

Actions under this thematic objective may contribute, if relevant, to related interventions identified under all other thematic objectives.

FUNDING PRIORITY: UPGRADING INFRASTRUCTURE

The objectives of the funding priority "Upgrading infrastructure" will be achieved primarily by thematic objective 'Promoting sustainable transport and removing bottlenecks in key network infrastructure' as well as thematic objective 'Supporting the shift towards a low-carbon economy in all sectors'.

Thematic objective: Promoting sustainable transport and removing bottlenecks in key network infrastructures



(Eurostat)

25 % in 2020

(RES Directive target)

20 % increase in energy efficiency (368 Mtoe of primary energy savings)

GIC26 = 6.07 Mtoe (2010)

(Final Energy Consumption = 2.90

Mtoe in 2010)

Primary Energy Savings = 0.75 Mtoe27


2020)

20 % GHG emissions reduction compared to 199028

+6 % (2010 emissions compared to 2005)


+11 %

(nationally binding target for non-ETS sectors compared to

2005)


66.4 % in 2010, 70.1 % in 2011

76 %

Country-specific Recommendation n. 4 of 2012: Improve energy efficiency, in particular in buildings and transport, and strengthen environmental incentives concerning vehicles and waste, including by considering incentives such as the taxation of vehicles. Foster renewable energy use, including through upgraded infrastructure and legislation. Continue the development of cross-border connections to end relative market isolation.

Country-specific Recommendation n. 5 of 2012: Enhance fiscal sustainability of municipalities while improving efficiency of local governments and ensure effective service provision, notably through stronger incentives for the merger of, or increased cooperation between, municipalities. Relevant reform proposals should be put in place within a 26 Gross inland consumption of primary energy excluding non-energy uses


28 30% if the conditions are right

27

reasonable timeframe.

For this thematic objective the funding priority translates into the following priorities and specific objectives reflecting country specific challenges to be supported by the CSF funds: 1. Supporting a multimodal Single European Transport Area by investing in the Trans-European Transport Network

• The deployment of the Baltic-Adriatic Corridor and connections to the ports, urban nodes and multimodal platforms as follows:

Helsinki – Tallinn sea connection

port interconnections, (further) development of multimodal platforms and their interconnections, icebreaking capacity, MoS, Motorways of the Sea

Tallinn – Riga –… rail connection

(detailed) studies for new UIC gauge fully interoperable line along the Baltic coast via Pärnu; works for new line to start before 2020; rail – airports/ports interconnections, rail-road terminals, Motorways of the Sea

• The deployment of high standards infrastructure along the other sections of the Core Network according to the TEN-T guidelines as follows:

Tallinn – Tartu – Koidula – RU border rail connection Upgrading

2. Enhancing regional mobility through connecting secondary and tertiary nodes to TEN-T infrastructure

• Remove transport bottlenecks and congestion through the elimination of gaps in the core TEN-T road network (TEN-T network needs to be well integrated with the existing network of secondary roads).

• The development of the regional transport system for passengers of adequate standards, including enhancement of passenger transport by rail.

3. Developing environment-friendly and low-carbon transport systems including promoting sustainable urban mobility

• Deployment of ancillary measures to enhance logistics (single logistic windows and integrated tracking and tracing) through innovative intelligent transport systems and administrative measures.

• The deployment of integrated ticketing systems for passengers at regional metropolitan level, as well as all complementary measures to ensure a sustainable pattern for regional and urban mobility to complement investments in infrastructure.

• Facilitate the shift of road freight transport to other transport modes, notably rail, through intermodal platforms, intelligent transport systems.

4. Developing comprehensive, high quality and interoperable railway systems • Connect secondary and tertiary nodes to TEN-T infrastructure. • Enhance freight and passenger transport by rail.

28


- Improve factual basis for strategic planning of transport infrastructure by using an appropriate traffic model, which considers real and projected demand with an efficient and effective integration of different modes of transport.

- Introduce a sound system for evaluation and prioritisation of projects, including in the broader regional context, and consider seeking support from JASPERS. Prioritisation should be ensured according to the contribution to mobility, sustainability, reduced greenhouse gas emissions, and the Single European Transport Area.

- Improve administrative capacity of the main infrastructure managers.

- Ensure financial sustainability of investments through the preparation and implementation of an appropriate maintenance strategy (applying the "polluter pays" and "user pays" principles). Revenues from pricing and charging systems and not EU funds should be used for financing maintenance costs. User charging systems deploying distance-related road tolls should be compatible with the requirements of Directive 2004/52/EC and Decision 2009/750/EC. This would allow to attract private funding through financial instruments.

- Overhaul the non-competitive and inefficient tariff system in the railway sector to ensure adequate resources for maintenance tackle the limitations in competition and increase the competitiveness of railway transport.

- Regarding the low European added value of many investments in local roads in this period, future investments should be served mostly via national funding. In the context of EU funding, local roads can be supported in cases they contribute to support physical, economic and social regeneration of deprived urban and rural communities and areas.

- Ensuring accessibility for persons with reduced mobility, notably on rail transport.

- Considering the reliance of infrastructure with regard to climate-related risks.

- The status of the mobility plan for Tallinn should be clarified.

- Energy consumption-based taxation of vehicles could be considered.

- Improve effectiveness of delivery of public services at the level of local governments.

Actions under this thematic objective may contribute, if relevant, to related interventions identified under thematic objectives aimed at low-carbon economy, climate change adaptation and environmental protection.29 Thematic objective: Supporting the shift towards a low carbon economy in all sectors (network infrastructure)


20 % increase in energy efficiency (368 GIC30 = 6.07 Mtoe Primary Energy

29 Thematic objectives 4, 5 and 6 according to the draft Regulation.

29

Mtoe of primary energy savings) (2010)


Mtoe in 2010)

Savings = 0.75 Mtoe31


2020)




+11 %


2005)


25 %


66.4 % in 2010, 70.1 % in 2011

76 %


Country-specific Recommendation n. 5 of 2012: Enhance fiscal sustainability of municipalities while improving efficiency of local governments and ensure effective service provision, notably through stronger incentives for the merger of, or increased cooperation between, municipalities. Relevant reform proposals should be put in place within a reasonable timeframe.

For this thematic objective the funding priority translates into the following priorities and specific objectives reflecting country specific challenges to be supported by the CSF funds: 1. Developing smart distribution systems at low voltage levels

• Build and upgrade low-voltage energy distribution networks, including smart grids and integration of distributed generation with the grid.


- The bulk of investment in this area should be made by the private sector. Estonia should ensure that public funding complements private investment, leveraging it, and not crowding it out. Moreover, a sufficient regulatory framework should be created (e.g. energy saving obligations).

- Financial instruments should be supported where the potential for private revenue or cost savings is large, including revolving funds and guarantee schemes.




30

- In case of infrastructure investments, grants should be used primarily to address market failures both nationally and in the Baltic Sea Region or support innovative technologies and investments going beyond cost-efficient energy efficiency performance, thus making sure that energy savings and GHG (Green House Gas) emission reductions are above those attainable with business as usual.

Actions under this thematic objective may contribute, if relevant, to related interventions identified under thematic objectives aimed at R&I, SMEs, environment and transport.33

FUNDING PRIORITY: SKILLED LABOUR FORCE, BETTER EDUCATION, HIGH EMPLOYMENT AND INCLUSIVE SOCIETY

The objectives of the funding priority "Skilled labour force, high employment and inclusive society" will be achieved primarily by thematic objectives 'Promoting employment and supporting labour mobility', 'Promoting social inclusion and combating poverty', 'Investing in education, skills and life-long learning' as well as thematic objective 'Enhancing institutional capacity and ensuring an efficient public administration'.

Thematic objective: Promoting employment and supporting labour mobility



66.4 % in 2010, 70.1 % in 2011

76 %

Country-specific Recommendation n. 2 of 2012: Improve incentives to work by streamlining the social benefits system and increasing flexibility in the allocation of disability, unemployment and parental benefits, while ensuring adequate social protection. Improve delivery of social services, while better targeting family and parental benefits and removing distortionary income tax exemptions related to children. Increase the participation of the young and the long-term unemployed in the labour market.

Country-specific Recommendation n. 5 of 2012: Enhance fiscal sustainability of municipalities while improving efficiency of local governments and ensure effective service provision, notably through stronger incentives for the merger of or increased cooperation between municipalities. Relevant reform proposals should be put in place within a reasonable timeframe.

For this thematic objective the funding priority translates into the following priorities and specific objectives reflecting country specific challenges to be supported by the CSF funds: 1. Access to employment for job-seekers and inactive people, including local employment initiatives and support for labour mobility

• Increase the coverage and effectiveness of ALMP. • Launch target-group tailored ALMP measures to those groups difficult-to-

integrate with particular attention to young, low-skilled and long-term

33 Thematic objectives 1, 3, 6 and 7 according to the draft Regulation.

31

unemployed. Measures should be target-group-tailored and combined with social assistance measures if needed;

• Increase significantly the participation of low-skilled people in ALMP measures, combined with participation in formal education, in cooperation with VET centres.

• Extend the apprenticeship and traineeship measures targeted at young people and introduce complex measures (incl. training, non-formal learning, apprenticeships, ALMP and personalised assistance) to facilitate the transition of youth from education to labour market.

2. Self-employment, entrepreneurship and business creation • Introduce integrated business start-up measures (incl. training, financing,

mentoring, follow-up, business counselling etc.) along with appropriate financial instruments.

• Enhance access to business support services and finance for existing micro-entrepreneurs, start-ups and self-employed.

• Support adaptation of workers and entrepreneurs to change and enhance in-company training.

3. Active and healthy ageing • Develop ALMP measures targeted at older people to prevent unemployment in

older age and support adaptation to changing labour market needs. • Increase significantly the participation of older people in lifelong learning by

designing specific training schemes for older people and improving access to training.

• Support healthy ageing and health and safety at work by improving the availability of illness-preventive services and using flexible working arrangements.

• Reinforce public health measures to address preventable risk factors for disability and premature death, and to improve quality and access for health and preventive services, particularly for disadvantaged groups.

4. Integrated local development strategies • Support community-led local development for diversification into non-

agricultural and non-fisheries activities in fisheries dependent areas, enhanced value added of fisheries products, as well as enhanced mobility between maritime sectors.

Actions under this thematic objective may contribute, if relevant, to related interventions identified under thematic objectives aimed at R&I, ICT, SMEs, low-carbon economy, climate change adaptation, resource efficiency, social inclusion and education.34 Thematic objective: Promoting social inclusion and combating poverty


34 Thematic objectives 1, 2, 3, 4, 5, 6, 9 and 10 according to the draft Regulation.

32

Reducing the number of people at risk of poverty or exclusion by 20 million in the EU

17.5 % in 2010, 58 000 people in 2009

15 %

Country-specific Recommendation n. 2 of 2012: Improve incentives to work by streamlining the social benefits system and increasing flexibility in the allocation of disability, unemployment and parental benefits, while ensuring adequate social protection. Improve delivery of social services, while better targeting family and parental benefits and removing distortionary income tax exemptions related to children. Increase the participation of the young and the long-term unemployed in the labour market.


For this thematic objective the funding priority translates into the following priorities and specific objectives reflecting country specific challenges to be supported by the CSF funds: 1. Enhancing access to affordable, sustainable and high-quality services, including health care and social services of general interest

• Extend access to affordable and high-quality long-term care services aiming at needs-based service delivery while respecting de-institutionalisation principle.

• Foster closer cooperation between different institutions at national and local level in providing integrated and needs-based social services while ensuring universal access to and high quality of services.

• Regarding the planned reform of the social protection system, the improved coverage and availability of labour market rehabilitation services combined with ALMP measures is needed in order to increase the employability of disabled, people having long-term sickness and people taking care of family members.

• Develop and provide integrated activation measures in cooperation with municipalities and non-governmental organisations (NGOs) to attract inactive people and/or long-term unemployed back to labour market.

• Create one central registry for all types of social benefits to better streamline the social benefits system and ensure better targeting.

Actions under this thematic objective may contribute, if relevant, to related interventions identified under thematic objectives aimed at employment, education and institutional capacity.35 Thematic objective: Investing in education, skills and life-long learning


The share of early school-leavers should be under 10 %

13.9 % in 2009, 11.6 % in 2010, 10.9 in 2011

9.5 %

35 Thematic objectives 8, 10 and 11 according to the draft Regulation.

33

At least 40 % of 30-34-year olds should have completed tertiary education

35.9 % in 2009, 40 % in 2010

40 %

Country-specific Recommendation n. 3 of 2012: Link training and education more effectively to the needs of the labour market, and enhance cooperation between businesses and academia. Increase opportunities for low-skilled workers to improve their access to lifelong learning. Foster prioritisation and internationalisation of the research and innovation systems.


For this thematic objective the funding priority translates into the following priorities and specific objectives reflecting country specific challenges to be supported by the CSF funds: 1. Reducing early school-leaving and promoting equal access to good quality early-childhood, primary and secondary education

• Introduce opportunities for early school leavers and school drop-outs to go back to formal education backed by adequate financial support and enable them to obtain a labour-market relevant qualification.

• Establish early intervention schemes (including learning support) and individualised educational, psychological and social assistance for pupils at risk of drop-out both in general education and VET. Support the national early school leaving tracking mechanism, including the improvement of the transition from general education to VET.

• Introduce an integrated career information and counselling system with the aim to support educational choices and prevent early school leaving for young people and provide support for adults in skills upgrading, career changes and adaptation to changing labour market needs.

• Improve access to childcare for children below 3 years of age. • Implement the upper-secondary education reform and ensure an efficient and

needs-based school network with improved quality of upper-secondary education. • Introduce further measures to maintain and increase the professional

competencies of teachers in general education and VET.

2. Enhancing access to lifelong learning, upgrading the skills and competences of the workforce and increasing the labour market relevance of education and training systems

• Improve the participation in lifelong learning for adults, in particular enhance the training and language learning opportunities for low-skilled and for people without any professional qualification while making use of the modernised training facilities of vocational education centres.

• Introduce further measures for upgrading the skills of labour force and increase the quality of vocational education by labour market relevant and up-to-date study programmes and teachers' training.

• Extend and generalise the work-based training schemes in the vocational education whereas involving social partners and the chambers of commerce and industry.

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• Enhance opportunities for obtaining professional qualifications by recognising and validating prior learning and working experience.

3. Improving the quality, efficiency and openness of tertiary and equivalent education with a view to increasing participation and attainment levels

• Implement the tertiary education reform and align the study programmes with labour market needs including putting a stronger emphasis on skills and competencies needed for working life (e.g. team work).

• Support international cooperation for students, professors, researchers and PhD-s. • Strengthen the cooperation and partnership between businesses and higher

education and research institutions.

4. Developing education and training infrastructure as regards pre-school facilities and the secondary education sector restructuring

• Extend access to services for households and children, particularly those with low work-intensity.

• Establish day-care facilities at public primary schools throughout the country and make them more accessible for families.

• Reorganise the upper-secondary schools network, thereby ensuring higher efficiency of spending.

5. Developing qualifications and skills relevant for Estonia's blue economy • Support maritime education, science and research and the qualifications and skills

relevant for Estonia's blue economy.


- Adopt the necessary changes to the law on Pre-School Child Institutions.

- Investments in secondary education restructuring need to be preceded by an agreement on the main principles of the reform.

Actions under this thematic objective may contribute, if relevant, to related interventions identified under thematic objectives aimed at R&I, ICT, SMEs, low-carbon economy, climate change adaptation, resource efficiency, employment and institutional capacity.36 Thematic objective: Enhancing institutional capacity and ensuring an efficient public administration

From Country Specific Recommendation n. 1 of 2012: Continue enhancing the efficiency of public spending.

Country Specific Recommendation n. 5 of 2012: Enhance fiscal sustainability of municipalities while improving efficiency of local governments and ensure effective service provision, notably through stronger incentives for the merger of, or increased cooperation between, municipalities. Relevant reform proposals should be put in place within a reasonable timeframe.

36 Thematic objectives 1, 2, 3, 4, 5, 6, 8, 9 and 11 according to the draft Regulation.

35

For this thematic objective the funding priority translates into the following priorities and specific objectives reflecting country specific challenges to be supported by the CSF funds: 1. Investment in institutional capacity and in the efficiency of public administrations and public services with a view to reforms, better regulation and good governance

• Increase the capacity of local governments to provide high-quality public services and create incentives for closer cooperation in provision of public services, in particular social and educational services.

• Strengthen the capacity to formulate policy and to make use of regulatory tools to improve the business environment through a consistent use of impact assessments, better involvement of stakeholders, administrative simplification and reduction of burden on businesses, increased use of ICT to support the regulatory reform.


- Incentives for merger or increased cooperation should be created for local municipalities in order to better support a qualitative change in provision of public services.

- The structural reform enabling better provision of high quality services at local level should precede the allocations of the structural funds.

- The interventions should focus on reform-oriented actions only.

Actions under this thematic objective may contribute, if relevant, to related interventions identified under thematic objectives aimed at ICT, SMEs, low-carbon economy, environment/resource efficiency and human capital development.37

FUNDING PRIORITY: ENVIRONMENT-FRIENDLY AND RESOURCE-EFFICIENT ECONOMY

The objectives of the funding priority "Environment-friendly and resource-efficient economy" will be achieved primarily by thematic objectives 'Supporting the shift towards a low-carbon economy in all sectors' and 'Protecting the environment and promoting resource efficiency'' as well as thematic objective 'Promoting climate change adaptation, risk prevention and management'.

Thematic objective: Supporting the shift towards a low-carbon economy in all sectors



GIC38 = 6.07 Mtoe (2010)




37 Thematic objectives 2, 3, 4, 6, 7, 8, 9 and 10 according to the draft Regulation.

36

Mtoe in 2010) 2020)




+11 %


2005)


25 %


66.4 % in 2010, 70.1 % in 2011

76 %



For this thematic objective the funding priority translates into the following priorities and specific objectives reflecting country specific challenges to be supported by the CSF funds: 1. Promoting the production and distribution of renewable energy sources

• Increase the share of RES in final energy consumption by fostering renewable energy production, distribution and use in line with the National Renewable Energy Action Plan, including through upgraded infrastructure (e.g. to integrate increasing amounts of wind energy).

• Accompany development of RES with appropriate spatial planning and potential impacts of renewable energy installations construction (e.g. wind turbines).

• Investments in energy technologies and solutions should be focused on the market roll-out of new generation of technologies targeted in the context of the Strategic Energy Technology Plan (SET Plan) and in the energy roadmap 2050.

2. Promoting energy efficiency and renewable use in SMEs • Promote energy efficiency in SMEs, in line with the National Energy Efficiency

Action Plan, including recovery of industrial waste heat and development of high-efficiency CHP.

• Develop RES innovations, technologies and industries, including offshore marine and wind energy, by targeted support schemes for SMEs in the field of production




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and development of RES technologies as well as support for R&D and cluster initiatives in line with smart specialisation strategies.

3. Supporting energy efficiency and renewable energy use in public infrastructures and in the housing sector

• Promote energy efficiency, in line with the National Energy Efficiency Action Plan, in the building sector with existing public and private buildings.

• Encourage energy audits and labelling. • Enhance construction of publicly accessible nearly zero-energy buildings (at least

10 publicly accessible nearly zero-energy buildings of various types with total usable area not less than 5000m2 in Estonia by 2015).

• Strive for energy savings, including in heat production, transfer as well at the end user's level.

4. Promoting low-carbon strategies for urban areas • Integrated low-carbon strategies and sustainable energy action plans for urban

areas, including public lightning systems and smart grids.


- Support from the CSF Funds should not duplicate support from revenue obtained from auctioning allowances under the European Emission Trading Scheme and should complement support schemes for renewable energy.

- The bulk of climate-related investment should be made by the private sector. Estonia should ensure that public funding complements private investment, leveraging it, and not crowding it out. Financial instruments should be supported in instances where the potential for private revenue or cost savings is large.

- In the case of physical investment, grants should be used primarily to address market failures or to support innovative technologies and investments going beyond cost-efficient energy performance, thus making sure that energy savings and greenhouse-gas emission reductions are above those attainable with business as usual.

- Complete transposition of energy-related EU-directives.

- Strengthen powers of the national energy regulator.

- Maintain coherent, stable and predictable renewable energy support framework.

- Introduce additional enabling measures to improve the legal and fiscal framework for the provision of energy services and energy performance contracting and to introduce market-based instruments (e.g. an energy saving obligation scheme).


Actions under this thematic objective may contribute, if relevant, to related interventions identified under thematic objectives aimed at R&I, SMEs, climate change adaptation, environment, transport, and human capital development.41

41 Thematic objectives 1, 3, 6, 7, 8, 9 and 10 according to the draft Regulation.

38

Thematic objective: Protecting the environment and promoting resource efficiency



GIC42 = 6.07 Mtoe (2010)


Mtoe in 2010)



2020)


+6 % (2020 projections compared to 2005)


+11 %


2005)


25 %


66.4 % in 2010, 70.1 % in 2011

76 %



For this thematic objective the funding priority translates into the following priorities and specific objectives reflecting country specific challenges to be supported by the CSF funds: 1. Addressing the significant needs for investment in the waste sector to meet the requirements of the environmental acquis

• Promote waste hierarchy (prevention, re-use and recycling).

2. Addressing the significant needs for investment in the water sector to meet the requirements of the environmental acquis

• Complete waste water collection systems and ensure the connection of households.




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• Complete infrastructure and treatment processes to ensure that drinking water meets EU standards.

3. Reduction of transport related air pollution • Reduce transport related air pollution, in particular retrofit on replacement

programmes for bus fleets, incentive schemes for cleaner transport, improved public transport infrastructure and promotion of alternative forms of transport.

• Promote a sustainable and low carbon transport policy, including paying attention to renewable energy use in transport.

4. Supporting the protection of biodiversity-rich land in order to preserve and reinforce biodiversity and contribute towards targets of the EU biodiversity strategy. In this context particular attention needs to be given to supporting sustainable management, restoration and monitoring of semi-natural areas.

5. Increasing the contribution of sustainable and resource-efficient fisheries and aquaculture to Estonian economy

• Support transition to sustainable fisheries (fishing at Maximum Sustainable Yield, continuation with already existing discard ban in Estonia, improvement of data collection for resource conservation purposes, strengthening the control of the implementation of CFP rules and continuation of reduction of overcapacity within the existing ITQ-system) and to aquaculture with a high level of environmental protection.

6. Harvesting the potential for sustainable growth of the Estonian blue economy through integrated maritime policy initiatives that should generate cost-efficiency for public spending and for business

• In line with the National Development Plan "Estonian Maritime Policy 2012-2020", support the use of the Maritime Spatial Planning and Integrated Coastal Zone Management, access to marine knowledge, integrated maritime surveillance, as well as the sustainable innovative exploration and exploitation of marine resources; and the implementation of the Marine Strategy Framework Directive.


- Plug the information gaps regarding compliance with the Directive 98/83/EC on the quality of water, the Directive 91/271/EEC on the treatment of wastewater and the Directive 2006/12/EC on waste. It should be made clear where Estonia stands with actual compliance and whether future compliance is adequately in hand, clearly planned and funded.

- The competent authorities should set in place (or expand/improve) economic instruments (such as landfill and incinerations taxes or even bans, extended producer responsibility schemes through take back obligations, pay –as-you throw systems at municipal level, deposit schemes when relevant), to help ensure full implementation of EU waste legislation, support the waste hierarchy and ensure a sound long term financing of the solid waste infrastructures.

- The new LIFE Regulation includes the possibility to finance Integrated Projects to facilitate the implementation of EU environmental legislation. Attention should be given to support complementary activities to the relevant Integrated Projects.

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- Improve the urban environment through preservation and valorisation of natural and cultural heritage with a focus on the exploitation and management of these non-renewable resources, and within the framework of integrated strategies.

- Strengthen environmental incentives concerning vehicles, including considering incentives such as taxation of vehicles.


Actions under this thematic objective may contribute, if relevant, to related interventions identified under thematic objective aimed at R&I, SMEs, low-carbon economy, climate change adaptation and transport.45 Thematic objective: Promoting climate change adaptation, risk prevention and management

For this thematic objective the funding priority translates into the following priorities and specific objectives reflecting country specific challenges to be supported by the CSF funds: (The actions under this thematic objective are expected to be covered by other funding instruments than the CSF funds. Insofar as the actions necessary for addressing the objectives of this thematic objective will not be covered by other funding instruments, the CSF Funds could be used to invest in ecosystem-based risk prevention and adaptation measures, as appropriate) 1. Supporting dedicated investment for adaptation to climate change

• Supporting the preparation, implementation and monitoring of a national strategy for climate change adaptation, and the mainstreaming of climate change adaptation in all relevant sectors.

• Ensure data availability and quality with regards to risks and vulnerabilities at local level.

• Increase cross-border and transnational cooperation to identify the most suitable adaptation and risk prevention measures.

2. Promoting investment to address specific risks, ensuring disaster resilience and developing disaster management systems

• According to the national adaptation strategy to be developed.

Actions under this thematic objective may contribute, if relevant, to related interventions identified under thematic objectives aimed at low-carbon economy, environment and transport.46 C. ADMINISTRATIVE ARRANGEMENTS The administrative capacity necessary to manage the CSF Funds should be ensured. Strategic goals for public service development to support achievement of the specific objectives and priorities under the thematic objectives need to be clarified. For instance, capacity in the area of technical (e.g. transport and green infrastructure) knowledge and

45 Thematic objectives 1, 3, 4, 5 and 7 according to the draft Regulation. 46 Thematic objectives 4, 6 and 7 according to the draft Regulation.

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capacity to supervise and manage public procurements are issues that should be strengthened as regards all administrative levels. Estonia has opted for a slim administration to manage EU Funds. The challenge would be to ensure that staffing is adequate to fulfil the tasks and there is sufficient continuity as to the capacity of the administration to deliver.

The involvement of national, regional and local partners in the programming, implementation and monitoring of the CSF Funds should cover each thematic objective. Estonia's management information systems for the CSF Funds should be developed to the effect that all exchanges of information between beneficiaries and authorities responsible for management and control of programmes can be carried out solely by electronic data exchange. Presently the data is being entered by 2nd level intermediate bodies, including for monitoring contribution to EUSBSR. The planning, tracking and reporting of climate related expenditure should be adequately coordinated for all CSF Funds, in accordance with the methodology developed by the Commission. The importance of independent assessments by the State Audit Office of Estonia is acknowledged. The Partnership Agreement and programmes should set out the actions required to • Reinforce the capacity of beneficiaries. Given the delays experienced e.g. in local

infrastructure projects in the current period and the lack of effectiveness at the level of local governments in the delivery of public services, particular attention should be paid to building competencies at local level (2/3 of the municipalities have a population of under 3000, which makes the provision of public services inefficient, fragmented and of variable quality).

• Reinforce capacity of partners, notably social and environmental partners. The development of civil society participation through capacity building of social partners, local authorities and NGOs should be ensured. In fields where the local authorities are the main beneficiaries, it would be beneficial to increase involvement from the county level (there are 15 counties with no strong administrative functions) in the decision-making process, as they have knowledge of the needs and capacities of the region available at that level. It is also important to build bridges between cutting-edge research knowledge and technology and farmers, business and advisory services.

• Achieve a reduction in administrative burden for beneficiaries. Development of e-cohesion, adoption into use of simplified cost methods and Joint Action Plan (JAP) schemes for the ESF, as well as clarity of the national legal framework for the implementation of the CSF Funds will be essential in this regard.

Some of the direct management instruments currently managed by DG Maritime Affairs and Fisheries are to be managed together with ex-EFF (European Fisheries Fund) measures under shared management in the 2014-20 programming period, which implies slight changes in the administrative set-up of the MA for the EMFF. With regard to the implementation of the EUSBSR, the MAs of the CSF Funds and the Ministry of Foreign Affairs should build the necessary cooperation platforms with other Member States for contributing better to the strategic design of the Partnership Agreement and programmes in this respect.

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