THE ESTONIAN GENOME PROJECT AND ECONOMIC DEVELOPMENT

1. Introduction W. Brian Arthur has recently described what he calls casino of technology strategizing for high technology and high risk ventures as follows: Imagine that all technology strategizing takes place in a big casino. There are gaming tables everywhere, and Larry Ellisons and Bill Haseltines of the world are all wandering from table to table wondering which game to join. There's new game forming--let's say it's broadband or digital banking. Haseltine, who runs Human Genome Sciences, is the first to the table, and he says, "I want to play this game." The croupier says, "Fine, Mr. Haseltine. You can play." Haseltine says, "How much will it be to ante up?" The croupier says, "For you, it will be $4 billion." Haseltine says, "Fine--who else will be playing?" The croupier says, "We do not know until they arrive." So Haseltine says, "OK. What products are we going to be playing with?" The croupier says, "We do not know until we see them." Haseltine asks, "How well will they work?" The croupier says, "No one knows that until the future." Haseltine replies, "What are the rules?" The croupier says, "The rules will be formed when people sit down." (Arthur 2003:48) Arthur could have just as well picked anything from biotechnology, (1) for example genetic databases. In this case Estonia could be considered a player in Arthur's high-technology casino, too. Estonia has set a legal background for genetic databases (2) and launched the Estonian Genome Project (EGP) in 2001. The EGP is creating a nation-wide health and DNA database of the Estonian population and will provide access to the database for the purpose of performing genetic studies of common diseases. In addition, however, the initiators of the project have declared as one of the objectives of the EGP to increase the international competitiveness of the Estonian economy. According to the mission statement of the EGP, the competitiveness is to be strengthened by development of medical, gene technology and research institutions' infrastructure, as well as investments in high technology, creation of new jobs, and the emergence of knowledge-intensive products and services in the stated fields. (3) However, the entire state budget of the Republic of Estonia for 2004 is less than $4 billion mentioned above by Arthur, and it is roughly one third of the Estonian GDP (estimated $15.2 billion in purchasing power parity in 2002 (4)). Moreover, to borrow from Arthur again, other players have also sat down at the gaming table: Iceland has deCode, (5) UK has initiated Biomedical Population Collection (now named The UK Biobank), (6) and Germany's independent science funding agency Deutsche Forschungsgemeinschaft has recently called for and endorsed founding such a database also in Germany. (7) Whatever one thinks of the EGP, it can hardly be denied that this is a scientific and technology-intensive project aimed at creating new knowledge. Thus, the economic benefits of the EGP should occur via innovation process; innovations, in turn, are arguably the major determinants of economic growth and development. (8) Thus, the question we try to answer is rather straightforward: under what circumstances can the EGP have positive impact on the Estonian economy? We propose to take a comprehensive approach and start--as the EGP does--from the competitiveness. Following OECD we define it as a capacity of an economy "to produce internationally competitive products and services (export), while at the same time maintaining or increasing the actual income of people." (9) (Tiits and Kattel 2003) In what follows, we will briefly sketch the theoretical background of what determines competitiveness (Part I). This will give us the necessary setting to look at, first, the technological and export performance of Estonian industry in the 1990s and real wage dynamics, and, second, to examine the EGP and its possible impact on the Estonian economy (Part II). …