Following the 25th Baltic Evening on Parliament Hill, at a roundtable discussion on investment and business opportunities in Estonia, Latvia and Lithuania it was evident that Estonia is a highly attractive country with which off-shore entrepreneurs should be familiar. Organized by Canada’s Ministry of Foreign Affairs and International Trade on May 23rd Ottawa, the forum reinforced Estonia’s reputation of a growth-oriented and technologically advanced location for entering the huge Baltic Sea area market.
Linking more than 120 million people, the Baltic Sea Region is considered one the fastest growing areas in Europe. (Canada’s Department of Foreign Affairs and International Trade, Market Research Centre [Dfait])
Presentations on behalf of the Baltic States were handled by their respective embassies in Ottawa. Charge d’affaires Sulev Roostar offered a comprehensive picture of Estonia’s drawing power:
* 4th in the world, behind Singapore, Hong Kong and Malaysia on the “openness for trade” index, 159.0% of total trade of gross domestic product; Lithuania and Latvia ranked 18th and 24th respectively. (Milken Institute, 2002)
* 2nd in Europe in investment incentives; with an index of 7.57 (on a scale of 0 - 10) Estonia’s attractiveness for foreign investors is ranked second to the Czech Republic (8.83); it’s ahead of Hungary (7.56), United Kingdom (6.69), Finland (6.21), Denmark (6.18). Russia is indexed at 3.50. (World Competitiveness Yearbook 2002)
* 21st in world competitiveness ranking; Estonia’s follows countries such as the USA (1st), Finland (2nd), Canada (8th), Germany (12th). Russia ranks 45th. (World Competitiveness Yearbook 2002)
* 4th in the world (with the USA and Ireland) in index of economic freedom rankings following Hong Kong (1st) and Singapore (2nd); the UK ranks 9th, Sweden 17th, Germany 20th, Russia 131th. (Wall Street Journal/The Heritage Foundation)
* 6th in Europe in adaptability to changes in the market; with an index of 6.08 (on a scale of 0 to 8, slow to quick); Finland (7.82), Sweden (7.57), Denmark (7.41), Hungary (6.74), and the UK (6.15). Germany (5.62), Russia (4.77) and Poland (3.27) follow. (World Competitiveness Yearbook 2002)
* There is no corporate income tax on reinvested earning with a flat 26% on dividends and individual incomes. (Ernst & Young)
* In 2000 Estonia ranked second in Central and Eastern Europe (CEE) in per capita foreign direct investment. (World Investment Report 2001)
* Estonia’s country credit rating arouses confidence: Fitch IBCA - A-, Standard & Poor - A-, Moody’s - Baa1. (Estonian Investment Agency)
* Estonian exports have grown from 1.4 to 3.7 billion EUR between 1996 to 2001. (Statistical Office of Estonia)
In the information and communications technologies (ICT) market, Estonia’s drawing power is equally significant. Dfait offers some considerable observations:
* ICT is the most developed in Estonia. It boasts one of the most modern telecom networks, with computer literacy and internet connections rates higher than many Western European countries. Topping the list of internet users, it has the highest number of computers per capita in Eastern and Central Europe (CEE).
* With close proximity to Finland, the Nordic “silicon valley”, Estonia got a jump start over Latvia and Lithuania, encouraging strategic investors early on to enter the telecom sector. In 1998 telecom services totalled $319 million (CDN). In 1999 Estonia spent 5.4% of its GDP on telecommunications, much of it wireless. Most European countries expended beween 2 and 3% in the same year.
* By July, 2001, Estonia had an installed capacity of 517,161 lines, representing a teledensity of 37.8%. The fibre-optic backbone system serves at least 16 major cities, with cables covering all of the country. Five fibre-optic cables link it to its neighbouring states.
* In June 2001, 45% of the population used cellular phones. This has risen considerably with 15,000 per month joining cellular networks.
* Expecting accession to the EU in 2003, Estonia has aligned its laws with EU directives.
* Government policies stimulated Internet use throughout the country; in fact access is a constitutional right (Dfait). In the Baltics, Estonia has the highest number of users. Half of all high schools are connected and 95% of all public schools. Fully 53% of home computers and 75% of all farmers are connected. A government and the private sector joint project’s goal is to have the highest per-capita Internet access penetration rate in the world by 2003, surpassing the current leader Finland.
* Identified as one of the most promising e-commerce destinations in CEE with an estimated annual turnover of $3.1 million (CDA). A third of Estonian Internet users regularly bank on-line.
* A paperless e-government initiative was launched in August 2000, making virtually all government business on-line. Government meetings are Webcast; unclassified documents are available on-line. There is draft legislation prepared for nationwide on-line voting in 2003.
In summary: a stable currency and balanced state budget, liberal foreign trade regulations whereby foreign investors have equal rights with domestic businesses (rights to purchase and own land, unrestricted profit repatriation), and an educated workforce with good language skills, resources of wood and oil-shale, a supply of low cost energy , an excellent transportation and telecommunications infrastucture, low taxes, and probability of EU accession make Estonia a “must see, must try” destination for entrepreneurs.
Estonian competitive edge should attract investors and trade partners
Arvamus
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