The Estonian Economy and Foreign Direct Investments
Tallinn 19 April, 2007
Stefan Andersson
Enterprise Estonia
Estonia at a Glance
PopulationAreaLanguageCurrencyGDP per CapitaGDP GrowthExport
1.34 million45,000 km2
EstonianEUR 1 = EEK 15.6466 9 800 EUR11.4 % (2006)58 % of GDP (2006)
Population in the Baltic Sea Region
Denmark 5.4 million
Sweden 9.1
Finland 5.3
Norway 4.7
Germany* 6.3
Poland** 38.1
Estonia 1.3
Latvia 2.3
Lithuania 3.4
Russia*** 7.2
TOTAL 80-85 million
*Schlesw.-Hol, Meckl-VP, Hamburg
** Entire Poland
***St Petersburg, Kaliningrad, Len. oblast
Flight Connections flights/week flight hours
Helsinki 49 0.5Stockholm 32 1.0Vilnius 21 1.5Copenhagen 19 1.5Oslo 18 1.5Riga 16 1.0Prague 14 2.0Amsterdam 14 2.5London 13 3.0Frankfurt 12 2.5Berlin 9 2.0Warsaw 7 1.5Brussels 7 2.5Göteborg 61.5Palanga 5 1.0Hamburg 42.0Paris 4 3.0Vienna 4 1.5Moscow 3 1.5Barcelona 34.0Milan 3 3.0Kiev 3 2.0Dublin 2 3.5Dubrovnik 2 3.0Simferopol 2 3.0
Source: Tallinn Airport,Summer 2007 timetable
Map of Estonia
Stable Business Environment
EU and NATO Membership.
Low Tax Level.
Flexible Labour Market.
EURO-pegged Currency.
Balanced State Budget.
Equal Treatment of all Investors. Low State
Intervention.
GDP Growth Q4 2006
3,2
3,5
4,4
4,5
5,8
6,9
7
10,9
11,7
0 2 4 6 8 10 12 14
Hungary
Germany
Sweden
Finland
Czech Republic
Lithuania
Poland
ESTONIA
Latvia
%
Source: EUROSTAT
4,4
11,1
4,4
0,3
7,9
6,57,2
6,77,8
9,8
11,4
-5,0
0,0
5,0
10,0
15,0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-10
-5
0
5
10
15
20
25
30gdp growth
inflation
GDP Growth and Inflation 1996-2006
Source: Statistical Office of Estonia
Natural Resources
Timber: 2 mln ha, 48% of Estonia covered by forest Wood-processing industry closely connected to the
Scandinavian forestry companies
Energy Oil shale reserves 1,8 bln tons. Annual
production 14 mln tons. 80% for electricity production.
Average Gross Salary in Estonia, (EUR/Month)
0
200
400
600
800
1000
1200
2000 2001 2002 2003 2004 2005 2006f
All Industries
ManufacturingIndustry
FinancialIndustry
Source: Statistical Office of Estonia
Knowledge Intensive Jobs(% of all jobs)
24%
22.2%
22.8%
23.9%
24.7%
24.7%
26.4%
30.9%
0% 5% 10% 15% 20% 25% 30% 35%
Bulgaria
Slovenia
Czech Republic
Slovak Republic
Latvia
Lithuania
Hungary
ESTONIA
Source: European Commission
Taxes in Estonia
22%
22%
20%
18%
13%
0%
0% 5% 10% 15% 20% 25%
individual income tax
tax on dividends
social insurance
vat
health insurance
corporate income tax *
unemployment insurance 0.3 (employer) 0.6 (employee)
* no corporate income tax on reinvested earnings
Source: Enterprise Estonia
Corporate Income Tax Rates in Eastern Europe, 2007
0%
15%
15%
16%
16%
19%
19%
24%
24%
25%
0% 5% 10% 15% 20% 25% 30%
ESTONIA
Lithuania
Latvia
Romania
Hungary
Poland
Slovak Republic
Russia
Czech Republic
Slovenia
Source: Enterprise Estonia (www.worldwide-tax.com)
Corporate Income Tax Rates in Europe 2007
0%
24%
25%
26%
28%
33%
33%
38%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
ESTONIA
Denmark
Austria
Finland
Sweden
France
Italy
Germany
* no tax on reinvested profits
Source: Enterprise Estonia; WIR 2005
IT development in Estonia
• e-elections (local 2005, national 2007)• e-government project (august 2000)• e-tax board - income tax statements can be filled out via internet (spring 2001) • digital signature act came into force (december 2000)• 90% electronic transactions, 80% of the population using internet banking (end 2005)• e-billing (july 2000)• world´s first MPS project for society (may 3, 2000)• mobile parking (july 1, 2000)
Networked Readiness Index 2006 - 2007
1. Denmark
2. Sweden
3. Singapore
4. Finland
5. Switzerland
6. Netherlands
7. USA
8. Iceland
9. United Kingdom
10. Norway
16. Germany
20. Estonia
23. France
28. Portugal
30. Slovenia
32. Spain
39. Lithuania
42. Latvia
Source: World Economic Forum
internet users per 100 inhabitants 2005
15,19
25,95
29,71
35,67
38,97
44,65
45,35
49,97
51,92
52,55
62,88
63
75,46
0 10 20 30 40 50 60 70 80
Russia
Poland
Hungary
Lithuania
Norway
Latvia
Germany
Czech Republic
ESTONIA
Denmark
UK
Finland
Sweden
Source: International Telecommunication Union
mobile phone subscribers per 100 inhabitants 2005
75,7
81,13
83,62
92,3
93,31
95,78
99,66
100,71
102,16
102,9
108,75
115,22
127,1
0 20 40 60 80 100 120 140
Poland
Latvia
Russia
Hungary
Sweden
Germany
Finland
Denmark
UK
Norway
ESTONIA
Czech Republic
Lithuania
Source: International Telecommunication Union
Index of Economic Freedom
Rankings 20071. Hong Kong2. Singapore3. Australia4. United States5. New Zealand6. United Kingdom7. Ireland8. Luxembourg9. Switzerland10. Canada
11. Chile12. Estonia13. Denmark16. Finland21. Sweden22. Lithuania30. Norway31. Czech republic41. Latvia45. France60. Italy
Source: Wall Street Journal; The Heritage Foundation
Ease of Doing Business Ranking 2006
1. Singapore
2. New Zealand
3. USA
6. UK
7. Denmark
10. Ireland
11. Japan
13. Sweden
14. Finland
16. Lithuania
17. ESTONIA
21. Germany
24. Latvia
35. France
36. Slovakia
52. Czech Republic
61. Slovenia
66. Hungary
75. Poland
96. Russia
Source: World Bank Group
Growth Competitiveness Rankings 2006-2007
1. Switzerland2. Finland3. Sweden4. Denmark5. Singapore6. USA7. Japan8. Germany9. Netherlands
10. United Kingdom12. Norway18. France25. Estonia28. Spain29. Czech republic36. Latvia40. Lithuania41. Hungary48. Poland
Source: World Economic Forum
Corruption Perception Index 2006
1. Finland
1. Iceland
1. New Zealand
4. Denmark
5. Singapore
6. Sweden
7. Switzerland
8. Norway
16. German
18. France
20. USA
24. ESTONIA
28. Slovenia
41. Hungary
45. Italy
46. Czech Republic
46. Lithuania
49. Latvia
61. Poland
163. Haiti
Source: Transparency International
Capital Hospitality Index 2006
1. Denmark
2 - 3. Finland
2 - 3. Iceland
4. USA
5. UK
6. Singapore
7 - 8. Australia
7 - 8. ESTONIA
9. Ireland
14. Norway
16. Germany
18. Sweden
21. Japan
22. Latvia
29. Lithuania
31. Slovenia
32. Slovakia
33. Czech Republic
35. Poland
37. Hungary
Source: Forbes
Foreign Direct Investments (FDI)
Equal Rights with Local Businesses
Right to Purchase and Own Land*
Unrestricted Profit Repatriation
* Approval needed when acquiring more than
10 ha of land
FDI into Estonia 1997–2006
495,5
2348.5
838822.2
306.8
602.7424.7
284.3
515.9
236.1
0
500
1000
1500
2000
2500
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
EUR million
reinvested earnings
Source: Bank of Estonia
FDI Stock in Estonia, by country, as of 31 December 2006
Russia2,3%
Latvia1,9%
Netherlands2,7%
Denmark1,5%
Norway2,5%
Germany1,3%
UK3,1%
others12,1%
Finland21,2%
Sweden51,4%
total stock 12.39 billion EUR
Source: Bank of Estonia
FDI Stock in Estonia, by Activity, as of 31 December 2006
others3,8%
electricity, gas and water supply
2,0%
other community, social and personal
services8,3%
wholesale and retail trade8,0%
manufacturing14,0%
transport, storage and communication
5,2%
real estate, renting and business
activities13,2%
finance45,5%
total stock 12.39 billion EUR
Source: Bank of Estonia
regional distribution of fdi, end 2005
Tartu1,2%
Pärnu0,7%
Narva0,4%
Ida-Viru county0,4%
Lääne-Viru county1,2%
Harju county1,9%
others15,3%
Tallinn78,9%
Source: Bank of Estonia
fdi per capita, (stock, USD)
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
1995 2000 2001 2002 2003 2004
Sweden
Finland
Estonia
Hungary
Czech Republic
Latvia
Lithuania
Poland
Russia
Source: UNCTAD
Estonian Exports and Imports 1997 – 2006
Source: Statistical Office of Estonia,special trade method
2.6
3.9
2.9
4.3
2.8
3.93.4
4.63.7
4.8
3.6
5.04.0
5.7
4.7
6.2
8.27.6
10.3
0123456789
1011
EUR billion
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
exports imports
Estonian Exports by Country, 2006 January-June
Source: Statistical Office of Estonia,special trade method
Germany5,1%
Gibraltar4,6%
Lithuania4,8%
USA6,7%
Russia7,9%
China2,8%
Norway2,7%
Others26,1%
Latvia8,8%
Sweden12,0%
Finland18,5%
total: 7.6 bln EUR
Estonian Exports by Commodity Groups, 2006
textile products 5,0%
chermical products 4,0%
prepared foodstuffs 3,0%
plastics and plastic parts 3,0%
others 12,0%
agricultural products and food preparations
6,4%
micsellaneous manufactured articles
8,0%
metals and articles of metal 8,1%
wood and articles of wood 9,8%
mineral fuels 16,0%
machinery and appliances 23,6%
Source: Statistical Office of Estonia,special trade method
total: 7.6 bln EUR
Estonian Imports by Country, 2006
The Netherlands3,6%
Poland3,8%
Latvia5,6% Lithuania
6,2%
Sweden8,6%
Germany12,4%
Italy2,6%
Denamrk2,3% Others
23,2%
Russia13,4%
Finland18,3%
Source: Statistical Office of Estonia,special trade method
total: 10.3 mio EUR
Estonian Imports by Commodity Groups, 2006
articles of rubber and plastic4,9%
textile products5,3%
chemical products6,7%
agricultural products and food preparations
7,3%metals and articles of
metal9,7%
wood and articles of wood3,3%
others10,1%
transport equipment12,2%
mineral fuels14,9%
machinery and appliances
25,6%
Source: Statistical Office of Estonia,special trade method
total: 10.3 mio EUR
Industrial Structure
publishing, printing4,7%
non-metallic mineral products
5,2%
chemicals and chemical products
4,4%
rubber and plastic products
4,3%
others24,0%
textiles6,6%
furniture7,7%
metals and fabricated metal products
9,0%
wood and wood products16,4%
food products and beverages
17,7%
Source: Statistical Office of Estonia
Major Foreign Investors
Swedbank
SEB
TeliaSonera
Tele2
Elisa
Stora Enso
Hallberg-Sekrom
Autoliv
HK-Ruokatalo
Atria
Larvik Cell/Heinzel
Maersk
Borås Wäfveri
Tolaram Grupp
Severstaltrans
Citycon
Major Foreign Investors
– general and industry specific information about Estonia and its investment and business (subcontracting and trade) opportunities
– useful contacts with the public and private sector (utilities, law firms, consultants, recruitment, industrial real estate, …)
– legal matters (how to establish a company, visa and residence permit questions, etc)
– arrangement of company visits– assistance in finding industrial property