Baltics

I. Why the Baltic region?

The Baltic States - Estonia, Latvia and Lithuania - have been independent for little more than a decade. But in that short time, they have successfully transitioned to market economies and implemented economic and financial reform. The Baltic States also hold a strategic position in Europe. They are surrounded by other developing markets, and much of the population speaks the national language along with English and Russian, providing an important link between east and west. 

These countries are beautiful, very technologically advanced and open to US businesses. However, it is also true that these are very small countries and many firms approach them as a group. Recognizing that there are significant differences between the countries, companies never-the less pursue a regional strategy, with allowances made for the cultural and business differences.

All three countries have improved ties to the west through membership in the WTO, NATO and most recently, the European Union , making them excellent entry points both into the EU and into Russia and Eastern Europe. The economic development agencies of these countries are eager to help firms that want to establish a presence, offering benefits and assistance.

Though still developing, these countries are already leaders in economic growth among EU member countries. Latvia's 7.2% predicted rate of growth for 2005 is number one in the EU overall, followed by Lithuania at 6.4% and Estonia at 6%.

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II. Baltic States at a Glance

Though Estonia, Latvia and Lithuania are often grouped together as “The Baltic States”, they have diverse economies that demand individual attention.

Estonia:

If you have ever heard of the small country called Estonia, it was probably in connection with Estonia's recent accessions to the European Union and NATO. Estonia is an economic tiger that features some of the most liberal trade and investment laws in the world. The Wall Street Journal's Index of Economic Freedom for 2005 rates Estonia 4th in the world in terms of ease of doing business, right behind Hong Kong, Singapore and Luxembourg. Economists sing the praises of Estonia's low, flat tax system, which features a zero corporate tax rate on reinvested earnings.

But what many people don't know is that Estonia is also a hotbed of high-tech entrepreneurship. Ninety-three percent of the population are mobile phone users, fifty-two percent of the population use the Internet and the government has changed Cabinet meetings to paperless sessions using a web-based documentation system. If you are an active Internet user, you probably have heard about Kazaa and Skype. But it may surprise you to learn that both of these applications were developed by Estonians.

The Story behind Kazaa and Skype

Bluemoon Interactive, the Estonian company that designed FastTrack, the technology behind such file-sharing applications as Kazaa, is the biggest success story in the Estonian IT business. Kazaa' s birth was the joint effort of an Estonian and Swedish programming team. After achieving enormous success, the founders sold Kazaa to Sharman Network, which still offers Kazaa downloads. 

After selling Kazaa, the founders established a new company that created Skype, which enables users to make free telephone calls all over the world. The advantage of Skype compared to other similar programs is the purity of the sound quality, the living proof of which is the growing user base. Various info technology and telecommunication specialists predict that the free Internet phone created by the Estonian programmers could have serious impact on communication business. 

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Latvia:

 Latvia is located at the crossroads of northern and eastern Europe, a location that contributes to the country's economic success. Latvia is centrally located between the other Baltic States and the Nordic countries. Riga, Latvia's capital, is not only the transport hub of the Baltic States, but also the financial, commercial and cultural center. The economy boasts a highly skilled population and is focused on service industries (especially transportation and financial services) and light industry (wood and textile processing)

Latvia provides a good market base for the whole Baltic region, a well-functioning transit and logistics point for exports/imports from/to the East and a favorable manufacturing location. During recent years, Latvia has gone through profound domestic reforms and also ascended into the European Union, which has had a positive impact on the country's economic development.

Latvia's GDP has grown by approximately 6.1% annually since 1996. Some of the reasons for this impressive growth are the efficient export strategies of the Latvian enterprises and high domestic demand, both when it comes to private consumption and investment.

Ever since Latvia regained its independence, foreign direct investment has been a driving force for its economy. The neighboring countries in the Baltic Sea region, such as Sweden, Germany, Denmark, Finland, Norway and Estonia are the main investors, and make up 50% of the total FDI stock within fields such as finance, telecommunications and manufacturing. 

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Lithuania: 

Lithuania boasts one of the fastest growing economies in Europe, indeed the world, and its economic prowess earned the country the nickname, the "Baltic Tiger." In 2003 the GDP grew by 9.7%, and growth has continued at an impressive 6.7% pace in 2004. Some of the ingredients behind this success include one of the lowest corporate tax rates in Europe; a highly educated workforce; low cost of labor; high quality of life; and stable banking. Once known as the Soviet Silicon Valley, the country has world-class specialists in biotechnology, lasers, telecommunications and information technologies bringing leading-edge products and services to global markets.

Domestic consumption has been a driver of Lithuania's economic growth, as Lithuanians acquire an appetite for the Western goods they were denied under Soviet occupation. To continue to grow at such a spectacular pace, Lithuania is eager to increase exports and increase foreign investment. Having become a member of both NATO and the EU, Lithuania is establishing itself as a promoter of democracy and free market principles. The country sits on Europe's new border, with access to and experience in markets of the EU, Russia, Belarus, and Ukraine. Lithuania offers opportunities to establish a base for supply chains for U.S. companies planning to operate in Europe or points east.

Philip Morris, Masterfoods, Coca Cola, Kraft Foods, Ochoco Lumber are among other 600 U.S. companies which have chosen Lithuania in which to do business.

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III. Baltic States by Numbers

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IV. Best Prospect

• Estonia – Telecommunications, General Science and Technology, Maritime transportation services - Port Management
• Latvia - Telecommunications Equipment, Computers & Peripheral Equipment, Computer Services, Drugs/Pharmaceuticals, Sporting Goods/Recreational Eq., Forestry/Woodworking equipment,  Pollution Control Equipment
• Lithuania – Computer Equipment; Energy & Power Generation Equipment; Pollution Control Equipment/Environmental Services; Telecommunications Equipment and Services; Automotive Parts and Accessories; Construction Machinery/Building Materials; Safety and Security Equipment/Services

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V. EBRD – European Bank for Reconstruction and Development

The Baltic States are three out of 27 countries in the former Soviet bloc that are eligible for funds from the European Bank for Reconstruction and Development (EBRD). EBRD investment is aimed at projects that promote the transition to a market economy, encourage investment and increase sustainable development in central, eastern and southern Europe, as well as Russia, CIS and central Asia. The US is one of the largest contributors to the EBRD and US companies are eligible to bid for many EBRD-financed projects. Projects take place in the public and private sectors, with the majority of projects being in the private sector. 

Though not many US companies apply for public sector projects, the successful bid rate -approximately 1 in 3 has been holding steady for the past few years. This is a higher success rate than Germany and France. Small, private sector procurement opportunities are very attainable for US companies.

The US Commercial Service has a liaison office at the EBRD ("CS-EBRD"), based in London, United Kingdom, which assists US companies to work with the EBRD. For further information about services offered by CS-EBRD, please visit http://www.buyusa.gov/ebrd.

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VI. Trade events

Estonia: 15 June 2005 – “Best Practices for American Chambers of Commerce in an Expanded EU” – a conference co-sponsored by the U.S. Embassy in Tallinn and the American Chamber of Commerce in Estonia. For more information contact Economic Officer Kelly Adams-Smith, US Embassy Tallinn, 372-668-8107, adamssmithke@state.gov.

24-26 August 2005 - Science/Technology Parks And Business Incubators Fostering The Enterprise Internationalisation And Partnerships: www.tehnopol.ee

Lithuania:  Information on major trade fairs in Lithuania is available at: www.litexpo.lt 

Latvia:  A complete list of trade events in Latvia can be found at: http://www.biztradeshows.com/latvia/

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VII. Contact Us

Estonia:

• US Embassy: www.usemb.ee
• US Commercial Service: www.buyusa.gov/estonia
• Enterprise Estonia: www.investinestonia.com
• Ministry of Foreign Affaires of Estonia: www.vm.ee

 Latvia:

• US Embassy: http://www.usembassy.lv/ 
• US Commercial Service: http://www.buyusa.gov/baltics

Latvian Investment and Development Agency

Perses iela 2

Riga, LV 1442 Latvia

371-703 9420 tel

www.liaa.gov.lv 

American Chamber of Commerce

Torna 4

IIA-301

Riga, LV 1050 Latvia

371 721 2204 tel/fax

http://www.amcham.lv/

 Lithuania:

U.S. Embassy, Vilnius

Akmenu 6

2001 Vilnius, Lithuania

Contact: Mr. Jonas Vasilevicius, Commercial Specialist

Telephone: 370 5 2665500; Fax: 370 5 2665510

Email: vasileviciusj@state.gov

http://www.buyusa.gov/baltics/en/

http://www.buyusa.gov/poland/en/lithuania.html

http://www.usembassy.lt

Lithuanian Development Agency

Sv Jono str. 3, 2001 Vilnius, Lithuania;

Telephone: 370-5 2627438;

Fax: 370-5 2120160.

Homepage: http://www.lda.lt

 Sources:

• CIA World Factbook
• US Census Bureau
• Trade Stats Express
• Statistical Office of Estonia
• Statistics Lithuania
• Latvia Central Statistics Bureau
• Commercial Guide – European Bank for Reconstruction and Development 2005
• Country Commercial Guides

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VIII. Additional Information

Please see our companion publications for each of the three markets:

• Estonia - WebGuide
• Latvia WebGuide
• Lithuania WebGuide

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Contributors: Lindsay Jansen, Robert Peaslee, Jonas Vasilevicius, Louise Hardiman, Mary Delmege, Aldis Celms, Michigan District Export Council

Date Updated: March 27, 2007