Estonia
 Estonia
is the northernmost of the
three Baltic states and is
bordered by the Baltic Sea,
the Gulf of Finland, Latvia,
and Russia. Since regaining
its independence in 1991,
Estonia has become one of
Europe's most progressive and
open economies. This country
of 1.4 million people within
the last 11 years has created
a sound legal structure and
favorable environment to
attract foreign investment,
become a leader throughout
Europe in IT innovation and
penetration, and placed itself
at the forefront of EU
enlargement in 2004. By no
means are these small feats,
and Estonia's progress is
illustrated by its economic
growth. Over the last five
years, the Estonian economy
has steadily grown. Despite
the global economic slowdown
in 2001, Estonia's GDP grew by
a total of 5.4 percent. In the
second quarter of 2002, GDP
growth jumped 6.5 percent,
which was well above
projections. Although the
global economic slowdown is
expected to continue, the
medium and long-term outlook
for Estonia remains promising.
The key to
Estonia's success, thus far,
has been its approach of
providing an atmosphere
conducive to trade. Estonia
has one of the most liberal
foreign-trade regimes in
Europe. Most imports enter
duty-free, with the exception
of agricultural goods.
Nonagricultural goods are only
subject to a $20
customs-handling fee.
In 2001,
U.S. exports to Estonia
totaled $121 million, which
accounted for only 2 percent
of Estonia's total imports and
consisted mainly of electrical
machinery, boilers,
transmission/ recording
apparatuses for radio and
television, and medical and
surgical instruments. This is
a modest figure, but it is
likely to increase in the
coming years. Nevertheless,
U.S. companies face fierce
competition from neighboring
countries. Most of the
Scandinavian countries, along
with Germany and the other two
Baltic states, are major
suppliers of imports to
Estonia. Estonia has globally
integrated its market and
oriented itself towards the
West. This orientation has
generated significant import
and export activity as well as
a great deal of foreign
investment.
Foreign
direct investment (FDI) has
played a considerable role in
Estonia's development. In
2000, FDI in Estonia totaled
$2.84 billion, the majority of
which came from Sweden and
Finland. The United States is
the fourth-largest investor in
Estonia, contributing close to
$120 million in annually.
The current
level of investment can be
attributed to the government
of Estonia's highly favorable
attitude toward FDI. In 1991,
Estonia adopted its current
law on foreign investment. The
intent of this law is to
affirm the liberal treatment
of foreign investments in
Estonia and to provide
potential investors with
detailed information on
investing in Estonia. The
government has sought to
maintain liberal policies and
establish free trade
agreements in order to attract
investments that could produce
exports directed to the
European Union, Central and
Eastern Europe, and countries
of the former Soviet Union.
Estonia offers a number of
advantages to investors,
including its strategic
location and relatively low
corporate taxes.
Trade
between the United States and
Estonia has slowly grown over
the last decade, but there is
room for improvement. There
are many ways for U.S.
companies to benefit from
doing business in the Baltic
states, and there are several
sectors in the Estonian
economy that hold
opportunities for U.S. exports
and investment. These sectors
include telecommunications/IT,
maritime transportation
services and port management,
and mechanical engineering and
metalworking.
Telecommunications
is one of the fastest-growing
markets in Estonia. The
telecommunications and postal
services sector is virtually
open. The state sold its
shares in Eesti Telecom via an
open tender to a consortium of
Swedish and Finnish firms in
January 1999. The results of
these investments can be seen
today as Estonia tops the list
of Internet users, and has the
highest ratio of computers per
inhabitants in Central and
Eastern Europe. Connection
rates to the Internet are even
higher than those in some
countries in Western Europe.
Estonia has
become an international
transit center. Its location
is ideal for the creation of
efficient transportation links
and distribution chains for
goods and services for
European and other
international companies. The
Estonian transportation and
logistics sector consists of a
combination of transportation
services, transit trade,
distribution centers, and
value-added logistics. The
majority of transportation
income comes from
international transit and port
services. Estonia has captured
an increasing share of the
rapidly growing trade through
the Baltic Sea. Its three
major cargo ports--the Port of
Tallinn, the Port of Parnu,
and the Port of Kunda offer
easy navigational access, deep
waters, and good ice
conditions. Estonian ports
provide excellent
opportunities for value-added
logistics services and can
serve as distribution centers
for the Baltic Sea region.
Mechanical
engineering, metalworking, and
related equipment are leading
branches of the Estonian
economy. Following the
privatization of state-owned
firms, the majority of
engineering enterprises
successfully reoriented their
exports from the former Soviet
Union markets to European
markets. The main subsectors
of Estonia's engineering
industry are machinery and
industrial equipment;
shipbuilding and repair;
production of tools, dyes, and
molds; production of
agricultural, forestry, and
road building machines; car
components and metal goods.
The overall engineering sector
has the largest export volume
in Estonia; it accounts for 30
percent of the country's total
exports.
Please see our companion WebGuide
Estonia for further
information about Estonia.
Date Updated: March 27, 2007
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