Estonia – an attractive investment location in Northern Europe

Estonia may be a small country – but it has a great deal to offer the inward investor or international businessperson. Located at the heart of the Baltic Sea Region – Europe’s fastest-growing market, with 90 million people – Estonia itself has been one of the fastest-growing economies in the region.

The country has some of the most liberal trade and investment laws in the world – the Wall Street Journal’s Index of Economic Freedom for 2001 rates Estonia 4th in the world in terms of ease of doing business, right behind Hong Kong and Singapore and on par with USA and Ireland. An extra advantage is Estonia’s system of low, flat rate taxes. To encourage companies to expand their business all corporate investments are exempted of corporate income tax from Jan 1, 2000. There is a 26% tax on dividends.

Foreign investment has played a key role in the Estonian economic success. The result has been a huge inflow of foreign direct investment – the per capita figure, over US$2039 per capita, is considerably higher than the regional average.

The proximity to the Scandinavian countries, well-known for their technological and telecommunication innovations, has had a positive effect on Estonia, leaving the country the most advanced in terms of telecommunications infrastructure in CE Europe with a penetration rate of mobile telephones on a par with Germany. Estonia also leads the way among the Baltic States in Internet usage and today an amazing 35% of the population is using the Internet in one way or other.

Opportunities for new economy

In addition to the opportunities in the traditional manufacturing sector, excellent infrastructure and skilled adaptable workforce create a good base for the knowledge-based economy. As a small country with a well-educated population that is willing to adopt new technologies, Estonia represents an excellent test market for all new technologies. The availability of modern infrastructure and cost effective services is an advantage. There are many examples already at hand.

Modern banking systems and widespread Internet usage have placed Estonian banks at the forefront of the electronic and Internet banking services in the world. Today about 25% of Estonians use Internet banking – a penetration that is on par with respective numbers in Scandinavia. E-Tax Board introduced with the aim of providing an opportunity to fill in tax statements via the Internet and a mobile parking project where mobile phone services are used for paying for parking.

Estonia also boasts a solid foundation in biotechnology. The country has excellent traditions in molecular biology and genetics, and there is currently a boom in interest in the life sciences among students. Generous funding from both the Government and private sector has provided state-of-the-art equipment, helping to attract talent and create a more fertile research environment.

Estonia has even greater plans for foreign venture capital, hoping that outside investors will play a leading role in establishing its centralised gene and health database-the Estonian Genome Project (www.genomics.ee). The estimated budget for the collection of genotyping and health information is $150 million over five years; although the current government has pledged to chip in, the vast majority will have to come from external sources. The scientific vision behind the database is to identify disease-related genes and to provide information about disease management.

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AUTHOR BIOGRAPHY

Andrus Viirg,