Why Estonia

Why Estonia?

www.investinestonia.com

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stonia is a country located at the heart of the Baltic Sea region – Europe´s fastest growing market of more than 90 million people.

An excellent business environment and liberal economic policy, moderate costs and the business friendly culture have already attracted numerous international companies to Estonia.

Estonia at a glance Estonia has been ranked 13th in the Index of Economic Freedom (2009, Wall Street Journal/ The Heritage Foundation), 22nd in the Ease of Doing Business Report (2009, World Bank), and 32nd in the Global Competitiveness Report (2009, World Economic Forum).

In Estonia, all capital is treated equally, foreign or domestic.

Estonia is a member of the International Center for the Settlement of Investment Disputes, the Multilateral Investment Guarantee Agency, and the New York Convention.

Estonia has the highest credit ratings among the Baltic countries (Fitch IBCA, Standard & Poor´s, Moody´s).

Estonia is the leading country in Central and Eastern Europe in terms of attracting foreign direct investments.

Estonian currency, the kroon is pegged to the Euro at 1 EUR = 15.65 EEK.

Estonia is one of the leading countries in the world in creating and implementing e-government solutions and cyber security.

0% corporate income tax is imposed on all reinvested earnings in Estonia.

The Estonian cost level is still significantly lower than that of neighbouring Scandinavian countries.

Estonia is within 3 hours flight from most major European, Scandinavian and Russian cities.

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Estonian economic policy is relatively flexible, and the business environment is open. It is worth noting that the government sector has not hindered economic development and has found possibilities for promoting the business environment. We trust that the favourable business environment will persist, in any case the indicators of economic freedom remain high. We certainly appreciate our advantageous economic-geographic position and the proximity of relevant markets. So far the opportunities for extending production have been good here as well.

The Estonian labour market, in its present state, provides ample options for employers, enabling them to react to changes immediately. The Estonian workforce is well qualified, and the know-how of young specialists is continually front-ranking. Admittedly, in the Baltic Sea region, Estonia has a certain cost advantage when it comes to labour. Furthermore, Estonia is certainly a developed e-country, which makes it possible to save considerably on resources.

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BO HENRIKSSON CEO of ABB Estonia Estonian Company of the Year 2008 Estonian Foreign Investor of the Year 2008

While the sea winds often storm in Estonia the economy is solid as a rock

Stability T

economic times. Also, the banking system provides a robust structure over business cycles. The leading Estonian banks are owned by banks domiciled in the Nordic countries.

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ince 2004, Estonia has been a member of the European Union (EU) and NATO. Being part of these organisations, Estonia can offer stability to its investors, even long-term. Importantly, a vast majority of the Estonian people supported the membership of these two international organisations. Due to its history, Estonia’s political relations with neighbouring Russia have been more complicated, but business relations have stayed strong.

he stability of the Estonian economy dates back to 1992 when the country, after regaining independence, decided to peg its currency to the German mark. From those days on, the country’s economic development has been significant, but the currency’s exchange rate has stayed the same, now pegged to the Euro. Estonia will introduce the Euro as legal tender as soon as possible, which will further enhance the country’s trade and tourism. corner-stone of Estonian stability is the balanced budget policy, pursued persistently over the years by various governments. This has given Estonia a national debt which is among the lowest in Europe, and enables appropriate fiscal reactions even in turbulent

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ommunications technology makes distances insignificant in Estonia. The country has been a front-runner in applying modern IT-solutions wherever possible. From registering a company to submitting its annual report, the Estonian entrepreneur corresponds with public institutions using eand m-services. Entrepreneurs can easily find partners for cooperation, and even ministers and other decisionmakers are conveniently accessible to the public.

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istances are short in Estonia, also from a logistical point of view. The country’s business life is concentrated around the capital of Tallinn, where more

Closeness

than half of the country’s GDP is produced. And operating one’s business from Tallinn means being within a 30 minute drive from the international airport. But even Estonia’s most remote parts are no farther away than a couple of hours’ travel from the capital, and mobile internet is available in the farthest corners of the country.

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he vicinity of major Northern European cities such as Stockholm, Helsinki and St. Petersburg, means a lot for the internationalization of Estonia, and particularly Tallinn. This can clearly be seen in tourism — seven million passangers travel through Tallinn’s seaport every year. The favourable location also helps entering into cross-border business relationships.

Estonia is the link between Western and Eastern Europe.

Estonia is rich in wildlife but even richer in internet connections

Estonians are known as hard-working and humble employees.

Ease of doing business S I T

ince our independence in 1991, Estonian business life has largely reoriented from the east to the west. Long before joining the EU, Estonia adapted its legislation and business procedures to conditions in Western Europe.

Businesses introduced Western accounting systems, gained Western quality certificates and, most importantly, Western business contacts. Focus increased on learning English and other European languages. This massive reorientation during almost 20 years has created a business environment according to Western standards.

n line with a generally liberal view on economics, the start-up and close-down of companies in Estonia is cheap and simple.

Compared to its neighbouring Nordic countries, the hiring and laying off of people in Estonia is regarded more as an open market agreement between employer and employee.

Trade unions generally intervene only regarding the level of minimum wages.

he business culture of a country is obviously also determined by a number of subtle and less tangible aspects.

Estonians are known to be quite formal in their business relations, for example, agreed times are held and payment terms and other contracts are honored. The entrepreneurial and working spirit is considered to be strong, sometimes at the expense of social skills. Business meetings tend to be formal and not personal.

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he Estonian cost level is gradually converging with the surrounding EU, but still, there are meaningful differences. On average, Estonian wages are about a third of those in Sweden or Finland, but maybe more importantly, wages are very market sensitive. Therefore, the spread between high and low income earners is substantially wider in Estonia than in the neighbouring Nordic countries.

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stonian taxes are low and simple. There is a general flat income tax (currently 21 percent) which applies to private individuals’ earnings whether out

Low cost of doing business

of work or capital. There is no corporate profit tax, instead the flat 21 percent tax is withheld when profits are distributed, e.g. as dividends, to the owners of the company. Social fees are levied at a rate of 33 percent of gross wages, but sick- and maternity leave costs are covered by the state. Estonia’s value-added tax rate is 18%.

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ffice rents, utilities and costs of various auxiliary services to businesses in Estonia are priced somewhat lower than in Scandinavia. Electricity is sold by a state monopoly and Estonia is self-sufficient in electricity. Gas is imported from Russia at EU-prices, and water- and sewage costs are determined by local municipalities.

The Competition Authority supervises the pricing of all public utilities.

Many new buildings here are reaching for the sky.

Luckily, the taxes are not.

German

Russian

American

Swedish

Estonian

Finnish

Latvian

Lithuanian

All investors are treated equally in Estonia.

Country of foreign investors F T U

oreign investors have played a decisive role in building the Estonian economy of today.

As a small country, Estonia has been bound to abstain from protectionism and barriers. Instead, the country has opened itself up to investors and trading partners of all nationalities.

Long before Estonia joined the EU and the WTO, the country had steered its course towards open borders for goods, services, people and capital. Today it has become a venue for foreign investors from different countries. Here they find new contacts and cooperation opportunities.

oday foreign companies dominate several sectors of the Estonian economy.

Banking and telecommunications are dominated by the leading Nordic players, but also e.g. the food- and electronics industries rely heavily on foreign capital. In relation to its size, Estonia has long been a leading Eastern European country in attracting foreign direct investments.

The foreign impact is also demonstrated by an export share of more than half of the country’s GDP.

nlike many other Eastern European countries, Estonia has not based its attraction of foreign investments on specially designed government support schemes. Instead, the country has held firm to the principle of equal treatment of all investors, irrespective of their origin. For instance, EU-financing is available on equal terms to foreign- and domestically owned companies. In the long run, a generally favourable business environment is believed to be more constructive to the economy, than politically targeted short-term incentives.

Estonian Investment and Trade Agency T

he Estonian Investment and Trade Agency (EITA) is organised as a division within Enterprise Estonia, the country´s largest support institution for business and entrepreneurship. We offer information and services to potential new and existing investors and trading partners. Our goal is to make Estonia the preferred partner in international business, for companies seeking new competencies in order to be more successful in their global markets.

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ur objectives are to ensure a competitive business environment in Estonia, to raise the profile of Estonia, and to develop business relationships with international companies.

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ITA is headquartered in Tallinn and has offices in the United Kingdom, Finland, Sweden, Germany, United States, China, Japan, Ukraine and Russia.

EITA services All information and services provided by the Estonian Investment and Trade Agency are free of charge to all qualified clients.

We provide prospective investors and trading partners with information and services at every stage of the decision process: General information inquiries Investment tours of Estonia Detailed investment proposals Identifying potential partners Identifying suitable properties Organising recruitment Advice on financing Negotiations with authorities Identiftying sourcing opportunties Please contact us at invest@eas.ee or trade@eas.ee for more information.

EITA Tallinn team Enterprise Estonia, Liivalaia 13/15, Tallinn, 10118 Telephone: +372 627 9700 Starting from 1.08.2009 we have new address!

Lasnamäe 2, 11412 Tallinn.

Phone numbers will remain the same.

EITA Global team Marketing – REET TRUUTS/RISTO HANSEN E-mail: reet.truuts@eas.ee/risto.hansen@eas.ee Telephone: +372 627 9442/+372 627 9345

Investment information and services – MARJU MIHKELSOO

Global offices – KRISTA HUMAL

E-mail: invest@eas.ee/trade@eas.ee Telephone: +372 627 9524

E-mail: krista.humal@eas.ee Telephone: +372 627 9369

Aftercare services – ELE-MERIKE PÄRTEL

Executive assistant – KRISTA MIHKELSAAR

E-mail: ele-merike.partel@eas.ee Telephone: +372 627 9526

E-mail: krista.mihkelsaar@eas.ee Telephone: +372 627 9409

Trade services – SVEN VALLISTE/TRIIN MÜÜRISEPP

Director – GERT STAHL

E-mail: sven.valliste@eas.ee/triin.myyrisepp@eas.ee Telephone: +372 627 9448/+372 627 9334

E-mail: gert.stahl@eas.ee Telephone: +372 627 9409

London – TIINA-MARIA VÄRAVAS

Hamburg – RIINA LEMINSKY

Tokyo – KOSAKU YAMAGUCHI

Trafalgar House 11 Waterloo Place, London, SW1Y 4AU, United Kingdom E-mail: tiina.varavas@eas.ee Telephone: +44 207 863 8865 Mobile: +44 754 527 1963

Mönckebergstr. 5, Hamburg, 20095, Germany E-mail: riina.leminsky@eas.ee Telephone: +49 40 3038 7899 Mobile: +49 162 934 5682

Shinjuku Park Tower 32F, 3-7-1, Nishi-Shinjuku, Tokyo, 163-1032, Japan E-mail: yamaguchi@estonia.or.jp Telephone: +81 50 5539 6001 Mobile: +81 90 9826 7757

Helsinki – VALDAR LIIVE

Sunnyvale – ANDRUS VIIRG

Kyiv – DENIS PRIIMÄGI

Mariankatu 8B, Helsinki, 00170, Finland E-mail: valdar.liive@eas.ee Telephone: +358 (0)9 2289 0444 Mobile: +358 40 830 4656

Plug and Play Tech Center 440 N. Wolfe Rd, Sunnyvale, California, 94085, USA E-mail: andrus.viirg@eas.ee Mobile: +1 415 335 3843 (US) Mobile: +372 503 5405 (EU)

Bankova st 1/10, Office 13, Kyiv, 01024, Ukraine E-mail: denis.priimagi@eas.ee Telephone: +38 044 361 6639 Mobile: +38 050 311 0123 (UA) Mobile: +372 505 9699 (EU)

Stockholm – KRISTER KALDA

Shanghai – VALLE FELDMANN

St. Petersburg – TOOMAS KÄSTIK

Estonian House Wallingatan 32, 2TR, Stockholm, 111 24, Sweden E-mail: krister.kalda@eas.ee Telephone: +46 8 23 6018 Mobile: +46 76 11 55 777

Unit 4906-50, Raffles City (Office Tower), 268 Xi Zang Middle Road Shangai, 200001, P.R. China E-mail: valle.feldmann@eas.ee Telephone: +86 21 6340 47 58 Mobile: +86 1370 1873 699 (CN) Mobile: +372 5058 285 (EU)

7. Linija V.O. 76, Room 519, St.Petersburg, RU 199178, Russia E-mail: toomas.kastik@eas.ee Telephone: +7 812 332 62 00 Mobile: +7 921 790 67 40

ESTONIAN INVESTMENT AND TRADE AGENCY www.investinestonia.com