glec estonia

8/12/2019 GLEC Estonia

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Group E2 06-July-2009

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Estonia An Investor Guide

Contents

1. Introduction ...................................................................................................................................... 2

2. General economic scenario .............................................................................................................. 3

3. Industry overview ............................................................................................................................. 4

4. Financial Institutions ......................................................................................................................... 6

5. Labor Force ....................................................................................................................................... 7

6. Taxation System ................................................................................................................................ 8

7. Currency and Exchange Rate ............................................................................................................ 9

8. Capital Markets ................................................................................................................................. 9

9. Fiscal Conditions ............................................................................................................................. 10

10. Investments and Savings ................................................................................................................. 12

11. Monetary policy and Inflation......................................................................................................... 13

12. Government Debt ........................................................................................................................... 14

13. Money Supply and Interest Rates ................................................................................................... 15

14. Foreign Investments ....................................................................................................................... 16

15. Trade ............................................................................................................................................... 17

16. Balance of Payments Position ......................................................................................................... 18

17. Social Conditions ............................................................................................................................. 19

18. Political Conditions ......................................................................................................................... 20

19. Ease of Doing Business .................................................................................................................... 20

20. Conclusion ....................................................................................................................................... 21

Sources .................................................................................................................................................... 21


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1.Introduction

Estonia is probably one of the very few countries in the world that has lesser male population

than female population. There are roughly 85.4 men per 100 women1in the country. Estonia is a

member of the European Union (EU) and is ranked 12

th

of 162 countries in the Index ofEconomic Freedom 20082.

The Estonian economy was one of the fastest growing in the world until 2006. The growth rates

exceeded 10% annually. Its addition to the EU in 2004 had helped the countries economy to

grow even at a faster rate. The recent financial crisis has however taken a big hit on the Estonian

economy.

Tallinn is the financial centre of Estonia. For any investor, there are three things that attract

him/her to the country: low rate of taxes, educated workforce, and an un-bureaucratic and

investor-friendly government. The real growth for Estonia has come from the innovations in the

information technology sector. Estonia has led the growth in the Eastern European geography

right from the front.

However, the Estonian economy has also suffered from its own set of problems. Given the

current economic slowdown, there have been worries about rising unemployment, fears of

inflation, fall in wages and contraction of the Estonian export markets. The Q1 growth of GDP in

2009 has been -15.1%3

. The rapid increase of current account deficit and the rise in real incomecompared to the rise in productivity have become more severe problems for the economy.

Nevertheless, overall Estonia has enjoyed positive growth and development over the last decade.

The next few years pose an immense challenge for the country. Our study group paper on the

Estonian economy focuses primarily on the recent macroeconomic trends in Estonia, the state of

labor and capital markets, monetary conditions, fiscal conditions, capital and trade flows, major

trading partners, exchange rate movements, the output composition and the trade composition for

the country. In effect, the paper serves as an effective guidebook for any prospective investorcontemplating investing in Estonia.


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2.General economic scenario

Estonia has a modern market-based economy and one of

the highest per capita income levels in Central Europe.

Estonia pursues a free market, pro-business economy.

The GDP4 of Estonia for 2008 (based on Purchasing

Power Parity) was US $ 27.72 billion.

Estonia was able to sustain high growth rates - on

average 8% per year from 2003 to 2007. The economy benefitted from strong electronics and

telecommunications sectors. Its strong trade ties with Finland, Sweden, and Germany were

highly instrumental in driving up growth. However, inflation and current-account deficit has

increased, thereby putting a downward pressure on the country's currency (Kroon). Estonia's

economy has now fallen into recession, primarily due to the slump following the bursting of the

real estate market bubble.

Figure 2 Real GDP Growth in Estonia 1999-2010 compared to the EU

Subject to recent turmoil, the Estonian economy had continued to grow with splendid rates.

Estonian GDP grew with double speeds after appointment to the EU in 2004. The GDP grew by

7.9% in 2007. For 2009, it is expected that the increase in labor costs, rise of taxation, and also

growing prices of oil and food are expected to raise inflation to just above the 10% mark in the

year 2009. Estonias GDP contracted by 3.6% in 2008, and is further projected to contract by

10.3% in 2010.

Figure 1 Sector wise GDP Composition


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A study of growth accounting of the Baltic states outlines the contribution of various factors to

the overall GDP growth. The contribution of labor is negligible and the TFP growth can be

attributed to factors like technological advancements, increased investment, positive effect of

externalities and changes in production composition.

Country Annualgrowth of

GDP

Contributionof capital

Contributionof labor

Contributionof TFP

Estonia 0.051 0.031 -0.005 0.025

% contribution 62 -10 49

Latvia 0.058 0.029 0.003 0.026

% contribution 50 5 45

Lithuania 0.052 0.027 -0.006 0.031

% contribution 52 -12 60

Source: World Bank calculations

Table 1 Growth accounting results for the Baltic countries, 1996-2003(35)

Figure 3 Estonia: contribution of capital, labor and TFP to output growth(35)

3.Industry overview

Estonia has quite a diverse economy with equal importance to industry, transport, commerce and

different services. Immediately after independence, many of the industries were mainly sub

contractors for the Nordic countries due to their low wages. However, with the increase in

wages and the development of skills the importance of sub contracting has decreased. The

complexity of the goods being manufactured has also increased nowadays, electronic goods

like mobile phones manufacture are being subcontracted to Estonian firms. Important sectors are


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processing industry, transport, warehousing and communications, commerce, real estate and

business services. 2/3 of Estonias production is exported.

The share of agriculture in the gross domestic product has decreased from 15% to 3.3% during

19912000. Consequently, employment in agriculture decreased from 15% to 5.2%. Farming hasbecome privatized and is more efficient, partly explaining the drop in employment for the sector.

Mining industry makes 1% of the GDP. Mined commodities include oil shale, peat, and

industrial minerals, such as clays, limestone, sand and gravel. The Estonian economy survives

primarily on the Service Sector.

Estonia has large forested areas and the related industries are wide spread. Though a very small

part of the work force is employed in the forestry sector, they provide the raw material for

timber, paper and furniture industries which form about 8 % of the total production. Oil shale is

an important natural resource and has been used in various industries and also as a source of

electricity generation.

Estonia has a strong information technology sector, partly due to the Tiigrihpe project

undertaken in mid 1990s, and has been mentioned as the most "wired" country in Europe.

Telecommunications industry has grown fast since independence. High usage of mobile phones

and internet has led to increased services being provided through these mediums. The

government is also quite internet friendly with many services available online. Call centers ofvarious companies are present in Estonia.

The sewing and textile industry has grown out of being a destination of cheap labor, but faces

competition from cheap products from China, India and Turkey. Engineering products like

cables, computers, mobile phones, laboratory equipment etc are manufactured in Estonia. The

best growth is seen in capital and durable goods industries.

Transport and transit is an important service industry. Approximately 7.5% of the workforce is

employed in transportation and the sector contributes over 10% of GDP. However transit flow is

decreasing as Russia is using her own ports increasingly. Passenger shipping for tourism is a

highly competitive and profitable business. Tourism has been increasing every year since

Estonia joined the EU. Easier border crossing and abolishment of restrictions has helped in

this.(5)


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Figure 4 Volume Index of Industrial Production 2008-2009

Estonia, however, has a shortage of skilled labor. The industrial output of Estonia has declined

substantially since 2007, and the process was accelerated since the 3rd quarter of 2008 after the

housing sector meltdown in the US.

The main port, the power plants, the postal system, and the national lottery remain state-owned.

In January 2007, the government repurchased the 66 percent of shares of the Estonian Railway

(earlier privatized) to control key part of Estonia's national infrastructure.

4.Financial Institutions

Estonia has more than 50 financial institutions, including six commercial banks and 10 foreign

banks. Four major banks control 95% of the assets. The largest banks are Hansabank, SEB,

Nordea, and Sampo Bank, all of which are owned by Nordic concerns. The two Swedish banks

(Swedbank and SEB) control 70% of the market.

The government has no stake in local credit institutions. Foreign financial firms dominate the

insurance sector. It is easy for foreign investors to obtain credit freely. Private sector has access

to all credit instruments as offered by major banks in Scandinavian region. The banking system

has consolidated rapidly. At the end of 2008, total commercial banks assets was approximately

31 billion USD.6


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Strong presence of foreign (Nordic) banks has increased cross border credit dependence and

vulnerability to its reversals due to changes in parent banks risk assessment. It is highly exposed

to contagion effects of International financial markets.7

5.Labor Force

In 2007, Estonia had a total labor force of 687.4 thousand, of which 655 thousand were

employed. The unemployment rate had come down steadily in Estonia, and was below the

average EU unemployment rates.

Figure 5 Unemployment rates in Estonia

However, with the economic crisis that Estonia is going through, the exports and domestic

demand has declined significantly. This has led to the increase in unemployment rates in Estonia,

and April 2009 estimate is around ~14%.

Estonia provides unemployment insurance for its workers to help them during a search for new

job. The benefits last from 180 up to 360 days depending on the employment history. Also, the

benefits go down after the first 100 days of receiving it.

The country has minimum wages of 278 per month (4350 EEK), 390 when adjusted for PPP

and is on the lower side of the EU.

Estonia witnessed a very high real wage rate growth between 2006 and 2008, while the

productivity growth declined. However, with the economy slowing down, the rate of growth is

projected to come down significantly, and so is the productivity.


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Figure 6 Growth in Labor Productivity Vs Labor Cost

6.Taxation System

Income TaxEstonia is one of the few countries that have a flat income tax rate. The current

rate of personal income tax is 21%. Corporate income is not taxed until the distribution of profits

(dividends). An interesting fact here is that the corporate income tax form only 5% of total tax

collections.

Social Tax Companies also pay a 33% tax on their wage bills that count towards the state

health insurance and pension scheme. The tax forms the largest chunk of the total tax kitty,

contributing around 36% of it.

VAT The second largest contributor to the tax income. The standard rate is 18%. Social

services like healthcare, postal service, etc are exempted from VAT.

ExciseEstonia levies excise duty on fuel, tobacco, and alcohol. Fuel and alcohol levies are the

largest part of the total collection.

19.1%

5.0%

25.9%10.5%

3.2%

0.1%

36.2%

Personal income tax Corporate income tax VAT Excise duties

Local taxes Social contributions Other state taxes

Figure 7 Breakup of government tax revenues


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Since 1991, Estonia has had a series of privatization deals that have seen most formerly state-

owned ventures acquired by private investors.

Long term trends: The emerging markets monitor predicts the following for Estonias capital

markets9

Estonia is facing a hard landing scenario this year, with negative real GDP growth in

the second quarter likely to be replicated in Q3 and Q4. We have revised down our full-

year economic growth forecast to -1.1% with a mild improvement to 2.5% expected in

2009. Beyond then, we still believe that a marked recovery is likely in 2010, with growth

forecast to register at 4.7% and 5.5% in 2010 and 2011, respectively.

Currently, the recessionary effects of the global economy have taken a huge toll on the Estonian

Capital markets. Ott Ummelas of Bloomberg reports that the output has dropped 34.5% in themonth of June 2009. Global credit crunch has led to slump in domestic demand. The capital

markets of Estonia are therefore in a worst position with weak future outlooks.

9.Fiscal Conditions

An investment boom during 2000-2007, especially in real estate, led to overheating of the

economy. The liberalized capital account and currency board limited the policy makers options

to manage the pro cyclical capital flows. Wages also grew rapidly in this period reflecting labor

shortage and skill mismatch. These developments called for counter cyclical fiscal policies, but

in practice budgets have been pro cyclical, with government increasing its spending, and cutting

tax rates.

Estonia has plans to convert from Kroons to the Euro. For this, it has to maintain its fiscal deficit

below 3% of the GDP. The current government has already cut government spending by 4.6% of

the GDP and proposing more taxes and further cuts in spending to maintain the fiscal deficit

level to 3%. However, with the current recession it would be hard for the government to maintain

this level.


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Figure 9 Exports (% change, yoy)(24)

Figure 10 Imports (% change, yoy)(24)

Estonia has always adhered to balanced budget rule and has kept its public debts at very low

levels. This also signifies the fact that the country hasnt used enough counter cyclical role fiscal

policy can play. The approved budget of 2009, based on 2.8% GDP growth, may result in

restrictive measures to prevent much deviation from targeted balance. The growth has been over

driven by non tradable sectors such as construction and real estate. It was financed by large

capital inflows, increasing private debts and leading to current account imbalance. External

financing has been major source of capital in the form of variable interest rates and foreign

currency loans, adding to financial vulnerability. Pro-cyclical fiscal policy amplifies the cycle.

Table 2 Macroeconomic and Financial indicators in selected emerging market economies(7)

Sharp cuts in the government spending and raising taxes might be counterproductive amidst an

economic downturn. The Keynesian school of thought believes that deficit arising out of

spending to climb out of recession is good for the economy. The already declining domestic

consumption might be further hit by the proposed consumption tax, and might drive the economy

into deeper recession.


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Estonia had a huge current account deficit that peaked at 18% of the GDP in late 2007. This

sparked the fears of an overheated economy. However, with the recession, the deficit fell to 9-

10% of the GDP in 2008, and in Q1 of 2009 Estonia saw its first ever balanced current account

since 199310.

Though the exports have fallen off a cliff in Estonia, the current account deficit is contracting.

This partially because of the lower domestic demand and partially because of easing commodity

prices across the world. The declining inflation also helps in further reduction of the current

account deficit.

10. Investments and Savings

Radical economic reforms were undertaken in 1992 which put Estonia on the growth path. Even

while refusing an IMF loan, the subsidies for state owned enterprises were cut. A market

economy slowly came into place through such elimination of inefficiency. An open trade policy

was adopted which brought in foreign investment. Flat tax rates increased economic activity and

encouraged investment and savings.

Figure 11 Saving Rate

The overall national saving rate also declined rapidly in the 90s, but had started to increase again

in the early 2000s

11

. However, while the % investment by households grew, the gross savings ofhouseholds has steadily declined which has led to a large number of households being in debt12.


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Figure 12 Gross household saving rate

11. Monetary policy and Inflation

The Bank of Estonia is the independent central bank of the country, accountable only to the

parliament. It formulates the monetary policy, aiming at a low inflation rate and stable currency

and consumer prices. The monetary policy follows the framework of the currency board. The

Kroon is pegged to the Euro on a fixed exchange rate. The bank cannot issue money uncovered

by high quality foreign reserve currencies. The high level of reserves maintained help to

maintain credibility and low interest rates. The bank can not devalue the exchange rate of the

Kroon. These policies require the budget to be balanced. This mechanism has helped to control

Inflation as shown in the chart below.

Inflation saw an all time high in 2008 when it peaked at 10.4%. However, inflationary pressures

have eased since then mainly due to the economic recession. An IMF report projects the inflation

for 2009 to be around 0.8% and a negative inflation rate for 201013.

The increase in food and fuel prices contributed greatly to the sharp rise in inflation in

2007 and 2008. In 2007, international food and fuel prices increased by 15.2 and 10.4

percent, respectively. The effect intensified in 2008 with a surge of 23.4 and 40.1 percent

in world food and fuel prices.14

Made for Slovenia, these words also hold true for Estonia. However, a large part of the inflation

also came from the increasing inflow of capital into the country prior to the bursting of the

housing bubble in the US.


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Figure 13 Annual Inflation in Germany and Estonia

12. Government Debt

Estonia has always adhered to the balanced budget rule and has kept its public debts at very low

levels. This competitive advantage has been passed on to investors through the low and fixed tax

rates. The government debt level was only 4.8% of GDP at end of 2008the lowest in the EU.

The general government debt as a % of GDP is shown below for some of the EU nations.

Figure 14 Government Debt as a % of GDP


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The low debt has acted in Estonias favor in various agency ratings in comparison to its Baltic

neighbors. According to the Fitchs Credit Rating report of May 2009, only 2% of the countrys

external debt is sovereign owned. They further estimate that 58% of the private sectors external

debt is to foreign parents and hence has a lower risk than market debt.

Agency Previous New Outlook

Fitch's Credit Rating A- BBB+ Negative

Moody's A1 A1 Negative

S&P Currency Rating

(Foreign/Local)

A/A-1 A/A-1 Negative, but removed

from CreditWatch

Table 3 Agency ratings for Estonia (Source: Bloomberg)

13. Money Supply and Interest Rates

Because of the currency board arrangement, money supply is restricted to the foreign reserves

available at the fixed exchange rate. This makes it easier to anticipate the behavior of the central

bank and reduce uncertainty in the monetary policy.

Dec 2004 Dec 2005 Dec 2006 Dec 2007 Dec 2008

M0 16676.44 22174.716 28979.297 29443.212 37838.02

Cash issued 8895.053 10101.719 11763.153 11762.182 11996.322

Cash in circulation in the economy 7714.18 8747.105 10067.66 9873.863 10091.213

Vault cash of MFIs 1180.873 1354.614 1695.493 1888.319 1905.109

Eesti Pank's liabilities to credit institutions 7781.387 12072.997 17216.144 17681.03 25841.698

M1 42041.064 57364.319 72118.12 75793.325 67349.916

Cash in circulation in the economy 7714.18 8747.105 10067.66 9873.863 10091.213

Demand deposits 34326.884 48617.214 62050.46 65919.462 57258.703

o/w EEK deposits 28390.06 39852.245 51713.886 49997.548 45280.374

o/w foreign currency deposits 5936.824 8764.97 10336.574 15921.915 11978.328

M2 58184.352 82599.107 105898.054 120098.653 126645.774

M1 42041.064 57364.319 72118.12 75793.325 67349.916

Time and savings deposits 16143.288 25234.788 33779.934 44305.327 59295.859

o/w EEK deposits 13073.23 17178.324 22612.591 24927.898 37181.544

o/w foreign currency deposits 3070.058 8056.464 11167.343 19377.429 22114.315Table 4 Money supply of Estonia 2004 to 2008 (SourceBank of Estonia)

The interest rates are not set by the central bank, but are market determined. The most common

representations are the TALIBOR (Tallinn Interbank Offered Rate) and TALIBID (Tallinn

Interbank Bid Rate). These are average interest rates, calculated from the interbank interest rates


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of quoting banks. The interest rates have been fairly constant except during the Russian financial

crisis when the interest rate was increased to protect the home currency. Estonias monetary

conditions are affected by the changes in the European Central Bank rates which have a direct

effect on local interest rates.15

Figure 15 Inflation Vs Interest Rates (Data sourceBank of Estonia)

14. Foreign Investments

Estonia has a liberal policy for foreign trade and investments. Domestic and foreign investments

are treated equally.

FDI inflows have increased after its integration into European Union, due to tariff and non tariff

barriers. GDP growth rate has also attracted FDI inflows. However, there has been a huge drop

in the FDI in the first quarter of 2009. FDI totaled 2.6 Billion Kroons, as of end of first quarter of

2009. Approximately 30% of FDI is invested into financial intermediation, 30% in Real estate,

renting, and business activities, 14% in manufacturing, and 13% in wholesale and retail trade.

Scandinavian countries are the largest foreign direct investors in Estonia. Foreigners can invest

in all sectors and can own land (with some restrictions on land purchase exceeding 10 hectares).

Any licenses required for investment are reviewed without any discrimination or favoritism.

Most capital transactions are not subject to control and residents and non-residents may hold

foreign exchange accounts. It has started harmonizing its FDI rules as per EU standards

especially in sectors such as aviation and real estate.


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15. Trade

The Estonian Chamber of Commerce and Industry views the following factors to be the

Estonias major comparative advantages.16

Proximity to the Nordic markets

Location between Eastern and Western Europe

Competitive cost structure and high-skill labour force

Russias 1998 economic crisis affected the Baltic countries through financial and trade links.

Since then, the Baltic countries (Estonia, Latvia and Lithuania) have been steadily moving away

from Russia and towards other EU countries in exports and imports17. Estonia trades primarily

with countries within the EUFinland, Sweden, Latvia, Lithuania, Russia and Germany.

Exports include machinery and equipment (33%), wood and paper (15%), textiles (14%), food

products (8%), furniture (7%), and metals and chemical products. They import machinery and

equipment (33.5%), chemical products (11.6%) and textiles (10.3%).18The Baltic countries have

recently signed a treaty to establish an open and integrated regional electricity market among the

three Baltic States.19

Estonia had no tariff barriers till 2000 but introduced tariffs mainly on agricultural products.

These tariffs are not applied on imports from European Union and its major trading partners-

Russia, Ukraine (with whom it has signed free trade agreements).

Figure 16 Growth in Estonias imports and exports


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Under the current economic crisis, since the EU is expected to be under recession for the rest of

the year, Estonias exports are reducing. Along with the lower exports, domestic demand is also

decreasing. Hence, imports have also reduced drastically. The chart shows the trend in the trade

balance over the past couple of years.

Indicator (million

kroons)

Last Published

Survey Period

Value Change

compared to the

previous period,

%

Change compared to the

same period of the

previous year, %

Exports April 2009 7 697.7 -7.2 -37.6

Imports April 2009 9 455.6 -4.5 -40.6

Table 5 Estonias Export and Import data(22)

A working paper suggests that shocks from EU trading partners explain a significant part of the

variation in Estonias GDP17. Also, since Swedish banks are present in all the Baltic countries, a

spillover effect from other Baltic states or from Sweden is also expected to affect Estonia

severely as with the earlier Russian Crisis.

Figure 17 Trade balance values for Estonia(23)

16. Balance of Payments Position

Estonia is currently in a negative balance of payments situation. However, the Estonian

government expects that the trend will see a reversal in 2010.


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Estonia has been running large current account deficits due to insufficient domestic savings.

With private consumption falling and investment falling, it is easy to understand that increase in

government spending is not the solution.

The country has a positive outlook

for exports, which is driven by an

optimistic vision for exports. The

economy expects the domestic

demand to contract as a result of

recessionary effects. Estonia

therefore expects to consume less

and export more in the future. The

graph on the right clearly shows

how Estonia has managed to keep

in check the negative balance of

payments as a percentage of GDP.

Also, after the recession and the

cooling of world oil and food prices

in late 2008, the negative balance of

payments is expected to decline significantly.

17. Social Conditions

Education: Estonia has consistently invested around 5% of its GDP on education and that has a

marked effect. The country has the third highest adult literacy rate in at world, currently at over

99%.

Healthcare: Estonia has an aging population and with the death rate exceeding the birth rate,

the country faces a problem of declining population. However, it has also witnessed increasing

life expectancy. Estonia has compulsory health insurance for its citizens since 1992 that covers

more than 90% of its population. Estonia spends around 5% of its GDP on healthcare

expenditure and finances a lot of it from the social taxes collected by the government.

Figure 18 Balance of Payments15


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Pensions: Estonia provides to its elderly citizens an old age pension allowance. All citizens

above the age of 63 and who have worked in Estonia for at least 15 years are eligible to receive

the pension. Estonia spends around 6% of its GDP on the pension. However, in April 2009, the

government announced its plan to stop its pension contribution to control the rising fiscal deficit.

18. Political Conditions

Estonia became independent of Soviet rule in 1991. Immediately, a series of political,

institutional and economic reforms were put in place by the government putting the country on

the growth path. In 2004, Estonia joined the EU and NATO. This kind of rapid growth is in

contrast to a country like Georgia which gained independence around the same time, but had to

deal with civil war, poor economic reforms etc.20

Estonia has poor relations with Russia In 2005, Russia refused to ratify the border treaty.

Consequently, the economic effect has been on transit traffic through Estonia from Russia. In

contrast, Estonia has excellent relations with the Nordic countries with who it trades the most.

A coalition consisting of Estonian Reform Party, Social Democratic Party and Union of Pro

Patria and Res Publica came into power with reform party leader Andrus Ansip as Prime

Minister in 2007. However, the Social Democratic Party left the coalition in May 2009. Estonia

is currently under Minority rule and this unstable state cannot be lasting. Disagreements over

policy issues may lead to pre-term elections.21

19. Ease of Doing Business

Estonia was ranked 22nd out of 181 countries in the

Ease of Doing Business index by The World Bank

Group. Before joining the EU, Estonia adapted its

legislation and business procedures to conditions in

Western Europe. Since language was a hindrance is

doing business with the west, focus increased on

learning English. This massive reorientation through

20 years has created a business environment according to Western standards. Starting-up and

closing-down of companies in Estonia is affordable and simple. Compared to its neighboring


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European countries, hiring people in Estonia is a contractual agreement between employer and

employee. The presence of Trade unions is minimal.

20. Conclusion

Estonia is a country of political and economic stability, ease of access, low cost of doing

business and investor fairness. As a leader is applying modern IT solutions; communications

technology makes distances in Estonia irrelevant. Estonian taxes are low and simple, and labor

costs are 33% of those in Sweden or Finland. This gives the economy enough competition boost

to attract foreign investments. Foreign investors have played a crucial role in building the

Estonian economy. The following factors make Estonia an attractive destination for prospective

investors:

StabilityA member of the EU and NATO, it offers long term strength to its investors.

Closeness to the EU- Estonia is the link between Western and Eastern Europe.

Ease of doing business It takes average of seven days to start a business in Estonia, as

compared to world average of 38 days.

Low cost of Capital and taxes Low taxes, no corporate profit tax on re-invested

capital.

Investor Equality- Estonia has high investment and financial freedom, low corruption,strict laws for property rights and a transparent regulatory environment.

The current recession has taken a huge toll on the economy of the country, however in the long

run a generally favorable business environment is present.

Sources

1. UNdatahttp://data.un.org

2. Index of Economic Freedom -http://www.heritage.org/Index/

3. EuroStat -http://epp.eurostat.ec.europa.eu

4. Haver Analytics -Link

5. http://www.estonica.org/

6. http://www.state.gov/e/eeb/rls/othr/ics/2009/117859.htm
http://data.un.org/http://data.un.org/http://data.un.org/http://www.heritage.org/Index/http://www.heritage.org/Index/http://www.heritage.org/Index/http://epp.eurostat.ec.europa.eu/http://epp.eurostat.ec.europa.eu/http://epp.eurostat.ec.europa.eu/http://www.haver.com/http://www.haver.com/http://www.haver.com/http://www.estonica.org/http://www.estonica.org/http://www.state.gov/e/eeb/rls/othr/ics/2009/117859.htmhttp://www.state.gov/e/eeb/rls/othr/ics/2009/117859.htmhttp://www.state.gov/e/eeb/rls/othr/ics/2009/117859.htmhttp://www.estonica.org/http://www.haver.com/http://epp.eurostat.ec.europa.eu/http://www.heritage.org/Index/http://data.un.org/


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7. OECDLink

8. http://www.absoluteastronomy.com/topics/Economy_of_Estonia\

9. http://www.emergingmarketsmonitor.com

10.Forbes -Link

11.NationMaster [Link]

12.Household saving rate higher in the EU than in the USA despite lower income - Eurostat

13.IMF -Link

14.IMF Selected Issues - Republic of SloveniaLink

15.Bank of Estonia -http://www.bankofestonia.info/frontpage/en/

16.Estonian Chamber of Commerce and Industry -http://www.koda.ee/?id=2097

17.Decoupling from the East toward the West? -Link

18.WikipediaEstoniahttp://en.wikipedia.org/wiki/Estonia

19.Interconnection of Baltic Energy Markets -Link

20.Growing Apart? A Tale of Two Republics: Estonia and Georgia.Link

21.The Economist Intelligence UnitCountry outlook Estonia 2009 - 10

22.Estonia Statisticshttp://www.stat.ee/main-indicators

23.Eurostat - External and intra-European Union trade Monthly statistics Issue 6/2009

24.World BankEU10 ReportMay 2009[PDF]Link

25.IMFhttp://www.imf.org/external/pubs/ft/fandd/2000/09/weber.htm

26.http://www.balticsww.com/post/sharp-drop-for-estonian-fdi/

27.Heritage Foundationhttp://www.heritage.org/index/Country/Estonia

28.http://www.state.gov/e/eeb/rls/othr/ics/2009/117859.htm

29.http://www.oecd.org/document/46/0,3343,en_2649_33733_42585326_1_1_1_1,00.html

30.http://unpan1.un.org/intradoc/groups/public/documents/un/unpan023213.pdf

31.www.aaberg.ee/public/english/Taxes%20in%20Estonia%202009.doc

32.IMFhttp://www.imf.org/external/pubs/ft/survey/so/2009/car041509a.htm

33.http://www.baltic-course.com/eng/analytics/?doc=15160

34.CIA World FactbokEstonia -Link

35.World Bank EU-8 Quarterly Economic Report January 2005 Part III
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