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ESTONIA


 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 6,413 5,500 5,100 100
         
GNI per capita
 US $ 4,130 3,870 3,780 74
Ranking is given out of 208 nations - (data from the World Bank)

REPUBLICAN REFERENCE

Area (sq.km) 
45,227 

Population
1,423,316

Principal 
ethnic groups 
Estonians 63.9%
Russians 29%
Ukrainians 2.7%

Capital 
Tallinn

Currency 
Kroon

President 
Arnold Rüütel

  

Background:
After centuries of Swedish and Russian rule, Estonia attained independence in 1918. Forcibly incorporated into the USSR in 1940, it regained its freedom in 1991 with the collapse of the Soviet Union. Since the last Russian troops left in 1994, Estonia has been free to promote economic and political ties with Western Europe. 

Update No: 272 - (29/08/03)

EU referendum on September 14th
The common perception of things has been that Estonia's adhesion to the EU was a mere formality. Nobody would dispute its excellent credentials to belong to Europe. It adhered to the Reformation before any other European state in 1527 and has been a model of Nordic propriety ever since.
The very success of Estonia at this time since independence outside not only the USSR, but also the EU, is giving some Estonians second thoughts. The referendum on entry on September 14th is not quite such a foregone conclusion as one might have thought.
It is arguable that they have achieved all that they need from integration into Europe already without the drawbacks. Since independence they have done remarkably well. The Germans, their traditional allies, helped to set up the koruna, their new currency, in June 1992. They soon established a free trade regime second to none in the world. It was a question of a bonfire of controls. 
GDP leaped ahead at 5% rates of annual growth. The sagacity of the move to monetary independence was shown in 1998-99 when they were the one FSU state to survive the rouble crisis without much in the way of reverse.

The Centre Party opposes EU entry
The Centre Party, Estonia's largest opposition group, has urged the nation to vote against EU membership. They object strongly to the fact that the EU is requiring the Estonians to scrap a great deal of their free trade practices, adopted since 1991. It is as if they have to join a new USSR, which does not take account of their peculiarities. 
At their ninth congress the majority vote went against the pro-EU position.

Estonia will join
Somehow, symbolism matters, Estonia will almost certainly vote for EU entry, after all. It would be wise of Brussels for them not to regret it.

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AGRICULTURE

Estonian press article highlights debate on EU farm aid funds


The EU will deprive Estonian farmers of hundreds of millions of kroons next year if the government fails to reach agreement on the employment of more than a hundred officials to handle the subsidy funds, Eesti Paevaleht has reported. To hire new officials, an extra 20m kroons [US$1.4m] are needed. "For the Ministry of Agriculture, the biggest problem in the [2004] budget talks is the employment of new staff. This is what the debate is about," Maido Pajo, adviser to Agriculture Minister, Tiit Tammsaar and member of the People's Union board, said.
According to the adviser, European subsidies will double in 2004, which will make it possible to allocate 2.5bn kroons [US$181m] to agriculture next year. "We have agreements for EU funds, as well as the means to contribute to the projects on the Estonian side. But first, we have to guarantee the administrative capacity," Pajo said. He added that more specialists were inevitably needed to analyse and check claims for subsidies and to pay out export subsidies. This has also been highlighted by the European delegations that have visited the country.
The Estonian Farm Register and Information Department, PRIA, wants to employ an extra 142 staff. Pajo said that efficiency would then improve immediately, because instead of the present 5 per cent, 3 per cent of the subsidies would go on administrative costs.
Indrek Raudjalg, head of public relations at the Ministry of Finance, said that an optimal solution was needed. "On the one hand, we need to improve the administrative capacity. On the other hand, employing more officials does not go with the government's overall savings policy," he said.
Ivari Padar, chairman of the [opposition] Moderates Party and a former minister of agriculture, clearly sided with the Agriculture Minister in the debate. "This is a serious problem. Figuratively speaking, we face the danger of reaching the point where we will lose a billion kroons because of a couple of dozen million," Padar said. "No one gives money to agriculture and rural development just for good looks. Both Estonia and Europe want to know how the money will be used. Nothing doing - claims have to be checked," he added.
Toomas Hendrik Ilves, a former foreign minister, said that there was a fight between the countries for more EU funds. "If Latvian agriculture receives three times more money than Estonia next year, support may drop to zero," Ilves noted. He added that the government had not managed to handle the road construction funds this year. "Lithuania and Latvia are clearly ahead of us. Jolly good road building is going on over there right now," he added.
Padar said that the root of the problem was the planned tax reform, which would seriously reduce the country's revenue. "I have told them both as an individual and a farmer that they should run the country and stop playing stupid games," he remarked.

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FINANCIAL NEWS

Estonian unemployment drops to 5 per cent

In July, officially recorded unemployment dropped in Estonia by 1,501, down to 41,282 individuals, which accounts for 5 per cent of the country's population able to work. The Employment Department reported that unemployment had gone down by 3.5 per cent over a month and by nearly 9 per cent over a year Estonian Radio Fourth Programme has reported.
The unemployment rate continues to be highest in East Virumaa District [in northeast Estonia] where it runs at 10.5 per cent. 
In July, 18,220 individuals received unemployment benefit.

Estonia expects budget surplus, but lower economic growth

The Ministry of Finance forecasts a budget surplus of 424m kroons this year due to improved tax collection. At the same time, economic growth is forecast to slow down due to instability in the world economy. The Ministry of Finance sees the big current account deficit as a negative signal: it will exceed the expectations of the spring. The Ministry of Finance has produced a pre-accession economic programme for the European Commission, Estonian Television has reported. 
The Ministry of Finance forecast demonstrates that the Estonian economic growth has declined from the spring expectation of 4.8 per cent to 4.5 per cent. The reason given is that the expected stabilization in the world economy has failed to materialize. At the same time, the receipt of revenue for this year's state budget has improved due to improved tax collection.
Finance Minister Tonis Palts said: "We are likely to have a budget surplus this year. If the current political decision is firmly against a supplementary budget that means we will now stick to this." 
The forecast for next year's state-budget revenue has equally risen, amounting to 46.317bn kroons. At the same time, the considerable EU foreign aid section will have an impact. 
Palts said, in a comment on the negative aspect, that Estonia has so far been rebuked for its big current account deficit which, in line with the ministerial summer forecast, will amount to 12.7 per cent this year and is bigger than the spring forecast and bigger than last year's. Both the IMF and the European Commission have highlighted the big current account deficit.

Estonian premier cautiously accepts IMF budgetary recommendations

The IMF has in its report criticized the Estonian plan to cut income tax and bring in a baby-raising benefit. The government coalition's representatives, however, have been defending their plans, saying that, thanks to savings, next year's budget will be balanced, Estonian Radio has reported. Prime Minister Juhan Parts said that the government took IMF recommendations very seriously.
Parts said: "The mission drew our attention to potential, in my view potential, dangers, which is the duty of an IMF mission. We are currently drafting the budget, there is work in progress. We will, of course, look through all the IMF recommendations, as a unit. When I was talking to IMF people, it emerged as a possible package of recommendations, so to speak, and they did not envisage that everything would be implemented.
"The government, as things stand at the moment, can confirm that we do not intend to draw up a second supplementary budget, even though the current economic situation is likely to enable us to do so. What is positive over the IMF recommendations is that they, in principle, saw as right and proper the government's plan to reduce income tax, as reduced taxes help the poorer section of the population to improve its economic situation.
"A balanced budget is something we will definitely pursue in the 2004 budget. The budget surplus that the IMF recommended us to consider so as to provide additional signals to investors and financial markets is something that I would not rule out, but I think that Estonia is currently a country in transformation and we need to put a number of things in order.
"In this sense, we are in a special situation as we cannot postpone a great number of things, or they might start hampering our life. And so, we will consider the recommendations and try to take them into account over the budget as a whole, as much as possible."

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FOREIGN LOANS

PHARE approves 20 Estonian projects

The steering committee of the EU's PHARE program approved 20 Estonian projects costing €23.5m in Brussels, BNS reported recently. Estonia will have to provide some €8m to co-finance the projects. 
The aims of the projects include upgrading the infrastructure of the border with Russia, developing and implementing a state anti-drug strategy, increasing energy-efficiency investments of local governments, developing a hydrographic network, and establishing an electronic information system for structural funds. 
Earlier this year PHARE allocated €12.5m for other Estonian projects, and the government hopes that an additional €3.5m will be granted before the end of the year.

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TELECOMMUNICATIONS

Bids submitted for UMTS licence

All three mobile operators in Estonia - EMT, Radiolinja and Tele2 - have submitted bids for an UMTS licence, BNS News Agency has reported.
The country's communications department earlier sent the three companies proposals to buy UMTS licences without a tender for 70m kroons each. There are plans to offer a fourth UMTS licence in an open tender at a starting price of 70m kroons. 

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