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ESTONIA


 



In-depth Business Intelligence 

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)

Books on Estonia

REPUBLICAN REFERENCE

Area (sq.km) 
45,227 

Population
1,408,556

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

Capital 
Tallinn

Currency 
Kroon

President 
Arnold Rüütel

  

Update No: 288 - (01/01/05)

Staunch ally of the US 
Estonia must be one of the most pro-US countries in the world. This also helps make it pro-Israel.
As Bush pointed out in a presidential debate when John Kerry complained that the United States was going it alone in Iraq, there are 30 countries standing with the US in Iraq. Estonia is one of them. Actually, by the end of January they will be down to 27, but if each of those nations sent 5,000 additional troops, this would nearly double the foreign forces in Iraq, as Nicholas Kristof pointed out in the International Herald Tribune.
Not a very realistic idea, of course. Estonia, for instance, has armed forces with a grand total of only 4,000 troops. In his splendid office in the picturesque old quarter of Tallinn, Prime Minister Juhan Parts told Kristof how much Estonians treasure American support. So Kristof suggested that Estonia show its appreciation by sending, say, 1,000 more troops to Iraq. The prime minister looked stricken. "Estonia is small," he said, arguing that the 55 Estonian soldiers in Iraq isn't bad for a country the size of his. He added: "Concerning public opinion here, of course, nobody is for war - this is quite obvious - and 60 percent were not very much in favour of Estonian participation. We contributed as much as we can at this moment." End of mission. 
One has to respect the contributions of countries like Estonia, which has already had two soldiers killed and 15 injured. Major Sten Reimann, who recently returned from a posting in Iraq, said that each Estonian soldier wondered before going out on patrol each day, "What am I doing here?" His answer, he said, was that bringing security to Iraq is a worthy goal. Others Kristof interviewed offered a more troubling answer. A student put it like this: "It's like an investment for us." By this logic, Estonia invests troops in Iraq, and then the United States is morally bound to rescue Estonia if it gets in trouble with Russia. Triin Tael, who was out with her baby along the cobblestone streets of Tallinn, said that many Estonians considered the United States and Russia to be equally bad. But, she said, they want to cultivate ties with distant Washington to protect them from neighbouring Moscow. ."It is in our interest to be friendly to the U.S.," she said, "because we are hoping that the U.S. and NATO will protect us if Russia attacks." So, on the basis of those 55 soldiers in Iraq, the United States is now committed to using its full economic and military force to back Estonia? ."Yes," she said. "That's exactly what we think." 
The absurdity of all this is that the last thing that even Putin's authoritarian Russia would do is invade Estonia. But it is entirely natural that a country that was twice invaded by Russia and has 400,000 ethnic Russians, 29%of its population, living in its midst as a consequence should think otherwise.

Parts visits Tel Aviv
Another consequence of Estonia's pro-US policy is that it s pro-Israel. Prime Minister Ariel Sharon of Israel took a swipe at the European Union on November 30th, telling the visiting prime minister of Estonia that he hoped the Baltic country's recent accession to the group, along with those of nine other new members, would reduce what Israel sees as traditional EU bias toward the Palestinians. Speaking at a state ceremony to welcome Prime Minister Parts, Sharon praised Estonia's policies against anti-Semitism and its inauguration in January 2003 of an annual Holocaust remembrance day. Sharon said Israelis hope "that the accession of these new countries will positively affect Europe's position and will result in a more balanced approach by the European Union toward Israel."
The Estonian leader arrived November 29th for talks with Israeli officials on bilateral relations, trade and attempts to resolve the Arab-Israeli conflict. In a red-carpet ceremony at Sharon's office in Jerusalem, Parts said, "The Middle East peace effort is one of the greatest security policy priorities of our time." "I'm pleased to be here at such a pivotal time in this process," he said. Israeli and EU officials see a more pragmatic Palestinian leadership since the death last of Yasser Arafat and hope the chances for peacemaking will improve. 

Relations with the EU
If the cornerstone of Estonia's geopolitical stance these days is to be pro-American, the heart of its geo-economic policy is naturally its membership of the EU since May. The big question is whether and when to join the euro.
The euro is rising to record levels against the dollar, winning favour as a reserve currency in central banks of countries like Russia and China, and flexing its muscle in bond markets. Yet the currency, which has replaced marks, francs and other national currencies for 300 million Europeans since 2002, is not likely to reach the 75 million newest citizens of the European Union for several more years. When Poland, Hungary, the Czech Republic and seven other countries joined the Union in May, there was heady talk about advancing swiftly to the next step in European integration: the euro. Now that enthusiasm has cooled markedly. Several countries have pushed back their timetables for joining the monetary union until the end of the decade, while they struggle to clean up their debt-stained public finances. As the dates keep slipping, sceptics wonder how the 10 newest members will ever meet the economic preconditions for adopting the currency. 
The pessimism does not extend to all new members. Estonia, which already ties its currency to the euro and has spic-and-span public finances, plans to adopt the currency by the middle of this year. Under the terms of the Maastricht Treaty, members must bring budget deficits to below 3 percent of gross domestic product. Inflation and long-term interest rates must fall within certain ranges, and members' central banks must be free of political interference. 
Being a full-fledged member of the EU probably means living with the more sedate growth of the Union's mature economies. For all the doubts about the euro, that is a trade-off new members are still willing to make because the currency will give them an anchor they have not had since the Communist era. 

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ARMAMENTS

US offers financing for Estonia FMF programme

Estonia will receive about US$5m in 2005 in the framework of the US foreign military financing programme (FMF), the press secretary of the Estonian Defence Ministry told BNS recently, New Europe reported.
The money will go for the acquisition of up-to-date communication systems. Estonia received US$6m under the FMF programme in 2004, and purchased radios, night goggles and spare parts for military cross-country vehicles. Part of the money was spent for retraining of helicopter pilots and wages of new instructors at the Baltic Defence College. Estonia is going to procure new-generation GPRS systems and communication assets for its navy before year-end. Apart from that, Estonia received US$2.75m in support of its contingent in Iraq last year.

Estonia to buy 60 armoured vehicles from Finland

NATO member Estonia will buy 60 used Pasi armoured personnel carriers from Finland to update its military capabilities, officials said, Agence France Presse (ATP) reported.
"The purchase is part of the Estonian defence strategy, which foresees the development of our army as a member of NATO," Defence Ministry spokesman, Madis Mikko, said. The government made the purchasing decision while negotiations were still being finalised.
The cost of the deal is about 200m kroons (€12.7m, US$16.5m), Mikko said. The personnel carriers will be used for the transport of infantry units, wither in training at home or in international peacekeeping operations," Mikko said. The vehicles, which the Finnish defence forces have used in international missions, will arrive in Estonia in the course of next year. Estonia joined NATO in March, along with six other former communist countries.
The Estonian defence forces, which number 3,500, have participated in international peace support operations in Kosovo, Bosnia-Herzegovina, the Middle East, Afghanistan and Iraq. Since 2002, the Estonian defence expenditures have been set at 2 per cent of gross domestic product (GDP).

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CREDIT RATINGS

S&P's raises rating for Estonia

Standard & Poor's Ratings Services recently raised its long-term sovereign credit rating on Estonia to A from A- due to the country's robust economic growth prospects, the strength of its public finances and its growing chances of joining the European Economic and Monetary Union (EMU). At the same time, the short-term ratings on the country were raised to A1 from A2, with a stable outlook. "A track record of fiscal prudence and sustained robust growth make Estonia one of the most advanced candidates for membership of the EMU," said S&P's credit analyst, Eileen Zhang. S&P sees the government of Estonia achieving a broadly balanced economy underpinning a gradual reduction in the current account deficit.

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TELECOMMUNICATIONS

Major changes coming for Estonia mobile phone market

Estonia's mobile telecommunication industry welcomed the arrival of a new player with the official launch of Bravocom on November 1st last year, New Europe reported. 
While it can't possibly hope to compete with market leaders EMT and Tele2, Bravocom is aiming to win a share of this lucrative market by offering fixed contract options that will see customers paying only for the services they use. It took Bravocom some 100m kroons (€6.4m) to launch operations.
The Tallinn-based, Estonian-owned company rents its network towers from Radiolinja mobile telecommunication company but issues its own SIM-cards and phone numbers, and has its own customer support operations. Unlike the other major players in Estonia, Bravocom does not sell mobile phones, although it may consider doing so in the future. At the moment the company offers a prepaid GSM card and a contract service under one trademark. Bravocom's arrival on the scene comes just two months before another major change is due to drastically shake up the telecommunication market. As of next year, Estonian mobile phone users will be able to change phone operators while keeping their old numbers, something that could radically alter what is presently a cosy state of affairs. "Despite the fact that from the beginning of the new year clients will be able to change their operators without changing their numbers, we believe there is still a certain demand for new and simple numbers," said Peep Poldsamm, Bravocom's CEO.
According to Poldsamm, Estonia may witness over a dozen new virtual and service mobile telecommunication operators in the near future. The Finnish service operator Saunalahti has recently found a network solution that allows it to operate in both Finland and Estonia, greatly boosting its sale of prepaid GSM-cards.
Before November 1st last year there were three operators covering the Estonian market of over 900,000 mobile phone users. Judging by the number of SIM cards that have been issued, the largest one, EMT, had up to a 47% market share while Tele2 and Radiolinja had about a 37% and 16% market share respectively, according to EMT.
A spokesperson for EMT, however, said that the company was not worried about the new operator's appearance, as it was neither offering new services nor attempting to win over new clients with drastically low prices. Bravocom is offering about 10,000 original numbers starting with the digits 545. The company is also offering fixed contracts that ensure clients only have to pay for whatever services they use without the additional cost of line rental. In neighbouring Finland, some one million people, or 25% of cell phone users, reportedly changed their operators as a result of the introduction, which will soon be introduced in Estonia.
Analysts predicted that up to 180,000 Estonian residents would change their mobile network operator at the beginning of 2005. All four operators in the country said that they hope to lure new clients during the network change, and everyone accepts that a price war will continue for some time. Meanwhile, the three established operators recently introduced special contract options for business clients that have seen call costs cut by several times the regular price.
Analysts are also estimating that Estonia's mobile telecommunication company profit margins will fall over the next few years due to the increase in competition. One such example of this trend can be seen with market leader EMT's ARPU (average revenue per user) rate, which has decreased from 423 kroons (€27) to 378 kroons since last September. Needless to say, all of this will come as music to the ears of Estonia's ardent mobile phone users.

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