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ESTONIA


 



In-depth Business Intelligence 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 8,383 6,413 5,500 95
         
GNI per capita
 US $ 3,870 4,130 3,870 72
Ranking is given out of 208 nations - (data from the World Bank)

Books on Estonia

REPUBLICAN REFERENCE

Area (sq.km) 
45,226 

Population
1,341,664

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

Capital 
Tallinn

Currency 
Kroon

President 
Arnold Rüütel


Update No: 289 - (27/01/05)

Freak weather bears out global warming thesis
Russian bears are meant to hibernate in winter and wake up in March. But the weather has been so mild this year that a black bear in St Petersburg zoo has not gone to sleep at all, and a brown bear has already woken up believing it is spring. 
It's the same story in Estonia, the Czech Republic and Slovakia, where hunters report that one of the warmest winters ever recorded has woken bears several months early. The polar bears of the Arctic, where unusual extremes of temperature have become commonplace, are having to live with reductions in sea ice, which makes it difficult to hunt seals - a phenomenon that, expert say, could lead to their extinction. 
According to climatologists in Scandinavia, Russia, Estonia and Iceland, record or well above average temperatures are being recorded across a great swathe of Scandinavia and northern Europe as balmy winds linked to the same Atlantic storm that brought gale-force winds and flooding this week to Scotland, blow in from the west. "Temperatures have been 8-9C (46-49F) higher than normal," said Roman Vilfant, head of Russia's Gidromettsentr weather monitoring centre. "The first 10 days of January have been very warm indeed. Usually air temperatures begin rising above zero after March 27. 
"This temperature is characteristic of the first days of April," said Tatyana Pozdnyakova of the Moscow weather bureau. "The warmth this year may be an effect of global warming. Climatic change chiefly affects winters," she said. "It's way warmer than usual in Scandinavia and Eurasia, very mild", said Pal Prestrud, director of the Norwegian government's centre for climate research. "Here in Oslo, the average temperature at this time of year is -4C, but it is close to 3C." 
"The winter here is above average, too", said Haddor Bjornsson, a climatologist with the Icelandic government's meteorological office. "We are seeing an overall warming. October 2004 was the only month in the last 30 which has been below the average temperature." 
In Estonia, where the average January temperature is -5C, they have been touching 7C. The warm spell is dramatically affecting life in usually freezing places. 
The Izvestia newspaper has reported that the river Neva in St Petersburg which is normally locked below ice until spring, has broken its banks, and in Moscow, where temperatures have reached a record 7C by early afternoon, several ice sculpting exhibitions and ice hockey matches have had to be cancelled. While some people say that it is saving them money, others are complaining that it is upsetting their metabolism.

Premier Parts
The prime minister of Estonia is the 38-year old Juhan Parts, who has been in office since April 2003. He heads a coalition government led by his own party, Res Publica, of which he is the head.
Governments come and go with a fair regularity in Estonia, while the civil servants stay and give continuity to policy, on which there is a large measure of bipartisan agreement. Parts has seven special advisers and assistants, as well as his cabinet of ministers. As with Tony Blair in the UK, it is strongly suspected that the advisers can have more leverage than the department-bound ministers.

The star of 'new Europe'
Estonia is in a different category from all the other recent entrants to the EU, that is 'new Europe.' It is not the richest of them. That is Slovenia. But it is in many ways the most successful in having introduced market reforms that have brought great problems elsewhere, although Estonia has its share of social problems too.
One has to o back to the immediate aftermath of independence in 1991 to find out why. Leading his coalition to election victory in the autumn of 1992, the 'golden boy' of Estonian politics, the then 32-year-old Mart Laar, formed a youthful government to push through many of the most difficult 'shock therapy' reforms, guided by an extremely liberal economic outlook. It is an irony that the Estonians now distrust their present prime minister for his 'inexperience' when their most successful one since independence was inevitably very inexperienced, as were his ministers, many of them in their twenties.
The initial reform had actually been undertaken by the preceding government, the creation of the Estonian kroon in June 1992, with advice from the Bundesbank. It was the first post-Soviet currency to be independent of the rouble and was soon a success. 
In the absence of a mantra on how to transform a command economy into a free market economy, Laar then had to rely on some basic fundamental economic thoughts, such as the idea that lower taxes will lead to higher economic growth and eventually higher public revenues. This idea had been around for some time -- many centuries and probably even millennia. But it was reinvigorated not earlier than in the seventies, when the American economist Arthur Laffer, sitting in a restaurant and explaining to a friend the mechanism behind it, depicted a graph on a napkin, which later became world-famous as the Laffer curve.
Though modest tax reductions became fashionable in its wake, the idea had never been put into practice in a radical way. It was Estonia, benefiting from the readiness of the population to adopt radical solutions, which set the ball rolling with a flat-rate 26 per cent income tax. The philosophy behind the flat-rate tax is simple. People that work more and earn more should not be punished for it. Progressive taxes act as a disincentive. In Estonia, the flat-rate tax fostered capital formation, lead to higher productivity levels, higher wages, and job creation. Moreover, a flat income tax rate is easy to collect and control. Today Estonia is even considering a further reduction in tax rate, to 20%. 
Moreover, Estonia abolished all import tariffs, it introduced a balanced budget required by law, massive deregulation and so on. Estonia also abolished its corporate tax on reinvested profits. These lessons have subsequently been eagerly absorbed in other new member states. Now Poland, Hungary and Latvia have all cut corporation tax to below 20%. Slovakia has introduced a 19% flat tax for both corporate and personal income; whereas, in the founding member states it often exceeds 30 percent. In Germany the rate is almost 40 percent, and in Sweden it ranges between 30 percent and 60 percent.
In its economic policy design Estonia has followed Milton Friedman's ideas of liberalism. As Mart Laar stated: 'Especially in a transition country, where the economy has to move from a fully government-controlled system to a market based one, it is very important to free the private initiative and give freedom of action to create economic value. The government must not punish entrepreneurial people; it has to encourage them, also through the tax system. The government must ensure the fair play only.
This is all a far cry from the thinking which seems to prevail in an number of countries of 'old Europe'. Proposals to harmonize taxes invoke images of tax cartels with minimum tax levels, squeezing the taxpayer and killing incentives.

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AVIATION

Estonian Air sees 41,346 passengers in November

Estonian Air carried on its regular routes to 16 destinations in November 40,890 passengers, plus 456 passengers on charter flights, PRNewswire reported.
The total number on regular routes for the 11 months of 2004 was 468,028 and on charter flights 37,128. When compared to year 2003, the passenger number has grown by more than a third. For the first time in the 13 years of Estonian Air, the number of passengers carried in one year, has exceeded half a million - the mark was crossed on November 26th on the Moscow-Tallinn flight. When compared to the previous year, the passenger number has grown on all 12 routes that were operated both in 2003 and 2004. In 2004, new routes to Munich, Gothenburg, Brussels and Dublin were launched. Estonian Air operated the Tallinn-London (Gatwick) route for the 10th year; both the passenger number and the average load factor have been steadily growing.

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TELECOMMUNICATIONS

Elion purchases Viru Net

Elion, the fixed line telephone operator owned by Eesti Telekom, purchased, Viru Net, a leading regional Internet service provider, the company announced in a statement recently, New Europe reported.
Elion said that the aim of the acquisition was to reinforce its market, positioning the county of Ida-Virumaa and consolidate the Estonian Internet Market. The transaction was valued at five million kroons (some 320,000 Euro). Viru Net, which was established in 1997, is one of the leading Internet service providers to businesses in Ida-Virumaa and since 2001 has also been providing its services to domestic consumers in the towns of Johvi, Kohtla-Jarve and Sillamae. Turnover of Viru Net in 2003 was 3m kroons (190,000 Euro) with a profit of 0.4m kroons (26,000 Euro).

Elion sells remaining holding in Eltel Networks

Elion Enterprises, a wholly-owned subsidiary of Eesti Telekom, has sold its 51 per cent majority interest in Baltic telecoms supplier Eltel Networks Corp, which already owns 49 per cent interest in the company, digital media reported recently.
The right to acquire 100 per cent of the company shares was given to Eltel Networks in May 2003, when a 49 per cent minority interest was sold. Eltel Networks is one of the largest companies in the Baltics, offering design, installation, construction and maintenance services for telecommunication and electrical systems. The company has subsidiaries in Latvia and in Lithuania.

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