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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: 297 - (29/09/05)

EU Dominates Jansa's Talks in Estonia
A role model for Estonia in many ways is Slovenia. The Slovenes experienced a less harsh form of communism than the Estonians and more market-oriented. Tito was not such a fanatic as Stalin, who left his indelible stamp on all the Baltic states. 
The Slovenian premier and his entourage came to Tallinn in September for wide-ranging discussions. EU issues, in particular the changeover to the euro, topped the agenda as Prime Minister Janez Jansa and his Estonian counterpart Andrus Ansip held talks on 14th September. They both arrived at the conclusion that the biggest obstacle for euro adoption is the spiralling cost of oil, which is pushing up inflation. 
Despite the soaring oil prices, the Estonian PM was confident that his country would have no major trouble. "I am convinced we will meet all criteria and adopt the euro in January 2007," he told the press in Tallinn. Jansa was equally confident about Slovenia's ability to make the changeover in 2007. Slovenia is already in compliance with three criteria; exchange rate stability will be provided next year, so inflation remains the only problem. 
Talks also touched on EU enlargement. "We share the same view on Croatia's accession: Croatia is cooperating with the Hague tribunal and we believe the EU should launch negotiations," Ansip said. 
The Slovenian PM moreover praised Estonia's achievements, in particular the flat tax rate which Slovenia is thinking about introducing, and said Slovenia is undergoing a second wave of reforms that Estonia has completed already. "Estonia's success is based on foreign direct investment; the tax system works because it is simple, transparent and easy to understand for everyone," Jansa emphasised. 
Jansa was confident that the strong business delegation accompanying him on the Baltic tour would help boost the currently modest bilateral trade. Also, Estonia could use Slovenia as a springboard for the 100-million market in the region, he said. 
At the end of their meeting, Jansa and Ansip signed an accord on the avoidance of double taxation. On his last stop on the three-day tour of the Baltic states, Jansa also met Parliament Speaker Ena Ergma.

British farmers grow roots in Estonia 
In the late 1990s, when Estonia became a candidate to join the European Union, the country's farms began to attract hefty pre-accession development aid from Brussels. This provided an advantage that many of the canny outsiders had foreseen was inevitable when Estonia regained independence in 1991. 
The subsidies paid for around two thirds of the farmers' new machinery. On top of that, they got hundreds of extra euros for every hectare they put under the plough. More broadly, EU membership offered the prospect of a developing, stable democratic society, increasing land prices, and of an expanding consumer market. 
A further boost to agriculture came when early restrictions on foreign investors, making it compulsory for them to work with a local joint-venture partner, were lifted. With new money, the outside investors began to rejuvenate an industry in which employment had shrunk from 115,000 jobs in 1992 to 32,000 by 2000.
"It has come a long way in the last nine years," says Nevil Hewitt, who left a job making bank cards in Britain to buy a dairy processing business near Estonia's Baltic coast in 1997. He buys milk from Estonian and Western farmers like Lampard and sells dairy products to supermarkets or ships them across the Baltic to Finland. "Not everything is simple all the time," he says. "But it is a good country to do business in." Its business climate, he said, is "more Scandinavian" than Russian.
A few years ago, around the time British agriculture was about to embark on a dizzying economic free fall, Ken Noble, an English farmer, saw a chance for a fresh beginning - 1,750 kilometres to the east.
He bought land for a few thousand pounds in Estonia, shipped big John Deere tractors from England, reclaimed more land from the brush and began to build a life, and an empire, far from England's tired fields. "All this," said Noble, 61 years old, on a recent afternoon, standing in a field of green wheat near the city of Tartu in southern Estonia, "as far as you can see, from here right across to the forest, is ours."
Noble, who bought his first Estonian fields in 1997, is one of a small vanguard of farmers from Western Europe who have sought opportunity in the new, formerly communist, eastern reaches of the European Union. Their presence is a measure of the tough conditions in British farming, an industry tainted by mad cow disease and shaken by a precipitous drop in food prices. But it also reflects the coming together of Europe as borders have fallen and East Europeans have begun to integrate with the West.
Farmers are not the first Western entrepreneurs to go east to carve profit from the ruins of the Soviet Union. But their migration perhaps marks a more indelible turning point: Their possession of the soil, their exposure to cold and rain are deep and intimate commitments to their new world, just as the surrender of their Western farms is a more final farewell to the old.
"We thought there was a hard time ahead for farming and we had to do something different," said Clifton Lampard, a farmer from Leicestershire who bought a bankrupt dairy farm near Turi, an hour south of Estonia's capital, Tallinn, in 2002. A year later, he bought two more Estonian farms with a group of Norwegian and English investors and, with his wife, helps to run them alongside the farm they still rent in England. "I came out here and thought, this all adds up," he says.
The reason it added up can be seen today in the green countryside around Turi and Tartu. Dilapidated Soviet era barns and lines of pine forests, home to storks and wild boar, punctuate vast stretches of land, most of it untouched since the collapse of the old planned economy. The newcomers discovered that if they cleared the soil and worked it, the local government would give it to them more or less for free. The land is so plentiful and cheap that many of the foreigners cannot always even say exactly how much real estate they own. For them, it was a pleasing contrast to Britain's crowded and expensive isle.
"I was selling land in Scotland for over £2,000 an acre and buying it in Estonia for £25 an acre," said Neil Godsman, from Aberdeenshire, who owns a dairy and grain farm in central Estonia. A massive mark-up, indeed.
As well as cheap land, the farmers got cheap labour - the big collectivised farms brought with them work forces of hundreds. The soil was perhaps of poorer quality than back home. But once the Westerners had installed modern equipment, added hundreds of cows to the herds and introduced new working practices, production costs came down to just over half those in the West. Vivi Norma, 55, and the two other women working in Lampard's brightly lit barn near Turi, milk 100 cows an hour compared with 12 under the Soviet system. "Our farm in England is not nearly as profitable," Lampard says.
Despite the young country's advantages, life has not always been easy for the new immigrants. Noble had four good harvests but fell out with his local joint-venture partner; then three successive harvests were ruined by rain and he posted big losses.
The Estonian work force proved another challenge for the foreign overlords. Cheap but hard to motivate and easy to offend, the local farm workers were used to an easier pre-capitalist life where - as Lampard describes it - one person tended the farm dog, another's sole role was to fix electric fences, another's was to lead the cows. 
Lampard had to spend weeks persuading some of his workers not to kill his best cows (with a hammer blow to the head) when they felt hungry. When he blocked villagers from entering the dairy where they had helped themselves to milk, he was lambasted in the local newspaper. 
The transformation was a struggle for the workers, who found the new practices hard. "The big change was the technology," said Volodja Ivanov, 48, an ethnic Russia who drives tractors for Noble. "It was not very easy from the beginning to adapt because everything was done quite differently." 
There were other tussles with the local council and punctilious veterinarians. The vagaries of the EU's subsidy system meant that Brussels' checks took longer to arrive than expected. Some of the new immigrants discovered that they had overstretched financially or they disagreed among themselves. Lampard is trying to sell his Estonian stakes and return to Britain.
Last October, Noble also decided to give up. But when he sold his lands to a Scottish farmer, he stayed on as farm manager. His new bosses are a second wave of investors who, despite the first generation's problems, still see profit in the East. Under his new bosses, Noble is diversifying away from traditional crops like wheat and experimenting with carrots, potatoes and rutabagas to see if he can please Baltic consumers.

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DEFENCE

Estonia seeks bids on air defence system 

Estonia plans to upgrade its anti-aircraft defence system and has invited European company MBDA and its US rival Raytheon to bid for a US$55m contract to supply missiles, officials said, Defencenews reported on August 18. 
Estonian Defence Minister, Jaak Joeruut, said the two companies had been identified as suppliers of the short-range anti-aircraft missiles needed by the country. "Estonia stands out among NATO member countries for its weak air defence capability," Joeruut told a news conference, adding that Estonia has only old, outdated Israeli missiles at present. 
He further said, "The aim of the state procurement is to supply Estonia with a modern and mobile anti-aircraft system which could be integrated into the joint air defence system of the allied forces, should there be a need to use this system in the NATO context," he said. 
"We have picked two companies which manufacture the type of systems we need, and these firms are MBDA Missile Systems and the Raytheon Company." 
Joeruut said the US$55m tender would be announced at the end of the month and the successful bidder would be announced in the spring of 2006. The new system should be in place by 2009, Joeruut said. Estonia joined the NATO last year. 

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INDUSTRIAL PRODUCTION

Industrial production up in Estonia 

Industrial production in Estonia grew 11 per cent year-on-year and 3 per cent month-on-month in July, AFX News reported, citing figures released by the national statistics office. 
The increase in manufacturing production was primarily brought on by the rise in the production of food, wood and metal productions, the figures showed. The statistics office said the production of electricity was down by 5 per cent, while the production of heat climbed 2 per cent.

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