Books on Estonia
Update No: 300 - (01/01/06)
The laboratory that seems to work
If you want to turn people off something, the way to do it is to stuff it down
their throats. That is exactly what the Russians did to the Estonians with
Communism. There is now no more anti-communist place on Earth.
It has now introduced the most radical measures imaginable. Professor Friedman,
the Economic guru of the Chicago school, advocated a flat tax - everybody pays
the same, rich or poor. The Estonians adopted it over ten years ago and it seems
to be working, although it is early days yet.
Yeltsin was asked his opinion of Lenin and replied:" A political genius.
But it is a pity he didn't try his ideas out in a smaller country first."
Premier Matt Larr did in Estonia in 1992 and they are working.
Both Finland and Estonia face tough challenges in the future - not least from
If you want to understand the perspective, it helps to think of a suitable
contrary. For Estonia it is undoubtedly Finland, undoubtedly European and a
victim and eternal foe of Russia, with its apparently eternal imperialist ways.
A curious thing is that before the Second World War Estonia was a more
prosperous country than Finland, which is now a rich nation, famed for high
taxes and its generous welfare state. But for the Finns only 30 miles across the
Baltic Sea lies Estonia. This small country, an unwilling part of the Soviet
Union until 1991, is now not nearly as wealthy as its Finnish neighbour.
The average annual salary is 6,000 euros (£4,100; US$8,000), but some of its
company taxes are as low as 0% to lure foreign investment.
Nevertheless, apart from the threat from cheaper competition from the Far
East, Finland's newest and potentially most damaging rival is just across the
Baltic. It only takes 15 minutes and 75 euros to take a helicopter ride from
Helsinki to the Estonian capital, Tallinn, and many Finnish business people are
making the journey.
Estonia is one of the EU's newest members and has caused a stir amongst the
older members, which have complained about its low tax regime. It initiated the
flat tax in the early 1990s, with great success.
Germany's former chancellor, Gerhard Schroeder, said that Estonia's 0% company
taxes were driving jobs away from his country. But former Estonian Prime
Minister, Juhan Parts, defends his policies thus: "We are trying to
encourage business to come to Estonia, and motivate entrepreneurs both domestic
and foreign," he says. "The tax system is very effective and it is
trying to create jobs here. If you are talking about certain needs of
harmonisation of the tax systems in the EU - for developing the better function
of an internal market - I think the Estonian model is quite suitable."
His successor Premier Ansip is carrying on the good work. But even though
Estonia has made great strides, it still has a long way to go to reach the same
high standards of living as its western European neighbours.
Meanwhile, Finland has some of the highest standards in the world but faces
tough competition from cheaper countries - and not just in Europe but also from
the Far East, and especially China.
But both Finland and Estonia are widely seen as following the right track -
Finland by investing heavily in research and development and its own people, and
Estonia through its aggressive tax policies.
Interview: Estonia is on course for currency integration
Estonia is the most successful of all the former Soviet states. It was the
first to set up an independent currency in June 1992, under the tutelage of the
It is now on track to adopt the euro as its official currency in January 2007,
Prime Minister, Andrus Ansip, said in an interview with the Japanese daily Sekai
Nippo. He expressed concern, however, that joining the euro-zone may make it
more difficult for his country to introduce a flat tax system for individuals.
The Estonian prime minister also voiced hope that the process to ratify the
European Union Constitution would be revived, and emphasized the need for the EU
to have common policies in the areas of foreign relations, security and energy.
He spoke with Sekai Nippo during a visit to London to attend the annual
conference of the Confederation of British Industry (CBI).
Q: What is the most important challenge Estonia faces after joining the EU in
A: The most important challenge is the question of joining the euro zone as a
single currency system. We want to join it on January 1, 2007. We have begun
preparations for that. Our fiscal policy has always been robust and it continues
to be so. We have a well-balanced budgetary policy. We have a surplus budget and
our national debt is less than 5 percent of GDP [gross domestic product]. Among
the criteria for the euro group membership, the inflation rate is the only
obstacle right now.
Q: If Estonia joins the euro group, won't it present a problem for you in that
the European Central Bank (ECB) will take over control of your country's
interest rate policy?
A: Estonia's currency, the kroon, was previously linked to the German Mark and
is currently linked to the euro. Interest policy is only a technical problem.
What may become a real problem for us is a matter concerning the tax system. We
will have to increase the consumption tax for gasoline, tobacco and alcohol.
However, we would actually like to lower the corporate tax by 1 per cent a year
over 4 years, and lower individual tax rates. We are thinking about adopting an
across-the-board 20 per cent individual income tax rate.
Q: Which of the EU member countries can be a model for Estonia?
A: We are not using any country in the EU as a model. There is always something
to learn from any country. For example, France is the best in child care, and
Denmark is the best in insuring its own security by promoting foreign trade.
Each country has had some good experience, and it is possible to learn from
Q: Does political integration into the EU present any problem to Estonia?
A: We need to adopt the EU constitution as a part of the political integration
process of EU. I am convinced that the ratification process will move forward.
We need common foreign and security policies and a common energy policy.
Q: You mentioned in one of your speeches that security concerns were the biggest
reason for Estonia to join the EU. What is your country's relationship with your
neighbouring country, Russia?
A: A country naturally desires to maintain a good relationship with a
neighbouring country, and this is true with Estonia. We would like to build a
good relationship with Russia. Our business relationship with Russia is good. On
the high level, we have issues including commitment to a border agreement. I am
looking forward to future cooperation.
Estonia halts expansion of windmills
Estonia's Economy Ministry decided to limit its support to wind-power producers
and will give preference to other forms of renewable energy. Einari Kisel, head
of the ministry of economy and communications' energy department said, "We
do not want to have too many windmills.
The price of wind energy is expensive. The unstable production causes additional
costs to other producers."
With its long coast-line, Estonia has an advantage for generating wind power and
can do it at a favourable cost compared to many European countries, Hannu Lamp,
managing director of Tuulepargid, Estonia's largest wind power producer, said.
The average payoff period of a windmill investment depends on the site wind
conditions, wind power purchase tariff, the cost of capital and share of
"carbon financing," New Europe reported.
Tallink seeks to raise 200m Euro in IPO
Tallink Group, the largest Baltic shipping company, plans to raise 200m Euro
(US$236m) in an initial public offering to finance buying three new vessels.
Tallink was listed on the Tallinn Stock Exchange in an effort to boost capital,
New Europe reported.
Tallink will offer as many as 34.09m shares to investors at between 4.70 and
5.88 Euro apiece, the Tallinn, Estonia-based Company said in a stock exchange
The company's ferries and cargo ships handled more than 3.2m passengers and
about 130,000 cars, buses and trucks in the 12 months up until August 31st. It's
adding new ships to its fleet, which currently offers mini-cruises, passenger
transport and vehicle shipments on routes between Finland and Estonia and
between Sweden and Estonia. The passenger shipping line, Viking Line and the
shipbuilder, Aker Finnyards have signed a letter of intent for the construction
of a new large passenger vessel. The ship is to be ready for delivery in January
2008. Viking Line says that the agreement also contains options for two more
vessels. The order is worth between EUR 110 and 130m.
The company said, "The ongoing investment and fleet renewal program is set
to continue with the delivery of the new cruise ferry, scheduled for the spring
of 2006, and the introduction of the two recently ordered high-speed ro-pax
ferries, scheduled for delivery in 2007 and 2008." The shares will be
offered on the Tallinn stock exchange, 26.5m will be new and 7.59m will be sold
on behalf of existing shareholders.