Estonia may be a small country, but it has a great deal to offer to foreign investors or international businesspeople. Located in the heart of the Baltic Sea Region, Europe’s fastest-growing market with 90 million people, Estonia itself has been among the fastest-growing economies in the region.

The country has some of the most liberal trade and investment laws in the world. The Wall Street Journal’s Index of Economic Freedom for 2005 rates Estonia 4th in the world in terms of ease of doing business, right behind Hong Kong, Singapore and Luxembourg. An extra advantage is Estonia’s system of low, flat rate taxes. To encourage companies to expand their business all reinvested profits have been exempted of corporate income tax. However, any redistributed profits, for example dividends, are taxed at 24%.

Foreign investment has played a key role in Estonia’s economic success. The result has been a huge inflow of foreign direct investment - the per capita figure, over 5 160 EUR per capita, is one of the highest among the new EU member states.

The proximity to the Scandinavian countries, well-known for their technological and telecommunication innovations, has had a positive effect on Estonia, making the country the most advanced in terms of telecommunications infrastructure in Central and Eastern Europe. 93% of the population uses mobile phones. Estonia also leads the way among the Baltic States in Internet use; an amazing 55% of the population is using the Internet.


Opportunities for new businesses

The traditional manufacturing sectors in Estonia, like wood processing, manufacturing and electronics offer an ideal opportunity to combine the advantages of the different parts of the region.

The Baltic Sea region, with its inter-connecting waterways and common sea, has acted as a major transport corridor since the Hanseatic days in the Middle Ages. Today, the Port of Tallinn boasts one of the largest cargo volumes and acts as a good base for developing distribution and logistic.

In addition, excellent infrastructure and a skilled adaptable workforce create a good base for the knowledge-based economy. The Research and Development Strategy of Estonia is focusing on the development of three areas: user-friendly information
and communication technology, biomedicine and material technology. With a well-educated population that is willing to adopt new technologies, Estonia represents an excellent test market for all new technologies. The availability of a modern infrastructure and cost effective services is an advantage.

Modern banking systems and widespread Internet use have placed Estonian banks at the forefront of the world electronic and Internet banking services sector. About 68% of per cent of Estonian people conduct their everyday banking via Internet. Tax returns can be filled via the Internet and mobile phones are used to pay for parking.

Being a small and open economy, Estonia does not have a strategy for granting cash incentives to companies. Instead it aims at creating an attractive business and investment climate. The companies that have established themselves in Estonia are able to enjoy some support measures aimed at increasing their competitiveness. With EU accession on 1 May 2004 the structural funds for business support are available to all Estonian companies. Enterprise Estonia, a state foundation for business support, is the implementing agency for the EU structural funds. Information on how Estonia can support international businesses can be found at the following website: www.investinestonia.com.

Source: Ministry of Foreign Affairs of Estonia