Creating a favorable climate for local and foreign investors
INVESTMENT TWO BODIES HAVE BEEN GIVEN WITH THE TASK OF PAVING THE WAY FOR FOREIGN INVESTORS AND PROVIDING SUPPORT TO LOCAL COMPANIES

PRINCIPAL AREAS of interest to U.S. investors include machine building and electronics, where special bodies have been set up to assist in the investment process

Since independence, Estonia has bet on foreign investment to drive its new economy. To this end, the new republic slashed export tariffs, created a liberal and open economic policy and devised a low tax system. The Estonian Investment Agency (EIA) was established in 1994 to monitor and improve Estonia's investment climate. In addition, Estonia became a member of the World Trade Organization (WTO) in 1999, a move calculated to increase the security of both foreign and Estonian entrepreneurs by creating a reliable framework for implementing national economic and trade policies.

Now Estonia is hedging its bets with increased national investment in its own medium-sized companies. A limited domestic market (the country has a population of just 1.5 million) has stimulated the development of a highly export-oriented country. Estonia is pro-free trade and has agreements with numerous countries. Main exports, of which 60% currently go to Baltic Sea countries, include agriculture, chemicals, wood products, minerals, textiles and machinery. The Estonian Trade Promotion Agency (ETPA) supports the country's SMEs and works to facilitate the growth of Estonian exports. Director Lea Kroonmann states, "Our normal tasks include supporting different schemes to cover the costs in export plans, as well as providing information on tariffs, import lists, etc. Lately we have been working with EU quality standards, trying to get companies to think about these issues and to act in accordance with world market needs."

A large part of Estonia's exports consist of subcontracting and the EIA often acts as a mediator for foreign companies who are looking to subcontract within Estonia. Director Andrus Viirg comments, "We provide matchmaking services for companies, connecting them to each other for both export and import purposes. Estonian companies have established a name for themselves as sub-contractive partners; a lot of the electronics for Nokia and Ericsson were made in Estonia. Volvo is now part of General Motors and there are many Scandinavian companies subcontracted to them. In turn, they subcontract from us."

Although Estonia has been gradually weaning itself away from Russian markets and orienting itself towards the West, with its well-developed logistics and transport infrastructure, the country still has strong potential to act as a transit between Europe and Russia. Currently inhibited by double tariff rates, Estonia believes things will change dramatically once Russia joins the WTO. Says Mrs. Kroonmann, "We have all learned Russian at school and their way of life is familiar to us so we understand their way of doing business, which is totally different to the U.S., for example."