Business environment and foreign investments

Considerations for the investor:

  • Estonian law is harmonised with EU law
  • The workforce is highly educated and motivated
  • A relatively good and rapidly-developing production infrastructure (ports, roads, telecommunications, warehouse facilities)
  • Highly-developed electronic communications: good access to internet, digital signatures, ID cards, web based projects
  • In perspective taking euro into use in 2011 = credibility + stability
  • Export development = new markets and new products

Business Climate

Overall, the business climate in Estonia is characterised by free business and trade in alignment with EU practices. Many companies are subsidiaries of European, particularly Scandinavian, firms.

There are no significant service or industry sectors where a monopoly has been created, except for some important infrastructure services (railways, ports, the national airline, power stations and energy transmission) that are provided by fully or partially state-owned companies or groups which effectively enjoy a monopoly. However, large stakes in some of those companies may be sold to strategic investors in the future.

Throughout the period of regained independence, the economic and fiscal policy of the government has mostly been aimed at achieving long-term economic growth.

In the shorter term an important goal is the transition to the Euro. The main short term task of the government is to manage a compromise between economic growth and social benefits.

Most investment and business is concentrated in Tallinn and its surrounding areas and the government's efforts to promote regional development have generally been in vain. 

The government has voiced its concern for small enterprises and export industries as well as for agriculture. In this respect the most important action taken on the part of government was an alignment of policies, institutions and standards with EU norms, to enable participation in financing from EU structural funds. This has facilitated standards closer to the western European level, though there is still much to achieve.

International agreements

Estonia is a member of the WTO and the EU. Foreign investments are protected by internal law and international agreements. Estonia has concluded treaties for the protection of investments with several countries including the U.S., Germany, France, Finland, Sweden, Norway, and Switzerland. Currently Estonia has 41 double taxation treaties in force.

Legal environment

Estonia has systematically reformed its legal system since the 1990s with the top policy priority being facilitating enterprise. Legislators and governments have always displayed the clear will to make the business environment attractive in order to benefit from tax revenues and the jobs created by attracting foreign investors.

The Estonian legal environment favours entrepreneurship and the entrepreneurial mindset. Foreign investors have equal rights and obligations with local entrepreneurs. All foreign investors may establish a company and conduct business in Estonia in the same way as local investors; no restrictions apply.

Property market

The Estonian property market has been booming in the past few years, resulting in the modernisation of existing production and service facilities, office spaces and residential buildings as well as in the construction of plenty of new ones.

Many foreign-owned construction and property management companies operate in Estonia along with local competitors. There is a large supply of various office spaces in all the major cities.

Foreign Investments

As the government reform policy has remained relatively consistent and liberal, the priorities being price liberalisation, fast privatisation, effective and up to date legislation and a stable currency, Estonia has attracted one of the highest levels of foreign direct investment per capita in comparison with other transition economies. The overall government attitude is very welcoming toward foreign capital, especially into sectors that are export oriented, innovative and support regional development.

Foreign Direct Investments (FDI)

Stock by Activities (as of 30 September 2009)
Source: Bank of Estonia

 

Foreign Direct Investments (FDI)

Stock by Countries (as of 30 September 2009)
Source: Bank of Estonia

Foreign Direct Investments 2008 (EUR, mln)
FDI Total (2008): 11.8 Bln EUR

More Information on FDI: