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Speech by the President of the Republic "EU Enlargement - Building a More Competitive Europe" at a Dinner on the Occasion of the World Investment Conference at La Baule on 26 June 200326.06.2003
Excellencies, Ladies and Gentlemen,
Ten countries, Estonia among them, recently concluded accession treaties with the European Union. All of these countries have historical ties with Europe: common values as well as cultural, economic and political togetherness. Yet, based on these values, we are both cooperation partners and competitors, for each country brings along its own knowledge, experience and potential. And just in this light, I would like to acquaint you with my native country, Estonia.
The Estonians have a saying: "The best things come in small packages". By that proverb I also would like to characterize Estonia, its people, and economy. Due to a rapid implementation of major reforms, Estonia has grown out of the status of a transition economy. Already in the first years of our regained independence we liberalized prices, foreign trade and international capital flows; we carried out a currency reform and privatised the bulk of enterprises.
As a result of that, Estonia has become a rapidly developing economic hub orientated at future. Our success has not gone without international recognition. As to its credit rating, Estonia already for three consecutive years is ranked in the A category, thus being comparable to European developed countries. Estonia in the World Economic Forum's competitiveness rating list places 26th and hence first among the EU candidate countries. In the Index of Economic Freedom, Estonia with Denmark and the US shares 6th place.
The fact that Estonia regarding foreign direct investment per capita belongs to the first among the Central and East European countries testifies to Estonia's attractiveness for investors. According to a poll carried out a few years ago, as many as 94% of foreign investors were content with having invested in Estonia!
So, what is it that entices foreign capital into Estonia? In describing Estonia's investment climate, I will also make use of assessments by foreign investors, lest you thought that I as a patriot was exaggerating.
The investors who look for new markets attach importance to the geopolitical location of Estonia. It is true that the Estonian market is small (our population being a bit short of a million and a half), but Estonia owing to its openness is a gateway to the rapidly growing market of the Baltic Sea region with its nearly 90 million inhabitants. Today, the EU countries account for more than 70% of Estonia's exports. If we combine with them Latvia, Lithuania and the rest of the future EU Member States, they account already for 80%. I believe this to be a sufficient evidence of the competitiveness of Estonian products.
Estonia as a future EU Member State offers to foreign investor several advantages. For example, the harmonisation of Estonia's legal system with the legislation of the European Union has helped to create a safe business environment.
In addition to European-style safety, characteristic features of the business environment in Estonia are transparency, relatively low operating costs and well-developed infrastructure.
In Estonia, it is equally easy to do business both for domestic and foreign capital. It goes without saying that there are no restrictions on repatriation of profits but, on top of that, in Estonia also foreigners have the right to own real estate. In addition to these advantages, we have a business-friendly - simple and favourable tax system. I will give you an example concerning income tax. To facilitate the development of enterprises, their reinvested profits are exempted from corporate income tax. Yet on dividends there is a flat tax rate of 26 percent.
In Estonia, costs for both establishing and operating a business are low, and that applies equally to purchasing and renting real estate as well as to telecommunication and transport services. Estonian pay level compared with other European countries is relatively low too: the average pay in the last year was slightly below 400 euro per month.
However, relative cheapness of labour does not mean lower quality. According to the Estonian Investment Agency, there is a broad spectrum of branches of industry in Estonia (e.g. woodworking, food, and electronics industries, and mechanical engineering), in which the manufacturers "offer Scandinavian quality to East European prices". And that is true indeed for we have skilled, motivated and adaptable workforce in Estonia. It is becoming norm that people in Estonia apart from their professional qualifications have a good command of several foreign languages.
Talented, well-educated people and stable financing by the state have created a favourable basis for the progress of advanced research. I would particularly highlight molecular biology, genetics, materials research as well as environmental and marine sciences. Regarding these areas, Estonians as partners in research, development and innovation are respected in international cooperation too.
One of the rapidly advancing areas is telecommunication. As to the use of mobile phones, our level is comparable to that of France (six in ten inhabitants are mobile phone users). The share of Internet users in Estonia's population (four in ten) is close to the average of the European Union. Using Internet is a customary way to carry out banking operations and to pay taxes in Estonia.
I dare to be optimistic looking to the future as well, because the keywords characterizing Estonia's political goals are openness, stability of the economic environment, promotion of enterprise and innovation, and a knowledge-based Estonia. Estonia will enter the expanding European Union bringing along this very approach.
I am sure that cooperation and competition between us will help create a stronger and more competitive Europe.
Ladies and Gentlemen, you, too, have an opportunity to participate in this process. But good business relations are based on human contacts. Travel between Estonia and France from this year on is very easy: there is direct air connection between our capitals. Hence - Welcome to Estonia!
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