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Wednesday, July 28, 2010

Estonia liberal economies

Estonia is considered one of the most liberal economies in the world, ranking 13th in the Heritage Foundation's 2009 Economic Freedom Index. Hallmarks of Estonia's market-based economy have included a balanced budget, a flat-rate income tax system (the first in the world), a fully convertible currency pegged to the Euro, a competitive commercial banking sector, and a hospitable environment for foreign investment, including no tax on reinvested corporate profits (tax is not levied unless a distribution is made).

Estonia's liberal economic policies and macroeconomic stability have fostered exceptionally strong growth and better living standards than those of most new EU member states. After enjoying 8% average annual GDP growth since 2000, the economy started to show signs of cooling in 2007 when GDP growth slowed to 6.3%. In the current economic crisis, GDP fell by 3.6% in 2008 and is shrinking further in 2009.

The economy benefits from strong electronics and telecommunications sectors; the country is so wired that it is nicknamed E-stonia. Many bars and cafes across the country are equipped with wireless connections. Skype, designed by Estonian developers, offers free calls over the Internet to millions of people worldwide. Tourism has also driven Estonia's economic growth, with beautifully restored Tallinn a major Baltic tourist landmark.

By the late 1990s, Estonia's trade regime was so liberal that adoption of EU and World Trade Organization (WTO) norms actually forced Estonia to impose tariffs in certain sectors, such as agriculture, which had previously been tariff-free. Openness to trade, rapid growth in investment, and an appreciating real exchange rate have resulted in large trade deficits in recent years. Estonia supplies more than 90% of its electricity needs with locally mined oil shale; however, it imports all of its natural gas and petroleum (roughly 30% of total energy consumption) from Russia. Alternative energy sources such as wood, peat, and biomass make up about 9% of primary energy production. An undersea electricity cable inaugurated in December 2006 allows Estonia to export electricity to Finland.

Notwithstanding these many achievements, the economy of Estonia still faces challenges. Early estimates for 2009 indicate Estonia's economy may decline more than 12%, and unemployment is rising (17% in June 2009). As the result of sharply declining revenues, Estonia's fiscal deficit could exceed 3% of GDP in 2009, although the government has cut expenditures in an attempt to qualify for joining the Euro zone. Adoption of the Euro is a key government priority.

Foreign Trade

Estonia is part of the European Union, and its trade policy is conducted in Brussels.

Estonia's business attitude toward the United States is positive, and business relations between the two countries are increasing. The primary competition for American companies in the Estonian marketplace is European suppliers, especially Finnish and Swedish companies.

Total U.S. exports to Estonia in 2008 were $225.5 million, forming 1.2% of total Estonian imports. In 2007 the principal imports from the United States were boilers, machinery, vehicles, chemicals, mineral fuels, oils and electronics. Estonian exports to the United States were around $392 million in 2008, making the U.S. Estonia's third--largest export market after the EU and Russia. U.S. imports from Estonia are primarily mineral fuels and oils, electronic machinery, games and sports equipment, and fertilizers.

Estonia's economy benefits from its location at the crossroads of East and West. Estonia lies just south of Finland and across the Baltic Sea from Sweden, both EU members. To the east are the huge potential markets of northwest Russia. Estonia's modern transportation and communication links provide a safe and reliable bridge for trade with former Soviet Union and Nordic countries. Many observers also see a potential role for Estonia as a future link in the supply chain from the Far East into the EU.

Country Commercial Guides are available for U.S. exporters from the National Trade Data Bank's CD-ROM or via the Internet. Please contact STAT-USA at 1-800-STAT-USA for more information. Country Commercial Guides can be accessed via the World Wide Web at the U.S. Department of Commerce's site and at the U.S. Embassy in Tallinn's website at They also can be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-553-NTIS. U.S. exporters seeking general export information/assistance and country-specific commercial information should contact the U.S. Department of Commerce, Trade Information Center by phone at 1-800-USA-TRAD(E) or by fax at 1-202-482-4473.

GDP (2008): $23.2 billion.
Real GDP growth rate (2008): -3.6%.
Per capita GDP (2008): $17,300.
Inflation (July 2009): -0.7%.
Unemployment rate (June 2009): 17%.
Natural resources: Oil shale, phosphorus, limestone, blue clay.
Agriculture (2.6% % of 2008 GDP): Products--livestock production (milk, meat, eggs) and crop production (cereals and legumes, potatoes, forage crops). Arable land--433,100 hectares.
Industry (17.9% of 2008 GDP): Types--engineering, electronics, wood and wood products, and textiles.
Services (60.9% of 2008 GDP): Transit, information technology (IT), telecommunications, business services, retail, construction, real estate.
Public sector (18.6% of 2008 GDP): Public services, education, healthcare, social services.
Trade: Exports (2008)--$12.4 billion. Partners--Finland 18%, Sweden 14%, Latvia 10%, Russia 10%, Lithuania 5.7%, Germany 5%, U.S. 5%. Imports (2008)--$16 billion. Partners--Finland 14%, Germany 13%, Sweden 10%, Latvia 9%, Lithuania 9%, Russia 8%.
Exchange rate (2008): 10.7 kroon (EEK)=U.S.$1.
Foreign direct investment (March 2009): Sweden 39.9%, Finland 22.3%, Netherlands 7.3%, Denmark 3.7%, Russia 3.5%, Norway 3.3%, Germany 1.9%, Cyprus 2.1%, Luxembourg 1.7%, U.K. 2.2%, France 1.5%, U.S. 1.4%.

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Tuesday, February 16, 2010

Republic of Estonia

Estonia /ɛsˈtoʊniə/ (help·info) (Estonian: Eesti), officially the Republic of Estonia (Estonian: Eesti Vabariik), is a country in Northern Europe. It is bordered to the north by the Gulf of Finland, to the west by the Baltic Sea, to the south by Latvia (343 km), and to the east by the Russian Federation (338.6 km). The territory of Estonia covers 45,227 km2 (17,462 sq mi) and is influenced by a temperate seasonal climate.

The Estonians are a Finnic people, with the Estonian language exhibiting many similarities to Finnish. The modern name of Estonia is thought to originate from the Roman historian Tacitus, who in his book Germania (ca. 98 CE) described a people called the Aestii. Similarly, ancient Scandinavian sagas refer to a land called Eistland, close to the Danish, German, Dutch, Swedish and Norwegian term Estland for the country. Early Latin and other ancient versions of the name are Estia and Hestia. Esthonia was a common alternate English spelling prior to independence.

Estonia is a democratic parliamentary republic and is divided into fifteen counties. The capital and largest city is Tallinn. With a population of only 1.34 million, Estonia is one of the least-populous members of the European Union. Estonia was a member of the League of Nations from 22 September 1921, has been a member of the United Nations since 17 September 1991, of the European Union since 1 May 2004 and of NATO since 29 March 2004. Estonia has also signed the Kyoto protocol.

The settlement of modern day Estonia began around 8500 BC, immediately after the Ice Age. Over the centuries, the Estonians were subjected to Danish, Teutonic, Swedish and Russian rule. Foreign rule in Estonia began in 1227. In the aftermath of the Livonian Crusade the area was conquered by Danes and Germans. From 1228–1562, parts or most of Estonia were incorporated into a crusader state Terra Mariana, that became part of the Ordensstaat, and after its decline was formed the Livonian Confederation. During the era economic activities centered around the Hanseatic League. In the 1500s Estonia passed to Swedish rule, under which it remained until 1710/1721, when it was ceded to the Russian Empire.

The Estophile Enlightenment Period (1750–1840) led to a national awakening in the mid-19th century. In 1918 the Estonian Declaration of Independence was issued, to be followed by the Estonian War of Independence (1918–1920), which resulted in the Tartu Peace Treaty recognizing Estonian independence in perpetuity. During World War II, Estonia was occupied and annexed first by the Soviet Union and subsequently by the Third Reich, only to be re-occupied by the Soviet Union in 1944.

Estonia regained its independence on 6 September 1991. It has since embarked on a rapid programme of social and economic reform. Today, the country has gained recognition for its economic freedom, its adaptation of new technologies and was one of the world's fastest growing economies for several years. However, Estonia's economy was second worst hit of all 27 European Union members in the 2008–2009 economic crisis,contracting sharply in the first quarter of 2009.