Overseas Business Risk - Estonia

Information on key security and political risks which UK businesses may face when operating in Estonia.

Overview

Estonia is one of the three Baltic States located on the east coast of the Baltic Sea. Its neighbours are Finland, Russia and Latvia.

Before the global crises in 2008-09 Estonia had one of the fastest growing economies in the EU enjoying double digit GDP growth rates. The financial crisis hit Estonia hard and the economy contracted, pushing up the unemployment rate. However, the government’s robust fiscal policies, involving a series of austerity measures, ensured that Estonia came out of crisis with a good foundation for growth.

Estonia successfully attracted foreign investment and refocused its trade from east to west, turning into the vital trading point between CIS, Russia and Western Europe.

Privatisation has been completed, the banking system is healthy and entry into the EU in 2004 and to euro-zone in 2011 have created stability and growth. Estonia’s government finances are outstanding in the context of the EU debt crisis. The government debt level is the lowest in the EU (6% in 2011) and the government budget has been in surplus in 2011.

Stable political situation as well as membership of the EU and NATO make Estonia an excellent place for doing business. There are good possibilities in many areas for British businesses, which are generally welcomed in Estonia.

Political and Economic

Estonia is a stable parliamentary republic. The highest body of state power is the unicameral Parliament (Riigikogu) which has 101 members. The President, Mr Toomas- Hendrik Ilves was re-elected in August 2011.

In March 2011 Andrus Ansip was elected to serve his third term as Prime Minister after Estonia’s sixth parliamentary elections since gaining independence in 1991. On 23 March 2011 a new coalition Government was formed comprising the Reform Party and the Union of Pro Patria and Res Publica. The next elections are due in March 2015.

The Estonian government has achieved economic stability and steady growth based on balanced (or surplus) state budgets and liberal trade and investment laws. Stringent fiscal policies allowed Estonia to become the 17th member of the Eurozone on 1 January 2011. Estonia’s openness to business is globally recognised: The Heritage Foundation ranked Estonia 16th in their Economic Freedom Index of 2012 and World Bank ranked Estonia 21st in its Doing Business 2012 report.

The Estonian economy has grown at a very high pace in the last decade and especially since EU accession in 2004. GDP growth peaked at 10.4 per cent in 2006. In 2007 the economy started cooling down and the global economic crisis hit the Estonian economy hard (the economy shrunk by 18% between 2009-2010). The difficult economic environment that led to increased unemployment forced companies to seek efficiency gains. The unemployment rate peaked at 16.9% in 2010.Decreasing prices and wages paved the way for Estonia’s next economic growth period. The economy came out from recession in 2010 and started to boom again at 7.5% in 2011 (the highest in the EU), driven by export. Unemployment remains high at 12.5% (2011).

In 2011, half of the value added of economic activities in Estonia came from the following three sectors: real estate, renting and business activities; manufacturing; and wholesale and retail trade. The main manufacturing industries in Estonia produce electrical and optical equipment, timber and wood products, food and drink, and fabricated metal products.

Trade relations are good in sectors such as ICT, but although imports from the UK doubled between 2010 and 2011, and UK has a good trade surplus in its favour, UK remain Estonia’s 8th trade partner, accounting for only 2% of exports and 3.5% of imports.

Estonia’s main export and import commodities are machinery and equipment, mineral products, metals and metal products, agricultural products and food, and transport equipment.

Most companies in Estonia are small and medium sized, or more specifically, micro companies. Only 0.4 per cent of Estonian companies employ over 250 people.

The Estonian tax system consists of state taxes and local taxes levied by rural municipality or city council. Resident companies and permanent establishments of foreign entities (including branches) are subject to income tax only in respect of all distributed profits.

Information on political risk, including political demonstrations, is available in FCO Travel Advice.

Human Rights

There are no significant human rights problems in Estonia. Estonia is an electoral democracy, with free and fair elections. Freedom House ranked Estonia as “Category 1 Free” in Political Rights and Civil Liberties. Corruption is a relatively minor problem, ranked 32 out of 178 countries surveyed in Transparency International's 2012 Corruption Perceptions Index. Public access to government information is respected, with government decisions published almost instantly online. Religious and academic freedom are respected. The Reporters Without Borders Press Freedom Index in 2012 placed Estonia third in the world in the degree of freedom enjoyed by journalists, news media and internet users. Estonia is actively engaged with human rights issues within the framework of the EU, UN, OSCE, and the Council of Europe. Estonia has presented its candidature for membership of the UN Human Rights Council 2012-2015, and successfully concluded the first Universal Periodic Review of human rights at the United Nations in 2011.

Bribery and Corruption

Businessman working at a computer

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

According to the NGO Transparency International Corruption Perception Index (CPI), Estonia was ranked in 32nd place in 2012.

Estonia is represented in Transparency International by the organisation TI –Estonia (in Estonian Korruptsioonivaba Eesti). The main aims of this organisation are improved public awareness, promotion of business ethics, observance of judicial system and focussing politicians attention on the fight against corruption.

According to TI-Estonia corruption in Estonia is most likely to occur in local government, public procurement and when politics and business mix.

For more information please contact

TI-Estonia Chairman of the Board Mr. Asso Prii

Pärnu mnt 67,

10135 Tallinn, Estonia

T: +372 6 844 074

M: +372 50 15 880

E-mail: info@transparency.ee

Web: http://www.transparency.ee

Visit the Business Anti-Corruption portal page providing advice and guidance about corruption in Estonia and some basic effective procedures you can establish to protect your company from them.

Read the information provided on our Bribery and corruption page.

Terrorism Threat

There is a low threat from terrorism. But you should be aware of the global risk of indiscriminate terrorist attacks which could be in public areas, including those frequented by expatriates and foreign travellers.

Information about fundamentals of counter terrorism in Estonia is available at the web site of the Estonian Ministry of the Interior and Estonian Security Police Board.

Read the information provided on our Terrorism threat page.

Protective Security Advice

With the growth of tourism, there has been an increase in tourist-targeted crime, particularly petty theft. You should be aware of the risks of pick pocketing and muggings, especially in bars, pubs, nightclubs and hotels in Tallinn’s Old Town. Remain vigilant, take sensible precautions and avoid unlit side streets and parks at night. It is safer to phone for a taxi rather than hail one from the street, whether official looking or not.

Theft of property should be reported in person to Tallinn Central Police Station, Parnu maantee 11, tel +372 6124200. You will need to obtain a police report if you have lost your passport.

Read the information provided on our Protective security advice page.

Intellectual Property

Businessman reading newspaper

According to the Estonian Patent Office, intellectual property requires legal protection.

Different types of intellectual property (works of art and literature, trade marks, inventions etc.) require specific legal protection.

Works which are not industrially manufactured, are protected by copyright.

Intellectual property rights are different from copyright and related rights, because these rights are not granted automatically. Particular procedures should be followed in the Patent Office to obtain these rights.

The main types of intellectual property are:

• Trademarks

• Patents and utility models

• Industrial design

Industrial property includes also:

• Geographical Indications

• Integrated Circuits

For more information please contact:

Estonian Patent Office

Toompuiestee 7,

15041 Tallinn, Estonia

T: +372 627 7911

F: +372 627 7912

Email: helpdesk@epa.ee

Web: http://www.epa.ee/

Estonian Author’s Society:

Eesti Autorite Ühing

Lille 13

10614 Tallinn, Estonia

T: +372 6 684 360, 6 684 362

F: +372 6 684 361

E-mail eau@eau.org

Web http://www.eau.org

Also refer to the web site of the World Intellectual Property Organisation (WIPO), and the Madrid Protocol for the international registration of marks: www.wipo.int/madrid/en.

Read the information provided on our Intellectual Property page.

Organised Crime

According to the EUROPOL Organised Crime Threat Assessment the organised crime dynamics in Estonia as well as in the other Baltic countries are determined by their location between countries supplying cigarettes and synthetic drugs and the destination countries for those products.

The institution which fights against various forms of organised crime in Estonia is the Central Criminal Police. The Central Criminal Police concentrates on organised crime, corruption and serious economic crime, money-laundering, narcotics and information technology crimes.

Tööstuse 52, 10416 TALLINN

T: +372 612 3705

F: +372 612 3726

E-mail: keskkriminaalpolitsei@kkp.pol.ee

Web: http://www.politsei.ee/

Read the information provided on our Organised crime page.