Estonian government threatens to terminate railway privatization

burkhardt.jpg
The Baltic Times, TALLINN
By Kairi Kurm
Apr 26, 2006

The government has approved a proposal to terminate the privatization of Estonian Railway, claiming the invester has failed to meet its obligations. The decision amounts to a final warning for Baltic Rail Services, the private company that owns 66 percent of Estonian Railway and has been at loggerheads with the government for several months now. The company is likely to be given 60 days to meet its commitments, or else it will be stripped of ownership.

The Ministry of Economy and Communications came forward with the proposal on the basis of several grave breaches in the privatization agreement.
“BRS’s behavior up to now shows that it does not take the state as a serious contract partner. They have followed the privatization contract only as much as they please,” Anu Hallik-Jurgenstein of the Economy Ministry’s public relations department told The Baltic Times.
“BRS said the privatization contract should be handled as a document that changes and develops over time, which should not be followed or completed in a random way. For this reason, it is inevitable that the state will be forced to get their contract partner in order,” the spokesman added.

The ministry also stated that Baltic Rail Services violated the agreement by pledging 6 percent of Estonian Railway’s stock as collateral against bank loans without the government’s consent, and has taken the ministry to arbitration court over the so-called golden share that the state owns.
Officials from BRS, who are trying to sell their stake in the company, blasted the ultimatum, saying Estonia now has its own Yukos, referring to the Russian oil company that has been systematically dismantled by the Kremlin.

“Yesterday evening [April 20], Estonia got its own Yukos,” said CEO Edward Burkhardt in a press release. “Certainly the Estonian government’s actions are a direct parallel to Russia’s treatment of Yukos shareholders, but this is happening in a nation that claims to have renounced its Soviet past.”
He added, “Of course, we do not believe that in a European Union member state such actions will be successful, but the panic-driven and uncivilized intent of the government is clear – to make a populist argument and to turn private investors into enemies in an effort to cover up its own mistakes.”
Burkhardt defended BRS’ performance as chief operative of Estonian Railway for the past five years. “This privatization has met every objective set forth by the government. Most importantly, they have cleaned up the pervasive internal corruption that existed during the period of state ownership,” he said.
Burkhardt went so far as to claim that the government was carrying out the interests of the Russian transport company Severstaltrans.

The state owns 34 percent of Estonian Railway. Edgar Savisaar, the economy minister who has spearheaded the government’s hard-nosed campaign against BRS, stressed that termination does not mean nationalization. “The owners of the company will be paid the full price of their holding, consisting of the sum paid to the state for the stake plus the investments made in the company. Payment to make up for price rises in the meantime in a justified amount will probably also be made.”
If BRS contests the contract termination with the Stockholm Court of Arbitration, a legal battle lasting for two to three years, or even longer, can be expected, the Economy Ministry predicted. The majority stake would remain in BRS’ possession for the duration of the court proceedings.
BRS stated that, according to agreements between itself, the state and Estonian Railway, the only way to settle differences is through the Stockholm Court of Arbitration. “BRS and Estonian Railway cannot accept a one-sided rescinding of agreements, and intend to force the state to accept responsibility damages to investment and other damage caused by its irresponsible and unlawful acts,” the company said.

Burkhardt said he was confident the plan to terminate the privatization wouldn’t succeed.
According to BRS board member Juri Kao, the Economy Ministry is in a panic due to a number of mistakes made in relation to the rail company. “The minister’s [Savisaar’s] proposal to nationalize the railway is colored by emotion and cannot be carried out in reality,” he said.
He explained that the ministry has ended up in a highly embarrassing situation, characterized by vital mistakes and violations of EU law, international agreements and domestic legislation. “The minister is trying to come up with new topics in a rush, but unfortunately many of [his] statements contain false information,” Kao said.
MP Meelis Atonen, a former economy minister and former member of council at Estonian Railway, questioned the judgment of BRS executives.

“Unfortunately the owner of Estonian Railway has not understood that Estonia is a European country and, since 2004, a member of the European Union. They expected a comparatively aggressive change in orientation from European railway regulation to an American one,” he told The Baltic Times. “In this situation, the state can not do much besides terminate the privatization contract.”
Meanwhile, a leading daily, Eesti Paevaleht, claimed that the real reason for the move lies in a report by the Security Police and Information Board, the agency in charge of foreign intelligence, claiming that Estonian Railway could fall under the control of Russian investors.
Among investors interested in acquiring BRS’s majority holding in the rail company are Transgroup Invest, a company with a Russian background that owns the coal terminal at the port of Muuga, and the Russian investment company Prominvestors (Industrial Investors) owned by Sergei Generalov.

Defense Minister Jurgen Ligi hinted to Eesti Paevaleht that the security police report drew attention to various risks in the event that Eesti Raudtee passed under Russian control.
Regarding Sevelstaltrans, a Russian company that owns Starman, the rail freight operator that has locked horns with BRS, Burkhardt said the state’s support was manifest in its refusal to allow BRS to revalue Estonian Railway’s assets.
If, for example, Estonian Railway could raise the value of its assets to 6 billion kroons (383.4 million euros) as desired by private shareholders, this would raise fees that rail operators providing goods carriage services on Estonian Railways’ tracks have to pay. This would cut Severstaltrans’ operational profitability in Estonia, Burkhardt said.
The present infrastructure user fee is half of what is reasonable, he said, adding that Estonian Railway would survive for a few years under such conditions but eventually it will start telling on the quality of infrastructure.

According to Burkhardt, the close ties between the government and Severstaltrans are also evidenced by Severstaltrans chief Andrei Filatov’s advice that Baltic Rail Services should sell its 66 percent holding back to the state of Estonia.
Private shareholders of Estonian Railway have reportedly filed a 5 billion kroon (319.5 million euro) claim in Washington against the state of Estonia, a suit that Savisaar calls artificial and preposterous.

Source: http://www.baltictimes.com/news/articles/15208/

Ilves versus Savisaar in presidential poll?

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The Baltic Times, TALLINN
By Kairi Kurm
Apr 19, 2006

presidential jockeying is reaching full stride in Estonia. According to polls, most residents would like to see Social Democrat and European Parliament member Toomas Hendrik Ilves as the next head of state. At the same time, the third most favored choice is a person whose name isn’t even on any party list – the ubiquitious leader of the Center Party, Edgar Savisaar.

Meanwhile the incumbent, Arnold Ruutel, the second most popular choice, has yet to announce whether he will run for a second term. His candidacy has only been put forward by the People’s Union, while right-wing parties and the Social Democrats are desperate to grant Estonia a new president.

NEWS ANALYSIS

The People’s Union believes Ruutel still has until the end of summer to decide. Lea Kiivit, secretary general of the People’s Union, told Eesti Paevaleht that it was unfathomable why Ruutel, who turns 78 next month, should be under pressure to make up his mind.
“People with better political memory know that Lennart Meri informed the public in 1996 about his decision to run for the second term only in mid-August,” she said.
Ruutel did, however, provide some clarity last week when he hinted that he had no intention of running in the parliamentary round. And if lawmakers prove unable to elect a president, there will be another round via an electoral college. Ruutel said he had not yet decided whether he would enter the race at that point.

At the same time, the president, speaking to students at Tartu University’s Narva College, pointed to his age as one reservation. “I have lived quite a few years. It is nice when representatives of the younger generation are nominated and have the chance to be elected [in Parliament],” Ruutel said.
The favorite candidate, Ilves, argued that there was no sense in holding a debate if a candidate’s decision to participate was not clear. He said parties should think about Estonia’s image rather than try to outwit each other.
“Since, at the end of local government elections, the head of People’s Union Villu Reiljan said they had the necessary electoral votes, then their aim is probably to torpedo the elections in Parliament,” said Ilves.

In accordance with the Constitution, the president of the Republic shall be elected by Parliament, but if the legislature fails to grant two-thirds of the votes (i.e., 68 votes) for one candidate, the chairman of the Riigikogu (Estonia’s parliament) must convene an electoral body – comprised of members of the Riigikogu and representatives of the local government councils – to elect the president within one month. This is precisely how Ruutel, an outsider in 2001, came to power. And top Estonian politicians do not want history to repeat itself.

White horse

Savisaar, who is minister of economy and communications, has so far not announced whether he will run in the presidential elections. “When Lennart Meri was asked whether he would run for a second term, he said he would reply to the question 24 hours before the elections, and no sooner,” Savisaar told the daily Postimees. Still, if Ruutel should decide not to put forth his candidacy, support for Savisaar would likely rise. A poll carried out by the daily Eesti Paevaleht shows that Savisaar would receive 14 percent and Ilves 6 percent of the pro-Ruutel vote. According to the same poll, 35 percent of respondents would back Ilves, 24 percent Ruutel and 11 percent Savisaar. “I don’t know what happens if Ruutel should decide to step down,” Savisaar confessed to Eesti Paevaleht. “But I know what happens if we both run at the same time. In this case, our votes will disperse mutually, and a third candidate would cut through the two of us nicely – just like a knife through butter. In this sense, running at the same time is neither useful for me, nor him.” Estonians support Ilves for his language and communication skills, which would enable him to better represent Estonia in the international spotlight. Savisaar, however, believes these qualities are not important for a future president. In his words, the main tasks of the president are “to maintain the nation’s confidence, state power and the president’s institution. I have seen one president whose support was very strong all over the world. It was Mikhail Gorbachev, who was friends with Bush, Chirac and other heads of nations, but who, at the same time, drop by drop, lost the credit of his country until he was left without any faith.” “Then he became King Lear, who was walking on an empty beach with no one to rely on. For this reason, I do not take the argument that we need a president for the outside world seriously,” Savisaar said. The main difference between Ilves and Savisaar is their approach to Estonia’s relationship with Russia. Savisaar has been accused several times for working on behalf of Russian interests, while Ilves has sometimes recklessly suggested ignoring Russia’s demands.
Source: http://www.baltictimes.com/news/articles/15150/

Tallinn’s new broom sweeps in own style

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The Baltic Times
Interview by Kairi Kurm
Apr 12, 2006

Juri Ratas is a loyal, enthusiastic Center Party politician with a sharp sense of humor. At the age of 27, he is the youngest mayor in Tallinn’s history. Initially, many were skeptical that this young Centrist could handle the responsibilities of city mayor, but Ratas has proved himself over the months. He has won the respect of many politicians for his ability to compromise and his dogged determination to turn things around in Estonia’s capital.

When you took the post of city mayor in November 2005 your aims were probably already set. What goals have you achieved that you’re proud of?
Can one achieve something in four months? (shows pictures of previous mayors, one of whom held the post for 10 years). We spent a lot of time on a new budget. Usually, the opposition does not approve the budget the first time round, but this time they did.
Every city mayor has to be a visionary, and one of our aims this year was to receive the title of European Capital of Culture 2011, which we did. The city has also proposed the idea of creating a ‘Green Capital of Europe.’ One of our main goals when joining the EU was to speak out for better cooperation. This – and the Estonian city in Europe – is one of the initiatives we want to start.
One of Tallinn’s main goals is to get hazardous cargo out of the city in order to protect our living environment here. We also plan to improve the highway that takes visitors from the airport to the city and open our seaside to citizens. Tallinn’s seaside area spans 46.2 kilometers, 30 of which can be opened for a walkway. The remaining 16.2 kilometers could open in the future.
We’re definitely going to solve the question of forced tenants. (Thousands of Tallinn residents have received the status of forced tenants when the houses they inhabited were returned to pre-war owners – ed). We plan to build new municipal flats for these people. A program adopted in 2002 has proposed establishing 5,000 new flats. When we look at municipal funds in other cities, such as Helsinki and Stockholm, the amount is much bigger.
Generally speaking, Tallinn should be a good place to live for citizens and a good place for our guests.

Many tourists agree that Tallinn is a nice city, but they are astonished by the poor conditions of its roads. Why hasn’t the city been able to repair them? Are you waiting for European support?
Tallinn has gained very little EU financial support for repairing city roads. This year we received some support for the analysis of our mainland connections. We also received funds for the construction of a waste dump. We are currently applying for funds that will go toward the reconstruction of various road crossings.

Going back to opportunities for the so-called forced tenants, many citizens are disappointed by the price of the flat given to them. Some cost only 1,000 euros, for example. Compared with the privatization opportunities back in the early ‘90s, the ratio of real estate prices to salaries is not so favorable, some argue.
Why shouldn’t these people be disappointed that they weren’t given the opportunity to privatize their flats like most of us did? We analyzed this situation and found that today’s calculations are based on those of the ‘90s. These are not set by the local government but are decided on the governmental level. This inequality has to come to an end. There are over 2,000 forced tenants in Tallinn, and we seriously want to find a solution to this problem by 2008 at the latest. In comparison, there are over 11,000 such people in Riga.
A home is something you cannot play games with. After we have solved this issue, we will start a new municipal construction plan to support young families. We are not planning to privatize flats, but rent them out on more favorable conditions.

Edgar Savisaar, head of the Center Party, has a lot of fans and a lot of enemies at the same time. How would you describe him? What makes him so popular?
He is certainly a person there is a lot to learn from. I think he is popular for what he has done.

When Savisaar received the most votes in Tallinn’s local elections, he could not decide for a long time whether he would continue as minister of economy or take the post of Tallinn mayor. Is it possible that he has continued managing the city through you, as a loyal and young politician?
(Goes to the cupboard and opens the doors) Do you think Savisaar is here? First of all, the idea that Savisaar sits in some city government cupboard, where I go to get advice from him, is not true. Secondly, when the Center Party had 32 seats on the City Council, then our party leader was the minister of economy. He has done his job well. If we compare the local municipality budget of road construction, it has increased by more than two times compared with previous years. Of course the decisions of a minister have helped the heads of local municipalities. Take changes in the legislation of forced tenants for example.

None of the other parties wanted to join the coalition after the last elections in October. How does the situation differ today?
The Center Party is in a coalition with civic residents. We have to run the city so that it becomes better for citizens. I am not a Center Party mayor, but a city mayor, and I have to see things from a wider perspective. As deputy mayor, I gained experience from being in a coalition with the Reform Party and Res Publica. There are many pros and cons. The main thing is to maintain stability.

A vote of no-confidence was launched against you at the end of March. One of the reasons was your decision to buy property on Harju Street for a price that, according to the opposition, was two times more expensive than the market value of 75 million kroons (5 million euros). Can you briefly explain this decision?
This can not be explained briefly. This property has 62 years of history, and for the last 19 years we only see the ruins. When we walk there with our kids, they ask when the war ended. They ask if it was last year. The bombing of this property was 62 years ago. A city that belongs to the UNESCO World Heritage site can not have ruins. These have to be covered up.
Generally speaking, we have not initiated a city government that reads news from the computer and feels comfortable. We have to find solutions to problems. We have to think about alternatives here, why such a solution was decided. One alternative is to keep these ruins; another one is to build something on top, but our society cannot come to an agreement on this. We can have greenery that is pleasant for everyone. Talking about the cost of the deal, the negotiations lasted for two years and started with a 330 million kroon offer. The city won 180 million kroons from its initial offer. The opposition claims that the price should have been 75 million kroons. Private property is holy and immune. The city cannot dictate its price. Besides, the price of 75 million kroons is based on the cost of property a couple kilometers outside Old Town. These areas are not comparable.

Talking about real estate, former Mayor Tonis Palts banned the construction of so-called ugly buildings. The Viru Hotel owners, in their plans for an expansion near the Old Town, were hoping that the new City Council would accept their proposal.
We have not given them permission. The city has asked an opinion from UNESCO, according to which Tallinn has to preserve its Old Town and its surroundings. We have to proceed from here, and we should protect our Old Town, as a cultural capital.

So Tallinn has been nominated as European Capital of Culture 2011. What does it mean?
The idea originated from Greece in 1983 when its minister of culture called together its colleagues from Europe. They decided that Europe needed to place a higher value on culture. Two years later, Athens was the first Culture Capital. In a few years, it will be Tallinn’s turn. Tallinn competed for this honor against four other Estonian cities. In the end, the Republic of Estonia chose Tallinn as its candidate. There will be another city from Finland, which hasn’t been chosen yet, that will also bear the name of European Culture Capital 2011.

What about this idea of Tallinn as ‘Green Capital of Europe?’
The main aim is the same. We should pay more attention to our environment. We can never pay too much attention to the environment. Tallinn should be a city that has done something great in terms of ecology. Just like those ministers who gathered in 1983, we plan to call all city mayors to Tallinn on May 15, during the Old Town festivities, and sign a joint plea to the European Commission to proceed with this idea. I have met several city mayors, and already have their support.

Source: http://www.baltictimes.com/news/articles/15112/

Estonia’s future niche for production

The Baltic Times, TALLINN
By Kairi Kurm
Apr 12, 2006

Over the past five years, Estonia has seen a record number of industrial parks develop across the nation. Some are supported by the local government, while others are privately owned. Yet all are becoming an increasingly affordable option for production and warehousing, with some land plots being sold at below market price. As Lasnamae Industrial Park board member Rein Pinn explains, “Since we sell production areas under the market value, we want to know exactly what business projects are planned and how many jobs will be created. We have a social orientation.’’ And although this mentality doesn’t apply to all of the Baltic state’s industrial parks, it shows that business development and production are clearly headed for new horizions. Here are a list of some of Estonia’s biggest projects.

One of the first industrial parks set up in Estonia was the Tanassilma Technological Village, which the Saku city govenrnment established in 2002. At the time, land in this area cost 550 kroons (35 euros) per square meter. Today, said project manager Tonu Soodla, there are no spare plots available. But there are plans to open up another five hectares of land for production this fall.
Tanassilma Tehnological Village http://www.tehnopark.ee

The plots at Lasnamae Industrial Park, which is the only park in Estonia owned entirely by a local municipality, cost approximately 800 kroons per square meter. According to Rein Pinn, board member at Lasnamae Industrial Park, this price is 400 kroons cheaper than market value. Only three out of 18 plots are vacant, and there has already been interest in these few.
Lasnamae Industrial Park http://www.ltp.ee/eng.html

The Parnu Production Park, located outside Parnu City, costs four times less than the park in Lasnamae, or 220 kroons per square meter. According to park manager Margus Joonas, the facility’s prime location near Parnu Port and proximity to mainland road connections are its most valuable attributes.
Parnu Production Park http://www.idakinnisvara.ee

The Tartu Ulenurme Technopark, located near the main Tallinn-Tartu-Luhamaa road, is the biggest in Tartu. The cost of land, which includes gas, electricity, water supply, new roads and lighting, is 350 kroons per square meter. Half of the plots have been sold, but dozens of new ones are planned for the park’s second stage of development.
Ulenurme Technopark http://www.bpe.ee

At Johvi, located 50 kilometers from Estonia’s eastern border, the local municipality has created one of the Baltic state’s most modern industrial parks. Located at the junction of two international highways and near the Sillamae Port, the Johvi Industrial Park is a good start for companies looking to head east.
Johvi Industrial Park http://www.jtp.ee/?lng=eng

In terms of transit business and water transportation facilities, Muuga Industrial Park is Estonia’s most interesting option. With 75 hectares of land and quick access to Muuga Port, the industrial park was an instant success. Each land plot has been given a 50-year leasehold for a price of 50 kroons per square meter.
Maardu Industrial Park (Muuga) http://www.kcgrupp.ee

Besides creating comfortable opportunities for companies to purchase real estate, some local governments focus on supporting knowledge-intensive companies. The Tartu Science Park and the Tallinn Technology Park are two such examples. Both facilities offer companies the opportunity to lease inexpensive offices and receive development support.
Tartu Science Park park.tartu.ee/eng/ and Tallinn Technology Park www.tehnopol.ee

Source: http://www.baltictimes.com/news/articles/15124/

Fight continues over priceless national asset

The Baltic Times
By Kairi Kurm
Apr 05, 2006

Government officials are not disturbed by fresh arbitration court papers that could result in a fine of 1 billion kroons (64 million euros) to the government for violating a contract with Baltic Rail Services, the private owners of the Estonian Railway. “The U.S. firm NRG Energy threatened us the same way, but we won the case,” said Heido Vitsur, economic advisor to Edgar Savisaar, minister of economics and communications, who is embroiled in a conflict with Baltic Rail Services.

Edward Burkhardt, CEO of BRS, told The Baltic Times that he saw no similarity whatsoever with the NRG case.
“The state is entitled to their opinion as to the likelihood that they will win, but they are playing a dangerous game with voters’ money, simply to pander to the interests of the Russian transit oil people, while in the meantime the railway infrastructure is going downhill,” he said.

Burkhardt, who leads the group of individuals that bought 66 percent of BRS in 2001, has not minced his words when criticizing the current government, which has hit BRS with a fine for failing to meet privatization obligations.
“The minister [Savisaar – ed], with the evident support of the prime minister and the governing coalition, has placed at risk a priceless national asset, the railway infrastructure, in exchange for favors from his Russian friends,” Burkhardt said. “Additionally, he has exposed the state and the Estonian citizens who pay the taxes to a risk of huge claims being progressed by the BRS shareholders through international arbitrations.”

According to Burkhardt, there’s been no specific claim presented in any of the court or arbitration cases being progressed, but if there were, these would be confidential.
As he explained to The Baltic Times, “As a measure of damages being incurred each year, consider that Estonian Railway has calculated a proper track access charge to average 32 kroons per ton while the minister has established a charge of approximately 16 kroons. Multiply this difference by 45 million tons of freight each year, and you will come up with an approximation of the transfer of money from Estonian Railway to the Russian transit interests that will be ultimately claimed from the state.”

BRS offered to sell its 66 percent stake in the railway back to the state for 2.5 – 2.6 billion kroons at the end of December, but the state balked, saying it did not want to spend more than 2.1- 2.2 billion kroons for a stake that it sold for approximately 1 billion kroons five years ago.
Most of Estonia’s political parties agree today that Estonian Railway’s privatization was a mistake, and that the rail infrastructure should remain in state hands.

In Burkhardt’s words, the state never made a firm offer, so it was doubtful that money offered was anything more than talk. Talks between the two sides were terminated once it became clear that the state was not a serious buyer, he said.
According to Vitsur, the disagreement derives from a U.S. investor trying to adapt American railway policies and accounting to EU standards. “Our standards are in accordance with EU regulations, not American ones,” said Vitsur.
Burkhardt disagrees. He said that railways in both locations run on tracks, serve customers and are managed similarly. Railways in the United States use U.S. GAAP (Generally Accepted Accounting Principals), while in Estonia they use IFRS (International Financial Reporting Standards), he explained.

“The state, Estonian Railway and BRS agreed we would use IFRS, and that is what we do, and our independent auditor has certified the results,” he said.
Still, shareholders of Estonian Railway failed to approve the company’s annual report for both 2005 and 2004 after state officials refused to confirm the re-evaluation of fixed assets. Savisaar said he could not endorse last year’s report since it had been carried out in a manner and on a scale “not consistent with the principles of understandability and objectivity.”
The report, which was compiled by the railroad company’s private owners, reportedly increased the company’s assets from 2.5 billion to 6.1 billion kroons (160 million to 394 million euros).

Burkhardt lashed out at Savisaar’s reasoning. “It’s interesting to see Savisaar’s comments. The reports are made entirely consistent with International Financial Reporting Standards and have been certified by Deloitte, our auditor. I would say that Deloitte and Estonian Railway’s financial staff are considerably more competent in areas of accounting ‘understandability and objectivity’ than is the minister and his staff,” he said.
Furthermore, he said that two other audit firms, KPMG and BDO, reviewed the company’s accounting, and specifically the asset revaluation carried out in 2004, on the minister’s request, and found the methodology to be proper under IFRS.
The asset revaluation in 2004, according to Burkhardt, was 3.8 billion kroons, bringing the net value of Estonian Railway assets to 6.2 billion kroons.

“Heavy investment in the years since privatization would have also contributed to an increase in total value,” Burkhardt said. “I suspect that an equivalent investment in Tallinn real estate over the same period would have yielded a larger increase in value, and certainly our revaluation was small indeed when compared with the electric and telecom revaluations.”
He argues that all Estonian utilities, including telecom and electric companies, use revalued asset basis in calculating their charges. “If they didn’t, there would be no financially viable electric or telephone service in Estonia, just as there is now no financially viable rail infrastructure,” said Burkhardt.

Burkhardt believes the real problem was that the minister did not like the results, particularly because the auditors had all approved the revaluation. “Since the minister is pandering to Russian oil transit interests and has committed to them to keep access changes at low levels and increase profits, he doesn’t want the revaluation to take effect, and his weapon is to continue to vote the state’s shareholding against approval of the accounts. This matter will get settled in arbitration in Stockholm eventually,” said Burkhardt.
BRS and the state representatives will meet at an extraordinary shareholder meeting on April 5.

Source: http://www.baltictimes.com/news/articles/15053/

Baltic’s grand port of Tallinn continues to dominate

port.jpg
The Baltic Times, TALLINN
By Kairi Kurm
Apr 05, 2006

The rise of intense Russian competition has forced Baltic ports to adjust their development strategies – often radically and on the fly – in order to retain their market share. With 12 percent of the cargo traffic in the Baltic Sea/Gulf of Finland region, Port of Tallinn is the third largest, but its managers know that they will need ingenuity and resourcefulness to maintain that position.

Last year, the combined market volume of the Baltic Sea’s eastern coast was about 328 million tons, 39.5 million of which were handled through Port of Tallinn.
Fast cargo growth continues in Russia’s ports, as political restrictions favor a transfer of goods through national ports and pipelines by setting higher railway tariffs on foreign exports. Heido Vitsur, the Estonian minister of economics and communications’ economic advisor, believes that tariffs will equalize once Russia joins the World Trade Organization.
“When railway tariffs equalize, new opportunities will open up for Port of Tallinn,” said Vitsur. “Estonia should gain a competitive advantage on the market with a better service and expenditure level.”

Along with growth of global oil production, the harbor expects an improvement in trade from Russia.
Port of Tallinn showed a 6 percent increase in cargo volumes last year, despite intensifying competition from Russian ports (St. Petersburg and Primorsk). Liquid cargo made up 66 percent, dry bulk 20 percent and rolling stock 8 percent. But this structure is likely to change.
“The company is planning to decrease the large dependence on liquid cargo and increase the share of container traffic,” said Vitsur.

This is also Muuga Port’s main drive, Ratassep added.
In terms of passengers, Tallinn is far and away the regional leader. In fact, Port of Tallinn is the third largest in north Europe after Southampton and Copenhagen.
“The Tallinn Port is ice-free all year round and does not require regular deepening. Unlike in Latvia and Lithuania, our ports – especially Muuga and Paldiski – have the potential to expand and develop. We are planning to increase the area of Muuga port by 50 percent in a five-year perspective,” said PR manager Sven Ratassepp.
What’s more, Port of Tallinn owns four smaller ports: Vanasadam (Old City Port), the passenger terminal located in the center of Tallinn, a commercial port in Paljassaare, Muuga Port and Paldiski South Port. In 2006, another terminal is planned to be opened in Saaremaa for cruise ships.

In terms of passenger traffic, 7 million people passed through the ports of Tallinn last year, which is a 4 percent increase. The ferries take passengers to Helsinki, Stockholm, Kapellskar, Rostock and St. Petersburg. But no high growth is expected in the near future, said Ratassepp.
“Our main task is to serve line passengers in the best possible way. We cannot influence growth much. It is the opposite regarding the cruise ships – here Port of Tallinn itself introduces Tallinn as a city of destination to international cruise operators and you see the results,” he said.
The number of cruise passengers increased by 22 percent to 250,000 in 2005, and a 10 percent increase is expected this year due to the opening of a harbor on Saaremaa Island.

According to Ratassepp, cruise passengers come mainly from the United States, United Kingdom, Germany, France and Italy. But he also said the share of tourists from Asia and Africa is increasing.
In 2005, Port of Tallinn consolidated net turnover increased by 7 percent to 72 million euros, mainly thanks to an increase in port dues and rental income. The company’s operating margin dipped slightly below 50 percent, leaving its net profit around 26 million euros, most of which were paid as dividends to the government.

Source: http://www.baltictimes.com/news/articles/15064/
Port of Tallinn http://www.ts.ee/

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