Foreign investments

Sound and liberal economic policies and excellent business climate has ensured a continuous growth of foreign direct investment (FDI) into Estonia. During the last 15 years Estonia has been one of the leading countries in Central and Eastern Europe in terms of inward investment per capita.

Numerous foreign companies have found Estonia to be a highly attractive location. Companies partly or wholly owned by foreigners account for one-third of Estonian GDP and over 50 percent of the country`s exports.

The general trends in foreign direct investment inflows can be summarized as follows:

  • during 1995-1996 the majority of the foreign direct investments were privatization-related;
  • there is an increase in terms of reinvested earnings since 1996 which was 66% of the total annual inflow of FDI in 2007;
  • there is a trend towards increasing share of cross-border acquisitions;
  • the share of greenfield investments has grown slowly as well.

FDI-flows into Estonia 2005 – 2007 (million EUR)

 

2005

2006

2007

Foreign direct investment in Estonia

2,254.5

1,341.0

1,815.3

Equity capital

1,786.9

147.2

265.9

Inflow

2,277.2

743.9

1,006.2

Outflow

-490.3

-596.7

-740.3

Reinvested earnings

524.8

911.1

1,215.2

Decrease

-570.0

-600.8

-722.6

Increase

1,094.8

1,511.9

1,937.8

Loans (net)

-53.0

320.0

264.3

Claims

-127.5

-247.9

-436.0

Liabilities

74.4

567.9

700.3

Other capital

-4.2

-37.4

69.9

Source: Bank of Estonia

FDI by Activities and Countries

By the end of June 2008, the cumulative stock of foreign direct investment in Estonia amounted to EUR 11.76 billion. 32.9% of those FDI has been invested in financial intermediation, real estate, renting and business activities followed with 27.5% and manufacturing with 14,4%.


FDI Stock by Activities as of 30 June 2008

Source: Bank of Estonia

The Scandinavian countries are the biggest source of foreign direct investment in Estonia. Sweden tops the list of investing countries with 39% of the total, followed by Finland with 23.9% and the Netherlands with 7.4%.

 

FDI Stock by Countries as of 30 June 2008

Source: Bank of Estonia

 Regional Distribution of FDI

Tallinn and the counties surrounding the capital continue to be the most favored areas for foreign direct investment in Estonia. However, a number of other regions have experienced increasing interest with major investments being made e.g. by Estonian Cell, (pulp production, Lääne Virumaa) and Wendre (textile production, Pärnumaa). Also the Ida-Virumaa region has attracted an increasing amount of FDI relating to its traditionally strong position in heavy metal and minerals industry.

Legal Framework

Estonia does generally not apply any restrictions or limitations on foreign capital invested into Estonia or its repatriation. (There are some special requirements though, when a foreign investor wishes to acquire land in excess of 10 hectars.)

To encourage companies to expand their businesses, all corporate reinvested profits are exempted of income tax since Jan 1, 2000. However, any distributed profits, for example dividends, are taxed at a 21% rate.

Source: Estonian Investment and Trade Agency www.investinestonia.com

Read more: Are there any restrictions?, Sector reviews

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

%d bloggers like this: