Weighing investment opportunities in Estonia? Kairi Kurm enlists three investment specialists to offer their advice.
Maris Lauri, analyst at Hansapank:
It is difficult to say what sectors are most promising since sectors depend on the general economic stage. Why have investors invested a lot in light industry and other Western-oriented exporting companies? It is because our labor is relatively cheap and we are closer to market. In Southeast Asia, labor is cheap but transportation to Europe is expensive.
Wood processing and other related activities like furniture production, for example, are [good] due to the local wood, the Russian market and a big number of companies. The problem about the wood processing sector is a crisis on the world market and declining prices, which means that this sector is not as profitable as it was a year ago.
A lot has been invested in the electronics enterprises. Machines and equipment are making a bigger share in exports, about 25 percent to 30 percent. The banking sector, which is one of the most advanced among Central and Eastern European countries, has attracted a lot of investments, especially from Scandinavia.
As an intermediate point between the West and Russia, Estonia has a fast developing transport sector. Although it has already got a lot of foreign investments, a lot is still needed and expected.
Investments are done for different purposes, some are long run and others are short run. Some invest in disadvantageous companies, as they expect a market for them in the future.
The food industry was a promising sector a year ago but is now out of the game as Russians have lost their purchasing power. Some other have also suffered.
Agu Remmelg, director of the Estonian Investment Agency:
We can approach this question from different standpoints. Which economic sector has the biggest potential, which markets are easily accessible, or when do costs play the most important role in an investment decision?
Wood processing is the best choice, as Estonia has its own wood resources and its sawmill industry is well developed.
The other attractive sector is electronics, engineering and the tool industry. Also, the plastics industry, which is related to electronics, and includes the production of plastic parts for mobile phones. Big industrial groups like Electrolux, Ericsson and Nokia are quite close to Estonia and offer perfect contracting opportunities.
In terms of services, transport, transit and logistics are very good due to the country’s good geographical position. More emphasis should be placed on value added logistics. We can for example bring big quantities of products to Estonia and then start packing them according to the specific needs of each country. Distribution of goods can effectively be made not only between East and West but also between North and South.
In the future I see that telecommunications sector has to be developed since the concession agreement with Estonian Telekom ends at the beginning of the century. Info-technology has good potential. Estonians are big Internet users and well-educated in this field.
Marek Lepamets, analyst at Uhispank:
There are many sectors in Estonia that need to be developed. Our labor is cheap, and thus light industry is doing well. Finnish labor unions are getting more nervous about that and one day we may have a situation where unions demand an increase of the wages of the Estonian subcontractors.
More emphasis should be put on high technology industries to make Estonia a more developed country that is able to produce something of its own and prevent well-educated engineers from going abroad.
Wood is one of the biggest resources, and thus wood processing has big potential. Not only wood cutting and pulpwood, but also wood processing with increasing surplus value.
Filed under: Foreign investment