Exhibition company to quit stock exchange

The Baltic Times, TALLINN
Jul 29, 1999
By Kairi Kurm

Eferelt, the majority owner of the Eesti Naitused exhibition company, wants to buy up to 20 percent of the company’s stock from smaller shareholders and quit the Tallinn Stock Exchange.

The Eesti Naitused management said it wants to finish quotation on the secondary list because less than the necessary 25 percent of shares are held publicly and the company’s majority shareholder does not intend to increase the volume of publicly held shares.

“The share capital of Eesti Naitused is unreasonably large and there is no reason to issue any additional shares to the shareholders,” said Helle Kallas, financial director at Eesti Naitused

As of July 19, Eferelt held 62 percent of the shares in Eesti Naitused and intends to increase its holding to 82 percent of share capital.

It offered to buy the necessary stock at 12.5 kroons ($0.81)per share, which is 20.4 percent higher than the share’s average close price on the Tallinn Stock Exchange during the last six months. The amount to be paid by Eferelt for the offering will be about 7.9 million kroons.

According to the preliminary information, the purchase offer will be valid from July 26 until Aug. 23.

The purchase offer does not include the 18 percent of outstanding shares held by the Baltic Republics Fund.

Eferelt does not intend to make substantial changes in the business activities of Eesti Naitused, which will continue organizing exhibitions, fairs and seminars, and executing selected strategic plans.

The net sales of Eesti Naitused amounted to 46 million kroons last year and the net profit reached 9.5 million kroons. For 1999 the company predicts 38 million kroons in net sales and 6 million kroons in profit.

Source:  http://www.baltictimes.com/news/articles/2237/

State supports agriculture insurance

The Baltic Times, TALLINN
Jul 29, 1999
By Kairi Kurm

After last year’s poor harvest forced the government to pay 227 million kroons ($14.8 million) in compensation to 13,000 farmers, the Agriculture Ministry this year decided to focus on crop and livestock insurance instead.

The idea of offering insurance to farmers came from the ASA Kindlustus company in 1997.

“They started the research and worked out the system at the beginning of last year. At the end of last year the government started to think about it,” said Olavi Petron, a specialist from the Agriculture Ministry.

“The aim of supporting insurance claims is to support insurance activities and to make farmers decrease their risks. This is much cheaper for the government,” said Petron.

At present five insurance companies have applied for insurance support from the ministry: Balti Kindlustus, Eesti Kindlustus, Leks Kindlustus, Nordika Kindlustus and Salva Kindlustus.

The ministry should compensate a certain percentage of the size of insurance premiums to farmers. The maximum compensation can be 40 percent, and as of July 20, the ministry had paid out 388,226 kroons in insurance support.

The total value of premiums under the insurance agreements concluded by farmers who sought support from government was 970,566 kroons. Farmers placed 118 applications for support from a total of 130 policies, 15 of which were for crop insurance and 115 on livestock insurance.

According to Petron, the reason for the smaller number of crop insurance policies, and hence claims, may be due to their high cost as well as a legal requirement that only a corporate body can apply for crop failure support.

Petron said that the cost of the insurance may become cheaper one day if more people buy it.

He said that the new system of supporting insurance cannot be taken as supporting the insurance sector in general, because he believes that the insurance companies will have big losses from insuring farmers for the first five or six years.

Mihkel Uibopuu, insurance director at Eesti Kindlustus said that the profitability of their new product depends on the development of the agriculture sector, which he is not optimistic of in the near future.

Eesti Kindlustus is the biggest supplier of agricultural insurance in Estonia. Uibopuu said that agricultural insurance forms only 0.3 percent of the total insurance portfolio of the company.

Source: http://www.baltictimes.com/news/articles/2235/

Estonia reforms social tax system

The Baltic Times, TALLINN
Jul 22, 1999
By Kairi Kurm

The Estonian government will propose that all employers should raise their employees’ wages by 8 percent to prevent a drop in income after the obligatory endowment pension is introduced.

When the endowment pension system is implemented in 2001, the part of social tax paid by employers into the state pension insurance budget will decline from the present 20 percent to 12 percent. The remaining 8 percent will have to be paid by the employee into an endowment pension fund of his choice. The pension sums are income tax free until they are withdrawn from the fund.

The government does not intend to change the present social tax rate to carry out pension reform. At present, the employer pays the 33 percent social tax. From the social tax, 20 percent goes to the social budget and 13 percent to the health insurance budget.

After the new system is implemented, 12 percent paid by the employer will be paid into pension insurance and 8 percent paid by the employee will go into the obligatory endowment pension fund. The third pillar of the reform is voluntary pension insurance payments into pension funds which have already been founded.

The government is planning to hold trilateral talks with employers and trade unions to discuss the pension reform on Aug. 26 and it will also discuss the reform with international experts. The law may be brought before Parliament by September.

Raivo Paavo, chairman of the Central Trade Unions Association, said that the association views the new system positively, but a lot of work needs to be done before it can start to work. He said that the details of the new system will be available to the association before the trilateral talks are held.

“We have to be sure that the salaries will not decrease. We have to negotiate over the right percentage paid by the employee – whether it is 8 percent or 6 percent or even 4 percent,” Paavo said.

“The other question is what will the employer offer in return if its payment decreases? Will they offer any additional insurance like unemployment insurance for example? Can the government guarantee that the salaries of all employees will not decrease?”

Veiko Tali, a member of the social insurance reform committee, said that the 8 percent payment into an endowment pension is not a tax because the employee receives it back when he retires. The pension sum can also be inherited, said Tali.

He said private companies cannot be forced to raise their employees’ wages, but they will be forced to do it under the pressure of the labor market.

“The costs of the private company will not increase much after the 8 percent pay rise,” said Tali. “The employers have no reason not to increase wages.”

The new system also enables the government to collect more social tax from increasing payments.

“We can expect much higher pension sums in the future in absolute terms when everything will be working under the new system.” he said “The present generation is financing the present and the future generations. We are creating a more reasonable system.”

Source: http://www.baltictimes.com/news/articles/162/

Swedes, Estonians buckle up together

The Baltic Times, TALLINN
Jul 15, 1999
By Kairi Kurm

 With an idea to gain access to the Russian market, Sweden’s automotive safety system producer Autoliv Inc. is set to buy half of Estonian car-belt manufacturer Norma’s shares.

The two enterprises signed a memorandum of understanding July 6, under which Autoliv will acquire up to 50 percent of Norma’s shares.

Estonia’s Norma, a dominant seat belt supplier to the Russian vehicle industry, has been one of Autoliv’s licensees and is currently a components supplier to the Swedish company.

“Now we will do due diligence procedure, then we will conclude the payment agreement, and the agreement will be completed toward the end of August,” said Mats Odman, director of communications at Autoliv.

“The price of the deal will depend on due diligence and the vision of Norma’s management on the price of the share,” said Juri Kao, Norma Group�s board chairman.

The Estonian company’s marketing value according to its present share price of 29.90 kroons ($2.09) is above 400 million kroons, and Autoliv will accordingly acquire about 200 million kroons worth of shares, said Sten Sumberg, trader at the Suprema investment company.

The price of Norma�s shares has increased by 24 percent since the announcement of the negotiations with the Swedish company. The Securities Inspectorate noticed that the share price started rising before the deal was announced and it is now analyzing all the transactions.

Sumberg said the acquisition of the car-belt producer by Autoliv means primarily stability to Norma�s shareholders and increases the value of the share.

“Norma used to cooperate with one big unstable client, Russia. Autoliv enables the company to expand to the West and also to Central-Europe,” said Sumberg.

Last year Norma�s sales reached 483 million kroons, while the Swedish company’s sales amounted to $3.5 million. Autoliv has 60 wholly-owned subsidiaries and joint ventures with more than 20,000 employees in 28 vehicle-producing countries.

The Swedish company has expressed an intention to transfer the production of car safety belts and other components partly to Norma, and also to update the Estonian company’s equipment.

The Swedes said they are interested in expanding their seat belt business in Eastern Europe and Norma, with its long-standing relationships with the Russian car industry, offers such an opportunity.

“We see two possible scenarios,” said Odman. “We can start selling more products to Russia, the kind of products that Norma does not have. The other scenario is to use Norma as a supplier for certain products. We can also move the production from Western Europe to Estonia.”

Autoliv President Lars Westbers also sees good potential in cooperation with the Estonian company.

“As a global company doing business with all major car producers in the world, we should also be able to further develop Norma by better utilizing its production capacity and its capabilities as a components supplier,” he said.

Source: http://www.baltictimes.com/news/articles/114/

Money laundering to be hung out to dry

The Baltic Times, TALLINN
Jul 08, 1999
By Kairi Kurm

All shady transactions exceeding 100,000 kroons ($7,143) in cash and 200,000 kroons in noncash are being checked by the police since July 1.

The Estonian government established an anti-laundering data bureau after the money-laundering prevention act came into force at the beginning of this month.

According to the law, the anti- laundering bureau can stop transactions for 48 hours in order to receive an approval from court to confiscate shady assets.

“Forty-eight hours is a short time of course, but the international money-laundering convention, which was signed on July 2 will help in this matter,” said Arnold Tenusaar, head of the anti- laundering bureau.

Latvia and Lithuania have already merged with the international convention, which obliges them to fight against depositing and investing money which comes from illegal trading with weapons and drugs, terrorism and bogus trading.

“Until July 1 money-laundering was not a crime in Estonia, ” said Tenusaar. He said that there have been a few laundering cases in Estonia and these have mostly been related to international cases that Interpol has been dealing with.

“According to the new law all financial and credit institutions are obliged to identify clients dealing with over a certain amount of money. Sometimes there are several smaller transactions related to each other which have to be checked,” said Tenusaar.

Insurance and gambling are two of the most popular ways to launder money, according to Tenusaar.” Money comes in one way and is paid out the other way. Transactions exceeding 35,000 kroons, which are related to insurance, have to be analyzed.”.

Tenusaar will run the bureau, which employs two policemen and a banking specialist. The supervisory body of the central bank will also take care of money-laundering prevention.

Source:  http://www.baltictimes.com/news/articles/2408/

Hansapank changes interest calculation

The Baltic Times, TALLINN
Jul 08, 1999
By Kairi Kurm

Hansapank made some changes to the calculation of interest revenue, which is more favorable to the bank as well as the smaller clients of Hansapank.

According to the new order, Hansapank pays one-percent interest revenue a year on the average balance of the monthly account since July 1. Until the changes went into force, Hansapank paid 3 percent on the minimum balance of the account per month, if the sum exceeded 1000 kroons ($ 67).

Interest revenue is paid out once in a quarter. With the changes in the interest calculation, Hansapank starts paying out interest on all sums of money, which according to Raul Parusk, head of the retail department of Hansapank, is good news for most of the clients of Hansapank.

“Seventy percent of our clients did not receive interest when the minimum level was 1000 kroons. Those clients, who spent most of their payroll bank account win from the new order and those, who did not spend their money much and had a high minimum level on the account, will lose with the new changes,” said Parusk.

Hansapank will definitely win from the new rules, as the 3 percent rate from the minimum balance is actually equal to 1.49 percent from the average balance. Parusk said that Hansapank had to decrease the interest rate level due to the general decrease of interest levels in Estonia.

Interest rates have decreased substantially in Estonia during the last year. The interest rate for a term deposit in Hansapank has decreased from 13 percent in autumn to 7 percent. Interest on loan has decreased from 17 percent to 12 percent during the same period, said Parusk.

Uhispank, second biggest bank after Hansapank, has the same interest calculation system as Hansapank had before the changes on July 1.

Source:  http://www.baltictimes.com/news/articles/2402/

A new verse in the Song Festival

The Baltic Times, TALLINN
Jul 08, 1999
By Kairi Kurm

About every 10th Estonian took part in the 23rd Estonian Song Festival on July 3 and 4. Song festivals only come around every five years so few wanted to miss this.

Every Song Festival must have a dance festival. When 7,000 dancers turned the stage into a map of Estonia the stage seemed almost as crowded and packed as the stadium’s 11,000 seats, which were almost all filled.

According to Anu Tali, one of the most popular composers in Estonia, there is a simple explanation why everyone did not attend, money.

For some the answer is simpler, the folk tradition just is not for them.

“Who wants to listen to the boring songs and sit on the Song Festival grounds if the sun is shining on top of your head?” asked Businessman Rein Lang. “You can take your beer in a much more pleasant environment.”

But the pessimism has yet to hit the performers, 1,500 of whom came from abroad for the festival.

Estonian President Lennart Meri explained that although it is popular to say song festivals are not popular any more, they are still related to the heart, like the language, mind and love.

Tiit, one of the performers at the Song Festival has been giving thought to how to keep the sentiment filled holiday alive. He believes one of the recent changes, the addition of classical music is a step in the right direction.

“The professional singers and orchestras performing on the first day of the festival give more value to the festival. People can hear something new besides the traditional songs, something that is performed in the concert halls.”

Source:  http://www.baltictimes.com/news/articles/2392/

Finns break Eesti Telefon’s monopoly

The Baltic Times, TALLINN
Jul 01, 1999
By Kairi Kurm

Although the fixed-line monopoly Eesti Telefon and the Transport and Communications Ministry regard the services provided by the Finnish company Supertel as illegal, the company continues its operation on the Estonian market.
Supertel started offering an international long-distance service based on Internet technology after it had published ads in local newspapers in the beginning of June.
The company announced that its services allow savings of up to 83 percent of the price of the conventional service and has won thousands of clients during its first month of operation in Estonia.
“We predict to conquer 10 percent of the market. Our operations are increasing with a snowball effect,” said Ants Aasmets, a representative of Supertel Eesti.
The Transport and Communications Ministry said it will put an end to the Finnish company’s operation which it considers illegal.
“We have prepared a document which stops their operations at once. The minister will sign it this week,” said Edvard Saarma, head of the ministry’s communications department.
According to Estonia’s communications law, a company needs a license to set up and operate communication networks.
“They have established lines on the basis of other operators in order to offer long-distance calls. This is in conflict with the communications law, which in itself is a good argument to stop their operations,” said Saarma.
Supertel, however, claims it fully confirms with the Estonian law. Aasmets also stated that his company does not need a license for communication networks because it uses the networks of companies which already have a license.
Aasmets said the service offered by Supertel does not violate the terms of Eesti Telefon’s franchise either because the data communication signal is not converted into speech before it reaches Finland.
Connection through Supertel is made by calling the Supertel server, through which the desired number is then dialed as an ordinary long-distance telephone number.
“Even if they had applied for the license beforehand, they still would not have been able to offer long-distance calls before the end of next year when Eesti Telefon’s exclusive rights end,” said Saarma.
Aasmets claims that if the company was not sure about the right to start offering this service, they would not have started such an advertising campaign.
Saarma predicted that when Eesti Telefon’s monopoly ends the competition will become very tough and the Estonian company will have to decrease its prices.
“Estonian Telephone will not survive otherwise. It has to cover the costs of fixed-line development, but in terms of free competition it is not possible to subsidize one service with revenues from another service,” said Saarma.

Source:  http://www.baltictimes.com/news/articles/2039/

Upscale hotel opened in Tallinn

The Baltic Times, TALLINN
Jul 01, 1999
By Kairi Kurm

The Schlossle Hotel Group has opened its third hotel in the Baltics. The Park Consul St. Petersburg Hotel in Tallinn received its first guests June 17.
Following its concept to provide an alternative to large impersonal post-Soviet hotels, the Schlossle Group sets up its hotels in historic city centers of Tallinn and Riga.
The group also owns Estonia’s only five-star hotel, Park Consul Schlossle and is reconstructing the Ridzene Hotel in Riga.
�All three hotels are of a high quality and each unique in a different way,� said Paul Oberschneider, chairman of the Schlossle Hotel Group. “We really are catering to a completely different market group.”
Oberschneider said it was hard to do everything up to international standards because the hotel was set up in an old building that had to be reconstucted. The St. Petersburg Hotel does not have an elevator and has limited parking space, but it boasts beautiful art deco architecture.
“As most of what we do is a bit like a theater, we create a concept that provides our guests with a common theme throughout,”said Oberschneider.
The five-star Park Consul Schlossle is furnished in medieval style, and the architecture of the hotel in Riga will reflect turn of the century Russian design.
The group is also planning to set up new hotels in Lithuania and Poland.

Source:  http://www.baltictimes.com/news/articles/2033/

Insurers choose risky business

The Baltic Times, TALLINN
Jul 01, 1999
By Kairi Kurm

Building a modern headquarters seemed a good idea for two Estonian insurance companies until the situation on the real estate market changed and the law on insurance was amended. The 12-story building is not now a symbol of prestige but rather of a looming bankruptcy.
The insurance company ASA Kindlustus and the life insurance company AB Elukindlustus, both part of the AB Insurance Group, have invested almost 18 million kroons ($1.2 million) in the construction of the 12-story building slated to become their headquarters.
AB Elukindlustus has invested almost 24 percent of its portfolio or 9.25 million kroons into the bonds of Maakri Ehitus, the construction company managing the project, and ASA Kindlustus has invested about 18 percent of its reserves or 8.8 million kroons.
The companies have also borrowed 44 million kroons for the project through third companies. One-third of the total construction cost (130 million kroons) was to be financed by the AB Insurance Group and the rest by Uhispank. When the real estate market went down, the insurance company lost interest in the construction of its headquarters and stopped financing the project.
The prices dropped from almost 300 kroons per square meter to 200 kroons per square meter, said Margus Mets, spokesman for AB Insurance.
Now the court has started bankruptcy proceedings against Maakri Ehitus. Leonid Apananski, AB Insurance Group council chairman, said the company may lose its investments due to the bankruptcy proceedings.
Amendments to the law on insurance came into effect June 1 which made the AB Insurance Group sell its bonds bought from Maakri Ehitus and from other second degree deposits and investments.
According to these amendments neither ASA Kindlustus nor AB Elukindlustus may invest its insurance technical reserves anywhere else but in fist degree mortgages or deposits in commercial banks of Estonia or OECD A Zone countries which include almost all EU countries
The AB Insurance Group should have sold its investments into Maakri Ehitus bonds by the time the law came into effect. The company had three months to sell its bonds, but Mets said the company could not find a good deal.
The company asked for a period of grace from the Insurance Supervisory Body for the redeposition of reserves and is planning to regulate its reserves with a new owner. Mets said the present owners are not interested in investing more into the company and they have been looking for new investors since autumn last year.
The company signed an agreement with the new majority owner June 17. According to the agreement the buyer must replace the technical reserves which do not comply with the law on insurance companies with reserves that are in compliance with the law.
Many competitors doubt that any investor would be interested in buying the unsuccessful investments of the insurance group although the group has already held negotiations with several potential investors. The company has promised to disclose the new investor by July 1.�

Source:  http://www.baltictimes.com/news/articles/2028/