Autoliv, Norma sign deal to supply seat belts

The Baltic Times, TALLINN
Oct 28, 1999
By Kairi Kurm

 Autoliv Inc., the worldwide leader in automotive safety acquired 49.5 percent of Estonian car seat belt producer Norma on Oct. 19. Autoliv purchased the shares from Norma Group, which still retains 1.5 percent. the terms of the transaction are secret.

Autoliv has the right to acquire the additional 1.5% of Norma shares before Jan. 1, 2002.

Norma shareholders also replaced three members of the five-member supervisory council and two of the five-member board with Autoliv’s representatives. Autoliv’s vice president, Jorgen Svensson, was chosen chairman of the council and Norma’s Peep Siimon as head of the board.

The negotiations on the purchase of Norma’s shares started in mid summer. Norma, a dominant seat belt supplier to the Russian vehicle industry, has been one of Autoliv’s licensees and is currently a component supplier to Autoliv.

This transaction enables Norma to increase its volume of exports and to the West and offers Autoliv an opportunity to expand its seat belt business in Eastern Europe.

Autoliv as the industry’s technology leader can contribute by offering Norma’s customers new safety technologies Norma is lacking, said Lars Westerberg, Autoliv’s president and CEO.

“Together with Norma’s management, we will explore how we can further develop Norma by transfering production and technologies to Estonia,” he said.

In 1998 Norma had sales of 483 million kroons ($30 million) and slightly more than 1,000 employees to Autoliv’s $3.5 billion in sales and 21, 000 employees.

Autoliv’s management said that Norma’s shares, which fell by 16 percent last week, will stay on the Tallinn Stock Exchange.


Private lottery businesses give headache to the Estonian Lottery

The Baltic Times, TALLINN
Oct 21, 1999
By Kairi Kurm

 Eesti Loto, the state Estonian lottery association, is facing financial problems because of too many lottery organizers and unfair competition in the market, its leaders say.

“The Estonian legislation, which dates back to the year 1994, is too liberal. The number of lottery organizers has to be limited and licensing requirements have to be stricter. Every lottery organizer should pay taxes as Eesti Loto does,” said Sven Kolga, its head.

The state lottery owes the government 1.6-million kroons ($109,215). Eesti Loto is the only lottery organizer in Estonia that pays gambling tax. Several competitors do not have to pay taxes, because the law does not require it from lotteries dealing with endowment of certain projects or marketing a special product.

The European State Lottery and Toto Association has been trying to help to improve Estonia’s lottery legislation, Kolga said. Members of the ESLTA visited Estonia at the end of September and suggested that Estonia monopolize the lottery business and bring its legislation into line with the European Union. EU experts said the many lottery organizers and different terms for payment of gambling tax as the main problems in Estonia.

“In 98 percent of European countries, the lottery business is organized by the government or is under strict governmental control,” said Kolga. “There is no domestic competition in lottery business in the EU. Monopolization guarantees a better control and limits expenses. Competition, on the other hand, brings along additional expenses and is disfavored by these countries.”

There are at present 27 valid lottery permits issued by the Estonian Ministry of Finance. Kolga said that a few counterfeit lottery tickets have also been found on the market, although police have not found any evidence for prosecution.

Eesti Loto is the only lottery organizer paying a gambling tax, 16 percent on sales of scratch lottery and 11 percent for online lottery sales, to the state budget. Half these funds go to the Estonian Olympic Committee and the remainder for supporting cultural, sports, scientific, social and environmental projects.

Currently three-fourths of the turnover of lottery games comes from online lottery. In 1998 the company paid out 50 percent of its 120 million kroon turnover in prizes and 15 million kroons to the state budget. In 1997 Eesti Loto took in 15 million kroons more in sales than in 1998.

“We have not reached the level of sales in online lottery business, which enables to cover the technical costs of online lottery system,” said Kolga. ” Sales have been declining over the last few years due to the slowdown of the economy and the declining interest in gambling. The tradition of gambling is short in Estonia,” said Kolga.

In January, Eesti Loto will join the Scandinavian Viking Lotto, which, according to Kolga, might liven up the lottery system in Estonia. Viking Lottery was established in 1993 and its biggest jackpot ever was 60 million kroons. Kolga said that the huge jackpot makes the game very attractive to local gamblers.

“Our access to their system shows that our business is trustworthy and secure,” Kolga said.

Unlike most European lottery associations, Eesti Loto does not offer consulting services to happy clients but has delegated this task to Hansapank and Uhispank, which help winners of over 100,000 kroons to invest their money.

“Some people have contacted them after receiving their prizes, but most are not interested in sharing the information with anyone else,” said Kolga, who aded that Estonians prefer cash prizes to merchandise like cars.

According to the company’s business plan, the sales of lottery tickets should grow by 40 percent by the year 2000 mostly because of the new cooperation with the Scandinavian lottery system.

“There is a lot to grow. Compared to the Finns, Estonians spend 30 times less money on lottery games,” said Kolga. Statistics show that last year Estonians spent an average of $ 6.3, Lithuanians, $6.9, and Latvians, $1.5, on lottery tickets. In Lithuania the market is not regulated, but in Latvia the lottery organizer has a monopoly.


Cheap car costs bureaucrat his job

The Baltic Times, TALLINN
Oct 14, 1999
By Kairi Kurm

 A high-up employee in Estonia’s Ministry of Finance has lost his job for allegedly taking advantage of his position to get a deep discount on a new car which he resold to a friend.

Minister of Finance Siim Kallas discredited Peep Lass, deputy secretary general, and dismissed him at once on Oct. 7. Peep Lass and his superior, Chancellor Agu Lepp, had purchased a new Audi A6 through procurement for 100,000 kroons ($6,860) less than its actual market price.

“When Siim Kallas started working as a minister, he gave no permission to buy cars,” said Daniel Vaarik, spokesman for the Ministry of Finance. “In spite of that, Peep Lass bought an Audi A6 in March this year without the minister’s knowledge and sold it a few days later to Chancellor Agu Lellep, who was to leave the ministry soon.”

Peep Lass received the brand new Audi A6 for 330,000 kroons and sold it to Agu Lellep for the same price, although its actual market price is between 430 000 kroons and 450 000 kroons, Vaarik said.

“Peep Lass caused a significant loss to the ministry, while public property was sold for an unreasonably cheap price,” said Vaarik. “His second mistake was that he did not have permission to make the deal.”

The tradition of selling luxurious cars at a discount price to ministries is not new. Car companies use the practice to advertise their cars.

“Every ministry has a price limit set on the purchase of cars. If these car companies would not make good offers, the ministers and chancellors would drive much cheaper cars,” said Vaarik.

This is not the first corruption case related to public property, said government spokesman Kaarel Tarand, but he believes that the Estonian nation is getting stronger and people are starting to value laws and act accordingly.

“Ethic norms are turning into a good tradition,” said Tarand.


Fishers land an investor

The Baltic Times, TALLINN
Oct 14, 1999
By Kairi Kurm

 Viru Rand, once one of the biggest and most successful fish processor in Estonia, was pulled late last month from the depths of bankruptcy by Agu Laanemets’ 52 million kroons ($3.47 million).

Laanemets bought the company a week before the end of the public sale. He has worked in Viru Rand since May, when the company’s business was already going downhill.

Before working in Viru Rand, Laanemets worked as the director of the giant company Estoplast and for a subsidiary of Norma in Russia. He said that when he left for Russia, Viru Rand was working successfully. Viru Rand went bankrupt Jan. 12.

“I can only guess [why it went bankrupt] because I came here later,” said Laanemets. “Most say the collapse of the Russian market caused it, but I think there is always a market if the price and quality are satisfactory. The Russian market was not ready to buy for high prices and Viru Rand was not ready to lower the price.”

Most of the production of Viru Rand historically has been exported to Russia and Ukraine.

Laanemets said the fish processor was engaged in many activities that were not related to production, such as trade, transportation and water purification. The company also had a big fishing fleet. When Laanemets got to the top, he started liquidating some of these activities and cut costs where possible.

In 1996 the company employed 1,630 employees. Viru Rand even won a special prize from the Estonian Confederation of Employers and Industry in 1997 for creating the most jobs. By early 1999 only 399 employees were left.

Laanemets dismissed only 42 employees after the purchase of the company’s assets. He gave his new company a new name: Viru Kalatoostus. Hansapank financed his 52 million kroon loan.

There are 118 fish companies in Estonia, most of which are not doing very well after the collapse of the Russian market.

“I bought the assets of a bankrupt Viru Rand because I think that on the bases of these assets I can set put up a well functioning company,” Laanemets said.


U.N.: Estonia most attractive to investors

The Baltic Times, TALLINN
Oct 07, 1999
By Kairi Kurm

Estonia has received the most foreign investment per capita among Central and Eastern European countries, according to a U.N. report, edging out fellow Baltic nation Lithuania and the Czech Republic.

Estonia received a total of 8 billion kroons ($534 million) in foreign investment last year, according to the United Nations’ 1999 World Investment Report, released in late September. This amounts to roughly $407 per capita.

Lithuania landed in second place, with $251 foreign investment per capita. The Czech Repulbic, with $247 per capita, placed third.

In 1997, Estonia ranked third among Central and Eastern European countries, behind Latvia and Hungary, but the volume of foreign investment here more than doubled in 1998.

Poland is still the regional leader in total investment, racking up $5.1 million worth in 1998.

Agu Remmelg, director of the Estonian Investment Agency, said the biggest investments in Estonia were made by Swedish and Finnish investors. Hansapank, Uhispank and the telecommunications sector where the major recipients.

Remmelg said Nordic investors are attracted to Estonia over Lithuania and Latvia thanks to the country’s proximity to Scandinavia and Finland. Also, Estonia’s liberal economy is an advantage. For Finns, the similar language plays a role as well.

The Estonian Investment Agency predicts 5 billion kroons’ worth of  foreign investment in 1999 and foresees a continued increase over the next couple of years thanks to the pending privatization of Estonian Railways, the energy company Eesti Energia and Tallinna Vesi, a water utility.

“During the first half of 1999, Estonia received 2.6 billion kroons in foreign investment, which is more than the total investments received in 1996,” Remmelg said.

Most Estonian investment projects are small on an international scale – few, Remmelg says, exceed 1 billion kroons.

“We can say that any project larger than 100 million kroons is huge,” he said. Estonia received 31 projects which went over the 100 million mark in 1998.

“We are successful in the eastern part of Europe but compared to the other countries in the Baltic Sea region we have a lot to develop,” said Remmelg. “Most of the investments in this region go to developed countries such as Finland, Sweden, Denmark and Norway. These countries get two to five times more investments than Estonia.”

Remmelg said the inflow of foreign investment is good for five reasons: it helps keep the current account deficit in balance with capital inflow, it’s good for integrating into the high-tech network of big corporations, it encourages potential investors to come to Estonia, it leads to increased employee training; and it brings large international corporations, most of which use more environmentally friendly practices than local companies.