Year’s end stirs no excitement in bank board rooms

The Baltic Times, TALLINN
Jan 27, 2000
By Kairi Kurm

Estonia’s three largest banks released their financial results on Jan. 17. Hansapank and Eesti Uhispank ended the year with a respectable profit, while Optiva Bank reported a small loss.

“Although Optiva Pank and Uhispank did some major provisioning at the end of 1999, nothing came as a surprise for me,” said Toomas Reisenbuk, chief analyst at Trigon Capital.

Because of underpricing assets at the end of the year, Optiva Bank reported a 30 million kroon loss in December and ended last year with a 18.7 million kroon unconsolidated loss. Analysts believe that Optiva Bank is getting ready for the new investor. Estonia’s central bank will sell its share in Optiva Bank during the first half of this year.

“I did not expect any better results for Optiva bank for the previous year. The bank’s consolidated results will be negative as well,” said Reisienbuk.

At end of December, the bank’S balance sheet came to 3.7 billion kroons.

Uhispank also made some major provisions at the end of the year.

Although the bank showed a major profit with the sale of Leks Insurance in December, the month’s results were quite reserved. Out of the 124 million kroons’ provisions the bank made last year, 115 million were made in December.

“I expected better consolidated results for the bank,” said Reisenbuk. Uhispank reported 101 million kroons’ unaudited profit for 1999. As of Dec. 31, Uhispank’s total assets stood at 14 billion kroons.

Hansapank reported an unconsolidated 540.4 million-kroon profit for 1999.

“It could have been better,” Reisenbuk said. Hansapank’s financial results for 1999 were significantly affected by extraordinary items received in December.

“Hansapank’s consolidated results for 1999 will be better by about 800 million kroons,” said Reisenbuk.

Hansapank will publish its consolidated preliminary results for 1999 on Jan. 28. Hansapank’s total assets stood at 25.81 billion kroons on Dec. 31.

Hansapank’s capital adequacy rating stood at 18.6 percent at the end of the third quarter, which means that the bank is overcapitalized. The management is considering ways to decrease the bank’s share capital.


Only one of four pays the parking fine

The Baltic Times, TALLINN
Jan 27, 2000
By Kairi Kurm

 Many citizens do not obey parking regulations in Estonia. The reason behind that probably lies in the new parking regulation, which is incomplete and does not force people to pay the fine. Today only every fourth person who parks in a restricted place or without a parking ticket actually pays the fine.

In 1998 almost 69 percent of offenders paid the fine for their infringements in Tallinn, then in 1999 the percentage was 25 percent. The number of fines almost doubled from 56,000 in 1998 to 100,000 in 1999.

“There are many reasons for the present disorder,” said Vello Koonik, head of the Tallinn Traffic Management Center. “When the parking law was in force, everything worked well. According to that law the penalty doubled when it was not paid by the due date. All transactions with the car were blocked by the car registration center until the bill was paid. Now the fine expires in three months in the event that we haven�t been able to sue for the fine,” said Koonik.

He said this case is tied to a lot of juridical details that are difficult to explain. “When the parking law was abolished, some paragraphs regulating parking were included in the traffic law and some in the administrative law. This process proceeded so fast that it was not thought out properly,” said Koonik.

“The problem is also to be found in the terminology. Fines written out by police are called a ‘pronouncement.’ A pronouncement should be executed, otherwise it will be enforced by the court. A fine written out by a traffic controller is called a ‘claim.’ A claim is not mentioned in the regulations.”

There are 21 hardworking traffic controllers in Tallinn and their number is consantly increasing, Koonik said.

The city of Tallinn missed out on fines worth millions of kroons last year. Out of the total of 38 million-kroon ($2.6 million) penalty sum, only 9.5 million kroons were paid in 1999. The respective figures in 1998 were 13.7 million kroons and 9.4 million kroons.

In spite of difficulties with payment, the transport department is planning to raise the cost of parking in the Old Town of Tallinn in order to decrease the number of cars on the streets. At present, parking costs 3 kroons per 15 minutes in the center of Tallinn and twice as much in Tallinn’s Old Town.


Bioyogurts are not dangerous

The Baltic Times, TALLINN
Jan 20, 2000
By Kairi Kurm

The Tallinn dairy Tallinna Piimatoostus has introduced a new healthy pro-biotic product TERE “biojogurt”. According to Austrian experts, bioyogurts can be dangerous for some people.

The German magazine Der Spiegel states that yogurts with pro-biotic supplements, which are popular in about 23 countries including Germany, Japan and UK, may cause illnesses in people with weak immune systems. These products may cause inflammation of the lungs and blood poisoning, the magazine reports.

Bioyogurt is a dairy product consisting of living lactic-acid bacteria. Tiiu Mai Laht, a researcher with the National Institute of  Chemical Physics and Biophysics in Tallinn, said this kind of product has been consumed for thousands of years.

“Der Spiegel is not a science magazine and they can not disprove this scientific truth. There are many German scientists who can say the opposite. It is possible that some people are born without a normal immune system and for those people, all normal food containing living micro-organisms can be dangerous. They can survive only in a sterile environment,” said Laht.

“Bioyogurts are as dangerous as living itself. There is always someone for whom one or another substance is dangerous. Bio-yogurt maybe harmful to perhaps one person in a million,” said Laht.

Laht claims that bioyogurt is very healthy because it helps to strengthen the body’s self defense, for example, by recovering bacteria which has been killed by antibiotics.

“When I suffer from some kind of inflammation and use antibiotics, I can still keep my level of microflora normal by eating bioyogurt. It makes me feel better. I do not feel sick and I do not have a headache. When I am well, I take bio-yogurt as normal sour milk,” said Laht.

Studies say that bio-products protect against gastrointestinal diseases and lower hypersensitivity. Living lactic acid bacteria are also used in products such as kefir, sour milk, cheese and curds.

“The world should not be overly sterile. People are used to living and competing all the time. In a sterile world there would too many problems to deal with such as allergic diseases for example,” said Laht.

“Bioyogurt provides you with normal digestion and a stress-free day,” a note on the label of the yogurt says. The Estonian health protection board approves the product.

Besides the bioyogurt produced by Tallinna Piimatoostus, there are two other pro-biotic products on the Estonian market: Alma’s kefir and sour milk produced by the dairy group Uhinenud Meiereid.

According to Kristina Seimann, a spokeswoman for Tallinna Piimatoostus, “Tere” Bioyogurt is the most popular yogurt on the Estonian market at present. The company holds about a one third market share in sales.


Dogs blamed in death

The Baltic Times, TALLINN
Jan 20, 2000
By Kairi Kurm

 On Sunday, Jan.16, an eight-year-old boy was found dead in Tartu. Whether he had been killed and then eaten by the dogs of an elderly neighbor woman Yevgenia, authorities were trying to determine this week.

On Jan. 16 a former serviceman, Gennady, 62, found the half-clothed body of the boy in the so-called Chinatown in Tartu.

The region, once occupied by Russian soldiers, looks quite deserted in some parts. Tumbledown summer cabins, fences and garages, surround the place where the incident happened on Saturday night. Some neighbors said they heard barking at night. The body found was bitten on the neck, and partially dismembered.

The autopsy revealed that death resulted from a neck injury. Other injuries were made later,” said Peeter Rehema of Tartu Police Prefecture.

The police killed Yevgenia’s two aggressive dogs on the spot during the investigation and took eight dogs for further examination. Yevgenia kept about twenty dogs in her garden, none of which were registered or vaccinated. She could not understand why her dogs would have killed a boy, the Estonian daily Postimees reported. She claimed she had fed them well.

Experts found human remains in the stomachs of the dogs that were destroyed.

According to the Estonian dailyEesti Paevaleht, veterinarian Ain Erkmaa believes the boy was killed before the dogs started biting him. He said the dogs looked as though they had been fed properly, and they were not of an aggressive type. The veterinarian also said the dogs are not capable of taking off trousers from a human being. Rehema said that the boy’s clothes had signs of tearing, and he believes that it is possible to take off clothes from a reclining
body. Rehema said that there are two versions of the incident: Either the dogs killed the boy, or the boy had frozen before the dogs started biting him.

The boy’s name was Yevgeni and he lived with his mother nearby on Jaama Street. Although he had had problems at home with his mother, Rehema believes that it had nothing to do with the investigation. Whether he climbed over the fence or was of a vagabond type, the fact is that the dogs attacked a human being, Rehema said.

Who is to blame for the death?

“It is difficult to say who is responsible,” said Rehema. “Theoretically, prosecution is possible for carelessness which causes death. If one wants to keep a dog, one should prevent it from harming people,”said Rehema. “Such incidents have never happened in Estonia before. We don’t have any precedent to follow. ”


Investor prefers Estonian citizenship

The Baltic Times, TALLINN
Jan 13, 2000
By Kairi Kurm

Ernesto Preatoni, an investor in the Baltics, has changed his citizenship from Italy to Estonia. He was one of the 10 foreigners granted citizenship for outstanding services in 1999. Why did he take this citizenship, and what are his chances of success? Reporter Kairi Kurm interviewed him to find out.

– Why did you take Estonian citizenship? Why did not you take Latvian?

It never came to my mind to take Latvian citizenship. I have been a resident of Estonia for four years. People might think I am crazy taking Estonian citizenship and renouncing Italian citizenship, but I believe much more in the future of Estonia than the future of Italy. Italy is not of the present. It’s rather like the past. Estonia is the future. When there is something wrong in Estonia, it is always possible to change it, but in Italy it is absolutely impossible.

– So we can call you an Estonian now?

Yes, even though I have not yet gotten my new passport because of  some bureaucratic reasons. It is funny to imagine myself crossing the Italian border with an Estonian passport.

– Do you speak Estonian?

I speak a little. I have not taken any exams.

– Are you interested in local culture and history?

I am interested in culture but I should say that I do not believe there are any particular cultures. There are local cultures. When I was young, our family spoke in a dialect Now everybody speaks dialects in Milan. When an Italian and Icelandic marry, they speak English (Preatoni’s wife is Icelandic). It does not affect the local culture much in my opinion.

– When looking back at your life, which are your most successful projects?

In Estonia it was when I bought and sold the share of Uhispank. The money I made there was not big, some $10 million. But maybe the biggest challenge we have won up to now is Kristiine shopping center. I am very satisfied with it.

– What are your worst projects?

It was 24 years ago when I invented myself as a publisher. I do not see any unsuccessful projects in the Baltics. There were some delays in the developments, because the economy was not so good.

– It is popular to invest in Internet-related companies because investors believe this sector will grow. Why haven’t you been active there?

There are only 24 hours in a day. I cannot do everything in my life. I agree that we are going in the direction of “disintermediation”. There is less and less need for intermediaries but, I believe the future is there. This Internet is a good business for people who do not have an excess of liquidity and intend to develop risky but very profitable businesses. I am representing another category, I am representing people with an excess of liquidity. Some people have a lot of time but no money to do businesses related to Internet.

– What would you like to say to the readers of the Baltic Times? What are your suggestions for the coming year?

I believe that The Baltic Times is read overall by business people, and so I am suggesting that they come to this country more often and do more business in this country, because this is what we need. We need Western know how. I hope there will be many people coming to these countries with this know how.


Skanska acquires the Estonian construction company EMV

The Baltic Times, TALLINN
Jan 13, 2000
By Kairi Kurm

 One of the world’s largest construction companies, Skanska, is expanding and strengthening its activities in the Baltic countries through the acquisition of a majority stake in the Estonian listed construction company EMV. Skanska is listed on the Stockholm Stock Exchange.

According to the contract signed between Skanska and EMV’s current shareholders, the Baltic Republics Fund, Hansa Investment Fund and a number of private investors, Skanska acquired a 61 percent stake in EMV for 86.7 million kroons ($5.7 million). The contract became effective on Jan. 3.

Skanska does not plan any significant changes in the business activities of EMV.

“One of the biggest changes in the company that I foresee when it becomes part of the Skanska concern is that its financial position will strengthen,”said Jaanus Otsa, board chairman at EMV. “We do not have any financial difficulties. We overcame them two years ago.

“We will grow in profitability rather than sales. I do not see any deep increase in market share in the near future. We will win more local bids because we are financially stronger, and we will also get more offers from the clients of Skanska,”said Otsa.

Skanska is planning to gain 100 percent control over the company and will thus make a public offering to all EMV shareholders for the sale of shares. Skanska launched a tender offer to all small shareholders to purchase the remaining shares at the same price per share and will apply to the Tallinn Stock Exchange for the delisting of EMV shares.

The price paid per share is 30 kroons, which is 13.94 percent higher than the average six-month share price on the Tallinn Stock Exchange.

The price of the deal is in accordance with draft take-over rules of  the Tallinn Stock Exchange, said Piret Raudsepp, member of the council of EMV and board chairman of Trigon Capital, which handled the tender. Skanska would not make better offers to the small shareholders after the end of the public offering, he said.

“The shares of EMV will not be so attractive to small investors [after the acquisition]. The amount of information they get about the company is smaller. Also, the strategy of Skanska foresees no dividends in the near future,”said Raudsepp.

Raudsepp was one of the persons who stopped the merger of two construction companies, EMV and MERKO, in the spring of 1998, because she felt the conditions of the deal were not favorable to the shareholders.

EMV, one of the leading construction companies in Estonia with 542 employees, also operates in Lithuania.

EMV’s construction services cover both housing and civil engineering. Skanska is operating in real estate development businesses in Latvia and Lithuania.

The company’s market share in Estonia is less than one percent. EMV, reporting sales of 778 million kroons in 1998, has a five-percent market share, similar to its competitors, Merko Ehitus and FKSM, Otsa said.


Multiplex movie theater to be established in Tallinn

The Baltic Times, TALLINN
Jan 06, 2000
By Kairi Kurm

The largest Estonian film distributor, MPDE, is planning to build a multiplex movie theater in Tallinn in the near future. The modern complex will comprise 11 movie theaters with a total of 2,000 seats, and bars and shops.

According to the agreement signed between a construction company Merko Ehitus and MPDE on Dec. 17, the total cost of the multiplex theatre is 160 million kroons ($11 million).

The construction costs account for about 120 million kroons. MPDE is planning to complete construction within one year and sell at least 700,000 tickets annually.

The architect of the project is an Estonian Andri Kirsima. The construction work is done with the cooperation of the Finnish movie theater chain Finnkino.

MPDE sold 90 percent of its shares to Finnkino in spring 1999 in order to finance the construction of the multiplex theater. Film distributor MPDE earned 6.5 million kroon profit from the sales of  33.3 million kroons in 1998.


Inexpensive Internet banking looking for commissions

The Baltic Times, TALLINN
Jan 06, 2000
By Kairi Kurm

 The three biggest Estonian banks provide Internet banking services for free. This is a welcome service because people prefer to communicate with the bank electronically rather than visiting the branch offices. As a result, Estonian banks earn less commission on services and are planning to charge a fee for some transactions.

Hansapank has changed the price list for business clients while Uhispank is planning to charge Internet bank clients in the future. Hansapank announced on Dec. 14 that beginning Jan. 10, business clients will be charged 3 kroons per domestic payment transaction. Joining the Internet bank as well as account information are free of charge. There is no periodic service fee.

Hansapank also changed the price list of Telehansa services and will introduce in the first quarter a new “Telehansa +” version, which enables the employees of big enterprises to work with the same program simultaneously.

“Information technolgy requires a lot of investments. Estonian clients are accustomed to good information technology standards and thus have higher requests. Hansapank has to cover these investments,” said Ando Noormets, spokesman for Hansapank.

Hansapank invested 122 million kroons in information technology in 1999 and will invest 167 million kroons in the year 2000.

Uhispank undecided

Uhispank has not decided when to start charging a fee for Internet services. Currently Internet transactions are free of charge.

“The share of transactions with the bank through electronic channels has increased from 40 percent to 85 percent,” said Eero Raun, spokesman for Uhispank. “When a large proportion of bank services are done through electronic channels, and the non-electronic channels of the bank are used less, the bank loses its revenues from commissions
and interest on loans,” said Raun.

Optiva Bank announced it is not planning to increase commission for Internet services in 2000.

Hansapank has about 95,000 Internet banking clients, Uhispank 30,000 clients and Optiva Bank about 6,000 clients on the Web. According to recent research done by BMF Gallup Media, there are about 300,000 Internet users in Estonia.

The percentage of Internet banking clients is very high in Estonia. According to Tiit Pekk, managing director of Hansapank e-commerce department, about 10 percent of Hansapank and Uhispank clients use Internet banking services. As a comparison only 1 percent of Deutsche Bank clients and 5 percent of Swedbank clients use its electronic services. At the same time Scandinavian banks are far ahead: Skandinaviska Enskilda Banken (SEB) has about 17 percent and Merita Nordbanken about 11 percent Internet banking clients.


The image of Estonia in the UK and Germany

The Baltic Times, TALLINN
Jan 06, 2000
By Kairi Kurm

 United Kingdom and Germany are not familiar with Estonia, the Estonian Investment Agency reported after the completion of a research in these two important countries. Half of the people questioned in the United Kingdom and only one fourth of the Germans know where the country is.

The Estonian Investment Agency together with research company ACNiel-sen organized a six week research in the UK and Germany at the end of 1999 among a total of 406 companies to understand the current image of Estonia in these countries. The sample companies were engaged in information technology, electronics, telecommunications,
wood processing, engineering, transport and distribution.

“Most of the information about Estonia is currently coming through TV and radio but companies would rather get it through Internet, e-mail and direct mail,” said Agu Remmelg, director at the Estonian Investment Agency. He said that the results of the research help in building a country’s image among potential investors and the agency is planning to send out additional information to 40 percent of the respondents.

An overall 65 percent of potential investors said that they did not have enough information about Estonia and half of the respondents were missing information on the general business environment of Estonia.

According to the research 27 percent of the British knew nothing about Estonia and the same share of respondents knew it as a former Soviet republic. Germans associated Estonia with adjectives like Baltic state and small.

“A surprisingly small percentage of respondents associated Estonia with the integration with the European Union,” said Remmelg. “At the same time accession to EU will make Estonia more attractive for 73 percent of companies surveyed.”

Respondents also mentioned other positive attributes of Estonia – economical and financial stability, good banking system and good telecommunications system.