Estonia 2001: old face and a winning song

The Baltic Times, TALLINN
By Kairi Kurm and Aleksei Gunter
Dec 20, 2001

Bad moonshine, Eurovision victory and a brand new president were what hit Estonia in 2001. Looking back at the year, The Baltic Times suggests its own version of the top five events for Estonia, together with their respective TBT headlines, and, below, how some Estonian celebs saw it.

1. “Ex-communist to lead Estonia to Europe”: The latest presidential elections concluded in September, a bitter fiasco for the ruling Pro Patria Union/Reform Party/Moderates coalition, resulted in an astonishing political comeback for Arnold Ruutel, Estonia’s last Soviet ruler and now a member of the People’s Union party.

Publishing books and making snazzy Web sites didn’t help the Reform Party’s Toomas Savi, the Center Party’s Peeter Kretizberg, Peeter Tulviste of the Pro Patria Union or Andres Tarand of the Moderates to fill Lennart Meri’s big shoes. Ruutel just kept riding around Estonia, meeting local government leaders who later sent their representatives to the electoral college that finally gave him the votes he wanted.

Ruutel, 73, holds a degree in agriculture and speaks Estonian, Russian and a smattering of German. He’s now reportedly taking a crash course in English. He was the second ex-communist leader to get a top post in the region this year, the first being Lithuania’s Algirdas Brazauskas.

2. “Death toll from poisoned alcohol rises in Parnu”: Deadly methanol spirit, which bootleggers took to be illegally distilled alcohol, became a fatal brew that killed 71 people and hospitalized 112 in the sleepy southwestern seaside town of Parnu at the beginning of September.

The liquid was stolen from a local company that used it in the production of biodiesel. A total of 12,000 liters of illegal alcohol and 3,500 liters of methanol have been confiscated since the tragedy erupted. Police are holding seven people on suspicion of manslaughter.

3. “OSCE opts to leave Estonia”: Doris Hertrampf, head of the OSCE mission to Estonia, recommended in December that the organization’s permanent council consider its job there done.

One of the main reasons to quit the mission was the amendments to the law on elections, which abolished language requirements for candidates taking part in both local and national elections. It’s now possible for someone who doesn’t speak Estonian to be elected. But Estonian is still the official language of the Parliament, so Russian-only speakers will find it tough to understand anything.

Local governments so far have no statute on their working language.

The Cabinet naturally welcomed the news. Russia, Estonia’s mighty eastern neighbor, expressed its displeasure, grumbling that issues related to national minorities still need OSCE assistance.

4. “Estonians conquer Eurovision”: With the lands of the Singing Revolution competing, victory sooner or later was inevitable. Estonia’s song “Everybody,” performed by the duo Tanel Padar and Dave Benton, won the 46th Eurovision Song Contest held on May 12 in Copenhagen, Denmark, bringing the first ever Eurovision victory to the Baltic states.

Now Estonia, as the winning country, is making preparations to host the next contest in May 2002. A preliminary budget for organizing the event has been put at $6.3 million, half of which will come from taxpayers across Europe.

5. “Estonia gets advice on how to brand itself”: The Eurovision victory has accelerated work on Estonia’s national brand, a project meant to make Estonia more recognizable in the world. Next year’s song contest is the ideal chance to introduce the country to a million-strong Europe-wide TV audience, so the implementation of the brand project initiated this summer is planned to start next May.

Interbrand Ltd., an experienced brand development and advertising agency based in Britain, will consult the Estonian project team, which has 8 million kroons ($470,000) out of the national budget for this year.

To keep the project going, millions more kroons will have to be spent over the next few years. It’s the first project of its kind in the Baltics.

Lottery company launches online gambling

The Baltic Times, TALLINN
By Kairi Kurm
Dec 20, 2001

Estonia’s state-owned lottery enterprise Eesti Loto launched an online gambling site on December 18 boasting that it is one of the easiest to use online lottery sites in the world.

“Our ticket sales system enables payment directly to the winner’s bank account after a selection has been made, while in other online games money has to be transferred to a certain account prior to gambling,” said Monika Salu, Eesti Loto’s chairwoman.

The new lottery system at enables players to see the history of previous games, which is very important to serious gamblers. The gambler can also choose as many automatic selections as he desires, whereas at kiosks the machine would make only one automatic selection.

According to Salu a number of foreign lottery companies have expressed interest in this unique system, which is very easy to use. The Estonian lottery companyhopes to make money by selling the copyright to the program, which cost 500,000 kroons ($ 29,000) to develop.

Although the site is available in Estonian, Russian and English, the law stipulates that only Estonian citizens and people with an Estonian residence permit can participate in online gambling. The gamblers can pay through the accounts of the three biggest Estonian banks (Hansapank, Eesti Uhispank and Sampo Pank). Eesti Loto will later transfer prizes of up to 10,000 kroons to the same account and contact the winners personally if the sum exceeds that limit in order to arrange the transfer of money.

The lottery company has agreed with the cooperating banks that payments through the Internet to Eesti Loto are to be free of charge, unlike normal payments through the Internet from a Hansapank account for example.

Salu believes the number of gamblers will increase by 1 percent in the first year and in a few years 10 percent of all gambling will be through the Internet. In countries where online gambling sites are less easy to use, the share of online gamblers has reached 5 percent, said Salu.

“We’ll gain a lot of new clients that prefer visiting the Internet to lottery kiosks, people who would otherwise not participate. I believe we’ll get another 10,000 clients as a result,” she said.

Eesti Loto also plans to initiate lottery games via mobile phones next spring and is already negotiating with local mobile phone operators. “The new system enables betting during a sports match via a mobile phone in front of a TV,” said Salu.

Salu predicted the company, which controls 95 percent of the Estonian lottery market, will make a 25 million kroon profit on a 138 million kroon turnover this year and pay prizes of up to 70 million kroons.

Statistics show that every second Estonian sometimes plays lottery games, while 15 percent of the population are regular players.

Mad-cow outbreak causes friction with Finland

The Baltic Times, TALLINN
By Kairi Kurm
Dec 20, 2001

Finnish Minister of Agriculture Kalevi Hemila this week criticized the Baltic states’ decision to ban imports of Finnish beef following the first discovery in Finland of a cow with bovine spongiform encephalopathy, or mad-cow disease.The discovery of one cow with the disease did not justify what in Estonia’s case is a five-year ban on Finnish beef imports, said Hemila, adding that such a ban had not been adopted by the European Union and did not befit candidates for EU membership.

“I discussed this with the Estonian minister of agriculture and told him that it was not a wise decision,” said Hemila. “There is no basis for such restrictions. If the Baltic countries are willing to join the European Union, they have to change their system.”

Hendrik Kuusk, head of the Estonian Agriculture Ministry’s veterinary and food department described Hemila’s reaction as “quite emotional.” “How can a small neighbor like Estonia treat Finland badly?” he asked. “We’ve treated the other countries the same way, and we can’t make any exceptions for Finland. Imports of beef from countries where mad-cow disease has been discovered are banned automatically.”

Estonia has banned imports of beef from a total of 19 countries including all EU member states except for Sweden.

The Finnish minister however was adamant there was no danger from Finnish beef exports. “We take good care of risk material from cows, and we know that all the meat produced is safe. It would be wise if the Baltic countries abolished all the restrictions.”

Hemila acknowledged that Finland like other EU members had previously restricted imports of beef from risky countries but had dropped its unilateral bans in favor of EU-wide restrictions imposed on countries that had not taken care of the problems.

Finland tested some 25,000 cattle for the disease this year, while in Estonia only 1,000 animals were tested because of lower financial resources.

No BSE symptoms have yet been found in Estonian, Latvian or Lithuanian cows.

Mati Loit, deputy director of Estonia’s veterinary and food department, said that until Estonia acceded to the EU it had the right to establish its own restrictions.

“Estonia is a small country, and it has to protect its market since it doesn’t have big funds to compensate for losses afterwards,” said Loit. “No EU officials have advised on these requirements. I don’t think that they would halt our entry into the union. We’ll have to harmonize our legal system step by step.”

Kuusk predicted that Estonia would harmonize its rules with the EU in the next two years at which point its unilateral ban on Finnish beef would be dropped.

A total of 31 cows have been imported in Estonia from Finland in the last nine years.

Baltic news agencies at war

The Baltic Times, TALLINN
By Kairi Kurm
Dec 13, 2001

The only Pan-Baltic news agency, BNS, became totally Finnish-owned after Finland’s main business daily Kauppalehti, a holding of the Finnish Alma Media Business Information Group, purchased a 15 percent stake from the U.S. business news provider Telerate on Dec. 4, 2001.Kauppalehti which bought a 22 percent stake in BNS in 1998 acquired full control of the company in May 2001 when it purchased a 59 percent stake from the Swedish Bonnier Group’s business daily Dagens Industry.

“We believe that the Baltic market will grow in the future,” said Juha Blomster, president of AMBIG. The company is planning to expand to Russia and Poland in the future.

“Our solid market position and the transparency of our company were the two most important things that stimulated the Finnish company to decide for us,” said BNS Board Chairman George Shabad. “The Baltic online media market is a difficult market with a lot of companies appearing, disappearing, investing a lot of money, losing it and shutting down.”

“The long history of BNS and the transparency of the company were very important for our investors,” he said.

BNS was founded by a group of Baltic students in Moscow in 1990 at the height of the Baltic states’ struggle for freedom to bring direct news from Estonia, Latvia and Lithuania to Moscow-based foreign correspondents. BNS was one of the founders of the English-language weekly The Baltic Observer, the forerunner to The Baltic Times.

Allan Martinson, one of the founders of BNS, who now manages Microlink, the biggest Baltic IT company, said that he would not have believed in the 90s that BNS would obtain such a secure position on the Baltic media market.

“There are many young people who believe that BNS has existed forever,” he said. “BNS is a strong, stable company and has overthrown a widespread myth that a news agency’s business can’t be succesful and has to be supported,” Martinson said.

BNS became the first competition to the former Soviet state-run news agencies in Estonia, Latvia and Lithuania which controlled the Baltic media market at the time. Delayed privatization and bad management led to their demise and BNS became the leader in the small Baltic market.

But competition is gathering strength. The former state-run wire services – ETA of Estonia, LETA of Latvia and ELTA of Lithuania – are now privately owned and back on their feet, seriously challanging BNS.

With 57 million kroons ($3.3 million) in turnover last year, BNS claims it controls 70 percent of the Estonian, 50 percent of the Latvian and 70 percent to 80 percent of the Lithuanian online information market.

“This is calculated according to the amount of money involved in the market, which includes portals, online newspapers, media monitoring services and other companies that release information products online,” Shabad said.

BNS’s competitors don’t agree. Their estimates show that BNS’s market share in Latvia is 40 percent and the Lithuanian market is divided 50-50.

Estonian ETA was privatized in 1999 but changed owners in April, 2000, after bankruptcy when its brand name was purchased by the Latvian investment fund C&R, ETA’s manager Tiit Lohmus said. The company, whose turnover last year was 2.2 million kroons, works unprofitably but hopes to generate more revenue in the future since many free-of-charge online news sources have closed down recently. Lohmus said that BNS produces more business news and for a higher price, while ETA is focused on human interest stories such as regional, social and cultural news.

The Lithuanian news agency ELTA is 39 percent state owned and the rest belongs to about 60 shareholders including newspapers, magazines, radio and TV companies. Last year the company netted a 3.4 million litas ($850,000) turnover and turned a profit. This year the company will end up with some 4 million litas in turnover and a loss due to large investments in construction works.

“Our strength over BNS is that we offer both photos and text,” said Gestutis Jankauskas, head of ELTA. “BNS has more business news, but we are planning to expand there as well.”

LETA feels the strongest of the three siblings with 2001 being its second profitable year since the company’s privatization in 1997. LETA is planning a 30,000 lat ($48,400) profit on a 800,000 lat turnover for the year. A little more than a third of the company belongs to the management, the other third to the U.S. investment fund Baltics Small Equity Fund and the rest to the U.K. investment fund Tradevision.

Martins Barkans, LETA’s board chairman, asserts that his company has regained its leading position on the Latvian market. “LETA produces more stories and covers more areas,” Barkans said.

Barkans said that BNS’ main weakneses are its “lack of development of new products and services, its frequent changes of local management in Latvia and its negative financial result from local operations in Latvia.”

Barkans stressed that the biggest advantage of BNS is its Pan-Baltic presence. But ETA, LETA and ELTA are already cooperating on the Baltic market.

“It’s just a question of time when we launch a joint product for the Pan-Baltic market,” ETA’s Lohmus said.

Christmas fair madness hits Baltic states

The Baltic Times, TALLINN
By Kairi Kurm
Dec 13, 2001

Hand-knitted stockings, translucent amber baubles and snowy bearded men in red suits are not the only signs of the approach of Christmas in the Baltic states’ cities.Christmas markets are the other seasonal phenomenon enjoying new popularity and bringing much needed lats, kroons and litas into the hands of small-business men and women.

The warm aroma of spicy mulled wine, fresh bread and traditional blood sausage will draw Finns and Swedes off ferries to visit Tallinn Old Town’s Christmas Market right up until Jan. 1.

The market place is a first for the Estonian capital and is intended to help boost winter tourism and draw in holiday shopping dollars from nearby Nordic nations.

“We’ve had the Christmas Market idea for four years,” said Paul Oberschneider, the main organizer of the Tallinn market and head of the real estate company Ober Haus.

“Christmas fairs create a community spirit at Christmas time all across Central Europe and Scandinavia.”

Latvia has jumped on the seasonal market bandwagon this year as well, with a new 50-stall shopping haven in Old Town Riga’s cobblestoned Dome Square, which will be open for business until Dec. 24.

“Dome Square will become the place where we feel the approach of the holidays, where an atmosphere will prevail which will create positive emotions in people,” said J.C. Cole, director of the new non-profit organization Vecrigas Ziemassvetku Tirdzins (Old Riga Christmas Market) and president of Architectural Investment.

“We really wish our people to regard this festivity as a national celebration. It’ll be a wonderful ending for the Riga 800 anniversary celebrations and become an annual tradition in the future.”

While a seasonal market targeted solely toward Christmas shoppers hasn’t caught on yet in Lithuania, the main arts and crafts market on Pilies Street in Old Town Vilnius almost doubles in size for the winter holiday season.

The pointed roofs topping the wooden stalls lining both sides of the street – backed by an imposing view of the castle – start multiplying as the number of merchants hawking amber baubles, hand-woven mittens, and both high and low quality antiques increases.

Winter shopping land

One stall holder at the Estonian market, Piibe Piibur, said sales of her knitted gloves and socks had taken off since she set up shop on the square’s icy cobblestones instead of selling inside a regular store.

Finns and Swedes make up most of the morning market shoppers, since ferries arrive at the Tallinn port early in the day, while Estonians start shopping after 4 p.m., once their work day is finished, Piibur said.

“People are very joyful when they come here with their children looking for Christmas presents,” said Piibur.

Kersti Murga said she was doing a roaring trade in ceramic houses which double as candleholders, while Elmar Kivipold said his pillows stuffed with grain, honey, buckwheat flour and cookies appealed more to Estonians than foreign visitors.

“Tourists aren’t interested in such souvenirs,” said Kivipold.

While some of the bestsellers vary very little from the north to the south of the Baltic states – amber jewelry, hand-woven patterned textiles in addition to leather book jackets and earthenware pottery – there are also local favorites.

Estonians are fond of blown glass and wooden toys, while Lithuanians snatch up carved oak bowls. Latvians eye traditional wooden spinning tops and ceramic whistles.

Costly cottages

Christmas shoppers may love the quaint feeling of browsing from one wooden stall to the next in the crisp winter air, but building and maintaining a market is not cheap.

The budget for Tallinn’s Christmas Market is just over 3 million kroons ($170,450).

While the rents merchants pay for the wooden stalls cover the cost of construction, electricity and cleaning services provided by the municipality, without sponsors the market couldn’t exist, Oberschneider said.

“There were quite a few sponsors this time,” he said. “But hopefully next year it’ll be a little better because we can’t continue funding this on our own.”

A large advertising campaign – with print ads aimed not only at English-speaking expatriates in the Baltics but at Nordic tourists as well – means larger costs than a run-of-the-mill market.

Riga’s market, which is donating proceeds to the Latvian Children’s Fund, is also dependent on such big name sponsors as Radisson SAS and Reval hotels, Sarma & Norde and Tritan.

Truckers sit on Russian-Baltic borders

The Baltic Times, TALLINN, RIGA
By Kairi Kurm and Leah Bower
Dec 06, 2001

Animosity between the Baltic states and Russia flared yet again as kilometer-long queues of trucks built up on the Latvian and Estonian borders.

Slowed by increasingly thorough inspections of Lithuanian, Estonian and Latvian trucks entering Russia, hundreds of vehicles idled for days in lines that stretched up to 10 kilometers.

And for truckers and companies whose goods are in transport, the border delays translate into lost money, the Latvian trucking association claims.

But there is no shortage of theories as to what is causing the slowdown.

“New management at the customs offices in the northwestern part of Russia is trying to prove that the former management’s work wasn’t good,” complained Toivo Kuldkepp, head of the Association of Estonian International Road Carriers. “The Russian border now checks the trucks very carefully.”

But Didzis Jonovs, adviser to the Latvian transportation minister, said the delays were caused by an inspection order specifically for Lithuanian transport, not Estonian or Latvian.

Jonovs didn’t, however, know why the Russian border officials were looking more closely at Lithuanian rigs.

“(The Russian officials) just organized everything they normally do in a different way,” he said.

Worst hit were the Luhamaa and Narva border crossings in Estonia and Latvia’s Terehova border crossing.

Estonia shares three border control points with Russia, while Latvia has two. Lithuania only shares a border with the Russian enclave of Kaliningrad.

At the Narva crossing, the line of trucks maxed out at 78 with only 30 vehicles being processed by Russian customs each day – down from 130, said a border official who asked not to be named.

“We don’t know why the lines are so long. Our Russian colleagues haven’t explained it to us,” he said.

An official at the Luhamaa border, where one vehicle waited four days to enter Russia, echoed Kuldkepps’ theory on a change in management sparking the tougher inspections.

“We could approve more vehicles, but our Eastern neighbor can’t accept so many trucks at once,” he said. “They want to check every vehicle. It’s probably because their management changed recently.”

Nearly 300 trucks piled up at the Terehova border Nov. 29, prompting drivers to threaten Latvian officials with a blockade if the situation was not addressed by both countries.

Latvian Automobile Associ-ation also claimed the border slowdowns were making truckers a laughing stock.

Latvian border guard chief Gunars Abolins notified his Lithuanian colleagues to start routing trucks through Belarus instead, which temporarily shortened queues Nov. 25. But the lines quickly built back up.

While delayed truckers along the Latvian border threatened to strike and block the crossings, officials tried to stave off a blockade.

The Latvian-Russian border was last shut down by truckers when the number of Russian transport permits ran out in 1999.

“The consequences of a strike could have been very unpleasant,” said Vija Mara Kronberga, head of the Latvian National Border Guard’s press office. “Everything was done to prevent it.”

Latvian Automobile Asso-cition pushed the Latvian government to send a note of protest to the Russian Embassy in Riga, which the Interior Ministry delivered.

Russian customs officials decided to relax border controls later in the week, and lines slowly decreased as truck processing sped up to normal levels.

Jonovs said this wasn’t the first time there was a long delay at the Russian border for truckers, but that it was definitely the worst in terms of wait time and numbers of backed-up trucks.


Estonian success story eyes new opportunities

The Baltic Times, TALLINN
By Kairi Kurm
Dec 06, 2001

Trigon Capital, Estonia’s largest investment bank, sold a fifth of its shares to Finland’s Jouhki business dynasty on Nov. 27, announced Trigon chairman Joakim Helenius.The sale will finance the bank’s expansion in Central and Eastern Europe and increase its access to potential clients in Scandinavia, he said.

The Jouhki family’s Thominvest Group paid 46.6 million kroons ($ 2.6 million) for a 21.26 percent stake in the bank, which until 1999 was known as Hansa Investments and was 50 percent owned by leading retail bank Hansapank.

In 1999 Helenius, a Finnish businessman with previous experience at such heavyweight financial houses as Goldman Sachs and Merrill Lynch, increased his stake in Trigon Capital to 69 percent.

“The Jouhki family invested here because they thought they could get a good return on their investment,” he told reporters this week.

“It’s a profitable business, and the value of their investment should grow dramatically.”

Last year Trigon Capital made a 30 million kroon profit on a 50 million kroon turnover, after incurring losses in the two previous years.

Helenius predicted that by the end of 2004 Trigon’s profit would reach 100 million kroons as it vied with leading providers of corporate financial services in Central and Eastern Europe.

“In two or three years we should expand to the rest of Central Europe, mostly offering finance for cross-border acquisitions and advising,” he said. “We are not planning to set up brokerage operations there.”

With offices already operating in Tallinn, Warsaw, and St. Petersburg, as well as representations in Riga and Vilnius, Trigon plans to open a regional center in Budapest and offices in Prague, Bratislava, Belgrade and Sofia.

Helenius believes that the countries preparing for European Union membership offer some of the most promising medium-term economic prospects in the world, a potential largely being overlooked by a global financial services industry only interested in the biggest deals in straitened times.

Trigon’s competitors in Estonia are Suprema, Baltic Cresco Investment Group, LHV Direct and a string of local commercial banks.

Peeter Saks, chairman of Suprema, which was named best Baltic investment bank in 2000 by the international business magazine Euromoney, declined to comment on his competitor’s operations.

Suprema sees no reason to expand beyond its present Baltic market, he said.

Euromoney named Trigon Capital Estonia’s best equity and best mergers and acquisitions house of 2001.

Although the company has the necessary funds to expand, another new investor, perhaps from Asia or America, could join the team in the future, said Helenius.