Nation interrupted: expectations for 2002

The Baltic Times, TALLINN
By Kairi Kurm
Jan 10, 2002

A recent poll carried out among Estonian decision-makers and business people revealed their expectations for the coming year. Emotional events like the Eurovision Song Contest and the winter Olympics came top of the list of things to look forward to in 2002.

But arguably the most important decision to be made this year will be whether Estonia is to be extended an invitation to join NATO at the Prague summit in November. A long-held dream of Estonian Foreign Minister Toomas Hendrik Ilves, many fear that with the government about to change it could stay unfulfilled.

Since Mart Laar announced his resignation, most Estonian residents are puzzled about who will replace him. Laar himself expects any new government to carry on with projects already launched, especially the path to the European Union and NATO, and the privatization of major national assets.

If the president fails to name a person to form the next government, elections are an option. Politicians and observers doubt, however, that this would make the picture clearer. Polls say there would be no clear winner.

Other political experts say that elections would hamper the work of the entire state administration machine for at least six months. All bills now under consideration will have to be terminated.

“I predict that a new government with a richer variety of parties will be created,” said Evelyn Sepp, who has reason to be optimistic; she is spokesman for the Center Party. “Whether Estonia receives an invitation from NATO this year or gets good news from the EU depends on integration processes globally,” she added.

Likely changes in managing the energy sector can, according to Sepp, be seen to after the current government crisis is solved. “Since we can’t absolutely exclude extraordinary elections I can’t give any preliminary prognoses,” said Sepp.

Toomas Reisenbuk, chief analyst at the investment bank Trigon Capital, said that the forming of a new government is the only thing he expects something from, because it will determine the development of the economy and changes in taxation.

The Estonian Genome Project team hopes to finally get investor agreements signed in 2002. According to Krista Kruuv, head of the Estonian Genome Foundation that runs the project, investors have already been found and the contract drafts are ready.

She declined to reveal the investors’ identities, apart from saying they come mostly from abroad.

After the investment channels start to work, a pilot project can be launched in three Estonian counties this year. Genetic data from 10,000 voluntary donors will be collected and analyzed. This will put the real project, its security and quality, to the test.

From Jan. 1, 2002, three Estonian financial supervision agencies – the banking supervision department at the Bank of Estonia, the Securities Inspectorate and the Insurance Inspectorate – formed a single watchdog called the Estonian Financial Supervision Authority.

The new body should help to enhance the stability, reliability, transparency and efficiency of the financial sector.

Daniel Vaarik, an adviser to the Ministry of Finance, said the formation of a new government, local elections in October, Estonia’s integration to NATO and other international structures and Eurovision are the most important events.

“For the Ministry of Finance, the implementation of the second pillar of pension reforms and preparing a state budget for 2003 are the priorities,” he added.

This next stage of pension reform, due to be put into place on March 1 and which will be mandatory for youngsters starting on the employment market, foresees funding pensions by paying monthly installments into a pension fund.

A new trading system that has allowed from Jan. 1, 2002, the trading of listed securities on the Tallinn Stock Exchange in the Helsinki Stock Exchange trading system, should liven up the Estonian stock market.

Juhani Seilenthal, manager at Nordea Bank Estonia, said the new trading system and the pension reform are the most important events for him.

“Where trading is concerned, on the one hand an era of ?independence’ is coming to an end, but on the other there will be a brighter future for Estonian securities,” he said. “It’s hard not to see this as a positive development.

“And as the trading will start in euros, this is the start of a new era within the bigger euro framework.”

The introduction of the euro as common currency by most of Western Europe should have positive implications for the Estonian economy. The growth predicted by many in the euro region will have a knock-on effect for Estonia’s own economic outlook.



Ruutel says it was greed that split the nation

The Baltic Times, TALLINN
By Kairi Kurm
Jan 10, 2002

Estonian President Arnold Ruutel held his first New Year speech on the national television station ETV minutes before the arrival of 2002. Ruutel, who is a former member of the opposition Estonian People’s Union Party, had a number of rebukes for the falling ruling coalition, which in his words has placed party interests before the interests of the nation.

Ruutel said that the ethical and political crisis in Estonia had split the nation in two. Each side had totally different opportunities and lived with different value systems.

“If some people do not care what others think about the privatization of the power stations in Narva or Estonian railways, if the shutdown of railway traffic in south-east Estonia and the permission to generously rise prices for those enterprises with a market monopoly are regarded as just economic experiments, it makes no sense to call for national consensus. It’s already there,” he said.

“Fortunately, there are parties and entrepreneurs in Estonia for whom the interests of the Estonian state are the top priority. But their voices have remained weak amid the greed and egoism, which is unfortunately still prevailing.”

He stressed that every individual of every age and interest group has the right to self-esteem. The September crisis in Parnu, when dozens of people died after drinking methanol-tainted moonshine, was a sign of too many people in Estonia living on the edge of an abyss seeking comfort or oblivion in drugs.

“We are flattered by the knowledge that when it comes to the openness of its economic environment Estonia is one of the top countries in the world. Our human development index is continually on the rise. But in spite of all this, the quality of life in Estonia is determined by the happiness of our people and by their capability to manage,” said Ruutel.

“To link it only to a hefty income, material security, or heavy consumption would be too simple. The quality of life depends on whether a human being can feel dignified at any age and in any situation.”

According to Ruutel, Estonia has had a lot to learn from its Nordic neighbors, which, owing to their well-balanced, people-centered economies and efficient regional policies, were turned into affluent societies with national self-esteem.

Ruutel, who, unlike his predecessor Meri, prefers inland trips to foreign ones, also preached the work of local municipalities, which to a great extent are shaping the face and the future of Estonia.

Foreign landowners not welcome

The Baltic Times, TALLINN
By Kairi Kurm
Jan 10, 2002

A survey conducted by the ES Turu-Uuringute research company shows that two-thirds of Estonian residents would ban or limit the sale of land to foreign residents.

Out of the 950 people questionned 43 percent would ban the sale of any kind of land, 26 percent would ban only the sale of agricultural or forest land and 2 percent the sale of real estate plots, while 18 percent support the sale of land to foreigners.

The survey shows that every third person aged 15 to 33 and every second one over 50 would ban the sale of land to foreigners. The biggest nationalists are among less educated people with smaller incomes living in rural areas. The supporters of land sale to foreigners are mostly wealthy and educated.

One-third of the people questionned were non-Estonians (non-citizens and foreigners living in Estonia). The percentage of non-Estonians speaking in favor of the ban of land sales to foreigners was smaller, 38 percent compared to 46 percent among Estonians. Twenty-four percent of the non-residents would withdraw all limitations, while the respective figure among Estonians was 15 percent.

At present foreigners can buy building sites under the same conditions as local residents. In order to buy forest land or agricultural land they have to send a petition to the governor of a province.

The sale of land on smaller islands or along the Estonian boundary is prohibited. Permission granted by the Estonian government is necessary for acquiring these lands, said Karin Madisson, layer at Sorainen law office.

Foreigners need the government’s permission if they want to get the right to use the land near the Estonian border for longer than 10 years or purchase real estate there. Once a foreigner has acquired real estate (not near the border) it is possible to obtain the property without the government’s permission.

With a company registered in Estonia foreigners have no restrictions for obtaining land. The government’s permission is then required only when land is obtained near the border.

“Since foreigners can easily establish companies in Estonia and companies do not need a governor’s permission for purchasing land, they very often buy land through companies,” said Madisson. She said that foreigners living in Estonia or planning a business in Estonia very often turned to their office with the wish to buy land.

“We find that there should be no restrictions on the sale of land to foreigners like it is common in developed European countries,” she said. “The present legislation does not give much opportunities for the state to control or limit the sale of land and thus does not fulfil its goal. The restrictions bring along the use of intermediaries and creates a shadow economy, which is not normal in developed countries. Permitting the sale of land would foster investments, create jobs and improve general wealth.”

It is very difficult to define how much land belongs to foreigners, because the owners are not registered according to their nationality, said Urmas Glase, spokesman for the Ministry of Environment. Most foreigners trade through intermediaries, he said.

According to his estimations the share of land sold to foreigners is about 3 percent. The island of Saaremaa is the biggest attraction, especially among Finnish citizens. The other popular region purchased is Ida-Virumaa county, which is inhabited by Russian speaking non-citizens. Ida-Virumaa county is the most northeastern county of Estonia surrounded by the Gulf of Finland in the north, Lake Peipsi in the south and the Narva River together with the Estonian-Russian border in the east.

Estonia’s accession to the European Union would at once abolish all restrictions on foreign residents. Several politicians believe a transitional period delaying the implementation of the freedom of land sales is necessary.

Evelin Sepp, spokesman for the opposition Center Party, said that Estonia needed a transition period since Estonian farmers have yet not reached a required profitability and competitiveness compared to EU countries and they should be given a chance to buy their land. She said that Estonian agricultural land was 30 times cheaper than in Europe.

Mart Nutt from the ruling Pro Patria Union said “Estonians want to limit the sales of coastal area rather than agricultural area, because their purchasing power is considerably smaller than this of neighboring citizens. Estonians are in an unequal condition.”

He said that Estonians wanted equal realistic opportunities and it was not protectionism or hatred behind the desire of imposing restrictions.

“In this respect the legislation has to be overviewed and a transition period established for the sale of certain land,” said Nutt. “At the same time I should admit that administrative restrictions do not offer enough protection because it is not possible to hinder the privatization of land through intermediaries.”

Nutt said that the above mentioned restrictions should not hinder the flow of investments or the activities of foreigners whose business is useful for Estonian agriculture and creates jobs. Estonia has acknowledged the freedom of land purchase that is common in the European Union countries and retreating from this position would be unjustified, he said.

Arnold Ruutel had, according to daily Postimees, said before he was elected president of Estonia that the sale of land should be hindered for at least 10 years because the preservation of landed property was the precondition for the existence of Estonia as a nation state. A week ago he told the Estonian dailies that he had been misunderstood. “I meant that we should fight against the speculators who purchase dozens of hectares of land in order to resell it,” Postimees quoted him. He said that the adoption of the bill which regulated the sales of land to foreigners should have been postponed for a few years.

Several companies want to quit bourse

The Baltic Times, TALLINN
By Kairi Kurm
Jan 10, 2002
Prompted by changes in their ownership structures the number of companies listed on the Tallinn Stock Exchange may decrease from the present 17 to 10.

“There are no certain leavers,” said Veikko Maripuu, head analyst at the investment bank Suprema, “but there are some companies which have not fulfilled all the necessary terms of the exchange and want to leave.”

This doesn’t mean, however, the exchange is in danger of disappearing, he added. “The situation would be problematic if Hansapank and Eesti Telekom decided to leave, but in the present situation it would become stronger by getting rid of those companies which are trailing behind.”

According to Maripuu trading in stocks looks set to increase as a result of cooperation between the Tallinn bourse and Finland’s HEX stock exchange and in tandem with the development of the second pillar of Estonia’s pension process, which obliges new employees to hold private pension plans.

He predicted that such state-owned companies as the Tallinn port Tallinna Sadam, Estonian power utility Eesti Energia and railway concern Eesti Raudtee would at least in part be listed on the exchange in future.

The companies preparing to quit the bourse at once are those with a big core of investors, where only a small number of shares – mostly with low liquidity – are traded.

The largest holders of shares in such companies as Sampo bank, meat packer Rakvere Lihakombinaat and cold store Tallinna Kulmhoone already have stakes of almost 95 percent.

Tallinna Kulmhoone wants to leave the exchange, but its majority owner Lithuanian Kauno Pienas Centras would have to increase its stake by another 0.7 percent to 95 percent before the exchange accepts the withdrawal, said Evald Karu, member of the board at Tallinna Kulmhoone.

“These few shares are hard to get,” commented Karu. “Stock exchange rules to protect small shareholders are understandable to some extent. But since the stock is not changing hands, I can’t see any reasons for staying at the exchange.”

Olle Horm, chairman of Rakvere Lihakombinaat, said the company’s majority owner, Finland’s HK Ruaokatalo, wanted to leave the Tallinn Stock Exchange because the stock was not freely traded on the bourse. “Getting on the stock exchange was a good idea, but it hasn’t given any additional value lately,” he said.

Eva Palu, spokeswoman for the Tallinn Stock Exchange, said the idea that 95 percent of a company must be owned by a single entity before delisting was considered was not set in stone. Each case was decided by the listing committee separately, she said.

So far none of the companies in which one owner holds a stake of more than 95 percent has turned to the stock exchange for delisting, she said, adding that a couple of companies wished to leave the exchange a year ago but failed to meet all the necessary requirements.

Many of the companies Maripuu believes will delist are remaining tight-lipped about their plans.

But ownership changes at the clothing manufacturing company Baltika and the wood processor Viisnurk could logically result in their core investor Baltic Republic Fund holding onto the companies for a couple of years before reselling to a new strategic investor by 2003, he said.

Andrus Aljas, finance director at Viisnurk, downplayed such claims. “BRF, which controls almost 60 percent of Viisnurk, has been in the company for seven years now. If someone wished to buy BRF’s stake an offer would also have to be made to other owners in order to protect the interests of the small shareholders. We, the management, do not want the company to be delisted. How else would a company outside the capital of Estonia be noticed if not through the exchange?”

Ulle Jarv, member of the board at Baltika said “We have no plans to leave the stock exchange, at least not in the near future.”

Estonian seat belt manufacturer Norma is another potential stock exchange leaver, said Maripuu. “History shows that Norma’s core investor Autoliv purchases companies in full after three years.”

But Autoliv spokesman Mats Odman denied there was any plan to delist. “We’re satisfied with the current situation. There are several examples where we have not bought out the whole company,” he said.

Maripuu said that the confectionery Kalev, construction company Merko and Tallinn department store Tallinna Kaubamaja were attractive Estonian companies that would probably find a new foreign investor.

But Katrin Muhls, finance director at Tallinna Kaubamaja, also denied the company was about to delist.

Nonetheless, Maripuu believes consolidation is now the name of the game. “Tallinn pharmaceutical plant Tallinna Farmaatsiatehas and the Latvian pharmaceutical Grindex are tied to each other so densely that they should be listed under one name,” said Maripuu.

The clothes manufacturer Klementi and the IT company XXL have also expressed desire to leave the exchange, said Maripuu.

Since 1999 nine companies have left the exchange, including EVEA Bank, insurance companies ASA Kindlustus and Leks Kindlustus, Estonian fair organizer Eesti Naitused, construction company EMV, Reval Hotel group, Uhispank, car dealer Fakto and the real estate developer Pro Kapital.