Port of Tallinn expects to conclude deal with Chinese

The chief executive of Tallinna Sadam told a transit commission meeting at theMinistry of Economy and Communications that the state-owned port company hopes to sign investment agreements with China in the fall.The Baltic Sea is one of the fastest-developing regions in which China is considering investing, CEO Ain Kaljurand said.

Plans are being made for a container terminal at Estonia’s main merchant port of Muuga, east of Tallinn. For handling containers, two kilometres of wharves need to be built. A terminal with an area of 100 hectares could receive ships carrying up to 8,000 containers, the ministry said in a statement.

Source: Estonian Review


Transit business is improving

Compared with the biggest ports on the east coast of the Baltic Sea Tallinna Sadam still held the third place after Russia’s Primorsk and St. Petersburg ports in terms of freight turnover.

If the large Russian ports managed to increase their freight turnover by respectively 12 and 11% to 74 and 60 million tons, then the freight turnover of Tallinna Sadam fell by 9% to 36 million tons. Ventspils, Klaipeda and Riga with respectively 31, 27 and 26 million tons followed.

The supervisory board of the state-owned company Tallinna Sadam decided in favor of an investment of 355 million kroons (EUR 22.7 mln) in the Paldiski South Harbour for the construction of new quays.

It also approved an investment of 25 million kroons in the Old City Harbor of Tallinn for the improvement of new ships calls. In the South Harbor of Paldiski, an 8 quayline is about to be built with a length of 160.1 meters and a ninth quayline with a length of 247.5 meters. The quaylines will be built in the sea with a depth of up to 13 meters and the area between the new quayline and the existing quay filled and covered. Works in Paldiski are expected to start at the beginning of 2009 and end in late May in the same year.

The volume of domestic freight carriage on Eesti Raudtee track increased by 88% against last January, amounting to over half a million tons.The volume of export freight carriage increased by 14% to 80,000 tons this January against the same month last year. Of the commodities, oil an oil products was the biggest group of freight in January amounting to 1.75 million tons. But against the same month last year that volume was 31% lower.

Source: http://web-static.vm.ee/static/failid/427/economy_february2008.pdf

Estonia does not want to pay too much pollution tax

The Estonian government finds that 1990, not 2005 as suggested in the present version of the EU´s climate measure package, should be taken as the basis in the calculation of carbon dioxide emissions.

Estonia’s energy supply security must not contract as a result of the climate and energy package, and neither must the competitiveness of our economy deteriorate,” Economic Affairs Minister Juhan Parts said. The government endorsed Estonian positions concerning 6 European Commission bills making up the renewable energy and climate package. One of Estonia’s most important positions is that energy produced from oil shale must partly be brought out from under the CO2 quota. This is because Estonia’s energy security will depend on oil shale energy in the foreseeable future. At the same time money from the sale of quota must only be channelled into energy sphere investments.

If the EU´s energy and climate package for the years 2013-2020 is implemented in its present form, further reconstruction of oil shale fueled generating units at Estonia’s Narva power plants will be in serious jeopardy.

In the light of things as they are now it makes no sense for Eesti Energia to proceed with the plan. The government may decide, however, that the new generating units are needed for Estonia to  ensure security of supply, and decide in favor of the corresponding investments. Together with the opening of the EU’s energy market in 2013 also the market for CO2 emission quotas will open. As a result, companies will have to buy quota for themselves on the market. Electricity generated using oil shale will after 2013 remain a competitor on the Nordic energy market, where the share of CO2 emissions in power generating is significantly smaller than in Estonia. Thus investments into new generating units in northeastern Estonia also depend on the price level on the Nordic energy exchange Nordpool. The possibility also remains that in an open market, cheap electricity from Russia will start arriving in Estonia via third countries, the price of which does not contain expenditure for carbon emission rights.

Eesti Energia will not be able to introduce higher prices for electricity from June 1 as originally planned due to a delay in regulatory approval.The Competition Board has made it clear that the new prices won’t be approved at a level 23% above the present prices as sought by Eesti Energia. Yet it has given no details. The law requires that consumers be notified of changes in the price of electricity at least 3 months in advance. Economy Minister Juhan Parts promised that debates involving the public will start soon on the future of the Estonian energy sector, including on the prospect of building a nuclear power plant.The first public forum should take place on March 12. The discussions will be held within the framework of the drafting of Estonia’s energy sector strategy. The strategy paper should be ready by the end of this year and it would have to be ultimately endorsed by the parliament. The purpose of the strategy paper is to set out what Estonia’s energy portfolio should consist of in the event of different scenarios, and it also should contain a decision in principle on whether and how to proceed with the matter of nuclear energy. Source: http://web-static.vm.ee/static/failid/427/economy_february2008.pdf

There is an excess of office space

A continuing increase in the amount of vacant real estate in the Baltic states is putting the real estate markets of these countries under pressure, and on the overheated Estonian market Swedbank and SEB are feeling particular squeeze.

Fresh internal reports at Swedbank show that the amount of vacant office space is growing at a high speed. According to Hansabank, the overall area of vacant office space in Tallinn is expected to increase by 45% over the next year. Thus far tenants have been found for only a small proportion of the new office space. In the event of a major slowdown of the Estonian economy large quantities of office space will become vacant and finding tenants may prove more difficult. Such a development may put the builders and their financers, mainly Swedish banks, under serious pressure.Source: http://web-static.vm.ee/static/failid/427/economy_february2008.pdf

Dividends paid to foreign pension funds raise question

The EU has taken infringement proceedings against Germany and Estonia over tax regulation according to which dividends paid to foreign countries’ pension funds can be taxed at a higher rate than dividends paid to local funds.The Commission also sent an official letter to the Czech Republic in connection with tax regulation permitting taxation of dividends paid to foreign companies at a higher tax rate than dividends paid to domestic companies. Germany, Estonia and the Czech Republic are requested to answer to the inquiry within 2 months. Dividends paid to Estonian pension funds by Estonian companies are not taxed in Estonia while 22% is deducted from the dividends paid to foreign countries’ pension funds.

Estonia is preparing to amend its taxation law in order to bring it into line with the mother companies and subsidiaries directive in force in the EU. The main issue of the amendments will be dividends paid to foreign owners.

Source: http://web-static.vm.ee/static/failid/427/economy_february2008.pdf

Prime Minister: there is no crises

According to Prime Minister Andrus Ansip, the economic situation of the Estonian state is very good and it is certainly not possible to speak about a crisis.

Ansip said there had been rumours already in the previous year that Estonia had come to an unexpectedly deep crisis. According to Ansip, there was considerable intake into the state budget above the target and the financial situation of the country was very strong. The prime minister also said that he had to sadden those people who expected poor results at the beginning of this year. The revenue intake of the budget is good beyond expectations. Concerning a new labor contract bill, which makes layoff simpler, Ansip said that it would incite people to learn more. He said that reproaches by various foreign organizations to Estonia that there was too little qualified labor in the country and that the labor market was inflexible, were true.Source: http://web-static.vm.ee/static/failid/427/economy_february2008.pdf

Consumer price index increased by 11%

According to Statistics Estonia, the percentage change of the consumer price index in February 2008 compared to February 2007 was 11.3%.

The price change was as follows:

goods 10.3%
food, alcohol and tobacco 15.1%
manufactured goods 6.6%
services 13.0%

At the same time, administered prices changed 20.8% and non-administered prices 8.6%. The index was mainly influenced by the increase in the prices of food, increase in the expenditure on housing and increase in the prices of motor fuel.

In February 2008, the prices of goods and services were on average 0.4% higher than in January 2008. In February 2008 compared to January, the consumer price index was mainly influenced by the increase in the prices of food, alcoholic beverages, health services, eating out, and fruit as well as by the decrease in the prices of motor fuel.

Change of the consumer price index by commodity groups, February 2008

Commodity group February 2007 –
February 2008, %
January 2008 –
February 2008, %
TOTAL 11.3 0.4
Food and non-alcoholic beverages 17.1 0.5
Alcoholic beverages and tobacco 9.4 0.8
Clothing and footwear 4.5 0.5
Housing 15.2 0.2
Household goods 4.4 0.5
Health 8.4 1.3
Transport 14.0 -0.3
Communications -0.8 -0.1
Recreation and culture 3.4 0.2
Education 8.2 0.8
Hotels, cafés and restaurants 15.8 1.0
Miscellaneous goods and services 11.7 0.4

Source: Statistical Office