Estonia is located in the heart of the fastest growing market in Europe - the Baltic Sea region. Due to its geographical location, the rapid economic development and liberal tax system, Estonia is the leader among the countries of Central and Eastern European countries in attracting foreign investment, and investment abroad per capita. Dynamic development and stability of reforms over the past ten years has enabled Estonia to finish in the 2002 negotiations for accession to the European Union. May 1, 2004 Estonia became a full member of the European Union, and January 1, 2011 successfully passed the single European currency (euro), that certainly says a successful economic development.

 

   Posted on the Heritage Foundation in The Wall Street Journal Index of Economic Freedom 2011 puts Estonia in 14th place among 179 countries in the degree of economic freedom. The lists of the International Association of Anti-Corruption Transparency International in 2010, Estonia held the 26th place out of 170 countries, that is one of the least corrupt countries in the EU. Competitiveness Index (Current Competitiveness Index) for 2011 - 2012. Compiled by the World Economic Forum, brings 33 in Estonia from 140 countries.
Estonia distinguishes the favorable investment climate. Foreign investors are guaranteed equal rights with the residents, including unlimited withdrawal of profits and capital, as well as the ownership of movable and immovable property.

 

   There are several reasons why foreigners invest in Estonia:

• In Estonia, they have a good income - even in times of economic crisis, the overall profitability of foreign investment has been  positive, although many businesses and industries have suffered serious losses.
• The business environment in Estonia is similar enough to the appropriate environment in developed countries, there is a low level of bureaucracy and corruption. In addition, the Estonian business culture tends to European traditions.
• Membership in the EU has made Estonia an attractive investment, moreover, the economic growth here was one of the fastest in the EU. The introduction of the euro brought to nothing the fears of investors about the stability of the Estonian currency, as entry to the OECD says the comparability of local business and economic environment with the best in the world.
• The labor force in Estonia is relatively cheap compared to developed European countries, and the quality of work is quite high. Salaries and even increased, but at the same time, local officials have improved their skills and opportunities for growth in labor productivity remains high.
• Low income tax for enterprises and opportunity to avoid paying income tax if money are not being paid out as dividends.
• Low cost of logistics in Europe, compared, for example, regions with low-cost production in Asia and Africa.
• In Estonia, although it is difficult to build large factories, but the small size of the company allows you to organize the production process more flexible, and if necessary to change quickly enough range of products. This is particularly important for some consumer goods (eg clothing, furniture, etc.). The number of foreign investment per capita in Estonia is among the highest in Eastern and Central Europe. If initially the majority of investments came to participate in the privatization of companies, later began to increase investments in operating businesses and create new enterprises. In the last decade, foreigners bought more local working and successful businesses.

 
Foreign investors


   Position of Swedish and Finnish companies in Estonia in recent years have weakened slightly, but the share of investment coming from these countries is still high. First place in Sweden (37.7% of direct investment) is due to possession of the largest banks in Estonia, Sweden has also invested in the telecommunications sector, and indeed in many other ventures. By country of origin of foreign investments to Estonia - Finland takes second place (22.6%), which also invested money primarily in the banking sector, but also, for example, trade and industry. The remaining foreign investments are distributed among the other European countries (notably the Netherlands, Cyprus, Britain, Germany, Norway and Luxembourg), deserve mention as investments from the U.S.. Russian investors in Estonia were relatively modest - they account for 3.4% of all investments made in Estonia. Of course, it is possible that part of the capital of Russia - is the so-called offshore investments or come under the guise of investments in other countries, however, estimated that their share is not so great. The bulk of foreign investments were deposited in the financial sector (31%), primarily in the banking sector. An impressive amount of foreign capital attracted manufacturing (14%), trade (11%), realty sector (12%), as well as professional, scientific and technical activities (13%). Investments came to Estonia for several reasons. Initially, foreign businessmen attracted by cheap The local, but rather a quality production. Today, the cheapness of production relegated to second place, since wages in Estonia grew quite rapidly. Yet the labor force in Estonia is still pretty cheap - considering the quality, wages and labor productivity growth, ie Estonia has not lost its attractiveness for investors, especially in comparison with developed countries. This fact has stimulated investment in the manufacturing industry, as well as in transport and communications sector. In Estonia, more and invest because of domestic consumption - increased prosperity of the Estonian people, they can spend more and more, great, and linked to the growth of domestic demand the need for investment - that is why foreign investors hoping to profit from this growth. If the earlier investment grew only in the financial sector, now more and more investments coming into the sphere of trade and services.


Foreign investment in Estonia


   Estonia is one of the most active investors in countries with economies in transition. However, in practice most of these investments are the investments of foreign investors in Latvia and Lithuania are in Estonia through its subsidiaries. Since in the 90s economic development in Estonia was the fastest, foreign investors began to boldly invest their money here earlier and in larger quantities. Their enterprises located in Estonia, in turn, began to invest in Latvia and Lithuania, and sometimes in Russia. A significant portion of these investments was carried out by Scandinavian companies in the financial sector as a result of the 43% foreign investment in Estonia fall on the financial sector. Increasingly active role played by Estonian companies in the economy of its southern neighbors, as a small market in Estonia quickly became close to growing businesses. To date, approximately 56% foreign investment of Estonia went to Latvia and Lithuania (Lithuania share a little more). Of course, at the same time successful Lithuanian and Latvian enterprises seek to enter the Estonian market. For Estonian businessmen important regions for investment are also Russia, Ukraine (5% and 4% respectively of investments) and Finland (7% of investment).