Estonia continues to invest in industry

In the course of the transition to a market economy, both industrial enterprises and construction businesses have been privatised by private entities after having been under state or joint ownership. The government considers the privatisation of industries in Estonia to have been generally quite successful as compared to that in other post-socialist countries: there have only been a few complicated court cases concerning privatisation. It has been impossible to entirely avoid such court cases or the bankruptcies of some businesses following privatisation.

Many industrial enterprises and construction businesses have been acquired by foreign investors, most of which are large international concerns. The reasons given for this are the need for more funds to be invested in industry and construction, the opportunities to partake in western know-how, the reputation of concerns which have been operating for a long time and their well-oiled marketing channels.

The Estonian government has considered it important to facilitate foreign investment and a liberal economic policy. The last decade saw an exemption from income tax on investments in enterprises in Estonia provided that the owners did not retrieve the income in the form of dividends. This step has attracted criticism from both Eastern Europe and Western countries out of fear of competition.

The biggest problems for the Estonian manufacturing industry during the last few years have been the lack of skilled workers and an outdated vocational education system. This stands in contrast to unemployment, which has been increasing steadily since the end of Soviet times. The Central Federation of Employers in Estonia intends to complete, with the support of the government, a survey titled “The workforce needed in Estonia” by spring 2003. The government is attempting to modernise the vocational education system and make it more sensitive to the needs of industry.

The development of innovative techniques, with the support of the government, is another trend affecting industry and the economy as a whole. The fact that Estonia needs an effective technology of its own, the so-called “Estonian Nokia”, has been talked about for years. For this purpose, the Estonian Technology Agency operates as part of the Enterprise Estonia foundation, providing grants and loans awarded through competition. The Export Credit and Guarantee Foundation is another body authorised by the government to grant loans on favourable terms. The planned construction of a plant to manufacture biodegradable plastic, using local grain as raw material, is one example of the attempts to implement innovative technology.

Among other things Estonia’s industry inherited from the time of the Soviet Union, there is a lack of attention to technology's impact on the environment. The biggest problems in this area are the oil shale sector in north-east Estonia, including mines, power stations and oil shale production, as well as the chemical industry, cement manufacturing and pig farms. In moving towards Western markets and the European Union, the Estonian government has undertaken to make sure that businesses follow environmental guidelines more closely. It is hoped that this step will help prevent Estonian enterprises from being accused of unfair competition at the expense of environmental investments. The Integrated Pollution Prevention and Control Act passed in 2001 stipulates that enterprises must reduce pollution to a minimum level by 2007, using the best available technology.

Nearly 130 Estonian chemical, building materials, energy, fuel and agricultural enterprises will have to invest at least 20 billion kroons in better technology, equalling approximately two-thirds of Estonia’s annual state budget. In the course of integration with the European Union, Estonian businesses will also have to observe other international standards, no easy task for enterprises forced to develop quickly in order to survive and compete.

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