estonian business for us students - march 2014
TRANSCRIPT
ESTONIA AT A GLANCE.Estonian Investment Agency» investinestonia.com
Area: 45,227 km2 (similar in size to Denmark or Netherlands)
Population: 1.32 million (68% Estonians, 25% Russians), Capital Tallinn (401,000)
Official language: Estonian (belongs to Fenno-Ugric language group, similar to Finnish language)
Currency: EURO
Member of: EU, NATO, WTO, OECD and the Schengen zone
Country credit ratings: Fitch A+
S&P AA-
Moody’s A1
Time Zone: GMT+2
Estonia is the heart of the Baltic Sea.
Why make business with Estonia?
A unique location and culture combining Nordic roots and Eastern influencesA unique location and culture combining
Nordic roots and Eastern influences.
Why make business with Estonia?
Business in Estonia Estonia can offer a progressive business environment with an
efficient and compatible infrastructure. Our e-services, mobile communications and internet applications are among the most progressive in the world. Estonians are adaptable towards new technologies, and use them willingly.
At the same time, our Nordic influence gives investors a transparent, clearly defined, sincere and honest partner who is considerate, rational and not very talkative. The Estonian approach is functional and one that creates timeless value. Our natural resources are powerful and accessible.
As an added value, rootedness is like a guarantee that Estonians do not give up and would rather break their arm than a promise they have given. Perseverance and culture are a good basis for long-term plans in any area of business.
High position in business environment rankings
1
9 1013 14
1619 19
2224
29
48
5557
Index of economic freedomrankings 2013
Source: World Economic ForumSource: Wall Street Journal; The Heritage Foundation
13 4 5 6
10
32
42
4648
52
Global competitiveness index 2013
High e-readiness and low corruption
Source: World Economic ForumSource: Transparency International
13
57
9
13
21 22
32
41 4244
49
Networked readiness index rankings 2013
Estonia is second in the internet freedom in the world.According to Freedom House
1 3 3
1214
1819
28
38
43
4749
Corruption perception index rankings 2013
Politically and Economically Stable
Political stability. Estonia is seen as
the most stable country in CEE –
more stable than Czech Republic,
Poland, Lithuania, Latvia, Romania or
Hungary.
No 1 in Europe in lowest
government debt. Government debt
was 10.1% of GDP in 2012. A stable
and future oriented state budget, with
a growing interest in entrepreneurs
and foreign investors.
Low inflation – 3,9% in 2012
9.05 8.77 8.5
6.496 5.92 5.64 5.24
4.37 4.12
012345678910
Risk of political instability, global rank
Source: IMD World Competitiveness Yearbook 2013
The higher the rank the lower the risk
A highly progressive environment that offers an efficient way of doing business.
Simple and favourable tax system
* 0% Corporate income tax on reinvested profits
All distributions are subject to income tax at the rate of 21% of the
amount of taxable payment
Personal income tax: flat rate 21%. The same rate applies for
expats
VAT: 20%
Social tax: 33% (20% for social security and 13% for health
insurance)
Unemployment insurance: 3% of the gross salary. (The employer
pays 1% of the salary and deduction from employees salary is 2%.)
no property tax
The land tax is from 0,1% to 2,5% on the assessed value of the land,
rate established by local government (i.e in Tallinn 2,5%).
All the taxes can be declared via E-tax/e-customs (an electronic
service desk of the Estonian Tax and Customs Board)
Source: European Commission
0% *
15.0%
15.0%
19.0%
19.0%
19.0%
26.0%
26.0%
26.3%
30.2%
0.0% 10.0% 20.0% 30.0% 40.0%
ESTONIA
Latvia
Lithuania
Poland
Czech Rep
Hungary
Finland
UK
Sweden
Germany
Tax rate on corporate income, 2013
Use of ICT
98%
95%
95%
94%
93%
91%90%
86%
85%
77%
0% 20% 40% 60% 80% 100%
Finland
Sweden
Lithuania
ESTONIA
UK
Czech Republic
EU 27
Latvia
Hungary
Poland
Enterprises with fixed broadband access, 2012
Source: Eurostat
100% of schools and government organisations have broadband connection
74% of homes have broadband connection (Statistics Estonia 2012)
98% of bank transfers are performed electronically
94% of income tax declarations are made via the e-Tax Board
1 192 029 active ID-Cards
Digital signature legislation
87%
85%
81%
74%
72%
68%
67%
68%
67%
61%
0% 20% 40% 60% 80% 100%
Sweden
Finland
UK
ESTONIA
EU 27
Czech Republic
Poland
Hungary
Latvia
Lithuania
Households with fixed broadband access, 2012
Why make business with Estonia?
A highly progressive environment that offers an efficient way of doing business.
Highly developed infrastructure that supports business development.
Among the most successful countries in the world in attracting inward investment.
Well developed infrastructure that supports business development.
Strategic Location – 240 million market
Estonia Distribution HubEstonia has been a global trading post for 760 years. As the “centre of Europe” moves further north and east, Estonia is once again a key gateway between the East and West, North and South, linking Scandinavia, the Baltics, Russia, the CIS, Central Asia, China and the Far East.
An impressive infrastructure – 5 key international ports, 4 free zones, 10 border posts to Russia, block trains to Moscow and Beijing, shortest EU flight time to China – still has plenty of capacity and scope for growth.
Estonia, ranked 7th in the world for ease of trading across borders, is an ideal location for international, intermodal distribution and transit activities.
Accessibility Toll free roads, excellent capacity, 10 border inspection posts from Estonia to Russia Electronic pre-arrival customs processing for the European Union and Russia border
checkpoints Excellent national and international rail network with particularly strong links to Russia
including partnership with Russia’s major wagon owners Containers to Central Asia: regular train “Baltic Transit” operated since 2003
Regular container train service Tallinn – Minsk – Black Sea Future: Southward extension, i.e. Turkey etc. Land and sea bridge connecting to the Far East
Land
Sea
Air
Port of Tallinn – the largest and deepest (18 m of depth) port of the Baltic Sea Port of Sillamäe – the easternmost port of the European Union EU tax exemption in the customs-free zones of the ports All-year navigation without assistance of ice breakers An ideal location for cargo shipment to neighbouring markets
2 international airports: Tallinn, Tartu Most European capitals served directly within 3 hours 7.5hr flight to Beijing – shortest in the EU Global connections via Copenhagen, Helsinki, London Helsinki connection provides frequent services from Europe to Far Eastern cities
in China, Japan and South Korea
Location - Markets sizes and delivery times
Russia – 143.8 mln to St.Petersburg – 24 hours (by train) to Moscow – 24 hours (by train) 48 hours (by truck)
Finland – 5.2 mln to Helsinki – 3 hours (by ship/truck)
Latvia & Lithuania – 6 mln to Riga – 4 hours (by truck) to Vilnius – 8 hours (by truck)
Belorussia – 10 mln to Minsk – 24 hours (by train) 48 hours (by truck)
Ukraine – 46 mln to Black Sea – 2 days (by truck) 5 days (by train)
Industrial & Science Parks
SILPORT hinterland territory of 600 ha has the Free Zone status and is available for developing different terminals, distribution and manufacturing facilities.
SAIVTA is developing 6 industrial parks in Ida-Viru
County in Eastern Estonia, a key development area.
Paldiski South Harbour Industrial Park - located 50 km west of Tallinn and it is the third largest harbour of the five harbours belonging to Port of Tallinn. A 21 ha industrial park area bordering on the harbour is developed.
Muuga Industrial Park is located in Muuga Harbour,
near Tallinn, the largest and deepest cargo port in Estonia. The total area of the industrial park is 75 ha.
Extensive network of quality sites for different user types at all stages of the development
process
Free Zone area – Transit Benefits
Free zone enables to set up distribution or manufacturing facilities
Free zone regime exempts from Value Added Tax (VAT) & customs duties, excise taxes on transit cargo
But preserves Estonian speciality – exemption from corporate income tax on retained earnings
There are 4 free zones in Estonia: Port of Muuga Port of Sillamäe Paldiski Northern Port Valga free zone
Customs EU common customs tariffs The online tariff dataase – TARIC Electronic customs board for tax administration From 1 August 2011, the new procedure of border crossing works
on the Estonian–Russian border and all motor vehicles are obliged to book a place in the electronic border queue in the Russian direction. Information and booking at the Internet addresses www.eestipiir.ee and www.estonianborder.eu
Estonian Tax and Customs Office: http://www.emta.ee/index.php?id=1939
Cutting Edge ICT connectivity
By 2015 all Estonian households,
enterprises and institutions will
have access to the broadband
network with the data connection
speed of up to 100 Mbit/s
Fiber optical backbone network
connects all Estonian county
centers
The country is completely
covered by digital networks
providing wireless internet
A network of Public Access Points
covers most cities and towns
Fiber optical network in
2015
Fiber optical network today
Estonia is part of the Nordic electricity market Estonia is part of Nordic electricity market and Estonian electricity
system is connected also with Russia and Latvia.
Estonian energy system is the only predominantly oil-shale-based energy production system in the world.
The biggest energy producer in Estonia is Eesti Energia, a 100% state-owned company.
The price of electricity consists of four components: electricity, network service, renewable energy support and excise duty.
Electricity market is 100% open starting January 2013.
Natural gas market
Natural gas is imported into Estonia
from Russia and from Latvia
Estonian natural gas company is
Eesti Gaas
Network services to all participants of
the natural gas market on the
territory of Estonia are provided by
EG Võrguteenus
The price of gas consists of three
elements: gas, network service and
excise duty
The price for industrial users is a
matter of negotiations
8.518.97
9.369.82 9.94
10.88
12.0412.46 12.48
13.76
0
2
4
6
8
10
12
14
16 Gas price for industries, 2012 (EUR per GJ)
Source: Eurostat
Labour market and education system
Total labour force: 691,000 The unemployment rate: 10,2% in
2012 General working time: 8 hours a day,
5 days per week. The duration of one shift may not exceed 12 hours
Overtime is allowed by mutual agreement
The duration of the annual vacation: 28 days
10 Public holidays a year The average wages in Estonia in 2012
was EUR 887. The monthly minimum wage for full-time work is EUR 320.
Education system
7 universities (6 public, 1 private) - ca 49,400 students
o University of Tartu – 17,200 students
o Tallinn University of Technology – 13,900 students
o Tallinn University – 10,300 students
22 other professional higher education institutions – ca 15,400 students
48 vocational schools - ca 26,200 students
214 gymnasiums (high schools) - ca 24,000 students
Living in Estonia Living cost lower that in Scandinavian countries, according to the
www.xpatulator.com database, Tallinn is in 285th place out of 780 cities
Most health services covered by general medical insurance system - all persons insured with the Health Insurance Fund have a family practitioner
Education: pre-school care, obligation to attend school from the age of 7 – basic, secondary and higher education. 2 international schools in Tallinn
Social insurance in the EU: http://www.sm.ee/eng/for-you/employees/social-insurance-in-the-eu.html
Why make business with Estonia?
A highly progressive environment that offers an efficient way of doing business.
Highly developed infrastructure that supports business development.
Among the most successful countries in the world in attracting inward investment.
Among the most successful countries to attract foreign investments – all entrepreneurs are treated equally.
Estonian foreign trade - commodities, (EUR bln)
0
2
4
6
8
10
12
14
2004 2005 2006 2007 2008 2009 2010 2011 2012 201310
months
4,7
6.2
7.7 88.5
6.5
8.8
12.1 12.5
10.3
6.7
8.2
10.711.4
10.9
7.6
9.2
12.613.8
11.5
Exports Imports
Source: Statistics Estonia
Sweden 15,9%
Finland 14,5%
Russia 12,1%
Latvia 8,7%
Lithuania 5,4%
USA 4,7%
Germany 4,5%
Norway 3,4%
Netherlands 2,5%
Others 28,3%
Commodities exports by country and commodity, 2012 Commodities exports represent 74% of Estonia’s GDP
Source: Statistics Estonia
Machinery and appliances 28,7%
Mineral products 15%
Base metals and articles of metals 8,3%
Wood and articles of wood 7,4%
Miscellaneous manufactured products 6,6%
Chemical products 5,2%
Transport equipment 5%
Food products 4%
Live animals, animal products 3,3%
Plastics and rubber 3,1%
Other 13,4%
Finland 14,4%
Germany 10,3%
Sweden 10,2%
Latvia 9,6%
Lithuania 8,6%
Russia 6,8%
Poland 6,3%
Netherlands 3,8%
UK 3,8%
China 3,5%
Others 22,7%
Commodities imports by country and commodity, 2012
Source: Statistics Estonia
Machinery and appliances 28,4%
Mineral products 15,5%
Transport equipment 9,2%
Chemical products 8,2%
Base metals and articles of metals 7,7%
Food products 5,6%
Plastics and rubber 4,9%
Textiles and textile articles 4%
Wood and articles of wood 2,4%
Vegetable products 2,1%
Other 12%
Estonian foreign trade - services, (EUR bln)
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 9months
4,72.6
2.9
3.33.5
3.23.4
3.94.2
3.3
1.4
1.82
2.22.3
1.82.1
2.7
3
1.4
Exports Imports
Source: Bank of Estonia
Structure of FDI inflow, (EUR m)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1H
-1000
-500
0
500
1000
1500
2000
2500
822.2770.8
2302.2
1431.9
1985.0
1181.81324.5
1206.8
244.9
1180.5
129.1
40
9.5
51
0.1
56
7.9
10
00
.1
13
73
87
0.6
40
8.4
10
13
.9
98
9.9 97
2.4
28
0.9
FDI inflow reinvested profits
Source: Bank of Estonia
Total stock: EUR 15 bln
Structure of FDI outflow, (EUR m)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1H
-1500
-1000
-500
0
500
1000
1500
137.4216.6
556
881.6
1275.6
760.2
1113.9
107.3
-1044.8
740.8
80.3
FDI outflow reinvested profits
Source: Bank of Estonia
Total stock: EUR 4.6 bln
FDI inflow by countries and activity, stock as of 30.06.2013Sweden 27,1%
Finland 23,0%
Netherlands 9,9%
Russia 4,9%
Norway 4,6%
Lithuania 3,0%
Cypros 2,9%
Denmark 2,5%
Luxembourg 2,2%
USA 2,2%
Other 17,7%
Financial and insurance activities 24,1%
Manufacturing 15,9%
Wholesale and retail trade 12,9%
Real estate activities 8,9%
Professional, scientific, technical activities 8,8%
Transportation and storage 5,7%
Agriculture, foresty and fishery 2,7%
Information and communication 2,6%
Other 18,4%
Source: Bank of Estonia
FDI outflow by countries and activity, stock as of 30.06.2013
Cyprus 30,9%
Lithuania 19,0%
Latvia 17,1%
Ukraine 6,1%
Russia 4,8%
Netherlands 3,4%
Finland 3,0%
Others 15,7%
Transportation and storage 28,9%
Professional, scientific, technical activities 19,3%
Financial and insurance activities 16,3%
Real estate activities 12,4%
Wholesale and retail trade 8,1%
Manufacturing 4,2%
Other 10,8%
Source: Bank of Estonia
Key sectors
ICT
Transport and logistics services
Business and financial services
Industrial machinery and metalworking
Electronics
Industrial opportunities – Engineering and metalworking
Competitive Advantage in Mechanical Engineering Products
- opportunities as a near-shore manufacturing hub for both in-house and outsourced production, services and distribution
- a dynamic, internationally focused mechanical engineering ecosystem, excellent accessibility, a sustainable, high-quality skills base and competitive, low-inflation costs.
1,250 companies are active in the machinery and metalworking
sector, ca 18,200 direct employees
EUR 1.4 billion revenues, of which 67% is generated from exports
3 main branches Metals and metal products – 64% of total revenues
Transport equipment – 22% of total revenues. 91% of transport
equipment production is exported
Machinery, tools & equipment – 14% of total revenues
Summary – Why Estonia?Competitive advantages in mechanical engineering products
Strategic location – global vision
Baltic, Nordic and Western European connections Proximity to Russia and other CEE markets Exports represent more than 100% of Estonia’s GDP
Dynamic engineering industry ecosystem
World class foreign investors supported by extensive local supply chains Productivity increased by 48% in 5 years Development and production of globally innovative products
Quality talent pool– resourcing for business
98,000 engineers 50% of engineers studied specialized or vocational engineering courses
R&D know how
High quality universities - Ranked 19th in the world for the quality of math and science education
Government support - Zero % tax on re-invested profits Mechatronics Innovation Centre at Tehnopol
Competitive costs & taxes – outstanding value
Labour costs are at least a third of those in Sweden or Finland Prime land values €20/m², prime bulk industrial space rent €4/m² Simple, flat rate tax system
Progressive infrastructure Sites – scalable and accessible Ports – growth potential, open year round 100% fibre broadband by 2015
Easy to do business Ranked by the IMD, World Bank and the World Economic Forum as the easiest place to do business in CEE Ranked 7th in the world for ease of trading across borders
Low risk
Lowest government debt in Europe (10.1% of GDP in 2012) Sustainable workforce – 8% unemployment; latent engineering talent pool Political & economic stability – joined the Euro in January 2011 Security – NATO chose Estonia for its cyber security operations
Opportunities for Mechanical Engineering Companies
Metals & fabricated metal
products
Tool-making
Machinery & equipment
Automotive components
Ship and boat building
Key Specialisms Opportunities
Nordic and Baltic production & distribution hub
Contract manufacturing & engineering services
High-end welding
Precision tungsten carbide dies
Design & R&D services
Product development , piloting & testing
Ideal “small country” test market
Scalable development sites around major sea
& land hubs
Successes StoriesOEMs using Estonia as an International Production &
Distribution Hub
6. Quality Talent Pool – Engineering Workforce
Of the total available Estonian engineering talent pool, around 47% are not currently working in a hands-on engineering role. These 46,700 skilled people represent an under-utilized and readily available recruitment base for foreign companies.
The high prevalence of private sector employers is indicative of the breadth of skills available within engineering, gained through exposure to a greater variety of projects.
Source: Oxford Intelligence Location Skills Audit© 2010
Status Adults with Engineering Skills
TOTAL 98,300
Currently work in engineering role 51,600
Previously worked in an engineering role 46,700
Private Sector big company
24%
Private Sector
medium company
26%
Private Sector small
company 30%
Government/Government agency or
other public sector 10%
Education school 1%
Education further or
adult education 1%
Self employed 8%
Engineering Professional Workforce segmentedby Organizational Type
6. Quality Talent Pool – Engineers: Qualified & Experienced
Source: Oxford Intelligence Location Skills Audit© 2010
Rank Education Levels Workforce
1 Specialised Secondary 45,700
2 Master’s Degree 19,100
3 Bachelor’s Degree 8,700
4 Doctorate / PhD 900
Almost half of the engineering workforce has studied either a specialised or vocational engineering course, highlighting that government support for the sector is strong.
Estonia is ensuring that its talent pool is being refreshed, to guarantee a plentiful supply of employees for the future. This continues to be balanced with experience, which will service corporate needs for middle management and more senior ranking positions.
0% 10% 20% 30% 40% 50%
less than 2 years
2-5 years
5-10 years
10 years or more
Experience working in a TechnicalEngineering Role
6. Quality Talent Pool –
Engineers: Key Specialisms
Source: Oxford Intelligence Location Skills Audit© 2010
Companies recruiting in Estonia can readily access a diverse range of engineering skills ability, supported by experience. Talent pools for more niche skills such as Thermal Power and Environmental engineering, are becoming more prevalent.
Rank Engineering Skill Workforce
1 Electrical and Electronics 26,700
2 Mechanical 22,200
3 Industrial and Manufacturing 22,000
6. Quality Talent Pool -
Number of students and graduates
Name of faculty
Name of the study programme
2011/2012
2012/2013
Social sciences, business & law
Social and behavioural sciences
3,746 3,487
Journalism 1,161 1,067
Business Administration
16,427 15,637
Law 3,448 3,124
Technical sciences, production and construction
Production and processing
3,751 3,748
Techical sciences 10,826 10,749
Architecture and construction
6,392 6,098
Name of faculty
Name of the study programme
2010/2011
2011/2012
Social sciences, business & law
Social and behavioural sciences
679 626
Journalism 234 210
Business Administration
3,870 2,284
Law 708 688
Technical sciences, production and construction
Production and processing
881 1,002
Techical sciences 2,473 2,244
Architecture and construction
1,392 1,193
Number of students Number of graduates
Source: Ministry of Education and Research World class talent: according to the World Economic Forum’s 2012-2013 Global Competitiveness Index, Estonia was ranked 19th in the world for the quality of its math and science education.
Universities & vocational colleges: student base = 91,000
8. Competitive Costs – Labour & Property
Source: Financial Times, fDiBenchmark.com, autumn 2013
Approximately four to five times lower labour costs compared to Germany and Sweden in the manufacturing of machinery & equipment
0.83 0.941.10 1.21
1.46
2.84
3.79
4.92
0.00
1.00
2.00
3.00
4.00
5.00
6.00
Latvia Lithuania Estonia Hungary CzechRepublic
UK Finland Sweden
Total labour costs, MEUR/yearMachine tools & equipment, 110 persons
Benchmark locations
Head of Manufacturing – 1
Production Manager – 1
Quality Control Manager – 1
Facilities/Office Services Specialist – 2
Secretary – 3
Warehouse and Distribution Operative – 3
Quality Control Specialist – 3
Engineer – 7
Production Operative (Highly Skilled) – 9
Production Operative (Skilled) – 25
Production Operative (Unskilled) – 52
Competitive labour costs, with a Scandinavian-like culture
8. Competitive Costs & Taxes –
Manufacturing Salaries
Source: FONTES Estonia Compensation Survey 2013http://www.fontes.ee/eng/fontes
Role Monthly Annual
Assembly line worker 630 7,500
Senior assembly line worker 700 8,900
Foreman 1,000 11,400
Mechanical engineer 1,200 13,300
Chief engineer 2,100 25,000
Plant manager 2,400 31,200
R&D/Product development director 3,000 38,000
Head of production 3,100 42,900
Median Salaries 2013 – Capital Region, gross EUR/month
8. Competitive Costs – Property Market Indicative range for rents (excluding VAT and operating expenses) in major towns of
Estonia for class A and B1 office premises (EUR/m2 per month).
Class A –property with professional property management company, located in Downtown (Südalinn), completely new construction, fully controllable technical systems, reasonable column spacing, raised floors and suspending ceilings, good underground parking ratio, corresponding infrastructure/amenities in the building (including cafeteria).
Class B1 –reconstructed or newly constructed building with fully or partially replaced technical systems, located in City Centre (Kesklinn) or on the edge of the City Centre; possibility to install raised floors and suspending ceilings, western-standard interior fit-out, and surfaces parking.
Type of space Tallinn Tartu Pärnu Narva
Office 5.5 – 15.1 4.8 – 11.5 4.0 – 8.0 3.1 – 5.5
Industrial 2.8 - 5.0 2.0 - 4.0 1.6 - 4.4 1.9 - 3.8
Source: Colliers InternationalTallinn Berlin Warsaw Stockholm Paris Helsinki London0
2
4
6
8
10
12
14
4.2 4.2 4.25.3 6
7.5
13.2Industrial rents in 2012, bulk space (EUR/sqm/month)
Estonian Investment Agency –free consultancy services to potential foreign investors
www.investinestonia.com www.estonia.eu
Thank you!
Ele Merike PärtelEstonian Investment Agency