The Nordic way
Estonia's main priorities in recent years have not departed much from the aspirations of central and eastern Europe. Since the mid-1990s the Tallinn government has been pursuing European Union accession, NATO membership and increased international co-operation in business and trade. The opinion in the international business arena is that in achieving the last goal, Estonia has surpassed most of its former Soviet-bloc companions. According to international ratings agency Fitch, the Estonian economy works smoothly, with a largely foreign-owned banking system, extensive foreign investment, a consistent economic policy and good progress in its EU accession talks.
Two weeks ago six parties clashed in Estonia's parliamentary elections, with four winners emerging. The majority in the centre-right coalition will now be formed by the republican Pro Respublika and the Centre Party, with the Reform Party and Estonian People's Union completing the alliance. Juhan Parts, leader of the republicans who is a candidate for prime minister, is committed to slowing down reforms, claiming, "The society is exhausted with year-long reforms." Instead, he promised the Estonian people stability and the stronger defence of their national interests after EU accession.
Those interests, most Estonians feel, will be particularly threatened if they are forced to scrap their duty-free shops, which would affect their competitiveness on the Baltic ferry market. This could result in lower numbers of tourists coming in from Sweden and Finland and eventually cause the collapse of the so-called ferry tourism.
This is no small worry with Sweden and Finland as Estonia's major foreign investors. Scandinavian dominance over the nation of 1.4 million is evidenced by Nordic investment and, in appearance, by everything from language to mentality.
In recent years the Estonian market was the smallest in the Baltic region for Polish exporters. The recent slump in beef exports caused by BSE-related bans has not helped the situation. Thanks mainly to small and medium-sized businesses, the trade numbers have been picking up even though the results are still far from satisfactory according to Polish businessmen.
The Estonian press has also been quick to comment on any stumbles by Polish businesses. This includes Polsat's spectacular failure in 2001 with the purchase of TV1, the smallest of Estonia's four national TV stations, which subsequently filed for bankruptcy. More significant and somewhat more successful was the 1998 purchase by Bank Handlowy (now Citibank Handlowy) of a 5.07% stake in Estonia's largest bank, Hansapank.
Iwona Górska, sales director for Suwałki-based furniture manufacturer Ajro-Szmigielski, says that although the company is already present on the Lithuanian and Latvian markets, it has only recently started looking at Estonia as a potential trade partner. She characterised the Estonian market as "poorly developed, relying mostly on foreign imports."
Górska also complains about the legal difficulties of doing business in Estonia, saying that starting a company there is much harder than in the other Baltic states.
"The law requires that at least one board member should be Estonian, while the foreign executives have no guarantee they will receive a work permit, of which there is a limited pool," Górska said. The law, incidentally, affects mostly former eastern-bloc nationals.
Although the work permit law will become invalid with Poland's and Estonia's EU accession, Górska said that the bureaucracy and legal proceedings have slowed down her firm's debut on the Estonian market. She also points out that customer demands are quite different there than in Lithuania or Latvia.
"Estonians really pay attention to good quality finishing and have a different, more Scandinavian taste," she said.
She described the process of negotiating with Estonians as "difficult," and explained, "They know exactly what they want, and additionally the (furniture) market is heavily controlled by the Finns."
Sławomir Strzałkowski, Polish commercial counsellor in Tallinn, agrees with Górska, saying that the Estonian market is heavily dominated by Nordic firms, which assemble and process a lot of products there that are then re-exported back onto their domestic markets.
"Estonia performs a middleman service for the Nordic countries in terms of manufacturing and production, and that is why it's so closely linked to their capital," he said.
Meanwhile, Strzałkowski points out that Polish companies are less likely to come to Estonia if their final goal is conquering the Russian and Far Eastern markets.
"Because of double export tariffs on the Russian border, our investors treat Estonia as an end destination rather than a gateway to Russia, as they do with Lithuania," he said.
As 68% of Estonian exports are directed to EU countries, while 58% of their imports come from the EU, it is apparent which market the small state and its manufacturers are really targeting.
"This is their preferential trade direction," Strzałkowski said. "Estonian businessmen are not really interested in Poland. The few that are, are looking for an opportunity to import Polish products into Estonia.
"In 2002, approximately 400 Polish firms came to me asking about investment opportunities and sector analyses. In the same period of time I received only 50 questions from Estonian entities, and most of them asked about impor-ting products from Poland.
"It's a challenge (for a small firm) to make it on such a small market; large companies will always find a way to succeed. But I think our SMEs will find a way. One just needs to adapt to the nature of the economy."
Strzałkowski also emphasises that venturing out to Estonia may be linked with additional expenses for a manufacturer, as the tastes there may be very different from central and eastern European standards.
"Their tastes are different, the colour schemes, designs and the overall look they are after, are more Nordic," Strzałkowski pointed out.
Another company getting ready to enter the Estonian market is Gdańsk-based cosmetics producer Ziaja. Artur Szyngwelski, assistant to the company's director, said Ziaja entered the Lithuanian and Latvian markets two years ago and it is now actively looking at investment opportunities in Estonia, with only final legal proceedings left to be completed.
"We've decided to enter the Baltic markets because they appear to be structured similarly to our market, and by now we are able to use our extensive domestic experience to succeed there," he said.
Instead of conducting time-consuming market research in terms of product demand, Ziaja representatives have selected 50 of their most popular products and registered them on the local markets.
"The market verified which were most popular, and now there are about 30 products left, with the cosmetics produced from goat's milk among some of the best-selling," Szyngwelski said. "We intend to proceed in the same way in Estonia.
"There is a contrast between the Estonian market and Lithuania and Latvia. Estonians have a very western approach to doing business. The Lithuanian and Latvian business mentalities are a little more Russian. It is sometimes easier to reach a consensus with them."
While more Polish companies are getting ready to expand beyond the tried-and-tested market of Lithuania and Latvia and into Estonia, Sławomir Strzałkowski has also been busy promoting Poland as a tourist destination, and the idea seems to be catching on. Come June, a regular bus service between Tallinn and Zakopane, via Warsaw and Kraków, will operate four times a week.
With a turnout in the recent parliamentary elections that was nearly 14 percentage points higher than during our parliamentary elections last autumn, there seems little doubt that Estonians will go in large numbers to vote in the European referendum, in which most of them are expected to vote yes.
Once the red tape and unnecessary regulations are stripped away, even more Polish companies are likely to enter the market, particularly in areas such as construction and transport. Meanwhile, we can hope that Estonians will flock here to spend their hard-earned "ferry tourism" euros.
Two weeks ago six parties clashed in Estonia's parliamentary elections, with four winners emerging. The majority in the centre-right coalition will now be formed by the republican Pro Respublika and the Centre Party, with the Reform Party and Estonian People's Union completing the alliance. Juhan Parts, leader of the republicans who is a candidate for prime minister, is committed to slowing down reforms, claiming, "The society is exhausted with year-long reforms." Instead, he promised the Estonian people stability and the stronger defence of their national interests after EU accession.
Those interests, most Estonians feel, will be particularly threatened if they are forced to scrap their duty-free shops, which would affect their competitiveness on the Baltic ferry market. This could result in lower numbers of tourists coming in from Sweden and Finland and eventually cause the collapse of the so-called ferry tourism.
This is no small worry with Sweden and Finland as Estonia's major foreign investors. Scandinavian dominance over the nation of 1.4 million is evidenced by Nordic investment and, in appearance, by everything from language to mentality.
In recent years the Estonian market was the smallest in the Baltic region for Polish exporters. The recent slump in beef exports caused by BSE-related bans has not helped the situation. Thanks mainly to small and medium-sized businesses, the trade numbers have been picking up even though the results are still far from satisfactory according to Polish businessmen.
The Estonian press has also been quick to comment on any stumbles by Polish businesses. This includes Polsat's spectacular failure in 2001 with the purchase of TV1, the smallest of Estonia's four national TV stations, which subsequently filed for bankruptcy. More significant and somewhat more successful was the 1998 purchase by Bank Handlowy (now Citibank Handlowy) of a 5.07% stake in Estonia's largest bank, Hansapank.
Iwona Górska, sales director for Suwałki-based furniture manufacturer Ajro-Szmigielski, says that although the company is already present on the Lithuanian and Latvian markets, it has only recently started looking at Estonia as a potential trade partner. She characterised the Estonian market as "poorly developed, relying mostly on foreign imports."
Górska also complains about the legal difficulties of doing business in Estonia, saying that starting a company there is much harder than in the other Baltic states.
"The law requires that at least one board member should be Estonian, while the foreign executives have no guarantee they will receive a work permit, of which there is a limited pool," Górska said. The law, incidentally, affects mostly former eastern-bloc nationals.
Although the work permit law will become invalid with Poland's and Estonia's EU accession, Górska said that the bureaucracy and legal proceedings have slowed down her firm's debut on the Estonian market. She also points out that customer demands are quite different there than in Lithuania or Latvia.
"Estonians really pay attention to good quality finishing and have a different, more Scandinavian taste," she said.
She described the process of negotiating with Estonians as "difficult," and explained, "They know exactly what they want, and additionally the (furniture) market is heavily controlled by the Finns."
Sławomir Strzałkowski, Polish commercial counsellor in Tallinn, agrees with Górska, saying that the Estonian market is heavily dominated by Nordic firms, which assemble and process a lot of products there that are then re-exported back onto their domestic markets.
"Estonia performs a middleman service for the Nordic countries in terms of manufacturing and production, and that is why it's so closely linked to their capital," he said.
Meanwhile, Strzałkowski points out that Polish companies are less likely to come to Estonia if their final goal is conquering the Russian and Far Eastern markets.
"Because of double export tariffs on the Russian border, our investors treat Estonia as an end destination rather than a gateway to Russia, as they do with Lithuania," he said.
As 68% of Estonian exports are directed to EU countries, while 58% of their imports come from the EU, it is apparent which market the small state and its manufacturers are really targeting.
"This is their preferential trade direction," Strzałkowski said. "Estonian businessmen are not really interested in Poland. The few that are, are looking for an opportunity to import Polish products into Estonia.
"In 2002, approximately 400 Polish firms came to me asking about investment opportunities and sector analyses. In the same period of time I received only 50 questions from Estonian entities, and most of them asked about impor-ting products from Poland.
"It's a challenge (for a small firm) to make it on such a small market; large companies will always find a way to succeed. But I think our SMEs will find a way. One just needs to adapt to the nature of the economy."
Strzałkowski also emphasises that venturing out to Estonia may be linked with additional expenses for a manufacturer, as the tastes there may be very different from central and eastern European standards.
"Their tastes are different, the colour schemes, designs and the overall look they are after, are more Nordic," Strzałkowski pointed out.
Another company getting ready to enter the Estonian market is Gdańsk-based cosmetics producer Ziaja. Artur Szyngwelski, assistant to the company's director, said Ziaja entered the Lithuanian and Latvian markets two years ago and it is now actively looking at investment opportunities in Estonia, with only final legal proceedings left to be completed.
"We've decided to enter the Baltic markets because they appear to be structured similarly to our market, and by now we are able to use our extensive domestic experience to succeed there," he said.
Instead of conducting time-consuming market research in terms of product demand, Ziaja representatives have selected 50 of their most popular products and registered them on the local markets.
"The market verified which were most popular, and now there are about 30 products left, with the cosmetics produced from goat's milk among some of the best-selling," Szyngwelski said. "We intend to proceed in the same way in Estonia.
"There is a contrast between the Estonian market and Lithuania and Latvia. Estonians have a very western approach to doing business. The Lithuanian and Latvian business mentalities are a little more Russian. It is sometimes easier to reach a consensus with them."
While more Polish companies are getting ready to expand beyond the tried-and-tested market of Lithuania and Latvia and into Estonia, Sławomir Strzałkowski has also been busy promoting Poland as a tourist destination, and the idea seems to be catching on. Come June, a regular bus service between Tallinn and Zakopane, via Warsaw and Kraków, will operate four times a week.
With a turnout in the recent parliamentary elections that was nearly 14 percentage points higher than during our parliamentary elections last autumn, there seems little doubt that Estonians will go in large numbers to vote in the European referendum, in which most of them are expected to vote yes.
Once the red tape and unnecessary regulations are stripped away, even more Polish companies are likely to enter the market, particularly in areas such as construction and transport. Meanwhile, we can hope that Estonians will flock here to spend their hard-earned "ferry tourism" euros.
