Estonia

Fertility Rate Increasing

The Wall Street Journal recently ran an article about how Estonia's program to increase its fertility rate is paying off... literally.  A good, free digest of this interesting feature was  covered by the Pittsburgh Post-Gazette. 

This story is particularly timely as the US population just hit 300 million and worries about overpopulation abound in the developing world.  Yet apparently declining populations in many countries is also an increasing worry.  As a result, governments will be watching Estonia's fertility project to see if it actually works.  If it weren't for the large influx of immigrants arriving in the US each year, the US population would be dropping. 

In the meantime, Estonia's economy is booming and the labor market is super tight. Yet the reform government still refuses to open up its borders to immigrants due to worries that large waves of immigrants from Russia and Belarus might overwhelm the tiny Baltic Republic with only 1.4mm people.  Relatively large numbers of Russians live in Estonia without actually being citizens.  A Russian official recently "nominated" Latvia and Estonia to the Guinness Book of World Records claiming they have the largest populations of non-naturalized citizens born in these countries in the world. 

While it maintains a tight immigration policy, Estonia's fertility project nevertheless is an example of how it continues to be a social and economic innovator.  It pioneered the use of the flat tax in Europe which has made its economy one of the most competitive in the world.  Given its economic successes, all eyes will be watching to see if it can generate as much success in reversing its recent UN designation as having one of the fastest shrinking populations on the planet. 

In Other News....

Rogue freighter "Probo Koala" from the Netherlands currently anchored and impounded by Estonia authorities just outside of Tallinn, now accused of dumping toxic waste off the Ivory Coast, killing half dozen people and injuring 80,000 or so.  More >>

Today President Bush submitted to the US Senate a new extradition treaty between the US and Estonia.  This treaty shall replace the one signed in 1923.  The old treaty allowed Estonia to refuse extradition requests, while the current one, submitted ahead of Bush's visit to Tallinn in November, does not.  More >>

Positive Press on Estonia and Baltics

Favorable press coverage on Estonia and the Baltics is available.  Full length articles need to be requested from the copyright holders themselves, however. 

Click here to download the PDF document with all key press mentions.

Time Magazine Features Estonia

The October 9th Issue of Time is the magazine's 60th Anniversary issue covering Europe.  Estonia features prominently in the cover story called "Getting It Right"; many potential lessons seem to be found in its miraculous transformation from sputtering Soviet satellite to economic powerhouse. 

The article does a nice job of highlighting some of the thorny issues that face this dynamic country, such as tensions between ethnic Russians and Estonians and the super tight labor market.  For example, will the flat tax system that Estonia pioneered turn out to be best for the country in the long run -- and thus for the many Eastern European countries that followed suit (including Russia and Ukraine)? 

Other interesting facts and insights from the article in no particular order:

• Estonia was the first former Soviet republic to introduce its own currency, the Kroon (pronounced "crown")
• 80% of tax payers file their returns online and wifi is ubiquitous and free
• GDP growth rate is the world's fastest at 12%
• Estonia is only one of two new EU members to have a budget surplus
• National debt will likely disappear by the end of the decade
• Unemployment has fallen from 14% in 2000 to 4% today
• There have been 12 governments since 1991
• In addition to a flat tax, whose percentage will decline to 20% of income by 2011, corporations pay no tax on undistributed profits
• 24-hour security guards are stationed in front of a Soviet monument to prevent it from being blown up by Estonian nationalists
• Many of the top jobs in politics and business are held by people under 40 -- the CEO of HansaBank, for instance, Erikk Raasuke, is just 35
• Use of credit to buy homes and large purchases like cars has increased 50% over the past year
• The monthly wage of $650 is half the EU average; productivity is below the EU as well
• Yet Estonia intends to be one of the five wealthiest EU nations on a per capita basis in the next 15 years
• The birth rate collapsed in the 1990's, but has finally begun to increase thanks in part to a maternity leave package that allows new mothers to go on leave for 15 months at full pay
• FDI has now reached $12 billion and companies wholly or partly owned by foreign companies represent one third of the economy and 50% of exports

Developing Economies Power Boom

Recent front page article in the LA Times discusses the unprecedented boom of emerging economies.  Of the 60 or so tracked by investment firm Bridgewater  & Associates, not one is in recession.   The last time developing nations' economies outpaced those of the developed world was in the early 1970s. 

A number of issues arise as a result of this economic environment, namely increasing unemployment rates in developed countries like those in Western Europe, creation of new middle classes, greater demand for US goods (a more recent phenomenon), and of course a rise in real estate prices in new markets like Estonia.  Some say the ballooning US trade deficit kick-started the boom in  emerging markets, likening US top heavy demand for imports over the last decade to the post-WW II Marshall Plan. 

Balts featured in LA Times

The LA Times published a story on the Baltic States on the front page of the Sunday Travel section on April 9, 2006.  It was good to see the three countries of Estonia, Latvia and Lithuania featured so prominently.  However, the article didn't get my blood moving about the Balts, except Riga.  The author, Beverly Beyette, didn't really have the time to dig into her journey too much and consequently this superficial piece makes glancing remarks about the region's history and the architecture.  More...>>

Recent articles by the NY Times, for instance, proved much more interesting and relevant.  Read a sample here: Download the_baltic_life.doc .

IMF Visits Estonia

The International Monetary Fund today published a report on its recent visit with Estonia's central bankers.  By all accounts, the report is glowing -- one gets the sense of a teacher praising a prodigious student.  The IMF maintains an obvious bias towards open economies and Estonia's economic performance over the last decade provides the perfect example of the progress a developing country can make by instituting open fiscal policies.

Concerns remain, however, about the possibility of Estonia's economy over-heating due to a 2005 GDP growth rate of 10% (well over the 7% target), high inflows of foreign direct investment, inflationary pressures and tightening labor markets.  As well, Estonia maintains a relatively large external account balance and the credit markets have witnessed explosive growth recently.  Concerns about a real estate bubble loom as well.  My apartment, for instance, which is still being built, has already increased in value by 20% in the last four months (although part of this is due to the effects of a depreciating dollar).

One of the main objectives of the IMF's visit was to determine whether Estonia could join the Euro when planned.  The conclusion of the study appears to echo much of what is known already: that the January 1, 2007 deadline will not be met due to higher than expected inflation in 2005.  While the IMF claims that Estonia should not suffer dire consequences as a result, it maintains the benefits of converting its currency and still recommends that policy makers do their best to meet Maasticht Treaty requirements.  Accordingly, EE central bankers are furiously crafting policies to maintain economic order and to dampen inflationary pressures which so far appear to be working in 2006.  It therefore appears that Estonia will be joining the Euro at some point in the near future.  For more on what Estonia's bank ministers are doing and plan to do, read the IMF's report.

Economist Remembers Meri

One of the highlights of this article: "He could also be a skillful negotiator, notably in 1994 when he drank Russia's president, Boris Yeltsin, into an acquiescent stupor at talks in the Kremlin. That secured a deal on the full withdrawal of Russian soldiers from Estonia." 

Despite Meri's skill in outmaneuvering the Russians, some suspected that Meri and his father were collaborators with the Soviets since Meri enjoyed unusual travel privileges and was a Merited Writer of the Estonian Soviet Socialist Republic. 

These suspicions were unfounded however.  Meri brazenly hooked up a Finnish mobile phone antenna in his backyard creating the first independent link to the outside world.  He did so while he was foreign minister of Soviet Estonia, risking being sent back on the next train to Siberia.  No wonder the penetration rates of mobile phone usage exceed 80% today in Estonia.

In another example of Meri's anti-soviet stance, he threw out Lenin's works when he moved into this new office and locked away a hot-line telephone from Moscow in a cupboard.  "It rings sometimes, but I don't answer it," he said.  Obviosly the Kremlin didn't pimp his mobile phone number.  Although in true Meri style, he probably would have sent calls from Moscow to voice mail.

Full Article...>>

Tallinn named 'Party Capital 2006'

 

 

 

 

 

It's official: The New York Times named Tallinn, Estonia's buzzing capital city, "Party Capital of the Year".  Indeed. 

Not many Americans, or Europeans for that matter, have even heard of Tallinn much less Estonia.  Mention any Baltic country or city to a state-side citizen and you're bound to get the quizzical dog look.  That's likely to change soon, however, as people get hip to this Baltic gem with its medieval architecture, progressive economy and its "full time party culture".

College grads who travel to Europe for some down time before cranking themselves into the job market are putting Estonia on their itineraries.  The  Baltic area is also a hot spot for cruises - even my mom will be on one this summer.  Further, Estonia sits square in the middle of the fastest growing business region in Europe, which has  received USD 720 billion in direct foreign investment in recent years.

Air transport to Estonia is exploding: in 2005, 1.4mm people flew into Tallinn Airport.  Think about it - as many tourists clamored to enter a country as there are nationals.  Unique passenger visits climbed 40% in 2005 and cargo volume grew by 90%.  Estonia is happening...

Meri Remembered

Lennart Meri, who died at the age of 76 on March 14, 2006, will be missed.  Meri was Estonia's first post-soviet president and was a key figure in leading its charge to independence after he and his family returned from exile in Siberia.  A charismatic leader, Meri will be remembered for his unyielding optimism and his strong intellect. 

Meri spoke six languages fluently including English, authored books and wrote films.  As a child, he used to transcribe whole radio broadcasts of Churchill speeches and lectures about the expanding universe from his homemade shortwave radio.

A pragmatic visionary, Meri often carried a screw driver around with him in the presidential palace so he could mend broken coffee makers and light fixtures.  Likewise, before he was president, he believed that Estonia was fixable and foretold that one day it would free itself from Soviet rule.  "In this sense, you could say that, in our family, there was never an Iron Curtain," he said. "The state of mind in my own family was that the existence of a totalitarian state was something very temporary." 

Today, Estonia is light years from its broken past.  As of Meri's death, the small nation of just 1.4mm people is the leading economic light of Europe having  posted the second highest GDP in the Union of more than 10% during 2005.  Estonia ranks 7th on the Heritage Foundation's Economic Freedom Index (ahead of the US - Download wsj_article_jan0406.doc), and is considered to be the most wired nation on earth.   

MICHAEL TARM, Associated Press Writer, has more...>>