Tallinn - City to Invest in
Tallinn is the centre of Estonian political and business life. With its population 400 000, the capital is the driving force of the country's economy. The city is home to about half of all Estonian companies, which are responsible for ca 50-60% of GDP and nearly 3/4 of total business profit.
More than half of the companies operating in Estonia on foreign capital are located in Tallinn. The economy is closely connected with the neighbouring Scandinavian countries. This has attracted extensive foreign investments, facilitated the acquisition of modern expertise and boosted trade.
Moody's has rated Tallinn with A3, comparing to the country's rating A1. These ratings have contributed to Estonia's place at 32nd in the IMD's "World Competitiveness Yearbook" of 2007-2008 and 12thplace in the Heritage Foundation's "Index of Economic Freedom" of 2008. The rankings also definitely help to support further growth. Like in many European countries and in American states, the economy in Estonia is also slowing down. The real growth of GDP in 2008 is -3,6%.
Several favourable factors have attracted direct foreign investments to Estonia. |In 2008, direct foreign investments to Estonia made up 8,6% of the GDP. In 2005, Tallinn has received 93,3% of foreign investments to Estonia. Most of the investments to Estonia came from neighbouring countries - 58,4% from Sweden and 22,8% from Finland. The most active sectors were financing (50,4%), other business activities (16,8%) and transport and travel agencies (16,0%). By direct foreign investments per capita in Central and Eastern European Countries Estonia ranked on the first position in 2003. What attracts such companies as Telia, Statoil, Coca-Cola, Tolaram, Ruhrgas and many other international corporations, is Tallinn's excellent location, its business-friendly fiscal policy and modern telecommunications infrastructure.
Since joining the Hanseatic League in 1285, Tallinn has played an important role in trade between East and West. The volume of transit cargo passing through the port of Tallinn in 2008 was 28 million tonnes. Estonia is one of the most direct and favourable transit corridors between the developing eastern markets, the Europe and North America. Large investments in infrastructure have brought the ports of Tallinn up to international standards and the logistics services provided are fast and of high quality. Tallinn is the third largest port of the Baltic Sea after St. Petersburg and Primorsk. Its volume leaves behind the ports of Ventspils, Gdansk, Riga and Helsinki. A wide variety of different groups of goods pass through the ports of Tallinn. In 2001, two major projects were completed at the Port of Muuga. A new steel terminal costing 205 million USD with an annual capacity of 3 million tonnes was launched in 2002. In 2006, a coal terminal with an annual capacity of 5 million tonnes was completed. Near the Port of Muuga about 200 hectares of land is available for new investment projects.
The Port of Muuga has the status of a free zone and this enables transit and distribution companies to use more flexible customs procedures. Advantages of the free zone, such as its simplified system for filling out customs documents and transfers of title of ownership, are particularly attractive to distribution companies who deal with high-value container goods. Tallinn International Airport is one of the largest airports in the Baltic States both by passenger and cargo volumes. The recently reconstructed passenger terminal and the new cargo terminal have further improved the capacity and service quality of the airport. In 2008 1,811,536 passangers (a growth of 4.8% compared to 2007) and 48,867 tonnes of cargo (a growth of 84% compared to 2007) passed through Tallinn Airport.
Within a short time, modern means of communication have become an inseparable part of the daily life of Estonians and the use of mobile telephones and the Internet is more widespread than in some other EU member states.
Different formats of e-commerce and e-government are gaining ground. To date, an e-government system has been developed for the Government of Estonia, enabling it to work and process information electronically. An e-meeting system has been worked out for the City Government of Tallinn and now all members of the City Government can participate in meetings regardless of their whereabouts. This has been the first step in turning the information environment of the meetings to being fully electronic. One further development here is a system for processing draft regulatory acts. There will no longer be a need to use large amounts of paper and the movement of documents will speed up considerably.
In banking the percentage of Internet bank users is 98%. Major players are Swedbank and SEB. Several innovative technical solutions and applications have been developed locally, for instance a mobile parking system of payment for parking by mobile telephone, MPS (mobile positioning system) and e-ticket in public transport. The majority of domestic IT products are designed in Tallinn. The attitudes of the population and the size of the country make Tallinn an ideal place for testing new technologies. The city has the infrastructure necessary for testing new products and services, as well as a modern network of services and an innovative population.
The service sector dominates the economy of Tallinn both with regard to profits and the number of people employed. Seven out of ten inhabitants of Tallinn work in the service sector. In the Estonian service sector the share of capital is 45%, for the financial sector the respective figure is 60%. All larger rating agencies have confirmed the stability of the Estonian economic environment (Fitch IBCA: A, Standard & Poor's: A/postitive, Moody's: A1). This explains why Tallinn has been a gateway for foreign banks that have launched development plans concerning the whole Baltic region. Successful implementation of new technologies in banking means that Internet and telephone banking services have found extensive use. The banking sector is dominated by Swedish (Swedbank and SEB) and Finnish (Nordea and Sampo) financial concerns. There are 6 commercial banks in Estonia, 3 branches of foreign commercial banks and 6 representations of foreign commercial banks.
Business services account for 70% of all service sector revenues. The providers of consultancy, accounting, advertising and design services include representatives of international and local companies. Real estate development has been progressing on a par with the general fast pace.
The industrial landscape of Tallinn is a fair reflection of the transition period in the economy where some sectors are waning and others are growing. The share of industrial output in the GDP fell sharply after the reinstatement of Estonia's independence, as enterprises lost their only or main market in Russia. At the same time, the past few years have seen a tangible increase in industry, as the restructuring that followed general privatisation has been completed and new long-term investments have been made.
Tallinn's industrial output makes up almost 1/3 of the total national output. Tallinn has both traditional and new branches of industry. Some of the machine building, metal processing, textile, food and furniture industries date back more than a hundred years and their production lines continue to be competitive abroad. Electronics and apparatus plants represent the new industrial generation, strongly oriented to exports. Tallinn houses such leading industrial companies as ABB Eesti and Elcoteq Tallinn, which provide outsourcing services for high-tech electronics components for such world-class international companies as Ericsson, Nokia, ABB, Philips and others. Norma manufactures one of the best-known Estonian consumer goods - car safety belts - for General Motors and several Russian car manufacturers. Successful companies also include the Baltic Ship Repairers and the well-known Tallinn companies of Liviko, Tallinn Dairy Industry, etc.