Speaking at a press conference on 30 December 1997, Agu Remmelg, Director of the Estonian Investment Agency, explained the latest figures on foreign direct investment (FDI), published by the Bank of Estonia.

'1997 is set to be a record year for foreign direct investments - both by foreign companies into Estonia and by Estonian firms abroad. This trend re-inforces Estonia's strong economic development, as we rapidly become a normal European economy, set to become part of the European Union (EU).'

The Bank's figures show that in the first three-quarters of 1997, FDI in Estonia reached 3.188 billion EEK, easily breaking the previous record for investment set in 1994.

FDI in Estonia, 1987-1997 (billion EEK)

Source: Bank of Estonia

The main investments during the third quarter of 1997 came from Norway (40.0 per cent), Finland (20.4 per cent), Switzerland (17.0 per cent), Great Britain (8.1 per cent), the USA (5.0 per cent) and Germany (4.4 per cent).

Remmelg explained the long-term benefits of FDI - as opposed to short-term portfolio investments - in providing ongoing re-investments, secure jobs and modern technology. 'FDI has also been crucial in terms of covering Estonia's trade deficit and producing an overall balance of payments surplus' he said.

The Bank of Estonia figures also show a continuing rise in Estonian investments abroad, as the country develops as a regional investment hub from which companies can export, expand and direct operations in neighbouring states.

Estonian companies invested 1.090 billion EEK abroad in the first three quarters of 1997 - equivalent to $52 per head. This is already double the 1996 level, which showed Estonia to be the only major foreign investor in Central and Eastern Europe.

Direct investment abroad, 1996 (US$ per capita)

Most Estonian direct investments have gone into neighbouring countries, such as Latvia, Lithuania, the Ukraine, Russia and Finalnd. Some exapmles include:

• the expansion by Estonian banks of financial services and insurance companies into neighbouring markets;
• Rakvere meat plant has acquired the largest meat packing plant in Latvia;
• Tolaram investments have started to expand their Estonian-based textiles, paper and property business into Latvia and Lithuania;
• Tallin Dairy has bought a milk processing plant in the Ukraine;
• Kaubamaja has opened a branch in Helsinki.

'These activities show that Estonia is becoming increasingly like our Nordic neighbours - a strong developed economy with high investment flows in both directions,' said Remmelg.

Remmelg also outlined the Estonian Investment Agency's activities during 1997, including:

• the opening of its first overseas offices in Germany and the United Kingdom (UK);
• its launch of a direct marketing campaign;
• and its setting up of an 'aftercare' programme to assist foreign companies already established in Estonia to prosper and expand.

'During the year the Agency has taken on over 50 new projects, many of them involving large multinational companies', he explained. 'Already, eight firm investment decisions have been made, involving over 1.5 billion EEK of investments and over 800 jobs.'

'With many other investment projects under consideration, plus the likely inflow of substantial amounts of foreign capital as privatisation of infrastructure gets underway, the outlook for 1998 and beyond looks extremely healthy,' Remmelg concluded.