REGIONAL LOGISTICS & ICT PROFILE: ESTONIA

Transcription

1

2

3 3 LogOn Baltic Regional reports 52:2007 REGIONAL LOGISTICS & ICT PROFILE: ESTONIA Ain Kiisler

4 4 L Consult OU Sarapuu 82, Tabasalu, Estonia Published by LogOn Baltic Turku School of Economics Rehtorinpellonkatu 3, FI TURKU, Finland All rights reserved. No part of this publication may be produced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher. Whilst all reasonable care has been taken to ensure the accuracy of this publication, the publishers cannot accept responsibility for any errors or omissions. This publication has been produced with the financial assistance of the European Union. The contents of this publication is the sole responsibility of the publisher and can under no circumstances be regarded as reflecting the position of the European Union. The content of this publication reflects the author s views. The Investitionsbank Schleswig Holstein is not liable for any use that may be made of the information contained herein. ISBN (electronic version) UDC Logistics, Competence, ICT, Regional Development, Baltic Sea Region

5 5 EXECUTIVE SUMMARY The geographical position of Estonia is one of its main strategic resources. Estonia is situated on a busy trading route between East and West and has always had excellent ports. The location provides the country with a sea connection with many countries, in particular the Baltic Sea countries. The country s favourable geographic location, along with its well developed infrastructure, offers excellent opportunities for all transport and logistics related activities. The other important Estonian location factor is proximity to Scandinavian countries, especially Finland and Sweden resulting in tight cooperation with these countries. In last years real estate, renting and business activities have generated the biggest share (19 20%) of GDP of Estonia indicating (together with construction) the increasing importance of inner consumption in GDP generation. Manufacturing sector has been in second place (ca 18% of GDP) followed by wholesale & retail trade (15% of GDP) and transport, storage & communication (12% of GDP) sectors. The dominating Estonian manufacturing branches are wood and wood products manufacturing, food and beverages manufacturing and metal products manufacturing. The fastest growing manufacturing branches during have been electrical machinery and apparatus production (share increased 116%), telecommunication equipment production (64%) and metal processing (49%). The most significant decrease of share in this period has been in traditional garments, textile and food & beverages industries. Estonian manufacturing is strongly export oriented. On average 51% of production was exported in 2000 and 54% in Estonian foreign trade is characterized by fast development rates in last years due to joining the EU in 2004, negative goods trade balance and positive services trade balance. The increase of goods exports has been faster than exports resulting in increasing negative balance. Only timber and timber products and furniture & other industrial goods are in surplus. This reflects Estonia's rapid economic expansion and an increase of investments and especially private consumption.

6 6 In 21st century the machinery and equipment have had by far the biggest share in Estonian goods exports (usually over 25% of yearly exports by value) and imports (25 31%). Main export partners in 2006 were Finland, Sweden, Latvia, Russia and UK. Main import partners were Finland, Russia, Germany, Sweden and Lithuania. Estonian TOP 4 export and TOP 7 import partners in 2006 were from Baltic Sea region. Estonian foreign trade has been in deficit with EU as well as the CIS. As regards the EU member states Estonia had the biggest trade deficit with Germany and Finland and the biggest surplus with Latvia, Hungary and Sweden. Concerning Estonian trade in services, transport services, particularly freight services are dominating both in exports and imports The Estonian transport system comprises rail, road, maritime, river, and air transport as well as the municipal electrified transport and carriage by pipeline. The operation services are mostly provided by private enterprises, including maritime transport, inter urban coach traffic, air traffic, and partially the rail transport. The export and import of goods to the west, north, and south are mainly organised by exploiting the opportunities of maritime and road transport, to a marginal extent also by air transport. As a rule, the goods are delivered to the harbours of Muuga, Tallinn, Paldiski, Sillamäe, Kunda or Pärnu, or taken by road transport to other European countries via Latvia mostly using the Tallinn Ikla road, or delivered to Russia by the Tallinn Luhamaa and Tallinn Narva roads. The transit is dominating in Estonian rail and ports freight operations. Goods transit made 81% of goods tonnage transported by Estonian rail carriers and 78% of Estonian ports turnover in Major part of transit goods is originating from / destined to Russia. By nomenclature of transit goods crude oil and oil products are prevailing, (68% of transit goods by rail and 56% of local ports turnover in 2006). However these shares have decreased since Instead of this the share of transits of coal has strongly increased. The further decrease of oil & oil products transits via Estonia is anticipated as Russia is attempting to move their oil exports into their own Baltic Sea ports. Therefore Estonian ports and their operators are seeking additional transit goods (development of container transit via Trans Siberian Railway; cars transit; acting as distribution centre for China's goods for Europe, etc.) and partners (China, Ukraine).

7 7 LÜHIKOKKUVÕTE Geograafiline asend on üks Eesti peamisi strateegilisi ressursse. Riik asub ida ja lääne vahelisel elava liiklusega kaubateel ja on läbi ajaloo omanud suurepäraseid sadamaid. Eesti asend võimaldab meretranspordiühendust paljude riikidega. Riigi soodne geograafiline asend koos hästiarenenud infrastruktuuriga pakub suurepäraseid võimalusi transpordi ja logistikaga seotud tegevusteks. Teiseks tähtsaks Eesti asendiga seotud faktoriks on lähedus Skandinaavia riikidele, eriti Soomele ja Rootsile, mis loob aluse tihedale koostööle mainitud riikidega. Viimastel aastatel on kinnisvara, rentimise ja äritegevuse sektor olnud Eesti SKP s suurima osakaaluga (19 20%) tegevusala. Koos kasvanud ehitustegevuse osakaaluga SKP s annab see märku sisetarbimise suurenevast tähtsusest SKP genereerimisel. Tootmissektor on teisel kohal (ca 18% SKP st), järgneb hulgi ja jaekaubanduse (15%) ning veonduse, laonduse ja side sektor (12%). Eesti domineerivateks tootmisharudeks on puidu töötlemine ja puittoodete tootmine, toiduainete ja jookide tootmine ning metalltoodete tootmine. Ajaperioodil on kõige kiiremini kasvanud elektrimasinate ja aparaatide tootmine (116% osakaalu kasv üldisest tööstustoodangust), telekommunikatsiooniseadmete tootmine (64%) ning metallide töötlemine (49%). Mainitud perioodi jooksul on märkimisväärselt vähenenud traditsiooniliste tootmisharude rõiva, tekstiili ja toiduainetetööstuse osakaal üldisest tööstustoodangust. Eesti tootmistegevus on tugevalt ekspordile orienteeritud. 51% Eesti tööstustoodangust aastal 2000 ja 54% aastal 2005 eksporditi. Eesti väliskaubandust iseloomustab kiire kasvutempo viimastel aastatel tänu ühinemisele Euroopa Liiduga a., negatiivne kaubandusbilanss ja positiivne teenuste bilanss. Kaupade impordi kasv on olnud kiirem kui ekspordi kasv tulemuseks on suurenev kaubandusbilansi negatiivne saldo. Kaubagruppide lõikes ületab vaid puidu ja puidutoodete ning mööbli ja muude tööstustoodete puhul eksport importi. Negatiivne kaubabilanss peegeldab Eesti majanduse tormilist arengut ja investeeringute ning eriti eratarbimise kasvu. Masinad ja seadmed on 21. sajandil olnud kaugelt suurima osatähtsusega kaubagrupp nii Eesti kaupade ekspordis (tavaliselt üle

8 8 25% ekspordi väärtusest) kui impordis (25 31%). Peamised ekspordipartnerid a. olid Soome, Rootsi, Läti, Venemaa ja Ühendatud Kuningriik. Peamised impordipartnerid olid Soome, Venemaa, Saksamaa, Rootsi ja Leedu. Eesti TOP 4 ekspordi ja TOP 7 impordipartnerid a. pärinevad Läänemere regioonist. Nii Euroopa Liidu kui SRÜ ga on Eesti väliskaubanduse saldo negatiivne. EL liikmesriikide lõikes on suurim väliskaubanduse puudujääk Saksamaa ja Soomega ning suurim ülejääk Läti, Ungari ja Rootsiga. Eesti teenuste väliskaubanduses domineerivad nii ekspordis kui impordis transporditeenused, eriti kaubaveoteenused. Eesti transpordisüsteem hõlmab endasse raudtee, maantee, mere, jõe õhutranspordi, samuti elektrifitseeritud linnatranspordi ja torujuhtmed. Transporditeenuseid osutavad peamiselt eraettevõtted, seda ka meretranspordi, linnadevahelises bussiliikluse, õhutranspordi ja osaliselt raudteetranspordi puhul. Kaupade eksport ja import lääne, põhja ja lõunasuunal toimub peamiselt mere ja maanteetransporti, marginaalsel määral ka õhutransporti kasutades. Tavaliselt toimetatakse kaubad Muuga, Tallinna, Paldiski, Sillamäe, Kunda või Pärnu sadamatesse või veetakse maanteetranspordiga peamiselt mööda Tallinn Ikla maanteed Läti kaudu muudesse Euroopa riikidesse või toimetatakse Venemaale Tallinn Luhamaa ja Tallinn Narva maanteid kaudu. Eesti raudtee ja sadamad teenindavad valdavalt transiitvedusid a. moodustasid transiitveosed 81% Eesti raudteevedajate poolt veetud veomahtudest ja 78% Eesti sadamate veosekäibest. Peamine osa transiitveostest on seotud Venemaaga. Transiitveoste nomenklatuuris prevaleerivad toornafta ja naftatooted. (68% raudteel veetud transiitkaupadest ja 56% kohalike sadamate veosekäibest a.). Alates 2004.a. on naftaveoste osatähtsus siiski vähenenud. Selle asemel on transiidis tugevalt kasvanud söe osakaal. Prognoositakse edasist Eestit läbivate nafta ja naftatoodete transiitvedude vähenemist, kuna Venemaa püüab suunata oma naftaekspordi omaenda Läänemere sadamatesse. Seetõttu otsivad Eesti sadamad ja nende operaatorid täiendavaid transiitkaupu (konteineritransiidi arendamine Trans Siberi magistraalil, autode transiit, tegutsemine Hiinast Euroopasse liikuvate kaupade jaotuskeskusena) ja partnereid (Hiina, Ukraina).

9 9 TABLE OF CONTENTS EXECUTIVE SUMMARY... 5 LÜHIKOKKUVÕTE... 7 TABLE OF CONTENTS... 9 LIST OF FIGURES LIST OF TABLES INTRODUCTION Project introduction LogOn Baltic Regional partner introduction Regional Profile introduction GENERAL INFORMATION ABOUT THE REGION Estonia in the Baltic Sea Region Main location factors General climate conditions Regional administrative divisions Government type and institutions Regional administrative divisions Historical background ECONOMY Economic importance of the region Market environment Key industry sectors International Trade International trade in goods International trade in services PUBLIC SECTOR SUPPORT FOR ENTERPRISES Organisations and types of supports provided Enterprise Estonia / Ettevõtluse Arendamise Sihtasutus Export and Credit Guarantee Fund KredEx...56

10 Logistics / ICT projects. Cooperation programs, partnerships LOGISTICS IN THE REGION Transport, connections and infrastructure Roads and road transport Integration in the BSR Railways and rail transport Airports and Air transport Waterways Ports and Sea transport Transport sector administration and industry associations Transport sector administration Objectives of transport development Industry associations Social and environmental issues in the transport sector Trade Unions Logistics industry: characteristics Overview of manufacturers participated Logistics sector development and outlook ICT IN THE REGION General ICT infrastructure in the region ICT policy in the region ICT industry: characteristics About the surveyed firms Summary HUMAN KNOWLEDGE BASE Professions and their qualifications Education and training Education and training at universities and colleges Education and training in vocational schools REGIONAL LOGISTICS AND ICT COMPETENCE REFERENCES

11 11 LIST OF FIGURES Figure 1 Tools used within the LogOn Baltic project Figure 2 Location of Estonia Figure 3 Map of Estonia Figure 4 Estonia: division by counties Figure 5 Estonian GDP, labour productivity and price level dynamics (EU25=100) Figure 6 Estonian trade in goods and services (source: Estonian balances of payments) Figure 7 Estonian goods exports the share of main goods groups (source: Estonian balances of payments) Figure 8 Estonian goods exports the share of main goods groups (source: Estonian balances of payments) Figure 9 The position of Enterprise Estonia in national support system Figure 10 The structure of Enterprise Estonia Figure 11 Estonian main (in blue) and supporting roads (in brown) Figure 12 TEN T road network in Estonia Figure 13 Estonian railways network Figure 14 TEN T railways network in Estonia Figure 15 Estonian airports (in black military, in red abandoned, blue club, green public, yellow private; 72 Figure 16 Port of Tallinn harbours (Source: 74 Figure 17 TEN T ports in the Baltic Figure 18 Transport of goods through Estonian Ports Figure 19 Distribution of Estonian ports tonnage turnover by export, import and transit, % (Source: Estonian Statistics Office).. 78 Figure 20 Numbers of containers and lorries & trailers moving through Port of Tallinn, thousands units (Source: Port of Tallinn, Estonian Statistics Office) Figure 21 Organisational structure of Estonian Ministry of Economic Affairs and Communications Figure 22 Number of respondents according to main industry Figure 23 Companies in manufacturing and construction by sector... 96

12 12 Figure 24 Manufacturing and construction companies by type of production Figure 25 Manufacturing and construction companies by position in the supply chain Figure 26 Trading companies by sector Figure 27 Transport service providers by sector Figure 28 Logistics service providers by cargo type Figure 29 Logistics service providers by customer segment Figure 30 Number of respondents according to company size Figure 31 Number of respondents according to respondents position in the company Figure 32 Number of respondents according to main industry

13 13 LIST OF TABLES Table 1 The counties of Estonia area and population Table 2 Estonia: key economic indicators Table 3 Estonia: share of value added by economic activity (current prices), % Table 4 Estonia: share of value added by economic activity (current prices), % Table 5 Estonian Industrial production: proportion by industries having above 1% share (%) Table 6 Share of exports in industrial sales of Estonian manufacturing branches (%) Table 7 Estonian trade in goods and services key figures Table 8 Estonia main export partners in Table 9 Estonia s main import partners in Table 10 Estonian Services balances , % Table 11 Estonian services exports , % Table 12 Estonian services imports Table 13 Kredex business and export support Table 14 Vehicles in Estonia (thousands) Source: Estonian Statistics Office Table 15 Estonian road transport figures Table 16 Estonian rail transport figures (public transport only) Table 17 Estonian rail transit goods nomenclature Table 18 Tallinn Airport indicators Table 19 Tallinn Airport flight connections Table 20 Air transport freight tonnage and turnover provided by Estonian air transport companies Table 21 Transports of goods through Estonia ports and Port of Tallinn harbours, mill. tons Table 22 Transport of goods through Estonian ports by group of goods (million tons) NB! Only goods flows above tonnes / year have accounted Table 23 Transit goods flows through Estonian ports. Only goods flows above tonnes / year have accounted Table 24 Port of Tallinn container and ro ro lines connections... 81

14 14 Table 25 Seagoing vessels registered in the Estonian Ship register (ships with gross tonnage 100 and more) Table 26 Sea transport in Estonia by tonnage and turnover Table 27 Estonia i2010 annual report 2007, European Commission104 Table 28 Students in higher education in the field of ICT and logistics in Estonia Table 29 Graduates in higher education in the field of logistics and ICT Table 30 Logistics study programs at Estonian universities and colleges Table 31 Graduates of vocational education by field of study Table 32 Vocational education organisations in the field of logistics128 Table 33 The list of Estonian experts interviewed

15 15 1 INTRODUCTION 1.1 Project introduction LogOn Baltic The LogOn Baltic project was approved within the Baltic Sea Region (BSR) INTERREG III B Neighbourhood Programme, which is sponsored by the European Regional Development Fund (ERDF), as part of the Structural Funds, and co financed by national project partners. The purpose of LogOn Baltic is to present solutions to improve the interplay between logistics and Information and Communication Technologies (ICT) competence and spatial planning and strengthening Small and Medium sized Enterprises (SMEs) competitiveness in the BSR. This is primarily done by the production and dissemination of information for regional development agencies on how to support enterprises in the participating regions in the field of ICT and logistics, thus improving regional development. The following regions are participating in the project: South West Finland Östergötland (Sweden) Denmark Southern Metropolitan Region of Hamburg (Germany) West Mecklenburg (Germany) North East Poland Lithuania Latvia Estonia St. Petersburg (Russia) LogOn Baltic provides an overview of logistics efficiency and logistics information systems and their exploitation, in order to improve the interaction between SMEs and other public/private actors. On the one hand, the empirical activities of LogOn Baltic compare the existing logistics services and infrastructure with the logistics needs in the participating regions, making it possible to develop perspectives and action plans for strengthening the logistics competence in the

16 16 regions. On the other hand it describes the existing ICT infrastructure and services, revealing up to what extent they meet with the companies needs for further development. In this way, LogOn Baltic focuses on: a. identifying development agencies and evaluating their performance in each region b. evaluating the level of logistics and ICT efficiency c. suggesting concrete actions for regional and local public sector bodies Data are gathered in each participating region using four tools: Development Measure Impact Analysis (DEMIA), Logistics survey, ICT survey and Expert Interviews; each of these is presented in a separate report. These results together with secondary data is presented in a regional report, that will describe the state of affairs in the region, with recommendations on what and how the region needs to develop. The regional reports are used as a basis for making an interregional comparison which is reported in an inter regional report. All reports are available on the project homepage, Regional partner introduction The regional partners in Estonia are Tallinn City Government, Tartu Science Park and Estonian Logistics Union. Tallinn, the capital of Estonia, is located in the Northern Europe on the Baltic Sea and is a well known Hanseatic Town. Tallinn is the largest city in Estonia and has developed into a major economical, political, cultural and social centre and tourist attraction of the country. Tallinn City Government is the local government s executive body that is in charge of city departments, institutions administered by departments, and responsible for implementing policies and programs. Tallinn City Government fulfils the assignments given to it by legislative drafting, economic activity, control and the involvement of the residents. One of the main aims of Tallinn City Government is to create economical environment to promote entrepreneurship, attract investments and modernise economical structure. Tartu is the second largest city and the centre of Southern Estonia. Tartu Science Park, the oldest science park in the Baltics, supports business innovation activities in the region by networking with universities, public and private sector. The technology incubator offers a variety of services to start up companies and the ICT Centre

17 17 organises seminars, courses and contests for students and mediates several national and international ICT activities. Tartu Science Park also offers help to foreign companies in extending business to Estonia. 1.3 Regional Profile introduction The Regional Logistics & ICT Profile (short form, Regional Profile) is one of the several support tools necessary for the analysis and description of the logistics and ICT competences in the region. Information from different areas of interest (i.e. economy, human resources, logistics infrastructure, ICT infrastructure, public sector, among others) together with the findings of the other empirical activities carried out during the project life, converges into the Regional Logistics & ICT Profile, turning it into a reference document for the whole project. All of the regions involved in the LogOn Baltic project are following the same content structure to help keep uniformity among the different Regional Profiles. ICT Surveys Logistics Surveys Expert Interviews 1º 1º 1º Regional Logistics & ICT Profile 0. Executive summary 1. Introduction 2. General information about the region 3. Economy 4. Public sector support for enterprises 5. Logistics in the region 6. ICT in the region 7. Human knowledge base 8. Regional Logistics and ICT competence 9. LogOn Baltic Initiatives DEMIA Desktop Research 2º Figure 1 Tools used within the LogOn Baltic project This tool is to be considered the main tool for secondary data collection, providing a comprehensive overview of the actual situation and development in the logistics and ICT industry.

18 18

19 19 2 GENERAL INFORMATION ABOUT THE REGION 2.1 Estonia in the Baltic Sea Region Figure 2 Location of Estonia Estonia, officially the Republic of Estonia (in Estonian: Eesti or Eesti Vabariik) is a country in Northern Europe with area of sq. km and population million (2006). Estonia has land borders to the south with Latvia and to the east with Russia. It is separated from Finland in the north by the Gulf of Finland and from Sweden in the west by the Baltic Sea. Average elevation reaches 50 metres and the country's highest point (Suur Munamägi) is 318 metres above the sea level. 47% of territory is covered with forests.

20 20 Figure 3 Map of Estonia Estonia boasts over lakes. Most are very small. The largest, Lake Peipus (Peipsi in Estonian) being km², forms much of the border between Estonia and Russia. Also there are many rivers in the country the majority of which are short and have a relatively small runoff. Only ten rivers are longer than 100 km. Estonia also boasts numerous bogs, and kilometres of coastline marked by numerous bays, straits, and inlets. The number of islands and islets is estimated at some 1,500, the biggest being Saaremaa (2 673 sq. km) and Hiiumaa (1 049 sq. km). Approximately a third of the nation (398 thousand people) lives in capital Tallinn. About 67% of the population reside in cities in general. The larger of these in descending order are: the university town of Tartu (101 thousand inhabitants); the industrial border town of Narva (68 thousand); and the summer capital Pärnu (45 thousand). The closest major city to Tallinn is the Finnish capital Helsinki, located at a distance of 85 km on the opposite shore of the Gulf of Finland. Riga is only one day's drive away (307 km). It's also a relatively short trip to St. Petersburg (395 km) and Stockholm (405 km). 2.2 Main location factors The geographical position of Estonia is one of its main strategic resources. The country is bordered on one side by the highly

21 21 developed EU consumer market and its well established manufacturing base and on the other side by the future centres for world economy and politics fast developing Russia and China, with their vast natural resources and huge consumer potential. The other important Estonian location factor is proximity to Scandinavian countries, especially Finland and Sweden resulting in tight cooperation with these countries. Estonia is situated on a busy trading route between East and West and has always had excellent ports. The location provides the country with a sea connection with many countries, in particular the Baltic Sea countries. Foreign trade and transit are therefore ever increasingly important to the Estonian economy. The country s favourable geographic location, along with its well developed infrastructure, offers excellent opportunities for all transport and logistics related activities. Estonia has become a transit centre between the East and the West as well as the North and the South. Its location is ideal for the creation of efficient transportation links and distribution chains of goods and services for companies in Europe and in other parts of the world. Approximately 7.5% of the country s workforce is employed in transportation and road management, and over the past years the share of transportation and telecommunications in the economic activity has steadily increased and currently constitutes ca 15% of the GDP. 2.3 General climate conditions 1 Estonia is located in the north western part of the East European Plain, i.e. within a transition zone from maritime to continental climate. The main factor influencing the climate of Estonia is the Atlantic Ocean (in particular the North Atlantic Stream), which influences the climate in the whole of Europe. The active cyclonic activity occurring in the northern part of the Atlantic Ocean (the Icelandic minimum) determines a very high variability of the weather in Estonia and causes strong winds, high precipitation and abrupt fluctuations in temperature. The latter are at their maximum in autumn and in winter. The prevailing western winds carry humid maritime air deep into the inland parts of the continent. In the cold season this brings about a considerably warmer, while in the warm season a somewhat cooler weather. The 1

22 22 annual average temperature in Estonia is considerably higher than in more eastern areas lying on the same latitudes but having a more continental climate. Estonia's high latitude leads to a big difference between daylight conditions in summer and in winter. Days are at their shortest on the winter solstice: in Tallinn, North Estonia, 6 hours and 2 minutes and in Valga, South Estonia, 6 hours and 39 minutes. The longest day, the summer solstice, lasts for 18 hours 40 minutes and 18 hours 10 minutes in the north and south, respectively. The annual amount of sunshine hours varies between 1600 and 1900, being higher on the coast and on the islands, and lower on the uplands. This amounts to less than half the maximum possible duration of sunshine. Temperate maritime and continental air masses dominate in Estonia, with each occurring at a more or less equal rate. Continental air masses are more frequent in the second half of winter, in spring, and in the first half of summer. Invasions of dry and cold arctic air masses occur from time to time in winter and in spring. In exceptional cases, southern cyclones carry warm tropical air masses far up to the north in summer. The main factor shaping the differences in air temperatures between different regions in Estonia is the Baltic Sea. In winter it keeps the coastal areas much warmer than the inland. At this time, the isotherms run from the north down to the south, during this period it is warmer in the west and colder in the east. The average air temperature in January is 6º to 7ºC in Central and East Estonia and 2º to 4ºC in the West Estonian Archipelago. The coldest month is February. In spring the inland warms up much faster than the sea. Therefore, coastal areas remain comparatively cooler than the rest of Estonia. Differences between the average temperatures in May exceed 3.5ºC. In summer these territorial differences begin to disappear. The average temperature in July varies between 16.0ºC and 17.4ºC. The coolest areas are located on the uplands, the warmest on the coasts of shallow inland seas, such as Pärnu Bay. In autumn, again, the inland cools down much faster than the coastal areas. Towards the winter, the contrasts in air temperatures become increasingly distinct. The annual average temperature in Estonia is between 4.3ºC and 6.5ºC, being lower on the uplands and higher on the western coast of the islands. The highest air temperature, 35.6ºC, was measured on 11 August 1992 in Võru, the lowest, 43.5ºC, on 17 January 1940 in Jõgeva. The vegetation period lasts for days and the frostfree period days. Both are longer on the coast.

23 23 The annual average wind speed in the inland parts of Estonia is less than 4 m/s; on the coasts of the open seas it is more than 6 m/s. Bigger still are the differences in the frequency of storm winds. In the inland, storm winds (more than 15 m/s) are rare, occurring only a few times a year, while on the coast and islands of the open seas the frequency of storm winds reaches days/year. Estonia is located in a region of humid climate, where the amount of precipitation exceeds the total evaporation. The annual average of the relative air humidity is 80 83%. It is higher in winter and at its lowest in May, being 70% on average. The annual average precipitation varies between 550 and 800 mm. There are about 160 to 180 rainy days a year. As a rule, the coastal zone receives less rainfall than the inland areas. It is particularly dry on the coast in spring and in the first half of summer. Areas with the highest precipitation are located on the uplands and at a distance of km from the western coast. The latter zone receives a comparatively large amount of precipitation in autumn and early winter. The maximum recorded annual total amount of precipitation has been 1157 mm, with a maximum monthly amount of 351 mm, and a maximum twenty four hour amount of 148 mm. The snow cover in Estonia is characterised by large territorial and temporal variations. The average duration of snow cover during winter is days. Snow cover remains for the shortest time on the small islands near the western coast of Saaremaa Island and for the longest time on the Haanja and Pandivere Uplands. 2.4 Regional administrative divisions Government type and institutions Estonia is a parliamentary democracy, with a 101 member parliament (the Riigikogu) and a president who is elected indirectly by parliament or, if no candidate wins a two thirds majority in parliament, by an electoral college composed of members of parliament and of local government representatives. Estonia holds presidential elections every five years. The last presidential election was in The President serves a maximum of two terms. The President is also the Supreme Commander of the National Defence of Estonia.

24 24 Parliamentary elections take place every four years; members are elected by proportional representation. The most recent elections took place on March 4, A party must gather at least 5% of the votes to take a seat in Parliament. At present 6 main parties are in the parliament. Citizens 18 years of age or older may vote in parliamentary elections and be members of political parties. In addition, resident noncitizens and those who have lived permanently in the area for at least 5 years preceding the election may vote in local elections, although they may not run for office. After parliamentary elections, the President traditionally asks the party with the most votes to form a new government. The President chooses the Prime Minister usually the leader of the largest party or coalition in the Parliament with the consent of the parliament to supervise the work of the government. The Estonian government has a total of 14 ministers. The parliament also appoints the president of the Estonian National Bank, the Chief of the Headquarters of the Estonian Defence, the Comptroller General of Estonia, the Chancellor of Justice of Estonia and the Chief Justice of the Supreme Court of Estonia, all on the proposal of the President of Estonia Regional administrative divisions A county (in Estonian: maakond) is an administrative subdivision of Estonia. The country is divided into 15 counties (figure 4). The government (in Estonian: maavalitsus) of each county is led by a county governor (in Estonian: maavanem), who represents the national government at the regional level. Governors are appointed by the government for a term of five years.

25 25 Figure 4 Estonia: division by counties Estonian population is divided quite unevenly between counties, (table 1). Also economic development levels counties are quite different. Major part of Estonian GDP is generated by Harju, Tartu and Pärnu counties Each county is further divided into municipalities which are of two types: urban municipality or town (linn), and rural municipality or commune (vald). Since October 2005 there are total of 227 municipalities in Estonia, 34 of which are urban and 193 rural.

26 26 Table 1 The counties of Estonia area and population County name Capital Area Population (2006) km 2 share people share Harju maakond Tallinn ,9% ,8% Hiiu maakond Kärdla ,3% ,8% Ida Viru maakond Jõhvi ,7% ,8% Järva maakond Paide ,0% ,8% Jõgeva maakond Jõgeva ,0% ,8% Lääne maakond Haapsalu ,5% ,1% Lääne Viru maakond Rakvere ,9% ,9% Pärnu maakond Pärnu ,0% ,6% Põlva maakond Põlva ,0% ,3% Rapla maakond Rapla ,8% ,7% Saare maakond Kuressaare ,7% ,6% Tartu maakond Tartu ,1% ,1% Valga maakond Valga ,7% ,6% Viljandi maakond Viljandi ,2% ,2% Võru maakond Võru ,3% ,9% Source: A municipality (omavalitsus) is the smallest administrative subdivision. Each municipality is a unit of self government with its representative and executive bodies. Municipality may contain one or several populated places. Some urban municipalities are divided into districts (linnaosa) with limited self government. For example Tallinn consists of 8 districts (Haabersti, Kesklinn, Kristiine, Lasnamäe, Mustamäe, Nõmme, Pirita, Põhja Tallinn). Municipalities are ranging in size from Tallinn with inhabitants to Ruhnu with as few as 60. As over two thirds of the municipalities have a population under 3 000, many of them have found it advantageous to co operate in providing services and carrying out administrative functions. 2.5 Historical background 2 Estonians are one of the longest settled European peoples and have lived along the Baltic Sea for over 5,000 years. The Estonians were an independent nation until the 13th century A.D. The country was then 2

27 subsequently conquered by Denmark, Germany, Poland, Sweden, and finally Russia, whose defeat of Sweden in 1721 resulted in the Uusikaupunki Peace Treaty, granting Russia rule over what became modern Estonia. Estonian cities Tallinn (historically Reval), Tartu (Dorpat), Narva (Narwa), Pärnu (Pernau) and Viljandi have been the members of Hanseatic League. Independence remained out of reach for Estonia until the collapse of the Russian empire during World War I. Estonia declared itself an independent democratic republic in November In 1920, by the Peace Treaty of Tartu, Soviet Russia recognized Estonia's independence and renounced in perpetuity all rights to its territory. The first constitution of the Republic of Estonia was adopted in 1920 and established a parliamentary form of government. Estonia's independence would last for 22 years, during which time Estonia guaranteed cultural autonomy to all minorities, including its small Jewish population, an act that was unique in Western Europe at the time. Leading up to World War II (WWII), Estonia pursued a policy of neutrality. However, the Soviet Union forcibly incorporated Estonia as a result of the Molotov Ribbentrop Pact of 1939, in which Nazi Germany gave control of Estonia, Latvia, and Lithuania to the Soviet Union in return for control of much of Poland. In August 1940, the U.S.S.R proclaimed Estonia a part of the Soviet Union as the Estonian Soviet Socialist Republic (E.S.S.R.). The United States never recognized Soviet sovereignty over Estonia, Latvia or Lithuania. During the course of WWII, Germany occupied Estonia for three years. In 1944, Stalin retook the country and resumed the mass deportations of ethnic Estonians to Siberia that had been initiated in Together with migration into Estonia from other parts of the Soviet Union, this resulted in the share of ethnic Estonians in the country decreasing from 88% in 1934 to 62% in In the late 1980s, looser controls on freedom of expression under Soviet leader Mikhail Gorbachev reignited the Estonians' call for selfdetermination. By 1988, hundreds of thousands of people were gathering across Estonia to sing previously banned national songs in what became know as the "Singing Revolution." In November 1988, Estonia's Supreme Soviet passed a declaration of sovereignty; in 1990, the name of the Republic of Estonia was restored, and during the August 1991 coup in the U.S.S.R, Estonia declared full independence. The U.S.S.R Supreme Soviet recognized 27

28 28 independent Estonia on September 6, Unlike the experiences of Latvia and Lithuania, Estonia's revolution ended without blood spilled. Estonia became a member of the United Nations on September 17, 1991 and is a signatory to a number of UN organizations and other international agreements, including IAEA, ICAO, UNCTAD, WHO, WIPO, UNESCO, ILO, IMF, and WB/EBRD. It is also a member of the Organization for Security and Cooperation in Europe (OSCE). After more than 3 years of negotiations, on August 31, 1994, the armed forces of the Russian Federation withdrew from Estonia. In 1992, a constitutional assembly introduced amendments to the 1938 constitution. After the draft constitution was approved by popular referendum, it came into effect July 3, Presidential elections were held on September 20, 1992, with Lennart Meri as victor. Lennart Meri served two terms as president, implementing many reforms during his tenure. Meri was constitutionally barred from a third term. Arnold Rüütel became president in 2001; Toomas Hendrik Ilves in Since fully regaining independence, Estonia has had 13 governments with 7 different prime ministers elected: Mart Laar, Andres Tarand, Tiit Vähi, Mart Siimann, Siim Kallas, Juhan Parts, and Andrus Ansip. Estonia began to adopt free market policies even before it declared independence in mid 1991 and has continued to pursue reform aggressively ever since. For example, the government set privatization as an early priority and has now completed the process of putting most major industries in private hands. After independence the Government of Estonia took steps to simplify the tax system. Tax evasion is now relatively low by regional standards. Income tax is levied at a flat rate, a principle supported by all the major parties except the Center Party, for which a progressive tax system remains a keystone policy. Budget performance is exceptionally strong; the IMF projected a surplus of 3.4% of GDP in An integral part of Estonia's transition to a market economy during the early 1990s involved reorienting foreign trade to the West and attracting foreign investment to upgrade the country's industry and commerce. In 1990, only 5% of Estonia's foreign trade was with the developed West; only 21% of this trade represented exports. About 87% of Estonia's trade was with the Soviet Union, and of that, 61% was with Russia. Estonia's main foreign trading partners today are Sweden, Finland, Germany and others in the West. Russia's share of Estonia's trade is less than 10%. The introduction of the Estonian kroon in June 1992, with only USD 120 million in gold reserves and no internationally backed stabilization

29 fund, proved decisive in stabilizing foreign trade. For stability, the kroon was pegged by special agreement to the deutsche mark (DM) at EKR8 = DM1 and later to the Euro. The new Estonian currency became the foundation for rational development of the economy. Money began to have clear value; the currency supply could be controlled from Tallinn, not Moscow; and long term investment decisions could be made with greater confidence by both the state and private enterprise. The central bank is independent of the government but subordinate to the parliament. In addition to its president, the bank is managed by a board of directors, whose chair is also appointed by parliament. The fall of the Soviet Union and the rapid contraction of Estonia's market to the East during the early 1990s caused Estonia's economy to shrink 36% from 1990 to But economic reforms in Estonia and the ability of its economy to reorient toward the West allowed Estonia's economy to pick up in 1995 with 4.6% growth and 4.0% growth in Russia's financial crisis in 1999 led to the only year of decline in Estonia's GDP since 1994 but the 0.7% decline was relatively small. The period was mainly dominated by the Estonian EU and NATO accession processes. Estonia was the first Baltic country to start direct accession talks with the EU. Estonia applied to join the EU in November 1995 and, while participating in accession negotiations, continued its program of major economic and social reforms. This gave Estonia a good opportunity to take into account EU objectives and to exploit the experience of existing EU member states when carrying out reforms. Examples of reform in the social area included the launch of unemployment insurance in 2002 and the 1999 implementation of the Occupational Safety and Health Act, which regulates safety and health requirements in the work place as well as the organizational aspects of the occupational health system. In 1999, Estonia joined the World Trade Organization, adding to its previous membership of the IMF, World Bank and the European Bank for Reconstruction and Development. In November 2002, Estonia was one of seven Central and East European countries to be invited to join NATO; it officially became a member of NATO on March 29, In just fifteen years since reestablishing independence, Estonia has proven itself to be an excellent Ally, having built a military capable of participating in ever more complex and distant military operations. EU accession negotiations proceeded rapidly, and Estonia joined the EU in May 2004, along with nine other countries, including its Baltic neighbours. The final decision was conditional on the outcome of a 29

30 30 national referendum which was held in September 2003 and returned a large majority in favour of membership. Estonia has developed into a strong international actor, through its membership in the EU and NATO; it is a capable advocate and promoter of stability and democracy in the former Soviet Union and beyond. Estonian troops have been in Afghanistan since 2002 and Iraq since It participates in the NATO training mission in Iraq and in the international police training mission for Iraq in Jordan. Estonia also provides peacekeepers for international missions in both Bosnia and Kosovo and contributes to EU battle groups and NATO Response Force rotations. It supports democratic developments in key countries of the former Soviet Union and beyond by providing training to government and law enforcement officials as well as non governmental organizations. It has valuable experience to offer new democracies from its own recent history, and it works hard to promote democracy, freedom, and stability worldwide.

31 31 3 ECONOMY 3.1 Economic importance of the region Market environment Estonia is considered one of the most liberal economies in the world, ranking in th, in th in 2005 and in th in the Heritage Foundation's 2006 Economic Freedom Index, above the all rest of BSR countries. By World Competitiveness Ranking Estonia have had on 23rd to 25 th place in last years ( th, rd, th ), being the most competitive among East European countries. Estonian economy is characterized by: Rapid GDP growth, being yearly above 7% in 21st century (table 2) Very liberal economic policy in trade and taxation (a flat rate income tax system, the first in the world). Large stock of inward FDI Balanced state budget Very low external debt of government High level of gross fixed capital formation Table 2 represents some basic Estonian key economic indicators. Estonian economy is diverse industry and transport, as well as commerce and different branches of services are all equally important. Due to the available natural resources Estonian economy largely relies on the branches related to the forest. Estonian energy sector is based on oil shale, a resource quite rare elsewhere in the world. Finland and Sweden are the most important trade partners.

32 32 Table 2 Estonia: key economic indicators * 2008* 2009* GDP, bill EUR 2,8 6,1 6,9 7,8 8,5 9,4 11,1 13,1 15,0 17,1 19,2 GDP real growth, % 4,5 10,8 7,7 8,0 7,1 8,1 10,5 11,4 9,2 8,3 7,7 Inflation (consumer price index), % 29,0 4,0 5,8 3,6 1,3 3,0 4,1 4,4 5,1 5,6 4,3 Current account balance / GDP(%) 4,2 5,4 5,2 10,6 11,6 12,5 10,5 14,8 15,2 13,8 12,6 Real private consumption growth (%) 5,9 9,9 6,8 7,0 7,9 15,8 14,7 9,9 7,3 Real investment growth (%) 13,0 17,2 7,0 13,5 12,7 19,7 14,8 5,9 3,7 Real export growth (%) 0,2 0,6 7,6 17,1 21,5 10,0 8,2 7,5 6,8 Real import growth (%) 2,1 5,4 10,6 15,2 15,9 14,7 12,9 7,7 6,4 Foreign direct investment inflow, mill 147,8 424,6 602,5 306,8 822,1 775,4 2348,0 1281,9 Foreign direct investment outflow, mill 1,9 66,7 225,5 139,8 137,4 216,5 493,8 822,7 Unemployment rate (%) 9,7 13,6 12,6 10,3 10,0 9,7 7,9 5,9 5,5 5,9 6,3 Change in the number of employed (%) 1,2 1,5 0,2 2,0 6,4 1,3 0,1 0,3 Value added growth per employee (%) 5,7 5,9 5,5 7,8 8,3 4,7 7 6,4 5,9 Real wage growth (%) 6,9 7,1 8,6 5,9 8,3 12,6 12,7 8,8 6,0 Average monthly gross wages and salaries, * Estonian Bank forecast published Source: Estonian Bank, Estonian Statistics Office

33 33 The rapid GDP growth has been basing on strong and growing internal demand, growing exports, investments and fast credit increase due to low interest rates and free access to capital. There are also unfavourable side effects of such fast economic growth being more and more actual in last years. These are fast increase of salaries, too low unemployment rate, excessive optimism about the future, sharp increase of real estate prices and accelerating inflation (also increase of fuel prices has had influence on inflation growth). Excessive optimism about future causes irrational income expectations, irrational credit and consumption decisions and creates risk of inability to pay back loans when economic growth slows down. Strong pressure on salaries growth have created situation when salaries / labour cost increase faster than productivity do, resulting in decreasing competitiveness in international markets (figure 5). Fast credit growth causes increasing external debt. Resources are moving into closed economic sectors due to inner consumption increase (retail trade, construction, internal services, tcc) not generating resources for paying back the external debt of Estonian economy. Figure 5 Estonian GDP, labour productivity and price level dynamics (EU25=100) So Estonian economy is facing with challenges in nearest years how to increase and sustain profitability in conditions of limited labour resources and increasing labour costs, increase productivity and stabilize external debt. For productivity growth investments into innovations (R&D) and technology intensive production are needed. Estonian Bank anticipates the slow withdrawing of Estonia s economic growth in following years (table 3) meaning the fall of GDP yearly growth rates below 10%. The country must steadily proceed with

34 34 the current successful economic policies because economics adjustments are going to take place in the form of natural market developments and thus do not require a different economic policy approach Key industry sectors Table 3 Estonia: share of value added by economic activity (current prices), % Primary sectors 6,1 5,8 5,3 4,7 4,9 4,7 4,2 Manufacturing 17,8 18,4 18,1 17,7 17,1 16,8 16,7 Electricity, gas and water supply 3,2 3,2 3,3 3,6 3,5 3,4 3,4 Construction 5,6 5,6 5,9 6,2 6,5 7,3 8 Wholesale and retail trade; repair of motor 12,3 13,1 13,8 14,2 14,5 15,2 15,1 vehicles etc. Hotels and restaurants 1,6 1,6 1,5 1,4 1,5 1,6 1,6 Transport, storage and communication 14,6 13, ,8 12,3 12,1 12,1 Real estate, renting and business activities 17,5 18,1 18,2 18,4 18,9 18,8 19,6 Financial intermediation 4,1 3,8 4,2 3,9 3,9 3,8 3,7 Public services 17,2 16,8 16, ,9 16,4 15,6 VALUE ADDED TOTAL Source: Estonian Statistics Office Table 3 shows the value adding by main economic activities. In last years real estate, renting and business activities have generated the biggest share of GDP, indicating (together with construction) the increasing importance of inner consumption in Estonian GDP generation. The manufacturing sector has been on second place, accounting ca 18% GDP share in last years. Wholesale and retail trade has generated 15% of GDP in last years. The transport, storage and communication sector share in GDP is 12% in last years. In this sector about 35% of value added is generated by transport, 35% by warehousing and 30% by communication industry. In 2005 road transport created 66% of total value added by transport, rail 21%, sea transport 4% and air transport 9%. The share of public services has decreased in 21st century being 16% in last years. 3 Monetary Developments & Policy Survey. Estonian Bank, March 2007

35 35 Table 4 Estonia: share of value added by economic activity (current prices), % Agriculture, forestry and hunting 1,1 7,1 2,4 0,4 Fishery 5,2 8,4 0,5 4 Mining and quarrying 13,5 4,9 6,3 7,3 Manufacturing 7 11,5 12,6 12,8 Electricity, gas and water supply 12,9 0,9 7 7,4 Construction 2,7 7,1 19,8 13,3 Wholesale and retail trade 14,3 7, ,6 Hotels and restaurants 4,2 16,3 23,6 11,7 Transport, storage and communications, 9,6 12,5 7,7 10,9 Real estate, renting and business activitivities 4 5,6 8,8 9,7 Financial intermediation 18,9 22,6 25,2 22,8 Public administration and defence; statutory social insurance 4,7 1,1 2,3 2,1 Education 0,9 0,9 0,9 5,3 Healt and social care 0,6 4,2 6,5 6,8 Other services 1,6 5,5 5,7 7 Source: Estonian Bank. Monetary Developments & Policy Survey March 2007 Table 4 shows GDP growth by sectors in Final intermediation sector has been the far fastest growing sector. Manufacturing is continuously growing, having above average growth rates since 2004 (resulting of joining into EU). Construction services growth gained its peak in 2005, probably the significant slowdown of growth rates will follow. Wholesale and retail growth rate has been above average, except Hotels and restaurant services increase has been caused by development of tourism and inner consumption. Transport, storage and communication services growth has been below average in two last years. Table 5 shows the proportions of industrial production by Estonian industries having above 1% share, ranked by shares in The share of manufacturing has increased from 86.5% to 91.3% of industrial production in this period.

36 36 Table 5 Estonian Industrial production: proportion by industries having above 1% share (%) Economic activities total Electricity, steam and hot water supply 9,9 9,7 9,2 9,5 7,7 5,9 Mining (oil shale, peat) 3,6 3,3 3,2 3,3 2,9 2,8 Manufacturing, of which: 86, ,6 87,2 89,4 91,3..manufacture of wood and wood products 11,9 12,1 14,1 14, ,2..manufacture of food products and beverages 18,6 18,4 16,7 15,4 15,4 14,8..manufacture of metals and fabricated metal 6,3 7,3 7,3 7,8 8,1 9,4 products..manufacture of furniture; manufacturing not 6,5 6,9 6,8 6,7 6,3 6,1 elsewhere classified, of which:...manufacture of furniture 5,6 6,2 6,1 6 5,6 5,3..manufacture of other non metallic mineral 4,2 4 4,2 4,5 4,7 5,2 products..manufacture of chemicals and chemical 4,5 4,4 3,8 3,8 4,4 4,9 products..manufacture of textiles 6,4 5,9 5,7 5,7 5,1 4,2..publishing, printing and reproduction of 4,2 4,3 4,3 4,1 4 4,1 recorded media..manufacture of electrical machinery and 1,9 2 2,2 2,5 3,2 4,1 apparatus..manufacture of rubber and plastic products 2,6 3,2 3,2 3,7 3,5 3,6..manufacture of radio, television and 2,2 2,3 2,2 2,4 3,5 3,6 communication equipment and apparatus..manufacture of machinery and equipment 2,6 2,7 2,8 2,9 2,9 3,2..manufacture of wearing apparel; dressing 4 3,9 3,9 3,2 2,9 2,4 and dyeing of fur..manufacture of other transport equipment 1,7 1,6 2 2,1 2,7 2,4..manufacture of motor vehicles, trailers and 1,6 1,9 2, ,9 semi trailers..other manufacturing n.e.c. 1,2 1,1 1,1 1,1 1,5 1,8..manufacture of pulp, manufacture of paper 2,1 2,1 2,2 2 1,7 1,7 and paper products..manufacture of medical, precision and 2,1 1,4 1,4 1,5 1,5 1,7 optical instruments..manufacture of glass and glass products 1,3 1,3 1,2 1,5 1,4 1,5 Source: Estonian Statistics Office Approximately one fifth of manufacturing is based on wood wood, furniture and pulp & paper manufacturing accounted for 19.6% of all industrial production in 2000 and 22.2% in The dominating Estonian manufacturing branches are wood and wood products manufacturing, food and beverages manufacturing and metal products manufacturing having altogether 36.8% share in 2000 and 39.4% in 2006 of all industrial production. The fastest growing manufacturing branches during have been electrical machinery and apparatus production (share increased 116%), telecommunication equipment production (64%) and metal processing (49%). The most significant share decrease in this period has been in traditional garments, textile and food & beverages industries (40%, 34% and 20% accordingly).

37 37 Table 6 Share of exports in industrial sales of Estonian manufacturing branches (%) Manufacturing total 51,2 54..manufacture of radio, television and communication equipment and apparatus 88,7 96,1..manufacture of motor vehicles, trailers and semi trailers 89,1 84,3..manufacture of textiles 46,7 82,1..manufacture of electrical machinery and apparatus 54,5 81,8..manufacture of chemicals and chemical products 72,3 80,1..manufacture of medical, precision and optical instruments 83,9 76,9..manufacture of pulp, manufacture of paper and paper products 71,6 69,8..manufacture of wearing apparel; dressing and dyeing of fur 69,7 67,4..manufacture of furniture; manufacturing not elsewhere classified, of which: 70 63,3...manufacture of furniture 71,8 61,6..manufacture of wood and wood products 67,1 60,4..manufacture of machinery and equipment 49,7 59,7..manufacture of glass and glass products 52,1 52,8..other manufacturing n.e.c. 47,4 48..manufacture of rubber and plastic products 52,2 45,9..manufacture of metals and fabricated metal products 40 44,7..manufacture of other transport equipment 65,2 38,4..manufacture of other non metallic mineral products 34,8 28,5..manufacture of food products and beverages 28,6 26,7..publishing, printing and reproduction of recorded media 4,7 14,9 Source: Estonian Statistics Office Estonian manufacturing is strongly export oriented. In table 6 the manufacturing branches mentioned in table 5 are ranked by share of exports in industrial sales in In average 51% of production was exported in 2000 his percentage was increased up to 54% in The biggest share of export is in telecommunications industry (96% in 2006). More than 80% of motor vehicles, textiles, electrical machinery and chemical products are produced for export. This indicates Estonian manufacturers' strong cooperation in international industrial networks. 3.2 International Trade Figure 6 and table 7 illustrate the general developments of Estonian foreign trade in goods and services

38 , ,0 8000,0 MEUR 6000,0 4000,0 2000,0 Goods balance Services balance Goods exports Goods imports Services exports Services imports 0, ,0 4000,0 Figure 6 Estonian trade in goods and services (source: Estonian balances of payments) Estonian foreign trade is characterized by fast development rates in last years due to joining into EU in 2004, negative goods trade balance and positive services trade balance. The increase of goods imports has been faster than exports resulting in increasing negative balance. Only timber and timber products and furniture & other industrial goods are in surplus. This reflects Estonia's rapid economic expansion and an increase of investments and especially private consumption. E.g. the deficit of goods accounts in 2006 was mainly boosted by transport vehicles the imports of motor cars alone exceeded the exports by ca 500 million euros (7.2 billion kroons) 4. The negative goods account has been traditionally partially counterbalanced by surplus in services trade, especially in transport services the largest type of services. However the negative goods trade balance is increasing faster than positive services balance in % of negative goods balance was covered by supply of services, this figure was 38% in Estonian Preliminary Balance of Payment for the year 2006, p. 4

39 39 Table 7 Estonian trade in goods and services key figures Goods Exports, MEUR 3585,8 3757,1 3702,8 4053,9 4805,1 6271,5 7663,2 Imports, MEUR 4440,2 4622,4 4882,0 5438,4 6434,4 7760,0 9832,0 Balance, MEUR 854,4 865,3 1179,3 1384,5 1629,3 1488,5 2168,7 Services Exports, MEUR 1614,3 1797,8 1799,6 1960,0 2279,0 2545,4 2770,6 Imports, MEUR 962,3 1076,1 1167,6 1227,3 1411,3 1738,5 1952,1 Balance, MEUR 652,0 721,7 632,0 732,7 867,8 806,9 818,4 Services exports % of goods exports 45,0% 47,9% 48,6% 48,3% 47,4% 40,6% 36,2% Services imports % of goods imports 21,7% 23,3% 23,9% 22,6% 21,9% 22,4% 19,9% Services balance % of goods balance 76,3% 83,4% 53,6% 52,9% 53,3% 54,2% 37,7% Goods Exports change over previous year 51,7% 4,8% 1,4% 9,5% 18,5% 30,5% 22,2% Imports change over previous year 41,5% 4,1% 5,6% 11,4% 18,3% 20,6% 26,7% Balance change over previous year 10,5% 1,3% 36,3% 17,4% 17,7% 8,6% 45,7% Services Exports change over previous year 15,1% 11,4% 0,1% 8,9% 16,3% 11,7% 8,8% Imports change over previous year 10,6% 11,8% 8,5% 5,1% 15,0% 23,2% 12,3% Balance change over previous year 22,3% 10,7% 12,4% 15,9% 18,4% 7,0% 1,4% Source: Estonian Balances of Payments 2005 and International trade in goods Goods exports Figure 7 shows the structure of Estonian exports by main goods groups. There have been significant structural changes in exports since nineties. The share of food and textile products has decreased more than twice. The shares of machinery & equipment and metals & metal products have increased significantly. In the 21st century the export of machinery and equipment have had the biggest share, being usually over 25% of total exports. Of this, export of mobile phones and their parts consist of the (decreasingly) biggest share (60% in 2004, 55% in 2005 and 48% in 2006). Other significant goods groups are cables, components of various mechanical equipment and transformers.

40 40 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Other 3,4 3,4 3,2 3,5 3,8 3,8 4,2 3,9 Furniture, toys, sporting goods 6,1 6,5 8,1 9,6 9,8 9,3 8,3 7,5 Transport vehicles 4,8 2,5 3,2 4,1 4,3 6,1 6,7 6,9 Machinery and equipment 14,0 36,3 33,1 24,8 25,0 27,2 28,2 23,7 Metals and metal products Timber, paper and products Clothing, footwear and headgear ,9 7,0 6,9 7,8 8,5 8,6 8,9 9,1 14,1 15,8 15,2 17,4 17,1 15,0 13,2 11,8 17,5 13,3 14,0 14,7 13,3 10,8 8,6 6,8 Chemical products 10,5 6,0 6,3 7,1 7,8 7,2 7,2 7,1 Mineral products 6,5 2,4 2,1 2,7 2,8 4,5 7,6 16,2 Food 16,2 6,8 8,0 8,3 7,5 7,5 7,2 7,0 Figure 7 Estonian goods exports the share of main goods groups (source: Estonian balances of payments) The main driving force behind the export growth in 2006 was the (re)export of mineral groups, which grew by 2.6 times over the previous year, decreasing almost all other export goods group shares (except

41 metal products). In % of exports comprised motor fuel. 80% of that in 2006 was imported for processing from Russia and Byelorussia and then re exported to USA, UK (Gibraltar) and Togo (ca 75% in 2005 and over 50% in 2004). The main timber and paper export articles are wooden sleepers, construction components, firewood, wooden furniture and prefabricated wooden buildings. Main metal products export articles are hot rolled steel products, scrap metal and iron constructions. Main chemical industry export articles are various construction materials (mastics, paints, vanishes, putties), plastic products, carbonic acids and nitrogen fertilizers. Food industry exports include spirits, fish fillet, canned fish and dairy products. In transport vehicles exports the re export of motor cars imported from Finland and Germany and exported to Latvia, Lithuania, Spain, Germany and Russia has dominated in last years (44% in 2006, 38% in 2005). Vehicles exports also include components of motor vehicles and trailers exports. Estonian textiles products exports include men suits and shirts, woman's costumes, leather footwear, bed linen, cotton fabric and fur. Regarding other goods, there are automatic equipment, toughened glass panes and glass packaging and cement products Table 8 shows Estonian TOP 15 export partners in 2006 and their share changes in total exports during the period. The EU share in total exports is falling, being 65% of total exports in On the other hand, share of exports to CIS countries has grown considerably more than tripled within the period, being 10.5% of total exports in The share of Baltic Sea region has also fallen in exports, from 77.5% in 2000 to 60.7% in Four of Estonia s TOP 5 export partners in 2006 Finland, Sweden, Latvia and Russia belong to BSR region. Export partner ranking 2006 presented in table 3.6 differs from official Estonian Statistics Office statistics (ESO). ESO export / import countries list is based on International Standard Codes for the Representation of Names of Countries ISO By this classification of countries 4.5% of Estonian total exports in 2006, 1.5% in 2005 and 1.2% in 2004 went to Gibraltar, as this is listed as independent export target region in ISO 3166). As Gibraltar is not independent state but possession of United Kingdom, then the export shares of Gibraltar and UK in have summarised in table 8 for better objectivity. So in 2006 the summarised UK+Gibraltar shares in Estonian exports were =7.1% in 2006, 41

42 =5% in 2005 and =4.9% in The export goods to Gibraltar were mainly motor fuels further redirected to UK. Table 8 Estonia main export partners in EL25 82,4 80,1 77,7 64,7 CIS 3,3 4,5 5,1 6 7,8 8,7 10,5 BSR 77,5 71,6 69,7 70,7 68, ,7 1 Finland 32,3 33,9 24,8 25, ,3 18,2 2 Sweden 20, ,3 15,2 15,3 13,2 12,3 3 Latvia 7 6,9 7, ,8 8,7 4 Russia 2,4 2,7 3,3 3,9 5,6 6,5 7,9 5 United Kingdom 4,4 4,2 4,8 4,2 3,9 5 7,1 6 USA 1,3 1,8 2,2 2,5 3,2 3,1 6,7 7 Germany 8,5 6,9 9,9 9,9 8,3 6,2 5 8 Lithuania 2,8 3 3,5 3,7 4,4 4,6 4,8 9 China 0,2 0,4 0,6 0,7 0,6 0,5 4,6 10 Norway 2,4 2,8 3,4 3,6 3,3 2,9 2,7 11 Denmark 3,4 3,5 4,5 4 3,3 3,2 2,6 12 Netherlands 2,5 2,8 3, ,5 2,3 13 Hungary 0,8 0,9 1,3 1,3 3,6 2,3 1,8 14 Ukraine 1,2 2 1,7 1,8 1,7 1,4 1,5 15 France 1,4 1,1 1,4 1,7 1,5 1,2 1,3 Other countries 8,9 13,1 12,5 11,6 11,3 12,3 12,5 Source: Estonian Statistics Office Finland and Sweden have been traditionally Estonia s biggest export / trading partners due to their proximity, tight contacts and cooperation. Major part of foreign direct investments into Estonian economy has come from these countries. However their shares have decreased due to Estonia s wider participation in international trade and increase of local labour costs many Estonian companies have started their export operations as cheap subcontractors for Finnish and Swedish companies. There have been significant changes in export partner's shares in the period. Finland s, Germany s and Sweden s share have fallen ca 40% each. Russia s share has more than tripled, share of USA has increased 5 times and share of China has increased 23 times.

43 Goods imports Figure 8 shows the structure of Estonian imports by main goods groups. Similarly to exports the share of food and textile products has decreased around 2 times since The biggest share increase has been in transport vehicles imports. The biggest import goods group is machinery and equipment products having 25 31% share in last years (25% in 2006). In this group mostly mobile communication devices and components of electronic equipment have been imported in the last years both for processing and for internal supply. In addition computers, cables, roadwork machinery and other mechanisms have purchased. Since 2003 the share of mineral products in imports has increased. The imports of mineral products doubled in 2006 over previous year by value. 87% of that accounted for motor fuel imported both for processing (from Russia and Belarus) and free circulation (from Lithuania). The majority of mineral products were further re exported. Also natural gas imports from Russia increased by a third. The third import group by share in last years is transport vehicles mainly motor cars and trucks mainly from Finland and Germany as well as their components The imports of chemical products consist of medicines, various plastic products, ethers, tyres. Metal products imports include comprised steel products, various iron pipes and constructions, metal furniture components, aluminium.

44 44 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Other 5,1 4,0 4,0 4,2 4,3 4,0 3,9 4,6 Furniture, toys, sporting goods 3,0 2,3 2,6 2,5 2,3 2,3 2,2 2,4 Transport vehicles 7,0 6,9 8,9 10,8 14,9 11,9 10,3 12,1 Machinery and equipment 22,6 38,5 33,5 29,7 27,8 28,8 30,9 25,4 Metals and metal products Timber, paper and products Clothing, footwear and headgear ,2 8,1 8,1 9,0 9,2 11,0 10,2 9,8 5,0 4,9 5,2 5,2 5,2 5,6 5,5 5,2 13,0 9,5 10,3 10,5 9,2 8,5 7,3 6,6 Chemical products 12,8 11,1 11,8 12,4 12,3 11,8 11,7 11,6 Mineral products 10,6 6,1 6,1 6,1 5,6 6,9 9,3 14,9 Food 13,7 8,6 9,4 9,7 9,2 9,1 8,6 7,3 Figure 8 Estonian goods exports the share of main goods groups (source: Estonian balances of payments) The biggest food imports articles were spirits and wines, pork, coffee, tobacco products and sugar in In the clothing, footwear and headgear group the main import articles in 2006 were footwear

45 45 from Germany, Netherlands and Italy; ready made men's and women's clothes from Finland and Germany; underwear from Latvia; various fabrics and textile commodities from China, Taiwan and Republics of Korea. Raw wood and plywood from Russia and paper products from Finland and Sweden are main import articles in the group of timber products in last years. Various furniture and lamps were purchased from Finland, Poland and Italy in 2006 Table 9 Estonia s main import partners in EL25 76,5 77,6 76,1 74,1 CIS 10,1 10 9,5 13,5 12,1 11,6 16 BSR 76,7 71,5 66,3 66,3 69,8 68,5 71,7 1 Finland 37, ,1 21,5 22,1 19,7 18,2 2 Russia 8 7,8 7,1 8,1 9,2 9,2 13,1 3 Germany 9,5 11, ,8 12,8 13,9 12,4 4 Sweden 10, ,5 9,8 9,7 8,9 9 5 Lithuania 2 3 3,8 4,1 5,4 6 6,5 6 Latvia 4,1 4 4,1 4,2 4,6 4,7 5,7 7 Poland 2 2,5 2,8 3,1 3,3 3,7 3,8 8 Netherlands 3,1 3,9 4,8 4,6 3,6 3,4 3,5 9 Italy 2,4 2,8 4,2 2,7 2,4 2,5 2,6 10 Denmark 3 3 2,9 2,7 2,7 2,4 2,4 11 China 0,2 0,4 1,7 1,4 1,9 2,1 2,1 12 United Kingdom 1,9 2,1 2,4 2,1 2,2 2, France 1,8 2,1 2,2 2, ,9 14 Belgium 1,8 2,1 2,2 2 1,9 1,8 1,8 15 Hongkong 0,3 1,7 1,8 1,1 1 1,9 1,4 Other countries 11,8 13,4 14,4 17,7 15,2 15,4 13,6 Source: Estonian Statistics Office Table 9 shows Estonia s TOP 15 import partners in 2006 and their share changes in total imports during The share of EU countries in imports has slightly decreased since 2004 and was 74% in The share of CIS countries has been fluctuating between 10% and 14% within and risen to 16% in The share of BSR countries has been in 66% 72%.since Estonia TOP 7 import partners in 2006 were all from BSR region. Estonia s main import partners have traditionally been Finland, followed by Germany, Sweden and Russia. Finland s share has fallen two times since 2000 (from 37.6 % to 18.2 in 2006). Since 2005 imports from Russia exceed imports from Sweden. In 2006 Russia also outpaced Germany, becoming the second biggest import country. 66%

46 46 of the imports from Russia in 2006 consisted of mineral products, the majority of which accounted for motor fuel imported for processing. Lithuania s share in Estonian imports has more than tripled in Also the share of Poland has almost doubled. China s share has increased more than 10 times Foreign trade has been in deficit with the EU as well as the CIS. As regards the EU member states Estonia had the biggest trade deficit with Germany and Finland and the biggest surplus with Latvia, Hungary and Sweden. Russia accounted for 12 billion kroons of the total 14 billion kroons deficit with the CIS in Foreign trade balance was in surplus with the Ukraine. As for other countries the largest surplus of trade was recorded with USA in International trade in services Table 10 shows Estonian services balances in by service categories. Table 10 Estonian Services balances , % Transportation 56 54, ,3 43,9 29,7 38,6 Travel 55,8 56, ,3 50,2 42,8 Construction services 4 8,3 11,3 0,9 0,3 0,4 4,6 Business services 1,7 1,6 1,8 2,8 11,3 20,3 22,6 Government services 16 17,7 17,5 1,4 0,7 1,5 0,8 Other 1,9 0,3 0,7 0,4 0,1 1,6 0,3 Total Source: Estonian balances of payments Traditionally travel and transportation have dominated in services supply but since 2003 business services have been also in growing supply. Construction services balance was negative in 2002, 2003, 2004 and Business services and Government services balance was negative up to Since 2004 other services balance has been negative.

47 Services exports Table 11 shows shares of different services in Estonian services exports. Transport services are still dominating in services exports despite their share having decreased since Freight services gave 22% of service exports in The share of other transport services has decreased almost twice in the 21st century. Passenger services exports have increased since 2005 mainly due to increase of sea travel services exports. In transport service exports traditionally sea transport services have dominating, followed by rail services exports. However in 2006 road transport exports exceeded the rail transport ones. The share of business services export has almost permanently increased faster than average in the 21st century. In last years especially computer and information services exports rise has been very fast (in % increase over the previous year by value). Table 11 Estonian services exports , % Transportation: 48,1 48,1 54,3 44,1 42,5 39,4 41 freight 20,8 23,7 32,8 22,9 24, ,7 passenger 10 9,4 9,1 9,5 7,9 8,2 9,6 other transport services 17,3 15,1 12,4 11, ,2 9,7 Travel 33,8 30,8 27,9 30,2 31, ,6 Construction services 2,6 4,7 3,9 3,8 3,1 6 2,5 Business services 11,1 11,7 9,9 15,4 16,6 18,8 20,3 Government services 0,3 0,5 0,4 1,5 1,3 1,2 1,2 Other 4,1 4,1 3,6 4,9 5,2 4,6 5,3 Total Source: Estonian balances of payments Services imports Table 12 shows the shares of different services in Estonian services imports. Similarly to exports, transport services are dominating in imports (42% of total services imports in 2006). Freight transport has the biggest share (28% of total services imports in 2006). The share of passenger transport in imports is much less than in exports (4.6% against 9.6% in 2006). The imports of transportation services are followed by travel and business services.

48 48 In import of transportation services sea transport has the biggest share, followed by air and road transport. Air transport is the single transport mode having negative services balance. The imports of transportation services are followed by travel and business services. Table 12 Estonian services imports Transportation: 45,5 45,7 51,2 37,2 41,6 43,9 42 freight 32, ,8 22, ,2 28 passenger 5,3 5,7 4,9 6,1 4,7 4,2 4,6 other transport services 7,4 5,9 5,4 8, ,5 9,4 Travel 22,3 17,9 15,4 23, ,7 24,1 Construction services 1,9 2,9 8,9 6,7 5,3 8,6 5,5 Business services 19,3 18,8 13,7 23,6 19,9 18,2 19,8 Government services 5,4 8,7 6,2 1,6 1,8 1,1 1,4 Other 5,6 6 4,6 7,5 8,4 7,4 7,4 Total Source: Estonian balances of payments

49 49 4 PUBLIC SECTOR SUPPORT FOR ENTERPRISES Estonian Government approved Estonian entrepreneurship development plan for on Oct. 19th 2006, in seeking other solutions for continuing fast development of local economy than massive import of workforce from abroad. Mentioned development plan is proceeding from surveys by which the main hindrance in Estonian economy development is low productivity. The insufficient productivity increase is often caused by lack of appropriate workforce. The import of labour from abroad will be only a temporary solution lowering entrepreneurs motivation to develop their products and technologies. By development plan there are four ways in increasing the productivity in Estonian economy: Development of knowledge and skills of local labour and managers. This means state help in paying the training expenses of companies, offering training courses not provided on sufficient quality level by local professional training market and advising for starting entrepreneurs. Favouring investment into modern technologies. This means financial support for such investments, also state granted credits, start up support for starting enterprises and help in finding contacts with foreign investors. Support for internationalization of enterprises which means bigger market, bigger production and lower production costs. It includes financial support and advising in expanding into new markets and export and investments guarantees by state. Simplification of procedures for entrepreneurs and streamlining entrepreneurship related legislation. This means simplification of enterprise foundation and intercommunication procedures with state institutions using ICT solutions but also more thorough estimation of impacts of existing and new legislation acts and entrepreneurs financial and time costs resulting in following these legislation acts.

50 Organisations and types of supports provided Entrepreneurship policy is worked and carried out by Ministry of Economic Affairs and Communications, except legislation matters which are partially under Ministry of Justice responsibility. Entrepreneurship policy implementing agencies in Estonia are Enterprise Estonia and Export and Credit Guarantee Fund Kredex Enterprise Estonia / Ettevõtluse Arendamise Sihtasutus Enterprise Estonia (EE) actively operates in the following areas: the enhancement of the competitiveness of Estonian enterprises in foreign markets, the inclusion of foreign direct investments, inbound and domestic tourism, the elaboration of technological and innovative products and services, the development of Estonian enterprises and the entrepreneurial environment and the enhancement of general entrepreneurial awareness. Finances of the state of Estonia and the structural funds of European Union Direct and Indirect income Clients and Partners Entrepreneurs, companies Business organisations State institutions Local governments County governments Non profit organisations Foundations Scientific institutions Higher educational estabishments, etc. Activities programmes National Development Programme, priorities and financing Enterprise Estonia Figure 9 The position of Enterprise Estonia in national support system EE is one of the institutions responsible for the implementation of EU structural funds in Estonia, as well as being the primary provider of support and development programmes targeted towards

51 51 entrepreneurs. Figure 9 illustrates EE position in national support system. EE was founded in 2000 by the Ministry of Economic Affairs with the aim of promoting the competitiveness of the Estonian entrepreneurial environment and Estonian businesses, thereby increasing prosperity. The restructured EE started to operate in full on October EE head office is situating in Tallinn. There are 2 local offices located in Tartu (South Estonia) and Jõhvi (North East Estonia). 6 offices are located abroad: in London, Hamburg, Stockholm, Helsinki, Moscow and St. Petersburg. EE had a total of 189 employees at the end of Figure 10 The structure of Enterprise Estonia EE is divided into 5 divisions: Business Start Up Division, Business Development Division, Investment and Trade Development Division, Estonian Tourist Board and Regional Development Division and 5 units: Development Unit, Marketing and Communication Unit, Finance and Administration Unit, Personnel and Training Unit and Monitoring Unit (figure 10) The structure of Enterprise Estonia challenges the project managers who have to deal with the large number of different schemes and analyse their adequacy for the clients' (enterprises, institutions) needs. In addition, Enterprise Estonia has a Management Board and a Supervisory Board. The services of Enterprise Estonia are provided throughout the divisions and units. EE appoints a

52 52 representative and consultant for each client to define the needs for public support. There are presently (June 2007) 25 programmes operated by EE, out of which 11 are aimed directly to enterprises (of which 2 are tourism specific). The support programmes for enterprises are the following. 1) Start Up Programme This is divided into two types of grants characterised by different goal orientations: Growth Grant is envisaged for start up of enterprises that plan quick development. The aim is to support the creation and development of exporting and viable new enterprises. The maximum amount of a support grant is payable on the condition that the enterprise in question estimates at least as its average annual sales revenue for the next three years. Start up Grant is envisaged for startup of small enterprises that do not necessarily need to have a large growth potential but anticipate a stable sales turnover and have an established market, thus contributing to the creation of jobs in a county. The maximum amount of the grant is ) Consulting Programme Quality consultation services are often too expensive for Estonian companies, therefore hindering them from further developing and sustaining their competitiveness. Through the Business Consulting Programme, small and medium sized companies can purchase business consultations from professional consultants at affordable rates and then apply the know how to raise their competitiveness. 3) Training Support Programme The aim of the training support is to support the in service training and retraining of entrepreneurs and the persons working in the companies for maintaining or increasing the competitiveness of employees at the labour market, developing entrepreneurship, establishing the conditions for the creation of new jobs and increasing the capability of persons in the field of research and development activities and development of technology

53 53 4) Business infrastructure development Programme Three application rounds were held as part of the support programme for the development of entrepreneurial infrastructure in applications were received in total, of which 106 were given the green light. Financial decisions totalling 7.3 million euros were made. The accepted applications concerned the improvement of enterprises physical infrastructure (building water supply, canalisation, heating systems, entrance roads, parking and loading grounds, etc.) The entrepreneurial infrastructure programme is being cofinanced through the European Union structural funds. 5) Export Planning Programme Aims at supporting the drafting of companies' long term export plans and financing their implementation. The programme enables companies to expand their export activities offering them appropriate training, consultation services and funding. The Export Planning Programme consists of two main stages: the drafting of an export plan and its implementation. A company participating in the programme compiles a long term export development strategy, which includes the marketing activities required for achieving the strategic goals. EE finances the compilation of an export plan with a maximum of towards covering the consultation costs. The execution of different marketing activities (participation at trade shows, visits to foreign markets, consultation services, promotional materials, participation in the contact events, etc.) will be supported by EE in the amount of up to The self financing rate for both stages is 50 percent of the eligible expenses. 6) Joint stands at international trade shows EE will accumulate proposals from entrepreneurs and speciality organisations that reflect their genuine interests in the following year's exhibitions. Proposals must be received no later than the 10th of January each year. Based on the proposals, EE will compile a list of genuine participants for the next year's exhibitions. After certifying the list of tradeshow exhibitions, EE will reserve the required exhibition areas. The size of the area reserved depends on: the success of the previous year's exhibition the potential of the current year's exhibition the interest in the exhibitions among entrepreneurs

54 54 the monetary support from budgetary funds the priority of the particular exhibition in relation to the country's export policy. 7) R & D financing programme Provides opportunities to launch new or improved products and services. The programme creates premises for the advancement of business competitiveness by introducing new and improved products and services to the market and implementing new technologies. The Government participates by offering financial support through the programme and sharing in the technological and marketing risks related to the projects. 8) Competence Centre Programme The general objective of Competence Centre Programme is to improve the competitiveness of enterprises through strategic cooperation between science and industry sectors in Estonia. To achieve this aim Enterprise Estonia supports the establishment of small R&D institutions the competence centres. Competence centres are small R&D institutions established and operated together by a number of companies and universities. Main characteristic of such centres is a strong focus on applied research, which is needed for the product development of the founders of these centres. The first call for Competence Centre proposals was announced in February Fourteen proposals were submitted under this call and in February 2004 Enterprise Estonia decided to start the financing negotiations with six applicants for establishment of following centres. One of the applicants, Competence Centre for Estonian Language Technologies, decided to renounce the establishment of a Competence Centre. Financing agreements for the first year of activity were concluded with the following Competence Centres: Competence Centre of Electronics, Info and Communication Technologies Competence Centre of Food and Fermentation Technologies Competence Centre of Healthy Dairy Products Estonian Nanotechnologies Competence Centre Competence Centre for Cancer Research

55 9) Innovation Awareness Centres The Innovation Awareness Programme aims to increase the awareness of innovation as an important factor of economical growth and to reinforce knowledge and know how on innovation methods and tools. Enhanced innovation awareness is instrumental for Estonian businesses in increasing their productivity, the results of which would widen their opportunities in expanding markets, strengthen products and services as well as leading to successful company management. Target groups and goals of the programme: policy makers: to develop better understanding and knowledge on innovation and how innovation influences the development of society and economy; opinion leaders and media: to develop better understanding and knowledge on innovation and to create positive attitude towards innovation; entrepreneurs, investors and top management of the enterprises: to develop better understanding and knowledge on innovation as the main factor for competitiveness as well as to develop the innovation management skills; technical staff of the enterprises: to develop creativity and initiative as well as to develop the innovation management skills; students, professors and academics: to develop creativity and initiative, to promote co operation with industrial sector and to develop the knowledge on entrepreneurship and innovation; pupil and teachers: to develop creativity and initiative as well as to create positive attitude towards science, technology, innovation and entrepreneurship; publicity: to create positive attitude towards and interest on science, technology, innovation and entrepreneurship. The following activities are supported in Innovation Awareness Programme: researches, surveys and dissemination of the results workshops, conferences, exhibitions networks publications, both printed and in the web broadcasting competitions. 55

56 56 10) Marketing and Product Development Programme for Travel Trade (tourism specific) 11) The green key programme (tourism specific) In addition EE operates internet portal Aktiva ( information gateway for entrepreneurs. Aktiva aims to help small and medium sized businesses and businesses that are just starting out. It offers business news, editorials and information about Internet based services targeted on the business sector by the state. Aktiva also offers a wide range of business instructions, an overview of business literature and future events essential to entrepreneurs; it is also possible to ask advice from public sector experts in the web environment and to have discussions with other entrepreneurs Export and Credit Guarantee Fund KredEx The Credit and Export Guarantee Fund KredEx was founded in 2001 by the Ministry of Economic Affairs and Communications with the aim to improve the financing of small enterprises in Estonia, decrease export related credit risks, enable people to build or renovate their homes and promote energy efficiency in Estonia. The mission of KredEx is to help raise the competitiveness of Estonian enterprises and the improvement of living conditions. The vision of KredEx is to offer financial solutions based on the best practices from the world. Kredex offers the following business and export support for enterprises Business Support: 1) Equity loans The equity loan is a loan product intended for successful and quickly developing companies, which have already gained some track record in their field of business and need additional capital for expanding their business but do not meet the criteria established for receiving a bank loan in the desired amount. Similarly to the company s owner, KredEx will grant the entrepreneur use of capital without demanding any collateral. Since the equity loan is not, as a rule, repayable until the lend of the loan period, the equity

57 57 loan will, in the bank s eyes, conditionally raise the company s equity, allowing the company to apply for an additional bank loan and finance its quick growth. In addition to being able to apply for otherwise unavailable financing, the company can also benefit from the fact that, unlike various venture capital funds, KredEx will not intervene in the management of the loan recipient. As a rule, the equity loan targets quickly growing small and mediumsized companies which have less than 250 employees and which have already gained some track record in their field of business, and need additional capital for expanding their business but do not meet the criteria established for receiving a bank loan in the desired amount. The loan may be used for purposes of corporate mergers and acquisitions, acquisition of a stake in the company by management board members, development of new products and other similar purposes. The equity loan may also be applied by an existing company for establishing a new company for pursuing a particular business plan. 2) Business loan guarantees Business loan guarantees are meant for companies whose value of the collateral property or self financing is not sufficient for getting a bank loan or who do not have a long history of operation. There are two kinds of business loan guarantees available Investment loan guarantee serves to cover long term investments: purchase of equipment; purchase, construction or renovation of production premises. It enables to secure the investments of newly launched companies and existing small and medium sized companies, thus facilitating rapid development. Investment loan guarantee serves to cover long term investments: purchase of equipment; purchase, construction or renovation of production premises. Working capital loan guarantee enables to secure the operations of newly launched companies as well as the existing small and medium sized companies. The loan guarantee is intended for shortterm financing of working capital: purchase of inventories; launch of large scale marketing campaigns; covering other scheduled or unscheduled current expenses. In addition to the working capital loan, KredEx also guarantees overdraft. The following companies can benefit from the mentioned guarantees: companies, the value of whose collateral is difficult to estimate or insufficient for the bank loan;

58 58 newly launched companies or companies with a short credit history; companies that expand their operations to new fields of business; companies operating in a business sector with a high risk level; companies applying from payment, prepayment, offer, realisation or warranty period guarantee from the bank, but have already pledged their property. The core principle behind the guarantee is that the primary liability of the entrepreneur lies with the loan the loan is secured by the entrepreneur s property. By providing a guarantee, KredEx assumes secondary liability. If the entrepreneur s business plan proves unsuccessful and the loan cannot be serviced, the property set as collateral to the loan will be realised in the first order. If the proceeds from the disposal of the collateral prove insufficient for covering the bank s claims, KredEx will disburse the guarantee to the bank. 3) Guarantee for bank guarantees 4) Leasing guarantees Export support: 1) Short term credit risk guarantees The guarantee can be used if the payment deadline given to the buyer is 3 6 months, i.e. the guarantee is usable upon exporting consumer goods, raw materials and other short term goods. EU guarantee suits for exporters who export their products or services to the OECD, including EU countries and whose annual export turnover is less than 2 million euros. Turnover guarantee suits for exporters who export their products or services outside the OECD, including EU countries. 2) Long term credit risk guarantees Long term export guarantees can be used by exporters and financial institutions and are meant to eliminate the risks in connection with exports of capital and quasi capital goods. Supplier credit guarantee. The Estonian exporter grants a credit to the buyer. KredEx provides the exporter with a guarantee, which covers the risk of default on repayment of the credit.

59 59 Buyer credit guarantee. A bank grants a credit to the buyer or the buyer's bank. The credit is based upon a loan agreement. KredEx provides the lending bank with a guarantee, which covers the risk of default on repayment of the credit Leasing guarantee. A financial institution grants a credit to the buyer that is based upon a leasing agreement. KredEx provides the financial institution with a guarantee, which covers the risk of default on repayment of the credit. 3) Preshipment risk guarantees Upon manufacturing specific goods to a specific buyer, or goods with a lengthy production period, the entrepreneur always faces the risk of the buyer withdrawing from the agreement before the delivery of the goods due to the buyer s insolvency or political events. Preshipment risk guarantee covers the expenses of the exporter upon fulfilment of the agreement concluded with a foreign buyer, if the exporter is forced to suspend production of the ordered goods. 4) Investment guarantee The guarantee can cover new equity investments to the project company as well as the acquisitions of already existing foreign companies. In addition to the initial investment, the guarantee can also cover future yield from the investment. Also medium and long term shareholder loans, bank loans as well as loan guarantees can be covered by the investment guarantee. Table 13 Kredex business and export support Cumulative since 2001 Business support Number of guarantee contracts signed Number of jobs created due to Kredex guarantee support Credits received by companies due to Kredex guarantees, MEUR 29,7 45,4 159,7 Guarantee amount issued by Kredex, MEUR 16,3 21,7 83,1 Amount of Kredex guarantee obligation, MEUR 28,1 85 Export guarantees Number of export guarantees issued Export turnover guaranteed by Kredex, MEUR 50 37,6 147 Exports guaranteed by Kredex / total Estonian exports, % 0,8 0,5 Credit amount guaranteed by Kredex for buyers abroad, MEUR 22,5 11,9

60 Logistics / ICT projects. Cooperation programs, partnerships Below Interreg projects relevant to logistics and involving Estonian partners are listed. Baltic Sea Information Motorways (BaSIM). Shipment of goods in the BSR increases and will grow in the future even faster. The concept of Baltic Sea Motorways along transnational transport corridors will be based on strong cooperation between players in the transportation field as well as on industry side. Improvement of productivity and competitiveness needs the development both physical and information infrastructure with special focus on the implication towards ICT. Estonian project partner is Port of Tallinn. Baltic Tangent (BT). Focuses on how road, railroad and maritime traffic links to the main transport corridors (TEN) should be improved, to enhance the prospects for the regions and municipalities concerned to benefit from the economic growth potential of the South Baltic Sea area. The aim of the project is to produce a comprehensive strategy, a partnership and an action plan for implementation of this improved transport infrastructure network linked to the main TEN north south transport routes in Scandinavia and the Baltic States. The BT project outcome will add new perspectives to transnational cooperation for the development of the southeast Baltic Sea Region and its relation to the Russian and Far East markets. The project is expected to generate knowledge of general interest about ways and means of developing and benefiting from an improved secondary transport infrastructure network linked to the TEN main routes at local, regional, interregional and transnational level of government in this part of BSR. In particular regarding spatial planning, logistical concepts and other conditions for economic and labour market development. Estonian project partners are Euregio PSKOV LIVONIA, Tallinn College of Engineering, Valga County Development Agency, Valga Town Administration, Integrating Logistics Centre Networks in the Baltic Sea Region (InLoC). Logistics centre development will continue to have a major impact on improving transport chains and promoting sustainable transport modes in the Baltic Sea region. Integration of logistics centre networks is needed because the full potential of them in regional development is not yet utilised in the area. The development of new

61 61 and existing logistics centres needs to be supported by integrating various sectors having importance for the development of the operational environment of logistics centres. InLoC aims at improving the competitiveness and attractiveness of the Baltic Sea region in relation to other European regions through transnational co operation on spatial planning and improvement of transport and communication links. InLoC stimulates the business sector of the area by creating better conditions for logistics operations and will result in innovative cooperation networks of all actors in transport chains as well as networks of the logistics centre related actors. Estonian project partner are Tallinn University of Technology and Valga County Government Safe and Reliable Transport Chains of Dangerous Goods in the Baltic Sea Region (DaGoB) Over 200,000,000 tons of Dangerous Goods (DG) per year moves in BSR (plus over 100M tons in NW Russia) mostly through densely populated areas, imposing real health and safety risks to people and environment. Despite formal implementation, DG authorities operational practices vary markedly between and even within countries, causing safety and other problems. No BSR wide analysis on DG cargo flows nor on DG related accidents exists, nor are there publicly available comparative studies on bordercrossing transport chains of DG. Units dealing with DG in BSR Ministries responsible for Transport usually have 2 3 staff preparing national DG legislation. Maritime, Rail and Road Administrations have a similar number of DG specialists in central administration, and a handful of field inspectors in main ports, rail and road districts. Other DG related authorities comprise e.g. port authorities, coast guard, customs, traffic police and rescue services. Their exposure to international cooperation is limited, and best practice is seldom shared across borders. There is imminent need for better information exchange between DG authorities, and between authorities and the private sector. DaGoB: analyses DG flows and DG related incidents/accidents and studies bottlenecks in border crossing DG supply chains involving shippers and logistics operators maps the roles of DG authorities in the BSR, the extent of cooperation between them and organises several joint exercises prepares a BSR wide ToolKit for national and local authorities. The Toolkit provides peer reviewed procedures to improve safety and security of DG transport without compromising the competitiveness of industries relying on DG, and disseminates

62 62 experiences of relevant IT applications. It also assesses the anticipated impact of EU's changing chemical legislation (e.g. REACH package) on DG Transport in the BSR. Estonian project partners are Estonian Maritime Administration, Estonian Railways Inspectorate and Port of Tallinn. RAIL BALTICA Transnational Integration through Coordinated Infrastructure and Regional Development (Rail Baltica) The Trans European railway Rail Baltica, linking Helsinki Tallinn Riga Kaunas Warsaw and continuing on to Berlin, is to be developed within the territories of new EU Member States. Objective( s) of the project has two main goals: (a) the definition of the most favourable route for the Rail Baltica railway link in terms of spatial planning and regional development, and (b) the raising of the awareness of the relevant actors (national and regional administrations and decision makers, industry and the public) in the BSR) on the benefits of attractive railway connections. Estonian project partners are Ministry of Economic Affairs and Communication and Ministry of Interior. Intermodality and Interoperability in the Baltic Sea Region (InterBaltic). The main objective of this pan Baltic project is to develop a common transport strategy for the Baltic Sea Region and thus to give private and public decision makers on regional, national and international level recommendations on building up efficient intermodal transport systems able to cope with the future cargo flows. The project will mainly build these strategies on findings from other projects and transport initiatives by working in close cooperation with other transport related projects, initiatives and organisations in the Baltic Sea region. Estonian project partner is Pärnu County Government.

63 63 5 LOGISTICS IN THE REGION 5.1 Transport, connections and infrastructure The Estonian transport system comprises rail, road, maritime, river, and air transport as well as the municipal electrified transport and carriage by pipeline. The infrastructure of national transport has generally been well established; due to high competition, the local logistics and transport companies have reached the western standards in terms of service and quality and have great transport potential. The operation services are mostly provided by private enterprises. Maritime transport, inter urban coach traffic, air traffic, and partially the rail transport are being provided by private enterprises. The major national transport enterprises include AS Tallinna Lennujaam (Tallinn Airport Ltd), AS Tallinna Sadam (Port of Tallinn Ltd), Eesti Raudtee (Estonian Railways) and AS Elektriraudtee (Electrical Railways), which is servicing the vicinity of the capital Tallinn. The export and import of goods to the west, north, and south are mainly organised by exploiting the opportunities of maritime and road transport, to a marginal extent also by air transport. As a rule, the goods are delivered to the harbours of Muuga, Tallinn, Paldiski, Sillamäe, Kunda or Pärnu, or taken by road transport to other European countries via Latvia mostly using the Tallinn Ikla road, or delivered to Russia by the Tallinn Luhamaa and Tallinn Narva roads Roads and road transport Integration in the BSR. According to Estonian Statistics Office, at the end of 2006 Estonia had a public road network of km, of which 57% was paved. Estonia does not have any motorways in terms of European context. In addition there were km of municipal roads, km of private roads km of forest roads and km of roads not classified in registry. The total length of urban streets were km, 87% of which were

64 64 surfaced. The density of the registered road network is km per 1,000 km 2 of which public road density 380 km / 1,000 km 2. This represents an increase of 11% since The highway system is under severe strain since, over the same period, the number of passenger cars has increased by 112%. Table 14 shows the number of vehicles in Estonia Figure 11 Estonian main (in blue) and supporting roads (in brown). The condition of covering is in places unsatisfying due to underfinancing during last 10 years. The main attention has focused on improving the quality of main road aortas. The following routes have included into list of Trans European transport networks (TEN T, figure 12): Tallinn Narva, E20 Tallinn Pärnu Ikla, E67 Tallinn Tartu Võru Luhamaa, E263 Jõhvi Tartu Valga Tallinn Keila Paldiski Tallinn Circuit

65 65 Figure 12 TEN T road network in Estonia These are main roads ensuring Estonian international road transport connections but simultaneously important from the point of view of local transport. Development of Jõhvi Tartu Valga road will ensure better availability of South Eastern Estonia for traffic flows from Narva towards Latvia. Tallinn Keila Paldiski road is an important

66 66 connection with harbours situated in Paldiski (South Port and North Port). EU supports surveys for establishing land connection between mainland and Saaremaa. Such bridge or tunnel will create better development conditions for both Saaremaa and Muhumaa economies. Table 14 Vehicles in Estonia (thousands) Source: Estonian Statistics Office Passenger cars 400, ,2 493,8 554 Lorries 80,2 83,4 85,7 86,2 92,9 Buses 5,3 5,4 5,3 5,2 5,4 Motorcycles 7,3 8,1 9,1 10,2 12,6 Trailers and semitrailers 37,4 39,9 42,7 46,3 52,7 Source: Estonian Statistics Office Table 15 shows Estonian road transport figures. The share of international transports in total one has decreased up to 2004 due to development of domestic distribution services. Table 15 Estonian road transport figures Total freight mill. tons 14,1 17,8 27,1 28,1 27,3 30,3 Change over previous year 6,8% 26,2% 52,2% 3,7% 2,8% 11,0% International freight mill. tons 3,4 3,2 4,0 4,1 5,4 6,5 Change over previous year 25,9% 5,9% 25,0% 2,5% 31,7% 20,4% International % freight % of total 24,1% 18,0% 14,8% 14,6% 19,8% 21,5% Total freight turnover, mill. tkm Change over previous year 18,9% 6,2% 46,5% 6,4% 11,8% 15,9% Internatoional freight turnove, mill tkm Change over previous year 28,3% 12,2% 36,4% 2,8% 21,7% 16,4% International % of total road turnover 88,3% 82,6% 76,9% 70,3% 76,5% 76,8% Source. Estonian statistics office By Estonian Statistics Office s statistics in 2006 the average distance in domestic journeys was 67 km and international journeys 864 km. Most of the goods in international connections were transported to Russia (24%), Finland (17%), Latvia (17%) and Germany (9%). 24% of goods were transported to Estonia from Latvia, 22% from Finland, 17% from Russia and 7% from Sweden. These figures also illustrate the integration of road transport into BSR system. There are numerous

67 67 freight forwarding companies (biggest are local subsidiaries of DHL, DSG and Schenker) having regular road groupage transport connections with European / BSR economic centres Railways and rail transport The railway network comprises 1268 km of track, of which 968 km are public railways. The length of electrified railways is 131 km 13.5% of public railways. The length of double track railways is km. Currently there are 73 railway stations in Estonia, 67 open for passenger transport. The density of the public railway network is 21.4 km/1,000 km 2. The width between the rails is 1,520 mm which is the same as in Russia, Finland and Latvia but different to Western Europe. Estonia s railway system is directly connected to the Russian railway systems and to the systems of other CIS countries. Figure 13 Estonian railways network Figure 13 shows Estonian railway network with stations. The railway network is divided between Estonian Railways (in black) and South West Railways (in blue). The passenger rail service, Edelaraudtee (South West Railways) was privatised at the end of 2000 and a freight carrier, Eesti Raudtee (Estonian Railways) in April The privatisation of Estonian Railways, which included the track infrastructure, proved unworkable

68 68 for both the investors and the government, and the company was renationalised at the start of The following Estonian railways are included into TEN T list (figure 14): Tallinn Tapa Narva Tapa Tartu Koidula Tartu Valga Valga Võru Koidula Tallinn Paldiski Planned Tallinn detour connecting Tallinn Paldiski line with Tallinn Tapa line. As Estonia s border with Russia is also the EU border with Russia, EU is giving attention to the building up of border crossing facilities. Currently there is no border station for trains arriving from the Petseri direction. So the customs control has to be made in Tartu station only. The building of a modern border railway station has been foreseen in Koidula. Also there are plans to the connect Petseri Võru Valga line with the Petseri Tartu line in Estonian territory in order to direct trains from one line to another without entering into Russian territory. Currently Estonia, Latvia and Lithuania have no direct rail connection with Central Europe as the railways gauges are different. Usually in Shestokai (LIT) border station goods have to be reloaded onto railcars with other gauge or railcar undercarriage changed. These operations consume additional time and money. For eliminating this obstacle, a Western Europe gauge railway building is planned from Warsaw via Kaunas and Riga to Tallinn (Rail Baltica). According to the data of Estonian Railway Inspectorate, there were 265 diesel locomotives, 56 rolling stock units of electrical trains, 96 rolling stock units of diesel trains, 234 passenger wagons and freight wagons registered in the Railway Traffic register at the end of 2006.

69 69 Figure 14 TEN T railways network in Estonia

70 70 Table 16 Estonian rail transport figures (public transport only) Total freight mill. tons 39,0 42,6 42,6 43,3 44,9 45,1 Change over previous year 0,3% 9,2% 0,0% 1,6% 3,7% 0,4% International freight mill. tons 33,4 38,6 38,7 40,2 40,9 41,6 Change over previous year 3,4% 15,6% 0,3% 3,9% 1,7% 1,7% International freight % of total 85,6% 90,6% 90,8% 92,8% 91,1% 92,2% Transit, mill. tons 35,6 34,6 37,6 36,3 36,5 Change over previous year 2,8% 8,7% 3,5% 0,6% Transit % of total freight 83,6% 81,2% 86,8% 80,8% 80,9% Total freight turnover, mill. tkm Change over previous year 5,6% 13,5% 0,5% 3,1% 7,1% 2,0% Internatoional freight turnove, mill tkm Change over previous year 6,1% 14,9% 0,4% 3,3% 6,9% 1,5% International % of total road turnover 95,2% 96,4% 96,5% 96,7% 96,5% 96,9% Source. Estonian statistics office Table 16 shows (public) rail freight transport tonnage and turnover figures. International transport (more exactly transit) is dominating in Estonian rail freight operations, giving 92% (transit 80.9%) of goods tonnage carried and 97% of freight turnover in Russian transit goods transports consisted of 88% of international rail freight tonnage and 75% of international freight turnover in Table 17 shows the nomenclature of railway transit goods. Crude oil and oil products are prevailing. However their share has decreased since 2004, from 84% in 2004 to 68% in Instead of it, the share of coal transits is strongly increased: from 3.4% in 2002 to 20.8% in The increasing share of coal in rail transit is connected to completion of Port of Tallinn coal terminal in Also the strong increase of sea containers transit is worth mentioning. Since 2003, when this kind of statistics became available, the number of transit TEU s carried by rail has grown around 70% yearly. The transport of sea containers on railway (together with frozen goods transports) is one of the development priorities of Estonian Railways (company). The company is obtaining 730 new container railcars for this in 2007.

71 71 Table 17 Estonian rail transit goods nomenclature Cereals 1,6 0,9 0 0,1 0,6 Foodstuffs and animal fodder 0,2 0,2 0,2 0,2 0,2 Coal 1,2 1,9 2,2 4,1 7,6 Crude oil 7 7,9 9,4 2,6 2,2 Oil products 21,9 20,7 22,3 25,8 22,7 Non ferrous ore and waste 0,2 0,2 0,2 0,3 0,2 Metal products 0,1 0,1 0,2 0,2 0,2 Natural and chemical fertilizers 2,6 2 2,4 2,3 2 Chemicals other than coal chemicals 0,3 0,2 0,3 0,6 0,8 and tar Other 0,4 0,5 0,4 0,1 0 Total 35,5 34,6 37,6 36,3 36,5 Oil+oil products % of total transits 81,4% 82,7% 84,3% 78,2% 68,2% Coal % of total transits 3,4% 5,5% 5,9% 11,3% 20,8% Transit containers, TEU Full Empty Container transit change (full+empty) over previous year 71,5% 71,7% 68,7% Source: Estonian Staistics Office Airports and Air transport Figure 15 shows all airfields in Estonia. There are numerous abandoned airfields having been used by the Soviet air forces up to The number of certified airfields is 12 airfields and 1 helicopter field. Tallinn, Tartu, Kuressaare, Kärdla, Pärnu airports and City Hall helicopter field in Tallinn are opened for international air traffic. Tapa, Viljandi, Narva, Rapla and Ridali airfields are used mainly by amateur pilots. The airfields in Kihnu and Ruhnu islands are important in ensuring the traffic connection in periods of difficulties with sea transport connections. By far the most important local airport is Tallinn Airport. The length of the runway of Tallinn Airport after reconstruction in 1995 is 3,070 m, and the width is 45 m. It is suitable for planes with the landing weight of up to 250 tons. Tallinn Airport is able to serve all types of planes used in civil aviation. Table 18 shows Tallinn Airport figures in Table 19 shows Tallinn Airport flight connections

72 72 Figure 15 Estonian airports (in black military, in red abandoned, blue club, green public, yellow private; Table 18 Tallinn Airport indicators Air movements Change over previous year 1,2% 11,0% 3,6% 11,3% 19,4% 1,1% Served destinations Change over previous year 7,9% 3,1% 0,7% 7,0% 18,7% 7,6% Regular lines Change over previous year 6,7% 12,5% 0,0% 28,6% 33,3% 8,3% Passengers, thousands 573,5 605,7 715,9 997, , ,8 Change over previous year 2,5% 5,6% 18,2% 39,3% 40,5% 10,0% Freight (including mail), tonnes ,1% 5,5% 18,4% 3,1% 89,7% 4,3% Source: Estonian Statistics Office There were 30 aircraft, 69 small aircraft, and 6 helicopters in Estonian Civil Aircraft Registry in 2006.

73 73 Table 19 Tallinn Airport flight connections 2006 Flights at week Flights at week Helsinki 48 Berlin 7 Stockholm 29 Amsterdam 7 Copenhagen 19 Warsaw 7 Vilnius 16 Brussels 7 Riga 16 Moscow 3 London 16 Barcelona 3 Oslo 13 Milan 3 Frankfurt 11 Kiev 3 Prague 11 Dublin 3 Source: Tallinn Airport Winter 2006/2007 timetable Air Transport has only a marginal importance for Estonia s transport system. Table 20 shows the freight tonnage and turnover carried by Estonian air transport companies. Table 20 Air transport freight tonnage and turnover provided by Estonian air transport companies Total freigh,t thousands tons 7,7 7,1 4,4 4,7 5,8 5,2 Change over previous year 35,1% 7,8% 38,0% 6,8% 23,4% 10,3% International freight thousands tons 6,9 6,8 4,3 4,5 5,4 5,0 Change over previous year 27,8% 1,4% 36,8% 4,7% 20,0% 7,4% International % freight % of total 94,7% 89,6% 95,8% 97,7% 95,7% 93,1% Total freight turnover, thousands tkm 3,5 5,4 4,5 3,3 3,7 2,8 Change over previous year 35,2% 54,3% 16,7% 26,7% 12,1% 24,3% Source. Estonian Statistics Office Waterways Ports and Sea transport Estonia has 64 operating ports, of which 38 handle commercial shipping. 36 of these are sea ports. Estonia has 320 km of navigable inland waterways with navigational marking. The traffic in inland waterways is primarily seasonal and involves mostly pleasure craft activities. As Estonia is situated on the coast of the Baltic Sea in the middle of the transit routes between the east and the west, the favourable geographic situation has ensured the transit sector of Estonia advantageous preconditions for operating, and success in the international market. Transit is an important trade flow for the Estonian ports, comprising 78% of the general transport of goods.

74 74 Of these 36 ports, the infrastructure of 5 (4 biggest harbours except for Saaremaa harbour) is administered by the state owned Port of Tallinn Authority. These are (figure 16): Muuga Harbour main oil, dry bulk and container port in Estonia, max depth 18 m, ice free. There are 6 liquid bulk terminals, 2 multipurpose terminals (one of them with a reefer complex), container terminal and ro ro terminal, dry bulk terminal, grain terminal, steel terminal and coal terminal Old City Harbour main passenger port in Estonia, max depth 10.7 m. There are 4 passenger terminals (incl. ro ro facilities) Paldiski South Harbour scrap metal, timber and ro ro port, max depth 13 m. There are passenger terminal, ro ro & general cargo terminal, timber terminal, metal terminal, biodiesel terminal (under construction) and 2 car terminals Paljassaare Harbour timber, oil, coal max depth 9 m. There are oil terminal, cooking oil terminal, timber terminal, coal terminal, general cargo terminals (incl. reefer terminal) and dry bulk terminal Saaremaa Harbour passenger port Figure 16 Port of Tallinn harbours (Source:

75 75 Figure 17 TEN T ports in the Baltic Up to 2002 the Tallinn ports had the highest cargo turnover in the region, but have since been overtaken by St. Petersburg and Primorsk. The development of these Russian ports poses a significant threat to

76 76 all the Baltic Sea ports which have relied on Russian oil transit for much of their cargo business. Other biggest Estonian seaports are Kunda (timber, cement), Sillamäe (timber, metals, and oil products), Pärnu (timber, peat) and Paldiski Põhjasadam (timber, vehicles, and containers) All ports other than Port of Tallinn harbours are private ones. The following 10 Estonian ports are included into TEN T network (figure 17): Muuga Old City Harbour Paljasaare Paldiski South Harbour Kunda Pärnu Rohulüla Heltermaa Virtsu Kuivastu The number of Estonian ports in TEN T list is quite numerous because of attention to local harbours ensuring mainland connection with islands (Rohuküla, Heltermaa, Kuivastu, Virtsu). Figure 18, 19 and table 21 characterise the size of good flows moving thorough Estonian ports. The amount of goods processed by Estonian ports has increased 25% in Port of Tallinn has achieved a 41% increase. Estonian ports are servicing mainly transit flows. The share of Estonia s own export + import flows has decreased up to latest years, being 32% in 2000 and 22% in 2005 and The main goods flow through Estonian ports is outgoing transit mainly from Russia, which share was 65% in 2000 and 74% in 2006 (being 76% in 2005).

77 Mill. tons Export goods Import goods Transit outgoing Transit ingoing Figure 18 Transport of goods through Estonian Ports Table 21 Transports of goods through Estonia ports and Port of Tallinn harbours, mill. tons Total Estonian ports 39,8 41, ,7 46,3 47,1 49,8 Export goods 9,4 9,2 9,1 9,9 7,6 6,8 6,6 Import goods 3,3 3,5 4,3 4,4 3,9 3,6 4,4 Transit outgoing 26 28,2 33, ,3 35,9 37 Transit incoming 1,1 0,4 0,3 0,3 0,3 0,8 1,7 Port of Tallinn Total 29,3 32,3 37,9 37,6 37,4 39,5 41,3 Export goods 4,4 4,4 4,3 4,8 3,4 3 2,9 Import goods 2,9 3,2 3, ,9 3,4 Transit outgoing 20,8 24,1 29,3 28,3 30,5 35,7 36 Transit incoming 1,1 0,4 0,3 0,3 0,3 0,8 1,7 Port of Tallinn share in: Total 73,6% 78,2% 80,6% 80,5% 80,8% 83,9% 82,9% Export goods 46,8% 47,8% 47,3% 48,5% 44,7% 44,1% 43,9% Import goods 87,9% 91,4% 83,7% 90,9% 76,9% 80,6% 77,3% Transit outgoing 80,0% 85,5% 88,0% 88,4% 88,9% 99,4% 97,3% Transit incoming 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% Source: Estonia Statistics Office and Port of Tallinn Prevailingly goods flows are moving via Port of Tallinn harbours (74% of total flows in 2000 and 83% in 2006) especially transit goods

78 78 where Port of Tallinn harbours served 97% of outgoing transits and 100% incoming transits in Other local harbours are operating mainly as export ports, although for example Sillamäe and North Paldiski ports have made serious attempts to develop transit goods processing in last years. 100% 2,8% 1,0% 0,6% 0,6% 0,6% 1,7% 3,4% 90% 80% 70% 60% 65,3% 68,3% 70,9% 68,5% 74,1% 76,2% 74,3% 50% 40% 30% 20% 8,3% 8,5% 9,1% 9,4% 8,4% 7,6% 8,8% 10% 23,6% 22,3% 19,4% 21,2% 16,4% 14,4% 13,3% 0% Export goods Import goods Outgoing transit Incoming transit Figure 19 Distribution of Estonian ports tonnage turnover by export, import and transit, % (Source: Estonian Statistics Office) Table 22 shows the nomenclature of goods moving via Estonian ports by tonnage. Oil and oil products flows are prevailing, despite their share has decreased since (64% of total goods turnover in 2004 and 56% in 2006). This is mainly outgoing transit from Russia delivered from North West Russia by trains to Port of Tallinn harbours. Oil and oil products share in transit goods processed by Estonian ports was in its maximal level in 2003 (85% of total transit flows) having decreased to 71% in 2006 (table 23). Estonian ports anticipate further decrease of oil & oil products in their turnover as Russia is attempting to move their oil exports into their own Baltic Sea ports (Primorsk). In last years the share of coal has been strongly increased in Estonian ports turnover. Coal shipments are processed by Port of Tallinn Muuga port coal terminal (0.4 mill. tons in 2000, 7.5 mill. tons in 2006). This is ongoing transit goods, achieving 19% share in transit goods turnover in 2006).

79 79 Table 22 Transport of goods through Estonian ports by group of goods (million tons) NB! Only goods flows above tonnes / year have accounted Cereals 1 0,1 1,6 1 0,1 0,2 0,4 Raw wood 4 3,3 3,1 3,3 3,1 2,6 2,3 Timber 0,6 0,6 0,7 0,6 0,5 0,3 0,3 Foodstuffs and animal fodder 0,3 0,2 0,2 0,2 0,2 0,1 0,2 Coal 0,4 1 1,2 1,8 2,3 4,1 7,5 Coke 0,2 0,2 0,3 0,7 0,6 0,3 0,4 Crude oil 3,5 4, ,6 0,3 Oil products 19,5 20,2 21,4 19,8 22,6 26,4 27,4 Scrap iron 0,6 0,4 0,3 0,4 0,6 0,8 1 Metal products 1,1 0,6 0,3 0,6 1 0,6 0,6 Cement, lime, manufactured building materials 0,5 0,5 0,1 0,2 0,1 0,1 0,1 Crude and manufactured minerals 0,6 1 1,4 1 1,1 1,2 1,5 Natural and chemical fertilizers 1,8 2,3 2,8 2,2 2,6 2,8 2,5 Chemicals other than coal chemicals and tar ,1 0,3 0,3 Transport equipment, machinery, apparatus, engines and parts thereof 0,4 0,5 0,6 0,5 0 0,1 0,1 Container goods 0,8 0,8 1 1,1 1 1,1 1,3 Goods on trailers 3,6 3,9 4,3 4,8 2,9 3,2 3,2 Other 0,9 0,8 0,7 0,5 0,5 0,4 0,3 Total 39,8 41, ,7 46,3 47,2 49,7 Crude oil & oil products of total 57,8% 60,8% 60,4% 59,5% 63,9% 61,4% 55,7% Coal & coke of total 1,5% 2,9% 3,2% 5,4% 6,3% 9,3% 15,9% Raw wood & timber of total 11,6% 9,4% 8,1% 8,4% 7,8% 6,1% 5,2% Goods in containers and on trailers of total 11,3% 11,4% 10,6% 11,3% 7,3% 7,6% 7,0% Source: Estonia Statistics Office Table 23 Transit goods flows through Estonian ports. Only goods flows above tonnes / year have accounted Cereals 0,8 0,1 1,5 1 0,1 0,1 0,3 Foodstuffs and animal fodder 0,2 0,1 0,1 0,1 0,1 0,1 0,1 Coal 0,4 1 1,2 1,8 2,3 4,1 7,5 Crude oil 3,5 4, ,6 0,3 Oil products 19, ,2 19,5 22,3 26,3 27,2 Scrap iron 0,2 0, ,3 0,4 0,6 Metal products 1,1 0,6 0,2 0,1 0,2 0,3 0,3 Natural and chemical fertilizers 1,2 1,7 2,3 1,7 2,2 2,3 2 Chemicals other than coal chemicals and ,1 0,1 Container goods 0,1 0,1 0,1 0,1 0,1 0,3 0,4 Other 0, ,1 0 Total 27,1 28,6 33,6 32,3 34,6 36,7 38,8 Crude oil & oil products of total, % 84,1% 87,1% 83,9% 85,1% 84,7% 78,7% 70,9% Coal of total,% 1,5% 3,5% 3,6% 5,6% 6,6% 11,2% 19,3% Goods in containers of total, % 0,4% 0,3% 0,3% 0,3% 0,3% 0,8% 1,0% Source: Estonian Statistics Office Raw wood and timber share of total goods turnover has decreased (12% share in 2000 and 5% in 2006). This is the biggest Estonia s own export goods group in Estonian ports turnover. The share of natural

80 80 and chemical fertilizers have had stable 5 6% share in total and transit goods turnover. Concerning the transit goods flows directions, oil product, metal products, fertilizers, coal and cereals are moving mainly out (the outbound handling of cereals exceeds inbound one since 2002). Inbound movement includes foodstuffs. Containers and scrap metal are moving in both directions ,3 Thousands TEU s / lorries & trailers ,8 172,5 76,7 78,1 87,9 192,1 99,6 201,2 113,1 227,7 127, , Containers Lorries & trailers Figure 20 Numbers of containers and lorries & trailers moving through Port of Tallinn, thousands units (Source: Port of Tallinn, Estonian Statistics Office). As the Russian oil transit through Estonia is anticipated to decrease, ports and their operators are seeking additional transit partners (China, Ukraine) and goods (development of container transit via Trans Siberian Railway; cars transit in ,000 new cars were delivered to Russia via Estonia; acting as distribution centre for China's goods for Europe, etc.). Figure 20 shows the container and lorries & trailers flows through Port of Tallinn harbours, which are almost totally dominating in this business among other Estonian ports. During container flows have doubled. Majority were export / import containers, share of transit containers is around 20%.

81 81 Table 24 Port of Tallinn container and ro ro lines connections Operator Route Arrival CONTAINER LINES Teco Line Germany Muuga Bremenhaven Hamburg Tue Muuga Teco Line Finbest Muuga Helsinki Antwerpen Wed Rotterdam Helsinki MuugaWed Teco Line Finbest Muuga Aarhus Antwerpen Sat Felikstowe Rotterdam Helsinki Muuga Unifeeder Container Muuga Bremenhaven Hamburg Wed, Sat Service Helsinki Muuga MSC Muuga Antwerpen Riia Helsinki Thu Kotka Muuga Team Lines Muuga Bremenhaven Hamburg Tue, Fri Muuga RO RO LINES Eckerö Line Old City Harbour Helsinki Old City Every day Harbour Old City Harbour Helsinki Old City Harbour Tallink Mon, Tue, Wed, Thu, Fri, Sat Tallink Paldiski Kappelskär Paldiski Every day Baltic Scandinavian Lines Mann Lines Paldiski Kappelskär Paldiski Every day Transfennica Scanrapid Eesti Scanrapid Eesti Source: Port of Tallinn Paldiski Turku Bremenhaven Mon Harwich Cuxhaven Paldiski Mann Lines Vlissingen Paldiski Haraholmen Mon Transfennica Paldiski Hanko Paldiski Tue, Thu, Fri Paldiski Lübeck Antwerpen Tilbury Paldiski Paldiski Hanko Uusikaupunki Emden Grimsby Zeebrugge Malmö Paldiski Paldiski St.Peterburg UK Zeebrugge Bremenhaven Malmö Hanko Paldiski Tue, Thu, Fri, Sun Fri Wed Number of lorries & trailers served has increased 57%. All Estonian (also the majority of Latvian and Lithuanian) road transport connections with Scandinavia are going via Port of Tallinn harbours (lorries, road trains, trailers with or without tractors on ferry). Table 24 shows Port of Tallinn harbours regular container and ro ro lines connections with Baltic and North Sea ports in 2006.

82 82 Goods to and from Estonian ports are mainly transported by foreign sea vessels. Estonia s own cargo vessel fleet is small (table 25). Table 26 shows sea freight tonnage and turnover provided by local sea transport companies Table 25 Seagoing vessels registered in the Estonian Ship register (ships with gross tonnage 100 and more) Total, of which: Passenger ships Merchant ships Fishing vessels Technical and ancillary vessels Source: Estonian Statistics Office Table 26 Sea transport in Estonia by tonnage and turnover Total freight mill. tons 1,5 1,6 1,3 1,4 0,8 1,0 Change over previous year 25,0% 6,7% 18,8% 7,7% 42,9% 25,0% Total freight turnover, mill. tkm Change over previous year 31,6% 33,5% 17,1% 18,7% 36,8% 6,8% Source. Estonian statistics office 5.2 Transport sector administration and industry associations Transport sector administration In Estonia transport sector is governed by Ministry of Economic Affairs and Communications (MEAC), which is result of consolidation of two former ministries, Ministry of Economic Affairs and Ministry of Roads and Communications in MEAC elaborates and implements the state's economic policy and economic development plans in the following fields: industry, trade, energy, housing, building, transport (including transport infrastructure, carriage, transit, logistics and public transport), traffic management (including traffic on railways, highways, streets, waterways and airways), increasing road safety and reducing environmental

83 83 hazardousness of vehicles; informatics, telecommunications, postal service and tourism; co ordinating the development of state information systems; research and development and innovation, metrology, standardisation, certification, accreditation, licensing, registers, industrial property protection, competition surveillance, consumer protection, export promotion and trade safeguards; measures regional development and investment, related administration of minimum stocks of liquid fuel and drafting the respective legislation bills. 5 According to the structure of MEAC (figure 21) transport sector is under responsibility of two deputy secretaries general. Deputy Secretary General of Maintenance of Transport and Transits is responsible for transport maintenance. There are two departments: Aviation and Maritime Department and Road and Railways Department (subdivided into Transportation and Traffic Division, Road Division and Railways Division) dealing with transport maintenance problems. Deputy Secretary General of Economic Development is responsible for transport development (together with economic policy, entrepreneurship, technology and innovation developments). There is Transport Development Division which is subdivision of Economic Development Department, dealing transport development problems. There are following transport related organisations in jurisdiction of the Ministry of Economic Affairs and Communications. Estonian Civil Aviation Administration (ECAA) is exercising civil aviation state inspection and supervising over the implementation of national laws and regulations. Main function of ECAA, based on intellectual and material resources, is to ensure aviation safety and execute aviation policy at the national level and in co operation with other states and international aviation organisations at international level. 5

84 84 Figure 21 Organisational structure of Estonian Ministry of Economic Affairs and Communications Estonian Road Administration (ERA) is a government agency, which operates within the administrative area of the MEAC, has a

85 85 directing function, exercises state supervision and applies enforcement powers of the state on the basis and to the extent prescribed by law. The main functions of the Estonian Road Administration are: organising road management and creating conditions for safe traffic on the roads in the state ownership; exercising state supervision over the compliance with the requirements established by legislation regulating the ERA s area of activity and, where necessary, applying enforcement powers of the state; participating in the development of the legislation regulating the ERA s area of activity and making recommendations for amending and supplementing legislation, including improving Estonian terminology; participating in the development of policies, strategies, and development plans in the ERA s area of activity; preparing and implementing projects in the ERA s area of activity, including participating in the preparation and implementation of international projects. Estonian Maritime Administration (EMA) is organisation, which principal aims are to ensure safe navigation in Estonian territorial and inland waters, perform Flag State Implementation and Port State Control activities. The EMA also issues certificates of competency and endorsements for seafarers, maintains the Small Craft Register, investigates marine casualties, carries out the installation and maintenance of aids to navigation, performs hydrographic surveys, compiles both electronic and paper navigational charts and publishes information publications concerning safe navigation. Additionally, the EMA also monitors vessel traffic in Estonian waters through the radar and AIS network and arranges icebreaker service in ice conditions. The fleet of the EMA consists of an ice breaker, buoy tender ships and hydrographic survey ships. Estonian Railway Inspectorate s objective is to perform national surveillance in the scope stipulated by the law and apply national enforcement in the railway field on the basis and in the scope stipulated in the law. The Inspection also carries the functions of the implementation agency of the European Union funds and performs, in the scope stipulated by the law, as the distribution organ of the railway infrastructure capacity.

86 86 Estonian Motor Vehicle Registration Centre tasks are: the registration of motor vehicles and their trailers, maintaining the register and archives; giving the right to drive and issuing driving licences, maintaining the register and archives; methodical guiding and monitoring the level of drivers training; monitoring and supervising the execution of motor vehicles and their trailers roadworthiness tests; confirming the type compliance with the national technical requirements for vehicles and issuing the relevant type codes; monitoring and supervising the technical testing authorities executing the technical expertise of the vehicles, their parts and equipment Objectives of transport development MEAC has worked out and approved Transport Development Plan for , which is the strategic basis for development of Estonian transport sector during next years. The Transport Development Plan provides for the lines of action to be taken and principles to be followed to address specific issues related to the sector. This document also serves as a basis for legislative amendments in the regulation concerning the field of transport. In preparing the plan, both the main objectives of the EU transport policy and the national development plan Estonia 2010 were taken into account, as well as the results of studies on the transport sector, the changes in production, trade and public transport due to globalisation. An important input in determining national priorities are the objectives set by the European Union. Therefore, the investment plan of the TEN T/Trans European Network co financed through EU funds was taken into account. The Development Plan is linked to several other sectoral development plans. They take into account the activities and objectives foreseen in the following approved development plans: the Estonian National Road Traffic Safety Programme and the Road Management Plan In addition, various development plans concerning the environment, regional and social policies, energy and business were taken into account in preparing the Transport Development Plan.

87 87 While the implementation of the national transport policy has been successful in general, it must be admitted that there are still some problems, mainly due to the lack of systematic planning and a single political framework. So far, the issues related to transport have been addressed by mode of transport; however, such approach does not allow for dealing effectively with complex transport related issues which require that competition between different modes of transport and their mutual effect is taken into account. The primary aims of Development Plan is to make planning more systematic, to create a comprehensive picture, to identify actual causes and thus to ensure sustainable development of the transport sector. Rather than setting long term objectives (for 10 to 30 years), this document foresees that objectives are set for the development of different modes of transport, creates a horizontal framework and establishes the Transport Committee to facilitate the involvement of all experts in the field in preparing a long term vision for Estonia. The general objective of the Government in the field of transport is to ensure for all people (including the physically impaired) and enterprises access to the sites necessary for their day to day activities. Thus, an effective transport system is an important prerequisite for economic growth and social development. Development plan has built on the following six issues that form a strategic framework for objectives and measures for preparing activities for : adequate planning adequate infrastructure issues of safety and security environmental effects enhancing popularity of public and light transport competitive Estonian transport companies Based on the mission of the Estonian transport policy and the six issues specified above, the Transport Development Plan defines six visions for the medium term (5 to 7 years) and nine related objectives to be achieved by the year For each objective, measures are proposed. The Development Plan includes also impact and performance indicators required for measuring the results. The visions and objectives and the rationale behind them are the following:

88 88 Vision: Effective system of planning, implementing and monitoring the transport policy Objective 1 To improve the efficiency of the system of planning, implementing and monitoring the transport policy Rationale: The existing system of planning and monitoring is fragmented by modes of transport and does not take adequately into account other policies or other policies do not take into account the problems of the transport policy. A prerequisite for defining long term visions and lines of action for the common transport policy is systematic and coordinated planning and effective monitoring. Vision: High quality state infrastructure Objective 2 To develop the national transport infrastructure to better meet the needs of population and business communities Rationale: Outdated and inadequate infrastructure hinders transport flows, the mobility of people and goods and therefore impedes economic growth and social development. Therefore, it is important to assess the development needs of all types of infrastructure, i.e. roads, transport hubs, waterways and ports, airports, railway, public transport stops and lanes, etc., and to modernise the infrastructure accordingly. Objective 3 To create spatial balance and diminish developmental differences within the country Rationale: On the one hand, unevenly distributed infrastructure increases the burden on attraction centres, and on the other hand, it impedes the development of outermost regions and makes it difficult to diminish the developmental differences. Therefore, it is important to take measures to increase spatial balance and to ensure optimal transport also in outermost regions by using appropriate modes of transport. Objective 4 To utilise state resources in order to meet more effectively the transport needs of the population and to ensure security Rationale: Taking into account that resources are always scarce, it is important to utilise all resources in the most optimal way and, if possible, to focus on versatile use of different objects. An important area where cooperation can be strengthened is civilmilitary cooperation. Vision: Diminished adverse environmental impact of the transport sector Objective 5 To minimise the adverse impact of the transport sector on the environment Rationale: The expansion of economy, industry and populated areas causes the transport sector to grow and therefore the negative impact on the surrounding environment and on people s health is increasing. To maintain and improve the quality of life it is necessary to find ways to minimise the adverse environmental impact or at least to stop it increasing.

89 Vision: Safe and secure transport sector Objective 6 To ensure the safety and security of the transport sector to reduce the number and severity of road accidents and to protect the transport infrastructure against possible attacks, including international terrorism. Rationale: The safety and security of the transport infrastructure and services is a prerequisite for the balanced development of the transport sector which reduces the cost of transport for society and ensures effective functioning of the economy. Safety and security are important for all modes of transport. Vision: Convenient and popular public and light transport Objective 7 To develop public and light transport in order to ensure that the population s transport needs are met. Rationale: The development of sustainable transport is a vital step of the transport policy. Public transport and light transport provide the population with necessary connections and access to various objects, having a significantly smaller adverse impact on the environment than the using of cars. Using public transport reduces the burden on transport hubs and thus makes the business transport sector more competitive. Vision: Well functioning transport market and internationally competitive Estonian transport companies Objective 8 To improve the rules promoting fair competition and the conditions for providing transport services by using the Rationale: 89 infrastructure The functioning of the transport market is significantly influenced by the business environment of the sector. Therefore, it is important that the state ensures appropriate conditions for competition and minimises the administrative burden imposed on undertakings. Objective 9 To enhance the competitiveness of the transport business, including the transit corridor through Estonia, and to facilitate the export of transport services and the development of the transport business Rationale: Taking into account how dependent the transport business is on the global economic development, on the situation of the transport sectors of the neighbouring countries and on the cooperation with them as well as on relevant consumption trends, it is important to ensure that Estonian transport companies have an opportunity to maintain their competitiveness. Therefore, it is necessary to promote the expansion of both the trade nomenclature and the geographical scope of transport by establishing the necessary state infrastructure (border points and connections thereto); it is also important for the government to take measures to reduce the time of inspection at the border and to ensure cooperation with our neighbours.

90 90 The Development Plan is prepared taking into account the existing situation and on going projects, the most important of which (e.g. the fixed link to Saaremaa and Rail Baltica) are highlighted to give a clear signal that feasibility studies are being conducted and the future of these projects depends on the results of the studies Industry associations There is numerous and well organised network of logistics and transit related industry associations in Estonia. Below are the most significant ones. Association of Estonian Road Carriers (ERAA) is a voluntary union of enterprisers involved with road transport. ERAA was founded in As from 1992 the Association is an active member of International Road Transport Union (IRU). Currently (in June 2007) ERAA has 448 member companies. The main task of the ERAA is to promote the development of road transport and to protect its members interests and rights on national and international level. The main activities of the Association are issuing permits to all the companies which have international road transport licences and giving out TIR Carnets to the companies accepted to TIR system. In Estonia ERAA is a guarantee organisation of international guarantee chain of TIR Convention. Association participates in discussions and decisions on questions concerning road transport on national and international level. ERAA provides its members with information and renders also other services connected with road transport. Estonian Freight Forwarders Association (EEA) is a voluntary union of corporate bodies engaged in international freight forwarding. EFFA was founded in 1994 and aims to represent and protect the common professional interests of its members, avoid unfair competition, contribute to the elaboration of legal acts and spread of information in its field. For achieving these goals EFFA is arranging sessions, completing reports and cooperating with organizations and officials of Estonia and other countries. Currently (in June 2007) EFFA has 69 member companies.

91 91 EFFA is a member of FIATA since October 1995 and member of CLECAT since 2006 At first in May 1995 EFFA and the Estonian Chamber of Commerce and Industry agreed the introduction of the General Conditions of the Estonian Freight Forwarders Association. Nowadays new General Conditions are effective from January 1, 2001 and comply with the General Conditions of the Nordic Association of Freight Forwarders NSAB Union of Estonian Automobile Enterprises (AL) is an employers' organisation to unite on voluntary basis the Estonian transport enterprises. Currently AL has 37 member companies. The Union of Estonian Automobile Enterprises was established in According to the statute, the association exists: to contribute to and to develop the transport sector in Estonia; to participate in the process of elaborating transport related legal acts; to represent and defend the interests and the rights of its members; to collect and to provide the members with necessary information; to provide the members with necessary tuition and formation. AL desires to unite the transport enterprises which follow fair business practice and provide reliable transport services to the customers. Transit Association (TRASS) was established The initiators of TRASS foundation were the biggest railway operators and oil products transit firms acting in Estonia. TRASS is voluntary noncommercial union, the main aim of which is development of transit trade in Estonia. Currently TRASS has 14 member companies. There are the follow purposes and missions of TRASS activity: increase of reliability and competitiveness of transit and rail transportation on territory of the Estonian Republic; support the Estonian Republic in business of formation and implementation the unite policy in field of transit and rail transportation; participation in legislative activity on questions concerned with transit and rail transportation in the Estonian Republic;

92 92 promotion of new flows of commodities and foreign investments into transit and rail transportation in Estonia; introduction of principle of equal competitiveness in transit and rail transportation sector of Estonia; uniform representation of interests of the businessmen dealing with transit and rail transportation in Estonia before the state and other infrastructural monopoly enterprises; informing the public on the events in field of transit and rail transportation in Estonia, and also about perspectives of their development. Estonian Logistics Association (ELA) was founded in 2000 and is acting as association of persons working in logistics associated industries and persons, organisations and foundations interested in logistics and development of this. The main purpose of ELA is development and strengthening of logistics competitiveness in Estonia both on inner Estonian and international level. Currently (in June 2007) ELA has 373 individual (individual persons) and 27 corporate members (companies). ELA is realising their purposes by: contributing to development of professional skills and knowledge of employees; contributing to development of logistics vocational training; integrating students of logistics into professional logistics work; contributing to development of professional training in logistics; introducing and presenting logistics services offered in Estonia contributing to development and deepening of cooperation between Estonian companies in the field of logistics; developing cooperation with associations and foundations in the field of logistics; contributing to statistics databases development in the field of logistics introducing and popularising logistics related professions; developing cooperation with governmental authorities, universities, research institutes, consulting companies for advancing logistics related researches; developing cooperation with media for achieving ELA purposes; contribution to drawing up future visions of Estonian logistics strategy and development in cooperation with governmental authorities, universities and professional associations.

93 93 Association of Port Operators (APO) was founded in 2002 It encompasses the majority of Estonian transit companies. As a traditional third sector organisation, its main task is to unify, develop and represent the joint interests of the port operators. Currently (in June 2007) APO has 19 member companies One of the most important aims of the APO is to organise cooperation of its members in communications with the state organs, Port administration and the other parties of the logistic chain Estonian Railway, National Customs Board, the Board of Border Guard, etc. This task is especially important, because the efficient servicing of the international transit business through Estonia and sustainable development of its competitiveness depend directly on the co operation of the different elements of Estonian logistic chain. Our Association also has an important role in the general development of the transit business and logistics of Estonia. 5.3 Social and environmental issues in the transport sector Trade Unions According to the Constitution of Estonia, employees can freely join trade unions and enjoy the right to form trade unions in their enterprises. The Trade Unions Act was adopted in 2000 (until which time a 1989 law on trade unions was still valid). The main basis for the tripartite (between employees, employers and government) and bipartite (between employees and employers) negotiations is the Collective Agreements Act from 1993 A tripartite collective agreement may be entered into between central federations of unions of employees, central federations of employers and the government, or between local federations of unions of employees, federations of employers and local government bodies. Tripartite collective agreements may deal with: the minimum wage and the procedure for amending it based on rises in the cost of living; additional measures to ensure occupational safety and health; additional employment guarantees; other additional guarantees pertaining to employment which are considered necessary; and procedures for monitoring the application of the collective agreement and providing necessary information.

94 94 In December 2006 the Employees Representatives Act was passed in the Parliament. One of the goals of the act was to implement EU Directive 2002/14/EC on informing and consulting of employees. The act prescribes employers obligation to inform and consult workers in case of both presence and non presence of a trustee. The information and consultation framework prescribed in directive is now obligatory on all employers who have at least 30 employees. Approximately 14 15% of Estonian labour force is represented by trade unions. There are two trade unions confederations EAKL (Confederation of Estonian Trade Unions Eesti Ametiühingute Keskliit) and TALO (Estonian Employees Unions Confederation Teenistujate Ametiliitude Keskorganisatsioon). EAKL has 19 and TALO 12 member unions in June The trade unions representing transport sector employee's interests are members of EAKL. There are 6 trade unions directly representing transport workers: Estonian Transport and Road Workers' Trade Union (Eesti Transpordi ja Teetöötajate Ametiühing) represent bus and lorry drivers, road builders and maintenance men and air traffic land service persons. This organisation had 4530 members in 2006, being the biggest member organisation of EAKL Air Line Trade Union (Liinilennunduse ametiühing) has founded in 2004 as umbrella organisation of Estonian Air Line Pilots Association (Estonian APLA) and Stewardesses and Pilots Trade Union. This trade union represents the interests of members of airlines crews. Seaman Trade Union (Meremeeste ametiühing) and Independent Seaman Trade Union (Sõltumatu Meremeeste Ametiühing) represent seaman interests Estonian Rail Man Trade Union (Eesti Raudteelaste Ametiühing) and Locomotive Crew Trade Union (Vedurimeeste Ametiühing) represent railway sector employees' interests. 5.4 Logistics industry: characteristics As part of LogOn Baltic project, a logistics internet survey was carried out in January February 2007 in Estonia. This was the first thorough logistics survey made in Estonia yet.

95 95 A total of 2960 companies were sent an asking them if they would take part in the survey. The number of those who agreed to take part was 146, means that return rate was 4.9%. In addition the survey questionnaire was available on a public website and information about it was spread to members of local logistics association. 40 persons filled survey questionnaires via public website. So a total of 186 Estonian respondents participated in this survey Manufacturing Trade Logistics service providers Figure 22 Number of respondents according to main industry Of the respondents 38% (69) represented manufacturing and construction, 38% (70) trade and commerce and 24% (43) logistics companies (figure 22)

96 96 Construction Other manufacturing Transport equipment Electrical and optical equipment Machinery and equipment Basic metals and fabricated metal products Other non metallic mineral products Rubber and plastic products Publishing and printing Pulp, paper, paper products Wood and wood products Textiles and textile products Food products, beverages and tabacco Figure 23 Companies in manufacturing and construction by sector Capacity selling (CS) Engineer to order (ETO) Make to order (MTO) Assembly to order (ATO) Make to stock (MTS) Figure 24 Manufacturing and construction companies by type of production

97 97 Manufacturer / final assembler Provider of semi finished products Provider of raw materials Figure 25 Manufacturing and construction companies by position in the supply chain Figures characterize manufacturing companies participated in survey. Half of them (52%) represent wood processing, machinery and other manufacturing industries (22%, 15% and 15% respectively). By type of production three quarters (74%) of manufacturing companies responded are manufacturers / final assemblers. Prevailing production types are making to order (48%) and engineering to order (28%).

98 Overview of manufacturers participated Sales of automotive fuel Sales of motor vehicles & vehicle parts Agency Wholesale: other Wholesale: food, beverages and tobacco Retail: other Retail: food, beverages and tobacco Figure 26 Trading companies by sector Figure 26 shows trading companies by sector. 49% of trading companies participated in survey are wholesalers of other good (other than food, beverages and tobacco), 20% are retailers of other goods, the share of food, beverages and tobacco wholesalers and motor vehicle & vehicle parts sellers is 11% each.

99 99 Other logistics services Logistics information systems and these management Courier activities Postal activities supporting and auxiliary transport activities Stevedoring and storage Air transport Water transport Rail transport Road transport Figure 27 Transport service providers by sector Other Express cargo Valuables General cargo Unit cargo Liquid bulk Solid bulk (GN) Figure 28 Logistics service providers by cargo type

100 100 2nd tier distributors / retailers 1st tier distributors / wholesalers Final product manufacturers / assemblers Providers of semi finished goods Raw material providers Figure 29 Logistics service providers by customer segment Figures characterize logistics service providers participated in survey. 63% of them are road transport companies, 14% represent supporting and auxiliary services (e.g. freight forwarding), 12% provide other logistics services. By cargo type handled, general and unit cargo are prevailing (38% and 26% accordingly). One third (32%) of responded logistics companies serve primarily final product manufacturers', 20% wholesalers. Both 17% of companies offer their services mainly to retailers and providers of semi finished products, 14% serve primarily raw material providers. 5.5 Logistics sector development and outlook By survey results, average Estonian companies logistics costs are 13.6% of turnover ranging from 13.3% in trading sector to 13.8% in manufacturing sector. In trading sector there is strong and clear correlation between company size and logistics costs (as % of turnover) levels bigger companies logistics costs are lower. Concerning manufacturing, insufficient number of medium and large size companies participated in survey do not allow to make similar conclusions. It can be only argued that micro size manufacturing

101 101 companies total logistics costs are ca 15% higher than small size ones. Since Estonia s accession into EU in May 2004 transportation costs have increased by opinion of over 50% manufacturers and traders responded. Other logistics costs have been rather stable in manufacturing. In trading sector over 50% of respondents reported also warehousing, logistics administration and other logistics costs increases. Manufacturers and traders presume the progression of logistics costs growth, especially in transport (over 80% of respondents), followed by warehousing costs. Traders are somewhat more pessimistic with respect to logistics costs other than transportation increase: roughly 70% answered traders foresee further cost increase against 60% of manufacturers. The most important area in development needs of personnel competence is transport management skills in manufacturing and logistics service providers sector. Trading companies most of all need to develop inventory management competence. Currently most widely outsourced logistics activity in Estonian manufacturing and trading companies is international transportation 97% of respondents outsource it at least in some extent. Other transport related activities (domestic transportation, freight forwarding, reverse logistics) are also widely outsourced (77 95%). Less outsourced logistics activities are invoicing and inventory management 16 17% of respondents are outsourcing these at lest in some extent. Concerning the development trends, IT systems, inventory management and warehousing are presumed to be the faster expanding fields of logistics outsourcing in Estonia. Opinions on operating environment are rather neutral than positive among survey respondents. The most positive opinion is about general business perspectives, especially in trading and manufacturing companies. Concerning usage of different ICT systems 37% of responded manufacturers and traders use Web based portals, 32% Intranet / Extranet, 27% EDI, 22% bar coding and 7% ERP systems. Logistics service providers use more web based portals (47%) but less bar coding (9%) and ERP systems (4%). EDI usage is on the same level as manufacturers & traders have (28%). One of the interesting results of survey was that majority of Estonian manufacturing companies see logistics as a tactical tool instead of strategic one. Surprisingly only 27% of respondents agreed that

102 102 logistics has a major impact on their firm profitability and one third agreed that logistics is the key source of their competitive advantage. By survey results, logistics is top management priority only in 29% of Estonian manufacturing and trading companies. Estonian companies assess their logistics abilities and performance quite highly. In questions asking respondents to compare their logistics performance with their competitors' one, 58% 74% of respondents consider their own company s performance better. By opinion of respondents the main logistics competitive advantage of Estonian companies in all sectors is their ability to respond to the needs and wants of key customers better than competitors. 83% of manufacturers & traders and 93% of logistics services providers find that regular monitoring and evaluation of logistics benefits their company. 75% of manufacturers & traders and 90% of logistics services providers regularly monitor and evaluate logistics costs internally. Respectively 45% and 53% do it with selected suppliers and / or clients. Benchmarking logistics performance metrics against competitors is much less in use and there is great difference between manufacturers & traders and logistics service providers respectively 23% and 50% do it. One a little bit surprising survey result is that Estonian manufacturers and traders assess their operational information sharing with external partners more effective than this one within own company 80% of respondents agreed that their external information sharing is effective against 70% of agreements about internal one. Same about information systems quality 65% of respondents agreed that their IT systems support information sharing with selected external suppliers and / or clients against 55% agreements about their IT systems ability to provide own company operational managers sufficient and timely information. Logistics service providers are much more effective in internal information sharing 90% agreed that this is effective in their firm, 68% agreed that their information system ensures operational managers sufficient and timely information. External information abilities are estimated quite similar level with manufacturers & traders. The most important future development needs of manufacturing companies are logistics costs cutting, careful selection of logistics services providers and development of logistics information systems. For traders these are improvement of customer service, development of information systems and logistics costs cutting. Logistics service providers need first of all to increase service provision capacity, develop an agent network and extend the range of service offerings.

103 103 6 ICT IN THE REGION 6.1 General ICT infrastructure in the region Estonia has a well advanced infrastructure and use, and in many respects tops the EU. It does have some weaknesses but it is by far the most advanced of all new member States from the enlargements of 2004 and Table 6.1 represents Estonian ICT data originating from Estonian i2010 Annual Report By mentioned report the number of households and enterprises with broadband access is above average and the growth is still relatively high. Use of Internet services among citizens is above the EU average and for content, media, reading online newspapers and Internet phone services Estonians are amongst the highest in Europe. egovernment has developed very quickly in terms of supply and use. The government reached full saturation for enterprises with all services available for full transactions and high for citizens' services. ICT use among enterprises is behind citizen use and below the EU average. However there is now progress for enterprise use in several areas. Some additional key facts about Estonian ICT market in addition to i2010 report. 65% of the population aged 6 74 years or 768 thousand persons are internet users. Every second Estonian citizen in age 6 74 is using Internet at least five days in week (TNS Emor survey, spring 2007) 6 Estonia i2010 Annual Report European Commission. Information Society and Media. sheets/2007_factsheet_ee.pdf

104 104 Table 27 Estonia i2010 annual report 2007, European Commission Rank* Broadband Total DSL coverage (% of total population Broadband penetration (% of total 8,6 12,7 17,2 9 population) DSL penetration (% of total population) 4,2 5,8 8,4 15 Households having broadband (as % of 66,0 76,8 80,3 7 those having access to the internet at home % of enterprises with broadband access 67,7 66,6 75,7 12 Number of 3G subscribers per 100 0,1 18 inhabitants Digital Television in households 8,5 16 Music: number of single downloads per 0, inhabitants Internet usage % of population who are regular internet 44,7 53,6 56,3 11 users Take up of Internet services (as % of population) Sending s 38,8 48,8 49,4 12 Looking for information about goods and 32,3 41,1 44,3 12 services Internet telephoning or videoconferencing 10,2 14,3 3 Playing / downloading games and music 19,6 24,5 27,9 6 Listening to the web radio / watching web 13,3 15,0 16,5 10 TV Reading online newspapers / magazines 37,9 45,6 50,3 3 Internet banking 35,0 44,6 48,2 7 Places of access % at home 32,3 40,3 46,0 12 % at work 20,5 19,7 27,6 11 % at educational place 12,4 7,5 11,3 9 % at PIAP 14,5 3,2 3,7 20 egovernment indicators % basic public services for citizens fully available online % basic public services for enterprises fully available online % 0f population using e Government services of which for returning filled in forms % of enterprises using e Government services of which for returning filled in forms ICT in schools 36,4 63, ,0 100,

105 105 Number of computers connected per 100 7,2 20 pupils % of schools with broadband access 95,0 1 % of teachers having used the computer 59,7 23 in class during the last 12 months e Commerce E commerce as % of total turnover of 2,8 2,0 enterprises % of enterprises receiving internet orders 8,7 7,2 14,4 13 % of enterprises purchasing on the 31,0 23,3 25,0 15 internet E business. % of enterprises with integrated internal business 27,7 24,6 23,8 19 processes With integrated external business 4,9 4,5 8,9 19 processes Security: % of enterprises using Secure 14,5 20,5 22,7 18 servers % of enterprises using digital signatures 5,3 9,0 10,9 13 for authentication Employment and skills % employees using computers 26,9 38,4 33,3 15 connected to Internet % of persons employed with ICT user 17,2 19,4 17,1 19 skills % of persons employed with ICT specialist skills 2,4 2,6 2,6 20 Rank among 27 EU members + Norway and Iceland Source: Estonia: Learning by example. From the Economist Intelligence Unit thousands households (45% of all) have desktop or laptop computer at home. 90% of home computers (279 thousands households) are connected to the Internet mostly via broadband connection (TNS Emor, spring 2007). This means 25% increase over previous year. All Estonian schools are connected to the Internet More than 80% of the population possess the ID card that enables both electronic authentication and digital signing. Relevant legislation is in place, giving the digital signature equal power with the handwritten one, and imposing a responsibility on public authorities to accept digitally signed documents;

106 106 There are over 700 Public Internet Access Points in Estonia and 1100 wi fi hotspots. About half of wi fi hotspots are free for users 7. In 2006 the government revealed plans to build a nationwide wireless network using code division multiple access (CDMA) technology, which will take over the 450 MHz frequency formerly used by the NMT cellular network. The network should be up and running by The number of Estonian websites surpassed one million already in In % Estonian companies had Internet website. 49% of website owning companies used it for orders fulfilment. Additionally it was under preparation in 13% of companies 9 Income tax declarations can be submitted electronically via Internet. In % of declarations were submitted via Internet. Expenditures made by the government can be followed on the Internet in real time. Cabinet meetings have been changed to paperless sessions using web based document system since In early 2007 Estonia became the first nation to legalize the casting of online ballots in a national parliamentary election. 113% of population are mobile phones subscribers. The number of active SIM cards in Estonian market exceeds 13% of Estonian total population. 86% of population is using mobile phones 10 Estonia is completely covered with digital mobile networks. 6.2 ICT policy in the region Estonia singles out the formation of a knowledge society as one of its strategic goals. The development of the information society is based on the Principles of Estonian Information Policy adopted by the Estonian Parliament in A follow up to the document, the Principles of Estonian Information Policy was elaborated and approved by the Government of the Republic in In January 2007 the 7 Puhkuse ajal päästab tasuta Internet. SL Õhtuleht facts about Estonian ICT market 9 Factum & Ariko survey "Use of ICT in Estonian enterprises", Postimees. Firmade andmetel ületab mobiilikasutajate hulk elanike arvu

107 107 Estonian Information Society Strategy 2013 entered into force formulating ITC development goals up to The objectives of the Information Society Strategy are the following: each member of the society leads a full life, using the opportunities of the information society in every possible way and actively participating in public life ( nobody will stay or will be left behind ); Estonia s economic growth is based on the wide use of ICT solutions; public sector is citizen centred, transparent and efficient. In order to realize the objectives, measures have to be elaborated and implemented in three dimensions on which the functioning of the society is based social, economic and institutional. So ACTION FIELD I is aimed to development of citizen centred and inclusive society. The final objectives of this action field are that: by 2013, 75% of Estonian residents will be using the internet, while household internet penetration will amount to 70%; by 2010, all public sector websites will comply with WAI quality criteria. To achieve the objective, two measures sets will be focused on: 1. Broadening technological access to digital information via: Development of data communications networks in areas of market failure and ensuring their commercialization. The objective is to ensure the availability of high quality internet service throughout Estonia. Thus, the development of internet connections will be facilitated in regions, where the private sector lacks economic interest to invest, and in areas, where the quality of internet does not correspond to the needs and requirements of the information society. Ensuring favourable environment for the development of new telecommunications technologies and technological convergence, including the take up of digital TV. The objective of the activity is to ensure a smooth launch of new telecommunications based services and guarantee the possibility to use services of similar quality irrespective of technological solutions used for their transmission.

108 108 Bringing public sector websites into compliance with WAI quality criteria so as to ensure their accessibility for all, including people with special needs. Further development of the Citizen portal at For citizens, the portal serves as a secure personalized virtual office through which they can, in their different roles, manage their affairs (use public services etc.) and communicate both with the state, enterprises and other citizens. All public sector services will be made available via the Citizen portal. 2. Improving skills and widening opportunities for participation. Continuous upgrading of knowledge and skills of all members of society in order to ensure their ability to cope in the information society. Provision of basic computer and internet training for the elderly and people with special needs will be continued. It will be ensured that curricula of all levels of education would facilitate the acquisition of computer and internet skills. In addition, the development of public sector e services will include relevant instructions and guidebooks. Development and promotion of internet based learning environments (elearning). The objective of the activity is to facilitate the improvement of existing and the acquisition of new skills in continuing education and retraining; to make traditional learning processes more flexible and individualized. Raising public awareness about the information society. The objective is to increase the awareness of the Estonian population about internet based services as well as the opportunities and threats related to the information society. Digitization and digital preservation of cultural heritage, making it available via the internet for citizens, and integrating it with elearning environments. Information about objects of historic, scientific, artistic, technological, social etc. value will be digitized and made available for the public. Planned activities include the development of a digital library and a virtual museum, establishment of a digital archive and a portal on cultural heritage. Widening opportunities for participation in decision making processes (edemocracy). Ministries and local governments will develop internet based environments for the inclusion of citizens and interest groups in decision making processes. In addition, evoting will continually be used.

109 109 Implementation of flexible work arrangements. Barriers to teleworking will be identified and solutions will be developed to overcome these. ACTION FIELD II is aimed to development of knowledge based economy. The final objectives of this action field are that: by 2013, the productivity per employee in Estonian enterprises will account for 75% of the EU average; by 2013, the share of ICT enterprises in the national GDP will amount to 15% To achieve this, the following measures will be pursued: 1. Promotion of ICT uptake by enterprises Supporting the ICT uptake and use of ebusiness through business and innovation support measures via: elaboration and implementation of a specific ICT programme; raising awareness about the opportunities of ebusiness in the framework of the Innovation Awareness Programme; supporting feasibility studies related to technology transfer; giving investment support to manufacturing enterprises for the modernization of technology; provision of training and consulting for enterprises, including IT companies; giving support for enterprise diagnostics to identify the development barriers and opportunities of enterprises. A part of the diagnostics focuses on the level of ICT uptake in a company and related possibilities. Re organization of general, vocational and higher education so as to ensure conformity of labour skills to the requirements of knowledge based economy. The objective is to provide workers of all professions with ICT skills and competence in order to cope in the knowledge based economy. To this end, national curricula will be modernized and electronic study materials, learning environments and e courses will be developed and taken into use at all educational levels.

110 110 Development of a common service space for the public, private and third sector to facilitate communication between the three sectors. Widening the opportunities of re using public sector information by the private and third sector. The objective is to ensure barrierfree use, both in terms of financial and administrative obstacles, of public sector information, including for commercial use. To this end, the usability of digital information created by the public sector will be increased through the modernization of legal environment and development of relevant IT solutions. Ensuring a favourable environment for the development of ebusiness. Relevant legislation, including privacy, consumer protection and information security related aspects, will be reviewed. 2. Increasing the competitiveness of the Estonian ICT sector Bringing IT education in accordance with the requirements of the ICT sector. To this end, training opportunities will be widened for IT lecturers both at vocational and higher education level; the apprenticeship system will be improved, and mechanisms will be developed for increasing motivation among post graduate students. Supporting the internationalization of the Estonian ICT sector. Planned activities include, among others, the following: making the software procured by the public sector available in order to avoid duplication of similar solutions and to facilitate the exports of Estonian ICT solutions; facilitating the participation of Estonian ICT enterprises in EU and international programmes and networks by supporting the preparation of project applications and ensuring the availability of required national selffinancing; facilitating the migration of highly qualified foreign labour; distribution, creation, and publishing of relevant standards. Facilitating the development of high quality and innovative information society and media services as well as settling intellectual property related issues. Favourable environment will be ensured for the development of multimedia services provided via the internet, digital TV and mobile communications. Legal

111 111 questions related to the principles of service provision will be solved. Elaboration and implementation of principles concerning the outsourcing of services necessary for the functioning of the state information system. The objective is to standardize the requirements, guidelines and practices related to services outsourced in order to ensure the functioning of the state information system (i.e. data communications, server hosting, application hosting, support services etc) in a way that would, on one hand, improve the service quality of different components of the state information system, and, on the other hand, favour the development of the market offering those services. Increasing the role of the Estonian ICT sector in the development of the country s defensive capacity. To this end, more use will be made of the potential of the Estonian ICT sector in organizing military offset and in promoting civil applications related to development works in the field of defence. ACTION FIELD III is aimed to development of citizen centred, transparent and efficient public administration. The final objectives of this action field are that: by 2013, citizen satisfaction with public sector e services will reach 80%; by 2013, satisfaction of businesses with public sector e services will be 95% To achieve this, two measures will be focused on: 1. Improving the efficiency of the public sector Transforming public sector business processes so as to make better use of advantages and possibilities enabled by the application of ICT. The objective is to simplify and speed up administrative procedures and ensure their efficiency by following ways: all management of business in the public sector, including proceeding and archiving of documents, will be made electronic; an analysis will be carried out about changes that have to be made in the legal environment and organizational management in order to ensure paperless management

112 112 of business and automation of business processes. Necessary changes will be implemented; the availability of public sector information will be ensured in a unique digital form; the capability of civil servants to cope with changes brought along by the development of the information society will be ensured, leading to increased efficiency in their daily work processes; those responsible for the development of the public administration will have sufficient ICT competence. Increasing the efficiency of policy formulation through better use of data and increased research about the impact and challenges of the information society. Research into different aspects of the information society both from the economic, societal and individual perspective will be increased. In addition, the definition of the ICT sector will be reviewed, and a system of ICT statistics and economic analysis will be developed, allowing thus improved evaluation of the impact of the ICT sector on the economy. Modernisation of state information systems so as to ensure their integration into a single interoperable whole functioning on the basis of user needs, not institutional structures by following ways: ensuring that the data used in different parts of the state information system would have a single meaning. To achieve this, the following actions will be undertaken: development of mechanisms for the re use of semantic assets; elaboration of XML based descriptions for main types of public sector documents; development of an XML competence centre; development of a common thesaurus for the indexing of services and websites; standardization of the structure of public sector websites and development of mechanisms for their re use; transition of state databases and registers to a serviceoriented architecture; ensuring full traceability of all public sector services by stages; development of the administration system for state information systems (RIHA), which contains service descriptions and ensures the re use of services and their fragments;

113 113 ensuring the re use of geo information generated by different public sector bodies; establishment of a competence centre and a repository for open source software for the re use of developed solutions and knowledge. Development of electronic authentication and authorization mechanisms, including participation in cross border eid (electronic identity) projects. The objective is to ensure the organizational interoperability of public and private sector organizations providing and using the public key infrastructure. Work planned under this activity seek to achieve a situation, where: the ID card is the main personal identification tool in the electronic environment both for the public and private sector; digital stamp or the Business ID procedures have been taken into wide use; the ID card and the respective software always correspond to new technological possibilities and international standards; legislation concerning the personal identification code and the ID card is reviewed so as to ensure its conformity to the requirements of the information society. Ensuring the functioning and development of support systems for the maintenance of the state information system. Development of systems necessary for increasing the efficiency of state and local government agencies. The objective is to improve the provision of e services at local level and avoid multiple development of similar solutions by different local governments. 2. Provision of user friendly public sector e services Integration of the public, private and third sector into one service space to improve the quality of service provision in the public sector. Citizens will be able, in their different roles, to make use of a common secure service space (based on the single window principle), allowing them to use public services and communicate in one environment with the state, businesses as well as other citizens.

114 114 Identification, development, launch and active implementation of high impact services (eprocurement, einvoicing etc). Development of public sector e services in different fields of life for citizens, businesses and public sector agencies. Relevant information systems will be developed and implemented in order to increase the efficiency of service provision through ICT, including making health and social services available irrespective of one s location. Opening up of Estonian e services for the citizens of other countries, especially those from the EU member states. 6.3 ICT industry: characteristics About the surveyed firms As part of LogOn Baltic project, an ICT internet survey was carried out among Estonian companies in February E mail with link to the questionnaire was sent out to approximately 3000 companies from all the sectors, concentrating on logistics and ICT. Three reminders were sent via e mail within a month from the original call. 117 companies responded to the survey. For the logistics survey taking place only two weeks prior current survey the same target group was used and therefore almost 4% of the response rate to the ICT survey can be considered good. More than half of the respondents represented micro sized companies (Figure 30). 26% were small companies, 16% mediumsized companies and only 4 (3%) out of 117 respondents represented a large company. This illustrates very well Estonian economical landscape where micro and small sized companies are dominative but also means we cannot generalize the results to large sized companies.

115 Micro Small Medium Large 4 Figure 30 Number of respondents according to company size 70% of the respondents were positioned as senior management members. Considerably fewer were working in the middle management (15%) or even lower position. Overbalance of the senior management responds to dominative representation of micro sized companies (figure 31), where one of few employees is often owner or manager Senior management Middle management Operational staff Expert Other Figure 31 Number of respondents according to respondents position in the company

116 116 Manufacturing industry forms 44% of the responses; 25% are from trading and 23% from other industries. Logistics service providers form only 8% which is explainable by the separate logistics survey realized just few weeks before. ICT survey was intended to cover more sectors/industries to have an overview about everyday use of ICT means and developments in the companies; therefore dominative and even representation of manufacturing, trading and other industries is an advantage Manufacturing Trading Logistics service providers Other Figure 32 Number of respondents according to main industry Summary Internet access rate among the responding companies can be considered high and access to company E mail accounts good. Main fields of ICT use are accountancy and marketing/sales; few use ICT in production related areas, but plan on starting usage. Most of the respondents have own IT department or IT person and there are no companies admitting they do not pay attention to ICT related issues. Overall trend shows that expenses on IT are rather low and made more on hardware than personnel; in the future expenses on software will increase the most. Password access control and virus protection applications are most used measures of data security, but password

117 117 updates and usage are huge problem. Most of the companies regularly monitor IT costs and performance internally, some on client basis but very few benchmark with competitors. Over half of the respondents have broadband connection and about a third use a modem. Most of the responding companies have a website which are mainly managed by IT service providers. Websites are generally used for marketing. Respondents use Internet to obtain information or complete/send online forms. There is a considerably small percentage of the companies who do not use Internet at all in communication with public authorities showing the companies are very willing to use all the opportunities ICT has to offer. Importance of E mail communication among Estonian companies is very high and exceeding even telephone/fax. Traditional means like personal visits and regular posts are used in over half of the companies simultaneously. The pressure from customers and suppliers to establish online order tracking is seen as the biggest development within next three years. There is more business handled electronically with suppliers than with end users and customers and the share is predicted to increase. Companies see E commerce to have a significant effect on several perspectives of doing business. E commerce s importance to the companies is seen as helping to simplify the transactions and the opportunities it offers of reaching new customers or suppliers and improving the service quality. The biggest barrier companies see on the use of ICT in overall is security. From other results most of the conclusions made based on expert interviews are confirmed by this survey, including lack of ICT personnel, lack of tailored solutions for the companies and from the positive side open mindedness of Estonian people for using ICT in their everyday work.

118 118

119 119 7 HUMAN KNOWLEDGE BASE 7.1 Professions and their qualifications The Estonian Qualification Authority (EQA, trademark Kutsekoda) is responsible for development of professional qualifications system in Estonia. EQA was established in 2001 in order to continue developing the professional qualifications system launched by the Estonian Chamber of Commerce and Industry in The Professions Chamber was established by the Estonian Chamber of Commerce and Industry, Estonian Employers' Confederation, Ministry of Social Affairs, Estonian Employees' Unions' Confederation (TALO) and the Confederation of Estonian Trade Unions. In addition to the founders of the Professions Chamber, the Supervisory Board of the Professions Chamber includes a representative of the Ministry of Education. Objectives of the Professions Chamber are: Facilitating the establishment and development of an integrated and organised professional qualifications system, and Establishing prerequisites for achieving comparability of the qualifications of Estonian employees as well as acknowledgement of other countries. To achieve these objectives, the Professions Chamber shall: organise the activities of professional councils as well as the development, supplementing and improvement of the professional standard, and establishment of evaluation criteria; work out methods for developing and implementing the employees' qualifications system, and the qualification evaluation system; organise performance of tasks given by professional councils; manage the state register of professions as an authorised processor of the register.

120 120 Currently EQA professional councils have approved 447 professional qualifications as professional standards in Estonia. 11 Professional council is co operative body between confederations of employers/employees of the respective field of economy, professional and vocational associations and the authorised representatives of the ministry. The objective of the professional council is registering the viewpoints and suggestions of different institutions, and achieving a consensus upon working out, implementing and developing the systems for employee qualification and award of professional qualifications. The professional council shall appoint experts in the field. These experts shall map (in work groups) the main vocations of the profession; develop the professional standard, grades of qualification as well as the scheme for awarding professional qualifications Professional standard is a document, which establishes the requirements on knowledge, skills, experience, values and personal characteristics necessary for the professional qualification. Professional qualification means a level of competence required in the given profession. This level shall be acknowledged based on regulated requirements, or historically or internationally developed requirements. Field of use of the professional standard: determining employee qualification requirements; preparing curricula and training programs; developing examination requirements; attestation and award of professional qualification; giving basis for comparison with international documents verifying qualification; establishing prerequisites for the increase of the competitiveness of the Estonian economy. The representatives of over different institutions (companies, training providers, professional and vocational associations) participated in active development of professional standards between 1998 and In addition to the above, every tenth company in Estonia expressed his opinion upon the opinion poll conducted in order to test the professional standards In transportation and logistics, there are qualification standards developed for: Docker, longshoreman, levels I, II, III Freight forwarder, levels III, IV, V 11 Estonian Qualification website

121 121 Handler, levels I, II Logistician, levels IV, V Tallyman level III, Truck driver II Warehouse manager IV, Warehouseman, warehouse keeper, storekeeper, level III There are certain general guidelines for different qualification levels (totally 5 levels) concerning basic education, ability to work independently, analytical skills, ability to act in changing environment, etc. For example the logistician profession is so demanding and complicated that qualification levels I, II and III do not exist for this. In ICT there are qualification standards developed for Chief information officer, level V IT specialist, level I, II IT system support specialist, level III

122 Education and training Education and training at universities and colleges Table 28 Students in higher education in the field of ICT and logistics in Estonia Applied and professional higher educational courses, diploma, bachellor and integrated bachelor & master courses Fields of study total, students Business % administration, students Business & administration, % 22,9% 22,1% 22,6% 23,3% Computer sciences, students Computer sciences, % 6,0% 6,2% 5,8% 5,8% Transport services, students Transport services, % 2,2% 2,6% 2,5% 2,2% Master courses* Fields of study total, students Business % administration, students Business & administration, % 31,2% 33,0% 29,0% 26,5% Computer sciences, students Computer sciences, % 4,7% 4,4% 5,6% 6,4% Transport services, students Transport services, % 0,0% 0,3% 0,5% 0,8% Doctor courses* Fields of study total, students Business % administration, students Business & administration, % 4,4% 4,7% 4,7% 4,1% Computer sciences, students Computer sciences, % 5,2% 5,5% 5,9% 6,0% Transport services, students Transport services, % 0,0% 0,0% 0,0% 0,0% Grand Total Fields of study total, students Business % administration, students Business & administration, % 23,3% 22,9% 23,0% 23,2% Computer sciences, students Computer sciences, % 5,8% 6,0% 5,8% 5,9% Transport services, students Transport services, % 1,9% 2,3% 2,2% 1,9% at the beginning of the academic year * Master courses include internship enrolment and doctor courses include residentship enrolment. Source: Estonian Statistics Office Tables 28 and 29 try to give overview about the number of students studying and graduated in higher education in the field of logistics and ICT in total and separately by three higher educational levels. For the first level the number of students in applied, professional, diploma, bachelor and integrated bachelor & master courses is summarized. In statistics of Estonia Statistics Office the logistics study programs are accounted under row "transport services".

123 123 Table 29 Graduates in higher education in the field of logistics and ICT Applied and professional higher educational courses, diploma, bachellor and integrated bachelor & master courses Fields of study total, students Business % administration, students Business & administration, % 27,3% 26,7% 24,4% 22,3% Computer sciences, students Computer sciences, % 3,6% 4,2% 5,4% 5,1% Transport services, students Transport services, % 1,5% 1,8% 1,9% 2,1% Master courses* Fields of study total, students Business % administration, students Business & administration, % 24,3% 26,4% 27,5% 26,6% Computer sciences, students Computer sciences, % 2,9% 4,3% 3,6% 3,9% Transport services, students Transport services, % 0,0% 0,1% 0,2% 0,2% Doctor courses* Fields of study total, students Business % administration, students Business & administration, % 1,3% 2,9% 3,8% 1,4% Computer sciences, students Computer sciences, % 0,4% 1,4% 3,8% 3,5% Transport services, students Transport services, % 0,0% 0,0% 0,0% 0,0% Grand Total Fields of study total, students Business % administration, students Business & administration, % 26,3% 26,2% 24,5% 22,6% Computer sciences, students Computer sciences, % 3,4% 4,2% 5,1% 4,9% Transport services, students Transport services, % 1,2% 1,5% 1,7% 1,9% Graduates during the academic year. In the case of graduates, the year stands for the end of the academic year. * Master courses include internship graduates and doctor courses include residentship graduates. Source: Estonian Statistics Office When in the field of ICT the statistics data is quite objective, in logistics the number of students studying and graduated is somewhat higher. Only students studying "clean" logistics programs have accounted in "transport services" row. The business and management students specializing in logistics have accounted under "business and management" field and therefore "hidden" (see also table 30 and subchapter ). This is also the reason, why there are no doctoral students shown in transport services / logistics row. By information of author, actually there are ca 10 logistics doctoral students at Estonian Universities (majority at Tallinn University of Technology). As there is no independent doctoral logistics study courses at Estonian Universities, doctoral students study and defend their theses under

124 124 other faculties' courses (e.g. Faculty of Civil Engineering and Faculty of Economics & Business at Tallinn University of Technology). Summing up, the number of students studying ICT is 5 6% of total number of students on each higher educational level. The share of ICT students of the total number of students graduated has been 5% on professional higher education / bachelor level, 4% on master level and 6% on doctoral level. In 2007 ca 640 ICT students were graduated at Estonian universities and colleges. 90% of them were already employed before graduation due to shortage of IT specialists in Estonia. So actually ca 60 new IT specialists became available in local labour market. Estonian organisations needing currently (in June 2007) 400 specialists got only 15% of their needs covered. 12 Concerning logistics higher education, logistics students share has been at least 3% of total number of students in last years at least 3% on basic level, below 1% on master level (this share has increased from 0% in 2003 to 0.8% in 2006) and below 0.5% on doctoral level Logistics The main providers of logistics education in Estonia are Tallinn University of Technology (as academic education provider) and Tallinn College of Engineering (as professional higher education provider). In 2007 there are 230 students studying logistics at Tallinn University of Technology (of which 50 students in master study) and 260 students studying transport and logistics at Tallinn College of Engineering. Table 30 shows the list of logistics study programs available at local universities, colleges and business schools. 7 of these cover the first step of higher education (professional higher education or academic bachelor study). One Tallinn University of Technology provides master study program in logistics since Three of these first level higher education study programs provided by Tallinn College of Engineering, Estonian Maritime Academy and Tallinn University of Technology are "clean" ones, concentrating only on logistics matters. For the rest of 4 first level programs logistics is one of possible specialization alternatives. 2 of these study programs 12 IT spetsialistidest on ettevõtetes suur põud, Eesti Päevaleht

125 125 are specialised in certain area of logistics, in maritime and military logistics accordingly. Table 30 Logistics study programs at Estonian universities and colleges Program University / College Transport and logistics Tallinn College of Engineering Business Management with specialization to logistics Port Management and managing of Marine Transport Management with specialization to logistics Military management with specialization to logistics Business Management with specialization to logistics Logistics Mainor Business school Estonian Maritime Academy Sillamäe Institute of Economics and Management Estonian National Defence College Audentes University Education type Professional higher education Professional higher education Professional higher education Professional higher education Professional higher education Bachelor study Duration 4 years 3 years 4 years 3 years 3 years 3 years Tallinn University Bachelor 3 years of Technology study Logistics Tallinn University of Technology Master Study 2 years Source: Tarvo Niine. The analysis of higher education in logistics in Estonia. Tallinn University of Technology The logistics study programs of Sillamäe Institute of Economics and Management and Audentes University are available only in Russian ICT The main providers of ICT education in Estonia are the two public Universities Tallinn University of Technology and the University of Tartu and the Estonian Information Technology College which is private institution. A large share of the first two emerges in the field of academic higher education and the latter plays an important role in the field of professional higher education. Professional higher education is also provided in several other private institutions of higher

126 126 education, the largest among which are College of Computer Science and Mainor Business School. The Faculty of IT at Tallinn University of Technology is the largest institution providing ICT education in Estonia. In 2007 over 2100 students are studying and 150 lecturers, researchers and engineers are working in the faculty 13. The Faculty of Mathematics and Computer Sciences of Tartu University have 800 students and 75 lecturers & researchers. 14 The Estonian Information Technology College is a private institution of applied higher education which was founded by the Estonian Information Technology Foundation (EITF) and started its activities in The founders of EITF were the Republic of Estonia, University of Tartu, Tallinn University of Technology, Eesti Telekom and the Association of Estonian Information Technology and Telecommunications Companies. The aim of the college is to prepare specialist in the field of ICT systems according to demand of employers. Currently there are over 550 students Education and training in vocational schools Table 31 shows the graduates of vocational education in the field of computer sciences and transport services. According to statistics 3% of graduated vocational students were related to logistics and 5% to ICT in The number of graduates (and admittance) in computer sciences has decreased last years due to reorganisation of computer science vocational training. At the start of current century many vocational training institutions started to offer vocational education in computer sciences. But the vocational education provided remained often too general, being unable to meet actual employers' requirements. Therefore in last years more attention has turned on intensification of vocational education in computers instead of admitting more study groups

127 127 Table 31 Graduates of vocational education by field of study Fields of study total Computer sciences Computer sciences % of total 8,0% 6,8% 6,5% 4,8% Engineering and engineering trades Engineering and engineering trades % of total 19,3% 22,1% 19,8% 21,7% Transport services Transport services % of total 2,1% 3,1% 1,9% 2,5% Source: Estonian Statistics Office Also the engineering and engineering trade statistics is included into table 31 as many professions under this row are tightly connected to ICT (e.g. electronics and automatics). According to Estonian Statistics Office 543 students were admitted by Estonian vocational educational institutions in the field of computer science in According to Estonian Ministry of Education 1343 vocational education students were admitted in the field of computer sciences, electronics and automatics in If to apply this ratio 1343 / 543 = 2.5 to graduated vocational students in computers, 344 * 2.5 = 860 vocational students in the field of computers, electronics and automatics were graduated in 2006 (11.9% of total number of vocational students graduated) Logistics There are 9 vocational schools / centres in Estonia providing logistics vocational education on the basis of basic and secondary education (table 32). The institutions providing giving truck and bus driver profession are not included. The usual study duration on the basis of secondary education is 1 year, on the basis of basic education 3.5 years.

128 128 Table 32 Vocational education organisations in the field of logistics Vocational education institution Profession provided Valga County Vocational Training Freight transport, warehousing and Centre Cargo handling; freight forwarding Ida Virumaa Education Centre Warehousing; freight forwarding Sillamäe Vocational School Warehousing Vocational Centre of Pärnu County Warehousing Narva Vocational Training Centre Freight forwarding Tartu Vocational Education Centre Warehousing Paide Vocational Secondary School Freight transport, warehousing and cargo handling Tallinn School of Transport Freight forwarding; organisation of traffic, warehousing; organisation of railway traffic Suuremõisa Technical School Organisation of small ports Source: adapted from Basic Training Programme in Transit and Logistics for Vocational and Technical Schools. Baltic Tangent Final Work transit%20and%20logistics%20for%20vocational%20and%20technical%2 0schools.pdf ICT ICT education can be obtained in vocational educational institutions on the basis of both post basic and post secondary level. The major vocational educational institutions on the level of post basic vocational ICT education are Kehtna School of Economics and Technology, Tallinn School of Transportation and Tallinn Polytechnic School. The major vocational educational institutions are Tallinn School of Transport, Kohtla Ida Virumaa Education Centre and Narva Vocational Training Centre. In spring 2007 there were total 23 vocational education institutions providing ICT related vocational education.

129 129 8 REGIONAL LOGISTICS AND ICT COMPETENCE Table 33 The list of Estonian experts interviewed Group Name of company / institution Logistics service DSV Estonia AS provider Schenker AS Manufacturing industry Wholesale & retail industry Support Initiative Via 3L aas Elcoteq AS AGA Baltika AS ETK AS Magnum Medical AS Elion AS Neuron Systems OÜ Transestonia OÜ (transit trade support initiative) Estonian Association of Information Technology and Telecommunications Tartu Science Park Interview partner Managing Director Managing Director & Logistics Director Logistics Director Logistics Manager & Forwarding Manager DMS Manager Logistics Manager Adviser of Strategic Development and Cooperation Logistics Director Quality Director Director Director Managing Director Project Manager Research Institution Tartu University Assistant professor department of Mathematics Logistics Consultant Telema AS Managing Director Local Authority Tartu City Government Consultant As part of LogOn Baltic project, logistics and ICT interviews were carried out with Estonian logistics and ICT experts in March April Table 33 shows the companies / institutions interviewed. At total 18

130 130 representatives from 16 companies / institutions were interviewed (in two cases couple of persons from the same company were simultaneously interviewed). 10 of them were logistics experts from 7 companies and 1 support initiative. The rest of 8 were ICT experts from 4 private companies and 4 support structures. The local logistics trends most often mentioned by experts are the following: Extensive logistics outsourcing, particularly in transportation Development of partnerships between companies Increasing focus on warehousing Logistics is seen as measure for (labour) costs reduction Development of (intermodal) container and trailer transit trade. Continuing retail trade concentration Widening implementation and use of bar and matrix codes. Increasing share of Asian suppliers in sourcing. Most often mentioned ICT trends are Widening use of Web and Internet based solutions ITC systems integration Transition to personal solutions Globalization Active and innovative clients Local companies have most numerous business contacts with Poland & Baltics region (more with Latvia and Lithuania than with Poland) and Scandinavia. In BSR region the minimum number of contacts is with Russian companies mainly due to uncertainty (border crossings, cash flows, etc.) and cultural differences. Concerning cooperation constraints and problems in BSR, there are no significant constraints with partners from EC countries, except sometimes supercilious behaviour by big German, Scandinavian and Polish suppliers due to low purchasing power of local companies. Also time consuming decision process in Sweden was mentioned by some of experts. The biggest cooperation problems are with Russian partners due to uncertainty, overpolitized business relations, difficulties in achieving win win relationships and differences in understanding values. Surprisingly only a small number of logistics experts from private companies knew some logistics or ICT related regional development activities. No one was able to estimate the success of regional development projects due to lack of information. Seems that private sector and local authorities are acting in different worlds private sector has no information what authorities do; authorities have no information

131 131 what the private sector needs and supposes. ICT sector experts were more informed about different activities and able to provide long lists. Still the differences between private companies and support structures were significant. By unanimous opinion of interviewed logistics experts the main key regional development issue in logistics is the poor quality of road infrastructure. Also the lacking possibilities for using rail transport in domestic distribution and low level of logistics (vocational training) education system were mentioned. Region s main logistics strengths: Labour skills and abilities in operating in conditions of limited / unbalanced logistics volumes and lacking economies of scale Favourable geographical location in relation to main suppliers and clients Modern solutions (ITC, terminals, etc) development started only recently, no out of dated solutions Region s main logistics weaknesses: The Russian trade & transit potential has not realized due to unsatisfying political relations Lack of economies of scale small market, small partners Small attention to long term planning and long term investments. Key issue in the ICT sector mentioned by sector experts is lack of qualified work force specialists with higher ICT training. Limited access to internet in the rural areas could also become one of the bottlenecks limiting future developments besides the problem that companies are not willing to make investments and innovate. The region s ICT strengths mentioned by the experts are: Well developed ICT infrastructure and high competition Willingness to use ICT solutions Public sector support in developing and using ICT solutions Main problems of ICT in the region are: Public sector has no clear vision on how to develop ICT sector Educational issues poor vocational education and decreasing popularity of ICT specialties in the higher education level People do not understand all the opportunities ICT offers The logistics competence level in experts' companies is rated high or very high. Same in the region is rated acceptable or high. Local authorities' logistics competence level is rated acceptable or rather poor. Majority of logistics experts (63%) assess the local authorities support and policy in logistics issues neutrally neither unsatisfied nor

132 132 satisfied. The rest of 37% are unsatisfied. Generally experts are satisfied with legislation and minimal state interference into business but dissatisfied with quality of transportation infrastructure. Support to ICT is evaluated as rather unsatisfied than satisfied by the sector experts due to lack of clear vision mentioned above. This is leading to support mechanisms not suitable for most of Estonian ICT companies. All logistics experts are unanimously satisfied wit local authorities ICT support and policy The most effective measures for further improvement of logistics operations in experts' companies are professional training for better skills, setup of new DC for better process organisation, integration of logistics operations and ICT and / or expansion into new markets or increase of business volumes in order to achieve economies of scale. ICT improvement possibilities in logistics companies are in ICT systems integration, implementation or upgrading of WMS (Warehouse Managements System), TMS (Transport Management System) and track & trace systems and ICT training. ICT companies see best opportunities in product development and systematic training of the employees. Local authorities can support by further developing infrastructure and vision.

133 133 REFERENCES Estonian Information Society Strategy 2013 (2006) Estonian Ministry of Economic Affairs and Communications Estonian Preliminary Balance of Payments for the Year 2006 (2007) Bank of Estonia i2010. Annual Report 2007 Estonia (2007) annual_report/2007/country_factsheets/2007_factsheet_ee. pdf Industrial Relations Developments 2006 Estonia (2007) Eironline: European Industrila relations observatory on line q.html Kattel R. Kalvet T. (2006) Knowledge based Economy and ict related Education in Estonia: Overview of the Current Situation and Challenges for the Educational System. Praxis Center for Policy Studies Kaupmeeste Riik (2007, in Estonian) edited by Tiits M. Estonian Academy of Sciences Monetary Developments & Policy Survey. March (2007) Bank of Estonia. Niine T. Eesti logistika alase kõrghariduse analüüs (2007, in Estonian) Master thesis, Tallinn University of Technology Ojala L. Naula T. Hoffmann T. (2005) Trade and Transport Facilitation Audit of the Baltic States (TTFBS): On a Fast Track to Economic Development. The World Bank. Quarterly Statement of Eesti Pank. Economic Forecast for (2007) Bank of Estonia, April 18, aarid/arhiiv/_2007/_172.html?objid= Transpordi arengukava (2006, in Estonian)) Majandus ja Kommunikatsiooniministeerium

134 134

135 135 LogOn Baltic Publications (as of ) LogOn Baltic Master reports 1:2007 Developing Regions through Spatial Planning and Logistics & ICT competence Final report Wolfgang Kersten, Mareike Böger, Meike Schröder and Carolin Singer 2:2007 Analytical framework for the LogOn Baltic Project Eric Kron, Gunnar Prause and Anatoli Beifert 3:2007 STATE OF LOGISTICS IN THE BALTIC SEA REGION Survey results from eight countries Lauri Ojala, Tomi Solakivi, Hanne Mari Hälinen Harri Lorentz and Torsten Hoffmann 4:2007 Aggregated ICT survey report Eric Kron and Gunnar Prause 5:2007 EXPERT INTERVIEWS CONSOLIDATED REPORT Summary of LogOn Baltic expert interviews conducted in seven regions of the Baltic Sea Region Matti Takalokastari LogOn Baltic Regional reports Development Measure Impact Analysis (DEMIA) 10:2007 REGIONAL DEVELOPMENT IN THE SOUTHERN METROPOLITAN REGION OF HAMBURG, GERMANY Development Measure Impact Analysis (DEMIA) on regional development related to logistics and ICT Janina Benecke, Jürgen Glaser and Rupert Seuthe 11:2007 REGIONAL DEVELOPMENT IN MECKLENBURG VORPOMMERN, GERMANY Development Measure Impact Analysis (DEMIA) on regional development related to logistics and ICT Gertraud Klinkenberg 12:2007 REGIONAL DEVELOPMENT IN ESTONIA Development Measure Impact Analysis (DEMIA) on regional development related to logistics and ICT Jaak Kliimask 13:2007 REGIONAL DEVELOPMENT IN SOUTHWEST FINLAND Development Measure Impact Analysis (DEMIA) on regional development related to logistics and ICT Kaisa Alapartanen and Heidi Leppimäki 14:2007 REGIONAL DEVELOPMENT IN LATVIA Development Measure Impact Analysis (DEMIA) on regional development related to logistics and ICT Riga City Council Rode & Weiland Ltd. 15:2007 N/A 16:2007 REGIONAL DEVELOPMENT IN POMERANIA, POLAND (THE POMORSKIE VOIVODESHIP) Development Measure Impact Analysis (DEMIA) on regional development related to logistics and ICT Anna Trzuskawska 17:2007 REGIONAL DEVELOPMENT IN SAINT PETERSBURG, RUSSIA Development Measure Impact Analysis (DEMIA) on regional development related to logistics and ICT Mikhail Pimonenko 18:2007 REGIONAL DEVELOPMENT IN ÖSTERGÖTLAND, SWEDEN Development Measure Impact Analysis (DEMIA) on regional development related to logistics and ICT Håkan Aronsson and Staffan Eklind ICT surveys 20:2007 ICT SURVEY IN THE SOUTHERN METROPOLITAN REGION OF HAMBURG, GERMANY Wolfgang Kersten, Meike Schröder, Mareike Böger, Carolin Singer and Tomi Solakivi 21:2007 ICT SURVEY IN MECKLENBURG VORPOMMERN, GERMANY Eric Kron, Gunnar Prause and Tomi Solakivi 22:2007 ICT SURVEY IN ESTONIA Seren Eilmann and Tomi Solakivi 23:2007 ICT SURVEY IN LATVIA Riga City Council, Telematics and Logistics Institute Ltd. and Tomi Solakivi

136 136 24:2007 ICT SURVEY IN LITHUANIA Darius Bazaras, Ram nas Palšaitis and Tomi Solakivi 25:2007 ICT SURVEY IN SOUTHWEST FINLAND Juha Läikkö and Tomi Solakivi 26:2007 ICT SURVEY IN POMERANIA, POLAND Anna Trzuskawska and Tomi Solakivi 27:2007 ICT SURVEY IN SAINT PETERSBURG METROPOLITAN AREA, RUSSIA Yuri Ardatov and Tomi Solakivi 28:2007 ICT SURVEY IN ÖSTERGOTLAND, SWEDEN Naveen Kumar, Håkan Aronsson and Tomi Solakivi Logistics surveys 30:2007 LOGISTICS SURVEY IN THE SOUTHERN METROPOLITAN REGION OF HAMBURG, GERMANY Wolfgang Kersten, Mareike Böger, Meike Schröder, Carolin Singer and Tomi Solakivi 31:2007 LOGISTICS SURVEY IN MECKLENBURG VORPOMMERN, GERMANY Eric Kron, Gunnar Prause and Tomi Solakivi 32:2007 LOGISTICS SURVEY IN ESTONIA Ain Kiisler and Tomi Solakivi 33:2007 LOGISTICS SURVEY IN LATVIA Riga City Council, Telematics and Logistics Institute Ltd. and Tomi Solakivi 34:2007 LOGISTICS SURVEY IN LITHUANIA Darius Bazaras, Ram nas Palšaitis and Tomi Solakivi 35:2007 LOGISTICS SURVEY IN SOUTHWEST FINLAND Tomi Solakivi 36:2007 LOGISTICS SURVEY IN POMERANIA, POLAND Anna Trzuskawska and Tomi Solakivi 37:2007 LOGISTICS SURVEY IN SAINT PETERSBURG, RUSSIA Valeri Lukinsky, Natalia Pletneva and Tomi Solakivi 38:2007 LOGISTICS SURVEY IN ÖSTERGÖTLAND, SWEDEN Håkan Aronsson, Naveen Kumar and Tomi Solakivi Expert interviews 40:2007 EXPERT INTERVIEWS IN THE SOUTHERN METROPOLITAN REGION OF HAMBURG, GERMANY Results and analysis of the intersectoral expert interviews in the field of logistics and ICT Wolfgang Kersten, Meike Schröder, Carolin Singer and Mareike Böger 41:2007 EXPERT INTERVIEWS IN MECKLENBURG VORPOMMERN, GERMANY Results and analysis of the intersectoral expert interviews in the field of logistics and ICT Gunnar Prause, Margitta Rudat, Gertraud Klinkenberg and Eric Kron 42:2007 EXPERT INTERVIEWS IN ESTONIA Results and analysis of the intersectoral expert interviews in the field of logistics and ICT Ain Kiisler and Seren Eilmann 43:2007 EXPERT INTERVIEWS IN SOUTHWEST FINLAND Results and analysis of the intersectoral expert interviews in the field of logistics and ICT Matti Takalokastari, Matias Suhonen, Petri Murto and Hilja Maria Happonen 44:2007 EXPERT INTERVIEWS IN LATVIA Results and analysis of the intersectoral expert interviews in the field of logistics and ICT Riga City Council and Rode & Weiland Ltd. 45:2007 EXPERT INTERVIEWS IN LITHUANIA Results and analysis of the intersectoral expert interviews in the field of logistics and ICT Ram nas Palšaitis and Darius Bazaras 46:2007 EXPERT INTERVIEWS IN POMERANIA, POLAND Results and analysis of the intersectoral expert interviews in the field of logistics and ICT Anna Trzuskawska 47:2007 EXPERT INTERVIEWS IN SAINT PETERSBURG, RUSSIA Results and analysis of the intersectoral expert interviews in the field of logistics and ICT Russia Natalia Ivanova

137 137 48:2007 EXPERT INTERVIEWS IN ÖSTERGÖTLAND, SWEDEN Results and analysis of the intersectoral expert interviews in the field of logistics and ICT Håkan Aronsson, Staffan Eklind and Naveen Kumar Regional Profiles 50:2007 REGIONAL LOGISTICS & ICT PROFILE: THE SOUTHERN METROPOLITAN REGION OF HAMBURG, GERMANY Wolfgang Kersten, Meike Schröder, Mareike Böger and Carolin Singer 51:2007 REGIONAL LOGISTICS & ICT PROFILE: MECKLENBURG VORPOMMERN, GERMANY Eric Kron, Gunnar Prause and Gertraud Klinkenberg 52:2007 REGIONAL LOGISTICS & ICT PROFILE: ESTONIA Ain Kiisler 53:2007 REGIONAL LOGISTICS & ICT PROFILE: SOUTHWEST FINLAND Jarmo Malmsten 54:2007 REGIONAL LOGISTICS & ICT PROFILE: LATVIA Telematics and Logistics Institute Ltd. 55:2007 N/A 56:2007 REGIONAL LOGISTICS & ICT PROFILE: POMERANIA, POLAND (THE POMORSKIE VOIVODESHIP) Anna Trzuskawska 57:2007 REGIONAL LOGISTICS & ICT PROFILE: SAINT PETERSBURG, RUSSIA Elena Timofeeva 58:2007 REGIONAL LOGISTICS & ICT PROFILE: ÖSTERGÖTLAND, SWEDEN Håkan Aronsson, Naveen Kumar and Staffan Eklind LogOn Baltic Master reports 60:2007 STRUCTURAL CHANGES AND TRANSPORT CHALLENGES A report about the Danish structural reform Kent Bentzen and Michael Stie Laugesen 61:2007 NEW TASKS NEW APPROACHES A study about the Danish structural reform Kent Bentzen, Lars Bentzen, Helen Carter and Michael Stie Laugesen 62:2007 STRUCTURAL REFORMS IN DENMARK AND THE BALTIC SEA REGION: A Study of Transferable Experiences from the Danish Structural Reform Kent Bentzen, Lars Bentzen, Helen Carter and Michael Stie Laugesen LogOn Baltic Regional reports 70(FI):2007 VARSINAIS SUOMEN LOGISTINEN KILPAILUKYKY Matti Takalokastari (toim.) 71:2007 N/A (see other reports) 72:2007 N/A (see other reports) 73(FI):2007 N/A (see other reports) Other reports in the LogOn Baltic publications series (not published by the Turku School of Economics) DEVELOPING PASSENGER AIR TRAFFIC IN TURKU Pekka Jaakkola ENTERPRISE ICT CUSTOMER ENQUIRY YRITYS ICT ASIAKASKYSELY Sari Vaihinen and Kalle Luhtinen TURKU LOIMAA TAMPERE KEHITYSKÄYTÄVÄ Loimaan seutukunnan kehittämiskeskus ja FCG Suunnittelukeskus Oy *) LogOn Baltic reports published in any other language than English language are marked with a 2 digit country ID code. E.g. publication no. 70(FI):2007 is written in Finnish language.

138

139

140