Estonia 's a potential transit center for rising China?

  • 2005-12-07
  • By Kairi Kurm
TALLINN - No doubt, the biggest buzz in the transportation sector is this week's visit of a Chinese delegation looking for opportunities to establish a transit center in Estonia.
The Chinese Embassy in Estonia welcomed the delegation of experts from the Chinese Transport Ministry and port representatives and operators on Dec.5 's 6.
During the busy two days, guests visited the biggest logistics centers that are ready to handle Chinese goods, as well as Estonian Railway and the ports of Tallinn and Sillamae. The stakes are high, and companies are vying for a piece of the action 's a piece so potentially enormous that it could change a company's fortunes overnight.

"Tightening the relationship with one of the world's fastest growing economies brings along continuous economic growth and cuts the risks that derive from a stagnating European Union," says Illimar Paul, member of the board at the Estonian Logistics Association.

The Sillamae Port is attractive for its short distance (25 kilometers) from the EU-Russian border. Latvia and Lithuania's ports, for example, are a couple hundred kilometers away from the border. The Muuga and Paldiski ports, with their nearby logistics centers and investment opportunities, are of big interest as well, said Paul.

Sven Ratassepp, public relations manager at Tallinn Port, which owns the Muuga harbor, said that Muuga, with its expansion plans, had a lot to offer to Chinese exporters. The harbor, which handles approximately 90 percent of the transit cargo volume passing through Estonia, is practically ice free, has an operating infrastructure, good location near the Petersburg highway and the distribution center could be quite close to the dock, said Ratassepp.

Latvian and Lithuanian officials also recognize the sweeping stakes of a partnership with Chinese traders and are also lobbying officials to win a strategic deal. But Estonians feel they have more to offer.

"It is easier and less expensive to do business in Estonia compared to Latvia and Lithuania. Estonia offers low taxes and a simple tax scheme. We can additionally offer competitive harbor fees and rental fees for land," he said.

RRK Tapa Logistics Park, which boasts 40,000 square meters of warehouse space and is ready to receive cargo via the Trans-Siberian railway, was also on the itinerary of the Chinese delegation. Tapa, which was used for storing raw cotton, is the biggest vacant warehouse and could become a good distribution center for Chinese products in the EU, said Paul.

Years ago the Tapa logistics park was an important military and strategic object. So thanks to its layout, the warehouse is suitable for handling expensive goods that demand high security. Tapa is the most important stop on the Estonian railway system, with annual throughput of about 40 million tons.

Estonia has a good location near Russia's wealthiest northwestern region and on the shores of the Baltic Sea, and is being marketed as a maritime gate to the Atlantic Ocean. The country's membership in EU, NATO and WTO guarantees stability and security.

Paul explained that Estonia's other advantage is its railway gauge, which is similar to that of Russia and will allow cargo operators to start a regular container transport via railway from ports to Russia, and through the Trans-Siberia railway.

"The visit of the delegation is very important for us 's we've all worked very hard for it. We can not sell the railway and port alone 's we have to offer a complex solution," says Priit Koff, public relations manager at Estonian Railway.

In the future, China's products could be exported to the U.S. market in an opposite direction through the West, he said: "Estonia could have a logistical center for loading goods and why not creating additional value."

Estonian labor could also become a key issue when comparing business opportunities in Estonia and Finland as transit partners. The Baltic state's labor is much more competitive, and there is better availability in the country, said Paul.

"In the long run, there is the possibility of a considerable population increase of Chinese in Estonia, which becomes an important catalyst for economic development, and [could] turn Estonia into the Hong Kong of the EU. Our liberal economy and unique taxation system support that trend," says Paul.