RIGA - In the seventeenth century the eastern shores of the Baltic Sea belonged to Sweden, and what cannons and ships did then, Swedish capital is ready to accomplish now. "Ten years ago, Swedish businessmen considered their home market to be Scandinavia. Now they consider it to be the Baltic Sea region," says Stig Friberg, trade commissioner of the Swedish Trade Council in Latvia.
Of all the Nordic countries, Sweden holds the strongest position in the Baltics. It is the second-largest investor in both Latvia and Lithuania. Its trade turnover with both countries is considerable: 650 million euros with Latvia and over 700 million with Lithuania.
In Estonia, the Swedish presence is simply colossal: 45 percent of the total foreign capital invested in the country is Swedish, and Sweden is Estonia's second-largest trade partner, with turnover reaching almost 1.4 billion euros.
The only country which holds a consistently stronger position across the Baltics is Germany.
"The scale of Swedish investments reflects the business structure in Sweden," says Mantas Zalatorius, the Swedish Trade Council's commissioner in Vilnius. "Swedish companies are not usually the first into an area, but when they go in they make very large-scale investments to signal their long-term intentions." Figures in Lithuania highlight this reality: the average investment made by Swedish companies is almost 14 million litas (4 million euros). The average investment for German businesses, in comparison, is just 4 million litas (1.2 million euros).
In Latvia, according to the Lursoft information system, two of the five largest foreign investments are Swedish (Tele2 and SEB). But Friberg points out that this should be three: the third-largest investor, Estonia's Hansapanka 's which operates through its local filial, Hansabankas 's is also Swedish-owned.
Even in Estonia, with a far greater number of Swedish businesses, the average investment is almost 64 million Estonian crowns (4 million euro). Compare this with the Danish average of around 1.2 million euro, and the sheer scale of Swedish investments becomes apparent.
In terms of trade patterns, there is little difference between the Baltics. Petra Martinsson, trade commissioner for the Swedish Trade Council in Tallinn, says, "The main Estonian products being shipped to Sweden are textiles, machine parts, electronics and furniture, while Estonia's main imports from Sweden are food, machinery and high-quality production tools. Swedish investors are active in every branch of industry, but we're not very big in retail or real estate."
Her colleagues in Riga and Vilnius report a similar pattern, and this is confirmed by the Swedish Trade Council's yearly business climate survey, a questionnaire sent to Swedish businesses throughout the region: in none of the three Baltic states are more than 30 percent of Swedish businesses involved in trade, and in both Latvia and Estonia almost two-thirds are involved in production.
Retail horizons
This pattern is gradually changing. As local purchasing power increases, so too does Swedish retail interest. As Martinsson says, "Interest in the retail sector is currently increasing."
In Lithuania, Zalatorius points out that "there is now high potential for retail-sector growth."
Nor is this the only change on the way: in Riga, according to Friberg, "until about two years ago most Swedish investors in the Baltics were medium or large companies. Now smaller companies are also entering the market."
However, if these facts bear out the Baltics' image as being a single market, the business climate surveys indicate otherwise. It is debatable to what extent the Swedish public is aware of the distinction between the Baltics. Martinsson says, "Swedes, unfortunately, don't know the difference."
In Friberg's words, "Swedes are aware that they are three separate countries in the same region. My impression is that everyone knows that Tallinn is in Estonia, and most know that Riga is in Latvia, but they're less certain about Vilnius. Many Swedes of middle age, and over, also know that Riga was the biggest city in Sweden during the seventeenth century."
What is clear is that those businesses interviewed for the business survey perceive marked differences between the three. Take corruption, for example. When asked, "Does corruption in Estonia affect your business' efficiency?", only 8 percent of Swedish businesses in Estonia answered "very much" or "to some extent," while 76 percent replied "very little" or "not at all." In Lithuania, 11 percent rated it a significant problem, while 58 percent thought not. In Latvia, however, 34 percent called it a problem, and only 35 percent replied that it was not.
In summary, the report on Latvia maintains that "corruption is commonplace, though less so than formerly." In the question of corruption, at least, there is a clear distinction.
Easy and gray
Other questions leave Latvia uncomfortably isolated. Asked "how does the grey economy affect your business' profitability?", 4 percent of respondents in Estonia replied that it had a serious effect, while 68 percent reckoned it had little to none. In Lithuania, 15 percent reckoned it a significant problem, while 50 percent thought it insignificant. In Latvia, however, 35 percent of respondents thought that it had at least some effect, and only 26 percent did not.
On the other hand, Latvia is highly regarded in terms of ease of setting up a business: 86 percent of respondents rated it favorably, compared with 84 percent in Estonia and 54 percent in Lithuania. Technology-wise, Lithuania surprises: if Estonia, predictably, has the highest rating for Internet services (92 percent rated them "good" or "very good," compared with 83 percent in Lithuania and 54 percent in Latvia), Lithuania's mobile-phone networks gave 100 percent satisfaction, compared with Estonia's 84 percent and Latvia's 68.
One factor which is clearly an issue in all three countries is manpower: a third of all respondents reckoned it hard to find competent staff across the region. In Latvia and Lithuania, the problem is compounded by a perceived lack of language skills: the report on Latvia rates it "outstandingly important" to know at least one of the local languages, particularly outside Riga, and 34 percent of respondents thought the lack of language skills in the local business community a problem, while in Lithuania the figure was 30 percent. Estonia fared much better, but even here, 16 percent found lack of language skills a hindrance to business.
But as Zalatorius remarks, "the business rationale always wins in the end." By this criteria, business sentiment is firmly in the Baltics' favor. In all three countries, despite their differences, Swedish companies see a clear business advantage.
Asked "How do you rate your profitability in the Baltics, compared with other makets?", 64 percent of respondents in Latvia replied "acceptable" to "very good." In Estonia the figure was 72 percent, and in Lithuania it was 85 percent, while in all three countries over 60 percent of respondents rated their future growth potential as "good" or "very good." With such positive sentiment in all three countries, the question of whether the Swedish public can tell the Baltics apart is irrelevant. What counts is business, and Swedish business is here for the long haul.
