An Italian's secret to his Estonian success

Italian investor Ernesto Preatoni started business in Estonia in 1995. He is active in the banking and real estate markets. He owns 80 percent of Estonia's biggest real estate company, Pro Kapital, which is planning to invest 1 billion kroons ($71.4 million) in real estate development in Tallinn. Kairi Kurm caught up with him to chat about his Estonian investments.

Why is investing in Estonia attractive?
Investing in Estonia was a good idea. The social conditions were the reason to invest here. The people are loyal. The country is not a third world country. There is a good culture. People respect the laws and rules.
The important thing is that in this country, there is a lack of entrepreneurs. About 45 years of interrupted history has caused this. In other countries, including Italy, there are very good entrepreneurs. Here, we are catering to different needs and doing it perfectly, in my opinion.
The second thing is that in this country, there is a need for money and in other countries there is an excess of liquidity.
So I can easily find people who can invest money abroad because the conditions in Italy and in Europe, generally speaking, are not good for investment for different reasons – very high taxes, few opportunities and low interest rates. Anyway, the European Community is not my dream.

What do you think about the taxes in Estonia?
Taxes are very good in this country. I have talked to several political men that say that in this country, we should sit down at the table and decide what we want to do; whether we want to develop as an industrial country or we want to make it a banking sector.
That is not clear in my mind and I don't think in anybody's mind. It is a pity because having a strategy is always very important. I do not believe that there is a real strategy.
We want to grow and become as rich as possible and as fast as possible, but that is not enough. This country really needs an entrepreneurial mentality. For example, if I buy Eesti Kaabel (Pro Kapital, an old factory rebuilt into a business center) and sell it away, I generate nothing.
But if I buy it and then transform it, I make a lot of jobs, create tax revenue, and provide shops and office space for people to buy. So this is what is needed in this country. We do not need fast speculators buying something and selling it away as fast as possible without any transformation. The capacity of every country is the capacity to transform something. Maybe we can just transform investments. Maybe we can become an important banking center such Switzerland or Luxembourg.
When somebody keeps telling me that things cannot be done because Estonia is a small country or Estonia has to join the European Community, I always say that Switzerland and Luxembourg are also small countries. Small today is just beautiful. Take General Motors for example. The working process has to be organized in such a way so that everyone who is working in a small segment will understand how useful his job is. If you are in a chain and you do not understand the final product, you are not participating, you will suffer and you will do your job in a very bad way.
So usually big is bad and small is beautiful. I believe that Estonia should consider remaining small. This is my personal opinion. Maybe I am just a visionary for long-term business, and for short-term business, I am wrong.

Are there any obstacles in investing in Estonia?
In Estonia, there is no established class of people who already have the economic power in their hands. So it is not as it is in Italy – if you invade a certain space of a certain institution or a certain family, then you become like an enemy and they start to put obstacles in your way.
In Estonia, there are some obstacles, though. For example, if you want to build something in the Old Town, they are sometimes a little bureaucratic. But this is reasonable at the same time.
Take for example this building on the corner of Vene and Viru streets. The facade of our building is beautiful. Compare this building to other shopping centers in the city or in the Old Town and you will understand that the quality of my life is good, otherwise I would not spend so much money to build something that could be useful and beautiful.
It has to be beautiful. We spent a fortune, but the architects did a very good job. We are really happy that we gave back to the city the building, which was considered one of the first buildings built in Tallinn.

How does the Estonian business environment differ from other Eastern European countries? Why did you want to invest in Estonia and not somewhere else?
It seemed to me that the rules in Estonia are clearer than in other countries. I have the impression that in Latvia, they are following the experience of Estonia. Estonia has a very small Russian influence in the country, in my opinion. It is very strange. I have nothing against Russian people. I am also doing business in St. Petersburg and I understand better why it is easier to do business in Tallinn and more difficult to do it in St. Petersburg. It is about the Mafia, but they are over exaggerating this problem. In Russia they are missing trust.
When I talk to an Estonian, he trusts me and I trust him. It is easy to do business because we do not start from the idea that we are cheating one another. When you go to Russia, it is exactly the opposite.
I am restructuring an important building in St. Petersburg, and, for the first time in my life, I had to finance the builders. Usually, the builders get paid after they have built, step by step. But I had to finance them because they could not buy the windows and the doors they were supposed to buy from Finland or Italy. Nobody would sell the goods to them if they could not pay in advance. There isn't much trust in Russia. That is the big difference between Russia and Estonia.

What would you change if you were the prime minister of Estonia?
I am not really in a position to answer that, but there is one thing I would like to change. The system of visas is very bad. In Egypt, I was able to make them change the system of visas. We have passport control, where they control people who enter and exit the country. We do not need a double control. It is just a way to get some money. Rather than having so many long lines and forcing people to fill out so many long forms, why doesn't Estonia offer a stamp in the passport for $30 or so and be done with it? They do it that way now in Egypt.
I have met several ministers and other people about that, but I was not able to change anything. This is something that, in my opinion, needs to be changed.
I would like to give you another example. We have a very good Italian technician here. We need him. He has spent five years with the same Russian girl.
She is like a wife to him but he cannot marry her yet because it is not common in Italy to marry if you have not been divorced for a long period of time. We are going to lose this important technician, because the girl was here for two months, then she was sent back to Russia and she cannot get a visa to stay here in Estonia. In my opinion, the country should be flexible in these kinds of things.