Its socioeconomic diversity and growth potential make it one of the most promising business areas in Europe. From 1997 to 1999 the region's weighted average economic growth of 3.2 percent exceeded the corresponding figures for both the EU and the United States.
Joakim Helenius, chairman of the investment banking firm Trigon Capital Group, sees three distinguishable periods for foreign investors coming to Estonia - Finnish "cowboy capitalism" from 1991 to 1994, the dominance of financial investors from 1994 to 1997, and takeovers by strategic investors starting in 1997.
The earlier period was dominated by the privatization process in Estonia, when "Finnish cowboys" - small-scale businessmen - came to the country looking for opportunities to make quick money.
Six years ago Estonia was discovered by financial investors who believed that Eastern Europe would catch up with the rest of the continent very quickly.
"Since then we've realized this won't be so easy," Helenius noted. "The problem was that in the 90s there was very little to invest in this part of the world," he told some 120 business people, diplomats and journalists who attended the international conference "New Opportunities in Estonia's Innovative Capital" held in Tallinn on June 7 - 8.
In 1996 the Tallinn Stock Exchange was opened and small enterprises were listed. Stock prices skyrocketed, and a lot of local investors invested heavily into the stock market.
"Money was not proportionate to the market's ability to absorb it," Helenius noted. "Suddenly, evaluations on stocks were so high, no financial investor deemed it worthwhile to make serious investments in Estonia."
As all bubbles, this one burst as well following the Asian financial crisis. The stock exchange crashed and a banking crisis followed in Estonia, and lots of companies felt it.
"For foreign investors, this situation was much more attractive and we saw a lot of strategic acquisitions," Helenius said.
Scandinavians started to buy into different sectors, like banking, food processing, construction, services and manufacturing.
One of the largest investments was the purchase of Estonian Hansapank by Sweden's Swedbank in 1998, which was "Swedbank's most successful investment ever," said Goran Collert, the bank's executive chairman.
"Hansabank's integration has created strong links not only to international markets, but also to the other two Baltic states - Latvia and Lithuania," Collert said.
He called Hansabank the only Pan-Baltic bank that has created an important financial link between the three Baltic countries.
"This is a major achievement - in most other sectors, Baltic integration has not progressed very far," Collert stressed.
Helenius, a 43-year-old Finnish national with almost 10 years experience in investment banking in the Baltics and Russia, noted that Baltic development in terms of attracting foreign investment has been similar, only on much smaller scale.
Helenius told The Baltic Times that companies in Latvia and Lithuania were not as transparent as in Estonia and their managers were not as ready to sell.
"Yes, they needed the money, but they could not see themselves giving up the control," Helenius said.
The Estonian government has been much more stable in its policies and has stuck to its words, he noted.
"Privatization has been an enormously difficult political process in Latvia and Lithuania," he said.
Estonia and the other two Baltic states of Latvia and Lithuania are increasingly viewed as part of a wider Scandinavian home market for leading Nordic companies, and this process of integration will continue, Helenius said.
Collert agreed. He said he sees the future of Estonia, Latvia and Lithuania as fully integrated members of a family of Nordic countries, which, of course, will be members of the EU.
"The people in this family will, as individuals and as entrepreneurs, look at the region as their home region and as their home market," he said.
Estonia has some very competitive advantages which would be hard to find in neighboring regions. A favorable tax regime, open economy, front-runner position in EU accession talks, privately owned banks, a well developed infrastructure, a geographical location for Tallinn being the closest capital city to Helsinki and Stockholm, educated workhorse and people's linguistic skills in English, Russian and Finnish make for a warm investment climate in Tallinn.
"We won't be able to offer you low wages, as there are no low wages in the EU," Estonian Prime Minister Mart Laar told the conference participants from Austria, Bangladesh, Canada, Denmark, Estonia, Finland, France, Germany, Japan, Italy, Latvia, Lithuania, Nigeria, Norway, Sweden, Switzerland, the United Kingdom and United States. "But we will be able to offer you low taxes and a good business environment."
A major concern frequently raised by international investors is the Russian-speaking minority in the Baltics. Helenius, however, stressed that, at least in Estonia, it's not a major problem.
"What we forget is that most ethnic Russians are very happy to be in Estonia," he said.
According to a recent Baltic Barometer 2000 survey on Russian minority opinion, 63 percent of Russians in Estonia trust the state, while in Latvia and Lithuania this number is only 31 percent and 23 percent respectively. "This degree of trust of the state is very high. In fact, Russians in Estonia represent general attitudes among the population - they do not stand out as a group."
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