Poor subcontracting results drag exports down

The effects of a global economic slowdown that sapped demand in the European Union, the United States and Japan were felt in tiny Estonia in 2002, with exports falling slightly year on year.

According to figures from the Ministry of Economic Affairs, overall exports last year amounted to 56.9 billion kroons (3.7 billion euros), a 1.7 percent decline.

Subcontracting services, also known as re-exports, took the biggest hit, falling by some 20 percent year on year.

Traditional exports of local production actually increased by 9.4 percent, the ministry said, a bit of silver lining on an otherwise dark cloud, officials said.

"Although growth was slow, it is positive that exports of local production grew steadily throughout the year," said Finance Ministry analyst Liis Elmik.

A drop in the sales of mobile phone parts producer Elcoteq-Tallinn was the biggest drag on re-exports, usually about one-third of all Estonian exports.

The company, a subcontractor for Finland's Elcoteq Network Corporation, saw sales drop in the first half of 2002 due to the overall global slowdown in the telecommunication sector.

Company officials said sales rallied in the second half but refused to comment on concrete figures.

Imports of raw materials for subcontracting fell by 16 percent while imports for the internal market grew by 13 percent to 63.3 billion kroons.

Total imports increased by 5.8 percent to 79.5 billion kroons, resulting in a 22.6 billion kroon foreign trade deficit.

Maris Lauri, an analyst at Hansapank, said that in monetary terms, it was the biggest gap in the history, but compared to the gross domestic product, it was in line with results of previous years.

The high increase in imports was caused by increased consumption and investments.

Elmik of the Finance Ministry said imports for investment projects such as transportation and machinery, undertaken to meet EU requirements in these sectors were three times larger than imports of consumer products.

But automobile imports increased by more than 22 percent year-on-year.

On the export side of the ledger, sales of wood and wood products, plastics and overland transport vehicles saw the largest increase.

Textile export growth was modest due to limited demand, while exports of fish products fell by 8 percent, mainly, analysts said, because of the declining value of the U.S. dollar.

Lauri said she was worried about the slow increases in the services sector. Revenues related to tourism and transit, she said, have traditionally been higher than overall imports, but cheap foreign travel packages had undercut the former.

Estonia's largest exporters, according to the Estonian Trade Council, include Elcoteq Tallinn, seat belt manufacturer Norma, paint producer ES Sadolin, textile company Kreenholmi Valdus, and wood/pulp companies Stora Enso Mets and Imavere Saeveski.

Most employ cheap labor and are 100 percent foreign owned. Last year was successful for most; ES Sadolin, Norma and Imavere Saeveski grew by more than 20 percent, according to official figures.

Several companies were against disclosing their export numbers but said average export turnover in 2002 was about 500 million kroons. The three biggest exporters had figures two to three times higher.

The biggest markets for Estonian exports in 2002 were Finland (25 percent), Sweden (15 percent), Germany (10 percent), Latvia (7 percent) and Great Britain (5 percent).

Top importers were Finland (17 percent), Germany (11 percent), Sweden (10 percent) and Russia (7 percent).