President of the Republic on the Swiss-Estonian Economic Seminar on January 25, 2001, in Zurich

Enlargement of the European Union and Economic Growth in the Baltic Sea Area - the Example of Estonia

Ladies and Gentlemen,

Estonia as a European Union candidate, Estonia as part of the dynamic Baltic Sea area, Estonia as an example. You have gathered here today to learn about Estonian enterprises, and I have been invited as I am the President of Estonia. Therefore it would be strange if, in my speech, I would not speak of Estonia at least briefly. At the same time, I would not like to become a promoter of Estonian products here today. I am convinced that our exporters are very good at it. Instead, I would like to describe Estonia, or to be more exact, to speak of the factors that influence Estonia today. Because Estonia today can only be understood when we understand the environment where Estonia exists. This environment consists, for instance, of the accession negotiations with the European Union, and the dynamic Baltic Sea area. Estonia is an example of what can be accomplished if we take the maximum use of the variety of opportunities suggested by these two factors.

Allow me therefore, ladies and gentlemen, first of all to turn to the development of the Baltic Sea area and the current stage of the EU enlargement, so as to unite these two parts into a whole, using the example of Estonia.

First, the Baltic Sea as economic and cultural space.

A common economic space developed around the Baltic Sea even long before the Hanseatic League was formed. Estonia and the Estonians were an inalienable part of that space, not limiting itself to trade with the Orient via the Russian rivers, but also connecting Estonians and Danes, Swedes and Latvians. Estonia was a trade partner and a mediator in the Baltic Sea economic space. This function was further strengthened by the formation of the Hanseatic League and the resulting economic development. It is certainly no news to you that already in the 13th-14th century, also the Estonian cities Tallinn/Reval, Tartu/Dorpat, Pärnu/Pernau and Viljandi/Fellin belonged to the Hanseatic League. Even today, the spires and gables of our capital remind us of those times. Following the pattern of Germany, also the Estonian cities were governed through magistrates and guilds. Our legislation has been similar to that of Germany ever since 1248, the first mentioning of the fact that the law of Lübeck was in force in Tallinn. Our traditions, our songs, and even our patterns of thought have been shaped by the thousand years in the cultural space of Northern and Central Europe.

Forty-five years of Soviet occupation had no power to change this fact. It is true that the Estonian economy lost most of its efficiency under the pressure of the Soviet planned economy, but we have also managed to restore it to a considerable extent within last ten years. Owing to our close neighbourhood with Finland and Sweden, and their cultural and technological impact, we have caught up with or even left behind several countries of Western Europe in that field. Our Northern openness to the Internet and usage of mobile phones is reflected in the fact that one-third of Estonians is already using the Internet, whereas the number of mobile phones is close to the number of fixed phone connections. More than 80% of bank transactions is made electronically, and last summer, the Wall Street Journal stated that the Estonian Hansapank was among the three technologically most advanced banks of the world. Our openness is also reflected in the Index of Economic Freedom of the Heritage Foundation, where Estonia is 14th of the 161 countries included in the list. It is true that we are behind Switzerland, but at the same time we are further up on the list than Germany for instance. In the latest UNDP Human Development Index, Estonia has been included to the first group, i.e. the group of highly developed countries.

The Baltic Sea area is not only a geographical concept, but also a mental and cultural one. But also economic: quite a few of you may carry a mobile phone marked ''Made in Estonia''. Estonia is currently making both Ericsson and Nokia phones. Our economic culture and structure have quickly readjusted themselves to those of our Northern and Western neighbours.

We have also revived our economic ties with Russia and our two Baltic neighbours. Thus, the freight turnover of the Port of Tallinn has grown two and a half times when compared to that of mid-Nineties, and Russia's transit constitutes most of this growth. The representation of Estonia with our Southern neighbours is also impressive: in the year 2000, Estonia was second on the list of direct investors to Latvia.

The Baltic Sea area is busier than ever, and Estonia is an ideal basis for participating in the area's economic growth. It is the more important considering that Estonia is also one of the first EU member candidates and that our membership is within close reach today. This is my second subject.

Ladies and Gentlemen, Estonia has set herself the goal to be ready for accession to the European Union on December 31, 2002. This is a realistic timetable. The economic reforms are almost complete; the European Commission writes that Estonia has a functioning market economy. According to the Commission's evaluation, Estonia comes third among the candidates. Also the economic ties between Estonia and the European Union have been tightening. On the first half of 2000, our trade with the European Union constituted 73% of our total foreign trade volume.

On the accession negotiations, Estonia has been successful. We have now closed more than 16 negotiation chapters, which is more than a half of the total number. Substantial discussions are still to be held on several voluminous chapters such as agriculture and environment protection, but I am convinced that also in these matters, we will be able to reach solutions soon. At the same time we have, in the course of negotiations, managed to minimise the number of transition periods, all of which are mostly of technical nature. We wish to accede to the European Union as soon as possible and without any additional clauses.

The prospect of accession to the European Union has helped us to overcome several obstacles that would perhaps have proved too difficult under other circumstances. Owing to the European Union's strict standards both in economic and social sphere we have implemented several reforms with greater speed than we would have managed otherwise, as we wish to be prepared for membership. Therefore, I can clearly state that the enlargement process as well as Estonia's political will to be among the first round of new members have indeed stimulated our internal reforms.

At the same time, Estonia's prospective membership in the European Union has attracted foreign investors. The European Roundtable of Industrialists has composed a whole book on how the European Union enlargement process has already today resulted in concrete economic profit both for the present and future members of the EU. It should especially be underlined that several investments into candidate countries have been made with the view of their future membership in the common market. For foreign investors, Estonia is one of the most attractive countries in Central Europe - we have constantly been among the leading three, and in 1999, only the Czech Republic left us behind. According to the latest World Investment Report, cumulative direct investments to Estonia constituted 36.5 per cent of our gross domestic product in 1998; this is not only the highest number in Central and Eastern Europe, but also twice the European Union average.

Ladies and Gentlemen,

This striving towards a better life, stronger economy and higher competitive ability is so characteristic of Estonia today. We are an economy that is striving forward, and also the enterprises represented here bespeak of this. Using her own example, Estonia will show you the opportunities that the Baltic Sea area and the enlargement of the European Union can offer as a social and economic motive force - when used skilfully. The time has come to conclude economic ties with Estonia, but also to invest in Estonia. We have enough potential both as concerns people and regional conditions. It needs to be used.

I thank you and wish you every success.