Only a few days ago Estonian Investment Agency held its annual Invest in Estonia Awards ceremony, of which I am the patron. Looking back to 1998, I was able to pronounce that it had been a successful year for Estonia. Despite the Russian crisis, we succeeded in attracting foreign investment on a record scale. Conservatively estimated seven billion kroons invested in Estonia in 1998 equals 480 million dollars or about 325 dollars per capita. This is serious money, but we aim to beat this figure in 1999.

Even more important than the amount of investment was its timing. More than half of the seven billion was invested in Estonia soon after the Russian crisis broke out. As the Western banks were struggling to calculate the damage done by the Russian crisis to Eastern and Central Europe, the leading Swedish banks considered massive investment in Estonia a good business idea. Moreover, the 18-fold over subscription of the Estonian Telecom Initial Public Offering in February confirmed that Estonia is firmly on track. In this respect, Estonia can be considered a kind of bellwether for Central and Eastern Europe.

There was another meaningful trend apparent at the Invest in Estonia Awards. The nominees for awards in four categories and the overall winner represented a fair cross-section of the world economies. Our biggest investors were, not surprisingly, our closest Scandinavian neighbours Sweden and Finland. At the same time, companies from the USA and Britain are not too far behind. And a company from Singapore has for four years won the award, each time in a different category. One could almost call Estonia Singapore's Singapore.

Looking back, I believe it is all explained by our past policies. Our commitment to economic and political freedom has been steady regardless of changes in Government and Parliament. Our system is based on a few powerful rules:

1. Our constitution requires the Parliament to pass a balanced budget.

2. Our monetary system is based on a currency board arrangement using a fixed 8:1 exchange rate with German Mark. As a result, the exchange rate has remained stable since 1992 and inflation has been decreasing consistently. This year it will probably be less than 7 %.

3. Estonia immediately established itself as one of the most liberal trade regimes in the world. Estonia has working free trade agreements with the European Union, EFTA, and most of the former Soviet bloc. When taking all of Estonia's Free Trade Agreements into account, then the free market for goods produced in Estonia exceeds 600 million consumers.

4. Estonia has a universal value added tax, and a flat rate corporate and personal income tax of 26%. Investments are about to be freed from corporate tax. Our tax system is beautiful in its simplicity.

5. In privatising large state enterprises, Estonia followed the German Treuhand model of international tenders with the goal of attracting inflows of foreign capital and new management. Over two thirds of GDP come from the private sector.

6. There are no restrictions placed on foreign ownership of business, repatriation of profits or ownership of land. Currently, 85% of Estonian businesses are private.

Based on these premises, our policy towards foreign investors has been to use no tools of competition which could be regarded as unfair. We do not believe in giving businesses gifts in exchange for creating jobs. We do not need to do this. I see our competitive edge as being fairness, transparency and a very good infrastructure. We aim to make Estonia an attractive place to live, because it is not just the money Estonia welcomes. There is at least an equal need for know-how, for world-class managerial practices, for people with an international outlook and world-wide business connections.

The future for Estonia lies with the European Union and we are engaged in accession negotiations as we speak. Economic ties with Europe are getting closer every year, we follow European guidelines in the legislative process. Our leading partners are the Nordic countries. Just one example of how the integration of Estonia with the Nordic countries is gathering speed: many Finns and Swedes - as well as other neighbours - take the trip to Estonia as easily as to any town in their home countries. Every year, Estonia is visited by 5 times more visitors than there are Estonians. In most aspects, Estonia is ready to join the EU immediately.

And this is not just wishful thinking: in a study commissioned by the Austrian Foreign Ministry, the Austrian institute of economy (WIFO) ranked EU aspirants and other East European countries according to economic and financial indicators. Estonia finished a powerful second, ahead of such formidable competitors as Hungary and Poland. To quote ''The Economist'', a publication respected by us all, Estonia is ''a little country that could''.

The former dependence on the Russian market has been decreasing rapidly. After seven years of change, Russia now accounts for only about 10 per cent of our foreign trade, other CIS countries for another 3,5 per cent. The European Union, on the other hand, absorbs 64 per cent of our exports and delivers 56 per cent of our imports. These numbers used to be the other way around. Estonia's success reflects the fastest economic turnaround anywhere in the region.

If we look at the structure of investments, we see that industry accounts for 30 per cent of foreign investments, finance for 22 per cent and distribution services for another 23 per cent. Logistics and telecommunications account for further 10 per cent. The same proportions are apparent in the structure of Estonian GDP. Agriculture accounts for 5 per cent of GDP, industry for 26 per cent, services for over 20 per cent, financial services for another six per cent, logistics and telecommunications for nearly 12 per cent. This structure tells of an economy, which has a firm grip on the future.

Indeed, the Baltic Sea Region has been, and still is, being pointed to as a model for regional economic development in Europe and beyond. The growth of trade is estimated to 80 per cent - a rate comparable to that of the Far Eastern economies in their ''tiger'' years. And the opportunities of the region have not gone unnoticed. To mention just one major project, there is the European Union ''Northern Dimension'', which promotes the relations of the EU with neighbouring regions, especially northwestern Russia, and emphasises also the infrastructure links of Estonia with St. Petersburg.

The Port of Tallinn has always been at the forefront of development. Estonian ports are known in the Baltic Sea Region for their effectiveness and their cost-effectiveness. In addition to this, Estonian banks are among the most reliable in our region as well as being technically ahead of the European as well as the global development curve.

This unique combination has made us the favourite of many businessmen whose trade has an east-west or also north-south direction. Our railway capacity is currently being upgraded to handle the increasing transit cargo flow.

On February 19 Moody's Investor Services assigned a rating of A1 to Estonia's kroon bonds. I assume that the audience here does not need to be told what this means. The most prominent reasons behind the A1 rating are a very low domestic debt and the government's tight fiscal policy. Estonia has had a surplus budget since 1997 and the general government debt in kroons is currently below two per cent of GDP, according to Moody's. Furthermore, according to the agency, the government's total debt is below ten per cent of GDP, local government being responsible for one fifth of the debt. Estonia is not as sensitive to the speculative capital outflow as economies with a large government securities market because most of the portfolio investments have been oriented to the share market.

To sum it up: Estonia is a stable and growing economy, situated in the centre of a region whose market, when counting only the Scandinavian countries and northwestern Russia, reaches up to 80 million consumers. And Estonia has become a trustworthy trading partner and the upholder of dynamic development in this region. Investors with good business sense and strategic vision are establishing their businesses in Estonia now. And they are welcome.

With those words I would like to express my thanks for your interest in Estonia.

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