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Greeting Address of the President of the Republic to the Estonian-Indian Business Seminar, Federation House, New Delhi on February 5, 1999
05.02.1999

Ladies and Gentlemen,

I am happy to be here and to see the number of people who have turned up for this Business Seminar. Indian traders and businessmen are well known for their business acumen, and have been well known since hundreds of years. India has been an important destination for European business travellers for many centuries. And as a representative of a small nation, I would like to add that it has always puzzled me that the Islamic seafarers were the first to discover India and the Christian European seafarers were the last. It seems in this connection and in political view that those who are the last have had a better chance to rewrite history.

Estonia is rewriting the past to have a vision for the future. The Estonian capital Tallinn was an important member of one of the mightiest leagues of merchants the world has ever seen - the Hansa. Tallinn's Old Town, is an UNESCO World Heritage listed site exactly because of the central role in the east-west and north-south trade she once played and is playing again today. Tallinn's mercantile flavour is today stronger than ever.

Estonians are a seafaring nation. The Baltic Sea has never been a dividing factor for us. The well-known writer and traveller Ernest Hemingway once wrote that in every port of the world one can always run across a sun-brown Estonian seaman. And I know the one he met in 1930s. Today this rings more true than ever. For us the sea is a means of communication, an environment to do business in. Port of Tallinn has always been at the forefront of development. Now more than ever, Estonian ports are known in the Baltic Sea Region for their effectiveness. In addition to this, Estonian banks are among the most reliable in our region as well as being technically ahead of the European and 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.

While we profit from our proximity to Russia, our future is tied to the European Union. Already more than 65 per cent of our trade is with the countries which belong to the European Union. Our leading partners are the Nordic countries. The integration of Estonia with the Nordic countries is gathering speed. Just one example: a great number of the mobile phones which many of you are perhaps carrying have probably been assembled in Estonia. Many Finns and Swedes and other people 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.

After Estonia was able to restore her independence she lost during World War II - and I am very glad that you heard from the chairman that we were using our songs, our identity as the strongest weapon - she has accomplished a quick transition from soviet command management to a modern, free-trading, open society. Our commitment to economic and political freedom has been steady regardless of changes in Government and Parliament, and this is one of the reasons why Estonia is a frontrunner among Central European countries to join the EU.

Our reforms had several important aspects:

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 1991 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%. From the very beginning the state sector has been able to meet its financial commitments and Estonians were given clear incentives to work industriously and save conscientiously.

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-third of GDP comes 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.

The results speak for themselves. In the area of foreign investment, the 1997 World Investment Report shows that between 1989 and 1996, Estonia is ranked second in Central-Eastern Europe in terms of per capita foreign direct investment inflows. At the same time, the Estonian economic space is becoming too small for our businesses. The trend has been for Estonian companies to branch out into neighbouring economies. In 1996, Estonia was already the highest per capita foreign investor among the Central and Eastern European countries.

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 and St. Petersburg.

To sum it up: Estonia is 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. I hope that Indian businessmen will really discover Estonia at today's Business Seminar. I expect many interesting and profitable contacts to arise from this occasion. With those words I would like to express my very sincere thanks for your interest in Estonia.

 

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