Chapter 4

Agriculture

Internet Applications, Secure Data Communication

Rank of sector: 1
ITA industry code: TES

Overview

Estonia leads the way among the Baltic States in Internet usage. Today about 66% of the population uses the Internet and about 53% of households have Internet access at home. Internet banking services have experienced rapid growth. Internet banking has become a common channel through which people perform cash transfers, pay taxes, pay for services, communicate with the tax board, etc.

Since January 2002, the Citizenship and Migration Board has been issuing a new primary domestic identification document - the ID card. In addition to many security features, the card has a machine-readable code and a chip, an electronic device containing visual data on the card and two security certificates (long number series), to verify the individual and supply digital signatures. In March 2007, Estonia became the first country in the world to employ internet voting for parliamentary elections. Possible future uses of the card include the integration of ID cards, banking cards and various access cards.

In April 2007, Estonia experienced an intensive, coordinated 'cyber attack' against government and private sector websites, following the government's decision to relocate a Soviet-era statue from the center of Tallinn to a nearby military cemetery. The targeted sites recovered quickly, but the attacks revealed weaknesses in cyber defenses and a lack of information security specialists. The government is drafting a cyber defense strategy for 2008-13. State institutions plan to spend an estimated $15 million raising the efficiency of information security over the next six years. The biggest part of this would be spent on protecting critical infrastructure.

In 2004, Estonia proposed establishing a NATO Cooperative Cyber Defense Center (CCD) in Estonia, which in 2007 received renewed focus and momentum. To date, six other NATO member states have expressed an interest in joining this Center of Excellence in Cooperative Cyber Defense. The CCD is currently up and running, and the Estonian government hopes to have it designated as a NATO Center of Excellence (COE) by December 2008. Non-NATO countries can also express their interest in joining the center's activities.

As part of Estonia's new cyber defense strategy, special courses will be introduced into the curricula of Estonian universities in the coming years. One department of the National Defense College in Tartu would be linked to the future NATO cyber defense center and have classrooms in Tallinn for teaching these courses.

E-voting

Estonia's parliamentary elections in spring 2007 were the world's first national elections to allow voters to use the internet to cast their ballots. Estonia first allowed e-voting in local elections in 2005. In 2007, 30,275 voters (3.4% of the total) voted online – three times the number from two years before. E-voters needed an ID card, ID card reader and a PC connected to the Internet. The software for the e-voting worked properly and no technical problems hindered the voting process. Officials monitored closely for cases of fraud, but none were reported. Estonia has since become a case study for many countries wanting to introduce e-voting.

An overview of e-government projects can be found: http://www.cyber.ee/english/

Opportunities

Identification and security related applications, software and hardware.

Resources

Estonian National Electoral Committee: http://www.vvk.ee/engindex.html
Cybernetica: http://www.cyber.ee/english/company/news/2005/evoting.html/

General Science and Technology

Rank of sector: 2
ITA industry code: GST, BTC

Overview

The Estonian Research and Development Strategy “Knowledge-based Estonia” was approved by the Riigikogu (parliament) on December 6, 2001. In May 2006, the Ministry of Economic Affairs and Communication revised and updated the strategy for 2007-2013. On the basis of this strategy, annual R&D action plans will be compiled which define specific programs and measures for promoting R&D. The Estonian Government intends to increase expenditures on R&D to 3% of GDP by 2014. The main strategies for financing this planned increase include a significant increase in state financing and the active participation of private and foreign capital. In 2007, the trade promotion agency Enterprise Estonia opened a new office in San Jose, CA targeting business opportunities for Estonian companies with IT and biotech firms in Silicon Valley.

The key areas for Estonian R&D are the following:

information and communication technologies

biomedicine

materials technology.

The goal of Knowledge-based Estonia is to develop research and/or technology parks with full sets of services in both Tallinn and Tartu, as well as a network of regional innovation and/or incubation centers in those regions where there is sufficient local potential. There will be information and training on the concept of risk capital and technological transfer guarantee schemes for small and medium enterprises.

The results of the OECD's 2006 Program for International Student Assessment (PISA) test showed that Estonian students and teachers rank among the best in the world. By average scores, Estonian students ranked fifth after Finland, Hong Kong, Canada and Taiwan.

The Estonian Genome Project Foundation was founded in 2001. The project aims to collect the phenotype and genotype data of one million Estonians (about 3/4 of the population) in a central electronic database. Systematic data collection and blood samples will lead to a unique database enabling large scale association studies, revealing new information about genes that cause and influence common diseases. This information could lead to more exact and efficient drug development, new diagnostic tests, improved individualized treatment and determination of risks of the development of a disease in the future. In addition to the Estonian Government support of EUR 320,000 the Project has successfully attracted private venture capital as well: USD 75,000 locally and USD 3.7 million internationally.

The main international links within the biotech field are with the neighboring countries. A meta-bioregion - ScanBalt BioRegion has been created, encompassing the Nordic and Baltic countries, Northern-Germany, Poland, Kaliningrad and the St. Petersburg area.

Biotech Research in Estonia
Today more than 15 different research institutions with an overall permanent staff of approximately 300 people are directly linked to the field of biotechnology. The key institutions are:

1) Tartu University
2) Estonian Biocentre
3) Institute of Chemical Physics and Biophysics

Tartu University: Key actors in the field of biotechnological research and development at Tartu University are the Institute of Molecular and Cell Biology and the Faculty of Medicine with its Biomedicum. For example, five inventions for which Tartu University has filed international patent applications since 2002 are:

Biosensor and its construction

Determination of DNA sequence

Bacillus SIM-7

Lactobacillus ME-3

Conductive transparent tip for scanning microscope

The Estonian Biocentre (EBC) was established in 1986 as a joint venture between Tartu University and the Institute of Chemical Physics and Biophysics to promote research and the technological development of gene and cell technologies in Estonia. In the year 2000 the EBC placed 3rd to 5th in competition with 184 research labs under the EC RTD Framework Program 5 and received a nomination as a Centre of Excellence in research together with additional financing. The main research fields are as follows:

Molecular Regulation of the cell cycle via protein p53

Transgenic mice

Immunodetection of tumor markers

Gene therapy

Studies of the human and bacterial ribosomal proteins

DNA replication

Development of DNA-chip-based technology for molecular diagnostics

Transcription regulation in bacteria

Biodegradation

Evolutionary genetics

Factor V gene mutations

Development of biotechnological expression vectors based on the papilloma virus replicon

Photosynthesis

Yeast metabolism

The National Institute of Chemical Physics & Biophysics (NICPB) has become one of the leading institutions in biotechnology in Estonia since 1984, when the Laboratory of Molecular Genetics (LGM) was started. Currently the NICPB consists of four laboratories, three of which (molecular genetics, biochemistry, bioenergetics) are active in biotechnological research. From 1997 the NICPB started teaching (at undergraduate, master and PhD levels) a gene technology curriculum at Tallinn Technical University (TTU). For that reason the Centre for Gene Technology at TTU was founded, consisting of three chairs (gene technology, molecular biology and molecular diagnostics). Currently all-together around 60 research scientists are working in three "biology-related" laboratories at NICPB (plus around 35 research scientists in the laboratory of chemical physics).

The main biotechnological research directions in the NICPB currently involve the following:

cell programming, novel therapeutic strategies for nervous system regeneration and in cancer-apoptosis phenomena interplay;

cell factories and biosensors;

DNA based technologies;

plant biotechnology;

Biotech Companies in Estonia

The first biotech companies in Estonia were started in the late 1970s and early 1980s as spin-offs from the Estonian Biocentre or the National Institute of Chemical Physics and Biophysics. Their activities included making protein preparations from blood sera and bacterial cultures. Introduction of the hybridoma technology in the early 1980s gave rise to production of numerous panels of monoclonal antibodies against different plant viruses, including potato viruses widespread in Estonia.

At present the 11 core biotech enterprises have about 145 employees. The focus of these companies are on developing and marketing technologies for genetic research and providing services relating to diagnostics and therapeutics. The main fields of competence in Estonian biotech companies are in the following areas:

Custom designed chip development;

Genotyping based on Arrayed Primer Extension technology (APEX);

Functional genomic and proteomic services and equipment (epitope tagging technology);

DNA analyses (finding DNA variations);

DNA vaccine development (HIV, cancer);

Applications of transgenic animal technologies Best Products/Services

Biotechnology

Resources

Tartu University: http://www.ut.ee/index.aw/set_lang_id=2

Estonian Biocentre: http://www.ebc.ee/EBC/

Institute of Chemical Physics and Biophysics: http://www.kbfi.ee/?id=56&lang=eng

Transit Services and Logistic Centres

Rank of sector: 3
ITA industry code: TRN

Overview

Estonia's location at the crossroads between East and West is an attraction for foreign companies to locate their operations in the country. Current and planned investment flows into transportation and communication reflect this, especially in the shipping and port sector. Foreign investments in transportation and communication have substantially risen over the past few years, and currently constitute 17% of the total FDI stock in Estonia.

Estonia's location is ideal for the creation of efficient transportation links and distribution chains for goods and services for European and other international companies. The Estonian transportation and logistics sector is comprised of a combination of transportation services, transit trade, distribution centers and value-added logistics. The lion's share of transportation income comes from international transit and port services.

Operator services are mostly provided by private enterprises. Sea transport, inter-urban bus traffic and air traffic are all organized by private companies. The most important state-owned transport companies are AS Tallinna Lennujaam (Tallinn Airport Ltd), AS Tallinna Sadam (Port of Tallinn Ltd), AS Elektriraudtee (Electrical Railways) and AS Eesti Raudtee (Estonian Railways). (Note: Electrical Railways provides service within the immediate vicinity of Tallinn. Estonian Railways in the major owner of the national railway infrastructure. End Note.)

Estonia's transport and communications sector is transnational by nature and, therefore is one of the economic sectors most thoroughly integrated with European countries. Estonia has become a member of all the necessary international transport and communication organizations.

Estonia became a member of the EU's visa-free Schengen zone in December 2007. Since then, border officers stopped checking travel documents from other Schengen countries at the passenger terminals in the port of Tallinn and on the border with Latvia. At the end of March 2008, checks also will be abolished at airports for travelers coming from other Schengen zone countries.

Located in the Baltic Sea region, Estonia has captured an increasing share of the rapidly growing trade through the Baltic Sea. Its three major cargo ports - the Port of Tallinn, the Port of Pärnu and the Port of Kunda - offer easy navigational access, deep waters, and good ice conditions.

The Port of Tallinn is the biggest cargo and passenger port in Estonia. It holds a leading position in the handling of cargo flows between Russia (as well as other CIS countries) and Western Europe. Estonia's sea transportation system is connected to other European ports. There are daily ferry links from Tallinn to Helsinki and Stockholm, as well as frequent cargo ferries to Antwerp, Copenhagen, Hamburg, Kiel, and Harwich, etc.

The Port of Tallinn's Muuga Harbor Free Zone is designed to increase the competitiveness of the transit sector in Estonia by granting more flexible customs procedures to companies rendering transit and distribution services. The Port of Muuga is especially attractive to high value container distribution operators. The simplified customs paper handling, easy transfer of ownership rights, and value-added operations allowed in the zone are designed to foster the development of distribution centers. Continuous infrastructure investment provides additional expansion opportunities at Muuga Port, which is one of the deepest and most modern ports in the Baltic Sea region.

In January 2008, the Port of Tallinn signed a cooperation agreement with Ningbo Port of China, one of the world's biggest ports, by which the companies will jointly build a container terminal and Chinese goods distribution center in Muuga. The total investment will amount to USD 220 million and the new terminal should be completed by the end of 2010 or early 2011. The new terminal will be the first major distribution center of Chinese goods in the Baltic Sea area and will serve markets of northwestern Russia, Scandinavia and the Baltic countries.

The port in Sillamae on Estonia's northern coast, opened in 2005, can handle up to 10 million tons of goods a year and receive even the biggest of ships that enter the Baltic Sea. The port is connected with the Tallinn-St. Petersburg highway by new roads. Owned by Estonia's Silmet Group and Russia-based oil interests, the Sillamae port is a landlord-type port that leases its infrastructure to independent operator companies on the basis of long-term rights. At present four terminals are being developed in the port. Sillamae Oil Terminal is building a facility for heavy and light oil products with a container capacity of 157,500 tons, Tankchem Ltd. a liquid chemical products terminal with a capacity of 46,500 tons, Sillgas Ltd. an oil and liquefied gas terminal with a capacity of 12,000 tons, and SilSteve Ltd. a general cargoes terminal with a 22 hectare open storage yard and 7,000 square meters of warehouses.

Best Prospects/Services

Free Zone status (with 0% taxes and duties) provides companies an efficient business environment for value-added distribution and manufacturing in the region.

Opportunities

Estonian ports provide excellent opportunities for value-added logistics services and can serve as distribution centers for the Baltic Sea Region, including Russia and Scandinavia.

Resources

Enterprise Estonia: http://www.investinestonia.com/index.php?option=displaypage&Itemid=77&op=page&SubMenu=

Port of Tallinn: http://www.ts.ee

Port of Sillamäe: http://www.silport.ee

Automobiles and Automotive Parts

Rank of sector: 4
ITA industry code: AUT, APS

Overview

For many years it was almost impossible to register U.S. made cars in Estonia due to strict restrictions. Last year the government eased some of those regulations, allowing registration of U.S. made cars which pass single body type approval, and which do not have a European analogue. Although the process is still expensive and time consuming, it has increased considerably the export of U.S. cars to Estonia. While in 2006, car exports to Estonia increased by 6.5% compared to the previous year; in 2007 they increased 108% over the same period in 2006.

Best Products/Services

U.S. made cars, which do not have European analogues.

Opportunities

All range of automotive aftermarket products and U.S. car parts.

Resources

Estonian Motor Vehicle Registration Center: http://www.ark.ee/atp/?keel=en

Agricultural Sectors

The Estonian food market holds potential for imports of a wide range of high-value packaged goods targeted to higher/middle income level groups, increasing numbers of tourists, and a growing expatriate community. The fast-developing consolidation of retail outlets through investment by large Scandinavian chains may provide new opportunities for exporters who can successfully connect with these companies. There are long established consumer preferences for domestic fresh products which have short shelf lives and are free of additives. Although consumer demand remains price-sensitive; consumers have started to show interest in organic foods. A preference for new products is strong among the younger population, but a significant number of consumers remain "tasting level" buyers.

Estonia is a net importer of food products. The Estonian food market holds considerable potential for a wide range of competitively priced packaged goods targeted at high/middle income groups and tourists. Estonia's most important food imports are beverages, meat products, fruits and vegetables, coffee, tea, preserves of vegetables and fruits, and feed grains. Major U.S. exports, which have good market potential, include fish (salmon), nuts (shelled almonds), dried fruit (prunes), fruit (grapefruit), wines, liquors and hardwood lumber.

Estonian food exports include dairy products, meat, fish, and beverages. The U.S. imports Estonian wood products (softwood and treated lumber), beverages, frozen fish and fish preparations, as well as starch, glues, and cotton articles.

Since Estonia's EU accession in 2004, the EU's external customs tariffs now apply on imports to Estonia. EU agricultural exports from European countries therefore face zero duties, compared with Most Favored Nation (MFN) rates for U.S. exports. Detailed information on the current customs tariffs applicable in the EU are available at

http://europa.eu.int/comm/taxation_customs/dds/cgi-bin/tarchap?Lang=EN

For more information see: Foreign Agricultural Service (regional office in Warsaw):
http://poland.usembassy.gov/poland/agric.html

Return to table of contents

Doing Business in Estonia: A Country Commercial Guide for U.S. Companies

Chapter 4: Leading Sectors for U.S. Export and Investment

Doing Business in Estonia:
A Country Commercial Guide for U.S. Companies

Chapter 4:
Leading Sectors for U.S. Export and Investment