Business Environment in Estonia
Estonia’s business environment in brief:
* There were 117,398 active enterprises in Estonia in 2016
* Small enterprises that employ one to nine people make up more than 80% of all enterprises
* Most enterprises – 21,288 – deal in wholesale trade, 12,776 – in agriculture, forestry and fisheries, and 11,214 – in construction
* Estonia is ranked 12th in the World Bank’s 2017 Doing Business Report
Description of Estonia’s business environment
Due to historic, socio-economic, geographic or other reasons, several services and manufacturing sectors are run by monopolies – mostly state-owned enterprises. For example, electricity utility Eesti Energia is a state-owned company, the railways are managed by the state-owned Eesti Raudtee, and the majority of Estonian commercial ports are run by yet another state company – Tallinna Sadam. The country’s network of natural gas pipelines is run by Eesti Gaas, which used to belong to Russia’s Gazprom and Latvia’s Itera but now is owned by Trilini Energy, a subsidiary of Estonian investment firm Infortar.
* Several sectors dominated by the monopolies are open for new businesses. For example, Tallinna Sadam has not yet encountered notable competition because there are just a few places suitable for a large port, and cargo throughput via Estonia is limited. Some other markets, such as electricity distribution, are gradually opening up pursuant to Estonia’s agreements signed with the EU. The monopolies that run nationwide infrastructures, for instance, gas pipelines, electric grids and railways, must treat all network users equally and may not impede competition in any way.
* There is substantial investor diversification according to investors’ country of origin in most business sectors except two: banking and telecommunications. In the banking sector, four Scandinavian banks – SEB, Swedbank, Danske Bank, and Nordea – control nearly the entire market, while the telecommunications sector is also dominated by the Scandinavians: TeliaSonera, Elisa and Tele2, which have taken almost the entire market.
* Estonia has excelled among the Baltic countries in terms of business environment conditions for a long time, ranking the highest in the World Bank’s Doing Business Report.
Starting a business in Estonia
* In the World Bank’s 2017 Doing Business Report, which measures how easy it is to conduct business in 190 countries around the world, Estonia is ranked 12th or its highest position so far. Estonia is in 14th place in terms of starting a business. It takes three steps, 3.5 days, and business start-up cost is 1.2% of income per capita. Minimum start-up capital is equivalent to 16.4% of income per capita.
* In the past, Estonia was ranked the highest in the category of trading across borders, but this year, just like last year, Estonia’s highest position is in the Registering Property category – 6th place. Registering property requires three steps in Estonia, and takes 17.5 days. Estonia also ranks high in Dealing with Construction Permits. With ten steps that will take 102 days, Estonia is in the 9th place in this category.
* Estonia still ranks rather low in the Protecting Investors section – 53rd place, although this is an improvement from the 81st place a year ago.
* In terms of trading across borders, Estonia has climbed to the 17th place.
* As regards resolving insolvency, Estonia’s position is rather weak. It ranks 42nd as it will take three years to complete the process.
* Estonia is among the countries boasting quite active Internet usage. In the first quarter of 2016, 86% of households in Estonia had Internet connection at home with 90% of households using wired or wireless Internet connections. As many as 88% of childless households and 92% of households with children had permanent wired or wireless Internet connections.
* Since the beginning of 2015, Estonia has been attracting investors by offering them to become the so-called e-residents of Estonia, or residents of the country’s virtual environment. Any foreigner can become an e-resident as Estonia will create a digital identity for them. During the past two years, 15,000 have obtained the status of e-resident and established over 1,000 new companies. According to expert estimates, the companies established by e-residents contribute EUR 4.3 million to the Estonian tax revenue every year.
Estonia’s international ratings:
* The international rating agency Moody’s Investors Service has confirmed Estonia’s rating at A1 with stable outlook. Standard and Poor’s assigned Estonia the AA- rating with stable outlook. Fitch assigned the country the A+ rating with stable outlook.
* 30th place in the 2016 Global Competitiveness Report (World Economic Forum, Geneva)
* 70 out of 100 points in the 2015 Corruption Perceptions Index (Transparency International)
* 12th place in the 2017 Doing Business Report (World Bank)
* 6th place in the 2017 Index of Economic Freedom