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Study reveals top reasons for investing in Estonia

A recent study by the University of Tartu disclosed the main reasons that foreign investors consider when investing in Estonia. Qualified workforce, political and economic stability as well as ease of doing business are among top factors.

Investors reveal Estonia’s qualified workforce to be one of the most important aspects to consider when expanding to Estonia. Among other findings, the study states that investors believe accumulation of technological and work organization know-how to give Estonia a strong competitive advantage.

“Our talented workforce and smart usage of IT measures available ensure high added value to companies. The nation’s digital mindset makes its workforce exceptionally adaptable – a characteristic of labour that is highly sought after,” comments Kaspar Kork, director of Estonian Investment Agency.

It is no secret that talent shortage persists as a global trend – the Estonian workforce is no exception. Despite global currents, Estonia is driving initiatives both in the private and public sector to guarantee the continuous supply of skilled talent. One of the most prominent measures is the country’s e-Residency programme, which remains to attract a flow of global interest.

While Work in Estonia promotes bringing in foreign talent, Invest Estonia assures that foreign investors are provided with aftercare services such as identifying the necessary workforce. “We are committed to helping companies find international talents in IT, engineering and other fields as well as offering different reception and integration services in the International House of Estonia,” comments Anneli Aab, Head of the Work in Estonia. Meanwhile, the private sector has initiated several actions, including Jõhvi Coding School and the Unicorn Squad, to further ensure the steady flow of new talent.

Balance of the Estonian market

According to the study, foreign investors welcome the stable and predictable nature of the Estonian economy, as the country is seen as having strong political and economic security. A balanced tax system and business-friendly approach make Estonia an internationally attractive and competitive business climate. Investors often note Estonia’s favourable tax policies. After all, Estonia has been ranked globally as #1 in tax competitiveness. The country has worked hard to ensure low red tape, efficient and transparent public services and a simple and business growth oriented tax system – all of which proves to be attracting new investments and global players to Estonia.

Ease of doing business

The study finds that the importance of modern infrastructure and e-solutions among foreign companies has grown significantly in the past ten years. As expected, digitalisation is gaining more and more weight in almost all sectors, especially in the form of data collection. According to the study, foreign investors find database technologies, encryption and security, cloud-based solutions and automation to be just some of Estonia’s strongest assets.

“Due to global labour shortages, we are seeing a trend of companies looking for opportunities for automation and digitalisation. Estonia offers an agile business environment with endless possibilities to test out new innovative ways for companies to digitalise their operations, ” says Kork.

Estonia has, in fact, become the world’s most digitally advanced society. The country has built an ecosystem where 99% of governmental services are online. 98% of companies in Estonia are established online, while declaring taxes only tends to take a few minutes. Even potential investors can make their first steps through quick and fully digital e-consulting.

Strategic location, flourishing market

Estonia is uniquely positioned. While it is in itself a perfect test and development bed for innovative ideas and a rapidly growing market, it is also a gateway to European and Asian markets via maritime, rail and air transport. Furthermore, larger companies report Estonia as having great growth potential and consider the country as a natural part of establishing their presence in the Scandinavian region. Investors refer to Estonia as a strategic location to test out innovative ideas and technologies as the country offers a multitude of opportunities for this in different sectors from next generation energy to autonomous transport systems.

Where to invest in Estonia?

Companies that have low labour needs and have a high level of automation or digitalisation or foreign investors advancing towards reducing labor intensity are advised to seek expansion to Harju County (including Tallinn) and Tartu region. Companies with more labor intensive production with an emphasis on manufacturing and renewable energy are recommended to pursue the Ida-Virumaa region.

As to expansion to the rest of the country, Estonian bioresource producers have made remarkable progress in recent years (especially in production of cereal and milk products). Now investments aimed at processing and valorising bioresources such as timber, grain, milk and fish by implementing new technological solutions are encouraged.

You can have a deeper look at what Estonia’s regions have to offer in the Regions section.

One of the main authors of the study, Professor of International Business at Tartu University Urmas Varblane finds that as a result of the COVID-19 crisis, the desire of multinational companies to make their operations more resilient may accelerate and lead to further regionalization and relocation. “Estonia may benefit from this trend, but it requires a targeted approach both from the government and local firms. The reshoring happens only if the firms in Estonia remain attractive for multinational companies and offer efficiency gains,” he comments.

Wish to do business in Estonia? Send us a request for e-Consulting to get started or obtain more information.

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What is it like to run a business in Estonia? How to benefit from the e-solutions and the efficiency of our business culture? What are the opportunities in specific sectors? Who to partner up with?

The Estonian Investment Agency’s team is happy to help you via its complimentary e-Consulting service, organize online or offline follow-up events such as virtual investment visits and guide you through the fairly simple process of investing in Estonia.

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