In a context where global foreign investment increased by 10.9% in 2013, in particular in Europe (+25.2%) and in Latin America (+17.5%), FDI flows to developing economies reached a new high of US$759 billion. However macroeconomic fragility and policy uncertainties are driving investors to caution.
In a manner similar to other small-scale open economies, Estonia needs a constant flow of foreign investments in order to maintain the expansion of its economy. Foreign investment has progressively developed in Estonia during the last ten years, led by the favorable market economy and a regular growth. Estonia possesses a large potential to attract FDI and it is one of the leader countries in Central and Eastern Europe in terms of investment inflows per capita.
Among the so-called Eastern European countries, Estonia is the most open to FDI. In 2013 FDI, mainly from Sweden (over 28% of total) and Finland (over 23%) represented over 80% of GDP. This importance of foreign investment, facilitated by the country's very pro-business attitude of the legislative framework and, more broadly, of Estonian society, is the expression of the country's the perfect integration into a northern circuit of production, in which the Estonian subsidiaries often function as outsourcing sites for Scandinavian parent companies.
The country is highly developed in the FDI-attractive fields of IT, bio technologies and green industries. It is an attractive location for investment in the Baltic region (one of the fastest growing European markets in recent years), with a strong economy. A balanced budget (constitutionally protected), a free trade regime, fully convertible currency, a competitive banking sector and an investment-favorable environment have all contributed to the success of the country. In 2013 the FDI influx totalled over USD 1.470 billion.
Information on the 2013 FDI influx in this region can be accessed in the Global Investment Trade Monitor published in January 2014 by the United Nations Conference on Trade and Development (UNCTAD).
|Estonia||Eastern Europe & Central Asia||United States||Germany|
|Index of Transaction Transparency*||8.0||7.0||7.0||5.0|
|Index of Manager’s Responsibility**||3.0||5.0||9.0||5.0|
|Index of Shareholders’ Power***||6.0||9.0||5.0|
|Index of Investor Protection****||5.7||5.9||8.3||5.0|
Source: Doing Business - Last Available Data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.
|Foreign Direct Investment||2011||2012||2013|
|FDI Inward Flow (million USD)||340||1,517||950|
|FDI Stock (million USD)||16,961||19,351||21,451|
|Performance Index*, Ranking on 181 Economies||51||-||-|
|Potential Index**, Ranking on 177 Economies||75||-||-|
|Number of Greenfield Investments***||29||31||17|
|FDI Inwards (in % of GFCF****)||6.4||26.9||15.4|
|FDI Stock (in % of GDP)||75.2||86.5||87.6|
Source: UNCTAD - Last Available Data.
Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.
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Last Updates: January 2015