This year Estonia is represented at the Emerging Europe Awards with two exciting projects. Among the nominees for the “modern and future-proof policymaking initiative of the year”, which showcases initiatives that use cutting-edge technology to support foreign direct investors, are Invest Estonia and its ComparEST service. Step by step, the little Baltic Tiger is becoming an emerging investment powerhouse.
ComparEST is an online tool that enables potential foreign investors to compare Estonia with other countries based on a range of factors, such as the business environment, labor market, and living conditions. It enables foreign investors to efficiently evaluate Estonia’s potential as an investment location, helping to streamline the whole process and make it more efficient. After all, last year FDI in Estonia hit an all-time high.
In fact, Estonia has maintained its position as the country with the competitive IT sector for two years running, according to the Future of IT report. The study considered the Estonian IT sector the strongest out of 23 neighbors. According to the 2023 edition, the Estonian ICT sector is considered the most competitive in the region for the second year in a row, followed by Lithuania and Poland. Estonia possessed the highest position in the region in 17 of 45 parameters, as well as topping one of four categories of the Index – Economic Impact.
In 2021, Estonia ranked first in Europe and second globally in the Digital Society and Economy Index, which measures the adoption and use of digital technologies in the economy and society. Nearly all government services are available online, and the country has one of the most transparent and straightforward tax systems in the world.
The ICT sector is one of Estonia’s most important and lucrative industries, with higher average wages than many other sectors of the economy. Education in the field is also on the rise, as the number of ICT specialists in Estonia has been growing steadily over the years, reaching 28,000 in 2021, up from 16,000 in 2012. More notably, in 2021, Estonia had the highest percentage of women studying ICT-related fields among the EU countries, with 38% of graduates being women.
The ICT sector has also added more value to the economy during the Covid-19 pandemic, with a significant increase in ICT exports and value added to GDP. All of that happened with no compromise to security. In 2021, Estonia was ranked 3rd in the world in the Global Cybersecurity Index, which measures the level of commitment of countries to cybersecurity.
Estonia’s policy front is also progressive, with its Digital Agenda 2030 strategy aiming to ensure that high-speed, dependable, and reasonably priced electronic communication connections are available throughout the country by 2030, regardless of location. Estonia’s Start-up Visa program has been instrumental in attracting start-ups to the country, with over 2,700 applications received since its launch in 2017.
On top of that, Estonia’s e-Residency program has attracted over 100,000 people from 170 countries, allowing them to establish and run an Estonian company remotely. Crucially, doing business in Estonia is highly profitable for tech companies, as the country has the highest output per person employed in ICT, at 11,064 euros. All these factors combined have made Estonia a top destination for businesses, entrepreneurs, and investors.
At the same time, Ülemiste City, the largest business campus in the Baltics located in Tallinn, is set to introduce an AI-based energy management system in all its office buildings. By utilizing real-time data, AI can make informed decisions on how to distribute and conserve energy more efficiently, reducing overall energy costs and the environmental impact of the business campus.
The energy management system will be introduced in all commercial buildings managed by Mainor Ülemiste, resulting in significant energy savings in a total of nearly 78,000 square meters of office space. The use of AI is yet another step that Estonia has taken to become more energy efficient. For example, the city of Tallinn has saved over €1.1M in energy costs in just three months by implementing energy-saving measures, reports city administration.
An analysis of the implementation of the energy-saving measures by the City Property Department showed that the city’s institutions reduced electricity consumption by an average of 18.2%, gas consumption by an average of 12.9%, and central heating consumption by an average of 7.7%.
With cutting-edge technology making its way into commercial estates, the country is now positioned to reach its energy savings goal even faster: Estonia aims to become 100% renewable by 2030.
In this scenario, the country’s flourishing economy, abetted by a highly educated workforce and startup mindset, has facilitated a high level of economic prosperity. As a result, Estonia now finds itself poised to extend its reach and make investments abroad. The recent paper by the University of Tartu gives a good overview of those efforts, positioning Estonia as an emerging investment powerhouse.
Estonian companies have made more FDI – in relative terms – than their counterparts in CEE countries, with over 11bn euros invested from 2004 to June 2022. The leading players were the finance and insurance firms.
The study showed that Latvia and Lithuania are no longer the most crucial targeting countries for Estonian companies. Other countries such as Finland, the US, the UK, and Poland are now increasingly coming to the fore.
The interviews with over 20 entrepreneurs revealed their reasons for investing: access to qualified labor and strategic assets was the most typical. Opening offices abroad will help Estonian companies to become more international, changing their perspective from domestic to global markets, and providing access to public procurement in the destination country.