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Country Commercial Guides FY 2000: Estonia Report prepared by U.S. Embassy Tallinn, released July 1999 Note*

CHAPTER V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT

Best Prospects for Non-Agricultural Goods and Services

1. Telecommunications
2. Environmental Protection Technology
3. Travel and Tourism services

Rank of sector: 1
Name of sector: Telecommunications
ITA industry code: TEL

Telecommunications is one of the fastest growing markets in Estonia, as the country modernizes the antiquated telecommunications infrastructure inherited from its socialist period. The privatization and deregulation of the Estonian telecommunications market began in 1991 with the separation of operative functions (enterprises) from the regulatory bodies (ministry) and continued through the creation of companies with foreign capital participation. The telecommunications and postal services sector is virtually open. One important exception is that the national telephone service provider, AS Eesti Telefon, was granted special rights in telephone communications until 2001. The state sold its participation in Eesti Telekom via an open tender to a consortium of Swedish and Finnish firms in January 1999.

The density of telephone coverage per 100 residents has risen from 22 at the end of 1992 to 34.2 as of March 1999. As of March 1999, there were 497,000 main telephone lines, of which 48 percent were digital lines. Approximately 20 percent of the Estonian population utilize cellular telephones.

The number of computer users is 400 thousand, which constitutes 37% of the adult (aged 15-74) population. Seven percent of computer users have a computer at home, and an additional 2% own their own laptops. There are 21,298 Internet hosts in Estonia (i.e. 147 hosts per 10 000 of population).

Rank of sector: 2
Name of sector: Environmental protection technology
ITA industry code:

Nearly USD 67.6 million was spent on environmental protection in Estonia in 1998, a figure which is expected to reach USD 565 million in the 1998-2000 timeframe, and nearly USD 950 million between 2001-2006. The actual amount is in doubt however, given that the majority of environmental protection investments are the responsibility of the currently cash-strapped public sector. Nonetheless, there are certain environmental standards that Estonia must meet in order to join the EU, and the environmental technology market in Estonia will continue to grow accordingly. Nearly 90% of the environmental investments in Estonia over the past years have been directed toward the protection of water and ensuring the quality of drinking water -- about USD 44.3 million. Significant resources were also put into waste treatment.

Rank of sector: 3
Name of sector: Travel and Tourism Services
ITA industry code: TRA

With the minimum of 28 days of vacation per year, 20 percent of the Estonian population traveled abroad in 1998, compared with 2.5 percent in 1993. Ninety- seven percent stayed in Europe, with a strong preference for Scandinavian destinations. North America and Thailand are the top choice among long-haul destinations. However, there is heavy competition from new destinations such as Morocco.

More than 5,000 tourists from Estonia visited the United States in 1998, which is 6.6 percent more than in 1997.

There are no direct flights between Estonia and the U.S., and competition between airlines to sell tickets to the U.S. is almost nonexistent -- the price of U.S. destination flights is correspondingly high. Competitively priced tourist packages are mostly sold through travel agencies in Scandinavia.

Best Prospects for Agricultural Products

High priority beverages: Live stock genetics, dairy related agricultural equipment, feed grains, feed supplements; pet food;

Medium priority: fresh fruits; beverages: wine; snack food: health snacks, nuts; convenience foods;

Estonia's agricultural sector has still not recovered from half a century of forced socialism, and is struggling both to modernize and adjust to free market competition at the same time it readies itself to enter the EU. Additionally, the financial crisis in Russia weakened one of the Estonian agricultural sector's largest export markets.

The most successful U.S. agricultural export to Estonia is poultry -- of the nearly USD 75 million of poultry imported by Estonia in 1998, over one-third was from the United States. Other significant U.S. exports include protein isolates and concentrates (USD 4.77 million -- one-third of Estonian imports), pork (USD 2.4 million), ham sausages (USD 1.2 million) and ethyl alcohol (USD 1 million).

To date there are no tariffs on agricultural imports. However, it appears that the Estonian government will place import tariffs on agricultural imports from certain third countries (this excludes Ukraine, Latvia and Lithuania, and members of either the EU, or EFTA) beginning January 1, 2000. The amount of the tariffs and the products to which they are applied remains to be decided. However, all tariffs will be within the limits allowed by the WTO.