estonia in transition
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Estonia in transition. Muslimin (1006793990) Haensri Jemy (. Where is Estonia?. Located on the Baltic Sea, and offering a gateway to Russia. Estonian History. Estonia as a free country in 1991. Lack of constitution, democratic institutions, and a legal system ; - PowerPoint PPT PresentationTRANSCRIPT
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ESTONIA IN TRANSITIONMuslimin (1006793990)
Haensri Jemy (
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Located on the Baltic Sea, and offering a gateway to Russia
Where is Estonia?
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Estonian History
Soviet Era (prior to 1989)• Poorest citizens in
Europe (did not improve after WW II)
• Economic decisions centralized in Moscow.
• No R&D, no Sales & Marketing functions
Perestroika (1989-1990)•Few manufacturing industries privatized
•However, sold only to ethnic Russians
Transition to Independence (1991)•Political turmoil and uncertainty
•Visible demonstrations against Russia’s military
Free country in 1991
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Lack of constitution, democratic institutions, and a legal system;Obsolete and bad infrastructures;Below-western-standard banking sector;Economy crisis:
high inflation declining GDP, export halted, domestic demand feel, companies went bankrupt, unemployed skilled & unskilled people
Estonia as a free country in 1991
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How has Estonia substantially improved its competitiveness, and performed so well compared to most other transition countries? How was Estonia able to advance so rapidly?
Question 1
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Post-Independence Political & Economy Decisions
Open for trades and investments•Memberships of WTO and later the EU•Council of the Baltic Sea States (CBSS) in 1992•No exchange controls or restrictions on foreign investment
Transformations•Communist-led planned economy to western market economy•Pegged currency to German Mark (1992) and the Euro (2002)
Structural Reformations•Privatization of state-owned firms (incl. utilities)•Building modern infrastructures.•Simple tax system
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Post-Independence Political & Economy Decisions (cont’d)
Business Environment
•100% literacy rate in Estonia•A state system offering good education for all in 9 + 3 year education system.
Education
•The Estonia Information Technology College was established in Tallinn in September 1999
Technology
•Modernized infrastructure.•Privatized utilities.
Infrastructure
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Post-Independence Political & Economy Decisions (cont’d)
Business Environmen
t (cont’d)
•Banks played the dominant role in Estonia’s financial markets
Financial Markets
•Strong Exports.•Tax-free/customs-free zoneTrade•Foreign MNC significant contributed to exports
Foreign Direct
Investment
•develop a number of emerging clusters
Economy
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Post-Independence Political & Economy Decisions (cont’d)
Clusters
Develop emerging clusters, typically built around the country’s traditional industrial sectors.
Integrate with some of the stronger clusters in the Nordic region, such as:
Food processing. Logistics. Forest products. Textiles and apparel. Automotive components. Telecommunications.
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Compare Estonia’s success with that of Chile. What are the similarities? What are the differences?
Question 2
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Estonia vs Chile
Similarities Econom
y crisis due to political turmoil
Free-trade market and bilateral trade agreement
Conduct structural reforms, liberalization in domestic market, and sharp reduction in trade barriers
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Estonia vs Chile (cont’d)
Differences
Estonia•No significant energy and mineral reserves
Chile•Mineral-rich•world’s largest copper reserve•Second largest lithium reserves
•Medium income country
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Estonia vs Chile (cont’d)
Differences (cont’d)
Estonia•Has a long history in IT and telecommunication
Chile•Agriculture•Has a long success history in wine making industry
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Estonia vs Chile (cont’d)
Differences
(cont’d)
Estonia•After the civil demonstration against Russia’s military, the civil society governs Estonia.•No military approach.
Chile•The military government to stabilize the political situation (Pinochet declared a state of emergency that gave government draconian powers).
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What are the issues facing Estonia in 2002?
Question 3
• The country was sometimes used as a test market for new
technologies by companies such as Erickson and Nokia. The IT and telco clusters grow faster among the Baltic Countries.
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What recommendations would you make to Estonia’s leaders?
Question 4
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Recommendations to Estonian Leaders
Balancing development
between bank & other financial
institution.
Defending competitive advance or
high technology in all sectors.
Vasten the export area to get more powerful
trade.
Increasing FDI to create
jobs.
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