Title of the presentation | Date | 1

Doing Business in EstoniaWednesday 2nd October 2013

Innovation and Manufacturing

Wednesday, 2October, 13

Who we are

David Clark CEO- Laser Diagnostic Instruments

Leo O Neill CEO- HML Project Management

OUR PRODUCTSSpectral Fluorescence Signatures (SFS)

OUR PRODUCTSLaser Induced Fluorescence LIDAR technology

OUR PRODUCTSLaser Induced Fluorescence LIDAR technology

International Client base:

• Microsoft

• Cisco Systems

• Allianz Real estate Germany

• European Parliament

• CBRE

Overview

Statistics – Production and Trade

Business climate – from a Manufacturing perspective

Political, Labour law, logistics

Innovation

Major sectors - examples

StatisticsLets get them out of the way first!

Production and Growth

GDP by economic activity 20124% 1%

16%

4%1%

7%

11%

8%

2%

5%3%

10%

5%

7%

4%5%

4%1% 1%Agriculture, forestry and fishingMining and quarryingManufacturingElectricity and gas supplyWater supply and waste management Construction Wholesale and retail tradeTransportation and storageAccommodation and food service activities Information and com-municationFinancial and insurance activitiesReal estate activitiesProfessional, scientific and technical activities Administrative and support service activi-ties Public administration and defenceEducationHuman health and social work activities

Manufacturing Growth

Source: Statistics Estonia 2013

Manufacturing Growth

Source: Statistics Estonia 2013

Logistics & TradeFrom a Manufacturing Perspective

Location

2 International Airports SAS, Lufthansa, Estonian Air, Finnair, Easyjet, Air Baltic

Ryanair Global connections via Coppenhagen, Stockholm,

Helsinki, Frankfurt and Munich

Tallinn Passenger port – 90 min Helsinki, Stockholm overnight

Logistical Hub

Ports:

Port of Tallinn, largest and deepest (18m) in Baltic Sea

Ice free Sillamäe – Eastern most port in EU

Rail: common gauge with Russia, Central Asia and onwards, RailBaltic

Population within: - 24 hours of Tallinn = 90

million 48 hours of Tallinn = 100

million 72 hours of Tallinn = 450

million

Estonian TradeTrade 2012

Per capita:

Estonia Ireland - Imports around same level, Exports half.

Greater than UK per capita in both Export and Import

Export Import11

11.5

12

12.5

13

13.5

14

12

12.7

0.5

1.1

2011 2012

Top Exports and Imports 2o12

Exports

Machinery and equipment 3,590 million euros

Mineral Products 1,870

Agricultural 1,170

Metals 1,040

Wood products 930

Import

Machinery and equipment 3,920

Mineral Products 2,140

Agricultural 1,360

Transport equipment 1270

Chemicals 1,130

Trade UKMain export

articles to GB & Northern Ireland

2012: Wood and wood products,

wood coal – 20% 

Machinery and equipment - 19%

Other manufactured goods (pillows, blankets, furniture) - 17%

Mineral products (fuel oil, peat) - 14%

Precious metals - 5%

Main import articles from GB & Northern

Ireland 2012: Machinery and equipment –

57%

Food, drinks, tobacco - 16%

Transport vehicles - 7%

Mineral products – 4%

Trade IrelandMain export

articles to Ireland 2012:

Food products (wheat) – 59.5%

Wood and wood products –15.9%

Chemical products – 5.7%.

Main import articles from Ireland 2012:

Machinery and equipment  – 42.6%

Prepared food products and beverages – 25.3%

Chemical products – 17.4%.

Business ClimateFrom a Manufacturing Perspective

Cultural Proximity

Business Culture English is the 2nd foreign language after Russian All law translated in English by 2015 Similar legal, accounting systems to UK

Plain Speaking, being frank (May I say this is not so with Estonians)

Honesty Flat Hierarchy Keeping Time (May I say again this is not so for our

counterparts)

Observations

Positive attitude towards international companies

Position between national and international companies is equal

Local proudness for big and medium size companies

Local entrepeneurship is high

Positive future outlook

Observations

Often local companies are lacking ethical code of conduct

Foreign companies has brought in a lot of behaviour models

The attitude towards Finland is positive and negative Don’t like to be the little brother

Estonians learn fast and in many areas already world class makers

Recent Development

Economic growth has been positive almost all the time 1997 the Russian crise affected Estonia 2008 the new crise appeared Today it is more and less stable Some risk for over heating exist Lack of specialists in some areas (IT) Risk for cost growth (salaries) Political populism

Comparison of Labour Market

Ireland Estonia N.Ireland Poland India

Working week

39 hours 40 hours 35 hours 40 hours 50 hours

Paid holidays 28 days 28 calendar days(includes weekends)

28 days 20 days (employed <10 y,26 days (employed for >10 y)

15 days

Public holidays

9 10 10 13 16

Redundancy terms

1 week + 2 weeks pay for every year worked

compensation 1 month for up to 5 worked years2 months after 5 years

1 weeks pay for every year worked over 22, 1.5 after 41years

1 months pay for< than 2 years, 2 mpay 2-8 years, 3 m pay for over 8 years

Notice period ca 1 month, severance payment up to 5 years 10 weeks pay, up to 10 years 20 weeks

Social tax contribution

Paid by employee

33% paid by the employer

Paid by employee

33-37% 24%

Corporate income tax

12.5% 0% (on reinvested profits)21%

23%, dropping to 21% in April 2014

19% 30-40%

Minumum monthly salary

Ca 1,460 EUR 320 EUR Ca 1,440 EUR

384 EUR 39 EUR

European Vs Baltic Markets

Drag picture to placeholder or click icon to add

Baltic market expected to grow despite European standstill

Innovation

Innovation

More VC investment per capita in 2013 than UK

Estonia one place behind Ireland in Community Innovation Survey 2010 (7th place)

2 Universities in Global top 500

Rapidly Growing Biotech Sector

Innovation

Success Stories

Rare metals for hi-tech: Silmet acquired by Molycorp 2011 (3% of global rare earth metal production)

Oil shale mining/extraction Enefit (largest privately owned oil shale in utah

Also: Metal construction and antennas for ground stations for satellite communications - Vertex & General Dynamics

Mining Industry Opportunity

Education -

Lack of

Middle/Senior Management

Engineers

Skilled operators and technicians

Leading in

IT Specialists

Arts & Culture

Education priorities and needs for the Industry

Management Engineering as bachelor/master as higher education Business administration as second education

Engineers Application engineering, software development,

electrical design, mechanical design, electronics design, testing, project management

Skilled operators and technicians Technical professional education

Employment Division

Engineering capacity

Population of Baltic Countries

Baltic's total 6,8 m

Estonia 1,34 m

Latvia 2,2 m

Lithuania 3,23 m

Yearly graduates

in IT, Power engineering, Mechanical engineering

4 universities: Tallinn University of Technology, Riga Technical University, Kaunas Technology University, Vilnius Gediminas Technical University

Estonia Latvia Lithuania

Bachelor degree 358 659 754

Master degree 247 307 374

Estonian PartnershipsNorthern Ireland & Ireland Success stories in Estonia

CRH Group Ireland

What is needed now?

Stable and solid politics

Balanced state budget

Border agreement with Russia

More effective taxation system Less tax on labor work

Education system to be re-organized

Key Takeaways

Doorstep to wealthy Nordic/Scandinavian countries (logistics, costs)

Most Western mind set of former-USSR, easiest access to Russia

More high skilled labour, management, international experience required

Industry needs a louder voice of support from government

Planning today for the next 2o+ years of Estonian Republic

Title of the presentation | Date | 51

Doing Business in EstoniaWednesday 2nd October 2013