Estonian IT companies offer the digitalization skills and manufacturing firms offer quality of goods that businesses globally demand and expect across all sectors. Thanks to superior sourcing conditions in the Nordic market, Estonian production offers cost-effective and efficient frameworks for manufacturing companies in Germany, UK, US and elsewhere. Implementing a risk mitigation strategy— called de-risking purchasing—to cope with an increasingly fragmented world makes economic sense. President of the European Commission Ursula von der Leyen introduced the strategy in a speech in March 2023. Since then, both the Biden administration and the G7 have embraced the idea.
"Of course, a single word is not enough to capture the true intentions of a given strategy. But as a summary of the motivation and to predict what it might achieve, risk mitigation represents a significant improvement over the terms decoupling and strategic autonomy," wrote Bruegel, an economic think tank, in June 2023. The term "exuberant" is increasingly heard from shareholders and managers in their work with the industry in Germany, the UK and globally, according to Birgit Linnamäe, a strategy consultant and scholar. The costs in the procurement force us to develop other innovative purchasing solutions, say managers in areas such as woodworking, window, roof and facade construction, modular and element construction, digitalization, and software companies, metalworking, electronics industry, and municipal utilities, to name just a few.
The UK and the USA are significant trade partners for Estonia. The UK has steadily been among Estonia's top 10 trade partners with exports of goods worth 480 million euros and exports of services worth 656 million euros in 2022. in 2022, the US was Estonia’s 6th largest export destination for goods worth 1,16 billion euros and services worth 660 million euros. Germany is Estonia's fifth-largest export partner. In 2022, the value of goods exported to Germany amounted to 1.22 billion euros, and the value of goods imported from Germany was 2.5 billion euros. Despite pessimism and challenges in the global industry and trade, the digitalization sector is one experiencing growing demand through the turbulences. Changing times are always also an opportunity when the cards are, so to speak, reshuffled. Creating a competitive edge with digitalization and innovation is a good and wise use of time during a quieter order situation in industry.
The example of wood industry can demonstrate the innovation and sustainability of production in Estonia. Estonian engineered timber construction and custom solutions offer economical and efficient solutions for construction contractors and timber companies across Europe, UK and USA. The industry commits to sustainability, minimizing environmental impacts, and providing modern, engineered and appealing timber construction solutions. This includes the digitalization of business processes, such as procurement. It is a norm for increasing number of factories that an automatic order is sent for raw materials running out for automatic restocking, from system to system.
Estonian timber manufacturing capabilities range from individual products like glued laminated timber components to mass-produced parts like roof, wall, or facade elements, to doors, windows, and prefabricated houses. Over the last 10 years, Estonia has been the largest exporter of wooden houses in Europe, and in the global comparison, it ranks fourth after China and Canada. Compliance with European regulations is ensured by certification already in place. By using certified wood and wood materials and complying with norms and regulations, it is ensured that construction products made in Estonia can be used throughout Europe and are attractive for German, UK, US and Asian markets. Estonian competencies place great value on customer service and personal customer care with English or local language communication, to ensure compatoblity with customer specific approach and cross-cultural understanding.
Examples from the software industry show the enormous growth potential of companies based in Estonia and their digitalization competencies. The value of total service exports from Estonia in 2022 was 10,7 billion euros, thereof the share of telecommunications, IT, and information services was 2,3 billion euros in 2022, demonstrating a 26% increase compared to the previous year 2021. 4% of working age population are employed by Estonia’s companies in information and communications technology sector. Estonia aims to be home to 500 deep-tech companies by 2030. Currently, there are about 120, with a rising trend. Biotechnology, drone technology, autonomous driving, hydrogen technologies are further areas that justify the mentioned goal.
Estonia, an EU member and strategically located on NATO's eastern border, has increasingly come into focus for German inquiries regarding the attractiveness of foreign investments in light of Russia's full-scale war of aggression in Ukraine. The Bank of Estonia reported that the value of direct investments into Estonia in the first nine months of last year 2023 increased by about two billion euros. This is more than in the entire year of 2022. Estonia, the northern of the Baltic States, south of Finland, is an attractive destination for investments in technology, industry, and startups.
In addition to the Canadian magnet factory of Neo Performance Materials in Narva, significant investments from two other G7 countries in Estonia have been decided: The investment by Japan's Marubeni in Skeleton and a joint investment by Corsica Sole from France and Evecon from Estonia to build the largest battery park in continental Europe near Tallinn. Also, the decision by Ericsson to establish a new 5G development and production center in the Ülemiste district of Tallinn falls into this category.
What makes Estonia a tax champion? According to the Tax Foundation, Estonia's tax code is characterized by features such as no corporate tax on reinvested and retained profits, a flat income tax rate, a land-value-based property tax, and a territorial tax system that exempts foreign profits from domestic taxation. For years, Estonia has led the OECD Tax Competitiveness Index, confirmed again in 2023. The transparent and simple Estonian tax system, which does not levy corporate, capital gains, or real estate transfer taxes, makes the country attractive for foreign investments.
The versatile and dynamic production facilities of Estonian and Baltic manufacturers offer flexibility to meet diverse value creation requirements. Traditional manufacturing companies are rapidly transforming into technology companies that utilize digital solutions and AI to enhance their competitiveness.
Advisors often play a supportive role in cross-border procurement transactions in the industrial environment, whether on the buyer's or seller's side, to ensure smooth communication and leverage cultural differences and practices. Advisors with local expertise or access to local networks can provide valuable insights into business practices, regulations, and market dynamics in specific regions. This knowledge can assist sellers and buyers in making informed decisions in their procurement strategies and accelerating their internationalization efforts.
Add a comment