Analysis: Estonia invests little in development cooperation partners

Photo: http://www.thinkglink.com/2010/11/12/investment-income-tax-wont-hit-most-homeowners/

Estonia's investments in countries that are partners to it in development cooperation are modest and of the partner countries Estonian companies have invested the most in Ukraine and Belarus, a study presented by the Praxis center for policy studies on Friday indicates.

On the other hand, Estonian investments in Afghanistan and Armenia are almost non-existent to this day. According to the Foreign Ministry the environment and legal conditions in these developing countries are not good enough for the ministry to be able to encourage Estonian businesses to invest money there.

Estonia mostly invests in developing countries and partner nations in development cooperation on a sector basis, considering the profitability indicators of projects. Companies from Estonia have invested the most in real estate business, vocational, research and technology activities, as well as retail and wholesale. There exist also investment patterns that are country-specific, such as investment in the wine industry in Georgia.

In the eyes of Estonian investors both political instability and cultural peculiarities are important reasons for dismissing investing in several development cooperation partner countries and other developing countries as too risky.

Praxis said that even though in Estonia's case development cooperation is systemic and well regulated, it displays certain weaknesses as far as promoting trade relations for the purpose of development cooperation is concerned. The situation would be improved by more efficient cooperation among ministries and better coordination between the associations taking part in development cooperation and the private sector. It its likewise necessary to promote trade as a part of development cooperation in order to raise the awareness of the public sector and the private sector.

Representatives of different areas of the private sector believe that Estonia's representations abroad, channels of business diplomacy and leading politicians in general help to enhance trade relations, but their contribution and capability differs greatly from sector to sector and country to country.