HomeReportsBureau of Economic and Business Affairs2017 Investment Climate Statements...Estonia

# 					2017 Investment Climate Statements: Estonia			

 In this section										/

													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

Estonia is a safe and dynamic country for investment, with a business climate very similar to the United States. As a member of the EU, the Government of Estonia (GOE) maintains liberal policies in order to attract investments and export-oriented companies. Creating favorable conditions for foreign direct investment (FDI) and openness to foreign trade has been the foundation of Estonia’s economic strategy. The overall freedom to conduct business in Estonia is well protected under a transparent regulatory environment.

Estonia is among the leading countries in Eastern and Central Europe regarding FDI per capita. At the end of 2016, Estonia had attracted in total USD 19.4 billion (stock) of investment, of which 27.5 percent was made into the financial sector, 18.2 percent into real estate, 13.7 percent into manufacturing and 12.7 percent into wholesale and retail trade.

Estonia’s government has not set limitations on foreign ownership and foreign investors are treated on an equal footing with local investors. There are no investment incentives available to foreign investors. While some corruption exists, it has not been a major problem faced by foreign investors.

The Estonian income tax system, with its flat rate of 21 percent, is considered one of the simplest tax regimes in the world. Deferral of corporate taxation payment shifts the time of taxation from the moment of earning the profits to that of their distribution. Undistributed profits are not subject to income taxation, regardless of whether these are reinvested or merely retained.

Estonia offers key opportunities for businesses in a number of economic sectors like information and communication technology (ICT), chemicals, wood processing, and biotechnology. Estonia has strong trade ties with Finland, Sweden and Germany.

Starting December 1, 2014, Estonia offered foreigners the option of e-residency. E-residents are issued a digital identity (smart ID-card) from the Republic of Estonia for a small fee. This does not entail full legal residency, citizenship or right of entry to Estonia, but gives secure access to some of Estonia’s digital services such as business registration and an opportunity to use digital signatures in an electronic environment. Such digital identification and signing is the legal equivalent to face-to-face identification and handwritten signatures in the European Union. More info: https://e-estonia.com/e-residents/about/

Estonia suffers a shortage of labor, both skilled and unskilled. The GOE has recently amended its immigration law to allow easier hiring of highly qualified foreign workers.

*Table 1*

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies Towards Foreign Direct Investment**

Estonia is open for FDI and foreign investors are treated on an equal footing with local investors.

The Estonian Investment Agency (EIA), a part of Enterprise Estonia, is a government agency promoting foreign investments in Estonia and assisting international companies in finding business opportunities in Estonia. EIA offers comprehensive, one-stop investment consultancy services, free of charge. The agency’s goal is to increase awareness of business opportunities in Estonia and promote the image of Estonia as an attractive country for investments. More info: http://www.investinestonia.com/en/estonian-investment-agency/about-the-agency 

**Limits on Foreign Control and Right to Private Ownership and Establishment**

Estonia’s government has not set limitations on foreign ownership. Licenses are required for foreign investors to enter the following sectors: mining, energy, gas and water supply, railroad and transport, waterways, ports, dams and other water-related structures and telecommunications and communication networks. The Estonian Financial Supervision Authority issues licenses for foreign interests seeking to invest in or establish a bank. Additionally, the Estonian Competition Authority reviews transactions for anti-competition concerns. Government review and licensing have proven to be routine and non-discriminatory.

Estonia’s government does not screen foreign investment. As a member of the EU, the Government of Estonia (GOE) maintains liberal policies in order to attract investment and export-oriented companies. Creating favorable conditions for FDI and openness to foreign trade has been the foundation of Estonia’s economic strategy. Existing requirements are not intended to restrict foreign ownership but rather to regulate it and establish clear ownership responsibilities.

**Other Investment Policy Reviews**

Over the past three years, the government has not undergone any third-party investment policy reviews (IPRs) through a multilateral organization such as the OECD, WTO, or UNCTAD.

**Business Facilitation**

The World Bank’s Ease of Doing Business report ranks Estonia in 14th place out of 190 countries on the ease of Starting a Business. Economic freedom, ease of doing business, per capita investments, the record-low national debt, euro zone membership, low corruption scores – all these factors play a role in fostering a good climate for business facilitation.

There are two ways of registering your business:

Electronic registration via the e-Commercial Register’s Company Registration Portal (takes from 5 minutes to 1 business day)

Through a notary (takes 2-3 business days)

Access to the Register: https://www.eesti.ee/eng/ettevotte_registreerimine/ 

Overview of the different type of legal business entities in Estonia can be found: http://www.investinestonia.com/en/investment-guide/establishing-a-company 

On 1 July 2014, an amended Taxation Act establishing the employment register entered into force, requiring all natural and legal employers to register the persons employed by them with the Estonian Tax and Customs Board.

The company must register itself as a VAT payer if the taxable turnover of the company, excluding imports of goods, exceeds EUR 16,000 (from January 2018 the limit will be EUR 40,000), as calculated from the beginning of the calendar year.

There are certain areas of activity (like construction, electrical works, fire safety, financial services, security services, etc.) in which business operation requires an additional registration in the Register of Economic Activities (MTR), but this can be done after registration of the company in the Commercial Register: https://mtr.mkm.ee/ 

International institutions and organizations give Estonia’s economic policies high marks. The Wall Street Journal/Heritage Foundation’s 2017 Index of Economic Freedom ranked Estonia 6th in the world. The index is a composite of scores in monetary policy, banking and finance, black markets, wages and prices. Estonia scores highly on this scale for investment freedom, fiscal freedom, financial freedom, property rights, business freedom, and monetary freedom.

**Outward Investment**

Estonia does not restrict domestic investors from investing abroad nor does it promote outward investment. Estonia companies have invested abroad about 6.5 billion EUR, mostly into EU countries. The main sectors for outward investments are services, manufacturing, real estate and financial.

							2. Bilateral Investment Agreements and Taxation Treaties					

Bilateral Investment Treaties (BITs) with third countries are available at the following link: http://investmentpolicyhub.unctad.org/IIA/CountryBits/66#iiaInnerMenu 

A Bilateral Taxation Treaty with the U.S. came into force on January 1, 2000. The U.S. and Estonia signed a Foreign Account Tax Compliance Act (FATCA) agreement in April 2014.

List of agreements with US can be found: http://www.vm.ee/en/countries/united-states-america?display=relations#agreements 

							3. Legal Regime					

**Transparency of the Regulatory System**

The Government of Estonia has set transparent policies and effective laws to foster competition and establish “clear rules of the game.” However, due to the small size of Estonia’s commercial community, instances of favoritism are not uncommon despite regulations and procedures designed to limit these practices.

Accounting, legal, and regulatory procedures are transparent and consistent with international norms. Financial statements should be prepared in accordance with either:

- accounting principles generally accepted in Estonia; or
- International Financial Reporting Standards (IFRS) as adopted by the EU.

Listed companies and financial institutions are required to prepare financial statements in accordance with IFRS as adopted by the EU.

The Estonian Generally Accepted Accounting Principles (GAAP) are written by the Estonian Accounting Standards Board (EASB). Estonian GAAP, effective since 2013, is based on IFRS for Small and Medium-sized Entities (IFRS for SMEs) with limited differences from IFRS for SMEs with regard to accounting policies as well as disclosure requirements. More info: http://www.koda.ee/en/services/accounting-and-audit-requirements/accounting/ 

The Minister of Justice has responsibility for promoting regulatory reform. The Legislative Quality Division of the Ministry of Justice provides an oversight and coordination function for

Regulatory Impact Analysis (RIA) and evaluations with regards to primary legislation. For government strategies, EU negotiations and subordinate regulations, oversight responsibilities lie within the Government Office.

The government of Estonia has placed a strong focus on accessibility and transparency of regulatory policy by making use of online tools: There is an up-to-date database of all primary and subordinate regulations (https://www.riigiteataja.ee/en/ ) in an easily searchable format; and an online list of primary laws to be prepared, modified, reformed or repealed within the coming year (www.just.ee/et/eesmargid-tegevused/oiguspoliitika/oigusaktide-moju-analuus ). An online information system tracks all legislative developments, and makes available RIAs and documents of legislative intent (http://eelnoud.valitsus.ee/main ). Estonia also established the website www.osale.ee/ , an interactive website of all ongoing consultations where every member of the public can submit comments and review comments made by others. Regulations are reviewed on the basis of scientific and data-driven assessments.

Estonia’s widely-praised “e-governance” solutions and other bureaucratic procedures are generally far more streamlined and transparent than those of other countries in the region and are among the easiest to use globally.

Estonia, an OECD member country, has committed at the highest political level to an explicit whole-of-government policy for regulatory quality and has established sufficient regulatory oversight.

**International Regulatory Considerations**

Estonia is a member of the EU. An EU regulation is a legal act of the European Union that becomes immediately enforceable as law in all member states simultaneously. Regulations can be distinguished from directives which, at least in principle, need to be transposed into national law. Regulations can be adopted by means of a variety of legislative procedures depending on their subject matter. European Standards are under the responsibility of the European Standardization Organizations (CEN, CENELEC, ETSI) and can be used to support EU legislation and policies.

Estonia has been a member of WTO since 13 November 1999. More on Estonian information exchange with WTO Committee on Technical Barriers to Trade (TBT): https://www.evs.ee/Tootedjateenused/WTOteatised/tabid/101/language/en-US/Default.aspx 

**Legal System and Judicial Independence**

Estonia’s judiciary is independent and insulated from government influence. The legal system in Estonia is based on the Continental European civil law model and has been influenced by the German legal system. In contrast to common law countries, Estonia has detailed codifications.

Estonian law is divided into private and public law. Generally private law consists of civil law and commercial law. Public law consists of international law, constitutional law, administrative law, criminal law, financial law and procedural law.

Estonian arbitral tribunals can decide in cases of civil matters that have not previously been settled in court. More on Estonian court system: http://www.nc.ee/?id=188  Arbitration is usually employed because it is less time consuming and cheaper than court settlements. The following disputes can be settled in arbitral tribunals:

- Labor disputes;
- Lease disputes;
- Consumer complaints arguments;
- Insurance conflicts;
- Public procurement disputes;
- Commercial and industrial disputes.

Recognition of court rulings of EU Member States is regulated by EU legislation. More:

http://www.europarl.europa.eu/RegData/etudes/STUD/2015/509988/IPOL_STU(2015)509988_EN.pdf 

**Laws and Regulations on Foreign Direct Investment**

Estonia is part of the Continental European legal system (civil law system). The most important sources of law are legal instruments such as the Constitution, European Union law, international agreements and Acts and Regulations. Major laws affecting incoming foreign investment include: the Commercial Code, Taxation Act, Income Tax Act, Value Added Tax Act, Social Tax Act, Unemployment Insurance Payment Act. More information is available at https://www.riigiteataja.ee/en/ . An overview of the investment-related regulations can be found: http://www.investinestonia.com/en/investment-guide/legal-framework 

**Competition and Anti-Trust Laws**

The Estonian Competition Authority reviews transactions for anti-competition concerns. Government review and licensing have proven to be routine and non-discriminatory.

More info on specific competition cases: http://www.konkurentsiamet.ee/?lang=en 

**Expropriation and Compensation**

Private property rights are observed in Estonia. The government has the right to expropriate for public interest related to policing the borders, public ports and airports, public streets and roads, supply to public water catchments, etc. Compensation is offered based on market value. Cases of expropriation are extremely rare in Estonia, and the Embassy is not aware of any expropriation cases involving discrimination against foreign owners.

**Dispute Settlement**

*ICSID Convention and New York Convention*

Estonia has been a member of the International Center for the Settlement of Investment Disputes (ICSID) since 1992 and a member of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards since 1993, meaning local courts are obliged to enforce international arbitration awards that meet certain criteria

*Investor-State Dispute Settlement*

The Embassy is not aware of any claims under Estonia’s Bilateral Investment Treaty (BIT) with the United States. Investment disputes concerning U.S. or other foreign investors in Estonia are rare.

In October 2014 AS Tallinna Vesi and its shareholder United Utilities (Tallinn) B.V., registered in the Kingdom of The Netherlands, commenced international arbitration proceedings against the Republic of Estonia for breach of the Agreement on the Encouragement and Reciprocal Protection of Investments between the Kingdom of The Netherlands and the Republic of Estonia. The international arbitration hearings were held in November 2016 and the decision in the matter is expected in 2017. More info: https://www.tallinnavesi.ee/en/investor-news-eng/recordings-of-the-international-arbitration-hearings-are-available-on-as-tallinna-vesis-website/ 

*International Commercial Arbitration and Foreign Courts*

The Arbitration Court of the Estonian Chamber of Commerce and Industry is a permanent arbitration court which settles disputes arising from contractual and other civil law relationships, including foreign trade and other international economic relations. More info: http://www.lawyersestonia.com/arbitration-in-estonia 

Recognition of court rulings of EU Member States is regulated by EU legislation. More:

http://www.europarl.europa.eu/RegData/etudes/STUD/2015/509988/IPOL_STU(2015)509988_EN.pdf 

Local courts recognize and enforce foreign arbitral awards. The Embassy is not aware of any investment disputes involving SOEs

**Bankruptcy Regulations**

Bankruptcy is not criminalized in Estonia. Bankruptcy procedures in Estonia fall under the regulations of Bankruptcy Act that came into force in February 1997. The Estonian Bankruptcy Act focuses on the protection of the debtors and creditors’ rights. According to the Act, bankruptcy proceedings in Estonia can be compulsory, in which case a court will decide to commence the procedures for debt collection, or voluntarily by company reorganization. More info on bankruptcy procedures: http://www.lawyersestonia.com/bankruptcy-procedures-in-estonia 

The detailed information about the creditor’s rights: https://www.riigiteataja.ee/en/eli/ee/Riigikogu/act/504072016002/consolide 

							4. Industrial Policies					

**Investment Incentives**

Estonia is open for FDI and foreign investors are treated on an equal footing with local investors. There are no investment incentives available to foreign investors.

**Foreign Trade Zones/Free Ports/Trade Facilitation**

Estonia’s Customs Act permits the government to establish free trade zones. Goods in a free trade zone are considered to be outside the customs territory. VAT, excise, import and export duties (as well as possible fees for customs services) do not have to be paid on goods brought into free trade zones for later re-export.

In Estonia, there are four free trade zones: Muuga port (near Tallinn), Sillamae port (northeast Estonia), Paldiski north port (northwest Estonia) and in Valga (southern Estonia). All free trade zones are open for FDI on the same terms as Estonian investments.

**Performance and Data Localization Requirements**

There are no specific performance requirements for foreign investments that differ from those required of domestic investments. The Estonian government does not mandate local employment or follow “forced localization” in which foreign investors must use domestic content in goods or technology.

Estonia continues to refine its immigration policies and practices. Amendments which entered into force on January 1st 2016 make it easier for employers to bring in highly qualified workforce from abroad. This simpler process is intended to motivate more foreign specialists to move to Estonia with their families. More info on work permits, visas, residence permits in Estonia: https://www.politsei.ee/en/teenused/working-in-estonia/ 

U.S. citizens are exempt from the quota regulating the number of immigration and residence permits issued, as are citizens of the EU and Switzerland.

There are no requirements for foreign IT service providers to turn over source code and/or provide access to surveillance (e.g., backdoors into hardware and software or turning over keys for encryption) or to maintain a certain amount of data storage in Estonia. There is no general requirement to register data processing activities in Estonia. Registration is required only if the data processor handles sensitive personal data.

Estonia has implemented the EU Data Protection Directive 95/46 EC through the Estonian Personal Data Protection Act 2007 (EPDPA). The EPDPA applies to both the public and private sector but is not applicable where personal data is processed by natural persons for personal purposes or where personal data is transmitted through Estonian territory without any other processing of the data in Estonia. Estonia is reviewing its current data protection legislation for consistency with the EU’s General Data Protection Regulation, which will enter into force in May 2018.

*Restrictions on transfer of data offshore*

Transfer of personal data from Estonia is permitted only to a country which has a sufficient level of data protection. Members of the EEA and White Listed countries are deemed to provide a sufficient level of data protection. Data can therefore be transferred within these areas without restriction. More info: http://www.aki.ee/en/guidelines/transfer-personal-data-foreign-country 

Personal data may also be transferred to U.S. data importers with EU/US Privacy Shield certificates. This does not require the authorization of the Estonian Data Protection Inspectorate.

Data can be exported to a third country outside the EEA, the White Listed countries and organizations with U.S. Privacy Shield certification if the data subject explicitly consents to the transfer or the Estonian Data Protection Inspectorate authorizes the transfer.

Estonian Data Protection Inspectorate

19 Vaike Ameerika St., 10129 Tallinn, EstoniaTelephone (+372) 627 4135Email info@aki.eewww.aki.ee 

							5. Protection of Property Rights					

**Real Property**

Secured interests in property are recognized and enforced. Mortgages are quite common for both residential and commercial property and leasing as a means of financing is widespread and efficient.

The legal system protects and facilitates acquisition and disposition of all property rights, including land, buildings, and mortgages. As of 1 October 2011, land reform in Estonia was almost complete. Restitution and privatization of lands commenced in 1991, but in almost every municipality there remain several complicated cases to be settled. In total, less than 4 percent of the Estonian territory (waterbodies included) lacks a clear title.

Foreign individuals and companies are allowed to acquire real estate with the permission of the local authorities. There are legal restrictions on acquiring agricultural and woodland of 10 hectares or more, and permission from the county governor is needed. Foreign individuals are not allowed to acquire land located on smaller islands, or listed territories adjacent to the Russian border.

Property may be taken from the owner without the owner`s consent only in the public interest, pursuant to a procedure provided by law, and for fair and immediate compensation. Everyone whose property has been taken from them without consent has the right to bring an action in the courts to contest the taking of the property, the compensation, or the amount of the compensation.

More info: http://www.globalpropertyguide.com/Europe/Estonia/Buying-Guide http://www.doingbusiness.org/data/exploreeconomies/estonia/registering-property/ http://www.lawyersestonia.com/purchase-a-property-in-estonia 

**Intellectual Property Rights**

Estonia maintains a robust IPR regime. The quality of IP protection in legal structures is strong, enforcement is good and infringements and theft are uncommon. Estonia adheres to the Berne Convention, WIPO and TRIPS, the Rome Convention, and the Geneva Convention on the Protection of the Rights of Producers. Estonian legislation fully complies with EU directives granting protection to authors, performing artists, record producers, and broadcasting organizations. Equal protection against unauthorized use is provided via international conventions and treaties to foreign and Estonian authors.

Companies should recognize that IP is protected differently in Estonia than in the U.S., and U.S. trademark and patent registrations will not protect IP in Estonia. Registration of patents and trademarks is on a first-in-time, first-in-right basis, so companies should consider applying for trademark and patent protection even before selling products or services in the Estonian market. It is vital that companies understand that intellectual property is primarily a private right and that the U.S. government generally cannot enforce rights for private individuals in Estonia. It is the responsibility of the rights’ holders to register, protect, and enforce their rights where relevant, retaining their own counsel and advisors. Companies may wish to seek advice from local attorneys or IP consultants who are experts in Estonian.

Estonia has been undertaking significant structural IPR reform which involves re-codification of all IPR laws. The draft language of the new Copyright and Related Rights Acts and the Industrial Property Act has been completed, but the law’s approval process has been put on hold to incorporate significant anticipated changes from new EU directives. The last major amendment to the existing Copyright Law on collective rights management and multi-territorial licensing of rights in musical works for online users –transposition of the EU Directive 2014/26/EU came into force in April 2016. Adhering to all international treaties and EU directives, the new laws will improve protection of IP rights in Estonia.

Estonian Customs tracks and reports periodically on seizures of counterfeit goods. In 2016, the Estonian Tax and Customs Board processed 317 cases involving counterfeit goods resulting in seizures of 170,677 items. The largest trademark infringed commodity groups were clothes, watches, and sports footwear. In Estonia, IPR crimes are prosecuted.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO`s country profiles at http://www.wipo.int/directory/en/details.jsp?country_code=EE 

A list of attorneys is available on the website of the U.S. Embassy in Estonia: https://ee.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/.

							6. Financial Sector					

**Capital Markets and Portfolio Investment**

Estonia is a member of the Euro zone. Estonia’s financial sector is modern and efficient. Credit is allocated on market terms and foreign investors are able to obtain credit on the local market. The private sector has access to an expanding range of credit instruments similar in variety to those offered by banks in Estonia’s Nordic neighbors Finland and Sweden.

Legal, regulatory, and accounting systems are transparent and consistent with international norms. The Estonian capital markets are rather inactive as both stock and bond market liquidity has been in a downward trend for the past ten years.

The Security Market Law complies with EU requirements and enables EU securities brokerage firms to deal in the market without establishing a local subsidiary. The NASDAQ OMX stock exchanges in Tallinn, Riga and Vilnius form the Baltic Market, which facilitates cross-border trading and attracting more investments to the region. This includes sharing the same trading system and harmonizing rules and market practices, all with the aim of reducing the costs of cross-border trading in the Baltic region.

Certain investment services and products may be limited to U.S. persons in Estonia due to financial institutions’ response to the U.S. Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).

Estonian financial services market overview: https://www.fi.ee/index.php?id=12737 

IMF report on Estonia: http://www.imf.org/en/News/Articles/2017/01/13/PR1710-Republic-of-Estonia-IMF-Executive-Board-Concludes-2016-Article-IV-Consultation 

**Money and Banking System**

Estonia’s banking system has consolidated rapidly. Total assets of the commercial banks were approximately EUR 24.6 billion in early 2017. The banking sector is dominated by two major commercial banks, Swedbank and SEB, owned by Swedish banking groups. These two banks control approximately 62 percent of the financial services market. The third largest bank is an affiliate of the Finnish Nordea group and the fourth largest bank is an affiliate of the Danish Danske Bank. There are no state-owned commercial banks or other credit institutions.

More information is available at: http://statistika.eestipank.ee/?lng=en#listMenu/2090/treeMenu/FINANTSSEKTOR/147/645 

The Scandinavian-owned Estonian banking system is modern and efficient, encompassing the strongest and best-regulated banks in the region. These provide both domestic and international services (including internet and mobile banking) at very competitive rates. Both local and international firms provide a full range of financial, insurance, accounting, and legal services. Estonia has a highly advanced internet banking system: currently 98 percent of banking transactions are conducted via the internet. By the IMF assessment from January 2017, the Estonian financial sector is in a strong position and adequately supports the economy.

The Bank of Estonia (Eesti Pank) is the independent central bank. As Estonia is part of the Euro zone, the core tasks of the Bank are to help to define the monetary policy of the European Community and to implement the monetary policy of the European Central Bank. Eesti Pank is also responsible for holding and managing Estonian official foreign exchange reserves as well as supervising overall financial stability and maintaining reliable and well-functioning payment systems. Eesti Pank is responsible for the circulation of cash in Estonia. The Central Bank and the government hold no shares in the banking sector.

Opening a bank account for investors: http://www.lawyersestonia.com/opening-a-bank-account-in-estonia .

**Foreign Exchange and Remittances**

*Foreign Exchange*

Estonia has been a member of the euro currency area since 2011. There are no restrictions on currency transfers or conversion.

*Remittance Policies*

There are no restrictions, limitations or delays involved in converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, or lease payments) into other currencies at market rates. There is no limit on dividend distributions as long as they correspond to a company’s official earnings records. If a foreign company ceases to operate in Estonia, all its assets may be repatriated without restriction. These policies are long-standing; there is no indication that they will be altered in the future. Foreign exchange is readily available for any purpose.

**Sovereign Wealth Funds**

There are no sovereign wealth funds or state owned investment funds in Estonia.

							7. State-Owned Enterprises					

In Estonia SOEs are primarily engaged in the provision of services of strategic importance.

In early 2017, the Republic of Estonia held an interest in 31 companies of which 25 were solely owned by the state. The largest SOEs are Eesti Energia (electricity production), Elering (electricity TSO), Estonian Railways, Tallinn Airport, Port of Tallinn.

The full list of SOEs is available at: https://www.eesti.ee/eng/contacts/riigi_osalusega_ariuhingud_1/riigi_osalusega_ariuhingud_2 

SOEs have assets worth about 6 billion euros and they employ about 15,000 people.

Public enterprises operate on the same legal basis as private enterprises. Until recently SOEs had politically-appointed boards but currently the board members are appointed by an independent committee. SOEs are governed by the different ministries.

Competition and public procurement of SOEs is subject to EU law. All SOEs have audited accounts. Large SOEs’ audits are publicly available on their websites. The activities of the SOEs are also audited by the National Audit Office of Estonia, which conducts assessments and provides recommendations directly to the Parliament.

**Privatization Program**

Estonia’s privatization program is now almost complete. Only a small number of enterprises remain wholly state-owned. There have been recent discussions on the political level about the possible listing of additional SOEs, such as Port of Tallinn and part of Eesti Energia.

							8. Responsible Business Conduct					

The majority of OECD Guidelines for Multinational Enterprises are incorporated into Estonian legislation. The non-profit organization, Responsible Business Forum in Estonia, aims to further CSR in Estonia, and is a partner in the CSR360 Global Partner Network. CSR360 (www.csr360gpn.org ) is a network of independent organizations, which work as the interface of business and society to mobilize business for good.

The Estonian Ministry of Economy and Communication works closely with CSR on educating private businesses and SOEs on responsible business conduct, recognizing best practices, and factoring RBC policies or practices into its procurement decisions. The American Chamber of Commerce in Estonia also maintains a Corporate Social Responsibility committee.

Government in general enforces the labor, human rights, employment rights, consumer protection, and environmental protection related laws effectively and these requirements cannot be waived to attract foreign investment. Estonia has adhered to the OECD Guidelines for Multinational Enterprises since 2001. The National Contact Point can be accessed here: https://mneguidelines.oecd.org/ncps/estonia.htm 

Natural resource extraction related revenues, including mining licenses, are less than 0.6 percent of government budget revenues and less than 0.3percent of the GDP. The revenues are reflected in the national budget.

Here you can find a summary of the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain: http://www.doingbusiness.org/data/exploreeconomies/estonia/protecting-minority-investors/ 

							9. Corruption					

Estonia has laws, regulations, and penalties to combat corruption and while corruption is not unknown, it has generally not been a major problem faced by foreign investors. Both offering and taking bribes are criminal offenses which can bring imprisonment of up to five years. While “payments” that exceed the services rendered are not unknown, and “conflict of interest” is not a well-understood issue, surveys of American and other non-Estonian businesses have shown the issue of corruption is not a serious concern.

In 2016, Transparency International (TI) ranked Estonia 22th out of 176 countries on its Corruption Perceptions Index (about the same level as France and Japan).

Anti-corruption policy and implementation are coordinated by the Ministry of Justice and the strategy is implemented by all ministries and local governments.

The Security Police Board is capable to deal with corruption offences and criminal misconduct, leading to the conviction of several high-ranking state officials.

Until recently corruption was most commonly associated with public sector activities. Last year, the government initiated efforts to educate private sector businesses about the risks of business-to-business corruption, for example within procurement activities). Before 2015, the Penal Code also lacked any separate provisions that would impose punishments for cases of private sector corruption, and criminal matters were resolved using the general sections on gratuities and bribery. 1 January 2015 saw the entry into force of provisions of the Penal Code for taking and giving bribes in the private sector. Both provisions set out an up to five years’ prison sentence for natural persons and a fine for legal persons. Within the first four months of 2015, the police registered three such crimes.

Estonia co-operates in fighting corruption at the international level and is a member of GRECO (Group of States Against Corruption). Estonia is a party to both the Council of Europe (CoE) Criminal Law Convention on Corruption and the Civil Law Convention. The Criminal Law Convention requires criminalization of a wide range of national and transnational conduct, including bribery, money-laundering, and accounting offenses. It also incorporates provisions on liability of legal persons and witness protection. The Civil Law Convention includes provisions on compensation for damage relating to corrupt acts, whistleblower protection, and validity of contracts, inter alia.

More info on the corruption level in different sectors in Estonia can be found at: http://www.business-anti-corruption.com/country-profiles/europe-central-asia/estonia/snapshot.aspx 

Estonia is a party to the UN Anticorruption Convention, the OECD Convention on Combatting Bribery and the UN Anticorruption Convention. Estonia has been a full participant in the OECD Working Group on Bribery in International Business since 2004; the underlying Convention entered into force in Estonia in 2005. The Convention obligates Parties to criminalize bribery of foreign public officials in the conduct of international business.

*Resources to Report Corruption*

Government agency contacts responsible for combating corruption:

+372 6121500 Security Police corruption hotline or+372 6123657 Central Criminal Police corruption hotlineOr e-mail: korruptsioonivihje@politsei.eeTransparency International in Estonia: http://www.transparency.org/whoweare/contact/org/nc_estonia 

							10. Political and Security Environment					

Civil unrest generally is not a problem in Estonia, and there have been no incidents of terrorism. Public gatherings and demonstrations may occur on occasion in response to political issues, but these have proceeded, with very few exceptions, without incident in the past.

							11. Labor Policies and Practices					

Estonia has a small population – 1.31 million people. The average monthly Estonian salary at the end of 2016 was about USD 1,260 and is expected to increase in the coming two years by 5 percent annually. About 75 percent of workforce is employed by the services sector. At the end of 2016, the unemployment rate was 6.6 percent. Unemployment is forecast to remain below 10 percent in coming years. Due to the relatively low level of unemployment, employers report difficulty finding workers in a number of sectors. More on the labor market: http://www.eestipank.ee/en/publications/series/labour-market-review 

With an aging population and a negative birth rate, Estonia, like many other countries of Central and Eastern Europe, faces demographic challenges affecting its long term supply of labor. Improving labor efficiency is a key focus for Estonia in the short-to-mid-term. Legal amendments which entered into force on January 1st 2016 make it easier for employers to bring in highly qualified workforce from abroad. This simpler process is intended to motivate more foreign specialists to move to Estonia with their families. More info on working in Estonia: https://www.politsei.ee/en/teenused/working-in-estonia/ 

The Law of Obligations Act, the Individual Labor Dispute Resolution Act and the Occupational Health and Safety Act deal with employment and labor issues. Labor laws may not be waived in order to attract or retain investment. Labor laws are quite strict and the principle of protection of employees as the economically weaker party is applied. Upon termination of an employment contract due to a lay-off, an employer must pay an employee compensation in the amount of one month’s average wage. In addition, an insurance benefit shall be paid to an employee by the Estonian Unemployment Insurance Fund depending on the length of service. More info: https://www.oecd.org/els/emp/Estonia.pdf 

Trade union membership remains low compared to most countries in the EU and there have not been any strikes in recent years. Estonia has ratified all eight ILO Core Conventions.

Estonian labor regulations on labor abuses, health and safety standards, labor disputes etc. are effectively monitored by the Estonian Labor Inspectorate: http://www.ti.ee/en/ 

							12. OPIC and Other Investment Insurance Programs					

Estonia has a bilateral agreement with OPIC.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

*Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy*