Estonia: Investing in Estonia
Estonia is open to foreign direct investments. According to UNCTAD's 2021 World Investment Report, net FDI inflows stood at USD 3.2 billion in 2020, representing a slight increase from the previous year (USD 3.1 billion), despite the global economic crisis triggered by the Covid-19 pandemic. The total stock of FDI was estimated at USD 34.5 billion in 2020. According to OECD data, most of the FDI stock is concentrated in the financial and insurance, real estate and manufacturing sectors. The main investor countries are Sweden, Finland, the Netherlands and Lithuania. According to the latest figures from OECD, in the first semester of 2021 FDI inflows to Estonia reached USD 2.26 billion, up by125 % compared to the same period one year earlier.
As with other small-scale open economies, Estonia requires a constant flow of foreign investment in order to maintain its economic expansion. Estonia is among the leading countries in Eastern and Central Europe regarding FDI per capita. The country has a very pro-business legislative framework and, more broadly, the Estonian society has a business-friendly attitude which is the expression of the country's perfect integration into the northern circuit of production, in which the Estonian subsidiaries often function as outsourcing sites for Scandinavian parent companies. Estonia is highly developed in the FDI-attractive fields of IT, biotechnologies and green industries. A balanced budget (constitutionally protected), a free trade regime, a fully convertible currency, a competitive banking sector and an investment-favourable environment have all contributed to the success of the country, that ranks 18th out of 190 economies in World Bank’s latest Doing Business report (losing two positions compared to the previous edition). Finally, the national government is developing a screening mechanism to adhere to EU Foreign Investment Screening Regulation (n. 2019/452): FDIs by investors from non-EU countries or controlled by them, acquiring a shareholding of 10% or more of the voting rights in the target company, would be assessed.
Foreign Direct Investment | 2019 | 2020 | 2021 |
FDI Inward Flow (million USD) | 3,184 | 3,395 | 989 |
FDI Stock (million USD) | 28,157 | 34,510 | 34,865 |
Number of Greenfield Investments* | 28 | 30 | 22 |
Value of Greenfield Investments (million USD) | 531 | 614 | 764 |
Source: UNCTAD, Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | Estonia | Eastern Europe & Central Asia | United States | Germany |
Index of Transaction Transparency* | 8.0 | 7.5 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 3.0 | 5.0 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 6.0 | 6.8 | 9.0 | 5.0 |
Source: Doing Business, Latest available data
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
The main advantages of the country are:
The main weaknesses of the country are:
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Latest Update: January 2023