Foreign direct investment in Estonia
Meier, Karmen (2021)
2021
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2021112922466
https://urn.fi/URN:NBN:fi:amk-2021112922466
Tiivistelmä
Estonia is a small country in Northern Europe that gained independence from the Soviet Union in 1991. Since then, Estonia has relied heavily on foreign direct investment flows which has had a significant effect on the country’s economy, bringing about capital formation, job creation, productivity growth and positive spill overs. The goal of Estonia is to attract high value-added investments; however, the country is facing challenges – poor demographic outlook, labour skills mismatch with demand, rising salaries and external shocks are all deterrent to investment flows.
FDI theory is explored to set the scene – motivations of the firms, modes of investment, determinants and the effects. Estonian economy is analyzed to find strengths and weaknesses as well as looking at determinants that drive or discourage FDI flows to Estonia. Further research is conducted to analyze Estonia’s FDI strategy including incentives and recent trends that could make Estonia more attractive to foreign investors.
The findings indicated that investors favored Estonia due to the stability of economy, skilled labour, tax system, digitalization, presence of technologies and location. The nearshoring trend and rising reputation as a technologically advanced country have attracted investors to Estonia.
In order to have sustained level of growth in the future, there needs to be a long-term dynamic plan in place and labour situation and infrastructure need to be improved. The plan should have a wider approach and alternative avenues to FDI should be explored. Greentech and focusing on environmentally friendly sustainable solutions is key as well as global trends are moving towards green technologies.
FDI theory is explored to set the scene – motivations of the firms, modes of investment, determinants and the effects. Estonian economy is analyzed to find strengths and weaknesses as well as looking at determinants that drive or discourage FDI flows to Estonia. Further research is conducted to analyze Estonia’s FDI strategy including incentives and recent trends that could make Estonia more attractive to foreign investors.
The findings indicated that investors favored Estonia due to the stability of economy, skilled labour, tax system, digitalization, presence of technologies and location. The nearshoring trend and rising reputation as a technologically advanced country have attracted investors to Estonia.
In order to have sustained level of growth in the future, there needs to be a long-term dynamic plan in place and labour situation and infrastructure need to be improved. The plan should have a wider approach and alternative avenues to FDI should be explored. Greentech and focusing on environmentally friendly sustainable solutions is key as well as global trends are moving towards green technologies.