Investment in Estonia

Since its declaration of independence in August 1991, Estonia has been a beacon of free-market success to reforming economies around the world.

Free-market shock therapy

Estonia's second prime minister, Mart, Laar, was widely credited with much of Estonia's stunning economic performance after its declaration from independence from the Russian Federation. Laar, as the story goes, was a reclusive historian who had read one economic text in his life: Milton Friedman's Free to Choose. Laar pushed through a combined VAT and flat income tax to replace the byzantine graduated system. He privatized and deregulated former preserves of the state with the zeal of the newly converted, to the rhyme and cadence of the laissez-faire gospel according to Friedman.

Laar's free-market gods proved very generous to Estonia, and  Although Laar lost his job in 1994 Laar's reforms have been preserved and expanded by succeeding governments, and Laar returned to his job in 1999 after Russia's 1998 default crippled many Asian and former Soviet economies. Estonia's per capita GDP stands at approximately $18,000, and Estonia's annual growth in the past decade has averaged 7 percent of GDP. Estonia also boasts an extremely advanced tech sector (for example, all voting is done from home computers, apparently without much fraud). Its banking sector is similarly sophisticated, and has served as a major conduit for Russian oligarchs' "hot money," especially after Putin's crackdown caused Russian oligarchs to get as much of their money out of Russia in the early 2000's.

Political tensions

Especially since Estonia joined the European Union in 2004, the pugnacious country of 1.3 million has taken advantage of the EU's protective umbrella to stick a finger in Russia's eye with gleeful abandon. Mart Laar pioneered this also, delivering billion-ruble bricks to the anti-Russian Chechnya rebellion in 1994 (a war Russia lost) after replacing the Russian ruble with the Estonian kroon as the nation's currency. However, 25 percent of Estonia's population is ethnically Russian, and Estonia's recent history has been characterized by domestic ethno-political unrest among the pro-Russia minority.

Investment outlook

Estonia's eager provocations of Russia are beginning to cause problems. After Estonia pulled down a statue of a liberating Russian WW2 soldier, Russian government servers launched a massive cyberattack on Estonia's telecom infrastructure, and Estonian Russians protested in outrage. While this type of low-level strife will probably fester in the next decade as a resurgent Russia spreads her wings, Estonia's EU membership protects it from existential political threats from Russia.

Estonia's deregulated labor market, advanced IT sector, educated citizenry, low and transparent tax rates, and low corruption make it an ideal investment destination.