- Business Relationships
- Foreign direct investment
- FTAs and Treaties
- Development Cooperation
- Prospective fields of study (MOP)
Trade relations with the EU
The Estonian economy is mainly oriented towards the surrounding Scandinavian, or the Baltic countries and on to Germany. The main Estonian export commodities are machinery and electrical appliances, mineral products, wood and wood products (Estonia is one of the main European producers of prefabricated wooden houses and log cabins), agricultural products and food (e.g. production of a wide range of dairy products) and products of the chemical industry. Machinery and electrical appliances, mineral products, raw materials, transport equipment (passenger vehicles), textiles and textile products, plastic and rubber products are in the first place of import. Estonia imports mainly from Finland, Lithuania, Germany, Sweden and Latvia.
- Allcountrylist: Overview of major industries in Estonia, including mining, construction, transportation, tourism, and foreign trade.
|Exports from the EU (million EUR)||8,961.9||9,490.5||9,865.4||9,459.2||ON|
|Imports into the EU (million EUR)||11,597.60||11,995.30||12,210.80||11,393.40||ON|
|Balance with the EU (million EUR)||2,635.8||2,504.8||2,345.5||1,934.3||ON|
Source: European Commission
Trade relations with the Czech Republic
The Czech economy has many elements in common with the Estonian economy, and the Czech Republic maintains an active balance of foreign trade with Estonia for a long time. The main export items include machinery and means of transport, industrial consumer goods, chemicals, raw materials, food and beverages. A certain obstacle for the economic cooperation of the two countries is the (in)size of the Estonian market, which often remains too small for significant Czech players, who are therefore looking for regional connections beyond the scope of bilateral investment.
|Exports from the Czech Republic (billion CZK)||2.3||8.5||9.1||8.3||ON|
|Imports to the Czech Republic (billion CZK)||7||2.7||2.7||2.5||ON|
|Balance with the Czech Republic (billion CZK)||4.5||-5.8||-6.5||-5.8||ON|
Trade relations with countries outside the EU
There is also a debate in Estonia about the impact of the sanctions imposed on the Russian Federation on the Estonian economy. The export of Estonian goods to Russia is small, but Russia is an important partner in the import of basic raw materials for some sectors – especially the wood processing industry and the transport sector. However, the loss of trade with Russia will not deal a severe blow to the economy as a whole. The share of exports to Russia in total exports was approximately 6% and imports approximately 8% in 2020.
|Exports from countries outside the EU (million EUR)||3,412.8||4,931.90||4,516.70||4,826.60||6,030.80|
|Imports to countries outside the EU (million EUR)||2,575.8||4,273.6||3 110.6||3,347.0||ON|
|Balance with non-EU countries (million EUR)||837||699.4||709.9||1,094.4||ON|
Source: EIU, Eurostat
Foreign direct investment
Estonia is among the leading countries in Eastern and Central Europe in terms of foreign direct investment per capita. By the end of 2019, Estonia had attracted investments totaling USD 27 billion. Initially, a large part of the investments was realized in the form of privatizations, but gradually the emphasis shifted to investments in other enterprises and the establishment of new companies.
The country is highly developed in the areas of IT, biotechnology and green industry, which are attractive for foreign direct investment. Investors come mainly from EU countries. The Estonian government has not yet set restrictions on foreign ownership and foreign investors are treated the same as local investors, but the government is currently developing a framework for screening foreign direct investment. There are no investment incentives available for foreign investors.
Foreign direct investment by field of activity (2021)
- 30% financial and insurance activities
- 18% wholesale and retail
- 17% real estate activity
- 11% of production
- 7% professional, scientific and technical activities
- 5% information and communication
Origin of foreign direct investment (2021 ) :
- 21% Finland
- 19% Luxembourg
- 13% Sweden
- 8% Latvia
- 6% of Belgium
- 4% Lithuania
No information is available on foreign direct investments from the Czech Republic.
FTAs and treaties
Treaties with the EU
With regard to the membership of the Czech Republic and Estonia in the EU (both countries have been members of the European Union since 1 May 2004), relations are governed by the EU acquis, therefore the relevant documents are the accession treaties of both states.
Contracts with the Czech Republic
You can find an overview of international agreements concluded between Estonia and the Czech Republic here. The most important treaty beyond the scope of EU rules remains the Treaty on the Avoidance of Double Taxation, valid since January 1, 1996. Based on mutual agreement, the Agreement between the Czech Republic and the Republic of Estonia on the Promotion and Mutual Protection of Investments, signed on October 24, 1994, was terminated in 2011.
Estonia’s development cooperation focuses on sharing experience with countries in transition in accordance with the principles of humanitarian aid and is based on the international frameworks of the UN, OECD and the EU. Estonia has been a provider of development aid since the late 1990s. In 2020, the country provided US$49.3 million in international development cooperation, representing 0.16% of gross national income (GNI). The government has committed to achieving an ODA/GNI ratio of 0.33% by 2030, and Estonia has committed at the European level to collectively achieve an ODA/GNI ratio of 0.7% by 2030. In 2020, Estonia allocated EUR million for humanitarian aid. Geographically, bilateral cooperation has focused on countries where Estonia’s transition experience is directly relevant. Eastern Partnership countries, i.e. Ukraine, Georgia, The Republic of Moldova, Armenia, Azerbaijan and Belarus have been Estonia’s closest partners for two decades. As one of the global leaders of digital transformation, Estonia is increasingly sharing its experience with e-governance and sustainable economic development models in Africa and Asia, especially in Kenya, Uganda, Namibia and Botswana.
Estonian development aid is mainly channeled through multilateral organizations and civil society organizations. Estonia’s main multilateral partners are the European Union, the United Nations (OCHA, UNHCR, UNICEF, UNRWA, WHO, WFP) and the Red Crescent Society. The possibility of direct involvement of Czech companies in Estonian development cooperation projects is limited.
While the Estonian Ministry of Foreign Affairs remains at the forefront of Estonia’s development cooperation strategy and policy planning, a new implementing body – the Estonian Center for International Development – was established in April 2021 to separate policy planning from implementation.
Prospective fields of study (MOP)
The main theme of the Estonian economy in the coming years will be modernization of industry, construction of transport infrastructure, digitization and further development of the service sector. 1,700 km2 of wind farms will be created in the Gulf of Riga. A super hospital for almost five hundred million euros will start operating in the capital. All the mentioned projects are based on the Estonian Recovery and Resilience Plan, from which Estonia can draw almost one billion euros by August 2026. The next five years will be marked by an investment boom. Estonia strictly adheres to the policy of open tenders, so Czech companies will have a unique opportunity to participate in this transformation of the Estonian economy.
Transport industry and infrastructure
Estonia tries to use its favorable location between the Nordic countries, the EU and the CIS countries, and it also has a deep, frost-free port for shipping. Czech companies are offered participation in infrastructure projects, the construction of highways or a new train station and tram depot in Tallinn, the renewal of the car and bicycle fleet and the relocation of the military port from the center of Tallinn, etc. The construction of a bridge between the mainland and the island of Muhu is also being prepared. The EU-funded Estonian recovery plan also envisages investments of around 91 million euros in the transport network. In the field of rail transport, Estonia plans to reconstruct the Turba – Haapsalu – Rohuküla line, electrify the lines to Tartu and Narva, and strengthen the north-south railway corridor for freight transport. State railway operator Elron plans to acquire six new electric train sets by 2024.
Healthcare and pharmaceutical industry
The approval of the Estonian recovery plan gave a new impetus to the project to build a “superhospital” in Tallinn. The construction and equipment of the hospital will cost 520 million euros, the renovation plan envisages the release of 326 million, the city of Tallinn will contribute another hundred million. For Czech manufacturers and distributors of medical devices, this project worth around twelve billion crowns will bring significant business opportunities. The project also includes the purchase of multi-purpose helicopters for emergency situations and the construction of landing areas. Estonia is a world leader in eHealth. The health information system was created already in 2008 and includes health data that is used by both doctors and patients. More than 95% of the data created by hospitals and doctors is digitized, e-prescriptions currently cover 100% of prescriptions.
Estonia is dependent on the production of electricity from oil shale, but in the coming years the sector will have to undergo a fundamental modernization with the aim of increasing the share of renewable energy sources and reducing dependence on oil shale. In the coming years, the country will receive over 430 million euros from EU instruments for modernization in this sector. The state also plans to invest in the modernization of the distribution network and smart grid solutions (modernization of high-voltage networks and the change from Russian to European standards, in which Czech companies can use a comparative advantage over domestic companies in knowledge and experience with European standards) and storage (battery) capacities. In order to accelerate the growth of electricity production from renewable sources, preparations are underway in Estonia for the construction of several wind farms. The first project envisages the construction of wind farms in three areas off the coast of Estonia, the first of which is to be launched by the end of the decade. The total area of the planned offshore wind farms will be 1,700 km2.
Estonia is known for its focus on digital and online solutions, which also brings opportunities for Czech companies in the supply of hardware (the largest data center in the Baltics with 135,000 servers and 4,200 m2 of space is currently under construction in Estonia), cloud installations, software for the digitization of state administration and business or solutions for cyber security (including mobile devices). The cooperation of Czech and Estonian startups offers space for the development of top ICT solutions, applications for streamlining work and leisure activities, or projects in the area of the shared economy. The Estonian Recovery and Resilience Plan funded by the Recovery and Resilience Facility (RRF) also remembers the further development of digital solutions:
Agricultural and food industry
The agricultural and food industry is the largest sector in Estonia by production volume, but even so, Estonia is not self-sufficient in this area. In order to reverse this trend, Estonian companies invested almost 50 million euros during the first half of 2021 in expanding their own production capacities. Opportunities for Czech companies are therefore offered in the export of food processing machinery and other equipment. Demand for supplies of brewing units and raw materials for beer production is also growing in the country, especially for microbreweries. According to the field of activity, the most active investors were producers of other food products (prepared foods, sauces, confectionery, etc.) – 1 million euros of investment, the beverage industry (10.2 million euros) and the fishing industry (10.5 million euros). Investments in other sectors were less than five million euros.
One of the main parts of the Estonian chemical industry is the processing of bituminous shale into shale oil, which, however, is strongly unecological. In the coming years, the sector will not avoid restructuring, which will offer opportunities for Czech companies to apply. The project for a new bituminous shale processing plant in the Ida-Viru region must be revised to meet European environmental standards under the Green Deal for Europe. The EU’s Just Transition Fund has allocated 340 million euros to this region for its transformation to greener operations. At the end of November 2021, the foundation stone for the new oil shale processing plant was laid. Completion is planned in four years and the total development cost is 320 million euros. Due to the ecological demands of this production, however, the new project must meet very strict rules,
Estonia annually spends an above-standard 2.31% of GDP on defense, due to the tense situation in Eastern Europe, it approved an additional 380 million euros for the years 2022-2026 to strengthen its defense capabilities. Estonia practices a policy of open international tenders, therefore the increase in the budget will bring very interesting opportunities for Czech companies, including manufacturers of small arms, drones and technologies for monitoring difficult terrain, manufacturers of trucks, but also for many other companies in the defense sector. In 2022, especially ammunition manufacturers should monitor the Estonian market. The Estonian Center for Defense Investments (ECDI), responsible for military acquisitions, will start buying new 6×6 armored vehicles, up to a thousand trucks, air defense missile systems and long-range missiles this year. A tender was recently launched for the purchase of sniper rifles and machine guns. The national plan envisages investments in communication equipment, cyber defense, autonomous driving systems and unmanned systems.