Estonian Review E E S T I R I N G V A A D E VOLUME 17 NO 8 FEB 21- 27, 2007

89th ANNVERSARY OF THE REPUBLIC OF ESTONIA President Ilves: We Estonians Were Saved By Our State Feb 24 – “For a long time, Estonia was just an idea. An idea born in this city, among intellectuals, writers, and students,” President Toomas Hendrik Ilves said in his Independence Day speech in Tartu. Alexis de Tocqueville concluded that civic society formed the basis of a successful and functioning democracy, Ilves said. “The 19th century rulers of Estonia did not read de Tocqueville, but they, too, were worried about the abundance of peasant, student, and intellectual societies, their discussion nights and newspapers, carriers of the spirit of democracy” “What began as an idea, became reality, our state was born on a foundation laid by civic organisations – societies, congregations, choirs,” the President continued. “Looking back at Estonian history today, we see it was here, in Tartu, that the foundation of our statehood was laid. This is where the Tartu Peace Treaty – the birth certificate of our nation, making us an equal among other nations – was signed in 1920.” The birth of the Republic of Estonia 89 years ago rescued the Estonian nation from peril of death, President Toomas Hendrik Ilves said “Considering the merciless annihilation of Estonians who lived in the Soviet Russia in the 1930s, we may but imagine what the fate of our nation would have been at the high tide of the Stalinist repressions,” he continued. “We know what happened to our Finnish-Ugric brethren at that time. We know, for example, what happened to nearly two hundred thousand Ingrians, of whom only a tenth survived to witness the collapse of the Soviet Union.” “The atrocities committed in Estonia after our annexation and occupation, have left a wound in the Estonian soul, a wound that has not healed even today,” Ilves said. “Almost 65 per cent of Estonians lost at least one near relative during the occupation period,” he explained. “Therefore, the moral void that allows a state to consider the Soviet Union’s victory over Nazi Germany its own, and yet to shrug off the responsibility for the execution of thousands of Estonians and the deportation of tens of thousands Estonians, is particularly abhorrent. And that state – to the contrary – justifies and defends the murderers and the deporters. And taunts Estonians, calling them fascists.” “Those accusations proceed from the fact that we have a democratic state,” Ilves said. The speech is available at the President’s web-page: http://www.president.ee/en/duties/speeches.php?gid=90077

FOREIGN NEWS of burial of Soviet soldiers in Estonia. We are taking care of them as provided by international law, Estonian Parliament Supports Mission in international moral principles and Estonian laws," Middle East Kaljurand underlined. Feb 21 - The Estonian parliament supported She added that Estonia would never take any dispatch of five staff officers of the defence steps that would go against international standards, forces for up to two years to UN missions in practise or ethics. Lebanon, Israel, Egypt and Syria. Defence Minister Jürgen Ligi told the parliament President Says Relations with Russia Not that creation of stability in the conflict-ridden Middle Dependent Solely on Estonia East region is an immediate security interest for Estonia. Feb 23 - Progress in Estonian-Russian relations He said that being a member of the international does not depend solely on Estonia, President community and member of the United Nations, Toomas Hendrik Ilves said. Estonia had also the obligation to contribute to UN Relations with any country depend on both sides' efforts of maintaining peace in areas of crisis and wishes and positions, the president said. dispatch of Estonian officers would help increase the "Estonia wants to have businesslike and mutually Estonian contribution. respectful relations with Russia," the head of state Under the decision Estonia will send to the Middle stressed. East a naval officer who will be serving in the naval A major obstacle to this is Russia's continued contingent of the UN peacekeeping mission, UNIFIL. reluctance to speak about the past as it actually Ligi said UNIFIL was created for the confirmation happened -- the birth of the Estonian state in 1918, of the withdrawal of Israeli forces from Lebanon, depriving the country of independence by the Soviet restoration of peace and security and support of Union in 1940 and 1944, and the great suffering the control by the Lebanese government. years of occupation caused Estonia and the Estonian It is the duty of UNIFIL to ensure security at the nation, the president said. 121-kilometer Israeli-Lebanese border in order to "We witnessed Russia's unwillingness to look avoid escalation of the situation and renewal of honestly at the history also in connection with the hostilities. border treaty when Russia would not accept the Estonia had earlier taken part in the UNIFIL mention of the Tartu Peace Treaty," Ilves added. mission in 1996-97 when a 135-strong It can be seen now as well, as recalling the year peacekeeping company was on a mission there. It 1944 Moscow only speaks about the liberation of was one of the biggest Estonian missions of all Estonia and will not admit that for Estonia this times; for example the present Estonian contingent meant replacement of one occupation regime with in NATO forces in Afghanistan is of 132 men. another, the president said. Although Estonian servicemen are taking part in the mission already since 1997, they have been ECONOMIC NEWS treated until the present as staff officers, for the dispatch of whom no parliament mandate was Currency rates in kroons required. But last year's Israeli-Hezbollah conflict (Bank of Estonia) showed that the UNTSO mission is also situated in a conflict-prone area and therefore staff officers Average Gross Monthly Wage in Estonia dispatched there must be treated as servicemen dispatched to a military mission. Rose above EEK 10,000 Ligi said that the duty of UNTSO military Feb 22 - The average monthly gross pay of full- observers was to watch observation of peace time and part-time employees of enterprises, agreements in the Middle East in order to prevent institutions and organizations in Estonia was escalation of conflicts. The UNTSO area of action 10,212 kroons (EUR 653) in the final quarter of comprises Israel, the Egyptian border zone, Lebanon 2006. and Syria. In monthly breakdown, the average sum was The parliament's resolution leaves the possibility 9,565 kroons in October, 9,911 kroons in November of sending up to two more staff officers to the and 11,160 kroons in December. mission. Average hourly gross wages and salaries in the fourth quarter totalled 60.28 kroons. Estonian Ambassador to Russia: Estonia Compared to the fourth quarter of 2005, the Honors Memory of Fallen in War average monthly gross wages and salaries were higher by 17.5 percent and the average hourly Feb 22 - Estonian Ambassador to Russia Marina gross wages and salaries by 19.2 percent. Kaljurand said that the memory of those who The annual increase in monthly pay was biggest fought against fascism was respected in in fishing (77.4 percent), and smallest in financial Estonia. intermediation (1.5 percent). "The memory of all those who died in the The average hourly gross wages and salaries struggle against fascism, either soldiers, officers of increased the most in fishing (69.3 percent), and the just victims, has always been respected in Estonia, least in financial intermediation (4.7 percent). is respected now and will be respected in the In absolute terms, the highest wages and salaries future," the diplomat told reporters after meeting were paid in financial intermediation, where the with head of the Russian Orthodox Church Alexy II. average stood at 15,822 kroons. In public Kaljurand said the whole history of Estonia was administration the average was 13,354 kroons and proof to this. "There are now several hundred places in fields related to real estate it was 11,856 kroons. Hotels and restaurants continue to post the to Warsaw by train. One of the main questions in lowest figures, with an average pay per employee of that study is whether Estonia should go on with the 6,521 kroons in the final quarter. Russian-standard gauge of switch to the European Employers' average monthly labour costs per rail gauge. employee stood at 13,746 kroons in the final It is also being weighed whether the new track quarter, and average hourly labour costs at 88.23 should pass through Tartu or a more direct route kroons. Compared to the fourth quarter of 2005, should be chosen going through Pärnu instead. average monthly labour costs per employee increased by 17.2 percent and hourly labour costs Estonia's Eesti Energia Keen to Start by 18.2 percent. Selling Energy in Lithuania Average gross wages and salaries in Estonia totalled 8,591 kroons a month in the first quarter of Feb 21 - Eesti Energia, the Estonian state- 2006, 9,531 kroons in the second quarter and 9,068 owned energy utility, wishes to start selling kroons in the third quarter. electricity on Lithuania's open energy market. "The Lithuanian energy market was opened in 2002, and it's open to different energy suppliers. Number of Jobless Drops by One-Third in That offers Eesti Energia the opportunity to fulfill Estonia in 2006 one of its strategic goals -- to develop new products, Feb 22 - The number of unemployed people markets and links," Eesti Energia CEO Sandor Liive registered with the Estonian Labor Market said. Board was 48,167 in 2006, a 32.9 percent Lumen Balticum would seek to sell electricity to decline from 71,735 registered jobless in 2005. corporate customers in the first place. On the average 15,421 people, who make up 1.8 Eesti Energia is a partner to Lithuania is several percent of the working-age population from age 16 important energy projects and the Lithuanian to pension age, visited the offices of the Labor subsidiary will help boost regional cooperation and Market Board every month. promote consolidation of the energy sector, Liive In 2005, the respective figures were 29,798 said. people and 3.2 percent. Year on year, the average number of monthly visits to offices of the labor Estonia's Mobi Expands Business of Its Market Board dropped 39.1 percent. SMS Services Portal to Latvia, Lithuania The director general of the Labor Market Board, Tiina Ormisson, said the drop in unemployment was Feb 21 - The "everyone's m-business" portal of attributable to the new labor market services and the Estonian mobile services company Mobi benefits law successfully enacted in 2006, as well as Solutions started business in Latvia and to double-digit rates of economic growth. Lithuania this week. The share of young unemployed, or people aged The portal, where users can create SMS services from 16-24, was 13.6 percent of the number of on their own, was launched in Estonia in 2002. registered jobless in 2006, compared to 15.6 In Estonia some 2,000 service providers had percent in 2005. People over 50 years of age made joined the service by the end of January, and up 29.5 percent of registered jobless in 2006 and together they had created more than 3,300 SMS 26.1 percent in 2005. services. In all more than 320,000 SMS messages New job offers during the year numbered 29,909, have been sent via the portal, Mobi said. up from 29,159 in 2005. The typical user is an online entrepreneur, no Jobless benefits were paid to 20,679 people matter whether big or small, who runs a website or during the year, a reduction by 34 percent from the a portal and wishes to offer SMS services via the year before. site, Mobi so-owner Rain Rannu said. Mobi has developed over 30 mobile applications. Sales by Mobi in 2006 came to 13.7 million kroons Estonia: Tallinn-Riga Train Line Could Be (EUR 87,500). Opened in 2009 Feb 21 - Edelaraudtee (SW Railway), operator Estonian Operator of Sillamäe-Kotka Boat of domestic passenger trains in Estonia, is Line Sets up Business in Finland planning to launch regular train traffic between the Estonian and Latvian capitals in Feb 21 - Narva Line, the holding of Saaremaa 2009. Laevakompanii (Saaremaa Shipping Company) Speaking at a conference on fast train link that runs a ferry between the Estonian town of between Tallinn, Tartu, Valga and Riga Sillamäe and Kotka, Finland, has set up a Edelaraudtee's development manager Tiit Riisalo subsidiary in Finland to take care of the ferry held out a plan according to which Edelaraudtee line's management, sales and marketing in would manage by 2009 to have a fast train going that country. between Tallinn and Riga via Tartu, covering the Leena Tuomaala-Kela, manager of Narva Line distance between the two capitals in four and half Finland OY, said the Sillamäe-Kotka ferry line was hours. finishing its first year of existence and that for In that case the distance between Tallinn and successful operation a representation in Finland was Tartu would have to be covered in two hours. At this necessary. point it takes the Tallinn-Tartu fast train from 15 "Our primary goal will be to raise awareness of minutes to 45 minutes more, depending on the the Sillamäe-Kotka route as a new and growing direction. logistical corridor on the Finnish market and to Anti Moppel, adviser to the Estonian Ministry of ensure better performance of the route in 2008," Economy and Communications, said a viability study said Tuomaala-Kela, who has long-time experience should be ready by the end of this month which in the shipping business. looks at the different options of getting from Tallinn

3 The Sillamäe-Kotka ferry route was inaugurated of the Employment, Social Policy, Health and in February 2006. Consumer Affairs Council in Brussels. Saaremaa Laevakompanii, which operates Aab said that the employment rate of the elderly subsidized ferries between the mainland and was currently 59 percent in Estonia, one of the Estonia's large western islands, specially established highest in the European Union. "But we have set our Narva Line for operating the new route, creating aim at increasing the share of the elderly among the more than 50 new jobs in the process. gainfully employed even further," the minister said. Regular freight traffic on the new route started in The aim of the discussion focusing on early March and passenger traffic in May. demographic changes is to shape an effective demographic approach. Themes of the highest Profit of Nordea's Banking Operation in importance for Estonia are solidarity between Estonia Grows 30 Percent to EUR 13.7 generations, social and cultural involvement of all age groups and issues of concord between working mln and family life. Feb 21 - The profit of Nordea Pank, the Estonia agreed with the chairman that in the Estonian branch of the Nordic banking group treatment of these issues it was necessary to have Nordea, grew 30 percent year on year in 2006 an approach of planning activities over several years to reach 214.3 million kroons (EUR 13.7 mln). so it would bring in all the important interest groups Total assets of Nordea Pank at year-end stood at and partners. 22.7 billion kroons, an annual increase of 37 The council adopted at the meeting a statement percent. The bank's loan and leasing portfolio shot on the contribution of the elderly to economic and up 45 percent to 19.7 billion kroons. social development. The statement underlines that in addition to challenges aging of the society Hansabank Advises to Review provides opportunities of increasing renewal and Investments in Baltic Stock Markets competitiveness of European economy and promotion of employment. Feb 21 - Hansabank has in its recommendations Another important item on the agenda was to personal banking customers advised to preparations to the European Council, in the review investments in Baltic stock portfolios framework of which the social affairs and labor and divide one's money between other regions ministers forwarded the key statements in their area and asset categories. for drawing up annual conclusions. The bank says in its letter to customers that it is These conclusion generally state that the Lisbon sceptically minded about the prospects of the Baltic economic growth and employment strategy has had market in the near term. a positive effect on the labor market. The "We're not ruling out that the markets may earn Commission has a very high opinion of Estonia's a few more percent in profit for the investor," activity in the implementation of the Lisbon strategy Hansabank said, adding however that in its view it and Estonia is one of six member countries to which no longer paid to take the risk in return for the the Commission did not find it necessary to give a potential extra returns. relevant official recommendation. Hansabank has surveyed two potential scenarios -- a positive one and a negative one -- as regards Estonian Government Gives Development the development of Estonia. In the case of a positive scenario the speed of economic growth will slow Fund 3 Percent Shareholding in Telekom down from this year's rate gradually to a more Feb 22 - The Estonian government gave the sustainable rate. In case of the negative scenario Development Fund 4,138,636 state-owned the halting will be an abrupt one. shares in Eesti Telekom as a contribution to Even though the likelihood of the negative the fund's investment capital. scenario is not big at the moment, signs of danger The Development Fund will use either dividends nevertheless exist. The threat lies in production's on the shares or proceeds from the sale of the becoming more expensive along with the rapid shares to finance investments. growth in incomes, which would result in Estonian It is estimated that the fund needs to the tune of companies' losing their competitive edge. 500 million kroons (EUR 32 mln) to meet its Right now the price-profitability ratio of the investment targets in the first five years of stocks quoted on the Estonian market is extremely operation. high. This means that investors are counting on Under the Development Fund Act, state-owned continued rapid growth in profits. Growth like that is shares of Eesti Telekom corresponding to a possible only in the case of extremely favorable shareholding of at least three percent had to be internal and external conditions. transferred to the fund to help form its investment Over the past seven months the Baltic stock capital. market as a whole has grown 50 percent. The The purpose of the Development Fund is to biggest gainers are Olympic, which has rocketed up stimulate and support changes in the Estonian more than 130 percent since listing, Tallinna economy that will help to modernize the economy, Kaubamaja (more than 112 percent), Baltika (nearly ensure export growth and create new high-skill jobs. 77 percent) and Tallink (more than 60 percent). The council of the Development Fund is headed by former Hansabank CEO Indrek Neivelt. Estonia Wishing to Increase Share of Elderly Among Gainfully Employed 12-Month Sales of Merko Ehitus Climbed Feb 22 - Estonia wants to increase the share of to EUR 281 Million elderly people among the gainfully employed, Feb 22 - The Tallinn-based construction group Social Affairs Minister Jaak Aab said at meeting Merko Ehitus posted a revenue of 4.4 billion

4 kroons (EUR 281 mln) for 2006, marking a More than 523,310 people have acceded to the 36.6 percent rise within a year. funded pensions system. In 2006 the group earned a profit of 581.7 million kroons. Kreenholm Union Cuts Pay Demand By Of that figure, 252.7 million kroons was the profit Half of SIA Merks and UAB Merko Statyba, 218.1 million kroons the profit of the parent company Merko Feb 21 - The textile workers union at the Ehitus, and 110.9 million kroons the profit of the Kreenholm textile factory in the northeastern group's Estonian subsidiaries. Estonian border city Narva has reduced its pay The group's net profit grew by 32.6 percent demand for 2007 by half. within a year while profit earned outside Estonia The union demanded in December a 20 percent grew by 155.9 percent. For the first time the net pay rise from January and another rise of the same profit of the Latvian and Lithuanian units (252.7 size from July. Yet now the union has agreed with million kroons) exceeded the profit of the parent the management about a 15 percent increase in company Merko Ehitus (218.1 million kroons). payroll from January. Debates on the second rise The chairman of the supervisory board of Merko are still going on. Ehitus, Toomas Annus, described the year 2006 as The average gross monthly wage at Kreenholm in marking a breakthrough for the company. 2006 was 4,300 kroons (EUR 275). If an accord is "The Latvian and Lithuanian subsidiaries of Merko reached on a 15+5 percent rise this year, a textile are growing faster today than the Estonian parent worker at Kreenholm would get 5,200 kroons before company. This is helping the group to reduce risks taxes. and at the same time maintain the pace of growth The union expects to complete the pay talks in necessary for development," Annus said. February and sign a new collective agreement. Merko Ehitus is a construction group active in A holding of the Boras Wafveri Group of Sweden Estonia, Latvia and Lithuania. The group, whose since 1995, Kreenholmi Valduse (Kreeholm Holding) shares are listed on the Tallinn stock exchange, employs 3,200 people at its five plants. About 98 employed 805 full-time employees at year-end. percent of the workers are union members. During 2006, about 460 employees quit Estonia's Liviko Planning New Beverages Kreenholm of their own motion.

Plant Feb 26 - Janek Kalvi, managing director of Estonian Liviko alcoholic beverages maker said ESTONIAN REVIEW a new beverages plant, the most up-to-date at (ISSN 1023-1951) least in the Baltic countries, would be launched Is issued by the in the vicinity of Tallinn by 2010. Press and Information Department, Ministry of Foreign Affairs ISLANDI VÄLJAK 1, TALLINN, ESTONIA 15049 "As we are still in the preliminary planning phase TEL +372 637 7600 I cannot quote any figures or other details. But it is FAX +372 637 7617 certain we need a new plant to serve us during the Estonian Review is also available over the next one hundred years," Kalvi said. Internet at http://www.vm.ee In addition to limitations of capacity also the poor To subscribe, please contact: [email protected] location of the present facility compels Liviko to build a new plant. "It is not rational to have a plant in the city centre. Logistically we have serious problems with the movement of trucks," the Liviko manager said, adding that it was also complicated to extend production premises within the city. Kalvi said the new plant would rise at a location considerably closer to Tallinn than the Jüri technical park area. "Let's say the new place will be within one or two kilometers from our present facility," the vodka maker added, remaining vague. At present the Liviko production complex is located in Masina Street off Tartu Maantee. All production will be transferred to the new plant in the future, but Kalvi said it was still early to say what would be done with the present property. The owner of Liviko is the investment firm NG Investeeringud.

Assets of Estonian Pension Funds Rose above 8 Billion Kroons Feb 26 - The sum total of Estonian funded pension funds climbed above eight billion kroons (EUR 511 mln) at the end of last week. There are 8,035 million kroons in the second pillar funds. The biggest second pillar pension funds are progressive funds administered by Hansapank and SEB Eesti Uhsipank, which amount to respectively 2.6 billion and 1.9 billion kroons.

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