Nordic-Baltic Review - NORCOUS Academia

BUSINESS FOCUS
What’s up, tiger
The Baltic countries have experienced strong economic growth for several years.
But what does the future hold for Europe’s ‘tiger economies’
The Nordic-Baltic Review turned to leading business minds for a quick analysis.
Questions
1. What are the Baltic region’s drivers for development and what are the decisive drivers for the future
2. What are the most important trading partners of the Baltic countries
3. What are the most acute problems in the near future
4. How will the Baltic region develop in the near future and catch up with the rest of Europe
Compiled by Kaisa Hernberg
4 Nordic-Baltic Review
Carl Bildt
Sweden’s former Prime Minister is a well-known
specialist on Eastern Europe. He has had a
prominent role in the Balkan peace process and
currently serves on the boards of numerous
European and American business and research
organizations.
1. The main driver in the region is a strong
desire to catch up with the rest of Europe after
lost decades of Soviet occupation.
In a more restricted economic sense, direct
investments from the Nordic region have given
these countries both a stable and efficient
financial system and a very modern telecommunications
system.
Relations with Russia also play a positive
role. Many types of transit trade remain important
to these countries, although some aspects
can sometimes be difficult to handle.
2. Within the EU, Nordic markets are naturally
the most significant, but as exports continue
to grow fast, we are likely to see Baltic
exports going to more and more destinations.
Entrepreneurs from the Baltic countries are
also active in the emerging markets in Eastern
and Southeastern Europe. The second-largest
foreign investment in Bosnia is Lithuanian,
and the second-largest investment fund dedicated
to the Balkans is Estonian. The Baltics
evidently have a nose for the opportunities of
emerging markets.
3. The immediate challenge is to preserve
the macroeconomic balance, as the countries
make the shift to the Euro in 2007 or 2008. As
long as they are on track to achieve this, I don’t
see a need to worry about their rather large
current-account deficits.
It is important to preserve all the policy
elements that have turned these countries into
the growth tigers of the EU. The much talkedabout
flat-tax revolution was initiated by Estonia,
and is still gathering momentum.
More political stability would be desirable,
although policy continuity has in fact been
remarkable despite frequent political changes.
But it takes time for a stable political system
with more or less stable political parties to
develop.
I do not see corruption as a major problem,
but it does require careful attention in parts
of the region. Rural areas should also begin
to catch up better with the rapidly developing
cities, not least to limit the scope for more
populist and retaliatory political forces in the
future.
4. It is perfectly realistic to expect
annual growth in the 5–7 per cent range during
the years to come, and I do not see any other
region within the EU achieving that.
It will nevertheless take time for these
countries to catch up with the ‘old’ members
of the EU. It is soon a decade and a half since
they re-established their independence. I vividly
remember the utter misery one encountered
back then when entering a grocery store
in Tallinn or Riga. What these countries have
achieved in these years is truly remarkable.
If they continue in the same way, I think