Analytics, Direct Speech, EU – Baltic States, Modern EU

The 25^th anniversary of the restored Baltic States’ independence coincided with the “silver jubilee” of diplomatic links between the Nordic and the Baltic States. Denmark has played particularly significant role along the Baltic States’ “path to freedom”. Thus, Baltic information offices were opened in the Danish capital at the end of December 1990; next year, on 28 August Denmark and Latvia re-established diplomatic relations; just two days before, Iceland established diplomatic relations with Latvia. As soon as Denmark never recognized the Baltic States’ “occupation”, it just “re-opened” diplomatic contacts with the newly established countries.

It is well worth remembering that at the cradle of “re-born” democracies in the Baltics were Lennart Meri (Estonia), Janis Jurkans (Latvia) and Algirdas Saudargas (Lithuania).

The restoration of independence process was really swift: already by 18 September 1991- during about 3 weeks – some 80 nations globally recognized the Baltic States’ independence.

Leaders & followers

The three Baltic States have been always better-off then their neighbors during the previous decades. However, some differences could be seen among the three; even at present the differences abound.

Thus, on all major socio-economic accounts (e.g. GDP per capita, unemployment, minimum wages, trade balance, etc.), Estonia is a leader with about €15,6 thousand per capita GDP compared to about €12,7 thousand in Lithuania and €12 thousand in Latvia. See Table below.

Estonian ambassador in Denmark, Märt Volmer, thinks that such a “leadership” among the Baltic States is due to people’s strive for “modernity”: it’s in our “national DNA to believe that we could do better”. And he added: “we look at Finland as an example to move slowly but properly; and in a wider view we look at Nordics as a benchmark. However, there’s long way to go in this complicated process, so we do not feel that Estonia is particularly good jet…”

The Soviet time’ legacy was not so easy to overcome in the Baltic States: in particular in Latvia, where industrial sector was most developed among the three states. Latvian ambassador, Kaspars Ozoliņš argues that this was probably the main reason behind the critical development strategies in Latvia: obsolete industries have been demolished, while creating new would take certain time… However, he is optimistic: Latvia has already developed strong and competitive sectors, at least within the EU’s market. He mentioned, among others, such sectors as ICT, bio-agro, even education, which attracts thousands foreign students from around the world. Even the old-aged wood-forest sector, Kaspars Ozoliņš added, “could be a perspective and competitive industry sector with the use of ICT”.

Lithuanian ambassador, Gintė Damušis, argued that facilitating country’s competitive advantage in Europe and worldwide should be the primary aim of her diplomatic efforts. The country can easily compete in the global biotechnology field and in producing cutting-edge laser technology and applications. And of course, manufacturing is important: Lithuania ranks 4^th worldwide as a “high growth location” for investment in manufacturing, which is “dispersed” around the country’s various regions. That’s another important activity’s sphere in the Baltics and Lithuania is heading the trend: e.g.  only about 0.7 million people is residing in Vilnius (out of totally about 3 million population) while in Latvia about half of the country’s population resides in the capital (which makes the rest of the country almost obsolete). 

Considering the accomplishments

Since renewed independence, the accelerated growth is tremendous in all three states. However, since joining the EU, the Baltic States have acquired significant support from the Union’s budget. Compared to the Baltic States’ contribution to EU’s budget, which is at the level of 1 per cent of countries’ GNI (see table below), the Union’s financial “injections” into the Baltics’ economies has been at the level of 3.5% of GDP in Estonia, 4.5% in Latvia and about 5.4% in Lithuania.

Numerous infrastructure projects have been realized in these states, including those in transportation, environment, waste processing and regional planning.     

Table: Baltic Countries’ profiles:

- Lithuania: Territory: 65 286 km², Population: 2 921 262 (2015), which is about 0.6% of total EU; GDP: € 37.124 billion (2015); Lithuania has held the revolving presidency of the Council of the EU in 2013; GDP per capita –about €12.7 thousand.

The Commissioner nominated by Lithuania to the European Commission is Vytenis Andriukaitis, responsible for Health and Food Safety among the EU member states. 

Breakdown of Lithuania’s finances with the EU (2014):

-Total EU spending in Lithuania – € 1.886 billion; -Total EU spending as % of Lithuanian gross national income (GNI) – 5.36 %; -Total Lithuanian contribution to the EU budget – € 0.320 billion; - Lithuanian contribution to the EU budget as % of its GNI -0.91 %.

- Estonia: Territory: 45 227 km²; Population: 1 313 271 (2015), which is about 0.3% of total EU; GDP: € 20.461 billion (2015); Estonia will hold the revolving presidency of the Council of the EU for the first time in the second half of 2017; GDP per capita - €12.7 thousand.

The Commissioner nominated by Estonia to the European Commission is Andrus Ansip, Vice-President for the Digital Single Market.

Breakdown of Estonia’s finances with the EU (2014): 

Total EU spending in Estonia: € 0.668 billion; -Total EU spending as % of Estonian gross national income (GNI) - 3.50 %; - Total Estonian contribution to the EU budget: € 0.178 billion; - Estonian contribution to the EU budget as % of its GNI -0.94 %.

-Latvia: Territory: 64 573 km²; Population: 1 986 096 (2015), which is about 0.4% of total EU; Gross domestic product (GDP): € 24.378 billion (2015). Latvia held the revolving presidency of the Council of the EU for the first time in 2015.

The Commissioner nominated by Latvia to the European Commission is Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue.

Breakdown of Latvia’s finances with the EU (2014):

Total EU spending in Latvia: € 1.062 billion; -Total EU spending as % of Latvian gross national income (GNI) – 4.45 %; -Total Latvian contribution to the EU budget: € 0.244 billion; -Latvian contribution to the EU budget as % of its GNI – 1.02 %

Sources at: http://europa.eu/european-union/about-eu/countries/member-countries/

Box: Assisting business development in Estonia

Estonia's open and stable economy is characterized by adaptability and innovation.
With conservative budget policy based on realistic prognosis Estonia has avoided government debt – it has been just under 10% of GDP for last years. Combined with the income from state reserves it means Estonia does not have fat greasy section in the budget called ‘repaying old debt’. That then means all the tax money goes to different budget sections and for businesses that adds stability and positive long forecast. Flat-rate income taxation, extensive freedom for foreigners to own land and 100% profit repatriation make Estonia one of the most business-friendly countries not only in Eastern and Central Europe: it is number nine in the world’s economic freedom index of the Heritage Foundation.  

Both domestic and foreign enterprise and capital are ensured equal opportunities. Membership in the EU, the WTO, the OECD and the Economic and Monetary Union provide an additional boost for expanding foreign trade.

Extensively favorable business environment makes Estonia an excellent base for doing business.

Government has made priority to enhance the efficiency of local administrations and extensive reform is underway, together with lowering taxes on labor and work with education system and energy market one should expect further improvement of the business environment.

General information about Estonian economy in: Economy in Numbers & Estonian Economy Overview .

Information for entrepreneurs in:

-Business information;

-Invest in Estonia

-Trade with Estonia, and

 e-Estonia.

“e-Estonia” is the term commonly used to describe Estonia's emergence as one of the most advanced e-societies in the world – an incredible success story that grew out of the partnership between a forward-thinking government, a pro-active ICT sector, and a switched-on, tech-savvy population. Thanks to this success, Estonians and the Estonian state enjoy a wide range of e-solutions that those living elsewhere can only dream about.

Key facts: 88% of the population aged 16-74 years uses the internet 88% of households have internet capabilities (Statistics Estonia, 2015); all Estonian schools are connected to the internet.

Reference: Statistics Estonia, 2015;

Rapid wi-fi internet connections are available in more than 1100 public places; in many places that service is free of charge. The area of wi-fi internet is constantly growing and encompasses all of Estonia. About 99,8% of banking transactions in Estonia are conducted through the internet. Income tax declarations can be made electronically via internet. In 2014, over 95% of income tax declarations were presented through the e-Tax Board. Expenditures made by the government can be followed on the internet in real time. Cabinet meetings have been changed to paperless sessions using a web-based document system.

More about it in: Components for Digital Society, and Estonian e-voting system.

Some additional information about Lithuania:

- http://www.investlithuania.com/news/lithuania-is-target-for-massive-investment-from-international-companies/;

- http://www.investlithuania.com/business-locations-projects/#zones

Diplomatic economy or/and economic diplomacy

Estonian ambassador underlined that his “support” for country’s business was through establishing local contracts and direct links with the Danish business community, mainly to instigate investments. “Frankly speaking, he adds, I am an Estonian spin-doctor, trying to sell my country’s image”. Seeing from the country’s economic success, I would say he is a good spin-doctor and country’s “promoter”!

But one has to admit that combining main ambassador’ competences, e.g. promoting free society’s values, economy, culture, and politics might be a pretty complicated endeavor…   

The most important sectors of Lithuania’s economy (latest statistics for 2014), according to the EU’s official website, have been wholesale and retail trade, transport, accommodation and food services (32.7 %), industry (23.6 %) and public administration, defence, education, human health and social work activities (13.9 %). These are, at the same time, spheres of Lithuanian embassy’s “economic diplomacy”, says Gintė Damušis.

See: http://europa.eu/european-union/about-eu/countries/member-countries/lithuania_en

The most important sectors of Latvia’s economy in 2014 were wholesale and retail trade, transport, accommodation and food services (25.3 %), industry (16.4 %) and public administration, defence, education, human health and social work activities (15.1 %). And so accordingly, the Latvian embassy is trying, and quite successfully, to promote country’s economic interests in Denmark and the Nordic states. According to Kaspars Ozoliņš, additional value in Latvian economy could be made through developing industrial and manufacturing sectors, reminding that it has been the EU’s task on “industrial renaissance” to increase the share in industrial sector in the Union to 20% of GDP.

Then Latvian ambassador added: “Probably the biggest economic effect can be attained by applying modern technologies, purposefully searching for innovative processes and solutions in the sectors of large volumes, like wood/forestry and agriculture sectors. In this way the total output of big sectors of economy can increase even without value added leaps in production: good example is food wheat which is relatively new crop in Latvia, and it has become important export product”. There is a great deal of work for ambassadors…

Public diplomacy in the Baltic Sea region

Baltic’s public diplomacy celebrated 25^th “silver jubilee” too: the Baltic Sea Parliamentary Assembly and yearly Conference (BSPC) took place in Riga at the end of August; hence 2016 has been named the “Year of Baltic and Nordic Cooperation”.

BSPC was established in 1991 as a forum for political dialogue between parliamentarians from Denmark, Estonia, Finland, Germany, Iceland, Latvia, Lithuania, Norway, Poland, Russia and Sweden. The BSPC is an annual assembly organised by the member states’ rotational presidency; it is Latvian turn in 2016. See more in: 

http://www.mfa.gov.lv/en/news/latest-news/49265-2016-year-of-baltic-and-nordic-cooperation

Latvian Parliamentary Secretary of the Ministry of Foreign Affairs, Zanda Kalniņa-Lukaševica, underlined that only by joint efforts it’s possible to make the Baltic Sea region politically, economically, socially, and environmentally sustainable and secure. And the only way to reach it is through open and trusted dialogues based on respect for human rights, freedom, democracy, self-determination and the rule of law.

The Baltic Sea Region is one of the most dynamic in Europe and holding a great socio-economic potential; the region’s dynamism is seen in intensive cooperation formats at the most different levels – between public officials, non-governmental organisations, experts, students, researchers – and through people-to-people contacts. There are several “cooperating structures” here: the Baltic Assembly, the Baltic Council of Ministers, cooperation of the Baltic and Nordic countries in the Nordic-Baltic Eight (NB8) format.

For example, the Council of the Baltic Sea States (CBSS), which brings together representatives from the governments of the Baltic Sea Region’s countries providing a broad-level political platform for achieving strategic goals and the implementation of forward-looking projects important for the region.

There are numerous challenges presently in the Baltic Sea Region:  ups and downs in economies, demographic changes and risks posed by migration, threats to environmental security, geopolitical changes and terrorist threat.

Changing diplomatic work

The ambassadors are unanimous in the opinion about the changes that occurred in their work due ICT involvement. If previously, Märt Volmer mentioned, the diplomatic staff’s work (CD’s) was, generally, concentrated on information exchange (e.g. to inform Danish community on what’s going on in Estonia), then presently this work is mainly done through the web-net. He added that he is more like “a salesman and image promoter forming direct connections”.

If fact, he says, making good allies and friends helps in security. 

But still, the economic and business contacts become a priority. Estonian NGOs are of a great help too: e.g. Estonian non-profit organisation Danish-Estonian Chamber of Commerce (DECC) established in September 2007. The DECC’s forerunner (the Danish-Estonian Business Club founded in 1996 as an informal forum for Danish businessmen in Estonia) aimed at promoting business relations between Denmark and Estonia. DECC also provides its foreign members with relevant information about business opportunities and conditions in Estonia.

See more in: http://estland.um.dk/en/denmark-and-estonia/decc/.  See more in the links: Enterprise Estonia, and http://www.eas.ee/?lang=en.  

However, the ambassadors’ role is “to represent his/her country –politically, economically and culturally”. Thus, Kaspars Ozoliņš underlined that “the embassy’s work is to excel Latvia’ image”. Of course, all directions are important, he added but mostly economic and cultural: for example, ambassador is working closely with Latvian Diaspora in Denmark, which accounts for about 5.2 thousand, NGOs and several social media platforms. He pointed out to the “Latvian Film Collection”, a set of Latvian movies shown around Denmark.

Besides promoting trade and investment, the ambassadors’ task is to support promotion of culture and heritage. Here the Baltics’ ambassadors are unanimous that one of their main aims is “promoting national identity, languages and “national pride”, says newly appointed Lithuanian ambassador in Denmark. Gintė Damušis, who headed her Foreign Ministry’s Diaspora Department before posted to Copenhagen, believes that bilateral relations can benefit from the ties and networks of diaspora communities and professionals. She thinks that “new ambassador’s work should include using social media as an instrument of communication and outreach”. There is a lot of untapped potential that can contribute to strengthening contacts and cooperation between countries –and not just between national public and private institutions, but between regions and people, she added.  

United we stand…

The Baltic States can reach and deliver much more for citizens (and for the rest of the world) acting united than being fragmented. This is the general Ambassadors’ conclusion voiced by Märt Volmer: “the three Baltic States can work together; and even so the Nordic and Baltic States, but only if we are good”.

The states are not losing sovereignty when acting together: actually, they are “regaining sovereignty” at the EU's level because in the modern world the only way in effectively exercising sovereignty is being together.

Thus, the Baltic States will be much stronger regionally and internally while working together in the interest of the citizens. Baltic Development Forum called the Baltic Sea region (with eight states) recently “the top of Europe” (www.bdforum.org ). 

With the present EU enlargement difficulties, the EU’s policy pursuing a one-size-fits-all super-state approach can no longer function. Bur differences among states shall not hamper sub-regional specifics.

Nordic influence is great both in Europe and around the world. For example, German chancellor Merkel came back from G20 convinced that outsiders now view Europe as old, weak and failing. Her goal and that of the EU leaders is to find Europe’s “wow-factor” and to find a replacement for her British ally when it comes to dealing with France and southern European states after Brexit. The replacement could be the northern dimension and more active role of the Nordic and Baltic States. That could and should the ambassadors’ noble task in the years to come.