Estonia Finance Profile 2012

Market-based competition

Estonia has often been cited as one of the most open and liberal economies in the post-communist world. Estonia has no price controls, the Estonian kroon is fully convertible, and the number of days needed to open a business is seven. All market participants enjoy equal opportunities. Profits may be freely used and transferred.
 

Anti-monopoly policy

Estonia established a Competition Board in 1993 with the main function of enforcing the country’s Competition Act, adopted that same year. This act (as later amended and together with a number of supplementary government decrees) defines and establishes sanctions for all “agreements, concerted practices and decisions” among firms that restrict free market competition. In 2008, the government reorganized the Competition Board into the Competition Authority and merged it with a number of other oversight institutions such as the Energy Market Inspectorate and the Railways Inspectorate. One of its recent high-profile cases was a decision in 2008 to stand against the slow but steady incorporation of Estonian pharmacies into two large chains. The Competition Authority argued that this trend posed a threat to price competition in the market for drugs and other remedies. The authority has also played an active role in monitoring utility prices (e.g., water, natural gas, heating and gasoline)

Liberalization of foreign trade

Estonia spurred much of its economic growth during the 1990s with a very liberal, tariff-free foreign trade policy. The country came under the umbrella of the European Union’s general foreign trade regulations following accession in 2004, but it has continued to maintain an open economy. This liberalism became a kind of vulnerability with the global financial crisis of 2008. Despite the hardships caused by the crisis, no political actors in Estonia have called for protectionism.

Banking system

The years 2007 and 2008 marked a symbolic end to the Estonian banking system when both major retail banks, Ühispank and Hansapank, changed their names to conform directly with their Swedish owners, SEB and Swedbank, respectively. The brand shift epitomized the degree to which the country’s banking system has become internationalized. At the same time, because the future of the Estonian banking sector depends heavily on the business decisions of Swedish bankers, the country is exposed to possible powerlessness in times of financial crisis.