A major methanol plant project in Pärnu was called off. Last year, Ericsson pulled out of an investment. Do all these developments suggest that Estonia is no longer an attractive investment environment for foreign investors?

No, it definitely doesn't mean that. Projects are paused or canceled in every country. The projects mentioned as examples each have their own specific reasons why they ultimately weren't carried out in Estonia.

More broadly, there are certainly global economic and geopolitical factors that have contributed to these kinds of projects not materializing in this region at the moment.

There are also a range of reasons affecting the implementation of energy-related plans in Estonia, likely including the reshaping of offshore wind projects. Power2X (the company behind the methanol plant — ed.) likely has its own reasons as well. I'm sure they'll provide their own explanation as to why they're not moving forward with this project in Estonia right now. But I don't think this indicates in any way that Estonia is no longer competitive.

There are similar examples in Germany and Scandinavia, where various projects are being canceled or are failing to launch.

This is simply a common occurrence in international investment projects — sometimes they're shelved for a while and then picked back up again later.

How much foreign investment has come into Estonia in recent years? The statistics published by the Bank of Estonia count undistributed profits as reinvestment, which in turn is reflected as foreign investment. How much of the foreign investment in recent years has actually been new, direct investment into Estonia?

It's difficult to separate that, yes, but this is in line with international statistical standards, which treat undistributed profits of a foreign company as foreign investment. In Estonia's case, that profit has likely remained here thanks to our tax environment, and the statistics reflect that. So, investment is being made into the Estonian economy and into companies already operating here.

Entirely new projects have remained fairly stable year over year. The Bank of Estonia could probably provide more precise figures, but based on our portfolio, we can say that the volume has been within the usual range over the past three years.

Last year, our result was €254 million in foreign investment into Estonia, though that figure also includes follow-on investments. These are concrete projects — expansions or new initiatives — where capital was invested to grow the existing economy and business operations.

Excluding reinvestments, are you able to say how much has come from new projects?

I can't give a specific figure offhand, but it's not particularly meaningful to separate it.

What's important from Estonia's perspective is that our tax environment keeps foreign capital here. In reality, that's fuel for the Estonian economy.

We've talked about projects that were canceled, but what major projects are currently in progress?

In recent years, the strongest sectors have definitely been energy and defense industry. Since we prioritize industrial investments, these two sectors are worth highlighting.

This year, a support measure for large-scale investments was launched. You could say that, for the first time in Estonia, we have several projects in the pipeline that are on the verge of being realized. It's still too early to speak about them in detail, as the state-supported investment decisions are expected to be made sometime in the fall.

Around 10 projects have shown interest in this measure. Likely up to five will apply for funding, and all of them are projects worth over €100 million. For Estonia, this is probably historically the first time that so many large-scale projects are being decided on at once.

The measure you mentioned allocates €160 million for the period 2025–2028. How much of that will go toward foreign investments?

We actually don't know yet what the breakdown will be — how many of the projects are backed by Estonian capital and how many are foreign. Among the investment projects in our portfolio, up to five have shown interest in the measure. But in the end, we'll see once the applications are submitted, and from there we can compile statistics and analyze what kinds of project profiles we're dealing with.

How has the Foreign Investment Center played an instrumental role in bringing investors to Estonia? What kinds of incentives have you offered and what kinds of problems have you helped solve?

Our main role is to attract industrial investments to Estonia. Our core activity is essentially marketing Estonia's economic and business environment to foreign companies and investors. That includes everything from advising on investment projects to organizing investor visits. We work to connect potential investors with local stakeholders in Estonia — ranging from various government agencies to officials and ministers — in order to build the trust and confidence that Estonia is the best place to bring their investment.

Estonia's main selling points continue to be our status as having the most competitive tax environment among OECD countries, as well as our standout digitalization. There's no other country quite like Estonia — government services are fully digital. We also have a highly skilled workforce, an agile business environment and strong entrepreneurial freedom to grow a business here.

In terms of specific measures, one example the minister of economic affairs recently highlighted is the cap on renewable energy fees for large consumers. This will definitely enhance our competitiveness, especially if we're talking about energy-intensive industries looking to operate in Estonia or expand here.

Another major boost to our competitive edge is the large-scale investment support measure. There's a lot of positive news to look forward to this fall on that front.

What concerns have foreign investors you've spoken with raised? What has driven them away from Estonia?

It really depends on the investment profile — what sector and what kind of company we're talking about.

It's no surprise that labor costs in Estonia have risen rapidly in recent years. We're definitely not a low-wage country anymore, and if cost savings are one of the primary criteria, that doesn't exactly work in our favor competitively.

That said, our skilled and intelligent workforce continues to receive praise. If a project isn't heavily labor-intensive, we're still very competitive in that space.

But if we're talking about a factory with more than a couple hundred employees, then companies often look toward places like Lithuania or Poland instead — which is entirely understandable and logical.

On the other hand, it also depends on the sector. If we're talking about alternative fuel producers — like hydrogen or hydrogen derivative manufacturers — then the price and availability of energy or the capacity of the energy grid are definitely among the reasons why some projects might not move forward in Estonia.

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