Question

Case Study Of Estonia:Transition, EU Membership , and The Euro (9-713-479)

1. What was the competitive position of Estonia when it regained independence in 1991? What were its assets and liabilities?

Answer 1

Economic Position:-

Estonia was one of the Soviet Union controlled territories which was primarily managed by the Russians before 1991 when it gained formal independence after the break down of the Soviets.

In 1991 itself, the process of economic reforms and changes was started by the government of the country, which allowed for easier investments to take place and also led to global recognition of the country being a hot spot for foreign investments with increased returns respectively.

The country decided to adopt Kroon as its currency in the year 1992, which gave it high economic independence. Further it inculcated laws which would allow foreign companies to enter into its markets relatively very easily.

This happened due to active tax reforms and abolishment of duties which hampered trade. The politicians within the country adopted a free market system, encouraging trade to the extent that there were no restrictions imposed on companies to the amount of money they could take back to their native countries post investment.

This led to rapid development of the country and allowed for higher than normal inflow of money which made it one of the key areas in Europe and ultimately being a critical part of the European Union respectively.

Assets and Liabilities:-

The core assets of the country post re independence was its manufacturing sector and export of energy to the neighboring countries respectively.

Estonia transformed itself from being an agricultural economy to being one which had high reliance on export of energy and manufactured goods and services.

This existed even pre independence wherein the Soviet Union wished to establish the country as a manufacturing strength respectively. The country had

The primary liability on the other hand for the country were its policies discouraging free trade which restricted the country from any real economic growth and development. This however was soon changed by pro globalization approach by the then government, thus allowing for higher capital flow and better investment opportunities for the government of the day.

The country developed from being a country with average GDP of 100$ or lesser in 1991 to being regarded as one of the most developed countries of the European Union, primarily because of the free market reign adopted by its leaders during early times.

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