Archive - January 2012

When Estonian businesspeople look towards Asia, they usually think first of China. However, that country has many suitors and there is little interest in newcomers; there are better hopes for Estonian companies in India.

  According to forecasts, India’s economy should grow to become the fifth largest in the world by 2025, thereby becoming larger than Germany’s, for example.

According to Citibank, by 2050 India may even be the largest economy in the world. Therefore, now is the right time to see how we can establish closer relations with India. “In the case of India, there has been a favourable coincidence of circumstances.

The Indian government developed an interest towards Estonia,” said Siim Sikkut, the head of the Development Fund’s Estonia-India foresight project.

He added that, in the case of India, Estonian companies are more interested in getting acquainted, while the Indian side is already ready to start conducting business. Sikkut observed that the goal is not only to have Estonian companies enter the Indian market but also to cooperate in the fields of science and education.

Interested in Estonia’s IT experience

In the scientific sphere, Estonia has some fields of activity in which we are world leaders. “The most drum-beating occurs in the field of cyber security and this has also been heard in India.

A large younger generation is growing up in there, with very few good schools to go to. They are increasingly interested in going abroad. Families are also becoming richer and they can afford this,” Sikkut said about the opportunities for educational cooperation. Indian companies are also interested in IT-related cooperation, since Estonia has specific experience of interest to India.

“The most basic opportunities are in the field of e-governance solutions. Although Estonia and India are not comparable in size, their people have come here to become acquainted with e-governance. We cannot write code for them, but just providing them with specific consulting can be sufficiently good business for our companies.” “India is a large country, and we are looking for cooperation opportunities in very different fields of activity.

Estonia has a good standing in the fields of software, energy, waste management and sustainable energy,” Aladiyan Manickam, India’s Ambassador in Estonia and Finland noted. “We are planning a series of seminars in Tallinn, in order to convince Indian companies to establish offices in Estonia,” Manickam added.

Sikkut confirms that Tallinn could be a good anchor location for Indian companies that want to expand their activities in the Baltic Sea Region and the rest of Europe. Naturally, Estonia is not the only one hatching such ideas. 

In the autumn, The Economist also noted that the British, unashamedly, are welcoming back the former subjects of their empire as bosses and business owners. Some Estonian companies have already made their first movements towards India.

The main products moving from Estonia to India include electrical machinery and equipment, paper pulp and wastes, ferrous metals, and high-precision equipment. In 2010, 97 companies from Estonia exported to India. The lion’s share of the export turnover was provided by companies that have historical ties with India, such as ArcelorMittal, or Horizon Pulp and Paper, whose owner has Indian roots.

However, there are also local companies who have turned their gaze towards India. For instance, Viisnurk’s export relations with India date back to 1998. However, between 2003 and 2008, relations were very timid because production volumes were only sufficient for the domestic and near-by markets.

“In 2008, we began actively searching for partners from farther away again, and one of the places we focused on was India. Since we already knew how our products could be utilised in this market, it was not complicated for us to find the right contacts,” Anu Krimm, Viisnurk’s sales director said. Viisnurk is yet to sign any long-term contracts, as each transaction is handled separately.

“Since India is very price sensitive, it is not possible to make long-term contracts because the cost of maritime transport is constantly fluctuating, and there are many competitive offers from other European manufacturers,” Krimm said.

Viisnurk sells fibreboard panels to India for use in construction and the manufacture of bulletin boards. “We mostly operate through agents who have experience of international trade; know English; and also know the local conditions and business practices,” Krimm said.

Information exchange is fast

Asper Biotech, which provides gene tests, has also tried to establish itself in India in the last three to four years. “We cooperate with scientific research institutions in India. We do not have any powerful partners or large clients, but have some smaller clients.

However, all business is important and we have gained certain experience. But the country is large and there is significant room for development,” noted production manager Eva-Maria Lass.

According to Sikkut, business becomes profitable when a branch is established in India, and subcontractors are also found there. In 2007, MS Balti Trafo, which operates in Vändra and produces small transformers and inductive components, decided to open its own factory in India. They sell a small amount in India, but most of the goods are shipped to Europe.

According to Jaanus Luberg, the managing director of the company, there is room for improvement in the Indian business environment. For instance, the laws are complicated; protectionism and over-regulation are prevalent; the laws differ by state; and, as a result of all this, corruption is rampant.

“Information exchange and achieving agreements with Indian businesspeople goes quickly; purchasing decisions are made relatively promptly – be they positive or negative,” said Krimm.

Business will definitely get a boost when Estonia opens its embassy in New Delhi in the autumn. However, there are also counter-opinions. Instead of the Far East or South America, Estonian companies should focus their attention on the untapped opportunities in Europe, thinks Taavi Laur, the head of the Estonian branch of UniCredit.

“It seems to me that when speaking about potential export markets, too much attention is paid to the Far East or South America, while there are countries closer to home where opportunities have yet to be utilised,” Laur opines.

This article appeared in daily newspaper Postimees on 16 January 2012.
Author: Adele Pao