Shaping Estonia as a transit corridor

TALLINN - The future of the Estonian economy could lie in the transit industry, but in order to maintain its success, changes are needed to keep up with the competition.

Such was the message at a recent transit seminar sponsored by the Transport and Communications Ministry in Tallinn March 5.

The transport industry is one of the pillars of the Estonian economy and an area in which many business people are predicting high growth in the future.

In 1997, the transport industry accounted for 17.6 billion kroons ($1.3 billion) in turnover, 9.2 billion kroons of which was in transit. The industry employed 48,100 people or 7.4 percent of the workforce in 1998.

The Transport and Communications Ministry released its strategic plan that outlined what Estonia should do to develop the transit industry between 1998 and 2005. In it, the authors pointed out that many businesses simply use Estonia as a transit corridor. Little value is added to products while in the country, meaning less revenue and jobs.

"The 1998 recession in Russia has shown, however, that the concentration on physical transit only and lack of focus on development of alternative services (value added, logistics, distribution center services) has made the industry most vulnerable as they are (except for the oil business) least prepared to adjust to new market conditions and opportunities," the plan reads.

The authors of the report also pointed out that the major transport players who are foreign owned had yet to enter the Estonian market as a basis for East-West transit.

Estonia's position as a transit corridor is precarious, said Arnout D. Lugtmeijer, board chairman of the Estonian Oil Service, one of the leading oil transport companies in Estonia.

"I hope that all of you realize that there are a lot of transit alternatives to Estonia," said Lugtmeijer. "In a very short time Estonia attracted a lot of cargo but it can be lost in a very short time as well."

A great deal of infrastructure development will need to be done before Estonia can secure its position as a transit corridor with Russia.

"Estonia has not created a stable transit corridor," said Transport Minister Raivo Vare noting that Estonia needed a foundation to coordinate the various industries associated with the transport industry. The ministry has already allocated 2.8 million kroons to develop the foundation and further investment will depend on the new government.

"We need to make a political decision where transit trade is more important," Vare said.

The foundation was based on a similar model developed by Dutch officials during the mid-'80s when they felt that their ports were becoming less competitive with other European outlets.

During a press conference after the conference, Vare added that Estonia shouldn't rely too heavily on oil cargo through the ports. Liquid goods, which are usually oil, make up 52 percent of the transit cargo through Estonia.