VZCZCXRO3070
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHTL #0621/01 2631034
ZNR UUUUU ZZH
R 201034Z SEP 07
FM AMEMBASSY TALLINN
TO RUEHC/SECSTATE WASHDC 0193
INFO RUCPDOC/USDOC WASHDC
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 02 TALLINN 000621 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR EUR/NB KATHERINE GARRY AND EEB/CBA 
HELSINKI FOR SCO BRIAN MCCLEARY 
COMMERCE FOR ITA LEAH MARKOWITZ 
 
E.O. 12958: N/A 
TAGS: BEXP ECON PGOV EN
SUBJECT: USDOC DAS FOR EUROPE VISITS ESTONIA 
 
 
¶1. (SBU) Summary: GOE officials told Department of Commerce 
DAS for Europe Paul Dyck that Estonia is very open to more 
U.S. investment and noted that Estonia's business climate 
has not suffered from the cyber attacks of early May.  They 
also expressed interest in the goals of the new Trans- 
Atlantic Economic Council.  However, business leaders and 
GOE officials both cited difficulties caused by Estonia's 
labor shortage.  Estonia's trade promotion agency reviewed 
its strategies for encouraging more investment, including 
interest in direct flights to the U.S. and persuading a 
major international bank branch to locate in Estonia.  The 
Ministry of Economy said they are keeping all options open 
with regard to Estonian participation in nuclear energy 
projects in both Finland and Lithuania.  End Summary. 
 
¶2. (U) During a visit to Tallinn September 11-12, Commerce 
DAS Dyck met with Siim-Valmar Kiisler, Deputy Minister for 
Economic Affairs and Communication and Mart Laanemae, 
Undersecretary of the Ministry of Foreign Affairs for 
Economic and Development Affairs.  He also met with Dr. 
Viljar Jaamu, Chairman of the state trade and investment 
agency, Enterprise Estonia (EAS).  As the keynote speaker 
at an Amcham "Charter Gold" reception, Dyck addressed 
members of the business community on U.S. investment goals, 
and challenges facing employers in Estonia. 
 
Investment, Labor Shortage, and Estonia's Economic Future 
 
¶3.  (U) DAS Dyck told all his interlocutors that the USG is 
interested in identifying new opportunities for U.S. 
businesses in Estonia and increasing the proportion of U.S. 
foreign direct investment.  (Note: the U.S. is currently 
the 8th largest in FDI, at 2.1 percent.  End Note.) The USG 
recognizes that Estonia is a transparent, investment- 
friendly location, with a simple, pro-business tax 
structure and a growing economy.  However, he noted, the 
labor shortage in Estonia's workforce is a big concern for 
many firms.  (Note:  The registered unemployment rate is 
currently 1.5 percent, and several firms -- including a 
telephone call center for Hilton hotels -- have recently 
announced closure or downsizing due to their inability to 
find enough workers at competitive wages and flexible 
hours.  End Note.)  Kiisler from the Ministry of Economic 
Affairs (MOE), and Laanemae from the MFA, both admitted it 
would be hard to bring even a single new auto plant to 
Estonia now, given how much labor such a factory would 
require.  "We've lost more jobs to China than we have 
here!" said Laanemae, only partly in jest.  Also, he 
acknowledged that locating one car factory in Estonia would 
soak up so many jobs that other sectors of the economy 
could suffer.  Nevertheless, both reiterated that Estonia 
would be very open to any potential investors, and would 
treat U.S. firms with equal preference to Estonian ones. 
 
¶4.  (U) Dr. Viljar Jaamu, Chairman of the state trade- 
promotion agency Enterprise Estonia (EAS), told DAS Dyck 
that while Estonia wants to emphasize non-labor intensive 
sectors like IT and tourism, it does not want to become a 
one-dimensional economy "like Cyprus or Egypt."  EAS still 
views attracting manufacturing to Estonia as a priority, 
but Jaamu admitted that it is unclear where the workers 
will come from.  Politically unpopular proposals to 
facilitate permits for workers from outside the EU are 
currently stalled in the GOE cabinet.  Jaamu listed 
bringing a major international bank like CitiBank to 
Tallinn and opening up direct flights to the U.S. as other 
priorities.  To that end, he has urged the Tallinn airport 
authority to grant special concessions to any airline 
opening new routes in and out of Estonia.  (Note: Jaamu 
said that 36,000 passengers per year fly from Estonia to 
the U.S., which is enough for two full flights per week. 
End note.)  Jaamu had even more ideas about pressing 
Parliament for legislation to allow international ship 
registry in Estonia and to attract accounting, logistics 
and other service providers, but again, lack of labor is a 
bottleneck.  Jaamu told DAS Dyck that the newly opened EAS 
office in San Jose, CA is focused on the IT sector, but is 
also trying to facilitate partnerships in Silicon Valley 
for Estonian firms.  Shortly after meeting with DAS Dyck, 
Jaamu also led a delegation to London to talk with 
financial regulators about opening an alternative stock 
market in Tallinn for small-cap firms, like London's AIM. 
 
¶5.  (SBU) At the American Chamber of Commerce (AmCham) 
reception, senior managers at both the Radisson hotel and 
UPS voiced concerns about the service sector workforce. 
 
TALLINN 00000621  002 OF 002 
 
 
They have very low turnover at the mid- to upper-levels of 
management, but extremely high annual turnover (almost 90 
percent) among drivers, housekeeping and restaurant staff. 
To meet next year's wage pressures (25 percent growth in 
2006) in an environment of modest revenue growth, the 
Radisson plans to cut 5 percent of their workforce in order 
to give senior staff raises.  According to the Radisson's 
General Manager, the hotel industry has been hurt in part 
by the fact that the convention tourism industry in Estonia 
has made little effort in recent years to seek out new 
business because it assumed that past growth would continue 
without additional encouragement. 
 
Trans-Atlantic Cooperation and Life after Cyber Attacks 
 
¶6. (SBU) MFA interlocutors asked for more information on 
the Trans Atlantic Economic Council created at the April 
U.S. - EU Summit.  Laanemae said that "Estonia would be 
happy to have as special a relationship with the U.S. as 
possible."  Both he and MOE's Kiisler noted that before EU 
accession, Estonians were very skeptical about what 
benefits membership would bring, but now they are very 
positive.  DAS Dyck asked his counterparts what affect the 
April Bronze Soldier riots and subsequent cyber attacks 
have had on the business and investment climate in Estonia. 
Both Laanemae and Jaamu said they do not feel that the 
Cyber Attacks have scared off potential investors.  Paul 
Elberg, MFA's Director of External Economic Policy and 
Development Cooperation, noted that previous disruptions in 
trade with Russia have resulted in Estonian firms re- 
orienting their business toward Western firms and 
investors.  (Note:  A couple of U.S. companies have told us 
privately that the riots and cyber attacks made them 
reconsider plans to invest or expand investment in Estonia. 
End Note.) 
 
Ignalina Nuclear Power Plant 
 
¶7. (SBU) Einari Kisel, Director of MOE's Energy Department, 
told DAS Dyck that Estonia is keeping all its options open 
for energy cooperation in the region.  Estonia has been in 
talks with Latvia, Lithuania and Poland for the past 18 
months about collaboration on a replacement for the 
Ignalina Nuclear Power Plant (INPP).  Recently, however, 
Minister of Economy Juhan Parts and Prime Minister Andrus 
Ansip have discussed Estonia's interest in a new Finnish 
nuclear power plant with the Government of Finland.  Kisel 
commented that it is hard to think of any other example in 
the world of a national-level nuclear power project 
involving more than two partner countries, as the INPP does 
right now.  Deputy Minister Kiisler welcomed the interest 
that U.S. companies such as GE and Westinghouse have shown 
in Ignalina, but added that most likely there would be no 
public tenders for the INPP until 2010 or beyond. 
 
¶8.  (U) DAS Dyck cleared on this cable. 
 
PHILLIPS