Joakim Helenius - Estonia Challenges Finland's Economic Model
An alarm bell rings, but it does not stop Finnish investment banker Joakim Helenius from talking as he sits in the head offices of Trigon Capital in the center of Tallinn.
"This is an unusual situation. There are two neighbouring countries that are close to each other, but which have very different taxation policies – Finland (progressive taxation) and Estonia (a 21 per cent flat tax). There are not many cases like this. This might actually be the only one in the world.”
Helenius feels that Estonia has better chances to prevail, because Estonia has virtually no net state debt.
"There are no pressures to raise taxes, whereas in Finland and the other Nordic Countries there are.”
The alarm bell was justan exercise, and no risks are in sight in other ways either. It was different in Estonia in the first half of the 1990s, when investment banker Helenius was one of the first foreigners to dare come to Tallinn.
Nowadays Helenius’s company Trigon Capital controls nearly a billion euros of investors’ money. The sum is the equivalent of about a sixth of Estonia’s state budget.
In Estonia the company has invested in projects such as a shopping mall that is being built, the Viisnurk wood products factory, and dairy farms.
World Finance named Trigon Capital this year’s best investment firm in the Baltic region.
"Estonia’s economic model corresponds well with the needs of a small country in the modern world”, Helenius says.
"In Finland, social equality thinking dominates decision-making.”
Helenius feels that Estonia’s economic model will increase pressure in Finland if, say, 1,000 small and medium-sized companies were to move from Finland to Estonia in a couple of years.
"Then Estonia would benefit in the same way that Finland has benefitted from Estonian labour.”
In the slump of 2008-2009 Finnish interest in setting up companies in Estonia dwindled, but the number is growing again.
The Finnish Embassy in Tallinn says that there are 3,500 companies working actively in Estonia, which are mainly under Finnish ownership.
But what are the companies doing in Estonia if much of Estonia’s labour force is in Finland?
Helenius says that this will be the next phase of development in Estonia. "There is a debate ahead about setting up an immigration policy.”
The impact of the present economic crisis cannot be felt yet in Estonia, but if exports from Finland and Sweden dwindle, exports from Estonian subsidiaries will also decline.
Estonia is better equipped to survive the crisis, Helenius insists.
Legislation was updated after the crisis of 2008-2009. It became cheaper to let employees go; now an employee can be terminated without notice.
Workers accepted pay cuts because there were no options.
As far as Trigon’s investments go, the crisis had its most severe impact on the construction material and furniture factory Viisnurk.
After big changes Viisnurk’s competitiveness is better now than it was before the crisis. Helenius believes that the same is true for all of Estonia.
The exceptionally deep slump of 2008-2009 did not reduce Helenius’s confidence in the Estonian economic model. Quite the opposite is true.
"I believe that the people are, on average, actually quite proud about how the country coped and how it rather quickly went through a process in which it was initially one of Europe’s weakest economies, and emerged as one of the strongest”, Helenius says.