Ferry competition intensifies between Helsinki and Tallinn

Stefan Andersson
private investor

New capacity will increase competition among ferry operators between Helsinki and Tallinn this year. This should contribute to low ticket prices in spite of rising fuel costs.

Approximately six million passengers travel by sea between Helsinki and Tallinn every year. As we approach the summer season, there are now six companies offering passenger transports on the route: Tallink, Viking Line, Eckerö Line, SuperSeaCat, Nordic Jet Line and Linda Line. But in spite of high fuel prices and declining passenger figures on the route last year, the operators are adding new capacity. This should intensify competition, to the benefit of travellers.

The market leader Tallink is this year replacing its Autoexpress II (capacity 700 passengers) by the new Superstar (2000 passengers), thereby increasing its capacity significantly. Considering that Tallink already holds a market-share of about 50% on the route, this is obviously quite an aggressive move.

Number two on the market Viking Line is replacing its soon 30 year old Rosella (1700 passengers) with the new XPRS (2500 passengers). Viking Line has stated that its goal is to hold a 25% market share between Helsinki and Tallinn.

Linda Line is also adding to its fleet this year by replacing Jaanika (190 passengers) with a newer fast-ferry with room for 400 passengers.

The three remaining operators continue with the same fleet as last year.

Since Tallink has terminated the Autoexpress service, the ferry operators’ total number of departures and arrivals will not increase this summer. Still, passengers will have 25-30 departures per day to choose between, in both directions.

The current competitive situation a risky one for all the mentioned companies. The fast-ferry operators, SuperSeaCat, Nordic Jet Line and Linda Line, are the hardest squeezed by high fuel-prices, as fuel constitutes a comparatively large share of their total costs. On the other hand, these operators can be quite flexible with their time schedules responding quickly to changes in demand. Tallink and Viking Line enjoy some advantages stemming from their sheer size, modern fleet, and stable income from freight services. But if demand were to cool down, they would get hurt sitting on large fixed costs, especially Tallink with its high financial leverage. Eckerö Line’s main problem is that it offers its customers the oldest and slowest ferry on the route.

Also the freight capacity on the Helsinki-Tallinn route will increase this year. The newbuildings Superstar and Viking XPRS offer some 2000 lane meters each. XPRS of course partly replaces old capacity. Freight volumes have trended upwards for some years between Finland and Estonia, however a general economic slowdown means that there are over-capacity risks also regarding freight.

Estonian GDP-growth in euros has been close to 20pct

Stefan Andersson
private investor

Measuring the Estonian GDP in fixed Eurozone prices suggests that annual growth peaked close to 20% in 2005. With such a ”euro-perspective”, the Baltic economies have been more overheated than broadly understood.

According to public statistics the Estonian real GDP-growth was 10-12% on an annual basis during the period from Q2 2005 to Q1 2007. Technically, 2000 year’s Estonian prices are used as the ”fixed price level” to calculate forthcoming years’ real GDP-growth.

The Estonian nominal GDP-growth in kroons, which of course is equal to the nominal GDP-growth in euros, fluctuated in the range 17-21% during the mentioned period, thus implying an Estonian GDP-deflator of close to 10%. But should the base for deflating the Estonian nominal GDP only be prices in Estonia? I think there are reasons to supplement the official GDP-growth with a euro-perspective.

Whereas the official real GDP-growth number is well suited to explain changes in GDP volumes between years, it does not necessarily give a fair picture of the change in the economy’s created value, especially over longer periods of time. Particularily for Estonia, I think there are a number of reasons why the value of the GDP could well be measured in deflated Eurozone prices:

* The Euro is already the most commonly used currency in larger transactions in Estonia

* The Estonian economy is heavily trade-dependent. Exports amount to 52 % and imports to 73% of GDP. Trade is dominated by the Eurozone.

* Estonia is geographically closely integrated with the Eurozone, Helsinki being only 80 km away. Cross-border travel is significant. Labour markets are integrated.

* The Estonian economy is very small, the Eurozone economy is very large.

* A comparatively large part of the Estonian GDP-base (from an income perspective) consists of company profits, which are easily moveable over borders.

* The EUR-EEK currency peg is not a potential monetary policy instrument, but merely an apple for apple exchange ratio.

Deflating the Estonian nominal GDP with the Eurozone GDP-deflator of about 2%, would give a euro-deflated Estonian real GDP-growth peaking close to 20% in Q3 2005 and hovering in the interval 15-20% from mid-2005 to mid-2007.

A consequence of this way of looking at the Baltics would be that these economies have been even more overheated than generally perceived, but also that growth peaked already in 2005. The value of their GDP has increased more than understood, and therefore their current account deficit could grow larger than was maybe expected. The credit expansion turned into fuel on the fire, causing dislocations between industrial sectors. On the micro level, the purchasing power of domestic salaries towards imported goods increased a real (not only nominal) 20% per year. And exporting companies saw wage costs rise a real (not only nominal) 20% per year.

Of course the judgement of the adequacy of the reported GDP figures contains a number of variables. For instance, the black part of the Baltic economies may have shrunk in recent years due to better control measures and higher minimum wages. This may instead have boosted the official GDP-numbers.

Estonian kroon grossly overvalued

Toomas Hõbemägi

Columnist Esko Passila writes in Äripäev that the strong kroon policy of the government is becoming a huge problem for Estonia.

“The actual value of the kroon to euro is only 50 percent of its current nominal value if you adjust it to inflation. Estonia should join the euro zone only after it has established a justified exchange rate to euro. And when it joins the euro zone there must be a timetable and a fixed timetable to achieve conversion,” writes Passila.

“This is leading Estonia into a similar crisis as the Finland had at the end of 1980s with its policy to protect a strong Finnish markka. This caused the Finnish banking to collapse and bankrupted about a third of all enterprises. Estonian government that is determined to maintain the fixed exchange rate between the kroon and the euro is steering in the same direction,” writes Passila.

Make no mistake: Estonia’s long-term economic trend is sharply upwards

Stefan Andersson
private investor

Yes, everything looks bleak in the economy now. But that is when one has to take a look at the bigger economic picture. I think the Tallinn Stock Exchange is interesting again.

These days when the Estonian economic growth is slowing, the real estate market is sharply correcting and the Tallinn Stock Exchange has fallen by 40% during nine months, it is easy to forget the big picture.

The big picture is that Estonia is situated between the Nordic countries with Norway accumulating huge amounts of liquidity from its oil-sales, Sweden hosting dozens of Europe’s most famous brands in engineering and retail, Finland through Nokia leading the world’s telecommunication industry and the St Petersburg region with a rapidly increasing wealth level.

There is just no way the Estonian economy will not continue to grow in this environment.

Quite contrary, unlike the countries mentioned, Estonia offers extraordinarily favourable conditions for companies and private individuals in terms of taxation and simplicity, as well as stability of politics and institutions. Several Estonian governments over the years, all over the political spectrum, have reiterated the direction of Estonian politics: more efficiency, more technology and low taxes. Entrepreneurial people have been moving into Estonia from all directions, boosting the economy.

Estonia’s strength will never be its size, but its speed. Also the ongoing real-estate crisis, where thousands of people have unfortunately made bad investment decisions, will eventually show the resilience of the Estonian economy. Labour markets will correct, not as in Sweden or Finland with unemployment, but with wage-pressure and reorientation. And as the neighbouring economies are more than 100 times larger than the Estonian one, many prices in Estonia will always be set from outside.

Thus, there is no room for big discounts on Estonian quality assets.

Estonia has among the highest level of agricultural land per capita in Europe. As the whole world economy is increasingly dominated by the demand of the Indians and the Chinese, I think also the agricultural sector in Estonia will play a major role for exports going ahead. Very favourable conditions for the production of wind energy is another area for future growth. Also the tourism industry demonstrates over and over that Estonia is a country people like to visit, and come back to – and I have met several IT-companies looking for talents here, realising that these people now know their market value.

Few are the examples when companies who have come to Estonia decide to leave, but several are the examples when they decide to grow. Low value-added work is being replaced by higher value-added. The wage-pressure created by excessive domestic demand in recent years, will again be adjusted according to the competitiveness of the export industries. Notably, the Russian-speaking part of the Estonian population will play a totally vital part in growing these export industries.

It is the high degree of economic integration which makes Estonia a special country in Northern Europe, and which is the foundation for the future economic growth. Today, investors are depressed about what has happened on the markets, but after some time they will ask, why did I not buy in to it. I think the Estonian real-estate prices should be adjusted a bit further, but I think that the Tallinn Stock Exchange is interesting already now. Especially companies with sound balance sheets should start attracting investors quite soon.

Air Baltic takeover talks

Photo: Rodolfo Clix

Scandinavian airline SAS continues negotiations on taking over Latvian national carrier Air Baltic.

In an interview with the Latvian business magazine LietiskaDiena, Latvian head of the Scandinavian company Marek Pedersen said: “I think negotiations are in an early phase. There has been lot of speculation, but so far there have been no decisions. According to possible scenarios, SAS can either purchase Air Baltic or continue its operations as before. I don’t know. I think, we have to wait for this summer and then we will see.”

Pedersen expressed SAS’s satisfaction with the current partnership: “Air Baltic is a very successful company which is developing and expanding dramatically. I am sure SAS is interested.”

SAS is also interested in expanding their business in the region. “So far we have benefited greatly from cooperation with Air Baltic, they support our flights’ network, but if there were a couple of cities in Scandinavia that would justify direct connections, we would launch them ourselves. Air Baltic would do the same. Our cooperation does not prevent us from doing something on our own,” the magazine quoted Pedersen as saying.

Latvian Transport Minister Ainars Slesers told Latvia’s Diena daily newspaper earlier that the Latvian government will have to make up its mind on Airbaltic soon, and that his proposal was not to sell the carrier off for the time being.

“We are the biggest shareholders, and it is necessary to invest in development,” the minister said, adding that the decision had to be made by the end of this year.

Last June SAS announced it would seek to obtain controlling stakes in Latvia’s Air Baltic, holding 47.2 percent, and in Estonia’s carrier Estonian Air, in which it holds 49 percent. The Latvian state currently holds 52.6 percent of Air Baltic shares.

BNS

Dimas: no trade-off between nature and economy

The idea that protecting biodiversity must harm economic progress is “outdated and mistaken”, EU environment commissioner Stavros Dimas told a seminar on development and Europe’s Natura 2000 nature protection network in the European parliament on Wednesday.

Mr Dimas described Natura as “one of the most advanced, extensive and flexible systems of nature protection in the world”. Where it has conflicted with development projects, this has often been because nature issues have not been taken into account sufficiently early in the planning process, he argued (EED 01/08/07 http://www.endseuropedaily.com/23691).

The commissioner accepted that the economic case for nature protection “may not be so obvious” (EED 05/02/07 http://www.endseuropedaily.com/22555). This is why the commission is carrying out a study on the economics of ecosystems and biodiversity loss, inspired by the Stern report on the economics of climate change, he said (EED 15/11/07 http://www.endseuropedaily.com/24294).

Follow-up: Seminar organised by ALDE http://www.alde.eu/, tel: +32 2 284 21 11, plus press release http://www.alde.eu/index.php?id=42&tx_ttnews%5btt_news%5d=9443&cHash=52848d17af and programme http://www.alde.eu/fileadmin/images/Photo_Library/2008/080416-ALDE-CoR-Natura_2000-Public_debate/Programme_03_04_EN.pdf.

See also Dimas speech http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/08/200 and commission conclusions http://www.endseuropedaily.com/docs/80417a.doc.

ENDS Europe Daily is Europe’s leading environmental news service. A free trial is available by clicking on the following link: http://www.endseuropedaily.com/web/helcom.

Estonia goes cyber "thanks" to occupation

Photo: Patricia Dekker

DUBLIN – Estonian President Toomas Hendrik Ilves said in Dublin on Tuesday that Estonia became an e-country “thanks” to the Soviet occupation lasting nearly 50 years.

“When Estonian independence was restored in 1991, there was nothing to be done with the structures that the occupation regime left behind. Many of the features that are characteristic of normal countries, such as banks, were totally missing,” Ilves said in his presentation at the Institute of European Affairs.

The foundation for Estonia’s e-revolution was the “internetization” schools and the development of Internet banking, he said.

In Estonia today, 66 percent of the population uses the Internet, and more than half of households have a home computer, 90 percent of which are connected to the Internet.

The audience was very interested in Estonia’s experiences with conducting e-elections and in the use of ID cards, as well as the possibility of using the e-tax board environment to file tax declarations.

“Although an e-country has clear benefits — savings in time and human resources, and the reduction of corruption — there are also great risks,” the president noted.

Estonia has not experienced any serious system errors, but last year it experienced a massive and coordinated cyber attack against the country with the goal of crippling the work of state institutions, banks and information channels, in order to destabilize the situation in the country, Ilves said.

The attacks came as a rebellion by those who were angered by the removal of Soviet war memorial.

Today, a NATO cyber security center is being established in Estonia, and European Union legislation to combat cyber crime and cyber attacks will also be planned as soon as possible, he said.

BNS

Military steps up

Photo: Jim Birt

It started out as a normal Monday morning in the Baltics, but by evening, dozens of military stories hit the wires.

Estonia’s Prime Minister Andrus Ansip spoke up in defense of Estonia’s participation in military missions abroad, calling it Estonia’s moral duty to the West.

“It’s very important for a small country to take part in foreign missions. By doing it we show our commitment to the principle of collective defense,” Ansip said in his speech to participants in the 18th senior courses in national defense.

The prime minister pointed out that in the period since the regaining of independence Estonia has received a lot of help from its Western partners.

“Now that Estonia is ready to itself give security assistance it is our moral duty to do it,” he said.

“A small country has little else to offer save for trust, and the promises that one has given must be fulfilled,” he added.

Recalling discussions on foreign missions that took place during the NATO summit in Bucharest, the head of government stressed that Estonia fully supports improving military-civilian cooperation in mission areas.

“It is not possible to achieve a breakthrough in Afghanistan by military means alone, and it’s not what one has been trying to do,” he said, adding that alliance members have also invested in the strengthening of the country’s civilian structures, and will continue to do so.

The militaries of all three countries are also participating in training each other as part of the Baltic Battalion Staff Intelligent Wolf in Tartu, Estonia this week.

Staff of Lithuanian Grand Duke Mechanized Infantry Battalion is expected to head to Estonia to focus on training battalion staff for improved decision making procedures by methods of using map in tactical exercise, and organizing general staff-level as well as separate subdivision-level consultations.

Staff personnel will be introduced to procedures and operations standard for battalion-level headquarters.

The exercise, to take place on April 21-25, will be headed by the commander of the Baltic Battalion, Major Remigijus Baltrenas. Estonian and Latvian staff members will attend the exercise together with Lithuanians, the Lithuanian Defense Ministry said.

This is the second exercise organized for the trilateral battalion which was formed in May 2007 to complete tasks in composition of NATO response forces.

And to top it all off, a five-day theoretical training of military engineers and reconnoiter unit commanders will take place in Latvian Home Guard’s Dobele battalion.

Carried out by six US Michigan National Guard instructors, home guards and professional servicemen will take part in the training, reported the Home Guard.

The aim of the training is to improve theoretical knowledge and practical skills in planning and performing military tasks, for participation in international operations.

In July Latvian home guards and troops will take part in annual field exercise organized by the Michigan National Guard in the US.

BNS

OSCE starts Latvian tour

By Mike Collier

Photo: FIGHT FOR YOUR RIGHTS TO PARTIES: Vollebekk’s visit will address voting and educational rights / (c) OSCE

RIGA – The latest in the never-ending round of inspections of Latvia’s citizenship rules and minority rights provisions has kicked off with the arrival of Organization for Security and Co-operationn in Europe (OSCE) high commissioner Knut Vollebekk on a two-day working visit which will include a trip to Latvia’s second city, Daugavpils.

Depsite an initial show of solidarity between Vollebekk and Foreign Minister Maris Riekstins at a press conference to launch the visit, significant differences of opinion quickly emerged on the subject of Latvia’s remaining ‘non-citizens’, the vast majority of whom are ethnic Russians.

“I would particularly like to follow up the work on education reform and the naturalisation process. Speaking of education it should be noted that Latvia has to deal with an extremely complex legacy of the Soviet Union’s assimilation policies and therefore I support the right and
indeed the duty of the state to promote national integration,” Vollebekk said.

“However, I would also like to mention that this shiould be done with due respect for minority rights and their cultural identity.

“The number of non-citizens still is high – about 372,000 I am told – and I intend to discuss with the Latvian government ways that I can help speed up the naturalization process. It is my firm position that the Latvian government should devote more attention to identify the causes of this
and I am very happy to learn that there is a survey that is presently being taken on why there is still such a large number of non-citizens.

Defending the governmental position, Riekstins responded saying: “People who want to participate in local or national elections are advised to take the very simple process of naturalization because both the language test and the history test are not very complicated. They should take these tests, become citizens and gain full participation.”

However, Vollebekk identified this as not in line with the
OSCE position. “I beg to disagree with the minister on this issue because I
believe the right to vote in local elections, instead of taking away some of
the incentive for gaining citizenship, might work the other way and work
towards integration,” he said Asked by The Baltic Times if he had read a report covering similar areas as his own brief, produced recently by UN Special Rapporteur Doudou Diene, Vollebekk said “If I recall correctly the report is around 150 or 160 pages and I must admit I haven’t read it but I have read some of the commentaries about it.”

Gottvater des US-Avantgarde Films von Bundespräsident Fischer ausgezeichnet

von Florian Widegger

Er gründete nicht nur die Zeitschrift “Film Culture” und beeinflusste damit wesentlich die Entstehung des US-Autorenkinos Anfang der 70er Jahre, sondern wird in aller Welt als “Gottvater des amerikanischen Avantgarde Films” verehrt. Die Rede ist von dem mittlerweile 85 jährigen Jonas Mekas.

Er wird gemeinsam mit der “Großmutter der Performancekunst”, der 61-jährigen Marina Abramovic am 1. April von Bundespräsident Heinz Fischer mit dem österreichischen Ehrenzeichen für Wissenschaft und Kunst ausgezeichnet.

Das Österreichische Filmmuseum würdigt dem Künstler Mekas bereits einen Abend zuvor und zeigt Reminiscences of a Journey to Lithuania aus dem Jahr 1971.

Im Text zum Film heißt es:

Mekas’ Filmgedicht ist Zeugnis einer Reise zu den Quellen: jenen der Herkunft, jenen des Mediums. Reminiscences beschwört ein luzides Klima der Unmittelbarkeit, ein Vergessen aller Stile. Die wiedergefundene Kindheit: schmuck- und kunstlos, als wäre die “Entwicklung des Films” aufgehoben, feiern die einfachen Bilder wie in den Tagen der Brüder Lumière nur sich und ihr Präsentes, die alte Mutter, das Dorf in Litauen, in das die Brüder Mekas nach 30 Jahren wiederkehren. Der Film ist in drei Abschnitte gegliedert: Brooklyn, 1950 bis 1953/Litauen/Elmshorn, Wien, Kremsmünster, Prinzendorf, Stammersdorf, Wittgensteins Haus. Mekas fügt hinzu: “In the Austrian part we see: St. Nitsch, St. Kubelka, St. Anette, St. Jacobs, Prof. Mikota. Extra! Extra! See Vienna burning!” (filmmuseum.at)

Nach einer Einführung von Peter Kubelka und der Filmpräsentation steht Mekas “in person” zum Publikumsgespräch zur Verfügung!

LINKS:

Filmmuseum

Jonas Mekas

Kurzfilm: 365 Films January 6, 2007