|The Central Chamber of Commerce of Finland, June 15, 2005
THE FINNISH BUSINESS PERSPECTIVE OF THE BALTIC AND POLISH MARKETS
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In 1998, 2001 and 20021, the Central Chamber of Commerce of Finland conducted surveys to determine the perspective of Finnish companies regarding the expansion of the European Union. The purpose of the 2001 and 2002 surveys was to assess the readiness of the Estonian, Latvian, Lithuanian and Polish markets for EU membership. The present survey reports on the viewpoints of top Finnish business executives concerning how the markets of the above mentioned countries have developed during their first year of EU membership.
The most important market
In terms of the countries examined, Estonia is the primary market for Finnish companies. It was named as the most important market by 57% of the Finnish companies that responded to the survey with 26% listing it as the second most important market. The Latvian and Polish markets were viewed as slightly more important than the Lithuanian market.
Business environment assessment
The survey respondents were asked to evaluate, on a scale of 4-10 (4=poor, 10=excellent), how well the business environments of these countries are functioning and what developments have taken place within those environments. The respondents were also asked to determine what, in their opinion, are the biggest problems within the markets and which business factors have developed positively. Finally, the respondents were asked to evaluate the activities of the
authorities and to list any factors or circumstances that have negatively affected or hindered their companys operations. The top business executives rated the Estonian business environment as the best of the countries in question. Estonia received a mark of 7.56, while the corresponding mark in the 2001 survey was 7.15. The business environments of Latvia and Lithuania were rated slightly lower than Estonia, with both countries receiving a mark of 7.04 (as compared to 2002; Latvia 6.50, Lithuania 6.48). Poland received a mark of 6.89 (as compared to 6.59 in 2001). All the marks received by the countries had risen since the surveys conducted in 2001 and 2002. The marks for Estonia, Latvia and Lithuania rose by as much as half a mark, while Polands mark rose by three tenths.
Sectors showing positive development
The respondents were asked to determine three sectors or factors that affect their business and which have, during the last few years, developed for the better. For Latvia and Lithuania, the results were compared with the 2002 survey.
Approximately one fifth of the respondents felt that Estonias commercial culture had improved
over recent years. Of the respondents, 16% felt that bureaucracy had decreased. Economic growth and EU membership have had a positive effect on the Estonian market.
Of the respondents, one quarter viewed Latvias EU membership as having had a positive effect on the Latvian market. One fifth felt that the development of Latvias commercial culture and the increase in purchasing power have had a similar effect. In 2002, there were developments in the countrys commercial culture (20%), transport and infrastructure (17%), economic situation (17%) and westernization (14%).
Almost half of the respondents recognised EU membership as the most important development in Lithuanias business environment. Logistics problems and bureaucracy have decreased and economic growth has had a positive effect on the market. In 2002, developments were seen in the countrys economic situation (24%), commercial culture (17%), increased purchasing power (17%) and westernization (14%).
One quarter of the respondents viewed EU membership as the most significant step forward for the Polish market. One fifth stated that bureaucracy has decreased and the corporate culture has improved. One fifth also felt that the countrys westernization has had a positive
effect on the Polish market.
Main problems detected in trading and in the markets
The respondents were asked to name the three problem areas that most significantly affect their companys activities in a specific market. For Latvia and Lithuania, the results were compared with the 2002 survey.
The respondents felt that Estonias primary problems were its (low) price level (17%) and low level of purchasing power (15%). Stiff competition (9%) and logistics problems (7%) were also mentioned frequently. Altogether 17% of the respondents saw no problems with the Estonian market. This percentage is clearly higher than that of the other countries included in the survey.
The biggest problem raised for the Latvian market was the lack of language skills (17%). The price level (10%), trade practices and corporate culture (10%) were also generally mentioned as problems. Only 4% of the respondents saw no problems with the Latvian market. The foremost problem areas that surfaced in the 2002 survey were customs clearance (29%), financing (27%), commercial culture (24%) and bureaucracy (19%). In Latvia, the customs clearance problems have been eradicated. The number of respondents who are dissatisfied with financing and bureaucracy has decreased considerably.
The most significant problems for the Lithuanian market were to do with its trade practices and corporate culture (22%). The price level (19%) was also seen as a problem along with stiff competition (19%). Logistics problems (16%) came to the forefront for Lithuania as well. Only 3% of the respondents felt that the Lithuanian market is without problems. Of all the countries surveyed, this percentage is the lowest. According to the results of the 2002 survey, the primary problems were financing (30%), heavy competition (29%), bureaucracy (26%) and customs clearance (21%). The number of respondents who currently consider these as problem areas has dropped considerably.
In Poland, the biggest problems were the trade practices and corporate culture (23%). The price level (21%), financing (19%) and bureaucracy (17%) have also brought about problems for the Finnish companies. Of the respondents, 6% felt that the Polish market had no problems.
Experiences with authorities
The respondents experiences with the activities of authorities in Estonia have improved clearly since 2001. The activities of the customs and border inspection authorities are seen as having developed considerably over the past four years. The activities of the inspection and certification authorities are also far better than they were four years ago. Of the respondents, 9% felt that the activities of the regional and local authorities have continued to unnecessarily slow their companys operations. This percentage is lower than that of the other countries surveyed.
The Latvian customs and border authorities have improved their operations from its assessment three years ago. The activities of the inspection and certification authorities have also developed.
However, 14% still felt that the activities of the inspection and certification authorities have slowed their operations unnecessarily. Of the respondents, 11% felt that the activities of the regional and local authorities have slowed their companys operations.
The activities of the Lithuanian customs and border inspection authorities and the inspection and
certification authorities seem to have improved over the past three years. The primary problems seem to be the activities of the regional and local authorities and, still, those of the inspection and certification authorities.
The results of the survey showed that the activities of the Polish customs and border inspection authorities have improved over the past four years, but one fifth of the respondents felt that the operations of their company were still being hindered unnecessarily by these activities. Every fourth respondent felt that the activities of the inspection and certification authorities hindered their business. Every tenth respondent was dissatisfied with the tax authorities and the regional and local authorities. The proportion of respondents who were dissatisfied with the activities of the Polish authorities was higher than for any other country in the survey.
The future significance of the markets
The respondents estimated that the significance of the Estonian, Latvian, Lithuanian and Polish markets will increase over the next five years. The significance of Poland, in particular, is expected to increase considerably.
The majority of the respondents are attempting to benefit from the growing significance of the Estonian, Latvian, Lithuanian and Polish markets by increasing their exports to these countries. In the Polish market, companies are also establishing subsidiaries (11%), forming alliances with local companies (20%) and increasing subcontracting (18%).
Almost one third of all the respondents have invested in Estonia during the preceding 12 months, whereas every fifth has invested in Latvia and Poland and every sixth in Lithuania. During the next 12 months, one in four respondents intends to invest in Estonia. Every fifth intends to invest in Latvia and Poland and every tenth in Lithuania.
The Central Chamber of Commerce of Finland commissioned Taloustutkimus Ltd to carry out the survey. The survey was aimed at Finnish companies which have operations in Estonia, Latvia, Lithuania or Poland. The contact information for these companies was obtained from the Finpro export registry. During the period 19-27 April, 2005, 70 telephone interviews were conducted for each country in the survey. For each country, 70% of the respondents were involved in import/export operations and 30% operated through a subsidiary or trade representative in the target country. The respondents stated their opinion about the country, the market of which is the most important or second most important to their company. Of the respondents, 68% represented industry, 11% services and 21% trade and
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The Central Chamber of Commerce of Finland is the central organisation of 21 chambers of commerce, which have 16,800 members. Membership is voluntary. The chambers of commerce promote free competition, market economy and free world trade.
The Central Chamber of Commerce of Finland
Aleksanterinkatu 17, P.O.Box 1000
00101 Helsinki, Finland
Tel. + 358 9 696 969, fax + 358 9 650 303
Mr Marko Kosonen, Researcher
Tel. + 358 6969 6662, fax + 358 650 303
Compiler Trade Web Site: Tutkimuksia
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