Foreign direct investment (FDI) in Estonia (2024)

Estonia is open to foreign direct investments. According to UNCTAD's World Investment Report 2023, net FDI inflows rebounded to USD 1.2 billion in 2022, compared to an outflow of USD 832 million one year earlier. In the same period, the total stock of FDI was estimated at USD 29.97 billion, around 78.6% of the country’s GDP. According to the national investment agency Invest Estonia, most of the FDI stock is concentrated in financial and insurance activities (27%), real estate activities (18%), professional, scientific, and technical activities (13%), manufacturing (12%), wholesale and retail trade (12%), and information and communication (7%). The main investing countries are Finland (23%), Luxembourg (20%), Sweden (13%), Latvia (8%), Belgium (5%), and Lithuania (5%).

As with other small-scale open economies, Estonia requires a constant flow of foreign investment in order to maintain its economic expansion. Estonia is among the leading countries in Eastern and Central Europe regarding FDI per capita. The country has a very pro-business legislative framework and, more broadly, the Estonian society has a business-friendly attitude which is the expression of the country's perfect integration into the northern circuit of production, in which the Estonian subsidiaries often function as outsourcing sites for Scandinavian parent companies. Estonia is highly developed in the FDI-attractive fields of IT, biotechnologies, and green industries. A balanced budget (constitutionally protected), a free trade regime, a fully convertible currency, a competitive banking sector, and an investment-favorable environment have all contributed to the success of the country, which ranks 16th among the 132 economies on the Global Innovation Index 2023 and 8th out of 184 countries on the latest Index of Economic Freedom. A new FDI regime in Estonia, effective September 1, 2023, scrutinizes direct and indirect investments by non-EU entities in critical sectors. This includes areas such as military goods, dual-use items, geological exploration, oil extraction, and companies providing vital services, media, or transport infrastructure. Failure to obtain prior authorization for foreign investments may prompt the CPTRA (Consumer Protection and Technical Regulatory Authority) to enforce corrective measures like share transfers or transaction reversals. Foreign investors must obtain licenses to participate in several sectors, including mining, energy, gas and water supply, railroad and transport, waterways, ports, dams, water-related structures, and telecommunications networks. The Estonian Financial Supervision Authority oversees licensing for foreign entities aiming to invest in or establish banks. Furthermore, the Estonian Competition Authority examines transactions for potential anti-competitive issues. Governmental reviews and licensing procedures adhere to standard practices and are nondiscriminatory.