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A Sea of Opportunity

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DQI Bureau
New Update

Business 2.0 recently published a list of cities called the Best

places to do business in the wired world. The twelve cities mentioned were

Bangalore, Barcelona, Helsinki, Hong Kong, London, Seoul, Shanghai, Singapore,

Stockholm, Tallinn, Tel Aviv, and Tokyo. It is good to see Bangalore on the

list. What is also interesting is that there are three cities from the Baltic

Sea Region (BSR). While Helsinki and Stockholm may not cause a surprise, the

inclusion of Tallinn, the capital of Estonia is indeed worthy of note.

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Not many in India may even be aware that there is a regional

cooperation network called the Baltic Sea Region Investment Network. The

investment promotion agencies of Denmark, Estonia, Finland, Latvia, Lithuania,

and Sweden have come together to offer the region as a whole. Interestingly,

Norway is not part of the network and apparently does not have an investment

promotion agency. A mixed bunch surely. On the one side there are the more

established economies of Denmark, Finland, and Sweden and on the flip side there

are the characteristic Baltic states of Estonia, Latvia, and Lithuania.

Traditionally, one would classify the Nordic countries of

Denmark, Finland, Iceland, Norway, and Sweden as one group and the Baltic states

as another. But after the break up of the erstwhile Soviet Union, the Baltic

States have realigned their economic policies to be a part of the Nordic group

and the larger European Union. Initially, the realignment was more for the

purposes of gaining independence. After having done that, the priority for the

Baltic States has been on development and is one of the primary reasons for the

formation of the BSR Investment Network.

According to the World Economic Forums statistics Finland,

Sweden, and Denmark have consistently been in the top 5 of the worlds most

competitive economies and Latvia, Estonia, and Lithuania are Europes

fastest-growing economies. And, according to a Forbes report, all six countries

are in the top 12 for the most investor-friendly in the world. Foreign ownership

of companies is over 15% in the BSR.

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Between the inner circle of Denmark, Estonia, Finland,

Latvia, Lithuania, and Sweden, and the greater circle of Iceland, Norway,

and the maritime provinces of Germany, Poland, and Russia, this region has a

population of close to 100 mn, an attractive market for business.

The network has been working to attract investments from all

over the world into the region. "We are aiming for borderless development

in the Baltic Sea Region and want to attract global foreign direct investments.

We do not have a target in terms of attracting a specific amount of FDI inflow.

That is left to the individual countries," says Annika Rembe, representing

Sweden who is the current chair-country for the BSR Investment Network. Invest

in the Baltic Sea Region and integrate into Europe is the call. Non-European

companies can leverage on the investment in the Baltic Sea Region to gain entry

into the EU and get advantaged relationship to the commercial, economic,

regulatory and political institutions of Europe. "In the future we will

explore the possibility of making a combined offer for companies to invest in

the BSR. That way we leverage on the individual strengths of the member

countries as well as ensure that a bulk of the investments stay in the

region," adds Rembe. The network provides standard services for setting up

a business whether it terms of regulatory information, government interaction,

or support in finding trade partners.

*Baltic Sea Region Statistics are for

Denmark, Estonia, Finland, Latvia, Lithuania, Sweden
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Thrust on India



Over the last two years the network has been focusing on attracting
investments from India. The sectors being targeted are ICT, life sciences,

engineering, and auto. Indian companies in the clean tech sector are also on the

radar of the BSR network. "Decision making amongst Indian businessmen is

faster than in many other countries," said Jari P Angesleva, investment

director of Invest in Finland. One of the value propositions of the Baltic Sea

Region is that it is the gateway to the EU markets. Countries like China, Japan,

and some other Asian countries have used this route. However, Indian companies

on the other hand have more often than not used the traditional route of UK as

the gateway to the EU.

India has more of a historical association with the Baltic

States than with the Nordic ones due to the Indo-USSR relationships of the past.

But the efforts of the BSR Investment Network seem to be paying off. Indian ICT

has been quickest off the block. Evaluserve, Geodesic Information Systems,

Hexaware, Infotech, Infosys, Larsen & Toubro, Mindtree, NEST Group, Sasken,

Tata Consultancy Service, Wipro, and Zenzar have already invested in the Baltic

Sea Region. "In India, the government does not specify regions for Indian

investments abroad quite unlike in China. The government lets the businessmen

decide and that is why dealing with Indian business is easier," added

Angesleva. Beyond the gateway to the EU, the Baltic Sea Region also provides

scope for Indian companies to expand into the Russian and the East European

markets.

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TCS has had integrated operations in Finland, Denmark, and

Sweden for more than eight years. According to company sources, they are working

towards the integration of Estonia, Lithuania, and Latvia into its global

network delivery model. The strength of the telecom market in Finland and Sweden

is well known and TCS sought to capitalize on that. Having done that, TCS is now

looking at the entire region which, incidentally, is a very IT savvy market. The

Wipro story is not very different. Nokia is a major global account for Wipro and

they have five near shore centers in the region to service clients like Nokia.

Wipro also acquired a Finnish company called Saraware Oy in June last year.

"The ideal balance between near and far shore should be 20:80. The focus of

Indian companies could be to acquire local companies which own intellectual

property and then be a part of a final product like a Nokia phone," said

Kimmo Solia, director of Wipro in Helsinki. According to Solia, Wipro is looking

at buying talent and not market share.

Finland



Trade between India and Finland has been growing. While Finnish exports to
India has a fair bit of telecom in it there is not much high technology exports

in the reverse direction. "The possible reasons for low Indian ICT activity

in Finland is because the cost of a Finnish engineer is relatively low, and the

low, levels of Indo-Finnish cooperation," said Nilay Oza, senior researcher

at the Helsinki University of Technology. Yet that represents an opportunity for

the two countries. "The number of Indians in Finland has increased over the

last couple of years and although most of them have come on limited period

assignment, the technology sector seems to be the bridge between the two

countries," added Oza. While Nokia, the $42 bn giant, leads the technology

sector in Finland it is not only about Nokia either. Tekes, the Finnish funding

agency for technology and innovation, has a key role in developing start-ups and

repeat the Nokia success story.

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RIGA , the capital of Latvia

is a beautiful, modern and dynamic European city bursting with history and

fun!

Estonia



Like the technology sector in Finland attributes a lot of its success to
Nokia, Estonias claim to fame is through Skype. Though the scales are hugely

different, the Skype success has spurred the technology industry in Estonia. In

2003, the government, along with Tallinn University of Technology and the City

of Tallinn, set up the Technopol which is a technology park to incubate and

develop the ICT industry in Estonia. Currently, the park has over 130 hi-tech

companies including Skype but none from India. According to Pirko Konsa, board

member of Technopol, "Considering the size of Estonia, the optimum number

of hi-tech companies that can be incubated is around thirty-five. There is a

shortage of adequate skilled people in the technology sector. But despite the

size and shortage of people, Estonia has made tremendous progress in

e-Governance." The e-Estonia aspect can be seen from several initiatives

taken by the government. Income tax filing is done electronically, and the local

government was made up entirely through e-voting and were the first to conduct

paperless cabinet meetings.

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Sweden



Drawing up a list of global companies that have sprung from a Swedish base
will throw up names like ABB, Astra Zeneca, Electrolux, Ericsson, Ikea, Saab,

SKF, and Volvo. The lone ICT company there is Ericsson and that also explains

why Sweden is much more focused on telecom. Universities and research

institutions are primarily focused on wireless technology covering signal

processing, mobile infrastructure, and services. There are some 500 companies

operating in the wireless technology industry itself. However, there are

requirements for diverse ICT services due to the presence of the strong

engineering, auto, and pharma sectors. Over the last decade, the ICT sector has

grown to become one of Swedens major industries and in the private sector

almost 20% of the workforce is engaged in the sector. More than forty Indian

companies are operating or have invested in Sweden, and most of them are from

the ICT or life sciences sector. Apart from acquisitions by the Indian IT

majors, there are investment opportunities for small and medium size companies

as well.

As Indian businesses becomes increasingly global by the day, the

Baltic Sea Region presents a sea of opportunity. While a relatively untapped

market, it also opens the doors to the larger market of EU and Russia. The

composition of the BSR Investment Network member countries itself presents

Indian companies diverse entry and investment options. Choose at will but

ignore not.

E Abraham Mathew



maildqindia@cybermedia.co.in

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