A Sea of Opportunity

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.

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.

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

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

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.

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.

RIGA , the capital of Latvia
is a beautiful, modern and dynamic European city bursting with history and

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.

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

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