Market Report: Information and Communication Technology – Baltic States
The Baltic ICT competencies are dominated by service, computer programming, consulting, and telecommunications. Business process support functions, software development for the finance and insurance industry, and internet banking are rapidly growing subsectors. The three Baltic states have developed a number of local network structures aiming to ensure communication between the industry and research organizations through the Baltic Sea Innovation Centres (BaSIC) network. Competencies of Baltic ICT specialists rank very high on the global labour market due to the high-quality ICT education, and the region is well-known for its strong experts in cybernetics and electronics.
Estonia is well known as an e-country with a developed digital society stemming. An ICT Demo Centre (IKT Demokeskus) was established in in early 2009 bringing together achievements such as the ID-card and Mobile-ID, the e-banking system, and the e-Tax office. The Demo Centre has attracted international partners such as Apple, HP, Lenovo, Microsoft, Sony Ericsson and Sun Microsystems. Ericsson has a factory in Tallinn of about 1,400 employees, where they produce mobile and broadband devices.
Latvia is in the top ten countries in Europe for investment and revenue in the telecom industry, and ICT services account for approximately 4.6% of Latvian GDP and employing over 30,000 people in 5,000 companies. This can be attributed to innovative practices and a stable, well–trained, and highly productive workforce. The ICT industry in Latvia has experienced significant growth in the past several years.
Lithuania has the largest ICT industry in the Baltic States with an outstanding potential both for local and foreign businesses. 13 out of the 20 largest IT companies in the Baltic States are based in Lithuania. The sector has experienced stellar growth, with an increasing number of highly-skilled staff, increased foreign investment in the ICT sector, and cutting edge services such as cloud computing, IT solutions for the financial sector, and engineering & medical software development at the front line of this growth.
The Digital Single Market Strategy (DSM), one of European Union’s top ten priorities, includes 16 initiatives to be delivered by the end of 2016. While the Baltic region enjoys substantial ICT investments, the DSM will create opportunities for new start-ups and allow existing companies to grow in a market of over 500 million people. Completing a Digital Single Market Strategy could contribute €415 billion per year to Europe's economy, create jobs, and transform public services.
Market Opportunities by Sub-sector
Telecommunications – Estonia is a powerhouse in telecommunication technology. In 2015, a new broadband network dubbed EstWin added 6,600 km of fibre optic cable and 1400 hubs providing 100 Mb/s high speed access, adding to the already-existing 90% broadband access. The incumbent operator, Eesti Telekom offers telecom services via its fully owned subsidiaries Elion (formerly Eesti Telefon) and the mobile operator Eesti Mobiiltelefon (EMT). The mobile market is dominated by three major players – EMT, Tele2, and Elisa.
Start-Ups – Estonia is responsible for developing thee popular voice application software Skype, which has since been acquired by Microsoft Corporation. Famous Estonian start-ups also include peer-to-peer money transfer service TransferWise, digital signature and time-stamping software developer Guardtime, and virtual fitting room Fits.me. The Estonian IT company Nortal got a foothold in Nigeria by winning a bid for a software project to improve the organisation of public finances in the country and, together with US company Fast Enterprise, won a €220 million contract to update the Finnish Tax Administration’s information systems.
Mobile Market – The mobile market remains the most dynamic part of the electronic communications sector due to fastest broadband speeds in the world. There are more than 400 electronic communication operators in Latvia, Latvian Mobile Telephone (LMT), Tele2, BITE Latvia) dominating the mobile market. LMT and Tele2 each possesses about 42% of the mobile telecommunication market. E-Commerce has also been expanding, with positive growth trajectory as 35% of the Latvian population order goods or services online.
App Development – Lithuania’s GetJar is the world’s most popular mobile application distribution and development community. It was the world’s first multi-platform mobile application download provider and is now only surpassed by Apple, with more than 1 billion downloads from its application store to date. It is the winner of the prestigious Mobile Excellence Award and in 2011 was voted as one of the world’s most innovative Technology Pioneers by the World Economic Forum.
Market and Sector Challenges
- The Baltic nations maintain close economic ties with neighbouring countries and have developed strong and loyal business relationships with many recognized European companies, which constitute major competitors in the region.
- Canadian products are well received in the Baltics, but the volumes are small and consumers remain very price sensitive.
- The limited knowledge of Canadian products and technologies, as well as vast distance between Canada and the Baltic remain major challenges.
- Prior to exporting to the EU, Canadian companies should be familiar with the relevant EU and national certification standards, as well as local requirements, for their products.
- Local partners will greatly enhance the chance for success in the Baltics. Depending on the nature of the product, a single agent, distributor or representative may suffice for all countries.
- Canadian ICT firms might plan for separate representation in each distribution channel to better address unique market, cultural and legal issues.
CETA Opportunities for ICT Products Companies
Tariffs – The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) expands Canada’s trade with the second-largest market and offers new opportunities for Canadian exporters by eliminating or reducing barriers. This allows Canadian products and services to be on equal footing with their EU competitors and to receive better treatment than most of their non-EU competitors. CETA will positively affect Canadian export of value added ICT products, eliminating tariffs on cameras and videorecorders (14%), printers (6%), radio parts (5%), and storage devices (3.5%) CETA’s impact is expected to bring significant new opportunities for the growth of Canadian-Baltic trade, with bilateral trade slated to grow by 23%. We encourage businesses to take advantage of the new Canada Tariff Finder at www.tariffinder.ca, which will allow exporters to look up and compare tariffs across markets where Canada has a free trade agreement, including CETA.
Certification – Baltic states’ import policies conform to EU policies for imported products and import taxes. Non-EU exporters are required to meet CE standards with EU destined goods, which are subject to EU product legislation. Imported ICT products must have conformity certificates to guarantee quality before entering the EU. Tight controls are also imposed for the labeling of ICT products. Labels must be in the local language, legible, not misleading and non-erasable.
Temporary Entry – CETA simplifies requirements for short-term business visitors, intra-company transferees, investors, contract service suppliers, and independent professionals to conduct business in the EU. While variations exist across EU member states, CETA allows temporary entry commitments related to activities such as technical testing and analysis services, as well as scientific and technical consulting services.
Representation – Canadian firms will discover that an experienced local partner will greatly enhance the chance for success in the Baltic states. Depending on the nature of the product, a single agent, distributor or representative may suffice for all countries. However, firms should plan for separate representation in each distribution channel to better address unique market, cultural and legal issues. Prior to exporting to the EU, Canadian companies should be familiar with the relevant EU and national certification standards, as well as local requirements, for their products. The limited knowledge of Canadian ICT products and technologies and the necessity to obtain large volumes and the vast distance between countries remain major challenges.
Investment – Canadian products are viewed positively by the Baltic states and are considered to be of high quality. CETA will have a positive effect on Canada-EU bilateral investment by providing investments greater certainty, stability, and protection for their investments. CETA encourages investment by prohibiting Canada and the EU from applying undue restrictions on investors and will ensure Canadian and EU investors receive fair and non-discriminatory treatment in each other’s markets.
- RIGA COMM Expo and Conference
- Telco Trends Expo & Conference
- Latitude59 startup event
- Estonian Ministry of Economic Affairs and Communications
- Estonian Association of Information Technology & Communications
- Estonian Clusters
- Latvian Ministry of Economy
- Latvian Information Technologies & Telecommunications Association
- Latvian Telecom Association
- Latvian IT Cluster
- TechHub Riga
- Lithuanian Ministry of Economy
- Lithuanian Innovation Centre
- Lithuanian BuildStuff Conference
- Fintech Lithuania
- InfoBalt Lithuania
- Clusters Lithuania
- Fintech News Baltic
The TCS and its Services
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Embassy of Canada in Riga
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Contact: Kairi-Liis Ustav, Programs Officer
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