Is private sector alone able to attract big picture industrial investors to Paldiski?

Posted by on June 18, 2018

Is private sector alone able to attract big picture industrial investors to Paldiski?

Paldiski, with its very favourable geographic and logistic location due to the vicinity of the port and power system is an ideal place for industrial enterprises and has a potential to develop into one of the most important industrial hubs in the Baltic region. PAKRI Science and Industrial Park has been acting since several decades for this goal and with its unique concept the company has managed to convince several big names of the industrial sector to consider expanding their production to Estonia. Some steps have been made on this way both alone and in cooperation with governmental, municipal and companies from other regions. However, the final choice was not in favor of Estonia.

At the conference on May 30th, devoted to the tercentenary of Paldiski, Sandor Liive, Chairman of the Board of PAKRI Science and Industrial Park, shared his observations and ideas of his three-year experience, when he was actively trying to attract industrial investments to Estonia and worked with investment funds in order to purchase in cooperation local companies.

 

No one must invest in Estonia, success determines the engagement strategy

His first observation was that no one must invest in Estonia. “There is not a single serious industrial enterprise or international investment fund, which would surely invest in Estonia. On the contrary, even the Skeleton company founded by local Estonian entrepreneurs and funded by Estonian investors, was seduced to build its factory in Germany. Namely seduced”, pointed out Liive. Also earlier large-scale industrial investments in Estonia are connected with some individuals and are rather a result of the engagement strategy than the effect caused by the advantages of the region. Behind ABB investments is the fan of Estonia Bo Hendriksson, who managed to convince the concern to come here with its very serious production as well as ABB financial center. Estonian Cell was the fruit of the fanatic efforts of the Norwegian businessman Roar Paulsrud and  lawyer Jüri Raidla”, added Liive. Alone the natural resources, vicinity of a large market or availability of specialists would not give us an advantage of other important competitors. Beside oil shales, wood and wind we have no other significant natural resources; and we have to more labour resources to boast of. In the vicinity there is no large-scale and bottomless market to have a competition advantage”, said Liive. We must attract here industrial investments using much more than before.

 

We have lost large-scale industries Google and Northvolt

Google considered twice building its server center in Paldiski. In 2008 the server center with annual turnover of around 300 million euros and 200 jobs was built in Hamina. This year a data center with annual turnover around 300 million euros and 500 jobs was built in Lisbon instead of Estonia. “In case of Portugal the prime-minister himself addressed the Google offering the company a dynamic start-up environment in addition to better rental terms. Finland fascinated mainly by its ability of fast administration and management, offering an already existing building at the seaside in addition to the state-aided electricity price for renewable energy.” Mentioned Liive. The Northvolt lithium battery factory can be brought as the biggest loss. Former Tesla employees decided to build the brand-new factory with 4 billion USD turnover and 3000 jobs in Sweden. On the initiative of PAKRI and EAS the information about the possibilities of Paldiski region reached them last April within the framework of the “Tesla country is Estonia” campaign to attract Tesla. Unfortunately, with Northvolt as well, Estonian ability to act fast and unite both public-private activities to satisfy the potential customer was lagging behind due to the concerns and fears related to possible risks. Namely, in the opinion of Northvolt’s representatives, one of the decisive reasons not to build the factory in Estonia was the significant energy consumption amount out of the total Estonian consumption volume.

Google factory is still an opportunity

 Within the framework of the mentioned campaign there are still efforts made to get Tesla factory to Estonia. There is a hope to be selected for the construction of a factory in Europe. The selection of the first factory location as well as investment decision was made by Tesla and its partners and the USA were chosen. Nevada management speed and the benefits offered by the state were deciding in this case. It’s a simple calculation: to generate around 100 billion USD revenue within 20 years, giving Tesla around 10 million USD and 400 ha free land – all this determined the location as well fast acting – for instance, the visit of the design team to the state was organized and paid by the authorities. At the shareholders’ meeting in California on June 5th Elon Musk announced that the next Tesla Gigafactory will be built in Shanghai. The location of the European factory is still open. Estonia, including representatives of both public and private sector must change its current strategy and learn from the best. Germany, Canada and USA continue to be most attractive for industrial investments. And here not only countries compete, but also municipal authorities of these states – federal lands in case of Germany and states in the USA.

 

Estonia must change strategy and perform a social-economic impact assessment

The major Estonian disadvantage in attracting investments is the government’s lack of wish to make exceptions for new investors. No impact assessments are performed to understand the positive impact of industrial investments to the state. Other required preliminary actions aren’t also considered important enough prior to the search of customer, so that by this moment the environment would be ready and all organizational and managerial issues would go fast and smoothly. In Germany a definite system was created how to get new investments and they comprehend which industries wish to get the investments. They work systematically to be able to find the enterprises they are interested at the earliest stage possible. “Germany, which won over our Skeleton, has not made any exceptions to attract the company. 15 people worked for Skeleton when the prime minister of the federal land visited them and said that he wanted them to his land”, noted Liive.

To attract new industrial investments to Estonia it is in the first line necessary for the government to make an impact assessment in the areas on today’s agenda. “The government could carry out a social-economic assessment of hypothetic server center, battery factory and electric car manufacturer. If we knew the effect of what it would bring to the state, we would be able to offer necessary governmental tools for attracting industrial investors to Estonia. Google, Tesla and other stakeholders in industrial sector wouldn’t wait until we debate in our country internally”, summarized Liive a possible solution.   

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