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Apr 8, 2009

Estonia: The little country that could!

Being a libertarian, I am always fascinated by the progress achieved by Estonia by transforming its its economy from a centrally planned structure under Soviet Communism to a free market economy. Estonia is currently the 41st country among the countries with the highest per capita income. It has rose from oblivion to recognition for its economic freedom,its adaptation of new technologies along with being one of the world's fastest growing economies for several years.

I was scanning through the Wikipedia and found these facts about Estonia, maybe we could learn something from her. Maybe, we (Nepal) could be a little hopeful about breaking this vicious circle of poverty.

In August 1940, Estonia was illegally annexed by the Soviet Union as the Estonian SSR. The provisions in the Estonian constitution requiring a popular referendum to decide on joining a supra-national body were ignored.

TheEstonian Sovereignty Declaration was issued on November 16, 1989 and formal independence declared on 20 August 1991, reconstituting the pre-1940 state, during theSpviet military coup attempt in Moscow. The first country to diplomatically recognize Estonia's reclaimed independence was Iceland. The last Russian troops left on 31 August 1994.

In 1994, Estonia became one of the first countries in the world to adopt a flat tax, with a uniform rate of 26% regardless of personal income. In January 2005 the personal income tax rate was reduced to 24%. A subsequent reduction to 23% followed in January 2006. The income tax rate will be decreased by 1% annually to reach 18% by January 2010.

A balanced budget, almost non-existent public debt, flat-rate income tax, free trade regime, fully convertible currency backed by currency board and a strong peg to the euro, competitive commercial banking sector, hospitable environment for foreign investment, innovative e-Services and even mobile-based services are all hallmarks of Estonia's free-market-based economy.

Estonia Ranks 22nd in the index of Civil and Political Liberties.

Although Estonia is in general resource-poor, the land still offers a large variety of smaller resources.

The Estonian energy market liberalization is in progress and should be completed before 2009, as well as all of the non-household market, which totals around 77% of consumption, before 2013.
Please share your comments!!


  1. i like the way estonia progressed from nothing to this way long..i wanted to kow one thing.isn't 18%flat tax on income too high..??

  2. it's high but given the fact that in progressive tax system the tax rate can go even higher( 45 % in Nepal's case) it's comparatively low...flat tax doesn't mean there is no tax exempt income but not the progressive increase in tax rates!!

  3. Your blog keeps getting better and better! Your older articles are not as good as newer ones you have a lot more creativity and originality now keep it up!