Urmas Varblane (ed.) Foreign Direct Investment in the Estonian Economy (Tartu: Tartu University Press, 2001, x+336 pp, hbk. ISBN 9985-4-0216-2) The first independent Estonian Republic was short-lived (1918-1940) and did not leave any memorable economic exploits behind. In turn, the second independent Estonia Republic (1991) is here to stay and can already boast some major economic successes. Behind Hungary and the Czech Republic and on par with Poland, by 2001 the tiny Estonia had become the third most advanced transition economy (EBRD 2001:14). It is an outstanding performance from a country that shed the shackles of the Soviet Union a little over a decade ago. In Estonia – and in fact in most countries of the region – foreign direct investment (FDI) has been one of the engines of successful transition. ‘Currently [in 2001] Estonia ranks third after Hungary and the Czech Republic by per capita indicators of the inflow of foreign direct investments,’ states Urmas Varblane in the book’s Preface (p. v). With the exception of Poland – where the per capita FDI stock is lower because of the large population – the rankings in FDI per capita and progress with transition are the same. Sheer coincidence? No. Foreign Direct Investment in the Estonian Economy has lots to say in support of why there is a logical link between the two. In itself it is also outstanding how fast and well a team of leading Estonian experts have prepared this important opus that should be instead be called the “Encyclopaedia of Foreign Direct Investment in Estonia”, rather than the modest title Urmas Varblane and his co-authors chose for this book. In six chapters, they summarise the main findings of the relevant theoretical literature and contrast it with the Estonian experience. Although the literature surveys offer little by way of novelty to the reader already familiar with the standard FDI literature and adopt a very heavy style, it is nevertheless surprising how well the authors have assimilated and applied the huge and complex international literature on FDI. It is also very laudable that, wherever possible, they have tried to keep the data as up to date as possible. In chapter one, Urmas Varblane provides a panorama of inward and outward FDI in Estonia by industry, country of origin and locational distribution. In other countries, it may have been surprising to see an analysis of outward FDI in a book on inward FDI. But Estonia’s case is somewhat exceptional. A large part of outward FDI is carried out by foreign affiliates. As a result of this indirect outward FDI, the players are almost the same in both inward and outward FDI and the issues to be analysed are linked with each other. This chapter also attempts to forecast FDI flows to Estonia in the future, especially in light of the country’s accession to the European Union. The author’s conclusion is that they are expected to grow, although their composition may change. In chapter two, Ele Reiljan examines the determinants of FDI in Estonia. The analytical framework (e.g. Table 2.3) is largely built on the World Investment Report 1998 (UNCTAD 1998). Still, the chapter is of great value as it presents the results of investor surveys carried out in Estonia and runs a multinomial logistic regression analysis on that data. To a certain degree, counter-intuitively most FDI in Estonia is market-seeking. In such a small economy (1.5 million people), one would have expected the predominance of efficiency-seeking motives. But it turns out that “market-seeking” here means not just the Estonian market but also the other Baltic states and the Russian Federation. In chapter three, Helena Hannula looks at FDI’s role in economic restructuring. Together Page 1 of 4 book review on Foreign Direct Investment in the Estonian Economy 25.01.2006 http://www.fdv.uni-lj.si/JIRD/indexof/vol6/kalotay.htm