ACCESSION NUMBER:342596 FILE ID:TXT401 DATE:05/05/94 TITLE:ESTONIA: MODEL OF REFORM (05/05/94) TEXT:*94050501.TXT ESTONIA: MODEL OF REFORM (VOA Editorial) (380) (Following is an editorial, broadcast by the Voice of America May 5, reflecting the views of the U.S. government.) One success story in the post-Cold War era is the Baltic republic of Estonia, where economic and political reform have proceeded apace. As Estonian Prime Minister Mart Laar said during a recent visit to Washington, "Two years ago, Estonia was a land in ruins. Ninety-two percent of our trade was tied to the former Soviet Union.... There were shortages of everything." In fact, according to official statistics, industrial production in Estonia plummeted 42 percent from 1991 to 1992. Bread was rationed and milk was sold only to those with more than three children. Since then, the situation has been transformed. In 1992, a new constitution was ratified by popular vote. Free and fair elections were held in which the majority supported economic reform. Subsidies to farmers and state industries were eliminated. Prices, including that of gasoline, were allowed to be determined by market forces. State enterprises were privatized. Almost all import and export tariffs were removed. Taxes were dramatically reduced. And Estonia launched its own currency, the kroon. A convertible currency pegged to the German mark, the kroon is backed by gold and foreign currency reserves. These measures have produced dramatic results. As a result of currency reform, inflation has fallen from 1,000 percent to 35 percent a year. Estonian exports increased 50 percent in 1993, while foreign investment doubled and foreign currency reserves tripled. The state budget is in balance, and registered unemployment is only 2 percent. One indication of the competitiveness of Estonian products is that some 80 percent of Estonia's trade is now with the West. Further progress is expected. For 1994, the international monetary fund has predicted a 7 percent rate of growth in Estonia's gross domestic product. This success is all the more remarkable since Estonia has no natural resources to speak of. It shows what the greatest resource of all -- human intelligence -- can do under sound policies. As Strobe Talbott, U.S. deputy secretary of state, has said, "Estonia proves to its neighbors that it is possible to make the transition from the Soviet era to the new era." 1NNN .