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."



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