Bankers Biding Time on Baltic Nations : Soviet crisis: A quick or easy transition to capitalism is not expected for Estonia, Latvia and Lithuania.


Estonia, Lithuania and Latvia, recognized as independent nations by the United States on Monday, are seen as possible clients by Western bankers, but few expect a quick or easy transition from communism to capitalism.

"There are business opportunities in the Baltics, but the journey will be long and hard," said Seppo Siljama, general manager at Kansallis-Osake-Pankki, a Finnish bank, in London.

Political instability and the economic uncertainty facing the three as they draw away from the shreds of the old Soviet economy mean that many bankers prefer to bide their time.

"The Baltics will certainly be a good business opportunity--but when?" one corporate banker observed.

The rudimentary state of their financial structures will slow progress, while a total population just more than 7 million means that the new Baltic nations do not boast the large markets that would attract some Western companies.

"There may be work advising the new governments, but until the situation settles down and we have reliable information, corporate business will be slow. . . . It will be some time before the Baltics are independently bankable," another banker said.

Scandinavian countries have the closest links with the Baltics, and Estonia, whose language is very close to Finnish, has already attracted a number of joint ventures from Finnish companies.

"Scandinavian firms will keep a close watch on opportunities in the Baltic states, which have a good pool of cheap, skilled labor," Siljama said. "But we are taking a cautious approach and do not plan to rush into anything."

KOP has already held talks with Estonian banks on setting up a Western banking system and discussed selling them modern information technology, he said.

"At the moment they are at the stage when they need basic, reliable banking systems," Siljama said. "But the Baltic people are stubborn and could achieve economic independence sooner than we expect because they are ready to pay the price."

Estonia is home to a number of relatively advanced companies that in the past have had links with the Soviet military and could now interest Western companies. Yet, the climate of uncertainty in the region will keep many other Western advisers at bay.

"Until the relationship between the Baltics and the other republics becomes clear, it's tough to start talking about these opportunities to a client," another banker said.

"The Baltics are in a similar position to that occupied by central Europe two years ago, and that experiment has taken longer to complete than many expected," he said.

Transition for the Baltics may even take longer than central Europe.

"The central Europeans existed as independent financial entities and had the basic fiscal infrastructure," the banker said. "The Baltics have lacked this experience for the past 50 years, and their infrastructure is much more limited."

For many, the central European countries will remain higher priorities. "Hungary and Poland at least have a central bank and, more importantly, a policy," another banker said.

But close cultural links between Europe and the Baltics make them an attractive springboard to other republics for Western firms, said Douglas Keel, a partner at KPMG Peat Marwick.

"They know the ways of the Soviet Union well and have strong motives for moving further toward the West, faster than perhaps the other republics in the old union," Keel said.

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World