Bo Henriksson: “Estonia is still an attractive economic environment“

ABB AS

Foreign Investor 2009

Bo Henriksson, the managing director of ABB Baltikum, believes that in spite of everything Estonia is continuously an attractive economic environment. Though, even more should be contributed to the innovation and education and the relations with Russia should be improved.

ABB takes the titles of the competition of Entrepreneurship Award every year. What do these titles tell you?
The company’s owners and managers continuously believe in investing to Estonia and we have good employees – nice skilled workers, capable specialists, engineers and capable managers who create sufficient added value. ABB has invested to Estonia more than a billion kroons within 17 years, the major part of it within the last seven years. We produce in four plants in Estonia which employs the total of thousand people.

In annual FT Global 500 ranking list of the business newspaper Financial Times which lists the companies according to the market value, ABB group is located on the 123rd place with the market value of 32 billion dollars and leads in the sector of industrial technology. No one among 122 companies in the table above have comparable production or development activities at the Estonian market.

How have the economic crisis and the abrupt amendments of law in Toompea influenced the activities of ABB?
We are mostly influenced by the processes at the world market –approximately 70 percent of the sales is related to export. The investments of our private clients are to a large extent dependent on the balance of the money market. Some of them have postponed their investments. The situation is much more stable in the business sector related to the establishing of the transfer and distribution network. This year we somewhat decreased the production. The record result of 2008 (the sale of 2.6 billion kroons) will not be repeated this year or also next year. But since 2010 the situation should become stable. This year our investments would obviously remain smaller than last year which reached 260 million kroons. I do not believe that the processes in Toompea could damage the economic environment so that this would have an impact on our activities. Only political earthquake, replacement of democracy with totalitarism would make ABB to terminate the activities of its plants here. The situation where the state would decide to nationalise ABB. But maybe not, as the group functions successfully in the conditions of different regimes and economic models.

If you could be the Estonian prime minister now, which five decisions were the first to be made by you ?
In order to change the economic environment I would warm up the relations with Russia. This would provide many new opportunities. I would also review the current policy of education, by contributing more to the engineer-technical specialties. I would support more innovation and export, by offering export benefits. Export is one of the main economic engines of Estonia. Also, I would search more compromises which would create higher political stability.

Do you believe that Estonia is continuously an attractive economic environment in the future?
Surely at least as attractive as up to now and this thanks to the flexible economic policy and open business climate. The government sector has not hindered the development of economy, the indicators of freedom of economy stay high. The favourable economic geographical location and closeness with the key markets is also important for us. The Estonian labour market offers many choices today, by enabling to respond operatively to the changes. The Estonian employees have a good qualification and knowhow, also the specific cost advantage in the region of the Baltic Sea. The high taxation of labour – one of the highest in Europe – is a serious risk. The government should deal with the latter, otherwise Estonia soon becomes the country with high price level which is not able to compete.

ABB is a mammoth group. What is the role and importance of the Estonian unit in its hierarchy?
ABB operates in approximately hundred countries, i.e. practically in half of the world’s countries. 120 000 people have been employed in the group. Estonia makes a small part of it. But we have fulfilled the objective of ABB, according to which it is essential to achieve the strong position at all markets where we operate. Thanks to our high percentage of export we are in the stronger position in the group. I would bring the plant of electrical machinery and industrial electronics to the fore where the considerable part of the wind generators and frequency transformers for the world’s leading windmill producers and developers of windparks is produced.

What is the starting point of ABB’s more forceful direction towards the renewable energy?
Our vision is to be the world’s leading energy companies and help the clients to use the electricity in a more efficient and sustainable way. According to the estimates the electricity consumption increases by 2030 from the current level by about 100 percent. At the same time the potential of energy saving is enormous. The losses could reach up to 80 percent. ABB’s technologies decrease the losses up to 30 percent. The greenest energy is the saved energy. As to renewable energy ABB is represented both in hydro, wind, sun and wave energy. For example in China, in the project of the Three Gorges Dam, ABB built the network connection, supplied transformers to the US wind energy company, provided the launch-ready solutions for the sun energy station in Spain and the specially adjusted generators for the Portuguese wave energy company. The potential of renewable energy is immense and there could be no losers wide-scale in the process of increasing its percentage.

What else is important for ABB?
Our main competitive advantage is innovativeness. ABB group has in the recent years invested to the research and development activities more than a billion dollars a year. Approximately 6000 researchers and engineers work with the new products and solutions in cooperation with 70 universities. For example, ABB invented in China how to transmit the hydro energy to the distance of 2000 kilometres. In India, where the reliability of electricity network with 53 million consumers was to be improved, ABB built so-called smart network which regulates the load in real time. ABB has created several revolutionary technologies which shift the current understandings beyond the limits of technologies. Lately the switchgear which allows more than million volt electricity was completed. This is the new record of voltage level. The importance of our products is hard to be explained to the regular consumer. The definition frequency transformer says obviously a little. But if we compare the car’s gear shift system - if the gears cannot be changed and the driver would push the gas constantly to the full, it would end bad. The same applies to the electric engines. The regular engines without additional equipment work always on full capacity, but up to 70 percent of the energy of the engines can be saved by varying the speed of the engine proceeding from the actual need of energy. Today only 5 percent of the engines have been equipped with the energy-saving frequency transformers.