"Our gift to President George W. Bush - the new Skype phone that enables users to make phone calls using the Skype system, without a computer - is rich in symbolism.

"Skype is an excellent example of how a good idea from a small country like Estonia, with its tiny population of 1.3 million, can achieve vast success all over the world," Jashko said.

Estonia topped a list compiled by the World Bank of countries which are well advanced in preparing for a knowledge-based economy, ranking just below the United States and above the 15 older member states of the European Union, which the Baltic state joined in 2004.

Founded in 2003 by two Estonians in Tallinn, Skype describes itself as "a little piece of software that lets you talk over the Internet to anyone in the world for free." The new Skype wireless phone does not require a computer to make calls.

Jashko said that other gift options were considered, including examples of Estonian design or books, but the Skype phone rose to the top of the churn as the best choice.

Meanwhile, officials said Friday that mobile telephone services could be switched off by providers, for security reasons, in parts of Tallinn during the Bush visit.

The US leader is due to arrive in the Estonian capital late Monday for a flying visit on his way to the NATO summit in neighbouring Latvia, the first summit of the military alliance to be held in a former Soviet republic.

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