In its meeting in Narva on Thursday the government came to several principal decisions concerning the dire economic situation of Ida-Viru County and the local shale oil industry’s problems.
The measures, which will enter into force no later than July 1 this year, include a reduction of state-imposed duties and fees to support the companies in the oil shale industry.
Companies pay the state a fee for the right to mine the local oil shale, paid per ton. This fee was reduced. There’s also a plan to switch to a new system where companies pay an environmental tax based on the market price of their final product.
Supporting the region by reducing taxes and fees
“The government principally agreed today that we want to compromise and temporarily reduce both resource and environmental taxes from July this year till the beginning of 2018,” Prime Minister Taavi Rõivas (Reform) said to ETV’s “Aktuaalne Kaamera” yesterday. He said that the Ministers of Finance, Economy and Infrastructure, and the Environment had the task to build a new taxation system for the industry until then.
Ahti Asmann, CEO of Viru Keemia Grupp (VKG), a company in the shale oil business that only recently announced massive layoffs, said that the government’s decision was positive. He called the decision a very strong signal to Ida-Viru County in the sense that the government considered the competitiveness of the local industry an important issue.
In the assessment of Eesti Energia, the reduction of resource and environmental taxes will help preserve the shale oil industry. In a press statement released on Thursday, the state-owned energy company’s CEO Hando Sutter said that the government’s decision had the advantage that it would help the state make a profit off the industry in the future as well.
Member of Eesti Energia’s management Margus Vals said that the company had brought the state €200m per year, and that yesterday’s decision, which according to the Finance Ministry was worth €40m, would help preserve the lion’s share of these profits.
The shale oil industry in Ida-Viru County employs more than 6000 workers directly, and more than 13,000 indirectly. The industry contributes 5% of Estonia’s GDP.
Supporting the region by subsidizing companies
Meanwhile, at least 20 companies currently looking for workers in Ida-Virumaa will receive state support. The government also supported the proposal of Minister of Health and Labor Jevgeni Ossinovski (SDE) to apply for support from the European Globalization Adjustment Fund (EGF).
Recent layoffs in Ida-Viru County pushed unemployment in the area to 11%. Considering that most of them happened in industries that directly depended on global market prices, the government found that the situation justified involving the EGF.
To apply for this kind of support, legislation changes are necessary, among them an adoption of provisions concerning state support and its registration, as well as changing the Unemployment Insurance Act. The task of drafting the necessary bills was given to the Ministry of Finance as well as the Ministry of Social Affairs.
The government also approved further support for jobs that would create added value in Ida-Viru County and help build and expand companies in the area.
Minister of Health and Labor Jevgeni Ossinovski explained that this kind of support would be provided to companies that hire at least 20 locals. “The companies will get 50% of their employees’ gross salaries reimbursed for one year. New companies will qualify for this subsidy as well as companies that move their business to Ida-Viru County or expand it to the area.”
Ossinovski went on to say that the new subsidy wouldn’t be limited to people who had recently been laid off, but to any resident of Ida-Viru County who had been without work for the last six months.
Jobs still not guaranteed
Finance Minister Sven Sester (IRL) pointed out that the new measures decided on by the government wouldn’t guarantee the preservation of existing jobs.
“This needs to be clear to everybody involved, including today’s decision makers. The private sector eventually decides for itself. The relief the state wants to offer is an opportunity to increase the likelihood that jobs can be preserved,” Sester said in a phone interview with ETV.
Sester also said that the shale oil industry was in a serious crisis. Company owners had to decide whether or not to go on, and the state had to consider if a resource that cost more to mine than it brought in revenue was really worth such support.
Editor: Editor: Dario Cavegn