Opinion digest: Open Enterprise Estonia’s consultation services and assessments to competition (3)
Enterprise Estonia handed out advice to companies, and assessed whether or not they should receive public support, without being economically accountable, lawyer Taivo Ruus wrote in a Postimees opinion piece on Monday. This needed to change, and these activities delegated to professionals.
Following the logic of business, someone needed to be made responsible for a paid service not being delivered as promised, lawyer Taivo Ruus wrote in an opinion piece published by Postimees on Monday. Enterprise Estonia should be required to open up its procedures to competition, and to delegate its advisory services and economic assessments of companies and their business plans to professionals under public contracts.
Enterprise Estonia, which is run as a not-for-profit fund with the aim to support emerging and developing businesses both financially and with professional advice, had been by far the most scandal-ridden institution in Estonia distributing European Union fund money, Ruus wrote.
What had been reported as the scandal surrounding a grant to OÜ Ermamaa, former President Toomas Hendrik Ilves’ company, had been substantially more systematic than the media had reflected, Ruus wrote. Beyond the type of grant paid out to Ermamaa, since 2008 there had also been support paid out with the aim to invest in technology, some of which had been demanded back without any involvement of the European Commission by the Ministry of Finance.
This had caused the bankruptcy of several businesses, who had built their business plans on the expectation to receive support for a long time to come.
Ruus pointed to an incident that happened in 2010 involving Estonia’s biggest foreign investor at the time, technology multinational Ericsson. Enterprise Estonia granted the company support to build new production facilities, but as it later turned out, this had been preceded by talks of the company both with Enterprise Estonia and then-Minister of Economic Affairs Juhan Parts (IRL).
In those conversations and related e-mail exchanges, Ericsson was promised state support in the amount of 20% of its investment. That they were paid investment support then broke EU rules: As Ericsson had planned and made orders for the new facility already before the grant was approved, it confirmed that there really was no need for the company to wait for state support.
In effect, Estonian state institutions at this point had supported a company with a very large sum of money that didn’t need it. This, of course, went against EU competition regulations. “The Ministry of Finance considered the support paid a breach of state support rules, and Ericsson paid back €4.2m of received support plus interest,” Ruus wrote.
Apart from paying out support, Enterprise Estonia offers advisory services to companies. Also, approved grants are preceded by assessments of business plans and companies. All of this is done internally by Enterprise Estonia, often by people without an actual business track record.
According to Ruus, it is these activities that the fund should delegate to professionals. “The possibility of real economic accountability guarantees the quality of the assessments and reduces the possible risk of corruption to a minimum,” Ruus wrote.
Of course it was strange that Enterprise Estonia’s current management was held responsible for mistakes made years ago by another, but any sign of accepting some kind of responsibility had to be welcomed, Ruus wrote.
At the same time, the decision by Enterprise Estonia’s supervisory board and the government to sack the fund’s management had replaced one scandal with another. That a public fund that offered advice and allocated public money wasn’t financially accountable naturally didn’t sit well with the tax payer, Ruus opined.
Taivo Ruus' opinion piece was published by Postimees on Nov. 28, 2016 (link in Estonian).