In Support of the 'State Capitalist,' Juhan Parts (2)
Äripäev business daily's deputy editor Aivar Hundimägi explains why he supports the state's more energetic role in rail and ferry services, despite the notion that nationalization runs counter to economic liberalism.
Both Economic Affairs Minister Juhan Parts and Prime Minister Andrus Ansip have drawn recent criticism: the government is accused of divesting private companies of business.
Estonian Air was taken over from SAS, and starting this year, Edelaraudtee is no longer allowed to transport passengers. The next step is that the government wants to have more of a role in organizing ferry connections between mainland and islands.
The decisions on train travel and ferry connections strike me as positive ones. Neither Edelaraudtee nor the Väinamere Liinid ferry company represented a free market economy. The state has been subsidizing them with taxpayer money for years, and the prices of their services have not been determined by free competition. Thus there have always been suspicions that private companies are paid too high a fee for the service they provide.
Economic Affairs Minister Juhan Parts said in Parliament's question hour this week that the state wants to buy ferries and then lease them to private companies selected at a tender. The minister's plan is for the state company Port of Tallinn to buy the ships. The ships are currently in private hands; the company leases them to other private companies and the state pays the ferry operator subsidies, most of which goes to the company that owns the ferries.
Parts says he is confident that if the state (or a state-owned company) owned the ships, this would save the taxpayer 8 million euros a year. That's thanks to the lower charter fees for the four ships. In addition, competition would be created in the operator service segment. Currently, the ferries are controlled by Vjatšeslav Leedo and another entrepreneur, Olav Miil, and it is hard for anyone else to enter the market as a prospective operator.
I would not be surprised to see the confusion that arose over the rail service contract at the beginning of the year used to disparage the state's plan to buy the ferries. Critics will probably start sowing fears of poorer-quality ferries, spottier schedules and worse service. That's easy to do, because unlike the case of the new trains, which replaced depreciated rolling stock, the private company has already introduced new ships to the island ferry lines and it's hard to find much to criticize in the operator's service. The question is about how much money the state must pay for this service.
One MP who will likely represent Leedo's interests and be a critic of the plans to dismantle his ferry monopoly will be Kalle Laanet. In the Reform Party, former Center Party member Ain Seppik will do lobby work for Leedo. It's likely that the dismantling of Leedo's empire will not be painless for Parts. He has less than two years in office and Estonia has at least one influential business person who is interested in replacing him as economics minister.
By intervening strongly in the train and ferry business, Parts and PM Andrus Ansip are rectifying mistakes made by Mart Laar and Tiit Vähi during their administrations. Years ago, the state placed the ferries and trains in private hands on conditions that were unfavorable to the taxpayer.
The actions of the current Ansip government have been called "state capitalism." But actually the Cabinet is fixing mistakes made during privatization, with the goal of saving the taxpayer several million euros a year and ensuring quality service at a lower price.
That doesn't mean that the state must forever be the one to organise passenger train services or ferry trips. The state can also lease out the ferries and trains it owns, but it can do this in a smarter fashion than previous governments.
Originally in the form of a Vikerraadio comment and published on uudised.err.ee.