Head of EAS: Even a strong fish cannot live for two hours in the sun

Peeter Raudsepp.
Peeter Raudsepp. Source: EAS

What will happen at the end of the economic crisis? Head of Enterprise Estonia (EAS) Peeter Raudsepp fears two things when thinking about when that time comes, that more people who have lost their jobs and income will leave Estonia and that foreign capital will start buying up successful Estonian companies.

We are at war, it is said these days. Is that a fitting comparison?

It is to some extent. We have casualties, people hospitalized, but the main thing is that countries' resources are really put to the test. Both financial resources, medical staff and equipment, as well as maintenance of law and order and security.

This is not the first crisis you have seen as a leader.

Yes, it is the third crisis to hit during my career as an executive. All three have been different and teach us that copy-paste solutions do not work.

What is different this time, compared to when the Russian market collapsed in the second half of the 1990s or the financial crisis of 2008-2009?

For citizens, the start of the crisis is completely different. If the previous crisis was long in the wind, both expected and unexpected at the same time, this one started abruptly, is extensive and encompasses – admittedly, in different ways – every company and businessperson.

We could already be thinking about what will happen once the crisis ends. Being forced into our homes for the duration of the economic break, we should be making preparations for post-crisis time.

We must not create for ourselves the illusion that the crisis ending will be akin to signing an act of capitulation, followed by fireworks and jubilation. That everyone can return to their recent job and transport will return to pre-crisis schedules.

That will not happen.

How will this crisis end?

First, the virus will end. That will not happen overnight either and requires everyone to be very careful. Only then can we say that the main obstacle standing in the way of recovery has been dealt with and the economy will start growing again.

That is also when we will learn who was hit hardest by the crisis. Who might they be?

First, I will say what I'm afraid of the most and what no one would like to see.

Human losses. Regarding the previous crisis, we are talking about roughly 100,000 people who left Estonia to work elsewhere, causing us to lose 100,000 consumers, workers, taxpayers… This has caused a situation where for a long time one of the top problems when considering investments has been where to find labor, including skilled labor.

The other major danger is that outstanding Estonian companies will start leaving and coming under control of foreign capital. Those who have the resources, capacity and by now the desire to acquire them.

These are viable companies.

Precisely, but they lack suitable conditions. I do not subscribe to this reasoning that a viable company will always survive. If you take a fish out of water and place it in the sun for a few hours, it will die. Whereas we cannot say it was not viable. It was very viable, just in the proper environment.

In a situation where the economy has been frozen like this, we cannot measure the viability of companies using the metrics of good times.

The risk is our companies sliding out of our control and into the hands of foreign capital…

We have been saying for a long time that capital has no nationality. But it does. We have seen it now and dare say that not every investment is welcome.

If capital has nationality, it can dictate who and where will run and develop the business and reap the rewards. We stand to lose control over these companies, say in how they are developed and high-paying jobs in the process. That would be unfortunate.

Who would buy up our companies in a crisis?

I'm sure they would be from more than one place. I sincerely hope this will not come to pass, that the crisis will not linger too long and that we can take some measures to guard against it.

Banks have become real estate owners in crises and successfully exited the situation elsewhere in the world. There has been talk in Estonia that the state could act as a shareholder for certain companies during difficult times.

Such as Tallink?

Yes, it has been on the table, and I'm sure Tallink is not the only such company. I believe it is very good such options are discussed and preparations made.

Should the European Union stand united in crises as extensive as this one, or is the "every man for himself" principle the way to go here?

We can no longer talk about the former world where every geographical location was a day's flight away. The world has suddenly become much bigger.

Free movement of goods and lack of protectionism is something we can discuss in the past tense. Goods aren't moving as freely anymore, supply chains are disrupted, also due to delays on borders.

In many ways, this is a time to howl with the wolves so to speak. I feel the EU has not adopted a common and clear position in this crisis, and even if there have been attempts, they've come too late.

To imagine having Rail Baltic with its astronomical maintenance costs in this situation, I would not like to see trains stuck on the Polish border.

You surprised me when you said the world has become bigger. Rather, our world is smaller as everyone in Europe is digging in.

It has become bigger in the sense that it is less accessible. We cannot go there. We know it [the world] exists, but it lies much farther away now.

We were accustomed to thinking about resources outside our borders as our own, things we could freely trade – outsourcing, materials goods… That is no longer strictly the case. It is much harder now as everything seems to be farther away.

The primary tasks of Enterprise Estonia are supporting the export capacity of Estonian companies, boosting tourism revenue and attracting foreign investments. Have your efforts ceased for the time being?

They have not.

How so? There is no export, not tourists and no foreign investments on the horizon.

Our workload has actually increased. For example, as concerns companies filing applications and receiving support. First of all, we are receiving the same amount of application we did before the crisis, which is good as it suggests entrepreneurs are looking to the future and remain optimistic. We believe that once disruptive factors are removed, the economy will return to rapid growth because supply and demand will still be there, even though things are haywire today. We are working with future applications.

Secondly, support recipients. There have been a lot of applications for business plan adjustment in light of the crisis and visions of what the future could be like.

Could you give a few examples?

I would refrain from giving concrete examples as our clients have business secrets.

But companies are looking ahead, altering business plans based on forecast demand but also ideas in terms of which models could work better in the future.

Thirdly, we are working more flexibly because companies need support much sooner in order to maintain liquidity, we are trying to process applications and make payments faster.

There is also counseling for companies in terms of how to avoid problems with projects that have already been financed. We want to be friendly, flexible, instructive and patient in this situation.

There is a shortage of personal protective equipment also in Estonia. What can our companies do to help in this situation?

The foreign trade and IT minister has tasked us with finding companies that can and want to manufacture such equipment. There are well over 100.

I can see these companies exiting the panic phase of the crisis and the first signs of sobering up. Companies are reorganizing production, looking for new opportunities to manufacture what is needed now and will likely be in demand after the crisis.

We have children's clothing manufacturers or companies that used to manufacture air filters, while all of them need support in meeting potential buyers [of personal protective gear] and cannot yet certify their products or test them in Estonian laboratories. We are trying to help with that in cooperation with the technical regulatory authority.

I do not think all of them will become successful mask manufacturers, but many will. There will be more demand for such products in the future. Also after the crisis.

How well-aimed do you hold the government's crisis plan that the Riigikogu is set to discuss next week?

EAS took part in drafting these proposals, we have a strong team of analysts and experts. I'm proud to say our analysts include two doctors of sciences.

It is positive that work on measures to alleviate the crisis was launched straight away – starting with the first aid package and moving on to measures for exiting the crisis.

Will €2.5 billion be enough to keep our nose above water in this economic crisis?

It all depends on how long the crisis will last. It is definitely not a trifling sum and will help us hold out longer.

But we cannot measure companies and entrepreneurs with the same stick here. They are clearly on the same spectrum, while there seems to be no hope for those occupying one end of it…

Such as?

I would not like to go into specifics. The others are capable of adjusting, looking for new opportunities. The primary keywords are takeaway and e-commerce, also production of personal protective gear where fast-changing demand is met with various original solutions.

And in the third category, the other end of the spectrum are those looking to come up with something entirely new, to seize a section of the market, acquire other companies and carry out mergers.

We cannot talk about the crisis having the same effect on all companies. It affects everyone, but it affects them differently.

Is the tourism sector the worst off because you cannot sell hotel beds to go?

It is. They were the first to be hit by this crisis. They were the first in and have spent the longest in this crisis, their liquidity was put to the test right at the start of it.

The processing industry will feel these effects later. Supply chain disruptions and liquidity problems are only just arriving.

However, I see that tourism could also be among the first sectors to recover. This presents an opportunity for domestic tourism that could be one of the first to find its feet. They will simply need to survive until that happens.

You became the head of EAS four months ago, in early December, when Estonia seemed to be growing steadily. Do you regret your choice of office today?

Not in the slightest. In fact, I believe Estonia will continue to move up in the world after this crisis and stands to gain quite a lot in the international perspective.

Are you not afraid such words could anger thousands of entrepreneurs and tens of thousands of people who have lost their jobs and income?

They might today. It is understandable.

What could we say Estonia gained from the crisis two years from now?

Domestic manufacturing and consumption have a lot to gain. I already mentioned domestic tourism. We also stand to gain in areas where we are experienced, such as e-economy. The Estonian IT sector becoming a strong global player is the result of long development and hard work. By now, it employs more people than the food sector and has twice the average salary. Therein lies one opportunity.

Your colleagues know that you are working from home somewhere between Kanepi and Otepää, somehow managing to marry Skype to the sauna. How?

My office is in the sauna house and work is done online. A combination of two things Estonia is good at and that between them ensure the technical and physical capacity to work, also mental and physical health.

It is true that the week only has three days now – yesterday, today and tomorrow – and that they are all alike. But we have a long road ahead of us still.

I'm concerned for my employees, what will have become of them a month from now, our capacity for weathering this domestic routine. Both parents need to work, while minding and teaching their kids. This is not an easy time for anyone.


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Editor: Marcus Turovski

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