Finance minister: We have money for good projects to shape the future

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Keit Pentus-Rosimannus. Source: Siim Lõvi /ERR

On Thursday, Minister of Finance Keit Pentus-Rosimannus (Reform) gave a speech in Riigikogu about how Estonia will use EU funds in the coming years. She outlined her vision for Estonia as a leader in sustainability and the green economy and gave an overview of how EU funds are to be used to achieve this goal. ERR News has republished the minister's speech.

Dear Speaker! Honorable Riigikogu!

Estonia expects good economic growth in the coming years and the public sector will make a significant contribution to this with decisions and investments that stimulate the economy.

In the years 2022–2027, about 3 percent of the GDP per annum will be spent on stimulating the Estonian economy with the support of European funds. The new period of European investments will see Estonia receive the greatest amount of European funds ever – if 5 years ago, a little more than €1 billion a year were invested in Estonia, then the investments in the government sector will be doubled and reach more than €2 billion a year. 

Head members of the Parliament,

I do not know who will lead Estonia in six years, on the first Thursday of May 2027. I do not know whether the construction of the Estonian–Finnish tunnel will begin after the completion of Rail Baltic, enabling the connection of two economic spaces. Or whether one of the main topics then, in the spring of 2027, will includes a new hydrogen technology solution created with the support of Estonian scientists and entrepreneurs, who received a boost from our green fund and have created many new jobs while preserving nature and the climate.

What I do know is that today, when we are discussing the budget of the European Union for the next seven years, we should focus not on the question how much should a certain fund receive money, but on how to use the biggest investment opportunities that Estonia has had since it regained its independence with the aim of supporting the ideas and ventures that change the future in best possible manner. 

If we have the greatest opportunities in our history to provide Estonia with a new impetus for development, then how are we going to use those opportunities? What is our vision?

Will we just cut down our forests, build new factories to squeeze liquids out of stone and worship diesel fuels as we have done in recent years? Do we continue more or less in an old-fashioned way, holding on to the past and longing for the past, hoping that the world around us will not change? 

Or are we trying every day to be one step ahead of the problems of the future and achieve more? Achieve that Estonia would also be among the winners in the global economy of the future.

When searching for Estonia's vision, some provide Singapore as an example, others the Nordics, and the third ones Switzerland. An example is always sought elsewhere.

I think that Estonia's vision should be Estonia– greener than grass and productive as a quantum computer – to become an example to everyone else in terms of a new economy that others are looking at and wanting to copy. It is the successful digital and green revolutions that will create good preconditions for this. Europe's biggest ever funding effort will be of great help here, in addition to our decades-long exemplary work on nature conservation and the Tiger Leap.

Based on this vision, the current funding plans have been put together and those who are opposed to these plans without offering a better alternative are opposed to Estonia's future. In the interests of historical truth, it must be acknowledged that the preparation of these plans began during the previous governments, which is both an advantage and a disadvantage of these plans.

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I am convinced that a transition towards a greener Estonia is our next great thing, a big aim that will combine both the knowledge of our researchers, the technological skills of our employees, and the readiness of companies to move up the value chain and bring us better wages, pensions, and public services. It also brings inner satisfaction of making the world a better place. Green transition, a greener Estonia is a great thing for us. Twenty years ago, we decided that our future is to be a digital state. We made the decision on time and with enthusiasm. The decision and choice that we make today are to be a green country that allows a better quality of life for every Estonian person.

The recent crisis has brought a sharper and wider recognition of the importance of preserving the environment. Understanding of how connected we are through the environment. There is just one planet that we live on. All the changes taking place here will, sooner or later, directly affect our corner of the world. This makes the European mission as a leader in climate policy particularly important. Estonia should use the advantage of its small society to be more dynamic and faster.

Although greenhouse gas emissions in Estonia have decreased by more than half compared to 1990, the Estonian economy is still one of the most emission-intensive in Europe – our greenhouse gas emissions amount to twice the EU average per euro of GDP (in 2017). Achieving the European Union's goal of climate neutrality by 2050 also requires Estonia's contribution. When entering office, the government set the goal for Estonia – by 2035, our previously environmentally taxing electricity production has been made free of burning oil shale, which has been so irreplaceable during the last century. By 2050 at the latest, Estonia has become a country that does not have a negative impact on the climate with its economy.

Estonia's green transformation is nothing abstract. It is the energy saved in the future – this means lower costs. It is the use of cleaner and renewable energy sources – this means a better living environment. It is constantly finding a new use for resources that have already been produced. New technologies, opportunities for Estonian entrepreneurs.

With the support of the European taxpayer, we have €1.8 billion to use to support Estonia's green transformation. How to use these funds?

First, energy consumption. €223 million for sustainable energy, resource consumption, transition to energy from renewable sources (€99 million from the RRF for the green transformation of companies – resource efficiency, upcycling of biological resources, changes in business models, green skills; €106 million for renewable energy development; €22.5 million for energy efficiency – district heating systems, boiler equipment).

Replacement of the 'produce-consume-throw away'' model with the circular economy. In other words, extending the life of resources already taken into use. 

€45 million for the Transformation of the Ida-Viru County, getting rid of oil shale dependence. €340 million exclusively to support the creation of new jobs in the Ida-Viru County and the living environment of this beautiful County.

€100 million for the development of new green technologies in strategic areas. Financial support for research-intensive green technology companies. This is from where the new green Skype, Pipedrive, Transferwise, Cleveron, or Skeleton with global reach could sprout from. An enterprise whose ambition is to change the world, export Estonian knowledge. 

If the Estonian economy wants to become more productive, productive like a quantum computer, a digital transformation is inevitable. Information is the new oil. Countries that are poor in their ability to process and use the information and digitize processes are losers in the economy of the future. We need a new leap in digitalization throughout society. At the same time, the age of research for new solutions and shrinking workforce also requires bold consideration of alternatives in the public sector, artificial intelligence is one of the possibilities.

The productivity of the Estonian labor force has increased, it is still however about three-quarters of the EU level. The introduction of new technologies would help increase productivity, but Estonian companies are modest in their use of digital technologies and spend less on research and development than what the EU average is (0.59 percent vs. 1.45 percent of GDP in 2018). Research and development but also co-operation between research, companies, and other institutions must grow significantly in Estonia. 

The basic infrastructure of e-services and the tools enabling the use of e-services are well developed, while the quality of the services is still uneven. In order to ensure the preservation of the infrastructure needed for e-services and the security and development of electronic means, it is necessary to contribute to the development of basic infrastructure as well as to the creation of new alternatives to the existing solutions. The constant development of technology (incl. the use of artificial intelligence) opens new opportunities for the state to provide existing services more efficiently and to make decisions in a smarter way.

We have €439 million available for a new digital transformation.

More than €70 million of this will be used to support the digitalization of companies. What does it mean? For example, real-time data exchange solutions help Estonian companies save more than €200 million a year. The introduction of digital solutions will save millions of work hours, equivalent to the full work time of 7,000 people. Digitalization provides an opportunity to direct saved costs to increasing the volume of your core business. This in turn supports the growth in productivity and economic growth more broadly. 

€164 million to upgrade the e-government, to further develop public services. Digital services are getting smarter, they remind themselves of people, and come to you when you need them. When a child is born, it is no longer necessary to look for different services and places to apply for benefits yourself. All public services related to establishing and managing a company can be located in one place, behind one door.

€48 million to ensure a fast and proper Internet connection. Be it by air or cable. 23,000 addresses will receive the opportunity to join as a result of this investment. This is about as much as the total number of people living in Põlva, Kärdla, Paide, Lihula, and Põltsamaa.

Connections. The world is networking, we must strive to be a hub of this network. Without connections, be it transport connections or high-speed internet, we are destined to be a backward and poor corner of the world.

The great time expenditure required to travel distances and the complexity of combining modes of transport and interconnecting routes are problems. In order to improve competitiveness, Estonia's transport and energy infrastructure connections with Estonia need to be improved.

That is why 5G Internet and Rail Baltic, which is the first stage in connecting the two economic areas by the Tallinn–Helsinki tunnel, are of vital importance to us.

We are talking to you today about the changes in various areas that are gaining momentum with the use of European funds, all of this must go hand in hand. To support one aim and not to pull in different directions when using the one billion. In the coming years, rail transport will receive the largest injection of money in history and keep pace with the whole green transformation. Why invest in rail transport? High-quality, fast, and convenient public transport is quickly accepted by the Estonian people. Rail traffic is the best example of this. When the opportunity arose to travel with new trains, people quickly got used to using this convenient mode of transport. While in 2013 just 4.2 million journeys by train were made per year in Estonia, then by 2019 – before the coronavirus period, Estonian people made 8.4 million journeys per year by train. Estonian people enjoy quick and environmentally friendly transport. All this supports the decision to make the biggest injection of money into rail traffic in the period of receiving European funds. 

In 2026, Rail Baltic will be completed with the use of European taxpayers' money to take you from Tallinn to Riga faster than it takes now to reach Tartu from Tallinn – this means an hour and 42 minutes, you will also be able to reach Vilnius in about the same time as it takes to see the movieTenet and perhaps two episodes ofÕnne 13 – this means 3 hours and 38 minutes. In addition to allowing mobility of people, Rail Baltic is of course an additional, fast way of moving goods. Markets are getting closer to businesses.

The completion of Rail Baltic is the first stage of another important leap – the connection of Estonian and Finnish economic areas by a tunnel. Linking our region together through the connections of several future climate-neutral countries has potential, the impact of which many still do not feel. We will move forward with this plan.

The new European budget will also bring the first upgrade to tram traffic in our capital in seven years. Do you still remember when the last major investment for environmentally friendly tram traffic on the streets of Tallinn was made? In 2014. Our government then decided to make this investment in Tallinn through a CO2 quota trade. Now we are going to again with the use of European funds – Ülemiste will have a decent, modern terminal connecting bus, train, and tram traffic. The tram network will be renewed in the form of the Old Harbour tram line that will connect the airport and the port.

If any of you can name a future problem that can be solved without the help of scientists, you may inform us. Climate change, the green transformation, the implementation of digital solutions, and the creation of new jobs through new technologies will all require the input of researchers. Using research results to meet future development needs, building a bridge between researchers and business – this is important in the new budget period of the European Union.

Estonian science is very capable, but it often develops separately even there where real needs of entrepreneurs require support from science. We have built and strengthened both the research and the business sector separately, the development of a smart economy (with higher added value) through an efficient transfer of knowledge from science to business has not been a clear enough priority for anyone. Therefore, I believe that state support in implementing applied research based on the needs of entrepreneurs is crucial and it is equally important to support entrepreneurs in finding co-operation partners and raising the levels of knowledge and skills to be a smart customer, in addition to providing financial support. 

The aim of starting with the applied research program, the center for applied research, is to bring together the demand of companies for practical science and the skills of researchers, to increase the income earned by companies through applied research and experimental development. We will see which green unicorn gets a start this way, we will see this before the turn of the decade.

This time, European funds will also be the necessary support for the sectors most in need of help to get out of the crisis. Support will be provided to young people who have dropped out of school or do not have work, a cross-sectoral child protection management model will be launched and the recruitment of young people with little work experience will be encouraged.

With the help of the European funds, it is possible to invest in the healthcare sector of Saare, Hiiu, Järva Counties and Narva, Tartu and Tallinn, which was at the immediate forefront during the entire health crisis.

Dear Members of the Riigikogu,

The process for planning the use of European funds has not taken place in just 100 days, it has been a two-year-long process. Hundreds of people have already offered hundreds of ideas and helped to create a historic opportunity for us to use European funds to shape Estonia in its own Estonian model – greener than grass and more productive than a quantum computer. I wish to thank everyone who has already taken part in this process, including members of the previous government and members of the Parliament, experts, businesses, universities, representatives of non-governmental organizations, and officials.

It is estimated that about 40 percent of the total planned European funds is money that has a pre-defined purpose for use – for example, large investments in rail traffic, road constructions, activities related to the Unemployment Insurance Fund. However, 60 percent of all these funds will be distributed on the basis of open competition – meaning that the best project and the best idea win.

We have money for good projects to shape the future in the coming years. But do we have projects that are good enough? Please do not offer new free lunches. Instead offer new world-changing solutions.

I thank you for thinking along with me!

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Editor: Helen Wright

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