Cabinet leans towards keeping under-scrutiny rural body as separate entity

KredEx logo.
KredEx logo. Source: Siim Lõvi /ERR

A body tasked with issuing loans to rural businesses which has recently been under scrutiny over its handling of funding aimed at alleviating the effects of the coronavirus pandemic may not be merged with state agency KredEx after all.

BNS reported Thursday that prime minister Kaja Kallas (Reform) had said that the agency, the  Rural Development Foundation (MES), could potentially be merged with KredEx and also foreign and e-state investment agency Enterprise Estonia.

The National Audit Office recently pointed out various inconsistencies in the MES' issuing of loans aimed to alleviate the effects of COVID-19, while KredEx was at the heart of a corruption scandal early on this year which led to the collapse of the Center/EKRE/Isamaa coalition, and the resignation of Kallas' predecessor, Jüri Ratas.

ERR's online news in Estonian reports that Kallas had, however, said that while merging the MES with KredEx and Enterprise Estonia – the latter two are already earmarked for merger – would likely be a bridge too far, mainly since the MES comes under a different ministry's remit than the other tow agencies. The suggestion of including the MES in the merger had been championed by Reform MP Aivar Sõerd, while the rural affairs minister under whose remit the MES falls said in effect that city slickers were looking at the agency from that perspective, one which would conflict with the viewpoint of those actually living in rural areas and depending on the sector for their livelihoods.

Various state bodies hold purse strings

Kallas said that: "We also discussed at cabinet level organizations which are still dealing with similar areas. In the bigger picture comes Enterprise Estonia, KredEx, MES, and also in some ways the PRIA and the KIK, but they have a slightly different specificity."

Kallas was referring to the Agricultural Registers and Information Board  (PRIA), another body at the center of corruption allegations during EKRE's tenure at the rural affairs ministry, while the KIK is the Environmental Investment Center. Both are responsible for issuing funding, including of EU origin.

KredEx as the state credit agency issued several high-profile loans, and many smaller ones, to companies who said their business had been harmed by the effects of the pandemic.

Once a security services investigation into the machinations surrounding a nearly €40-million loan to a half-finished real estate project in Tallinn became public, in January, it was followed within hours by Jüri Ratas' resignation. Ratas' party, Center, had been implicated in the scandal.

Prime Minister: KredEx and Enterprise Estonia easier fit

Kaja Kallas said that: "The MES and KredEx have very similar directions, but at the moment we are moving faster by merging KredEx and Enterprise Estonia, since it seems to be easier as they are under the administration of the one ministry. However, will also be discussing these additional options, one by one, to concentrate services in one place."

While KredEx and Enterprise Estonia, known in the Estonian media as the EAS, fall under the economic affairs ministry's aegis, the MES as its name and function would suggest is the responsibility of the rural affairs ministry.

IT and foreign trade minister Andres Sutt (Reform) said that even the Enterprise Estonia/KredEx merger was still to be the subject of further analysis.

Rural affairs minister Urmas Kruuse (Reform) said the MES needed to remain a separate entity, focusing on rural areas.

MES long been under scrutiny

The concept of merging the MES, founded in 1993, with other state bodies is not a new one – as early as 2008 the audit office had already questioned the need for it to be a discrete body, ERR reports.

Reform MP Aivar Sõerd, however, said that the cabinet has not given a sufficient account as to why the MES should be excluded from the merger.

"Why it is that one sector is under a separate agency was not very clear," Sõerd said, referring to a conversation he said he had had with Andres Sutt.

"It would be logical to place all three agencies together," he went on.

"If the merger of two large agencies creates synergies, makes management more flexible, then it is logical to conclude that a third agency could be added there. It is illogical why KredEx and Enterprise Estonia are to be merged, but at the same time MES will remain a separate institution," he went on.

Rural minister: MES tensions need alleviating

The National Audit Office (Riigikontroll) recently published a report in which it pointed to irregularities in the issuing of loans from a similar fund at the MES, which, the report said, saw millions loaned under the scheme to rural-related businesses not obviously hit by the pandemic and it effects, including even loans totaling €5 million given to enterprises which never even made the claim that they had been hit by the coronavirus pandemic and its ensuing restrictions and economic effects in the first place.

Urmas Kruuse said that, due to the political regime at the time (the period under scrutiny predates Kruuse's time as minister, a post which was previously held by Arvo Aller (EKRE) and, before that, Mart Järvik (EKRE) – ed.) the reputation of rural entrepreneurship

"It is definitely not necessary to look only at the MES management. A solution is certainly needed to alleviate the tensions," Kruuse told ERR Thursday, adding that merging the agency would not be necessary and would in fact harm those living in rural or more sparsely populated areas.

"The state must reach out to those people with its loan programs and grants, even if it seems like a riskier activity from a metropolitan point of view."


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Editor: Andrew Whyte

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