Otto Richard Pukk and Arno Kolk: Estonia leaving industry in the cold

Otto Richard Pukk and Arno Kolk.
Otto Richard Pukk and Arno Kolk. Source: Estonian Electronics Industries Association

The certainty of available power and its sensible price is what has kept entrepreneurs in Estonia. This certainty needs to be maintained for both industrial producers and ordinary consumers, Otto Richard Pukk and Arno Kolk from the Estonian Electronic Industry Association write.

The era of torches and oil lamps ended with the Middle Ages and it comes as no surprise that the functioning of the modern world depends on energy generation. But looking at the energy strategy approach of Estonia's rulers, one cannot be sure the realization has hit home. Industry has been unfairly excluded from the current energy strategy, despite its considerable direct and indirect effect.

Industry is no one's hobby or something they do for fun – industrial production is necessary for everyday life. Both international and local industrial companies have often spent decades building their production units and structures, moving to new markets, expanding production, pursuing R&D etc.

The fact that salary advance and other growth curves have been impressive should not be overlooked. Local industry has nevertheless successfully adjusted to changes, while continuing to pay taxes, create jobs, offer consumers goods and develop a functional economic system.

It is natural that new companies are created and others disappear from time to time. The coronavirus crisis recently demonstrated what happens when a part of the economy collapses. The situation was new and it took time for work to be restored in uncertain conditions.

But now, when it is once again possible to steer scenarios through decisions, Estonia seems to have knowingly opted for an incomprehensible strategy. When other countries are supporting their industries, Estonia is placing its in a worse competition situation that benefits no one and rather motivates companies to consider moving to alternative markets.

Calls to replace production with innovation are baffling as industry is innovative per se. After all, inventions need to be introduced and manufactured some way. It is equally pointless to talk about capital or contracts in a crisis situation without realistic power generation capacity or enough gas for running operations.

"We'll buy it somewhere" is not a sustainable strategy in a situation where the region is short on available production capacity and several neighboring countries have said domestic consumers will be prioritized in a crisis.

Eesti Energia's plan to start hiking the universal service price almost immediately after it was fixed is adding to the confusion. It is clear that it affects ordinary consumers, while it also hits industry and the general economy by proxy.

Every employee and small enterprise whose living and operating expenses go up as a result affects our industry, either through salary pressure or bigger supply expenses. Our industry cannot function without employees or small contractors and suppliers.

Decision-makers need to realize that stability is key in critical fields. Stable power has always served as a prerequisite to Estonia's success. As producers, we can always do it cheaper somewhere else, while the certainty of stable power and its price is what has kept manufacturers here. Estonia needs to maintain and provide this stability for both industrial producers and ordinary consumers.

Soaring energy prices have yielded more excise and tax revenue, and it would be sensible to send these unexpected proceeds to consumers so they could cover costs already incurred.

In the big picture, the government would do well to take another look at its strategic approach, whether it is even sensible to first collect the money in taxes just to distribute it as benefits. It may come too late for some companies or households, for staving off unavoidable choices.


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Editor: Marcus Turovski

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