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Aivar Hundimägi: Minister Järvan against enterprise support and rightly so

Aivar Hundimägi.
Aivar Hundimägi. Source: Erik Prozes

Survival not of the fastest or strongest, but those quickest to adjust is what matters in the world of business. Unfortunately, state benefits are holding back necessary change, Aivar Hundimägi finds in Vikerraadio's daily comment.

Minister of Entrepreneurship and IT Kristjan Järvan (Isamaa) took a fair bit of flak from representatives of business associations in Äripäev last week over his reluctance to compensate medium and large businesses for soaring energy costs.

But I like Minister Järvan's courage to swim upstream heading into elections this spring. One would be hard-pressed to find another politician opposed to benefits in Estonia. Sticking with the recent policy of hiking state benefits, we would soon find ourselves with an inefficient society living well beyond its means.

Äripäev wrote in its editorial last week that using benefits to postpone investments in productivity or energy saving is hardly beneficial for society.

Based on what we know, most businesses are coping with soaring energy bills. Making universal support measures available to everyone would amount to what was done in the coronavirus crisis. However, Äripäev finds the situation today different from the spring of 2020. A large part of the economy suddenly came to a halt then, there was uncertainty and universal benefits helped mitigate a wave of layoffs. While the salary support instrument reached companies that did not need it, the extraordinary situation demanded rapid action and decisions could not be postponed.

Those in favor of benefits say that they are due eventually when the state has to support people laid off from bankrupt companies. While this is correct, such benefits are aimed at helping people find new jobs in companies or sectors, which is more competitive in the long run.

I'm sure we will see plenty of bankruptcies and major layoffs next year. While they may be painful for some, others will get the chance to seize market share, procure equipment and find employees. It is not beneficial in the long run to use taxpayer money to support companies sporting low productivity in fear of layoffs.

Whether we like or not, two trends are unfolding that we in Estonia cannot affect: wages are growing and energy will remain expensive. We need to adjust. Survival not of the fastest or strongest, but those quickest to adjust is what matters in the world of business. Unfortunately, state benefits only work to hold back necessary change.

Allow me to give an example from the media business that I am in and that recently got a mention in ERR. Home delivery of periodicals is set to become at least 22 percent more expensive next year, which will hurt county newspapers. Local papers have no real way of finding new subscribers as rural areas are emptying, while paper, electricity, heating, labor and now home delivery are getting costlier.

Estonia has laid down a lower VAT rate for periodicals and is paying print newspapers a benefit for home delivery in rural areas. The delivery subsidy was hiked to €4.5 million this year. Considering rapid inflation, one would imagine the subsidy growing again next year.

However, since media consumption has changed considerably in recent years, politicians should ask themselves whether the measures is serving its purpose before deciding to hike the sum again. A print newspaper has long since stopped being the primary source of information for many.

Of course, my position has to do with the fact that I run Äripäev's first county online news portal Lääne-Virumaa Uudised that is not published in print and does not qualify for the delivery subsidy. However, print newspapers' home delivery subsidy serves as a good example of how an established business support measure can be very difficult to change even after the business environment changes considerably.

Unfortunately, almost all political parties tend to favor ramping up benefits. No one dares ask whether benefits could be targeted, whether we should revisit or even abolish instruments that have been in place for years. Now, this hunger for benefits seems to have reached entrepreneurs and private sector executives.

It is only natural to see businesses promote their interests. However, politicians with the power to decide various support measures need to be able to see the big picture and consider every new benefit carefully. That is why I like Minister of Entrepreneurship and IT Kristjan Järvan's opposition to enterprise benefits. It is of more benefit to Estonian companies that million of support euros.


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Editor: Marcus Turovski

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