Estonia operated ten prisons with 4,500 inmates back when the state-owned AS Eesti Vanglatööstus was created in 2001. By today, the country has just three prisons and this summer the total number of inmates fell below 2,000 for the first time, said Rait Kuuse, Ministry of Justice undersecretary for prisons.

"The inmates we have or will have rather need guidance and to be taught different skills today. So the state-owned public limited company model simply won't stand the test of time," Kuuse remarked.

That is why the Ministry of Justice plans to terminate the company. Kuuse said the company will be retained until the end of next year, while new contracts will be handled by the Tallinn Prison a soon-to-be-created department of which will be put in charge of prison labor all over Estonia. "All activities that show promise today will be retained," he added.

AS Eesti Vanglatööstus currently sells around one hundred different products, ranging from doghouses to firewood baskets and ash pans, under its main trademark of Stoveman But the company made the lion's share or €1.9 million of its €3.9 million sales revenue last year on stoves and stovetops.

"We are seeing shorter punishments. And if your business model is based on long punishments where you have time to teach people very specific skills, including welding, we are realizing today that this model is not sustainable."

But Kuuse said that this does not mean the Stoveman trademark will immediately disappear.

"The work will continue but might become simpler as the number of inmates falls. Perhaps we should also look at what kind of work would benefit the state and what is not always available on the market."

The undersecretary also said that a state agency is more flexible than a company, giving the example of Estonian Defense Forces (EDF) exercises and how the prison industry can take it upon itself to put the army's gear in order.

"For example, shining the boots of all exercise participants, which is something the Tallinn Prison has been handling. We would be hard-pressed to source something that labor intensive in a short time on the market."

It has also been suggested that the prison industry constitutes unfair competition. Indeed the firm's annual report reveals that the state is subsidizing the company to the tune of €2.2 million annually by charging lower rent for manufacturing premises.

Kuuse said that state-companies are subject to more state aid rules than agencies. "Having a prison in charge of inmate labor is a more transparent option than having a state company handle it."

It has been discussed whether AS Eesti Vanglatööstus should pay the owner dividends. The firm currently spends proceeds on expansion, and while a state agency does not need to generate profit, Kuuse suggested the industry will have to pay its own way also in the future.

"Activities to organize inmate employment should break even. Offering services, we will make sure it continues to pay for the people and activities involved," the undersecretary stressed.

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