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State-owned companies can direct prohibited donations to marketing budgets

State-owned Eesti Energia has financially supported the Narva Energy Run for years.
State-owned Eesti Energia has financially supported the Narva Energy Run for years. Source: (

With a bill sent to the Riigikogu amending the State Assets Act, the Estonian government is seeking to ban state company donations for anything but research and development. Current cultural and sports contributions may be partially counted under marketing, however, which is part of state companies' work.

State companies' support to various venture has ranged from €700,000-1.2 million over the years. The greatest decrease to €400,000 occurred last year, when questions had already arisen regarding whether and to what extent state-owned companies should be involved in sponsorship.

According to the bill forwarded to the Riigikogu by the government on Thursday, only research and development activity would be allowed to be supported.

Last year, AS Eesti Energia supported the education field with approximately €20,000. Money was also given to support the organization of Lüganuse Municipality Days, for exampe, and €40,000 in support was granted to nonprofit MTÜ Spordiürituste Korraldamise Klubi, or Sport Events Team, who organized the Narva Energy Run.

Nonprofit board member Mati Lilliallik said that the state company's contribution to the organization of the Ida-Viru County public sporting event is difficut to overestimate.

"Seven years ago, they created, together with us, Ida-Viru County's biggest public sporting event, which has proven to be quite viable and attracted attention all over Estonia," he said. "It would be very unfortunate if such a thing were crippled and canceled only due to notches in legislation."

Minister of Finance Sven Sester, however, noted that it wasn't that simple. According to the minister, the change in legislation is needed so that state-owned companies would direct their resources either specifically for their own benefit or, if profits are generated, direct them in them in the form of dividends to the state.

"Over the course of many years, state-owned businesses have not always drawn up support programs primarily on the basis of the businesses' potential vaue added which could be generated by one or another contribution," Sester expained. "In other words, these decisions have been relatively not measurable in the context of the businesses' economic results."

According to the minister, contributions made to research and development in fields related to a business would be beneficial to the business. Culture and sport, he noted, should be financed from the state budget.

Eesti Energia crafting image as caring company

Eesti Energia Marketing and Communications Director Monika Viidul said that the run is not supported just because, but rather also as a means of supporting Eesti Energia's responsible and caring corporate image.

"The Narva Energy Run has been an important channel for Eesti Energia, through which we have had the opportunity to introduce ourselves and our brand and maintain awareness thereof in more than 500,000 clients," Viidul explained. In other words, the event is a marketing tool.

If contributions being addressed by the State Assets Act are determined by a business' council, marketing activity can simply be reflected in the respective budget line. What counts as marketing and what as simply willingness to serve will apparently begin to be determined in cooperation with state-owned companies, regulators and auditors.

Should the state nip the potential conflict in the bud and place limits on state-owned companies' marketing expenses?

"We can think of it that way too," said Sester. "We can also develop the matter further — why does the state even own this or that busines? And do state-owned businesse even need to advertise themselves if they are in an economic sector where there is no competition? But these are issues that are already matters for the next stage."

Editor: Aili Vahtla

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