The European Commission has given its preliminary approval for Estonia’s recovery plan, worth just under one billion euros. For the first time in Estonian economic history, a remarkably substantial volume of support is being directed specifically at industrial enterprises. Our industry certainly needs this backing, particularly given the high expectations and responsibilities placed on it in meeting the climate neutrality target. At the same time, however, channelling 200 million euros in state aid into the digitalisation and automation of business processes represents such a significant market distortion that it would be reasonable to ask: what is the ideological rationale behind it — what is the change or transformation that our industry is expected to achieve with these funds?
Regrettably, there is no public discussion whatsoever about the use of this state aid. I know many different civil servants, and not one of them is pocketing state aid for personal gain. At the same time, I have seen how important it is for organisations mandated to represent businesses to provide accurate assessments of their sectors’ needs. An outside perspective may therefore be useful.
There is a trend in our business policy that concerns me. As a citizen and entrepreneur, I would like to see it changed — or at least moderated, so that the state aid flowing from the Recovery and Resilience Facility to industrial enterprises becomes accessible in a way that generates real economic value, rather than simply increasing the volume of outsourced IT services and driving up their cost. One must bear in mind that the design of domestic subsidies is a ruthless contest between competing interest groups. Everyone is pulling the blanket in their own direction, and the winner is whoever has the best ideology and messaging.
The billion-euro support package of the Recovery and Resilience Facility lands in the Estonian economy as part of the EU’s restart plan — that is, as part of the EU budget. Accordingly, on the reverse side of every euro received as direct support from the Facility is an entry for the additional amount that Estonia’s contribution to the EU budget will increase by. In the broader picture, according to the Chancellor of Justice’s assessment, Estonia will in the future make payments to the EU budget that are 34 million euros per year higher than at present.
The statutory principle underpinning state support for business is that the minister responsible for the relevant sector decides what type of support is granted, taking into account the sector’s development plans and programmes. From the perspective of industry, this might suggest that the framework is in place. We have one minister and, under that minister’s remit, one technology. And it is precisely this that gives cause for concern.
EU funding always supports broader developments than the interests of any individual member state. Our supposedly settled framework is, however, out of step with developments in European industrial policy — placed around the corner, facing the past. The common industrial data space, robotisation, the EU data cloud — these topics, unfortunately, do not resonate with us. But they could. Those mandated and invited to represent industrial enterprises could recognise that the concept of digitalisation in Estonia is still defined by vendors of specific services in a specific sector, not by developers of new technologies. The result is a rhetoric that equates digitalisation, automation, and process efficiency with a single equals sign. This is, regrettably, a disservice to the support of Estonia’s industrial development, as it deprives companies of the opportunity to receive investment support in the areas of development that are actually needed. And what is actually needed, above all, is equipment, connected devices, and digital technologies — that is, solutions that make digitalisation happen.
Equally important, though less tangibly visible, is the fact that in this way we are failing to link the support provided to our enterprises with the broader EU industrial policy picture. As a result, our companies lose the opportunity to be part of EU-level framework programmes — such as InvestEU, the sub-programmes of Horizon Europe designed to support industry, and the digital and green transition support programmes. In other words, companies lose the opportunity to leverage their investments through EU direct support and financial instruments.
In post-COVID discussion forums and panels, it has become customary to speak of an ongoing global structural shift in which value chains are being reconsidered and manufacturing industry is returning to centre stage. We have the money. We have the resources. What we do not have is a debate about how to deploy public loans and aid in the interests of developing our own industry.
This article was published in Äripäev on 30 September 2021.