Development Fund to be shut down

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Photo: Arno Saar / Õhtuleht

Yesterday, Economic Affairs Committee at Riigikogu decided to shut down operations of Development Fund (Arengufond) as it currently stands. For development monitoring, a separate unit will be created at Riigikogu, and everything related to investments will be transferred to Kredex.

Economic Affairs Committee chairman Toomas Kivimägi said the shutting down of Development Fund was the right thing to do. «Humanly speaking, with the Development Fund staff in mind, the news isn’t the merriest of course,» said Mr Kivimägi, adding that due to the shrinking of the population, state structure cannot stay the same.

Reorganising of the Development Fund operations has been in the air for over a year, and last October the committee proposed that the roles be redistributed. Yesterday, a decision was reached to create a separate parliamentary unit for monitoring, with its budget and decision-making competency. Mr Kivimägi said it was early to tell what this would look like.

Investment activities will go under Kredex. Via press release, committee member Maris Lauri explained that this will help harmonise all state measures to support enterprise. Domain-based topics like green economy and energy, and smart specialisation, will be taken back under economy and communications ministry governance.

Mr Kivimägi said that the Riigikogu has not been satisfied with Development Fund’s activities. He assessed the fund to have been at its best when led by Ott Pärna who left the fund in 2012.

Development Fund chairman Ville Jehe said the most valuable decision was to continue the monitoring. According to him, the operations of the fund were clearly positive, all told.

«Development Fund was handed two tasks and one of these was done perfectly. The way how investment activity was jump-started in Estonia, and all are talking about start-ups, Estonia has a dozen private equity funds dealing with investment – this would not be, if back then the state had not taken the bold step to start it itself. In that sense, I think the balance sheet bottom line is green,» he said.

As the main problem with monitoring, Mr Jehe sees that during eight years, owner of the fund never ordered a single monitoring from them. This was also noted in a report by Ms Lauri completed at end of last year.

Of the committee, six members voted for closing the fund down, while two Centre Party people were against. Mihhail Korb was against saying the state should have been a better owner.

«We find that they are dealing with the form of the fund, but they should be dealing with the content. Riigikogu must have given clearer tasks, which the fund was expected to accomplish. For starters, they ought to have assessed the results of the activity, and if these had not been satisfactory, only then to take such a severe decision as was taken today,» said Mr Korb.

According to the fund’s CEO Annika Lentso, monitoring must remain independent in the future as well. «Within the Riigikogu structure, independence of the monitoring activity must be ensured to prevent parties from dictate which decisions may be taken as resulting from monitoring,» reads the press release by Ms Lentso, according to whom the fund will now go by what Riigikogu and its council will decide.  

Mr Jehe said the fund has 22 on its payroll but there will be no large-scale lay-off probably as the units will be divided and in high likelihood the people will be able to continue with their work if they so desire.

The bill to close down the fund will be presented in April; Mr Kivimägi hopes the parliament will pass it in May or June. The monitoring might be transferred in the fall, but surely within this year said the economic affairs committee chairman.


Development Fund

  • The idea came from President Lennart Meri who stated in his Anniversary of the Republic address in 2000: «let’s make a nice Estonian SITRA, then we will also reach what we call happiness.»
  • Development Fund begun operations in 2007. It was trusted with two direction of activity: investments into early phase enterprises, and development monitoring. Among the investments are the engineers’ social network GrabCad and the virtual fitting room Among other things, the development monitoring encompassed smart specialisation and Startup Estonia.
  • The fund’s first manager was Ott Pärna who, after leaving with a scandal in 2012 left behind an office space way too luxurious.
  • The next CEO Tõnis Arro did move the fund to premises more austere but was accused in waste in internal audit – like purchasing personal items with the fund’s credit card. In 2014, Pirko Konsa temporarily stepped in but stepped back in March.
  • Last summer, both chamber of commerce and industry and employers’ confederation begun to doubt the fund was needed. Last summer, both declined to nominate their candidates into its council.