Andres Sutt: Eesti Post needs a functional business model

Minister of Entrepreneurship and Information Technology Andres Sutt. Photo: Sander Ilvest

Minister of Entrepreneurship and Information Technology Andres Sutt’s (Reform) first task is making support available to the tourism sector.

Your predecessor Raul Siem has described the activity of Eesti Post as inefficient. Do you agree?

I am set to meet with the management and supervisory boards of Eesti Post on Friday to ask them how they perceive the situation. For me, Eesti Post is part of the last mile. For as long as there are people who want their periodicals delivered in print, we need a functional service. When it comes to universal mail service, we are talking about a business of mounting costs on a dwindling market. We need to take a frank look at that business model and analyze what we can do more efficiently, what should be our service standards and how much it will cost.

Eesti Post’s free market activity is another matter as the company is in the parcel delivery business and offers other services. I want to meet with the management and supervisory boards to discuss what it is we want from Eesti Post five and ten years from now and base our choices and investments on that.

Eesti Post is a vital service provider. People living in rural areas must also be delivered their mail on time. Is underfunding the main problem today?

The service clearly needs to be subsidized when it comes to universal mail. It is not a profitable business model. But the service is indeed a part of state presence and needs to be ensured in the most effective way possible. I believe it will also change in time. Perhaps we will be able to replace some physical post offices with smart package delivery terminals that do other things besides allowing people to send and receive packages. We need to discuss these ideas and arrive at a functional business model. It must also be decided whether the free market portion of Eesti Post could be privatized.

In other words, the current business model is not working?

The business model definitely needs to be revisited. There is no doubt. This cannot be done in a matter of weeks, while we will be taking it one topic at a time and I will have proposals in the future.

Did you learn what are Estonian startups’ expectations for the state during your meeting with them?

Their expectation for the state is very simple: an open business environment. They do not want excessive red tape when it comes to labor and expect a constructive dialogue for policy design. They did not suggest the state should make available more support measures and emphasized the importance of legal environment instead. In truth, past successes go beyond technology. We agreed to meet regularly. I have similar agreements in place with tourism sector organizations and the Estonian Association of Information Technology and Telecommunications. We can take Estonia forward by looking for common ground with entrepreneurs.

What lies at the heart of the startup support measure mentioned in the coalition agreement?

Enterprise Estonia is working on an instrument to give new companies that cannot yet attract private capital some operating funds. We are talking about Startup Estonia and the tourism sector. Marketing Estonia in the world will become vital again once we overcome the acute phase of the coronavirus crisis.

Tourism representatives find that the state lacks a clear picture of the sector that has resulted in modest support. Has the new government an idea of what tourism is about?

It is a good question in that tourism is an entire ecosystem. It is not just hotels, restaurants or entertainment. A whole is formed from all of these components. It is also one reason why Estonia is attractive. I talked to the Finnish ambassador to Estonia last summer who told me that the structure of Finnish tourists coming to Estonia has changed. More people are coming not just to visit the Fotografiska or Telliskivi in Tallinn but also for our high-quality restaurants, spas, theaters and movie theaters. Estonian tourism or entertainment ecosystem sports a very high quality. First and foremost, we need to maintain people and competency. Not every company can be saved. The market needs to go through a cleansing. But we need to help companies that are still alive and have viable business models.

Do you agree the previous government left the tourism sector out in the cold?

More could have been done in terms of support. I believe that the Unemployment Insurance Fund’s [salary support] measure worked the best. It was set up quickly and went a long way. And while it was not 100 percent accurate, hitting four out of five targets is good enough in a crisis. KredEx measures make for a separate subject. I find that KredEx first and foremost has competence and can create the most value added for the taxpayer through offering loan surety. I see no need for direct loans today.

Taxi app Bolt moved for state crisis support last year but was turned down. Would you have given the startup financial assistance?

Would, should and could are useless in the real world. When it comes to Bolt or any other company for that matter what counts is a universal and just approach. As I mentioned, I met with representatives of the startup community and the Estonian Founders Society and the meeting culminated in their clear ambition or what they want to contribute to Estonia’s development. While the sector yields around €1 billion today, the ambition is to hit €10 billion in the next decade.

The Estonia 2035 strategy includes the specific target of our labor productivity hitting 110 percent of the EU average. If we can ensure growth in other sectors, we can give our economy the kind of momentum our country with its aging population needs. We need more business activity and Estonia must be internationally active.

Foreign labor caused a lot of bad blood between entrepreneurs and the previous government. From industrial companies to berry growers – will things be easier for them from now on?

That is definitely one fundamental change this government has produced: Estonia has been opened. Talking about labor, we have some 57,000 people out of work today. We also have a number of sectors that have labor shortage. Talking about IT but also the processing industry. These are the fields where we need to remain open to additional labor to avoid labor shortage becoming a bottleneck for economic development. Every new job that uses additional labor creates demand for other products and services. But this does not mean opening the borders to absolutely anyone. We will allow people our labor market needs and who share our values to come here.

What exactly is meant by the “last mile”? Will remote rural households gain high-speed internet access through cable or 5G networks?

First of all, we need to talk about the people. Which technical solution will be used to bring them high-speed internet is up to experts to decide. Mine is the strategic level. High-speed broadband is becoming increasingly vital because remote working is here to stay. Working remotely from a rural area must not get stuck behind one’s internet connection. How quickly these links can be developed is another question. We are talking about 60,000 addresses on the white part of the map so to speak. These links are being developed as part of last year’s support period measures and once we receive feedback from the European Commission in terms of Recover Europe and other funds, we can draw up new applications. It will likely happen at the end of this year. We cannot be everywhere inside a single year.

The government is not afraid of Chinese influence growing out of hand during 5G network development?

First, we need to decide on the security parameters we want the network to have. I want to move quickly in this field, which is when we can declare competitions to find operators for frequency permits and hold the auction. It is not a question of countries but rather whether we will entrust someone else with the base infrastructure. We increasingly make use of online solutions to organize our everyday lives. It is vital to make sure technological solutions do not come with backdoors that allow information to be used for other than intended purposes. The security consideration is crucial.