LAND OF CROOKS

Aug 09, 2001

The level of corruption, according to various surveys, is comparatively small in Estonia. However, certain recent cases including the multi-million dollar privatization of the country's railway system cast doubt on past achievements. Last week's discovery that a respected British investor for Estonia's long-troubled passenger railway company Edelaraudtee has mysteriously sold most of its shares to a conglomerate run by two local professionals - one a CEO for the privatized enterprise, another a notorious lawyer who has already been involved in court litigation - casts doubts on the transparency of privatization in Estonia.It also leads to the thought that what remains of Soviet-style thought and action in this country is more significant than many people suspected. All the responsible Estonian officials questioned have admitted their surprise and even astonishment about the new owners of Edelaraudtee but have added that the law has not been violated and therefore everything is just fine. This attitude is surprising, to put it mildly.

It was Prime Minister Mart Laar himself who in his first term as prime minister in his early 30s, directly after the restoration of Estonia's independence, acted against the "spontaneous privatization" of state enterprises by their managers, as they usually lacked the knowledge to run a company and the money to invest.

Now, 10 years later, it's Laar's Pro Patria Union party, the senior partner in the ruling three-party coalition, that supported, in May, the restoration of most passenger lines suspended earlier this year. This move was backed by money. In June, the Parliament approved an additional $2.8 million in state subsidies to Edelaraudtee for 2001, and $7.48 million for the next two years, placing the government in an "unexpected situation," according to Finance Minister Siim Kallas.

Mart Laar's party is even ready to put the pride of Estonia - the balanced state budget - at risk, just to please this pair of local "railway tycoons."

Altogether, in three years Edelaraudtee will receive, including the above additions, about $26.32 million from the state budget. Quite a comfortable pillow for the couple.

In this case, the Parliament has acted like a generous genie for them. It is suspected that the state subsidies to the railway increased two or three fold as soon as they bought the company. Originally, only $3.5 million per year was planned to be allocated to Edelaraudtee. This figure later increased to $4.9 million. Now, after the June vote, it will increase even further.

Even Estonian President Lennart Meri was one of the few politicians in the country to criticize the rail privatization process.

But the worst thing is that this deal has also cast doubt on the privatization of the Estonian railway system's freight arm, Eesti Raudtee. The two banks that promised earlier to back the deal, the EBRD and Hansapank, suddenly withdrew just before Edelaraudtee's change of owners become public. Fear of wheeling and dealing was quoted by some Estonian media as one of the possible reasons.

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