The Baltic Course




From Prime Ministers to Millionaires

During the fast developing privatization process in nineties the three Prime Ministers of the Baltic countries became millionaires by cultivating their private businesses at the same time they held political office. The Baltic Course offers the answers of Mr. Andris Skele, Mr. Bronislovas Lubis and Mr. Tiit Vahi to questions concerning the interrelation of bussiness and politics. The interviews were published last autumn in magazine

Janis Domburs, Vakaris Deksnis (Lietuvos Rytas), Taivo Paju (Postimees)

- How did you evaluate your private property at the moment when you left the post of the Prime Minister and what is your evaluation of it now?

Bronislovas Lubis: Children, as a rule, enjoy legends and fairy-tales. But sometimes, I am afraid, even grown-ups whose childhood has passed long ago are fond of them. Yes, legends - they are enjoyable, but, unfortunately, far from reality.
As for my financial position, I would like to remind you that during six years beginning with 1993 when I resigned the post of the Prime Minister I have been involved in business. My business has not always been a straight line. Sometimes it has made some curves, but always with a strong tendency to climb. The fact that we have managed to privatise and retain state owned industrial enterprise Azotas, that we have reached the western markets with the products of Achema - those are the greatest achievements.
If I am to discuss 240-320 millions of litas, a strong suspicion arises that my financial position is mixed with the property I am in charge of. If anyone would pay me at least half of the amount mentioned I would have immediately retired from its management and sold all the shares I own in the companies.

Tiit Vahi: When I left the post of Prime Minister in January 1997 I had an apartment (by the way the redecoration was done taking a loan) and a cottage, built during the Soviet times, as well as a house in the Valga district. I had shares in small investment company I founded together with my partners in 1993. But the company was hardly active due to my post of the Prime Minister.
Today the company is active. We have taken advantage of the so-called Tallinn Stock Exchange boom. Right after I had retired from the post of the Prime Minister it was the right timing to rise the prices of the shares. We took the advantage of the situation later leaving the Stock Exchange in due time. We sold our shares thereby significantly improving financial situation of the company. Afterwards we made investments in different projects. One of them - Silmet in the Eastern part, the other - hotel (guest house) in the Southern part of Estonia.

- What advantages or disadvantages have you experienced in your business activities taking into account your post of the Prime Minister?

Andris Skele: The only advantage: I had a very vast range of acquaintances, and even vaster circle of those who recognise me. Many who recognise me, but do not know anything about me. But that is a great advantage. I have experienced both periods in the beginning of my business career as well as in 1997 when I founded the above mentioned UVK Ltd.
Unfortunately, I have to take into account a rather great number of ill-wishers. But you cannot escape that.

Lubis: I cannot give a simple answer. The positive thing is that I know a lot of entrepreneurs. Although already before restoration of independence when I was the Chief Engineer of Azotas and I was quite a well-known person with a splendid business career perspective.
Of course, the posts of Vice-Prime Minister and Prime Minister were very helpful giving the chance to extend my knowledge in marketing and understand the macroeconomic processes better - and that, in turn, helped my business.
But today the influences of the past are affecting me negatively because the reporters used to say: He was the Prime Minister and due to that he has advantages for his business. Thus the negative image is created, the idea of protectionism is continuously floating in the air, even if there is no ground for.

Vahi: I presume there still are more opportunities than the negative facts and difficulties. I have a lot of information due to the fact that I have been in politics a long time and I know almost all VIPs not only in Estonia but also abroad.

- Would you comment the thesis: at the present moment in business the initial accumulation of capital takes place in the Baltic countries as well as in other countries in the former East bloc.

Skele: I think that the above mentioned period of initial accumulation of capital, as you put it, is over. Also in Latvia.

Lubis: Yes, that's true. The process is present. During the soviet times it did not exist at all.

Vahi: I suppose that the period of initial accumulation of capital has finished, the second period - redistribution is due to begin. And that is only fair because supposedly the initially state owned capital was seized by the persons who could not manage it properly. At the moment the capital flow is directed towards those who are able to manage the enterprises, business and capital.

- Do you think the laws of your country restricting business activities of politicians in their private business with respect to the conflict of interest are acceptable to you? Are any changes required in this sector?

Skele: I am of the opinion that the direction chosen is the right one but this area of legislation is still underdeveloped. There is still a lot to do in this area. For instance, the AveLat Group is a very good sample: mass media and public opinion or at least part of society has insisted on turning over my ownership of shares to an independent administrator although none of the norms of Latvian legislation foresees this. I have introduced all the required procedures in order to exclude any speculations in the future.
Let us suppose - what should a supermarket owner in a district do if he is elected a chairman of the district council? How should he behave? Should it not be regulated by the jurisdiction of Latvia? Should it not be prescribed by law the way the Prime Minister or a Member of the district council should behave? I suppose it has to be prescribed by law. And this is our task to be solved in the future.

Lubis: I think that politicians should be able to participate in business activities only indirectly and not directly due to the fact that politics should be considered as their main job. Otherwise rather negative associations occur for the majority of people. I do not think that business people may not be involved in politics, but it may become true only after their business has become completely transparent.

Vahi: I am of the opinion that politicians are not able to sit on two chairs at the same time being simultaneously involved in politics and taking the post in the government, and, to make it even more complicated - manage their own business. The restrictions existing in Estonia, to my mind, are correct. On the other hand, I have only one but - sometimes politicians are charged without any proof all suppositions being based on rumours only. The politicians have to have some protection so they are charged only in those cases when in fact they are proved guilty.

- To what extent at the present moment in the former Soviet Union the support and involvement of well - off business people is necessary? Do you consider it might reduce corruption or vice versa, approximation of political and economic powers would serve as a cause of anti-democratic tendencies and even in formation of an oligarchy?

Skele: At the basis of stability is a strong middle class. Simultaneously, involvement of well-off and prosperous people in politics should facilitate stability. In turn, transparency and openness, as well as a democratic mass media are a guarantee against anti-democratic tendencies. It is very important to ensure publicity.

Lubis: I suppose that if wealthy individuals are getting involved in politics that is a positive tendency. After all they are not concerned with everyday problems and they can concentrate on solving the state issues. But I would like to stress it once more that the other part of their private business should be maximum transparent in order to escape any doubts in the society.
Businessmen should assist those political parties with programs that most of all coincide with their business development perspectives. I do not see anything suspicious in this aspect.

Vahi: It seems that the main question is still not touched upon - the people may be fair or unfair. I think private business and politics are different things.
In private business we are fighting for our enterprise, here the goal - increase of profit. But in politics the main goal - prosperity of people and strengthening of the state.

- What is your attitude towards the concept of national business? Do you believe in the vitality of this idea? If so, can you be called the representative of such a business?

Skele: You can talk about national schools in business. This can also be referred towards business management traditions, but not towards ownership. That is the question of culture and tradition. The culture of business management is under development at the present moment. It is essential that it goes in the right direction. I followed the same thought at the time when I was actively involved in business.

Lubis: I do not think that Lithuania owns any national business. Because now the business has become international. Even the owner of a small shop sells the goods produced in different countries.

Vahi: Yes. I think that national business exists. Being the Prime Minister I supported national business if any possibility occurred under the conditions.
I will put it this way - may be capital has no nation or nationality but any nationality or nation may have the capital. And, I think, without any capital, without any production a nation cannot exist.
In fact, to a certain extent I am representing the national business at the present moment due to the fact that Silmet Group is one of the biggest privately owned enterprises in Estonia where all the shareholders are of Estonian origin.

- Do the principles of financing the political parties influence the ideology of political parties in your country? Do you foresee, as a businessman, any illegal ways of business structures to influence politics?

Skele: Yes, they can influence. But the methods are unacceptable if they are secret, if society is not informed of it. If there is no ideology at all behind it. If the politicians are ready to change their position, and their ideology depends on whether they have the power or not. That cannot be acceptable.

Lubis: I am not a hundred percent expert in this area, even more than that, this is not the issue for general discussion in Lithuania. It came up just before the Presidential elections when the names of those who finance the elections were made public. But I suppose it is not a bad idea because businessmen as well as trade unions and other public entities have to defend their interests.
The businessmen have to support those political parties whose programs will fit most their business activities. I do not see anything bad in this respect.
My answer to the question if we have supported any political force? is affirmative.
At the same time I do not think that my personal influence is very big. The role of the Industrial Confederation is also conditional. The Memorandum signed - is only reflection of economic programs that should be implemented in Lithuania. For instance, one of the articles explaining zero tax on investments has already been implemented. But reduction of taxes and some other articles of the Memorandum, unfortunately are not carried out yet. I would like to point out that any exclusive rights and privileges of the industrial sector are not discussed in the Memorandum. The aim of the document - to make business more democratic thus creating better conditions for its growth.

Vahi: In Estonia political scenery should be better painted.
I still consider that Estonia already today has certain conditions for transferring to two polar political system - to my mind, it should be based on the market economy. Because no one for sure is willing to return to socialism.
Both right and left wing may agree on that. The right wing - those who first of all see the implementation of political task: that, as we already discussed it earlier, improvement of prosperity of people via active support of economics, business people and industry. Others sooner fighting for more even redistribution of the industrial profit.
However, at present businessmen are concerned with making deals with politicians. But, I suppose, in the future party lobbying should be on political basis, that is, the producers should support those parties whose programs include perspectives of further development for the industry. And vice versa the employees are supporting those parties who are for more even redistribution of the social product of industry.

- Does the lobbying like it is understood in western democracies exist in your countries? How have you felt this as a Prime Minister and an entrepreneur?

Skele: To my mind, lobbies are developing in Western democracy traditions in Latvia. It is introduced by Western companies. I would not agree hundred percent with the definition of manifestation of lobbies, I would rather talk about the political discussions concerning economic activities where more substantial and motivated arguments are demonstrated. The main task of a professional lobbyist is argumentation, confidence, information, training. Latvia at present is lacking publicity. I think that at the time when we will be able to read in newspaper announcements about a lobby of industrialists in the Saeima (Parliament) that has succeeded in adopting this or that amendment to a law or any other information of the kind we would make one more step towards real political responsibility and democracy.

Lubis: Yes, it exists. The Memorandum was one of its manifestations. And this is an open manifestation of goals and interests of the Industrialists Confederation. The Confederation is one of the public organizations aiming at become a professional lobbyist.
When I was the Prime Minister the forming business circles were overwhelmed by the spontaneous ideas instead of continuous interest lobbies, since the time was complicated both politically as well as economically.

Vahi: Certainly, lobbies exist in Estonia. Politics is goal-oriented work of different groups interlinked by common interests. And if at this moment I am an entrepreneur then I have certain common interests with other entrepreneurs in order to improve the economic environment for Estonian entrepreneurs.
Of course, we are organizing a union and, for certain reasons, we are willing to influence the politicians so that they justify our hopes.
When I was the Prime Minister very often I had discussions with the trade union members, signing of trilateral agreements, meetings with the young people as well as retired persons, etc.
A lobby group is always many sided: employers, employees, retired persons, young people, non-citizens of Estonia. But it is necessary to train anyone - as much as possible. By supporting one group sometimes we are restricting the rights of the other.
My politics was based upon the idea: to produce more in order to have more product in the end to redistribute.