National Audit Office: Competition between EAS and the Ministry of Foreign Affairs does not support the development of Estonian commercial diplomacy

10/7/2020 | 12:00 PM

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TALLINN, 7 October 2020 – In its overview, the National Audit Office found that Estonian entrepreneurs are generally satisfied with the organisation of commercial diplomacy in our country, but competition and poor information exchange between EAS and the Ministry of Foreign Affairs does not support the development of commercial diplomacy. Commercial diplomacy also needs significantly longer-term funding.  

Keeping commercial diplomacy going requires at least 20 million euros of public funds every year. The network of the diplomats of the Ministry of Foreign Affairs and foreign representatives of Enterprise Estonia (EAS) in 38 states and 46 cities allows Estonian entrepreneurs to receive services and knowledge that would be difficult and costly to obtain in the market. Companies that have received support for export and brokerage of investments have generally given positive feedback on the work of diplomats and foreign representatives of EAS.

The “Estonian Foreign Policy Development Plan 2030” approved by the Riigikogu in the summer places supporting economy and commercial diplomacy in a strategically important position. The National Audit Office agrees with the strategy that the cooperation of the three parties – Ministry of Economic Affairs and Communications, EAS and the Ministry of Foreign Affairs – plays a key role in achieving the objectives of foreign economic policy. At the same time, it is clear that the Ministers have different visions of governance and the future of the field.

“If one institution says let’s cooperate but the other institution demands to be given the leading role, it’s clear that their visions of the future are different,” commented Auditor General Janar Holm on the overview. “Estonian commercial diplomacy does not need a lot more work, as such, but a little more cooperation.” 

Despite the activities supporting the cooperation and synergy of the field of commercial diplomacy (reviewing annual plans, annual overview of commercial diplomacy for the Economic Development Committee of the government, round tables), there are still deficiencies both in comprehensively guiding the development of the field at the level of the government as well as in information exchange and cooperation at the level of management and specialists.

Common goals and coordination of working plans are the prerequisites for creating synergies between the foreign representatives of EAS and embassies. “What President Lennart Meri hoped for from Estonia foreign policy could also go for commercial diplomacy: we should think with a million heads but talk as one mouth,” said Holm. “Unfortunately, different institutions make similar plans at the same time, managing to surprise one another with both intending to send more employees to the same country.” The risk of duplication could be reduced by agreeing on a division of labour both in broader terms and in specific target countries.

So far, the expertise and roles of the foreign missions of the Ministry of Foreign Affairs and the foreign representatives of EAS have been different but have complemented one another. EAS foreign agencies employ foreign representatives who specialise in supporting exporting companies, involving foreign investments, and developing tourism and know the local knowledge, culture, and market/economy. The support of diplomats working at embassies increases the credibility of Estonian companies in the eyes of foreign partners as an added value. Diplomats also assist if contact with the authorities of the receiving state is required. The network of honorary consuls also provides commercial diplomatic support.

In the opinion of the National Audit Office, the expected impact of important steps changing the current organisation of commercial diplomacy should be assessed before implementation and risks should be alleviated. The Estonian Chamber of Commerce and Industry, the Foreign Affairs Committee of the Riigikogu, and the Minister of Foreign Affairs have expressed their opinion that bringing the foreign representatives of EAS under the management of the Ministry of Foreign Affairs would help to increase the efficiency and effectiveness of using resources aimed at foreign economic policy.

“Different countries use different successful systems,” said Janar Holm. “Technical questions should not be an obstacle that prevents doing something.” The important thing is to ensure that the necessary functions do not go by the wayside when establishing a new system. The status of, for example, foreign representatives of EAS in the service of the Ministry of Foreign Affairs as non-diplomatic contractual employees should be addressed so that both diplomats as well as non-diplomatic foreign representatives would be sure to have an opportunity, within their competence, to operate in the foreign market as a team supporting one another.  

As a significant shortcoming, the parties outlined the lack of a common system for information management. According to the survey conducted by the National Audit Office, more than half of the diplomats in charge of economic issues are not using the EAS memos or analyses as an information source because these do not reach the diplomats, and the assessment of the use of common information systems is generally poor or there is no cooperation in this field. A common information transmission channel or system or a similar environment would improve the quality of information exchange and save working time.

A longer-term holistic approach to funding the activities of commercial diplomacy is required. In order to operate at a good level abroad in a foreign state, it takes time to adapt to the environment and to establish a network, which is why funding should be planned for a multi-year perspective and more comprehensively. The state budget is limited; a significant part of the activities of commercial diplomacy by EAS has been funded by European Union grants. Competition has developed between authorities implementing commercial diplomacy. In the long run, a decision has to be made on how and which activities would continue if the amounts allocated for the support of Estonian companies from the European Union funds or the opportunities of the state budget decrease.

Too short a notice period is a big problem for entrepreneurs interested in including a business delegation in the international visits of senior civil servants. The portal visiidid.ee has been created to plan high-level foreign visits with a business delegation and joint stands for trade fairs. If the visits are led by ministers, chancellors or vice-chancellors, better planning could bring the time of announcing visits forward. All visits that have been agreed upon should be entered in the portal visiidid.ee as soon as possible.

However, there is still no nation-wide systematic overview of visits that have already taken place and feedback of companies. The portal could also serve as a place for giving an overview of completed visits, getting feedback, and clarifying market needs both publicly and between institutions, because this would help to plan and organise further activities even better.

Background

In broader terms, commercial diplomacy means all activities of the state aimed abroad that improve the international competitiveness of Estonian economy, be it as growing exports, increased attractiveness to foreign investors or a higher number of visits by foreign tourists as well as increased reputation of the state in foreign markets.

Substantive management of commercial diplomatic activities and responsibility for the development of the field has been divided between the agencies of the Ministry of Foreign Affairs and the Ministry of Economic Affairs and Communications. The activities of Estonian companies abroad are supported by the diplomats and business and investment advisers working at embassies and foreign representatives of EAS. The focus of the overview is on activities that take place abroad or are related to its planning. Commercial diplomacy is viewed as a tool for implementing foreign and economic policy.

 

Priit Simson
Head of Communications of the National Audit Office of Estonia
priit.simson@riigikontroll.ee
+372 640 0777
+372 5615 0280
www.riigikontroll.ee

  • Posted: 10/7/2020 12:00 PM
  • Last Update: 10/12/2020 1:51 PM
  • Last Review: 10/12/2020 1:51 PM

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