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Lockdown part two: Resilience is key

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As lockdowns and travel restrictions are reintroduced around the world, it is essential that businesses, governments and charities work in close co-operation to ensure the protection of the most vulnerable. COVID-19 and its consequences will clearly be with us for some time to come, so building our long-term resilience is fundamental. These measures must be formed in a calm, reasoned manner and with the long-term implications in mind, writes Yerkin Tatishev, founding chairman of Kusto Group.

My generation in the former Soviet countries went through a similar experience of massive economic and social shock in the 1990s when the USSR collapsed. Having grown through those difficult years, we perhaps have a better sense of perspective now. We know that in order to survive a crisis and flourish afterwards, patience and a plan for the future is required.

Quick wins are always in demand, often without any real consideration for their long-term impact. One can see this in business and politics across all societies, only exacerbated in times of crisis. Amid the general panic, the idea that “something must be done, this is something, therefore we must do it” often takes hold.

At Kusto Group, we already had established a charitable foundation #KustoHelp, which enabled us to deliver $2,4 million of aid to at-risk populations during the pandemic. That we had this structure in place was due to long-term thinking and the recognition that our company has a social responsibility to help those less fortunate.

In business you learn that when you have steady processes already ingrained - you have all systems in place, the right leaders, the right specialists, local competencies - you can adapt far better to a disaster or disruption. If anything, a crisis is a perfect moment to remove all unnecessary procedures, meetings, layers and bottlenecks. In other words, companies that have effective structures in good times, are in a much better position to handle the bad times. In many markets I see divisions of Kusto Group, such as agriculture and construction materials, continue to perform well for this very reason.

The same can be applied to governments and public administration. While no country or company has handled the pandemic perfectly, it has been easy to see that those with good governance have come out much stronger than those without. This learning is a perfect illustration of the need to reform structures if we are to be resilient in the long term.

The World Bank’s chief economist warned two weeks ago that countries would have to take on additional debt to help fight the economic impact of the coronavirus. As undesirable as this normally is for public finances, supporting our industries is an essential investment in the long term. Businesses take years to build up, involving massive investments of time, money and effort. The cost of letting them collapse is far greater than supporting them through the crisis. They also of course have a responsibility to support their workforce, local communities and partners through these difficult times.

Helping businesses survive the crisis is one element, but for the longer term we also have to look at areas that provide future resilience. Education and digitalisation are key to this. Young people and their education are key to a society’s fortunes, but it’s always one of the first places that cutbacks are made when the going gets tough.

With schooling and university now largely being held online, poverty has become a greater predictor than ever of success, as good access to the Internet becomes a necessity. The rapid digitalisation of our economies likewise means that those countries, businesses, and workers with poor connectivity will struggle to keep up. Investment in both these areas will be absolutely essential to a durable recovery. With the Yerzhan Tatishev Foundation, focusing on tech and innovation, and the High Tech Academy I have tried to make my own modest contribution to this effort.

This pandemic is a crisis of a scale not seen in recent memory. Mitigating its impact will require an equally unprecedented level of cooperation between stakeholders across our society. Beyond providing vital support to businesses, we have to look to our long-term resilience and growth, through education and digitalization. This pandemic will be with us for some time now. There will be other crises ahead. Are we ready for them?

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Commission approves German scheme to compensate accommodation providers in the field of child and youth education for damages suffered due to the coronavirus outbreak

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The European Commission approved, under EU state aid rules, a German scheme to compensate accommodation providers for child and youth education for the loss of revenue caused by the coronavirus outbreak. The public support will take the form of direct grants. The scheme will compensate up to 60% of the loss of revenues incurred by eligible beneficiaries in the period between the beginning of the lockdown (which started on different dates across the regional states) and 31 July 2020 when their accommodation facilities had to be closed due to the restrictive measures implemented in Germany.

When calculating the loss of revenue, any reductions in costs resulting from income generated during the lockdown and any possible financial aid granted or actually paid out by the state (and in particular granted under scheme SA.58464) or third parties to cope with the consequences of the coronavirus outbreak will be deducted. At the central government level, facilities eligible to apply will have at their disposal a budget of up to €75 million.

However, these funds are not earmarked exclusively for this scheme. In addition, regional authorities (at Länder or local level) may also make use of this scheme from the local budgets. In any event, the scheme ensures that the same eligible costs cannot be compensated twice by different administrative levels. The Commission assessed the measure under Article 107(2)(b) of the Treaty on the Functioning of the European Union, which enables the Commission to approve state aid measures granted by member states to compensate specific companies or specific sectors for the damages caused by exceptional occurrences, such as the coronavirus outbreak.

The Commission found that the German scheme will compensate damages that are directly linked to the coronavirus outbreak. It also found that the measure is proportionate, as the envisaged compensation does not exceed what is necessary to make good the damages. The Commission therefore concluded that the scheme is in line with EU state aid rules.

More information on actions taken by the Commission to address the economic impact of the coronavirus pandemic can be found here. The non-confidential version of the decision will be made available under the case number SA.59228 in the state aid register on the Commission's competition website.

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Commission approves Austrian measures to support rail freight and passenger operators affected by the coronavirus outbreak

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The European Commission has approved, under EU state aid rules, two Austrian measures supporting the rail freight sector and one measure supporting the rail passenger sector in the context of the coronavirus outbreak. The two measures supporting the rail freight sector will ensure increased public support to further encourage the shift of freight traffic from road to rail, and the third measure introduces temporary relief for rail operators providing passenger services on a commercial basis.

The Commission found that the measures are beneficial for the environment and for mobility as they support rail transport, which is less polluting than road transport, while also decreasing road congestion. The Commission also found that the measures are proportionate and necessary to achieve the objective pursued, namely to support the modal shift from road to rail whilst not leading to undue competition distortions. Finally, the waiver of infrastructure access charges provided for in the second and third measures described above is in line with the recently adopted Regulation (EU) 2020/1429.

This Regulation allows and encourages member states to temporarily authorize the reduction, waiver or deferral of charges for accessing rail infrastructure below direct costs. As a result, the Commission concluded that the measures comply with EU state aid rules, in particular the 2008 Commission Guidelines on state aid for railway undertakings (the Railway Guidelines).

Executive Vice President Margrethe Vestager, in charge of competition policy, said: “The measures approved today will enable the Austrian authorities to support not only rail freight transport operators, but also commercial passenger operators in the context of the coronavirus outbreak. This will contribute to maintaining their competitiveness compared to other modes of transport, in line with the EU Green Deal objective. We continue working with all member states to ensure that national support measures can be put in place as quickly and effectively as possible, in line with EU rules.”

The full press release is available online

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Commission approves €5.5 million Estonian scheme to support companies active in tourism sector affected by coronavirus outbreak

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The European Commission has approved a €5.5 million Estonian scheme to support companies active in the tourism sector affected by the coronavirus outbreak. The measure was approved under the State aid Temporary Framework. The public support will take the form of direct grants and will be open to accommodation providers, travel agencies, tourism attraction operators, tourism service providers, international coach service providers, conference organizers and tourist guides.

The purpose of the measure is to mitigate the sudden liquidity shortages that these companies are facing because of the restrictive measures imposed by the government to limit the spread of the virus. The Commission found that the Estonian measure is in line with the conditions set out in the Temporary Framework. In particular, the support (i) will not exceed €800,000 per company; and (ii) will be granted no later than 30 June 2021.

The Commission concluded that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a member state, in line with Article 107(3)(b) TFEU and the conditions of the Temporary Framework. On this basis, the Commission approved the measure under EU state aid rules. More information on the Temporary Framework and other actions taken by the Commission to address the economic impact of the coronavirus pandemic can be found here.

The non-confidential version of the decision will be made available under the case number SA.59338 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved. 

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