Romania is on the right track


Interview with H.E. Mr. Matthijs van Bonzel, the Netherlands Ambassador to Bucharest.

The Netherlands celebrates |King’s Day this year on April 26. How important is monarchy nowadays to the Dutch people? Do you think monarchy could be considered a warrantor for good democracy these days?
In the Netherlands we think by large majority that a constitutional monarchy is the right system to live in. The Monarchy is a symbol of unity, of stability of the country. The monarch does not play a large political role, but mostly an emotional role for the population. For example, if a disaster takes place, the King will go there to comfort the affected families. If there is something to celebrate, like winning Olympic medals or a successful football team, then the team will be received by the King. When there is a change of government, the new government takes its oath of allegiance in front of the King. The role of the King in the making of the Government has changed a bit over time. These things go gradually; slow evolution is the key of stability as such. On the other hand, the celebration of the National Day is a very popular and informal party throughout the country. So no parades, but everywhere you will find flea markets, music, dance performances, and streets colored orange, as the symbol of the royal family, with decorations and people wearing orange items.
How would you describe the bilateral relations between Romania and the Netherlands in the past year?
I am optimistic about two things that I think are most important and inter-related:  one is the economy and the other is the rule of law. Our cooperation in both these  fields increases and Romania is getting more and more integrated into the European Union. This integration is important, Romania still has a few things to improve, things described in the CVM report: modern laws, efficient unbiased justice, anti-corruption. They must be achieved the sooner the better for the country to be a stable, attractive economy, to do justice to the society, to give Romanians incentives to invest in their own country, to promote foreign investments, to attract non-reimbursable funds. These things go together.

Are there any high-level bilateral visits this year?
We had Dutch Foreign minister Frans Timmermans in Romania in February at the invitation of the Romanian counterpart, Titus Corlatean. Now we will have our minister of Foreign Trade and Development, Lilianne Ploumen coming on April 22-23 with a large trade delegation. In May we expect incoming visits of two Dutch parliamentary committees. One to Moldova and one to Bucharest. So, we have a high season.
Giving the fact you frequently voiced against corruption acts in Romania, how do you see now the authorities fight against this real rod? All those public persons lately prosecuted for corruption are for real or are just authorities’ speed actions to be exemplified for the next Cooperation and Verification Mechanism report?
It was about time, these are necessary measures to be taken to catch up in the fields of rule of law, efficient justice and the fight against corruption. They are essential measures that should have been taken before 2007. They were promised again in 2007, and are as relevant today in 2014. These reforms are essential for Romania’s well-being in the EU, for Romania’s economy to grow, for the public sector to become efficient and transparent, for Romanian citizens to improve their well-being and civil rights. I am encouraged. Now we see reforms are catching up, the justice sector is becoming more professional, more resistant and independent vis-à-vis executive and legislative. The anti-corruption fight is gaining more substance. This is the progress that we should all appreciate, Romanians and Europeans. Indeed, Dutch Parliament attaches high importance to these points. We say: ‘Let Romania first and foremost implement what it promised in 2007, and needs to implement in order to fit into the European economy, and in the European house as it was meant to be. Once there, with those reforms done, it is the right moment to consider further phases of integration, like Schengen or European Monetary Union. It is of crucial importance for Romania to catch up with these things. You cannot be member of a club, jump over the membership requirements and then ask for something new. OK, if you want something new, first finish what you have to do in the 1st place as a member. Now look: Romania is catching up. The most important thing is that the market economy will flourish if the rules are there, if the rules are being applied, if the government follows the necessary steps. That is the most important thing to watch: are Romanians investing, are tourists spending, are foreign investors coming, are all of them creating new jobs? Do people pay taxes, enabling the state to spend money on infrastructure, on health, on education? All that follows from the fact that private people work to set up a business and create jobs. For that you need stability of laws, of justice, of efficient and clean governance.
The problem is that some investors do not pay taxes, and that some taxes are not collected. The easy approach is to say “oh, then we increase VAT another percent”.   What happens  is that those who pay taxes will have to pay even more, so they will be less inclined to invest and spend. But those who were already used to avoid paying taxes will keep avoiding that, at an even higher premium. So the most important thing  for a government to do is to make sure that everybody who has to pay taxes, pays taxes. For that you need – again – laws, justice, non-corruption.  And a loyal and qualified public service. The state has to employ incorruptible,  qualitative, high-paid staff. They have to have a good salary because those people are important, they guard the framework of the country. All this should be interesting  for the media too, I would think. It is important that the media addresses these issues.
I was pretty stunned when I got here and saw that the basic laws were not in force yet: Criminal Code, Civil Code, Civil Procedure Code and Criminal Procedure Code. Now they are there, they have been enacted. Now they have to be implemented, which is a huge task for judges and prosecutors. Romania is on the right track, we see that it is going in the right direction, but we are just a little bit impatient, and we want to help. Why? Because it is in everyone’s interest. The market economy is a win-win phenomenon. An example: the Dutch don’t only want to sell flowers to Romania, we would rather see Romania produce itself, to add its flowers to the world market. We support that. If a Romanian enterprise does start producing and exporting flowers, it will sooner or later want to buy some Dutch greenhouse technology, seeds, marketing knowledge, or logistics. So we all benefit. There are numerous win-win business alliances possible. For us it would be wonderful if Romania starts exporting more. There are already good examples, such as ships from Damen Shipyard Galati or cars from Dacia.
The real issue is a strong rule of law as precondition for becoming a flourishing market economy. It will benefit the Romanian economy and improve the lives of the Romanian people. In the end, that is what matters.
You support the idea that Romania must undertake the promised Justice reforms if it wants to attract big investments. Yet, the Netherlands has topped the list of foreign investors in Romania over the last 14 years. Do you mean is it room for more Dutch important investments? Could you give us the last figures of 2013 in terms of bilateral volume trade?
We exported to Romania EUR 1, 8 bln in goods last year, and imported for around EUR 1, 2 bln. One should add the growing sectors of movement of services, capital, and workers. They are more difficult to track in statistics. Romania provides more and more services abroad, like software, computer-based design, and consultancy. It is the same for us. So, goods are just one asset.
Yes, Dutch investors see a lot of plusses coming to Romania, but they also encounter the minuses. For example, Company X sets up a logistics business here in Romania, but they run into problems with VAT reimbursement by the tax authorities. They ask for the VAT to be reimbursed again and again and ask themselves “why don’t we get the money back?” For 25 per cent over cash flow is a lot of money for small enterprises. Sometimes the answer from authorities is that “oh, in the chain, somewhere, another company was cheating or is being investigated so we have to stop the whole VAT chain”. But like this, all the others suffer, not only the company that is possibly guilty. Faced with this problem, Company X approaches the embassy. We suggest them to go to a lawyer. But indeed, if the lawyer agrees to help, it results in a lawsuit lasting two, three, four, five years. That is killing for business. It makes that a company will say ‘well, we won’t invest more in Romania; we’ll go to Hungary or elsewhere’.  Other companies may say ‘ok, I will suffer from it, I will stay but I am not going to expand’. Both answers turn out very bad for Romania’s economy. We know such cases from our 4,000 companies based here. Romania would face enormous progress if these things improved. So we try to help justice to become more efficient, and talk to all involved to help to speed up tax and customs procedures. The new Codes will definitely help, for example with the consideration to install new specialized commercial courts. I am very happy that in the new period for EU funding, Romania requested to acquire funds for justice infrastructure and for judges’ training.  There was no money for justice in the last period, merely for highways. But in the EU we cannot expect highways, ports and railroads unless the judicial system and public procurement procedures function up EU-level.
Coming back to your question, we certainly see promising sectors Dutch companies are interested in, such as agriculture, logistics, high-tech and software. There again we face the need to see both the economy and the law develop, hand-in-hand. Take  agriculture. Romania is a big country. Around Bucharest the land is flat, fertile and accessible. Modernization depends to a large extent both on infrastructure and on legality like a good functioning cadaster. First, if the cadaster functions, farmers can go to the bank, get a loan and start investing in production. Second, the infrastructure of agriculture has to be re-established. The old irrigation systems of the communist times are broken, they have to be changed, so much the more with the climate changing, resulting in floods and droughts. A third need is greenhouses. For instance, the famous Romanian tomatoes, very tasty, all come in the market in the same season, so prices go down and nobody makes a good profit. But if we have green houses, and cool storage, and logistics, farmers can start producing and selling both earlier, as well as later in the year. Consumers will have more months of fresh Romanian tomatoes, prices will not rock-bottom, and, important also: Romanian producers can start to consider exporting.
Predictability is a core issue for private enterprise. Laws and tax policy need to be clear, in order for them to invest ahead. To achieve that, government and business have to understand each other, talk, exchange ideas, in a structural way. I applaud that recently the Ponta-government set up such a structured dialogue with private enterprise. This dialogue, the so-called Coalitia, shows the way ahead.
You warned Romania still faces challenges also when it comes to topics such as health and family planning. What do you think is the reason for that? Apart from negative facts, what do you think are Romania’s strong points that could bring us economic and social growth benefits?
Romania is evolving from a state-managed communist system into a Western free market system. The old system is not capable to cope with the situation it faces nowadays. Romania will have to reform its health system to a system that enables more private investment, private incentives to function. Systems in other western countries are not perfect either. People should not think the ideal health system exists. But it’s very good to look at other countries, to compare and to ask for their good and bad experiences. We are 28 in the EU, we make studies in health, education, and we compare our systems in detail, so we can learn from each other. It is important that, as a country, you open up, you look at the neighbors and ask ‘let me see how you are doing this’. This helps to identify the fields in which countries need more development and also to identify its potential. Romanians and Dutch share ‘educational secrets’, such as subtitling TV programs. That’s why Romanians and Dutch understand and speak easily many foreign languages. And to speak more than one language is very important; it is an asset we both share, that will help us get around in our European Union without borders. Romanians are very good in English. Especially in the IT industry and the services sector this language skill combined with sound investment in education and especially technical education will create a huge comparative advantage. Talking about technical skills, this is what Romania traditionally can offer: a very competitive background, having good technical, engineering universities. That is an asset. It should be a national priority to focus on technology. Modern agriculture is technology, a key field. Agricultural universities should research more new modern technologies. Our Agricultural University Wageningen receives Romanian students and researchers. They will bring new technology and expertise back home; meet fertile grounds and hopefully a receptive business environment as discussed.
Another example. There are many elegant spas in Romania, with beautiful old hotels, very scenic landscapes, hot waters. You could establish in these spas sanatoria and other institutions that promote medical tourism. It would contribute to the development of the country. Romania has this potential, especially in the areas of those spas. Romanian doctors are everywhere: in France, in Germany and the Netherlands. They speak the languages, know the customers. I think many of them would love to return to Romania, for their family, for their nation. If they find a good investment climate here, legal security, justice, tax transparency, they’ll do it. I know the Government also sees this opportunity; it would enormously help promote Romania as a tourist attraction and as a medical tourism destination, as it would be a very interesting way of earning money and foreigners visiting your country. You have to develop that, and to encourage tourism. Public campaigns may not be so efficient; you have to promote private initiative.
Another example. The economic crisis in the EU was rather an opportunity for Romania. A country that is relatively cheap can attract companies to invest, especially companies that suffer from prices elsewhere and lose competitiveness as a result. Such companies look for other countries to settle. Romania is among those other countries, competes with them. So together with the Netherlands-Romanian Chamber of Commerce my Embassy made a Guide in which we inform investors about Romania and tell them “You don’t have to go to India or China, come to Romania!” Of course, there are hurdles for those companies – we discussed them – but we will try to help companies and Romanian authorities to tackle them. So it is a common business. Romania and the Netherlands develop better as partners if we promote such investments together. It is fun working together. We see results, we see society evolving, we will get there.

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