A modern government

We have a modern government that is in line with the ‘trend.’ Premier Emil Boc poses while mowing or using the fillister in order to show us he is accustomed with manual labour. Going from manual labour to Premier’s labour he picks on the press moguls, treading the path opened by current President Traian Basescu, former leader of the party now led by Emil Boc. Education Minister Daniel Funeriu is proudly posing with the new draft education law, a controversial law that is riddled with grammar errors, according to education trade unions. Mrs. Elena Udrea, the tourism minister, posed in a carriage, on a horse, at a ‘tuica’ and ‘sarmale’ festival and on who knows what fashion festival stage. Finance Minister Sebastian Vladescu hired two showbiz people – singer Dan Bitman and showman Andrei Gheorghe – in an effort to no longer have his ministry perceived as a scarecrow. Meanwhile Gheorghe left the ministry but no PR changes were felt. Other ministers either fight against each other or remain anchored in a certain moment in space and time, for the public. After the incident in Craiova – when a driver attacked an elderly pedestrian that subsequently died in hospital because of a heart attack – Internal Affairs Minister Vasile Blaga found no other answer but that the prosecutor and not the police is at fault for the absence of any measures. Economy Minister Adriean Videanu is no longer dealing with curb stones like he did while he was mayor of Bucharest; on the other hand he built a house on the bank of Snagov Lake, on a plot of land that he obtained from the nearby Church! Labour Minister Mihai Seitan and Defence Minister Gabriel Oprea argue over the pension law for soldiers, while Justice Minister Catalin Predoiu forgets the grade that the European Commission gave to Romanian justice system; rows in the justice system are growing every day and he launches for public debate a law on speeding up trial procedures.


Do any of the things above have anything to do with economic relaunch? Most of them no, some indirectly. The certain thing is that the government seems far too little preoccupied with economic problems although trade unions are protesting increasingly often and the economic recovery we are waiting for is left in abeyance. Just the other day, IMF representative Jeffrey Franks said in an interview that this year’s economic growth won’t surpass 1 per cent, with a GDP growth of 0.8 per cent set to be reported in the second semester.


But the government is not at all inclined to back private companies, the engine of any market economy, while reducing public investments to a minimum. On the other hand, it moves towards further taxing companies and citizens, something that is not liable to stimulate recovery. Education and pension laws are important but weren’t there more pressing issues to consider at the height of the crisis? Some companies actually suffer because the state reimburses their VAT after months of delays, others because last year’s debts were not paid by the state. But the government actually considers taking measures in this regard: changing the fiscal procedure code. On one hand, the draft emergency ordinance stipulates cutting the interest on delayed payment of debts owed to the state from 0.1 to 0.05 per cent, while on the other hand introducing penalties of 5 per cent and 15 per cent respectively for delays in the payment of the said interest. In other words, companies will pay both the interest on delayed payment and a penalty for its delayed payment. Consequently, SME representatives claim that if public authorities delay the reimbursement of VAT and fees or the payment of public acquisition contracts they should pay interests and penalties identical to those paid by companies when delaying the payment of sums owed to the state.


This is only an example of how things that can be simple are rendered complicated. Under the guise of reducing taxes, the government wants to take even more money from companies at a time when few of them are able to operate at satisfying capacity. The introduction of the minimum tax, which according to calculations of SME representatives will in some cases surpass by far the 16 per cent level if the calculation formula proposed by the Finance Ministry is respected, thus reaching a level of 28 per cent of gross revenues, is part of this ‘trend.’


Bureaucracy is added to the ‘tempestuous’ actions, a bureaucracy that often chokes the business environment and local businesses. Foreign investments are dropping (EUR 4.89 bln in 2009, half the value registered in 2008) and the relative political and economic instability is also reflected in the way companies act. “As a businessman I can say that I am helped not only by a relaxed fiscal system, but also by a stable environment in which the government won’t change the legal framework overnight by issuing an ordinance. In Romania the business environment is permanently kept in a state of nervousness,” Cezar Coraci, president of UGIR 1903 employers’ association, recently said.


In this context we shouldn’t be surprised by the way small companies react. Nevertheless, the fact that around 2,500 companies were recently registered by Romanians in Bulgaria is worrisome. According to the Romanian-Bulgarian Chamber of Commerce, quoted by ‘Saptamana Financiara,’ most of the SMEs that “left” for the neighbouring country are active in commerce and processing industry domains. What draws them to Bulgaria? On the one hand, the lower profit tax (10 per cent as against 16 per cent here), the tax on dividends (5 per cent), the rent, labour and services which are cheaper than in Romania. Last but not least, bureaucracy (the time needed to register a company is incomparably smaller than here) and the financial resources needed: the minimum capital needed to register a company – only EUR 6! With EUR 400 one can cover all the taxes needed to register the company, the aforementioned publication writes. Moreover, state authorities reimburse VAT much faster.


It seems that the Emil Boc Government is not aware of regional competition for investments, with the bill growing for companies and then for citizens. Before 1989, we were watching films and sport on Bulgarian television. Now many Romanian tourists prefer the Bulgarian seaside to the Romanian one. Tomorrow we risk relocating our businesses there, then our homes…


It is obviously an exaggeration, with the neighbouring country’s overall economic situation being comparable to that of Romania and thus not in the position to change economic developments at macro level. Still, an alarm signal should be pulled. Instead of posing with a scythe or on stage, the Romanian government and ministers, albeit animated by the modern spirit, should also offer pragmatic alternatives to current hardships.