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Bucharest
January 25, 2021
BUSINESS

EC: Administrative burden remains substantial for business environment

Romania’s declining competitiveness reflects the fact that major changes to improve the business environment have been postponed. As a result, the administrative burden remains substantial, European Commission ‘Competitiveness report 2013’ reveals. “Comprehensive and effective efforts to foster structural change towards a more knowledge-intensive economy need to be implemented to improve the situation. Similarly, considerable efforts would be needed to ensure that Romania is able to implement its commitments aimed at enhancing the independence of the judiciary.” the document notes.
Romania is classified as a modest innovator according to the Innovation Union Scoreboard 2011, with a performance well below the EU average (24 out of 27 EU Member States), European Commission Competitiveness report 2013 reveals. “Still its growth rate makes Romania one of the growth leaders in the‘catching–up’group of countries. This situation is due to a large extent to chronically low public and private R&D and innovation expenditures”, the document shows. At the same time, innovation and industrial policies are not coordinated and integrated due to the absence of national strategies as well as to the insufficient cooperation and consultation at inter-institutional level between the institutions responsible for policy design and implementation in these fields
To improve its competitiveness, Romania faces the challenge of setting and implementing national strategies for industry and innovation defining clear, coherent and coordinated policies and priorities, and refocusing the scattered national resources on areas of comparative scientific and economic advantage. Further, an effective reform of the public administration at central and local levels would be essential since weak administrative capacity limits reforms, hinders the absorption of EU funds and is dissuasive for investors. Moreover, transparency in decision making processes and greater accountability in financial and political institutions are essential cross-cutting issues to consider.
At the same time, it is important to improve the governance in the area of business environment and the quality of regulations. Mitigating further the high financing costs and overcoming the scarcity of credit, including through developing strong and liquid local capital markets are of particular importance to facilitate access to finance for businesses. Furthermore, developing the weak transport and communication infrastructure would be critical to improving competitiveness and attracting investments.
In the long term, the challenge will be to ensure a paradigm shift away from unskilled labour and energy intensive sectors towards more smart, low-carbon and resource-efficient activities.

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