You have been assisting foreign investors for over 15 years in Romania as a business attorney. What is their perception of the situation in Romania?
Investors’ perception of Romania is reflected upon the high volume of investments and is directly linked to the level of commitment, to the objective of the investments project carried out: buying or selling assets in the form of M&A, greenfield investments, capital increase or financial restructuring.
If we talk about the period between 2007 and 2017, the total volume of foreign investments in Romania soared from EUR 4.2 billion to EUR 7.5 billion. In terms of their nature and as far as their impact on the local economy is concerned, one can notice that greenfield investments, which are the most profitable on the long run, remain at a relatively steady level and do not have a leading position. One must look for the cause in the very ways investors perceive the general economic and social environment in the country, i.e. how they evaluate price stability, budgetary deficit, indebtedness, exchange rate fluctuation, competitiveness, but also how they evaluate the political and tax and legislative stability, the degree of development of the transport and communications infrastructure.
Finally, investors look closely at what is happening on the labor market, its dimensions, the education level, the working population or the wage level, the work/capital ratio, productivity.
This provides a better understanding of the reasons why foreign investments do not increase as much as the opportunities and needs of the Romanian economy. Romania is compared with other countries in the region and decisions are taken accordingly.
What does Romania need to do to attract more investments?
First of all, we should proceed from the assumption that Romania needs foreign investors that do not only come with capital, but also with know-how, with resources for development that the local economy does not posses. They can embody Romania in the global economic chain. Then, referring to what should be done, I would say that first of all the issues that keep investors at distance such as: corruption, lack of infrastructure, tax and legislative unpredictability must be solved. Investors choose business-friendly areas.
Then, it is urgent that authorities come up with extensive public investment projects, to provide a long-term development vision. At the beginning of this year, a list of large projects that are supposed to be implemented in PPP was published in the Official Gazette. It is a good thing. The PPP legislation was improved, public procurement laws have been aligned with European regulations, but unfortunately too few concrete steps were taken since the publication of that list (only two projects have been launched).
Under the changing world economy’s paradigm, the future is closely linked to innovation and technologic development.
Romania has to look more towards the future, and for that, it needs to enhance and develop its legal framework in order to increase the attractiveness for investments in the high technology industry, for instance. Romania does not need to invent the wheel in order to complete this step, but to adopt models, to fight for greater European convergence, which remains our sole chance.
Finally, I would point out the need for a new approach in the authority – investor relationship. Central and local authorities in the administrative or control area should be educated to collaborate with the investors, be they national or international. Through education, I mainly understand a higher degree of professionalization of the management authorities, in particular, and larger transparency in the decisional act, dialogue, consultation in taking / amending of any decision impacting an economic sector.
Regarding of models, can Netherlands be a model for Romania, given your involvement in the leading of the Netherlands Romanian Chamber of Commerce?
I would say one of the best ! Besides the fact that Netherlands is the major foreign investor in Romania, it is also one of the European champions in innovation, dynamic economic environment, and the list can go on.
I would start from some statistical data. It is the sixth economic power within the Euro Area, Europe’s first maritime shipping service provider, the world’s second largest exporter of agricultural products, after the USA. And, perhaps even more important, Netherlands ranks second in the Global Innovation Index among 136 states, especially through its regarding market management, information and communication technology.
The Netherlands also stands out as one of the first 25 global economies due to its achievements in point of education, attraction and capitalization of knowledge or the digital creativity of the economic actors. Here are some future directions towards which Romania could direct its efforts and where it could use the Dutch know-how.
The Dutch development model is characterized by international openness, technological innovation and absence of restrictions in attracting foreign capital. Due to its tradition in innovation and to its exceptional digital infrastructure, Netherlands hosts one of the largest start-up ecosystems in Europe. It deserves the name of Sillicon Valley of Europe. For instance, only in Utrecht there are about 400 start-ups that benefit from resources provided by local communities. Amsterdam has one of the best European accelerators, such as Startupbootcamp and Rockstart, but it also hosts other very dynamic companies such as Uber or Google. The High-Tech Centre Holst in Eindhoven is, as some say, the smartest square kilometer in Europe.
And let’s not forget that although it is a country of small dimensions (41,526 km²) and with a population slightly surpassing 16 million, the Netherlands capitalizes the potential that it has especially in sectors such as manufacturing industry, chemical industry, electronic industry, agriculture at full extent.
What would be the Romanian business market evolution for the next period?
That’s very difficult to estimate, but the evolution of business will depend on domestic conditions, world economic trends, and strategic moves by our neighbors and our competitors in attracting foreign investments. There are countless unknown variables for the moment that make me be quite reserved (Brexit, the EU-US trade agreement, the Euro-parliamentary and presidential elections in Romania). Romania had an economic growth that exceeded the European average in previous years, and it is likely that figures will help the country be again in the top of economic growth in 2019. Up until, the estimation is of 4.1% of the GDP. There are still growing resources, including for maintaining a positive trend of investments, but somehow the investment environment is under pressure in both Romania and Europe. Projects that have been developed during the last year in Romania were numerous, but only a few were extensive. From our experience, the companies in industry, IT, logistics or telecommunications take into account investments projects, but they blame the unpredictability of the legislative framework that repeatedly causes surprises.