Sovereign Fund gets legal base. Details announced by Minister Teodorovici

The Government adopted on Thursday the ordinance that provides for the general framework for the establishment of a Sovereign Fund.

Later, after new talks with ALDE coalition partners, Social Democrats will also impose a government decision to establish the famous Sovereign Development and Investment Fund, one of the priorities from the government program drafted by Darius Valcov.

Prime Minister Viorica Dancila announced at the beginning of the meeting at Victoria Palace that this „financial instrument for supporting Romania’s economic development” is needed.

Minister Eugen Teodorovici: The Fund can sell companies from portfolio on the Stock Exchange

The Finance Minister explained on Thursday that the companies from the Sovereign Fund could be listed and sold on the Stock Exchange in a proportion of over 51%. The state will have only two representatives out of nine in the Fund’s management and its governance will be ensured based on the OUG on corporate governance.

The main remarks made by the Minister of Finance:

• The purpose of the Fund is not the privatization of companies. The fund will be active in PPP participations and will help the financing of start-ups, increase companies’ competitiveness, create jobs, develop human capital, etc.
• OUG 109 provisions on companies’ corporate governance will be followed.
• It will be possible to sell more than 51% of the companies’ capital by listing them, without an upper limit, as this is the practice for other funds and to demonstrate to EU authorities that there are no bureaucratic limitations created by the state.
• The companies that will be included in the Fund will be decided next week. The state had only two representatives of the nine members of the Sovereign Fund’s management.
• Viorica Dancila stressed that there will be projects implemented including by public-private partnerships.

„Such a development model, successfully applied in other countries, brings benefits at several levels, by profitable investments and supporting projects in priority areas. By establishing sovereign development and investment funds we aim at creating some vehicles of financial investment and intermediation, shares or participations in profitable projects or companies, a segment that currently is not covered by the financial market in Romania, which, on the one hand, would have a multiplier role in the economy, for a sustainable development and, on the other hand, would stimulate, mobilize available financial resources toward the real sector and, at the same time, toward profitable projects. The activity of the fund will support development areas and activities such as: financing Romanian companies of a strategic importance, investments in manufacturing industry, investments in infrastructure projects, increasing Romanian economy’s competitiveness, pursuing the energy strategy, capital markets. There are large-scale projects that we can develop together with other institutional or private investors, including by participating in public-private partnerships, as we have committed within the government program,” Viorica Dancila said on Thursday.

On Tuesday, Finance Minister Eugen Teodorovici said the draft Emergency Ordinance on the Establishment of the Sovereign Development and Investment Fund has received all the necessary approvals. He said that after the adoption of the OUG, new talks will take place within the coalition, with ALDE, on the list of companies that will be included in the sovereign fund.

On 10 November, the Finance Ministry launched for the public debate the framework draft for the establishment of sovereign funds and invoked „an extraordinary situation whose regulation cannot be postponed, as immediate actions need to be taken by the means of emergency ordinance.”

PSD President Liviu Dragnea announced on November 3, after hours of talks with ALDE leaders, that the ordinance for the establishment of the Sovereign Fund „will be adopted in the first government meeting”.

In July, the Constitutional Court upheld all the objections raised by the opposition and President Klaus Iohannis on the Law on the establishment of the sovereign development and investment fund, issued by the Parliament and stated that such a Fund should be established by government decision.

The draft approved by the Parliament indicated that 33 large state-owned companies and a capital injection of RON 9 billion are to be managed by an institution whose leaders will be appointed by the Government.