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de Victor Bratu 27.3.2017
Four hours of discussions, seven business representatives, two economic analysts, four officials. 21 March 21 2017 (details – LINK_HERE) – the year when Romania started to realize that it spent the last 15 years importing consumer goods and commonly used raw materials which it should produce by itself if it wishes to further count on the European economic map. It should do that – for tens, perhaps hundreds of reasons.
There are industries that have died, sectors that have atrophied, while confusion and incoherence in development have placed companies with their backs against the wall. All that while nothing has been created or grew instead.
The discussions of the conference outlined eight big problems to which decision-makers, the business environment and its representatives should find solutions. And economic policies.
* Production chains were broken in whole sectors and manufacturing companies have come to import up to 90% of the raw materials. Which 15-20 years ago they found available in the country.
* There is no reliable network of Romanian commercial attaches in the big markets, and exports are supported by sporadic and inefficient efforts in the country. That happens unlike the countries that are the source of the highest trade deficit for us: Poland, Hungary, the Czech Republic.
* The state’s attitude toward the manufacturing companies is most often hostile: the supervisory institutions still see the manufacturing entrepreneurs as potential criminals and force the laws. Added to this, the central or local bureaucracy, or, in most cases, both of them.
* Although a significant part of the problems hindering the efficiency of the businesses active in the manufacturing field are related to the local administration, the local administration is indifferent, when not hostile: creating industrial parks would be a chance for the specific problems from the manufacturing field (much more complex than those of the retail or services sectors) to be solved at least in the matter of taxes, access to utilities, access to the minimum infrastructure.
* The economic policies provide absolutely no coherent support measure for the internationalization of Romanian producers’ activity.
* There is absolutely no concern for protecting the strategic areas of the economy. If there were any, those appointed to make policies would notice that in some years, the chemical industry, for example, generated 90% of the trade deficit. And that is happening in a country having resources available.
* Added to that, the two “basic” requirements that a state having a responsible leadership make available to the business environment: a future-oriented education, with its research arm from which the added value is expected. The workforce has already become a bigger problem than money.
And, of course, the infrastructure.
Without them, the business environment slips through and improvise.
Below are some ideas of the conference speakers.
We should mention that the problems listed during the conference will be taken over in the coming weeks by a project team that will transfer them to the Parliament, then from the Parliament to the Government and then move them back. They will circulate them until finding the concrete solutions.
Mircea Turdean: production chains are broken, what we used to buy from Oltchim we buy now 3 times more expensive from Germany and Hungary
Mircea Turdean, CEO of Farmec, points out that there are no longer available in the country the raw materials that industry uses. Consequently, “we support the foreign production, not the local one” – said the head of Farmec SA.
The General Manager of Farmec called, paradoxically, not for getting help, but for the state, if not to grow, at least to help what’s left of the chemical industry survive.
“Of the 21 chemical plants that Romania had, 15 closed. Without the support of the state, they have no chance, and the rest may also disappear,” warns Mircea Turdean. For Farmec, but also for other cosmetics manufacturers, the local chemical industry is important – the raw materials that could have been purchased from the country are now imported.
According to Mircea Turdean, 90% of the raw materials for Farmec are from imports.
“I wish that what happened to others to not happen to Oltchim as well. We also manufacture dry cleaning products and bought the raw materials from Oltchim. Today we cannot do that any longer, but we buy from Germany or Hungary, more expensive products. Before the 90s, the state had strategic enterprises today do not have it. If falls Oltchim, a gămadă business will have problems ….” said Mircea Turdean.
Mihai Daraban, CCIR: System of Romanian commercial attachés in major European capitals should be urgently reset
Mihai Daraban, President of CCIR, believes that Romania has lost the competitive advantage related to the skilled workforce, having been left for now with the advantage of the relatively low labour cost.
Mihai Daraban believes that the Government should not be focused anymore on the public sector, but on the business environment. And a problem that the business environment faces is workforce quality because, the president of CCIR says, “education and economy are, unfortunately, two parallel lines.”
Mihai Daraban repeated Tuesday an older remark of his: 150,000 companies in Romania are not found in the tax system. “The Trade Register tells us today that we have 810,000 active businesses, but we have 660,000 balance sheets filed. The situation is repeating year after year and there are 150,000 companies not found in tax system,” says Mihai Daraban.
The President of CCIR has also warned on a matter of foreign economic relations, an area where the state does not help the local companies. Moreover, Mihai Daraban expressed his hope that the business environment will be consulted regarding a sensitive area, “We should also have a say when the commercial attachés are appointed – the offices of the embassies all over the world are full, but we not exist in terms of economic representation. We need to reset the system of the economic attachés who should work for the private sector, not for the state. Today we have a dramatic situation – the economic representatives are not compatible with the Romanian realities. ”
Ionut Dumitru: There is no such thing as self-financed tax cuts. If we had Bulgaria’s budget revenues, we would have budget surplus
Ionut Dumitru, Chairman of the Fiscal Council, has nothing against the fiscal easing, but he believes that it “should be closely analysed”.
“We focused on tax cuts, but most of the cut is on the tax on labour. The income tax is low and in terms of VAT we are among the states with the lowest rate – we move from one extreme to the other. If we want a sustainable growth in the long run, then we should give money to education, health, investment. But we have the lowest allocations in the EU to these areas and, besides, the investments have quantitatively halved,” said Ionut Dumitru.
“The budget deficit in Romania started to grow again, after it has been decreasing for a long time. Now, according to the forecast of the European Commission, Romania is to have the highest deficit in Europe – 3.6%. We are also talking about tax revenues collected in 2017 of only 25.4% of GDP, according to the EC’s forecast, compared to a European average of 40%. What European country we are talking about when the gap between us and the European average is 15% of GDP?,” said Ionut Dumitru.
According to him, Bulgaria performs better at collecting the revenues.
“Imagine that if Romania had Bulgaria’s revenues, it would have a budget surplus. The budget revenues that we have reached are at a historically low. In the recent years, we had a massive decrease in the tax revenues. The fiscal easing cost us 2% of GDP. There is no such thing as self-financed tax cuts. This is an illusion, there is no such thing,” said the Chairman of the Fiscal Council.
Given the discussions about the two-speed Europe, Ionut Dumitru also urged: we should see how many speeds we have in Romania. “Most counties become impoverished, there are very few counties having convergence to the national average. Covasna is the most sensitive, it is becoming the poorest county. Population is decreasing very sharply – in some counties we have lost 20% of the population since 2002. All these take their toll on the business environment.” says Ionut Dumitru.
Grigore Filip, CEO of Aerostar SA, believes that the gap between the Romanian economy and productive economies can be closed by the large companies, provided they get support from the state. The head of Aerostar says that the most important help that could come from the state consists of an appropriate training for the graduates to have access to employment.
Grigore Filip believes that it should be stimulated the development of the large companies “that also push the small and medium companies forward“.
“A focus on developing the companies in Romania is necessary, as we also support the development of SMEs. I believe though that there are no sectoral policies for the large companies in Romania. And it does not even matter the capital, we all live in the same hostile environment… Of course, the fiscal predictability is a problem, but the workforce is a bigger problem. It is surprising to see how far the graduates are from our needs. How far they are even from the basic needs of the industry,” said the General Manager of Aerostar.
Grigore Filip: “The outcome of the Romanian education system is far from today’s technologies, let alone the future technologies. We spend a lot to train the people – this is Pepelea’s nail. Sadly, the biggest inertia we found in the education field, as the curriculum does not change.”
Daniel Stancescu – Adeplast: We worked with our polystyrene at a hospital in Austria and in Romania, at issue is whether to ban it
Daniel Stancescu, CEO of Adeplast SA, presents an unparalleled situation that the construction sector faces today: “All building materials are placed on the market under certain certifications issued every three years. This year, we are waiting for the approvals to be renewed, but the committee refuses to meet.”
The head of Adeplast also spoke about other problems that the industry faces. “I saw this year a draft on banning the polystyrene as insulation material. Others use it, in developed countries, and we try to eliminate it. Since 20 January I have been trying to start a dialogue, but the ministries give us no answer. What shall we do? We have invested millions of euros, we are not alone, and we witness now a unique initiative in Europe. We have recently completed works at a university hospital in Austria where we used our products….” says Mihai Stancescu.
And that is not all- “We were dismayed when the Ministry of Environment launched the Green House program that contains exclusivity conditions for the materials for which there is no production capacity in Romania.”
Also as an example, the CEO of Adeplast presented one more unparalleled situation: “In 2013, we invested more than 20 million in Roman town, to approach the markets of Ukraine and Republic of Moldova. Following what happened in Ukraine, we gave up this market and focused on the Republic of Moldova. We went to Eximbank and received worse conditions than if we would have approached other banks- as producers, we should also get support in this area“.
Ionut Misa, State Secretary at the Ministry of Finance, believes that Romania reached the point where “the politics should put aside all divergences and agree with the business environment on the directions for the next 10 years“.
The Secretary of State showed availability for dialogue: “It is clear that the Ministry of Finance can do more, we must understand the problems you face. We try to help by legislation, control and prevention. I know, we are not perfect, I always said that we should burry our head in the sand, we must be open to suggestions.”
Ionut Misa listed some things that the Government has already approved – incentives for the research/development activity, the change of the state aid system.
“There have been many discussions focused on the added value created in the economy and the fact that we are not yet able in Romania to create products with gross value added. We have been used as a consumer market, the focus was only on consumption and, from my personal point of view, this was not the best approach. Undoubtedly, consumption is important and can be an element of economic growth, but it should be accompanied by investment, supported by production, supplemented by many other economic measures. If we only focus on consumption and being a market for other countries like Poland, Hungary, the Czech Republic, we have no future,” said Ionut Misa.
According to the MFP official, if Romania remains anchored in the belief that its own labour market is the most competitive and qualified, it will stand to lose in the medium and long term.
“An analysis by the IMF and the National Bank made a comparison between the Romanian economy and the Polish, Czech and Hungarian economies. It also showed how and what elements influenced the differences between these markets. It analysed the relation with the exchange rate or the workforce productivity and competitiveness. That is true, we are no longer the labour market that we used to be. This thing should tell us something and we should rethink our entire strategy for the future. If we remain further anchored in the idea that we have the most competitive and qualified workforce and we should not worry, that everyone will come here, as they need us in the medium and long term, we will certainly stand to lose,” said the secretary of state.
Stefan Radu Oprea PSD Senator: Businesses should communicate with Parliament committees, this is where law fine-tuning takes place
Stefan Radu Oprea, Vice President of the Economic, Industries and Services Committee from the Senate, urges businesses to get involved in creating the legislation with economic impact.
“We need good and clear laws, I ask the businesses environment, please do not avoid the specialized committees. The fine-tuning of the laws takes place in the committees, and if you notice anything, come to the committees’ meetings, communicate the problems,” said the PSD Senator.
The PSD Senator tried to ensure that the Government takes into account the requirements of the businesses:
“There are three drivers of economic increase in the government program. We have investment planned. We have the Fund for Development on the agenda, which I see that also got the interest of the IMF and the World Bank. This fund will invest – for instance, in Prahova is lacking a collection centre for agricultural products, possibly linked to a cannery. It is possible to do that with co-financing, with EU funds. I also add the state aid grants, for which we change the granting philosophy. We allocate more than 2% of GDP, real money that can be accessed by the small, the medium and the large companies“, said Senator Stefan Radu Oprea.
The PSD Senator has also announced plans for supporting the domestic manufacturing industry: “I hope to modernize the technology used, for instance, in the defence industry. It is very important that we allocated 2% of GDP for the expenditure in defence, I suggest to also spend this money on the domestic market, to launch orders to the Romanian producers.”
Gabriel Biris, Partner of law firm Biris-Goran believes, after an experience of almost a year as Secretary of State at the Ministry of Finance, that a holistic approach of the Romanian economy’s problems, which involves decision and political will and transparency, cannot be obtained in Romania yet.
Instead, says Gabriel Biris, we should try to solve specific targeted problems, meaning to not attach “boulders” to the economy.
“We have a unique talent to create our own obstacles. There are many problems that we should not have. I call them boulders. Generally, they can be easily removed by targeted measures,” says Gabriel Biris.
Biris-Goran Partner gave some examples of ” boulders” that the state tied to the economy and then “wonders why it does not work”.
The first example: the “intent and capability” problem. Gabriel Biris refers to the internal regulations of ANAF that allows it to evakuate these things during the VAT registration procedure.
“Why do we assume by default that all are thieves? What are the criteria? They are set by OPANAF that are secret and, ironically, are modified. So, we try to meet criteria that we only guess. And we even wonder then that there are problems…” says Gabriel Biris.
The second example: “they knew or should have known” problem. This also refers to a practice of the tax authority that attracts the vicarious liability for the action of a different company than the one audited.
The third example: the fine for packaging applied to the producers although the waste collection system is not functional.
“There are dozens of boulders like these. We must identify the causes and eliminate them, not fix the effects,” says Gabriel Biris.
Minister Alexandru Petrescu: Public procurement framework is inappropriate for international fairs, we work on changing it
Alexandru Petrescu, Minister for Business Environment, Commerce and Entrepreneurship, considers that the productivity of Romanian business can be improved by following two directions:
- the internationalization
- support for the acquisition of technology
In both areas, Minister Petrescu promises major changes.
“The internationalization program is a program that I found in the ministry and allows the applicant to obtain up to 50,000 lei for creating the visual identity was, participating at the international fairs. It is part of the initiative for encouraging the small businesses. It will start in May. We are working on the logistics to make it feasible. It is a program that we combine with another one that addresses the micro-industrialisation, under which applicants can receive grants for investment in equipment. If the two programs converge we shall have a higher level of productivity. We should bring though several elements together: we are also talking about the education area, where we should increase the employee training level,” said Alexandru Petrescu.
Regarding the participation of the companies at the fairs and exhibitions, the minister admitted the existence of a big legal barrier in the field: the public procurement framework is totally inappropriate for participating at the international fairs.
“We have a totally inappropriate framework for the dynamics that the fairs have. We have 67 annual fairs and a too burdensome procedure – we have to use SEAP, to stay there 20 days… If we also get complaints, it is over … We come to fight between us. Am established a working committee, we invited representatives of ANAF, former ANRMAP to come up with a proposal to improve the way in which we can award contracts for services, to help these companies. We have the money, we have the intent, but we get stuck in the method of purchasing the services to support these companies. I gave the committee 10 days to come up with some proposals,” announced Minister Petrescu.
Virgil Popescu, PNL Chamber of Deputies member: If Oltchim is a strategic company, why not buy it ourselves through a state company?
Virgil Popescu, Vice President of the Committee for Industries and Services of the Chamber of Deputies, is convinced that one of the solutions for the economic recovery is to restore the manufacturing chain. Besides, the industries with high added value should have priority access to resources.
In his statement, the liberal MP reviewed some problems of the Romanian economy in terms of representing its interests at the international level. “The external representation network has quality problems, but also in terms of quantity, as there are not enough people. There is also a gap between the central and local levels- there are companies that are not aware of the support programs. Moreover, it seems that in many cases, participation at the international exhibitions are tourist activities. Why pay airline tickets and not organizing fair booths? I do not believe that we need intermediary companies to buy tickets and rent spaces for exhibitions. We should be the ones searching for the people, not let them blindly looking to find us,” said Virgil Popescu.
The liberal MP also put forward a solution to save Oltchim: “Why a state-owned company does not buy it? If we decide that a piece of Oltchim is strategic, why not have the courage to buy it ourselves? I we do not find a private company a state company should buy it…”
An AHK barometer shows that 91% of the German companies present in Romania would choose again to come and do business in our country, if they were to make a fresh start.
But that does not mean that there are no more things to be improved, says Mihai Boldijar, Vice President of the Romanian-German Chamber of Commerce, who also gave a personal example: in the past, he obtained a work permit in Asia in 30 minutes, while in Romania the same document is obtained in about three months.
The Vice President of AHK confirmed that “education has a problem of convergence to the industry needs,” and presented other weaknesses as well. Among them, the infrastructure and the decrease in quality and availability of the local suppliers.
“Problems also occur when we talk about productivity and investment in new technologies. If you do not produce quality, we know that we cannot survive. We, Bosch, already have the man/machine and machine/machine communication. At the European level, we talk about artificial intelligence, sensors… Romania is forced to look in the right direction, I believe that education should be calibrated looking to the future,” advised Mihai Boldijar.
The conclusion, from the perspective of AHK: “We have the same sufferings as any Romanian investor. We should not draw a distinction, we need each other, so that we all take Romania forward. Last year, I worked on the strategy for competitive Romania. There were hundreds of hours of work, we already know what needs to be done. I hate to resume issues raised 2,3,5 years ago. I say that we should choose something and follow it all the way through…. “, says Mihai Boldijar.
Andreea Paul, INACO: We should make just a few things and production will restart: Education, research and infrastructure
Andreea Paul, Chairman of INACO, believes that if robotics and artificial intelligence are global trends, Romania would be able to excel in five fields. Where to prepare clear development projects and employ “top 10 world experts” to work on them.
Andreea Paul’s proposals are:
- Medicines and biotechnology
- Organic agriculture and eco-tourism
- Alternative fuels
- Aeronautics and railway industry
- Exploitation of rare materials and metals
“The most liberal economies in Europe support their own producers to export, struggle with the EU. Why should we not support our Romanian brands? Romanian producers can develop on the international markets, but we need to cure our phobias for doing that. We cannot be a strong economy, unless we have a strong state. We are fighting with old weapons“, said Andreea Paul.
INACO’s Chairman listed some promising areas where Romania can move forward, but only with the strong involvement of the state. “At the Polytechnic University of Bucharest, robotics is practiced with the help, at the mercy of donors. The Government has no program in this field,” says Andreea Paul.
“We need a new way towards competitiveness, not just call it by optimistic names. What it is to be done? Education – research and infrastructure. Just that! “says Andreea Paul.
Vasile Iuga, Senior Adviser with PwC, believes that the Government must ask itself a fundamental question – what and how to do for the industrialization to take place in Romania?
Vasile Iuga moderated the cursdeguvernare.ro conference held Tuesday on the topic “Gap between Romanian economy and productive Romania: How to fill it!” – organized at The Chamber of Commerce and Industry of Romania.
Vasile Iuga warned on a very important phenomenon – the profound change in the employment in Romania: “Today, we have the same number of employees as in 2006, but: we lost 450,000 jobs in the manufacturing industry over the last 10 years and the number of employees increased by 800,000 in IT, by more than 200,000 in the trade sector, and by 200,000 in the public administration,“.
Regarding the capital structure of the economy, Professor Vasile Iuga said: “Foreign capital represents 8% of the companies in Romania, 40% of the total assets, 25% of the employees, 80% of the exports and a three times higher productivity than the Romanian industry.”
In these circumstances, the PwC Senior Adviser noted that Romania’s trade deficit is mainly generated not in relation to the countries with the leading economies of the EU, but the Visegrad countries.
The conference has been broadcasted live – HERE-LINK – where presentations can be watched.
On Thursday, cursdeguvernare.ro allocated a special page to the event – in the conferences section– where each speaker’s presentation can be watched, individually.