Local potential, converted to competitive leads
Romania and US develop a joint cooperation and strong partnership in economy trade and regional security, based on optimist figures on macroeconomic perspective. US Ambassador and AmCham top representatives detail on main aspects to be further addressed.
By Magda Purice
Romania's GDP growth is expected to accelerate from 4.2 per cent this year to 4.7 per cent in 2019, according to the spring estimates released by the National Prognosis Commission and quoted by AmCham representatives. It's also worth mentioning that Romania climbed from 77th place in 2011 to 53rd in 2015 in the World's Economic Forum's Global Competitiveness Report, giving strong signs of economic recovery from a macroeconomic perspective. Also, Romania and USA developed strong US-Romania Strategic Partnership in terms of security and diplomatic bond. The recently publicly-voiced remarks of US Ambassador to Romania, Hans Klemm, on the occasion of the 2016 Independence Day Reception, included noteworthy highlights on the bilateral diplomatic and economic bond between the USA and Romania.
US Ambassador Hans Klemm stated on July 4th:
"Under our strategic partnership, we also advanced cooperation in energy security, political coordination, and consular matters. Also, the bilateral bond focuses on additional energy on the economic dimension of our partnership, to increase trade and investment flows between our two countries. We brought trade missions to Romania, that are supporting Romanian entrepreneurs in IT, education and ecotourism, and have encouraged American investors to consider the economic potential that Romania offers, just as we have encouraged Romanian investors to consider America. And to yet further broaden the scope of our partnership, we jointly launched new work this year in cyber security and, most promisingly, to redouble our promotion of joint collaboration, and exchanges of students and scholars, in science, technology, education and culture – and possibly energy, medical and agricultural research as well. I am convinced that if we work earnestly together, the potential of our partnership is boundless."
In addition, according to a statement of Ionut Simion, president of AmCham and country managing partner PwC, in an interview for The Diplomat – Bucharest, a positive economic environment, favourable conditions for doing business and an effective mix of incentives are crucial for developing existing and attracting new investments.
According to the PwC manager and the representative of AmCham, Romania has lots of strategic areas that can be converted into competitive advantages, but if we have to name just one, Romania's infrastructure is a topic that needs further attention. Implementing a comprehensive and coordinated plan to improve Romanian infrastructure towards EU standards of quality and coverage can be a catalyst in attracting new investments and expanding existing ones. "Besides all the priorities, in this direction, the improvement of EU funds absorption should remain a top priority of the Government while both observing the quality of the projects and their relevance for the overall economic environment. Last but not least, there is a lot of potential in the Romanian workforce that can be translated into value added for the economy by building a competitive advantage on the skills of employees, not on the wage level," Simion stated.
Most of the U.S. investors are large corporations with international presence that have expanded their operations in Romania over the years, and it is important to mention that when it comes to investments, AmCham appreciates the launching of the investment promotion agency that will actively promote Romania's investment opportunities and support prospecting and current investors. In our opinion other measures that would help to attract investors' attention towards Romania would be: to maintain highly-skilled specialists in the country and reverse the brain drain phenomenon, building on the positive experience of the IT sector; stimulate investments in key export industries and create incentive packages for local and foreign investors based on new technology implemented, number of jobs created, and high value added export capacity created; as well as to recognize and develop the capital markets as an important alternative source of capital, for both private and public lending.
Enhanced economic relations between Romania and the U.S. remains a strategic issue on AmCham's agenda taking into account the strong relationship between the two countries in the wider context of the Strategic Partnership for the 21st century, that sets the grounds not only for enhanced military and defence cooperation, but also for intensified economic ties. As the institution official states, the local macroeconomic stability is the anchor of any successful effort to increase private sector development and economic growth, and without macroeconomic stability, domestic and foreign investors will stay away and resources will be sidetracked. "It's no surprise that U.S. investors are mostly searching for a stable economy, with low inflation, doubled by consistent policies aimed at long term-strategic country vision. In this context, the need for a long-term strategic country project focused on increasing Romania's economic competitiveness is becoming more and more stringent," Ionut Simion added.
In this regard, AmCham's president said that the institution will continue to stress in the dialogue with decision-makers the need for better public policies and measures aimed at supporting the investment community, increased transparency and predictability of the legislative framework, strengthened by consistent implementation of the law. A reinforced country competitiveness economic strategy is a potential game changer, and for this to happen we need to set the coordinates of a clearly formulated country project.
In order to continue to attract and retain additional foreign direct investment Romania will have to further progress on transparency, stability and predictability in economic decision-making, reducing non-transparent bureaucratic procedures, while also intensifying the fight against corruption. "It's obvious that a healthy economic growth is an attraction for investors, but stability and sustainability also play an import role, so at a macroeconomic level proposing an articulated country project endorsed not only by the Government, but also by the business community is something that we all should promote and support," AmCham's president stated.
The encouraging grounds
So far, Romania has made concrete steps towards becoming a more competitive country on the global scene, and it seems that for the time being the macroeconomic situation is stable, with low inflation and external deficits, according to the representative who quotes several specific measures: the new Fiscal Code and Fiscal Procedure Code, entered into force on 1 January 2016, introduced several incentives both for companies and individual investors; the announced reduction of the standard VAT rate from 1 January 2016, along with other reduced rates for certain types of supplies increased domestic consumption and stimulated economic growth in 2015. However, Ionut Simion said that "future growth prospects will depend heavily on the fiscal and investment policies of the Government. Moreover, the recent adoption of the new public procurement package plays an important role to the predictability of Romania as a promising investment destination. Thorough consultation with the relevant stakeholders and having real impact studies before elaborating new legislatives measures or amending existing ones are issues that authorities should take into account in order to improve the framework for private investments."
In this respect, AmCham's president said "Determined fight against corruption, full transparency and accountability in managing public funds, investing in intelligent utility network infrastructure, increased quality and accountability of public service, building administrative capacity at both central and local level are just some of the challenges that Romania needs to further address. Another worrying feature for Romania's future economic development that in our opinion needs to be addressed by government policy is the evolution of the country's demographics. Population statistics show a constant decrease of Romania's population since 1990 - in the last ten years alone, the decline was of about seven per cent. Such an extent of depopulation, if not properly addressed, will have a major impact on the evolution of the business environment, affecting a wide range of areas from availability of workforce to the size of the consumer market, ultimately undermining Romania's potential for sustained economic growth."
AmCham unites over 400 companies with investments of at least 20 billion USD and 250,000 work places as a total. Out of the 400 companies, 37 per cent are with Romanian social capital, 28 per cent American companies and 26 per cent European companies. At the same time, 55 per cent of the companies are multinational, 37 per cent are SMEs and eight per cent are non-profit organisations.