US calls for coherent, long-term strategy

As USA celebrates 4th of July, its eyes are wide open on the latest developments in Romania's ongoing struggle for the rule of law. Still, the country is one of the fastest growing economies in Europe, and remains an attractive market for foreign investors in several industries, with potential yet to be developed.

2018-07-03 10:19:10

Romania's central bank lists the US as one of the most active foreign direct investors in the country, with the worldwide power pouring in around 1.5 billion Euro every year, on average.

At the same time, the American Chamber of Commerce in Romania (AmCham) emphasizes the need for a coherent, long-term investment plan, built on sustainable basis and visionary policies, as a way to boost Romania's economic growth potential, without affecting the macroeconomic balance.

"Time has come for a shift in approaching economic growth," says Anda Todor, president of AmCham Romania. "More attention needs to be paid to the qualitative approach, rather than quantitative. This will reflecthow citizens and businesses experience economic development. Nowadays, the quality of life, the purchasing power, the quality of infrastructures and the public services are becoming more important as an expression of welfare in an economy."

AmCham experts put together the ‘Investment – the Column for Romania's Sustainable Economic Growth' report, stressing the need for an accelerated absorption of EU funds and for more public and private investments as a move to transfer welfare to the citizens' level. Also mentioned in the report are FDI inflows and capital market development by stimulating capital supply and demand.

"We recommend the elaboration and endorsement of a National Investment Plan, based on the model of the Investment Plan for Europe launched by the European Commission in 2014," said AmCham vice president Daniela Nemoianu. "Such a plan should include, similarly to the European one, a pillar for the establishment and financing of strategic investments in Romania, especially from the public sector. The National Investments Plan would be worthy of the Centennial agenda, and a great project Romania could undertake before its EU Council Presidency mandate in 2019.

The report outlines the necessary conditions for long-term impact investments, in the context of the accelerated global competition for capital. It also identifies the sectors with high potential for investments that Romania should set as priorities for development.

"Ensuring predictability and transparency of the legislative and fiscal frameworks, special measures for the modernisation and development of critical infrastructure, advanced and calibrated economic policies to narrow the gap between regions and capitalise on domestic capital are among the prerequisites that can determine the evolution of the Romanian economy," added AmCham vice president Radu Florescu.
The AmCham report emphasises the need for sound policies to encourage investment. Such policies need to particularly pay attention to incresing the chances that capital cupply meets capital demand efficiently, including an improvement in providing incentives for a more direct – yet sustainable – risk-taking, for those who have either savings, or capital to invest."We believe that it is important to incentivize long-term savings, as it contributes to ensuring financial protection of individuals and their families, introducing new forms of financial intermediation, in addition to intensified financial education efforts, a chapter where the Romanian population is unfortunately still deficient compared to other EU countries", concluded treasurer Ciprian Ladunca, outlining the report's recommendations on capital market development.

The report proposes a conceptual framework to address investments and is AmCham's attempt to bringing the tipoc into public debate. Experts feel that, without a coherent investment process, the coountry and its inhabitants cannot experience sustainable economic growth.

‘Hands off the private pensions!' says AmCham Romania

Early last month, AmCham together with the Foreign Investors Council, addressed the Romanian Govenment on behalf of its over 430 members, be they American, international or Romanian companies.
As that ensure the income for over 250,000 Romanian employees and their families, AmCham Romania expressed its concern regarding possible measures and public policies that could affect the wealth of the employees. The body called for the preservation of the current private pensions system, as it insures future welfare for current contributors to the ailing pension scheme in Romania, at the same time facilitating the future development of the Romanian fiancial market.

AmCham Romania points out that the demographic realities that Romania currently faces - the accelerated ageing of the population, increasing emigration, especially among youth - actually call for measures to support the systems in place, which contribute to maintaining the living standards during the active age, but also beyond retirement, through diversified sources of revenue.
"Under such circumstances, a long-term sustainable social insurance system in Romania is not merely an objective, but a necessity," said the organization. "The Pillar II compulsory private pension scheme is a reliable income source which complements the public pension, as the purpose of such financial instrument is exclusively to accumulate savings for the retirement age."

Beyond the future social impact, the private pension system presently contributes to the development of the local economy, as it invests 92 per cent of its assets on the Romanian financial market. The success of the state and corporate IPOs in Romania is largely due to the private pension funds.
Over seven million Romanians have accumulated savings amounting to more than nine billion Euro through the Private Pensions Pillar II scheme in the first ten years of the system's functioning. Roughly15 per cent of this amount represents the benefits of the investments placed by private pension administrators.

The high performance in the administration of Romanian's retirement savings is acknowledged by many relevant international entities, although it has been achieved in the context of low cost indexes, compared with the ones used by similar financial instruments in other markets.

Despite the professional management and the real positive profits during the entire period of the private pension funds' operations, the evolution of the participants' savings has been negatively affected by political decisions, such as not observing the calendar for increasing the allocation (in three out of the ten ten years since the system is in place) or most recently, reducing the allocation.

In this context, AmCham stresses the need to put an end to political measures that sacrifice long-term objectives - in this case, the wealth of future generations of retirees - to compensate short term budgetary needs. The additional revenues to the public social insurances budget through a potential cancellation of contributions to private pensions, will, in fact have significant negative consequences.
"We believe that long-term saving is the only sustainable solution, and is a must for the Government, the Parliament and all the relevant authorities to understand the longstanding implications that such change could have on the economy at large, on Romanians' present and future quality of life, especially with the private pensions system being the only saving instrument that most Romanians contribute to," said AmCham.

Xerox Romania hopes for stability and for a growing business environment

Romania continues to be appealing to foreign investors, as it has great potential for further development, Gabriel Pantelimon, general manager of the company, told The Diplomat-Bucharest.
"I believe that investors are seeing great business opportunities and are attracted by the dynamic and competitive environment," he said. "Romania has also become known for its high quality human resources, including many foreign languages speakers and Romanians′ native openness towards new technologies, both for working with and developing them. All of these are tempting advantages for investors when it comes to setting up and managing a business."

Pantelimon hopes for stability and for a growing business environment that will encourage more investments and further development. "Everybody, both in the private and in the public sector, will benefit from a more transparent, predictable, and stable economic environment that will allow Romania to continue to grow rapidly," he added. "There were not too many changes that directly affected our business. We did take a close look at the changes related to salary contributions and adjusted our plans accordingly, like all businesses."

Last year was a good one for Xerox Romania, with "excellent performance and growth from a market share perspective."

The company focused on maintaining a high level of customer satisfaction, which was later confirmed by the renewal of a series of important partnerships. Moreover, Xerox Romania also experienced growth in the indirect sales channel, both in terms of sales results and number of partners across the country.
"As far as opportunities go, we are pleased to see an increased interest in digitalisation on the local market," Pantelimon said. "This is exactly what we do, we provide the solutions and technologies that will help companies bridge the physical and digital worlds. However, we can only grow as a business if the business environment is stable, so we try to stay as flexible as possible. Our primary focus is keeping close to our customers and partners, understanding their needs and providing them with the best suited products and services. We are expanding and optimising our network of channel partners, so that we will be able to offer our range of solutions and technologies nationwide, along with our top-notch services."

At the end of 2017, Xerox Romania employed almost 220 people.

Ford confirms second vehicle for Craiova plant in Romania, 200 million Euro new investment and 1,500 new jobs

Ford confirmed it is investing up to 200 million Euro and adding an additional 1,500 jobs to manufacture a second vehicle at its Craiova assembly plant, in southwest Romania.
The new vehicle is in addition to the EcoSport small SUV currently built in Craiova. The model and start date for production of the second vehicle will be confirmed closer to launch.

"This new investment will add to our evolving line-up of exciting new models manufactured in Europe and continues the transformation of our Craiova facility," said Steven Armstrong, president and CEO of Ford of Europe, Middle East & Africa. "The addition of this second vehicle is a testament to the operational flexibility of our Craiova plant and reflects the strong partnerships we have with local suppliers and the community."

Ford′s overall investment in its Romanian manufacturing operations - including the 200 million Euro investment announcement - "is nearly 1.5 billion Euro since acquiring the Craiova facility in 2008. Significant upgrades have recently been made to Craiova′s vehicle operations, with more than 550 robots installed on location to further improve efficiency and quality in the paint, trim and chassis, and body shops."

To support the new vehicle, Ford Romania expects to hire nearly 1,500 basic and skilled operators for a third shift to increase the current workforce of more than 4,400. This will bring the total workforce to roughly 5,900 employees.

The Craiova-built EcoSport, launched in 2017, is sold across Europe and features a powerful and fuel-efficient new 1.5-litre EcoBlue diesel, Intelligent All Wheel Drive and a sporty ST-Line model.

Delphi shuts down Caras-Severin factory due to lack of labour force

US-basedDelphi Packard, which has been present in Romania for over 15 years, has announced it will shut down its factory in Moldova Noua, which employs 698. The company, the biggest employer in the area, laid off in 2016 many of its employees and said the factory closure was due to the scarcity of labour force in the region.

According to a statement, the lack of labour force made the company reach the decision to shut down its factory. In 2016 the company had a turnover of 84 million Euro.

"After the January meeting with representatives of the union, the management of Aptiv Electrical Distribution Systems Romania communicated the fact that the Moldova Noua factory could not carry out a full project due to constraints caused by the limited labour force available in the region. In order to carry out a complete project specific to our type of industry, based mainly on labour force, there is a need for a larger number of employees than that we managed to attract in the region. We were thus forced to take the decision to adjust our operations in Romania," company representatives said in a statement.

According to the statement, the factory's activity will stop at the end of March and will impact its current employees. "We will take all steps needed, together with the parties involved, to minimise the negative impact and to look for solutions that can help employees affected by this measure," company's officials said.

According to the Caras-Severin mayor, "it is sad what will happen. I don't know precisely what the reason is, because at the start of 2016, at Delphi there were 2,300 workers (…) It is a pity that the county will have a negative impact of almost 700 unemployed," Matei Lupu said.

IBM to open fourth business service center in Romania

American IT giant IBM will open a new business center in Cluj-Napoca this July. This will be the fourth such center operated in Romania after the ones in Bucharest, Brasov and Timisoara.
The Cluj-based center will be located in Liberty Technology Park, the office complex developed by Ioan Sturza, the president of Fribourg Capital.

Cluj-Napoca has attracted many IT companies in the last years, both multinationals and start-ups, which have been attracted by the good transport connections, the pool of skilled employees, and the welcoming atmosphere for expats.

Most tenants in Liberty Technology Park are IT companies. The office project hosts over 1,700 employees, out of whom 200 are expats.

Other tenants in the park include Siemens, Halcyon Mobile and Control Data Systems.
IBM posted a turnover of 180 million Euro in Romania last year up 9.4 per cent year-on-year. Its net profit gained 10.9 per cent to 16.7 million Euro. The company's average number of employees in Romania rose by 22.1 per cent, to 2,653, according to official data.

Visa prepares cheap solution for Romania's cash-back law

Visa could implement by the end of this year a cheap ‘mVisa' solution to Romania's cash-back law, which introduces mandatory electronic payments to shops with sales higher than 10,000 Euro per year, says Catalin Cretu, Visa's general manager for Romania, Croatia, Slovenia & Malta.

"We want the mVisa solution to be implemented as soon as possible, and it is possible even by the end of 2018, but it depends on the willingness and the ability to implement this solution, given the many other regulations we have to implement," Cretu said, quoted by Agerpres.
The cash-back law was subject to criticism as it introduces additional costs to small shop-owners, as a POS costs about 300 Euro.

"A bank cannot afford to bail out 300 Euro at a trader without incurring certain fixed costs. Visa has the solution to unlock this situation and what we want is to talk to the banks and with the payment industry to introduce a solution with negligible costs or even zero for the final trader," Cretu added.

Metropolitan Life launches new insurance product for family needs

Insurance company Metropolitan Life recently launched a new insurance product that is supposed to address the needs of each customer in a personalized way.

‘As you want' provides access to a wide range of protection products for high control over unpredictable life events and also the possibility for the accumulation of savings for the future.
"The launch of ‘As you want' insurance is the natural answer to what consumers have said they wanted," said Carmina Dragomir, CEO of Metropolitan Life. "This product is not only a powerful tool of protection but also an encouragement for us to be the ‘designers' of our own lives, as we want – an approach through which Metropolitan Life redefines the concept of protection on the insurance market in Romania."

This expansion of the company's portfolio takes place in a context where, according to a study conducted by Metropolitan Life, when purchasing life insurance, people's motivations are related to individual and family protection, protection against unforeseen expenses, saving for retirement, but also the peace of mind offered by a long-term protection plan.

‘As you wish' insurance includes the payment by the company of an insured amount of up to 200,000 Euro in the unfortunate case of death of any cause of the policyholder. In case of permanent disability or fracture and burn injuries, the company provides a benefit of up to 500 per cent of the insured amount, and for surgery due to accident or accident and illness, it offers the same benefit, which can go up to 7,600 Euro.

In case of hospitalization due to accident or accident and illness, the company offers up to 150 Euro per day of hospitalization, starting on the first day. In the event of a serious illness, customers can benefit from an insured amount of up to 173,000 Euro.