Techniques of attraction
In a country of widening wealth inequality, balanced regional development is vital. Ana Maria Cristina, president of the Romanian Agency for Foreign Investment, hopes international cash can help
Renault’s takeover of car plant Dacia is
a blueprint that this Government would
like to use to encourage foreign investment.
When the French giant bought
the Communist-era factory in 1998 and
launched a long-term strategy to build
its brands, this had a knock-on effect in
the local area, where a mini-empire in
vehicle part manufacture is developing.
Confidence in the country from a
global player has had a smaller, but discernable
effect on the rest of the nation.
Romania now has a global reputation as
a country specialised in producing car
parts. No month goes by without the Romanian
Agency for Foreign Investment
(ARIS) providing assistance for companies
in the field of vehicle components
keen to do business in the region.
“Most of the time the business is related
to Renault,” says Ana Maria Cristina,
the 31-year old president of ARIS. “This
is what we intend to do in other fields.”
The Government’s aim is to create
clusters of industry - like in Pitesti - a
combination of classic economics of
manufacture with a European spin to
ensure regional development.
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Therefore ARIS, a small Governmental agency which assists in foreign investments over ten million Euro, will encourage, say, a washing machine firm to set up shop in an area with a history of manufacturing appliances, but potentially high unemployment. In addition the agency will promote the area to satellite companies interested in appliance parts manufacture. “This way, I am sure that we will have an important flux of quality investments,” Cristina says.
The next task is to help develop the Daewoo car plant in Craiova. Without an owner, the former state-owned car maker for the Oltcit brand, and then the Daewoo Espero, Leganza, Nubira and Matiz, has failed to secure an owner since the Korean company was bought out by General Motors. The American firm does not want to purchase the whole plant, although Renault Nissan has shown interest. Cristina hopes a decent buy-out could have a similar resonant effect on Craiova and its neighbourhood as has been achieved in Pitesti.
Making it happen
Manufacturing, IT and agricultural
development and diversification seem to
be the sectors that Cristina wishes to develop
in the regions of Romania.
In counties such as Vaslui or Iasi in
Moldova there is a greater focus on the
textile industry, while Ialomita, to the
east of Bucharest, is an area with potential
for food growth and processing, or
with new projects in the energy industry.
Support from ARIS is coming for the
alternative fuel energy from oil seed rape - Biodiesel. In late 2005 Portuguese
company Martifer announced its
intention to build a biodiesel distillery in
Lehliu Gara (Ialomita county) with a 45
million Euro investment over eight hectares
of land.
“The Martifer project will help the
development of Romania’s southern
region,” she says. “Very soon we will
launch a similar Biodiesel project, based
on ethanol, another alternative fuel.”
Ideally, Cristina wants Romania to
become a place for the large scale manufacture
of electronic brands.
“This is a status Romania has lost in
the last few years in Poland’s favour,”
she says. “We have tried to approach the
best in the world, such as Sony and Panasonic,
and given them the highest possible
incentives in the European context
of competition. But we are in the position
in which everyone knows that state
aid is forbidden in Romania because of
the EU.”
Nevertheless, state aid and incentives
are applicable in certain criteria: to build
up a flagging district or to set up a new
industry.
Cristina is clear that she wants to be
able to subsidise new investment. Some
of which she can achieve with existing
laws, others still staying within EU
competition guidelines.
“We have to take all the advantages of
the competition laws and not their disadvantages,”
she says.
Cristina says that public life wrongly
associates ‘subsidies’ or ‘state aid’ with ‘tax incentives’ such as holidays for paying
income tax from investors.
“Subsidies do not only mean tax support,”
she says.
She argues that for huge regional investments,
the investor may receive support
in buying land which belongs to the
Local Council for under the market price
or even receiving that land for free. Another
subsidy could be to give an investor
a building for the company and even
helping the investor to construct a building
using public money. Added to this
are grants that an investor can use to buy technological equipment, staff training
or financing facilities for research and
development.
“There are possibilities for subsidies
allowed by the law of state aid but, for
the moment, these are not regulated in
Romania,” she says.
ARIS’s new plan includes helping
draft a new law, the first in five years,
to establish the incentives that the Romanian
state and the central and local
authorities can give to investors. This
is especially important because EU and
Romanian competition laws seem at
odds with large amounts of state aid that
companies have received in the past ten
years.
“The law applying to foreign investments
is outdated,” she says. “That’s
why ARIS tries to create new legislation
in accordance with EU norms, which
will include the meaning of state aid and
subsidies that are encouraging regional
development.”
Missing out
Pharmaceuticals and some retailers
are missing from Romania, says Cristina.
“Although GSK and now Zentiva produce
here,” she says, “some large pharmaceutical
producers are absent and it
is a national priority for ARIS to bring
some of those pharmaceutical producers
here. The consumption of medicines
has grown in Romania, but they are still
expensive. Most of them are imported
and we would need a few big players on
this market.” As for who this will be and
when, Cristina replies that she is “in discussions”
with multinationals.
Retail has picked up recently.
Kaufland, Real and Lidl have all booked
their place in Romania and franchises in
Ikea and Debenhams are on their way
here. But what about Tesco? There is
no word yet on whether it will definitely
come to either Romania or Bulgaria. If
the British giant set up shop, Cristina
says its presence would “stimulate” the
competition.
Flat hunt
The ruling coalition’s one big idea – the flat tax of 16 per cent on profits and
incomes - is heavily advertised on the
website of ARIS in both English and Romanian.
This is the agency’s chief selling
point. Though this tax may not be as low as Serbia and Montenegro, Cristina
says it is a lightning rod for investment. “This has increased the speed and decision-
making process of investors and
should see higher results of investments
this year,” she says.
EU membership, which she believes
is a certainty for 2007, will also be a
huge advantage to investors from non-
European markets. “The interest is high
from Japanese, Chinese and Indians,”
she says.
But time is running out.
“There will be a rush of business coming
into Romania this year,” she says. “Investors can still take some advantages
of the fact that we are not in the EU. It
may be the last opportunity for many.”
By Ana-Maria Smadeanu
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