|  07.11.2012

Confidence, a cornerstone of doing business in Europe

A straight forward view on Romania’s main priorities, by Petre Bunescu, Chairman of the Board (ad-interim) and Deputy CEO of BRD - Groupe Societe Generale

KNOWING THE STRENGTH, IMPROVING THE WEAK


Romania should maintain and preserve its traditional strong points, among which the most important is its well educated workforce. I think that the weakening of the educational system is indeed the most important danger that we have to cope with during the years to come. Another field that should be improved and developed is the administrative capacity. Along with macroeconomic absorption capacity and financial absorption capacity, the administrative capacity is a key driver for engendering a more efficient EU funds absorption capacity. Each and every of the above mentioned domains is important for any country. As far as Romania is concerned, the banking system is well developed and supervised; it is healthy and has proven to be a real support for the economy during the years. Its role in the development of the country is undeniable and it can be argued that few of the other sectors can develop without its direct support. As I have already said, the education is also very important, as well as the health and social services, domains in which the State has a very important part to play. At the same time, Romania should work harder and be more committed to develop the infrastructure. A special attention need to be granted to the highways sector which should interconnect the main regions of the country. This might bring at least two main advantages: a more balanced distribution of investments and a more flexible labor force.

 

In a random order, the measures should focus on: developing the research and innovation sector, increasing the collection rate of the budgetary revenues, enhancing the infrastructure, reducing the underground economy and improving the communication process within the society on both horizontal and vertical axes.

 

WINNING THE CONFIDENCE OF INTERNAL AND EXTERNAL MARKETS

 

Lending depends not only on the will of banks about granting loans, but also on the absorption capacity of the market and, more importantly, on the solvability of the potential clients. On the retail customers market, the demand is at present at a much lower level, and many corporate customers, especially SME’s, have been weakened during this very tense period. Thus, the number of bankable projects is lower, and the dimensions of the lending are consequently smaller. There are a number of possible solutions. One set of solutions addresses Romanian companies, which should grant more attention to competitiveness and innovation and find new markets for their products, possibly towards the East. The second set addresses the governmental area, which should imagine and implement policies and incentives meant to encourage the economy. In a simple manner, lending as any other kind of activity, means a professional relation between two partners. The regular additive is what we call trust or confidence of the partners to each other. This is what Romania should try to get, preserve and improve: a boost in confidence on both internal and external markets. Lack of confidence always brings reluctance and retreat instead of development.

 

According to a recent report made by the Commission for the European Affairs of the French Senate, the absorption of European funds could have helped Romania’s GDP grow by 3.8% every year since 2007. Unfortunately, the lack of expertise at the level of the administrative apparatus has brought until now only a 15 % absorption of the funds. It is obvious that this situation cannot change over one night; among the possible solutions could be the implementation of a user friendly legal framework and the easing of the bureaucracy associated to this process, keeping however in mind the necessity to keep control over the procedures.

 

ADHESION TO THE EUROZONE – A MATTER OF FUNCTIONALITY AND TIMING

 

Defining the time horizon for Romania’s accession to the Eurozone as a full member is an attribute of the authorities, which have announced a tentative time target, i.e. 2015, which is currently under debate but also quite improbable at this moment. Such a decision should be the subject of a double assessment questions: i) are we ready to get in, and ii) are they prepared to accept us? In the light of the latest evolutions of the State debt crisis that threatens to affect some of the most important members of the Eurozone, some other new members of the EU (a case in point is neighboring Bulgaria) have recently announced an indefinite delay of their accession. On the other hand, Romania is still rather distant from the fulfillment of the Maastricht criteria; still, even in the event of the eventual fulfillment of these criteria it would be necessary to have a debate over the convenience of the adhesion time. All in all, this is the right way and we will adopt the single currency, but we still have to submit this decision to a fine assessment and to choose the right momentum also. This is not a condition that should be marked but a decision that should be functional.

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