THE NEED FOR EFFICIENT PROJECTS, NOT ALLURING INDUSTRIES
Romania’s economic growth is still fragile, it needs consolidation, and therefore focus should be on the priorities of the economy. The recent developments on political scene deterred the focus of the Romanian public administration from the current and future economic priorities that might affect the perspective of growth for the economy. A number of decisions need to be made today in order to secure the economic development in the future. I can give the example of EU funding for the next budgeting period 2014-2020, in addition to the need to increase the current funds absorption rate.
Romania has a number of areas that need further developments such as infrastructure, energy agriculture which are in the same time great opportunities to attract private and public investments. Additional investments would represent new sources of economic growth and industrial competitiveness, and provide new employment opportunities to citizens as well as more revenue sources to the State. At present there are over 46,000 public investment projects in different stages and this creates an imperative need for prioritization, given the limited budget resources (total public investments were around EUR 8bn in 2011 while capital expenditures were less than EUR 5bn). Romania should select a small number of productive projects at the expense of unproductive ones and pursue them until full implementation.
For example the energy sector in addition to the over €16bn contribution by the foreign investors in the last decade, it still needs investments of a minimum of €15-20bn in the medium term, to modernize the existing assets and build new capacities (especially in the electricity generation sector). Given the fierce competition for investments on the international markets, the need to prioritize is more important than ever. It is not about what sector/industry/project is more important; the question we need to answer is: what project/investment, if financed, if well executed whitin an optimum timeframe will have a multiplier effect on the economy? The private investors community has offered its expertise, experience and resources to contribute to these kind of analysis and action plans.
ACTION PLAN IN ECONOMY:
1. Increase the absorption rate of the EU funds and the efficiency of their spending
2. Revitalizing economy’s financing through capital markets; improving corporate governance
2. Facilitating both private and public sector investments
3. Strengthening institutional reform with the aim of increasing growth potential
4. Stabilizing the macroeconomic environment and increase investors’ confidence on the potential of Romanian market
LENDING - A MATTER OF CONFIDENCE
The banks have continued to lend to both companies and private individuals throughout the crisis. That is a fact. The demand itself for lending has decreased significantly and this is something we seldom discuss. Why would somebody decide to take a mortgage loan, while he/she is not confident that he/she will have a job tommorrow? On the companies side, as long as you do not have a market anymore, most probably you will consider freezing investments in new production capacities therefore the need for investment loans will decrease.
Another fact is that the money is scarcer and more expensive on the international markets, therefore one should not expect the same growth rates for lending as five years ago nor the same prices. Thirdly, and this is valid especially for Romania, the issue is that we only rely on lending for business developments; the local capital market is a fundamental player that need to step in.
PLANNING AHEAD IN REACHING TO EU MONEY: GET-TOGETHER FOR HIGH LEVEL TALKS
The topic is of crucial importance for Romania, therefore should be a joint effort both by authorities and private sector. In our view a high level summit to design the action plan for 2012-2013 and how business sector can help increase EU funds absorption rate could be a good start in achieving the objectives:
- define the immediate action plan to increase absorption rate in 2012
- set up the framework and priority actions for the next 2 years
Streamline EU Funding processes by centralization and identify and eliminate bottlenecks. Improve the expertise including by taking into consideration the experience of some commercial banks in managing financing schemes.
Define top 5 measures to ensure max. absorption and access to EU funds, for the 2014-2020 EU fiscal exercise, disbursements would be conditioned by meeting the individual sector targets. Devising realistic strategies and objectives as soon as possible would increase the likelihood that the necessary funds would be channeled into economy where these are most needed.
We should rather focus on working hard and consistent to meet the convergence criteria. The targeted timeline for accession is not at all as important as really being prepared. The troubles that some of the Eurozone countries are facing prove it.
We cannot afford anymore to be on our own. As I said, the resources are scarce and some of them, especially expertise and know-how should really be put together and used to shape up for the better the economic future of the country. It is not only the Government's responsibility, it is also the main concern for the business community. Therefore I believe that all stakeholders should contribute. And to do that, what we need is a good consultation process, a real dialogue, rule of law and discipline. The aim should be to efficiently use the existing resources to implement the necessary measures that could bring Romania back on growth trend and increase its competitiveness.