Foreign investors suggest Romanian authorities to set up a private equity mechanism which would help SMEs add value to their businesses, arguing that Romanian SMEs have a high debt profile, blocking access to additional leverage (in relations with banks or other financial players).
“The FIC recommends the setting up of a private equity-like entity, with public-private capitalization. Two entities need to be created: the fund itself and the management body to run the fund’s business. The fund should also have an exit focus and should not plan to invest for a time horizon longer than three to five years. Returns from investments should be reinvested in the fund. The fund could develop partnerships with recognized International Financial Institutions (EBRD, IFC, EIB) to support the sustainable development of emerging markets,” according to recommendations of the Foreign Investors Council (FIC) included in the 10th edition of the FIC white book “Regaining Momentum”, released on Tuesday in the presence of president Klaus Iohannis.
Foreign investors also think that penalties for tax evasion should be increased and a list of taxpayers with arrears should be made public. ‘Reform of ANAF should continue, to eliminate the practical deficiencies in fiscal administration, as well as creating an integrated public IT system connecting different authorities (such as fiscal, health, local administration, legal, and the land registry),’ reads the report.
In the foreign investors’ view, agriculture is still a potential source of growth in Romania, but provided our country endorsed medium and long term sector strategies, finds new sources of financing, increases investments in infrastructure and promotes incentives for land consolidation and cooperation among farmers. “The FIC recommends better designed incentives for the consolidation of agricultural land. The state should support those farmers which decide to come together in associations and to develop the land for agricultural purposes in a consolidated manner,” the white book recommends.
FIC members are also recommending a greater involvement in infrastructure projects by the private sector, arguing that the private sector has considerable expertise which the Government can use to facilitate the development of more infrastructure projects at a faster rate.
On the other hand, foreign investors believe extra deduction of research and development related expenses for scientific and technological projects and programmes directly serving key national socio-economic programmes should be increased.
“An increase in the supplementary deduction of R&D related expenses for scientific and technological projects and programmes directly serving key national socio-economic programmes and with potential to increase Romanian Intellectual Property assets could be made a priority. This would support the Government’s strategy for R&D and Innovation to boost Romania IP assets that are currently well above the EU average. R&D initiatives could also be encouraged and financially supported by consortiums formed between technical universities and industry partners. To facilitate this process, an analysis of best practices applicable in other states in relation to the implementation of R&D incentives would be particularly useful,” says FIC.
In his turn, president Iohnnis attending the launching ceremony said that, although the state budget showed a RON 6 billion surplus in the first four months of this year, public investment is down more than 30%. “I am disappointed to see how public investment continues to fall (…)Our main goal is to restore the confidence of investors and entrepreneurs in the Romanian business environment. It’s time to start over with a paradigm change. Romania’s progress can only come from a new development model, built on competitiveness, that would stimulate entrepreneurship and innovation, the creation of added value and productive, well-paid jobs,” said Klaus Iohannis at the launching of FIC’s 2015 White Book.
On the other hand, the Romanian president criticized the Ponta Cabinet in his speech before the foreign investors, describing the pole tax and the tip tax debacle as “lack of vision and rash decision-making”. The President added that corruption undermines economic development and complained that too few companies owned by Romanian interests developed significantly.