M3 cancellation effect: Investments of over EUR 1 bln,10,000 new jobs dropped, REI Finance says
About 3,500 companies that are part of the “green list” for non-reimbursable financing, out of a total of 27,000, that applied for financial support through Measure 3 supporting investments in Romania, a project announced by the Romanian Government during 2020, and which have met all the conditions to receive the funds from the State, would have created more than 10,000 new jobs and would have paid fees of EUR 300 million only with their remuneration for a period of five years, while their investments would have exceeded 1 billion euros, authorities are considering the complete cancellation of their financing, according to REI Finance Advisors data, one of the most dynamic consultancy companies specialized in attracting non-reimbursable funds through European axis and state aid.
“We are warning the responsible authorities to find effective and transparent solutions to cross this impasse we are in. If financial resources cannot be found in June, we propose that the signing of contracts be postponed until 1 September and that funds be allocated to the budget correction. To the over 300 million euro potential taxes paid by the beneficiary companies to the state we also add the taxes on profit, buildings, the horizontal development of other companies – the 500 million euro effort of the government would have contributed to the development of Romanian small and medium-sized companies and the increase in GDP. In addition, the investments generated by the companies would have exceeded 1 billion euros, given the co-financing by the beneficiaries, and the creation of 10,000 new jobs. Another consequence of the M3 cancellation is that, on the one hand, more than 27,000 companies that have implemented will lose confidence in the future in accessing the sources of government funding, despite the constant effort that we and our team have been making for more than 10 years, but also, on the other hand, consultancy companies who work on projects financed by state funds will lose trust, as there is no predictability and firm assumption”, said Roxana Mircea, partner of REI Finance Advisors.
Under Measure 3 – Investment grants, with more than 27,736 applications, companies should have received grants ranging from 50,000 to 200,000 euros for development projects, but an alleged fraud brought before the Romanian Ministry of Economy, Entrepreneurship and Tourism, but not yet proven, as well as the lack of funds required to pay the HoReCa Scheme – Measure 2, the financing of the projects was blocked, even if they met, for some 3,500 companies, the eligibility criteria in full.
“More than 450 companies applied for Measure 3 through our team of specialist consultants, strictly following all the steps outlined in the Guide for Applicants. We understand the situation and we respect the Ministry’s decisions, but more than 10% of the projects submitted through us are in the ‘green zone’ and the companies that have implemented with the support of the REI are entitled to receive the necessary financing, according to official communications”, added Roxana Mircea, partner REI Finance Advisors.
More than €40 million paid and lost by companies for planning and consultancy
Over 27,000 companies that applied for financial support through Measure 3 to support investments in Romania would have paid over 40 million euros for consultancy and planning services received, money they will lose should Measure 3 be canceled, REI Finance Advisors also shows.
According to REI, between 500 and even 4,000 euros were paid by the companies for consultancy and planning services, as well as for drawing up the general statement, money which could not be recovered in the current context, as the Economy Ministry, Entrepreneurship and Tourism published a background note on the annulment of Measure 3 and the relocation of funds to Measure 2.
“Out of the 450 projects that have applied with us for Measure 3, more than 10% are in the green zone, according to Ministry updates. For these companies we have prepared the offers, according to the Government’s specifications, we have prepared the budget, financial forecasts, submitted the projects to the Ministry’s platform, we have allocated an important company resource to speed up the procedures in order to make the time for re-submission more efficient, but companies will no longer pay their consultancy costs for implementation, an estimated amount of around half a million euros, if Measure 3 is to be canceled, which will create a considerable cash flow deficit. We believe that only next year the Ministry of Investments and European Projects will launch financing axes for the programmatic period 2021-2027. The situation is all the more serious as there is no certainty of allocation of funds toward companies that have demonstrated eligibility in the new form proposed by the government“, added Roxana Mircea.
The government proposes to re-launch Measure 3 with funds from REACT-EU
One of the proposals put forward by the government would be to re-launch Measure 3 with amounts from other sources of European funding, namely from REACT-EU, but this program will only be available next year, and the beneficiaries cannot wait 2-3 years for the purchase of the necessary equipment for their development.
The government announced that the beneficiaries who submitted applications for funding in order to access funds under Measure 3 would not be restricted by eligibility criteria to resubmit their application for grants, but those who concerned the acquisition of buildings, accommodation facilities, about more than 1,000 projects will no longer be eligible. The draft amendment to the GEO 130 is, however, in full public debate.
Government Emergency Ordinance no. 130/2020 has undergone successive amendments, taking into account the positive impact of the measures set out therein and the requests for support from potential beneficiaries.
Thus, for Measure 1, about 29,250 applications were registered. After their assessment and the contracting process, the savings are around 50 million euros.
Under Measure 2, a number of 22,226 applications were submitted, worth lei 5,246,397.727. In view of the budget exhaustion, only 3,945 financing contracts could be signed.
Under Measure 3, roughly 27,736 applications were submitted and only around 4,000 companies would have been eligible for funding, out of the EUR 500 million allocated to M3. The request of over 7 times higher for the allocated budget shows the acute need for financing the Romanian small and medium-sized companies, all the more so in the context of the pandemic, which has affected the local companies even more.