Foreign investors maintain concerns over legislative framework, workforce availability in Romania

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The latest results of the FIC Business Sentiment Index released today reveals the foreign investors’ trust in the legislative environment remains low following the debacle of Emergency Ordinance No. 114/2018, yet noting that “it has not further deteriorated.”

“Romania continues to score poorly on infrastructure and regulatory burden. Investors have no option but to adapt to the “new normal”, that is a situation of constant lack of predictability where anything might happen at any time. Studies have shown that this lack of predictability have a significant impact on investments, albeit one difficult to quantify,” the index reveals.

FIC notes that the most worrying indicator right now and the one that continues its steep decline is the availability of adequate workforce. “A whooping two-thirds of respondents say they are unable to find adequate workforce. This is for the first time when more than half of the respondents of the FIC sentiment index reported facing this problem”.

Main takeaways from this recent survey:

• There is no big change in the sentiment of FIC members since March 2019; roughly half of respondents expect their revenues to grow next year and almost one third expect them to remain similar to this year.

• We are noticing a decrease in members who are anticipating growth in their export markets which is consistent with the slowing down of the German and other European economies, Romania’s main trading partners

• One third of members will increase their capital spending next year and plan to hire more, and 40% will keep investment and hiring to similar levels as this year.

• The scores on infrastructure, bureaucracy and regulatory burden remain unchanged

• In terms of trust in the economic and legislative environment members say not much has changed since March, when there was a very sharp decrease following OuG 114. This reflects the fact that nothing similar has been put forward by the Government since, but at the same time attitudes are not changing and trust remains very low.

Looking at the results and trends of the sentiment index we believe the authorities and political parties need to work in a couple of important directions in the following period. First and foremost, they must strive to restore trust in the Romanian legislative environment. Romania is a stable member of the European community which means it has more space to be unpredictable but this cannot go on indefinitely without harming investments and undermining the mid and long-term potential of the economy,” FIC argues.

Secondly, according to investors, a long-term strategy must be envisaged regarding the situation of the labour markets.

Businesses will adapt to a tighter labour market or one where there is an increasing lack of certain skills because they have no alternative. However, the authorities need to pay attention that the general wage level does not outpace the general productivity level of the economy as this will harm the competitiveness of the economy in the long run.

FIC believes that the focus of the policy should be on improving the overall productivity of the Romanian economy. “This can be done by investments in education and infrastructure but also by upgrading the kind of public services that will increase the quality of life and stop the outflow of people to other countries.
FIC members remain committed to the long-term development of the Romanian economy having invested tens of billions of euros and hiring more than 185.000 people.”

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