1. As Romania is going through another economic cycle, in the expansion phase, how has this evolution been captured by EY Romania in 2016, in terms of business growth? How was the increase compared to the group dynamics and what were the reasons?
EY Romania’s revenue has grown by 15% in the last fiscal year, while, at a global level, EY’s revenues were up by 9%. The leading market growth over the past five years is the result of the continuous investments in our people and in innovating our services, which serve both local and international clients.
2. EY Romania’s services include assurance services, business consultancy, transaction advisory services, tax and law consulting. Which of these was the main engine for growth? What are the main economic sectors that have fueled growth in 2016 and why?
All of our service lines have significantly grown this year. The highlights of the year were given by the financial services and energy and resources sectors. There was also a significant upward trend in our consulting services such as: digital consulting, corporate finance, tax controversy, fraud investigation and dispute services.
At a global level, the audit services have increased with almost 5%, business consultancy with 13%, tax consultancy with almost 10% and consultancy in transactions with 14%.
3. How relevant is the low interest environment to the capital structuring decision for companies and how do they benefit from this window of opportunity?
Low interest rate environment as a singular event may not increase access to finance as this is dependent first on the credit merits of a company and/ or of a project. Low interest rate however stimulates other type of financing to pick up like acquisition finance, namely financial investors starting now to complement equity with debt for their acquisitions. Moreover, the low interest rate environment favors a shift from intercompany funding towards market funding, hence freeing up liquidity at group level that can be used for alternative higher yield investments.
4. At this moment in time, what are your hopes, as well as your worries regarding the fiscal developments?
The predictability and the transparency of the taxation system in Romania are as important as ever. In the last 10 years, good progress has been made in this direction – the number of adjustments and amendments of the tax legislation has decreased from year to year. The hope is that this number will go further down in the next years and that any changes will be announced with more time in advance, so that taxpayers may adjust their expectations, business models and plans in due time. One vital factor in this respect is the critically important reform of the National Agency for Fiscal Administration, financed by the World Bank. The significant gains in tax collection efficiency expected of such a reform (and recorded in other countries with similar evolution) could make an important improvement to the state of public finances and actually reduce the need for periodical tweaking of the taxation rates, rules, procedures.
Concerns regarding the fiscal developments are usually strongly correlated to the fundamentals of the Romanian economy, its strengths and weaknesses (like reliance on consumption), the nature and sustainability of the current GDP growth, the increased volatility in our region and the world at large. Any negative macroeconomic development may translate in the need for higher taxes with all the adverse consequences this frequently entails for businesses, individual taxpayers, consumption and investments.
5. You’ve always been a supporter of true entrepreneurship. Are you content about its evolution in 2016? What do you expect for 2017?
EY Romania has been supporting entrepreneurship through our signature program Entrepreneur Of The Year, the barometers that uncover the entrepreneurship ecosystem’s challenges and the strong partnerships developed with key support organizations, like Romanian Business Leaders, Impact Hub and Junior Achievement Romania. EY Entrepreneur Of The Year program, started in Romania in 2014, recognizes entrepreneurs who demonstrate excellence and extraordinary success in such areas as innovation, financial performance and personal commitment to their businesses and communities. 2016 brought our second participation in the worldwide final of the program and our first participation in the EY Entrepreneurial Winning Women program. With this new program, we channel our support and convening power to help women entrepreneurs achieve the full potential they envision for their companies.
6. What is your stance on the shortage of skilled workers that companies are complaining about? What is the solution you would suggest for this problem?
We are experiencing a transformational shift in the way businesses operate due to disruption created by the global trends nowadays. Talent shortage is one of the effects of this transition and it is more a limitation of skillsets and mindsets than a lack of people available on the market. The solutions reside on one hand in adapting the current available workforce to the new models and, on the other, on leadership shifting the mindset away from the industrial revolution approach to talent management. As consultants, we are tapping into this opportunity of partnering with our clients in order to navigate these change efforts through our services in People Advisory. Some of the areas we address together to reach a shorter change curve are: upskilling and redeploying talent into a more agile mix, engaging in cultural transformation, creating innovation think tanks and communities of practice to drive a talent agenda that makes sense today and can be flexible enough for tomorrow.
7. Did you expect the unexpected in terms of Brexit? Is there a clear way that Romania might benefit from Brexit or will the negative things coming from a shrinking European Union prevail? Please explain.
The consequences of Brexit are still difficult to assess. In the short term, there’s a slight decrease in the confidence of the investors. This uncertainty has slowed down investment, both in the UK and on the continent. However, major changes in public policy, workforce market and commerce are yet to be seen. As prospects for the Romanian economy are highly dependent on the EU, which takes 70% of its exports, we still have to see how the Brexit evolution unfolds.
8. As 2017 follows an election year in Romania, from your previous experience, what should we expect? What changes should the new administration bring to the business environment?
Romania’s competitiveness is central to the country’s priorities, in a multidimensional and multiannual perspective. For 2017, some of the potential priorities would be: supporting Romania’s digital transformation to achieve its full potential, a regulatory environment that enables further investments in the energy sector, improving the performance and the governance of the state-owned companies and supporting the local entrepreneurs to become regional players. Last but not least, the priorities should entail moving Romania’s capital market to the next level and supporting the local entrepreneurs to become regional players.
