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Adjusting to trends, challenges and opportunities

Adjusting to trends, challenges and opportunities

Romania is still competitive and welcomes foreign investments but has to pay attention to industry trends and forecasts in current economy context, underlines Iulian Sorescu, Associated Partner, Head of Financial Dept., Noerr Finance and Tax.

The aces of Romania are still valid. The labor force is still cheap, the knowledge and willingness of Romanian employees are still high and the absorption capacity of the country is still high. In addition, the political instability seen to our neighbors is turning even more the face of foreign investors to Romania. Concerns of foreign investors about the Hungarian economy should be used by Romanian government in attracting new investors here.

 

On top, the economic trend of moving production fields from West to East is still visible. In comparison with the pre-crisis period, the economic uncertainties force global players to look continuously for costs optimization, and therefore to the Central and Eastern Europe. Until our neighbors geographically placed to our East do not become attractive, we can still use our aces to attract more foreign investors to contribute to a strong Romanian economy. Without them, the state cannot manage this country.

All these arguments make Romania appealing for various investors. On the one hand, they are looking to the potential of development of several industries like energy. But on the other hand, the relocation trend from West to East is conducted based on the industries booming globally. Therefore, the industries outperforming globally will show good results and get more funds also in Romania. And the global trends are changing fast. If now energy is booming and banks are collapsing, in 2 years the rules might be different.

The more countries are encountering economic difficulties, the higher advantages Romania has for development. As recently Cyprus added to the short list of Greece, Ireland, Portugal and Spain needing money from outside; the eyes of the investors for further expansions will be much targeted on Romania, which proved in the last 5 years to be still stable.

Trust – a wasted philosophy or blunt rule for overall economic growth?

Trust was always targeted for Romania, but the Romanian Governments did not prove it until now. The country is still performing due to the global trend of relocation from West to East. But let’s continue to hope that one day the trust will be trustful also in Romania.

 

Romania has always been a challenge for private investors with a huge potential for development. However, due to the lack of focus on business and country development, the potential remained more or less untouched. What investors in terms of taxation want is simple: stability, incentives and pro-activity of tax authorities. Solving these three wishes of business players, the economy will boost immediately.

 

 

The state is not a good manager in Romania. This was proved in the last 20 years and is visible whenever you walk inside Romania. Without a strong state management, the only chance is to use the expertise of foreign players. Either global or small players, they all have more expertise and transfer it to Romania together with their businesses. So let’s encourage them to share it with us or take the bull by its horns and restructure the state. This is not easy, but doable.

 

2013, a new year with the same expectations

That of seeing real changes in the Romanian economy. Even if the Romanian government is now in the 9 month honeymoon after the elections, it is expected to see real developments in this country. The signs visible now are only the result of a political move that is well perceived outside, but not based on real measures taken. The stock exchange is still correlated with the booming markets outside and the stable exchange rate is just a temporary effect of the better image of Romania after elections. Beside all these good signs, Romania needs real measures to boost the economy.

 

Energy is indeed the current star in Romania, beside the continuous investments of foreign players in the production field. However, the brightness of this star, yesterday being in the dust, will not be the same without a real support of the Romanian Government in providing facilities and infrastructure. Without them, in 5 to 10 years this boom will be stardust.

 

Globalization makes markets unified and dependable on each other, with good and bad things. Romania should see only the bright side of it and use the positive energy still existing in the Central and Eastern Europe, by offering incentives for foreign and existing investors. Sometimes these incentives, which do not cost the state budget a fortune, count much more in the eyes of investors and the results are much higher. Beside the non-reimbursable funds, which are anyway coming in majority from outside, there is almost nothing in terms of facilities for investing in Romania. So what to expect more, if the basis for business development is not strong. Any tax incentives for creating new workplaces, for reinvesting the profit and for business development in general would be more than welcomed and our Government does know it. Action is needed only.

Authors

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NOERR