Romania is an attractive market: it has a raw technical talent, smart and creative young professionals that are highly adaptable to diverse business environments. Romania is appealing in general, but it needs to better co-ordinate.
For instance, last year alone, the Romanian IT&C income reached new heights: more than 9.4 billion EUR, a figure similar to the boom of 2008. IT&C counts as more than 1.1% of the GDP and we should also mention the large investments in the online and retail industries that were announced last year. However, most of the IT&C income consisted of outsourced technical services. However, on a whole, we need to build on talent retention – providing a stable economy is a manner in which young people find the right job in their country; and on delivering educational business programs with a national outreach.
I believe that the IT&C industry, which can include a variety of sub-classes: IT, software, cloud, SaaS (software as a service distribution system), e-commerce is the market with the greatest possibilities of paving the way for international companies. International companies built by Romanian entrepreneurs with headquarters in Romania. IT&C and technology in general are verticals where we have proven our abilities and performance.
Nevertheless, in order to have a better fit Romania for large national and international investments, we need to implement a more elaborate sense of discipline. Romanians, government as well as the private sector, need to have a better understanding of the ways through which people can embrace entrepreneurship. Individual programs, such as Radu Georgescu’s “Jurnal de antreprenor” or mine are nice and valuable for the community, but highly insufficient. This means better national education programs, sustainable government grants for SMEs and smaller start-ups, a consistent and efficient legal system, a powerful lobby for national and international investments.
TRUST – A WASTED PHILOSOPHY OR BLUNT RULE FOR OVERALL ECONOMIC GROWTH?
There is no business without trust. Trust goes both ways: internal stakeholders must have a structured and professional collaboration; external stakeholders should be the emblem of business integrity and confidence.
So yes, trust is a must-have principle of doing business. For smaller projects, I recommend to have a good understanding business trust from start. This includes having a transparent and objective communication on the website, in the company’s description or brochures, service presentations, business pitches.
YET, FISCALLY CHALLENGED
The local fiscal environment is actually deceiving, because the corporate tax is still relatively low and attractive for investors at 16% and in fact, with the flat tax, all taxes are pegged at the same level of 16%, again very attractive for investors, foreign and Romanian. However, when we discuss the number of taxes, it becomes indeed a challenge (too many state and local taxes that should be compressed and unified into a smaller number, to ease the bureaucracy of tax administration for businesses, not necessarily the amounts. One tax that is excessive remains the payroll tax (the compounded taxes on the employee and employers side amounts to 80% or more of the total net values), one of the highest levels in Europe. This is a problem currently being addressed by recent governmental initiatives to reduce some of these taxes on labor (particularly the social contributions).
The currency was stable all along, I think it was only some bad press about Romania prophesying the doom of the Romanian currency, when in fact, even last year, with some volatility, the exchange rate against euro showed only a 2.5% spread from the first to the last day of the year. So this is not only a happening, I think most if not all investors who bet their placements on the local currency made nice gains time and time again, especially since the refinancing rates on RON are still quite high at 5.25% per year, so the yield on local currency can be very good if the currency is stable against euro, given the high interest differential.
INSPIRED BY BENCHMARKS
Romania is somehow a bit behind. Looking at states such as Poland, Germany, Austria, and Bulgaria, both the state and the private sector are working together in creating a viable program that endorses entrepreneurship and business in general. Highly heaped business legislation, unstable and rigid government policies are showstoppers.
We should look for examples in the region. Poland is third, behind Russia and China, in the leading Top Coder ranking list. Poland’s Internet economy is growing by 14% annually and 1.9 million students – equals to 5% of the population – are currently pursuing entrepreneurial university programs. Bulgaria has two accelerators funds for technology entrepreneurs, funds of 21 million EUR granted by the European Commission. Croatia has a minister of entrepreneurship.
The Romanian community needs to understand that SMEs are recognized as one of the principal driving forces in economic development. This means an entire revolution of the Romanian system, which includes entrepreneurial education, economic legislature, fiscal support, legal endorsement, governmental lobbying.
LEARNING FROM PAST LESSONS
The tech bubble is a threat everywhere, not for Romania alone. Speculation in technology stocks may have a sad, discouraging outcome and we should learn from the experience of the bursting dotcom bubble of 2000-2001.
Designing a bullet-proof business plan, starting from a creative, scalable idea; idea which has not been investigated by large corporations which are actually better managed than ever before, is becoming increasingly harder. It is my impression that in the recent years the entrepreneurial ecosystem has been more flooded with “wanna-be” business concepts than actual profitable businesses, or by concepts that solely rely on the success of other platforms or enterprises. In the end, all these projects could result in a downfall: once one base pillar falls, others soon crumble down too.
Therefore, and as in any maturing industry, a quality filter will change the entrepreneurial ecosystem. This does not mean that young people should not look into entrepreneurship as a possible career path. But what they should pay more attention to is the way in which they put together their business. This is why initiatives such as VentureConnect are extremely needed on the market – entrepreneurs will have an actual test of how valuable their project is and how likely it is able to grow both locally and internationally.
Romania starts to materialize its position as the largest consumer market in the region (indeed a very fragmented region in the Balkans, where Romania has a population which is anywhere between two-three times to ten times the populations of the other countries in the Balkans.) However, until now there was little done both on the governmental front as well as on the private business front to exploit effectively this position of Romania in the region. Bucharest is also the largest city in the region (actually the largest city anywhere between Poland and Bulgaria and Austria to the former soviet space), but has done little to position itself as a real large business hub in the region. I believe that, little by little, we will anyway see this position as a regional hub being assumed and justified by Bucharest.