ZF asked people who have been making annual budgets of millions of euros for their own companies or for multinationals for years to provide an opinion on how to build a sustainable 2012 budget.
“I think the personnel structure should be revised compared with the European average – that is check and see how many taxpayers to a public servant there are in Romania and how things stand in Europe. If they find out there are too many of them, then the necessary steps should be taken,” says Ovidiu Wencz, the executive that was general manager of Campofrio for nine years. “I used to cut the number of employees when sales were going down, that’s a question of simple arithmetic. There will surely be budget optimization results if the right decisions are made.”
There were 199,000 people working in public administration and national defense jobs at the end of July 2011, 40,000 more than in December 2004, the year when the Democrat Liberal Party (PDL) came to power together with the National Liberal Party (PNL), according to the National Statistics Institute data acquired by ZF.
Mihai Matyas, general manager of La Fantana, the largest local bottler of water for use in water cooler systems and also an executive that spent years working for Pepsi, believes that better cooperation of the government with the business sector could lead to a budget draft in sync with the realities of 2012.
“The main problem with the budget is that not everybody takes responsibility for what they do when participating in its application. All those who make decisions about spending public funds have to bear the responsibility for what they signed, as is the case in private companies,” Matyas says. In a private company, he explains, a thorough analysis of the spending and revenue of every sector and of the performance indicators in every budget chapter is conducted and the money is allocated based on the results. The manager says he is not in favor of cutting personnel spending by cutting wages, yet a better management of costs on goods and services, which entails a control over the system of awarding contracts in tenders, could generate significant improvement in terms of savings.”
Why an accurate budget is needed
The problem with devising a budget in sync with economic realities comes after the 2009 budget was far from reality (authorities expected 2% economic growth and 18% higher revenue and got 7% economic decline and 6% lower revenue instead). The same happened in 2010, when the budget was built around a 1.5% economic growth estimate, despite signals consumer spending would not rebound and the gross domestic product fell by almost 2%.
“They should conduct a feasibility analysis of the investments already committed and make the name of whoever signed an investment decision public; somebody should be held liable for how public funds were spent. If they are to be credible, then they should state who is responsible for spending of public funds in every county,” Wencz said.
Dan Ostahie, owner and chairman of electronics, home appliances and IT products retailer Altex, says the most important thing for Romania is to set a series of common goals for the national bank (BNR), the government and Romanians, both people and the business sector, before starting to build the budget.
“BNR’s goals (about a 2% inflation target) and the government’s (curbing budget deficit to less than 2% of GDP and boosting investment) do not respond to the legitimate needs for economic growth and improving the living standards in Romania,” Ostahie believes.
More communication with BNR and with business people
The businessman who built a business that reached almost EUR200 million sales last year says the government should organize roundtables and invite both BNR members and representatives of the business sector to look for complementary solutions that should lead to economic growth in Romania in 2012. “They can only be organized if there’s a real interest for communication,” Ostahie explained.
Gabriel Carlig, 44, who established Jolidon, a swimsuit and underwear company eighteen years ago, which later became one of the few Romanian multinationals, believes steps need to be taken to stimulate the economy. “Investment must certainly not be cut. Investments and consumer spending should be revitalized first,” Carlig says.
His statement comes at a time when consumer spending continued to decline in 2011, the drop of the last three years is close to 20%.
Jean Valvis, one of the best-known businessmen on the local market, with mineral water, wine and agricultural operations, in turn, believes investments must not be cut.
“Investments should not suffer especially in those fields where Romania has a competitive edge. Agriculture is such a field.” He says he does not see any other way for Romania to overcome this world economic war. “I also believe sectors that register debts and losses should not receive support. No money must be invested in those zombies.”
“Were I the head of the government, I would choose several directions, some of them part of a medium-term strategy and others part of a short-term one. I would make extensive investments in modernizing the public sector, in job retraining for many of its employees and at the same time freeze hiring,” says Vladimir Sterescu, country manager of Computer Generated Solutions (CGS), a provider of call-center services with almost 2,500 employees in Bucharest, Brasov and Sibiu. “There’s talk about having to cut the number of people working for the government; ok, let’s cut it. So what will we do with those people then? They have to be trained and integrated either in the private sector or in those state-owned companies that are truly profitable. The process whereby people move from public to private sector will be self-regulating.”
He says that if he could, he would invest extensively in those state-run companies that can be profitable and disband those that stand no chance of turning a profit.
Monetary policy rate is no help to the business sector, either
Carlig believes a good step for the economy would be a cut of the monetary policy rate. Even though the BNR cut the key rate to 6% last week (the week of October 24 to October 30), after a year and a half of keeping it at 6.25%, the businessman says, “it is too small a step, taken late. There’s still room for cuts.”
(English version by Loredana Fratila-Cristescu)