Rice, who is in charge of GE’s global operations, visited Romania last week, as part of a tour that also included Turkey and Poland. GE has 250 employees in Romania and operates mainly the sectors of wind energy, electricity and medical equipment.
He says the sectors that the company is looking at in Romania are energy, healthcare and transport. Rice commended Romania’s smooth transfer of power from one government to another and said the stability of the administration, transparency and an environment of fair competition between companies are factors that could get General Electric to invest in Romania.
GE vice chairman: Pure capitalism is but a notion
John Rice says he has noticed a global trend of government involvement towards changing the course of economies. From now on what will count very much will be the ability of governments to bring the benefits of economic growth towards the base of society, towards the low-income population.
General Electric, an industrial conglomerate with 300,000 employees, reported total revenues of $147 billion in 2011, twice more than Romania’s exports.
Rice’s remarks come as the GE executive talked about GDP growth rates weakening all over the world and about the impact that public investments in infrastructure will have on the future evolution of the global GDP.
The GE executive even says the notion of “pure capitalism” has remained a theoretical notion, and that the definition of capitalism is changing. He cited a series of articles published in The Economist in which there is talk of “state capitalism.” “I think this is the new way. The definition of capitalism is changing.”
John Rice says in order for Romania to be considered for a EUR1 billion investment from GE, it needs government stability or a smooth passage from one government to the next.
A prospective investment by GE in Romania could be in the manufacturing of energy equipment, medical equipment or transport. Rice said talks with local managers of multinationals have revealed the quality of the Romanian education system.
GE has 250 employees in Romania, spread across six divisions, of which the most important are in energy, healthcare and production of airplane engines. The company supplied the turbines for a wind farm developed by CEZ in Dobrogea, the largest one in Europe, as well as for other wind farms and for Petrom’s gas-fired electric plant.
It is not clear how much GE sells in Romania and how much GE exports from Romania. Cristian Colteanu, manager of GE Romania, says the US company has so far invested $500 million in Romania.
According to the latest Trade Registry data, General Electric controls two companies in Romania: General Electric Medical Systems Romania SRL, with a turnover of $10 million in 2010 and 21 employees and GE Equipment Services Ro SRL, with turnover of around $5 million in 2010 and 8 employees. GE also operates on the local market through a branch, General Electric International Inc. Romania, which had turnover of $50 million in 2010, three times higher than in the previous year and 86 employees.
How can Eastern Europe and Romania benefit from the general trend of jobs moving from the West to the East in the search for lower wages?
“Through education and by acquiring the necessary skills and abilities,” says Rice, who runs GE’s global operations division from Hong Kong. He says global commercial exchanges don’t wipe out jobs, quite the contrary, they create them.
The company may assemble a plane in France or the US, where labor is not cheap but people are skilled, but the global supply chain also includes parts made in Romania.
Rice says attracting foreign investments entailing a strong local involvement are the best solution for a country’s development.
He talks about the Chinese model [where foreign investors can hold a stake of 50% at the most], which is under development, and which cannot be considered good or bad. But, according to him, the World Bank says state-run Chinese companies need massive restructuring.
Rice gives the example of the Chinese Government, which told foreign companies to come and invest in China, help it grow, make investments and create local industrial facilities.
But Nokia came to Romania and then decided to leave. What should the Romanian Government have done?
Romania hasn’t done anything wrong in terms of how it dealt with Nokia, and the country needs to continue its struggle to attract foreign investments, the GE executive says.
(English version by Daniela Stoican)