The new scheme, agreed with external partners, will come into force starting July 2014 and will be valid until 2020. Through it, the state will support part of a company’s salary expenses if the latter creates at least 20 new jobs. However, the companies will have to meet certain eligibility criteria, as well as some requirements related to share capital or profitability and maintain each newly-created job, as well as initial investments, for a period of at least five years, according to a Finance Ministry draft.
Amid the global crisis, the race for foreign investments has intensified internationally, and state aid is a form of attracting foreign capital. Multinationals get the bulk of state aid in Romania. The dominance of foreign-held companies among state aid beneficiaries also reflects the structure of the Romanian economy.
“There have been several stated support schemes in the past five years, but looking at their outcome, at the unemployment rate, I would not say they’ve had a major impact. Unemployment rose, despite the economic rebound. Companies think on the long term. When you have a company that needs to survive under crisis conditions, the hiring appetite, even amid such state aid schemes, stays low, comments analyst Aurelian Dochia.
“On the long term, the fate of a company depends on the market, and not on state support schemes. The move is welcome. But, if the market does not give signs of stabilization, companies will not move to hire only based on a state aid scheme,” says Dochia.
Multinationals react faster and have the capacity to move more quickly to meet all the conditions, showed Dochia.
Newly-set companies will be able to benefit from stated aid on the basis of the new scheme if at the date the funding agreement application is registered they have subscribed and paid share capital worth at least RON20,000, which they should maintain until the end of the monitoring period, have shareholders/managers with experience in the field for which funding is requested and do not belong to shareholders that hold or held in the past two years another enterprise that carries or carried out the activity for which funding is requested.
On the other hand, operating companies can get state aid on the basis of the new scheme if their profitability is higher or standing at 1% in the last financial year and their own capitals were positive in the respective year. Beside these conditions, all the companies wanting to access state aid also have to meet eight eligibility criteria.
In the first two months of this year, the Finance Ministry had 22 investment projects under analysis, along schemes approved last year, totally worth EUR465.5 million, for which state aid worth EUR165.7 million was requested. A number of 4,962 new jobs should be created in the wake of these investments.
The government extended until June 2014 two state aid schemes that were set to expire in 2013, spurring investments and job creation, according to analysts.
In 2013, the total value of the 23 investment projects that were approved stood at EUR680.87 million, with 7,967 new jobs set to be created in the wake of these projects. For the projects, the Finance Ministry approved state aid totally worth up to EUR215.9 million. In 2013, state aid worth EUR69.3 million was paid.
In the past five years, investments of above EUR2 billion have been supported in Romania with state aid of almost EUR700 million, with the car industry as the top beneficiary.
(English version by Catalina Apostoiu)