“If you remain stable, predictable and do not surprise the business sector with new taxes, you stand every chance of growing 5% over the next decade. Romania is headed in the right direction. I am optimistic about 2020,” said Nikolai Beckers, chief executive officer of Telekom Romania at the Key Players in the Economy Conference organized by Ziarul Financiar in partnership with Alpha Bank, CEZ and Carrefour.
The Telekom CEO believes the government could cut taxes and use the money for infrastructure.
The salaries in the upper bracket are sometimes even higher than in developed countries. Salaries in the opposite bracket are really low. It is important to raise the minimum wage, but productivity is very low in many areas, such as agriculture, he added.
Romania has sound economic growth for the first time, instead of one fuelled by capital inflows and loans, said Maricel Popa, state secretary with the Economy Ministry.
“It’s a process accompanied by a deficit decline, by a record low inflation.”
Equally optimistic about the trend of the economy is financial analyst Ionel Blanculescu, who estimates Romania will reach a new economic boom phase in 2018-2019.
Unlike the past boom days, the current economic growth has a particular component, which has to do with an economic climate where tsunami-like phenomena occur more often.
“Economies can no longer be planned, we can no longer do five-year forecasts, with linear growth estimates,” explains Dan Ostahie, CEO of computer and electronics retailer Altex.
“We now have tsunami-like phenomena, coming from the technology area mainly. Some industries disappear, others soar. The future world will be governed by IT.”
The businessman believes Romania is a lucky country, which is headed in the right direction and its economic growth will reach 5% a year stimulated by needs, by the geographic position and climate.
“Growth will come from IT, as well as from agriculture. Economic growth will receive a boost in two or three years and if we do not miss it, we will be growing at a rate of 5% a year.”
Macroeconomic developments show in the number of market concentration operations, which saw an abrupt decline during the crisis and are now seeing a resurgence.
“The Council would approve 80-90 market concentration operations before the crisis and then we dropped to half and are now starting to recover. We have seen 40-50 market concentration operations in the energy, financial services, real estate sectors and one in food retail in the past year, where we have been more reluctant,” said Bogdan Chiritoiu, Competition Council chairman.
The surveys of the council show that there are sectors with fierce competition and lower prices than in the EU, such as telecom (four competitors) and food retail. Moreover, the banking sector is seeing some improvement, as interest margins were higher than in other countries in the EU. There are also problem sectors, such as professional services, cement, which is a concentrated market in Romania.
“Before EU accession, investigations focused on state aid, now greater efforts are being made to uncover antitrust cases, fines have gone up, as well.”
Bogdan Chiritoiu added the institution he runs is analyzing freight transportation, construction materials and food processing legislation, in order to remove some anti-competitive provisions, which hinder development of certain sectors.
Analyst Ionel Blanculescu is optimistic, too, saying Romania is now in the first phase of a new economic cycle, the pick-up phase, which started in 2014.
“We had 4.2% growth in the first quarter, compared with the first quarter of 2014, and 1.6% compared with the fourth quarter of 2014. Let’s say 3% a year, a good figure. We have a good growth period ahead of us and we must use it. We have EU funds to use, EUR23 billion, and most programs approved by the EU.”
He expects a new economic boom in 2018-2019, a trend partly driven by the 100th anniversary of the Great Union Day, which will show in investments. Moreover, in 2019 will be Romania’s turn at EU presidency for the first time.
Remus Borza, Hidroelectrica’s court-appointed trustee, explained how serious the insolvency of this state-run company was for the economy and the energy system, showing the real potential of the state-run companies.
“Hidroelectrica is a competitive, solvent company that has radically restructured costs and production flow. It was the most profitable company in Romania relative to its revenue. These are results that called for sacrifice, 35% of the employees left. Hidroelectrica’s insolvency meant a great deal for the energy system, as well as for the economy.”
The government owns stake in fewer than 1,000 companies, while the Trade Registry has 700,000 companies registered. Those companies have to be run in line with the economic efficiency principle, as any private company, Borza said. On the other hand, he criticized the government’s policy to support metal industry companies with fiscal incentives or indirect subsidies via Hidroelectrica.
“We externalized profits to those companies, to Alro, to ArcelorMittal and to thermoelectric power producers such as Complexul Energetic Oltenia (Oltenia Energy Complex). The government is cutting the green certificate scheme for the two producers even now. The people and economic operators who have no lobby experts suffer.”
Altex’s CEO Dan Ostahie, too, criticized some steps taken in the past. He says the decisions commercial banks, the government and the central bank made in 2009-2011 led to the “destruction of the private economy, by destroying consumer spending.”
After 2004-2006, which were years of growth fuelled by easy loans, the computer and electronics market decline in 2009-2011 was abrupt, reaching as much as 50% in 2009, worse than in other countries in the region.
Ostahie says soon such easy loans will return in stores because there can be no economic growth without consumer spending.
“Altex took a while to start its online commerce business. We are (…) investing a lot in it. We invested EUR50 million in development in the brick&mortar in 2008-2010. We now have the same resources to invest a in another model. Technology is changing very fast and one has to invest to keep up.”
Retail as it is now is obsolete and needs changing, yet no one knows that model should be developed, he added.
“We’ve got the Amazon model, but we need scalability, we cannot apply it on small markets. We expect to see a fast-paced development of online business and emergence of fast players. Those that are already on the market are carrying rocks and if they do not throw them out of the boat on time, they risk losing.”
Mihai Guran, regional operations sales director with Bitdefender, has a similar vision of the future, saying Romania stands chances of growing and advising local companies to have the courage to take competitive products to the international market.
“I recommend them to go to international markets, get some funding and get a competitive product out there. Innovation sells. It takes courage.”
(English version by Loredana Fratila-Cristescu)