With a skilled labor force that is one of the most competitive in the European market, Romania ranks ahead of Hungary, Cyprus, Croatia, Bulgaria, Luxembourg and Greece for ease of doing business, according to the World Bank. The country also registered a sharp increase in FDI projects in 2017 compared to 2016 and supports a thriving IT start-up environment thanks to proactive government programs. Ex-Minister of Business and Trade Ştefan Radu Oprea explains his vision for the future, and why the time for Romania has come.
You were appointed in January 2018. What have been the major milestones during this time, and what more do you hope to achieve?
We have a government program that we ran with at elections, and which we are keeping to. What we are doing for small and midsized enterprises (SMEs) as well as for exporters follows a strategy that is part of a whole ecosystem that we want to implement here in Romania: we want to have one of the most business-friendly environments in the region. This is our vision, and what we are working toward.
What specific steps have you taken toward this goal?
There have been some impressive developments, such as the Start-Up Nation program to restart the entrepreneurial spirit. Every year, 10,000 newly established companies are selected and receive a grant of €44,000. In 2017 there were 19,200 business plans, from which we selected 10,000. Today there are about 7,200 companies producing for profit and contributing to the Romanian economy. The fields of activity in the first year were production, creative industries, and the IT sector. We have created about 17,000 new jobs, out of which 14,000 went to our target group of young university and high school graduates. Another figure that I like to underscore is that 46% of entrepreneurs are women, which shows a good gender balance. I recently read that six out of every 10 young people want to be entrepreneurs. According to Eurostat, we used to have only 2.2 companies per 100 inhabitants, compared with the European average of 4.5, which put us in last place. So the aim of our Start-Up Nation program, developing the entrepreneurial spirit, has been achieved. Young entrepreneurs are answering the call, setting up new businesses, believing again in the possibilities of Romania.
How else are the Romanian economy and the business fabric evolving?
We had growth of nearly 7% in 2017, 4.1% in 2018, and 5% in the first quarter of this year, which means that the market is enlarging and there should be space for the new companies. And there are a lot of scale-up programs to improve capabilities in services and trade. We are also putting a lot of effort into the internationalization of Romanian companies: from the nearly €70 billion in foreign trade, 75% was with the EU and 23% with Germany. Romanian products are still known for their quality in what we call “traditional markets” – MENA and East Asia regions. Being on those markets with special dedicated programs is one of our aims and part of our trade diplomacy: we are signing MOUs with different countries, providing incentives for companies wishing to take part in trade exhibitions abroad, trying to overcome the barriers against trade. This is one of the things I want to develop in Romania, and we are currently on the offensive in this sense.
Would a good example of internationalization be Bitdefender, the cybersecurity and anti-virus software company?
Bitdefender is a good example because a lot of people are familiar with it, yet they don’t know it’s a Romanian company. But there are more examples. We can talk about Romania’s new unicorns [privately held tech start-ups with a market valuation of $1 billion or more] such as UiPath, which specializes in robotic process automation, and is aiming to capitalize around €10 billion.
UiPath has moved to the US. What can Romania and Europe do to retain innovating companies?
Innovation is changing today. Classic innovation comes from companies with budgets for R&D and from universities. But these days, you and a few friends with a good idea for a company can go online, and finance your project through good marketing, and become citizens of the internet rather than belonging to a country. In Europe today, there is venture capital to a certain level, but after that, the companies go to other parts of the world to secure financing, because the tools there are better. My proposal for keeping innovation in the EU is to develop a screening mechanism through the network of incubators and accelerators that already exists in Europe today, but which needs to be enhanced. There needs to be a proper network in the EU’s MFF (Multiannual Financial Framework) to be able to raise private funds in Europe and create start-ups that can be the new champions.
Romania provides a good environment for start-ups. Is this what you have contributed to the EU?
One of the ideas around the development of the business environment is that we should imagine one solution for all of Europe so that innovation can remain here.
Europe is drafting public policies based on the Small Business Act, which has to be modernized. Romania has proposed to revise the Small Business Act by introducing the digitalization concept. In order to have a competitive business environment, we need to facilitate private investment to eliminate bureaucratic burdens and create a digital infrastructure at the European level.
In Romania, we have developed legislation with this in mind, considering that 99% of companies in the EU are SMEs, and that these created 85% of new jobs in the last five years. Individual countries know that this is the core of their industries. So public policies and programs should address SMEs in the new MFF, with a focus on the competitiveness of Europe through start-ups with a view to the future.
When you look at the attractiveness of Romania in terms of FDI, 2007 was your best year. Now it’s roughly half of what it was last year. How do you hope to increase this figure?
This should be the year of investment in Romania. There are public policies and strategies in place, and our fiscal burden is one of the lowest in Europe. We also have Invest Romania, a one-stop shop for investors to help them find possibilities in green-field or brown-field investment, offering the service for free. We know that there is a lot of competition for any new project, so the business environment must be friendly, and we are focusing our efforts there as well. We have changed the rules to reflect the real needs of the business community and provide state aid as well as fiscal incentives. And there is no longer a 6-8 month wait to sign a contract. So real investor needs are being met. We listened to those needs and transformed the legislation accordingly.
What about the Romanian labor force? How competitive is it?
I have heard from German companies established here who are very happy with their Romanian workers, praising their attitude, mentality, innovative approach and good skills. We are also working to improve the stability of the labor force through our public policy: we raised the minimum wage, although it remains four times lower than the EU average. Romania produces skilled workers and I want to underscore the relevance of the IT sector: we have over 100,000 employees in the IT sector, and we have stabilized them through 0% taxation on wages in the IT sector.
How important are PPPs in your development plans for Romania?
We are involved in marketing PPPs all over the world. We have projects in infrastructure, roads, railways, the Bucharest airport, agriculture, energy, health and tourism. The involvement of the Romanian state is up to 25% of the project, and we feel that a lack of good infrastructure in the country should be an opportunity for construction companies. With the new PPP law, there are investors who want to be part of Romania’s development. We understand that the bidding process used to be too complicated and could take years, but we have streamlined it through public policy. The key-word is to simplify.
How important is infrastructure for Romania, especially considering that it is still not part of the Schengen area?
It is really important, and I always discuss this topic with foreign investors who already do business here. A lot of people think of the Schengen area just in terms of visas, but it also has an economic side to it. I’ve been to visit big automotive companies that export goods to other EU countries, and the average speed of freight trains is well below the EU average. Yet, such delay is nothing compared to the 10 hours waiting time that freight trains spend at the border, due to the fact that Romania is being kept out of the Schengen Area. Any such delay means higher costs, which are reflected in the higher price that the EU citizens are paying.
It’s obvious that we’re stepping up investment in infrastructure, but we need to see the whole context. In terms of the technical process, we have taken all the necessary steps for accession, so now it is a political decision.
Where do you see synergies with Germany?
There are obvious synergies because 23% of our exports go there. We are producing parts that are assembled in Germany, and there are German companies investing in Romania and exporting to other countries from here. The auto industry is the main driver in both countries. And taking into consideration our history, there are parts of Romania that once had a lot of German inhabitants. Romanians are skilled in languages, and this is another benefit for our competitiveness.
What are the key aspects that German investors should keep in mind when considering Romania?
Business is not just about profit; you are also a human being and quality of life matters. Germans who come to Romania have a good feeling about their experience here, and their attitude is important to the perception of other Germans who don’t know what it’s really like here. The media tend to focus more on the negative aspects and less on the positive, yet there are a lot of success stories in Romania that need to be talked about. My advice to investors is that they should get to know Romania better, speak with the people who are already here, and see what they have to say about it. There is a time for everyone, and our time has come. Now is the time for Romania.