Foreign Investors regarding the Romanian Business Environment
The Foreign Investors Council (FIC) analyzes crucial issues of the current economic climate, both from the standpoint of overcoming the financial crisis and the measures necessary for strengthening the administrative capacity of the State institutions.
The over 115 FIC member companies are important players in the Romanian economy by the contribution of over 30% to the creation of the national revenue and investments of approximately EUR 30 billion.
FIC has as its main objective the promotion of the dialogue between investors and policy makers for improving the business environment in Romania.
Consistent to such objective, FIC members, basing on their international experience, make recommendations for improving the business environment and are partners in the institutionalized dialogue with the Romanian authorities and with the international financial institutions, the IMF, EU, the World Bank.
Last year the international financial crisis reached the Romanian economy and rendered the measures taken by the Government and the Parliament of Romania unable to avoid recession, the signs of deterioration of the financial and economic situation being quickly noticeable, a decrease of economy by over 7%.
As response to such conditions, the private environment reacted, i.e. each company revised its internal processes in order to reduce expenses and make their activities more efficient. The result concretized in particular in the reduction of personnel and expenses related to personnel, increase of productivity and allocation of the available financial resources for productive investments.
Now, when analysts suggest that the transfer of the effects of the crisis from the private sector to the State sector, the Government and Parliament of Romania shall take into account the same type of measures.
"There are still significant challenges as regards the economic situation, deteriorated as a result of the effects of the international financial crisis, and the structural issues related to the preservation of the competitiveness of the Romanian economy. Now, once more, the capacity of the administration to establish the long and medium term strategy for its priorities and in particular to find as soon as possible the key factors necessary to the economic re-launch should be proved," stated Mr. Shachar Shaine, FIC's President.
FIC appreciates that reducing the expenses related to personnel together with the increase of the efficiency of the services supplied by the State institutions represent a measure with a direct and immediate impact on restoring the balance between the budget's revenue and expenses.
The immediate results may be obtained by allocating, as a matter of priority, the financial resources from the existing available funds, to certain categories of expenses, firstly to investments and in particular to infrastructure. This way, jobs shall be created, other sectors of the economy shall be stimulated and, in the end, this shall be a signal for the business environment that the economy may begin to increase again.
The evolution of the economy in the first three months of this year was still characterized by recession. Therefore, the increase of the revenue as a measure to balance the budget is very difficult to estimate and an increase of the taxes at this point is less likely to bring additional revenue to the State Budget. FIC considers that better results may be obtained by applying certain measures for stimulating the taxpayers that have a high degree of tax compliance, on the one hand, and hardening the sanctions for failure to pay and tax evasion on the other hand.
For the business environment, the transparency and predictability of fiscal rules in the economy are the most important elements of the medium and long term business plan.
Mr. Shachar Shaine concluded: "consequently, FIC considers it is essential for the authorities and the political parties to be aware of the seriousness of the situation and to implement as soon as possible a coherent and plausible plan. The contemplated measures, even if they shall also have a social impact, must be taken without delay. The absence of firm measures or the postponement of certain decisions shall continue to induce a state of uncertainty to the business environment and shall delay Romania's opportunity to overcome the effects of the crisis."
The Foreign Investors Council (FIC) is an association of the leading foreign investors in Romania. The FIC was established in 1997 when it officially started its activity with 26 companies as members. Today FIC accounts about 110 companies whose cumulated investments in Romania represent approximately two thirds of the total foreign direct investments made since 1990. FIC includes multinational companies providing the Romanian economy with a variety of goods and services.
The member companies of the FIC believe that the dialogue between policy makers and the investors lies at the very heart of successfully improving the climate for investment while stimulating the development of the Romanian economy.
The FIC is well positioned to provide constructive input to policy makers given the breadth of its membership, both in terms of their international experience and their substantial investment in Romania.
The management of the member companies devotes its time individually or in work groups, proposing solutions to the decision makers. FIC has produced six "White Books", setting out detailed improvements which it felt were needed in the business and investment climate, based on research and debate by FIC members.