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High growth without infrastructure is not possible in the long run

Romania's transport infrastructure development has been slow over the past decades due to a combination of lack of prioritization, discontinuity of decision making and poor planning and execution. The figures support this. It used to be that people argued infrastructure would spur economic growth. Romania is rapidly approaching the point, if it has not reached it already, where the current infrastructure will act as a break on growth. To reach a parity in terms of living standards with western economies, Romania needs at least two decades of strong economic growth. The current growth rate will be impossible to maintain in the medium and long term without immediate and massive investments in infrastructure.

According to the Global Competitiveness Report 2016-2017, Romania ranks 88th out of 139 countries when it comes to the quality of its infrastructure, its position having deteriorated by two places compared with the 2015-2016 ranking. Also, Romania’s country report 2017 made by the European Commission shows that Romania has the highest rate of public investment in the EU in the last decade and although overall performance improved, the country ranks last in the EU in the perceived quality of infrastructure.

It is vital for Romania to change the way it approaches the infrastructure sector. The efforts made until now are not sufficient. There are several key points which the authorities must address:

  • Clear objectives. It’s still not clear which are the priorities for the next 3 to 5 years and how these projects will be financed and implemented.
  • The National Road Investment Company (CNIR) needs an appropriate corporate governance structure in order to ensure that it is properly managed; the new investment entity should comply with Law No. 111/2016 regarding corporate governance. It is also important to clarify the scope and objectives of CNIR, as well as the unit that will manage the projects, because the lack of professional management and expertise has sometimes led to delays in projects for minor reasons.
  • Key issues of clarity, hierarchy and funding schemes are extremely important and relevant, not only to facilitate the development of strong infrastructure but also to overcome existing bottlenecks that lead to delays in the development of projects. An inter-institutional joint effort is needed to achieve this.
  • The Sovereign Fund for the Development of Romania (FSDI) investment criteria and priorities will need to be clearly defined.
  • The new PPP law should provide a coherent framework, which formers versions of the law did not.
  • The absorption rate of EU Funds is too slow and the authorities should take all necessary steps to accelerate it. Without these funds, it will be almost impossible for Romania to develop large infrastructure projects.

FIC believes infrastructure is key for Romania’s future development and it is also one of the three pillars Romania must focus on if it is to become one of the top 10 EU economies, a message we are also conveying through our Va Urma (www.vaurma.ro) campaign.