Romania lost competitive advantage in the region as major investments are now done in the neighboring countries, and its next major competitors are Serbia, Ukraine and even Hungary, Continental Automotive Romania CEO Christian von Albrichsfeld said at BR’s Foreign Investors Summit.
Continental have over 243,000 employees in the world and 60 percent of its business is in the automotive electronics industry.
In Romania, Continental has 19,700 employees and it invested EUR 1.4 billion in 10 locations. 5,700 people are engineers working in R&D, and the rest, employees in production.
“In Romania, the growth was mainly based on consumption. But the investments, including public investments are lower, especially in the infrastructure. Romania lost competitive advantage in the region, as we see that major investments are now done outside, in the neighboring countries,” von Albrichsfeld warned.
According to Continental Romania’s CEO, Serbia, Ukraine and even Hungary are the next major competitors for Romania.
“The salaries were increased artificially in the last years and far beyond the productivity increase (e.g. minimum salary with 76 percent – without contribution swap – from end 2014 to January 2018, so in little more than 3 years) and the companies cannot compensate this with normal measures. They will start to automatize production. Romania has lost the competitive advantage of low wages, so why would investors choose Romania instead of other country in the region?” he asked.
The high disproportion between labor costs and productivity has to be and will be corrected, but Romania needs to invest in education and to understand that wage increases must follow – not precede – productivity increases otherwise this will create unemployment especially in underdeveloped regions.
“Continental collaborates with both sub-universities and universities level of education. We have a self-driving car developed in Romania, we are working on smart cities. We need more people in IT, in software structures, in technology fields. And we need a Start-up culture,” von Albrichsfeld indicates.
The CEO underlined the importance of building infrastructure in Romania.
“The big cities need to be connected to western highway network. More clever approaches are necessary in this field, like connecting Brasov to Sibiu instead of trying to go over the mountains,” he said.
“There are several things that we need to bring back to Romania, among which there is predictability, to be able to plan 5 years in advance. Stable fiscal system, sustainable growth, more infrastructure investments and more education for much better skilled people,” von Albrichsfeld added.