Confindustria: Cheap farmland and CAP funding lures in more Italian investors

Foreign investors control about 8.5 percent of Romania’s farmland, and out of this, almost a quarter is owned by Italians. Their presence is about to increase even further, Mauro Maria Angelini, president of Confindustria Romania, told BR. He is also the VP of Confindustria Balkans and has extensive background in international management.

Simona Bazavan

What sectors of local agriculture interest potential Italian investors?

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Given that we are talking about medium- and long-term investments and not about speculative operations, among the most attractive sectors we would mention the wine industry, especially considering that the government’s investment program for this sector provides funds of over EUR 48 million through to 2018.

Some of the activities financed under this program and where Italian companies have expertise are the restructuring and reconversion of vineyards and the modernization of the production process with the purpose of increasing productivity and competitiveness.

Looking at the Italian investments made in recent years, sunflower production, which last year was up by half y-o-y, and grain production in general remain sectors of interest. Another one is soybean production, especially as Italian companies active locally have recently implemented a new technique which increases yields to three times the national average.

How many Italian companies are active in the local farming sector?

Italian investors represent about 6.5 percent of the total number of farmers. About 8.5 percent of Romania’s farmland is owned by foreigners and out of this, 24 percent is held by Italian companies.

Are new Italian firms entering the Romanian market?

Confindustria Romania has exclusively represented Confagricoltura in Romania since 2013 and in this capacity we continuously receive numerous requests for information, clarifications and concrete business opportunities in the local agriculture sector. The interest is coming both from large companies and individuals looking to invest especially in grain production, livestock, rice production, the processing of fruits and vegetables, the milling industry and dairy production.

And this is not surprising. Land costs less and is widely available and the workforce is becoming more qualified without getting more expensive. New investors are also attracted by the new the Common Agricultural Policy (CAP) for the period 2014-2020 under which Romania has an allocation of EUR 19 billion. In addition to this, the liberalization of the land market came into force on January 1, a measure that undoubtedly attracts Italian investors to start a business in Romania. We expect Italian investors to set up numerous small and medium-sized businesses in Romania as a direct result of this.

What are the challenges?

Even though the industry has reported strong growth in recent years and has become, alongside industrial production, a leading sector in the Romanian economy, some Italian investors are still discouraged by the existence of structural issues. Investments are particularly impeded by the excessive fragmentation of land, which forces Italian entrepreneurs to consolidate land in order to reach the number of hectares required by a farming business. This is a rather challenging endeavor, both in legal and bureaucratic terms, due to the lack of a land registry until 2007. The low level of mechanization, the reduced storage capacity, the current lack of skilled labor and underdeveloped infrastructure are other issues. On one hand this deters Italian investors, but on the other hand it shows the hidden and still unexploited potential of Romania’s agriculture, where an investment made today can be an advantage for the future, especially in terms of land availability and its competitive price.

What should Romanian farmers and authorities learn from the Italians’ experience?

Romania’s agriculture still has unresolved structural problems – the excessive fragmentation of land, low mechanization, limited storage capacity, irrigation, market structure and difficult access to credit. Still, Romania has enormous potential, and in order to develop, it can learn from the Italian experience, both in terms of organization and representation.

Italian agriculture developed based on local capital and the setting up of medium and large companies where this was possible. It focused on integration but also on improving economic condition for small producers. Romania too can evolve from subsistence to industrial agriculture by addressing issues through government actions and EU funds. For this the country needs to address bureaucracy, simplify access to EU funds, address the land cadastre issue and put a permanent focus on product quality, for internal use as well as for export.