Although Romania still struggles with issues such as underdeveloped infrastructure, poor EU funds absorption and bureaucracy, the country has reported progress over the past couple of years, said participants to the sixth edition of the German and Austrian Investors Forum organized by BR this Monday. And recent news about Romania’s fight against corruption helps improve the country’s image even further, they added.
“There is definitely a positive development in what we see happening with the anticorruption fight,” commented Gerhard Reiweger, the ambassador of the Republic of Austria to Bucharest.
Achim Troster, deputy head of mission with the German Embassy to Bucharest added that there are “hopeful signs” coming from Romania’s political scene. “Let me just mention the elections last year, and not because of the fact that a perfectly German-speaking president was elected. What is most relevant for the economy is the fact that the fight against corruption will continue and we have seen this in the last report issued by the European Commission at the end of January, the famous CVM report, which sees some positive signs on a repeated basis. This is not a breakthrough but it is a very good sign,” he explained.
Troster added that he is also optimistic that one of the recommendations of the last CVM report, the one on tackling everyday corruption is being addressed. “Things will be improving, slowly but steadily,” he added.
Representatives of companies present to the event have also saluted the authorities’ efforts to fight corruption. “For us in Romania it (e.n. the anticorruption fight) has been a fundamental shift over the past one and a half year on how this is being tackled both in the public area but also in the private sector. This is basically changing our profile on how we want to invest in Romania,” said Markus Lause, director of the enterprise business unit at Vodafone Romania.
Bridging the gap between the west and the rest
Transylvania has long been a region of interest to German and Austrian investors, especially those active in manufacturing, because of its proximity to the west, its qualified workforce and large German-speaking population. In the meantime, the rest of the country, with the exception of the capital Bucharest which has seen strong development in the services sector in recent years, has benefitted from considerably fewer investments, be they German, Austrian or otherwise, noted Joerg K. Menzer, managing partner at Noerr and the event’s moderator.
The underdeveloped transport infrastructure in the south and east of the country is the main reason behind these regions’ incapacity to attract more investments, commented Mihai Boldijar, general manager of Bosch Romania. When a manufacturing company has to transport its goods to western markets as fast as possible in order to meet contractual deadlines, the road infrastructure makes all the difference in the decision to invest or not, explained the GM.
As a result, Transylvania has become very dense in terms of manufacturing companies and often there are direct competitors present in the same area, he added. Investing in transport infrastructure is vital to ensure that the gap between Transylvania and the rest of the country doesn’t widen even further, stressed Boldijar.
Bosch has been present in Romania for 20 years and currently has more than 2,000 employees in the country. “We’ve made some very large investments over the past five years and we will continue to do so. So the clear message is yes. We are very confident about Romania,” said the firm’s GM. The company runs two factories in Romania and has plans to invest further, both in production as well as R&D activities.
Representatives of Austrian real estate developer Immofinanz also talked about further investments in Romania. “We have seen increasing demand, especially for office and industrial space. There are companies that are expanding or extending their contracts. They see the local economy’s potential,” said Sorin Visoianu, country manager for office and logistics at Immofinanz Group Romania. As a result the developer is currently investing EUR 34 million of its own funds to build an additional 20,000 sqm (GLA) of office space in the Iride Business Park in Bucharest and will start the development of a logistics park in the capital this year.
Paving the way for the Mittelstand
Romania’s poor infrastructure was only one of the main issues when doing business in Romania raised by representatives of the two communities. Bureaucracy, fiscal and legal stumbling blocks such as the legal framework for public procurement procedures and the poor absorption of EU funds were also discussed. Addressing all this would help attract more investors locally and this time around more small and medium-sized companies, argued participants.
“We all know about Continental, Bosch, Schafer, E.On and others being present locally. I would very much like to see small and medium-sized capital companies coming to Romania as well. I think this would be an excellent source of growth and a new driver for improving the relationship between Romania and Germany and Austria,” said Vasile Cristescu, business development manager at Rodl & Partner.
This would be a welcome development given that most major German and Austrian investors are already present locally and there were few newcomers last year, commented other participants. “German and Romanian bilateral relations have been improving with regard to trade as well as investments. There have not been many newcomers given that we also saw a decrease of FDI to Romania of about 10 percent last year. So we didn’t see so many newcomers but we saw a lot of expansion investments made by German companies here in Romania,” said Sebastian Metz, general manager of the Romanian-German Chamber of Trade and Industry (AHK Romania).
Twenty years from now…
Romania has made considerable progress over the past few years and it continues to develop in the right direction, said Arnulf Gressel, deputy head of Advantage Austria. However, changes need to happen faster and the authorities have to come up with a long-term development strategy, argued panelists. In this context, making sure that the country maintains its main strength – its workforce – over the years is crucial.
“What will Romania look like in 10, 20 years given migration and its ageing population? We are unfortunately losing very good people and we need to have a plan. Companies are looking at the long run,” warned Bosch Romania’s GM.
This is an issue that applies to the present as well as the future, argued other participants. The economy on the whole needs more than university graduates but also better qualified skilled laborers, said Metz. “This is something that is greatly needed because there has been an increase in labor costs and this can only be offset if the efficiency of these workers is also increasing. This is only done when you are better qualified. The dual education system can answer this challenge,” he suggested.
What will Romania look like in 20 years? Should progress take place faster, it will have the resources to ensure its future. “What we have to watch out for is that we don’t lose the time we have. If we go on for another 10, 15 years the same as we have for the past 25 years we will not have enough young and strong people to carry this country further. This is my personal belief,” concluded Menzer.