Still enough time for state aid submissions

Companies that commit to make an investment that creates at least 200 new jobs for five years after completion can still apply for and obtain state aid until the end of this year. Manuela Furdui, managing partner at FinExpert, sheds some light on what type of businesses are eligible for state aid and why most firms with local capital stand little chance of success.

By Otilia Haraga

How can a company obtain state aid?

The first step for a company that intends to apply for state aid is to establish whether its project is eligible, verifying whether conditions set by government decision HD 797/2012 are met. The main conditions for obtaining state aid are that investments have an innovative character or include an IT&C component representing at least 20 percent of the value of the investment plan, and at the same time create 200 new jobs that the company can maintain for five years after completing the investment.

Not eligible are call-center activities (under NACE [the activity domain list, a classification of activities in the national economy] Code 7022, consultancy for business and management; NACE Code 7320, market and public opinion research; and NACE code 8211, combined secretarial activities).

After a company obtains financing, what other steps are necessary?

After the financing agreement is obtained, there follows the most important phase of the process – the implementation of the project and the reimbursement of the eligible expenses (the cost of the newly hired personnel for a two year period). The period allocated for reimbursements runs until 2018, which allows ample time for the implementation of all approved projects and for the reimbursement of the entire approved sum. The next phase after completing the implementation is the monitoring throughout the five years during which the investment and the 200 new jobs are maintained.

What is the profile of companies to which FinExpert has provided consultancy?

Currently, FinExpert’s state aid client portfolio numbers over 10 big investors whose applications have resulted in a new financing agreement. The state aid approved for the projects assisted by FinExpert exceeds EUR 150 million. The most successful scheme – judging by the volume of the submitted requests for financing and the issued agreements – is the one instituted via HG 1680/2008 (open until the end of 2013) which targets initial investments of at least EUR 5 million leading to the creation of at least 50 new jobs.

Most companies that secure state aid belong to the industrial sector: 48 percent from the automotive sector, 7 percent are in car and equipment manufacturing, 7 percent come from the medical sector, 4 percent from the plastics industry, 4 percent from tourism and 30 percent from other industries. Most companies have concentrated their operations in western and southern Romania, mainly in Prahova county.

For the state aid scheme instituted via HD 797/2012, we have received numerous requests for consultancy (at least five-seven per month). Unfortunately, few projects prove to be eligible, meaning they fail to fulfill all criteria. Most of these companies are located in the economic centers of Bucharest, Iasi, Cluj and Timisoara, which are in fact important suppliers of skilled labor.

Are these companies generally multinationals?

One of the conditions imposed by the government decision is that only a company registered according to Law nr. 31/1990 can submit an application for state aid. Indeed, most of these companies are part of multinationals. Very few firms with solely Romanian capital can fulfill the selection criteria. Essentially, state aid schemes are oriented towards the development of the region and the business environment, and the creation of new jobs, irrespective of the nature of the capital.

How do you comment on the short period in which companies can submit their applications?

Regarding the January-March time span, we cannot talk about lack of financing but only the fact that the state budget for 2013 was only approved in March. During this time, the submission of financing applications for all ongoing schemes was suspended. Since it has opened, everyone is aware that this scheme is valid only until the end of 2013. It is true that the time is short, but since we are talking about a relatively low budget compared to the state aid scheme supporting durable economic development, HG 1680/2007, I believe there is enough time for submission and approval for companies that have clear development projects for the next three to five years.

It is very important to mention that applicants must submit their application in due time so that the documentation can be analyzed and the financing agreement issued by December 31, 2013.

The scheme has been criticized for favoring multinationals and restricting Romanian companies’ access to financing. What is your view?

In my opinion, based on discussions with companies in the field, from the viewpoint of the required number of new jobs, the state aid scheme does not stimulate local Romanian investments. Large companies, multinationals, that have the ability to create at least 200 new jobs will most likely recruit existing employees working for smaller local firms.

IT is among the few sectors, if not the only one, where both the salaries and the number of employees have increased, as this is the field where companies are still hiring, but it appears there are not enough candidates. In theory, firms with Romanian capital have equal chances of access to financing, but usually they do not meet the imposed criteria.

otilia.haraga@business-review.ro

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