Market looking more star-spangled to US firms

The predominant tone was more optimistic at the third American Business Forum organized by BR last week, after some of the improvements that US companies have been advocating for some time, such as the new PPP law and Labor Code, were eventually approved by the authorities. While stressing the importance of certain details that need to be settled in their respective domains, American investors see the future more brightly.

Staff

“The last two times that Business Review held this event, in 2009 and 2010, it was difficult to be optimistic – because in June 2009 things were continuing to get worse very quickly and in June 2010 everyone’s consensus was that Romania would bottom out but things might get a little worse before they got better,” said Blair Labarge economic counselor with the US Embassy. He went on to say that now everyone seems to agree with the IMF and private sector forecasters that the economy is gradually recovering and continuing to improve. He warned, however, that as Romania is approaching an election year, the challenge will be to continue with the structural reforms and not to fall into the trap of populist measures.

Also present at the event, Alexandra Gatej, president of AmCham, which numbers 300 member companies that have invested over EUR 10 billion locally, said that this year the organization would concentrate its efforts on promoting the need to increase the competitiveness of the Romanian economy. 

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Good news from Brussels said Dan Schwartz, managing partner at Scot & Company, who talked about a project for an EU directive on the common consolidated corporate tax base. If adopted, it will bring a ‘one stop shop’ approach by applying a single set of tax rules and allow businesses to deal with only one tax administration regime at EU level.

One of the most notable American investors in Romania is Ford. Sales of new vehicles have plummeted in the past couple of years but Henrik Nenzen, managing director of Ford Romania, said the company was optimistic regarding the future. The market for new vehicles could reach 300,000 units per year up from 100,000 units, Nenzen said, adding that the new registration tax will help boost sales of new cars.

Putting the recession aside, 2010 brought some good news for local foreign investors. “Looking at the big picture, the public-private-partnership (PPP) law that was passed and the reforms of the Labor Code are good things, ” said Perry Zizzi, partner at Clifford Chance Badea. However, particularly in the PPP law, amendments would be needed. “We would like to see the possibility of public institutions being not only able to put in assets but also cash, ” he continued.

Attendees agreed that progress has been made in the past few years in Romania and pension reform stands as proof of this. “Pension reform in Romania is one of the few successful reforms that have ever been made in Romania. At the moment, in 2011, there are 5.29 million participants in it,” said Mihai Coca-Cozma, president of the board of directors and GM of Alico Pensions. The assets total EUR 1 billion, “which is basically 1 percent of the Romanian GDP,” he added. The market was very aggressive and very competitive: it started with 14 administrators and now there are only 9 on the market. “As an American company, we have a great advantage because the authorities are more open to listening to us,” concluded Cozma.

In a post-event interview with BR, Dragos Manac, CEO of Appnor MSP, pronounced the IT domain a leading sector in the Romanian economy. “Niche, high-margin services for the global market should be our focus,” he said. Switching from running infrastructure and platforms in house to acquiring them as a service is a growing trend for the companies that need to upgrade their current infrastructure or just need to run a predictable, cost-effective IT environment. The cloud computing movement is a big enabler in this area. Cloud services are growing on the local market, but still lagging a bit behind other EU countries, said Manac.

The third edition of the American Business Forum was held last week at JW Marriott Grand Hotel and was attended by 110 participants. The event was sponsored by Fine Law Patrascanu & Associates, Horvath & Partners, Clifford Chance Badea and Scot & Company.