Election aftermath: hoping for a smooth outcome

After a year dominated by political feuds and with the parliamentary elections finally over, it is vital the new government focuses on the economy for a change and how to support growth, the local business community is urging.

Simona Bazavan

Romania’s parliamentary elections on December 9 brought a clear victory for the center-left governing coalition – the Social Liberal Union (USL) – which won two thirds of the seats in the Chamber of Deputies and Senate.

The elections have changed not only the political structure of Parliament but also the number of actual lawmakers. The present electoral system, which combines constituencies with proportional representation, will mean that over 2012-2016, Parliament will host a whopping 588 MPs, up by 117 from the present number of seats.

Overall, Romanian Prime Minister Victor Ponta’s USL won 395 of the total 588 seats, followed by the opposition Association for a Right Romania (ARD) with 80 seats, Dan Diaconescu’s populist PP-DD with 68 seats, the Democratic Alliance of Hungarians in Romania (UDMR) with 27 seats, and representatives of the minorities with the remaining 18 seats.

With the elections now done, the next step is the appointment of a new PM to form the government. The incumbent Ponta, president of the Social Democratic Party (PSD) and co-head of the USL, is also the coalition’s nomination to form the next government. The appointment, however, has to be made by President Traian Basescu with whom Ponta has been locked in a power struggle since his appointment to office this May.

While the president has recently softened his language towards Ponta, he previously said he would never reappoint him prime minister and had made no public comment on the result of the elections or his intentions by the end of December 13.

With this summer’s impeachment attempt and its outcome still fresh in the memory, an impasse in the forming of the new government would see Romania plunge back into political turmoil with severe consequences for the economy, everyone agrees.

“Markets have welcomed Romania’s ruling coalition’s landslide victory in Sunday’s election, hoping the country will win a new deal with the IMF and push through reforms in return,” wrote the Financial Times, while the Wall Street Journal warned against the risks of “the bitter partisan feud” among Romania’s top leaders, which threatens the country’s economic development.

While the USL scored a clear victory, “the bitter trench warfare” between Basescu and Ponta “will probably continue, distracting policymakers from urgently needed reforms of the economy,” predicts The Economist.

Bloomberg wrote about Ponta’s huge majority in Parliament, comparing it to “Prime Minister Viktor Orban’s position in neighboring Hungary.”

Coming back to Romania, local businesspeople told BR of their expectations are for the new government.

Corneliu Bodea, VP, Adrem Invest

The new government has a difficult mission for the coming period and it must have a clear, coherent and unitary strategy in order to meet its strategic objectives. It must identify those vital sectors which can support economic growth by attracting investments, such as agriculture and energy; it must support Romanian entrepreneurs and come up with policies for the development of the public sector (…) The clarity of these public policies and predictability are essential for attracting local and foreign investments.

Florin Eugen Sinca, analyst, BCR

The new government’s main priority should be economic growth (…). At present ,Romaniacan support economic growth of only 1-2 percent, significantly below the 5-6 percent reported before the recession. Given this, Romania would need about 50 years to converge towards the GDP per capita in the Euro Zone, which is a long time. Implementing pro-growth economic policies therefore is absolutely necessary – promoting laws which would support private investments in agriculture by consolidating farmland into large plots for exploitation, developing PPP for infrastructure, attracting investments from outside the EU through actively using our diplomacy, supporting the IT&C sector where Romania benefits from extremely talented specialists and continuing privatizations through the BSE.

Ion Andronache, CEO, Syscom 18

We don’t have any sort of expectations from the present government, just as we didn’t have expectations from former ones. We live in two parallel worlds and they don’t understand anything at all about ours. The less we hear from them the better. In an ideal world where the Romanian government also dealt with industry, it would do the following: keep the exchange rate stable, force banks to lend money to industry, support Romanian firms in getting orders from state companies and offer fiscal incentives for exports for Romanian companies.

Camelia Sucu, president, Class Living; owner, Iconic Food Wine & Design and Piata de Gros Abundia

The only thing I truly want and which I publically ask of the new government is that in the future if they can’t make local entrepreneurs’ lives easier, at least don’t complicate them by devising obstacles as has been the case until now. The business environment is a country’s prosperity engine and entrepreneurs themselves have the means to generate progress through their businesses provided they have a legal, fiscal and administrative environment which is at least fair if not visionary. And I admit there is something more that I would hope for: the decency of collaborating if absolute agreement on decisions can never be reached (…) Reducing VAT on foods would for me be the sign that someone is beginning to really want the quality of life to go up in Romania. Also establishing agriculture as a national high-priority sector and stimulating PPPs in strategic domains.

Dragos Damian, president, Association of Generic Medicines Producers from Romania (APMGR)

I believe it is mandatory for the new government to develop a two-fold strategy that includes general and strategic actions. Nonetheless, as president of the APMGR, I would like to stress the importance of an integrated strategic approach towards the pharmaceutical sector as this would have an impact both economically and socially.

Alexandru Lapusan, CEO & founding partner, Zitec

I hope the new government will not hike taxes for small and medium companies and that it will support exporting industries. I would also want the new government to offer more support to the IT industry and not by discriminatory programs meant only for large players. In a highly competitive field such as IT and on the related labor market, such interventions won’t help the industry but only a few companies. In my opinion, a Silicon Valley can’t be achieved through government ordinances but by offering the right environment where if there is value, companies will raise themselves.

Besides support for exports and avoiding raising taxes, it would be best if the government let private companies manage themselves as government interventions will do more harm than good.

Victor Ciuperca, area manager, amb Holding

First of all, there is something inadequate about the phrase “new government”. We are in theory dealing with the same governing political force since May 2012 which has now been confirmed by the popular will (…) If the government keeps the majority of its members and policies, proving that after the political crisis in May 2012 the coalition sent its best to Victoria Palace, then the expectations are in line with the performance so far: high taxes, increased social protection and legal uncertainty for the business environment. However, any manager wants from any government first of all fiscal stability and predictability, measures to reduce unfair competition and the black market, a decrease of tax pressure for employers/employees, a stable exchange rate and of course reduced bureaucracy.

Measures which I would like to see taken include a fiscal amnesty and encouraging local businesspeople with accounts outside the country to bring their cash here with no questions asked for a certain period of time, exempting newly set-up companies with a social capital of under EUR 10,000 from paying profit or revenue tax in the first year of activity and changing the fiscal code to offer investors tax incentives, especially in rural areas.

George Stanson, business manager Romania, Bulgaria, Croatia, Serbia Case IH & Steyr Balkans

Bringing the 1-2 million hectares of land that is not cultivated back into the production system is the only way to generate “added value” in a sector which guarantees the sale of the final product each year. If this is done without delay,Romania’s budget stands only to gain. Related to this, a large share of the land which hasn’t been cultivated for years could be reintroduced into the production system by applying the law that allows foreign companies to buy local farmland from January 2013.

Randy Tharp, managing director, Epstein Architecture & Engineering

It is vital for Romania to maintain credibility in the eyes of investors. The program of reforms agreed with the IMF, the European Commission and the World Bank should continue (…).

State-owned company restructuring and, if necessary, sale can be the cornerstone for the new government in 2013. Money from privatization would be a serious buffer to protect Romania against the Euro zone crisis. So far, none of the state-owned companies has been listed, even though the government has committed to sell more stakes. The new government must get large-scale investment projects started, especially in infrastructure, hire better trained people in the public sector and use the available European funds.

Grigore Horoi, president, Agricola

Players from the economic environment – without exception I believe – are waiting for the establishment of a climate of peace and stability. We are lacking leaders who treat things seriously, who are willing to help when needed, who inspire and encourage. In other words, with every beginning we hope that the new elite will address the country’s problems seriously, that it will use its resources wisely and that its strategic decisions will be grounded and inspired. Some of the concrete measures I would like to see taken include the setting of strategic directions, the creation of a fair economic environment, the end of “legal thefts”, solving the issue of the losses reported by state companies, a stable legal environment, supporting innovation and a strategy for the implementation of good practice European policies.

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