Interview. Eric Stab (FIC): More public investments are needed to support the country's growth

Elected for a second mandate at the helm of the Foreign Investors’ Council, Eric Stab tells BR in an interview what his priorities are in this role and how Romania can attract new investments from large firms that are already present here as well as from new players looking to start doing business locally.

He says that Romania has the potential to grow by more than 4 percent annually provided that the authorities focus on investments in key areas, such as infrastructure. On the Brexit vote, the head of the FIC says the direct impact on Romania will be limited, although on the long run exports might take a hit – but this depends on how the UK actually negotiates its exit terms from the European Union.

Ovidiu Posirca

Why do you think you got a second mandate at the helm of the Foreign Investors’ Council?

I am pleased to have been elected president of the Foreign Investors’ Council for the second time in a row. I believe the FIC is an important voice of the business community and a well-respected one in the whole country.

I think it is important that the foreign investors who represent a significant share of Romania’s GDP can also express their views on the business climate in the country, on the issues they are facing and how to address them, the goal being for foreign investors, but also Romanian capital, to try to foster economic growth in this country, because we are all interested in economic growth, good business practices and a good business environment. We have been doing this for close to 20 years and we aim to continue going in the same direction because the potential is there.

The question is how do we ensure that at the end of the day there are more investments in the country, how can we ensure that investors feel satisfied with their position here, how can we also make sure we promote Romanian capital as well. There is a bit of a trend, sometimes, to set foreign capital and Romanian capital in opposition – I hear that very often. Actually, it’s a mistake. Foreign investors are also interested in healthy Romanian capital because we need customers and suppliers, so we want to ensure that the Romanian economy and capital goes well.

The only difference between foreign and Romanian companies/entrepreneurs is the origin of the capital. We are all Romanian companies, we have Romanian employees, so we should have aligned interests and this is something that people sometimes misinterpret or misunderstand.

What are your specific objectives as head of the FIC?

The general priority is still to ensure that we have an attractive business climate in Romania. This is what we are very focused on, with the goal being to attract additional investments and to ensure that the investors that are already here are happy with their investments so that together, through those investments, we can boost economic growth.

To do so we have to focus on a number of areas and the FIC has for some time had taskforces, on specific topics such as infrastructure, energy and healthcare. Our goal is both to come up with proposals that are in the interest of Romania, of the country, and to interact with the public authorities, be it the government, Parliament, national agencies and so on to try to ensure that those messages are heard and listened to.

We also work through other channels such as Coalitia pentru Dezvoltarea Romaniei, in which we are a founding member. We do have regular interactions with the government so this is another channel to convey those messages.

What is important for us is to really work in the interest of Romania, not for specific interests. We don’t have any vested interests. We always focus on what’s important for everybody and to find a consensus as well.

This will be at the heart of my and my fellow board members’ mandate for the 12 months to come.

At present we have around 125 companies in the FIC and it’s increasing, which is good. The stock of foreign investments in Romania since the Revolution is close to EUR 70 billion and more than half of those investments are represented in the FIC. We represent more than 200,000 jobs.

What do you think about the current government, because there are several high-ranking officials – ministers and state secretaries – that have a lot of experience in the private sector?

I don’t think it is fair to compare governments because the context is always different. Our role as the FIC is to interact with the government.

The current government has some specific features, being a technocratic one, so indeed a number of its members have a background in business. So maybe we speak a little bit more the same language than a more political government. They don’t have an easy task either, the context is complicated. We have a good quality interaction with them, just as we did with the old government.

What we are paying a lot of attention to is that we have the opportunity to meet on a regular basis, to convey our messages, that there are public consultations taking place on government initiatives, also on parliamentary initiatives, that there are proper impact assessments being carried out whenever legislation or regulations are changed.

What counts for us is predictability, transparency and stability, because this is the basis of any healthy country that wishes to attract investments. I think Romania can still make progress in these areas. It is not quite yet at the level where it should be.

For that to happen, there are some basic rules that should be followed, such as proper consultations, impact assessment before decisions. These are the things for which we have long been advocating and on some aspects we’re seeing progress. It’s interesting what’s happening with the current government in terms of public consultations – there is a ministry taking care of this.

Economists generally agree that Romania’s economy will grow by around 4 percent of GDP. What do you think about this figure and do you think it is sustainable?

Compared to other countries in the EU, it is good. This being said, it’s probably still not good enough for Romania to keep catching up with the rest of Europe at an increased pace.

Our view is that the potential of Romania is higher.

If you look at where that 4 percent is coming from, at the moment it is still very much driven by consumption. Not enough by investments. We believe that if there is more happening on the investment side, we should be able as a country to deliver a higher level of economic growth.

Unfortunately, one of the big issues we have in Romania is that there are not enough public investments to boost economic growth beyond the 3.5-4 percent that we’re currently seeing.

Infrastructure is one of the areas where obviously more needs to be done. More needs to happen as well in the area of public administration efficiency at a central and local level.

Do you think the Brexit vote will impact the local economy in any way?

I was sad to see the outcome of the British referendum. It’s not good news, neither for the EU, nor the UK.

In terms of the impact, it’s still early days to try to assess it. It’s an unprecedented situation. You can’t compare it to something else similar that has happened before. So far, the British government has not notified its exit according to Article 50.

Will there be significant consequences for Romania? From what I see here and from my gut feeling, I don’t see massive direct consequences.

What is more difficult to assess are the indirect consequences. There are of course a number of countries in Europe that are more exposed to Britain than Romania, and should the consequences of the Brexit be very significant on those countries, this could have collateral and knock-on effects on their interaction with Romania, for instance, in the area of Romanian exports. Depending on the shape in which those countries might end up being, we could see such collateral damage on the Romanian economy. I hope that those that will be involved in the negotiations and concrete terms of the exit will ensure that the economic consequences for the EU, including Romania, will not be too significant.

FDI climbed last year to a six-year high of EUR 3 billion. What’s your outlook for this year?

Based on the data from the first quarter, we have seen a decrease, so whether we will catch up in the remainder of the year and reach EUR 3 billion, it’s difficult to say.

What I do believe is that we need more investments from the existing investors that are here and already know Romania well. We need to make sure there are more investments coming and then of course it would be good to attract new foreign investors and there we have to work on a number of aspects. One of the things that I find a little bit sad and worrying as well is the gap that we have outside Romania in terms of the perception of the country: the gap between perception and reality.

Investment decisions are not always just taken on the absolute reality because you need to know it well. You know it pretty well when you are already active in a country. You know it less well when you look at a country from outside and there perception actually counts a lot, which is why it’s so important in my opinion to work all together on the image that Romania conveys and try to align the perception with the reality.

Then, of course, hard facts are important as well and this is why it is also important that Romania keeps making progress with pretty strong levels of growth, on aspects such as infrastructure.

If you were a company looking to invest in Central and Eastern Europe, why would you choose Romania?

From a more general point of view, what I believe is important to always underline is the potential of the country, which is very significant. What Romania also has to offer – it’s a country that is actually very wealthy but that ignores it. It is rich in natural resources, work force skills in many areas, it is rich in beautiful landscapes, and tourism is still underdeveloped in Romania. It is important to highlight this to any potential investor.

Then, it’s important to have a few success stories to put forward, to ensure that there are testimonies, people explaining what their experience on the Romanian market is.

There is also another aspect that we should not underestimate. When an investor is looking at a country in the region to build a new factory, for instance, they will also compare countries – where will I be better treated in terms of stability, predictability and transparency? Where will I have the best infrastructure to reach my markets? Where is the most interesting potential? Romania, from this point of view, also has very positive things to show.

How do investors perceive Romania from the perspective of labor costs?

The important aspect in my opinion is competitiveness and there are many important things from this point of view: fair salaries, which doesn’t necessarily mean low salaries.

At the moment, if you go further east, even pretty far east, yes, you can find cheaper workers than in Romania, but this is not the point, but how competitive is the economy overall. For that we have to speak about productivity, not just salaries. We have to talk about the other things that a country can offer, such as a skilled labor force, flexible labor legislation – and here I am not speaking about flexibility just to be able to decrease your staff very easily, but how competitive is the labor legislation in Romania compared to other countries that are also trying to attract investments.

Eric Stab CV

June 2015 – present: president of the Foreign Investors Council

January 2010 – present: chairman and CEO of Engie Romania

He is also chairman and CEO of Engie Poland. Stab holds a master’s degree in management from ESCP Europe and is a graduate of the executive program of Stanford University.

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