Local businesses seek state aid boost

Manuela Furdui, managing partner of Finexpert, tells Business Review about the challenges and difficulties that companies face in accessing state aid and outlines the general conditions that a potential applicant must meet to secure such financing.

Anda Sebesi

How can the state aid absorption rate be increased in Romania?

The relatively low absorption rate so far is most likely the result of the low publicity surrounding the state aid scheme established by HG 1680/2008 and of the current economic crisis and lack of significant investments in Romania. In addition, the cumulative eligibility criteria – the value of the initial investment and the number of new jobs created – limit the pool of potential beneficiaries. Amending the legislation to diversify the types of activities that qualify for state aid could be a solution provided that the eligible fields of activity are in line with European Commission guidelines on regional aid. It is worth noting that the absorption rate has increased in the last twelve months, mainly because the minimum level of investment was cut to EUR 5 million. At present the main problem is time, as the state aid scheme runs only until December 31 next year. Under such conditions, it is almost impossible to implement some large projects.

What are the main difficulties facing companies who would like to access state aid?

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As the majority of investors are foreign companies, the difference between the organizational culture to which the applicant is used and the Romanian administrative-legal system is a major impediment. Looking at it another way, one of the conditions imposed by the relevant legislation is that the project can be started only after the financing is approved. From the business perspective, not many companies are inclined to delay the implementation of their project by about six months.

What are the main fields that have benefited from state aid so far?

The majority of state aid beneficiaries come from industry and production for the automotive market. So it could be said that automotive is the main field. As a result of legal changes in 2011, there are also beneficiaries from the tourism and medical sectors.

What general conditions must a potential applicant meet to secure state aid? Is a financial contribution or guarantee required from the beneficiary?

Job creation is strictly linked with the value of the initial investment which must reach a certain sum. In this area there are two new general conditions that the potential applicant must meet: to make an initial investment, as defined in EU legislation, and for the particular project to be worth at least EUR 5 million. The complementary financial sources to the state aid can be diverse: bank loans, share capital or credit from the mother firm. Companies seeking state aid have to prove the financial viability and sustainability of their project by presenting financial scenarios for five years. If the money is sought for a greenfield investment, the applicant needs to prove its commitment to the project, generally by acquiring the land on which it intends to build.

How hard is it to obtain state aid in Romania at the moment? How can access to such funds be eased?

Any company that meets the criteria set out by the state aid scheme and proves the economic viability of its project can qualify for state aid. A grant application form and the thorough documentation (the investment plan and a technical-economic study conducted by a specialized company) will be carefully analyzed by the implementation unit and has every chance of materializing into a financing agreement. After the company secures financing approval, accessing to the state aid is effectively done by applications for reimbursement, and this in fact is the key point of the whole process.

Can you give us some examples of companies that have accessed state aid in order to develop their business?

The list of beneficiaries of financial agreements between 2010 and 2012 is published on the Ministry of Public Finance website. Lufkin Industries, Delphi, Pirelli, Renault, Honeywell and Bosch have all been granted state aid.

anda.sebesi@business-review.ro