Goodwill is not enough for foreign investments

According to a warning survey on the crisis potential, drafted in July by the Romanian Academic Society within a UN Development Programme project, Romania still ranks last as for the value of direct foreign investments attracted by Central and Eastern European countries.

Total value of the direct foreign investments is very low, considering its ratio to the number of inhabitants, as Romania is the second-largest country in this region.

The authors of the survey consider that, even if the problem has been tackled and some signs of growth have been registered lately, the situation shows no significant improvements.

It is certain that the gap between Romania and Bulgaria is deepening from this point of view. Romania constantly fails to go beyond the stage of goodwill and of drawing up the institutional framework boosting the direct foreign investments.

Each of the governments having ruled the country after 1990 was willing to resume ties with foreign investors. However, no coherent strategy based on a stable legislative framework for domestic and foreign investments was actually enforced.

As the governments revised the measures aiming to boost the foreign investments sometimes even several times per year, the investment environment was seriously harmed.

While the Government was not actually aware before 1997 of the need to make privatisation by attracting multinational companies, the incoherence in the regulation system that followed only drove foreign investors away.

The failure to privatise large state-owned companies has triggered incalculable consequences. The Privatisation Authority often has to extend the deadlines for submitting the purchase bids, as not many companies are willing to take over these plants.

PSAL I, which should have been concluded a long time ago, is actually running simultaneously with PSAL II, while the first 20 companies in PSAL II have recently received agreement to benefit from privatisation consultancy.

Nastase-led Government over the past seven months has seemed willing to leave previous habits behind and re-launch a policy for encouraging investors. After a great deal of efforts, Banca Agricola (Agricultural Bank) was eventually privatised, as the main stake was bought by a consortium comprising Raiffeisenbank and the Romanian-American Entreprise Fund. The contract for the privatisation of Galati-based Sidex steel mill was signed with ISPAT.

However, the authors of the warning survey on the crisis potential in Romania outline that the Government still has a problem to solve, which otherwise may turn into its “definitive label”.

The direct investment Law, approved by the Executive after lots of delays, stirred controversies due to its unclear and sometimes contradicting stipulations.

While the law was being discussed, Premier Adrian Nastase made aggressive statements regarding the IMF and the World Bank, which had previously been against tax-exemptions and incentive granting for investments exceeding one million dollars.

“A more reserved attitude towards the international officials and investors would allow the Government to look more professional in the eyes of its business partners,” the report says.