S

STABILITY PACT

FOR SOUTH EASTERN EUROPE

BUSINESS ADVISORY COUNCIL (BAC-SEE)

Co-Chairman Prof. Dr.-Ing. Manfred Nussbaumer M.Sc.

c/o Ed. Zblin AG, Chairman of the Board of Directors
Albstadtweg 3, D-70567 Stuttgart tel. (++49-711) 7883-616, fax: -668, e-mail: HV-VS.Hildebrand@zueblin.de
Co-Chairman Yves-Thibault de Silguy
c/o SUEZ Lyonnaise des Eaux, Directeur Gnral
16 rue de la Ville lEvque, F-75783 Paris - tel (++33-1) 4006-6699, fax: -6691, e-mail: ydesilgu@suez.fr

Letter of Advice
Paris/Stuttgart, 01.08.2016

Mr. A. NASTASE
Prime Minister
ROMANIA

Dear Mr. Prime Minister,

On behalf of the entire Business Advisory Council (BAC) of the Stability Pact, we
would like to thank you once again for your attendance at the Opening Session of our
meeting in Bucharest on September 27. It was a great honour for us that you even
interrupted an important cabinet meeting that day to deliver your message on the
future fiscal and legal policies of your government. Please forward our gratitude to
your minister for Foreign Affairs for hosting the reception on Thursday evening and to
your Finance Minister for his clear and business minded intervention at the beginning
of our BAC-Meeting.
In the discussions during our meeting there was repeated praise for the commitment
of your administration to achieve economic stability and to attract foreign investment.
The BAC recognises all the efforts made by your government in the past year and the
progress already achieved. As BAC it is one of our main responsibilities to highlight
obstacles to foreign investment to the governments in South Eastern Europe. During
our meeting several issues were raised regarding obstacles to foreign investment in
Romania, which we would like to sum up under:
-

speed of change to be increased

implementation and enforcement of state of law to be improved
fight against corruption to be intensified.

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BUSINESS ADVISORY COUNCIL (BAC) TO THE STABILITY PACT FOR SOUTH EAST EUROPE (SEE) The Co-Chairmen

Please find attached a more detailed analysis of our observations from the
discussions we had with local and foreign businesspeople on the occasion of our
business mission to Bucharest. We are very much interested in contributing to further
advance the reform process in your country. We believe that this will allow Romania
to move on from its present position to take a leading role in SEE and insure a
successful economical development of your country in the future.
Very sincerely yours.

M. Nussbaumer

Y.-T. de Silguy

attachments:
summary of business disincentives

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BUSINESS ADVISORY COUNCIL (BAC) TO THE STABILITY PACT FOR SOUTH EAST EUROPE (SEE) The Co-Chairmen

STABILITY PACT
FOR SOUTH EASTERN EUROPE

BUSINESS ADVISORY COUNCIL (BAC-SEE)

September 28, 2001

The Business Advisory Council supports the efforts of the Romanian Government led
by President Ion Iliescu and Prime Minister Nastase for political stability and
economic reform. The course taken under their leadership is clearly directed towards
Europe, and the Stability Pact has created a favourable regional political
environment. The stand-by agreement with the IMF is another precondition for a
positive development.
Last year, for the first time in many years, the Romanian economy displayed a sturdy
growth rate. The increase of over 8% in industrial production provides a solid basis
for investment and employment.
The enormous amount of legislative activity pursued by the Romanian government is
no less impressive. The new investment laws, for example, significantly facilitate
foreign investment by allowing free profit transfer and granting foreign investors two
to four year tax-free profits in specific sectors. By doing so, the Romanian
government aims to net 1.8 billion US dollar's worth of foreign direct investments.
However further progress is needed to attract more foreign direct investment:

Tenders for public contracts and method of payment

The rules and regulations for public tenders have been changed by the Romanian
government towards compliance with EU standards. However, in practice the
implementation of these guidelines is not yet fully successful. Continuing effort is
required to enforce compliance with these tender regulations.
It would also be beneficial to find a solution for the issue of advance payments as
well regular payments given the current inflation rate. The method for converting LEI
(Romanian currency) into USD or EURO is very complicated and time consuming.
Given the current inflation rate we would like to see the depreciation of the Romanian
currency (LEI) during the scheduled time of a contract to be accounted for. Especially
in cases where clients (e.g. on public contracts) do not pay in time, there is a
substantial risk for the contractor caused by the deprecation which needs to be
accounted for. This is most severe in cases were materials or services have been
delivered, which had to be purchased in USD or EURO.
Within the EU, Romania's image remains tainted by corruption, bureaucracy
and inefficient administration. Improving this image is an urgent necessity. The
Business Advisory Council to the Stability Pact will contribute to improving this image.

A problem still confronting businesses in Romania is the- in part - continuing

instability of the legal and institutional framework conditions, especially of mid-level

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BUSINESS ADVISORY COUNCIL (BAC) TO THE STABILITY PACT FOR SOUTH EAST EUROPE (SEE) The Co-Chairmen

authorities. The government should support and protect entrepreneurs in their

relation to the state-by implying administrative procedures, preventing unjustified
rising of cost.
A further obstacle is the lack of funding available for small and medium-size
businesses. Financing from banks is inaccessible because of high interest rates and
securities. There is also limited access to international finance and lack of project
appraisal skills in bank sectors. International financial institutions should take a more
active part in this area, and commercial banks criticised for their reluctance to take
risks. Government should more strongly support SMEs .

Similarly there is a lack of funding available for regional projects and projects
on a municipal level. The BAC considers it necessary, especially with regard to
infrastructure projects the establishment of municipal development funds. Such funds
already exist for example in Bulgaria.

The BAC considers necessary the establishment of a data base ( la Dun &
Bradstreet) for credit scoring of companies, in order to make accessible and
available financial information on the credit potentials of enterprises in the region.

Privatisation still at a low pace, stop-and-go-approach, and no improvement

in privatisation legislation. Conditions for investors are sometimes not realistic. Many
obligations are demanded from investors, no obligations are taken by the state,
therefore more Greenfield investments, no real interest in privatisation, no PR abroad
for privatisation projects.
The Business Advisory Council is going to contribute to promote privatisation policies
and projects among investors abroad.

Corruption and bribery government is preparing to accede to the OECD

convention on combating bribery, but is yet not a signatory.

Role of state-still predominant in many sectors of economy. Deregulation

necessary, especially in the Energy, Telecommunications sectors.

Free trade agreements with neighbouring countries would attract foreign

investors and enlarge the market for production and consumption.
.

Serious obstacles are faced by foreign contractors in the construction

industry:

Customs Procedures:
The projects in the civil engineering industry are usually awarded on short notice. (i.e.
as soon as a contract is awarded, work has to start). Due to the nature of the
foundation engineering business, these works are amongst the first that need to
commence.
In some cases equipment has to be bought or rented from outside of Romania. Up
on delivery to Romania, the goods have to go through customs. This procedure can
take up to one week, mainly because of the lack of transparency that makes it

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BUSINESS ADVISORY COUNCIL (BAC) TO THE STABILITY PACT FOR SOUTH EAST EUROPE (SEE) The Co-Chairmen

difficulty to obtain the proper papers. Especially in our industry were there is a lot of
pressure on time, this waiting period is substantial.
From our experience we would welcome a central office that can issue all the
documents required at one location (e.g. the border check points or the airport).
Procedure for obtaining planning permission for construction
We have repeatedly suffered from problems caused by long periods of approval for
planning permissions, structural design of buildings and safety assessment. This
problem was also encountered by other contractors and consultants in the
construction industry. For example, it can take four weeks and more until planning
permission is granted. We were involved in projects were it appeared that two or
more authorities were checking more or less the same aspects of a project. For
foreign investors this is a serious concern as their interest is to see a return on their
investment as soon as possible. Ultimately it is also a disadvantage for Romania over
other counties in the region.
We would therefore like to suggest that the process of approval for planning
permissions, structural designs, safety assessment etc. is critically reviewed and all
possibilities are considered to shorten the time period theses assessments are
allowed to last. Perhaps it would also be beneficial to install one central agency that
deals with all these matters.

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