CONTENTS PILLAR I PILLAR II PILLAR III PILLAR IV PILLAR V
Introduction Human capital, with a focus on education and demography Modern infrastructure Attracting capital flows Sustainable development and environmental protection Rule of law and law enforcement Country Strategy Conclusion
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Many thanks for the contributions to this edition: Project team: Ileana Guýu (PwC), Sînziana Pardhan Frangeti (Colliers), Andreea Manole (Pfizer), Florin Deaconescu (PwC), Laurenýiu Dinu (EU Advisors), Daniela Nemoianu (Nemoianu Attorneys at Law), Ionuý Sas (PwC), Dragoş Ion (Coca-Cola Hellenic) Board Members of AmCham Romania AmCham Romania Committee Members AmCham Romania coordinators: Ana-Maria Dorobăý, Anca Harasim
INTRODUCTION PRIORITIES FOR ROMANIA The document Priorities for Romania is part of a series of actions initiated by the American Chamber of Commerce in Romania (AmCham Romania) to encourage the focus on the public debate, especially in election years, towards strategic themes for the Romanian economy and society, as a whole. The recommendations gathered in this edition are mainly addressed to political parties enrolled in the competition for the national parliamentary elections taking place in December 2016. They outline AmCham Romania’s vision on the priorities of the next parliamentary and executive mandate during which Romania will have important opportunities, both internally and externally. The report equally represents an invitation to the Romanian political parties to submit to public scrutiny electoral programs strongly anchored in domestic realities and external inter-dependencies, but also a selection of candidates who meet the requirements of integrity, professionalism, commitment and responsibility, who can make it possible to reach Romania’s strategic objectives. According to AmCham Romania, the premises on which political offers should be based on for the 2016-2020 period, are linked to changes which are increasingly difficult to anticipate globally, to Romania’s opportunities to stand as a regional leader within the international structures to which it belongs, to the need to transfer the economic performance of recent years to the population's well-being and of accompanying economic growth with measures to increase competitiveness. One of the reference points of the mandate to start in 2017 is that Romania will assume the EU Council Presidency between January and June 2019, a complex exercise, characterized by a multi-faceted responsibility in a difficult period for the European Union’s existence as a whole. It is an episode with important benefits of visibility and promotion of Romania’s regional priorities, for which preparation must begin now. Internally, one of the steps that needs cross-party support and long-term commitment is the project of strategic positioning of our country, a project which gives coherence to public policies, to investment grants and efficient use of all types of resources.
• Capitalization of sectors with high competitive potential: The evolution of the Romanian economy, characterized in the last 25 years by a significant process of structural transformation, has favored the diversification of industrial sectors and the multiplication of activities generating added value. Therefore, the volume of exports and its structure have evolved in a positive manner as well. This dynamic gives us an advantage in capitalizing on multiple options of ramification for the sectors and activities with increased economic growth yield in order to boost exports. To materialize this potential, it is essential to provide reduced transaction costs.
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Introducere
From an economic perspective, we consider necessary for a medium-term development, to strengthen the Romania’s main segments of economic growth, on the basis of which have been identified the five areas of action to be pursued as a priority in the mandate of the next Executive and which are to be detailed in this report:
• The relatively low level of public deb: In 2015, the level of public debt (relative to GDP) was around 38%. The level of this indicator places Romania on a favorable position compared to other EU Member States and even to some members of Eurozone. From this perspective, Romania still has some maneuvering space to use this leverage for supporting the process of economic growth and development in the medium and long term. However, it is important that this competitive position to be capitalized on with prudence and consistency by decision makers to avoid the abrupt developments from the past. • Systematic investments in human capital, crucial for the economic activities with high added value and for Romania's aspirations towards an economy based on innovation. It is widely accepted that success of an economy and well-being of a society are directly dependent on the human capital capacity to generate added value activities, which implies a solid level of knowledge, skills, creativity and expertise. In the past 25 years, Romania did not manage neither to come up with a coherent reform of the educational system nor to develop an efficient mechanism for continuous education at the national level. However, the general context is characterized by islands of excellence, a fact which has encouraged many investors. The quality of education in Romania is recognized internationally, Romanian students being constantly in the rankings of international competitions, the results of Mathematics Olympiads being emblematic for Romania. In international reports, Romania has positive results in chapters such as knowledge of the English language, number of graduates in science/ mathematics/technology, score obtained for reading, etc., while the number of engineers per capita, namely 25% of the total number of graduates, is higher than in the USA, India, China or Russia. All this shows that there is a great potential in the manpower of Romania, which has to be translated in added value for the economy through systematic investments.
Introduction
• Energy independence and security, long term economic growth potential and relevance at regional level for Romania. Currently, Romania is enjoying a considerable level of energetic independence as compared to other EU member states and an important strategic position regarding the transit routes of European energy infrastructure. The interconnection of the national energy market to the European one has evolved significantly since joining the European Union, which offers Romania flexibility and helps to increase energy security.
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The following areas of action are not chosen by chance, being based on the favorable context listed above, as well as on the strategic analysis conducted by AmCham Romania upon the publication of the Romania Competitiveness Report 2016. Thus, we consider that Romania must take important and rapid steps in a series of five essential pillars for our future development: PILLAR I
Human capital, with a focus on education and demography
PILLAR II
Modern infrastructure
PILLAR III
Attracting capital flows
PILLAR IV
Sustainable development and environmental protection
PILLAR V
Rule of law and law enforcement
The recommendations in the following pages take into account the essential contribution of these pillars to promote economic growth, society modernization; they identify the key structural obstacles and propose measures to address the priority issues for the next Cabinet mandate. The measures proposed by AmCham Romania are structured in measures with medium-term impact. However, we also list a series of measures that require endurance efforts and which will have long term effect on the economy.
Introduction
The time horizon subject to recommendations is 2020. The implementation of these measures should transform the Romanian economy into an economy founded on the generation of added value, which, at the same time, translates into the improvement of the population living standards, of Romania’s image and attractiveness for investors, by assuming a visionary and powerful country model.
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HUMAN CAPITAL, WITH A FOCUS ON DEMOGRAPHY AND EDUCATION
PILLAR I Romania's population has recorded a sharp decline in the last three decades through a cumulative effect of emigration and reduction of birth rate (7% decrease only in the last 10 years). If the demography trend continues according to current estimates, Romania will face in the medium and long term the negative effects of an active population decrease, the reduction of the consumer market size and the sharp ageing of population. All these will put a significant pressure on the state budget, where the social security systems will need to be restructured, and will negatively influence the country's economic development. In this context, it is necessary to adopt policies meant to stop the population decline through focusing on stimulating birth rate growth. Stimulating birth rate is a social problem. Moreover, in Romania there is a tendency of couples to have their first child when they are in the range of 30 to 35 years old, when it is easier to predict income. In this context, the State can and should stimulate the birth rate by fiscal measures for the families that have more than two children. The introduction in 2003 of the maternity leave and the child raising allowance has represented a measure with a clear stimulating effect on the employed women birth rate, while the elimination in 2016 of the maximum limit for the monthly allowance represents also a much-awaited measure that will surely prove positive effects. Equally, Romania faces two pressing problems, with both qualitative and quantitative ramifications for the productivity of the Romanian human capital: brain drain, in particular, and emigration of population, in general. The reversal of these phenomena should be a priority for any Government, by adopting concrete measures to attract diaspora back to Romania. Thus, measures are recommended in order to provide incentives to hold skilled specialists in the country and to reverse the brain drain. The healthcare system can become a contributor to the economic growth The need for reform in the healthcare system is a reality known and assumed in Romania nowadays. However, we still miss measures to approach effectively and with long-term vision the problems of this sector. The obstacles that stand in the way of European standard medical services for Romanian patients relate both to the funding of the health system and to a low efficiency of spending the allocated funds. These factors lead to an alarming percentage of deaths that could be avoided. According to an Eurostat report published in May 2016, in Romania, one of two deaths could have been prevented given the current knowledge and technologies. Adequate funding of the health system should be supported in the short term by increasing the percentage of GDP assigned for health and in the long term, by creating the legal framework for private funding sources in the system.
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Human capital, with a focus on education and demography
Demography - negative natural increase is worrying
In addition to the problem related to funding, the Romanian health system must begin to work efficiently and for the patients’ benefit, to distribute intelligently the resources available today. The expenses assigned to medical services per capita, the number of doctors per 1000 inhabitants and the number of beds per doctor are indicators in which Romania records gaps as compared to the rest of Europe. Measures that could reduce the gaps in the health system include the improvement of Romanian patients’ access to treatments, the increase of doctors’ retention in the system and focus on education and prevention among the population. Romanian patients do not have timely access to innovative medicines due to the failure to meet the deadlines in the process of reimbursement of new drugs and delayed elaboration of therapeutic protocols. A greater discipline of relevant institutions in these processes would improve Romanian patients’ access to treatments which other European citizen have enjoyed for some years. A greater attention should be paid to doctors’ retention by creating and implementing programs to stimulate them to remain in the Romanian medical system. Meanwhile, the Romanian population does not benefit from enough education and prevention campaigns and this lack has caused real problems for the system. For instance, the worrying decrease of vaccination rate at the national level, but also the emergence of antibiotic resistance, are real dangers for the human health and also issues that put additional pressure on the medical system. Without a prevention-based approach, the burden on the system will increase in the long term, and the expenses for medical treatments and services will not be sustainable. It is essential for the Romanian health system to stop being perceived as a "black hole" for the public money, and to become a recognized contributor to economic growth. Health is a value in itself and also a preliminary condition for economic prosperity. To create wealth, the society needs healthy people - they are more active, more productive and contribute to a greater extent to the development of economy and society. Moreover, the health sector has a great potential to create new jobs and reduce unemployment. Healthcare reform is essential - in terms of retention of specialists, the need to increase the efficiency of public investment and to create the framework for private investment. Education - a sine qua non condition for development
PILLAR I
The contribution of human capital to the country’s competitiveness is significantly influenced also by the quality of the education system through the skills the human factor endorses as a result of the school training process. According to the Competitiveness Report published by AmCham Romania in 2016, the Romanian education system is still underdeveloped as compared with the European Union. Romania has a low level of expenses for education, with a share of only 3.1% of GDP in 2015, significantly under the EU average which in 2015 was 5.3%. Thus, Romania ranks below the EU average in terms of GDP percentage spent for education, Students/teacher ratio and Lifelong learning. These structural problems of the Romanian education system are closely linked to the turbulent and continuously changing environment in the public education system. Given that there were more than 9 ministers of education in the last 10 years, it was impossible to shape and implement a coherent strategy in the education system. Romania is in an utmost need of such a strategy which shall be supported by a joint agreement in order to avoid ad-hoc changes that were and are extremely harmful, even more when education is one of the most difficult sectors to reform and the results of specific policies cannot be assessed until many years have passed.
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Regarding lifelong learning, a chapter in which Romania records weak results compared to other EU countries, rapid actions are required to increase the number and quality of programs for professional training across the country. The benefits of these actions will contribute both to the up-skilling of the workforce, and to the reduction of structural unemployment.
Labor legislation, as amended in 2011, is flexible, performance-oriented, establishing a balance in terms of employees and employers’ rights. The current legal framework favors the development of companies on the principles of performance and is favorable both for employers and for employees, who can receive additional benefits. Society as a whole can also benefit from the creation of new jobs. AmCham Romania supports the current labor legislation and stresses that amending the labor legislation in the direction of reducing the importance of performance and increasing the emphasis on protecting employees, could lead to difficulties for employers/investors. Faced with unmotivated employees and an unproductive company, employers could consider restricting their activity and even closing some companies, case in which Romania would face an increase in the number of unemployed people that would require support from the State. The improvement of quality in the labour market should take into account: • Increasing the level of education of the active labor force (e-Learning, Lifelong Learning, etc.); • Increasing the quality of the education system, including high schools, vocational schools and universities (Master and PhD) to satisfy the needs of added value-based economy; • Strengthening the links between universities, research centers and businesses by adapting curricula and the research objectives to the requirements of economic reality; • Facilitating the access of young people to the labor market through integrated measures, including guidance, counseling, internships and apprenticeships; • Promoting intense involvement in the education system of highly experienced specialists, including those retired; • Stability of legislation regarding labor relations (Labor Code and Social Dialogue Law). In addition to that, the R&D area can contribute significantly to the innovative capacity of a country, with beneficial effects in increasing competitiveness and hence the economic growth. Romania has a lot of catching up in this area, as demonstrated by AmCham Romania Competitiveness Report. Therefore, measures such as increasing the expenses per researcher or implementing efficient policies to improve the country's innovative capacity are recommended. A vital role in the R&D area is assigned to university centers, therefore the Romanian Government can adopt the examples offered by more developed countries by creating a program of financial incentives for innovation. Also, public-private partnerships should be supported through the implementation of coherent policies in this direction. Thus, it is recommended to increase expenses assigned to the R&D area by the Government and the private sector, and to adopt efficient, dedicated policies intended to improve the country's innovative capacity.
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Human capital, with a focus on education and demography
Romania also faces a reduced participation rate to workforce and a very high level of poverty. Paradoxically, despite the fact that Romania has the lowest social protection expenditure per capita in the European Union, the amounts are mistakenly directed, generating a lack of interest among the active workforce to participate in the labor market. In this direction, AmCham Romania supports the implementation as soon as possible of the World Bank Strategy on social inclusion, which lists measures for unlocking the potential of some population segments which are currently lacking economic opportunities (through solutions to modernize and streamline the policies of social inclusion, reduction of poverty, actions to encourage the participation in the labour force, etc.).
MODERN
INFRASTRUCTURE
PILLAR II Agriculture - significant, untapped potential With arable land per capita twice the EU average, Romania could have a major competitive advantage in this sector. Unfortunately, this is not used, the efficiency of farming in Romania being half the EU average. The rehabilitation of irrigation infrastructure and its expansion where it is economically viable could have a clear short-term positive effect over the agricultural productivity and would lead to a greater predictability and independence of the sector’s revenues from weather conditions. From this perspective, given that electricity prices play a major role in determining the price of water for irrigation, an integrated approach to the problem should be considered for the modernization of the irrigation infrastructure, including: the use of renewable energy for irrigation, smart grid-type solutions, digital platforms and applications on the operation of irrigation systems, including tools for preventive maintenance. All these could lead to a drop in the price for irrigation water, the loss of water in the network and thus increase the accessibility/attractiveness for Romanian farmers who use the system, with a positive impact directly on the Romanian agriculture competitiveness. Adoption of a legislative and fiscal package of measures which encourages farmers’ association and land merger in optimal areas for exploitation, together with tax measures to discourage export of raw material (cereal, wood, etc.) and to encourage more advanced processing in Romania could stimulate the sector without a major investment effort. Encouraging local, advanced processing in the value chain would allow more efficient use of labor in the rural areas given that statistics indicates that 27% of the population seems to be "engaged in agriculture".
In a globalized and interconnected economy, the digital progress represents a need both for the national economy and for the citizens of that country. Staying behind in this critical area reduces significantly competitiveness, while inducing social or national security vulnerabilities. According to the Competitiveness Report of AmCham Romania, although it has recorded notable growth rates in the level of connection of households and it is among top connection speeds in some areas, Romania has a long way to go. Until now, the communications infrastructure has been generally developed by private operators for minimum coverage to satisfy demand, especially in crowded areas, with short-term budgets (annual) approved at the headquarters abroad. The DESI report – The Digital Economy & Society Index – indicates that Romania is on the last place among EU countries in terms of digitization level. In 2015, Romania adopted the National Strategy on the Digital Agenda for Romania, which was welcomed by AmCham Romania. The next step is its implementation, given that the European Union has already established a clear strategic direction on the digital agenda for all Member States. It is, therefore, necessary to create and implement an action plan that realistically
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Modern infrastructure
Digitization policies - important pillar, positioning Romania on the map of global digital economy
reflects the transposition of the above-mentioned strategy in the proposed time horizon, while mobilizing the necessary financial resources, in all fields. Thus, consideration should be given to the general directions set by the European Union in the EU Digital Agenda in which concepts such as Smart City, Smart Grid, E-Health, „Infrastructure as a service” play a central, catalyst-type of role. AmCham Romania considers the following ICT strategic directions: • Create a professional team for ICT strategy in public administration - development of a CIO department at the Government level; moreover, we consider that the purpose of GovITHub should be preserved and the initiative should be further developed; • Adopt and implement a national IT infrastructure to ensure interoperability of systems and services within central and local public administration1; • Adopt and implement a national strategy for digitization of the public sector by introducing cloud services, with different adoption measures (public/hybrid/private cloud); • Adopt and implement a simplified data classification system based on the open data rule, except secret data/top secret data; this system should be accompanied by security measures adapted to the type of protected data; • More extensive development of the Open Data project, by setting clear obligations for public institutions to open their data, focusing on certain data sets that can help to create useful applications for citizens and the national economy. Also, AmCham Romania considers that cybersecurity is critical for an advanced society and cannot miss from the ICT comprehensive plan. It is recommended to align the current law project with the NIS Directive. Concrete measures of developing the ICT sector: • Increase the use rate of e-Government services, by adopting modern, flexible and scalable technologies; • Penetrate the Internet with a 100% broadband infrastructure; • Digital literacy of the population: increase digital skills, starting with early childhood education and continue up until lifelong learning, through certified/noncertified formal or non-formal courses, etc.; providing ICT infrastructure in schools and making recommendations on the minimum level of technology available in schools; • Adopt technology in the health field; • Support e-commerce development; • Upgrade the Governmental structures with City Next-type of programs supported by Interoperability programs.
PILLAR II
Energy - competitive position. What are the next steps? As indicated in the AmCham Competitiveness report, Romania ranks above or at the level of the EU average in terms of analyzed indicators (percetage of energy from renewable sources in total consumption, EUR/Kwk price, market share of dominant manufacturer, GDP/energy unit, etc). At the same time, the share of vulnerable consumers in Romania is among the highest in the European Union and the existing infrastructure badly needs investment. Beyond an analysis of the positive and negative factors that accumulate in these positive indicators, Romania should consider strategic directions for the sector. 1
Reflecting the principles of the action plan “EU eGovernment Action Plan 2016-2020 - Accelerating the digital transformation of Government”: “digital by default”, “once only”, interoperability by default”, etc.
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From the perspective of development and increasing economy competitiveness, Romania needs an efficient and competitive energy market, regulated fairly and intelligently to ensure balance between the need for investment, food safety and consumer protection, while limiting the environmental impact. In this regard, it is necessary to expedite the effective adoption and implementation of a visionary national energy strategy, to prioritize the modernization of the sector, to target the needs and objectives of the national economy in the medium and long term and to materialize the benefits that Romania may have due to the strategic position in the interconnection of regional and European markets, particularly in the transit to supply European markets. It is also necessary to make the correlation between the goals and actions included in the energy strategy and the measures resulting from the implementation of the relevant European directives, for example the Directive on alternative fuels. Lastly, we believe that promoting complex projects at the national level which stimulate both socio-economic development and an increase in energy consumption, must be one of the immediate priorities of Romania, given the declining trends on energy consumption in conjunction with the need for modernizing the energy sector in the context of an increasing regional integration. The national energetic strategy should ensure through legislative measures a higher degree of energy independence directly correlated with the energy resources available at the national level and Romania's energy security. Transports – you can only go so far without infrastructure! AmCham Competitiveness Report 2016 includes indicators that address road, rail and air infrastructure and confirms Romania’s significant distance from the EU average in all respects.
The implementation and financing of the Master Plan for Transport must take into account the priorities and the related positive effects that some decisions might have on areas such as tourism ramification, unlocking the potential of some regions, increasing attractiveness for investments in other regions or increasing the competitiveness of certain exporters. We emphasize that recommendations on implementation and funding of the Master-Plan for Transport refer to all means of transport, including railroad, river/sea and air sectors which do not receive the same attention as the road sector. It is very important for Romania to benefit from the European projects for developing the TEN-T network and to achieve multi-modal infrastructure development at the level of assigned regions and connection to TEN-T networks. Besides the aspects mentioned above, another dimension of infrastructure in which Romania could obtain positive effects with relatively low efforts is where the Government could take a centralized initiative at the central administration to replicate at national level the success model in which some cities (especially in the north part of the country) were able to reactivate certain industrial hubs and transformed them into industrial parks which are very attractive for foreign investors. The multiplication of the reactivation model for industrial hubs, along with the model used to attract investors, can have multiple effects in underdeveloped regions.
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Modern infrastructure
Romania already has a Master-Plan for transport and shall focus now on the implementation and identification of funding sources, even if the Master-Plan can be improved. Also, the public procurement legislation is another vulnerability point in engaging the infrastructure works, but this has been recently reviewed as it is in the monitoring stage. With these ingredients, the priority must now be implementation, but it depends on the efficiency of the absorption of European funds, the budget allocation of funds for co-financing, the development of partnerships in the public-private system or the increase of technical skills of some State-owned companies such as CNADNR [Romanian National Company of Motorways and National Roads], including project management skills.
ATTRACTING
CAPITAL FLOWS
PILLAR III Investments are the main transversal mechanism that can strengthen any of Romania's strategic objectives - whether economic or social. Total investments in Romania (measured by gross fixed capital formation) amounted to 24.7% of GDP in 2015, marking a decrease compared to 2011 when the indicator's value was 27.1%. Although this indicator is better than the European average of 19.8% of GDP, Romania needs to focus on increasing the investment level, as main engine in the effort to increasingly recover the development gap between Romania and the other European states (GDP per capita in Romania is 27.5% of the European Union average). Apart from public investments which need to be targeted strategically (as indicated in other sections), private investment is a more flexible source of capital, with a faster growth potential and therefore needs to be encouraged properly. Private investment targets: local investments for productive capital, foreign direct investments and financial investments. Domestic capital reinvested in the economy offers both long-term stability and a multiplying effect. In this direction, intense efforts are needed to ensure a favorable framework for the development of the local business environment and for increasing local investments in productive capital, from start-ups to large companies with local capital. Romania enjoys an increasing number of successful entrepreneurial stories, both at small and large scale. In Romania's path to an added value-based economy, entrepreneurial activities, especially those which integrate innovative elements and added value, are essential ingredients that should be supported and proactively encouraged.
Also, the development of a strong and liquid local capital market would ensure a funding alternative, one that is much needed both for private and public investments and which will reduce the economy dependence on bank financing. The benefits for to the national economy as a result of the capital market development are potentially large, but this development is particularly sensitive to a number of institutional variables, including competition, protection of minority investors and the overall efficiency of that economy. For this reason, supporting the capital market involves a wide and ambitious reform program. Investors, both local and foreign, face differences from one country to another in terms of access and use of capital market, especially in the following areas: • Tax issues and fees applied; • Free transferability of financial instruments, the possibility of transactions made outside the market and transactions carried out without payment;
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Attracting capital flows
Within private investments, emphasis should be placed also on FDI because besides being a rich source of capital, they produce a number of positive side effects, from balancing the current account, to the transfer of know-how and best practices in the economy.
• Market infrastructure, associated degree of risk (the existence or non-existence of a Central Counterpart and risk management mechanisms, including an appropriate Guarantee Fund); • Predictability, which causes an increased interest from investors and can motivate them to continue and even increase their investment. AmCham Romania's recommendations on increasing the economy investments target the following actions:
PILLAR III
• Maintain the current flat income tax; • Implement well-targeted incentives to consolidate the existing businesses and attract new foreign investors; • Better use of existing schemes of state aid for large investments (to support investments that promote regional development by creating jobs) as a strategic tool to stimulate investment in fields or priority geographical areas and to improve it by the simplification/streamlining of the application procedure; • Implement a state aid scheme for medium-sized investment projects, to expand the range of companies that may have access to such incentives; • Encourage investments in key export industries and create incentive packages for local and foreign investors selecting them on criteria such as the innovative technologies implemented, the number of jobs created and the ability to export with high added value; • Further development of the agency dedicated to foreign investments (Invest Romania) so that it can become a promoter of Romania in international business environments and a real support for investors which are interested in Romania; • Improve the use of European funds to develop physical infrastructure, with private financing through public-private partnerships and/or concessions and strengthen the competitiveness of Romanian companies on local and foreign markets; • Improvement of EU funds absorption must remain a key priority of the Government with respect to the quality of projects and their relevance to the overall economic environment. • Recognition and development of the capital market as an important alternative source of capital for both private and public borrowers. • Implementation of measures to promote a greater liquidity in the corporate bond markets, by creating a specialized pan-European agency of scoring (rating) of these bonds, with criteria and affordable tariffs structured on the specifics of the issuing companies (especially for SMEs).
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SUSTAINABLE DEVELOPMENT AND ENVIRONMENTAL PROTECTION
PILLAR IV A globalized economy requires a fierce competition at the international markets level and achieving competitive advantages is influenced both by the natural environment of the countries and the existing international climate. Thus, the natural endowment with production factors and the geographic position that a country possesses are competitive criteria. In terms of the natural environment, Romania has categorically optimal conditions to try to secure a competitive advantage if it is used and managed economically in maximum conditions of efficiency and sustainability, as a viable source for creating national wealth. Given the exacerbated economic volatility, tourism is considered one of the sectors with a high potential to deliver economic growth and development at the international level. A developed and sustainable tourism sector can hugely contribute to the efficient use of the natural environment, to increase the employment of labour force, to increase national income and hence it can leave its mark on the balance of payments. Thus, tourism can be an important engine of growth and prosperity, especially in emerging countries, such as Romania, and it could be a key element in reducing regional disparities. Despite its contribution to economic growth, tourism development may be hampered by a series of legislative and regulatory barriers that may affect its competitiveness. The National Strategy for Sustainable Development of Romania 2013-2020-2030 developed by the Ministry of Environment and Sustainable Development even since 2008 noticed that Romania still has to overcome significant gaps compared to other Member States of the European Union, while seeking to absorb and put into practice the principles and practices of sustainable development in the context of globalization and the situation has not changed in recent years. It is a fact that Romania has an economy based on intensive consumption of resources and a natural capital facing the risk of damage that may become irreversible.
PILLAR IV
AmCham Romania considers that areas which should come under the attention of the Romanian Government in the short and medium term to ensure sustainable exploitation of the natural environment of our country should include as priority forest protection and waste management. Even if in Romania the issue of forest management has been on the public agenda for over a decade, while authorities have invested huge efforts in the past years to adopt a European legislative framework and to consolidate institutional capacity, the major challenges have worsened and become chronic, especially through the devastating impact of corruption. Despite all actions undertaken so far (for instance, the Forests’ Radar, creating Forest Guards, implementing "The Surveyor of Forests" application, increasing fines, etc.), illegal deforestation continues to be widespread and most alarming is that they heavily affect national parks and natural protected areas. Only through a series of consistent, uncompromising and far-reaching measures that can correct the distortions caused by extended corruption in all levels, to fully and timely apply the law and to induce medium and long term sustainable preventive effects, we can ensure the protection of forests and a sustainable exploitation.
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• Set forth an intervention program and an inter-institutional work group specialized on corruption in the forestry field, to focus on the maximum enhancement of territorial controls and prompt application of wide corrective measures, including in the protected areas/natural parks; • A permanent, proactive collaboration between the Ministry of Environment, Water and Forests with the Ministry of Justice, DNA [National Anticorruption Directorate], DIICOT [Directorate for Investigating Organized Crime and Terrorism], Ministry of Interior and other competent authorities will be able to lead to immediate action against illegal deforestation and abusive restitution, unlock and acceleration of high corruption records in the forestry field, punishment of those responsible and recovery of direct and indirect material damages; • Issuance of operating licenses a for limited period (for instance, 2 years, as in Ireland), along with conditions related to bio-diverse replanting, according to the forestry arrangements; Swedish law requires planting after harvesting the wood; • Strict protection of virgin forests and national parks, including rivers - by special protection and management programs, accompanied by monitoring, control and strict punishment programs; • Set forth an afforestation/reforestation plan of calamity lands/cleared areas, including clear deadlines and strict punishment if such deadlines are not met; • Adopt a forestry strategy at national level. The waste management area has a solid transposition of European legislation in the local legislation; however, the implementation of measures provided by the law is far below expectations. The lack of modern infrastructure of waste management, especially to ensure the separate collection, will lead to a situation in which Romania will not fulfil the commitments in this area, undertaken by the EU adhesion and which will lead to the occurrence of proceedings for infringement. The management of packaging waste, transposed into the national legislation, envisaged the implementation of separate collection of household waste from population by 2007, at the national level. In reality, the separate collection of municipal waste is still in the projection stage. Without a functional separate collection, given that 60% of the packaging waste is found in households, manufacturers cannot achieve the recycling targets. Consequently, the targets for recycling and recovery of packaging waste cannot be met, without a separate collection from households. Protecting the environment of littering and waste packaging, a better quality of life, in general, is the actual objective of collection and recycling. Therefore, a series of measures are required to address systemic problems and the long-term sustainability of waste management: • Fix as urgently as possible the chaos in the management of packaging and electric and electronic equipment waste. Stopping the major gaps existing nowadays on the market can only be achieved by raising the awareness of all actors (including local authorities) involved in this field. Not reaching the recovery/recycling targets for such waste would lead to substantial penalties applied to Romania, which will affect the state budget, along with all the subsequent consequences. Simultaneously, not reaching the recovery/recycling targets for such waste by private economic actors significantly affects their companies and causes chain reactions throughout the entire economy of Romania;
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Sustainable development and environmental protection
The following specific measures are required:
PILLAR IV
• Correlation of the entire current legislation. This is necessary to ensure stability of the national waste management and the predictability that the private sector needs to be able to design business development in the medium and long term; • Transparency in the review of the current system and the current procedures of responsibility transfer, in full compliance with the principle of establishing fair and objective costs for each actor in the chain of recovery of packaging waste; • Balancing the level of contributions paid for failure to comply with targets, where appropriate, by producers or local public administrations (for which the penalty is now 20 times smaller); • Increasing the expertise of local authorities in implementing waste management projects financed by European funds; • Encouraging separate collection of waste by directing subsidies to economic operators in the industry and through specific legislative measures.
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RULE OF LAW AND LAW ENFORCEMENT
PILLAR V The Romanian legal system has developed in the last years - the legal framework was modernized and solid prerequisites have been created for operating a functional rule of law. These initiatives and efforts must be continued, along with extended substantiation of the impact and socio-economic reasoning and a faster implementation speed. Transparency and predictability of laws Regarding the legal framework, permanent principles such as predictability, clarity and stability, under a uniform, consistent and fair application of law should be applied by the legislator and governors. Legislative measures should be implemented only based on effective consultation with civil society and the business environment, pursuing a coherent and strategic vision and estimating their impact. Measures of anti-corruption and bureaucracy reduction Corruption is a serious and direct threat to national security and a major obstacle against Romania's development. It requires consistent and unbiased application of the law, acceleration of research and sanctioning of corruption cases by investigating on the merits in terms of legality, effective and prompt recovery of damages, efficient preventive and remedial measures. Preventive measures rather than post facto remedies are more effective in terms of outcomes and costs. Therefore, the modernization of the Romanian State and the justice system must prevent negative phenomena (such as corruption, tax evasion, bureaucracy), and not just to penalize them. Governance must be based on a proactive, balanced and cooperative attitude between public institutions and citizens. Effective justice
PILLAR V
Trust in a functional justice system is gained also through efficiency, capabilities and fairness of legal courts. Recent advances in the field of justice are not to be ignored, but litigants still perceive the negative effects of bureaucracy and lack of transparency and unpredictability of the procedural framework. Court specialization would significantly reduce the time required to rule the cases, with direct effect on the quality of the justice act.
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AmCham Romania proposes a set of recommendations for strengthening the rule of law:
Rule of law and law enforcement
• Transparency and predictability in all stages and at all levels of the legislative process; • Substantiation of impact, efficiency and competitiveness of any legislative measures; • Strengthening the integrity of public and private sector by supporting the fight against corruption and implementation of ethical standards, in the parameters of the rule of law and bureaucracy control; • Improving courts infrastructure through computerization and preparation of an administrative staff with specialized skills in their management; • Court specialization, unification of jurisprudence and publication of judgements.
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ROMANIA’S COUNTRY PROJECT
ROMANIA NEEDS A COUNTRY PROJECT NOW! Under the pressure of global and regional changes, Romania's efforts of competitive positioning must be supplemented by the geopolitical, economic and technological dimensions. Macroeconomic growth is an advantage, but it only has meaning if it materializes in a sustainable higher standard of living, a prosperous business environment, qualitative public services and modern infrastructure. It has been a decade since Romania has benefited from alignment and actions focused on achieving the last objective of synchronized national strategy: Romania's accession to the European Union. Since then, no other national joint project took shape, making room to a lack of coherence in public policies adopted and an inefficient use of resources. AmCham Romania has steadily pleaded in recent years to achieve and adopt a multi-generational project which can define the role and place that Romania can have in Europe and the world. We appreciate the recent initiatives in this direction of the Romanian Government and the Presidential Administration and, regarding the structure and progress of the project, we consider essential to mobilize and involve all relevant entities of the society so that each of them would be able to contribute to the formulation of vision and be involved in implementation. The architecture of such an exercise is sophisticated and requires professional facilitation and dedicated resources. Once shaped, Project Romania will be broadly supported, representing the long-term direction for our country. According to AmCham Romania, the Country Project involves the joint establishment of a strategic direction and competitive priorities that take into account the long-term common interests and expand the country's role in the Euro-Atlantic and regional partnerships. We must take our share of responsibility toward the achievement of our common goal of ensuring democracy, rule of law, prosperity and security, through the transformation of Romania and the whole society’s engagement in an intensive exercise for integration and trust in Romania's potential. The business environment has assumed in recent years an active function, playing the role of immune system, beyond the immediate perimeter. We believe that the concerns raised repeatedly by the business community, such as those made in this document, can be remedied by adopting a viable Country Project. One must look beyond personal, biased or circumstantial interests, in a joint mission involving responsibility, long-term determination and strong anchors. To gain traction, such concept excludes right from the start unilateral approaches, it goes beyond the need for paternity or electoral/governmental plans and must be built on a strong, honest and open operational platform, with a direct and substantial participation, in an advanced and balanced democratic exercise, for the benefit of citizens and Romania, and also beyond the identification of an identity vision and the content of society mandate by politicians and governors. The Country Project needs to be anchored in a coherent European and transatlantic logic that can stress out the status of regional leader of the country. In support of such project, AmCham Romania proposes the implementation of measures included in this document, as key-conditions. The ultimate objective is to position Romania as a leading European economy and a prominent regional actor, with increased attractiveness for investors
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CONCLUSION We want the recommendations within “Priorities for Romania” to be a starting point for a series of constructive debates that will become the norm during elections and which will ultimately be reflected in the quality of political offers. Our intention was to provide a clear picture of business priorities on certain strategic areas requiring immediate and medium-term interventions, without, however, claiming that they are exhaustive. Romania needs a concentration of State powers energies, in the early years of the future executive mandate, in an effort to define objectives which distillate national strategic priorities for the next decades, especially since the next Cabinet will also ensure the rotating Presidency of the EU Council early in 2019. We will have a chance to contribute actively and though constructive initiatives on the European Union developments and this objective can be achieved only through dynamic institutions and a clear vision. Strategic decisions such as the governance model of the EU or Brexit will be negotiated during this period, and Romania must take consistent positions that meet its membership in the European Project to design the national interest in a dynamic environment and to provide the guidance necessary for the coagulation of consensual positions at the continental level. In an ideal Romania, the next edition of “Priorities for Romania” should not resume any of the recommendations contained in this report.
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The American Chamber of Commerce in Romania (AmCham Romania), the first choice for advocacy and business growth in Romania is a leading business association in Romania that represents over 400 members, U.S., international and Romanian companies whose investments in Romania exceed USD 20 billion and have created over 250.000 jobs. AmCham Romania is firmly committed to facilitating an open dialogue between the business community and central authorities, promoting measures and priorities for an improved business climate and increased economic competitiveness for Romania, at a regional, European and global level. AmCham România is an affiliated member of the U.S. Chamber of Commerce and AmChams in Europe.
For more details, please visit us at: www.amcham.ro Facebook/AmCham Romania LinkedIn/AmCham Romania amcham@amcham.ro Union International Center, 4th Floor 11 Ion Campineanu St., Bucharest 1