romania: investment opportunities · romania developed additional instruments to encourage foreign...

ROMANIA:

INVESTMENT OPPORTUNITIES

Macroeconomic indicators Outcomes

Eurobond minimum interest rates In 2013, Romania has borrowed at historical minimum rates, on the domestic and foreign markets (for example, 4.15% for the 7-year Eurobond issuance). http://discutii.mfinante.ro/static/10/Mfp/buget2014/RAPORTBUGET_2014.pdf

Foreign Direct Investments EUR 59,126 million (31 .12.2012) http://www.bnr.ro/PublicationDocuments.aspx?icid=9403

Exports FOB EXPORTS (MIL. EURO)

1.I-31.VII 2014

Intra EU 28 21,687.5

Extra EU 28 8,611.8

http://www.insse.ro/cms/files/statistici/comunicate/comert_ext/a14/ce07r14.pdf

Structural Funds and Cohesion Funds – absorption rates

approx. 37% (August 2014) http://www.fonduri-ue.ro/comunicare/stiri/2679-eugent-teodorovici-intalnire-cu-

reprezentantii-guvernului-din-croatia

Business environment in Romania (1)

Economic growth

• 2013: 2.2%

• 2014 (estimated): 2.2% http://discutii.mfinante.ro/static/10/Mfp/buget2014/RAPORTBUGET_2014.pdf

Inflation • June 2014: 0.66%. http://www.bnr.ro/PublicationDocuments.aspx?icid=3922

Competencies

• Industry

• IT&C

• Foreign languages 2

Key sectors: infrastructure (transport and energy), industry, agriculture and fishery, education, environment protection, IT&C, research-development-innovation;

Advantages: a privileged geographic location, legislative and political stability, highly qualified workforce at competitive

costs, developed IT&C infrastructure etc.;

Attractive tax policy:

- Low corporate income tax rate (16%)

- Low employer’s social contribution rate (15.8%)

- Tax exemption for the reinvested profit

- Industrial park investments exempted from the tax on land and buildings

- Access to stimulating funds in accordance with the domestic and EU legislation.

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Business environment in Romania (2)

Romania developed additional instruments to encourage foreign investments, in accordance with EU regulations.

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Policies encouraging foreign investments

STATE AID

Transfer from

government

resources

Economic

advantage

Selectivity Effect on

competition

and trade

Grants;

Guarantees;

Tax incentives.

Public land

purchased/leased

below market level;

Wage costs subsidized;

Access to no-tax

infrastructure;

etc.

A limited number of

recipients

which meet the

requirements

and objectives.

Reduced if EU

regulations

are observed

State Aid Policy of MofPF

Overall purpose: regional development through - stimulating investments - stimulating the use of innovative technologies - job creation Types of state aid: Direct allocation of eligible costs Eligible costs: - tangible assets (buildings, equipments) - non-tangible assets (copyright, licenses, know-how or unpatented technical knowledge, software) or - wage costs for 2 years associated with directly created jobs as a result of an investment.

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State Aid Policy of MofPF 2007 – 2014

Total budget allocations

2.3 billion Euro

Number of approved investments

71

Total investment amount

Over 3 billion Euro

Total amount of approved state aid

Over 800 million Euro

Number of new jobs to be created by the state aid

recipients as a result of the investments

Over 25,400

Total amount in contribution to regional development

Over 1.7 billion Euro

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2007 - 2014

MAIN SECTORS

- Automotive

- Railway transport equipment

- Aeronautics

- Renewable energy

- Health

- Tourism

- Food industry

- Mining industry equipment

- Home appliances

- Cellulose and paper

- IT&C

- R&D&I

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MAIN SECTORS

- Automotive

- Railway transport equipment

- Aeronautics

- Renewable energy

- Health

- Tourism

- Food industry

- Mining industry equipment

- Home appliances

- Cellulose and paper

- IT&C

- R&D&I

MAIN BENEFICIARIES

- Renault

- Daimler

- Ford

- Pirelli

- Bosch

- Continental

- Arcelik

- DeLonghi

- ETI

- IBM

- Microsoft

- Deutsche Bank

- Siemens


- Conclusions -

Attract sustainable foreign investments; Create jobs (suppliers/customers); Multiplying effect in the economy; Contribution to the import/export balance in Romania; Development of traditional industries; Industrial know-how; Highly qualified professional training; Improved living standards.

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2014 - 2020

Selection of priority investments which help regional development; Secure adequate financial resources from the state budget; Monitoring of funded investments; Develop new state aid schemes to support regional development.

The state aid scheme for wage expenditures, effective in 2014-2020, for which the applications are received in a first session from September 22 through October 17, 2014

The state aid scheme for the purchase of assets, effective in 2014-2020,

was adopted in the government’s meeting of September 17, 2014.

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Government Decision nr. 332/2014

Government Decision nr. 807/2014

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- Aims at the creation of 10 jobs in each location as a result of the implementation of an investment - The eligible expenditures are the wage costs incurred 2 years in a row

- Aims at supporting investments of minimum 10 million Euro - Eligible costs:

*construct new buildings; *lease existing buildings;

*purchase tangible and non-tangible assets

Government Decision nr. 332/2014 introducing a state aid scheme to support

investments which promote regional development by creating jobs

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EFFECT

Reduce unemployment and

economic gaps among regions

Purpose of the state aid scheme

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REGIONAL DEVELOPMENT

NEW INVESTMENTS NEW JOBS CREATION

Main particulars of the state aid scheme

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Scope

How is the state aid disbursed

Duration

Budget

Estimated number of Recipients /new jobs

- Companies of all sectors (except for those referred to in the EU Regulations)

- Non-reimbursable funds from the state budget - Up to the maximum allowed intensity according to the Regional Map

- 2014 – December 31, 2020 – issuance of funding approvals - 2015 - 2025 – disbursement of approved state aid

- RON 2.7 billion (equivalent of EUR 600 million)

- Maximum RON 450 million (echivalent of EUR 100

million)

- 1,700 companies / 35,000 new jobs

Region Intensity / MAXIMUM state aid amount

2014 - 2017 2018 - 2020

Bucharest Region 15% of the eligible expenditure (maximum

11.25 million Euro)

10% of the eligible expenditure

(maximum

7.5 million Euro)

West Region

Ilfov Region


(maximum

26.25 million Euro)

The rest of the country 50% of the eligible expenditure

(maximum

37.5 million Euro)

Maximum state aid amount /intensity

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Eligible expenditures (1)

Eligible expenditures are the wage costs incurred in a time span of 2 consecutive years, for the new jobs enabled by the investment. Wages costs consist of: * Up to the limit of the gross average wage approved in the annual social security law and

valid in the year in which the financing application is registered. It includes the contributions and the income tax paid by the employees, too.

Total gross* annual wage expenditure + Total attached contributions paid by employers

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The state aid for eligible expenditures shall be disbursed if the below

requirements are fulfilled:

jobs are directly created by an investment project;

jobs are created after the date on which the financing agreement is

received, but within maximum 3 years after the investment completion

date;

no work relations between the employers or their associated companies

and the employees within the 12 months before the date on which the

financing application was registered.

Eligible expenditures (2)

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Let’s assume a company which creates 10 jobs in Iaşi, a city on the North-East Region

map, for which the maximum state aid share is 50%, and which pays to its employees a

wage higher than, or equal to, the average wage paid in the economy. The state aid shall

be calculated as follows:

Eligible expenditures (Example)

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Indicator Formula Calculation

Total expenditures with the annual gross wages

Monthly gross average wage x nr. of newly created jobs x nr. of months

2 298 lei x 10 x 12 = 275 760 lei

Total annual contributions paid by the employers

Total annual gross wage expenditure x 22.75%

275 760 lei x 22.75% = 62 735 lei

Total annual amount of wage costs Total annual gross wage expenditures + Total employers’ contributions

275 760 lei + 62 735 lei = 338 495 lei

Maximum amount of the annual state aid

Total annual amount of wage costs x maximum intensity

338 495 lei x 50% = 169 247.5 lei

Total maximum state aid amount Maximum annual state aid amount x 2 consecutive years

169 247.5 lei x 2 = 338 495 lei

a) the companies must be registered according to Law 31/1990; b) the companies undertake an initial investment in Romania in one of the eligible sectors; c) there are no outstanding obligations to the component budgets of the general consolidated budget; d) the companies are not included in the category “companies in difficulty”; e) the companies are not subject to any enforcement, insolvency, bankruptcy, judicial reorganization, dissolution, operational closure, liquidation or temporary activity suspension procedures; f) the companies are not subject to any state aid recovery rulings or any similar rulings have already been executed; g) the companies have not received other regional state aid funds for eligible costs of tangible or non-tangible assets nature under the same single investment project; h) the companies have not closed an identical or similar activity in the European Economic Area within the two years prior to the year in which the funding application was registered and, at the time of registration, the companies do not have any specific plans to close such an activity within the 2 years after the completion of the initial investment, in the region under consideration.

Eligibility criteria for companies – cumulative (1)

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Eligibility criteria for companies – cumulative (2)

+ Old companies:

a) the return on sales is equal to, or higher than, 1% in the last closed financial year; b) the own equity is positive in the last closed financial year.

+ Start-ups:

a) the subscribed share capital is minimum 30,000 lei; b) do not belong to shareholders who hold or were holding, in the past two year prior to the registration of the funding application, another business which is or has been in the line of business for which the funds are being requested.

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a) it has to be considered an initial investment, or an initial investment for a new economic activity, in the case of large companies in the Bucharest region; b) result in the creation, in each investment location, of at least 10 new jobs, of which minimum 3 for disadvantaged people; c) must be viable and cause the company to be efficient in economic terms.

Eligibility criteria for investments – cumulative

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In sessions of 20 business days, which can be extended

The registration sessions shall be communicated in advance by the

Ministry of Public Finance, at http://www.mfinante.ro/ and

http://www.mbuget.gov.ro/

Documents shall be sent out by either registered mail or courier, to the

General Registration Desk of the Ministry of Public Finance at 17,

Apolodor Street, sector 5, Bucharest

Registration of funding applications

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State aid approval procedure

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STAGE 1

STAGE 2

- Verification of the eligibility of undertakings and calculation of a score în order to select the eligible undertakings under the budget scheme

- Technical and economic analyze of the

investment projects of the pre selected

undertakings în order to determine their viability

Assessment criteria Judgment Score

Number of jobs created

35/10

3.5 points.

The period in which minimum 10 jobs are created.

8 months < 1 year 10 points.

Investment location According to the Monthly Statistics Bulletin nr. 2/2014, at end-January. Unemployment rate in Argeş County: 7.2% Unemployment rate in the country: 5.8% 7.2>5.8

10 points.

Return on sales in the latest closed financial year, for active companies.

ROS = 1.7% 1.7% < 2%

0 points.

Subscribed share capital (for startups)

N/A N/A

Let’s assume an active company, with the return on sales in the latest closed financial year of 1.7%,

making an investment in the Argeş county which creates 35 jobs over 8 months from the estimated

date of receipt of the funding approval. The score shall be calculated as follows:

How to calculate the score (Example)

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Total score: 23.5 points.

State aid disbursement

The state aid is disbursed to

recipient companies

on a quarterly basis, after part

or all of eligible expenditures

have been incurred

First disbursement is subject

to the creation of 10 jobs

in the same location

of an investment, of which

minimum 3 for disadvantaged

workers

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The state aid approval application

First assessment stage shall be completed in maximum 30 business

days from the day on which the application registration session is

closed.

The second assessment stage shall be completed in maximum 30

business days from the date on which the full documentation is

considered complete

The state aid disbursement application

The state aid shall be disbursed within maximum 45 business days

from the date on which the application is considered complete

Time limits

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Classification at the time of registration of the state aid approval application

Initial investment -years-

Jobs created -years-

Large companies 5 5

SMEs 3 3

Preservation of the investment and jobs

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Government Decision nr. 807/2014 introducing a state aid scheme

to support investments of major economic impact

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Purpose of the state aid scheme

REGIONAL DEVELOPMENT

INVESTMENTS IN HIGH TECHNOLOGY FIXED

ASSETS TO ENABLE HIGH VALUE-ADDED

PRODUCTS

EFFECT

Reduce economic gaps among

regions and recovery of the

Romanian economy

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Main particulars of the state aid scheme

- Companies of all sectors (except for those referred to in the Community Regulations)

How is the state aid disbursed

- Non-reimbursable funds from the state budget - Up to the maximum allowed intensity according to the Regional Map

Duration

Budget

- 2015 – December 31, 2020 – issuance of funding approvals - 2015 - 2023 – disbursement of approved state aid

- RON 2.7 billion (equivalent of EUR 600 million)

- Maximum RON 450 million (echivalent of EUR 100 million)

- 150 companies

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Scope

Estimated number of recipients

Region Intensity / MAXIMUM state aid amount

2014 - 2017 2018 - 2020

Bucharest Region 15% of the eligible expenditure (maximum

11.25 million Euro)


(maximum

7.5 million Euro)

West Region

Ilfov Region


(maximum

26.25 million Euro)

The rest of the country 50% of the eligible expenditure

(maximum

37.5 million Euro)

Maximum state aid amount /intensity

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Build new constructions; Lease existing buildings; Purchase tangible assets* (technical installations, new

machinery and equipment); Purchase non-tangible assets* (patents, licenses, know-how

or other intellectual property rights). * NEW + PURCHASED IN MARKET CONDITIONS

Eligible expenditures

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a) the companies must be registered according to Law 31/1990; b) the companies undertake an initial investment in Romania in one of the eligible sectors; c) there are no outstanding obligations to the component budgets of the general consolidated budget; d) the companies are not included in the category “companies in difficulty”; e) the companies are not subject to any enforcement, insolvency, bankruptcy, judicial reorganization, dissolution, operational closure, liquidation or temporary activity suspension procedures; f) the companies are not subject to any state aid recovery rulings or any similar rulings have already been executed; g) the companies have not received other regional state aid funds for eligible costs of tangible or non-tangible assets nature under the same single investment project; h) the companies have not closed an identical or similar activity in the European Economic Area within the two years prior to the year in which the funding application was registered and, at the time of registration, the companies do not have any specific plans to close such an activity within the 2 years after the completion of the initial investment, in the region under consideration.

Eligibility criteria for companies - cumulative -

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Eligibility criteria for companies

- cumulative - + Old companies (based on the latest closed financial year):

Net Profit /Sales x100 > 0% Own equity > = 0

+ Start-ups:

Sales >= RON 100,000 NO new firms of shareholders who hold or have held, within the two years prior to the current application, another company in the same line of business as the one for which the funding is now requested

NO outstanding obligations to the component budgets of the general consolidated budget YES shareholders/managers experienced in the line of business for which the funding is requested

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Eligibility criteria for investments

- cumulative -

The investments must be initial investments, for: - setting up of a new unit; - developing a new economic activity; - increasing the capacity of an extant unit; - diversifying the range of products of an extant unit; - making a fundamental change in the general production process of an extant unit;

* Bucharest, large companies = initial investment to start an economic activity; Total investment amount = RON 44 million ( EUR 10 million); The investment has to: - be viable and cause the company to become efficient; - to confirm the stimulating effect of the state aid; - to create contributions to the regional development; - to induce other related investments in the region.

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Approval procedure

Applications can be received in a continuous session to provide a permanent funding facility to investors;

Registration is suspended on the date on which the total funding requested is found to have reached the maximum annual budget allocated to the scheme;

Reasonable assessment time – 45 working days for issuing the financing agreement *)

*) as of the date on which the full documentation is considered complete.

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Disbursement of state aid

State aid shall be disbursed

to recipient companies after

all or part of eligible

expenditures are incurred

The state aid shall not exceed

the level of the project’s direct

contributions * to the regional

development (implementation

time + preservation of the

investment)

Preservation of the investment

The initial investment must be preserved functional for at least 5

years after its completion, along with the new working places

created

* taxes to the general consolidated budget and local budgets

(contributions associated to the employee’s wage income

+employer, corporate income tax, tax on land and buildings )

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Prioritize investments; Complementarity with other funding programs at national level; Attract foreign investments + redeployment from outside the EU

area; Encourage the transfer of know-how and modern technology; Create as many as possible sustainable jobs which bring

contributions to the state budget; Secure, through the state budget, the sources of funds to pay the

approved state aid, on the agreed deadlines; Permanent monitoring of investments.

The Government’s State aid Policy in 2014 – 2020

- Conclusions -

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During the period in which the state aid scheme is valid, as of the time of opening the application registration session, the Ministry of Public Finance shall provide all the applicants with a dedicated platform for questions, clarifications and problem reporting, at:

Ask a question, request clarifications, report a problem

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MINISTRY OF PUBLIC FINANCE

17 APOLODOR STREET, SECTOR 5, BUCHAREST

http://www.mbuget.gov.ro/

http://www.mfinante.ro/

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