The schedule of economic recovery is accelerating

03 iul. 2020 English Section
(Translated by Cosmin Ghidoveanu)

The Government's plan to support companies is able to achieve convergence with European economies 

Following the emergency measures, the Government has launched a new phase to support the economy - grants for business development and to accelerate the computerization process, support for greenfield and for workforce employment, non-reimbursable financing programs for companies, which will help to grow competitiveness.

The calendar of economic recovery is accelerating, the Orban Government is making available a sectoral plan to support the economy, based on a model of economic growth that focuses on stimulating and developing domestic capital, supporting investment projects in strategic areas of public infrastructure (transport, health, education, local development, agriculture) and transforming the economy in line with global developments.

For the first time, a Romanian government is presenting a plan to support companies, from the smallest to the largest; including startups, amounting to over euro 3 billion, of which over euro 1 billion in grants for allowing companies to resume their business (working and investment capital), euro 1.2 billion in grants, euro 300 million in grants for entrepreneurial initiatives and the computerization of companies, 410 million euros in the form of grants and financing measures in agriculture.

On top of that, there is also the public investment program in key sectors (transportation, health, energy), which presents projects with an estimated budget of over 184 billion euros over several years.

This support plan, which will be supplemented as funding sources get more solid, is able to bring about convergence with the European economies and the increase of the GDP per capita to 87% of the EU27 average over the medium term.

Nothing Keynesian about this economic model proposed by the Orban Government, although some analysts more inclined towards the theoretical side could identify some elements of economic thinking ...... It is a rallying to lay the foundations of a functioning economy, to meet the challenges generated by the current health crisis and the incoherence of local economic policies so far: the resumption of companies' operations, but this time on a solid basis, workforce occupancy, including by attracting the active unemployed population and Romanians in the diaspora, ecological transition and computerization of companies, regaining trust.

The expected injection into the economy is in full agreement with European policies and is aimed precisely at the sources of economic instability and Romania's trade deficit areas, through the development of vital economic sectors and the relocation of production to proximity areas. This financial injection will also allow the expansion of the Romanian entrepreneurial segment and the tapping of the entire domestic potential with an equitable distribution of revenues.

Thus, the economic recovery plan proposed by the current government includes:

- Support grants for micro-enterprises (2000 eur / LLC without employees) and SMEs (working and investment capital, and economic reconversion, respectively), including a state aid scheme for trade and services activities affected by Covid-19,

- grant programs for increasing the competitiveness of SMEs (for investments and increasing competitiveness, through ROP, or for financing large investments in increasing productivity). In the latter case, the allocated budget is 550 million euros, and the grant value - between 2 million and 6 million euros;

- Grants for innovative entrepreneurial initiatives and the computerization of companies, of which grants of up to 100,000 euros for start-ups created by students in competitive and innovative fields, grants of up to 100,000 euros / project for the computerization of SMEs or grants between 30,000 euros and 100,000 euros / project to finance digital education programs for employees in SMEs; Also worth mentioning is the Start-UP program, which will benefit from a scheme for financing innovative startups through grants with an estimated value of 42,000 euros;

- Grants and support measures for agriculture and the development of the agri-food industry which are aimed at: financing warehouses for the distribution of agricultural products, with the goal being the construction of 8 regional warehouses for storing, sorting, packaging, labeling and marketing of local agricultural products; grants of about 6,000 euros / beneficiary for the purchase of irrigation kits; grants of up to 100,000 euros for the development of processing and distribution of agricultural products made by small producers; facilities for the installation of young farmers by leasing to them lands which are part of the public or private domain of the state which are dedicated to agricultural use;

- Financing programs for new investments and for the relocation of companies in Romania, as part of state aid schemes with a maximum amount of 37.5 million Euro / investment for greenfield investments or for supporting investments that promote regional development;

- State guarantees and schemes to ensure the liquidity of companies, by continuing the SME Invest program, but also through government guarantees of up to 90% of commercial loans (for working capital or investments) contracted or in the process of being contracted by companies with a turnover higher than 20 million lei. The commercial credit insurance guarantee scheme aims to incentivize insurers' risk exposure and facilitate companies' access to commercial credit insurance. In case of a loss, the amount borne by the Ministry of Public Finance represents 80% of the amount not collected / not recouped by the insurer. Also worth mentioning is the program for guaranteeing the leasing of equipment and machinery for SMEs that opt for non-bank financing. Financing of up to 5 million lei / beneficiary will be granted, guaranteed within a limit of 1.5 billion lei;

- Instruments for increasing the capitalization of companies and for financing investments, which will consist comprise both tax rebates and the establishment of the Romanian Investment Fund (FRI) for financing investments in areas of strategic interest and the National Development Bank (NBD) as a credit institution for investment projects, with the role of borrowing from the equity markets and granting financing on advantageous terms for investment projects in strategic areas, following the model of other existing institutions in EU countries;

- Occupancy increase and social security measures, which are aimed, on one hand, at preserving jobs and creating new ones, including by supporting job market insertion, and on the other hand at providing assistance to vulnerable groups (students, the elderly, seasonal workers / day laborers in HoReCa, agriculture and tourism). Thus, in addition to the measure already passed of awarding furlough compensation to employers whose activity is suspended and to the incentives for the resumption of economic activity (41.5% of the gross salary per employee that returns to work after an interruption, over a period of 3-months), the government will provide incentives for continued telework (an aid of 500 Euros / employee for the purchase of IT equipment) and financial support for flexible work. Thus, the government will pay through the SURE European financing mechanism a compensation amounting to 75% of the difference between an employee's gross salary as stipulated in the individual employment contract before the downsizing of the work schedule and the gross salary for the hours actually performed following the work schedule reduction;

- A national investment plan which presents in detail the public investment projects in key sectors: transportation, energy, healthcare, education, local development, agriculture, environment and sports.

Tănase Stamule is an Economic Issues Adviser to the prime-minister and Dean of the Faculty of Business Management of the Romanian Academy of Economic Studies of Bucharest

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