Dutch trade mission to Romania, with suppliers for the food and agri sector  1-4 May 2012

The international division of the agency NL of the Dutch Ministry of Economic Affairs – NL EVD International and the business development company Rocon organize a business trip for a group of Dutch companies willing to establish relations and exchange experiences with potential Romanian partners. During 1-4 May the Dutch companies will have individual matchmaking meetings with Romanian business partners in Bucharest and at the International Trade Fair Agraria in Cluj-Napoca. With this occasion, H.E. Matthijs van Bonzel, Ambassador of the Kingdom of the Netherlands in Romania, is hosting a networking event meant for the members of the trade mission to meet representatives of branch organisations, Romanian companies and Dutch companies already based in Romania.

Trade mission members:

Dutch flag still flying on local market despite dire straits

Like other Europeans, Dutch investors are fighting to cope with the widespread economic challenges as they seek solutions to keep and increase the businesses they own on the local market

The Diplomat - 2012 - From the Print Edition, http://www.thediplomat.ro/articol.php?id=3066 

 

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Romania’s largest foreign investor has more than 4,000 companies in the financial, consumer goods, agriculture, and transport and logistics fields, and top-ranking Dutch officials voiced their compatriots’ resolve to maintain and increase their local interests.
While political relations between Romania and the Netherlands are currently somewhat tricky, after the Dutch authorities vetoed Romania’s accession to the borderless Schengen zone, for companies it is business as usual, and the Western European country remains the largest investor in the Romanian economy.
According to official statistics provided by the Netherlands-Romanian Chamber of Commerce, bilateral trade between the two countries amounted to almost EUR 2.7 billion in 2010, an increase of 8.6 percent on 2009.
Of this sum, Romanian exports accounted for EUR 1 billion, or 2.75 percent of Romania’s overall exports, while the rest represents imports from the Netherlands.
At the end of 2010, almost 4,000 Dutch companies were registered in Romania, with a total investment value of EUR 5.85 billion.
The Netherlands is the largest foreign investor in Romania, active in many economic sectors, but its presence is higher in consumer goods, agriculture, transport and logistics, and financial services, according to the Chamber of Commerce.
In keeping with the European picture, foreign investment flows have decreased since the beginning of the current crisis, says Peter de Ruiter, PwC Romania partner and tax and legal services leader, and president of the Netherlands-Romanian Chamber of Commerce.
“This is an EU-wide phenomenon, which is not particular to Romania. Therefore, new Dutch investments have also taken a downwards trend. However, companies that were already present in Romania have strengthened their position here. One such example is ING Bank, which has actually gained market share in Romania since 2008, and its situation is by no means an exception amongst Dutch companies,” said de Ruiter.
Although no official statistics on the current situation of local Dutch investments have been made public in the last two years, Hans Smaling, head of the commercial and trade department at the Embassy of the Kingdom of the Netherlands, struck a positive note, saying that no drop in Dutch investors’ interest in business opportunities in Romania has been spotted so far.
And he does not believe that the political differences between the countries are a serious impediment to the business community.
“I personally do not feel that the Dutch Government’s current stance on the Schengen issue is damaging to the business interests of Dutch companies operating in Romania,” Smaling added.

Focus moves to beta skills

The recent economic dynamics in Europe and worldwide have shifted the emphasis of the labor market towards so-called beta skills, which means a focus on productivity, as well as manufacturing and technical skills, Hans Smaling, economic counselor of the Royal Netherlands Embassy, told The Diplomat – Bucharest.
However, the emphasis on productivity should not rely too heavily on Europe’s labor resources, since the Asian markets are major competitors when it comes to rapid and high productivity and manufactured products.
“Countries in Europe should particularly focus on R&D and innovation, to come on the market with the best viable solution, after which they have to start producing it,” advised Smaling.
The diplomat commented that for Dutch and other foreign investors alike, Romania’s low labor costs are no longer a main criterion in choosing the country as a business resource. “Labor costs in Romania are becoming comparable with other states in Europe and companies, especially those conducting industrial and production activities, come here to find specialists and very highly-skilled workers,” said Smaling.
Turning to the hopes for Romania as a business destination within Europe and worldwide, the official said that he sees “Romania as one of the fast-growing economies in Europe in the coming years.” Smaling is hopeful about the current macro-economic strategies in which Romania is involved (the European gateway platform strategy for instance) and recent economic measures taken in Romania to comply with the treaties agreed with the IMF, World Bank and European Commission.
Still, problems remain in the form of the long-discussed deficiencies in the Romanian business and administrative infrastructure, administration transparency, the predictability of fiscal policies, excessive bureaucracy and, one of the most important but also subjective matters, mentalities. On the Schengen issue, the embassy official says that the matter will eventually fade from people’s minds after two consecutive positive reports. EC leaders have postponed their decision on Romania and Bulgaria’s Schengen accession until September.

Schengen not a deal-breaker for business

The much-discussed Schengen issue will not and has not interfered with the development of the business landscape, regardless of the origin of the investor. According to Peter de Ruiter, the economic partnership between Romania and the Netherlands will grow even stronger, as expected.
“We see enormous development potential for Dutch companies operating in Romania in several areas from energy, trade, logistics and transport to agriculture and consumer goods. I am confident that the Schengen issue will be resolved by September this year and that by then it can be seen as only a temporary cloud in this successful relationship overall,“ de Ruiter told The Diplomat – Bucharest.
Still, with the coming years offering no certainty, Romania has to continue improving operational efficiency and liquidity management, while businesses must maintain a lean organization with a close monitoring of costs, urged the Chamber of Commerce official.
In Hans Smaling’s opinion, Romania offers investors a friendly taxation system, with a flat tax of 16 percent, which, according to the embassy official, “is pretty low compared with other European states”. The main local challenge in fiscal prudence is to improve the tax collection system, broaden its base and bring the grey economy into the legal one.
Holding steady
Meanwhile, Romania has more work to do on several urgent issues that for years have dampened some investors’ enthusiasm and made life hard for foreign businesses operating locally. “In order to maximize its potential, Romania should improve its infrastructure and adopt several key fiscal measures that would create a very attractive business climate and act as a magnet for foreign investments,” de Ruiter urged. “One of these measures should be the introduction of good holding legislation. This would attract and retain capital in Romania and also contribute to the development of the financial and professional services sectors. If we look at the EU countries that have adopted such holding legislation, like the Netherlands, Luxembourg and Cyprus, we see that this has been a key ingredient of their economic success and, on the long run, increased the revenues to the state budget.”
Another major fiscal measure that some investors believe Romania should adopt is the possibility of VAT deferral for imports. Today, this is only an option for companies with yearly turnovers of more than RON 150 million. The Chamber of Commerce president argues that this possibility, which has no impact on the state budget on the longer term, would greatly improve Romania’s status as a CEE trade hub. In addition, in the import field, he urges Romania to take advantage of the strong points of the Constanta harbor.

Harboring grand designs

The Constanta harbor, along with the coastal businesses in which Dutch companies also have an interest, ranks among the top priorities in Romania’s strategy to become the Eastgate Trade Hub of the CEE region, part of the European Gateway Platform strategy (EGP), founded by a number of Dutch companies. Under the strategy, Romania has been assigned a total of EUR 19 billion of EU Structural Funds over 2007-2013, of which EUR 8.5 billion is earmarked for investments in infrastructure and regional development. The EGP strategy includes the expansion of the port of Constanta, the navigability of the Danube and the development of multi-modal junctions and inland waterway networks, all projects that will begin within the next few years. The Netherlands has the technology and knowledge to play a role in these developments. Given the economic growth, the investments flowing from Brussels to Romania over the coming years and the country’s strategic geographical position as a gateway to the Central European and wider continental market, Romania offers numerous business opportunities to the Dutch logistics and infrastructure sector. Dutch companies are “willing to invest in Constanta harbor and, currently, there are several investments in the pipeline,” Smaling said.
The local port is not the only development opportunity for local and foreign companies, given the government policies and measures to be taken within the administration. Dutch representatives – embassy officials, business association spokespeople and private investors – also pointed out that the Southeast Europe Danube Strategy aims to revamp Europe’s most important river into a modern transport route.
The region includes ten countries, six EU members and 200 million inhabitants, of whom 75 million live in regions bordering the river. The Danube strategy has to be built on solid, achievable projects and is included in the EGP strategy, which is supported by the Dutch Government. In addition, another advantage of the EGP platform strategy is that it has been incorporated as a priority into Romania’s national strategy, said Smaling.