Austrian businesses need more predictability

Held in partnership with Raiffeisen Bank, Trainart, Volksbank Romania, BauMax Romania, Asigurarea Romaneasca - Asirom Vienna Insurance Group, Julius Meinl and Billa, the 2011 edition of this annual business conference was hosted by the JW Marriott Bucharest Grand Hotel and moderated by Luciana Petrescu, Net Worth Advisory


What can you tell us about the bilateral trade between Austrian and Romania?
As you know, our trade grew rapidly until 2008. Our exports to Romania peaked in 2008, reaching 2.4 billion Euro. Unfortunately Austria suffered a sharp decline in 2009, but 2010 looks positive, as Austrian exports to Romania grew modestly by around five per cent, reaching 1.7 billion Euro. What is even more promising is that Romania’s exports to Austria grew by around 55 per cent, reaching 996 million Euro. This trend is the result of a change in the portfolio of Romania’s exports. In the past, we had mainly textile and leather products, and raw materials. However, in the last two years the proportion of industrial and electronic products has grown remarkably, which also shows the recovery of the Romanian industry.     
We are quite optimistic for this year, as we witness the positive developments in the industry in general. Of course, there are sectors such as construction and trade, which are in a more difficult position. Nevertheless, investors have also gained confidence and are further exploring the Romanian market to start new investment projects.

What are the main obstacles for businesses from the Austrian perspective in 2011?  
Any investment decision is based on various criteria, including labor cost, competition, market potential and of course the legal environment. Therefore there is not a single aspect influencing investment decisions. However, if any one of those criteria is perceived negatively investments plans can be put on hold. The general business environment, the legal background could be regarded as the biggest obstacle to investors, but it has also seen improvements during the past few months. There are very often sudden changes in laws and regulations. Investors would be happy to see more transparent and clearer rules and regulations, better public procurement, better public administration and the general improvement of the legal system.  

How would you characterize the level of Romanian investment in the Romanian economy?
I think this is a key point in Romania. Over the past few years the economic growth was mainly driven by foreign investments. Since the onset of the economic crisis in 2009, international investors in general had to reduce their exposure. If Romania had had a stronger domestic investment, the crisis would not have had the same impact here.



What are your estimations regarding the evolution of the Romanian economy this year? How would you characterize the performance of your bank in 2010 and what are your expectations for 2011?
We expect the Romanian economy to grow in 2011, achieving an increase of 1.5 per cent, compared to -7.1 per cent in 2009 and -1.3 in 2010. The main drivers for this moderate growth will be the higher external demand and investments. At the same time, we expect household consumption and public spending to remain at a low level.
Meanwhile, we have had negative news coming from the inflation front. On the other hand, the national currency, the Romanian leu, has gained four per cent since the beginning of the year. At the moment, the exchange rate is 4.1 lei to the Euro and we estimate the same level for end-2011.
All in all, last year was successful for us. We managed to regain the number three position in the market and we also managed to become the main bank for most of our retail clients. In 2011, one of our priorities is to grow, but we want to do that in a healthy sort of way so we can be a serious partner for our clients in the future.


How was 2010 for the insurance market?
We can broadly say that 2010 was a rough year for the entire industry. The insurance industry closely follows the trend of the general economy. Our industry is driven by consumer spending, personal assets, it is driven by investments and all of these indicators were slowing down in 2010. On the other hand, the difficult conditions last year brought a bit more discipline to the market, which is a good thing for the industry.
What else can insurance companies do to secure their profitability in times of crisis?
I believe the key thing is to do your homework when the times more favorable, because if you wait until the crisis hits then it is usually too late. So, do your homework early! And Asirom was lucky to have done do just that. Risk management is of utmost importance for the insurance business. The important thing is to have discipline and of course to think sensibly about the future.
For 2011, we see that the economy is picking up, and business revival normally stimulates insurance growth.


How would you characterize the level of Romanian investment in the Romanian economy?
We have clients representing 100 per cent Romanian companies who have started to establish subsidiaries in German speaking countries, and that is a very positive sign. I would also like to point out that in 1990 there was no private capital in Romania. So if we compare ourselves to countries in which the private capital has been active for centuries we have to understand that - on the one hand - we are still in a stage that could be described as “wild capitalism” and – on the other hand - if we want to build something we need a certain period to reach maturity. And most companies have yet to reach that maturity.
As for the figures regarding the volume of Romanian investment in Romania, they are fairly easily accessible. It is easy to find out how many companies with Romanian capital there are and what their subscribed capital is.



Can we talk about the existence of post-crisis banking?
All businesses, including the banking industry, have had to readjust their strategies and target the right positions, the right market, the right products, the right costs and prices. I have only been in Romania for one year, but I must say that pre-crisis growth here was really impressive. It was unbelievable how fast Romania was growing. However, most people probably overlooked the fact that the trend could reverse. In 2011, our main objectives are to conduct a sustainable business and become profitable again.



What aspects could define a country as attractive for investment in the current economic environment?
The reason why Romania ranked high among the most attractive investment destinations in our study among leading German, Austrian and Swiss industrial groups lies in the interesting mix that the country still offers. You have an attractive labor cost, a significant market size and, believe it or not, these investors see Romania as a stable market from a macro-economic point of view. Overall that is the mix that makes Romania attractive to investors. Another important aspect is the availability of qualified personnel. There are people who can speak foreign languages, there are engineers and there are decent costs. The political and legal stability are also very important criteria. Even if all the other aspects were superb, investors still wouldn’t go to a place where they cannot be sure their investment is safe. The access to utilities is also very important. So all things considered, Romania is in a quite good position.
Even so, the general atmosphere is much too negative in the Romanian business environment. Things are going much better than you are led to believe. Everyone likes to complain, the public opinion is much too negatively charged. 
Nevertheless, there is room for improvement, and the Romanian business environment could benefit from a better strategy at governmental level.


Based on the negative views we have heard regarding the workforce here, one may wonder why investors have come to Romania at all. If Romania had had nothing positive to offer I am sure they would have gone to Russia, Ukraine or other countries instead. I am sure that every prospective investor has found good things and bad things here, but in the end, in many cases, the positive aspects exceeded the negative ones.


2008 was marked by the financial crisis, 2009 was marked by recession, while 2010 and 2011 were marked by economic recovery. The second half of 2011 and 2012 will be marked by growth. However, the growth will be based on limited budgets. Thus investors should select their strategy carefully and choose their sector well. That is one of the biggest challenges in 2011.



What has been done for Romanian investors to be encouraged to invest in this country?
The Chamber of Commerce of Romania is one of the strongest supporters of Romanian capital. The Romanian capital is younger, we have to admit that, and they are not even that courageous as we would like them to be. So there is Romanian capital, but not that visible and not where we would need it. But we can say that at the Chamber we are lobbying for the development of Romanian investment. 
The Chamber of Commerce of Romania operates like a transmission belt for the local chambers of commerce and bilateral chambers and over the last year, the local chambers have started to become more active.


Are companies still investing in training programs and, if so, which programs are most in demand?
Training programs are in demand again. Compared to 2009, we saw an improvement in training demand in 2010. Companies started to invest in training programs and according to a survey conducted by HR Club last year, training programs are top priority for companies, alongside recruitment processes. Also, new funds are being accessed and there is a lot of EU money to be invested in training programs until 2013.
We have also noticed that companies no longer invest in off-the-shelf training programs. They invest in specialized, complex programs, and training companies have to tailor their programs especially for each client.
Creativity and innovation was a very popular topic in training last year. In times of crisis all companies need creative people, people who can come up with creative ideas to stimulate business growth. 
For top management people, who have already completed all the training programs available in the market, we have created a program called Drama training for top management level. It uses theatre techniques to be applied in business.