Boosting the Romanian Economy by Fostering SME's
How to boost the Romanian economy by fostering SMEs was the topic of the event held on 22 September at the Athenee Palace Hilton in Bucharest. It was a difficult debate because on the one hand, the representatives of the entrepreneurs demanded a solution of “easy credits” offered by banks to start-ups and small firms, while on the other hand, the Vice Governor of the Romanian National Bank said that SME’s are, since the economic crisis, not good credit risks for banks. In the end, both sides agreed on a solution offered by the Vice Governor to the audience.
This event with more than 60 entrepreneurs and guests from media and civil society was hosted by the Friedrich Naumann Foundation for Freedom in collaboration with the Centre for Institutional Analysis and Development Eleutheria (CADI).
The first part of the event gathered entrepreneurs in a round table to discuss what the Romanian economy needed to create real economic growth. The round table’s interactive exercises in an open space format enabled these mostly young entrepreneurs to discuss openly their daily business problems. What they considered their biggest problems were not just the state and the bureaucracy - uneducated employees and a lack of information are equally problematic. In contrast, “easy financing” was a lesser problem, though still highlighted as a challenge.
The Workshop’s results and the conclusions were presented to a conference of government and non-governmental representatives in order to identify solutions to the SME`s problems in Romania. The participants in the conference had the chance to debate with speakers such as: Daniel Kaddik, Project Director of FNF Southeast Europe, Bogdan Olteanu, Vice Governor of the National Bank of Romania (BNR), Catalin Beciu, Secretary of State for SME`s, Valentin M. Ionescu, former Minister of Privatisation and today an entrepreneur and initiator of the Business School in Romania (above photo, from left to right).
The moderator of the discussion, Horia Terpe, the Executive Director of CADI, presented the conclusions of the round table, that the Romanian economy’s main problems are in three areas: financing, interpersonal relations, and the relation with the state. It seems that at least regarding financing, the entrepreneurs found the inflexibility of the banks as a real drawback. They thought that SME`s and start-up businesses should get bank loans backed with state guarantees.
In response to this proposal, Bogdan Olteanu, Vice Governor of the National Bank of Romania, explained that: “SME`s are the most unsafe debtors for banks. The banks have great difficulties in restoring a state of optimism after the economic crisis – and great difficulties in convincing their stockholders that SME`s should receive investments […] because the banks have not paid dividends for a long time; from America to the other corners of the world, it`s not a Romanian problem. The banks cannot afford risks. Then, they will direct their credit to those areas where their risks are smaller and the payback is bigger”. As a solution to the problems of the SME`s, Olteanu mentioned the creation of a guaranty mechanism which should address the fact that “SME`s in Romania are undercapitalized.”
Regarding the matter of capital, Catalin Beciu, Secretary of State for SME`s, argued that Romania is still in the “primitive accumulation of capital stage” 25 years after the end of the totalitarian system. Therefore, entrepreneurs’ top priorities should be more training and professional development and advice from experts.
Actually, what entrepreneurs need is less intervention by the state and fewer regulations, so that the entrepreneurial culture can foster and the market can function freely. “The entrepreneur is a hunter of opportunities, he is capable of giving another meaning to the abilities he already has. The problem an entrepreneur deals with is that, although he compares costs today, he might not foresee the perspective for a higher cost in the future”. This line of thought was well picked up by Valentin M. Ionescu, entrepreneur and initiator of the Business School in Romania.
Minimal state interference would lead to job creation and economic growth. If they are left to operate freely, entrepreneurs would act through informal laws for the benefit of the economy. Unfortunately, Mr Ionescu stated that there is “a class of privileged people with access to privileged information, who put pressure in order to distort the market mechanisms through regulations”.
In conclusion, a common problem identified also by Mr Daniel Kaddik, Project Director of FNF Southeast Europe, is the asymmetry of information between the private sector and the administration, “as a major source of corruption and a barrier that hinder business growth”. He argued in particular for the application of e-governance as a solution to this asymmetry. Finally, it takes political will to implement the recommended solutions.
You can watch the entire debate in Romanian here.
For more information for FNF Southeast Europe visit their website or Facebook page.
Find the photo album from the event here: