Up to 40.000 Euro / project – program România Start Up Plus

The state aid scheme funded under the Human Capital Operational Program 2014-2020 (POCU) has begun to operate through which entrepreneurs will be able to get EUR 40,000 per project implemented in urban areas to finance business plans selected by scheme administrators.

For each development region in Romania except for Bucharest – Ilfov that is not eligible under this call for proposals, many entities have been selected as fund managers dedicated to the development of entrepreneurial skills.

The Entrepreneurship Scheme comprises three implementation phases:

Phase I – Entrepreneurial training

Phase II – Implementation of business plans funded by European funds (European Social Fund)

Phase III – Monitoring the functioning and development of the funded businesses

In Stage I of entrepreneurial training, the Scheme Administrator has the obligation to carry out actions that ultimately result in the improvement of the entrepreneurial skills of individuals (e.g. unemployed, inactive people, people who have a job and set up a business to create new jobs) intending to set up a non-agricultural business in the urban area

At least 300 people belonging to one or more target group categories will be selected to participate in the entrepreneurial training courses organized by each administrator. The courses will last at least 40 hours / trainee, being recognized by the NAC.

Stage I will continue with the submission of business plans for selection in order to receive a grant of € 40,000. Number of business plans providing economic activities falling within the NACE, Section G – Wholesale and retail trade; repair of motor vehicles and motorcycles, except Group 452 – Maintenance and repair of motor vehicles will not exceed 20% of the total number of business plans financed through the same project.

Applicants and individuals who have not participated in the entrepreneurial training courses organized within the project will be able to apply, but their number may not exceed 10% of the total number of beneficiaries of state aid granted under the project.

Business plans will be subject to the approval of a jury involving at least one business representative (entrepreneurs, employers’ organizations, etc.) in the project implementation region and a representative of financial or non-banking financial institutions.

The jury will evaluate and select business plans based on a methodology approved by the MFE within the grant application submitted by the Entrepreneurship Scheme administrator.

Persons whose business plans have been selected for subsequent de minimis aid in the businesses they set up will necessarily carry out a practice internship in an existing, functioning business whose economic activity is part of the same CAEN group as the one for the selected business plan.

The traineeship will have a minimum duration of 40 hours and will take place at the registered office or, as the case may be, at the point of work of the selected company.

The implementation period for Stage I is no more than 12 months from the start date of the project.

A minimum of 30 business plans proposed by representatives of the target group will be approved for Stage I to be considered completed.

In Stage II of implementing the business plans selected for funding, the Scheme Administrator will provide personalized counseling / mentoring / mentoring services to set up and start operating the businesses that will carry out de minimis business plans within the project.

The maximum amount awarded for approved plans is € 40,000 / business plan, representing a maximum of 100% of the total eligible costs, and is only granted to enterprises set up by persons whose business plans are approved.

Granting this funding will be done on the basis of a grant agreement. De minimis aid will be granted in two installments, as follows:

  1. An initial installment of up to 75% of the amount of de minimis aid as approved on the basis of the business plan and provided for in the grant agreement concluded.
  2. A final tranche representing the difference to the total de minimis amount after the de minimis aid beneficiary proves that it has achieved, within the 12-month period of Stage II, revenue representing at least 30% of the value of the initial tranche. If this deadline is not met, the final installment is no longer granted.

After setting-up, newly created businesses must continue their activity for a minimum of 18 months, of which at least 12 months in stage II.

All payments related to the start-up and operation of newly created enterprises must be made within the first 12 months of operation. In the subsequent 6 months of sustainability, the beneficiary of the de minimis aid will ensure the continued operation of the business and will maintain the employment created.

Persons who are part of the project team, associates or employees of the beneficiary or its project partners may not be employees or associates within the companies set up by the project.

In Stage III of the monitoring of the functioning and development of funded businesses, the administrator of the Entrepreneurship Scheme has the obligation to ensure that the number of persons employed in the newly established enterprises is at least equal to the total number initially assumed. The duration of this phase is no more than 6 months after the completion of the second stage.

Example of grid for evaluation and selection of the business plan

Nr. Crt. Criterii Punctaj
Calitatea planului de afaceri

 

Max 70
A 1 Descrierea afacerii si a strategiei de implementare a planului de afaceri Max 10
    – nu este clara si nici bine structurata 3
    – este clara, structurata insa punerea in aplicare este incerta 5
    – este clara, structurata si poate fi pusa in aplicare 10
B 2 Descrierea produselor/ serviciilor/ lucrarilor care fac obiectul afacerii Max 10
    -nu este clara si nici bine structurata; 3
    -este clara, bine structurata, insa nu este corelata in totalitate cu achizitiile propuse in planul de afaceri 5
    -este clara, bine structurata si este corelata in totalitate cu achizitiile propuse in planul de afaceri); 10
C 3 Analiza pietei de desfacere si a concurentei Max 10
    -nu este clara si nici bine realizata 3
    – este clara, insa nu se bazeaza pe o apreciere realista/cunoasterea situatiei 5
    -este clara si bazata pe o apreciere realista/cunoasterea situatiei 10
D 4 Strategia de marketing Max 10
    – nu este clara si nici bine structurata; 3
    -este clara, bine structurata, insa nu prevede modalitati concrete de realizare – 5
    -este clara, bine structurata si prevede modalitati concrete de realizare 10
E 5 Cheltuielile pentru care se solicita finanatare  sunt necesare in vederea desfăşurarii activităţilor pentru care se accesează finanţarea. Cheltuielile efectuate trebuie să fie în legătură cu fluxul activităților/subactivităților care sunt necesare desfăşurării sau promovării activităţilor codului CAEN, pentru care se solicită finanţare, așa cum sunt detaliate activitatile codului CAEN Max 10
    – Cheltuielile pentru care se solicita finanatare  nu sunt justificate 3
    – Cheltuielile pentru care se solicita finanatare  sunt partial justificate 5
    – Cheltuielile pentru care se solicita finanatare  sunt justificate 10
F 6 Proiectii financiare privind afacerea.Planul de afaceri este fundamentat din punct de vedere tehnic si economic, cheltuielile si veniturile prognozate putand fi verificate Max 10
    -estimarea veniturilor si cheltuielilor nu este corecta si nu este bine structurata 3
    -estimarea veniturilor si cheltuielilor este corecta, bine structurata, insa are un grad ridicat de incertitudine 5
    -estimarea veniturilor si cheltuielilor este corecta, bine structurata, si are un grad scazut de incertitudine 10
G 7 Partea  descriptiva a planului de afaceri  este corelata cu previziunile financiare si codul CAEN pentru care se solicita finantare Max 10
    – partea  descriptiva a planului de afaceri  nu este corelata cu previziunile financiare si codul CAEN pentru care se solicita finantare 3
    – partea  descriptiva a planului de afaceri  este partial corelata cu previziunile financiare si codul CAEN pentru care se solicita finantare 5
    -partea  descriptiva a planului de afaceri  este corelata cu previziunile financiare si codul CAEN pentru care se solicita finantare 10
Contributia proiectului la temele orizontale si secundare ale POCU 2014-2020 Max 30
H 8 Dezvoltarea Durabila Max 5
    -nu sunt descrise produsele, tehnologiile sau serviciile care contribuie la aplicarea principiilor dezvoltarii durabile 0
    – sunt descrise, insa nu este clara contributia la aplicarea principiilor dezvoltarii 2
    – sunt descrise si este precizata contributia la aplicarea principiilor dezvoltarii 5
I 9 Sprijinirea tranzitiei catre o economie cu emisii scazute de CO2 Max 5
    – nu sunt descrise activitatile care contribuie la tema secundara 0
    – sunt descrise, insa nu este clara contributia la tema secundara 2
    – sunt descrise si este precizata contributia la realizarea temei secundare 5
J 10 Inovare sociala Max 5
    – nu sunt descrise activitatile care contribuie la tema secundara 0
    – sunt descrise, insa nu este clara contributia la tema secundara 2
    – sunt descrise si este precizata contributia la realizarea temei secundare 5
K 11 TIC Max 10
    – nu sunt descrise activitatile/solutiile TIC care contribuie la tema secundara 0
    -sunt descrise activitatile/solutiile TIC, insa nu este clara contributia la tema secundara 5
    -sunt descrise si este precizata contributia la realizarea temei secundare 10
L 12 Cercetare/dezvoltarea tehnologiei si/ sau inovarii Max 5
    -nu sunt descrise activitatile/solutiile care contribuie la cercetare/dezvoltarea tehnologiei si sau inovarii 0
    – sunt descrise activitatile/solutiile, insa nu este clara contributia la cercetare/dezvoltarea tehnologiei si sau inovarii 2
    -sunt descrise si este precizata contributia la realizarea cercetarii/dezvoltarii tehnologiei si sau inovarii 5

 

To prepare a competitive business plan and related financial forecasts, you can contact us at office@areteconsulting.eu .

European funds up to EUR 1 million per project Integrated Danube Delta Territory – Projects can be submitted until 23.08.2018

Through the Integrated Strategy for Sustainable Development of the Danube Delta with a deadline to be implemented by 2030, it was established that a part of the European funds for the period 2014-2020 will be dedicated to the financing of some public or regional investment projects for conservation and reconstruction ecological aspects of the Danube Delta Reserve, the modernization of the infrastructure related to the area, the development of the public and private economic sector, urban and rural tourism and regeneration.

Thus, from 23.02.2018 to 23.08.2018, the call for POR 2.2A dedicated to the companies from the Integrated Territorial Investment Area (ITI) of the Danube Delta is open, with a total value of 50,587,986 euros, urban SMEs and medium sized firms in rural areas . Applications may be submitted exclusively via the MySMIS electronic application, available at http://www.fonduri-ue.ro/mysmis. The geographical area covered by this measure can be found in the picture accompanying this article and includes localities in Tulcea county including the municipality with the same name and in northern Constanta county.

The amount of non-reimbursable funding is at least EUR 200,000 and a maximum of EUR 1 million, equivalent in RON at the Inforeuro exchange rate valid on the date launch of the call for projects. These ceilings apply to the full amount of non-reimbursable financing, consisting of both State aid and, where appropriate, de minimis aid.

Under this call for proposals, the following categories of State aid are granted, depending on the type of investment

  • regional state aid for investment, for
  1. Construction, extension of production facilities / services;
  2. Provision of tangible, intangible assets, including on-line trading tools

and

  • de minimis aid for
  1. Implementing the process of certification of products, services, or specific processes, quality management systems, the environment, or health
  2. Internationalization (international participation at fairs, trade missions, exhibitions, as exhibitor outside Romania).

The project proposed in the grant application must necessarily include investments in tangible assets, financed by regional state aid (construction, extension, endowment of production facilities / services).

It is optional to include investment in intangible assets that can be funded through regional aid and investment funded by de minimis aid (eg product certification, quality management systems, internationalization). The eligible value for the component eligible for de minimis aid may not exceed 20% of the total eligible investment value.

The maximum amount of grant that can be claimed and granted is determined by applying, at the amount of eligible expenditure eligible for regional aid, the maximum aid intensity applicable to the SME category and to the region in which the project is implemented, as shown in the table below. If the grant application contains both regional and non-de minimis aid investments, the percentages below apply only to the regionally fundable component (ie the eligible amount of the expenditure financed by regional aid).

Type of SME/

Development region

South East
Mid size enterprises 60%
Micro and small enterprises 70%

 

The date of granting the aid is the date on which the financing contract for the proposed project enters into force, irrespective of the actual payment / reimbursement.

 

Under this call, projects (applications for funding) that only contain investments (activities) funded by de minimis aid are not eligible.

 

Under this call for proposals, the program contribution is up to 90% of the eligible value of the expenditure eligible for de minimis aid (de minimis component). The eligible amount of the component eligible for de minimis aid may not exceed 20% of the total eligible investment value.

 

In order to be eligible, the applicant enterprise has been carrying out activity for a period of at least one full fiscal year, did not have the temporary activity suspended at any time in the current year of submission of the grant application and in the previous fiscal year and recorded operating profit (> 0 lei ) in the fiscal year preceding the submission of the grant application. The operating profit criterion refers to the entire activity of the applicant. The applicant had an average number of employees of at least 3 in the fiscal year preceding the application for funding.

 

The project has to be implemented:

  • in the urban area (including villages belonging to the cities) from the Danube Delta Integrated Territorial Investment Area for SMEs.
  • in the rural area of the Danube Delta Integrated Territorial Investment Area for medium-sized enterprises.

Only investments located in the territory covered by ITI Danube Delta are eligible.

 

The applicant must demonstrate ownership of the right to concession / superficie / usufruct / comodat / rental / lease, as the case may be, for a period covering the period of three years from the date of the final payment for the project.

 

The amount of non-refundable funding required is at least EUR 200,000 and up to EUR 1,000,000, equivalent in RON at the Inforeuro exchange rate valid at the launch date of the call for projects.

These ceilings apply to the full amount of non-reimbursable financing, consisting of both State aid and, where appropriate, de minimis aid.

 

The duration of the project activities after the signing of the financing contract is not longer than 36 months and does not exceed 31.12.2023.

 

We present below the score grid for the projects submitted within this call.

 

Annex 4 ITI – Technical and Financial Assessment Grid
 
      Criterion / Sub-criterion Scoring
1. The contribution of the project to achieving the investment priority objective 56
  1.1. Field of activity (CAEN class) in which the investment is made (according to Annex 2 “List of eligible areas of activity” in the guide) 17
  a. It is contained in one of divisions 55, 86, 93 17
  b It is contained in one of divisions 13, 14, 15, 16, 17, 18, 20, 22, 23, 25, 26, 27, 28, 29, 30, 31, 32, 33, 41, 42, 43, 58, 59, 60, 62, 63, 71, 73, 74, 91 15
  c. It is contained in one of divisions 21, 36, 37, 38, 39, 45, 95,96 9
  1.2. The innovative character of the proposed investment 6
  a. Through product / service innovation and process 6
  b. Through product / service innovation 4
  c. Through process innovation 2
  1.3. The proposed investment includes 21
  a. Internationalization activities – participation, internationally, outside Romania at trade fairs, trade fairs, exhibitions as exhibitor. 6
  b. Activities of (re) certification of at least one management system 4
  c. Activities of (re) certification of a product / service / process 6
  d. Acquisition of intangible assets with an eligible value, excluding VAT, of ROL 45,000 (patents, licenses, trademarks, software, including online visibility, implementation of e-commerce tools, other similar assets) , in the context of the investment, is sufficiently justified in the business plan. 5
  1.4. Economic and financial forecast following the implementation of the project, at the end of the second full financial year, after the implementation of the investment 12
  1.4.1. Overall Solvency Ratio (Total Asset / Total Debt) 6
  a. >=4 6
  b. >=3 si <4 3
  c. >=2 si <3 2
  d. <2 0
  1.4.2. ROE (Net result / Equity) 6
  a. >=7% 6
  b. >=6% și <7% 3
  c. >=5% și <6% 2
  d. <5% 0
2. Project quality, maturity and sustainability.

Applicant’s financial and operational capacity

33
  2.1. Economic and financial capacity of the applicant in the financial year preceding the application for funding 18
  2.1.1. Overall Solvency Ratio (Total Asset / Total Debt) 6
  a. >=2 6
  b. >=1,5 și <2 3
  c. >=1 și <1,5 1
  d. <1 0
  2.1.2. ROE (Net result / Equity) 6
  a. >=5% 6
  b. >=3% si <5% 3
  c. >=1% si <3% 1
  d. <1% 0
  2.1.3. Ratio of operating profit (recorded in N to N-1, where N is the fiscal year preceding the submission of the grant application) 6
  a. >=20% 6
  b. >=10% si <20% 3
  c. >=0% si 10% 1
  d. <0% 0
  2.2. The quality of the business plan 15
  a. The investment costs are sufficiently substantiated, for example through price / catalog / website offers, any other verifiable sources (at least 2 sources) max.4
  b. The projections of operating income and expense are realistic, sufficiently justified, based on correct data, verifiable sources. max. 4
  c. Market analysis demonstrates the demand for the products / services offered and substantiates growth prospects. In the product / service description, particular qualities / benefits of product / service compared to competitors are identified. Market analysis identifies key competitors, presenting the similar products / services they offer, their market share, their advantages and disadvantages. max. 4
  d. The marketing strategy is achievable (identifies appropriate and effective tools) under the conditions of available resources. max. 2
  e. The business plan is developed in accordance with the minimum requirements expressly mentioned in the standard model guide. max. 1
3. Respect for the principles of sustainable development, equal opportunities, gender and non-discrimination.

(There will be no scoring for the compliance of the applicant with legal obligations in these areas)

10
  3.1. The investment includes measures to improve the quality of the environment and increase energy efficiency: 6
  a. Use of renewable energy sources 2
  b. Retrofitting / purchasing more energy-efficient equipment (including lighting efficiency in production areas). Optimizing the operation of facilities and technological flows 2
  c. Minimizing source waste generated. Increase recovery and recycling of waste 2
  3.2. The investment includes measures to ensure equal opportunities and treatment: 4
  a. Adaptation of infrastructure, including equipment and machinery for access and operation by persons with disabilities 2
  b. Employing disadvantaged people 2
4 Strategic concentration of investments 1
  a. The project is based on a Local Development Strategy selected under the ROP priority axis 7 1
      Total 100

Start Up Nation 2018

Start Up Nation 2018 is the most popular financing program for SMEs set up after January 30, 2017. It pursues two major objectives – increasing the number of entrepreneurs and creating new jobs in the eligible areas of the program, mainly in IT & C and production. Its popularity is due to easy accessibility compared to other sources of non-reimbursable funding. This accessibility translates into two dimensions – the scoring grid that consists of only four (4) criteria and the business plan (including financial forecasts) that is easier to draw up. Of course, the maximum amount that can be obtained in the amount of 200,000 lei is much lower than other programs like POR 2.1 or POR 2.2 where non-refundable funding can reach values up to millions of euros.

For an overview of the program, it’s important to understand the scoring grid first. The minimum score for the project to be eligible is 50 points out of 100 maximum possible. We present below the scoring grid in 2017, as the grid to be used in session 2018 has not yet been published; on March 30th, only the procedure was posted on the management authority’s website.

No. Criteria Points Comments
1 NACE activity
Production and programming TI – cod CAEN 6201 40 points
Creative industries – without NACE 6201 35 points According to the list
Services 30 points
Trade and other activities 25 points
2 Number of jobs to be created after project implementation Mandatory minimum 1 job.Evidence of employment of full-time contract workers for an indefinite period at the time of submission of the reimbursement documentation
At least 1 job created as above for the disadvantaged person / unemployed / graduate after 2012 20 points
2 jobs created as above, occupied by disadvantaged people / unemployed / graduates after 2012 25 points
3 Share of investments in fixed assets listed at points 2.1 , 2.2 and 2.3.6.8.1. (including IT-computing equipment) of GD 2139/2004, software required to carry out the activity ≥ 50% of the amount of eligible expenditure included in the business plan  10 points
4 Innovative nature of the investment 5 points Explain how implementing the Business Plan will lead to increasing the use of new, modern and / or IT solutions in the production / service delivery process and which is the innovative and / or creative potential of the Business Plan.For YES, proof will be provided in the application of the supplier of goods purchased at a minimum of 50% of the amount of eligible expenditure, of a document certifying that their manufacturing technology is not older than 3 yearsi
Total 100 points

 

Admission to the program will be in descending order of score obtained in assessing online business plans. Equal scores will prevail:

  • the number of jobs to be created by the project;
  • the number of jobs occupied by disadvantaged persons / unemployed / graduates after 2012;
  • the acquisition of technological equipment over 50%;
  • the activity that the program accesses;
  • date and time of enrollment in the program.

 

The consultancy for the preparation of the documentation to obtain the financing under the program and the implementation of the project is considered eligible expenditure within the limit of 8,000 lei without VAT; This activity can be done before signing the grant agreement. Eligible advisory service providers may only be consultancy organizations that are legally entitled to carry out this type of activity, CAEN code 70.

Cars are eligible for all activities within the program, justifying the necessity to purchase them in the business plan, up to a maximum of 36,000 lei without VAT and maximum 1 car / beneficiary. For car rentals, driver and pilots and taxi transport, the maximum value and the number of vehicles purchased are not limited. The maximum limit for spending on the purchase of mobile phones and tablets is 2,500 lei (VAT included) on the equipment.

Through the project, workspaces, production spaces, and service and commerce premises can be purchased. The value of the asset to be procured under the project will be based on an evaluation of an ANEVAR expert, with the exception of mobile work / production / services / commerce units. Assets under this category should not be residential at the time of purchase. Expenditures for the arrangement of these spaces and for the purchase / arrangement of the land for these spaces are not eligible.

Unlike other programs where it is only allowed to purchase tangible / intangible fixed assets from non-reimbursable funds, in this program, are considered eligible expenditure: wages, utilities (electricity, gas, sanitation, telephone and internet subscriptions) and rents for workspaces, production areas and service and trade facilities. Salaries are eligible to a maximum of 4,122 lei gross / employee / month plus the employer’s contribution. Payment of these expenses is only made on the basis of a claim for reimbursement of the value of the salaries, utilities and rents related to the period after the signing of the grant agreement, for the implementation period. The salary level for newly created jobs for those required through repayment / payment applications must be maintained for the entire duration of the maintenance obligation, ie 2 years after the project implementation is completed.

Training courses for the development of entrepreneurial skills in Romania or in another EU member country – for the associate / administrator of the applicant company, are eligible in the amount of maximum 3,000 lei.

The date on which the on-line registration is active shall be communicated on the Management Authority website at least 5 days before the start of the registration process itself.

In 2017, the projects that met 100 and 95 points had the certainty of obtaining funding. For those rated from 90 points down only the top 150 qualified in the budget allocated to the program.

For this reason, it’s a good idea to have the necessary documents ready for you to submit your application immediately at the opening of the session. In this way you maximize your chances of success.

Modernization of agriculture and rural areas through National Rural Development Plan Measure 4.1 Zootechnics

The National Rural Development Plan 2014-2020 (NRDP) is one of the cooperation programs that run in 2014-2020 in Romania with the support of the European Commission in rural areas, with funding being provided for about 85% from the European Union budget.

The NRDP includes a multitude of priority axes and investment priorities benefiting from grants in the period mentioned. Of these, two priority axes are undoubtedly the preferences of the private sector in agriculture and rural areas – we refer to measures 4.1 and 6.4. The NRDP 4.1 finances investments in the modernization of agriculture while NRDP 6.4 finances in the de minimis regime (maximum 200.000 Euro per project) investments in the rural area for the development of non-agricultural activities. In the following we will analyze the evaluation criteria for the projects funded by Measure 4.1 Zootechnics.

According to the Partnership Agreement concluded in 2013 between Romania and the European Union, the Romanian government has identified some weaknesses, obstacles in the development of sustainable agriculture that can be addressed in 2014-2020 under measure 4.1 through the use of funds European countries in order to modernize and improve productivity and competitiveness in the agri-food sector, with the following priorities considered:

  • The technical endowment of farms, such as equipment, machines and machinery, efficient irrigation systems at farm level;
  • Stimulating the cultivation and storage of fruit and vegetables (native varieties adapted to pedoclimatic conditions, constructions, protected vegetable growing areas), field crops (native varieties), raising livestock (swine, cattle and poultry) and harvesting the breeds local;
  • Investments needed to diversify agricultural activities on farms and add value to agricultural products;
  • Stimulating the association and investments that serve the associative forms of farmers;
  • Investments to promote the efficient use of resources and air quality, including the production of renewable energy for its own use, and to reduce GHG and ammonia emissions from agriculture;
  • Development and adaptation of agricultural and forestry infrastructure.

The above listed priorities have been adapted and transformed into assessment criteria specific to measure 4 – Investments in physical assets of NRDP, which includes sub-measure 4.1 Investments in agricultural holdings.

In order to make it easier to understand how to benefit from NRDP funding 4.1, we will go to presenting this sub-measure from the evaluation grid which mirrors precisely the priorities set out in the Partnership Agreement mentioned above. In this second article about NRDP 4.1 we will refer to the example of a zootechnical farm.

Criterion no. Evaluation Grid – Livestock Sector, NRDP 2014-2020, Sub-measure 4.1 Scoring
1 Principle size of the agricultural farm targeting medium-sized farms  
1.1 ≥12.000 – ≤50.000 Euro 15p
1.2 >50.000 – ≤100.000 Euro 13p
1.3 >100.000 – ≤ 250.000 Euro 11p
The rating will be based on the economic size of the entire holding as a result of the investments proposed by the project, including in cases where the investment proposed by the project does not affect the entire holding as evidenced by the technical and economic documentation correlated with the information provided under the section concerning Establishment of the farm category within the grant application.
   
2 Principiul sectorului prioritar (suine, bovine și păsări)  
2.1 Breeding farms in priority sectors:  20p
2.2 Cattle (including buffaloes):  
  a) Meat 20p
  b) Milk, including mixed breeds 19p
2.3 Pigs:  
  a) Fattening 17p
 2.4 Poultry:
  a) Meat/ eggs  15p
3 The principle of integrated food chains, ie the combination within the same project of the investments in the primary agricultural production with the processing and / or marketing of the obtained production.  
3.1 a) primary agricultural production – processing – marketing 15p
b) primary agricultural production, including conditioning / marketing (in the case of apiculture products and egg production) 15p
3.2 primary agricultural production – processing 14p
3.3 a) integration of primary agricultural production with processing and marketing through members of OIPA 10p
b) integration of primary agricultural production, including conditioning and marketing (in the case of apiculture products and egg production) through members of the OIPA 10p
3.4 integration of primary agricultural production with processing / conditioning (apiculture products and egg production) and marketing as a member through producer groups or cooperatives. 14p
   
4 The principle of associating farmers holding small and / or medium-sized farms within cooperatives or producer groups established under the national legislation in force. The applicants are:  
4.1 producer groups or cooperatives formed predominantly from farms up to 12.000 SO 20p
4.2 producer groups or cooperatives formed predominantly from farms ranging from> 12.000 to <50.000 SO 18p
4.3 producer groups or cooperatives formed predominantly from agricultural holdings ranging from> 50.000 to 100.000 SO 16p
   
5 The principle of the agricultural potential of the area targeting the areas with potential determined based on the specialty studies  
5.1 The project is implemented in an area with high agricultural potential 10p
5.2 The project is implemented in an area with medium agricultural potential 9p
   
6 The principle of agricultural farmer qualification level in the agricultural holding manager  
6.1 higher education 10p
6.2 high school or post-secondary studies 8p
6.3 vocational schools or vocational training which provide a minimum level of qualification in the agricultural field 6p
   
7 Water Economy Principle for projects that provide investments to modernize farm-level irrigation systems by prioritizing investments leading to the largest water savings  
7.1 over 20% 0p
7.2 >10% – ≤20% 0p
   
8 The principle of indigenous breeds  
8.1 The applicant proposes through the project or demonstrates that he obtains / holds / develops at the level of the farm and provides within the technical-economic documentation that he / she will preserve and develop the indigenous breed nucleus throughout the project implementation and monitoring. max. 5p

 

Note that for the Criterion 1 the size of the farm expressed in Euro should be calculated, eligible for this sub-measure being only farms or farm associations of over 8,000 Euros. The calculation of the size is done by consulting the standard production coefficient table that was updated in 2017, available also on the AFIR website. For example, a farm with 100 dairy cows will have a standard size of 100 X 1.200,46 Euro / cow = 120.046 Euro so it will receive 11 points according to the evaluation scale above.

Criterion 2 is easy to understand, for scoring, consider the majority animal species in terms of the projected economic size (SO) as compared to the total economic size of the entire farm that results at the end of the first year of follow-up of the investment envisaged in the project.

Criterion 3 leads to points only if at least two activities in the production – processing – marketing chain are found within the investment. In case of criterion 3.1a and 3.2 (whether the application for financing is for modernization or new investment), it will be compulsory to integrate the production with the processing at farm, and in terms of marketing (criterion 1a) this can be done as follows: 1. directly by the farmer to the final consumer, or 2. by selling the processed product at farm level to other processors, restaurants, boarding houses, retailers, proven through precontracts / contracts concluded directly with them. 3. or by a combination of the two ways previously described. In the case of projects concerning apiculture products or egg production, score may be awarded under criterion 3.1b (regardless of whether the application is for modernization or new investment) if the project foresees, in addition to investments in primary agricultural production and investment in conditioning, and the marketing of the production can be done under the detailed conditions above. Also, Agricultural Cooperatives and Producer Groups integrating at project level investment in primary agricultural production with processing / conditioning and / or marketing (under Selection Criteria 3.1 or 3.2) can be scored under selection criteria 3.1 or 3.2. For criterion no. 3.3 a and b (for OIPA members), the fund applicant farmer demonstrates that he / she is processing / conditioning and marketing through other OIPA members, and for criterion 3.4, the fund applicant, member of the cooperative or producer group, demonstrates that it processes / conditioning and markets through other members of the cooperative or producer group or directly through a cooperative / producer group.

Criterion 4 assigns points to associated producers only.

For Criterion 5, assignment to the potential (high or medium) type will be made taking into account the ATT mark for the ATU where the project work point is located, depending on the animal husbandry mode, whether closed or free, and the existence or otherwise of the processing action on the farm. Consider the predominant species of the total number of farm animals (expressed in SO) (high potential = green color, medium = yellow color, red color is low potential and no score). In the case of investments aimed at raising bees, the maximum score will be awarded.

Criterion 6 is again simple to understand, higher education must be related to the agricultural field. The document attesting adult vocational training must be a certificate of qualification issued by an adult training provider recognized by the National Qualifications Authority or a certificate of competency issued by a Center for the Evaluation and Certification of Professional Competencies obtained on other paths than formal ones, which must also be authorized by the National Authority for Qualifications or a certificate of graduation of the qualification course issued by ANCA.

Regarding Criterion 7, due to the fact that in the zootechnical sector this selection principle is not applied, the score is 0.

For the purpose of calculating the score for Criterion 8, the number of heads of domestic animals, the purchase schedule and the calculation of the economic size (SO) affected shall be specified in the feasibility study. Scoring will be granted to animals for which a certificate of origin for breeding animals can be presented according to the “Indigenous races list” issued by Breeders Associations or Breeding Organizations that establish and maintain herd books. The list of these organizations and associations and the list of native races can be found on the AFIR website.

The minimum score to be eligible is 25 points, but due to high competition, only projects with much higher scores were selected in previous sessions.

Modernization of agriculture and rural areas through National Rural Development Plan Measure 4.1

The National Rural Development Plan 2014-2020 (NRDP) is one of the cooperation programs that run in 2014-2020 in Romania with the support of the European Commission in rural areas, with funding being provided for about 85% from the European Union budget .

The NRDP includes a multitude of priority axes and investment priorities benefiting from grants in the period mentioned. Of these, two priority axes are undoubtedly the preferences of the private sector in agriculture and rural areas – we refer to measures 4.1 and 6.4. The NRDP 4.1 finances investments in the modernization of agriculture while NRDP 6.4 finances in the de minimis regime (maximum 200.000 Euro per project) investments in the rural area for the development of non-agricultural activities. In the following we will analyze the evaluation criteria for the projects financed under Measure 4.1.

 

According to the Partnership Agreement concluded in 2013 between Romania and the European Union, the Romanian government has identified certain weaknesses, weaknesses in the development of sustainable agriculture, which can be addressed during 2014-2020 under measure 4.1 through the use of funds European countries in order to modernize and improve productivity and competitiveness in the agri-food sector, with the following priorities considered:

  • The technical endowment of farms, such as equipments, performing machines and machines, efficient irrigation systems at farm level;
  • Stimulating the cultivation and storage of fruit and vegetables (native varieties adapted to pedoclimatic conditions, constructions, protected vegetable growing areas), field crops (native varieties), raising livestock (swine, cattle and poultry) and harvesting the breeds local;
  • investments needed to diversify farm activities on farms and add value to agricultural products;
  • stimulating the association and investments that serve the associative forms of farmers;
  • investments to promote the efficient use of resources and air quality, including the production of renewable energy for its own use, and to reduce GHG and ammonia emissions from agriculture;
  • development and adaptation of agricultural and forestry infrastructure.

The above listed priorities have been adapted and transformed into assessment criteria specific to Measure 4 – Investments in physical assets of NRDP, which includes sub-measure 4.1 Investments in agricultural holdings.

In order to make it easier to understand how to benefit from NRDP funding 4.1, we will go to presenting this sub-measure from the evaluation grid which mirrors precisely the priorities set out in the Partnership Agreement mentioned above. In this first article about NRDP 4.1 we will refer to the example of a vegetable farm, in later presentations we will provide examples from animal husbandry, fruit growing, vineyards, beekeeping sectors for which there are special programs.

Criterion No. Evaluation grid – Vegetal sector, NRDP 2014-2020, Sub-measure 4.1 Scoring
1 Principle re Size of the holding targeting medium-sized holdings  
1.1 ≥12.000 – ≤50.000 Euro 15p
1.2 >50.000 – ≤100.000 Euro 13p
1.3 >100.000 – ≤ 250.000 Euro 11p
   
2 Principle re priority sector  
2.1 Vegetable culture in protected areas:  
  a) seeds and / or planting material 20p
  b) production 19p
2.2 Oil and protein plants:  
  a) seeds and / or planting material 20p
  b) production 18p
2.3 Grains and pottatoes:  
  a) seeds and / or planting material 20p
  b) production 17p
   
3 Principle re integrated food chains, ie the combination within the same project of the investments in primary agricultural production with the processing and / or marketing of the obtained production.  
3.1 a) primary agricultural production – processing – marketing 15p
b) primary agricultural production including conditioning / marketing – for investments in production units for the production of vegetables, table grapes 15p
3.2 primary agricultural production – processing 14p
3.3 a) integration of primary agricultural production with processing and marketing through members of OIPA 10p
b) primary agricultural production, including conditioning and marketing – for investments in production units for the production of vegetables, table grapes through members of the OIPA 10p
3.4 integration of primary agricultural production with processing / conditioning vegetables and table grapes and marketing as a member through producer groups or cooperatives 14p
   
4 Principle re associations of farmers holding small and / or medium-sized farms within cooperatives or producer groups established under the national legislation in force. The applicants will be:  
4.1 producer groups or cooperatives formed predominantly from farms up to 12 000 Euro 20p
4.2 producer groups or cooperatives formed predominantly from farms ranging from> 12 000 to 50 000 Euro 18p
4.3 producer groups or cooperatives formed predominantly from farms ranging from> 50,000 to 100,000 SO 16p
   
5 Principle re the agricultural potential of the concerned area targeting the areas with potential determined based on the specialty studies  
5.1 The project is implemented in an area with high agricultural potential 10p
5.2 The project is implemented in an area with medium agricultural potential 9p
   
6 Principle re formal education level of the agricultural holding manager  
6.1 University degree 10p
6.2 Highschool 8p
6.3 Proffesional schools or training courses that provide for a minimum agricultural training 6p
   
7 Water economy principle for projects that provide investments to modernize farm-level irrigation systems by prioritizing investments that lead to the largest water savings  
7.1 over 20% 5p
7.2 >10% – ≤20% 3p
   
8 Principle re native varieties of seeds  
8.1 The applicant proposes or demonstrates through the project that he obtains / develops at the level of the agricultural holding and provides in the technical-economic documentation that he / she will preserve and develop the core of the native varieties of seeds throughout the implementation and monitoring of the project. max. 5p

 

Note that for the Criterion 1 the size of the farm expressed in Euro should be calculated, eligible for this sub-measure being only farms or farms associations over EUR 8,000. The calculation of the size is made by consulting the table with standard production coefficients that was updated in 2017, available also on the AFIR website. For example, a farm exploiting 100 ha by common wheat cultivation will have a standard size of 100 ha X 614,09 Euro / ha = 61,409 Euro so it will receive 13 points according to the evaluation scale above.

Criterion 2 is simple to understand, the score is calculated according to the yields to be obtained on plant categories after the investment is implemented.

Criterion 3 leads to points only if at least two activities in the production – processing – marketing chain are found within the investment.

Criterion 4 assigns points to cooperatives (associated farmers) only.

The score for Criterion 5 is established by consulting the table on zoning of the agricultural territory. Only investment on farmland located in areas with medium and high agricultural potential will receive points.

Criterion 6 is again simple to understand, higher studies have to be related to the agricultural field.

Criterion 7 involves the existence of modernizable irrigation systems within the proposed project.

In order to obtain the Criterion 8 score, AFIR provides for the list with accredited domestic seed producers.

Minimum scoring to be eligible is 25 points but due to high competition only projects with much higher scoring have been selected in the previous sessions.

Important aspects to know about grants for SMEs as of February 2018

Small and medium-sized enterprises (SMEs) will also have a wide range of sources of non-reimbursable funding this year – 2018. Regrettably, however, as every year, there is no fixed timetable for calls for projects, the deadlines only become certain after the launch of the call guideline in public debate, usually just one month before the calls are opened.

However, it is important to know what funding possibilities the SMEs have and what are the general conditions for accessing the funds, as the preparation of a project is not an easy task for any entrepreneur. And this is not because the entrepreneur, promoter of the project does not know what he wants but because the project must meet certain eligibility criteria. As regards the allocation of public funds, the substantiation of the project can not be based on the applicant’s business instinct but on “evidence” supported by documents issued by third parties and by financial forecasts drawn up on the basis of a profitable activity history of the firm.

Take for example the common case of European funds dedicated to SMEs for investment in tangible assets in the production equipment category. The price of such a good can be estimated by the entrepreneur according to his own research or field observations but his own assessment would not be scored. It is important that the price comes from the manufacturer of the equipment or from an authorized dealer and that it bears the written form of a price offer obviously non-binding. At least three such offers are required for the price to become credible to the public authority responsible for managing the non-reimbursable funds allocated to that call for projects. Getting these price offers may take even weeks, which is why the call for tenders should take place before the call for projects is opened.

It is also useful for an entrepreneur who intends to apply for a grant to check in advance the legal status of the company. Even if the company is complying every month with its tax payments, there may be registration errors, so it is healthy for the company to get its tax clearance in advance to ensure that it has no outstanding debts. At the same time, the company will have to prove ownership / concession / use of the space intended for the implemention of the investment for usually at least 5 years. It is therefore advisable to check in advance those documents because they are generally hard to be obtained / rectified within a short time, being dependant on a multitude of external factors. If the funds are requested for a new construction, the urbanism certificate must be issued on the company’s name and indicate the destination of the construction according to the requested activity.

Moreover, because we find ourselves during the closure of 2017 accounts, it is good to know that on all SMEs financing lines an eligibility criterion is the recording of operating profit  as a rule in the year before application for grants . As the difference between profit and loss can be extremely small from an accounting point of view it is advisable that the 2017 balance sheet show a profitable activity. In this way, the state will be confident that the allocated non-reimbursable funds will be more likely to succeed when SMEs are making profits in their current work.

Also in the category of the common evaluation criteria of the projects promoted by SMEs, there is also the proving of the project implementation capacity. This capacity translates primarily through the human resource that will complete the proposed project and the context in which it will be carried out. A formal adaptation of an expert’s biography is not enough to overlap exactly with the project requirements, but also a broader context to show that the company can support the proposed project through its current workflow. Recommendations from customers and suppliers, independent market studies can help by adding points to the evaluation. Again, they can not be obtained overnight, they must be prepared early.

These are just a few things that need to be prepared in advance to make sure that you can develop a competitive application to get a grant from European or national funds.

In the table below we included the main non-reimbursable financing lines for private companies open at February 2018:

No. Program Grant value Private contribution / Beneficiaries Eligibile activities
OP Competitiveness POC 1.2.1Innovative Technology Project Max. 22.500.000 lei Depending on the type of beneficiary / enterprises for which the research activity is not the main activity. Mandatory in the project:– experimental development

– the introduction of research results (initial investment for innovation) into production.

Only eligible domains:

– Bioeconomy.

– Information and communication technology, space and security

– Energy, Environment and Climate Change.

– Eco-nano-technologies and advanced materials.

– Health, a priority area of national interest.

PO Large Infrastructure POIM 6.2 Max. 200.000 Euro Industry companies with over 1,000 consumptiontoe / year. – Acquisition and implementation of the energy consumption monitoring systemlevel of the industrial platform.

– Preparation of the project (elaboration of studies, obtaining approvals, authorizations, etc.).

– Project management, project audit.

PNDR 4.1a Investments in fruit-growing holdings Variabile Between 10 şi 50% – Investments in the setting up and modernization of the fruit farms, including the setting up and conversion of fruit plantations and the modernization of the agricultural machinery and equipment park.– Investments in setting up and upgrading of fruit nurseries, including the increase of the areas occupied by planting material.

– Establishment and upgrading of fruit processing units at farms.- setting up and / or upgrading access to the farm, including utilities and connections.

– investments to meet Community standards for young farmers, where support can be granted over a period of maximum 24 months from the time of installation.

– Other investments.

 

Average gross salary to rise significantly in Romania starting with 2018

We are living this period in Romania not only the count down for the Christmas and New Year but also for the new salary payment system which will be introduced starting January 2018.

The gross salaries of the Romanians will rise spectacularly but net salaries will be hardly maintained at the level from December 2017. Till now only employees working in the public sector are guaranteed the same net salary.

In brief, according to the new fiscal legislation, the employer and the employee will negotiate the gross salary which would comprise all related taxes paid currently shared by the employee and the employer namely pension and health contributions. Those taxes would continue to be paid in the name of the employee by the employer in the future as well. But the failure to do so will constitute for the employer a criminal penalty and not just a contravention sanctioned with an administrative fine.

Until now, the gross salary of the employee included only a part of health and state pension contributions, the other part was paid by the employer without being accounted for in the gross salary, though it was calculated for each employee based on the employee’s gross salary negotiated with the employer.

First, we have to understand that this transfer of contributions from the account of employer to the account of each employee stipulated by the law which will enter into force on January 1st, 2018, is not done automatically. Thus, each employer be it public institution, state owned company or private firm, has to negotiate and establish the new salary for each employee. A related Government’s ordinance set the obligation to do so from the end of November 2017 up until this Christmas.

Second, it is nonetheless important to observe that the employers may choose to keep constant the expense with the salaries or to transfer the currently paid contributions to their profits and not to the net of the employees in order to maintain their existing net salary.

In order to encourage employers to keep current net salary of the employees, the Government decided to lower tax on salary from current 16% to 10%. This move would compensate the fact that the contributions to health and pension funds paid currently by the employers are related to the existing gross salary of the employees which are lower than the future salaries which would include all contributions.

There are at least 2 categories of employees who will be disadvantaged by this transfer of contributions, namely the IT staff and the researchers who are currently benefitting of no tax on salary. Consequently, for them the lowering of tax on salary from 16% to 10% does not help. In case their employers choose to maintain their overall expense with salaries, then the net salaries of IT and R&D employees will decrease if no other specific legislation will be adopted during next 10 days. In addition, a new tax is introduced for the employers called solidarity tax with a level of 2,25% applied to the overall salary expense.

In brief the new fiscal legislation is including health and pension contributions paid by the employer and employee in the gross salary of the employee as follows:

  • Unified social contribution for state pension fund included in the gross salary of the employee – 25%
  • Unified social contribution for health included in the gross salary of the employee – 10%
  • Tax on salary after deduction of the health and pension contributions – 10%
  • Social contribution for the employer – 2,25% on the overall expense with salaries. In addition, the employer will have to pay some extra contributions for hard labor conditions.

The new labor contracts, by exception, can be registered with the national register up until March 31st in order to be considered valid although applied from January 1st.

Following the above described changes, the minimum salary established by law will become from next January, 1.900 ROL.

As of December 2017, this legislation although adopted by the Government and in force from January 2018, is under debate in Parliament and important amendments could be voted.

If all those changes apply and the employers will maintain the net salaries of the employees at their current level than Romania will register a significant increase of the average gross salary. In October 2017, this indicator was 3.327 ROL (around 725 Euro). Starting with January 2018, we will assist to a significant increase of this parameter, which could go up to around 950 Euro throughout 2018 but the net gain of the employees will stagnate.

After 25 years of restructuring, Romanian power sector at a crossroad

In November 2016, the Romanian Ministry of Economy posted for public consultation a preliminary draft of the energy sector 2016-2030 with a year 2050 perspective.  It tackles all energy resources such as crude oil, natural gas, coal, biomass and energetic waste and includes special sections for electricity. It is thus an occasion for a review of the Romanian power sector and its evolution during the past 25 years.

From the beginning, it is important to note that the country’s energetic system was designed at national scale, during ‘50s, and at that time it took into account not only, on one side, the natural endowment of the country which disposed of virtually unlimited resources of low quality coal (lignite and low caloric hard coal), limited reserves of natural gas and crude oil supplies and good water resources but also, on the other side, an ever-increasing consumption of electricity. For decades, the country’s power system was engaged in a race against time to meet the huge demand coming from a developing economy and a population in process of urbanization.

Large power plants based on lignite and hard coal were built during ‘60s with the role of supplying the country a constant volume of electricity, with a continuous functioning regime. In addition, to deal with peak consumption periods or shortages of coal electricity, some large hydro power plants were built totaling approx. 5,2 TW of installed power and around 100 dams (out of which 89 large dams) playing a significant role also in preventing overfloods. Due to shortage of electricity caused by ever-growing consumption of the metal processing, machine-building and chemical platforms, cement factories, mining exploitations and irrigation systems, in 1978, it started the construction of the first nuclear power unit (finalized 20 years later).

Thus, in 1990, Romania had an integrated electricity system with an installed power of 23 TW of which 16,8 TW in thermal power plants (73%) and 5,5 TW in hydro (24%). In addition, some natural gas fired power plants were built in larger cities or on important industrial platforms to supply the households and the economy with hot steam for industrial purposes or for households heating in centralized distribution systems including Bucharest. The first nuclear power unit whose construction started in 1978, would be commissioned only in 1996, and a second unit a decade later.

After 25 years of restructuring the energetic system, mainly the power producers, by: i) shutting down the loss producing entities; ii) focusing investments on lower cost producers (hydro power plants, nuclear units and lower cost lignite fired plants) with the aim to keep price of electricity down to protect the population whose consumption decreased dramatically during ‘90s; and iii) promoting green energy (with generous subsidies schemes for wind and solar electricity producers, state aid meanwhile drastically reduced) especially after integration into EU in 2007 in accordance with European strategy, the installed power for electricity generation has remained constant at 23 TW but with a different breakdown: coal based power plants – 27%,  hydrocarbons – 21% (natural gas, heavy oil), hydro – 28%, nuclear – 6%,  wind – 13%, solar – 5%. In brief, the 25% reduction of coal fired power plants capacity was replaced by wind, solar and nuclear generated electricity.

Not only the power producers side has restructured during those past 25 years but the consumption as well. According to industry data3, in 1989, Romania registered the highest consumption of electricity of all times equal to 84 TWh produced domestically and additional 9 TWh imported. After 1990, the drastic restructuring of the industry which took place mainly in the period 1995 – 1999, through massive lay-offs and closures of assets especially of those energy intensive such as the metal processing industry, machine building units, petrochemical platforms, mining exploitations and dismantling of the irrigation systems, was reflected by more than significant reduction of the electricity consumption, from the all times high 93 TWh registered in 1989 to a minimum of 49 TWh in 1999 (when the country was closed to default).

Afterwards, the consumption of electricity resumed growth in parallel with the economy, but since the economic crisis of 2008, the GDP advance decoupled from electricity consumption reflecting the end of the restructuring process of the economy and the introduction of new technologies with a low demand for electricity. Consequently, the country’s electricity consumption has stabilized during the past years to around 60 TWh.

Concluding, it is important to observe that the installed capacity of electricity generation has remained constant during past 25 years although the country’s consumption has significantly decreased leading to the idea that some production capacities are underutilized (exports are limited). Thus, it would be important for any power sector strategy to first assess the perspectives of the electricity consumption based on a national long term development strategy. The theory of the ever-increasing demand is not anymore actual and the export of significant electricity volumes could not constitute a reliable argument for investments in the sector unless agreed via long term secured purchase agreements.

 

Note: This article was first published in the section Voices of http://emerging-europe.com/

 

Fiscal highlights for the beginning of 2017

Year 2017 begins with important fiscal changes some of them announced for quite some time, e.g. over one year as it is the case for the reduction of standard VAT level from 20% to 19% (return to its 2008 value, increased in 2009 due to the crisis to 24%), others modified overnight in the first days of the current year effective immediate or starting with February 1st, e.g. taxation of microenterprises, tax on profit exemption for the companies which activate exclusively in the field of research and development, removal of minimum threshold for the revenues obtained by software companies in order for their employees to benefit of tax on salary exemption  a.o.

Overall, apparently, there is a certain move of the new Government towards the reduction of taxation level in order to boost economic activity in the field of SMEs and in sectors with high value added such as research and software. It is still unclear how that loss of income will be compensated having in view that some categories of state employees will also benefit of increased salaries. In addition, a law adopted by the Parliament just before the parliamentary elections held in December last year, cancelled over 100 parafiscal taxes such as the tax for state radio and television, the green stamp tax which was used to stimulate the acquisition of new cars, tax on constructions and many others.

Romania registered in 2016 the highest GDP growth of all EU, according to the latest forecast released in November 2016 by the National Commission for Prognosis, the advance of the country’s GDP would be 4,8% for the past year after being 3,8% in 2015. For the current year the estimated advance is around 4,3%. Considering those high values for the GDP growth, and the fact that in 2016 the budget deficit did not exceed the established ceiling, it is obvious that there is space for a fiscal relaxation.

The big problem is that there is still unclear how this loss of income for the state budget will be compensated. By mid-year we could realize that fiscal deficit goes higher and higher and that it becomes more and more expensive for the government to borrow to cover the deficit. It will be then necessary to impose some new taxes which would affect the credibility of the government with even more negative impact on the country’s rating and borrowing capacity.

One solution would be of course to limit the public investments in order to keep the budget deficit under control but this would hamper the economic growth and would make even greater the development gap between Romania and the EU average. Other solution which is under consideration at the governmental level would be to replace those taxes which were either cancelled or reduced with some other fiscal measures which would affect only higher salaries or incomes.

A first measure was approved by the Government last week, the ceiling of five average gross salaries for the payment of the contributions to state pension and to state health care was removed starting with February 2017. In October 2016, the average gross salary was 2.874 ROL (around 640 Euro) which means that the measure will be applied for the employees earning more than 3.200 Euro gross per month. According to the Government, there are 36.000 people affected by this measure including the prime minister, the president and other high ranked officials. But this measure which is estimated to bring additional 2 billion ROL (approx. 450 mil. Euro) to the state budget will only cover the increase of salaries granted for some categories of civil servants beginning January 2017 and the general increase of the pensions.

It is thus necessary to have an overall increase of the state budget revenues which could be achieved by curving the tax evasion, by recovering the seized assets from those who were convicted for frauds and by a more efficient and higher absorption of the non-reimbursable European funds which would not only fill the budgetary gaps but will also support a healthy growth of the economy.

In brief, the fiscal landmarks of the year 2017 are the following:

  • Standard VAT level is 19% starting with January 2017.
  • Increase of the ceiling of 100.000 Euro to 500.000 Euro for the revenues of a company in order to qualify as micro-enterprise.
  • According to new regulations, tax on revenue for micro-enterprises will be 1% for the companies with one or more employees and 3% for those with no employees.
  • Companies active exclusively in Research, Development and Innovation (R&D&I) are exempted of tax on profit for the first 10 years of activity with the observance of state aid regulation. As a transitory measure, companies with R&D&I profile, established before the adoption of that legislation, are exempted of tax on profit for the period January 6th, 2017 – January 6th, 2027.
  • Beginning with February 2017, medical services paid by the employees can be also deducted from the taxable income up to 400 Euro along with voluntary health care insurance.
  • Removal of the ceiling of five average gross salaries for the payment of the contributions to state pension and to state health by the employees and employers starting with February 2017.
  • For the real estate transactions done by natural persons, the 3% tax will be applied after the deduction of 450.000 ROL (100.000 Euro).

Consumption increase as growth engine in 2015

National Statistics Institute, published mid-February 2016, preliminary GDP growth rate for 2015. The advance of 3,7% looks impressive although only an estimate which might suffer certain adjustments. In addition, European Commission forecasts a 4% increase of Romanian GDP in 2016. The question now is whether this performance reflects a genuine increase of the economy or is owed to certain favorable fiscal measures taken throughout 2015-2016 period which led / will lead to a consumption increase.

Noteworthy, in June 2015, VAT for food products was reduced from 24% to 9% which automatically determined an advance of the consumption. Moreover, salaries in the public sector have been applied an overall increase of 10% starting December 2015 after medical staff benefitting of a 25% growth of earnings from October 2015 and professors of 15% since December. And good news continues, with the new fiscal code applied from January 2016, VAT general level was decreased from 24% to 20%, tax on dividends was reduced from general rate of 16% to 5% for natural persons while the minimum gross salary on economy is planned to be increased with 19% from May 2016.

We are thus facing an avalanche of fiscal reduction and personal income growth for each Romanian which would ultimately lead to a strong increase of consumption, which in turn should produce more tax revenues, higher than those lost through tax reduction measures. This is a simple equation which would certainly work as such in a developed economy where local producers could absorb this rising demand. The question is whether Romanian economy is prepared to take its share of this consumers’ money surplus. According to the Government, apparently the calculations done by the Ministry of Finance indicate that the budget deficit will be maintained under 3% as agreed with the European Commission for 2016 in spite of all those fiscal relaxations and increase of salaries in the public sector.

Representatives of the National Bank of Romania have recently expressed serious concerns on the sustainability of such growth rates on medium term. Their opinion is that GDP growth of about 3.5% – 4% was achieved due to the advance of consumption due to the 9% reduced VAT for food products, to salary increases and to ever reducing bank interest. NBR representatives fear that in the near future the effect of all those fiscal relaxations and salaries increases will melt and stimulating the economy through fiscal measures will stop. Then, the wind will blow in reversed direction leading to excessive budget deficit. Currently Romania is spending 1,6% of GDP on financing public debt and if this debt will go higher than we would need to cut spending from health, education, defense etc.

Thus, it is important to note that if Romanian economy should not rely on internal consumption for GDP increase, then the alternative would be to push the exports, consequently relying on foreign consumption for its growth. But what does this mean? It means first an increase of investments level be it domestic or foreign. It’s a fact that the budget deficit in 2014-2015 remained under 3% because the Government did not implement the investments as planned. The absorption of EU funds had been a total failure therefore co-financing was not anymore needed. The irregularities found in public acquisition put a halt in many major local public investments project while at national level, the political disputes and government reshuffling have determined the postponement of any major infrastructure project.

It would be difficult to rely on local capital for increase of exports. During past 25 years there has been little opportunity for a Romanian class of true entrepreneurs to emerge, corruption and lack of a functional judicial system plagued the business environment. In addition, the largest exporters are by far foreign companies therefore, as usual we would need to rely on foreign investors in order to increase our exports. Minimum salary will go higher starting May 2016, it will in premiere reach 1 Euro/hour. Would it be possible to still be attractive if the employees will be more expensive?

The response is affirmative, if the same employees will become more competitive or if the business environment overall will be more competitive. This means that Romania could not afford anymore low cost jobs, our salaries will be too high for those. But we cannot all be software programmers or car engineers which leads to the necessity of establishing reliable professional schools where people can acquire high level skills in partnership with the industry and as a response to the demand coming from labor market. This also means that employment level will have to go up with more unemployed people especially from rural areas and from Eastern part of Romania become active on the labor market.

And above all those, we would need an infrastructure to support private investments which in turn would boost exports such as fast transport connections between borders, a strong educational system at all levels, a reliable medical care network. Otherwise we will all remain stuck into the idea that there are outside forces which want us underdeveloped.