Victor Ponta, Romania’s Prime Minister and the President of the Social Democratic Party, discusses his government’s top priorities as well as Romania’s investment attractions.
European Times: What is the role of the Social Democratic Party in Romania and how do you see it developing in the future?
Victor Ponta: The Social Democratic Party has always been the dominant party in Romania’s parliament and among local authorities. My party has recently been engaged in modernising and transforming itself into a progressive, centre-left party. This process began during the mandates of my two predecessors, Mr. Nastase and Mr. Geoana. They promoted a lot of young leaders and modernised the party, and that is why our party has received the most votes in parliamentary, local and European elections. In May, we won 16 out of 32 seats in the elections for representatives to the European Parliament. As head of the party, I will continue this process of reform and will continue to promote young leaders and a modern approach. I’m very proud to report that our Minister of Finance is the first female Minister of Finance in Romania’s history and she is 34 years old. Our ministers of energy, small and medium enterprises, education and health are all under 40 years of age as well, so they are younger than I am. I am very proud that the party and the parliament have supported such a young government and team.
European Times: What are your key objectives during your mandate?
Victor Ponta: Over the past two and a half years we have achieved very positive economic results. According to Eurostart, Romania’s current growth rate is 3.9%, which is amongst the best in the European Union. In addition, we have implemented a disciplined financial and budgetary regime, which is important for maintaining microeconomic and macroeconomic stability. When we took office, Romania’s public deficit was 4.6% and this year it will be 2.2%, or less than half what it was before. I am also very proud of our economic and social model which shows that not only cuts in benefits and austerity measures can result in economic growth and a lower deficit, but a clever allocation of priorities. We have managed to increase the minimum wage, unblock all the European structural programmes, and absorb millions of Euros of European Commission funds while also achieving more inclusive social and economic development. I am very happy to see that there are a lot of young leaders in Europe now, like Matteo Renzi, who, like our government, have confidence in a new model which focuses on budgetary discipline, economic growth and social inclusion.
European Times: What needs to be done in order for Romania to enter the Schengen area?
Victor Ponta: Both our government and the European Commission have recognised that we have done everything we are required to do for Romania to become a member of Schengen, both in terms of technical requirements and in terms of our borders, which are very safe now, much safer than those of other European countries. We have even fulfilled all political requirements by respecting the Mechanism of Cooperation and Verification regarding the justice system. The most recent reports by the European Commission state that Romania has improved its justice system in independence, efficiency and effectiveness. Based on this, we are absolutely ready to join Schengen. I think that the delay is the result of internal political debates, but I am optimistic and I have talked personally with the President of France, Mr. Hollande, and with the Prime Minister, Mr. Valls. I also spoke with Chancellor Merkel and Prime Minister Rutte, because France, Germany and the Netherlands were still worried about Romania’s association with Roma integration. I am optimistic that soon Romania will be accepted into Schengen. I would like to emphasise that the same standards must be imposed on all countries wishing to join Schengen, and any country which meets these standards must be accepted into Schengen. Romania’s entry into Schengen will benefit European trade and economic development, because Romania is a very important economic partner for all EU countries. Not being a Schengen member works against trade ties between Romania and other countries. Based on these factors, I am optimistic that by the end of this year we will be a member of the Schengen area, which I believe will be a win-win situation for Romania and for the other European members of Schengen.
European Times: What are some current trends in foreign investment in Romania?
Victor Ponta: For both foreign investors and for Romania, it is a win-win situation. Almost every day, an executive of a large foreign company comes to my office wanting to invest in Romania, and that makes me happy. Investors are coming here for the following reasons: first of all, Romania offers a very positive fiscal environment. We still have a flat tax of 16%, and we are promoting all the state-aid schemes which are approved by the European Commission. Secondly, we have very skilled people. Our students are well trained and it is much more profitable for companies to keep them here instead of taking them to the UK or the US. Third, labour costs in Romania are an incentive because the average wage of Romanians is below the European average. All companies want to know how much they will need to pay in taxes, how well trained local labour is, and what the average wage is. Romania offers advantages in all these areas. We have also worked very hard over the past two years to keep energy prices very competitive, which has not been easy! Romania’s energy prices are still below the European average, and this has stimulated the growth of our industry. In addition to all these attractions, our government has created some new investment incentives; for example, the reduction of labour taxation by 5%. Romania is now among the top European countries in investment attractiveness. Romania welcomes foreign investors because investors create jobs, pay taxes, and, over the long term, train our labour force to be competitive, professional and oriented towards EU standards. This means that, thanks to foreign investors, Romania will develop a new generation of skilled workers who are competitive and know how to use new technologies. We want our younger generation to live and work in Romania, pay taxes, and support the older generation and our pension system. So, FDI is a win-win for both investors and for Romania.
European Times: Can you single out some of Romania’s high-potential sectors?
Victor Ponta: One of our successful sectors is energy. In less than six months, we have managed to launch very successful IPOs of state-owned energy companies which are now listed on the Romanian and London stock exchanges. These include gas-producer Romgaz and electricity-distributor Electrica. These IPOs brought in around one billion Euros in new funding which will remain in the companies for investment in infrastructure. Another thriving sector is the auto industry. Romania has attracted investment from major global players like Renault (Dacia), Ford and Daimler, which just opened a new plant, as well as many other companies, including ones producing automobile parts. These companies have created thousands of jobs and have helped make our automotive sector very competitive. Then there is Romania’s traditional wealth: agriculture. Last year, for the first time in 20 years, Romania was a net exporter of food products, particularly organic food products. Tourism is another rapidly developing sector. We have succeeded in promoting Romania’s natural and cultural heritage, including the absolutely gorgeous Danube Delta.
European Times: What are some other advantages Romania offers investors?
Victor Ponta: In addition to advantageous energy prices, fiscal conditions and skilled people, Romania offers stability and predictability. We have worked very hard on this for the past two years and now investors can see that Romania is on a safe, stable, predictable path. This makes us very competitive, not only compared to other European countries but also compared to any countries anywhere, because companies can do business all over the world from Bucharest. This is the 21st century and competition is not local or regional, but global.
European Times: What are the prospects for Romania’s continued political stability?
Victor Ponta: Romania confronted one of the worst economic, financial and social crises imaginable between 2009 and 2011. Then in 2012, not only my party but also the coalition which I led had a great electoral victory with an absolute majority and a two-thirds majority in parliament. Our government is stable and is going to be stable until 2016. Of course, internal political disagreements are a daily occurrence in Romania as in any country, but what is important to remember is that Romania has proved to be a very reliable partner for the European parliament and the European Commission. We aim to keep our portfolio in the European Commission and in the Agricultural Commission, which has been very effective in promoting the new European agricultural policy. Romania has also proved to be a very reliable and committed supporter of the EU and of NATO regarding the crisis in Ukraine. We have always been in favour of Moldova, Ukraine and Georgia, and this is very important, because in moments of crisis you can see whom you can count on and whom you cannot count on. Romania has demonstrated its pro-European, pro-NATO commitment as well as its reliability. No major political leader or party in Romania will question this commitment. I am also very proud of the fact that Romania has not elected any anti-European representatives to the European Parliament and 16 of our representatives are from the Social Democratic Party.
European Times: What are some future opportunities for investors?
Victor Ponta: The energy sector is the sector in which we have made the most structural reforms in terms of legislation, transparency and competition involving both producers and distributors. The IPOs of Romgaz and Electrica were over-subscribed. We are continuing this process by privatising the biggest producer of coal energy and, next year, Romania’s hydropower company. So, if I had to choose the top sector in Romania for investors, it would be the energy sector. The second most promising sector is agriculture, especially organic food products. Our production of organic food increased 400% in just one year. Step by step, Romania is building brand recognition for its organic food, not only in the European market but also in the global market. I am very proud of this.
European Times: Can you comment on Romania’s efforts to achieve energy independence?
Victor Ponta: We are in a much more fortunate situation than our neighbours, because we import only 25% of our gas from Russia and I know that many countries in this part of Europe import up to 90%. We have developed sufficient production of electricity and we would like to export electricity but must first modernise our infrastructure. Concerning gas, our strategies are geared not only to the Romanian market but also to Moldova. We want to supply both countries’ gas needs through investing in our traditional gas resources. Leading Romanian gas company Petrom OMV and global companies Repsol and Mol have received licenses to do research on gas. We are also very optimistic about offshore exploration, and Exxon has already invested more than US$1 billion in this. Romania will invest around US$5 billion. Initial exploration results have been very positive, with important resources indicated in Romania’s offshore areas in the Black Sea. My government has been courageous enough to allow exploration of non-conventional resources of gas as well, such as shale gas, and Chevron and some other companies are involved in this effort. As soon as we know whether we have shale-gas reserves, we will decide whether we want to exploit them, and I am in favour of doing this, of course through respecting the highest environmental-protection standards. I believe that in around five years Romania will be producing enough gas and electricity to satisfy our national needs as well as Moldova’s needs.
European Times: Which countries are Romania’s most important geo-political partners?
Victor Ponta: We have a strategic partnership with the US which is both political, including military ties, and economic. I also strongly support the economic relationship among Romania, Poland and Turkey, the region’s three biggest countries. Romania continues to try to build very good relationships with Asian countries like China and Japan and with all our possible markets around the world. We hope to launch energy and infrastructure projects with China and with Chinese companies.
European Times: What is your personal message to potential investors in Romania?
Victor Ponta: Romania is the country with the greatest potential and the worst image. Romania needs to take advantage of its potential to develop economically and socially while also tackling its negative image. Our image problem concerns the integration of the Roma people and I believe we should attack this image problem directly. We have to be very pragmatic in explaining to European society that Romania is a democratic country now, a country committed to European values and one which is working to continue to improve. I honestly believe that Romania has a very strong future and we Romanians must promote this. Stability and reliability are essential, and as long as Romania provides these, our country will offer real incentives for international investors.