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Action points for Romania: A look at indices for Romania in global reports

Date: 10/01/2013
Source: EY
Author: Mihaela Matei, Marketing Supervising Associate EY România

We already know that Romanians are not the richest people in the world. Credit Suisse Research Institute calculated in 2012 an average wealth (see definition below) of USD 17,164 per average adult in Romania, given that most of Western Europe exceeds the threshold of USD 100,000 per adult. The good news is that our "wealth" increased 4.5 times from 2000 to 2012, even with the severe adjustment of 36% in 2011-2012 of the national wealth - not to point out the existing disparities in wealth distribution in Romania.

The "wealth" is calculated as total financial and real estate assets minus total liabilities. The latter also increased from an average of USD 60 per adult in 2000, the average debt reaching USD 2369 in the middle of 2012, which means a 40 times increase according to Credit Suisse estimates.

Ranked by revenue, not by wealth, the World Bank puts us into the category of less than USD 10,000 in 2012, with USD 7.943 GDP per capita (not per adult) in 2012, down 10% from USD 8.874 in 2011.

In order to exceed the threshold of USD 20,000 and enter the following category of "wealth" USD 25,000-100,000, as well as to exceed the threshold of USD 10,000 GDP per capita, we need to become more competitive within companies, while public policies and regulations should support this transformation.

A few days ago the World Economic Forum released the new The Global Competitiveness Index 2013 - 2014, in which Romania is ranked 76 of 148 countries. In another global report, released by the World Bank and IFC, Doing Business 2013, Romania ranks 72 of 185 countries surveyed by the ease of "doing business". The aspect refers to how simple regulatory systems are, so as not to limit the set up and growth of companies, but to facilitate it.

In the first report, which takes into account 12 criteria and even more sub-criteria to analyze the competitiveness of countries, the respondents (all of them business leaders from Romania) emphasized that the most problematic areas for developing our competitiveness are: the level of fiscal requirements (17.8 %), corruption (13.4%), complex tax regulations (11.8%), access to funding (10.5%) and bureaucracy (10.2%). In the World Bank's Doing Business ranking, Romania is ranked 136 of 185 countries in terms of fiscal requirements. That means that a company has to undergo 41 payments on average in one year and spend 216 hours per year for calculating taxes, while the actual rate of fiscal requirements (% profit) for a company is 44.2%.

In addition to the above indicators, if we go further into the World Economic Forum’s study, we can see other action points for Romania.
Many companies complain about how little adapted are university graduates to market needs. It's interesting to note where Romania stands regarding training offered to employees. We are ranked on the 134th place, near the end of the top. Only 14 other countries are positioned below us according to this indicator. We dispose of European Funds seeking to make a change in this area, as without trained employees it’s difficult to improve the competitiveness of the Romanian companies, as well as of the Romanian economy.

The report has several sub-criteria relating to labor market efficiency, also an important indicator of competitiveness. The more talented employees in the country, the healthier the relations between employer and employee; and the less fiscal requirements, so as not to demotivate people in getting employed, the more competitive the Romanian economy will be.

Unfortunately, Romania is ranked one of the worst places to work in by level of labour incentives through tax. We are ranked the 146th country , followed only by Argentina and Italy. Almost as daunting is our ability to retain talent - ranked 138 out of 148.

Also referring to fiscal requirements, its level is not very stimulating for investment, one of the necessary factors for growth: we are ranked 136 of 148 analyzed countries.
The good news is that we are placed generally over two other EU countries: Slovakia (78) and Greece (91).

If we refer, however, to the Regional Competitiveness Index realized by the European Commission, Romania is the least competitive of the EU countries, ranked even after Bulgaria. Regarding its capital, Romania has a good standpoint, which indicates development and opportunity disparities between Bucharest and other country regions. It's interesting how much these differences between regions are pulling us down, resulting in the last place in the EU.

We have highlighted some of the indicators we need to improve. To get the most significant effects in the overall standings, it would be preferable to act on these specific indicators, as a company, as well as in public policies. European funds are some of most at hand resources we can use and that can "make the difference". Perhaps fiscal requirements are a touchy subject in this fragile economic moment. Although, surely, we can act on the level of bureaucracy, one of the worst indicators for Romania, showed both by the Report on Competitiveness and the Doing Business report.

Everyone talks about competitiveness, to the point where it became just a nice word that we want to associate with the phrase "the Romanian economy." If there is anyone else left to be convinced of its importance, the World Economic Forum defines „competitiveness” as that set of policies, institutions and factors that determine the productivity of a country. And productivity leads directly to the welfare of each one of us, because it determines the prosperity of an economy.

The same competitiveness is a prerequisite for the rates of return obtained by investors in Romania. In other words, the higher the competitiveness, the higher the rates of return - a necessary condition for economic growth. This reads for all of us into the promise of an economically favorable future.

So, as a film director would conclude, to all those on the movie set, business people and those who draw up public policies: "Action!"
Action points for Romania
A look at indices for Romania in global reports

Author: Mihaela Matei, Marketing Supervising Associate EY România

We already know that Romanians are not the richest people in the world. Credit Suisse Research Institute calculated in 2012 an average wealth (see definition below) of USD 17,164 per average adult in Romania, given that most of Western Europe exceeds the threshold of USD 100,000 per adult. The good news is that our "wealth" increased 4.5 times from 2000 to 2012, even with the severe adjustment of 36% in 2011-2012 of the national wealth - not to point out the existing disparities in wealth distribution in Romania.

The "wealth" is calculated as total financial and real estate assets minus total liabilities. The latter also increased from an average of USD 60 per adult in 2000, the average debt reaching USD 2369 in the middle of 2012, which means a 40 times increase according to Credit Suisse estimates.

Ranked by revenue, not by wealth, the World Bank puts us into the category of less than USD 10,000 in 2012, with USD 7.943 GDP per capita (not per adult) in 2012, down 10% from USD 8.874 in 2011.

In order to exceed the threshold of USD 20,000 and enter the following category of "wealth" USD 25,000-100,000, as well as to exceed the threshold of USD 10,000 GDP per capita, we need to become more competitive within companies, while public policies and regulations should support this transformation.

A few days ago the World Economic Forum released the new The Global Competitiveness Index 2013 - 2014, in which Romania is ranked 76 of 148 countries. In another global report, released by the World Bank and IFC, Doing Business 2013, Romania ranks 72 of 185 countries surveyed by the ease of "doing business". The aspect refers to how simple regulatory systems are, so as not to limit the set up and growth of companies, but to facilitate it.

In the first report, which takes into account 12 criteria and even more sub-criteria to analyze the competitiveness of countries, the respondents (all of them business leaders from Romania) emphasized that the most problematic areas for developing our competitiveness are: the level of fiscal requirements (17.8 %), corruption (13.4%), complex tax regulations (11.8%), access to funding (10.5%) and bureaucracy (10.2%). In the World Bank's Doing Business ranking, Romania is ranked 136 of 185 countries in terms of fiscal requirements. That means that a company has to undergo 41 payments on average in one year and spend 216 hours per year for calculating taxes, while the actual rate of fiscal requirements (% profit) for a company is 44.2%.

In addition to the above indicators, if we go further into the World Economic Forum’s study, we can see other action points for Romania.
Many companies complain about how little adapted are university graduates to market needs. It's interesting to note where Romania stands regarding training offered to employees. We are ranked on the 134th place, near the end of the top. Only 14 other countries are positioned below us according to this indicator. We dispose of European Funds seeking to make a change in this area, as without trained employees it’s difficult to improve the competitiveness of the Romanian companies, as well as of the Romanian economy.

The report has several sub-criteria relating to labor market efficiency, also an important indicator of competitiveness. The more talented employees in the country, the healthier the relations between employer and employee; and the less fiscal requirements, so as not to demotivate people in getting employed, the more competitive the Romanian economy will be.

Unfortunately, Romania is ranked one of the worst places to work in by level of labour incentives through tax. We are ranked the 146th country , followed only by Argentina and Italy. Almost as daunting is our ability to retain talent - ranked 138 out of 148.

Also referring to fiscal requirements, its level is not very stimulating for investment, one of the necessary factors for growth: we are ranked 136 of 148 analyzed countries.
The good news is that we are placed generally over two other EU countries: Slovakia (78) and Greece (91).

If we refer, however, to the Regional Competitiveness Index realized by the European Commission, Romania is the least competitive of the EU countries, ranked even after Bulgaria. Regarding its capital, Romania has a good standpoint, which indicates development and opportunity disparities between Bucharest and other country regions. It's interesting how much these differences between regions are pulling us down, resulting in the last place in the EU.

We have highlighted some of the indicators we need to improve. To get the most significant effects in the overall standings, it would be preferable to act on these specific indicators, as a company, as well as in public policies. European funds are some of most at hand resources we can use and that can "make the difference". Perhaps fiscal requirements are a touchy subject in this fragile economic moment. Although, surely, we can act on the level of bureaucracy, one of the worst indicators for Romania, showed both by the Report on Competitiveness and the Doing Business report.

Everyone talks about competitiveness, to the point where it became just a nice word that we want to associate with the phrase "the Romanian economy." If there is anyone else left to be convinced of its importance, the World Economic Forum defines „competitiveness” as that set of policies, institutions and factors that determine the productivity of a country. And productivity leads directly to the welfare of each one of us, because it determines the prosperity of an economy.

The same competitiveness is a prerequisite for the rates of return obtained by investors in Romania. In other words, the higher the competitiveness, the higher the rates of return - a necessary condition for economic growth. This reads for all of us into the promise of an economically favorable future.

So, as a film director would conclude, to all those on the movie set, business people and those who draw up public policies: "Action!"

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