State Aid: Financing Opportunity for Foreign Investors in Romania
The last 7 years is a period long enough to conclude that state aid has been one of the most effective and efficient financing tool within the Romanian authorities. Romania is already at the second edition of state aid schemes, the first edition having been successfully completed in June 2014. The first wave of projects financed by state aid can be summed up by having more than 60 investment projects approved, with a total value of over EUR 3 billion, which are to generate more than 25,000 new workplaces. The funds’ absorption rate also proves the success of the past schemes: 99% in case of the scheme for hiring new employees, more than 50% in case of the scheme for medium and large investments and 19% in case of the scheme for very high investments. All these figures show the real intention of the authorities to stimulate projects with a major impact on economy, in order to create new workplaces and support investments which bring added value by their implementation.
The distribution of state aid funds was especially directed towards foreign capital companies activating in industry, production or services, while local entrepreneurs preferred less capital intensive investments which qualified for state aid to a lesser extent. According to the representatives of the Ministry of Public Finances, high importance is given to projects that assume know-how transfer, implementation of modern technologies or creation of innovative products. From this perspective, with small exceptions, the majority of activity sectors are eligible for state aid, some fields being highly appreciated by authorities.
For the next period, the Government seems to continue its undertaking to finance viable investment projects by having launched during 2014 two new state aid schemes which are valid until 2020. Thus, the scheme introduced by Government Decision no. 807/2014 finances the investments in assets, whereas the scheme introduced by Government Decision no. 332/2014 finances the salary costs for projects focusing more on creation of workplaces rather than on investments in assets. The investors may benefit from similar conditions as in the past, namely a refund of up to 50% of the assets costs or of the salary costs for a period of 2 consecutive years.
The main eligibility criteria which have to be fulfilled by companies in order to benefit from these non-refundable funds are: minimum value of the investment of EUR 10 million for the scheme financing the assets or the creation of a minimum number of 10 workplaces for the scheme financing the salary costs.
The total budget valid for this second wave of state aid amounts to EUR 1.2 billion (EUR 600 million for each of the two schemes), the applying companies being treated according to the principle “First-Come, First-Served”. Although no allocation of this budget according to the regions has taken place, the authorities encourage investments in the less developed regions of the country and this can be noticed by the different percentages of eligible costs to be financed by state aid. During 2015 the Romanian Authorities have already approved financing for more than 20 investment projects, consuming approx. 14% of the budget allocated for investment in assets and approx. 2,5% of the budget allocated for investments in salary costs.
The percentages of around 50% state aid show a great victory of the Romanian authorities in convincing the European Commission to still keep these high financing quota for state aid. Considering the whole Central and Eastern Region, Romania is leader in state aid financing, most of its neighbours being accepted in average for 20-30% state aid.