Report of the Financing the Economy Conference

This report provides a snapshot of the challenges and opportunities in leveraging resources in the region and highlights some recommendations and observations that could be perceived as inputs for a new growth model for the Romanian economy. It is a synthesis of the discussions held within several panels during the ‘Addressing Needs, Leveraging Resources in Financing Non Euro-zone Economies’ Aspen Institute Romania conference that took place under the auspices and at the premises of the National Bank of Romania on March, 18th, 2014. You may find the full report here.

The report unfolds with a description of the geopolitical and socio-economic challenges for non Euro-zone countries and sequentially taps into ways to address the needs of a growing economy: the EU multi-annual financial framework 2014-2020, development banking, pension funds, capital market and venture capital. Policy priority areas as well as infrastructure investment priorities are highlighted throughout the chapters. Many of the considerations are valid for all the non—Euro-zone countries, however the focus of the event is on Romania, its economy and policy options.

The report should be interpreted as a transition step towards further consistent practical approaches for financing the economy that will be developed based on the establishment of the Romania Gateway Unit in 2014. Stemming from a wide set of policy approaches promoted by the Aspen Institute Romania and its partners, Romania Gateway creates the institutional space for unprecedented public-private cooperation and coordination. Its adoption as an official policy by the Romanian Government makes a watershed moment for policy convergence and public private partnership in achieving financing targets and linking them to lasting development.
The Romania Gateway is recognized as a strategic project of national interest, being implemented through a dedicated public-private team – the Gateway Unit and should contribute to the development of the New Silk Road concept that aims to revitalize the ancient Silk Road via a combination of modern highways, rail links and energy pipelines connecting Europe, Asia and Middle East.

The East-West Gateway Unit has several objectives: (i) indentifying strategic projects for Romania; (ii) analysis of all projects identified from a cost-benefit perspective; (iii) providing a clear prioritization of these projects based on their importance, impact and resources required for implementation; (iv) structuring a viable financing and partnership mechanism for large-scale projects; (v) developing a coherent communication and progress monitoring strategy at Government / Prime Minister level.

Main Recommendations Stemming from the Report    

Finance-related

·         Establish a National Development Bank either by creating a new vehicle or redesigning/re-assigning a part of EximBank / CEC Bank
·         Create a dedicated sovereign investment fund for infrastructure
·         Ensure better spending of EU funds in highest impact areas and large infrastructure projects
·         Improve PPP mechanism; create equity and debt national investment vehicles
·         Increase savings through reform of the pension model and support portfolio diversification of pension funds for financing infrastructure
·         Upgrade the capital market to investment grade by continuing reforms and removing barriers
·         Apply leverage on a well-planned, clear infrastructure development strategy, attracting state budget financing, EBRD / EIB / IFC contributions, large international investment funds, private developers and syndicated loans from banks

Priority areas

·         Develop the agriculture infrastructure and food processing sector and combine nature’s gifts with the affordable labor force conditions.
·         Transport infrastructure: improve roads, railways, and ports to reduce the cost of transport and trade and boost exports.
·         Energy sector: continue reforms, improve the governance framework for state-owned enterprises, privatize the non-strategic companies and render the IPOs for strategic companies.
·         Conduct education reforms to enhance skills and ensure a better matching between labor supply and market demand through vocational training and university investments.
·         Improve the regulatory environment by streamlining administrative procedures and adopting new legislation to help attract investment and encourage entrepreneurship.
·         Increase investments in R&D from both private and public sources. Develop industry clusters in knowledge-intensive industries, increase industry collaborations with universities, and provide support for startups.
·         Design an investment mechanism to foster bilateral economic relations with Moldova

Additional messages
  • Large infrastructure projects should be delivered based on national consensus and should not be politically colored, overcoming electoral cycles.
  • Experienced human capital and competent management are compulsory for developing optimal private and public sector involvement mechanisms for funding infrastructure.
  • The key to success relies in the establishment of a transparent and credible, meritocratic environment, that would nourish on the experience of top-level professionals
 
 


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