BUCHAREST (Romania), February 2 (SeeNews) – With social tensions in Romania heightening by the day over the government's decision to backtrack on fighting corruption, investors warn they are cancelling or delaying their projects in the country, industry groups say.
A record 300,000 people gathered on Wednesday night in Bucharest and other Romanian cities to protest an emergency government decree that eases or scraps penalties for corruption offences. The decree, seen by critics as an attempt to reverse Romania's anti-corruption drive, has drawn fire from president Klaus Iohannis and the country's judicial system watchdog.
The unrest is prompting investors, who planned to invest in Romania, to postpone their decision and to focus on other markets until they see more stability in the country, the local unit of French credit insurance agency Coface said in a press release on Thursday.
"In light of recent events, we have received on Wednesday calls from some international investment funds, which expressed their concern over what will happen in the next period, because they have increasingly little predictability and signals do not encourage long-term investment. One of the funds told me they had a budget of 100 million euro ($108 million) for investment and takeovers of companies this year in Romania, but have cancelled any investment and put on hold current projects," Coface service director and chief economist Iancu Guda said.
In Guda's view, it is important to achieve stability as soon as possible and avoid a political crisis, which will have dangerous effects in the long run such as lack of predictability and discouraging investments.
Also on Thursday, the Foreign Investors Council (FIC) in Romania joined its peers from the business community to express its concern regarding the recent changes to the Penal Code adopted by the government.
"FIC believes that any government, regardless of electoral cycles, should consider the fight against corruption and structural reforms of the Romanian economy as top priorities. The rule of law and free markets are necessary ingredients for long-term economic growth and the only way to generate prosperity for society at large," FIC said in a press release.
FIC added that the way these decisions had been taken could send a negative signal to investors and international institutions and Romania will thus lose the opportunity of attracting new investments.
"The trust of the investors in Romania as a friendly country for doing business can be easily lost and rebuilding this image will require significant effort and will take up a lot of time and energy," FIC warned.
One of the largest employers' organization in Romania, Concordia, said on Thursday that the government's decisions to amend the criminal legislation were adopted hastily, without proper consultations and without evaluating the emerging risks to the Romanian society, including lowering Romania’s attractiveness as an investment destination.
"These measures, although aimed at the legal sphere, will have a major impact on economic relations with international partners, both for states and businesses (companies with Romanian capital and foreign capital), due to lack of confidence they will generate which could endanger Romania’s economic growth targets. The lack of predictability in decision making will be reflected in increased borrowing costs for Romania, resulting ultimately in increased taxation to cover the deficits that will arise," Concordia said in a statement.
Concordia also noted that the present government does not demonstrate a genuine desire for public consultation, neither for transparency and well grounded political and economic decisions.
Concordia represents more than 500 companies employing more than 275,000 people.
German investors in Romania also voiced their concern on Wednesday evening, saying that the government's actions send a strong signal of uncertainty and could negatively influence the strong economic relations between the two countries.
"A limitation of the rule of law and the danger of corruption recurrence will have obvious negative effects on the economic development of the country. Romania is in danger of losing its positive image hard regained last year. This is all the more regrettable, as Romania thus weakens its position as a stable and reliable investment location, especially in the delicate political context globally," the Romanian-German Chamber of Commerce and Industry said in a press release.
U.S. investors doing business in Romania also said that the lack of transparency in adopting legislative changes in justice sends a strong negative wave of mistrust and uncertainty, internally and externally.
"It is extremely worrying for the business community and society as a whole, that legislative pieces with such moral, societal and economic implications with immediate and long term effects are adopted by the Government without observing the minimum requirements of transparency in decision-making," the American Chamber of Commerce in Romania said on Wednesday.
AmCham Romania has over 400 members - U.S., international and Romanian companies, both large corporations and medium and small-sized enterprises, which sustain some 250,000 jobs in Romania and have invested in the country some $20 billion since 1993.
($= 0.9251 euro)