Clare Nuttall in Bucharest -
The European Bank for Reconstruction and Development (EBRD) plans to resume investments in national transport and energy infrastructure in Romania, where according to country director Matteo Patrone lack of investment is holding back growth.
Romania has one of the fastest GDP growth rates in Southeast Europe, but poor transport infrastructure in particular has led to uneven growth across the country, with some regions lagging behind.
Investing into infrastructure to reduce regional disparities and boost inclusion is one of the three priorities of the EBRD’s new strategy for 2015-2018, the bank announced at a press conference in Bucharest on October 6. The other two priorities are broadening access to finance and increasing private sector competitiveness.
In its previous four-year strategy period, the EBRD invested almost €1.5bn in 75 projects. This sum was allocated fairly evenly across four areas - the financial sector, energy, infrastructure and the private sector.
The amount the bank will invest in Romania in the next four years has not yet been decided as its board still has to approve plans for investment across its regions for the coming years. However, Patrone says the bank will try to maintain or slightly increase the volume of investment, though this will depend on the country’s needs and investment opportunities.
The commitment to infrastructure is where the new Romania strategy differs from previous strategies. “The major impediment to even growth in Romania is the chromic underinvestment in infrastructure,” Patrone said in an interview with bne IntelliNews. “We realise that in order to be instrumental in reducing the transition gap in Romania we probably need to re-engage in financing infrastructure investment, which we haven’t done at a national level for a while.”
Given the size of the “gap” in the transport infrastructure sector, action by the Romanian government will be needed, although Patrone is also keen to attract as much private sector capital as possible in the medium term. Public private partnerships (PPP) are one method the EBRD is considering to increase private investment in the sector.
Romania has struggled to put EU funds available for infrastructure investment to use, and the EBRD is interested in cooperating with the EU to help the Romanian state to absorb funds more effectively.
In the energy sector, Patrone says the EBRD is a potential investor in gas pipeline infrastructure as Bucharest seeks to turn the country into a regional energy hub.
Unlike the transport sector, energy has attracted numerous private sector investors. However, according to Patrone, “If Romania has ambitions to become a gas hub for the region, it will need to improve gas infrastructure within the country and inter-connections to neighbouring countries. This is something the EBRD would be very interested in looking at.”
Patrone did not disclose which Romanian companies the EBRD is planning to support, as discussions with both government officials and individual companies are still in progress.
Several projects were discussed during Romanian Prime Minister Victor Ponta’s visit to the bank’s London headquarters in September, and lists of potential projects in the transport and energy sectors have been drawn up. “We are now at a stage where we are prioritising these projects,” says Patrone.
The EBRD forecasts growth of around 3% in 2015 and 3.2% in 2016, which is among the fastest in Southeast Europe. Romania is already counted by the EBRD as an advanced transition country.
Patrone says Romania is doing “incredibly well” in macro-economic terms, and compares well to the rest of the region in terms of potential. “Because of its size, the degree of development and the presence of natural resources, Romania probably has some of the biggest potential among our countries of operation,” he adds.
However, he points out there is still room for improvement. The EBRD will continue working with the Bucharest stock exchange to improve the local capital market, after making progress in this area during the previous period.
Improvements to Romania’s investment environment are also needed. While Patrone says the ongoing dialogue between the authorities and the business community is “very constructive”, there is a need for action in other areas such as the high level of bureaucracy. “We are pleased to see there is significant attention to these matters from the authorities,” he says, but adds: “We will see whether this translates into significant improvements.”
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