Dragoş Cabat: "In Romania, the crisis will be over nine months after it"s done in the United States!"

Ovidiu Vrânceanu,Braşov

"The Romanian crisis will last nine months longer than in the US", economic analyst Dragoş Cabat, chairman of CFA România, yesterday said in Braşov. Cabat said that the "the crisis began in America and it hit Europe four - five months later, and newer members of the EU, including Romania, were hit another four-or five months after the European countries", and "it is rather to be expected that the crisis will end following a similar pattern". As the United States expect their economic recovery to begin at the end of 2009, or in the beginning of 2010, the analyst said that it is likely that by the end of 2010 the crisis will end in Romania as well.

He said that "Romania would have gone through a crisis anyway, given the accessibility of consumer loans. Being able to take out a loan with just the ID card was a warning sign of the crisis".

Cabat explained that the signs of the crisis appeared back in 2006 - 2007 when the profit margins of large companies began to shrink, when it was getting increasingly difficult to secure credit lines for investments, and companies were already facing a slight financial deadlock. "From now on, banks will be far more cautious in giving out loans, because the perspective on risk has changed". Cabat also proposed a few steps for adapting to the crisis, one of them being stricter customer screening, given the fact that this year, the number of checks and promissory notes rejected by banks increased 70%, and 90% of commercial transactions are paid after 90 - 120 days.

On the issue of salary policies, Cabat says that on top of layoffs and cutting wages across the board, bonuses should be awarded based on merits, as in Romania, just like in most European countries, employees are usually relatives of the managers.

Strict financial management should also be applied, by calculating profitability for each product. "Most Romanian companies don"t know how to determine the profitability per individual products and don"t know where their money goes", the analyst said. Another step would be the optimal management of inputs and outputs, but without cutting insignificant expenses. "It"s been said that cutting coffee expenses is pointless if it doesn"t increase economic efficiency and it"s absolutely true. Protocol expenses are important, but they need to be trimmed down", Cabat said, speaking at the Regional Economic Forum held by Media Xprimm in Braşov.

• No country will see growth rates higher than 5 - 7%

The analyst also said that banks changed their outlook on lending and that the exuberance of lending to anyone is over. "After the crisis, no country, not even China, let alone Romania, will see economic growth of more than 5 - 7 %, like they used to do before the crisis, no matter how big an economic boom it would go through", Cabat said, who added that "the main currencies - the dollar, the Euro and the even the yen will depreciate, but I can"t say in relation to which currency, hopefully against the leu".

• The minimum lump sum tax - a mistake

On the issue of the lump sum tax, Cabat claims that this was the largest mistake that the Government led by Emil Boc made. "It is understandable, because most of them are not business people and they don"t understand how business works, so anybody can make a mistake", he said, who added that a better decision, but which will be extremely unpopular, would be the increase of the VAT rate. "This is exactly why it"s implementation has postponed until next year, after the presidential elections. The VAT is a tax determined based on turnover, which is why for the government it is a better alternative than the net profit tax", the analyst said.

• Mountain tourism could become very profitable in the future

Businesspeople who attended the forum criticized the policy of the Government on promoting tourism. Dragoş Cabat said he partially agreed with them, at least on the fact that "Romania has some issues when it comes to seaside tourism, where it will never be able to keep up with Greece or Turkey. Their summer season lasts four months longer, and they can afford to charge less for accommodation". Given these circumstances, seaside tourism will only be there for week-end trips and for "Romanians who for some strange reason choose not to go abroad for holidays".

Mountain tourism has a much better outlook and it could become a large revenue source for the budget, whereas "religious tourism is just a fairy tale". "The real issue is infrastructure, and Romania will need at least 15 years, to get its roads in shape. As to the standards of travel services, another generation will have to go by before they improve", the analyst said.