Economic Crisis Reaches Furniture Factories

Romanian furniture manufacturers are confronting major difficulties as a result of the global economic and financial crisis and are asking authorities to step in and save the industry. Aurel Rizea, President of the Associated Furniture Manufacturers in Romania, told Agerpres that furniture manufacturers were currently confronting a significant decrease in sales compared to last year and a drastic collapse of export orders. The Association announced that furniture manufacturers had already started to cut jobs, while some of the factories had stopped production completely. "This time last year, we had export orders to keep us busy for the entire year 2008," Rizea said. Another cause of the ongoing problems is that the partner companies have no strategy based on which to forecast turnovers and the increase in the cost of raw materials, energy and bank interests, so the necessary amount of operating capital has increased, too. "Until now, we used to solve these problems by increasing the credit lines for the operating capital, which is no longer possible. It is also not possible to take new loans because of the drastic increase in the interest rates. Access to EU funds is blocked for many companies because of their losses and the impossibility to ensure co-financing. On top of everything, the cost of financing for investment projects has gone up by as much as 50%. Also, the payment conditions are disfavouring exporters and there are no more guaranteed payments," Rizea explained. Reacting to the new circumstances, the Board of the Associated Furniture Manufacturers proposed a set of solutions to minimize the effects of the global crisis. One of them is to delay VAT payments to the State for the invoices sent to State-controlled entities until the invoices are paid. Alternatively, the penalties for delay could be cancelled for the respective period. Another option would be to offset the companies" debts to the State against the VAT that is not reimbursed within 45 days after the date of invoice, or the payment of the social contributions to the public pension fund, medical insurance etc only at the company"s headquarters, centralized for all branches. Furniture manufacturers also believe it is necessary that the profit tax be paid once per year, after the end of the fiscal year. Also, the State should fully cover the payments of 75% of the salaries of those in technical unemployment and take steps to adapt the conditions for disbursing structural funds to the current circumstances. As for exports, domestic manufacturers are asking authorities to start negotiations with the Russian Federation and the CIS Members and to discourage furniture imports through customs duties on non-EU furniture subsidized in the country of origin. Romanian furniture manufacturers also want that public institutions be forced by law to buy only Romanian-made furniture. Also, furniture manufacturers should receive loans for domestic production under the same conditions as the loans for export-oriented production. Alternatively, the co-financing of projects for small and medium-sized enterprises using non-reimbursable EU funds should be guaranteed by the Guarantee Fund.