Gheorghe Piperea, MEP: "The sovereign fund should focus on supporting Romanian capital"

The sovereign investment fund should focus on supporting the Romanian capital, emphasized the MEP and university professor Dr. Gheorghe Piperea.

He said: "There are economic powers of the planet, such as Norway or Saudi Arabia, which have sovereign wealth funds. Also, China has a sovereign fund that places its large liquidities at its disposal, for example, in bonds issued by the United States, and even if the US controls the value of these funds from time to time through the far too frequent quantitative easing programs, China in turn controls his, not always very obvious, American economy, through this investment fund".

The MEP added: "The fundamental question is what will feed this sovereign fund and also what will it do with the liquidity or financial instruments. Another fundamental question is whether the executive and respectively the board of this sovereign fund will be a new political sinecure or a team of professionals with a vision to make the sovereign fund an extremely serious economic policy instrument, an anchor for situations where, in -one way or another, politics or society, slips. The fact that we will have a budget deficit this fall I think is clear to everyone. We are no longer talking about a deficit of 6.5% as was forecast in the budget, but we are already talking about a deficit of 7.9% and I think we will go towards 10%. The fund could be a buffer that can avoid this kind of budget deficits, to balance them. In addition, the sovereign fund could be an instrument to capture capital from the market".

According to the MEP, the Romanian capital that the sovereign fund should support is made up of large companies but, above all, SMEs. "From a conference organized together with the Chamber of Commerce and Industry, we learned that more than 63% of the profit tax that is collected from the economy comes from SMEs. Also, more than 60% of employees throughout the country work in SMEs. However, this means that there is movement in this area, which I think should be promoted as best as possible, and the best way is by offering capital. There are state programs, such as IMM Invest, which has some success, but most of the money that went through this program was money that rolled over previous debts and a little for investments (...). The program was still a good idea for getting out of the disastrous economic situation caused by the pandemic, but it is not necessarily the model for the sovereign investment fund to follow", said Gheorghe Piperea.

• "Large investments that are not suitable for SMEs and the provision of guarantees for small and medium-sized businesses - fundamental elements of a sovereign investment fund"

Large-scale investments, for example in infrastructure projects and the provision of guarantees for small and medium-sized businesses, are fundamental elements of a sovereign investment fund, according to the MEP. "The Sovereign Fund can have a lot of things to do. For example, there are large-scale projects that cannot be done overnight and that cannot be done by SMEs", said Gheorghe Piperea, referring to highways or systems to protect against floods.

Regarding SMEs, the lawyer pointed out that there are many projects that can be done, but there is no funding. "In February 2022, Mr. Vasilescu, the adviser to the governor of the National Bank of Romania, said that only 5% of Romanian enterprises are bankable. Or, this means that any hope of getting capital from the banks is an illusion. But such a lever, such as the sovereign fund, provides the necessary guarantees to obtain capital".

Read Do we need a Sovereign Fund in our country?

Gheorghe Piperea also raised an issue related to the operation of a sovereign investment fund in our country. "Is this a sovereign investment fund in the sense that it manages shares or assets, or is it also a vehicle to get involved in the strategic management of portfolio companies. The type of involvement in strategic management would give rise to a problem of compatibility with the Ordinance on corporate governance in public enterprises. Either will be indirect incompatibility, because the strategic management will be done according to the principles of the World Bank. Either a derogation will be made, but not because we want to replace that ordinance, but because, being an investment fund, which has its own transparency and independence rules, I don't think there is a problem with not respecting that set of rules from the World Bank," said the MEP.

Gheorghe Piperea also drew attention to the fact that sovereign investment funds are, among other things, real shields at a strategic, economic and national level in the face of massive investments of the type made by funds such as BlackRock or Vanguard. "BlackRock, Vanguard and State Street together have about 60 trillion dollars, and of course you can't stop such a rollercoaster with money or a counteroffer, but through the element of strategy," said Gheorghe Piperea.