Gov"t Crisis Containment Plan Fails - Exports Drop 61%

Andreea Arăboaei

The collapse of Romania"s exports this year has been substantially augmented by the inefficiency of the governmental and banking measures as the fall of the international markets is only a partial explanation for the failure, according to Mihai Ionescu, President of the Associated Exporters and Importers of Romania (ANEIR).

Six months after the beginning of the decline in November 2008, Romanian exports have come to a dramatic record: in the first ten days of May, deliveries to non-EU destinations collapsed to 39% of the value recorded in the corresponding period of 2008.

"Our Association requested - and the Government promised - that the overdue value-added tax refunds which the State owes to exporters since 2008 would be paid before 15 March 2009, although fiscal regulations stipulate a deadline of 45 days. Well, at the end of March, we presented the Finance Ministry with a full list of overdue payments. Moreover, an entire sector, that is, grain exporters, who are now close to the new crop, has not received one penny from the nearly 100 million EUR which the Finance Ministry owes and does not pay under the pretext of the never-ending tax refund audit," said the ANEIR president.

The promised default offset between VAT refunds and the due fiscal obligations of the exporters, which is part of the crisis containment plan approved by the Government, has not started functioning yet, either, Ionescu stressed. "Additionally the Finance Ministry order regarding the simplification of VAT refunds to exporters - which had been agreed with our Association - has been sitting untouched in the Ministry"s drawers for weeks. As they miss the money blocked in VAT refunds from the Finance Ministry, exporters cannot deliver foreign orders and, in some cases, are contemplating bankruptcy," Ionescu added.

The ANEIR president stressed that the Government"s lack of will to align export-related VAT norms to EU regulations had caused a reduction in the number of export companies from approximately 15,800 two years ago to only 9,800 currently. He added it was impossible to estimate how many more would go bankrupt this year.

It was also the lack of money and the impossibility to borrow from banks that prevented many exporters from honouring their orders this year. "Although our Association has signed a number of agreements with several banks that promised to facilitate financing for exporters, many loan applications are under review for several months. We also performed a small experiment: the exact same applications by the same companies were submitted to several banks at the same time. It was precisely the State-run banks, CEC and Eximbank, that gave most of the negative answers and caused most of the delays. Let us remember that these banks are meant to finance primarily small- and medium-sized enterprises and exporters," Ionescu added.

"A few days ago, the Ministry of Economy asked the Ministry of Finance and the Export Council to reduce the funding for improving export competitiveness by 9.2 million RON, that is, approximately 30%, despite the enormous gap separating Romania from its main competitors," Ionescu announced, explaining that, in the absence of immediate and very energetic measures, the 61% export plunge recorded in the first ten days of May could perpetuate and even aggravate in the following months.