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"Rebuilding Romania" - National Investment and Economic Relaunch Plan (summary)

Inquam Photos/ Octav Ganea
Guvernul Romaniei

The Government is set to present, on Wednesday, the National Investment and Economic Relaunch Plan, in an event that will be attended by President Klaus Iohannis, Prime Minister Ludovic Orban and members of the Cabinet.

We are presenting the summary of the document titled "Rebuilding Romania".

"REBUILDING ROMANIA

National Investment and Economic Relaunch Plan

Changing the development paradigm

The health and economic crisis provoked by the COVID-19 global pandemic showed the vulnerabilities of Romania determined by the model of development promoted by the previous governments.

Only through the prompt and sustained intervention of the Government and through the voluntary conformation of Romanians to the measures adopted by the authorities, the spread of coronavirus infections was limited and controlled efficiently and the economy was saved from collapse through measures of support for companies and employees.

The model of development of Romania based only on the consumption of the population, determined by the pro-cyclical policies of the previous governments, must be changed into a new model of economic growth focused on:

- stimulating and developing autochthonous capital and competitiveness of Romanian companies

- investments in strategic domains of the public infrastructure

- the digital transformation of the economy and public administration

- preparing the economy for the new technological revolution

- the transition towards a durable economy

The objective of the new model of economic development: convergence with European economies, so that the Gross Domestic Product per capita at a standard purchasing power parity reach 87 pct of the EU27 average, in 2025.

Context

MACROECONOMIC DEVELOPMENTS AND POLICIES ADOPTED IN THE CONTEXT OF COVID-19

Macroeconomic developments in the context of COVID-19

In view of overcoming the negative effects of the pandemic and increasing economic resilience, the Government allotted the necessary resources for intervention against COVID-19, as well as for supporting economic activity (paying furlough indemnities for employees and other professionals and fiscal and budgetary facilities for the affected economic domains).

The prognosis of the evolution of the GDP for 2020 took in consideration the effects of the COVID-19 pandemic, the measures of support for the business environment, the labor market, the behaviour of consumers, as well as interventions in the medical domain. As such, it is expected that the GDP of Romania reduce by 1.9 pct in real terms, in 2020.

The risks on the economic dynamic are mainly of foreign nature, the economy of Romania being strongly tied to the situation of commercial exchanges with the Euro Zone at the level of some industry activities with high added value.

The probability of a delayed return of industrial activity will be the main factor that could lead to a negative dynamic of the GDP in the last two quarters, concomitantly with a more accentuated decrease at the annual level.

A return of the pandemic will affect the prospects for growth and will cause significant damages to companies and jobs, which needs a fast and directed fiscal and economic stimulus, coordinated at the national level and at the level of the European Union, in order to limit the effects of the crisis and to embolden economic relaunch.

Fiscal and budgetary policies of support in the context of COVID-19

The main fiscal measures and economic programs of support adopted by the Government in order to limit the negative effects caused by the crisis determined by the COVID-19 pandemic:

- Credits with state guarantees and subsidized interest rates for investments and working capital with a ceiling of 15 billion RON through the IMM Invest program (around 40,000 beneficiaries);

- Delayed payments for bank installments for a period of 9 months for individuals and companies affected by the COVID-19 crisis (around 300,000 beneficiaries);

- Bonuses for tax payments for companies and individuals, suspending fiscal and budgetary obligations during the state of emergency and state of alert, the rescheduling of budget debts after December 31, 2020, tax exemptions for specific taxes for affected industries, the suspension of deductions and foreclosures, VAT returns with later control, payment of outstanding medical leave indemnities, etc. - 15 billion RON impact

- Delayed payments for bank installments, rents and utilities for companies affected by the COVID-19 crisis on the basis of the certificate for emergency situations (around 30,000 beneficiaries).

Programs to support and protect jobs affected by the COVID-19 crisis

Payment of furlough indemnities up to 75 pct of the gross average wage from the state budget for employees of companies affected by the crisis and other professionals with their activity temporarily suspended (1.3 million beneficiaries / 4 billion RON impact)

- Total number of furloughs as an effect of the SARS-CoV-2 pandemic was 1,495,111 in the 16.03.2020 - 01.06.2020 period.

The payment of the furlough by the Government saved the jobs and incomes of Romanians in the crisis period with beneficial effects for the support of consumption in the economy and for capital availability of companies.

- On 15.03.2020, the total number of active work contracts was of 6,547,692, and on 01.06.2020 the number of active work contracts was of 6,439,494.

Starting with June 1, for the resumption of activity the employees who were furloughed for at least 15 days, the Government is supporting 41.5 pct of the gross wage for a period of 3 months (nearly 750,000 beneficiaries / 3.35 billion RON impact).

Plan for Economic Relaunch

SUPPORT GRANTS FOR COMPANIES

Support grants to restart enterprises, for working capital and investments

Support grants for microenterprises:

- Grant value: 2000 EUR per LLC with no employees; all domains; expenses covered: stocks, debts to providers, rents, utilities; number of beneficiaries: 50,000; budget: 100 million euro

Aid scheme for commerce and services activities affected by COVID-19

- Financing rents for the period in which the commercial or services activity rendered was affected during the state of emergency or alert: the value of rent/beneficiary/month, for a period of 3 months. Budget: 160 million RON.

Working capital to restart economic activities for SMEs:

- Value of grant: maximum 125,000 euro; Domains: Hospitality industry, tourism, transport, events; expenses covered: stocks, debts to providers, equipment; budget: 350 million euro.

Grants for investments and for the economic reconversion of SMEs:

- Value of grant: 50,000 - 200,000 euro; Domains: health, pharmaceutical, food, vehicle, IT, energy, constructions, transport, tourism, textiles industries; expenses covered: production, equipment, tools, technologies acquisition; budget: 550 million euro.

Programs for non-refundable financing to increase the competitiveness of SMEs

Grants for investments for microenterprises by overcontracting projects in the reserve list of the Regional Operational Program - Axis 2.1:

- Grant: max. 200,000 euro; allotted budget: 117 million euro; Overcontracting: 130 million euro;

Grants to increase competitiveness of SMEs by the additional allotment of funds through the Regional Operational Program - Axis 2.2:

- Grant: 200,000 - 1,000,000 euro; Budget (initial allotment and overcontracting): 450 million euro

Grants for the development of SMEs through the financing of large investments in increasing productivity through the Regional Operational Program:

- Grant: 2,000,000 - 6,000,000 euro; Budget (initial allotment and overcontracting): 550 million euro

Grants for innovative entrepreneurial initiatives and the digitization of companies

Grants for start-ups for students in competitive and innovative domains:

- Value of grant: 40,000 euro/2 jobs created up to 100,000 euro/5 jobs created. Activity domains provided in the National Strategy for Competitiveness of Romania and in the Research Development Innovation Strategy; Budget: 150 million euro

Grants for digitization of SMEs

- Value of grant: 30,000 euro/project up to 100,000/project; expenses covered: IT equipment, automation of industrial equipment, automation of technological flows; budget: 150 million euro

Star-Tech Innovation (New Start - UP program)

- Objective of scheme is to finance innovative start-ups through grants with an estimated value of 42,000 euro. Beneficiaries: approximately 7,000 new SMEs.

Financing digital education programs for SME employees

- Value of grant: 30,000 euro/project up to 100,000 euro/project; budget: 30 million euro

Support for the development of agriculture and agrifood industry

Financing commercialization warehouses for agricultural products

- Objective: constructing 8 regional warehouses with controlled temperature for the storing, sorting, packaging, labeling and commercialization of local agricultural products. Value of investment: 120 million euro.

Grants for the acquisition of irrigation equipment

- Acquisition of kits for irrigation - 6000 euro/beneficiary. Budget: 48 million euro.

Grants to finance rural entrepreneurship

- Objective: direct support of processing and distribution activities of agricultural products obtained by small producers; value of grant: 40,000 euro/2 jobs created up to 100,000/5 jobs created; budget: 200 million euro.

Installing young farmers with agricultural land leased by the state:

- Estimated budget is 42 million euro (20 million euro distinct allotment for youths outside the border with the purpose of return to country of those with experience and training in the agricultural domain). For the first time, the beneficiaries can access the facility of leasing agricultural lands, free of contract with a surface of maximum 50 hectares, belonging to the public or private domain of the state.

Financing programs for new investments and the relocation of companies to Romania

State aid scheme for new investments (greenfield)

- Objective: Stimulating and attracting new investments with a major impact in the economy by financing investment projects, including greenfield investments.

- Value of state aid: maximum 37.5 milliuon euro/investment; allotted budget: 1.5 billion RON annually until 2023.

State aid scheme to support investments that promote regional development

- Objective: grants for regional development through investments that determine the creation of new jobs.

- Value of state aid: maximum 37.5 million euro/investment; allotted budget: 450 million RON annually until 2025.

GUARANTEEING SCHEMES AND INSTRUMENTS TO ENSURE LIQUIDITY

Programs to guarantee credits for working capital and investments

The IMM Invest program to guarantee credits for working capital and investments for SMEs

- Credits guaranteed by the state up to 80 or 90 pct and 100 pct subsidized interest rates for investment credits and credits/lines of credits regarding working capital contracted by microenterprises and small and medium-sized enterprises. Ceiling: 15 billion RON; number of beneficiaries: 40,000.

State guarantees for the crediting of large companies for working capital and investments

- Guarantees, in the name and account of the state, covering the guaranteeing necessary up to 90 pct, for new credits or those already granted by commercial banks for investments and/or for the support of current activity of companies with a turnover higher than 20 million RON. Ceiling: 8 billion RON; number of beneficiaries: 600.

Guaranteeing programs to ensure liquidity of companies

The guaranteeing scheme regarding the insurance of commercial credits (provider)

- Through this program the stimulation of risk exposure of insurers is targeted, as well as facilitating access of companies to insuring commercial credits.

- In case of a loss, the sum paid by the Ministry of Public Finance represents 80 pct of the sum not cashed/not recovered by the insurer. Allotted ceiling: 1 billion RON.

Program to guarantee regressive factoring type financing and discounting commerce effects

- Objective: granting guaranteeing facilities by the state for short-term credits granted to small and medium-sized enterprises the value of which is established by correlation with the value of factoring/discounting operations type financing.

- Value of a factoring facility granted to the SME adherent to a ceded debtor is a maximum of 500,000 RON. Allotted ceilings: 1.5 billion RON/factoring; 1.5 billion RON/discounting.

Program to guarantee leasing of equipment and tools

- Objective: guaranteeing leasing for SMEs that opt for non-banking financing.

- Financing to be granted up to a maximum limit of 5,000,000 RON/beneficiary, guaranteed in the limit of a guaranteeing ceiling worth 1.5 billion lei.

FINANCIAL-BANKING INSTRUMENTS TO INCREASE CAPITALIZATION AND FINANCING OF INVESTMENTS

Instruments to increase the capitalization of companies and financing investments

Measures to stimulate the increase of own capital of Romanian companies

- Bonuses for paying profit tax granted depending on the maintaining of positive own capital and/or increasing them over a period of time.

Establishment of the Romanian Investment Fund (FRI) to finance investments in strategic interest domains

- Establishment of a state investment fund for the financing of activities such as private equity (investment funds in the form of participation in the social capital of companies), venture capital (investment funds in new or recently established companies), investment promotion agency, educational projects for entrepreneurs, etc. Initial capitalization: 300 million euro.

Establishment of National Development Bank (BND) as a credit institution for investment projects

- Establishment of a development bank following the model of other development banks in the European Union that contract loans on the capital markets and grant financing, in advantageous conditions, for investment projects that support national objectives of strategic interest.

ACTIVE MEASURES TO OCCUPY THE LABOR FORCE AND FOR SOCIAL PROTECTION

Measures of support for employees and companies to resume economic activities

Prolonging furlough indemnities

- Continuing the measure to grant furlough indemnities for employers/professionals with their activity suspended. Impact: 850 million RON/month.

Stimulating the resumption of economic activity and occupation

- For beneficiaries of furlough indemnity that resume their activity a sum is granted worth 41.5 pct of the gross average wage of the employee (maximum 41.5 pct of the gross average wage at national level) for a period of 3 months. Impact: 3.35 billion RON.

Support for flexible work schedule

- The Government will ensure the payment of an indemnity worth 75 pct of the difference between the gross wage of an employee mentioned in the individual labor contract before the reduction of the program and the gross wage resulting from the work hours rendered following the reduction of the work program. The measure applies to companies which have had at least a 10 pct drop in turnover compared to the similar month of the previous year. The financing of this measure will be covered through the SURE Program.

Grants for the professional training of employees

- Financing scheme addressed to employers who invest in the professional training of their own employees. They benefit from a subsidy established depending on the level of qualification of the training program followed. Allotted budget: 150 million RON.

Other measures of support for the occupation of the labor force

Stimulating the employment of youths, persons over 50 years old and Romanians returning from abroad

- Support worth 50 pct of the gross wage of the employee, but no more than 2500 RON, is granted to employers who employ: Youths aged 16 to 29; Persons aged over 50 years old the work relations of whom have ceased during the state of emergency; Romanian citizens that had their labor relations with foreign employers ceased, for reasons not of their fault.

Active measures for seasonal and day laborers in the domains of agriculture, hospitality industry and tourism

- Protecting employees by the granting of additional support measures for:

- Persons who have conducted activities as day laborers in the month prior to the request; persons who conduct seasonal activities on the basis of individual work contracts, for a pre-determined period of at least 3 months.

Jobs for youths

Value of grants for entrepreneurial actions: 25,000 euro for supporting jobs destined for youths. Budget: 300 million euro.

Stimulating work in remote work regime

- Granting an aid worth 500 euro/employee to acquire IT equipment for employees that conduct activities in remote work regime during the state of emergency/alert.

Social protection measures

Food and body hygiene packages for vulnerable persons

Support for persons in difficulty, at risk of poverty or with precarious income by offering food packages and packages for body hygiene;

- Beneficiaries: 1.18 million persons; allotted budget: 225 million euro.

Vouchers for hot meals for elderly people

- Vouchers for hot meals granted to persons aged 75 and older which have income lesser than the minimum guaranteed income. beneficiaries: 250,000 persons. Allotted budget: 100 million euro.

Vouchers for pupils

- Vouchers for pupils that come from families with low income or incomes lesser than the minimum guaranteed income at risk of severe poverty, for the acquisition of school supplies, clothing and footwear. Beneficiaries: 400,000 children. Allotted budget: 30 million euro.

National Investment Plan

TRANSPORT, ENERGY, HEALTHCARE, EDUCATION, LOCAL DEVELOPMENT, AGRICULTURE, ENVIRONMENT, SPORT

TRANSPORT INFRASTRUCTURE (I)

Road: Completing infrastructure works in implementation - 407.3 km of highways and expressways. Estimated cost: 4.3 billion euro.

- Sibiu - Pitesti (Lots 1, 4, 5), Craiova - Pitesti, Transylvania Highway (Suplacu de Barcau - Bors), Sebes - Turda, AO: Bucharest South Ring Road, Bacau Detour option, Danube Bridge in Braila.

Connecting with highways the historical provinces of Romania and with pan-European transport networks, by starting works on approximately 3,000 km of highways and expressways. Period: 2020-2030. Estimated cost: 31 billion euro

- Sibiu - Pitesti (Lots 2, 3), Transylvania Highway: Nadaselu - Suplacu de Barcau, Union Highway: Tg. Mures - Iasi - Ungheni, A3: Ploiesti - Comarnic - Brasov, A7: Ploiesti- Suceava - Siret, AO: Bucharest North Ring Road; Bucharest - Alexandria - Craiova - Lugoj, Buzau/Focsani - Braila - Galati, Macin - Tulcea - Constanta; Transregio Gilau - Cluj N. - Apahida

Rail: Investments in around 3,000 km of railroad, between 2020-2030, estimated cost of approximately 18 billion euro

- Finalizing the rehabilitation of the railroad on the route Border-Curtici-Simeria, component of the Pan-European Corridor IV, for the circulation of trains at a maximum speed of 160 km/h.

- New railroad modernization projects for the purpose of ensuring connectivity objectives: Ploiesti-Suceava-Darmanesti, Bucharest-Craiova-Timisoara-Arad, Suceava-Cluj Napoca, Buzau-Fetesti, Port Constanta-Palas, Predeal-Brasov, Bucharest rail ring, Cluj Napoca-Episcopia Bihor

- Metropolitan train Nadaselu - Baciu - Cluj-Napoca - Apahida - Jucu - Bontida

TRANSPORT INFRASTRUCTURE (II)

Metro: Developing new mainlines and extending existing mainlines

- Finalization of works on Bucharest M5, launching M6 - section between North Rail Station- May 1 - Otopeni Airport, M4 - section between North Rail Station - Progresu Rail Station, M2 extension Pipera - Petricani and Berceni - South Ring Road

- Cluj Napoca Metro - Mainline: Gilau - Floresti - Cluj-Napoca

Naval: Total investments worth 4.3 billion euro

- Modernization and extension of maritime and river port infrastructure, with emphasis on the Constanta Sea Port

- Dredging, exploitation, consolidation works and other investments to ensure navigation on the entirety of the Danube year round

Air: Total investments worth 2.9 billion euro

- Extending and constructing terminals for passengers, as well as cargo areas. Creating inter-modal links between air, road and rail infrastructure

ENERGY INFRASTRUCTURE

Value of investments programmed in the National Energy System for the 2020-2025 period is estimated at 12.48 billion euro between energy production to intelligent transport networks and natural gas and electricity distribution.

- Green energy: on-shore and off-shore wind power parks (2x300MW) - 4.6 billion RON; new hydro-power production capacities (Retezat, Vidraru, Mariselu, Avrig, Bistra, Livezeni, etc.) - 1.6 billion RON;

- Strategic Romgaz investments worth 15.69 billion RON: electric plants with gas turbines (Iernut, Mintia), development of Neptun Deep, Est Rapsodia and Trident offshore projects in the Black Sea, methanol plant (greenfield), new energy capacities in partnership with private companies (Chimcomplex, Alro, Liberty Galati, etc.)

- Plan to restructure and decarbonize 2020-2025 of Oltenia Energy Complex worth 7.2 billion RON;

- Increasing production capacity for nuclear electric energy with at least one more unit until 2030 and extending the operation life of Unit 1 by another 30 years;

- Increasing the capacity of electrical energy transport lines and trans-border interconnection lines - around 4.6 billion RON

- Investments in the national system for transporting natural gas and for the interconnection with the international transport system - around 9 billion RON

HEALTHCARE INFRASTRUCTURE

Building the first 3 regional hospitals in the 2021-2027 period, with a total value of 1.64 billion euro:

- Cluj Regional Emergency Hospital - 539.59 million euro;

- Iasi Regional Emergency Hospital - 500.35 million euro;

- Craiova Regional Emergency Hospital - 602.73 million euro;

Local investment programs for the healthcare system in 2021-2027 period, with an approximate budget of 17.5 billion RON for the building/modernization/rehabilitation of:

- 1,450 medical centers in the rural environment;

- 25 county hospitals;

- 110 city hospitals.

EDUCATION INFRASTRUCTURE

Investments in school units programmed for the 2021-2027 period:

- 2,488 schools units will be included in modernization/rehabilitation programs, estimated costs - 6,046 billion RON.

- 375 school units will benefit from investments worth 31.4 million RON to have compliant restroom facilities (2020 allotment);

Reform of Early Education Program

- Financing the construction of a number of 180 kindergartens with extended or weekly schedule - 146 million euro

Building/modernizing school campuses/student dorms/university centers:

- building 40 schools campuses that would include: school, high-school, boarding school, sports field, laboratories, cafeteria, with a total value of approximately 2 billion RON;

- building 30 student dorms totalling 10,244 beds for 30 higher education institutions in 13 university center cities. The total value of investments reaches 1.248 billion RON.

INVESTMENTS IN LOCAL DEVELOPMENT (I)

Extending water supply and sewer networks:

- For the 2021-2027 period a budget worth around 8 billion RON is allotted to extend water supply and sewer networks for financing 750 projects, of which 600 in the rural environment and 150 in the urban environment;

- Other investments for 500 micro water treatment plants, septic tanks and water supply systems, worth 250 million RON.

Extending the distribution networks for natural gas:

- Government to allot 1 billion Euro in the 2021-2027 multiannual framework, from a total budget estimated at 9.6 billion RON for the extension and establishment of new intelligent natural gas networks with the purpose of connecting 70 pct of homes in Romania.

Modernization and rehabilitation of county and local roads:

- Government proposes to rehabilitate and modernize in 2021-2027 period around 20,000 km of local roads, with a value of approximately 20 billion RON and 7,000 km of county roads, for which 12 billion RON are to be allotted.

INVESTMENTS IN LOCAL DEVELOPMENT (II)

Strategy to renovate, provide heating and energy rehabilitation of buildings and rehabilitate buildings with seismic risk

- Thermal rehabilitation of 45,000 buildings, estimated value at 8 billion RON;

- Consolidation at the national level of 300 buildings with high seismic risk, estimated value at 1 billion RON;

- Modernization of heating infrastructure in 15 administrative-territorial units, total value at 650 million RON.

Houses for specialists in healthcare, education and other social-professional categories

- 10,000 housing units for specialists (2 billion RON) and 5,000 housing units for youths, destined for rent (1 billion RON).

Rehabilitation of historical monuments, cultural patrimony and administrative headquarters - 2 billion RON.

AGRICULTURAL IRRIGATION INFRASTRUCTURE

Rehabilitation of irrigation infrastructure

- Investments in rehabilitation of 138 irrigation systems, serving an area of approximately 2.4 million hectares.

- Value of investment works in irrigation infrastructure: 3.4 billion euro

Building of Siret-Baragan Canal by resuming investment process for sectors 1-3 of stage I.

- Stage I - approximately 50 km up to the southern limit of Vrancea County - for this stage studies and design are completed and execution may be resumed; for stage I of execution, the total costs are estimated at 83.67 million euro.

- Stage II - approximately 140 km on the territory of counties Braila, Buzau and Ialomita until the outlet in the Dridu accumulation - for this stage feasibility studies and design need to be drawn up.

Rehabilitation of desiccation-drainage infrastructure

- Investments in the rehabilitation of 443 desiccation-drainage systems, serving a surface area of 2,838,674 hectares.

- Value of investment works in desiccation works: 1.1 billion euro

Systems to combat soil erosion

- Investments in rehabilitation of 220 systems to combat soil erosion, serving an area of 500,000 hectares

- Estimated value of works to combat soil erosion: 500 million euro

ENVIRONMENT INVESTMENTS

Continuing the car scrappage programs Rabla and Rabla Plus. The two programs benefit from a cumulated financial allotment in 2020 of 545 million RON;

Continuing the program to develop the infrastructure for recharghing electrical vehicles in Romania, both in localities, as well as at the level of highways, national and European roads - cumulated financial allotment in 2020 at approximately 268 million RON.

Continuing development programs of 'green' transport by financing electrical/LNG buses in cities and localities. The launching of a new session in 2020 benefits from a cumulated financial allotment of approximately 930 million RON;

Launching programs to increase the energy efficiency in public and private buildings in 2020, with a cumulated financial allotment of approximately 813 million RON;

Implementing the program to increase the energy efficiency in the energy production units. Program benefits from financial allotment in 2020 worth 628 million RON;

Starting the program to reduce emissions by afforestation of fields in 2020, with a budget of 59 million RON.

SPORTS INFRASTRUCTURE

Professional sports:

- Building 12 sports complexes with capacity between 3,000 - 30,000 seats, with a total value of investments of 3.5 billion RON;

- Building 8 Olympic swimming pools with a value of 1 billion RON and 5 artificial ice rinks for competitions with a total value of 300 million RON;

- Building 5 multipurpose halls, with capacity between 5,000-16,000 seats, with a total value of 1.2 billion RON.

Mass sports:

- Building 250 school sports halls, 45 school swimming pools, 500 sports bases with a total estimated value of 5.5 billion RON;

- Building 10 sports centers for Olympic sports, that would comprise training halls, schools, boarding schools, cafeteria, coach school, medical center, with an estimated value of 2 billion RON.

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