Strengthening Planning and Budgeting Capacity and Supporting the Introduction of Performance

Advisory Services Agreement on

Strengthening Planning and Budgeting Capacity and Supporting the Introduction of Performance Budgeting (P156889)

Output No. 3 Institutional Strategic Plan 2017-2020 for the Ministry for Business Environment, Trade and Entrepreneurship

June 2017

Project co-financed from the European Social Fund through the Operational Programme Administrative Capacity 2014-2020 This report has been delivered under the Advisory Services Agreement on Strengthening Planning and Budgeting Capacity and Supporting the Introduction of Performance Budgeting signed between the General Secretariat of the Government and the International Bank for Reconstruction and Development on June 8, 2016. It corresponds to Output 3 under the above-mentioned agreement.

Disclaimer This report is a product of the International Bank for Reconstruction and Development / the World Bank. The findings, interpretation, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. This report does not necessarily represent the position of the European Union or the Romanian Government.

Copyright Statement The material in this publication is copyrighted. Copying and/or transmitting portions of this work without permission may be a violation of applicable laws. For permission to photocopy or reprint any part of this work, please send a request with the complete information to either: (i) the General Secretariat of the Government (1 Victoriei Square,

2 Bucharest, Romania); or (ii) the World Bank Group Romania (Vasile Lascăr Street, No 31, Et 6, Sector 2, Bucharest, Romania).

3 Table of Contents

4 List of Acronyms

CCIR Chamber of Commerce and Investment of Romania CPM Chancellery of the Prime Minister (assimilated to the GSG as of 2017) EIB European Investment Bank ESF European Social Fund ESIF European Structural and Investment Funds ESP Export Support Program EU European Union FDI Foreign Direct Investments GVA Gross Value Added GD Government Decision GDP Gross Domestic Product GSG General Secretariat of the Government ISP Institutional Strategic Plan IE Individual Enterprise LPA Local Public Authority MARD Ministry for Agriculture and Rural Development MBETE Ministry for Business Environment, Trade and Entrepreneurship MNPM Multiannual National Program for Micro-industrialization MRDPAEF Ministry for Regional Development, Public Administration and European Funds MRI Ministry for Research and Innovation MoE Ministry of Economy MoPF Ministry of Public Finance NEF Non-reimbursable External Funds NES National Export Strategy NIS National Institute for Statistics NRDP National Rural Development Program NTRO National Trade Register Office NSC National Strategy for Competitiveness 2014-2020 OCEP Office for Commercial and Economic Promotion OECD Organization for Economic Cooperation and Development ONRC National Trade Register Office OPAC Operational Program Administrative Capacity 2014-2020 OPHC Operational Program Human Capital 2014-2020 PPU Public Policy Unit RAS Reimbursable Advisory Services RDA Regional Development Agency ROP Regional Operational Program 2014-2020 SMEs Small and Medium Enterprises TOSMEC Territorial Office for SMEs and Cooperation WB World Bank

5 List of Figures

List of Tables

List of Boxes

Acknowledgements

The Institutional Strategic Plan is the result of work by World Bank staff, consultants and staff of the Ministry for Business Environment, Trade and Entrepreneurship (MBETE). Main contributions were delivered by Elena Botezatu and Emanuel Rauta (experts, World Bank), as well as by Arabela Sena Aprahamian (senior private sector development specialist, World Bank) and Madalina Pruna (private sector specialist, World Bank). The team benefited from the solid methodological guidance of Costel Todor, in his capacity as senior strategic planning specialist.

The authors give special thanks to Lalita Moorty (Macroeconomic and fiscal management Practice Manager) and to Ms. Elisabetta Capannelli (Country Manager, Romania) for the overall coordination and to Mr. Cătălin Păuna (TTL, Senior Economist, World Bank) and Mr. Victor Giosan (senior expert, World Bank) for their guidance and valuable advice. The team also thanks Gord Evand (international expert, World Bank), for the insightful peer review. Last but not least, the team sends thanks to Ms. Brigita Orzan (expert, World Bank) for the constant and substantive support.

The team would like to thank the staff at the Secretariat General of the Government (SGG) for the support and excellent collaboration provided throughout the elaboration of this Note, in particular to Secretary of State Radu Puchiu, and General Director Dragoș Negoiță, as well to the counselor Radu Iacob and the project team, who provided useful recommendations and achieved a proper project management.

Special thanks are also addressed to the team of the Ministry for Business Environment, Trade and Entrepreneurship, for the significant participation and substantial contribution. Foreword

Background The General Secretariat of the Government (GSG) has signed a reimbursable consultancy services (RAS) agreement with the World Bank, with the goal to strengthen the planning, budgeting and policy monitoring capabilities of the Government, the Ministry of Public Finance (MPF) and the selected ministries. To improve the efficiency of public spending, the RAS focuses on i) continuing to consolidate the existing processes of developing the Institutional Strategic Plan (ISP) under the guidance of the General Secretariat of the Government (GSG); Ii) building intra-governmental capacity to monitor ISP updates and implementation with the help of a common IT tool developed with the support of the Bank; and iii) the development of a central unit within the GSG, for reporting on the implementation of major ISP priorities of selected ministries. The defined activities of these SCRs arise from the functional analyzes of the Public Administration that highlighted that the public sector needs a better link between planning and budgeting, resulting in poor connections between the resources used and the results. Therefore, the Government has asked the Bank to help institutionalize a process to monitor policy implementation, with clear roles and responsibilities for GSG, MPF and the line ministries, using methodologies, tools and processes developed under the RAS. This will be an integral part of government budget reform. In order to make the process of strategic planning mandatory, GSG wants the ISP to become a product developed consistently by each ministry. As a selected ministry, the Ministry for Business Environment, Trade and Entrepreneurship has committed itself to carrying out a comprehensive reform program covering both public policies and public administration. Strengthening the strategic planning function is an important component of this reform. Developing the ISP for the 2017-2020 budget cycle comes at an important moment in the 2014-2020 policy cycle.

Methodology The elaboration of the 2017-2020 ISP took place between September 2016 and June 2017. The process enjoyed a broad, stable and substantial commitment from all relevant management and operational staff within the ministry, as well as SGG specialists. The Strategic Planning Process 2017-2020 of the Ministry for Business Environment, Trade and Entrepreneurship was supervised by a Strategic Planning Coordination Committee, with representatives from all departments. The Working Group met as deemed necessary between September 2016 and April 2017. The World Bank provided technical support throughout the process. In an endeavoring to be comprehensive, informative and participatory, the World Bank held a training program with

7 members of the Working Group in September 2016 to present members with the principles of strategic planning, in parallel with the use of theories and the ISP 2014-2017.

Executive summary

The General Secretariat of the Government (GSG) is committed to improving the efficiency of public spending. By establishing an Institutional Strategic Plan (ISP) for the budget cycle 2017- 2020 in the Ministry of Public Finance and the 13 selected ministries, GSG aims to strengthen the budgetary, planning and monitoring capacity of the Romanian Government1. The ISP 2017-2020 is based on the strategic objectives of the sector, on the priorities and institutional objectives assumed by the Ministry for Business Environment, Trade and Entrepreneurship; It also provides clear programs and measures (including budgets) needed to achieve these goals over the medium term as well as a robust performance assessment framework to assess progress towards these objectives. The ISP is organized around the main areas under MBETE responsibility, as follows: Strategic Objective 1: Supporting the balanced and sustainable development of enterprises, especially SMEs in high added value and smart-specialization sectors, aims at improving conditions for business and increasing the performance of the public administration, with direct effects in respect to increasing the contribution of SMEs to domestic VGA and improving labour productivity. Strategic Objective 2: Intensifying the presence of Romanian companies on external markets, aiming at consolidating the Romanian presence on foreign markets and increasing high value-added exports. Strategic Objective 3: Increasing direct foreign investments in Romania, especially in competitive and high value-added sectors, aiming at increasing the FDI in Romania and supporting the creation of new jobs in the economy. Strategic Objective 4: Developing the institutional capacity of MBETE, so as to strengthen the Ministry of Economy's ability to effectively and efficiently carry out its policy and regulatory functions A description of the expected strategic objectives and expected impacts, programs and expected outcomes and measures with their planned outcomes correlated with the financial resources and their distribution over the implementation period 2017-2020 is presented in the body of the Institutional Strategic Plan below.

1 The project was initiated and developed in 2016 by the Chancellery of the Prime Minister (CPM), reorganized in 2017 under the coordination of the GSG

8 I. Context

Overall global economic outlook

Global economic growth remains low (2.3-2.4%) for the sixth consecutive year, with the prospect of maintaining the same trend, at least during 2017, when it is not expected to exceed 2.7% - 2.9%. The World Bank Report2 sums up the current context as "weak investment in uncertain times", highlighting the sluggish economic growth, the shifting trade and economic policies, and, generally, the increasing uncertainty currently associated with the major world economies. Further slippage in the financial markets and a decrease in the overall growth potential amid the economic growth slowdown in China and developed countries are other risks which keep the outlook on the downside. In this context, the evolution of trade flows is also questionable, given that in 2016 global trade declined. The European Central Bank3 confirms the estimates, assessing that economic growth would exceed 3% only starting 2018, when commodity (especially oil) prices will have stabilized, and also as a result of the post-crisis structural measures that will begin to show their effects, especially across the European Union. Higher performances could be achieved due to strong domestic demand, low prices of raw materials and favorable macroeconomic policies, all of which are of particular relevance for Romania. Underinvestment and low productivity, however, remain the main obstacles to development and analyses show that these setbacks will occur in the future as well, in the medium term.

Macroeconomic conditions

In the context of a significant economic growth during the past years (+4,9% in 2016, no 1 in the European Union), of an increase in foreign direct investments (+25% more than in 2015) and of exports (+14%), Romania should focus on continuing structural reforms so as to avoid threats affecting non-price competitiveness and future growth prospects, posed by successive tax cuts, rapid increase of the minimum-wage and consecutive wage increases in the public sector, low rate of EU funds absorption etc.4. Table 1 Outlook on key macroeconomic indicators, Romania Indicator 2015 2016 2017 2018 Real GDP (y-o-y) 3.9 4.9 4.4 3.7 Output gap -1.2 0.0 0.6 0.4 Gross fixed capital formation 8.3 5.5 6.2 6.3 Harmonized index of consumer prices -0.4 -1.1 1.6 2.9 (HICP, y-o-y) General government balance (% of GDP) -0.8 -2.8 -3.6 -3.9 Source: EC, Country Report Romania February 2017, European Semester5

2 WB, Global Economic Prospects, January 2017, http://www.worldbank.org/en/publication/global-economic-prospects 3 ECB, Macroeconomic projections for the Eurozone from the Eurosystem experts, December 2016, https://www.ecb.europa.eu/pub/pdf/other/eurosystemstaffprojections201612.ro.pdf?a331c36798f120991b9f4a8fc8358368 4 http://www.imf.org/en/News/Articles/2017/03/17/ms031717-romania-staff-concluding-statement-of-the-2017-article-iv- mission 5 EC, Country Report Romania February 2017, European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews […] Nonetheless, Romania should be able to capitalize on its advantages in terms of economic growth and supportive fiscal framework, complemented by political stability and strong support for democratic values, amid regional uncertainties. SMEs and Entrepreneurship SMEs represent 99.8% of enterprises in the EU and 99.7% in Romania. The vast majority of SMEs are micro-enterprises with up to 10 employees (93% of the companies in non-financial sector). While the SMEs population density varies significantly between Member States, Romania holds the last position, with only 2.2 SMEs/100 inhabitants, which is less than half the EU average of 4.5 SMEs/100 inhabitants.

Figure 1 Density of SMEs in the EU, 2015 (no/100 inhabitants)

Source: SME Performance Review 2016, Eurostat data

At the same time, the density of SMEs varies widely amongst the different parts of the country, reflecting an uneven economic development and entrepreneurial dynamics. The highest values are in Bucharest (5.9), Ilfov (4.3), Cluj (4.0), Brasov (3.3), Timis (3.2), Bihor (3.1) and Constanta (3.0) and lowest in Botosani (1.0), Vaslui (1.2) Mehedinti (1.3), Dambovita (1.4), Teleorman (1.4), Calarasi (1.5), Ialomita (1.5). Of the 41 counties plus Bucharest, 18 have an SME density below 2/100 inhabitants and only 3 counties exceed the density of 4 SMEs/100 inhabitants6. According to NTRO, some 2,600,000 companies were established between 1990 and 2015, out of which 808,878 were still active in December 2016. Over 100,000 companies are born and die each year (cancellation vs. registration) and only about 14,300 companies established in 1990 survived until 2015. Compared to their EU peers, Romanian SMEs have a much lower start-up survival rate: 75% of the total start-ups don’t survive their first year, while almost 60% never pass the second. This makes topics related to bankruptcy (and "rehabilitation"), as well as "a second chance” particularly important for supporting local entrepreneurship.

http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52017SC0088 6 Authors' calculations, NIS, TempoOnline Figure 2 Enterprise survival rate

Source: SME Performance Review 2016, Eurostat data (2013)

Enterprise performance Romanian SMEs ensure 65.7% of the total workplaces in enterprises (just above the EU average) and contribute by 49.86% to the total value added (still below the EU average), but significantly improved in comparison to 2009, after an effective catching-up. Prospects are still positive for the next period, as well, with estimations up to 8% annual growth.7

Figure 3 Evolution of the value added and persons employed in SMEs, Romania and the EU

Source: SME Performance Review 2016, Eurostat data The performance of Romanian enterprises is well below that of EU, at 53.7% of the EU average in terms of labor productivity (per hours worked)8, despite the significant productivity gains that were achieved in recent years. At the same time, Romania is a modest innovator and the technological intensity of enterprises low. Out of the total number of enterprises, only 22% activate in high-technology or knowledge- intensive sectors, generating 26% of the value added.

7 SME Performance Review, http://ec.europa.eu/growth/smes/business-friendly-environment/performance-review-2016_en 8 http://ec.europa.eu/eurostat/tgm/refreshTableAction.do?tab=table&plugin=1&pcode=tesem160&language=en Figure 4 Technological intensity and knowledge-based activities, Romania, 2014

Source: SME Performance Review 2016, Eurostat data Quality of the business environment Ranking 36th in the WB Ease of Doing Business 2017 Report, the overall conditions and the quality of the business environment in Romania are characterized by modest progress, despite improvements. Although not under the direct responsibility of the MBETE, poor infrastructure remains a key factor limiting competitiveness and an obstacle to doing business, along with high administrative costs, access to skilled labor and corruption. Progress was made in the simplifying administrative procedures for business, particularly in support for entrepreneurship. E-government for business is still lagging behind, despite the significant investments made in introducing interoperability, facilitating on-line provision of services and promoting transparency9. Figure 5 Romania – EU Benchmark Performance, Small Business Act indicators

Source: SBA Factsheet Romania 2016

Exports and internationalization Romania's exports have increased significantly in recent years, reaching record levels of 57.4 billion Euros in 2016 (5.1% more than in 2015). In 2015, the country’s share in the global trade market reached 0.39%, almost doubling in size since 2000 (from 0.18%). Romania´s main trading partner is the EU market, absorbing 70.9% of the total exports and bringing 75.3% of the total

9 EC, Country Report Romania February 2017, European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews […] http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52017SC0088 imports. Traditional markets, such as Turkey or Russia, have recently shown a decrease in demand, mainly due to internal factors. The main exported goods are: vehicles and transport equipment (47%), food products, beverages, tobacco and chemicals. However, as highlighted in the latest EC European Semester Report10, flagship export sectors such as vehicles and machinery lost market share in 2015 and they were only partially compensated. Other sectors may become increasingly vulnerable on the international market, as labor cost competitiveness continues to erode. Out of the total 22,183 exporting companies11, 5% account for 59% of Romania's exports; top 100 companies perform 49% of the total exports, almost as much as all the exporting SMEs (which account for 41% of the total value of exports)12. Bucharest Municipality and Timis and Arges counties are, predictably, on the first three places in the top exporting counties, showing severe regional imbalances, besides the heavy dependency both on a limited number of sectors and a limited number of players. Lack of information and know-how, as well as limited access to foreign markets are among the most common reasons preventing Romanian companies from going beyond the local market. Foreign investments Foreign direct investments experienced a significant growth in 2016, reaching over four billion Euros. In the past 10 years, the FDI stock increased 1.5 times, from 42 billion Euros in 2007 to 64 billion Euro in 2015, driven mainly by the overall positive trend of the Romanian economy, the low cost of labor, proximity to Western markets and, not lastly, by the membership to the European Union and associated reforms. Sectoral distribution of FDI shows that the largest investor interest was in manufacturing (especially automotive parts), followed by the financial intermediation and insurance (13%), trade (12.2%) and construction and real estate (12.2%). Investments in RDI, high-tech or high value added activities continue to remain low, while poor infrastructure, unpredictable regulatory framework, increasingly difficult access to skilled labor and corruption are among the most important negative features detracting further investment. Increased focus should be given to investors already present on the Romanian market, as green- fields were rare in during the last few years and most of the FDI inflows came by developing already existing operations. Further efforts could be employed to better them to the local economies, so as to increase positive spill-overs. Administrative capacity The Ministry for Business Environment, Trade and Entrepreneurship (MBETE) was established in January 2017, after the mandate of the former Ministry of Economy, Trade and Relations with the Business Environment (METRBE) was split between the new ministries13. MBETE holds, by mandate, the responsibility for coordinating and implementing the Government Program and the public policies in respect to: entrepreneurship, SMEs, trade, foreign direct investments, and business environment. At the same time, this responsibility is shared with other line ministries, institutions and organizations, including local-level.

10 Idem 10 11 2015 data 12 NIS Share of top exporting companies in total exports, 2015 data, available at: http://statistici.insse.ro/shop/index.jsp?page=tempo3&lang=ro&ind=EXP101N

13 The Ministry of Economy, the Ministry for Business Environment, Trade and Entrepreneurship and the Ministry of Tourism The latest institutional framework comes after a long series of reshuffles (at least one per year during the last 7-10 years), which is resulting in increasingly high staff turn-over, loss of institutional memory, excessive focus on administrative tasks and horizontal support functions (HR, public tenders, IT, financial) being stretched to theirs limits. This adds up to the absence of basic material resources (e.g. office supplies), outdated equipment (e.g. computers, printers), outdated (or continuously updating) procedures, absence of automated processes (e.g., document flow, archive), contributing to a poor working environment, low staff motivation and amplified uncertainty, and ultimately, lack of ownership and accountability for the tasks performed. Program-based budgeting is in place to some extent at the level of MBETE, particularly concerning SMEs programs. However, proper evaluation exercises (beyond the regular monitoring and reporting) are needed to assess their implementation, efficiency and effectiveness. In most cases, however, the highest share of public funding available for SMEs, for example, is not managed directly by MBETE, but by other institutions (for example: MRDPAEF, MARD, MRI). While complex and comprehensive mechanisms for coordination exist, many are not fully functional, which often makes correlation difficult and results in the sub-optimal implementation of the public policies. Together with the limited digitalization of the public administration, this is preventing MBETE to properly monitor and assess their outcomes. II. Mission and Vision

The Ministry for Business Environment, Trade and Entrepreneurship acts as a specialized body of the central public administration, under Government subordination, and implements the Government Program and strategy in the fields of SMEs, business environment, trade, entrepreneurship and foreign investments, in line with the requirements of the market economy and in view of fostering private initiative.14 Drawing upon the mandate established by law, as well as on the country’s strategic priorities established for 2014-2020, the mission and vision for the MBECE are of responsibility are as follows: The Mission of the Ministry for Business Environment, Trade and Entrepreneurship is to: Contribute to fostering entrepreneurship and the consolidation of SMEs, promoting exports and internationalization and supporting the attraction of foreign direct investments. The ministry represents the main counterpart for the business environment, initiating and supporting measures aimed at improving the regulatory framework, reducing the administrative burden and strengthening the collaboration between the state and the private sector. The ministry supports the constant improvement of the Romanian business environment so as it may contribute to achieving balanced and sustainable economic growth. At the same time, MBECE contributes to increasing the presence of Romanian companies on the global market, through exports and internationalization, as well as to attracting foreign direct investments in the country. The Vision of the Ministry for Business Environment, Trade and Entrepreneurship is that: By 2030 Romania will have a competitive entrepreneurial and business ecosystem, supported by an improved administrative and regulatory framework. These will constitute the premises for encouraging private initiative and fostering the sustainable development of Romanian companies, for promoting exports, internationalization and for attracting foreign investments in high added value sectors, thus contributing to sustainable economic growth and citizens’ welfare.15 In view of reaching these objectives Romania has already adopted a series of important strategies and measures and it secured significant EU funding targeting private companies, especially SME. Moreover, a number of complementary programs, financed from the national budget, are part of the comprehensive effort of improving business environment and supporting the private sector.  Vigorous entrepreneurial initiative is essential for enhancing growth potential and welfare generation. By constantly setting-up new companies, entrepreneurs bring in new opportunities, create jobs, innovate and introduce new goods and services on the market. The effects of their actions exceed the local economy, generating structural changes across the economic sectors and even for the whole society.  SMEs, rightfully deemed as “the backbone” of the economy, make up for 99% of the Romanian companies and employ 75% of the labor force. Most of them only operate at local scale, don`t have the necessary growth vocation or potential and remain in the same size category in which they were created (usually, micro-enterprise), throughout their life cycle. However, SMEs are the determinants of welfare at local level, through the jobs and income they constantly and sustainably generate and support. Business resilience is 14 GD no. 23/2017 on the organization and functioning of the Ministry for Business Environment, Trade and Entrepreneurship 15 The MBETE vision is aligned with the vision committed to under the Government Strategy for the development of the SME sector and improving the business environment in Romania. Horizon 2020 particularly important for absorbing shocks, preserving jobs and enabling sustainable economic development.  Reducing the administrative burden and creating an enabling environment by improving the regulatory framework contributes significantly to reducing costs for operating businesses, favoring not only the enterprises already present on the Romanian market, but also increasing its attractiveness as a business destination.  Improving the interaction between enterprises and state institutions by reaping on the benefits of digital interaction is another imperative line of action. Online presence and communication, based on faster, more flexible and more reliable instruments, saves costs and also facilitates international exposure of Romanian companies.  Exports are a measure for the competitiveness of Romanian products and services and reflect their capacity to cope with global competition; accessing the global market also allows companies to capitalize on new opportunities, beyond the domestic market. Attracting foreign direct investments brings added value for the economy, creates new jobs and business opportunities for local companies, fosters technological transfer and the adoption of new technologies in Romania and, on many occasions, it is the trigger for economic revival.  Last but not least, a well-functioning, stable institutional framework, with a high level of expertise and equipped with the proper instruments and resources, is necessary in order to achieve efficient and effective implementation of policies, particularly because of the current distribution of responsibilities between the different regulatory and funding institutions and agencies. Consolidated collaboration mechanisms among the public and private stakeholders are also a pre-condition for achieved the expected results. III. Strategic objectives, programs, measures, indicators

Strategic Objective 1. Supporting the balanced and sustainable development of enterprises, especially SMEs in high added value and smart-specialization sectors

SMEs represent the highest number of companies and employ the biggest share of the work force; as such, are placed at the center of both international and EU economic policies, as key leverages for growth, innovation, employment and social integration. The UN sustainable development goals, and especially Goal 8, relate to supporting entrepreneurship and SMEs development, as factors that lead to an inclusive and sustainable economic growth and generate high-quality and productive jobs. Support for SMEs and entrepreneurship is also a key line of action for EU interventions, across the common economic policies. Given its important contribution to economic growth and job creation in Romania, supporting SMEs is a priority of the Government`s economic program, and the measures considered to this end reflect, first and foremost, the vulnerabilities and areas “market failure”, among which the most important are related to the absence of a “critical mass”: - The SME density in Romania is the lowest in the EU, with only 2.2 SMEs/100 inhabitants, not even half of the EU average of 4.5 SMEs/100 inhabitants. Moreover, the SME density differs significantly across the country, with higher concentration in large urban areas, in the Western regions and in the Bucharest area. - SMEs in Romania have a high death rate, are smaller than those in the EU, don`t grow and don`t innovate as those in the other EU Member States. Moreover, their international competitiveness is below their potential. In Romania, the obstacles in the way of business creation are related to the insufficient capacity of entrepreneurs of putting their ideas into practice, mainly because of difficult access to finance, low entrepreneurial culture and relatively high-risk aversion, poor entrepreneurial education; lack of business and managerial skills, lack of guidance or lack of trust. Bureaucracy, high administrative costs and the overall unpredictability of the regulatory framework are among the most significant challenges related to the Romanian business environment. The general lack of trust between the private sector and administration and the poor collaboration culture are other obstacles to business development. While several lines of financing are available and numerous initiatives have been promoted constantly for supporting entrepreneurship, SMEs and the consolidation of the business environment, lack of correlation among stakeholders has often resulted in duplication of efforts, inconsistencies and inefficient use of resources. Although the effectiveness of some of them (SRL-D package16, for example) is undeniable, their respective impact is difficult to assess, in the absence of a solid evaluation culture and practice.

16 SRL-D package refers to the Program for stimulating the creation and development of microenterprises, first initiated in 2011 (GO no.6/2011), comprising an integrated set of legislation, financing (de minimis grants) and fiscal incentives. The Program was repeatedly adjusted and improved and is probably one of the most successful initiatives for supporting business creation in Romania. Box 1 Strategic Objective 1: Impact and result indicators

Table 2 Strategic Objective 1: Financial allocations by budgetary programs (thousand lei) SO 1 Supporting the balanced and 2017 2018 2019 2020 sustainable development of enterprises, especially SMEs in high added value and smart-specialization sectors Program 1.1. Business environment - - - - Program 1.2. Business creation 510.50 28.000 28.000 28.000 0 Program 1.3. SME support 166.41 125.70 125.70 125.70 0 2 2 2 TOTAL SO1 67691 15370 15370 15370 0 2 2 2 Note: The budget for Program 1.1 is included under SO4, Program 4.1, Measure 4.1.4 – Functioning of the MBETE

Program 1.1. Business environment improvement Rationale. Program 1.1 regarding the improvement of the framework conditions for doing business in Romania stem from the national priorities established at Government level for the period 201- 2020 through: - The Government program 2017-2020, Section on Public Policies for SMEs; - Government Strategy for the development of SMEs and improving the business environment in Romania. Horizon 2020, approved by GD 859/2014; - National Competitiveness Strategy 2014-2020; - Small Business Act (EU); - Government Strategy for the Consolidation of the Public Administration 2014-2020; - National Strategy for Digital Agenda 2014-2020; The latest SME Performance Review states that Romania needs to continue the ongoing process of simplifying administrative procedures for businesses and also that “The strategic framework for public administration reform has been in place since 2014, but its implementation was slow in 2015. Complicated administrative procedures and widespread corruption still constrain the delivery of services (including e-government services). Strategic planning, program budgeting, consultation practices and evidence-based policy-making remain under-used.”17 A lot of effort has been dedicated to improving the situation, and the MBETE has been at the core of almost all the measures and initiatives (strategic, regulatory or otherwise) which have been adopted. The Government Program sets out an ambitious goal of “restarting the business environment” which

17 2016 SBA Fact Sheet – Romania, Section on Responsive administration, pg.8 should provide a solid positive change in the interaction between the administration and the private sector. Although improving, online interaction between SMEs and public authorities is still relatively low and resources have been inefficiently used in developing several “one-stop-shops” for SMEs, each with limited functionality and utility for the end-users. Several digital life-events related to the business life-cycle are yet to be implemented, although none of them are under the direct responsibility of MBETE. Objectives. Program 1.1 sets out to achieve the following results: (1.1.1) Reducing the complexity of administrative procedures for enterprises: o The share of enterprises considering that the complexity of administrative procedures is a problem for doing business (%)18 will decrease, from 79% in 2015, to 75% in 2020; (1.1.2) Delivering online services to businesses: o The share of SMEs interacting online with authorities (%)19 will increase, from 65.35% in 2015, to 70% in 2020; (1.1.3) Increasing the participation of the business environment in the development of the regulatory framework: o The share of initiatives proposed by the business environment in total adopted initiatives will increase to 50% in 2020; Description. Improving the framework conditions for enterprise creation and development will focus on three tiers of action: reducing the administrative burden, enabling the digital interaction and consolidating the consultation process between the administration and the private sector. Reducing the administrative burden for business will focus on continuing the process of measuring administrative costs, in order to simplify and streamline existing legislation. A constant effort to monitor, count and analyze the necessary authorizations, licenses, permits is also envisaged. The SME Test should be mainstreamed in developing and adopting regulations and a dedicated budgetary program would significantly improve the process. Enforcing the existing regulations, such as actually applying the “Once only” principle, removing stamps or certified copies should also be a priority for improving the conditions for doing business in Romania. However, this can only be achieved in close collaboration with the other responsible institutions and authorities and with a high government commitment. Enabling the online interaction between the administration and enterprises is vastly linked to the activity of other institutions (especially the National Trade Register Office). However, the MBETE share responsibility with them in setting the agenda and supporting the efforts for the implementation of the life events related to the functioning of companies, committed under the National Strategy Digital Agenda20: establishing and selling a company, modifying the statute, obtaining financing, obtaining support and information for establishing a company and for its functioning, bankruptcy, liquidation, signing and enforcing contracts, tax registration etc.) Improving the consultation mechanisms in the process of the elaboration of legislation is one of the priorities (Direction for action 5) established by the National Strategy for the Development of the SME sector and the Improvement of the Business Environment. Horizon 2020. This entails the proper functioning of the various committees and working groups at Government level (such as the WG for

18 SBA indicator 19 Idem 16 20National Strategy Digital Agenda for Romania2020, Annex 5, pg.144-146, available at: https://www.comunicatii.gov.ro/?page_id=2154, the elaboration and monitoring of the Action Plan for Improving the Business Environment, established and 2001 and which effectively functioned until 2013), as well as of the several consultative bodies benefiting from the presence of the private stakeholders. Online consultation instruments, increased responsiveness and transparency, as well as frequent engagement in direct consultations with the business environment are also necessary. Success factors. The critical success factors for achieving the envisaged change are related to: - Absorption of the available EU funds, particularly those directly targeting entrepreneurship, SMEs and business development, but also those related to local development, education and training, infrastructure, innovation. - Ensuring a stable, predictable and favorable regulatory framework in the field of taxation, labor, intellectual property etc. - Activating initiative and potential at local level; - Maintaining a stable, predictable and favorable macroeconomic conditions, so as to consolidate market trust; - Maintaining a high level of commitment across the Government for achieving the necessary reforms and achieving the assumed targets for entrepreneurship, SMEs and business support; - Strengthening the collaboration mechanisms between MBETE and the other line ministries, particularly the MRDPAEF, MoPF, MEC, MRI, MARD, MLSJ; - Ensuring organizational stability, as well as proper functioning resources (human, financial, operational) for MBETE.

Measures. The measures by which the program will be implemented are presented synthetically hereafter. Their allocated budgets, as well as the associated monitoring indicators and targets are presented in the Annexes to the ISP. Table 3 Measures associated to Program 1.1

(1.1.1.) Reducing the complexity of administrative procedures for enterprises

M1.1.1.1. Data collection and support for measuring administrative costs for business

M1.1.1.2. Improving and simplifying the regulatory framework

(1.1.2.) Delivering online services to businesses

M1.1.2.1. Supporting the implementation of digital instruments

(1.1.3.) Increasing the participation of the business environment in the development of the regulatory framework

M1.1.3.1. Improving the communication process among the stakeholders involved in the development of the business environment Program 1.2. Business Creation Rationale. Program 1.2 focuses on promoting entrepreneurship and stimulating business creation and stems from the government priorities established for the 2017-2020 period through the following strategic documents: - The Government program 2017-2020, Section on Public Policies for SMEs; - Government Strategy for the development of SMEs and improving the business environment in Romania. Horizon 2020, approved by GD 859/2014; - National Competitiveness Strategy 2014-2020; - Small Business Act (EU); - Action Plan for Entrepreneurship (EU) - Reigniting the entrepreneurial spirit in Europe. Encouraging entrepreneurship, supporting the creation of new enterprises and creating a favourable framework for activating private initiative are key priority elements for achieving sustainable growth and creating new jobs in the economy, particularly at local level. Entrepreneurial initiative is also an enabling factor for successfully implementing the other economic policies, such, as, for example, the industrial policy. At the same time, entrepreneurship is leverage for capitalizing on innovation and creativity. Despite its undeniable advantages for the economy, entrepreneurship and a career alternative remains insufficiently desirable or inaccessible for the majority of the active population, for reasons ranging from the difficulties associated with opening and running a business to the general attitude of the society toward failure and its perception on successful role models. Stimulating entrepreneurial education, improving access to finance and improving support mechanisms for entrepreneurs, particularly during the first years of the business (exiting the “Valley of Death” and overcoming growth crises) are the main necessary lines of action. In line with the national and European priorities, the public policy framework needs to be updated so that it may enable entrepreneurs to capitalize on the new opportunities arising from the digital economy, from the evolution of business models or from the trends in consumer preference. Other key issues that need to be further embedded in the public policy for entrepreneurship relate to bankruptcy and rehabilitation (second-chance), supporting the activation of particular groups (such as women, youth, diaspora, creative), maximizing on the local potential, especially in areas with low entrepreneurial activity. At the same time, complementing the economic policy objectives in terms of industrial restructuring and implementing a new industrial policy model, based on high-tech and high added-value, the entrepreneurship policy initiatives and programs will be particularly directed towards competitive sectors which hold a smart specialization potential21 and are capable of generating and supporting the expected structural change in the economy and can make a noticeable contribution to increasing the international competitiveness of Romanian products and services. Objectives. Through implementing Program 1.2 the following results are envisaged: (1.2.1) Increasing the number and density of SMEs, especially in high-tech and high value-added sectors: o The number of SMEs will increase by 24%, compared to 2015 (this target is assumed at national level, by the Government Strategy for the Development of the SME Sector and Improving the Business Environment in Romania. Horizon 2020) o The density of SMEs will increase to 36 SMEs/ 1.000 inhabitants, compared to 22 SMEs

21 As established through the National Competitiveness Strategy 2014-2020 / 1.000 inhabitants in 2015 (this target is assumed at national level, by the Government Strategy for the Development of the SME Sector and Improving the Business Environment in Romania. Horizon 2020). o The share of SMEs in high-tech or knowledge intensive sectors will increase from 2222 to 24% Description. The Program envisages a comprehensive package of measures for supporting the creation of new enterprises, ranging from enabling access to finance to encouraging entrepreneurial education, promoting entrepreneurship and consolidating the strategic and regulatory framework. Promoting access to finance for entrepreneurs will be achieved by direct funding programs (grant, de minimis), dedicated to those who want to set up a business. Granting up to 44.000 euros/ project, Start-Up Nation Romania is the most ambitious program ever implemented in Romania for supporting entrepreneurship. It targets the creation of 10.000 new enterprises, especially in productive and creative sectors and carries a particular focus to activating vulnerable groups and young graduates. Stimulating entrepreneurial initiative will be achieved by a number of actions, comprising awareness, promotion and training. The Program for stimulating the activation of women entrepreneurs was reformed, so as to significantly expand its reach and target group, shifting from (very limited) direct financing for business set-up to a broader range of activities. As such, a minimum of 400 participants (women) will be supported to take part in workshops across the country and 28 in international events on entrepreneurship-related topics. An important part of the MBETE mandate is related to consolidating the strategic and regulatory framework for entrepreneurship. Significant effort will be put into developing, monitoring and evaluating policies, programs and instruments dedicated to supported entrepreneurship. After a complete financing cycle from EU funding and after implementing numerous other measures, their specific outcomes and effects are yet to be fully analyzed. As such, in order to better substantiate the proposed measures and initiatives and to enable evidence-based decision-making, MBETE activity will also focus on: - Monitoring and evaluating the different financing programs dedicated to stimulating entrepreneurship and business creation, with particular emphasis on their contribution to achieving national targets and objectives, as set per the strategic documents adopted at Government level; - Analyzing and updating the regulatory and strategic framework for entrepreneurship; - Expanding and updating the data and information available for MBETE (by enabling access to existing databases, as well as creating new ones), as well as by consolidating its capacity for analysis and prognosis. Success factors. The critical success factors for the implementation of P1.2 are related to: - Absorption of the available EU funds, particularly those directly targeting entrepreneurship, but also those related to local development, education and training, infrastructure, innovation. - Ensuring a stable, predictable and favorable regulatory framework in the field of taxation, labor, intellectual property etc. - Activating initiative and potential at local level;

22 Eurostat data - Maintaining a stable, predictable and favorable macroeconomic conditions, so as to consolidate market trust; - Maintaining a high level of commitment across the Government for achieving the necessary reforms and achieving the assumed targets for entrepreneurship, SMEs and business support; - Strengthening the collaboration mechanisms between MBETE and the other line ministries, particularly the MRDPAEF, MoPF, MEC, MRI, MARD, MLSJ; - Ensuring organizational stability, as well as proper functioning resources (human, financial, operational) for MBETE. Measures. The measures by which the program will be implemented are presented synthetically hereafter. Their allocated budgets, as well as the associated monitoring indicators and targets are presented in the Annexes to the ISP. Table 4 Measures associated to Program 1.2

(1.2.1.) Developing the entrepreneurial ecosystem M1.2.1.1. National Program for stimulating SME creation - Start-Up Nation Romania M1.2.1.2. Multi-annual National Program for developing entrepreneurship among women in the SME sector M1.2.1.3. Implementing actions for encouraging entrepreneurship (promotion, training, information etc.) M.1.2.1.4. Developing, monitoring and evaluating policies, programs and instruments for supporting business creation and the consolidation of the entrepreneurial ecosystem

Program 1.3. SME support Rationale. Program 1.3 is based on the priorities established at national level through the following documents: - The Government program 2017-2020, Section on Public Policies for SMEs; - Government Strategy for the development of SMEs and improving the business environment in Romania. Horizon 2020, approved by GD 859/2014; - National Competitiveness Strategy 2014-2020; - Small Business Act (EU); According to the Government Strategy for the development of SMEs and improving the business environment in Romania. Horizon 202023, four main challenges were identified at macroeconomic level, which affect domestic SMEs. They relate to: - Insufficient critical mass of SMEs, meaning there are two few active enterprises in the economy; - Reduced share of medium-sized enterprises in the total number of SMEs; - A vulnerable sectoral structure, with a high share of enterprises activating in the services and trade sectors;

23 Available at: http://www.dreptonline.ro/legislatie/hg_859_2014_strategia_dezvoltarea_sectorului_intreprinderilor_mici_mijlocii_imb unatatirea_mediului_afaceri_Romania_Orizont_2020.php - Low resilience of businesses, reflected by the fact that approximately two thirds of new enterprises go out of business before the end of their first year and 50% of new enterprises go bankrupt during the first five years; Apart from difficult access to finance, enterprises, particularly SMEs, suffer from the lack of operational and managerial skills, insufficient market information and an ecosystem which may enable their development. As such, supporting SMEs is essentially conditioned by the implementation of certain horizontal measures, related to the existence of a stable and predictable macroeconomic and regulatory framework, of proper infrastructure, of the availability of skilled labor and of business support services and structures. The challenges affecting SMEs are becoming increasingly critical as enterprises get more exposed to international competition and deeper integration into global value chains is achieved. Technological advance and the digital economy are, in the present context, a temporary threat which needs to be mitigated through proper measures, so as not to become a permanent weakness. Objectives. Program 1.3 sets out to achieve the following results by 2020: (1.3.1) Improving survival rate of SMEs: o The share of active enterprises in total, one year after creation (% increase, will increase from 80% in 2015 to 85% in 2020): (1.3.2) Increasing investments in SMEs: o The share of newly-created enterprises which invest during the first year after their creation will increase from 11,6% in 2014, to 15% in 2020) o Gross investments of SMEs will increase by 15% in 2020, compared to the 2015 baseline, of 78.9 bn lei Description. Program 1.3 comprises a mix of financing, support and regulatory measures focused on developing local capital, enabling industrialization and increasing the competitiveness of Romanian companies. Financed entirely from the state budget, the Program is specifically designed to provide a comprehensive approach in the field of SME policy, to complement the other available funding sources and to provide the necessary instruments for monitoring and evaluation. Access to finance for SMEs will be done through the Multiannual National Program for Micro- industrialization (MNPM), aimed at supporting investments in priority economic sectors24, increasing and modernizing the activity and competitiveness of SMEs and enabling job creation. Clearly targeting productive activities, MNPM provides de minimis grants in order to allow for buying equipment, machinery, work stations, tools and installations measurement, standardization, control, IT equipment, freight transport vehicles etc. The Program for developing and modernizing product and service commercialization activities is another de minimis scheme targeted at facilitating SMEs access to finance, aimed at improving their economic and technical performance by supporting their promotion activities. Retailers and market services providers are also eligible under the program.25 Taking into account that one of the main obstacles affecting SMEs are related to the lack information, knowledge and skills and to the insufficient integration in business networks, an important line of action is dedicated to SME support measures. As such, the UNCTAD/EMPRETEC Program for supporting the development of SMEs will continue to provide training and technical assistance to existing and potential entrepreneurs and to enterprise managers, so as to improve their

24 As defined per programe procedures 25 As per the preliminary program procedure available at http://www.aippimm.ro/categorie/programe/proiecte- proceduri-de-implementare-2017/ business abilities. At the same time, by mandate, the ministry will continue to provide a wide range or counselling, assistance and networking services. Enabling access to the local market and contact facilitation is the focus of two other de minimis programs which will continue implementation and will provide free access to events for enrolling participants. The Program for the organization of the SME Fair (TIMM) is part of the European SME Week and will finance eight regional fairs, during three days. The program aims at enabling business contacts and establishing partnerships among SMEs, banks and guarantee funds and also to provide training through workshops. The Multiannual National Program for Supporting Craftsmanship and Artisanship aims at stimulating small businesses in traditional and creative sectors, consolidating the small class of craftsmen and artisans, especially from rural and small urban areas and who perform individually or are already associated. The program supports promotion of products and services on national and international markets by organizing a dedicated national fair and several workshops, round tables, trainings, presentations etc. 26 Financing is particularly directed towards those crafts which entail a large number of manually executed operations and towards relaunching traditional products and services, including popular art and artisanship. Last but not least, Program 1.3 will support the development, monitoring and evaluation of policies, programs and instruments for SMEs, for enabling better decision-making and substantiating future initiatives. As such, MBETE will focus on: - Monitoring and evaluating the different financing lines targeting SMEs, from the point of view of their contribution to achieving the national targets and objectives set through the strategic documents adopted at Government level; - Analyzing and updating the strategic and regulatory framework relevant for SMEs; - Expanding and updating the data and information available for MBETE (by enabling access to existing databases, as well as creating new ones), as well as by consolidating its capacity for analysis and prognosis. Success factors. The critical success factors for the implementation of P1.3 are related to: - Absorption of the available EU funds, particularly those directly targeting SMEs and business development, but also those related to local development, education and training, infrastructure, innovation. - Ensuring a stable, predictable and favorable regulatory framework in the field of taxation, labor, intellectual property etc. - Maintaining a stable, predictable and favorable macroeconomic conditions, so as to consolidate market trust; - Maintaining a high level of commitment across the Government for achieving the necessary reforms and achieving the assumed targets for SMEs and business support; - Strengthening the collaboration mechanisms between MBETE and the other line ministries, particularly the MRDPAEF, MoPF, MEC, MRI, MARD, MLSJ; - Ensuring organizational stability, as well as proper functioning resources (human, financial, operational) for MBETE. Measures. The measures by which the program will be implemented are presented synthetically hereafter. Their allocated budgets, as well as the associated monitoring indicators and targets are presented in the Annexes to the ISP. 26 Idem 10 Table 5 Measures associated to Program 1.3.

(1.3.1.) Increasing the number, density and investments of SMEs, especially in high added- value sectors M1.3.1.1. Multi-annual National Program for micro-industrialization M1.3.1.2. Program for the organization of the SME Fair (TIMM) M1.3.1.3. Multi-annual National Program for supporting Craftsmanship and Artisanship M1.3.1.4. Program for developing and modernizing commercialization of market products and services (1.3.2.) Improving the survival rate of SMEs M1.3.2.1. UNCTAD / EMPRETEC Romania Program M.1.3.2.2. Implementing actions for SME support (counselling, networking etc.) M1.3.2 3. Developing, monitoring and evaluating policies, programs and instruments for supporting SME competitiveness Strategic Objective 2. Intensifying the presence of Romanian companies on external markets

Romania`s exports have increased significantly during the past years, reaching a record level of EUR 57.4bn in 2016 (5.1% more than in 2015). Foreign direct investments have contributed greatly, as approximately 50% of exports are performed by the top 100 exporters, mainly with foreign or mixed capital, which have the advantage of skills and know-how. Nonetheless, even the largest of exporters depend on their Romanian suppliers, which are mostly SMEs27. Romania`s main commercial partner is the EU market, which absorbs 70.9% of all exports, and from where 75.3% of all imports come. The main exported goods are: cars and transport equipment (47%), agri-food products, drinks, tobacco and chemical products. However, only 4.67% of SMEs perform export activities, and in this respect Romania is under half of the EU average. Romanian exports are, usually, of low added value and technological intensity. Romanian SMEs fail to capitalize enough the development potential offered by the digital environment and need support in order to increase exposure and interaction with foreign partners and promote their products and services more effectively on external markets. As anticipated by the National Export Strategy, a series of challenges need to be mitigated in order for Romanian enterprises to be able to access international markets. New business models based on networks, externalization and delocalization of activities, flexibility of value chains as well as fast connection to consumers and information will be paramount to maintaining and gaining market share. Future efforts need to be directed towards improving the capacity of Romanian operators and providing them with the proper instruments, so as to enable a faster adaptation. Intensive work is also necessary in respect to promotion activities, accompanied by a shift in the promotion approach, from the current rigid marketing to the more holistic attitude of permanently and flexibly developing, updating and advertising the Romanian offer. Support for internationalization should also target expanding the operations of Romanian companies abroad. This should start mainly from consolidating their internal capacity and skills, by providing access to training and advisory services, as well as enabling participation to international events (such as fairs) or facilitating contacts on external markets. While most SMEs lack the knowledge and means to access foreign markets individually, at institutional / country level the main challenges are linked to the very limited resources dedicated to export promotion, insufficient coordination and often duplication of efforts among stakeholders, absence of basic support instruments, lack of correlation between the national, regional and local efforts and initiatives28. Under these circumstances, the design of support and promotion activities is increasingly difficult and needs to be streamlined through a series of concrete actions in order to provide the necessary framework for encouraging the internationalization of Romanian companies. The expected change (impact) after the implementation of measures under SO2 relates to further consolidating Romanian presence on foreign markets and, at the same time, increasing the share of high-tech and knowledge intensive exports of goods and services in total exports by entering new markets, reactivating former partnerships and expanding the range of exported goods and services on traditional markets. Expected outcomes refer to increasing the base of exporting companies and increasing the absolute value of Romanian exports.

27 http://www.minind.ro/strategia_export/SNE_2014_2020.pdf 28 SNE, pg. 9-10 These goals and targets are established nationally in the National Competitiveness Strategy and are also in line with the National Export Strategy.

Box 2 Strategic objective 2: Impact and result indicators

Table 6 Strategic Objective2: Financial allocations by budgetary programs (thousand lei) SO 2. Intensifying the presence of Romanian 201 201 201 202 companies on external markets 7 8 9 0 Program 2.1. Export promotion 32.01 42.0 42.0 42.0 0 11 11 11 TOTAL SO2 32.01 42.0 42.0 42.0 0 11 11 11

Program 2.1. Export promotion Rationale. Enterprise internationalization capacity is directly linked to their size (and Romanian enterprises are smaller than their EU peers), to their maturity (and the resilience of Romanian companies is low) and to their activity (online presence is more likely to generate international exposure). However strenuous, expanding on foreign markets generally has positive effects both at firm and macroeconomic level, by increasing turnover and creating new jobs. Exposure to international competition is also more likely to improve the quality of the products or services it delivers and to encourage innovation and increase efficiency. P2.1. is based on the priorities established at national level through: - The Government program 2017-2020, Section on Public Policies for SMEs; - National Export Strategy 2014-2020. - National Competitiveness Strategy 2014-2020; - Government Strategy for the development of SMEs and improving the business environment in Romania. Horizon 2020, approved by GD 859/2014; Objectives at strategic level regard the intensification of Romanian exports, including on markets outside the EU, as well as increasing their quality, by focusing more on high-tech and high value added products and services. Strategic objectives. Program 2.1 sets out to achieve the following results by 2020: (2.1.1.) Increasing the number exporting companies and the value of their exports o The share of exporting companies in total will increase, from 4,6% in 2015, to 5% in 2020; o Total exports will increase by 10% in 2020, compared to the baseline value of 54 bn. Euros in 2015. Description. The program is designed to support export activities performed by Romanian companies, especially SMEs, through measures aiming at enabling their access to international trade promotion events, developing specific instruments, providing direct assistance and performing promotion activities. An important line of action is dedicated to streamlining the regulatory and operational framework for exports promotion. The Government Program 2017-2020 prioritizes the support for the internationalization of Romanian companies, targeting SME exporters in particular. This is intended by means of facilitating their presence to Romanian stands or individually within international fairs, economic missions, and other international events. The Export Support Program (ESP) aims at developing the capacity of the stakeholders (public and private) involved in export promotion or internationalization of Romanian companies, with the ultimate goal of increasing total exports and consolidating the competitive position of the country. The actions included under the ESP include: - Developing the Foreign Trade Portal: http://www.portaldecomert.ro/Default.htm; - Developing and implementing programs and campaigns dedicated to the promotion of Romanian brands/trademarks; - Developing export strategies; - Providing advisory services to exporters. One of the key instruments for identifying opportunities and enabling business contacts is the foreign network of MBETE, that is the economic and commercial promotion offices (ECPO), functioning within the Romanian diplomatic missions abroad or in countries/commercial centers of interest for Romania. These offices perform a wide range of responsibilities for export promotion, economic cooperation and attraction of foreign investment. In terms of policy development, Program 2.1 will support the development, monitoring and evaluation of policies, programs and instruments for export promotion and internationalization, for enabling better decision-making and substantiating future initiatives. The Government Program sets out as a priority achieving more flexibility of the export support system, with the following necessary actions: - Defining some efficient, high-impact instruments; - Clearly defining objectives and indicators for programs; - Setting-up more clear rules and simplifying access to available instruments; - Ensuring complementarity to EU funding; - Eliminating duplications in responsibilities; - Ensuring a coherent and common approach to supporting the Romanian export offer. This requires, first and foremost, ensuring the necessary resources, as well as updating the information base at the level of MBETE, including through studies and analyses regarding the integration of Romanian economy in global value chains, impacts of the programs and measures already implemented or in place etc. Success factors. Critical success factors for achieving the envisaged change are related to: - Maintaining a high level of commitment across the Government for achieving the necessary reforms and achieving the assumed targets for entrepreneurship, SMEs and business support; - Strengthening the collaboration mechanisms between MBETE and the other line ministries, particularly the MRDPAEF, MoPF, MEC, MRI, MARD, MLSJ; - Ensuring organizational stability, as well as proper functioning resources (human, financial, operational) for MBETE. Measures. The measures by which the program will be implemented are presented synthetically hereafter. Their allocated budgets, as well as the associated monitoring indicators and targets are presented in the Annexes to the ISP. Table 7 Measures associated to Program 2.1

( 2.1.1.) Increasing the number of exporting companies and the value of Romanian exports M2.1.1.1. Export Promotion Program M2.1.1.2. Functioning of the External Trade Network M2.1.1.3. Program for supporting the internationalization of Romanian operators M2.1.1.4. Developing, monitoring and evaluating policies, programs and instruments for export support

Strategic Objective 3. Increasing direct foreign investments in Romania, especially in competitive and high value-added sectors

Attracting FDI is beneficial not only at macroeconomic level, but also and especially at the level of local communities, as this is often the main (or only) means for revitalizing economic activity, creating new jobs and stimulating small businesses. The positive effects associated to FDI are also linked to innovation uptake, through technological transfer, transformation of business models, labor force development or improved business ethics etc. The National Competitiveness Strategy for 2014-2020 mentions that “Foreign investors have a vital role in determining the specialization trends in the Romanian economy and, consequently, the way in which competitive advantages are formed. According to statistics, more than 72% of the turnover of large and very large enterprises in industry is generated by the local offices of multinationals residing in Romania.” 29 Foreign direct investments have increased significantly in 2016, reaching over EUR 4bn, and thus exceeding the levels reached during the economic crisis. In the past 10 years, the FDI stocky increased 1.5 times, from EUR 42bn in 2007 to EUR 64bn in 2015. The FDI breakdown on economic activities reveals that investors showed the highest interest in the manufacturing industry (especially car parts), then financial intermediation and insurance (13%), trade (12.2%), constructions and real estate transactions (12.2%). As a destination for investments, Romania has major competitive advantages, both thanks to its political, economic and social stability, and to the (still) low labor costs or proximity to Western markets, and the geo-political context is an opportunity to attract foreign direct investments. At national level, uncertainties are linked to the effects of the recent macroeconomic measures, which are still to show effects. Overall, the major unknown for the future evolution of FDI flows is linked to the changing trends at global level, especially for the large players which manifest a stark turn to economic nationalism, which determines an increase in potential risks and decreases investors’ propensity to take decisions. Under these conditions, intensified efforts are necessary both to promote Romania’s advantages for potential new investors and to continue to support and encourage existing investors in order to expand their operations. In fact, during the last few years, most of the FDI resulted from new investments made by investors already present in the country. At the same time, attracting FDI must be done by taking into consideration the national interests and priorities in respect to smart specialization, increasing value added activities, sustainable development, maximizing multiplier effects and benefits for the citizens and for the state. This is 29 NCS pg. 7 implicitly linked to avoiding the risk of relocating investments and of reinitiating the vicious circle of destructuring local economies. The expected change (impact) after the implementation of the program and measures associated to Strategic Objective 3 refers to increasing FDI flows in Romania (bn. euros), supporting the creation of new jobs in the economy, as well as attracting FDI in sectors and fields which may essentially contribute to the structural change of the economy, to its shift toward smart specialization and increase of value added. The expected outcomes are related to increasing the number of FDI in Romania (new investments or capital increase), as well as keeping the investors, namely increasing their operations and investments, so as to ensure sustainability and permanency. The financial allocations for implementing P3.1 and its subsequent measures is are included under SO4 – P4.1 – Functioning of MBETE. Apart from personnel costs (current), other costs, such as transport, promotion materials, events, office supplies, technical assistance etc. are not earmarked for investment promotion. The costs associated with the external network cannot be broken down into export and investment promotion.

Box 3 Strategic objective 3: Impact and result indicators

Table 8 Strategic Objective3: Financial allocations by budgetary programs (thousand lei)

SO 3. Increasing direct foreign investments in 201 201 201 202 Romania, especially in competitive and high 7 8 9 0 value-added sectors

Program 3.1. FDI attraction 0 0 0 0

TOTAL SO3 0 0 0 0

Note: The budget for Program 3.1 is included under SO4, Program 4.1, Measure 4.1.4 – Functioning of the MBETE

Program 3.1. FDI attraction Rationale. Program 3.1 is based mainly on the priorities stated in the Government Program and in the National Competitiveness Strategy. International competition for attracting foreign direct investment, both against the different parts of the world (Asia, Africa) and intra-region (Central and East-European countries) remains intense, particularly in the general context of overall decrease of FDI flows. Since investment decisions are made increasingly carefully and the offers of the different countries are sensibly different, in order to remain competitive, Romania needs a more pragmatic strategic approach, informed by arguments and coherent in its implementations, so that it may attract high-quality FDI, which may contribute to its structural economic reform objectives, to the creation of sustainable jobs and to balanced economic growth. International best practice shows that effective investment promotion agencies use strategies which combine general marketing with a targeted approach and also provide a strong facilitation and after- care proposition. During the recent years, significant efforts have been put into improving the Romanian FDI attraction instruments, albeit the very limited resources. However, the link between InvestRomania30 core team and the MBETE external network remains utilized below its potential and lack of dedicated resources remains a challenge. At the same time, the strategic framework for FDI attraction has yet to be developed, in terms of overall objectives, sectoral priorities (the industrial policy is also currently under development), use of incentives (types, criteria to be employed, size, duration), territorial priorities, roles of stakeholders. Objectives. Program 3.1 sets out to achieve the following results by 2020: (3.1.1.) Increasing FDIs in Romania o Annual FDI flows will reach a 5% increase by 2020, compared to the 2015 baseline of 3461 million euros (3.1.2) Maintaining and expanding existing investments: o Tangible and intangible investments in FDI enterprises will increase, from 48,1% of total FDI stock in 2015, to 50% in 2020. Description. Program 3.1 is set to continue the measures already in place at the level of MBETE in respect to promotion and assistance to investors, while focusing on improving the overall strategic and operational framework. In respect to promoting Romania as a location for investment, the Government Program establishes the set-up of eight Regional Agencies for Investment Attraction and Trade Promotion. They are meant to perform a double role in supporting domestic enterprises in their internationalization efforts and, at the same time, they hold responsibilities in identifying investment opportunities at local level, promoting, greenfield investment projects, providing information in respect to the facilities available for foreign investors. Further responsibilities include counselling and assistance for investors in obtaining licenses and permits, connecting to utilities, contracting support services and establishing partnerships. Liaison with EU or international funding agencies, bilateral chambers of commerce, embassies are other role envisaged for the Regional Agencies. While several options are presently being analyzed for their set-up, the agencies should become functional starting with 2018. At the same time, the current initiatives and promotion projects implemented by MBETE will continue, by: further developing and updating the InvestRomania web portal, developing studies, analyses, briefs, event organizing and participation, developing and implementing targeted promotion campaigns etc. This requires, however, that the necessary resources are available; a dedicated program, earmarking financial resources for travel, events and promotion material would deliver significant improvements. Establishing a coherent approach to FDI attraction is a priority, in terms of objectives, types of investments, location, sectors, so that incentives to investors may be awarded based on clear criteria and may generate predictable results. As such, analyzing the effectiveness and efficiency of the existing instruments, as well as developing the strategic framework will be done under P3.1. Promotion activities will also be performed by and in collaboration with the external network of MBETE. Closer links between InvestRomania and the offices abroad are necessary, as well as a common approach and shared objectives and targets. Assistance to potential investors, as well as providing after-care services is the second main line of action under P3.1. This is provided directly through InvestRomania central office and will be

30 http://investromania.gov.ro/web/ complemented by the Regional Offices, once they in place. The roles of other stakeholders also need to be clarified and collaboration needs to be enhanced. Given the fact that during the last few years the majority of FDI flows were generated by investors already present on the Romanian market and, at the same time, taking into account to benefits of integrating FDI enterprises into the local economies, a more articulate approach in assisting is likely to generate significant results. As such, assistance to existing FDI enterprises is the third line of action to be performed and further developed. Success factors. Critical success factors for achieving the envisaged change are related to: - Maintaining a stable, predictable and favorable macroeconomic conditions, so as to consolidate market trust; - Ensuring a stable, predictable and favorable regulatory framework in the field of taxation, labor, intellectual property etc.; - Consolidating the collaboration with the external network and enhancing its performance in relation to investment promotion; - Safeguarding proper functioning resources (human, financial, operational) for InvestRomania, preferably through a dedicated budgetary program. Measures. The measures by which the program will be implemented are presented synthetically hereafter. Their allocated budgets, as well as the associated monitoring indicators and targets are presented in the Annexes to the ISP. Table 9. Measures associated to Program 3.1

(3.1.1.) Increasing the number of foreign investors in Romania M3.1.1.1. Organizing and/or participating in activities for promoting Romania as an investment destination M3.1.1.2. Providing assistance to potential investors M3.1.1.4. Developing, implementing, monitoring and evaluating measures for increasing FDI M3.1.1.5. Setting up Regional Agencies for Export Promotion and Attraction of FDI M3.1.1.6. Functioning of the external network (3.1.2.) Maintaining existing investors M3.1.2.1. Providing assistance to existing investors Strategic Objective 4. Improving the administrative capacity of the MBETE

MBETE has underwent several transformations throughout the years, both in terms of structure and responsibilities, being disbanded/ recreated/ restructured in one way or another every year from the past ten. The following examples are particularly relevant for the structural changes that affected MBETE: - Transferring the Managing Authority for the Sectoral Operational Program Increasing Economic Competitiveness 2007-2013 to the Ministry of European Funds, losing the role of Intermediary Body for SMEs and of any role in the implementation of Structural Instruments 2014-2020; - Constantly changing the status of the structure in charge with implementing the programs and projects for SMEs, from agency to department; - The MoE taking over the Department for Foreign Investments (InvestRomania), which until 2016 was subordinated to the General Secretariat of the Government. These frequent changes hinder the day-to-day functioning of the ministry and have an impact on the overall performance. On the long run, the negative consequences are reflected in: - Losing the institutional memory; - Diminishing the capacity to perform some roles/tasks; - Impossibility to provide a back-up, if needed; - Weakening the institutional culture; - Reducing the employees willingness to take on responsibilities; - Employee demotivation. Even more significant, the absence of human, material (including basic) and financial resources to carry out day-to-day processes impacts performance on the long-term. Currently, horizontal functions such as public procurement, human resources, IT support, and accounting are severely understaffed and overburdened with administrative tasks related to the institutional changes, preventing them from concentrating to development and ensuring a proper functioning of the ministry. This, in turn, hinders the achievement of the mandate, respectively the formulation, implementation, monitoring and evaluation of public policies to support the business environment and the economic operators in Romania. Given the very different nature of the tasks performed within the ministry, traditional impact performance indicators such as cost, time and productivity are particularly difficult to aggregate across the different departments so as to provide an overall sensible figure. “Client satisfaction” type of indicators is also difficult to employ, for the same reasons. The expected change (impact) after the implementation of the program and measures associated to Strategic Objective 4 refers to the concrete effects on the MBETE in respect to its functioning, after the implementation the measures. The expected results after the implementation of the program and measures under SO4 relate to improving the processes, resources and the management of people. Box 4 Strategic Objective 4: Impact and result indicators

Table 10 Strategic Objective 4: Financial allocations by budgetary programs (thousand lei)

SO 4. Improving the administrative 201 201 201 202 capacity of the MBETE 7 8 9 0 Program 4.1. Improving framework 43.693 98.478 99.161 99.928 conditions for delivering the mandate 43.693 98.478 99.161 99.928 TOTAL SO4

Program 4.1. Improving framework conditions for delivering the mandate Rationale. The analysis of the internal environment has revealed a significant number of constraints preventing the ministry from performing its tasks and delivering its mandate at the expected standard. The staff sustains substantial efforts in performing day-to-day activity, with inadequate resources, limited support and while burdened with administrative tasks generated by the repeated organizational changes. Human resources and proper instruments are essential for successfully developing and implementing the Government policies and programs, and they are both limited, in quantity and in quality. Objectives. Program 4.1 sets out to achieve the following results: (4.1.1) Improving effectiveness and efficiency: o Managerial control standards will be fully adopted in line with Order 400/2015 (16 standards) o The HR development program will be implemented 100% o Public policy documents will be 100% compliant with the impact assessment procedure o Extra-budgetary sources will increase by 10% Description. Capacity building at the level of MBETE will concentrate on ensuring the necessary resources and instruments for functioning, for developing and implementing the policies, program and project of the ministry. At the same time, it will focus on increasing the quality of the decision- making processes; last but not least, efforts will be devoted to developing the human capital by ensuring proper training, supporting the attraction and retention of personnel and improving organizational culture. Process improvement will require a comprehensive set of actions, dedicated to developing, updating and streamlining work procedures, implementing managerial control standards, introducing new work methods and streamlining internal communication, including through the use of digital media and adoption/development of IT tools. Evidence-based decision making should be mainstreamed at the level of the ministry, by providing access to data and information for the ministry staff (via protocols or, preferably, by connecting the ministry to integrated databases which should be developed under OP Competitiveness and OP Administrative Capacity, at the level of the public administration). A comprehensive reform of human resources strategy is also necessary, in order to cover skill gaps and shortages, particularly in view of preparing and executing the complex tasks required by the 2019 EU Presidency. Success factors. Critical success factors for achieving the envisaged change are related to: - Ensuring organizational stability; - Maintaining consistency in the mandate and priorities of the MBETE; - Maintaining a high level of commitment across the Government in terms of achieving the policy objectives under MBETE mandate; - Safeguarding resources (human, financial, operational) for the proper functioning of MBETE; - Rapidly increasing staff and attracting skilled personnel; - Attracting extra-budgetary resources from the available EU funds for administrative capacity development. Measures. The measures by which the program will be implemented are presented synthetically hereafter. Their allocated budgets, as well as the associated monitoring indicators and targets are presented in the Annexes to the ISP. Table 11 Measures associated to Program 1.1

(4.1.1.) Improving efficiency and effectiveness M4.1.1.1. Improving human resources management M4.1.1.2. Improving managerial systems at the level of MBETE M4.1.1.3. Promoting evidence-based decision-making M4.1.1.4. Ensuring the proper functioning of the MBETE IV. Framework for the Implementation, Monitoring and Evaluation of the ISP

The Institutional Strategic Plan will be implemented in correlation with the annual budgetary planning and execution, taking into consideration the multiannual budgetary and strategic planning framework that covers four years. Thus, the ISP will serve as basis for substantiating the budget for the following year and, in turn, it will be updated based on the past year performance in spending the allocated resources. Although currently there is no direct link between the budgetary planning process and program setting within ministries, it is estimated that by 2020 the entire institutional budgeting to be done solely on programs, thus allowing for an increased efficiency and clearer links between funding and results. The ISP implementation starts once the annual budget has been approved by the Parliament. It should be fully correlated with the Government Program and the Annual Work Plan of the Government, so that the activities and projects are monitored and, if needed, tailored as to allow for the envisaged results to be achieved. Within the MBETE, the responsibility for preparing the Annual Operational Programs for the ISP implementation will fall under the responsibility of the WG and of all the ministry directions and will be coordinated by the designated Secretary of State. The team is also responsible with the monitoring and first- level reporting to decision-makers (State Secretaries, Minister). The team will be comprised of representatives from all structures that have responsibilities in the ISP implementation, appointed through an Order of the Minister. Monitoring and evaluation: a monitoring and evaluation framework is set in the ISP sections and summarized in the annexes. This provides information on indicators and targets, for different planning levels. Details on the impact and outcome indicators suggested to assess performance are to be found also in the previous section of the ISP. While in the case of monitoring the MBETE team has acquired a significant experience from the implementation of the national programs for SMEs, which can be successfully replicated to all the programs of the ministry, the situation is different for evaluation. Currently, at the level of MBETE there is no formal approach to evaluation (ex-ante, interim or ex-post), neither in respect to the regulatory framework (Regulatory Impact Assessment) or to the financing programs. For the future, it is highly recommended that this should become a common practice, as it can supply valuable information to decision-makers, generating efficiency and effectiveness gains for implementation. Data collection and management: a strategic planning and performance evaluation application has been developed, with the structure template suggested for the ISP. The application is development at the Centre of the Government (GSG) and will be employed to collect the data and present it in a structured way, by Project, Measure, Program and Strategic Objective, respectively. Reporting frequency: As per the methodology, input and process indicators will be monitored quarterly, output indicators will be monitored every semester, outcome and impact indicators will be monitored annually. Input and process indicators, not included in the ISP, should be established at action/project level (in the Operational Plan) and monitored on an ongoing basis, along the implementation). In order to generate as little administrative burden as possible for the monitoring team, it is advisable that indicators should be collected from public, official sources (NIS, Eurostat, WB, other national or international institutions and organizations), whenever possible. At the same time, data collection for any other parallel monitoring or evaluation exercises (such as those conducted for national strategies and plans) should feed into the ISP monitoring and evaluation, as much as possible. Transparency and communication is also important for the reporting of results. The center of the Government, the Parliament, as well as other stakeholders, public or private, should be allowed and encouraged to learn about the progress achieved in delivering the results, the challenges encountered and the necessary steps ahead. In this context, the ISP should be a useful and powerful communication tool for increasing the visibility of the MBETE team and of the efforts made. Internal communication is essential in respect to the implementation of the ISP and it should be used as means for sharing information among the different direction and task groups at the level of the ministry. ISP evaluation and revision: As per the methodology, yearly revisions of the ISP are recommended, so as to align the projected priorities, programs and measures to the respective political priorities and overall context, and to update indicators and targets. A diagram of the ISP monitoring cycle is presented below.

Figure 6 Monitoring cycle of the Institutional Strategic Plan 2017-2020

A complete exercise of strategic planning will be done once every four years. In the meantime, between April and June, MoE, through the ISP working group, will prepare an annual update to establish if any changes are necessary to the ISP. This will focus on:

Comparing achieved outcomes against those planned for the previous year; - Updating the context, identifying any major changes in the assumptions used for the current plan; - Adding one additional year in to the plan, updating any necessary programs and measures. As such, the timespan of future ISPs should cover the following periods: ISP Timespan 2017 2017- 2020 2018 2018 -2021 2019 2019-2022 2020 2020-2023 The revision exercise should be completed by the 30th of May of every year, so as to provide the necessary input for the future budgetary exercise. V. Financial Resources

The ISP of the Ministry for Business Environment, Trade and Entrepreneurship is comprised of four strategic objectives, comprising six budgetary programs and 30 measures. All the measures are implemented by the MBETE and thus the resources allocated for their execution make up the yearly budget of the ministry and of the eight regional offices. Currently, the state budget is the only funding source for the implementation of the ISP. Expenditure limits are those established by the Fiscal-Budgetary Strategy for 2017-2019. As such, the validity of the budgetary programs is linked to the overall budgetary performance framework. During the projected period (2017-2020), the strategic objectives and budgetary programs within the ISP will amount to 7.6 bn lei, with a significantly higher allocation in 2017 (0.7 bn lei) and a relatively equal distribution for the next three years (about 0,29 bn lei each).

Figure 7 Annual financial allocations by strategic objectives (lei)

TOTAL 2017 2018 2019 2020 Strategic objectives 1.637.3 752.61 294.19 294.87 295.64 19 3 1 4 1 1.138. 676. 153.7 153.7 153.7 SO1. 016 910 02 02 02 158.04 32.0 42.01 42.01 42.01 SO2. 3 10 1 1 1 SO3. 0 0 0 0 0 341.26 43.6 98.47 99.16 99.92 SO4. 0 93 8 1 8

The distribution by strategic objective shows the main share of the budget (92%) is directed towards entrepreneurship and SME support (programs under SO1), while the resources necessary for implementing SO3 are completely included under SO4 (functioning of the ministry), since no earmarking was possible for the current financial exercise. Distribution by expenditure shows that personnel & good and services expenditures are relatively constant, while other expenditures increase significantly. Given that currently the ministry is facing substantial shortages and envisages consistent actions for consolidating its administrative capacity, significant effort will be necessary to attract additional resources from external sources and to improve efficiency.

Table 12 Financial allocations, by expenditure (thousand lei)

Specification 2017 2018 2019 2020

Total state budget envelope 765.25 2.294.09 2.294.87 2.295.64 9 1 4 1

Personnel & good and services expenditures financed from state 44.933 48.264 49.047 49.814 budget envelope All other expenditures financed form 720.32 2.245.82 2.245.82 2.245.82 state budget envelope 6 7 7 7

In respect to budget management, the most important institutional challenge is the capacity of the ministry to actually implement the ISP: that is to plan, execute and monitor the budgets under the four strategic objectives. A particular task would be that of monitoring the expenditure made under SO3, so as to enable proper program budgeting from 2018. From a managerial and organizational perspective, the transition to program-based budgeting is the main challenge during the life-cycle of the ISP, particularly bearing in mind the fact that this process needs to be coordinated, implemented and streamlined from the center of the government, with political support and commitment and in collaboration with the Ministry of Finance. Annex 1a: Budgetary Objectives and Programmes for the period 2017-2020 (thousand lei)

Financing sources ,000 RON Budgetary Total FEN Co-financing FEN programs ,000 RON 2019 2020 2018 2019 2017 2018 2020 2017 2018 2019 2020 SO1. Supporting the balanced and sustainable development of enterprises, especially SMEs in high added value and smart-specialization sectors Business P1.1. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 environment*

2 8 1.98 5 . 28. 28.0 1.982. 1.982. 28.000 510.500 0 2.50 P1.2. Entrepreneurship 10.500 28.000 0 28.000 00 00 500 500 0 0 0 0 0 0 0 0

5 1.98 1 1 1 12 125.7 1.982. 1.982. 125.702 . 166.410 0 2.50 P1.3. SMEs Support 66.410 25.702 25.702 5.7 02 0 0 0 0 7 500 500 02 0 0 2

1.98 1.982. TOTAL 153.70 153.70 0 2.50 0 0 0 0 1.138.016 153.702 153.702 500 SO1 2 2 0

SO2. Intensifying the presence of Romanian companies on external markets 4 2 42. 42.011 . 42.011 32.010 42.011 01 42.011 0 0 0 0 P2.1. Export promotion 32.010 0 164 0 0 0 1 1 1

TOTAL 158.043 42.011 164 42.011 42.011 42.011 0 0 0 0 0 0 SO2 SO3. Increasing direct foreign investments in Romania, especially in competitive and high value-added sectors

P3.1. FDI attraction* 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 TOTAL 0 0 0 0 0 0 0 0 0 0 0 0 SO3 SO4. Improving the administrative capacity of the MBETE

41 9 9 Improving 99. 98.478 . 99.161 43.693 98.478 16 99.928 0 0 0 0 0 0 P4.1 framework 43.693 9 0 0 1 conditions 2 8 TOTAL 341.260 99.161 99.928 98.478 99.161 0 0 0 0 0 0 0 SO4 **The budget for the programme is included in Program 5.1, as at the time of drafting the ISP, a separate allocation was not possible for the activities envisaged. The implementation of the program only requires operational expenditure for the responsible directions, which are included in the over functioning budget of the ministry.

42 Annex 1b: Programmes, Measures and related Budgets for the period 2017-2020 (thousand lei)

Value ,000 RON / year State budget FEN Co-financing FEN Budgetary program/ TOTAL ISP Measure 2 0 2017 2018 2019 2 2017 2018 2020 2017 2018 2019 2020 2017 2018 2019 2020 1 9 1 5 1.9 3 1.982. 82. 676.91 153.702 153.702 1 676.910 153.702 . 153.702 0 1.982.500 0 0 0 0 OS1 0 500 50 7 0 0 2 Business P1.1. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Environment* Data collection and support for 0 0 M1.1.1.1. measuring 0 0 0 0 0 0 0 0 0 0 0 0 0 0 administrative costs for business*

Improving and simplifying the M1.1.1.2. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 regulatory 0 framework* . Supporting the 0 0 M1.1.2.1 implementation of 0 0 0 0 0 0 0 0 0 0 0 0 0 0 digital instruments* Improving the communication process among the M1.1.3. stakeholders 0 0 1. involved in the 0 0 0 0 0 0 0 0 0 0 0 0 0 0 development of the business environment* P1.2. Entrepreneurshi 5 28.000 510.500 2 0 0 0 0 0 1.982. 1.982. 1.982. p 10.500 28.000 28.000 2 8.000 8

43 Value ,000 RON / State budget FEN Co-financing FEN Budgetary program/ 2 Measure 0 2017 2018 2019 2 2017 2018 2020 2017 2018 2019 2020 2017 2018 2019 2020 1 9 . 0 0 500 500 500 0

1 National Program 7

for stimulating SME 17.50 500. . 1.982. 1.982. 1.982. M1.2.1.1. 500.0 17.50 17.50 0 0 0 0 0 creation - Start-Up 0 000 5 17.500 500 500 500 00 0 0 Nation Romania 0 0

Multi-annual 1 National Program 0 for developing 10.5 10.5 10.5 . 10.5 M1.2.1.2. 10.500 1 10.500 0 0 0 0 0 0 0 0 entrepreneurship 00 00 00 5 00 among women in 0 the SME sector 0

Implementing actions for encouraging M1.2.1.3. entrepreneurship 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (promotion, training, information etc.) *

Developing, monitoring and evaluating policies, programs and M1.2.1.4. instruments for 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 supporting entrepreneurship (business creation) * P1.3. SMEs Support 1 125.702 1

44 Value ,000 RON / State budget FEN Co-financing FEN Budgetary program/ 2 Measure 0 2017 2018 2019 2 2017 2018 2020 2017 2018 2019 2020 2017 2018 2019 2020 1 9 66.410 25.702

7 Multi-annual 4 National Program 74.35 74.35 74.35 . 74.35 M1.3.1.1. 74.359 7 74.359 0 0 0 0 0 0 0 0 for micro- 9 9 9 3 9 industrialization 5 9 The Romanian-Swiss 40.70 0 0 0 M1.3.1.2. Support Program for 8 SMEs Multi-annual National Program 8 M1.3.1.3. for supporting 890 890 890 8 890 890 9 890 0 0 0 0 0 0 0 0 Craftsmanship and 0 Artisanship

Program for 4 developing and 9 modernizing 49.94 49.94 49.94 . 49.94 M1.3.1.4. 49.949 4 49.949 0 0 0 0 0 0 0 0 commercialization 9 9 9 9 9 of market products 4 9 and services

UNCTAD / 504 M1.3.2.1. EMPRETEC Romania 504 504 Program

Implementing 0 0 0 0 0 M1.3.2.2. actions for SME 0 0 0 0 0 0 0 0 0 0 0 support * Developing, monitoring and evaluating policies, M1.3.2. programs and 0 0 3. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 instruments for supporting SMEs competitiveness * OS2 42.011 32.010 42.011 4 42.011 16 0 0 0 0 0 0 0 2 4

45 Value ,000 RON / State budget FEN Co-financing FEN Budgetary program/ 2 Measure 0 2017 2018 2019 2 2017 2018 2020 2017 2018 2019 2020 2017 2018 2019 2020 1 9 . 32.010 42.011 0 1 1 4 2

Export 42.011 . P2.1. 32.010 42.011 4 32.010 42.011 42.011 0 0 0 0 0 0 0 0 Promotion 0 1 1 Export Promotion 0 0 M2.1.1.1. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Program*

Functioning of the 0 0 M2.1.1.2. External Trade 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Network*

Program for supporting the 0 0 M2.1.1.3. internationalization 0 0 0 0 0 0 0 0 0 0 0 0 0 0 of Romanian operators *

Developing, monitoring and evaluating policies, M2.1.1.4. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 programs and 0 instruments for export support* OS3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 P3.1. FDI Attraction* 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Organizing and/or participating in activities for M3.1.1.1. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 promoting Romania 0 as an investment destination * 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 M3.1.1.2. Providing assistance

46 Value ,000 RON / State budget FEN Co-financing FEN Budgetary program/ 2 Measure 0 2017 2018 2019 2 2017 2018 2020 2017 2018 2019 2020 2017 2018 2019 2020 1 9 to potential investors*

Developing, implementing, 0 0 M3.1.1.3. monitoring and 0 0 0 0 0 0 0 0 0 0 0 0 0 0 evaluating measures for increasing FDI *

Setting up Regional Agencies for Export M3.1.1.5. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Promotion and 0 Attraction of FDI*

Functioning of the 0 0 M3.1.1.6. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 external network *

Organizing and/or participating in activities for M3.1.2.1. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 promoting Romania 0 as an investment destination * 9 9

98.478 . 99.161 9 43.693 98.478 99.928 0 0 0 0 0 0 OS4 43.693 1 0 0 6 1 9 9 Improving 98.478 . 99.161 9 43.693 98.478 99.928 0 0 0 0 0 0 P4.1. framework 43.693 1 0 0 conditions 6 1 Improving M4.1.1. human 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1. resources management* M4.1.1. Improving 0 0 0 00 0 0 0 0 0 0 0 0 0 0 0 2. management

47 Value ,000 RON / State budget FEN Co-financing FEN Budgetary program/ 2 Measure 0 2017 2018 2019 2 2017 2018 2020 2017 2018 2019 2020 2017 2018 2019 2020 1 9 systems at the level of MBETE* Promoting M4.1.1. evidence-based 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3. decision making * 9 Ensuring the 9

M4.1.1. proper 98.478 . 43.693 99.161 9 43.693 98.478 99.928 0 0 0 0 0 0 0 0 4. functioning of 1 MBETE 6 1 *The budget for the measures is included under M4.1.1.4. Ensuring the proper functioning of MBETE, as at the time of drafting the ISP, a separate allocation was not possible for the activities envisaged. The implementation of the program only requires operational expenditure for the responsible directions, which are included in the over functioning budget of the ministry.

48 Annex 2: Institutional Strategic Plan (summary table)

Baseline Target 2019 Target 2020

Strategic Objective 1. Supporting the balanced and sustainable development of enterprises, especially SMEs in high added value and smart-specialization sectors

Impact indicator 1: Ease of Doing Rank 36 30-40 30-40 Business score

High Impact indicator 2: Responsive Low High Rank performanc administration score performance performance e

Impact indicator 3: SMEs % 53% 58% 60% contribution to GVA

Impact indicator 4: Labour % of EU average 53.7% 58% 60% productivity (GDP/hours worked)

Program 1.1. Business environment

Result 1.1.1. Reducing the complexity of administrative procedures for enterprises

Result indicator: The share of % 79% 76% 75%

49 Baseline Target 2019 Target 2020

enterprises considering that the complexity of administrative procedures is a problem for doing business (Small Business Act)

Result 1.1.2. Delivering online services to businesses

Result indicator: Share of SMEs % 65.35% 68% 70% interacting online with authorities

Result 1.1.3. Increasing the participation of the business environment in the development of the regulatory framework

Result indicator: : Share of initiatives proposed by the business % 0 40% 50% environment in total initiatives adopted by MBETE

Program 1.2. Entrepreneurship

Result 1.2.1 Increasing the number and density of SMEs, especially in high-tech and high added value sectors:

Result indicator: Net number of % 512.135 15% 20% SMEs (increase)

No/1.000 Result indicator: SMEs density 22 34 36 inhabitants

Result indicator: Share of SMEs in high-tech or knowledge intensive % 22% 23% 24% sectors

Program 1.3. SMEs Support

Result 1.3.1 investments in SMEs

Result indicator: Share of newly-created enterprises % 11,6% 2014) 13% 15% which invest during the first year after their creation

Result indicator: Gross investments of SMEs (current % 78,9 bn Lei 13% 15% prices)

Result 1.3.2 Improving the survival rate of SMEs

Result indicator: Share of active % 80% 83% 85% enterprises in total, one year

after creation

Strategic Objective 2. Intensifying the presence of Romanian companies on external markets

Impact indicator 1: Domestic 75,6% (2011 value-added share of gross % 76% 78% data) exports

Impact indicator 2: Share of Romanian exports in the % 0,4% 0,7% 0,8% global exports

Program 2.1. Export promotion

Result 2.1.1. Increasing the number exporting companies and the value of their exports

Result indicator: Share of exporting companies in total % 4,6% 4,9% 5% will increase

Result indicator: Total exports % 54 bn Euro +8% +10%

Strategic Objective 3. Increasing direct foreign investments in Romania, -

52 Baseline Target 2019 Target 2020 especially in competitive and high value-added sectors

Impact indicator 1: FDI stock in Bn Euro 64 72 76 Romania

Impact indicator 2: Number of Persons 1.228.000 1.450.000 1.500.000 employees in FDI companies

Program 3.1. FDI attraction

Result 3.1.1. Increasing FDI in Romania

Result indicator: FDI flows, y/y % 3,4 bn euro +5% +5% evolution

Result 3.1.2 Maintaining and expanditng existing investments

Result indicator: Share of tangible and intangible 49,5 % 48.1% 50% investments in FDI % enterprises in total FDI stock

Strategic Objective 4. Improving administrative capacity of MBETE

Impact indicator 1: Gap between % <±10% <±10%

53 Baseline Target 2019 Target 2020 the planned budget and the execution (%)

Program 4.1 Improving framework conditions

Result 4.1.1. Improving efficiency and effectiveness

Result indicator: Managerial control standards adopted in line with Order Number 0 14 16 400/2015

Result indicator: Degree of implementation of the HR % 0 100% 100% development program

Result indicator: Public policy documents compliant with the % 0 100% 100% impact assessment procedure (%)

Result indicator: Extra-budgetary % - +5% +5% resources (%)

54 Annex 3: Programs and connected Measures, Output Indicators (summary table)

Output indicator / Unit / Targets Measures 201 2017 2020 9 Program 1.1. Business environment Result 1.1.1. Reducing the complexity of administrative procedures for enterprises

M1.1.1.1. Data collection and support for measuring administrative costs for 1 1 1 1 business The measure is focused on continuing the processes of quantifying administrative costs for businesses. A constant effort to monitor, count and analyze the necessary authorizations, licenses, permits is also envisaged. The SME Test should be 10 10 10 10 mainstreamed in developing and adopting regulations and a dedicated budgetary program would significantly improve the process.

M1.1.1.2. Improving and simplifying the regulatory framework Enforcing the existing regulations, such as actually applying the “Once only” principle, removing stamps or certified copies should also be a priority for 5 5 5 5 improving the conditions for doing business in Romania. However, this can only be achieved in close collaboration with the other responsible institutions and authorities and with a high government commitment.

Result 1.1.2. Delivering online services to businesses

55 Output indicator / Unit / Targets Measures 201 2017 2020 9

M1.1.2.1. Supporting the implementation of digital instruments 2 2 2 2 This measure refers to delivering on the responsibility of MBETE of supporting the efforts for the implementation of the life events related to the functioning of companies, committed under the National Strategy Digital Agenda in respect to 20. obtaining access to information and support regarding establishing and selling a 10.000 00 20.000 company, modifying the statute, obtaining financing, bankruptcy, liquidation, 0 signing and enforcing contracts, tax registration, establishing partnerships, facilitating networking etc.

Result 1.1.3. Increasing the participation of the business environment in the development of the regulatory framework

M1.1.3.1. Improving the communication process among the stakeholders 50 50 50 involved in the development of the business environment 1 1 1 Improving the consultation mechanisms entails the proper functioning of the various committees and working groups at Government level (such as the WG for the elaboration and monitoring of the Action Plan for Improving the Business Environment, established and 2001 and which effectively functioned until 2013), as well as of the several consultative bodies benefiting from the presence of the 50 50 50 private stakeholders. Online consultation instruments, increased responsiveness and transparency, as well as frequent engagement in direct consultations with the business environment are also necessary and envisaged under this measure. Program 1.2. Entrepreneurship

56 Output indicator / Unit / Targets Measures 201 2017 2020 9 Result 1.2.1 Increasing the number and density of SMEs, especially in high-tech and high added value sectors:

M1.2.1.1. National Program for stimulating SME creation - Start-Up Nation Romania Promoting access to finance for entrepreneurs will be achieved by direct funding programs (grant, de minimis), dedicated to those who want to set up a business. 10. Granting up to 44.000 euros/ project, Start-Up Nation Romania is the most 10.000 00 10.000 ambitious program ever implemented in Romania for supporting entrepreneurship. 0 It targets the creation of 10.000 new enterprises, especially in productive and creative sectors and carries a particular focus to activating vulnerable groups and young graduates. 20 M1.2.1.2. Multi-annual National Program for developing entrepreneurship among 400 2000 00 women in the SME sector Stimulating entrepreneurial initiative will be achieved by a number of actions, comprising awareness, promotion and training. The Program for stimulating the activation of women entrepreneurs was reformed, so as to significantly expand its 10 28 100 reach and target group, shifting from (very limited) direct financing for business 0 set-up to a broader range of activities. As such, a minimum of 400 participants (women) will be supported to take part in workshops across the country and 28 in international events on entrepreneurship-related topics.

M1.2.1.3. Developing, monitoring and evaluating policies, programs and 2 2 2 2

57 Output indicator / Unit / Targets Measures 201 2017 2020 9 instruments for supporting entrepreneurship (business creation) An important part of the MBETE mandate is related to consolidating the strategic and regulatory framework for entrepreneurship. Significant effort will be put into developing, monitoring and evaluating policies, programs and instruments dedicated to supported entrepreneurship. After a complete financing cycle from EU funding and after implementing numerous other measures, their specific outcomes and effects are yet to be fully analyzed. As such, in order to better substantiate the proposed measures and initiatives and to enable evidence-based decision-making, MBETE activity will also focus on: monitoring and evaluating the different financing programs dedicated to stimulating entrepreneurship and business creation; analyzing and updating the regulatory and strategic framework for entrepreneurship; expanding and updating the data and information available for MBETE (by enabling access to existing databases and creating new ones), as well as by consolidating its capacity for analysis and prognosis. Program 1.3. SMEs Support Result 1.3.1 investments in SMEs 165 16 165 M1.3.1.1. Multi-annual National Program for micro-industrialization 5 The Program is aimed at supporting investments in priority economic sectors, increasing and modernizing the activity and competitiveness of SMEs and enabling job creation. Clearly targeting productive activities, MNPM provides de minimis grants in order to allow for buying equipment, machinery, work stations, tools and installations measurement, standardization, control, IT equipment, freight

58 Output indicator / Unit / Targets Measures 201 2017 2020 9 transport vehicles etc.

M1.3.1.2. Program for the organization of the SME Fair (TIMM) Enabling access to the local market and contact facilitation is the focus of two other de minimis programs which will continue implementation and will provide free 15 access to events for enrolling participants. The Program for the organization of the 150 150 SME Fair (TIMM) is part of the European SME Week and will finance eight regional 0 fairs, during three days. The program aims at enabling business contacts and establishing partnerships among SMEs, banks and guarantee funds and also to provide training through workshops. 150 15 150 M1.3.1.3. Multi-annual National Program for supporting Craftsmanship and 0 Artisanship The Multiannual National Program for Supporting Craftsmanship and Artisanship aims at stimulating small businesses in traditional and creative sectors , consolidating the small class of craftsmen and artisans, especially from rural and small urban areas and who perform individually or are already associated. The program supports promotion of products and services on national and international markets by organizing a dedicated national fair and several workshops, round tables, trainings, presentations etc. 31 Financing is particularly directed towards those crafts which entail a large number of manually executed operations and towards relaunching traditional products and services, including

31 Idem 10

59 Output indicator / Unit / Targets Measures 201 2017 2020 9 popular art and artisanship.

M1.3.1.4. Program for developing and modernizing commercialization of market products and services

The Program for developing and modernizing product and service 20 200 200 commercialization activities is another de minimis scheme targeted at facilitating 0 SMEs access to finance, aimed at improving their economic and technical performance by supporting their promotion activities. Retailers and market services providers are also eligible under the program.

Result 3.1.2 Maintaining and expanding existing investments

M1.3.2.1. UNCTAD / EMPRETEC Romania Program Taking into account that one of the main obstacles affecting SMEs are related to the lack information, knowledge and skills and to the insufficient integration in business networks, an important line of action is dedicated to SME support 10 100 100 measures. As such, the program will continue to provide training and technical 0 assistance to existing and potential entrepreneurs and to enterprise managers, so as to improve their business abilities. At the same time, by mandate, the ministry will continue to provide a wide range or counselling, assistance and networking services.

M1.3.2.2 Implementing actions for SME support 5 5 5 5 This measure will support the development, monitoring and evaluation of policies, 200 20 200

0 programs and instruments for SMEs, for enabling better decision-making and substantiating future initiatives. As such, MBETE will focus monitoring and evaluating the different financing lines targeting SMEs, from the point of view of their contribution to achieving the national targets and objectives set through the strategic documents adopted at Government level; analyzing and updating the strategic and regulatory framework relevant for SMEs, such as promoting Programinternationalization, 2.1. Export enterprise promotion transfer and other topics of interest; expanding and updating the data and information available for MBETE (by enabling access to existingResult 2.1.1. databases, Increasing as well asthe creating number new exporting ones), as well companies as by consolidating and the its capacityvalue of for their analysis exports and prognosis.

M2.1.1.1.At the same Export time, Promotion another function Program of the ministry performed under this measure 1 1 1 1 is that of providing direct counselling to SMEs. 10 This measure is aimed at developing the capacity of the stakeholders (public and 100 100 private) involved in export promotion or internationalization of Romanian 0 companies, with the ultimate goal of increasing total exports and consolidating the 1 1 1 1 competitive position of the country. The actions included under the ESP include: 1 1 1 1

1 1 1 1 - Developing the Foreign Trade Portal: http://www.portaldecomert.ro/Default.htm; - Developing and implementing programs and campaigns dedicated to the promotion of Romanian brands/trademarks;

M2.1.1.2.- Developing Functioning export strategies; of the External Trade Network One- Providing of the keyadvisory instruments services for to identifyingexporters. opportunities and enabling business contacts is the foreign network of MBETE, that is the economic and commercial 10 100 10 100 promotion offices (ECPO), functioning within the Romanian diplomatic missions 0 abroad or in countries/commercial centers of interest for Romania. These offices perform a wide range of responsibilities for export promotion, economic cooperation and attraction of foreign investment. 500 50 500 M2.1.1.3. Program for supporting the internationalization of Romanian operators 0 The Program is aimed at facilitating the promotion of SME products and services abroad, stimulating communication and partnership and preparing entrepreneurs for entering new markets. Through de minimis grants, beneficiaries may access funding for taking part, with their own display stand, in international trade fairs and shows; they may also take part in economic missions organized abroad, create visual identity (trademark, logo, slogan etc.), developing the website / mobile app.

Other activities include training (in the country or abroad) on the topic of product/service promotion, market research, as well as other actions related to entering new markets.

M2.1.1.4. Developing, monitoring and evaluating policies, programs and 0 1 0 0 instruments for export support This measure focuses on delivering on the Government Program priority of achieving more flexibility of the export support system, with the following necessary actions: - Defining some efficient, high-impact instruments; - Clearly defining objectives and indicators for programs; 3 5 5 5 - Setting-up more clear rules and simplifying access to available instruments; - Ensuring complementarity to EU funding; - Eliminating duplications in responsibilities; - Ensuring a coherent and common approach to supporting the Romanian export offer. Program 3.1. FDI attraction Result 3.1.1. Increasing FDI in Romania

M3.1.1. Organizing and/or participating in activities for promoting Romania as an 12 12 12 12 investment destination The current initiatives and promotion projects implemented by MBETE will 1000 10 1000

00 continue, by: further developing and updating the InvestRomania web portal, developing studies, analyses, briefs, event organizing and participation, developing and implementing targeted promotion campaigns etc. This requires, however, that M3.1.1.2. Providing assistance to potential investors Assistance to potential investors, as well as providing after-care services is the second main line of action under P3.1. This is provided directly through 20 20 20 20 InvestRomania central office and will be complemented by the Regional Offices, once they in place. The roles of other stakeholders also need to be clarified and collaboration needs to be enhanced.

M3.1.1.4. Developing, implementing, monitoring and evaluating measures for increasing FDI Establishing a coherent approach to FDI attraction is a priority, in terms of objectives, types of investments, location, sectors, so that incentives to investors 2 2 2 2 may be awarded based on clear criteria and may generate predictable results. As such, analyzing the effectiveness and efficiency of the existing instruments, as well as developing the strategic framework will be done under this measure. 8 8 8 8 M3.1.1.5. Setting up Regional Agencies for Export Promotion and Attraction of FDI

The Government Program establishes the set-up of eight Regional Agencies for Investment Attraction and Trade Promotion. They are meant to perform a double role in supporting domestic enterprises in their internationalization efforts and, at the same time, they hold responsibilities in identifying investment opportunities at local level, promoting, greenfield investment projects, providing information in respect to the facilities available for foreign investors. Further responsibilities include counseling and assistance for investors in obtaining licenses and permits, connecting to utilities, contracting support services and establishing partnerships. Liaison with EU or international funding agencies, bilateral chambers of commerce, embassies are other role envisaged for the Regional Agencies. While several options are presently being analyzed for their set-up, the agencies should become functional starting with 2018.

M3.1.1.6. Functioning of the external network Promotion activities will also be performed by and in collaboration with the external network of MBETE. Closer links between InvestRomania and the offices 10 10 10 10 abroad are necessary, as well as a common approach and shared objectives and targets.

Result 3.1.2 Maintaining and expanditng existing investments 5 5 5 5 M3.1.2.1. Providing assistance to existing investors Given the fact that during the last few years the majority of FDI flows were generated by investors already present on the Romanian market and, at the same

65 Output indicator / Unit / Targets Measures 201 2017 2020 9 time, taking into account to benefits of integrating FDI enterprises into the local economies, a more articulate approach in assisting is likely to generate significant results. As such, assistance to existing FDI enterprises is the third line of action to be performed and further developed Program 4.1 Improving framework conditions Result 4.1.1. Improving efficiency and effectiveness

M4.1.1.1. Improving human resources management 1 A comprehensive reform of human resources strategy is also necessary, in order to 150 150 cover skill gaps and shortages, particularly in view of preparing and executing the 50 complex tasks required by the 2019 EU Presidency.

M4.1.1.2. Improving managerial systems at the level of MBETE 0 1 1 1 Process improvement will require a comprehensive set of actions, dedicated to 10 15 developing, updating and streamlining work procedures, implementing 5 managerial control standards, introducing new work methods and streamlining internal communication, including through the 0 1 1 use of digital media and adoption/development of IT tools.

M4.1.1.3. Promoting evidence-based decision-making 0 5 5 Evidence-based decision making should be mainstreamed at the level of the 0 1 1 ministry, by providing access to data and information for the ministry staff (via

protocols or, preferably, by connecting the ministry to integrated databased which should be developed under OP Competitiveness and OP Administrative Capacity, at the level of the public administration) 1 M4.1.1.4.At the same Ensuring time, significant the functioning effort shouldof the MBETEbe dedicated to performing the analyses 15 15 necessary for the argumentation and justification of policy measures, both under 5 RIAGiven requirements the shortage and of resources,as part of the significant evaluation efforts process. should be dedicated to attracting funding and support (technical assistance) from external sources. As such, EU programs are envisaged for improving the existing resource base and enabling capacity development. 1 2 2 Also, a number of public tender procedures will be prepared, launched and managed (up to contract completion), so as to ensure the proper functioning of the ministry.

67 Annex 4: Institutional profile

The regulatory framework relevant for the activity of the Ministry for Business Environment, Trade and Entrepreneurship reflects the areas of responsibility designated by mandate and are divided into four different topics: business creation (entrepreneurship) and SMEs, business environment, international trade and public administration (MBETE functioning). Given the inter-related nature of the activities covered under the first three topics, they are equally applicable to a fifth area, referring to foreign direct investment. Also, most of the pieces of legislation included under the first topic (business creation and SMEs) may as well be considered to be applicable for the second (business environment). However, they were only introduced once, where it was considered most suitable, so as to avoid unnecessary duplication. At the same time, the enumeration below is not intended to be comprehensive but rather to present the most relevant regulatory framework for the activity of the MBETE. At the same time, with the exception of international trade, the legislative framework presented hereafter is also limited to the national legislation in force.

Business creation and SMEs

 Law no. 346/2004 on stimulating the creation and development of small and medium enterprises, updated;  Law no. 62/2014 amending and supplementing Law no 346/2004 on stimulating the creation and development of small and medium enterprises;  GEO no 6/2011 stimulating the creation and development of micro-enterprises by young entrepreneurs, updated;  GEO no 44/2008 on the performance of economic activities by self-employed individuals, individual enterprises or family enterprises, updated;  Law no. 58/1998 on the banking activity;  Law no. 31/1990 on trading companies, republished, updated;  Order ME - DIMMMAT 32 no 698/2014 approving the Methodology for the preparation and use of the SME Test;  Order ME - DIMMMAT no 699/2014 approving the Regulation for the organization and functioning of the Group assessing the economic impact that legislation has on SMEs  GO no 77/ 2014, approved by Law no 20/2015 on national procedure in the state aid field, as well as for amending and supplementing Competition Law no 21/1996.

32 ME-DIMMMAT = Ministry of Economy – Directorate for Small and Medium Enterprises, Business Environment and Tourism

68 Business environment

 Law no. 1/2005 on the organization and functioning of the cooperation*, republished, updated  Law no. 120/2015 on stimulating individual investors-business angels;  Law no. 102/2016 on business incubators;  GEO no 27/2003 on the silent approval procedure, updated  GEO no 49/2009 on the freedom to establish the service providers and freedom to provide services in Romania, updated  GD no 803/2001 on setting up the Inter-ministerial working group for the preparation and monitoring the Action Plan improving the business environment  GD no 685/2013 amending and supplementing Government Decision no 803/2001 on setting up the Inter-ministerial working group for the preparation and monitoring the Action Plan improving the business environment  Competition Law no. 21/1996, amended, updated.

International trade

GEO 56/20.06.2016 amending and supplementing GEO 120/09.25.2002 (rep. 2008) on approving the System to support and promote exports with funding from the state budget, as subsequently amended and supplemented. Export regime  Regulation (EU) 2015/479 of the European Parliament and of the Council on common rules for exports  Regulation (EC) 2009/116 of the Council on the export of cultural goods  Council Regulation (EC) no 428/2009 setting up a Community regime for the control of exports, transfer, brokering and transit of dual-use items  Council Directive 98/29/EC on harmonization of the main provisions concerning export credit insurance for transactions with medium and long-term cover Import regime  Council Regulation (EEC) no 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff (Official Journal L 256, 09/07/1987), as subsequently amended;  Regulation (EU) 952/2013 of the European Parliament and of the Council of 9 October 2013 laying down the Union Customs Code  Harmonized Commodity Description and Coding System - www.wcoomd.org  Commission Communication concerning autonomous tariff suspensions and quotas  Council Regulation (EU) no 1387/2013 of 17 December 2013 suspending the

69 International trade

autonomous Common Customs Tariff duties on certain agricultural and industrial products and repealing Regulation (EU) no 1344/2011  Council Regulation (EU) no 1388/2013 opening and providing for the management of autonomous tariff quotas of the Union for certain agricultural and industrial products, and repealing Regulation (EU) No 7/2010  Regulation (EU) no 478/2015 of the European Parliament and of the Council of 11 March 2015 on common rules for imports  Regulation (EU) no 755/2015 of the European Parliament and of the Council of 29 April 2015 on common rules for imports from certain third countries  Council Regulation (EC) no 717/2008 of 17 July 2008 establishing a Community procedure for administering quantitative quotas Generalized system of preferences  Regulation (EU) no 978/2012 applying a scheme of generalized tariff preferences and repealing Council Regulation (EC) no 732/2008; UN and EU sanctions – national framework  Law no 217 of 2 June 2009 approving GEO no 202/2008 on enforcing international sanctions;  GEO no 202/2008 on enforcing international sanctions;  GEO no 128/28.12.2010 amending and supplementing GEO no 202/2008 GEO no 202/2008 on enforcing international sanctions;  GD no 1541/2009 approving the Regulation for organization and functioning of the Inter-institutional Council set-up in view of ensuring the general cooperation framework in the field of enforcing the international sanctions in Romania;

 Law no. 500/2002 on public finances, as subsequently amended and supplemented  Law no. 188/1999 on the civil servants` status, as subsequently amended and supplemented  GD no. 23/2017 on the organization and functioning of the Ministry for Business Environment, Trade and Entrepreneurship

4.1.2. Policies and strategies By mandate, MBETE is responsible for developing and implementing the Government Program in the field of SMEs, business environment, trade, entrepreneurship and foreign investments. Currently, there are not available any comprehensive documents stating the

70 Romanian policy in a given area, except for strategies and plans. However, as a member state, Romania has fully committed to the EU policies which it has endorsed and transposed at national level. The core policies relevant for the activity of MBETE are presented below, together with their latest respective policy papers: - EU SMEs policy33: Communication from the European Commission “Think Small First” - A “Small Business Act” for Europe {SEC(2008) 2101} {SEC(2008) 2102}, updated34; - EU single market policy35: Communication from the Commission - Upgrading the Single Market – more opportunities for people and business36; - EU entrepreneurship policy37: Communication from the Commission ”Entrepreneurship 2020 Action Plan – Reigniting the entrepreneurial spirit in Europe” (COM/2012/0795 final)38; EU trade39 and investment40 policy: “Trade for all – Towards a more responsible trade and investment policy” (COM(2015) 497 final)41 - EU state aid Policy42; - EU competition Policy43. Other important policies fall outside of the ministry’s mandate but are, nonetheless, essential for successfully achieving the intended objectives. These policies are related to employment, education and training, innovation, regional development. The strategic framework is comprised of documents at EU and national level, as follows: - Europe 2020 Strategy44; - European Semester45; - The Partnership Agreement for 2014-202046 and the subsequent Operational Programs, especially the Regional Operational Program47, Operational Program Human Resources48, Operational Program Competitiveness49; - Government strategy for the development of the SME sector and improving the Romanian business environment – 2020 horizon (GD no 859/2014);

33 https://ec.europa.eu/growth/smes_en 34 http://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX%3A52008DC0394 35 https://ec.europa.eu/growth/single-market_ro 36 https://ec.europa.eu/transparency/regdoc/rep/1/2015/EN/1-2015-550-EN-F1-1.PDF 37 https://ec.europa.eu/growth/smes/promoting-entrepreneurship_en 38 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2012:0795:FIN:en:PDF 39 http://ec.europa.eu/trade/ 40 http://ec.europa.eu/trade/policy/accessing-markets/investment/ 41 http://trade.ec.europa.eu/doclib/docs/2015/october/tradoc_153846.PDF 42 http://ec.europa.eu/competition/state_aid/overview/index_en.html 43 http://ec.europa.eu/competition/consumers/what_en.html 44 https://ec.europa.eu/info/strategy/european-semester/framework/europe-2020-strategy_en 45 https://ec.europa.eu/info/strategy/european-semester_en 46 http://www.fonduri-ue.ro/acord-parteneriat 47 http://www.inforegio.ro/ro/por-2014-2020.html 48 http://www.fonduri-ue.ro/pocu-2014 49 http://www.fonduri-ue.ro/poc-2014

71 - National Export Strategy 2014-202050; - National Strategy for the Sustainable Development of Romania – Horizons 203051; - Strategy for the Territorial Development of Romania 203052; - Competitive Romania – a project for a sustainable economic growth53; - National Strategy for the Digital Agenda54; - Strategy for strengthening the public administration 2014-202055.

4.1.3 International Treaties/ Agreements The Accession Treaty of Romania to the European Union is the overarching treaty governing the WTO AGREEMENTS - Final Act - Agreements establishing the WTO - Multilateral agreements on trade in goods i. Agreements on agriculture ii. Agreement on sanitary and phytosanitary measures iii. Agreement on textiles and clothing iv. Agreement on technical barriers to trade v. Agreement on trade-related investment measures vi. Agreement on enforcing Article VI, GATT 9 – Anti-dumping vii. Agreement on enforcing Article VII, GATT 9 – Customs valuation viii. Agreement on pre-shipment inspection ix. Agreement on rules of origin x. Agreement on import licensing xi. Agreement on subsidies xii. Agreement on safeguards - General Agreement on Trade in Services (GATS)

50 http://www.minind.ro/strategia_export/SNE_2014_2020.pdf 51 http://www.mmediu.ro/beta/domenii/dezvoltare-durabila/strategia-nationala-a-romaniei-2013-2020- 2030/ 52 http://www.mdrap.ro/dezvoltare-teritoriala/-2979 53 Available at: http://www.minind.ro/Romania_competitiva_2016/pdf/Romania_competitiva_un_proiect_pentru_o_dezvolta re_economica_sustenabila.pdf 54 https://ec.europa.eu/epale/ro/resource-centre/content/strategia-nationala-privind-agenda-digitala- pentru-romania 55 http://www.mdrap.ro/userfiles/strategie_adm_publica.pdf

72 - Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) - Agreement on public procurements - Understanding of the interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994 - Understanding of the interpretation of Article XVII of the General Agreement on Tariffs and Trade 1994 - Understanding on the balance of payments provisions of the General Agreement on Tariffs and Trade 1994 - T rade and environment - Dispute Settlement Understanding (DSU) - Trade Policy Review Mechanism (TPRM) [1.] Other agreements include the Framework agreement between the Government of Romania and the Swiss Federal Council concerning the implementation of the Swiss-Romanian cooperation program to reduce economic and social disparities within the enlarged European Union (GD no 1065/2010), as well as all the Bilateral trade agreements which Romania is signatory of.

73 56 4.1.4 Organizational Chart of the Ministry for Business Environment, Trade and Entrepreneurship, as per GD 23/2017

56 http://lege5.ro/Gratuit/ge2dimjqheya/hotararea-nr-23-2017-privind-organizarea-si-functionarea-ministerului-pentru-mediul-de-afaceri-comert-si-antreprenoriat

74 4.1.5 Institutions and organizations under subordination, coordination or authority For the purpose of performing its tasks, the MBECE has under its subordination 8 territorial offices (TOSMEC) in Brasov, Cluj-Napoca, Constanta, Craiova, Ploiesti, Targu-Mures and Timisoara, with responsibilities only for promoting and implementing the SME-centered programs managed by MBECE and funded from the state budget. At territorial level an important part is played by the Regional Development Agencies, with whom the MBECE has collaboration relations in almost all its field of competence. No. of Institutions subordinated to MBETE position Financing s Territorial Office for SMEs and Cooperation Braşov 10 State budget Territorial Office for SMEs and Cooperation Cluj-Napoca 13 State budget Territorial Office for SMEs and Cooperation Constanta 13 State budget Territorial Office for SMEs and Cooperation Craiova 10 State budget Territorial Office for SMEs and Cooperation Iasi 12 State budget Territorial Office for SMEs and Cooperation Ploiesti 10 State budget Territorial Office for SMEs and Cooperation Targu Mures 10 State budget Territorial Office for SMEs and Cooperation Timişoara 11 State budget

4.1.6. Partnerships and collaborations The MBETE partnership network, it comprises many public and private stakeholders acting at national/regional or European/international level, among which: associative structures of the business environment (business organizations, employers` associations, federations), the Export Council, bilateral Chambers of Commerce or CCIR, consultative boards, working groups, etc. International stakeholders include: the European Commission (EC), Organization for Economic Cooperation and Development, World Bank (WB), World Trade Organization (WTO)57 (OMC), United Nations Conference on Trade and Development58 (UNCTAD), International Labor Organization59 (ILO), International Network for Small and Medium Enterprises60 (INSME), World Association of Small and Medium Enterprises61 (WASME), European Association of Guarantee Institutions62 (AECM), United Nations Industrial

57 https://www.wto.org/ 58 http://unctad.org/en/Pages/Home.aspx 59 http://www.ilo.org/global/lang--en/index.htm 60 http://www.insme.org/ 61 http://www.wasmeinfo.org/ 62 http://aecm.eu/

75 Development Organization (ONUDI63), European Business Angel Network64 (EBAN), World Association of Investment Promotion Agencies65 (WAIPA) etc. [2.] MBETE coordinates or takes part in several working groups at Government level, among which: - WG Impact Assessment Normative Acts - WG Developing and monitoring the Action Plan to improve the business environment - WG SBA Implementation - WG Cultural and Creative Sectors - WG Europe 2020

4.1.7. Information regarding staff and budget MBETE has 331 staff positions, excluding dignitaries and their cabinets, broken down into three State Secretary portfolios, two general directorates and 11 directorates. Out of the 331 positions, 83 are filled by staff with economic responsibilities seconded abroad –external network of the Ministry.66 It is organized as Offices for Commercial and Economic Promotion (OCEP) within Romania`s diplomatic missions abroad (embassies or general consulates) or in countries/ commercial centers of interest for Romania. Throughout the years, the organizational and institutional structure has changed quite often and the Ministry has been reorganized almost annually between 2007 and 2017, alongside the Ministry of Economy. Figure 8 MBETE - Organizational structure 2007-2017

200 200 201 201 Organizational structure 7 9 3 7 elements 67 68 69 70

Total no of positions71 546 403 n.a. 331 Positions in the external network n.a. n.a 83 83 Delegated ministers - - 1 -

63 http://www.unido.org/ 64 http://www.eban.org/ 65 http://www.waipa.org/ 66 http://www.dce.gov.ro/Materiale%20site/reteaua_externa/reteaua_externa_DCE.htm 67 GD 387/2007 on the organization and functioning of the Ministry of SMEs, Commerce, Tourism and Liberal Professions, repealed 68 GD 4/2009 on the organization and functioning of the Ministry of SMEs, Commerce and Business Environment, repealed 69 GD 47/2013 on the organization and functioning of the Ministry of Economy, repealed 70 GD 23/2017 on the organization and functioning of the Ministry of Business Environment, Commerce and Entrepreneurship 71 Excluding dignitaries and positions associated to the Minister`s Cabinet

76 State Secretary Cabinets 3 2 n.a. 3 General Directorates 16 5 n.a 2 Directorates n.a n.a n.a 11

4.1.8. Service delivery model In virtue of its mandate, MBETE performs the following functions: a) Strategy-related, by which it prepares the strategy for the implementation of the Government Program in the fields of small and medium enterprises, business environment, commerce, entrepreneurship and foreign investments, as well as developing the strategies and programs for economic growth in these fields; b) Regulatory and synthesis function, by which the regulatory and institutional frameworks needed in order to achieve the strategic objectives in its fields of responsibility are developed; c) Representation, by which it is ensured, under the law, on behalf of the Romanian State and the Romanian Government, internal and external representation in its fields of activity, including in respect to European affairs; d) Implementing the provisions in the Treaty of Accession of Romania to the European Union for its fields of responsibility; e) State authority function: - It controls the unitary enforcement and compliance with the legal provisions in its fields of responsibility, as well as the control over how the entities under its subordination are functioning; - By which it exerts the functions of coordination of policies and measures aimed at encouraging and stimulating SMEs, monitoring and evaluating them, through the territorial offices for small and medium enterprises; - By which it is ensured that the task and obligations falling upon the Romanian Institute for Foreign Trade are carried out. f) Of managing the public property in its fields of responsibility; g) Of coordinating at national level, together with other authorities interested, the activities related to the international economic relations, commercial flows and economic cooperation, ensuring the secretariats for the Intergovernmental Economic Collaboration Commissions with other States and preparing the economic component for the meetings held at the Government level; h) Of absorbing the funds given by the European Union in the fields under its responsibility; i) Of collaborating with the social partners. When performing its functions, the Ministry has general or specific tasks in its fields of competence, which are detailed in GD 23/2007: - 23 general tasks; - 66 tasks in the fields of trade, commercial policy and international economic relations;

77 - 38 tasks in the fields of SMEs, cooperation and business environment; - 23 tasks in field of foreign investments.

As for providing services for citizens and companies, these are related to the activity of economic operators. However, most of them are managed by third parties (other ministries, institutions or public authorities), be it setting-up or managing a business, payment of taxes, employing labor force, implementing commercial contract, insolvency or bankruptcy, etc. MBETE is a national contact point for: a) SME Envoy; b) SBA; c) COSME; d) Investment Plan for Europe (Juncker). The services provided directly to economic operators are related to: a) Funding for entrepreneurs and companies, through the SME national programs; b) Issuing certificates on the compliance of the status of associations or county/national unions of cooperative companies; c) Technical assistance, support and consultancy services for foreign investors; d) Support the economic agents` participation to international fairs and missions; e) Information, either face-to-face, by phone, website, newsletter, different materials; f) Counseling; g) Training in entrepreneurship, business management, etc. h) Market studies i) Replies to petitions and complaints Access to finance for entrepreneurs and enterprises takes place with the support of the territorial offices, responsible with monitoring the projects during their implementation. The services from c)-g) can be provided either directly, through the Ministry staff, or by contracting external providers. Other services refer to supporting other institutions with background documents and information in its field of responsibility, including drafting of mandates for state officials.

78 Annex 4.2 SWOT Analysis

Sector / Strengths Weaknesses Organization Business Environment,  Approach based on  Numerous but fragmented SMEs, budgetary programs programs and small sized Entrepreneurship  General upward trend of the  Too few enterprises active in the economic and trade economy; performance (improving  Too few medium-sized Romania´s position in enterprises; international rankings);  Too few enterprises active in  The existence of potentially production areas; competitive sectors (e.g. the  Two-thirds of the new electrical and electronic enterprises go out of business in equipment sector, the the first year of life; automotive sector, the ICT sector, the apparel industry,  Insufficient development of the food industry, the competitive economic clusters at furniture industry, etc.) and regional/local level; smart specialization (e.g. the  The persistence of business Bioeconomy, the organization structures and information and competitive strategies communications developed over 40 years of technologies, the energy and communist economy, structures the environment, the eco- that delayed the transformation technologies); processes  High entrepreneurial spirit.  Labor force shortage Trade, investment  Portfolio/project  Structure not fully integrated yet management approach within the ministry, the case of  The presence of skills for InvestRomania (e.g. salary new media tools use and for differences) innovative communication  Poor functional link with the and promotion channels use external network  Lack of territorial network  The gradual increase of  Low international investment of visibility on international Romanian companies markets reflected by the  Trade opening occurs at low increasing global market performances (low value-added share of the goods export products with low technological from industries and intensity) agriculture

79 Sector / Strengths Weaknesses Organization  The increase of FDI volume  Unbalanced territorial in Romania development Overall administrative  Small but professional  Organizational instability capacity teams, dedicated to the  Lack of human resources priority fields  Limited financial resources for the implementation of programs  Scarce material resources, especially IT equipment/software  Poor support services, particularly IT/procurement (understaffed)

Sector / organization Opportunity Probability

Business Environment,  Untapped potential local demand Medium SMEs, Entrepreneurship  SMEs access to resources (natural, financial, High etc.)  The existence of an untapped competitiveness High potential (cultural and creative sectors, for example.)  Public pressure for simplifying regulations High aimed at business  Implementation of EU programs and strategies High for SMEs (e.g. SBA)  Substantial reconfiguration of the production High and trade structure Trade, investment  Relocation of industries - west/east, including High services  The geopolitical situation, especially towards High Russia, Turkey and Greece  The development of sectors with competitive Medium potential  Opening up new markets High

80 Sector / organization Opportunity Probability

 Using the new technologies and the virtual High environment Administrative capacity  Changes in the regulatory framework High regarding the salaries of staff paid from public funds and employing staff outside the organizational chart  European funded projects that allow High attracting specialized human resources

Sector / organization Threat Probability Impact

Business Environment,  Labor force shortage High High SMEs, Entrepreneurship  High risk aversion among High High SMEs

 The instability of the High High regulatory framework

 The bureaucracy and the High High administrative burden on the business sector

 The instability/financial crisis, Low High based on unsustainable growth, decrease in collected revenues to the state budget and public expenditure growth (repeating the scenario of 2008)

Trade, investment  The decrease of FDI flows at Medium High international level

 The unattractive business High infrastructure for developing investment projects

 The gradual increase in labor High High costs

 BREXIT High Low

 The competition from other High High investment destinations

81 Sector / organization Threat Probability Impact

Administrative  Maintaining organizational High High capacity instability

82 Annex 4.2. PESTLE Analysis

PESTLE Analysis – POLITICAL FACTORS

Measures to reduce/eliminate the Factor Impact Probability Implications risks / Measures to capitalize on opportunities Democratic state, Positive High Attractive and Promoting the with solid and stable suitable environment advantages that principles for economic Romania has in terms of development investment Frequent policy Negativ High Uncertainty of the The cross political changes at the e strategic directions, parties ownership of government level the extension of the the national priorities decision making The annual budgeting, processes, the per programs fruitless efforts The interest of the Positive High Favorable conditions Promoting the main political forces for attracting advantages that to attract foreign investment in the Romania has in terms of investment priority areas for investment Romania Favorable geopolitical Positive High Favorable conditions Promoting the context for for attracting advantages that investment, especially investments Romania has in terms of towards Russia, investment Turkey and Greece Tense geopolitical Negativ Mediu The need to Increased expenses for atmosphere e m strengthen the investment in the position within the defense industry region, the EU and NATO Unprecedented wave Negativ High Large flow of Promoting and of migration from the e immigrants, social defending the national conflict areas and labor market interests of Romania pressures; pressure within the EU to adopt a on the state budget favorable common policy on migration and

83 PESTLE Analysis – POLITICAL FACTORS

Measures to reduce/eliminate the Factor Impact Probability Implications risks / Measures to capitalize on opportunities to adopt a coherent strategy on the management of the migration phenomenon in Romania The implementation Positive High Stability and Promoting the interests of the EU programs predictability in the of Romania in the EU and strategies, as a implementation of Taking over the member state the public policy objectives of the EU as measures anchors for the public policies in Romania The upcoming EU Positive High Promoting and Preparing the future Council Presidency in supporting the presidency, ensuring 2019 priorities of Romania the necessary human on the European resources and their agenda and proper preparation strengthening the administrative capacity of the institutions involved

84 PESTLE Analysis – ECONOMIC FACTORS

Measures to reduce/eliminate the Probabilit Factor Impact Implications risks / Measures to y capitalize on opportunities Pressure to increase Negativ High Loss of Investments in (re) salaries generated by e competitiveness based technology, energy the increases in the on labor force costs, efficiency, etc. to public sector especially in some increase the labor labor-intensive sectors productivity to Increased vulnerability compensate for the of the economic salary costs increase sectors where the The implementation labor force costs are of a fiscal policy to high and the compensate for the amplitude between labor costs burden the average/median increase wage and the minimum wage is reduced The vulnerability of some geographical areas dependent on these sectors, in terms of unemployment The existence of an Negativ High Failure to take some The development and untapped e investment the implementation of competitiveness opportunities public policies geared potential (e.g. circular Suboptimal towards the economy) development development of sectors with high competitive potential New markets that can Positive Medium Increasing the Promoting Romanian be opened international presence companies and of Romanian products for export. companies Strengthening trade relations with other countries

85 PESTLE Analysis – ECONOMIC FACTORS

Measures to reduce/eliminate the Probabilit Factor Impact Implications risks / Measures to y capitalize on opportunities European funded Positive High Increasing the Accessing available projects that allow administrative funding and staff attracting specialized capacity recruitment human resources Maintaining this staff after the completion of the European funding by amending the organizational chart and providing the budgetary resources The instability/financial Negative Medium The slowdown of the Avoiding pro-cyclical crisis, based on economic measures unsustainable growth, development Limiting the measures decrease in collected with a potential revenues to the state negative impact on budget and public the business expenditure growth environment (e.g. (repeating the scenario raising the minimum of 2008) wage) Improved revenue collection to the state budget Compliance with the agreed fiscal budgetary framework and the prudential norms The significantly higher Negativ High The domestic demand Supporting the access supply of imported e covered by imported of Romanian products, to the products, to the producers to the detriment of the detriment of locally market, promoting domestic ones manufactured Romanian products products

86 PESTLE Analysis – SOCIAL FACTORS

Measures to reduce/eliminate the Factor Impact Probability Implications risks / Measures to capitalize on opportunities

Unfavorable Negative High The lack of labor Adopting a strategy and demographic resources in the implementing measures to trends medium and long enhance the birth rate, the term retention of young people in the country and the return of diaspora, especially before the end of their working life

Lack of trained Negative High Difficulties in Reconfiguring the regulatory labor force in developing/ framework regarding the areas required by expanding vocational training for adults, the labor market businesses facilitating the involvement of Difficulties in employers in the training process attracting investors (initial and ongoing), updating the national qualifications framework, encouraging labor mobility, supporting work-based learning (apprenticeships, internships, continuous professional training etc.) Decoupling the management of vocational and technical educational units from the didactic management and the business orientation

High levels of Negative High Reduced domestic Promoting measures to reduce poverty and demand for poverty, rebalancing the profit poverty in labor domestic quality distribution ratio between capital products and the and labor (now 70/30%), activating preference for the labor force and replacing social cheap products, benefits with services usually imported

87 PESTLE Analysis - TECHNOLOGICAL FACTORS

Measures to reduce/eliminate Factor Impact Probability Implications the risks / Measures to capitalize on opportunities

Using the new Hig High Capitalization of Increased use of the new technologies and the h development technologies and the virtual virtual environment niches for environment in the relationship companies in between the state and the Romania private environment Increasing Supporting the introduction, use investment and development of new attractiveness technologies in the priority areas, including services (e.g. tourism)

88 PESTLE Analysis – LEGISLATIVE FACTORS

Measures to reduce/eliminate Factor Impact Probability Implications the risks / Measures to capitalize on opportunities

The instability and the Negative High Thick and rigid The evaluation of the complexity of the regulatory administrative barriers for the regulatory framework framework, with business environment, per many sectors concerned interconnected Continuing the de- acts, bureaucratization process contradictions and ambiguities Ensuring the integration of IT systems in the public It generates administration uncertainty and high administrative costs

Changes in the Positive High Increasing the Supporting and accelerating the regulatory framework administrative adoption of the measures regarding the salaries capacity provided of staff paid from Motivating staff public funds and employing staff outside the organizational chart

PESTLE Analysis – ENVIRONMENTAL FACTORS

Measures to reduce/eliminate the Factor Impact Probability Implications risks / Measures to capitalize on opportunities

Increased pressure Positive High Increased costs for Providing incentives and support (regulatory, economic operators measures, a reasonable phase-in consumer etc.) to in the short term calendar shift to environmentally friendly

89 PESTLE Analysis – ENVIRONMENTAL FACTORS

Measures to reduce/eliminate the Factor Impact Probability Implications risks / Measures to capitalize on opportunities technologies

90 Competența face diferența! Proiect selectat în cadrul Programului Operațional Capacitate Administrativă cofinanțat de Uniunea Europeană, din Fondul Social European Competence makes a difference! Project selected under the Administrative Capacity Operational Program, co-financed by European Union from the European Social Fund