The gap is widening

The future of Romania is not a question of money – it’s all about transparency, know-how and education!

For once, Romania was the leader in a ranking provided by EU’s statistical office ‘Eurostat’ this month. However, it was a questionable merit, since Romania recorded the highest annual increase in hourly labor costs among the EU-states in the 4th quarter of 2015.

Well, increasing labor costs – whether it’s for higher salaries or other components of doing business in Romania – is not a problem per se, if those costs are matched by a higher output and/or higher quality. But this is a very, very big ‘if’, and it’s more likely that the higher labor costs are just another blow for Romania’s international competitiveness and therefore, in attracting investments.

And foreign investors (who, by the way, not only invest money here, but generate an important know how-transfer and offer quite a few decent jobs inclusive a modern ‘on-the-job training’ for the local population) have to deal with yet another issue on top of the ‘traditional’ problems in Romania:

• Political instability
• Economic uncertainty with frequent legal and tax changes 
• A mind-boggling, excessive bureaucracy where incompetence and arrogance seem to be the main requirements to obtain a position behind the counter
• A third-world infrastructure

Speaking of infrastructure, on a recent conference in Bucharest, investors from Germany and Austria for once did not only complain about Romania’s shameful infrastructure, but named the real reason behind this disaster for society and economy: it’s not that there isn’t money, that there aren’t construction companies or that Romania doesn’t have the expertise to build roads. The biggest problem is the authorities’ incapacity to speed up investments, the lack of transparency in public auctions and the public administration’s poor know-how.

And – at the same investor’s conference – they came up with an issue that is widely experienced among business people here but rarely talked about in public by foreigners: they busted the myth of the ‘well educated people’ and stated, that international companies are faced with the lack of skilled employees in Romania. In diplomatic-terms the investors said: ‘The question of education is also becoming more and more important. Romania must ensure that its economic growth is not hampered by a lack of skilled workers.’ Well, in off-the-record business-terms, it sounds more like: ‘Romania’s education-system is completely missing to prepare the youngsters for the requirements of a modern society and economy in the 21st century.’

My prediction: if Romania is not moving in the right direction real quick (and this includes a massive increase of investments in research and development) foreign investors will start to move on their own – out of the country.

So what? you might say.. Romania’s economy is growing again.

Indeed, for 2016 the forecast in GDP is almost plus 4%. But this view would only proof the lack of education and basic knowledge about economy, because Romania’s current uptrend lives off completely by consumption while exports (even now!) are still contracting. Anyone who has the slightest idea about economy should rise a red flag. The real driving force of an economy like Romania would be real savings and investments, not consumption. 

Investment is money put into areas where it’s expected to increase in value, consumption, on the other hand, is the purchase of goods and services that are likely to depreciate in value.

But this knowledge is neither very well known nor very popular among a vast majority of romanians and this poses the question ‘what the hell did they learned in school or university about basic economics’?

Instead of being aware of the short nature of this current growth, I constantly encounter the very naive opinion that Romania’s economy will catch up with the EU-average in about 5 to 10 years time. If you happen to agree with this opinion then please stop drinking, it obviously clouds your judgment, because exactly the opposite is true! The gap is widening, and I am not talking about Germany, France or the UK.

Even other former communist-countries like Poland are now playing in another league than Romania and they are moving fast forward. I don’t want to bore you with details of why and how – I just tell you this: instead of the usual city-trips to London or Rome, visit Warsaw, Gdansk or the ‘IT-city’ of Kraków for once. You don’t have to be a macro-economist to see – and experience – the differences between here and there, from flexibility and customer service to infrastructure and efficiency – it’s another world compared to Romania and the average salary in Poland is now close to 1000 EUR/month. Although there is undoubtedly still a big need for improvements in Poland to match the best in Europe, the country is in my humble opinion on the right track and should serve as an inspiration for Romania.

Romanians shouldn’t believe in economic fairytales lectured in tv-talkshows or during election-campaigns, but face the cruel reality: the widening gap between Romania and other countries in economics (as well as in social issues like education or the awareness of ecology) won’t be closed soon, even in the unlikely case, that Romania starts to act now.

The years since the ‘Revolution’ are lost, while other nations made much more progress, so it’s not overstated to assume, that Romania will need about 50 years to catch up with a global standard, when the above mentioned parameters are finally adjusted  – and kept – towards a modern economy and society.

That’s 50 years in which the country will continue to lose the best and the brightest minds to other nations that not just offer better salaries but a much more decent and respectful behavior towards employees, customers or in relation with authorities – and a much better education for their future kids.

Anyone who opposes this view is invited to check-out the example of Germany. The ‘unification’ of East and West is still not fully accomplished after almost 27 years and – although they were once united for decades, speak the same language and the West spent around 2’000 billion EUR in transfers since 1989 – there are still huge social and salary gaps between East and West.

That it’s very hard, yet almost impossible, to catch up again when you’re on the wrong track too long, is not only valid in economics or social issues, it’s also true in a sector, each Romanian is an expert: football.

Back in 1986, Steaua Bucuresti played at the same level as FC Barcelona. But in recent years, Romania’s ‘football-strategy’, implemented by big-mouth ‘financiers’, couldn’t be more stupid: the focus on short-sighted consumption (buying second-class players from abroad) instead of long-term investments (into youth-teams and modern stadiums, followed by increasing transfers of the well educated local players for good money into the big leagues) did nothing else than widen the gap almost irrevocably between the quality of football in Romania and other european leagues (clearly visible this year through the non-qualification of any Romanian team in european club competitions).

Little Switzerland – an opponent of Romania at the ‘Euro 16’ in France this summer – has a much smaller reservoir of talented players than Romania but did exactly the opposite: the result of investments instead of consumption. This season, more than 25 swiss players are under contract with teams from the Bundesliga, Premier League or Serie A and the swiss champion (Basel) is directly qualified for the group-stage of next season’s Champions League.

The key for future success in football or economics is investing, not consumption. 

Once upon a time at the Estadio Ramon Sanchez-Pizjuán in Sevilla…