Ukraine conflict puts a

Just as the global economy started to move steadily towards recovery from the covid-19 pandemic, there was another major systemic shock. Russia’s invasion of Ukraine marked a tectonic shift in geopolitical risk levels. Beyond triggering a horrific humanitarian crisis in Eastern Europe, the economic effects of the conflict and the associated sanctions will be felt across the world, slowing down growth while adding to the pre-existing inflationary pressures.

By Anda Sebesi

Even though Russia and Ukraine together represent a relatively small part of the world economy, they account for a large share of global energy exports. The reliance of many European countries on Russia’s oil and gas has prompted a political debate on how to quickly and permanently lower this dependency. Both countries are also global major exporters of metals, intermediate manufacturing inputs, food staples, and agricultural commodities.

Due to its proximity to the conflict zone and its trade links with both Russia and Ukraine, the Central and Eastern Europe region has been the focus of a lot of concern since the conflict started. Romania was facing a pressing need for adjustments in its macroeconomic imbalances even prior to that moment. The country has been under the EU’s excessive budget deficit procedure since early 2020¬—although the pandemic led to its suspension in the meantime.

According to the Global Economic Outlook report published by KPMG in April 2022, efforts to bring down Romania’s relatively large structural budget deficit in the years to come could have a knockon effect on its economic growth. In addition, the constant deepening of the current account deficit—which stood at -7.1 percent of GDP in 2021, the second largest in the EU—would require a gradual and rather immediate correction, in order to avoid further increases in the country’s financing costs.

The same source says that higher imported inflation would likely keep pushing up nominal interest rates, eroding consumers’ purchasing power and hampering short-term economic growth prospects. However, with the right policies in place, which should be aimed at encouraging investments and stimulating long term growth, Romania could weather this crisis.

While the has adopted EU several packages of economic and individual sanctions against Russia, the inflationary pressure intensified by the higher commodity prices and a deep recession of certain economic sectors such as automotive, transport, chemicals, political risk and uncertainty could make companies more reluctant to invest during this period. “The large-scale emigration from Ukraine (figures discussed by the specialists indicate over 5 million refugees to date, with an additional 6.5 million displaced inside Ukrainian borders) is another socio-economic factor with a significant impact,” says Alina Timofti, Partner and Co-Head of NNDKP Tax Advisory Services. The complete absorption of funds available via the EU’s Recovery and Resilience Fund would go a long way in terms of improving domestic economic outlook. “While the situation remains difficult, Romania has several advantages. First and foremost, we are a NATO member, which offers a security guarantee. Moreover, the evolution of the military situation since the start of the invasion has so far considerably reduced initial concerns of the conflict potentially spreading to areas beyond Ukraine. Furthermore, Romania’s EU membership provides an indication of stability to investors, as well as offering all the benefits of the Single Market,” says Ramona Jurubita, Country Managing Partner at KPMG in Romania. She adds that the government and the business community need to present a clear message that Romania is not only a safe place to invest, but it also offers many opportunities in spite of the current challenges. At the same time, the authorities can further help growth with investor-friendly policies, such as support for key sectors like health and education as well as making full use of the available EU funding, especially to develop the country’s infrastructure.”

VULNERABILITIES MAY BECOME OPPORTUNITIES

Romania’s vulnerabilities could be turned into opportunities if the agriculture and energy sectors were treated as strategic, Timofti believes. She points out that, unlike Poland and Hungary, Romania may not necessarily among the first relocation options for Ukrainian businesses. However, with sustained, coherent support and a well-rounded strategy that is quickly designed and implemented by authorities (including local ones), the country’s attractiveness and its chances to become a relevant destination may increase. “Investment-related facilities ranging from fiscal and state aid schemes to the elimination of undue bureaucratic barriers are really helpful mechanisms in the context of a relocation decision,” Timofti notes. According to Razvan Vlad, Partner in the NNDKP Corporate/M&A practice, despite the conflict being close to its borders, Romania continues to follow the business guidelines that were set prior to the beginning of the war, and investments in key sectors of the economy (such as infrastructure, healthcare, etc.) have continued as scheduled. “The legislative framework tends to remain quite stable and, with the exception of a couple of legislative acts aimed at addressing issues generated by Russia’s aggression against Ukraine, investors may rely on a relatively safe business environment and on laws which are adapted to EU regulations and requirements,” he says.

CAN ROMANIA ABSORB THE UKRAINIAN WORKFORCE?

Romania is facing a severe labour shortage in multiple important sectors. This trend has been accelerated by the pandemic, which fuelled the competition for talent even more, especially for roles where remote work fits like a glove. “In March alone, the number of job offers on BestJobs reached the 40,000 threshold, with most of them being in Sales, IT, Finance & Accounting, Management, and Engineering. We are also seeing an increase in candidate activity, but there is still a major gap between supply and demand in this field,” says Andrei Frunza, the CEO of BestJobs.

The most recent data shows that almost 80,000 Ukrainian refugees have chosen to stay in Romania, out of more than 600,000 who have travelled through our country, and Romanian officials have announced that more than 1,770 Ukrainian citizens have been employed on the local market since the war broke out. Most of them were hired in industries like hospitality, manufacturing, construction, retail or auto services. “We definitely cannot call the military conflict an opportunity, but integrating Ukrainians into the local workforce is a challenge that we simply need to solve,” Frunza argues. He adds that BestJobs data show that Sales, IT, Finance/Accounting, Management, and Engineering remain the areas with the largest labour shortage. In most of these industries, jobs can be performed remotely by those who have the right skills and mindset and speak an international language. “Blue-collar positions are a good fit for international workers, as it is an area where having the hard skills required to perform a job is what matters most,” he adds.

Once refugees started coming to Romania, BestJobs thought about ways to help Ukrainian citizens find either short-term or long-term employment, offering companies the option to highlight openings that are also suitable for Ukrainians. “At this point, there are almost 1,000 job opportunities marked as Ukrainian-friendly by companies that are willing to hire Ukrainian citizens and provide additional support for their integration process. 80 percent are white-collar jobs for specialists with different skillsets and at least intermediate knowledge of English.”

But does Romania have the capacity to absorb Ukrainian workforce in the medium and long term? “It depends on the sector. IT specialists might all be absorbed right away. Medical professionals could also find it quite easy to find employment here. However, accountants, lawyers, and those whose training is based on Ukrainian laws and regulations will find it more difficult to do so,” says Perry Zizzi, President of the Romanian Diversity Chamber of Commerce (RDCC) and Managing Partner at Dentons Bucharest office. When we talk about the integration of refugees into the labour market, it is important to look at our economy and society as a whole, but also at the EU response to this situation. “Today we are facing one of the biggest global displacement crises, so it is not about a single industry being ready to absorb Ukrainian workforce. It’s about a stable climate and a better future that involves all of us,” says Andreea Voinea, HR Director at BCR. She adds that compared to its European peers, Romania has little experience with large-scale immigration. In addition, the situation is quite similar in the region, as Eastern European countries are embracing the millions of Ukrainians fleeing war as potential workforce, and it will be difficult to handle such a huge inflow and integrate them all.

“At the same time, we must not forget that the labour market is changing, and the past two years have brought a massive shift in the way work is perceived. We are now facing the so-called ‘uberization of work,’ and this can be a plus in terms of the integration of Ukrainian employees,” Voinea adds. On the other side, the Romanian Labour Ministry announced last month that Romania’s workforce was lacking in numbers, especially in sectors such as construction, tourism, and hospitality. Earlier this year, the government issued a decision allowing 100,000 people from abroad to work in Romania, to cover the labour shortage recorded last year. In addition, in a relatively short time, the Romanian government revised the legal norms and introduced a series of derogations from the immigration legislation to allow Ukrainians easier access to the Romanian labour market. Romania’s Emergency Ordinance no. 20/2022 set out new support measures for Ukrainian citizens, which include the right to stay in Romania for work purposes without being required to obtain a long-term visa for local employment and free access to the Romanian unemployment system, under the same conditions applicable to Romanian citizens. “In my opinion, we need close collaboration, and the Labour Ministry should continue to exchange ideas with companies, HR professionals, and job-matching services to create a long-term plan and encourage the adoption of Ukrainian workforce,” Voinea notes. Along the same lines, Zizzi believes that given the fragility of the global economy

and the uncertainty caused by the conflict in Ukraine, it is difficult to say whether Romania could absorb all the Ukrainians who seek to remain on its territory. “In our experience, one of the biggest barriers to absorption (particularly that of blue collar workers) is their lack of Romanian or English language skills. That is why it is so important to offer language training as a way to integrate, and this is something that the RDCC is carrying out together with its partners,” he says, adding that most Ukrainian refuges have been hired by Romanian organisations in fields like call centres, support activities, IT, marketing or tourism agencies, beauty salons, hospitality (baristas, waiters)¬—so in both white collar and blue collar positions.

BANKING INDUSTRY READY TO HIRE UKRAINIANS

Over the past few years, digital transformation has received considerable attention in the banking sector, and the job structure in this industry is constantly evolving. But what remains unchanged is people’s contribution. Delivering a top-notch employee experience is a priority, and banks are aware of the required balance between technology and human engagement across all channels. The banking industry needs talented people who can create solid products and design clear processes. It needs people with both hard and soft skills, who can perfect the customer experience and focus on understanding, supporting, and advising clients at a higher level.

According to Voinea of BCR, Ukrainians have been part of the international workforce for a long time now. “They are a highly skilled workforce, and we must take into account the fact that Ukraine has been one of Europe’s most popular locations for outsourcing tech development, generating more than 20,000 tech degrees per year according to the IT Ukraine Association. Moreover, 70 percent of Ukrainian workers have secondary or higher education degrees,” she says.

She points to the bank’s local project, Jobs for Ukraine, a recruitment platform developed by Jobful and InnovX-BCR to support Ukrainian citizens who are looking for a job in Romania. Voinea also adds that BCR has improved its operations, adjusting business flows to respond effectively to the needs of refugees, with the help of four Ukrainian employees that it recently hired, offering them critical roles in some of its branches and its Contact Centre.

The perspective of Russian supplies to Europe being halted does not alter the EU’s energy transition agenda; on the contrary, it further underlines the importance of switching to renewable fuels that are not subject to the kind of geopolitical blackmail we are currently witnessing, nor vulnerable to the volatility of the gas market.

The war has proven that the European Union has been too dependent on Russia for its energy needs. Our security lies in renewables and diversification of supply through LNG, biogas, and green hydrogen. Renewables give us the freedom to choose an energy source that is clean, cheap, reliable, and ours; an energy source that will create new jobs in Europe and fuel the green economy of the future.

The REPowerEU plan presented by the Commission on March 8 sets out how the EU could replace Russian energy supplies with alternatives and speed up the rollout of renewables. To those who are fearful or doubtful, I say: we have options! For example, 20 million tonnes of hydrogen can replace 50 bcm of Russian gas. We estimate that by the end of this year, almost 25 percent of Europe's current electricity production could come from solar energy. And also by end of this year, two thirds of the gas imported from Russia could be replaced. It is undoubtedly a very difficult exercise, but it can be done if there is enough political will to simply move faster towards what we had already decided to do.

To cater for the coming winter, the Commission also aims for gas storage facilities in the EU to be filled to 90 percent capacity by October. In addition, the Commission is ready to support the joint procurement of gas and it has proposed several ways to help the most vulnerable customers and businesses. It has also issued additional guidance to Member States, confirming that it might consider regulating prices for end consumers in exceptional circumstances, and setting out ways in which Member States can redistribute revenue from high-energy sector profits and emissions trading to consumers.

The war in Ukraine is already putting pressure on Romanian companies’ ability to develop globally The absence of business development teams, the scarcity of promotional strategies, and the effects of the war in Ukraine represent the latest challenges for Romanian companies looking to take their products and services across the country’s borders.

By Claudiu Vrinceanu

Getting access to a business development team in a target market represents one of the most critical barriers for Romanian firms when choosing to export, due to the rising HR costs.

When going abroad, Romanian companies (whether tech or non-tech) have two ideal options: recruiting a Head of Internationalisation (or Head of Exports) or a Chief Revenue Officer for each target market. The Head of Internationalisation should be a person who is naturally curious, open-minded, adaptable when interacting with different business cultures and personalities, and flexible. The Chief Revenue Officer should manage all the go-to-market activities and customer-facing teams that are meant to drive revenue for the

company.

One challenge for local firms lies in the fact that Europeans are not the best at selling, especially to the US market. “Folks in the US learn how to sell at a young age, through things like lemonade stands and girl scout cookies. To be successful in selling to the US market, you need to be short, concise, and assertive. Europeans are more laid back, wordy, and patient. You can always hire those people, assuming you recognise the gap. Still, if you're from Europe, most of your networks are likely to be in Europe too,” Shani Shoham, the new Chief Revenue Officer at Romanian tech firm Bunnyshell, tells Business Review.

The ideal solution is to hire someone in the US who has experience working with Europeans, or even better, has countryspecific experience, recognising the fact that each country has a distinct culture, Shani Shoham notes. That person would be able to speak “American” with US-based prospects and partners while being aware of the culture internally.

In terms of cost, the average Chief Revenue Officer in the US makes USD 261,000, according to PayScale. The average bonus for a Chief Revenue Officer is USD 81,000, representing 31 percent of their salary, with 86 percent of people in these roles reporting that they receive such compensation each year.

PROMOTION: A NEVER-ENDING ISSUE

Romanian entrepreneurs say that promoting Romanian companies and their interests abroad is very important and that the local ecosystem currently lacks internationalisation initiatives. Strategic partnerships with other companies are also crucial. Romania's Chamber of Commerce and Industry (CCIR) has several bilateral agreements with foreign countries. It is currently lobbying to introduce a mandatory contribution for companies looking to become CCIR¬ members—provided for in a parliamentary legislative initiative. The Chamber of Commerce hopes that this project will lead to better representation and promotion of Romanian businesses abroad. Still, most of the local business environment is critical of the scheme.

Additionally, the war in Ukraine is already putting pressure on Romanian companies’ ability to develop globally. Economic protectionism will intensify, supply chains will be affected, and, for some entrepreneurs, specific markets in Ukraine and Russia have disappeared. For example, Indonesia, the world's largest producer of palm oil, has announced that it intends to ban the export of this product, the most widely used vegetable oil, to the extent that could further raise global food inflation.

Under normal circumstances, sales in Russia and Ukraine would have contributed to the total business generated by a number of Romanian companies this year. An example is manufacturer Ivatherm, which had estimated that almost 10 percent of its would come from Ukraine and Russia. In this geopolitical context, due to the war and all the sanctions and restrictions the west has imposed on Russia, such Romanian companies have had to turn their attention to other countries.

With the growing importance of foreign direct investments (FDI) in generating economic development and increasing exports, many countries have founded investment promotion agencies (IPAs) very useful in drawing, supporting, and facilitating investment. Romania is also attempting to re-establish an investment promotion agency of its own, as indicated by recent discussions at the government level.

By Claudiu Vrinceanu

Romanian entrepreneurs want the establishment of performance indicators (KPIs) for commercial attachés

Romania’s future investment promotion agency should be the first entity to interact with investors and serve as an intermediary between foreign investors and the government. Ideally, the body must play an essential role in site selection, incentives, data collection, bureaucratic certification, and company establishment procedures.

Corporate planning and sector prioritisation, the institutional framework for FDI, and investor services are the main pillars of an investment agency, according to the World Association of Investment Promotion Agencies (WAIPA). Given that the Romanian agency will also include export strategy and programmes, its main objectives will include developing projects to stimulate the internationalisation of companies (outbound), and not just inbound ventures. Firstly, corporate planning refers to strategies for sector prioritisation for investment promotion. Secondly, the institutional framework for FDI and export strengthens the IPA's institutional framework by improving governance, resources, tools, capacities, and institutional coordination among key stakeholders. The third area of focus would be improving investor-focused services based on the comprehensive investor services framework (CISF) to cover every stage of the investment lifecycle (attraction, entry and establishment, retention and expansion, and linkages and spillovers).

COORDINATION, PROMOTION, INFORMATION, AND OVERSEAS OFFICES

Coordination should be a key pillar for the promotion agency, with the aim of identifying barriers to investment by consulting investors to support efforts to reduce bureaucracy as well as analyse investor views in determining the most important obstacles. The agency will then present recommendations for specific policies and programmes to local and central governments.

A second important pillar could be represented by a department that promotes easy access to the Romanian market for foreign investors and promotes Romanian firms’ interests in foreign markets. This promotion division should also have financial resources to implement concrete actions, such as marketing materials, industry events, and developing relations with the international press to promote Romania as an attractive destination and understanding of the need for foreign investments.

A third critical pillar is the existence of an investment generation division that provides information assistance by meeting with potential investors and dialoguing on the country's competitive advantages. The next step is to provide information on investment opportunities and business partners, contact information for regional and local authorities, and information on investment procedures, company registration and legislation. The agency should also generate contacts with potential clients and provide information for potential investors through simple activities, such as liaisons with foreign embassies and business associations.

An IPA’s fourth activity pillar could carried out outside the national territory, and here the opportunity would be to move economic promotion offices within the Ministry of Entrepreneurship. In this case, relations with diplomatic and consular missions must be collaborative, not subordinate. For example, Romanian entrepreneurs want the establishment of performance indicators (KPIs) for commercial attachés. A simple method could be creating an electronic platform that would facilitate the evaluation of all the attachés. Both companies that have completed the internationalisation process as well as those who have abandoned the process could participate. This method would ensure a transparent and ongoing evaluation process. At the same time, it would allow “democratization” to make a bureaucratic system accountable.

The local ecosystem needs international partnerships to facilitate the transfer of new technologies The agribusiness sector in Romania has a long way to go before it reaches its full potential, which raises an opportunity for the local ecosystem to develop its AgriTech segment to overcome certain challenges and increase its supply of goods and services for global markets. 2022 is the year of the AgriTech boom at the global level, but in Romania the number of tech startups is still low in this field.

By Claudiu Vrinceanu

KEY INSIGHTS

Romania could adopt some international best practices to develop its AgriTech sector and boost the performance of its agricultural industry. The government could support investors by launching programmes to finance and stimulate investment in AgriTech, a Deloitte report notes. Romania aims to become competitive in the regional and global agribusiness sector and an essential player in the AgriTech field. There are many examples of initiatives to facilitate the transition to "global first" thinking and innovation that brings excellent added value, including government awards for AgriTech innovations or hosting a dedicated annual conference to attract global players to Romania. Moreover, the local ecosystem needs international partnerships to facilitate the transfer of new technologies from global markets and the development of programmes to draw the next generation of entrepreneurs into AgriTech.

PLAYERS

Nextcelerator and AgTech are two programmes that have managed to open up the field of initiatives that support the development of the local AgriTech ecosystem. Their aim is to foster the potential of such startups to generate sustainable revenue and connect them with growth capital investment partners to pursue their development plans. Nextcelerator is a new digital accelerator designed to help early-stage AgriTech companies drive innovation in CEE's agriculture sector. The programme uses mentoring sessions to diagnose the startups' gaps and opportunities and then deploy appropriate support mechanisms in training, business planning, and introduction to farming. The overall goal of this programme is to develop the capacity of market-ready AgriTech startups and entrepreneurs in Central and Eastern Europe. AgTech is an incubation programme that encourages and helps innovation in agriculture, and it also works with early-stage AgriTech startups across the country. The incubation phase occurred over a period of three months and provided support to five of the ten startups that had participated in the previous stage.

TECH STARTUPS

Ten of the most active and experienced Romanian AgriTech startups and scaleups are AgroCity, Enten Systems, Agricloud, Agrobazar, StartAgro, Fermier Bun, CBN AgroTech, Vetfast, Kolta, and Verdefood. One of the most visible startups in this field is AgroCity, a farm management platform that integrates modern technologies to help farmers streamline operations. The platform digitalizes and brings together all the processes of an agricultural farm (from plots, rental, and monitoring to planning and carrying out production operations). INVESTORS

Between 2018 and the end of 2021, 857 financing rounds in AgriTech and AgriFood were completed in Europe, totalling USD 4.5 billion.

After a stagnation of investments in 2020, the end of 2021 seemed to witness a return. Locally, investments in AgriTech amount to only a few hundred thousand euros per startup, and such financing is not very widespread.

The most active investor is a strategic one, Holde Agri Invest, a Romanian company that exploits agricultural land, which has invested in AgroCity and Enten Systems.

WHAT CAN WE LEARN FROM OTHER COUNTRIES

Romania’s AgriTech and FoodTech ecosystem is in an early stage, both in terms of the number of startups and of the existing support system, with a few local niche programmes, dedicated investment funds, and a growing interest in innovation.

Accelerating the ecosystem requires collaboration and the creation of a closer link between tech startups, agricultural associations, and companies with solid experience in the field, as stated in an EIT Food report. This would further support startups in understanding their customers' needs, testing their products, and growing.

Ramona Bratu, Marketing Director at ALDA Romania, the company behind the SAGA Festival, sat down with Business Review to talk about the upcoming second edition of the festival and offer an overview of ALDA’s other projects in Romania and all the backstage efforts involved in organising these events.

By Mihai Cristea

With the second edition of the SAGA Festival set for June 3-5, what are your thoughts about the experience of the first edition, its results, challenges, and the lessons you learned from it?

The first edition of SAGA was a long waiting game, due to the pandemic context. When we finally got the approval to organise the event, everything happened super quickly and we had to prepare all the festival communication with the new date and location in just around 3 weeks. There were lots of challenges, but fortunately they were accompanied by great outcomes: SAGA had great results in terms of awareness for a brand new festival. Over 40,000 happy festivalgoers per day and amazing reactions from both the people who attended and those who saw everything in the media and online, on social media, and wanted to be part of the movement this year. One of the greatest lessons I’ve learned is that you can’t build anything great without trust.

The second edition is quickly approaching, so what can you tell us about the preparations, the concept, artists, venue, and any other aspects?

and enjoy the SAGA experience. There will be 10 stages and over 150 local and international artists. From a musical perspective, this year brings something new, namely a great collaboration with Bucharest-born music platforms—renowned clubs such as Expirat, Control, and many others. They will be present at the festival for their own audience and for all SAGA participants, coming from over 30 countries.

After the second edition of SAGA, you will also organise the Sound of Bucharest event, Armin Van Buuren's biggest solo show in Europe, which will take place in Bucharest on September 24. What can you tell our readers about this project?

Sound of Bucharest is an event that will take place every year, starting with September 2022, and it will showcase a phenomenal production, in line with the consistent quality of events created by ALDA throughout the years. It also brings together the world’s greatest DJs, such as Armin Van Buuren, who will come to Bucharest this year for an impressive solo show. This event will be broadcast live in over 100 countries, and we strongly believe that the Palace of Parliament is the best place to promote Bucharest, as it is an iconic place with a huge potential to attract visitors from abroad, now and in the future.

Earlier this spring, ALDA organised WE ARE ONE, the biggest charity event in Romania, in support of Ukrainian refugees. How did you approach the marketing campaign and overall strategy behind this event?

If you lack courage, you won’t be able to move or change anything, neither in life nor in business. I am grateful for all that we have achieved, both in terms of funds raised as well as in terms of image. Things were stagnating for many reasons, then the war came on top of it all, and since I just don't like to sit and wait, I spoke to my marketing team and the ALDA management team about what we could do to get involved in the way we knew best, by getting people together.

The reason was very important: raising money for the war-torn Ukrainian people. An important factor that helped the marketing campaign was something that initially looked like a threat: time. Time pressed us to move even faster and create a movement in Romania.