Costescu (InvestRomania): From investment banking to a public sector job – Romania is now a country of quality, not cheap labor

Newsroom 27/06/2016 | 11:12

Although he worked abroad as an investment banker until a few months ago, state secretary Manuel Costescu has taken up the challenge of making Romania more attractive to foreign investors. In an interview with Business Review, the head of InvestRomania detailed the reasons investors are choosing the country for new projects. One of the conclusions is that Romania still has one of the most price-competitive workforces in Europe, but companies are now looking to develop more complex projects, which demand R&D expertise.

 

Ovidiu Posirca

What’s the investment story of Romania? Are we still talking about a country that can attract companies based on lower wages than the EU average?

Romania today has a very different narrative from 15 years ago. Indeed, Romania has, on average, one of the most price-competitive workforces in Europe. However, this is only part of the story. We hear investors who come and stay in Romania mention several attributes which make our country their destination of choice: the high quality of products and services, an educated and large workforce (100,000 IT specialists by 2018) who are very willing to work hard, language skills (numerous service firms see this as highly valuable), great IT infrastructure (top three in Europe), very appealing and increasingly hip lifestyle, low crime rate, political stability in an unstable region (we do not have any nationalist parties in power or representing large parts of the population), connectivity to Europe, cultural affinity, to name but a few.

Romania is now a country of quality. We talk to investors who tell us that the error rates on their shop floors are lower than in the countries of origin – and on a recent visit, I confirmed the statement with the headquarters of the company. More and more investors come to Romania because you can produce high-quality products and deliver high-quality services at a competitive price.

How did this evolution unfold? While investors came to Romania 15 years ago because of cheap labor, the workforce has developed with the industries and allowed entrepreneurs to branch out into areas with higher value added. So even as the costs of production have risen (which is undoubtedly good for the workers), so have the quality and the value added. We see now that investors who used to manufacture products are also expanding into R&D. We also see investors who started manufacturing low complexity products grow in complexity, as they discover that the workforce is able to develop alongside and deliver a very high level of performance.

Can Romania attract major investments without offering state aid?

You must take into account that there are large investments that did not benefit from state aid at all, and yet they were executed. The total CAPEX in state aid for example was EUR 100 million for 2015, while investments were somewhere in the range of EUR 3 billion.

That being said, state aid is a mutually beneficial instrument making the investment case better for foreign investors and returning to Romanian taxpayers EUR 2.28 for every EUR 1 invested in the 2007-2014 interval.

Also, state aid is offered by our neighbors, so to stay competitive it is important to understand what our competition does.

What are the sectors with significant investment potential that haven’t been explored enough in Romania?

In terms of sectors with high investment potential, the government has identified six priority sectors that we promote within our “Industry of the Month” project. We launched this in early May, with the key objective to improve the visibility of the most important industries. The sectors I mentioned are IT, automotive, aerospace, bio-economy, creative industries and agriculture. What you must remember is that these sectors (where InvestRomania aims to encourage investment, both foreign and domestic) are not the only ones we are working on, but they have the potential to drive outstanding economic growth. We are promoting these industries continuously on our site http://investromania.gov.ro/ and on our Facebook page https://www.facebook.com/investro/, posting topics of interest and relevant information from these areas and our current events.

Do you think Romania could attract companies making innovative products, such as electric carmakers Tesla or Ford?

Of course it can. And I do not think we should limit the discussion to automotive. I think the engineers, software developers and overall innovators have reached a maturity through which they are able to attain even 0 percent error rates in manufacturing. This can only happen through dedication and talent, and I believe we have plenty of both. This is not wishful thinking, as I am not the only one seeing this potential. Significant automotive manufacturers have started the development of R&D operations locally. InvestRomania is currently working with several foreign investors interested in opening R&D facilities here. Clearly the trend is upwards. That being said, we need to be very clear about what clients need and also understand the limitations we have as an investment destination.

You used to work as an investment banker in London. How is Romania perceived in the City? Why did you take this job in the public sector?

Foreigners’ (and Romanians’) perception of Romania lags far behind today’s realities in Romania, at least as far as investment opportunities are concerned. It is our responsibility to use every channel to close this gap. As mentioned, this can be done by working hard on a true and compelling message which is then delivered through various channels: media, conferences, events, roadshows, etc. Whenever our team travels somewhere (domestically and abroad) we ensure that we have conversations with investors, but also the relevant media channels, universities, administration officials, etc.

However, I would like to highlight an area where perception is aligned with reality: Romania’s technocrat government. And here, I would like to paraphrase several of the European and US politicians whom I’ve met over the past four months, and whom I have always admired for their integrity and courage: “The team you are part of is made of individuals of true integrity. Romania deserves more of them; finally after too many years the government is an asset for the Romanian people.”

Why did I accept this job… the answer is simple, though not entirely mine. I’d been asking myself the same question – why should I accept this role? – then I heard Minister Costin Borc say in an interview: “I believe in Romania”. At that moment I knew the reason. And this was very simple: because I believe in Romania. I am not the only one, though. I am part of that critical mass of individuals who attracted me through their integrity, the most important attribute when representing your fellow citizens, starting at the very top with Dacian Ciolos, Dragos Pislaru, Dragos Tudorache, Vlad Voiculescu, Oana Bizgan, Ramona Ianus, Calin Ungur, and Dan Suciu, to name but a few.

However, I have no doubt that everybody who has served in this government because they believe in Romania will remember this experience. My personal view is that, for that part of society of successful but politically inactive individuals, this could be an Apollo moment, which could gradually change our society.

 

CV Manuel Costescu

February 2016-present: state secretary at Invest Romania

2010-2016: investment banker at JP Morgan – public sector coverage

2009-2010: owner of Kugi-Costescu Consultants

2005-2009: engagement manager at McKinsey&Company for multinational companies in the US and Canada

Costescu holds an MBA from MIT – Sloan School of Management. He has a master’s in Public Administration/International Development from Harvard University – Kennedy School of Government and a bachelor of Economics from Brandeis University.

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