International economic development consultant Aldous Mina, and former US Peace Corps representative identifies US-Romania, commercial relationship building. Mina spoke with BR about the benefits of attracting foreign direct investment to Romania, as the globalization of markets enters the fourth industrial revolutions era.
Aldous, who published the books faceconomics Like it 2012, Barbecue Markets and the Secret Economic Sauce of the New World Market Environment 2017, says that foreign development experts can assist in Romania’s aspiration in becoming more visible for investors at an international level.
Mina has worked in Romania for several years and has provided consultancy services in Central and Eastern Europe. He is the managing partner and lead consultant for CEE at PGC Group, a market entry and global finance consulting network.
How ready are the economies in Central and Eastern Europe, including Romania, for the fourth industrial revolution?
Let me simply provide this thought. I believe the question can be answered by the following question. Are countries within Central and Eastern Europe open to the promises and opportunities that the 4th industrial revolution provides? Emerging and Frontier markets now have the opportunity to test drive the changes and innovations that the 4th industrial revolution offer. With this said, I believe that Central and Eastern Europe including Romania, is up for a wonderful future ahead, if they open their hearts and minds to innovative ideas, embracing concepts that may be foreign in nature to the national norm and cooperate with those that have had a proven track record in market development and capacity building in the region.
The 4th industrial revolution is none like other industrial revolution in the past. When the printing press was developed, it was to provide knowledge and awareness to the domestic market. Today, the influences of technology transcend borders and increases knowledge and inspirations worldwide. An inspired society is a winning society, which is one of the promises brought forth by the 4th industrial revolution movement.
Social media, magnified awareness to people worldwide in such short period of time and behemoth in economic development application. Today, learning through social media has become the norm in emerging and frontier markets, while knowledge sharing is increasing within developed economies. The sharing economy has gone viral and I believe it will continue to manifest itself in further economic potential building around the world.
I would say, Romania, has proven ready for the fourth industrial revolution in various segments of the domestic market in my opinion. As a trajectory, I often see new and innovative approaches to economic development being displayed by both entrepreneurs and skilled business community in Romania. With this said, I also see an overly eager and early expectations in return on investment business community which, often discourages many would be entrepreneurs almost instantaneously. I believe the Romanian start up community must learn to diversify and properly manage resources for them to sustain and develop a more structurally sound organization.
Over all my assessment of Romania’s development via the 4th Industrial Revolution is very optimistic, though the amount of time that it will take for Romania, to fully engage as a business leader in the European continent will take a substantial amount of time, resources and know how to cultivate without the help of foreign experts or the Romanian diaspora that are well skilled returning to assist.
The foreign investment communities in Romania say the economy is shifting from a low-cost model to a largely R&D destination for multinational companies. What should Romania do to attract more investors doing complex projects?
I believe Romania, is a multi-dimensional market economy system, in which various sectors can flourish given the right commercial environment. The technology sector is one of the very attractive industry within the local market and I feel the (Research and Development) R&D competition globally is what propels the entry of multinational companies into Romania’s core competency industries, such as cement technology, aerodynamics, shipping, bio/chemistry, water purification and even military etc. But we also, need to consider the fact that Romania, is also experimenting with new and innovative ways to address the agriculture industry, transportation and port authority to be ready for maritime trade and investment. So, it is a win-win strategy when cooperation and innovation is welcome and embraced by both Romanian and foreign investors.
Romania, will not be able to attract investment from abroad without foreign economic development specialist helping promote the local market. Perhaps, not even that alone would suffice. Romania, as a country will have to develop a favorable market reputation. It will take more than just words of foreign diplomats representing Romania’s market credentials and potential. I believe those who have worked, experienced the potential and lived in Romania, as expats would have to sing the song of economic prosperity.
Many countries, may it be developed or developing are racing other countries to the top. What I mean by this, is that countries are tailoring their economic strategy to help attract investments worldwide to enter their domestic market.
For example, these can be in a way of land use discounts or incentives, trainable workforce that are ready to compromise, visa and repatriation of assets mechanism, freedom from political influences, and even work life balance for expatriates living in a host country. So, Romania, as a part of a twenty-eight market union, as well as one of the many countries in the Eastern European Region would have to formulate a decisive approach to compete in the new world market arena for investments.
Romania’s economy is set to grow by around 5 percent this year, while the budget deficit might exceed 3 percent of GDP. Is the country’s economic development on a stable footing if we look just at these two indicators?
Romania, just like any emerging markets will go through various fluctuations in economic performance. The International Monetary Fund have forecasted past 5 percent GDP growth looking all the way back in 2010, which was seven years ago for Romania. So, an economy cannot be assessed using two or even the tradition market indicators of the past alone.
Many of Romania’s start up, Artificial Intelligence community, Online service providers and even the mail delivery sector has the potential to make such a profound impact in the economy. And because of the rapid business development happening within the online and social media business sectors many organizations that typically forecast economic health or financial struggles of a country are playing catch up on ways to forecast an economic revolution happening in most countries.
The best way to promote economic growth and even optimism for Romania and other emerging and frontier markets is by thinking outside the proverbial box. This would entail working with foreign experts, increasing capacity building via cooperation, looking deep down within ourselves and giving back to the community that we belong in. In short, think as a unit.
Economics revolved around how people feel about their financial and social wellbeing. Hence, in economic development it is crucial that people feel that the opportunities and resources are abundant and can be easily obtain. These can be exercised, by promoting sustainable economic development agendas. An example, would be attracting foreign direct investment, opening the market toward transparency in competition and government policy that is clear for both local and foreigners to engage in.
Furthermore, a strong economy is a visible economy in both local and international sense of the word. Therefore, if Romania, continues to economically evolve where the market environment is favorable to invest in, neighboring countries are willing to cooperate with and infant industries are able to grow, then Romania, would be considered a stable and strong market to do business in and partner with.
From your experience, how can Romania, as an emerging economy, bridge the development gap between various parts of the country? For instance, in major cities in western Romania the unemployment rate is very low, while in the eastern part of the country the workers have left abroad because there are not enough jobs?
In my humble opinion, opportunities can be created when there is no barrier to opportunities. A free market system is only free when jobs are competed for and valued as an asset by the employees, companies and decision makers. Employment gaps are symptoms of poor economic development structure and initiatives. In order to fully create a flourishing market economy; the political environment has to be pro capacity building and should pave the way to structured development which is a bottom up approach, starting from the community schools, city council, local mayor’s office, universities, NGO’s and all the way to the top European Union representative.
A market is a community, hence giving every stake holder a voice to help address issues that aren’t always known is key to economic development. The local public should be given the right to invest and improve the dynamics of their local communities. Promote outside the box thinking in capacity building where both the young and old generations are granted an opportunity to speak their minds without repercussion and engage in an open dialog.
With this said, I do understand that there are segments of the Romanian population who may not always agree with progress or understand the full benefits of change. This is a normal knee jerk reaction to a growing economy. As many would say, growing pains are always a part of a transitioning society. Therefore, I believe decision makers, consultants, government leaders, and academia would have to hold the public’s hand and help them walk through the changes.
Market barriers present a hindrance to growth when the conditions aren’t being addressed or decision makers lack the ability to identify issues preventing market development. Furthermore, when the local mentality is evolving from a post-communist to a free market economy, it will take a substantial amount of re-education, business training and overall re-setting of perspective and priorities in order to fully allow sustainable economic growth to flourish.
As a consequence, the Chamber of Commerce’s within the country and other economic development apparatus should be effectively developed and managed to support business and job creation. They can teach each other best practices to fully develop capacity building and bring in international business experts to help with the transition to a more macroeconomic dimension in business principles. Foreign experts typically have an approach that comes from looking in from the outside which increases the potential of organizations to understand the pressing issues lingering within their business and market environment.
When do you think Romania should join the Euro zone and what’s your opinion on European common currency project?
First and foremost, markets create economic zones when there is a strong argument for its benefits. The main function of the Eurozone was to control inflation among economically strong nations. Let me be clear, it was created to provide safety in market forces that could affect those developed nations primarily. It was not designed to support growth of neighboring countries that are developing.
In addition, not having a fiscal policy in each member country is not the best foot moving forward. It destabilizes the economies of both debtor and loan guarantor countries. When the ECB, is the sole monetary policy manager within a group of countries that tend to have a deficit economy, their approach is going to be more reactive in nature rather than proactive in perspective.
With this said, there are currently 19-member countries within the Eurozone, which have 19 very different market systems and trade structures. If Romania, were to join the Eurozone, I believe it would require for Romania and the European Central Bank, to formulate a structured financial apparatus that would create sustainable economic growth for Romania, a developing country. This will enable the national bank to increase its capacity in lending within the domestic market. However, I believe it is also worth noting that the risk involve will be put under a microscope by not only the larger economies of Europe, but the weaker economies looking to also transition into the Eurozone environment.
The common currency system was developed to counter balance the currencies that are dominant in the world market. It was architected to be used to preserve wealth and the value of a market environment. The premise behind the European financial sector was to have a common currency in which it can utilize to help build the European market environment, may it be as an export destination or a barrower market. With this said, I believed that because of the changes happening in the world market environment, a common currency system is proving to be very problematic for Europe.
I’m not sure how long the Euro as a currency will remain active with the current state of affairs within the European Union and their respective markets. And it would be premature to make an assessment or prediction. I believe it would be best to explore ways to keep the European market economically sustainable.
Many factors will have to be considered on Romania’s as session into the Euro currency unit and looking at what has happened in Greece, where the ECB and even Germany, worked tirelessly in order for Greece to be able to repay its debt or even meet the basic requirement of Eurozone membership can be used as an indicator for Romania’s future accountability. As an alternative, Greece had to engage in a rather unprecedented level of austerity— short for belt tightening on their expenditures as a country in order to remain in the Euro Area and I believe this would be a relevant subject to entertain for Romania’s decision makers.
Romania, as a sovereign state would have to weigh the benefits of joining the common currency system. It will require to formulate a plan to sustain its economic growth, attract investment from overseas, keep a strong and well qualified labor market, dedicated public servants in preserving democracy and transparency and above all reducing the numbers of well-educated Romanians immigrating within the European Union or other developed countries, just to name a few.
From your perspective, how will the expansion of the share-economy and automation of operations in various industries influence the development of the global economy in the next decades?
The fourth industrial revolution is a people power movement. The basic tenets of a market economy are the ability of the population to self-sustain through economic development and adopt to market forces. This is done by entrepreneurship, businesses organizations, social support system, a comprehensive pollical approach to job creation and ability to participate in the globalization of markets.
Automation is not a new concept, it simply took longer to implement because it was not a job creator in societies that have a large population. Today, automation is largely increasing the potential for new business sectors to develop as well as give a country a competitive advantage. I believe many developing and developed countries will utilize automation moving forward because many countries would focus on a knowledge based economy in which, the population would contribute in new ideas and promote broader revenue yielding concepts for individual countries.
This takes me to the share economy concept, where people are feeding off new ideas and turning it around to serve a broader purpose. Social media is the catalyst and will most likely engulf the medium of knowledge transfer well into the next phrase of the industrial revolution worldwide many years from now.
Having new concepts which often happens instantaneously may become a nuisance for organizations that have invested time and resources into research and development. The trajectory of a shared economy can be a DISRUPTOR to traditional industries and processes. However, it also enables growth and productivity among companies that are ready to compete and remain attractive within a well-educated world population.
The globalization of markets is permeating the vast and fast ideals of automation to develop core competencies worldwide. Hence, decades from now, I believe the labor market would shift from a blue-collar market environment to a largely white collar professional community in developed countries. The next phrase would entail a substantial growth of blue collar skilled workers in developing countries and frontier markets, which will increase economic growth and the rise of the middle class in those societies.
The leap froging factor, a concept fast evolving around the world, in many industries would escort the transition of many developing markets in gaining momentum to compete and attract investment worldwide. This would allow the fragmentation of economic unions worldwide, such as the Brexit effect in the EU because they would gain control and autonomy in who to trade with around the world and develop a preference in economic relationship building.
Do you think that Trump’s administration will have any impact on the globalization process of businesses?
Great question, but that remains to be seen and for President Trump, to convince the world market as well as the American business community that he has a policy that will be able to meet the challenges in the new world market environment. Coming from the business sector and as someone who has been tested by many market influences, I do believe that President Trump, may have a more stronger tolerance for risk taking and economic development foresights. However, he is faced with many challenges and opportunities in our domestic market as well as the global market system. With this said, he would have to set realistic and actionable priorities in a very limited fiscal market setting.
In addition, to local market forces he would have to engaged a very globalized international market community all of which are piggy backing from ideas that have originated from the states or have been influenced by concepts from the US. Mr. Trump, would have to focus on creating new markets for us to trade with and develop a solid commercial relationship worldwide.
Just like what I wrote in my book (Barbecue Markets and the Secret Economic Sauce of the New World Market Environment, Mina 2017) The new world market is no longer playing to the beat of one (economic) drum, markets are now engage in a competitive trading environment. Trade and commerce around the world could enter many growing and stabilizing markets other than the US, because they now have options never before seen in the past.
The rise of social media is a unique game changer around the world. Mr. Trump, seem to understand the power of social media and has displayed his ambitions and frustration via the social media environment. With all of this being taken under consideration, I firmly believe that the Trump administration is actively looking to develop commercial relationships around the world. For example, early June of this year, he invited President Klaus Iohannis, to Washington DC, to further cultivate economic and diplomatic ties between the US and Romania. He has also, been very vocal about his support in helping create a stronger economic environment for investment in Romania from the US and vice-versa.
To further make a case on this US-Romania economic trajectory, recently US ambassador to Romania Hans Klemm, also stated that he was proud to announce the participation of Romanian businesses in the Select USA summit that was held in Washington DC, just a few weeks ago. With this, I believe that both countries are embarking on an unprecedented move in market creation and economic development strategic relationship building.
In conclusion, just to further reinforce the strategic value of the US-Romania economic cooperation. In October of this year, a large delegation of American companies will be participating in a trade mission which is going to held in Bucharest. There are five countries within South East Europe, that will be a part of this network building, investment opportunity identifying, economic development structure building and business relationship cultivating cultural exchange within the region and the United States of America. I believe having to put our best foot forward is key to economic development building and this event would be a wonderful opportunity to engage in. Thank you for your time and consideration of the new world market forces escorting the fourth industrial revolution worldwide.