One of the companies that will receive state aid has a turnover of 5,100 lei, a profit of 541 lei and will receive state aid to make “sustainable investments” in production worth 26-45 million euros, according to a Romanian businessman. Association (AOAR)

The association representing companies with Romanian capital engaged in manufacturing activities draws public attention to the inferior way of managing state aid, which leads to a loss of confidence in the ability of ministries to manage public funds, according to an AOAR press release

Government Resolution No. 959/2022 established a state aid scheme for providing grants for investments intended for the manufacturing industry, a project competition opened by the Ministry of Economy.

81 projects were submitted to the competition, which ended on December 16, 2022, of which 21 received the maximum score of 100 points.

The applicant’s guide expressly required the submission of a business plan that “must emphasize the economic efficiency of the enterprise and the viability of the investment for which financial support is requested.”

In order to distinguish the 21 companies that received the maximum score, only the criterion of turnover profitability was taken into account, without considering it in the context of the analysis of “viability of investment”, respectively, the ability to absorb and use state aid by qualified companies.

This led, in the opinion of AOAR, to the appearance of mocking situations based on published information, which discredit the assessment process (for example:

• one of the companies that received financing is a company with a turnover in 2021 of 5,100 ron, with a profit of 541 lei, with a turnover rate of 90.29%! This company must receive state aid and make “sustainable investments” of between 26.25 and 45 million euros;

• 6 out of 8 winning companies have a turnover of less than RON 600,000, and the average turnover of all winners is RON 1,108,582 (approx. EUR 220,000). Each of these companies must receive state aid and make “sustainable investments” of €30,000,000 each (average value).

• the total (aggregate) number of employees in 8 winning companies is 14, i.e. an average of 1.75 employees per winning company;

• the average profitability for the 8 winning companies is 67.2% (reaching more than 90%, according to the data published on the website of the Ministry of Economy), which is significantly higher than the profitability of companies with manufacturing activities (located on average between 5.2% and 17 % according to the attached table).

Acquaintance with such tables by those who established the connection between the 21 companies would be a mandatory condition and would allow to avoid the liquidation of companies that are actually engaged in the processing industry, “apartment companies”.

It takes a minimal level of insight to understand that such companies win the tender, but do not have the experience and resources to make large-scale investments, as well as the ability to absorb and implement state aid that is 200 times the size of their business. , also stated in the AOAR press release

Most likely, they are used to mask the economic interests of other subjects who do not want to appear publicly and/or who would not qualify and will change their ownership in subsequent periods (through capital increases, convertible loans granted directly or indirectly, etc.), Romanian entrepreneurs add.

In other words, state aid becomes the subject of trade between business entities through mechanisms that are used specifically for such auctions.

By ignoring business plan analysis and “viability of investment” by those involved in the solution, the basis is laid for a “secondary market” in which there will be companies used to win tenders for public assistance. are traded

They represent unfair competition to companies that are actually engaged in the production industry and that applied for this state aid. A procedure for distributing state aid based purely on profitability, taken out of the context of viability analysis, creates an unprecedented, imperfect situation that lacks transparency and economic justification.

Compared to the above, the way in which the 21 companies were divided needs to be corrected, taking into account, according to the Applicant’s Guide, the “viability of the investment plan” and the likelihood of the actual absorption of the state aid by the applicant state.

The AOAR also requests that all companies that receive the maximum score of 100 points and have a track record and turnover figures compatible with the level of public assistance requested be considered for funding.

We note that such companies as “Khimkompleks”, “Promateris”, “Zareya”, etc., which are regional leaders in their field of production, were not selected, not having the opportunity to have a profitability indicator at the level of “apartment companies”, – summarize the authors of the issue