Detailed Study on the Evolution of the State Aid Scheme issued by G.D. No. 807/2014
OMEGA Consulting conducted a thorough research of publicly available information on the results and the evolution of the investments made with the State Aid Scheme issued by G.D. No. 807/2014.
The study was conducted to provide an overview of this funding program. We recommend this reading for active entrepreneurs in the Romanian market who want to better understand the typology of the funded projects.
In our presentation we analyzed the projects financed between 2014 and 2019 and the positive socio-economic consequences they had. Thus, the research hypotheses considered:
– the number of projects by year and the value of the grants;
– the industries that have accessed this state aid;
– number of new created jobs;
– number of projects / share of grants by region.
EUR 325 million for 2020
The huge budget of EUR 325 mil. of the state aid scheme 807/2014 for 2020 has attracted the attention of our company. Therefore, OMEGA Consulting carried out an analysis of the investments made through the State Aid Scheme regulated by G.D. No. 807/2014.
Justification of the Intervention
Taxes and duties are the most important tool of a democratic state for achieving social development goals, well distribution of wealth and reducing inequality. Also, the taxation instrument is necessary for the correct distribution of the money supply, which otherwise would reenter the markets circuit, thus causing inflation. Therefore, the state aid aims the economic development of the companies, which subsequently will increase the contribution to the state budget through taxes and duties.
The success of the state aid scheme was based on the large size of the investments.
OMEGA Consulting has the pleasure to present you the socio-economic impact of the investments made between 2015 and 2019 through this scheme.
The Evolution of the State Aid Scheme
2015 – the first year that this scheme contributed to the investments of companies and totaled EUR 69 mil. for 7 companies, including Robert Bosch SRL and Automobile Dacia SA.
2016 – the government financed through this aid projects worth over EUR 200 mill, its contribution being about 100 million euros. If in 2015 the maximum value reached by state aid was about 15 mil., in 2016 Arctic SA received EUR 36 mil. euros for a new production line. The total investment was almost EUR 100 mil., and almost 500 new jobs were achieved.
2018 – the first investment close to the maximum that can be granted. Unniversal Alloy Corp. Europe received funding of EUR 37.39 mil., the highest amount approved by Government, for a total private investment of EUR 100 mil. . The American company already operating in Maramures has inaugurated a component production center for the aeronautical industry. Almost 700 new jobs were created by the company for this investment. Also, companies such as MG TEC Industry, Automobile Dacia SA or Sogefi Suspensions Eastern EU have accessed this year financing of EUR 32, 25 and 22 mil. respectively. A total of 19 projects were funded in 2018, compared to 4 in 2016. The increase in the number of projects financed, as well as the increase of the accessed values, tell us that the private sector is beginning to find this funding source as a safe and stable one. The total amount funded by the government in 2018 is EUR 203 mil. .
2019 – the state aid scheme financed 21 projects, totaling EUR 108 mil. . Among the projects financed are the investment of the Haier giant which builds in Prahova a refrigerator factory that will employ 740 people. The total investment reaches to over 51 million with a total aid of 25 million euros. Among the funded projects we also find Maspex Group with two projects: one in Vatra Dornei with a grant of EUR 8 mil. and a second project with a grant of EUR 9 mil. in Valenii de Munte.
The Evoloution of the Grants
Therefore, 7 companies accessed the aid in 2015 totaling EUR 69 mil. – 14% of the total amount guaranteed by the state between 2015-2019. The year 2018 was the real success of the State Aid Scheme, over 3500 jobs being realized through investments of over EUR 400 mil., with EUR 204 mil. state aids, representing approximately 41% of the total amount guaranteed during this period. Considering the increase of the realization of the jobs and the huge budget that the financing line has for 2020, OMEGA Consulting estimates about 5000 jobs that will be created through the investments that will be made this year.
OMEGA Consulting analysis also turned its attention to the industries that had appetite for investments. Therefore, between 2015 and 2019, the automotive and the construction of cars sector attracted over 181 million euros through state aid, representing 37% of the total grants. The automotive industry was followed by the metallurgical industry, an industry that managed to attract almost 98 million euros through only 6 projects, which makes the beneficiaries extremely competitive in their sector of activity.
New Job Creation
From the jobs created point of view of, the automotive industry and the car construction industry again occupied the 1st place with a total of 4346 new jobs created out of 10542 in total, representing 41%. The growth we expect in 2020 is 60-70% compared to the average of the new jobs created by these investments in the 2015-2019 period. This is due to the budget of EUR 325 mil. for a single year, a budget that can be compared with the amount of grants approved in all 4 years. The budget of 2020 is almost 5 times higher than the total amount accessed in 2015, 3 times higher than the amount accessed in 2016, 1.6 times higher than the amount accessed in 2018 and 3 times higher than the amount accessed in 2019. All these figures indicate that 2020 will be a year of big investments.
Analysis of the Regions in Romania
Our analysis also offers a perspective on the development of the regions in Romania. South Muntenia accessed a total of almost 171 million euros and created 3100 jobs, representing the largest amount accessed. On the 2nd place from the accessed values point of view, it is the North West, which accesses almost 168 million, but it is on the 1st place from the new jobs created point of view – 3688. North East and the South East managed to attract only EUR 32 mil. and created only 440 jobs.
The Ilfov Bucharest region also attracted EUR 7 mil., developing 170 jobs through a single project – Therme Nord Bucuresti. The A-Heat group from Austria has invested over EUR 50 mil. in total, making one of the most well-known wellness and relaxation complexes.
The state aid scheme regulated by G.D. 807/2014 presents excellent opportunities for companies with investment plans for 2020. The huge budget of EUR 325 mil. can finance both investments of large companies, which can access grants of up to EUR 37.5 mil, as well as small companies or startups. More details on what and how it is funded through this state aid scheme can be found by clicking here!
Disclaimer: This article was made based on the public information provided on the webiste of the Ministry of Public Finance in Romania and contains only general information and should not be used as a basis for taking decisions or actions that could affect the finances or business of your company in any way. OMEGA Consulting (an OMEGA Trust service line) assumes no legal or other responsibility for the accuracy of the information, any errors or damages that may arise as a result of the analysis of this document or the data or names presented. The presentation was made according to the public information available at the time of writing. This presentation does not in any way reflect the position of the Government of Romania or any other public institution. The sole purpose of this document is to inform clients and partners of Omega Trust or OMEGA Consulting.