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Romania has this year approved a new state aid scheme that focuses on innovative investments, in a move to boost job creation and develop the domestic R&D scene. Although companies looking to apply for state aid may perceive the process as bureaucratic, it is more streamlined than accessing EU funds, said some of the specialists that attended last week’s Access to Finance Workshop on State Aid, organized by Business Review.
The state aid schemes in place support regional development and stimulate investments, which allow companies to gain a competitive advantage, according to Oana Soviani, head of the grants and incentives practice at law firm Salans.
There are three state aid schemes running at the moment, with one expected to close this year. Four years ago the government approved HG 1680/2008, with a total budget of EUR 1 billion. The scheme runs between 2009 and 2013 and EUR 600 million of financing is still available. It covers up to 50 percent of eligible costs and has a financing limit of EUR 28.1 million for all regions, except Bucharest and Ilfov County, where it is EUR 22.5 million.
A second scheme, HG 753/2008, had a total budget of EUR 575 million and will conclude this year.
The latest one, HG 797/2012, becomes operational in November and will run for two years. It has a maximum budget of around EUR 100 million and should finance ten projects. This one covers up to 40 percent of the costs with a financing limit of EUR 22.5 million in Bucharest and Ilfov County, and 50 percent with a limit of EUR 28.1 million for other regions.
The manufacturers of components for the automotive sector represent the largest share of recipients through the state aid scheme SAS 1680.
German firm Bosch secured EUR 39 million in state aid to develop car electrical systems and speed sensors. Draxlmaier got EUR 10 million to diversify the production of electrical cables for car manufacturers Daimler and Porsche. Meanwhile Romanian carmaker Dacia received EUR 15.4 million to develop its first SUV, the Dacia Duster, which has enjoyed lively sales. Other companies that have secured funds are active in the medical, energy and tourism sectors.
Companies wishing to get state aid need to have a solid investment plan and a good application file. Short-sighted firms may end up eventually returning the aid.
“In Romania not many applicants have flocked to get state aid, maybe due to the bureaucracy and the detailed applications that have to be made,” said Soviani of Salans. She added that EUR 600 million was still available in June as the money accessed so far has been below the initial estimates.
An investment partially funded by state aid has to be maintained for five years, which is the monitoring period. The two ongoing schemes differ in terms of investment eligibility.
For SAS 1680 the value of the project and the initial investment is taken into account, while for SAS 797 innovation is paramount, according to Soviani.
SAS 1680 has three thresholds including initial investment volumes from EUR 5 million to over EUR 30 million. Investments should create from 50 to over 300 jobs accordingly.
For SAS 797, the initial investment needs to be innovative or have an IT&C component of at least 20 percent of the investment plan. In addition it should create at least 200 jobs in the next three years following the completion of the investment.
Activities in the telecom, IT&C, informatics, R&D and manufacturing sectors would qualify automatically for this scheme, stated the Salans associate.
Companies looking to develop new units, extend existing ones or diversify production can apply for state aid, explained Soviani.
“The SAS 797 scheme focuses on innovation, while the SAS 1680 scheme covers investments that involve the asset purchasing of a closed unit, or one which would close without this acquisition,” said Soviani.
In terms of eligible costs, HG 1680 covers manufacturing units, medical and tourism buildings, as well as patents or licenses, and the full personnel expenditure for two years in the case of newly created jobs, according to Manuela Furdui, managing partner at Finexpert, a financial consultancy. The firm currently has 18 files in the approval or analysis stages for state aid. Its clients include Pirelli Tyres Romania and Lufkin Industries.
SAS 797 covers only the wage expenditure for two consecutive years of the newly created jobs. Equipment has to be new and cannot be acquired from companies within the same group, although exceptions have been made in the automotive industry, said Furdui.
The eligible costs for a production unit stand at EUR 370-EUR 425 per square meter, excluding VAT. For a tourism structure they are EUR 750, and for medical care units EUR 850.
“The land value is not included in the investment in SAS 1680, and in SAS 797 neither the building nor the land can be covered, as it is about equipment and software,” said Furdui.
Companies requesting aid under SAS 1680 need to present an investment plan and a techno-economical study. Aside from the investment plan, SAS 797 requires a job creation plan and a business plan.
The investment kicks off four months after the Ministry of Finance grants the state aid for SAS 1680, and in three months for SAS 797.
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