Romanian best practice example of regional state aid schemes ` Mihaela Marinescu Romanian Competition Council State Aid Department

Best practice Romania GD no.1680 on implementing a state aid scheme for economic regional development

Best practice Romania The main objective: regional development through investments and creating new jobs. Communitarian legal base: EC Regulation 800/2008

Best practice Romania Conditions for eligible investments:  Initial investment between million euro and creating at least 50 new jobs;  Initial investment between million euro and creating at least 100 new jobs;  Initial investment between million euro and creating at least 200 new jobs;  Initial investment over 30 million euro and creating at least 300 new jobs.

Best practice Romania The initial investments and new created jobs may be created in all the sectors except for: (a) aid favouring activities in the fishery and aquaculture sectors, as covered by Council Regulation (EC) No 104/2000 (1); (b) aid favouring activities in the primary production of agricultural Products; (c) aid favouring activities in the processing and marketing of agricultural products, in the following cases: (i) when the amount of the aid is fixed on the basis of the price or quantity of such products purchased from primary producers or put on the market by the undertakings concerned; or (ii) when the aid is conditional on being partly or entirely passed on to primary producers;

Best practice Romania The initial investments and new created jobs may be created in all the sectors except for: (d) aid favouring activities in the coal sector; (e) regional aid favouring activities in the steel sector; (f) regional aid favouring activities in the shipbuilding sector; (g) regional aid favouring activities in the synthetic fibres sector.

Best practice Romania The undertaking should not be in one of the following situations:  firm in difficulty  subject to an outstanding recovery order declaring an aid illegal and incompatible with the common market

Best practice Romania The maximum state aid level per undertaking is Euro million, except for Bucharest and Ilfov county where the maximum state aid level per undertaking is Euro 22.5 million.

Best practice Romania The maximum intensity for the eligible projects under Euro 50 million can not exceed 50% of eligible investment costs or wage costs for 2 years for the new created jobs. For the projects in Bucharest and Ilfov County, the maximum level of intensity is of 40%

Best practice Romania Regional investment aid for large investment projects is subject to an adjusted regional aid ceiling, on the basis of the following scale: Eligible expenditure Adjusted aid ceiling Up to EUR 50 million 100%of regional ceiling For the part between EUR 50 million 50 % of regional ceiling and EUR 100 million For the part exceeding EUR 100 million 34 % of regional ceiling

Best practice Romania Thus, the allowable aid amount for a large investment project will be calculated according to the following formula: maximum aid amount = R × (50 + 0,50 × B + 0,34 × C), where R is the unadjusted regional aid ceiling, B is the eligible expenditure between EUR 50 million and EUR 100 million, C is the eligible expenditure above EUR 100 million.

Best practice Romania The investment shall consist in tangible and/or intangible assets relating to: (a)the setting-up of a new establishment, (b)the extension of an existing establishment, (c)diversification of the output of an establishment into new additional products or a fundamental change in the overall production process of an existing establishment. Costs related to the acquisition of assets under lease, other than land and buildings, shall be taken into consideration only if the lease takes the form of financial leasing and contains an obligation to purchase the asset at the expiry of the term of the lease.

Best practice Romania The eligible ‘tangible assets’ means assets for the construction in industrial, medicine and tourism industry, and subsequent equipment and machinery. The eligible ‘intangible assets’ means assets entailed by the transfer of technology through the acquisition of patent rights, licences, know-how or unpatented technical knowledge. In the transport sector the cost for acquiring transport equipment were not considered eligible assets.

Best practice Romania In order to be eligible, the tangible assets should:  be used exclusively in the undertaking receiving the aid and be used exclusively in the establishment receiving the aid;  be regarded as amortizable assets;  be purchased from third parties under market conditions,  be included in the assets of the undertaking and remain in the establishment receiving the aid for at least five years.

Best practice Romania The aid was calculated either as a percentage of the:  investment’s eligible tangible and intangible costs or  estimated wage costs of the person hired, calculated over a period of two years, for employment directly created by the investment project The highest value of the costs shall be taken into account.

Best practice Romania The investment must be maintained in the recipient region for at least five years after the whole investment has been completed. This shall not prevent the replacement of plant or equipment which has become outdated due to rapid technological change, provided that the economic activity is retained in the region concerned for the minimum period. In order to have an efficient and viable investment project, the beneficiary contribution should be of at least 50% of the eligible costs, either through its own resources or by external financing, in a form which is free of any public support

Best practice Romania Special conditions imposed to the beneficiary:  No public debts towards the general or local budget;  An investment plan and an economic assessment, made by a specialized firm proving the viability and efficiency of the investment. In drafting such a plan, the beneficiary should take into account certain indications provided by the grantor through the GD;  An assessment on how this investment should help in regional development of the concerned area: the level of taxes that shall be paid, the number of partnerships with local universities/professional schools shall be concluded, how many other suppliers shall come with the financed investment

Best practice Romania Outcome of this state aid schemes : 49 financing contracts; The total value of the investment: over Euro 1.16 biliard The total value of the state aid granted: over Euro 380 million; The total value of the state aid paid: Euro million; The number of the new created jobs following the investments: over 13,000 new jobs; The value of the contributions to the regional development: over Euro 686 million; The main activities financed were: producing cars and equipment for car industry, rolling stock industry, aeronautic industry, plastic industry, renewable energy, medical industry, tourism, etc.

Best practice Romania Economic sectors:Main beneficiaries:  Automotive industry  Railway equipments  Aeronautical engineering  Renewable energy  Health  Tourism  Food industry  Equipments for the extractive industry  Home appliances  Paper and cellulose, etc.  Renault  Daimler  Ford  Pirelli  Delphi  Honeywell  Bosch  Continental  TRW  NTN-SNR Roulments  UAC  EADS  Lufkin/GE  DeLonghi

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