To an extent, it represents a missed opportunity for reflection, especially for the political class who only celebrated the business success in the late evening of a day full of social media images of UiPath and NYSE. However, this could also be a chance to move things forward, convince local companies to be bolder and make use of the Bucharest Stock Exchange, which has seen solid growth even in the context of the pandemic.

First, the fact that a self-taught programmer with little resources built a company that rose to compete with global giants should inspire a generation. He might not have too many followers on social media, but Daniel Dines is an example very much worth taking to heart to any young Romanian person. Secondly, it shone a light on Romania’s still underdeveloped capital markets: Romania is growing but it needs to grow even faster and here BVB growth and enthusiasm should be matched by additional private sector energy and public policy ambition. And an invitation to do better for everyone, something that should really be a priority, especially for the politicians who were late in acknowledging UiPath’s success.

In terms of numbers, if one looks at 2019, Bucharest’s stock market (BVB) has a capitalization of about EUR 37.8 billion (Romania’s GDP is around 220 billion). For the Warsaw Stock Exchange, it’s about EUR 260 billion, at a GDP of EUR 519 billion. To say that corporate Romania is punching below its weight would be an understatement. Nonetheless, the signs are very bullish for BVB: a 20% growth only in 2021, a EUR 2.03 billion market capitalization increase since the start of 2020, and a bold, but realistic plan to represent more than 20% of the country’s GDP by 2030.

The Brightside

In the 1990s and 2000s, Romania eschewed the East Asian development model of creating domestic manufacturing champions in its developmental period of weak patent protections and relatively cheap labor in favor of a fast accession to the European Union. Overall, it handsomely paid off, as the option of European integration has been the best decision taken by this country in the last 30 years. However, even in the context of remarkable growth rates, the idea of automatic convergence proved to be no more than an illusion: there are clear limits to the current growth strategy, and the signs are all around us, in poverty seen in rural areas, high-income inequality, and high emigration rates.

It is high time for Romania to think more strategically about the ideas, policies and tools that could boost the convergence process. A better and more extensive use of the local stock market is not a magic bullet, but for sure a sign of financial maturity and sophistication that could open up a virtuous (and very profitable) cycle.

It is exactly the European integration process that sowed the seeds for this potential success. The next step is to do more than take stock of these major advantages and to really fructify them. Here are two things that could make all the difference.

First, the fact that legislation has to be harmonized with and open to European Union oversight might mean a lost chance for rapid growth, but it also offers foreign investors greater regulatory and legal security. With lower risk comes a lower premium needed for investment, and many hoped that it would translate into a falling cost of capital for many Romanian businesses looking to expand. It didn’t, partially because much of Romanian business remained reliant on debt financing and focused on the domestic market instead of opening up to equity capital and looking at export markets. For sure, the expanding stock market could offer a middle ground in the coming months and years to this predicament. After UiPath in the US, why not have Elrond or FintechOS listed on the BVB (as well, or as a first step)?

Secondly, it comes with access to a still rich market. Structurally, the EU-27 is predicted to fall to just 9% of global GDP at PPP rates by 2050, according to PwC, and European markets are saturated. But the example of UiPath should be taken to heart – there are plenty of talented people around. Furthermore, Romania could have positioned itself as a destination for global businesses looking to export to the European Union by setting up joint ventures in Romania. Instead, non-Western investment was looked down upon while local talent was often left to seek their fortunes elsewhere. Fortunately, the window of opportunity has not closed, and the potential is still here, so things could easily be turned around and transformed into a collection of unicorn stories.

Attracting Investment

Corporate Romania can still win big. The advantages are still there. It is really time to be bold and act quickly.

An expansion of equity capital coupled with a focus on export competitiveness would allow many Romanian investors to fund expansion abroad. With relatively stable cash flows from the domestic market making their shares attractive, local IPOs would allow many middling domestic giants to reinvent themselves as regional champions. Greater openness to foreign financial investment would allow for the Romanian stock market to expand capitalization-to-GDP ratios to levels approaching examples such as Poland. The current BVB leadership for sure does not lack neither ambition nor competence and strategic vision, it only has to better sell the advantages of a listing to the already successful Romanian companies. Last but not least, allowing local and international business greater leeway would generate both tax revenues and jobs simply by using the natural advantages that come from being part of the European Union.

So far, Romania has systematically taken on board all of the disadvantages of its national strategy while paying little attention to turning the advantages into an investment, tax revenue, jobs, and profits. There is a silver lining in all these developments and the goal should be to see the next UiPath have an IPO on the Romanian stock market. This is what all relevant stakeholders should aim and work for: success, in terms of inspiration and delivery, at home, not just abroad.