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Consultant și analist de risc politic, CEO Smartlink, fost Policy Manager la Google Bruxelles

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Romanian Superclans: the need for sustainability

An important chunk of the economic debate in Romania is centred around how the state should arbitrate between domestic and foreign capital.
editorial radu magdin_ok

Supporting more the domestic capital has become a key part of PSD’s economic discourse, a “panacea” to tax optimisation, profit repatriation, and even production delocalisation often associated with the MNCs. With notable exceptions (the discussion on wages and the willingness to work in Romanian-owned companies), many hold an idyllic perspective on the Romanian capital and ignore the big consolidation and transformation problem it faces.

In Romania, the successful big business stories are built around the entrepreneurial spirit and the hard work of those who seized the opportunity brought about by the transition from Communism to market-economy and EU-integration. It is often the case that, when one hears the name of a brand, the first instinct is to think about the story of its founder/owner. For instance, one could take the example of Dedeman and the natural association with the Pavăl family.

Worldwide, family-owned companies are doing well. According to Credit Suisse’s Family 1000 report, since 2006, these companies have outperformed their non-family-owned counterparts. However, in a volatile business and political environment, their attempt to stay on top is not easy. It involves, as a Deloitte report on 100 future leaders of family-owned companies from EMEA shows, finding the balance among family values, growth, and ownership independence. The challenge is to think creatively in terms of geographic investments and expansion, innovation and research, and the role of new technology.

In Romania, as well as in the rest of Central and Eastern Europe, the future of these companies is even more on the line given that the business roots are not deep and the time of the first succession is rapidly approaching. The initial entrepreneurial drive has to be sustained and supported by ongoing adaption and transformation. Clearly identifying who is responsible for succession has to be matched with how well prepared the heiress/heir is, with how well the person is attuned both to the business realities and with the complexity of economic and political evolutions. If there is one thing that I would stress for those interested in Romania and CEE, is that politics will become more and more relevant in the coming years. I do not know whether this is good or bad news, but it is a key element to consider alongside other essential questions related to how the initial conditions for success have evolved. Expertise and a deeper understanding of the structuring trends will be very precious in the coming years.

Directly tied to my previous point is the idea of leaning from the predicament the foreign capital is currently experiencing in Romania. The key take-away? Invest in building strong connections to the communities you are serving; this would generate not only more revenue, but also will act as the best protection in complicated economic and political times, when the politicians are called to decide who should foot the bill. Contrary to the expectations, politicians are simple beings, whose behaviour is most of the time driven by what the polls are saying.

The easiest thing to do is to tax those whose favourability is the lowest (just think about the banks and connect this with the recent emergency bill). I believe that every major Romanian-owned business should put more resources in engaging with the public; and this is more than about good business practices. It is about philanthropic work, about civic education, about financial education and education more broadly, about making strategic moves towards societal needs which are, unfortunately, unmet by the current institutional framework.

Managing succession, understanding politics, and building strong community relations is what will make the difference in a local business environment that will continue to be volatile and highly competitive. As we know too well, staying at the top is harder than getting there – a lesson to be internalised by the major Romanian family businesses.

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