Cautare




, Contributor

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

Opinii |
|

A stark choice for MNCs in Romania: truly understanding politics or becoming its victim

The end of the year has been anything but calm for the Romanian business sector. A draft emergency bill published by the Government a few days before Christmas announced new and significant taxes affecting especially the banks, the energy and utilities companies, together with the privately-administered pension funds.
editorial radu magdin_ok

Consequently, the Bucharest stock exchange experienced a 12% daily drop, a dip last seen during the 2008-2009 crisis that wiped out the entire 2018 share increases. The business associations and economic experts were unanimous in condemning the lack of predictability of the fiscal policy and warned against the overall effect on economic growth and on consumers.

Adjustments could have been made – they weren’t done on the essential parts- , but the overall picture is clear: the economic nationalism, alleged concerned patriotism, embraced by the ruling coalition is more than rhetoric and will affect major chunks of the economy in the following years. For the business sector, the bad news is that this governing style (to call it “philosophy” would be too much for what has been merely a knee-jerk reaction) is here to stay. The question is how the multinational companies operating in Romania, or more widely foreign and local investors, could mitigate the negative effects and prevent similar developments from happening.

The economic nationalism turn was already present in the PSD 2016 manifesto. What was not clear was who would foot the bill for the measures proposed by the social-democrats. With a robust economic growth, few considered the full consequences of such policy options, although the PSD leader hinted at times at who were the potential targets – the MNCs, the banks, the energy and retail companies. The emergency bill closely follows the directions of the speech Liviu Dragnea delivered to the PSD National Council two days before the press conference of the Finance Minister and the PM’s economic and fiscal adviser; even more importantly, they reflect not only what the PSD leadership and rank-and-file members believe, but also the dominant opinion among the PSD supporters and voters. For example, based on a June 2018 CURS public opinion survey, only one in four Romanians trust the banks: the opportunity is there for any political entrepreneur who sees a significant source of votes to tap into. The PSD did the right thing for a big chunk of voters, because, to quote a famous political communicator from the parliamentary majority, “it could do it”.

The PSD orientation will not decisively change if/when Liviu Dragnea loses the tight control over the party. The country still has inequality and important social needs, so a progressive party is important for the political scene. The problem is social change and progress can come even without frustration: demonizing part of the private sector for schemes and low profits will not make the rest rich. A finer rebalancing act is needed, but there is no one in Romanian politics on the left able and willing to do that. The lack of ideology in the public debate (it was more about shouts from the PSD and screams from business and opposition) can make CEOs wonder if there is still something right on the left, or anything left on the right flank of politics. Targeting the MNCs is a convenient strategy to deflect the attention from the less convincing policy performance of the government (likely to continue considering the PSD’s current competence and personnel crisis and lack of appetite for professionalization and an “open door” revolving door expert policy) and could become a necessity as the global and European context takes a turn for the worse (especially given the trade war between US and China and the tense security regional climate). The huge inequality that characterises the Romanian society cannot remain without political effects, so the PSD electoral base will easily embrace any move that is aimed at those identified in the public discourse as “the enemy of the people”.

Given these very likely trends, what should the MNCs operating in Romania consider as the working plan for the coming years? The first things that they could do is to really pay attention to what the social-democrats are saying: this regulatory avalanche did not come out of the blue and the lack of contingency plans should trigger some reassessments within the MNCs’ public affairs departments. For example, having Dragnea’s most recent speech in mind, the hypermarket operators should prepare for government action next year: talking about “poisoned food” will not remain without regulatory consequences, either at the executive or legislative level. This is not about the MNCs spying on what the PSD wants to do, it is about understanding public signals and trying to defuse, as much as possible, the tensions by coming up with strong rationales for every potential scenarios (note that these narratives should go beyond the typical, bland press releases about the “disastrous economic impact” that do not impress anyone and should seek to engage more with political motivations) and also a positive, defensive if not offensive, narrative.

Businesses should go beyond the bubble of those sharing and voicing their perspectives – the spectre of offshoring/outsourcing does not frighten anyone in the case of sectors such as banking, energy or utilities. Especially with the surge of hard power considerations at the global and regional level. I would strongly advise against strong public reactions and I would take a different route. This is my second point. In a recent article in HBR on what multinationals need to do to succeed in Africa (this is in now way meant to underline Romania is less than a vibrant EU country – even the EU now looks more into MNCs profits from a regulatory perspective), the key advice is to genuinely show long-term commitment to local communities and to build businesses of meaningful scale. This is the best way forward in any country, in any continent, when you smell populism or appetite for demonization.

Something in the business model or in the approach has to change in order for the MNCs in Romania to reconnect with local communities and to regular voters – it is more than public relations, it is about doing a better job at taking care of workers, at taking into account the customers’ demands, and at promoting the good work done at the community level. Also, make sure you walk the talk, and you have the same quality products on shelves in Romania and other key markets. Obtaining the respect of the consumers will make it less likely – or more costly – for politicians to target MNCs from specific sectors (indeed, one exercise to do these days is to look at who is sheltered from the negative effects of the announced decisions). All in all, in these complicated times, the MNCs should equip themselves with the tools of understanding electoral politics in order not to become its main victim; and, by gaining public respect and recognition, to keep themselves out of the reach of hungry political entrepreneurs.

The end of the year has been anything but calm for the Romanian business sector. A draft emergency bill published by the Government a few days before Christmas announced new and significant taxes affecting especially the banks, the energy and utilities companies, together with the privately-administered pension funds. Consequently, the Bucharest stock exchange experienced a 12% daily drop, a dip last seen during the 2008-2009 crisis that wiped out the entire 2018 share increases. The business associations and economic experts were unanimous in condemning the lack of predictability of the fiscal policy and warned against the overall effect on economic growth and on consumers.

Adjustments could have been made – they weren’t done on the essential parts- , but the overall picture is clear: the economic nationalism, alleged concerned patriotism, embraced by the ruling coalition is more than rhetoric and will affect major chunks of the economy in the following years. For the business sector, the bad news is that this governing style (to call it “philosophy” would be too much for what has been merely a knee-jerk reaction) is here to stay. The question is how the multinational companies operating in Romania, or more widely foreign and local investors, could mitigate the negative effects and prevent similar developments from happening.

The economic nationalism turn was already present in the PSD 2016 manifesto. What was not clear was who would foot the bill for the measures proposed by the social-democrats. With a robust economic growth, few considered the full consequences of such policy options, although the PSD leader hinted at times at who were the potential targets – the MNCs, the banks, the energy and retail companies. The emergency bill closely follows the directions of the speech Liviu Dragnea delivered to the PSD National Council two days before the press conference of the Finance Minister and the PM’s economic and fiscal adviser; even more importantly, they reflect not only what the PSD leadership and rank-and-file members believe, but also the dominant opinion among the PSD supporters and voters. For example, based on a June 2018 CURS public opinion survey, only one in four Romanians trust the banks: the opportunity is there for any political entrepreneur who sees a significant source of votes to tap into. The PSD did the right thing for a big chunk of voters, because, to quote a famous political communicator from the parliamentary majority, “it could do it”.

The PSD orientation will not decisively change if/when Liviu Dragnea loses the tight control over the party. The country still has inequality and important social needs, so a progressive party is important for the political scene. The problem is social change and progress can come even without frustration: demonizing part of the private sector for schemes and low profits will not make the rest rich. A finer rebalancing act is needed, but there is no one in Romanian politics on the left able and willing to do that. The lack of ideology in the public debate (it was more about shouts from the PSD and screams from business and opposition) can make CEOs wonder if there is still something right on the left, or anything left on the right flank of politics. Targeting the MNCs is a convenient strategy to deflect the attention from the less convincing policy performance of the government (likely to continue considering the PSD’s current competence and personnel crisis and lack of appetite for professionalization and an “open door” revolving door expert policy) and could become a necessity as the global and European context takes a turn for the worse (especially given the trade war between US and China and the tense security regional climate). The huge inequality that characterises the Romanian society cannot remain without political effects, so the PSD electoral base will easily embrace any move that is aimed at those identified in the public discourse as “the enemy of the people”.

Given these very likely trends, what should the MNCs operating in Romania consider as the working plan for the coming years? The first things that they could do is to really pay attention to what the social-democrats are saying: this regulatory avalanche did not come out of the blue and the lack of contingency plans should trigger some reassessments within the MNCs’ public affairs departments. For example, having Dragnea’s most recent speech in mind, the hypermarket operators should prepare for government action next year: talking about “poisoned food” will not remain without regulatory consequences, either at the executive or legislative level. This is not about the MNCs spying on what the PSD wants to do, it is about understanding public signals and trying to defuse, as much as possible, the tensions by coming up with strong rationales for every potential scenarios (note that these narratives should go beyond the typical, bland press releases about the “disastrous economic impact” that do not impress anyone and should seek to engage more with political motivations) and also a positive, defensive if not offensive, narrative.

Businesses should go beyond the bubble of those sharing and voicing their perspectives – the spectre of offshoring/outsourcing does not frighten anyone in the case of sectors such as banking, energy or utilities. Especially with the surge of hard power considerations at the global and regional level. I would strongly advise against strong public reactions and I would take a different route. This is my second point. In a recent article in HBR on what multinationals need to do to succeed in Africa (this is in now way meant to underline Romania is less than a vibrant EU country – even the EU now looks more into MNCs profits from a regulatory perspective), the key advice is to genuinely show long-term commitment to local communities and to build businesses of meaningful scale. This is the best way forward in any country, in any continent, when you smell populism or appetite for demonization.

Something in the business model or in the approach has to change in order for the MNCs in Romania to reconnect with local communities and to regular voters – it is more than public relations, it is about doing a better job at taking care of workers, at taking into account the customers’ demands, and at promoting the good work done at the community level. Also, make sure you walk the talk, and you have the same quality products on shelves in Romania and other key markets. Obtaining the respect of the consumers will make it less likely – or more costly – for politicians to target MNCs from specific sectors (indeed, one exercise to do these days is to look at who is sheltered from the negative effects of the announced decisions). All in all, in these complicated times, the MNCs should equip themselves with the tools of understanding electoral politics in order not to become its main victim; and, by gaining public respect and recognition, to keep themselves out of the reach of hungry political entrepreneurs.

 

 

 

Postează un comentariu

sau înregistrează-te pentru a adaugă un comentariu.

*

Comentarii

Nu există comentarii