This content is from: Local Insights

Regional aid scheme

In October 2007, the Romanian government adopted Government Decision 1165 for the promotion of economic growth by supporting investment (GD 1165). GD 1165 applies Commission Regulation 1628/2006 on the application of Articles 87 and 88 of the treaty on national regional investment aid (Regulation 1628). It creates an aid scheme, which is exempted from notification, in accordance with the criteria in Regulation 1628.

Under this aid scheme, undertakings may benefit from certain non-reimbursable funds, granted through the budget of the Ministry of Economy and Finance, to carry out investments in material or immaterial assets or for the creation of new jobs. To qualify for aid, the investment must comply with certain criteria regarding, among others, the nature of the investment and the undertaking benefiting from aid.

The aid scheme covers only initial investments, defined as being an investment in material and immaterial assets relating to the setting-up of a new company, the extension of an existing company, the diversification of the output of a company into new additional products, or a fundamental change in the overall production process of an existing company. An initial investment is also represented by the acquisition of capital assets directly linked to a company, when it has closed or would have closed had it not been purchased.

To benefit from aid, the company must meet certain eligibility criteria. It must be registered under Romanian Company Law, with headquarters and activities in Romania. It must invest more than €30 million ($44 million), and the initial investment should generate at least 300 new jobs. It should not be in difficulty (as defined by the relevant European regulations), nor should it be subject to a procedure for the recovery of previously granted state aid. Any area of activity is eligible for aid, except for fishery and aquaculture, coal and steel, transportation, shipbuilding, synthetic fibres, and the production of the agricultural products listed in Annex I of the EC Treaty.

The maximum amount of the aid is the RON equivalent of €28.125 million ($41 million), if the company carries out investments and creates jobs following an initial investment in any region, and of €22.5 million, if the initial investment is carried out in Bucharest or Ilfov. The total maximum budget of the aid scheme created by GD 1165 is €500 million, and the annual limit is established through the relevant budget. For 2007, the budged for this aid scheme is €10 million.

The aid is granted if the beneficiary has submitted an application to the authority responsible for administering the scheme, and the authority confirms in writing that, subject to the final outcome of a detailed verification, the project in principle meets the eligibility criteria laid down by GD 1165. If work begins before the fulfilment of such conditions, the whole project shall not be eligible for aid. The undertakings benefiting from aid must report the financial data concerning the effects of the aid to the Ministry of Economy and Finance on an annual basis, for five years after finalising the investment. The duration of the aid scheme is five years, from 2007 to 2013, with the possibility of extension. GD 1165 estimates that around 110 undertakings will benefit from this scheme, with an average of 22 undertakings per year.

State aid measures can be effective tools for achieving objectives of common interest and for correcting market failures. By enacting GD 1165, Romania has underlined its determination to become a competitive and attractive environment for investors, and to ensure the sustainable development of the national economy.

Iulia Bunescu

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