Guest Writer Ronnie Smith takes a look at Romania’s ways of generating its own capital investment rather than waiting for outside funding, and at the struggles to convince business leaders to take their companies to the market.
Victor Cionga, Director General of the Bucharest Stock Exchange, was the guest speaker at this month’s British Romanian Chamber of Commerce breakfast meeting on Tuesday morning. Mr Cionga is a widely experienced and talented man, but he has been having a tough time at the Stock Exchange since he started working there in September last year.
One of the major problems he faces is the unwillingness of many Romanian companies, their owners and senior management to accept that there can be definite benefits to public listing and to raising finance through the issue of shares. As Mr Cionga explained, this is a ‘cultural’ issue that is very unlikely to be resolved in the immediate future. The consequent shortage of opportunities for institutional and large private investors in Romania, through the simple but dire shortage of the necessary range of companies listed in Bucharest, means that money that could be invested in Romania is instead being sent to the growing stock exchanges in Vienna, Warsaw and Istanbul.
This lack of capital in the Romanian market is one of the major contributory factors in the continuing stagnation within the Romanian economy as a whole. Romania so often waits for grants or loans from international bodies, rather than generating its own capital investment.
It may indeed be sometime until Romanian business leaders come to accept that taking their companies onto the market gives them access to a wider and more flexible range of funding for expansion and future development. It also makes available a high level of international expertise through active shareholder interest in their businesses. Sharing business in order to improve and grow does not mean a complete loss of control. Nor does it mean a smaller share in profits, particularly if those profits dramatically increase overall.
The cultural issue of which Mr Cionga speaks comprises a toxic mixture of ego, fear and greed among businessmen, who have initially been successful in the abnormal post communist period. They have inevitably followed a single shareholder model of company ownership and management. However, that period would now seem to be coming to an end. We are seeing major businessmen now paying for poor investment decisions when they ventured into the reality of the free market and who are selling assets quickly to meet their large obligations to banks. Had they understood the benefits of stock market listing in time, their businesses may have been spared rapid contraction and collapse.
A successful and liquid stock exchange would contribute greatly to Romania’s economic maturity and growth but the country’s business community must quickly educate themselves on how and why this will benefit them before real progress can be made.
By Ronnie Smith, Guest Writer
Ronnie Smith is Scottish and now lives in Romania, working as a professional training business consultant and communication coach. He is also a teacher of political science, a political and social commentator and a writer of fiction. The views expressed are his own and do not necessarily reflect those of Romania Insider.com or of any other people or companies mentioned in this article, unless stated so.