Mark Mobius: For a country like Romania there’s no problem in getting money, it’s how to gain investors’ trust

There is plenty of money on the international markets from which Romania could benefit in the following years, as the country has the potential to turn into one of the growth champions in the region, but it needs to earn investors’ trust by continuing reforms and eliminating market barriers, in order to convince them to bring their money here, said Mark Mobius, executive chairman of Templeton Emerging Markets Group, in an exclusive interview for Romania-Insider.com. Mark Mobius has been one of the most high profile fund managers investing in Romania and promoting the country to other institutional investors in the last five years. He helped American group Franklin Templeton win the mandate to manage Fondul Proprietatea, Romania’s largest closed end fund, with some EUR 3.5 billion in assets, in 2009. Since then, he has been travelling at least twice a year to Romania to attend Fondul Proprietatea’s shareholders meetings and meet the fund's investors, as well as to look for new potential investments for the Franklin Templeton emerging markets funds which he’s managing. He said he has seen the country make important progresses during this period, both in terms of reforms and in changing some of its old mentalities. “The first thing is giving us the contract to manage the fund. This is amazing actually when you think about it. I can’t think of any country in the world that would have done what Romania did: taking what is basically a sovereign fund, with huge assets of the country and asking a foreign fund manager to come and manage it. This is a revolutionary step, the first amazing development in Romania. And it underlines Romanians' creativity and willingness to move in a different direction than everybody else,” Mobius told Romania-Insider.com. The second thing he noticed is that the International Monetary Fund (IMF), and the EU reform programs, though difficult to accept by Romanian officials, have moved ahead. The Government began to establish a legislation which improves corporate governance and requires professional management and board members in state-owned companies. Things like these move the country forward, he said. However, the speed at which these reforms are implemented is still slower than what investors expect, Mobius added. He also thinks that more privatizations should have been made. Mobius still believes that Romania has the potential to become a growth champion among emerging markets, but says that the country needs to reduce restrictions in setting up new companies and to speed up the process of granting approvals and licenses. “What you want to do is to encourage the small and medium enterprises, because these are the companies that generate employment. In order to encourage them you need to make it easier for them to do business, because they are busy, they don’t have time to stay in line to get approvals and licenses. This could really kick start the economy,” Mobius explained. Opening up the market, by reducing restrictions, according to EU and IMF recommendations, can also generate more interest and bring more money in. “There is also a lot of EU money waiting to be utilised. It would be a pity for Romania not to use this money. The nice thing about EU money is that there are outsiders watching how this money is used in order for it to be used in a proper way, and that’s very good for the country,” Mobius said. He also believes that Romanians who live and work abroad will also create a tremendous force, because they will be returning and starting enterprises in the country. “Instead of having an outflow, you will have an inflow of people coming into the country.” He believes technology to be one of the most interesting sectors in Romania, with potential to support the country’s future economic growth. “Romanians have a tremendous pool of engineers and educated people who are good on computers, software, as well as in the fields of oil and gas exploration and production. And I would think that those are the areas that are interesting going forward.” However, in order to realise this growth portfolio and to bring more investors in, Romania must also lower restrictions on the local capital market. “There are a lot of barriers for people who want to invest here, and this is why the stock market is so small.” Franklin Templeton has also supported the Bucharest Stock Exchange initiative to identify and eliminate restrictions which make it harder for investors to bring their money here, known as the “Great Barriers Shift” initiative, which aims to change the capital market legislation and regulations as well as eliminate some fiscal barriers. “The listing of Fondul Proprietatea on the London Stock Exchange will have a huge impact on Romania and the investment community. When a fund is listed in London it means that people controlling USD 50 billion or more can buy a Romanian stock that represents all of Romania without having to go through all the complications of registering on the Romanian stock exchange,” Mobius added. “As soon as you have this fund listed in London, then you have maybe ten brokers doing research and writing reports on the fund and on Romania. So all this helps a lot.” However, the Romanian capital market regulator ASF rejected, end-November, the new regulation on Depository Interests (DIs) that would have allowed Fondul Proprietatea to proceed with its listing on the London Stock Exchange (LSE) in December.