I hear investors say they have refrained from opening new production facilities in Romania because they cannot ship their freight quickly or efficiently enough, says Dan Pascariu, chairman of the board of directors of UniCredit Tiriac, the fourth largest bank on the market.
"The undeveloped infrastructure is becoming a major handicap for the economy. The warning is obvious when major investors set conditions for financing expansion of the transport infrastructure in order to come to Romania," Dan Pascariu told ZF.
He believes the link between investments and infrastructure projects "is extremely tight".
"It's inadmissible that we have seen just 150 kilometres of highway built over 17 years. Other countries in the region have addressed this issue with greater ease, because they are smaller, but Romania will not catch up without a strong transport network."
On Monday, NBR's governor Mugur Isarescu said the poor infrastructure along with the rigidity of the labour market, red tape and an array of small taxes are discouraging foreign investments, given that the structural reforms the economy still requires also entail stimulating foreign investments.
In addition, Pascariu believes that prolonged political instability could also affect the economy. "We've been lucky so far that the economy has evolved separately from politics, but as long as communication between the private sector and public institutions remains inconsistent, with many times when there's no one available to talk to, there can be no long-term perspective of how business will develop."
The governor also believes that this is the reason why structural funds are not accessed.
Pascariu believes the lack of a modern transport infrastructure can also choke real estate projects that are difficult to connect to the network of roads that exist today.
"The real estate market is booming, though I don't think we are experiencing a bubble, but we will have various price categories depending on the quality of the buildings," the banker adds. He is also surprised by the very high prices of homes in old apartment buildings. "I expect that one day the apartment blocks built in the '60s and '70s to be bought in full and taken down to make room for modern homes."
Pascariu says that UniCredit Tiriac, one of the first banks to become involved in real estate financing, is already unable to cover all the projects it is approached with.
"We have become more selective, especially when it comes to retail projects, because human resources and cash are limited and on the other hand, there are those prudentially aspects about a bank's exposure to the real estate market."
The banker believes Bucharest is already saturated with hypermarkets but is experiencing a shortage of office space and especially residential space.
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