March 11, 2019 / 3:48 PM / 6 months ago

Romanian pension funds ready to invest in infrastructure

BUCHAREST, March 11 (Reuters) - R omania’s private pension funds are willing to finance major infrastructure projects, their industry association said, potentially offering the government a way to resolve a dispute over part of a widely-criticised fiscal package.

The Social Democrat government approved a far-reaching emergency decree in December covering areas such as banking, energy, telecoms taxes and private pensions without an impact assessment or public debate, prompting criticism from employers, unions, the European Central Bank and several international lenders.

The decree dealt a blow to Romania’s 11-year-old mandatory private pension scheme by slashing management fees for fund managers and enabling Romanians to withdraw from pension funds after contributing for five years.

The decree also forces pension funds to raise their share capital by an overall 800 million euros ($899 million), prompting the European Commission to warn of potential market exits.

During a meeting earlier this month, fund managers asked officials to scrap the share capital requirement.

After the meeting, Senate speaker and junior coalition partner Calin Tariceanu said the government wanted pension funds to take a more active role investing in the real economy, adding a compromise could be reached.

Radu Craciun, president of Romania’s private pension association, said the industry would be only too happy for the government to amend legislation allowing it to invest in areas that could deliver higher returns and benefit the economy.

“Romanian private pension managers have pleaded over the last few years for a diversification of investments for better risk management and exposure to accelerated growth economic sectors,” he told Reuters.

“This entails using securities and unlisted investment vehicles such as private equity funds or real estate funds. Other solutions for private pension funds to finance infrastructure works could be infrastructure bonds, specialised private equity funds or participating in syndicated loans.”

Romania overhauled its indebted, communist-era pension system in 2008, making it mandatory for all working Romanians under 35 to contribute to private pension schemes as well as their state pension.

The seven mandatory private pension funds manage assets worth 10.2 billion euros for just over 7 million contributors. They hold a fifth of state treasuries and are the largest institutional investor on the bourse.

Meanwhile, Romania’s infrastructure is some of the European Union’s least developed. The EU’s ninth largest member by land area, it only has a little over 800 kilometres of motorway and massive needs in healthcare, education and utilities.

$1 = 0.8898 euros Reporting by Luiza Ilie; Editing by Mark Potter

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