Patriciu: The state should sell buildings worth billionsUpdated: 24-06-2009 |

Dinu Patriciu, the wealthiest Romanian, who controls businesses in the oil, real estate, IT, and media sectors, expects the economy to decline 7-10 percent this year and estimates that the state will face difficulties in paying pensions and public sector employee salaries as of September.

The businessman said that a solution for attracting money to the state budget would be the sale of all non-performing state assets, including buildings, using the sale and leaseback system.

"Bureaucrats can be tenants. We are talking about tens of billions which could be attracted. The price is not important. Only the yield is negotiated in a sale and leaseback contract. Investors accept yields of 6.5-7.5 percent on administrative buildings, in which the offices of state institutions are located. This means huge entries for one year, then you pay for 20 years and take your asset back," the businessman explained. Patriciu owns such buildings in other countries, but said that, if he were interested in such a business on the local market, it would be a "drop in the bucket." The businessman does not rule out Romania risking not receiving the second installment of the stand-by loan from the International Monetary Fund, although it is a known fact that he was not necessarily in favor of the signing of the agreement with the fund.

Patriciu said that Romania should switch to a Monetary Council, following the Bulgarian model, which would set the leu-euro exchange rate to provide stability for companies. The Bulgarian model is now very attractive for companies, because of the 10 percent flat tax. That is why Patriciu has recommended that the value added tax (VAT) be cut to 15 percent from a present 19 percent in Romania, and the flat tax be lowered to 10 from 16 percent.

"The flat tax should be cut to increase budget revenues. These will definitely rise, because part of the 35 percent of the gray economy will be brought to the surface. Reducing VAT is a method to instantly capitalize corporations," Patriciu indicated.

Business Standard