Romania must seize the opportunities brought by the digital transformation in terms of attracting investments, remaining a competitive economy and retaining highly specialised, value-added jobs. Nevertheless, a structural transformation such as the one facilitated by digital technologies requires a changed of paradigm on how the authorities, companies and citizens tackle the processes in a more simplified and efficient approach, and not only to use electronic means for outdated and bureaucratic processes.

In the past period, the Government and Parliament adopted important legislative acts as government cloud, interoperability, eIDs updates, 5G, Communication Code, clarifications on R&D facilities. Once fully implemented this initiative will represent a major step in the development and de-bureaucratization of Romania and will stimulate investments. Also, an important instrument for identifying the best measures for the digital transition is the ongoing dialogue with the private sector, and the group Law and Technology Law organized at the level of the ITC Committee of the Chamber of Deputies represents a model of best practices for consultation with the business environment.

Romania ranks among the EU countries with highest internet speed and coverage, which represents a competitive advantage for the countries as well as a stimulus for the IT and the whole economic sector. Whether we talk about industry players or about the household needs, the internet coverage is a must. Maintaining this competitive advantage is always easier than recovering a gap.

ENSURING THE CONDITIONS FOR THE DEVELOPMENT OF BROADBAND INTERNET ACCESS SERVICES

The evolution of the retail markets for broadband and TV retransmission services is worrying in terms of the degree of competition and, by implication, in terms of the future consequences for users. Both markets have been dominated by one operator with an increasing market share for a long period of time and which will continue to evolve in the same direction and, relatively soon, monopolize the markets. The market shares we are referring to were, in mid-2022, 64.5% of the broadband market and 76% in the cable TV retransmission services market. Both market shares are above what the law considers a presumption of dominant (or significant) market position and require the application of measures to facilitate the development of other players.

Only by ensuring competitive conditions will it be possible to provide good quality services at low prices to users and meet the 2030 connectivity objective of 1GB for all households, undertaken at European level through the Digital Decade Policy Programme[3]. In the absence of such obligations and having in view the current strategy of this operator (higher prices in less competitive areas than in competitive areas), all customers will be soon left without choice.

Achieving the connectivity target mentioned above, as well as the target to cover all populated areas with next-generation high-speed wireless networks with a performance at least equivalent to 5G, requires major investments from operators. As we know, most of the traffic carried over networks is generated by a small number of large digital platforms (such as: Google, Apple, Facebook, Amazon, Netflix, etc.), and the telecom industry has suggested to the EU that it should impose a cost sharing mechanism. 

Another important topic for the telecom industry is the correct application of the legal provisions on the construction, modernisation and rehabilitation of motorways, expressways, national roads and bypasses (Law no. 159/2016).  More precisely, it is important that, in these situations, budgets should be allocated  to allow the inclusion in these projects of work to put in place the conduits needed for electronic communication networks. It is also important that the tariffs for accessing the terrain along the roads should be set along with the ANCOM guidelines in this respect.

Digital society is facing major changes. As more and more of our day-to-day activities go electronic and digital, very large volumes of data about us become available. This phenomenon is aggravated by both technological and behavioural factors (e.g.: increased use of online services such as e-commerce, e-government, social media, etc.). This has been accelerated even more by the pandemic.

Today, many firms are building their business models around the use of this data, especially for advertising, personalised offers and real time customer interactions. This use can also generate services that will benefit both individuals and society in general.

In this context, a user centric privacy framework must be based on a correct understanding of the user’s privacy interests. A consistent user privacy experience should be provided, which establishes familiarity with the privacy implications of applications and services, empowers the user and drives better privacy management while addressing regulatory requirements.

All types of digital services are subject to compliance with the General Data Protection Regulation (GDPR), which became applicable as from 25 May 2018. Additional rules have been adopted concerning data governance (Regulation (EU) 2022/868 of the European Parliament and of the Council of 30 May 2022 on European data governance and amending Regulation (EU) 2018/1724/Data Governance Act), digital services (Regulation (EU) 2022/2065 of the European Parliament and of the Council of 19 October 2022 on a Single Market for Digital Services and amending Directive 2000/31/EC/Digital Services Act), digital markets (Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828/Digital Markets Act) and network and information security (Directive (EU) 2022/2555 of the European Parliament and of the Council of 14 December 2022 on measures for a high common level of cybersecurity across the European Union, amending Regulation (EU) No. 910/2014 and Directive (EU) 2018/1972, and repealing Directive (EU) 2016/1148/EC).

In parallel, discussions on finalising the proposal for a regulation on privacy in the electronic environment have continued and new rules have been proposed to regulate artificial intelligence, the European Health Space, and other digital aspects.

Similarly to GDPR, the ePrivacy Regulation aims to review and update data protection rules in the electronic communications field, irrespective of whether the service is free or paid for and including all traditional and modern forms of communication. Although discussions took place before May 2018 (when the GDPR became applicable), no final resolution was reached on the matter.

These legislative changes have a significant impact on all companies carrying out activities in Romania, especially in the ITC and digital services sectors. Companies need to gradually adapt their products and services, as well as their internal processes, to ensure compliance with the regulatory requirements. The authorities have provided only limited support for these efforts, while the amount of information and data available on how the authorities apply the norms is limited.

The Electronic Identification and Trust Services Regulation (eIDAS Regulation 910/2014/EC) seeks to enhance trust in electronic transactions by providing a common foundation for secure electronic interaction between citizens, businesses and public authorities, thereby increasing the effectiveness of public and private online services, electronic business and electronic commerce in the EU.

The Regulation lays down the conditions for the recognition of notified electronic identification schemes of Member States, as well as the rules for trust services, especially those for electronic transactions, and establishes a legal framework for electronic signatures, seals and stamps.

It became applicable for trust services on 1 July 2016 and finally provided a consistent legal framework for cross-border acceptance of electronic identities and signatures. It is directly applicable in all EU Member States and does not need to be transposed into member states’ national laws. As an exception, some aspects must be defined at national level, such as the liability regime for trust services providers and the legal effects of simple and advanced electronic signatures, as the Regulation does not govern their validity and the evidential weight in court. Qualified electronic signatures are, by Regulation, equivalents to handwritten signatures and have equivalent legal effects.

The internal market principle provides that a qualified trust service based on a qualified certificate issued in one Member State will be recognised as a qualified trust service in all other Member States. Products and trust services that comply with the Regulation need to be permitted to circulate freely in the internal market.

At national level, there are three draft laws on electronic signature registered in Parliament by different Parliament members. The public authorities and businesses have embarked on a roller coaster journey to regulate the issues left by the European legislator to the discretion of each Member State.

The main points of discussion and dispute have been related to express recognition of legal effects for all three types of electronic signatures, differentiated according to the level of trust and security and to remote or technology-based identification procedures allowed for the acquisition of qualified electronic signatures.

The COVID-19 pandemic has affected businesses at large, which turned to digital technologies to keep their activities running. Signing documents is one of the most recurrent and important processes in every business. Even in normal conditions, the entire process is time-consuming, requiring printing, exchanging with all signers, and mailing. This became even more challenging when signers started working remotely and needed to avoid physical contact as much as possible. Unfortunately, digitalisation measures such as the recognition of the legal effects of all three types of electronic signatures, which would have facilitated day to day processes, have not yet been enacted in Romania. 

The most recent of the draft laws on the use of electronic signatures is even more restrictive in terms of the legal effects of an advanced signature, conferring legal effects equivalent to a holographic signature only to advanced electronic signatures issued by a public authority. We believe that a more flexible approach should be taken, that facilitates the use of an advanced signature, taking into account the technical and legal security considerations – for example, by equating the advanced signature issued by a qualified trust service provider to a handwritten signature (i.e. considering the requirements to which it is subject according to Regulation (EU) no. 910/2014).

The e-commerce sector in Romania has experienced rapid growth in recent years, offering numerous benefits to both consumers and businesses, reaching an estimated turnover of EUR 6.5 billion in 2022. The convenience, accessibility and variety of products and services offered through e-commerce platforms have made them a popular choice among Romanian consumers. According to the National Institute of Statistics, in 2022, a record percentage of 66% of Romanian internet users placed at least one online order. We have also seen a spectacular year-on-year increase in the number of rural consumers, of approximately 23% compared to 2021. In addition, the e-commerce sector has created new employment opportunities and contributed significantly to the Romanian economy, while at the same time proving to be an efficient and much less energy-intensive alternative to traditional commerce.

According to McKinsey & Company, Romania is the third largest digital economy in Central and Eastern Europe, after Poland and the Czech Republic, and has the potential to reach EUR 52 billion by 2030. According to the same study, “Digital Challengers on the next frontier”, in terms of e-commerce, Romania stands out for the largest share of exports in digital commerce, i.e. 24%. At the same time, Romania has a net positive balance in terms of goods sold by Romanian companies to consumers abroad vs. goods bought by Romanian consumers from online stores abroad, in the context in which Romanian companies do not yet enjoy all the advantages of the European Single Market.

However, the sector also faces a series of challenges that limit its potential to contribute even more to the economy and society. These challenges need to be addressed to ensure the continuous development of the digital economy in Romania, so that it can reach its maximum potential as a driver of economic growth.

After repeated delays, in July Parliament adopted a bill initiated by the Government in 2016 on electronic IDs. The new legislation, which became Law no. 162/2020, provides for the issuing of electronic IDs that would allow Romanian citizens to identify themselves in relation to electronic databases of Romanian public authorities as well as private third parties.

Furthermore, the law states that electronic IDs will incorporate an advanced certificate for electronic signature to be issued by the Ministry of Internal Affairs and will also allow storage of a qualified certificate for electronic signature issued by a qualified services provider.

The implementation of the law would allow citizens to benefit from a large range of private electronic services, including banking, insurance, telecom services etc. However, the implementing rules of the law make no reference to the issuance of the related qualification certificates.

Electronic IDs would also “open the door” to Romanian citizens to also authenticate themselves in other EU Member States, if they are notified to and accepted by the European Commission as the Romanian national electronic identification scheme. Mutually recognised electronic identification means would facilitate cross-border provision of numerous services and enable businesses to operate cross-border without facing many obstacles they currently encounter in interactions with public authorities.

Moreover, by adopting Emergency Ordinance no. 38/2020 on the use of documents in electronic format in relations with public authorities and institutions, the Government created the framework through which public authorities are required to accept electronic signatures in relation to taxpayers.

Furthermore, the Authority for the Digitalisation of Romania (ADR) has been quite active. On 1 September 2020, the ADR announced the signing of a contract worth nearly RON 100 million for a Centralised Software Platform for Digital Identification - “PSCID". The aim is to ensure the proper “gateway” for the use of electronic signatures in relation to public authorities. However, the project was launched without proper consultation with stakeholders.

In October 2020, the ADR launched a public consultation on a major public policy proposal on eGovernment. The aim of the project is to develop the institutional capacity of public authorities to create and implement eGovernment tools for citizens and the business environment, as well as to ensure the vision and directions of action in eGovernment.

In 2021, the ADR issued a rule on the regulation, recognition, approval or acceptance of the remote personal identification procedure by using video means. This rule allowed the implementation of remote authentication, through video means, at public institutions such as ANAF. However, the process of obtaining ADR approval by a third party for the use of such methods is not transparent, inhibiting the enrolment of private service providers. This facility, both from a legislative point of view, but especially from a functional point of view, should not be a substitute for efforts to issue and integrate electronic identity documents.

One negative aspect is that the two bills initiated in 2019, and which were meant to create a national framework for fully implementing Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market (eIDAS), are still awaiting the decision of the Chamber of Deputies. As a result, national legislation on the use of electronic signatures remains unclear.

However, even though some progress has been made, there are still steps that need to be taken before this progress is seen by citizens and the business environment, as well as by public authorities.

Over the last decade, the development of information technologies, sensors, big data and products/services based on information has changed the way people live in cities. Access to information, services and communication is now provided anywhere and anytime by smartphones and people have adapted to this new way of living. This has created an urban environment with a growing demand for efficiency and resources. As a result, public administrations need to consider the development of the management models of cities. Moreover, Romania needs to eliminate the digital divide and ensure strong gigabit and 5G connectivity. 5G is not just about improving quality and meeting increased demand; it is also a key asset for Romania to compete, especially in relation to manufacturing, cities, transport, vehicles, utilities, and connected healthcare. 
 

The development of smart cities, and the digitalisation of business will support the green transition. For example Smart Energy Meters enable businesses, municipal authorities and households to monitor, manage and reduce their energy use. Smart cities improve the efficiency of energy-intensive services such as public transport, public road networks and street lighting. The conception and development of Smart Cities is highly dependent on Internet of Things technologies, and sometime the two become synonymous.

Smart cities deliver a huge breadth of opportunities and benefits. Some key highlights are smart grids, as well as greater mobility, better protection of the environment and greater safety. Smart Grids work with connected sensors in various municipal systems to help cities to become more efficient by better managing energy demand and supply. With connected mobility infrastructure, smart cities can manage traffic flows and public transport services to reduce congestion and support the mobility of citizens. By managing congestion, smart cities can also help to improve air quality, while smart municipal services can manage wider pollution through intelligent waste removal. Finally, by using an integrated system, smart cities can improve safety in traffic, as well as facilitate wider security management e.g. through optimal allocation of security resources and traffic management for emergency responses.

The main challenge the public sector faces in responding to the opportunities a “smart city” brings is to quantify the impact of disruptive technologies. This can lead to challenging investment decisions. The structure and culture of city councils can impede strategic thinking on information and communications technology and the required organisational changes can be hard to implement.

In Romania, 594 smart city projects had been implemented by June 2020 in 87 cities; almost double compared to the beginning of 2019. The projects are grouped within the six Smart City Verticals – Smart Economy, Smart Mobility, Smart Environment, Smart People, Smart Living and Smart Governance.

The leading cities, by number of planned projects, work in progress or finalised projects are: Alba Iulia (106), Cluj-Napoca (54), Timișoara (26), Arad (19), Iași (19), Brașov (18), Bucharest– Sector 4 (18), Oradea (17), Sibiu (16), Piatra Neamț (15), according to the Romanian Association for Smart cities.

Among the solutions introduced in Alba, the following stand out: free Wi-Fi in public areas and public transport, traffic management, an environment monitoring dashboard with comparative measurements in urban and suburban areas, real time notifications on the public transport schedule, smart lighting, and a city proximity engagement platform promoting tourism, water management in remote areas, as well as online surveys.

Research and development activity is considered a national priority as it has a significant role in the sustainable economic development strategy.

Thus, the tax facilities currently available in Romania consist of granting an additional deduction of 50% for research and development costs, income tax exemption for employees who carry out such activities, as well as the possibility of profit tax exemption in the first 10 years of activity for companies that carry out research-development activities exclusively.

The legislation that regulates fiscal incentives for research and development activities was introduced in Romania more than 10 years ago, and has undergone several changes since then.

The latest legislative amendments adopted, applicable from 1 January 2023, consist of the regulation of a framework structure for the National Register of Experts, the clarification and improvement of the way of carrying out the certification process through the existence of framework models for each necessary part of the expert report, as well as the introduction of the requirement for large taxpayers to certify the research and development projects for which they apply the additional deduction when calculating profit tax.