Romania – A Strategic Choice

1. Romania – A Strategic Choice Manuel Costescu – State Secretary, InvestRomania

2. Swiss Investment in Romania (December 1990 - April 2016) Source: National Office of the Trade Register (ONRC) The subscribed share capital accounts for only a part of the total FDI. According to ONRC, the country of origin of the investment is the country where the capital comes from and not the country of origin of the transnational company.

3. Bilateral relations between Romania and Switzerland • At 31 December 2015, 6 groups of product concentrated 80.80 % of Romanian exports to Switzerland, of which the first 3 groups are: • Machinery and electrical equipment: 90.91 millionsEUR (29.5%); • Metals and metal product: 38.33millionsEUR (12.40%); • Vehicles, aircraft and transport equipment: 36.31 millionsEUR (11.80%); • At 31 December 2015, 2 groups of product represent 78.70% of Romanian imports from Switzerland: • Chemicals andrelated products(mainly pharmaceuticals): 205.65 millions EUR (46.40%); • Machinery and electrical equipment 143.16 millions EUR (32.30%).

4. Romania – a promising investment destination Economic growth in Romania is among the highest in the EU with 4.2%, and is forecast to remain above potential in 2016 and 2017 3 EUR BN NET FDI INFLOW Area: 238,391 km2 160 Romania has been a member of EU since 2007 and a member of NATO since 2004 Capital: Bucharest EUR BN NOMINAL GDP 55 Romania is ranked 1st in the EU for maximum speed of internet connectivity and 2nd for high speed broadband adoption Currency: LEU (RON) EUR BN EXPORTS Population: 19,5 mn ppl In 2021, Romania will host the European Capital of Culture for the second time, after Sibiu in 2007. Baia Mare, Bucharest, Cluj and Timisoara have been shortlisted for this role Moody’s S & P Fitch BBB- Stable Baa3- Positive BBB- Stable S-E Europe

5. Historically, investing in Romania has never been easier, with the government becoming a partner for businesses and entrepreneurs World Bank ease of doing business rank EU labor costs rank 37 2 Ahead of Bulgaria, Croatia, Hungary, Italy, Turkey, Serbia or Greece Romania has a very competitive labor force in the EU UKR EU gas prices rank Maximum broadband speed MD HU RO 1 1 Low gas prices and 5th lowest electricity in Europe Romania’s maximum broadband ranks first in the EU SRB BG Source: World Banks, Doing Business Report 2016

6. Romania is now more connected than ever, boasting a transport network of 14 international & domestic airports and 8 major ports InternationalFligths SUCEAVA Domestic Fligths IASI SATU MARE BAIA MARE Under construction Ports ORADEA BACAU CLUJ-NAPOCA TARGU MURES GALATI ARAD BRASOV SULINA SIBIU TULCEA BRAILA TIMISOARA M. KOGALNICEANU CONSTANTA BUCURESTI OTOPENI DROBETA TR. SEVERIN MANGALIA CRAIOVA GIURGIU

7. 130 direct flights can be accessed from 4 Romanian international airports, leading to 76 destinations in 31 countries worldwide Barcelona Bari Basel Bologna Brussels Bucharest Cologne Dortmund Dubai Eindhoven Geneva London Madrid Malmö Memmingen Milan Munich Nuremberg Paris Rome Tel Aviv-Yafo Valencia Venice Vienna Warsaw Zaragoza Barcelona Bologna Brussels Bucharest Istanbul London Milan Munich Paris Rome Tel Aviv-Yafo Turin Venice Vienna IASI 14 direct flights CLUJ-NAPOCA 26 direct flights BUCURESTI OTOPENI 73 direct flights TIMISOARA 17 direct flights Barcelona Bari Bologna Brussels Bucharest Dortmund Eindhoven Frankfurt London Madrid Memmingen Milan Munich Paris Rome Valencia Venice Alghero Alicante Amman Amsterdam Athens Barcelona Bari Basel Beirut Belgrade Berlin Birmingham Bologna Brussels Budapest Catani Chisinau Cluj-Napoca Copenhagen Doha Doncaster Dortmund Dubai Dublin Düsseldorf Eindhoven Florence Frankfurt Geneva Glasgow Hamburg Iași Istanbul Larnaca Liverpool London Madrid Málaga Malmö Malta Milan Moscow Munich Naples Nice Nuremberg Oradea Oslo Paris Perugia Pescara Pisa Prague Rome Satu Mare Sibiu Sofia Stockholm Strasbourg Stuttgart Suceava Tel Aviv Thessaloniki Timisoara Turin Valencia Venice Verona Vienna Warsaw Zaragoza Zürich

8. 70 industrial parks are spread across Romania, most offering capabilities suited for industries like aerospace, IT&C and industry Industrial parks in Romania Status at regional level 1 North West Region: 15 parks 1 1 1 West Region: 3 parks 1 3 1 9 South West Region: 6 parks 1 1 1 South Region: 22 parks 2 3 10 1 South East Region: 2 parks 1 1 1 North East Region: 4 parks 2 1 14 Center: 16 parks 4 1 2 1 Bucharest: 2 parks 1 2 2 • There are 70 industrial parks spread across Romania, placed under both private and public ownership • All offer access to utilities, particular benefits packages according to their focus and potential for synergies • Also, investors are exempted from land, building and urban planning taxes as well as for land destination changing

9. Technology is becoming a significant part of Romania’s backbone infrastructure, being leveraged by a talented pool of developers Top 10 EMEA countries by avg. speed (Q2 2015, Mbps) Top 10 EMEA countries by top speed (Q2 2015, Mbps) SE CH NL NO FI CZ DK RO BE IL RO IL SE NL CH BE RU FI HU UK Top 10 EMEA countries by Mbps Broadband adoption (Q2 2015, % > 4 Mbps) 95.0 95.0 94.0 93.0 93.0 92.0 91.0 90.0 90.0 88.0 NL IL RO DK CH SE BE AU FI HU Share above 10 Mbps Share between 4 - 10 Mbps • The internet infrastructure has developed along with the developers, who are leveraging the network to offer high quality outsourcing services, although the focus is now shifting towards product design and, consequently, startups Source: Akamai Technologies; InvestRomania

10. Nominal GDP grew by a total 275% between 2000 and 2014, while FDI stock grew by 971% for the same interval Evolution of nominal GDP in Romania 2000 – 2014 [EURbn] +10% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Nominal GDP  Evolution of FDI stock in Romania 2000 – 2014 [USDbn] +18% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 CAGR FDI stock • Source: Eurostat; UNCTAD; InvestRomania

11. Manufacturing, financial services and trade account for approx. 56% of FDI stock existing in Romania, followed by utilities and real estate Spread of FDI stock among different sectors [%, 2014] Computer & electronics FDI (EUR billion) +14% 1,43 1,25 1,06 1,05 0,84 Manufacturing 1,7% Financial services 5,1% 2010 2011 2012 2013 2014 2,5% 5,6% Trade  32,0% 0,9% Utilities FDI (EUR billion) Utilities 6,0% 0,6% Real estate +15% IT&C 9,8% Extractive industry 6,64 6,70 5,72 4,36 3,87 Prof., scientific, tech. and admin. 11,1% 13,0% Agribusiness 2010 2011 2012 2013 2014 11,7% Transportation IT&C FDI (EUR billion) HoReCa CAGR Other  +4% • The computer & electronics manufacturing sector as well as utilities are registering the highest FDI growth rates • IT&C, while not growing at the same acceleration, is becoming a focus sector with strong connections to international markets 4,13 3,60 3,08 2,97 2,85 2010 2011 2012 2013 2014 • Source: National Bank of Romania; InvestRomania

12. A large majority of FDI stock in Romania is of European origin, with Western Europe (NL, AT, DE) in the lead with EUR 31 billion (52%) Global spread of FDI stock in Romania (%) European spread of FDI stock in Romania (%) 1,8% 10,5% 18,4% 27,0% 14,2% 15,3% 7,8% 5,3% 87,7% 4,1% 8,1% Netherlands Germany Italy Switzerland Europe USA Others Austria France Cyprus Others • Most of the local FDI stock is owned by companies originating from Western and Central Europe, led by the Netherlands, Austria, Germany, France and Italy • The US is being responsible for only 1.8% of FDI stock in Romania • However the presence of companies of American and transcontinental origin is significant in Romania, due to investments executed through European based proxies due to fiscal reasons

13. Romanian labor costs are some of the lowest in the EU, maintaining a competitive position relative to member states National minimum wages in the EU (EUR/ month, 2016)* BG RO LT HU CZ LV SK HR EE PL PT GR MT ES SL FR DE BE NL UK IE LU National minimum wage Estimated average hourly labor costs (EUR/ h, 2014)** 40 39 37 36 35 34 32 32 31 30 28 22 21 16 16 15 13 12 10 10 9 9 8 7 7 6 5 4 DK BE SE LU FR NL FI AT DE IE IT UK ES CY SL GR PT MT EE SK CZ HR PL HU LV LT RO BG Other labor costs Wages and salaries * Denmark, Italy, Cyprus, Austria and Finland have not implemented a national minimum wage; ** Enterprises with 10 or more employees Source: Eurostat

14. With the local taxes already low compared to European peers, the government plans future tax cuts through the new fiscal code Overview of the Romanian tax system VAT Social Security Employee Employer • The government is committed to reducing the tax burden – 2016 marked the drop in VAT to 20%, which will be followed by another drop to 19% in 2017 • VAT on food products is 9% 20% 16% 23% • Tax System of Romania • The individual tax rate does not have any planned cuts for the near future • However, the new fiscal code planned a reduction of the dividend tax from 16% to 5% • The government’s commitment to lower the tax burden covers the corporate tax rate as well, with a reduction to 14% planned for 2019 16% 16% Individual Tax Rate Corporate Tax Rate Source: InvestRomania

15. The top university centers in Romania are Bucharest, Cluj – Napoca and Iasi, followed by Timisoara, Sibiu, Brasov and Constanta Botosani Baia Mare Suceava Iasi Satu Mare Top 3 University Centers Roman Bistrita Vaslui Zalau Piatra Neamt Bucharest-33 Universities Cluj-10 Universities Iasi-10 Universities Targu Mures Bacau Birlad Cluj-Napoca Oradea Turda Onesti Medias Sfantul Gheorghe Human Capital Index Alba Iulia Arad Focsani Galati Deva Human Capital Index 2015 - Rank 39 Upper-middle income Country - Rank 3 Brasov Sibiu Braila Hunedoara Tulcea Timisoara Buzau Ramnicu Valcea Ploiesti Targoviste Age group rankings Targu Jiu Resita Slobozia Pitesti 25 – 54 Rank 36 15 – 24 Rank 45 55 – 64 Rank 29 Constanta Calarasi Drobeta-Turnu Severin Bucuresti Slatina Giurgiu Craiova Number of graduates by University Center [‘000] = City >100,000 inhabitants = City 50,000 – 100,000 inhabitants 29 10 9 6 5 4 4 3 3 B CJ IS TM CT DJ BV AR SB Sources: NIS, World Economic Forum

16. Over a 25% of graduating students will have a technical degree, followed by approx. another quarter in business and economics Percentage of university graduates by subject of degree (2014) • The quality of education in Romania is recognized internationally, local students consistently ranking in the top 10 in International Olympiad competitions in math and informatics, better than any other country in the EU • The focus on technical subjects is significant, with the number of engineers/ capita – higher than the US, India, China or Russia • With 5 polytechnic universities, 59 domain specific universities and 174 private colleges, the most successful students tend to pick high tech industries, such as IT – the local education system supplies over 7,000 IT&C engineers every year • 99% of Romanian students learn two or more languages in upper secondary education 2% Science and humanities 10% Technical 28% Economics 11% Law Medical Arts 23% 26% 433 Number of students by subject of degree (‘000, 2014) 112 134 80 43 57 8 * Includes: mathematics, physics, biology, chemistry, geography, journalism, history, political and administrative science, philosophy Source: NIS, Eurostat

17. 9 out of 10 university students are proficient in English, as a result of the fact that almost all students study 2 languages in high school Languages studied by Romanian students (2014) 97% • 97% of Romanian high school students study 2 or more foreign languages while in secondary education • The predominant languages are English, French, German and Spanish, yet initiatives for teaching Japanese, Nordic languages or the entire Latin language family (Spanish, Italian, French) exist University students in Romania are proficient in (% of total): 90% 26% 17% 8% 5% Source: Assoc. of Business Services Leaders, NIS, Eurostat

18. With a budget of EURm 600 for the next 6 years, the two schemes for regional state aid aim to support value adding investments GD 2014/ 807 GD 2014/ 332 Aim • The creation of at least 10 jobs per location, out of which 3 jobs are for unfavored workers • To support minimum investments valued at EUR 10 million Eligible Costs • Construction of new buildings • Renting costs for existing buildings • CAPEX aimed at technical installations and tools • Acquisition of intellectual property • Salary costs registered for a 2 consecutive year period resulted as a direct consequence of the investment • Salary costs are comprised of gross annual salary plus benefits Budget • Total budget for the two schemes is EUR 600 million, with annual investments projected at EUR 100 million Payout • 2015 – 2023 • 2015 – 2025 • The two schemes offer state aid in the form of non reimbursable grants from the state budget, caped by the limit of maxim intensity approved according to the regional map Sources: Ministry of public Finance

19. The intensity of state aid varies according to the region, varying from 15% (in Bucharest) to 50% in most of the country • State aid intensity, according to development region: • North West – 50% • North East – 50% • South East – 50% • South – 50% • South West – 50% • West – 35% • Ilfov County – 35% • Bucharest – 15% North-West 50% North-East 50% Center 50% West 35% South-East 50% 35% South-West 50% South 50% 15% • State aid intensity is established as per EU and national regulations and is subject to change according to EU law on the matter • Development regions of Romania represent a split of counties into larger regions in order to technically better target development programs and policies

20. More than 10 nationalities have developed expat communities in Romania, particularly in its large urban centers (Bucharest, Cluj) Expats networks in Romania by home country and main originating cities • New Delhi • Mumbai • Kolkata • Bangalore • Warsaw • Katowice • Krakow • Lodz • Toronto • Vancouver • Montreal • Ottawa • London • Birmingham • Glasgow • Liverpool • Rome • Milan • Turin • Genoa • New York • Chicago • Houston • Los Angeles • Berlin • Hamburg • Munich • Cologne • Paris • Marseille • Lyon • Lille • Madrid • Barcelona • Valencia • Seville • Amsterdam • Rotterdam • The Hague Sources: InterNations

21. Life in Romania is good: the culture, the people and the places make it rich in great experiences for expats … to maintain the same standard of living from… In Bucharest, you need a monthly salary of… … with a salary of: Prague 57 000 Czech Koruna 46 580 Czech Koruna Warsaw 8 800 Zlotys 7 381 Zlotys Vienna 3 300 Euro 1 700 Euro London 4 500 Pounds 1 365 Pounds Berlin 3 100 Euro 1 714 Euro Paris 4 400 Euro 1 738 Euro Budapest 610 000 Forints 538 500 Forints Sources: Numbeo

22. Compared with other EU capital cities, the standard of living in Romania is high considering the differences in living costs BUCHAREST vs. LONDON BUCHAREST vs. BERLIN Consumer Prices • 57% lower in Bucharest • EUR 3,100 net salary in Berlin ensures the same standard of living • 44% lower in Bucharest • 41% lower in Bucharest • 56% lower in Bucharest • 38% lower in Bucharest Rent Prices • 86% lower in Bucharest Restaurant Prices • 64% lower in Bucharest Groceries Prices • 55% lower in Bucharest Standard of living equivalency (EUR 1,700 net salary in Bucharest) • EUR 5,707 net salary in London ensures the same standard of living Source: Numbeo; InvestRomania

23. Romania – a stable business climate, great investment opportunities, competitive workforce and outstanding lifestyle options Investing in Romania One single corporate tax level of 16% 43 billion EUR European funds assigned before the end of 2020 Tax exemption for reinvested profit Potential market of over 20 million consumers One of the most dynamic economies in Central and Eastern Europe 2016 High life standards, great lifestyle and rich personal experience An important domestic market and stable/safe country A competitive tax policy and state support for businesses Talented and skilled workforce More than 10 nationalities have developed expat communities High living standards and lifestyle Rich experiences for expats Few cultural and linguistic barriers University graduates are flexible, innovative and future-oriented