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Why to Invest in Romania ?. International Investment Forum Romanian Chamber of Commerce and Industry October 15, 2004 Bucharest, Romania Anca Harasim Executive Director, AmCham Romania. Romania: Country Profile. Romania: Country profile.

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why to invest in romania

Why to Invest in Romania ?

International Investment Forum

Romanian Chamber of Commerce and Industry

October 15, 2004

Bucharest, Romania

Anca Harasim

Executive Director, AmCham Romania

romania country profile1
Romania: Country profile
  • Area: 238,391 sq km (12th in Europe and 81st in the world)
  • 21,680,974 inhabitants (March 2002)
  • Urban population: 55%
  • Population structure by nationality: 89.4% Romanians, 7.1% Hungarians, 0.5% Germans, 3% Others
  • Currency:1 LEU (plural LEI)
  • Capital city: Bucharest
  • Main cities: Cluj, Iasi, Constanta, Timisoara, Galati, Craiova, Brasov, Ploiesti.
economic overview exchange rate rol usd 1997 2002
Economic overviewExchange rate ROL/USD (1997-2002)
  • Exchange rate policy in 2003 aimed using this parameter as a stabilizer of inflation expectations and preserving external competitiveness.
leading industries
Leading industries

Romania’s major industries include:

  • Textile and foot ware,
  • Light machinery and auto assembly
  • Mining
  • Timber
  • Construction materials
  • Metallurgy
  • Chemicals
  • Food processing
  • Petroleum refining
preferred sectors for recent foreign investment in romania
Preferred sectors for recent foreign investment in Romania
  • Oil and gas exploration
  • Car manufacturing
  • Banking and finance
  • Food processing
  • Heavy engineering
  • Telecommunications & IT
  • Commercial construction
  • Consumer products
why to invest in romania1
One of the largest markets in CEE, 2nd after Poland

Skilled labour force, with solid knowledge in technology, IT, engineering

Rich natural resources, including fertile agricultural land, oil and gas

An important potential for tourism

Extensive maritime and river navigation facilities (Constanta is the largest port on the Black Sea)

Attractive location:

Allows easy access to countries of the former USSR, Middle East, Northern Africa being located at the cross-roads of traditional commercial routes

At the junction of 3 prospective European transportation corridors:

Corridor 4: for motor vehicles and railways (Berlin-Prague-Budapest-Arad-Bucharest-Constanta-Istanbul-Salonic)

Corridor 7: river (Constanta-Danube-Main-Rhine)

Corridor 9: for motor vehicles and railways (Helsinki-Moscow-/Kiev-Odesa-Bucharest-Constanta-Alexandroupolis)

Why to Invest in Romania ?
why to invest in romania cont
Why to Invest in Romania? – cont.
  • The presence of branch offices and representatives of various well-known international banks: Citibank, ABN-AMRO, ING Bank, RZB, HVB, etc.
  • Diplomatic relations with 176 countries
  • Member of the UN and other international organizations
  • Accession to NATO and European Union
  • Functional Market Economy Status granted by the USA and the European Commission
  • Increasing international country rating by Standard & Poor’s and Fitch Ratings
Romania – an important country for the United States and the European Union
    • Its geopolitical position, history and recent world events require the country advance to its rightful place among Western nations;
    • Romanian’s admission to NATO has encouraged the Government of Romania (“GOR”) to commit more to Western alliances and take important steps to reduce corruption, minimize bureaucracy and strengthen the market economy;
    • The Country Report released by the EC on October 6, 2004, has awarded Romania the “functioning market economy” status.
  • Romania – an important market to US and EU companies
    • Romania has the second largest population in CEE, with 22.5 million consumers with increasing purchasing power, but yet to develop a middle class comparable to Poland and Hungary;
    • AmCham Romania has over 190 members comprised of some of the largest US companies, the majority of whom report significant profits and growth, which compare very well to other regions of the world.
government of romania a new sense of openness and urgency
Government of Romania – a new sense of openness and urgency
  • Promoted consultation with the business environment and, in that respect, had issued Government Ordinance 396/2002 and Law 52/2003, which requires that draft legislation affecting business environment be submitted for comment to interested parties
  • Applied, starting with January 2004, a new fiscal system, based on a single fiscal code and a fiscal procedure code, destined to ensure a stable and predictable business environment
  • AmCham actively took part in the consultations led by the ministries regarding the draft of the Labor Code and of the Fiscal Code, although with mixed results.

EU Enlargement

  • 10 new countries joined the EU in May 2004
  • The number of states raised by 66%; Population raised by 20% to 447m
  • But GDP rises only 4.5%; Average GDP per head will FALL by 13%
  • It is a long-term process –benefits already felt and over next 5 years

EU Enlargement – Overview

  • Major impacts:
    • Level playing field
    • Wealthier customers
    • More Western competitors
    • Removal of trade barriers facilitate Pan-European distribution strategies
  • Local CEE companies face threats and opportunities:
    • Costs of conforming to EU regulations
    • Competing on open market
    • But good CEE companies will build niches and even expand westwards

EU Accession Process:

  • Driver to advance reforms and ensure fully functioning market economy
  • Will improve rule of law
  • Much work continues, notably to improve:
    • the legislative process
    • regulatory oversight by governmental agencies, administration of the courts
    • consistent and regular enforcement of laws.

Business Impacts

  • Companies adjust to new laws, new funding systems
  • Level playing field, richer consumers, more competitors
  • Best local CEE companies start to exploit EU market
  • CEE corporate dinosaurs start to collapse as subsidies decline
  • Western companies buy some up? Or cherry pick?
  • Economies move away from industry and agriculture to services – opportunities for services and IT companies

Business Impacts – cont.

  • Business to business:
    • local CEE companies will look for Western partners to survive
    • will want Western partners to break into Western markets

Local CEE companies

  • Those in heavy industry, food, energy and telecoms will face most pressure
  • Opportunities for partnerships, M&A or buyouts
  • Shake out of inefficient CEE companies means… greater specialization of local business integrating in supply chain of MNCs
benefits of eu accession
Benefits of EU Accession
  • But FDI will CONTINUE and not fall off - in 2003 CEE region was ONLY part of world that saw FDI increase
  • EU accession gives benefits to CEE region compared with rest of the world:
    • reduces all types of risks
    • reduces transaction costs
    • Increases market to 450m and potential for production sites

Source: EIU, January 2003

eu accession effects on investments
EU Accession Effects on Investments
  • Type of investment will change as CEE moves away from low cost base
  • New members won’t be able to compete on cost with Romania, Ukraine and Far East
  • But within the EU, the CEE markets will stay low-cost bases for another 15 years
  • They retain advantage over Far East as location on basis of skills, infrastructure & proximity, i.e. when cost alone is not the criterion
eu accession effects on trade
EU Accession Effects on Trade
  • 80% of CEE goods already enter EU tariff-free – Freeing up of agriculture and services to come
  • Removal of threats of anti-dumping will ease trade flows especially in fertilizers, chemicals, steel, clothing & textiles
  • This will block remnants of business with CEFTA but Balkans helped by EU association agreements (Stability Pact Bi-Laterals)
  • EU insists that member states fulfill all Schengen requirements strictly
  • Meeting Schengen does not trigger lifting of internal border controls (estimated 5 years, whereas Greece waited 8 years to join Schengen and Italy 7 years)

Romania’s Accession to EU

  • Romania’s goal: EU membership by 2007.
  • Romania must demonstrate:
    • political and administrative requirements related to democracy, rule of law and human rights.
    • adoption of Acquis Communautaire.
  • Three more chapters to be closed by the end of 2004: Justice and Home Affairs, Competition and Environment
benefits of the enlargement
Benefits of the Enlargement
  • Benefits of enlargement outweigh the costs
  • Strong incentives for economic reform
  • High rates of economic growth
  • Achievement of a functional market economy
  • Better employment prospects
  • Enlargement is a “positive-sum” game
consequences of enlargement
Consequences of Enlargement
  • Better climate conducive to trade and investment
  • Expansion of the EU Single Market: competition rules, enterprise policy and regulatory reforms
  • Subject to EU’s WTO obligations
  • Common External Tariff
  • Future adoption of Euro
opportunities for u s business
Opportunities for U.S. Business
  • Improved market access: one standardization process; one certification process
  • EU Structural Funds: environment, transport, alternative energy, IT development, industrial investment
  • Regional development aid open to Public/Private Partnerships with U.S. companies
trade and investment leads
Trade and Investment Leads
  • Equipment for food packaging
  • Sterilizing, dehydrating and jar packaging equipment
  • Request for Aluminum extrusion line
  • Demand for high productivity pipe soldering equipment
  • Equipment and know-how for powder injection molding
  • Demand for automotive expendables
  • Equipment needed for urea formaldehyde resin factory
  • Equipment for furniture factory
  • Equipment for primary wood processing
  • Equipment for internal television network
trade and investment leads1
Trade and Investment Leads
  • PPP in telecommunications
  • PPP for railway project
  • Partnership in railway freight business
  • Partnership in establishing a mortgage fund in Romania
  • Demand for specialized medical equipment: MRI, CT
  • Partnership for a private maternity clinic.
  • Demand for agricultural tractors
  • Partnership for agribusiness on 30,000 hectares
  • Packaging equipment for mineral water
  • Equipment for stratified beams production
amcham making connections for u s business
AmCham – Making connections for U.S. Business
  • Established in 1993, is the largest business association in Romania with 190 members which created over 40,000 jobs and representing a total of 5.5 billion USD investment
  • Assists its members develop their business in Romania
  • Actively contributes to the improvement of the business environment and regulatory framework
  • Supports U.S. – Romanian business ties
AmCham services
  • Lobby and advocacy
  • Networking and Communication
  • Linkages with United States and European Union
  • Publications
  • Special events

Declaration of Business Principles

  • Respect relevant laws and regulations and adherence to the rule of law
  • Respect the highest standards of business practices in dealing with government officials
  • Engage in fair business practices
  • Follow responsible environmental policies
  • Engage in good corporate citizenship
  • Establish the highest standards for labor conduct
  • Ensure a safe and healthy workplace
Increased membership 5 times in the last 4 years

Negotiated and implemented the Free Trade Agreement with Yugoslavia

Signed the Memorandum of Understanding with AmChams in SE Europe to better promote the region to foreign investment

Abolished Ordinance 18 (hard currency repatriation)

Increased the tax-deductible interest rate

Developed a successfull Intellectual Property Rights and Corporate Social Responsibility Programs in 2003 and 2004

amcham committees
Tax Committee

EU Committee

Labor Task Force

Judicial Reform Task Force

Competition Task Force


Small and Medium Enterprises Committee

Public Affairs Committee

Membership Committee

6. IT&C Committee

CSR Committee

AmCham Committees
future perspectives 2004 2005
Improve dialogue on legal issues and continue AmCham’s involvement in the GOR consultative process

Support the government in the EU accession process

For SMEs: develop periodic events on specific topics and training seminars

Promote IPR and continue the Corporate Social Responsibility Program

Initiate a Business Principles/ Corporate Governance Program

Future Perspectives 2004-2005:
future perspectives 2004 2005 cont
Further our efforts to remain the leading business association in Romania

Present the Government with pertinent solutions for the improvement of the Romanian regional competitiveness

Promote transparency at all levels and authorities in order to ensure a level playing field for all taxpayers

Future Perspectives 2004-2005-cont.
amcham board of directors
Honorary Chairman Jack D. Crouch II, U.S. Ambassador to Romania

PresidentRoberto Musneci, GlaxoSmithKline

Vice PresidentsMatthew Price, Procter & Gamble

Dan Ionescu, General Electric

TreasurerVasile Iuga, PricewaterhouseCoopers

Members of BoardNikos Koumettis, Coca-Cola Romania

Radu Enache, Hewlett Packard

Obie Moore, Altheimer & Gray

Henk Mulder, ABN AMRO Bank

Andy Dillon, Timken Romania

Executive DirectorAnca Harasim

Fax: +40-(21)-312 48 51


Web page:www.amcham.ro

AmCham Board of Directors: