Foreign Direct Investment in Romania
- Romania rapid opening-up process of its economy has resulted in attracting significant foreign direct investment (FDI).
- UE enlargement has contributed significantly to raising Romania’s attractiveness for foreign investments.
- Other advantages for foreign investors are the big internal market, rich natural resources, a small tax on profit, numerous agreements for avoiding double taxation and political advantages such as NATO and EU membership.
- Romania is currently the single largest investment destination in Southeastern and Central Europe with FDI valued at 7.1 billion € in 2007.
- FDI in Romania have grown by 60% in the first 8 months of 2008 compared to the same period in 2007, reaching a level of 6.5 billion €.
- 22% of FDI experts appreciated Romania as the most attractive investing destination in south-east Europe, creating strong expectations for a positive evolution of investment flows
FDI is a key factor for economic modernization through changes in production patterns, technology transfer and greater competition pressures. In the latest years, Romania has benefited from important FDI flows, mainly due to the privatization process, but also due to the advantages of cheap labor force and a big internal market. From the beginning of the transition period, Romania went through a rapid opening-up process of its economy, which has resulted, among others, in attracting significant foreign direct investment (FDI). The presence of foreign firms has grown significantly, which is a sign of increasing economic integration.
In the latest years, Romania benefited of high flows of FDI. The FDI per capita has increased six times since 1999. In 2006, Romania was located in the third place among the New Member States (NMS), after Hungary and Poland, in total value of FDI stock. In 2007, Romania's FDI flows decreased, as a consequence of the finalization of the privatization process (Kardos Mihaela, Evolution and perspectives of Foreign Direct
Investment in Romania, 2008, p. 116).
EU enlargement has contributed significantly to raising Romania’s attractiveness for foreign investments. Romania has conformed to European regulations, shows records of economic growth and has a market economy status. The transition towards ERM II has created institutional instruments for a controlled inflation and computational pressures have strengthened monetary discipline.
80% of the total FDI stock comes from the EU. About 50% of the total comes from just three countries: Austria, the Netherlands and Germany (Economic analysis from the European Commission’s Directorate-General for Economic and Financial Affairs, Volume 5, Issue 3, 8.02.2008).
Business environment plays a fundamental role in choosing a country for FDI destination. According to the most recent study made by World Bank, in 2007 Romania placed itself on the 48th position out of 178 countries analyzed, climbing 7th places since previous year (World Bank, Doing Business 2008, www.worldbank.org).
Other advantages for foreign investors, considering Romania as a possible destination for the development of their business, refer to the dimension of the internal market, rich natural resources, a small tax on profit, numerous agreements for avoiding double taxation and political advantages such as NATO and EU membership.
According to estimations made by the United Nations, 22% of FDI experts appreciated Romania as the most attractive investing destination in south-east Europe, creating strong expectations for a positive evolution of investment flows (United Nations, Prospects for Foreign Direct Investment and the strategies of transnational Corporations, 2005-2008, New York and Geneva, 2008, p.47).
Foreign direct investments (FDI) have grown by 60% in the first 8 months of 2008 compared to the same period in 2007, reaching a level of 6.5 billion €, making Romania the single largest investment destination in Southeastern and Central Europe (source: Romania monthly economic review - October 2008, Ernst & Young S.R.L.).