Foreign Trade of Romania - Foreign Direct Investment

Foreign Direct Investment

Foreign direct investment (FDI) in Romania has increased dramatically. Romania is the 2-nd place in the Central Europe for FDI. Foreign direct investment flow attracted by Romania in the first 2 months of the year 2008, reached Euro 1.2 million, thus registering a 40% increase against January and February 2007. Considering the FDI structure, the predominant was „other capitals” (loans granted by mother company to affiliate structures in Romania) representing 50.8% out of January and February total, followed by „reinvested profit” and „capital participation” amounting 49,2%.

In 2006 net foreign direct investment was inbound US$12 billion (EUR 9.1 billion). Skilled labor force, low taxes, a 16% flat tax for corporations and individuals, no dividend taxes, liberal labor code and a favorable geographical location are Romania's main advantages for foreign investors. FDI has grown by 600% since 2000 to around $13.6 billion or $2,540 per capita by the end of 2004. In October 2005 new investment stimuli introduced – more favorable conditions to IT and research centers, especially to be located in the east part of the country (where there is more unemployment), to bring more added value and not to be logistically demanding.

Origin of direct foreign investment 1996-2005 – the Netherlands 24.3%; Germany 19.4%, Austria 14.1%; Italy 7.5%, United States (8th largest investor) 4.0%. Top investors from countries, by companies: Erste Bank (Austria), OMV (Austria), Gaz de France (France), Orange (France), Vodafone (U.K.), Ford (U.S.), MOL (Hungary), ENEL (Italy), E.ON (Germany), Nokia (Finland) ... General Motors considers Romania for plant. General Motors could shortly begin investments in order to develop a production centre in Romania, with Cluj-Napoca as a potential location for the future plant, close to the Nokia Village. Nokia invested $100 mn in a plant near Cluj-Napoca. SABMiller is set to invest EUR50m (US$69m) in expanding production at one of its breweries in Romania (Ursus (beer)). Czech-based investor and developer CTP Invest plans to allocate EUR 60 mln next year in industrial property development in Romania. Snowmobile and motorcycle maker Polaris Industries Inc. will invest 50 million euros ($69.41 million) in a snowmobile plant in Romania. British investments in the Romanian economy currently exceed 5 billion euros, with more than 3,200 British companies operating in key sectors, including telecommunications, information technology, financial services, and water and environmental protection.

Sectors of direct foreign investment - industry 38.4%; banking and insurance 22.2%; wholesale and retail trade 13.1%; production of electricity, gas and water 10.5%; transportation and telecommunications 9.2%. Foreign capital is attracted by skilled and relatively inexpensive labor, tax incentives, modern infrastructure, and a good telecommunications system. Romania has strength in information technology and other significant areas such as auto components, chemicals, apparels, pharmaceuticals and jewellery.

European Union (EU) approves €143 million aid to Ford plants in Romania. The government aid will be part of a total investment of €600 million (US$934 million) in the plants to make engines and complete vehicles in the Craiova region of southwest Romania.

In 2008, Procter&Gamble (P&G) intends to allocate EUR 50 mln for construction of cosmetics factory in Romania. This would be the first greenfield in cosmetics industry in Romania. PSA Peugeot is interested in opening an engine factory in Romania of a total investment of EUR600 million.