By Alexandra Jocham, RBI |
Discover CEE talked with Gerd Bommer, Austrian economic delegate in Bucharest, about the attractiveness of Romania for investors, interesting business locations and first-hand tips for doing business.
Mr. Bommer, what makes Romania attractive for investors?
Romania is an economy with a relatively strong and big domestic market, which is the main attractive factor for investors in many business sectors, like foodstuffs. The domestic market profits from quickly rising household incomes, is home to many investment projects (most of which are expansion and modernization projects) and a still very high inflow of foreign direct investments. Investors profit from low costs in terms of labour, real estate and logistics. These competitive cost advantages are crucial for investors in sectors like automotive supplies, metalworking and the plastics industry. For those investors the low-cost level combined with being in a European Union market (EUR 1 Certificate of Origin) that has rather short logistical delivery times, builds a very attractive basis for an investment decision. This is also proven by the fact that Romania is, besides Serbia, the most attractive near shoring market in Europe, profiting from production being transferred back from Asia to Europe.
Which region or sector is developing especially well?
In terms of regional development, we see different stages: investments and economy concentrate on the Bucharest-Ilfov area, but also on cities like Cluj-Napoca, Brasov, Sibiu, Constanta, Iasi and the area Timisoara-Arad. Besides Bucharest-Ilfov, the western regions of Transylvania from Targu Mures via Cluj-Napoca, Oradea, Arad, Timisora to Sibiu and Brasov show a better development than the other ones. The southern regions of Wallachia/Romania and Romanian Moldova are particularly weak. Especially the latter suffers from a massive lack of infrastructure of highways and railways.
In terms of sectors, there are many that are doing really well – IT should be mentioned first of all. In 2013, the IT sector made up for 3 per cent of Romania’s GDP, in 2018 this value was already at 8 per cent with more than 100,000 software engineers working in the field. Apart from this area, especially retail, fast moving consumer goods (FMCG are products that are sold quickly and at relatively low prices (e.g. packaged foods, beverages, toiletries or over-the-counter drugs; editor’s note), hotels and catering as well as logistics are developing at a higher pace than others. The construction sector suffers from a lack of infrastructure projects being initiated.
In which areas must Romania improve to attract more investors?
The biggest downsides for investors lie in the legal, tax and economic framework created by the Romanian government as well as red tape (official routine or procedure marked by excessive complexity resulting in delay or inaction; editor’s note) in general. The Romanian government tends to change legislation overnight, without prior coordination with businesses and with a poor quality of drafting. These erratic framework changes create an environment of opacity, instability and unpredictability.
Furthermore, the scarcity of labor force, shortcomings in infrastructure and the imponderables of jurisdiction add to the difficulties of investors. We do not see a clear, powerful and sustainable strategy by the government to tackle these problems effectively.
What tips do you have for investors?
My most important tips are:
It’s never too late to enter a market, but you must be informed and prepared beforehand.
If you decide for an investment in Romania, do it for the long term.
Don’t be scared by the imponderables of the framework system, they can be dealt with, though it doesn’t add to the attractiveness of Romania as an investment location.
Avoid corruption, as this will jeopardize your investment and your company overall. If you have a clean track record, your development will be slower in the beginning, but after some time much stronger and more sustainable.
Be informed about the market, your customer and the system and structure of the business environment. To achieve this as an Austrian company efficiently within a short time, feel free to contact us at ADVANTAGE AUSTRIA (email@example.com) and we will support you with any information needed.
Are there any special habits that should be considered in business relationships?
Romanians are rather emotional relationship-oriented people, especially in the southern parts of the country. They tend to focus on personal relationships and have a very special approach to the concept of time. Structure and system in working with and within organizations are stronger in the urban areas, but always require a certain degree of flexibility. Generally, the skills and educational level of managers are very high in Romania as compared to other CEE countries and the role of women in business tends to be stronger than in other countries, such as Austria.
If I visit the country, what should I especially look for?
Never forget to add a bit of sightseeing to your busy travel schedules, as Romania is a beautiful country with diverse touristic opportunities from mountains to seaside, from culture to history, from urban tourism to secluded and hidden gems. Keep in mind that cities like Bucharest do not openly brag with their beautiful sides, but they are well worth to be discovered!