Economic Overview & Business Opportunities
BucharestBusiness opportunities in Romania – @Adam Global
The Romanian economy is one of the world’s fastest developing markets outside of Asia. As the largest in south-eastern Europe and the second largest in CEE, Romania is characterised by a rising GDP, high-growth and rapid investment. It’s a region that is rich in land and energy resources, as well as being a strong manufacturing base with a low cost work force.
Being the 9th largest member of the EU 27 by size (38,931 square km) and the 7th largest by population (19m) Romania is the second largest consumer market in Central-Eastern Europe. Together with its neighbouring countries Romania is part of a 100m market. The government has put in place tax breaks and other incentives to boost investment in different sectors of the economy. A flat tax of 16% is just an example.
Geographically placed at a cross roads of the major EU, Commonwealth of Independent States and Middle Eastern markets, doing business in Romania means being at the centre of three important pan-European corridors. These have links with Europe from west-to-east and north-to-south, while water transport not only comes inland via the Danube but also at the Black Sea via Romania’s largest seaport at Constanta.
Now a part of the EU single market and NATO, Romania is divided into eight development regions, all aimed at supporting and stimulating economic growth. Areas of great potential due to the region’s extensive natural resources include tourism and agriculture, energy and services. Automotives, IT & ICT, green energy, oil and gas, pharmaceuticals, food production, aeronautics, shipyards, R&D and mining are also dynamic sectors. While those recording the highest growth, with the most potential include transport, telecommunications, banking, insurance and, again, tourism.
Greatly improving on the disappointing 1.8 billion EUR of EU Cohesion Policy funding for the period of 2007 to 2013, prospects are looking more positive for doing business in Romania with its most recent 22 billion EUR endowment, received for the period of 2014 to 2020. Public investment will continue to focus on regional operations, infrastructure and transport, as well as the environment. Green energy remains a priority, with the government aiming to invest a projected 18 billion EUR of EU funding into meeting its ‘20-20-20’ target, by establishing new sources of renewable energy across biomass, hydro, solar, wind, geothermal, bio fuels and others.
Government support is also focussing on investment and initiatives across crafts production and manually manufactured products, while developing and establishing business and technological incubators.
One sector with the greatest and most diverse potential for business in Romania is tourism. The region is teeming with attractions, across its awesome natural beauty, historical rural architecture and small wood and craftwork industry. There are three biosphere reservations in a country that also boasts a third of the natural springs of the whole of Europe. That means a wealth of areas enjoying natural therapeutic factors and the opportunity for business and investment in ecotourism that comes with it.
Real Estate investment opportunities
From January 1, 2014, foreign citizens and legal entities are allowed to acquire land in Romania under the same terms and conditions as Romanian citizens and legal entities. As for the agricultural land, the conditions of a pre-emption right require compliance. Additionally, foreign citizens and legal entities may own buildings under the same conditions as Romanian citizens and legal entities.
According to the new Civil Code, the authentic form of the sale-purchase agreement is not sufficient to ensure ownership right over real estate. Thus, registration with the relevant land book of the ownership transfer is mandatory. So, regardless of the moment the parties conclude the agreement, the ownership right will be transferred at the time of the inscription in the Real Estate Register. Nevertheless, until finalization of the cadastral works for each territorial unit, registrations shall be performed for third parties’ acknowledgement purposes only.
In order to support small projects, Law no. 220/2008, regarding the promotion of renewable energy projects, provides the opportunity to sell the produced energy at regulated tariffs, in which case the investor can no longer benefit from green certificates (GCs).
For the producers that were accredited on 1 January 2014, a number of GCs will be reduced, out of the initially established number of GCs (e.g., 0.5 GCs out of 2 until 2017 and 0.25GCs starting with 2018, for each MW produced in wind power plants and 3 GCs out of 6 for each MW produced in photovoltaic power plants).
For the already accredited projects, the E-RES target for 2014 benefiting from the green certificates promotion scheme has been established by ANRE at 11.1%.
Romania has been a leading player in the software development space and has been ranked at the top of IT outsourcing service providers in the global market by all the major consulting firms since 2005.
Outstanding technical skills and a passion for engineering marked in people’s genes, a culture of open communication, strong work ethics, great language skills and one of the best developed Internet infrastructures in the world helped Romania become one of the most attractive destinations for the IT outsourcing and software development businesses.
More and more software companies develop and grow in Romania for its renowned global delivery service centers and R&D potential.
The country’s competitiveness has raised awareness not only among European clients, for whom the advantage of operating under the European Union umbrella brings obvious business advantages, but also among more distant markets, such as the US, Canada, Australia and countries in the Middle East who also invested heavily in software outsourcing projects in Romania
In 2014, the country was awarded its highest economic freedom score to date, reaching 65.5 and making it the 62nd freest economy in the world, the 29th out of 43 in Europe. But most importantly, this new peak means the country has advanced 23 points in 20 years, the eighth best improvement of any country and a fair indication of the possibility for exponential growth. With further structural reforms and government efforts to privatise the rail, mining, and petrochemical sectors to come, the Romanian economy is primed for a comeback.