To invest or not invest in Romania?
Romania has much to offer to business incorporating in the country, especially due to its location and EU membership. However, conducting business activities in the country is still somewhat challenging, as the country still faces problems associated with-developing countries. Companies that wish to invest in the country must weigh such benefits and obstacles before proceeding.
To help you decide if Romania is the ideal place for your business ideas, we have gathered the main advantages and disadvantages of choosing the country.
Robust economic growth
Romania has had one of the highest economic growths in Europe. From 2000 until the economic crisis in 2008, the country witnessed a growth of around 6%. Since the crisis, the country is recovering and growing at a rate of 3% – 4% annually. Most of the growth has been led by the increase in private consumption, which is expected to continue in the following years.
Romania is strategically positioned between the Eastern and Western Europe. Having joined the EU in 2007, Romania has the advantage of being a part of the agreement that allows the free trade of goods and services in the region. This means that any company incorporated in Romania can have free access to Germany, France, Spain other countries. One the other side, Romania is on the edge of the EU bloc, bordering non-members such as Ukraine, Serbia, Moldova, etc. Moreover, Romania is just a few hours away from Moscow. Therefore, companies that wish to explore markets beyond the European Union will be able to take advantage of such position.
Skilled labor force at a cheaper price
Romania is the 7th most populated country in Europe, with a total of almost 20 million people. Majority of the population is educated and almost all young Romanians are proficient in at least two languages, one of them being English is the most common. The biggest advantage is that such high-quality labor force is considerably cheap. According to the European Union, Romania has the second lowest average wage in Europe, an annual average of €2,668 in 2014, compared to €16,507 for the EU.
Ease of doing business in Romania.
Romania ranks 36 among 190 countries in Doing Business ranking by the World Bank, a position that has been achieved due to changes made by the Romanian government to facilitate and attract investments in the country. For example, the government has in the past years simplified the process of establishing a business, reducing the necessary company incorporation time from 29 days in 2004 to 12 days in 2016.
You can run a business at low cost
In Romania, the day-to-day business does not come at a high price. Electricity for example costs €0.10 per Kwh, compared to an average of €0.15 for the EU-28, and gas prices are an average of €9.99 per GJ vs. €11.47 in the EU-28. Any company incorporating in the country will be able to operate their business at a lower cost than they would otherwise in the rest of the European Union.
Good quality of life
The quality of life in Romania is very good, especially in Bucharest, Romania’s capital. The city was ranked 109th from 230 cities across the globe by Mercer’s Quality of Living ranking. Although Romania is mostly associated with the tales of Dracula, Bucharest was once considered the “Paris of the East” or “Little Paris” due to the style of the building in the city center. Apart from the capital, Romania counts with several medieval cities, with scenic views and great communities.
Corruption is a widespread practice
- Romania has the 3rd highest perceived corruption among European countries according to the Corruption Perception Index 2015, just ahead of Bulgaria and Italy. This has a direct effect on everyday lives of people and businesses operating in the country, which struggle with inefficiency and bureaucracy in the government, as well as incomplete public projects.
- The National Anticorruption Directorate, the agency responsible for preventing, investigating and prosecuting corruption cases, has made serious progress, especially in the last year. The number of files submitted to the NAD reached a new record in 2015, most of which are against high-level politicians and businessman. However, the country still has a long way to go to change its international image.
The country still lacks proper infrastructure
- Unfortunately, Romania ranks very low in regards to the quality of its infrastructure. It one of the lowest ranking European country in regards to transport infrastructure by the World Economic Forum.
- Transportation has been dominated by stated owned enterprises, therefore a very corrupted segment. Much of the budget allocated to transportation has ended up in private pockets and many of the assigned projects have been left unfinished.
- The two above issues are tied together and until corruption has been properly dealt with, the infrastructure will continue to be inefficient in the country.
The country still hasn’t been able to reduce poverty
- Romania has the highest poverty rates in the EU, almost 40% of the population is at risk of poverty and social exclusion, which has been one of the main drivers of immigration to the rest of the European Union in recent years.
- The financial crisis of 2008 had a serious hit in the less privilege population, especially those on the countryside, where 45% of the population still lives. Although the country has had high economic performance in the last years, it still hasn’t been able to distribute such gains into these segments of society.
It is up to each company to decide what is most important, if the advantages that the country offers are too good to be missed, or if the challenges outweigh are a too high price to pay. If you have decided to follow through with incorporating in Romania, the local government has launched the website Invest in Romania, where you can find all the above information and more in English.
Furthermore, with over 10 years of experience in business set up worldwide, we at Healy Consultants would be happy to help you with your engagement in Romania. Call us at +65 6735 0120 or email us at email@example.com for more information.