romania – top destination for investment bucharest, october 2007 romanian agency for foreign...

Romania – Top Romania – Top Destination for Destination for

InvestmentInvestment

Bucharest, October 2007

romanian agency for foreign investmentromanian agency for foreign investment

by Oana NisioiHead of Investment Promotion

Department

2

Structure of the Structure of the PresentationPresentation1.Geo-strategic position

2.Macroeconomic outlook

3.Valuable human potential

4.FDI performance

5.Infrastructure development

6.Investment legal framework

7.Potential sectors for development

8.ARIS – one stop shop

1. Geo-strategic position1. Geo-strategic position

4

Romania’s Geo-strategic PositionRomania’s Geo-strategic Position

Our friend the wind

AreaArea

238,391 km2

92,043 sq mi.

the 9th in the 9th in EUEU

PopulatioPopulationn

21.6 mill inhabitantsthe 7th in the 7th in

EUEU

Capital Capital citycity

Bucharest1.9 mill inh

Member Member ofof

EU, WTO, IMF, WB, NATO

5

Romania’s Strategic LocationRomania’s Strategic Location

Helsinki – Kiev - Bucharest –Odessa/AlexandropoulosIXIX

The Danube river2,300 km long

VIIVII

Dresden/Nuremberg - BucharestConstanta/Thessaloniki/Istanbul

IVIV

Pan European Pan European

Transport CorridorsTransport Corridors

The Eastern border of The Eastern border of the inland European the inland European

Union Union

Strategic position at Strategic position at the turning point where the turning point where EU meets the Balkans EU meets the Balkans

and CIS countriesand CIS countries

2. Macroeconomic outlook2. Macroeconomic outlook

7

4.1%

7.7%

6.5%

8.4%

5.2%5.1%5.7%

2.1%

2000 2001 2002 2003 2004 2005 2006 2007e

Significant Potential for Significant Potential for GrowthGrowth

2006

Rapid & sustainable GDP growth;

7.7% in 2006, based on increases in final consumption by 11.5% and in investment by 16.1%;

Highly comparable with EU25 GDP growth rate of 2.9% in 2006.

Source: EUROSTAT, *forecast Source: National Institute of Statistics

GDP Growth RateSlovakia 8.3%

Romania 7.7%

Czech Republic*

6.1%

Bulgaria 6.1%

Poland 5.8%

Slovenia 5.2%

Hungary 3.9%

8

Declining InflationDeclining Inflation

Consolidation of low inflation (sustainable disinflation);

3.66% (Mar'07/Mar'06), a record low for the post-1990 period;

Source: EUROSTAT Source: National Bank of Romania

Inflation Rate

4.0% 3.8%4.86%8.6%

40.7%

30.3%

17.8%14.1%

9.3%

2000 2001 2002 2003 2004 2005 2006 2007e 2008e

Annual Inflation Annual Inflation RateRate

Dec'06/Dec'05

HungaryHungary 6.6%6.6%

BulgariaBulgaria 6.1%6.1%

Romania 4.9%

SlovakiaSlovakia 3.7%3.7%

SloveniaSlovenia 3.0%3.0%

Czech RepCzech Rep 1.5%1.5%

PolandPoland 1.4%1.4%

3. Valuable Human Potential3. Valuable Human Potential

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Human CapitalHuman Capital

Young population (more than 55% is under the age of 40 and 37% is between 25 and 49 years old)Almost 21.7 million people

Demographics

Talent pool160 higher education institutions109 thou university graduatesAvailability of technical engineersHigh industrial experienceFlexibility

Cities with more than 100,000 inhabitants

more than 1,000,000 inhabitants

300,000 – 400,000 inhabitants

200,000 – 300,000 inhabitants

100,000 – 200,000 inhabitants

Source: National Institute of Statistics

11

Law9%

Arts2%

Engineering23%

Education31%

Medicine5%Economy

30%

University graduates in Romania

(by education field)

ValuableValuable Human PotentialHuman Potential

high performances in international competitions

high percentage of technically competent professionals (23% are engineering graduates out of 720 students enrolled)

highest growth rate of IT specialists in the region (Annually 7000 university graduates in the software field & More then 3.000 students in 105 local Cisco academies)

Source: National Institute of Statistics

strong language skills (English, French, German, Italian, Spanish, Russian, etc.)

large skilled labor force at comparatively low wage rates

12

181326

504637648

713

1213

Slovenia Czech Rep Ungaria Poland Slovakia Romania Bulgaria

CompetitiveCompetitive Labor CostLabor Cost

174 179 204267

326380

2002 2003 2004 2005 2006 2007e

Regional ComparisonRegional Comparison2006 - EUR2006 - EUR

Gross monthly wagesGross monthly wagesEUREUR

Source: Vienna Institute of International Economic Studies; National Institutes of Statistics

The average gross monthly wage in Romania is the second lowest after Bulgaria

It is expected to grow by 16.7% in 2007

4. FDI Performance4. FDI Performance

14

1147 1294 1212

5183 5213

9082

1946

2000 2001 2002 2003 2004 2005 2006

Inward FDI FlowsInward FDI Flows

2006

Record value in 2006;

FDI Stock over EUR 30 bill (1990 –2006);

In the first 7 months of 2007 – EUR 3.6 bill

Source: Vienna Institute of International Economic Studies

Source: National Bank of Romania

Annual Inward FDI1 Poland 11093

2 Romania 9082

3 Hungary 4874

4 Czech Republic

4752

5 Bulgaria 4105

6 Slovakia 3324

7 Slovenia 303

EU

R

million

15

the the NetherlandsNetherlands AustriaAustria GermanyGermany GreeceGreece FranceFrance

4.264.26bill EURbill EUR





SwitzerlandSwitzerland ItalyItaly CyprusCyprus USAUSA HungaryHungary






Major Investing CountriesMajor Investing Countries(1990-2005)(1990-2005)

1 2 3 4 5

6 7 8 9 10

Source: National Bank of Romania

5. Infrastructure Development5. Infrastructure Development

17

BUCURESTIFETESTI

CERNAVODA

GIURGIU

DROBETA TR. SEVERIN

ARAD

TIMISOARA

DRAJNA

ORADEA

BORS

NADLAC

LUGOJ

DEVA

ORASTIE

SEBES

SIBIU

PITESTI

CONSTANTA

MIHAILESTI

CAMPIATURZII

TARGU MURES

SIGHISOARA

FAGARAS

BRASOV

PREDEAL

COMARNIC

PLOIESTI

BUZAU

FOCSANICRISTIAN GHIMBAV

BICAZ

PRAID

SOVATA

PIATRA NEAMT

GHEORGHIENI

SABAOANI

ALBITA

CRAIOVA

CALAFAT

IASI

Highway Infrastructure Development - 2013

CLUJ NAPOCA

18

ARADARAD

CRAIOVCRAIOVAA

TIMISOATIMISOARARA

BAIA MAREBAIA MARESATU SATU MAREMARE

CLUJ CLUJ NAPOCANAPOCA

ORADEAORADEA

TARGU TARGU MURESMURES

SIBIUSIBIU

OTOPEOTOPENINI

IASIIASI

BACAUBACAU

SUCEAVSUCEAVAA

M. M. KOGALNICEANKOGALNICEAN

UU

BANEABANEASASA

MANGAMANGALIALIA

CONSTANCONSTANTATA

BRAILABRAILA

GALAGALATITI

OLTENIOLTENITATAGIURGIGIURGI

UU

SULINSULINAA

CORABICORABIAA

DROBETA TR. DROBETA TR. SEVERINSEVERIN

Ports and AirportsPorts and Airports

International flights

Domestic flights

TULCEATULCEA

CARAS-CARAS-SEVERINSEVERIN

ORSOVORSOVAA

CALARACALARASISI

19

Mobile Communication Mobile Communication InfrastructureInfrastructure

– coverage area -– coverage area -

Consolidated market;

Major international players;

More than 90% network coverage.

20

Map of Industrial ParksMap of Industrial Parks

More than 40 Industrial Parks

Both private & public

Greenfield & Brownfield

Access to utilities

Package of services offered by the park administration

Wide variety of activities to be developed

Some created for high-tech activities

6. Investment Legal Framework6. Investment Legal Framework

22

CompetitiveCompetitive TaxationTaxation

Corporate Corporate TaxTax VATVAT

Social ContributionsSocial Contributions

EmployeeEmployee EmployerEmployer

BulgariaBulgaria 10% 20% 12.43% 24-24.7%

Romania 16% 19% 17% 30.75-42.95%

HungaryHungary 16% 20% 13.5% 33.5%

PolandPoland 19% 22% 18.71% 17.23-20.12%

SlovakiaSlovakia 19% 19% 13.4% 34.4%

Czech Rep.Czech Rep. 24% 19% 12.5% 35%

SloveniaSlovenia 25% 20% 22.1% 16.10%Source: CEE-CIS Tax Notes - Source: CEE-CIS Tax Notes - PriceWaterhouseCoopersPriceWaterhouseCoopers

Many Central and Eastern European countries reduced Many Central and Eastern European countries reduced considerably their corporate tax in order to diminish the considerably their corporate tax in order to diminish the fiscal burdenfiscal burden

23

New Investment LawNew Investment Law Incentives for investments in Romania in:

regional development (including infrastructure)

environment protection

research and development

human resources and social inclusion, including

training

Directed according to economic status of

each region

Law expected to be passed by end of this

year, beginning of next year

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EU grant programmes – Structural EU grant programmes – Structural Instruments and Agriculture FundsInstruments and Agriculture Funds

European Fund forRegional

Development (EFRD):• infrastructure + local

development• job creation +

maintaining• heath + education

European Social Fund (ESF)

• employment + training

Cohesion Fund (CF)• large transport +

environmentprojects

Structural Instruments (1+2+3)

Structural Funds (1+2)

European Fund for Agricultureand Rural Development (EFARD)

Fisheries Fund

Agriculture Funds

For post accession funds - the total amount allocated for the period 2007-2013 refers to more than Euro 33 billion;

For structural & cohesion funds, the allocations are estimated around 19 bill euro & for agriculture, rural development and fisheries more than 7 bill euro.

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Structural funds channeled by Structural funds channeled by Operational ProgrammesOperational Programmes

Operational Programme

Managing Authority

IncreasingCompetitiveness

Ministry of Economy and Finance

Regional Tourism

Ministry of Development,Public Works and

DwellingsMinistry of SMEs, Trade,

Tourism and Self-Employed

Development of HumanResources

Ministry of Labour, Family

and Equal Opportunities Transport Inter-modal transport

Ministry of Transport Operational Programmes of interest toOperational Programmes of interest to

businessbusiness

7. Potential Sectors for 7. Potential Sectors for DevelopmentDevelopment

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Potential Sectors for Potential Sectors for InvestmentInvestment

Manufacturing Wood processing

Automotive components

Construction materials

IT & Communication Textile industry

Energy (non-conventional)

Food processing

Electric & Electronics Pharmaceuticals

Real Estate Infrastructure

8. ARIS – one stop shop 8. ARIS – one stop shop for foreign investorsfor foreign investors

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Who is A.R.I.S?Who is A.R.I.S?

Governmental body under

the authority of Prime Minister

In charge with attracting and

retaining foreign direct investment

Interface between

investors and central & local

authorities

Providing free of charge

SERVICESSERVICES for foreign

investors in Romania

Search and advice on the best location in Romania to fulfill the company' needs

including site search, analysis &

touring around

Search for industrial

and service suppliers

Value added information on

incentives and other

administrative procedures

SERVICES

Thank you Thank you for your attention!for your attention!

tel: +40 21 233.91.03tel: +40 21 233.91.03

fax: +40 21 233.91.04fax: +40 21 233.91.04

email: [email protected]: [email protected]

website: www.arisinvest.rowebsite: www.arisinvest.ro

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