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With the uptrend in the economy, an improvement in the structure of GDP utilization has been seen, more funds going to accumulation and investments.
Inflation has constantly dropped, which is a positive signal, likely to help the population regain confidence in the national currency.
In October 2004, the Regular Report presented by the European Commission before the European Parliament granted Romania the status of “functioning market economy.” Consequently, direct foreign investment began to follow in.
As of January 1, 2005 a flat tax rate is applied: 16 percent for almost all income, pay, company profit, independent activities, rent, farming activities, copyrights, pensions, prizes, etc. A3% tax is going to be levied on the turnover of micro enterprises.
Companies pay a tax on profit of 16 percent less than in the previous years, which determined businesses to cease trying to evade taxes. The reduction from 25 percent to 16 percent in the profit tax has attracted more investment.
Parliament House - Romania The flat tax rate has triggered the growth of the tax base and implicitly higher state revenues by cutting down on the weight of the “underground” economy. Six months later, a budget excess of ROL 10 billion was recorded.
For the current year the budget deficit is envisaged at 1-1.5 percent, and inflation will stand at about 7 percent.
The Romanian Government’s foreign investment policy is closely related to the economic development of the country.
Investors are attracted to Romanian by the regional market, low costs – labor force, land, production (cheap utilities) – economic and political stability, as well as by the highly skilled labor force. Starting this year, a different kind of programs is going to be devised to support investors.
The most sought – after sector. The most attractive sector in point of investment is telecommunications with 24 projects in a total amount of nearly USD 440 million, that is 19.23% of the overall money invested. Second ranked the energy industry- engaged value of USD338 million, that is 14.8%- and the iron and steel industry- USD185 million, namely 8.12% of the total investment. Next came the machine building industry (6.03% of total investment), the industry of wood, pulp and paper (5.7%), and commerce (10.09%).
Among the foreign investors that engaged over one million US dollars in investment, Holland ranks first with 14% of the total. Second ranks Austria (8.08%), followed by Germany (6.95%).
Last year, Romania attracted over 50% of the direct foreign investment. The evolution of DFI in this country was mainly favored by the privatization of the Petrol oil company and of the utility companies Electrica Dobrogea and Electrica Banat. It is estimated that the total volume of the investments in the region will stay at Euro 8 billion in 2006, too.
In 2005, Romania was a very attractive spot foreign investors, this tendency continuing in 2006 as well as. In Eastern Europe, Romania is the number one point of interest, particularly in the next two years. Investment banks, pension funds, and above all family funds, as a rule our suppliers of capital, are more open to the idea of investing in Romania.
The latest economic developments, especially the single tax rate (16%) perceived as genuine “engines” that could spark new inflows of capital. “We are optimistic and we believe that in the long run the fiscal reform will have positive effects,” stated the representatives of Sigma Bleyzer.
A few reasons why it is worthwhile to invest in Romania. Starting 1999, the Romanian economy recorded a significant growth at an annual rate of about 5.4%. The change of the country rating from “ stable” to “positive” (according to Standard& Poor) and the existence of rich material resources (oil, gas, coal, ferrous and non- ferrous ores, wood, wool, etc.), as well as a skilled and competitive labor force provide a diversified and extensive domestic market ranking second in Central and Eastern Europe, after Poland.
Moreover, Romania is a country with a favorable geographic location at the crossroads of major commercial corridors that connect the Far East to Western Europe on the east- west axis. Through the Rhine- Main- Danube Canal, it can ensure important connections between the north and the south, giving access to over 200 million consumers on a radius of 1000 km.
Further advantages in the field of energy resources, coal, oil and gas extraction:
Modernization of the high capacity equipment at the lignite quarries.
Increasing the underground storage capacity of natural gas.
Rehabilitation of the natural gas transport network infrastructure.
Building a corridor for the transport of natural gas from the Caspian Sea {in the Middle East}, via Romania, towards Europe (with a capacity of 30 billion cu m/year-the NABUCCO pipeline).
Development of the infrastructure for oil products, starting with the pipeline network between the terminal Constanta Port and southern Deposit, and continuing with developing the domestic pipeline routes, and with interconnecting the national crude oil transport system to the ADRIA system (the Constanta-Pancevo-Omisalji-Trieste pipeline).
The volume of investments for the 53 projects in the sector of energy and energy resources stands at Euro 5,600 million. The largest investments go to Unit 3Nucleara S. A. Cernavoda (Euro 850 million), the hydroelectric station of Tarnita-Lapusesti (Euro 600 million), and to Constanta- Trieste pipeline (Euro 400 million).
According to UNCTAD’s World Investment Report, presented by UN representatives in Romania, by the beginning of the year Romania had recorded investment worth about 5 billion dollars, a major share of which came from privatizations in the banking, energy, oil and gas sectors, thereby ranking second in this respect in Central and Eastern Europe. The positive trend continued in the first seven months of 2005, FDI growing 29.8 percent as compared to the previous year.

Parliament House - Romania
According to officials at the Ministry of Agriculture, Forests and Rural Development, by January 1, 2007, the matter of landed property will have been solved. The law package on property solves the issue of returning farmland and forests to their former owners.
For the first time after the Revolution, aid has been granted for three areas within the perview of the Ministry of Agriculture: fisheries, wine-growing and tobacco growing. Another first is the earmarking of 300 billion lei for the mountainous zone, the money helping people in those areas to buy farming equipment.
Dairy Farming - One of the fields of major importance for Romania's economy is the production and processing of animal produce. The dairy industry has been so far based on the production from small private farmers owning no more than 5 milk cows. Statistical data indicate that 80% of the milk for industrial processing comes from the small holders.
Privatization in agriculture has been concluded. The private sector accounts for 97.3% of the production value, that is 97.4% of the vegetable production and 98.9% of the animal one. Organic agriculture represents, along with IT and the light and furniture industries, one of the main resources of Romanian exports.
Opportunities for Foreign Investors
The sale of state-held stocks in companies originating in the former Socialist era enterprises encouraged the establishment of new private companies. One of the strategic options of all Romanian governments after 1990, this was a prerequisite for private property to develop in all possible fields, boosting the functioning market economy mechanisms.
Privatization Methods
Public offering - the legal steps to take are: advertisement for the selection of an underwriter company, the company presentation file submitted to the Bucharest Stock Exchange, selection of the broker- dealer company, underwriting contract negotiation and signing, issuing of the offer prospectus, approval by the National Securities Commission, and the actual public offering.
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