Romania lags behind in FDI

Romania is behind Albania in terms of Foreign Direct Investment (FDI), in a survey of European countries. Still, Romanian authorities hope two billion dollars in FDI to enter the country.

A 2003 survey of FDI in Central and East-European countries, conducted by the Vienna Institute for International Economic Studies, ranked Romania 13 in the 15-country list, with 61 euros FDI per person per year.
Either it is dollars or euros, everybody agrees that Romania should have been able to attract more money from abroad to power the economy for profit-making and balance the public accounts.

With a total of 1.4 billion euros FDI last year, Romania registered a 20% growth of FDI, year on year. While Enache Jiru, deputy minister of finance, states that the FDI Romania will attract in 2004 will go up to two billion euros. If we choose to tally the figures from a different angle, than on the one hand Romania got on aggregate 10.4 billion dollars since 1990, while on the other hand, the whole of Eastern Europe attracted last year 23 billion euros in FDI. This means that Romania in 14 years was able to capture only 45% of the money that flowed into the region last year alone.

A Bank Austria Creditanstalt report shows that the FDI in our region could go flat at 20 billion euros per year, starting with 2004/2005.
A simple calculus shows that the estimate provided by Jiru places Romania’s ambitions at ripping only 10% of the aggregate figure above.

The Foreign Investors’ Council (FIC) in Romania has 85 member companies that invested a total of 6 billion euros into this country. On 30 September 2003, the FIC issued a set of recommendations for raising the level of FDI in Romania. The Executive is hardly in a position to disregard them, since the country’s GDP is less than seven times the FDI of the 85 foreign investors.

The recommendations carrying the highest degree of urgency were those regarding the amendment of the Work Code. There were six requests in all: the fund for guaranteeing salaries in case of bankruptcy to be scraped; the work-week to be capped at a maximum of 48-hour; the incompetent workers to be sacked easier; the bonuses for employee loyalty to be scrapped; the participation of trade-unions in setting work-loads to be ended; the professional development of employees to not be compulsory on all companies by law, but reported on a yearly basis by each company with over 100 employees.
Other FIC recommendations referred to fiscal and judicial reforms.

Ruxandra Stan, executive director of CFI, evaluated the effect these recommendations had on the Romanian authorities. Following nine months of negotiations among the Ministry for Work, social partners and the CFI, the amendments to the Work Code should be agreed upon by the beginning of August. And, for the new Work Code to become applicable in 2005, the Executive should approve it by September.

FIC stated its appreciation for the Government lowering the tax on profit at 19% but said that "in order for the fiscal strategy to be consistent, the Executive should state clearly what sectors of the economy wants to encourage with its fiscal policy."
FIC thinks that the package of laws regulating the judiciary is good, as "it will create the premise for a higher degree of independence the judges will have from political pressures."
As far as competition rules go, implementing the laws on the topic is key, the FIC position is. Still, abiding by the existing laws is still a problem, since this does not work yet for the Sole Registry of Controls, for instance, as various controlling bodies still overlap. (TR. NOTE: the Sole Registry of Control was introduced as a means to stop the abusive, recurrent and sometimes overlapping controls various authorities conducted on businesses, thus halting their operation arbitrarily.)
It is well-known that Romania never lacks good intentions.

"We think that if the Parliament will approve the package of laws drafted by the Ministry of Justice, clear criteria for evaluating the performance of judges and prosecutors will be laid down. An inquiry among foreign investors showed that a Good Practice Code is needed for the fiscal inspectors to apply the laws consistently," said Stan.