Investors move east to booming Romania

BNR issues data on foreign investment
Bucharest Daily News – January 25 , 2006

Robert Comanoiu

Direct foreign investment in the first eleven months of 2005 totaled 4.436 billion euros, up 105.6% compared with the same period of 2004, when the figure was 2.158 billion euros according to provisional data issued by the National Bank of Romania (BNR).

Initially, BNR had reported direct foreign investments of 2.2 billion euros for the first eleven months of 2004. However, the National Bank changed the calculation methods for foreign investment and revised the statistical data. Thus, the reported value in the January-November 2004 period increased to 4,749 billion euros under the new method.

The new calculation method consists of book-keeping of the profit re-invested by the foreign companies in the account of the direct foreign investments.

The Romanian Agency for Foreign Investments (ARIS) sustains that the decrease of the investments because of the new methodology is not relevant.

“The difference is not important because the calculation was made by comparing the provisional date for 2005 with the final revised data for 2004. During the course of 2006, BNR will issue final revised data for 2005 when we will see that the amount of foreign investment in 2005 was a record one, much higher than that in 2004, surpassing the most optimistic previsions made by ARIS, the National Trade Office Registry (ONRC) or BNR,” shows an ARIS statement.

The ONRC data comply with the information offered by ARIS. These show a 43.6% advance of the nominal capital belonging to foreign companies, meaning 2 billion euros in 2005 compared with 1.4 billion euros in 2004.

ARIS shows that Romania’s attractiveness for the foreign investments was also seen in the number of companies that have a foreign share in the nominal capital, which totaled 10,748 companies.

ARIS estimated a total volume of foreign direct investments for 2005 amounting to 3.2-3.8 billion euros.

For the current year the forecast is 6-6.2 billion euros.

The nominal capital subscribed by the companies with a foreign capital share expresses the total value of the sums subscribed by the associates at the creation of the company and the increase of the nominal capital during the company’s existence

Investors move east to booming Romania

By Alexandru Alexe
Associated Press (in Bucharest Daily News – August 14, 2005

A billion-euro real estate development in former plum orchards north of Bucharest illustrates the fruits being picked in Romania and Bulgaria, future EU members seeing an economic boom while much of old Europe stagnates.

The 1.2 billion euro ($1.47 billion) Baneasa development, one of the largest of its kind in the region, will include more than 3,000 houses, a business park and a large commercial district, developers say. It is expected to create 10,000 temporary jobs and space for 25,000 permanent jobs.

While the office space will be open to all clients, it is expected to draw software, communications and other high-tech companies, said Bogdan Todea, a spokesman for the developer.

Bucharest mayor Adriean Videanu announced plans last week to annex dozens of surrounding villages to spur similar developments. The project would give the crowded city space to grow, while modernizing the undeveloped surrounding area, Videanu said.

Following the 1989 overthrow of communism, Romania and its southern neighbor Bulgaria lagged behind Hungary and other central European states in attracting foreign investment, as they struggled to privatize state industries and retool centralized economies.

But analysts say the countries are catching up, and their economies have been expanding rapidly since 2000. Economic growth is expected to hover at around 6 percent for the next three years in both countries, with Bulgaria seeing lower inflation.

“Romania and Bulgaria are perceived as the new forces,” said Radu Craciun, an analyst at
ABN Amro. “They have low labor costs, and due to their geographical positions have better access to the Middle East, Russia and the Balkans.”

“Foreign direct investment potential is and has been very favorable and all the years I have been here have not heard of anyone losing money,” said Gil Woods, a U.S. lawyer who heads the
Foreign Investors Council in Romania.

He said the country was hampered in the past by bad public relations and non-responsive governments.

This year, however, direct foreign investment reached 951 million euros ($1.16 billion) from January to May, a 12 percent rise compared to the same period last year, according to official figures.

“Romania has a great future in development,” said Andreas Wiennen, general manager of the German-based auto parts maker
Eckerle Group, which opened a new factory in 2003 in the Transylvanian city of Cluj.

He said the group had also considered expanding in Bulgaria or Ukraine before choosing northwest Romania, which he said was more developed. “The company is doing great here,” he said.

Despite relatively low monthly wages by EU standards of about $300 (240 euros) in Romania and $255 (207 euros) in Bulgaria, the domestic markets are also becoming attractive due to a high consumer appetite for electronics, appliances, cellular phones and new cars.

In Bucharest, a city of 2.3 million, two new malls opened last year and a dozen of hypermarkets and supermarkets have sprung up in the last few years.

French chain
Carrefour SA reported last month that sales in its four Romanian stores nearly doubled to about 190 million euros ($233 million) in the first half of 2005. The supermarket company plans to add four more stores by next year, the Ziarul Financiar daily reported.

The car market has boomed as well, with sales up 60 percent in the first five months of 2005.
Renault, which also owns Romania’s top carmaker Dacia, has sold more than 100,000 of its popular new model, the Logan, since it began production last year.

The French automaker recently announced plans to build a 219 million euro ($270 million) new gear box plant in Romania.

Fearing an overheating of its economy and a rise in inflation, Romania enacted stricter credit rules last week and is considering raising the VAT to slow the pace of consumption.

The economic boom is not evenly distributed, however, with a strong concentration of investment in urban areas and around Bulgaria and Romania’s Black Sea coasts, while few foreigners venture in rural, poorer regions of eastern Romania.

Meanwhile, the Timisoara region in western Romania is home to some 1,900 Italian businesses.

“Romania is a Latin country that will soon be in the European Union,” said Mauri Giancarlo, whose company, Perugia-based
Mauri System, sells pastry and breadmaking equipment and has expanded its business in Romania. “It is a market that I am slowly discovering and I am convinced that I will work well here.”