Doing Business In Romania 2014
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Business report for those interested to invest, import and export to Romania.

Business report for those interested to invest, import and export to Romania.

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  • 1. DOING BUSINESS IN ROMANIA 2014 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 2. About The British Romanian Consultancy • We are market entry specialists and we help EU and non-EU businesses export, import and invest in Romania. • Our services include: - Market Research: Expert Service - Find Your Romanian Business Partners - Assistance / Consultancy - Tailored Presentations About Romania - Tailored Business Trips - Real Estate Evaluations & Transactions - Translation / Interpretation • Our clients are: Private companies, Chambers of commerce, Professional associations. 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 3. Introduction To Romania 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 4. Why Romania? “Do not be put off by scandals and rumours … Romania is a country that is open to the West and has an energy and willingness to develop and grow … embrace it, there are great benefits in both directions!” (Interview with Anthony Willats, the Managing Director of Chapman Taylor in Romania) http://www.thebrc.co.uk/being-successful-in- romania-a-british-perspective-2/ “British investment and know-how could make a difference in Romania!” (Interview with Ambassador David Broucher) http://www.thebrc.co.uk/british-investment- and-know-how-could-make-a-difference-in- romania-interview-with-ambassador-david- broucher/ 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 5. Why Should You Do Business In Romania? General considerations: • Romania is the second largest consumer in Central-Eastern Europe and the largest one in S-E Europe. • Together with its neighbouring countries Romania is part of a 100m market. • Romania`s strategic location allows access to countries of the former CIS, the Balkans, the Middle East and North Africa. • Romania joined the EU in January 2007, so becoming part of the European Single Market. • As a new EU member state, Romania is in the process of adopting standard EU business practices and regulations. • Romania is also a member of NATO. • Romania is the 9th largest member of the EU 28 by size and the 7th largest by population. • The best 10 places to do business in Romania (according to Forbes Romania) are: Bucharest, Timisoara, Cluj-Napoca, Ploiesti, Oradea, Constanta, Sibiu, Brasov, Pitesti, Arad. • Romania has many sectors you could invest in successfully: infrastructure (transportation & energy), industry, agriculture and fishery, education and environment, IT&C. 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 6. Country Data • Location: South-Eastern Europe • Area: 238,391 square km ( as big as the UK). • Population (on 1st of January 2014): 20,1 million inhabitants. (Source: National Statistics Institute) • Capital: Bucharest (the 6st largest city in the EU). • Government: Parliamentary Democracy (Semi-presidential republic). • Native language: Romanian ( a Latin language which presents similarities with French, Italian, Spanish and Portuguese) • Business languages used: English (most used), French, German, Italian, Spanish. • GDP: 3.5% in 2013 (Source: Eurostat); 2.6% expected for 2014 and 2.8% for 2016 (Source: European Bank of Reconstruction and Development, EBRD) • Religion: Orthodox (majority of population) • Currency: relatively stable since 2011 1EUR = 4.39RON (on the 27th of May 2014) Romania aims to adopt Euro in 2019. • Neighbours: Hungary, Serbia, Bulgaria, the Republic of Moldova, Ukraine. 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 7. Access Airports: Romania has 16 international airports. Henry Coanda / Otopeni is the main international airport and it is located near Bucharest. Other international airports are in: Satu Mare, Arad, Timisoara, Oradea, Baia Mare, Cluj Napoca, Targu Mures, Sibiu, Caransebes, Suceava, Iasi, Bacau, Tulcea, Constanta, Bucuresti/Baneasa. Road infrastructure: 632,8 km motorways and over 16,887 km of national roads (Source: Romania`s Roads and Motorways Authority – CNADNR) Harbours: Romania has 2 major seaports at the Black Sea (Constanta and Midia) and river harbours on the Danube (Galati, Braila, Tulcea, Giurgiu). The Danube is connected to the Black Sea by Danube – Black Sea Channel. The rail network has 20,077 km the 7th biggest in the EU (Source: Romania`s Railways Authority) 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 8. Population of Romania About 54% of Romania`s population lives in urban areas. Main ethnic minorities: Hungarians are the largest community in Romania (6.5%) with a population of 1,227,623. Other minorities are: Italians, Turks, Greeks, Ukrainians, etc. Top 10 biggest cities in Romania: Bucharest, the Capital, is the largest city and counts for 1,883,425 inhabitants. It is followed by: Cluj-Napoca (309,136 inhabitants), Timisoara (303,708 inhabitants), Iasi (263,410 inhabitants), Constanta (254,693 inhabitants), Craiova (243,765 inhabitants), Galati (231,204 inhabitants), Brasov (227,961 inhabitants), Ploiesti (197,542 inhabitants), Oradea (183,367 inhabitants), Braila (168,389 inhabitants). Administrative organization: 41 counties (“judete”) and Bucharest. 8 Development regions: North-East, South-East Dobrogea, South Muntenia, South West Oltenia, West, North West, Centre, Bucharest – Ilfov. 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 9. Macroeconomic Data • Romania registered the highest GDP growth in the EU in 2013: 3.5% (Source: Eurostat) • The European Bank of Reconstruction and Development (EBRD) estimated at the beginning of May 2014 that the Romanian economy would grow by 2.6% this year and 2.8% in 2015. The European Commission estimated the Romanian economy would grow by 2.5% this year and by 2.6% in 2015. IMF estimated a growth of just 2.2% this year followed by an advance of 2.5% in 2015. • Romania`s GDP was €139bn in 2013. • According to a study by AT Kearney the shadow economy in Romania was 28.4% of the GDP (about €39.5bn) in 2013, up from €38.3bn in 2012 and €38.8bn in 2011. • Romania`s budget deficit was 2.5% at the end of 2013. • Romania`s rate of inflation has been declining since 2010 down to 3.2% in 2013. The European Commission estimates that Romania`s rate of inflation will go down to 2.5% this year and grow to 3.3% in 2015. • Unemployment rate in Romania was 7.3% in 2013. It is estimated to decrease to 7.2% this year and 7.1% in 2015. (Eurostat) 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 10. MACROECONOMIC DATA • Romania`s GDP grew by 3.8% in the first quarter of 2014. This is the largest annual advance registered by an European Union (EU) member state. • Budget (2013 est.): -revenues: $60.11 billions -expenditure: $64.85 billions • Public debt: 38.6% of GDP (2013 est.) • Taxes and other revenues: 31.8% of GDP (2013 est.) • Romania has an investment grade by: - S&P: “BBB-” with stable outlook and “A-3” - Fitch: “BBB-” with stable outlook - Moody`s: “Baa3” 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 11. Foreign Investment • FDI grew by 30% in the first quarter of 2014 (€570m), more than half of the investments (€290m) being attracted in March 2014. • FDI was €2,7bn in 2013, 26.8% higher than in 2012 (€2.1%). It was the highest value recorded in the last four years. • For the period 2014 – 2020 Romania was allocated €39bn. Romania`s rate of absorption in 2013 was 29.87%. • 192,000 companies with foreign participation in social capital were registered in Romania between 1991 and January 2014. • Major foreign investors in Romania come from: Germany, Italy, Netherlands, Spain, Turkey, Hungary, Cyprus, Israel. • Foreign companies in Romania have about 40% of the Romanian Turnover. 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 12. INTERNATIONAL TRADE I • Romania`s trade in 2013 reached €104.8bn, 5.1% higher than in 2012. It was a record volume and it was 4.6% higher than the previously record of €100.2bn in 2011. • Romania`s exports in 2013 registered a volume of €49.6bn (10% higher than in 2012), the highest flow of Romanian exports in the history of Romania`s foreign trade. Exports were the main driving force of economic growth in Romania in 2013. • Romania`s dispatches towards the EU member states was 8.8% higher in 2013 compared to 2013 and continued to hold a high share of Romania`s exports (69.6%). • Exports to non-EU countries were 12.8% higher in 2013. • Romania`s exports registered a significant increase to Germany, Italy, France and Turkey. • The export of machinery and transport equipment grew from 40.4% in 2012 to 42.0% in 2013 and the export of food, beverages and tabacco grew from 7.5% in 2012 to 8.5% in 2013. • Romania`s imports increased by 1.0% in 2013. • The import of machinery and transport equipment grew from 33.7% in 2012 to 35% in 2013. • Romania`s trade deficit dropped by 40.8% in 2013 down to €5.7bn. 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 13. INTERNAIONAL TRADE II Starting the 1st of January 2017 Romania is an EU member which means that Romania: •Is part of the world`s largest single market (a market of 500 million people with a total GDP of around £11.00 trillion), an economic zone larger that that of the USA and Japan combined; •Benefits from the free trade in terms of the absence of custom duties of tariffs; •Benefits from the freedom of movement for goods, capital and work force; According to the World Bank Romania ranks 73 out of 189 in terms of ease of doing business, compared to the Regional Average (Europe and Central Asia) of 71 and the Czech Republic (75). •For those interested in starting a business, registering property or trading across borders, Romania ranks 60 as ease to start a business, 70 as ease to register property and 76 as ease of trading across borders. •For those interested to invest in Romania, Romania rank 52 out of 189 on the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain. 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 14. STARTING A BUSINESS IN ROMANIA – OPTIONS AVAILABLE I. You can set up a new trading company, a Romanian legal entity It will operate based on cooperation, association agreements and so on with foreign companies. It may have only foreign associates. Unlike the other types of trading companies that might be set up in Romania, this is the only entity that can transfer (shift) its head office to another member state. The legal status of the company may be: Limited partnerships: minimum 1 associate, €50.00 minimum capital; Joint-stock companies: minimum 2 associates, €25,000.00 minimum capital; European company: to be set up according to EC Regulation No. 2157/2001 and Law No. 31/1990 – within the terms of trading companies. II. You can set up a subsidiary of a foreign trading company The subsidiary is an agent of the parent company and can be set up only if the statute of the foreign company allows it. It doesn’t have its own legal entity or a capital distinct from that of the parent company. The parent company establishes the scope of the business for the subsidiary, the assets that are assigned to the activity thereof, the organization and operating mode etc according to the Association Articles of the subsidiary. As it doesn’t have a distinct capital, the subsidiary can’t have its own creditors and debtors and can enter into commercial relations only on behalf of the parent company. Its relative independence derives from the fact that it may sell assets, carry out work or provide services from the equity granted by the parent company. The subsidiary can be sued for the operations performed in the country of residence. The accounts should be kept in Romania although the subsidiary will be an entity without legal status. It will be a tax payer for the profit assigned by the parent company to the subsidiary. 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 15. STARTING A BUSINESS IN ROMANIA – OPTIONS AVAILABLE III. You can open a branch of a foreign company in Romania (if the statute of the foreign company allows this) Characteristics: The branch has legal status, its own capital and management bodies, as well as operative independence established in the Association Articles, but it is subject to the control of the parent company. As it has its own capital, it may act in the commercial relations on its own behalf and on account of itself. It is considered an entity resident in Romania so it elaborates its own financial documents and presents them to the tax bodies in Romania. Provisions regarding the avoidance of double taxation are applied where appropriate. It may be set up with capital from the parent company alone or together with another contribution. The share capital of the branch is subscribed and paid by the founding parent company. The branch’s scope of the business can’t exceed the limits of that of the parent company. IV. You may open a commercial representative office in Romania (which is currently referred to as an “agency”) You can open a commercial representative office even if it is not the appropriate formula to the type of activity you intend to carry out. It applies very well to foreign trade, tourism and press agencies. Characteristics: The representative office is a secondary seat of the parent company: it doesn’t have its own legal status nor does have a distinct capital. It can only represent the parent company to its partners in Romania. The parent company assigns assets to it. The representative office will perform only the authorized activities and legal deeds, keeping the legal provisions in Romania. The financial-banking operations of the representative office are made via accounts opened with the Romanian banks. The staff of the representative office is employed by the parent company and can be made up of Romanian or foreign citizens. 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 16. TAXATION IN ROMANIA • A company is tax resident in Romania if it is incorporated under the Romanian law of if its place of effective management is in Romania. Resident companies are considered as well the legal entities headquartered in Romania, but incorporated under EU rules. • Romania is an EU member state and has double tax treaties with 87 countries. • The standard corporate tax is 16%, the individual tax is 16%, standard VAT is 24% with two reduced rates of 9% and 5%. No payroll tax is due by the employer. •Capital gains are taxed at a rate of 16% and income from the sale of real property is taxed at a rate between 1% and 3%. 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 17. BUSINESS CULTURE IN ROMANIA • If you ever wondered why your e-mails are not answered and your phone calls returned you may not know that Romanians value personal relationships very much so they prefer to do business with people they already know or were introduced to by someone trustworthy. It takes time to get them to trust you but once this is achieved many doors can open for you and your business. • Despite the Latin background Romanian business culture is reserved, formal and hierarchical; • Romania places great emphasis on formal approaches and good manners so it is unusual to use first names in Romanian business. • Titles are important and you should address people by their professional or academic title with their family name or “domnul” (Mr.) or “doamna” (Mrs or Ms) along with their family name; • Business appointments should be made a few weeks in advance and re-confirmed a couple of day before the settled date. • Business cards are usually exchanged; • Meetings are usual quite formal and the business attire should be formal; • Be punctual; • During the summer months, Christmas and Easter many businesses close for an extended period; • Romanians are quite direct and frank but take care to be courteous and not offend people; • Romanians value their privacy very much and feel uncomfortable if asked personal information. On a business meeting you should avoid small talk of informal discussions. • Hand shakes upon arrival and when leaving are a custom in Romania too. It is good to wait for a woman to extend her hand first. 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 18. WHERE TO LOOK FOR BUSINESS OPPORTUNITIES IN ROMANIA Agriculture • The Romanian Agriculture has the capacity to feed 35-37 million inhabitants ( 15-17 millions more than Romania`s population) but it is underdeveloped. • 29% of Romanian work force is in Agriculture. • It contributed by 6.4% (est.)to the GDP in 2013. • The agricultural land represents 37.73% (14.7 million hectares) of the total land in Romania. • 64.1% of the agricultural land is arable land, 22.5% is represented by pastures, 10.7% is represented by hayfields and 2.7% is represented by vineyards and orchards. • Main problems: - lack of tractors and combines; - lack of managers; - low productivity; - Lack of silos; - Small Ecologic Agriculture (only 0.4% of the agricultural land in Romania) - Weak infrastructure • Funding available: EU Funds (2014 – 2020) €8.15 billions to be invested in: - Modernising farms, processing units and infrastructure; - Developing the agricultural exploitations and encouraging start-ups in Agriculture; - Forests; - Ecologic Agriculture; - Know-how; • Romania has 3.7 million agricultural holdings the biggest agricultural production being the crop production (70.8%), followed by animal production (28.5%) and agricultural services (0.7%). • In 2013 Romania registered a record production of wheat and rye, the highest one in the last 23 years (7.3 million tons), 37% higher than in 2012. •Romania registered as well a record production of oats (362,137 tons) and rape (647,811 tons), 6 times higher than in 2012. 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 19. WHERE TO LOOK FOR BUSINESS OPPORTUNITIES IN ROMANIA I Industry • Romania`s industry registered the 2nd highest growth 8% (est.) in the EU in 2013. • Romania ranks 26th out of 194 countries as industrial production growth rate. • Romania`s industry contributed by 34.2% (est.) to the GDP in 2013. • 28.6% of the Romanian labour force works in industry. • In 2012 the biggest part of Romania`s industry (76%) was represented by manufacturing, 17,1% was electricity, gas, steam & air conditioning production and supply, 3.5% was mining and quarrying and 3.4% was water supply, sewerage, waste management and decontamination activities. Industries presenting business opportunities: • Automotive Manufacturing; • Oil & gas; • Renewable energy; • Textiles and footwear; • Food processing; • Furniture; • Paper & Plastic; • Chemicals; • Construction materials 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 20. WHERE TO LOOK FOR BUSINESS OPPORTUNITIES IN ROMANIA II Services • It is a developing sector in Romania, still under the EU average. • It is estimated that in 2013 it has a contribution of 59.4% to the GDP. • Approximately 42.4% of the labour force works in Services Sector. • Business opportunities could be found in: - Financial services in the rural area; - Tourism; - IT&C; - Transportation; - Call-centres; 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 21. DISCLAIMER & SOURCES Disclaimer Whereas every effort has been made to ensure that the information given in this Report is accurate, Europe Market Entry Services Ltd trading as The British Romanian Consultancy does not accept liability for any errors, omissions or misleading statements and no warranty is given or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned. The purpose of the Doing Business in Romania 2014 Report, prepared by Europe Market Entry Services Ltd is to provide information to help recipients form their own judgments about making business decisions as to whether to invest or operate in Romania. The Report's contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by Europe Market Entry Services Ltd as to the accuracy of the Report, its completeness or its suitability for any purpose. No liability is accepted by Europe Market Entry Services Ltd for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the report. No warranty is given, or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned. Sources • Romania`s National Statistics Institute • World Bank Doing Business In Romania • Deloitte – Romania Highlights 2014 Report • KPMG - Investment in Romania 2013 • CIA World Fact Book 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk
  • 22. CONTACT Contact details: T: +44(0)7920 147 592 W: www.thebrc.co.uk E: welcome@thebrc.co.uk A: Bedworth, Logs Hill Close, Chislehurst, Kent, BR75LP, UK On Social Media: LinkedIn: http://uk.linkedin.com/in/lorelacorbeanu Twitter: TheBRC2 Register to our mailing list: http://www.thebrc.co.uk/ Visit our blog posts: http://www.thebrc.co.uk/category/blog/ 6/2/2014 A publication by Europe Market Entry Services Ltd trading as The British Romanian Consultancy, www.thebrc.co.uk