Romania: a thriving gateway to the Balkans
Foreward by Andrew Chilvers
During the past two decades the key nations of Central and Eastern European (CEE) have grown significantly following moves to liberalise their economies. On average Poland, the Czech Republic, Hungary, Bulgaria and Romania, to name a few, increased their per capita GDP by 115% between 2004-2020. Employment was at its lowest ever at a mere 4.6% and productivity levels were catching up with the developed states of the EU.
In CEE countries growth has been the result of several factors such as the prosperity of the traditional industries, competitive exports and foreign investment, as well as the significant inflow of various funds from the EU and others.
However, this growth ground to an abrupt halt last year with the onset of the Covid-19 pandemic. As elsewhere, the pandemic hit the CEE region on several fronts, with disruptions to the regional services sector and global supply chains – this was particularly damaging to those countries with large vehicle manufacturing sectors. Nevertheless, the CEE economies are known for their economic resilience and many believe they are better positioned to cope with the aftermath of the Covid-19 crisis than their West European counterparts.
Indeed, many analysts predict that the next year or so will be only a temporary setback as CEE economies quickly find their feet again. With this gradual re-opening, the economies in the region are forecast to grow by a healthy 4.1% in 2021 from what was a severe 5.1% contraction last year, according to Moody’s Investors Services.
Overall, economic growth is expected to be more robust in the region compared with countries to the West due to the regional economies’ reliance on traditional manufacturing and heavy industry, with less exposure to hospitality and tourism. The collapse of the latter sectors has had devastating effects on countries such as Croatia and Greece but has spared the majority of CEE countries.
Romania: a thriving gateway to the Balkans
The new Business Europe – Romania
Romania represents to many companies and entrepreneurs an opportunity to develop their businesses in a way that they may not have been considered previously. Even now 30 years after the reunification of Europe, Romania is still a land of opportunity and there are many areas needing foreign investment and know-how.
For those considering expanding their business, Romania offers a unique opportunity in the type of business they can open or invest in. Whether they need to look at a greenfield investment or invest in an existing business there are many opportunities in Romania.
Despite all these advantages there are also other matters that an investor needs to consider. Anyone wishing to open a business or invest in Romania needs to do so with an open mind, but also with care. Whilst Romania is a safe country to invest in from the physical as well as the legal perspective, care is needed at all stages until the investor has built up their own knowledge of Romania, its legal system, and its people.
The Romanian legal system has been developing over the last few years but there is often a difference between theory and practise. Fortunately, with the advent of the internet, and until recently the ability to travel and learn, the workforce and leaders of business in Romania have been on the fast track of learning, implementing and exploiting the opportunities that Romania has to offer. All this opens a field for a foreign investor who wishes to do business in Romania.
Development of commercial law
Commercial law had been developing slowly before 2007, but with the signing of the EU accession treaty in that year the law and legal system in Romania have undergone an overhaul in a way that many businessmen and indeed lawyers would not recognise. This has meant that when an investor looks at Romania it is important that those who advise him are aware of the issues that can and will be encountered. For several years after 2007 many Romanian lawyers refused or failed to understand the paramount importance of the “acquis” and the body of European law. They believed and tried to apply the old laws on the basis that Romanian laws are the best for Romania. Fortunately, for business and the foreign investors this perception is not as strong as it was due the fact that more and more young lawyers are qualifying; they are being exposed to more European Union ways of thinking and applying and practising law.
It is true that there are still a number of lawyers who hold to the old ways, but they are having to adjust. The courts are now implementing the laws of the European Union and understanding the roll that they play in the development of Romanian jurisprudence. All this has had a major impact on foreign investment in Romania.
Do not leave your brains at the airport
It means that a foreign investor needs to choose carefully with whom they work with in Romania. They also need to carefully choose their advisors in Romania. They need to find an advisor who not only understands the way that Romania works, as indeed it does, but they also need to find an advisor who understands their needs and requirements. As a former chairman of the British Romanian Chamber of Commerce often said: “Do not leave your brains at the airport when you get on a flight to Romania”.
By this he meant test everything in Romania as you would at home; speak to more than one person; if necessary get several views. You should question the advice you are given in Romania by lawyers or accountants if it does not feel right. Ask questions, test the replies. As in many countries in Eastern and Central Europe, even now there is a reluctance to offend or upset a foreign investor. This means that sometimes important information is not supplied or offered or supplied in such a way as to obfuscate the real message. There is no intention to mislead but sometime serious misunderstandings can occur. Remember, if you the foreign investor speaking to a Romanian in your language, the Romanian’s vocabulary will not be as large as yours and they may have a limited understanding of what information is required or given.
If having decided Romania is the place where you wish to look to invest in, then you can be assured that the rule of law is strong in Romania and commercial agreements and transactions will be honoured and implemented. Romania is a place where foreign investors are welcome, and this welcome should be built upon.