Foreign Direct Investment in Romania
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Septembrie 2008 |
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LARIVE ROMANIA |
Adresa
Strada Emil Pangrati, Nr. 3
Ap. 1
Bucureşti, Sector 1
Telefon
+40-21-223.00.14
+40-21-223.00.15
Fax
+40-21-223.00.19
Website
www.larive.ro
The accession of Romania to the European Union took place on January 1, 2007. This date was set at the Thessaloniki Summit in 2003 and confirmed in Brussels on June 18, 2004. The accession of Romania, together with Bulgaria, means that EU now has 27 members and half a bn people, and stretches East as far as the Black Sea.
Romania’s strategic geopolitical location will influence the EU’s policy towards its relations with all of Eastern Europe, the Middle East, Turkey, and Asia. Romania has been percieved, in the political and economical context of the last 10 years, as a zone of stability and democracy in its immediate neighborood.
Romania benefits from the EU accession that offers a harmonization of capital market regulations, taxation and accounting rules. Export procedures to the EU members are now simplified with regard to business administration and exchange risks, while conversion charges are diminished and a new extended market is open. EU integration will boost economic growth and foreign investments, at the same time putting pressure on inflation and generating exchange rate volatility, as analysts state. The immediate impact of integration will not be perceivable in terms of the economy or the capital market, and the benefits related to accession must be expected to surface on a longer term.
Considering the experience of other countries that joined the European Union and according to many analysts, the economy will continue to expand, also boosted by investor’s confidence, the capital inflows will increase and direct investments will tend to be replaced by portfolio ones, once financial instruments diversify.
The significant effects to be registered soon after the accession are: a boost in the economic growth, increase in portfolio investments, moderate price increases, exchange rate volatility. However, being one of the largest EU members in terms of size (the 9th in the EU 27) and population (the 7th in EU 27), Romania is likely to become more and more appealing to investors, especially in some higher value added sectors, which are less dependent on low wages.
As an EU member, Romania benefits from post-accession funds, which are significantly larger that the pre-accession funds. The total amount allocated for Romania for the period 2007 - 2013 for Structural and Cohesion Funds is EUR 19.668 bn. The Funds are meant to increase economic competitiveness, improve transport and environmental infrastructure, develop and strengthen Romaniaregional development, improve human-resources development and strengthen administrative capacity.
The National Development Plan (NDP) is the fundamental tool that Romania will use in order to diminish, as soon as possible, the social and economical disparities with the EU.
Legal framework regulating the direct investments
In order to boost the business climate in Romania and attract foreign capital to the economy, the Romanian Government set-up new regulations aimed to support investments. In this context, authorities issued the Emergency Government Ordinance 85/2008 on stimulation of investments.
The Emergency Ordinance is the result of the business climate prompt need of regulations to settle a framework for investments, in accordance with both the EU’s and the national legislation on state aids. It supports investments in the development of certain economic areas, taking into account Romania’s development priorities, thus focusing particularly on those regions that attracted fewer investments in the past, in order to assure a balanced territorial development.
It’s stipulations set the basic principles as regards granting and application of facilities for investments (such as equal treatment for the investors, transparency of procedures, efficiency in the use of facilities, confidentiality as regards the investors’ property rights, and eligibility – depending on the source of the financing funds), the types of facilities to be granted (state aid type), the eligibility conditions for both investment and investor and other general provisions.
Based on these provisions, the responsible authorities initiate laws/administrative norms which institute support measures in the form of state aid schemes or individual aid for each priority area.
From the moment the new rules came into force, Law 332/2001 on the Promotion of Direct Investments with Major Economic Impact (Investment Law) as further amended and supplemented, has been declared null and void, but for one single article stating that the investments have to last for at least 10 years. In case of voluntary dissolution during this term, the company which benefited from the facilities offered by the Law will be obligated to pay not only the taxes imposed by the legislation for the whole period during which it functioned, but penalties for overdue payments owned in the absence of facilities, as well.
With this piece of regulation, a new Government agency is established instead of the Romanian Agency for Foreign Investment (ARIS). The new Romanian Agency for Investment (ARI) plays the same role of intermediary between investors and central and local authorities. It also offers technical assistance/guidance as regards the available schemes by means of which investors can apply for financing from the responsible authority. ARI is continuously informed by the responsible authority on the new investment projects and will publish on its web site a list of state aid/individual aid schemes, which will be updated permanently.
The Ordinance 85/2008 speaks only of the Agency’s implication in the process of application for the incentives, its structure, statute, attributions and responsibilities being set later on by a Governmental Decision based on a project of the Ministry of Economy and Finance.
