Romania welcomes all forms of foreign investment. The government provides national treatment for foreign investors, meaning that the government does not differentiate treatment due to source of capital. Romania’s strategic location, membership in the European Union, relatively well-educated workforce, competitive wages, and abundant natural resources make it a desirable location for firms seeking to access European, Central Asian, and Near East markets. U.S. investors have found opportunities in the information technology, telecommunication, energy, services, manufacturing, and consumer products sectors.
The investment climate in Romania is a mixed picture, and potential investors should undertake due diligence when considering any investment. The Romanian government has taken steps in recent years to improve tax administration and collection, enhance transparency, and support a legal framework conducive to foreign investment. Romania is also a regional leader in judicial efforts to combat high and medium-level corruption. However, the current government’s attempt in late January 2017 to weaken criminal legislation has shaken confidence in the government’s commitment to rule of law and anti-corruption efforts, and triggered prolonged protests in Bucharest and other cities. Some government leaders accused “multinational companies” of sponsoring the protests, adding to occasional political rhetoric scapegoating foreign corporate entities for domestic companies’ alleged dire circumstances. The Romanian government has exposed its state owned enterprises (SOEs) to heightened standards of corporate governance through initial and secondary public offerings and attracted additional international investors, bolstering Romania’s capital markets. The Romanian government’s sale of minority stakes in several SOEs in key sectors, such as energy generation and exploitation, has stalled since 2014. The development and enforcement of corporate governance codes for SOEs remains incomplete.
Consultations with stakeholders and impact assessments are required before enactment of legislation. However, this requirement has been unevenly followed, and public entities generally do not have the capacity to conduct thorough impact assessments. The arbitrary passage of ill-conceived economic legislation serves as a disincentive to U.S. and multinational investment. Romania has made significant strides to combat corruption, particularly at the national level, but corruption remains an ongoing challenge. Inconsistent enforcement of existing laws, including those related to the protection of intellectual property rights, also serves as a disincentive to investment. Continuing to attract and retain additional foreign direct investment will require further progress on transparency, stability, and predictability in economic decision-making, and the reduction of non-transparent bureaucratic procedures.
|TI Corruption Perceptions Index||2016||57 of 176
(up 1 spot)
|World Bank’s Doing Business Report “Ease of Doing Business”||2017||36 of 190||doingbusiness.org/rankings|
|Global Innovation Index||2016||48 of 128
(up 6 spots)
|U.S. FDI in partner country ($M USD, stock positions)||2015||$2.6 billion||http://www.bea.gov/
|World Bank GNI per capita||2015||$9,500||http://data.worldbank.org/
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Romania actively seeks foreign direct investment, and offers a market of around 20 million consumers, a relatively well-educated workforce at competitive wages, a strategic location, and abundant natural resources. To date, favored areas for U.S. investment include IT and telecommunications, energy, services, manufacturing – especially in the automotive sector – and consumer products.
Romania has taken steps to strengthen tax administration, enhance transparency, and create legal means to resolve contract disputes expeditiously. Mergers and acquisitions are subject to review by the Competition Council. The Competition Law allows Romania’s Supreme Defense Council to review strategic mergers and acquisitions, in addition to review by the Competition Council. To date, the Supreme Defense Council has not acted on any merger or acquisition. Romania’s accession to the European Union (EU) on January 1, 2007 has helped solidify institutional reform. However, legislative and regulatory unpredictability, as well as weak public administration continue to negatively impact the investment climate.
As in any foreign country, prospective U.S. investors should exercise careful due diligence, including consultation with competent legal counsel, when considering an investment in Romania. Past governments in Romania have, on occasion, allowed political interests or budgetary imperatives to supersede accepted Western business practices in ways harmful to investor interests. For example, a 2013 windfall profit tax on natural gas and electricity liberalization was initially due to expire in December 2015 but has been extended to December 2017, while a 2014 tax on special construction, which hit investors with physical infrastructure particularly hard, was allowed to expire in December 2016.
Investments involving public authorities (central government ministries, county governments, or city administrations) can be more complicated than investments or joint ventures with private Romanian companies. Large deals involving the government – particularly public-private partnerships and privatizations of key SOEs – can be stymied by vested political and economic interests, or bogged down due to a lack of coordination between government ministries. The Public-Private Partnership (PPP) Law was revised in 2011 and again in 2016, but the implementation rules have not been published. The law envisions the creation of a contractual public-private partnership, as an alternative to the creation of a project company. The contribution of the public partner can now be both in-kind and cash, provided the public contribution complies with state aid rules and with public finance legislation. According to the new law, the public partner initiates the public-private partnership projects and awards them according to public procurement rules. How the PPP law is implemented will be of considerable interest to investors over the next few years, but the Ministry of Finance has yet to indicate when it will complete and/or begin public consultations on the implementing regulations.
Limits on Foreign Control and Right to Private Ownership and Establishment
Romanian legislation and regulations provide national treatment for foreign investors, guarantee free access to domestic markets, and allow foreign investors to participate in privatizations. There is no limit on foreign participation in commercial enterprises. Foreign investors are entitled to establish wholly foreign-owned enterprises in Romania (although joint ventures are more typical), and to convert and repatriate 100 percent of after-tax profits. The Romanian capital account was fully liberalized in 2006, prior to gaining EU membership in 2007. Foreign firms are allowed to participate in the management and administration of the investment, as well as to assign their contractual obligations and rights to other Romanian or foreign investors.
Other Investment Policy Reviews
The Heritage Foundation’s Economic Freedom Report indicates that the government does not screen or discriminate against foreign investment, but the report states that regulatory and judicial systems may be deterrents. Economic growth rates have improved, but the benefits have not been felt by all Romanians. Progress on implementing reforms and improving the business environment has been uneven. The World Bank’s Doing Business Report indicates that Romania continues to rank below the world average in dealing with construction permits and setting up utility services. Transparency International’s most recent 2016 annual review cited substantial improvement in perceived corruption in Romania and noted progress made during the Ciolos Administration. However, in reaction to the government’s January 2017 passage of emergency ordinance 13, which provoked wide-spread public protests against what was seen as an attempt to roll-back anti-corruption efforts, Transparency International called on the Romanian government to focus on strengthening anti-corruption efforts, including introducing stronger corporate ethics standards and implementing existing anti-corruption legislation.
The National Trade Registry has an online service available in Romanian at . Romania has a foreign trade department within the Ministry of Business Climate, Trade, and Entrepreneurship and an investment promotion department in the Ministry of Economy. Romania defines microenterprises as having less than nine employees, small enterprises as having less than 50 employees, and medium sized enterprises as having less than 250 employees. Regardless of ownership, microenterprises and SMEs enjoy “de minimis” and other state aid schemes from EU funds or from the state budget.
There are no restrictions on outward investment. There are no incentives for outward investment.
2. Bilateral Investment Agreements and Taxation Treaties
The U.S.-Romanian Bilateral Investment Treaty (BIT) on the Reciprocal Encouragement and Protection of Investment (signed in May 1992 and ratified by the U.S. in 1994) guarantees national treatment for U.S. and Romanian investors. The agreement provides a dispute resolution mechanism, liberal capital transfer, prompt and adequate compensation in the event of an expropriation, and the avoidance of trade-distorting performance requirements. In 2004 the U.S. Government negotiated a political understanding with the EU and eight accession countries, including Romania, to cover any possible inconsistencies between pre-existing BITs and the countries’ impending EU obligations. A resulting revised BIT was ratified by the U.S. Senate and the Romanian Parliament in 2004, and went into effect on February 9, 2007. Other bilateral trade agreements with third countries were terminated upon Romania’s EU accession.
Romania has a bilateral taxation treaty with the United States; the treaty was signed in 1973 and entered into force in 1974.
4. Industrial Policies
Currently, customs and tax incentives are available to investors in six free trade zones. State aid is available for investments in free trade zones under EU regional development assistance rules. Of the 36 companies that applied for state aid in 2016, only six were selected. Large companies may receive aid up to 50 percent of their eligible costs. The ceiling is 35 percent in the counties of Ilfov, Timis, Arad, Caras Severin, and Hunedoara. In Bucharest the ceiling is 15 percent until December 31, 2017, at which time it will drop to 10 percent. The ceiling for small and medium-sized enterprises (SMEs) is 10 percent higher than permissible aid for large companies, and for the smallest category of companies the ceiling is 20 percent higher. Prospective investors are advised to thoroughly investigate and verify the current status of state incentives.
In 2007, Romania adopted EU regulations on regional investment aid, and instituted state aid schemes for large investments and SMEs. Both Romanian and EU state aid regulations aim to limit state aid in any form, such as direct state subsidies, debt rescheduling schemes, debt for equity swaps, or discounted land prices. The EC must be notified of, and approve, GOR state aid that exceeds the pre-approved monetary threshold for the corresponding category of aid. To benefit from the remaining state aid schemes, the applicant must secure financing that is separate from any public support for at least 25 percent of the eligible costs, either through their own resources or through external financing, and must document this financing in strict accordance with Ministry of Finance guidelines. Amendments made in 2010 to the state aid scheme for regional projects score applications based not only on the economics of the project, but also on the GDP per capita and unemployment rate for the county of intended investment. When granting state aid, the Ministry of Finance requires that the state revenues through taxes equal the state aid granted. Numerous foreign and American firms have successfully applied for and received Romanian state aid.
The Green Certificate System, part of the Renewable Energy Law, provides incentives for certain types of renewable energy. The Green Certificates are traded in parallel with the energy produced. Although the Green Certificates are intended to provide an additional source of revenue for renewable energy producers, repeated revisions to the support system including deferring release of the certificates, and limiting the validity of the certificates released, have created instability in the renewables investment climate. Energy intensive industrial consumers receive exemptions from acquiring green certificates. In March 2017, the government revised the renewable energy support legislation. The changes include extending the validity of tradable green certificates to allow trading until 2032 and requires green certificates trading to be done anonymously, with the intention of leveling the playing field for all green certificates sellers on the market.
As a member of the EU, Romania must receive European Commission (EC) approval for any state aid it grants that is not covered by the EU’s block exemption regulations. The Romanian Competition Council acts as a clearinghouse for the exchange of information between the Romanian authorities and the EC. The failure of state aid grantors to notify the EC properly of aid associated with privatizations has resulted in the Commission launching formal investigations into several privatizations. Investors should ensure that the government entities with which they work fully understand and fulfill their duty to notify competition authorities. Investors may wish to consult with EU and Romanian competition authorities in advance, to ensure a proper understanding of notification requirements.
Companies operating in Romania can also apply for aid under EU-funded programs that are co-financed by Romania. As of March 2017, Romania is in the process of obtaining EC accreditation for its management authorities for 2014-2020 programs and meeting the outstanding ex-ante conditionalities. These are the preconditions for Romania to start absorbing EU funds from the 2014-2020 budgetary cycle. When planning a project, prospective applicants must bear in mind that the project cannot start before the financing agreement is finalized; the application, selection, and negotiation process can be lengthy. Applicants also must secure financing for non-eligible expenses and for their co-financing of the eligible expenses. Finally, reimbursement of eligible expenses – which must be financed upfront by the investor – is often very slow. Procurements financed by EU-funded programs above a certain monetary threshold must comply with public procurement legislation. In an effort to increase the rate of EU funds absorption, Romania has amended regulations to allow applicants to use the assets financed under EU-funded programs as collateral. However, understaffing and a lack of expertise on the part of GOR management entities, cumbersome procedures, and applicants’ difficulty obtaining private financing still remain significant obstacles to improved EU funds absorption and project implementation by Romania.
Foreign Trade Zones/Free Ports/Trade Facilitation
Free Trade Zones (FTZs) received legal authority in Romania in 1992. General provisions include unrestricted entry and re-export of goods, and exemption from customs duties. The law further permits the leasing or transfer of buildings or land for terms of up to 50 years to corporations or natural persons, regardless of nationality. Foreign-owned firms have the same investment opportunities as Romanian entities in FTZs.
Currently there are six FTZs, primarily located on the Danube River or close to the Black Sea: Sulina, Constanta-Sud Agigea, Galati, Braila, Curtici-Arad, and Giurgiu. The administrator of each FTZ is responsible for all commercial activities performed within the zone. FTZs are under the authority of the Ministry of Transportation.
Performance and Data Localization Requirements
There are no performance requirements imposed as a condition for establishing, maintaining or expanding an investment.
The government does not require investors to establish or maintain data storage in Romania.
Romania neither follows nor is there legislation requiring a “forced localization” policy. Romania does not have requirements for foreign IT providers to turn over source code or provide access for government surveillance. Romania’s Constitutional Court has twice ruled such specific legislative drafts are unconstitutional.
5. Protection of Property Rights
The Romanian Constitution, adopted in December 1991 and revised in 2003, guarantees the right to ownership of private property. Mineral and airspace rights, and similar rights, are excluded from private ownership. Under the revised Constitution, foreign citizens can gain land ownership through inheritance. With EU accession, citizens of EU member states can own land in Romania, subject to reciprocity in their home country.
Companies owning foreign capital may acquire land or property needed to fulfill or develop company goals. If the company is dissolved or liquidated, the land must be sold within one year of closure, and may only be sold to a buyer(s) with the legal right to purchase such assets. Investors can purchase shares in agricultural companies that lease land in the public domain from the State Land Agency.
The 2006 legislation that regulates the establishment of specialized mortgage banks also makes possible a secondary mortgage market, by regulating mortgage bond issuance mechanisms. Mortgage loans are offered by commercial banks, specialized mortgage banks, and non-bank mortgage credit institutions. Romania’s mortgage market is now almost entirely private. The state-owned National Savings Bank, CEC Bank, also offers mortgage loans. Since 2000, Romania has had in place the Electronic Archives of Security Interests in Movable Property (AEGRM) that represents the national recording system for the priority of mortgages structured by entities and assets, ensuring the filing of transactions regarding mortgages, assimilated operations, or other collateral provided by the law, as well as their advertising. Most urban land has clear title, and the National Cadaster Agency (NCA) is slowly and deliberately working to identify property owners and register land titles. According to the National Cadaster Plan, 2023 is the deadline for full registration of lands and buildings in the registry. According to NCA data, 9.5 million (24 percent) of the estimated real estate assets (land and buildings) were registered in the cadaster registry as of March 2017.
Intellectual Property Rights
In USTR’s Special 301 report, Romania is on the watch list. As elsewhere in the EU, Internet piracy – both Torrent site peer-to-peer (P2P) file sharing and business-to-consumer piracy – remains the top IPR concern. Despite the lower priority placed on IPR enforcement at the policy level, cooperation between law enforcement authorities, including prosecutors and police officers, and intellectual property-based private industry continues to be close at the working level, leading to innovative approaches to prosecuting IPR crimes within this constrained legal and fiscal environment. In order to increase the odds of IPR cases being heard in court, law enforcement authorities, when appropriate, are bundling related charges of fraud, tax evasion, embezzlement, and organized crime activity alongside IPR violations. Not only has this increased the odds of IPR cases going to court, it also strengthens the evidence of “social harm” stemming from IPR violations. Lack of social harm has often been cited as a reason for dismissing IPR cases in the past.
Romania’s Customs Authority reported the seizure of approximately 1.46 million pieces of counterfeit goods in 2016 compared to 6.17 million pieces in 2015 and 6.73 million pieces in 2014. The declining trend continues at an accelerated pace, in line with growing purchasing power and demand for genuine physical goods. Cigarettes, razor blades, pens and pencils, toys, bearings, clothing, stickers, footwear, footballs, footwear, and cosmetics and accessories accounted for the majority of those seizures. The amount of seized pharmaceuticals fell from 1,322 pieces in 2015 to 370 pieces in 2016. While there was a significant increase in seized quantities of pens and pencils, watches, memory cards, cosmetics and accessories, sunglasses, and mobile phones, there was a significant drop in seized quantities of batteries, bearings, condoms, footwear, clothing, cigarettes, and headphones. According to both the National Customs Authority and the national police, the vast majority of counterfeit goods seized in Romania originate in China.
Romania is a signatory to international conventions concerning intellectual property rights (IPR), including Trade-Related Aspects of Intellectual Property Rights (TRIPS), and has enacted legislation protecting patents, trademarks, and copyrights. Romania has signed the Internet Convention to protect online authorship. While the IPR legal framework is generally good, enforcement remains weak and ineffective, especially in the area of internet piracy. The once-flagrant trade of retail pirated goods has largely been eliminated, but unlicensed use of software and personal use of pirated audio-video products remains high. The recording and film industries have expressed concern over increasing levels of internet-based piracy. Romania has passed broad IPR protection enforcement provisions, as required by the WTO, yet judicial enforcement remains lax.
Romania is on the Special 301 Watch List primarily due to weak enforcement efforts against on-line copyright piracy. Customs officers can seize ex-officio, and then destroy counterfeit goods after the rights holder first inspect the goods and draft a declaration. The government is responsible for paying for the storage and destruction of the counterfeit goods. Counterfeit goods are not prevalent in the local market.
Romania is a party to the Paris Convention for the Protection of Industrial Property, and subscribes to all of its amendments. Romanian patent legislation generally meets international standards, with foreign investors accorded equal treatment with Romanian citizens under the law. Patents are valid for 20 years. Romania has been a party to the European Patent Protection Convention since 2002. Patent registration can be filed online. Since 2014, Romania has also enforced a distinct law regulating employee inventions. The right to file a patent belongs to the employer for up to two years following the departure of the employee.
In 1998, Romania passed a trademark and geographic indications law, which was amended in 2010 to make it fully consistent with equivalent EU legislation. Romania is a signatory to the Madrid Agreement relating to the international registration of trademarks and the Geneva Treaty on Trademarks. Trademark registrations are valid for ten years from the date of application and renewable for similar periods. Beginning 2014, trademark registrations can be filed online. In 2007, Romania ratified the Singapore Treaty on the Law of Trademarks.
Romania is a member of the Bern Convention on Copyrights. The Romanian Parliament has ratified the latest versions of the Bern and Rome Conventions. The Romanian Copyright Office (ORDA) was established in 1996, and promotes and monitors copyright legislation. The General Prosecutor’s Office (GPO) provides national coordination of IPR enforcement, but copyright law enforcement remains a low priority for Romanian prosecutors and judges. Many magistrates still tend to view copyright piracy as a “victimless crime” and this attitude has resulted in weak enforcement of copyright law. Due to the popularity of downloading pirated content, copyright infringement of music and film is widespread throughout Romania.
Resources for Rights Holder
Contact at Mission:
American Chamber of Commerce
11 Ion Campineanu St, Union International Center, 4th Floor Bucharest
email@example.com, +40 21 312 4834
State Office for Inventions and Trademarks (OSIM)
5 Ion Ghica St, Bucharest
firstname.lastname@example.org, +40 21 306 0800
[List of trademark lawyers]
Romanian Office for Rights of Authors
118 Calea Victoriei, Bucharest
email@example.com, +40 21 317 5080
6. Financial Sector
Capital Markets and Portfolio Investment
Romania welcomes portfolio investment and is working to increase the efficiency of its capital markets. In September 2016, the FTSE included Romania on its “Watch List” to possibly
reclassify the country to “Emerging Market” status. Currently FTSE states that Romania still fails to meet the turnover velocity criteria. The Financial Regulatory Agency (ASF) is responsible for regulating the securities market. The ASF implements the registration and licensing of brokers and financial intermediaries, the filing and approval of prospectuses, and the approval of market mechanisms.
The Bucharest Stock Exchange (BVB) resumed operations in 1995, after a hiatus of 50 years. The BVB operates a two-tier system that, at present, lists a total of 86 companies, with 23 companies listed in the premium tier. The official index, BET, is based on a basket of the 10 most active stocks listed. BET-TR is the total return on market capitalization index, adjusted for the dividends distributed by the companies included in the index. The BVB also has an alternative trading system (ATS) with 262 listed companies. The BVB allows trade in corporate, municipal, and international bonds, and in 2007, the BVB opened derivatives trading. Starting July 2015, investors can use gross basis trade settlement, and beginning March 2015, trades can be settled in two net settlement cycles. The BVB’s integrated group includes trading, clearing, settlement, and registry systems. The BVB’s Alternative Trading System (ATS) International allows trading in local currency of 15 foreign stocks listed on international capital markets. In 2015, the BVB launched a market (AeRO) dedicated to SMEs and start-ups. By the end of 2016, 278 domestic and two foreign companies were listed on the AeRO.
Despite a diversified securities listing, the situation on the international capital and financial markets has adversely affected the Romanian capital market, and liquidity remains low. Neither the government nor the Central Bank imposes restrictions on payments and transfers. The red tape associated with capital market access, still high trading fees, and inconsistent enforcement of corporate governance rules have kept Romania within the frontier market tier. Country funds, hedge funds and venture capital funds continue to participate in the capital markets. Minority shareholders have the right to participate in any capital increase. Romanian capital market regulation is now EU-consistent, with accounting regulations incorporating EC Directives IV and VII.
Money and Banking System
There are 37 banks and credit cooperative national unions currently operating in Romania. The largest, Romanian Commercial Bank (BCR), was privatized in 2006 by sale to Erste Bank of Austria and has a 15.8 percent market share. The second-largest is the French-owned Romanian Bank for Development (BRD-Société Générale) with 13.0 percent market share, followed by privately-owned Transilvania Bank (12.6 percent), Austrian-owned Raiffeisen (8.4 percent), and Italian-owned UniCredit (8.1 percent).
The banking system is stable and well-provisioned. However, according to the National Bank of Romania, non-performing loans account for 9.5 percent of total bank loans and interest. The solvency rate of the banking system is 18.3 percent.
The GOR has encouraged foreign investment in the banking sector, and there are no restrictions on mergers and acquisitions. The only remaining state-owned banks are the National Savings Bank (CEC Bank) and EximBank, comprising 8.3 percent of the market combined.
While the National Bank of Romania must authorize all new non-EU banking entities, banks and non-banking financial institutions already approved in other EU countries need only notify the National Bank of Romania of plans to provide local services based on the EU passport.
Foreign Exchange and Remittances
Romania does not restrict the conversion or transfer of funds associated with direct investment. All profits made by foreign investors in Romania may be converted into another currency and transferred abroad at the market exchange rate after payment of taxes.
Romania’s national currency, the Leu, is freely convertible in current account transactions, in accordance with the International Monetary Fund’s (IMF) Article VII.
There is no limitation on the inflow or outflow of funds for remittances of profits, debt service, capital gains, returns on intellectual property, or imported inputs. Proceeds from the sales of shares, bonds, or other securities, as well as from the conclusion of an investment, can be repatriated.
Romania implemented regulations liberalizing foreign exchange markets in 1997. The inter-bank electronic settlement system became fully operational in 2006, eliminating past procedural delays in processing capital outflows. Commission fees for real-time electronic banking settlements have gradually been reduced.
Capital inflows are also free from restraint. Romania concluded capital account liberalization in September 2006, with the decision to permit non-residents and residents abroad to purchase derivatives, treasury bills, and other monetary instruments.
Romania was again identified as a Financial Action Task Force (FATF) jurisdiction of concern in the 2016 International Narcotics and Control Strategy Report (INCSR).
Sovereign Wealth Funds
Romania does not have a sovereign wealth fund. The current government has indicated an intention to create a sovereign wealth fund, the National Fund for Development and Investment (NFID). The Ministry of Economy has the lead in drafting the NFID implementation blueprint.
7. State-Owned Enterprises
The Ministry of Energy oversees energy generation and distribution assets, and uranium and coal mining. The Ministry of Economy has authority over state-controlled natural gas carrier Transgaz, national electricity carrier Transelectrica, national salt company Salrom, national waters company SNAM, and copper mining company Cuprumin. The Ministry of Transportation (MOT) has authority over the entities in the transportation sector, including rail carrier CFR Marfa. Romania’s privatization law permits the responsible authority to hire an agent to handle the entire privatization process, though ultimate decision-making authority remains with the government. Joint ventures between state-owned energy companies and private investors for electric power production have been stalled due to decreasing energy consumption and declining energy prices.
The terms of Romania’s 2013-2015 precautionary stand-by agreement with the IMF included the sale of minority stakes in several state-owned energy companies through initial public offerings (IPOs) and secondary public offerings (SPOs) on the Bucharest Stock Exchange (BVB). To date, successful transactions have included a 15 percent SPO for natural gas transmission operator Transgaz in April 2013 (following a 10 percent IPO in November 2007), an IPO for 10 percent stake in nuclear power producer Nuclearelectrica in September 2013, an IPO for a 15 percent stake in natural gas producer Romgaz in October 2013, and an IPO on the BVB and London Stock Exchange for the majority privatization of state-controlled electricity distributor Electrica in June 2014. The government indicated plans for a 15 percent IPO for integrated coal mining and coal-fired power production company Oltenia Energy Complex, but the offering was not carried out. Preparation for the IPO of hydropower producer Hidroelectrica is ongoing.
Romania has implemented the Electricity Directive and the Gas Directive of the EU’s Third Energy Package, introducing a structural separation between transmission system operator activities, and generation, production and supply activities. Ownership unbundling rules apply to investors with participation in energy transmission, generation, production, and/or supply activities. According to the Third Energy Package directives, the same entity cannot control generation, production and/or supply activities, and at the same time control or exercise any right over a transmission system operator (TSO). Furthermore, the same entity cannot control a TSO and at the same time control or exercise any right over generation, production and/or supply activities. Consequently, the Ministry of Economy oversees the national natural gas carrier Transgaz and national electricity carrier Transelectrica, while the Ministry of Energy has authority over state-controlled electricity producers. Prospective investors are strongly advised to conduct thorough due diligence before any acquisition, particularly of state-owned assets.
As a member of the EU, Romania is required to notify the European Commission’s General Directorate for Competition regarding significant privatizations and related state aid. Prospective investors should seek assistance from legal counsel to ensure compliance with relevant legislation. The state aid schemes aim to enhance regional development and job creation through financial support for new jobs or investment in new manufacturing assets. The Ministry of Finance issues public calls for applications under the schemes. GOR failure to consult with, and then formally notify, the European Commission properly has resulted in delays and complications in some previous privatizations.
Private enterprises compete with public enterprises under the same terms and conditions with respect to market access and credit. Energy production, transportation, and mining are majority state-owned sectors, and the government retains a monopoly on electricity and natural gas transmission.
Investors receiving state aid, whose investments have been affected by the global economic crisis, have found renegotiation of their state aid agreements to be cumbersome, in part due to local authorities’ failure to acknowledge that market conditions have changed. Some investors have experienced problems due to the occasional failure of GOR entities to fully honor contractual obligations following conclusion of privatization agreements.
Romanian law allows for the inclusion of confidentiality clauses in privatization and public-private partnership contracts to protect business proprietary and other information. However, in certain high-profile privatizations, parliamentary action has compelled the public disclosure of such provisions.
8. Responsible Business Conduct
Romania adhered to the OECD Declaration on International Investment and Multinational Enterprise in 2004. The GOR regularly sends representatives to the working sessions of the OECD Investment Committee and its Working Party on Responsible Business Conduct. Romania established an OECD National Contact Point in 2005 to promote the OECD Guidelines for Multinational Enterprises. Romania’s investment promotion agency Invest Romania currently serves at the contact point.
Romania defines responsible business conduct (RBC) in its National Anticorruption Strategy (NAS) as promoting a competitive business environment with integrity and implementing international standards and best practices in the public and private sector. The Ministry of Justice organized a second round of NAS cooperation meetings in May 2017 with stakeholders from public institutions, independent agencies, civil society, and the business community. These meetings served to establish evaluation criteria for the declaration of gifts and whistleblower protections.
Several NGOs in Romania pro-actively monitor, advocate, and raise concerns on RBC issues. No high-profile cases of private sector impact on human rights were recorded during the past year. However, the National Council for Combating Discrimination, the government agency responsible for applying domestic and EU anti-discrimination laws, imposed several fines on companies for discrimination against their own staff or prospective employees. The cases involved gender-based discrimination and harassment over labor union membership and child care leave. The government has not fully implemented a law which prohibits discrimination against persons with physical, sensory, intellectual, and mental disabilities in employment, education, transportation and access to health care.
SOEs are required by law to publish an annual report. Majority state-owned companies that are publicly listed, as well as state-owned banks, are required to be independently audited. If properly implemented, legislation on corporate governance of SOEs should ensure the professional selection of board members and managers, and bring more transparency and accountability to the management and oversight of SOEs. The Corporate Governance Code (enacted through Government Emergency Ordinance 109 / 2011 and revised through Law 111 / 2016) does not have language requirements for SOE executive and non-executive board members. However, the corporate governance principles that the Ministry of Economy applies for the recruitment of board members of SOEs under its purview require candidates to have good command of the Romanian language, which restricts eligibility.
Romania does not participate in the Extractive Industries Transparency Initiative (EITI), but is an adherent to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas since 2012.
Romania’s fight against high and medium-level corruption has become increasingly credible, with significant numbers of prosecutions and convictions of corrupt public officials in recent years. Its prosecutorial efforts have become a model in Southeastern Europe. Romania was ranked 57th of 176 countries in Transparency International’s 2016 Corruption Perception Index, still among the lowest ranked EU member states, but ahead of Italy, Greece, Bulgaria and other countries in its region. The European Commission’s (EC) 2016 Report on Progress under the Cooperation and Verification Mechanism (CVM) in Romania noted a “positive trend and a track record pointing to strong progress and growing irreversibility of reform.” However, in order to ensure irreversibility of reform, more steps need to be taken, including “the Government and Parliament ensur[ing] full transparency and tak[ing] proper account of consultations with relevant stakeholders in decision-making and legislative activity” on criminal and civil codes; continue to implement the National Anti-Corruption Strategy and respect its deadlines; and “ensure that the National Agency for the Management of Seized Assets is fully and effectively operational” so that it can provide “reliable statistical information on confiscation of criminal assets.” The report recommended transparent and merit-based selection procedures as a way to provide robust leadership, avoid political interference in senior appointments, and support judicial independence. The report also noted that Romania needs to do more to combat low level corruption, especially in the healthcare and education sectors.
The National Anti-Corruption Directorate (DNA) continued to investigate and prosecute corruption cases involving medium- and high-level political, judicial, and administrative officials throughout 2016, with over 1,200 indictments, of which more than a quarter were on abuse-of-office charges. Conflicts of interest, respect for standards of ethical conduct, and integrity in public office in general remained a concern for all three branches of government. Individual executive agencies were slow in enforcing sanctions, and agencies’ own inspection bodies were generally inactive. The national fiscal authority (ANAF), however, through its fraud division increased financial audits of private companies.
The Ministry of Justice adopted in August 2016 a national anti-corruption strategy for 2016-2020, which follows on and expands the more relevant findings of the previous national anti-corruption strategy, 2012-2015, which focused on strengthening administrative review and transparency within public agencies, preventing corruption, increased and improved financial disclosure, conflict of interest oversight, more aggressive investigation of money laundering cases, and passage of legislation to allow for more effective asset recovery. The strategy includes an increased focus on corruption prevention, including education in civics and ethics for civil servants, a requirement for peer reviews of state institutions, stepped-up measures to strengthen integrity in the business environment, a significant decrease in public procurement fraud, and an increased role for ethics advisors and whistle-blowers. However, the current government so far has not acted to move forward on this anti-corruption strategy and instead indicated it may compile a new one.
In March 2002, to reduce corrupt practices in public procurement, the GOR inaugurated a web-based e-procurement system ( ), designed to provide a transparent listing of both ongoing and closed solicitations, with the names of the winners and the closing prices made available to the public. The use of “e-licitatie” has increased government efficiency, reduced vulnerability to corruption, and improved fiscal responsibility in government procurement. State entities, as well as public and private beneficiaries of EU funds, are required by law to follow public procurement legislation and use the e-procurement system.
Romania implemented the revised Public Procurement Directives with the passage in May 2016 of four new laws to improve and make more transparent the public procurement process. The National Agency for Public Procurement has general oversight over procurements and can draft legislation, but procurement decisions remain with the procuring entities. The 2016 CVM report points to low acceptance and even resistance to integrity rules within a substantial number of local authorities, with implications for public procurement. In October 2016, the “Prevent” IT system, an initiative sponsored by the National Integrity Agency for ex-ante check of conflicts of interests in public procurement, was signed into law. The mechanism aims to avoid conflicts of interest by automatically detecting conflict of interests in public procurement before the selection and contract award procedure. The January 2017 CVM report highlights public procurement as an area where corruption reduces the positive impact of investment and notes that preventing conflicts of interest, fraud, and corruption in public procurement remain a serious challenge.
The laws extend to politically exposed persons, yet, at the same time, criticism of magistrates by politicians and in the media and lack of respect of judicial decisions remain frequent. Laws prohibit bribery, both domestically and for Romanian companies doing business abroad. The judiciary remains paper based and inefficient, and Romania loses a number of cases each year in the European Court of Human Rights (ECHR) due to excessive trial length. Asset forfeiture laws exist, but a functioning asset forfeiture regime remains under development. 80 percent of cases in the court system are property related.
Only private joint stock companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials. This is due to their adherence in principle to corporate governance rules, rather than the government’s proactive stance. U.S. investors have complained of both government and business corruption in Romania, with the customs service, municipal officials, and local financial authorities most frequently named. In some cases, demands for bribes by low- to mid-level officials reach the point of harassment.
Romania is a member of the Southeast European Law Enforcement Center (SELEC). Romania does not provide protections to NGOs involved in investigating corruption.
UN Anticorruption Convention, OECD Convention on Combatting Bribery
Romania is member of the UN Anticorruption Convention. Romania is not a member of the OECD Anti-Bribery Convention.
Romania expressed interest to join the new anti-corruption working group of the Open Government Partnership initiative.
Resources to Report Corruption
Contact at government agency responsible for combating corruption:
National Anticorruption Directorate (DNA)
Str. Stirbei Voda nr. 79-81, Bucuresti
+40 21 312 73 99
Contact at “watchdog” organizations:
Strada Semilunei, apt 1, Sector 2, Bucuresti,
+40 21 211 7400
Freedom House Romania
Bd. Ferdinand 125, Bucuresti
+4021 253 28 38
Colivia, Pache Protopopescu 9
+40 0723 627 448
10. Political and Security Environment
Romania does not have a history of politically motivated damage to foreign investors’ projects or installations. However, anti-shale gas protestors invaded the site of a U.S. energy company’s exploratory well in October 2013, damaging the perimeter fence and some equipment. Major civil disturbances are rare. During the February 2017 anti-government protests, some government leaders pointed to “multi-nationals” as among the orchestrators. As of March 2017, there has been no tangible effect of this claim, and there has been no retribution taken against “multi-national” companies by the government or protestors.
11. Labor Policies and Practices
Romania has traditionally boasted a large, skilled labor force at comparatively low wage rates in most sectors. The labor pool has tightened in highly skilled professions, in particular the information technology sector. The university system is generally regarded as good, particularly in technical fields, though foreign and Romanian business leaders have urged reform of outdated higher education curricula to better meet the needs of a modern, innovation-driven market. Payroll taxes remain steep, resulting in an estimated 25-30 percent of the labor force working in the underground economy as “independent contractors,” where their salaries are neither recorded nor taxed. Even for registered workers, under-reporting of actual salaries is common. The unemployment rate in Romania was 6 percent in 2016, but the unemployment rate among youth aged 16-24 was 20 percent.
Low levels of unemployment are matched by one of the highest inactivity rates of the working-age population in the EU. The economically inactive population, the portion of the population aged 15-64 years old not , represents 34 percent of the total working age population. The inactive population includes those unavailable to work or not looking for work as they are retired, enrolled in an education or training program, have other family responsibilities, caring for children or for incapacitated adults, or simply wish not to work. Romania had 8.5 million active people in 2015, of whom 2.1 million were active in agriculture. Of these 2.1 million people, 90 percent were either self-employed or living on subsistence agriculture.
Romania faces a shortage of healthcare staff as doctors and nurses continue to depart Romania to work abroad, motivated not only by the higher salaries, but also by the antiquated medical practices they face in Romania. Annually Romania admits approximately 3,000 new doctors into practice, but roughly 3,500 leave the system through death, retirement, or emigration. Romanian hospitals now face a shortage of approximately 13,000 doctors. The GOR issued a 10 percent wage increase for doctors of public hospitals in August 2016 to help address this outflow of medical personnel, however, the GOR lacks a comprehensive strategy to remedy these staff shortages.
The Labor Code is the law regulating the labor market in Romania including contracting, controlling how regulations are applied, and jurisdiction. It applies to both national and foreign citizens working in Romania or abroad for Romanian companies. As an EU-member state, Romania has no government policy that requires the hiring of nationals, but has annual work permit quotas for other foreign nationals. In 2017, the government set up a total of 5,500 work permits, identical with 2016 numbers. Once the quotas are exhausted for a particular category, the government cannot issue additional work permits in that category until the following year – unless the Romanian government exceptionally adjusts the quotas. Work permits are issued for a maximum of one year for a fee of 200 Euros (payable in the RON equivalent of that day’s exchange rate), except for students and seasonal workers, who pay 50 Euros. These permits are automatically renewable with a valid individual work contract.
Since Romania’s revolution in December 1989, labor-management relations have occasionally been tense, the result of economic restructuring and personnel layoffs. Trade unions, much better organized than employers’ associations, are vocal defenders of their rights and benefits. Employers are required to make severance payments for layoffs according to the individual labor contracts, internal regulations, and collective bargains. The Labor Code differentiates between layoffs and firing; severance payments are due only in case of layoffs. There is no treatment of labor specific to special economic zones, foreign trade zones, or free ports.
Romanian law allows workers to form and join independent labor unions without prior authorization, and workers freely exercise this right. Companies may claim damages from strike organizers if a court deems a strike illegal. Labor unions are independent of the government. Labor dispute mechanisms are in place, including any conflicts between employers and employees regarding economic, social, professional interests. The labor conflicts are solved in court according to civil code. They can be initiated by the employee, employer, or labor union. Several public-sector strikes took place Romania during 2016, bringing doctors, nurses, teachers, postmen, civil servants, and prison guards into the streets. They sought higher pay, better working conditions, and proper staffing, especially in the healthcare sector where personnel deficits result in staff working excessive overtime.
Union representatives alleged that official reports of incidents of antiunion discrimination remained minimal, as it is difficult to prove legally that employers laid off employees in retaliation for union activities.
The government has generally respected the right of association, and union officials state that registration requirements stipulated by law were complicated, but generally reasonable. Collective bargaining is used for companies with over 21 employees representing written agreements between the employer or patronage and the employees. Currently there are 14,343 collective labor agreements in the private sector at the company level. The law permits, but does not impose, collective labor agreements for groups of employers or sectors of activity.
Romania, as an EU-member state and ILO-affiliated country, observes international labor rights. The law prohibits all forms of forced or compulsory labor, but the government did not effectively enforce the law. Such practices often involving Roma and children continue to occur in Romania, as penalties are insufficient to deter violations. The minimum age for most forms of employment is 16, but children may work with the consent of parents or guardians at age 15. The law prohibits minors from working in hazardous conditions, provides a basis for the elimination of hazardous work for children, includes a list of dangerous jobs, and specifies penalties for offenders. In May 2016, the national minimum monthly wage was set at 1,250 RON (approximately USD298), while in January 2017 the newly elected government increased the minimum wage to 1,450 RON (USD345) for full-time employment, or approximately 8.74 RON (USD2.03) per hour.
Labor laws and regulations are not waived or derogated to attract or retain investments. The 2011 amendments to the Labor Code gave employers more flexibility to evaluate employees based on performance, and significantly relax hiring and firing procedures. Romania enacted several labor related laws in 2014, including one approving the national labor strategy for 2014-2020. Since 2014, parliament has considered a bill to reintroduce the national collective bargaining agreement, and it remains pending.
Current legislation makes it very costly to engage non-EU citizens in Romania. Foreign companies often resort to expensive staff rotations, special consulting contracts, and non-cash benefits. In January 2017, the government removed the cap on social welfare contributions, levying social welfare contributions on the entire gross salary without any ceiling. Prior to this, employees with gross wages above USD3,347 per month paid a monthly maximum social contribution of USD331, but as of February 2017 they will pay 10.5 percent of their gross income.
12. OPIC and Other Investment Insurance Programs
OPIC has been authorized to do business in Romania since the signing of the 1992 bilateral agreement. OPIC-supported investment funds in Romania & southeast Europe include the 2013 Treetops Capital Agribusiness Fund (Romania), and the 2012 Accession Mezzanine Capital (Poland, Romania, Bulgaria, Ukraine, Czech Republic). The 2009 OPIC-supported non-bank financial institutions in Romania included CAPA Finance, Verida Credit , and Express Finance.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
* Source: National Statistics Institute
** Source: National Office of Trade Register, National Statistics Institute
Table 3: Sources and Destination of FDI
FDI domestic data from the National Office of Trade Register are below CDIS and National Bank of Romania data. Tax havens sources of inward FDI, i.e., Cyprus, are domestically reported as such, without mentioning the ultimate source as another possible country of origin. The CDIS source doesn’t report outward direct investments from Romania.
Table 4: Sources of Portfolio Investment
|Portfolio Investment Assets|
|Top Five Partners (Millions, US Dollars)|
|Total||Equity Securities||Total Debt Securities|
|All Countries||3009||100%||All Countries||Amount||1148%||All Countries||1861||100%|
Romania did not attract significant foreign direct investment (FDI) until after the 1990s, due to delays in post-Communist economic reforms. According to data provided by the National Office of the Trade Registry, the cumulative net stock of FDI from January 1990 to December 2016 totaled USD 59.16 billion. Romanian direct investments abroad from January to December 2016 totaled USD1.035 billion.
Major sectors for foreign investment include:
- Automobile and automotive components (Renault, Daimler Benz, Ford, Siemens, Continental, Alcoa, Delphi Packard, Johnson Controls, Adient, Honeywell Garrett, Michelin, Pirelli);
- Banking and finance (Citibank, Société Générale, MetLife, ING, Generali, Raiffeisen, Erste Bank, Unicredit, Alpha Bank, National Bank of Greece, Intesa Sanpaolo, Garanti Bank, Credit Agricole, Allianz, Leumi, Fairfax);
- Information Technology (Hewlett Packard, Intel, Microsoft, Oracle, Cisco Systems, IBM);
- Telecommunications (Orange, Deutsche Telekom, Telesystem International Wireless Services, Vodafone, Liberty Media/UPC);
- Hotels (Hilton, Marriott, Best Western, Crowne Plaza, Accor, Ramada, Radisson, Sheraton);
- Manufacturing (Timken, General Electric, Cameron, LNM, Marco, Flextronics, Holcim, Lafarge, Heidelberg, Plexus, Toro);
- Consumer products (Procter and Gamble, Unilever, Henkel, Coca-Cola, PepsiCo, Parmalat, Danone, Muller);
- Retail chains (Metro, Delhaize, Kingfisher, Dm Drogerie, Carrefour, Cora, Selgros, Auchan, Kaufland, Praktiker, Leroy Merlin).
According to Romanian Trade Registry statistics, the value of U.S. direct investment in Romania as of December 2016 was about USD1.19 billion. The U.S. is the 14th-ranked foreign investor nation, after the Netherlands, Austria, Germany, Cyprus, France, Italy, Greece, Spain, Luxemburg, Czech Republic, Switzerland, UK, and Hungary. U.S.-source investment represented 2.1 percent of Romania’s total FDI. As official statistics do not fully account for the tendency of U.S. firms to invest through their foreign, especially European-based, subsidiaries, the actual amount of U.S. FDI is higher. Romanian statistics also over-emphasize physical, capital-intensive investments, while overlooking the impact of foreign investment in services and technology.
Significant U.S. direct investors (including investments made through branches or representative offices) include:
- Advent Central and Eastern Europe – investment fund;
- AECOM – engineering and design;
- Adient – automotive;
- Met Life – life insurance;
- Alcoa – automotive, aluminum processing;
- Bunge – grain trading;
- Cargill – grain export and food processing;
- Citibank – banking;
- Coca-Cola – beverage, food;
- Cooper Cameron – gas field equipment manufacturer;
- Delphi – automotive parts;
- EuroTire – mining and heavy equipment tires;
- Flextronics – medical, telecom, automotive;
- Ford – automotive assembly;
- General Electric – diversified industrial products;
- Hewlett Packard – IT equipment, services;
- Hoeganaes – iron powder for automotive;
- Honeywell – automotive;
- IBM – IT equipment;
- Intel – software development services
- McDonald’s – food;
- Microsoft – software services;
- New Century Holding – investment fund;
- Office Depot – office and business supplies;
- Oracle – IT services, consulting;
- Pepsico – beverage;
- Philip Morris – tobacco products;
- Procter and Gamble – consumer products;
- Qualcomm – telecommunications;
- Smithfield Foods – food production and distribution;
- Timken – industrial bearings;
- Liberty Media UPC – cable television operator;
- Visa – financial services;
- URS – engineering.
In addition to these companies, the European Bank for Reconstruction and Development (EBRD) remains the single largest investor (debt plus equity) in Romania, with some USD7.85 billion invested. The U.S. is a 10 percent shareholder in the EBRD.
Foreign Portfolio Investment
In 2016 foreign portfolio investment net inflows amounted to USD1.251 billion, out of which USD1.489 billion represented the net acquisition of long-term debt securities.
14. Contact for More Information
Information Resource Center Director
B-dul Dr. Liviu Librescu 4-6