Executive Summary Title
Romania welcomes all forms of foreign investment. The government provides national treatment for foreign investors and does not differentiate treatment due to source of capital. Romania’s strategic location, membership in the European Union (EU), 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, automotive, telecommunications, energy, services, manufacturing, healthcare, consumer products, insurance, and banking sectors.
Since the 1989 revolution, Romania has embarked on an uneven, but ascending economic growth path. Due to the COVID-19 pandemic, Romania’s economy declined by 3.9 percent in 2020, and rebounded with a 5.9 percent real GDP growth rate in 2021. As of February, the European Commission (EC) projected 4.2 percent real GDP growth for Romania in 2022. However, spillover effects from Russia’s invasion of Ukraine, rising global energy prices, and an ongoing COVID-19 pandemic have led several international financial institutions to adjust the growth rate downwards, predicting closer to 3 percent GDP growth in 2022.
On March 9, 2022, Romania lifted all COVID-19 pandemic restrictions. During the COVID-19 pandemic, the Government of Romania supported businesses and workers by broadening eligibilities for unemployment benefits, enabling employers to adopt flexible work models, and instituting a temporary credit and lease payment moratorium.
Romania stands to receive 27 billion EUR in grants and loans from “Next Generation EU” funding via the National Resilience and Recovery Plan (NRRP). The NRRP funding, which will be disbursed between 2021 to 2026, aims to support Romania’s green transition, digitalization efforts, and health system resilience. However, a demonstrated lack of administrative capacity to absorb and implement projects using EU funding may impact Romania’s ability to absorb the funds and dampen the NRRP’s impact.
As an EU member state, Romania’s climate objectives align with EU strategies, including the 2030 Agenda and the European Green Deal. However, legacy environmental issues limit Romania’s ability to deliver on biodiversity and clean air goals. Environmental challenges include poor air quality, inadequate waste management practices, and insufficient protective measures for natural areas. Illegal logging remains a concern despite progress towards improved traceability of extracted wood.
The investment climate in Romania remains a mixed picture, and potential investors should undertake due diligence when considering any investment. The European Commission’s 2020 European Semester Country Report for Romania pointed to persistent legislative instability, unpredictable decision-making, low institutional quality, and corruption as factors eroding investor confidence. Frequent reorganizations of public institutions also contributed to a significant degree of instability.
The government’s sale of minority stakes in state-owned enterprises (SOEs) in key sectors, such as energy generation and exploitation, has stalled since 2014. In 2020, the Romanian government enacted a two-year ban on the sale of state equities of SOEs. Successive governments have weakened enforcement of the state-owned enterprise (SOE) corporate governance code by resorting to appointments of short-term interim managers to bypass the leadership requirements outlined in the corporate governance code. Instability in the management of SOEs hinders the ability to plan and invest.
Consultations with stakeholders and impact assessments are required before enacting legislation. However, these requirements have been unevenly followed, and public entities generally do not conduct impact assessments. Frequent government changes have led to rapidly changing policies and priorities that serve to complicate the business climate. Romania has made significant strides to combat corruption, but it remains an ongoing challenge.
|TI Corruption Perceptions Index||2021||66 of 180||http://www.transparency.org/research/cpi/overview|
|Global Innovation Index||2021||48 of 132||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country historical stock positions)||2020||$3.93B||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2020||$12,580||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
Romania actively seeks foreign direct investment and offers a market of around 19.2 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, healthcare, consumer products, insurance, and banking. InvestRomania, within the Ministry of Entrepreneurship and Tourism, is the government’s lead agency for promoting and facilitating foreign investment in Romania.
Romania’s accession to the EU on January 1, 2007, helped solidify institutional reform. However, the lack of legislative and regulatory predictability and impact assessments, as well as low institutional capacity, continue to negatively affect 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. Governments in Romania have repeatedly allowed political interests or budgetary imperatives to supersede accepted business practices in ways harmful to investor interests.
The energy sector has suffered from unanticipated changes. In 2018, offshore natural gas companies benefited from a streamlined permitting process but were hit with a windfall profit tax that previously applied only to onshore gas production. Additionally, in February 2018, legislation changed the reference price for natural gas royalties from the Romanian market price to the Vienna Central European Gas Hub (CEGH) price, significantly increasing royalties. The Government of Romania (GOR) liberalized the natural gas market on July 1, 2020, and the electricity market as of January 1, 2021, for both household and non-household consumers. As energy prices surged during the winter of 2021-2022, the GOR capped energy prices for households and subsidized remaining balances. To reduce the effect on the state budget, the GOR levied a windfall tax on natural gas and electricity producers’ 2021 profits.
In March 2021, the Romanian Parliament passed a bill reinforcing the government’s authority to vet transfers of petroleum agreements to companies from non-EU countries, and to determine if a transfer poses a threat to Romania’s national security. Transfer of a petroleum agreement must be approved through a government decision.
Investments involving public authorities can be more complicated than investments or joint ventures with private Romanian companies. Large deals involving the government, particularly public-private partnerships, can be stymied by vested political and economic interests or bogged down due to a lack of coordination between government ministries.
Designed to recoup drug reimbursement costs that exceeded state-budgeted amounts, Romania’s claw back tax was 27.65 percent in 2019. In May 2020, the GOR approved a revised and differentiated claw back tax, capped at 25 percent for innovative medicines, 20 percent for generic medicines, and 15 percent for locally produced medicines. While the 2020 legislation provided some relief to pharmaceutical companies, the claw back tax continued to negatively affect the availability of drugs in the Romanian marketplace. In February 2022, the Romanian Competition Council fined five plasma therapies producers for allegedly colluding to limit immunoglobulin supplies in the Romanian market between 2015 – 2018.
Foreign and domestic private entities are free to establish and own business enterprises, and to engage in all forms of remunerative activity. Romanian legislation and regulation 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.
Romania has established legal parameters to resolve contract disputes expeditiously. Mergers and acquisitions are subject to review by the Competition Council. Under the Competition Law, the Competition Council must notify Romania’s Supreme Defense Council of mergers or acquisitions of stocks or assets that could affect national security. The Supreme Council of National Defense (CSAT) then reviews the referred mergers and acquisitions for potential threats to national security. The Romanian capital account was fully liberalized in 2006, prior to joining the EU in 2007. Foreign firms are allowed to manage and administer their investments, and to assign their contractual obligations and rights to other Romanian or foreign investors.
Romania has not undergone any third-party investment policy reviews through multilateral organizations in over ten years.
In January 2022, the Organization for Economic Cooperation and Development (OECD) opened accession discussions with Romania. Over a multi-year period, OECD technical commissions will assess Romania’s candidacy against OECD standards and policies in areas such as the investment climate, governance, and environmental protection. In January 2022, the OECD published an economic survey with initial recommendations on how Romania can further its socioeconomic development. Among other findings, the report recommended that Romania continue to digitalize and modernize its tax administration to raise tax collection and improve tax compliance; to strengthen its administrative capacity to absorb EU funds; and to address gaps in transportation infrastructure.
The National Trade Registry has an online service available in Romanian at https://portal.onrc.ro/ONRCPortalWeb/ONRCPortal.portal . InvestRomania offers free assistance and advisory services to foreign investors and international companies for business activities, such as project implementation and opening new offices or manufacturing facilities. More information is available at http://www.investromania.gov.ro/web/ .
According to the World Bank, it takes six procedures and 20 days to establish a foreign-owned limited liability company (LLC) in Romania compared to the regional average for Europe and Central Asia of 5.2 procedures and 11.9 days. In addition to the procedures required of a domestic company, a foreign parent company establishing a subsidiary in Romania must authenticate and translate its documents. As of March 2022, foreign companies did not need to seek investment approval. A Trade Registry judge must hold a public hearing on the company’s application for registration within five days of submission of the required documentation. Applicants can submit and monitor the status of their registration documents online.
Companies in Romania are free to open and maintain bank accounts in any foreign currency, although, in practice, Romanian banks offer services only in Romanian lei (RON) and certain hard currencies (Euros and U.S. dollars). The minimum capital requirement for domestic and foreign LLCs is RON 200 (USD 45). Areas for improvement include making all registration documents available to download online in English.
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. Business facilitation mechanisms provide for equitable treatment of women in the economy.
There are no restrictions or incentives on outward investment.
3. Legal Regime
Romanian law requires consultations with stakeholders, including the private sector, and a 30-day comment period on legislation or regulation affecting the business environment (the “Sunshine Law”). Some draft pieces of legislation pending with the government are available in Romanian at http://www.sgg.ro/acte-normative/ . Proposed items for cabinet meetings are not always publicized in advance or in full. Generally, the agenda of cabinet meetings should include links to the draft pieces of legislation (government decisions, ordinances, emergency ordinances, or memoranda) slated for government decision, but this is not always the case. Pending parliament legislation is available at http://www.cdep.ro/pls/proiecte/upl_pck.home for the Chamber of Deputies and at https://www.senat.ro/legis/lista.aspx for the Senate. The Chamber of Deputies is the decision-making body for economic legislation.
Foreign investors point to the excessive time required to secure necessary zoning permits, environmental approvals, property titles, licenses, and utility hook-ups.
The Sunshine Law (Law 52/2003 on Transparency in Public Administration) requires public authorities to allow the public to comment on draft legislation and sets the general timeframe for stakeholders to provide input; however, comments received are not published. The Sunshine Law’s public consultation timelines do not have enforceable penalties or sanctions, and thus public authorities can bypass its provisions without harm. In some cases, public authorities have set deadlines much shorter than the standards set forth in the law or passed a piece of legislation before the deadline for public input expired. The regulatory enforcement process is not digitalized and is not made accountable to the public.
As an EU member state since 2007, Romanian legislation is largely driven by the EU Acquis Communautaire, the accumulated body of EU legislation. European Commission (EC) regulations are directly applicable while national legislation implements directives at the national level. Romania’s regulatory system incorporates European standards. Romania has been a WTO member since January 1995 and a member of the General Agreement on Tariffs and Trade (GATT) since November 1971. Technical regulation notifications submitted by the EU are valid for all Member States. The EU signed the Trade Facilitation Agreement (TFA) in October 2015. Romania has implemented all TFA requirements.
Romania recognizes property and contractual rights, but enforcement through the judicial process can be lengthy, costly, and difficult. Foreign companies engaged in trade or investment in Romania often express concern about the Romanian courts’ lack of expertise in commercial issues. Romania has no specialized commercial courts, but it does have specialized civil courts. Judges generally have limited experience in the functioning of a market economy, international business methods, intellectual property rights, or the application of Romanian commercial and competition laws. As stipulated in the Constitution, the judicial system is independent from the executive branch and generally considered procedurally competent, fair, and reliable. Affected parties can challenge regulations and enforcement actions in court. Such challenges are adjudicated in the national court system.
Inconsistency and a lack of predictability in the jurisprudence of the courts or in the interpretation of the laws remains a major concern for foreign and domestic investors and for wider society. Even when court judgments are favorable, enforcement of judgments is inconsistent and can lead to lengthy appeals. Failure to implement court orders or cases where the public administration unjustifiably challenges court decisions constitute obstacles to the binding nature of court decisions.
Mediation as a tool to resolve disputes is gradually becoming more common in Romania, and a certifying body, the Mediation Council, sets standards and practices. The professional association, the Union of Mediation Centers in Romania, is the umbrella organization for mediators throughout the county. Court-sanctioned and private mediation is available at recognized mediation centers in every county seat.
Romania has no legal mechanism for court-ordered mediation, but judges can encourage litigants to use mediation to resolve their cases. If litigants opt for mediation, they must present their proposed resolution to a judge upon completion of the mediation process. The judge must then approve the agreement.
Since Romania joined the EU in 2007, the country has worked assiduously to create an EU-compatible legal framework consistent with a market economy and investment promotion. At the same time, implementation of these laws and regulations frequently lags or is inconsistent, and lack of legislative predictability undermines Romania’s appeal as an investment destination.
Romania’s legal framework for foreign investment is encompassed within a substantial body of law largely enacted in the late 1990s. It is subject to frequent revision. Romania enacted major changes to the Civil Code in October 2011, including replacing the Commercial Code, consolidating provisions applicable to companies and contracts into a single piece of legislation, and harmonizing Romanian legislation with international practices. The Civil Procedure Code, which provides detailed procedural guidance for implementing the new Civil Code, came into force in February 2013. Fiscal legislation is revised frequently, often without scientific or data-driven assessment of the impact the changes may have on the economy.
Given the state of flux of legal developments, investors are strongly encouraged to engage local counsel to navigate the various laws, decrees, and regulations as several pieces of investor-relevant legislation have been challenged in both local courts and the Constitutional Court. Few hostile takeover attempts have been reported in Romania. Romanian law has not focused on limiting potential mergers or acquisitions. No Romanian laws prohibit or restrict private firms’ free association with foreign investors.
Romania has extensively revised its competition legislation, bringing it closer to the EU Acquis Communautaire and corporate best practices. As of 2014, companies with a market share below 40 percent were no longer considered to have a dominant market position. This approach eliminates the need for the Romanian Competition Council (RCC) to conduct full investigations, saving considerable time and money for all parties involved. Resale price maintenance and market and client sharing are still prohibited, regardless of the size of either party’s market share. The authorization fee for mergers or takeovers ranges between EUR 10,000 (USD 11,944) and EUR 50,000 (USD 59,720). The Fiscal Procedure Code requires companies that challenge an RCC ruling to front a deposit while awaiting a court decision on the merits of the complaint.
Romania’s Public Procurement Directives outline general procurements of goods and equipment, utilities procurement (“sectorial procurement”), works and services concessions, and remedies and appeals. An extensive body of secondary and tertiary legislation accompanies the four 2016 laws and has been subject to repeated revisions. Separate legislation governs defense and security procurements. In a positive move, this body of legislation moved away from the previous approach of using lowest price as the only public procurement selection criterion, allowing authorities to use price, cost, quality-price ratio, or quality-cost ratio. The revised laws also allow bidders to provide a simple form (the European Single Procurement Document) to participate in the award procedures. Only the winner must later submit full documentation. As of April 2021, only companies from EU member states or signatory countries of the WTO Public Procurement Agreement have been allowed to bid on public procurements in Romania.
Public procurement laws stipulated that challenges regarding procedure or an award can be filed with the National Complaint Council (NCC) or the courts. Disputes regarding execution, amendment, or termination of public procurement contracts can be subject to arbitration. The revised laws also stipulated that a bidder must notify the contracting authority before challenging either the award or procedure. Not fulfilling this notification requirement can result in the NCC or the courts rejecting the challenge.
The EC’s 2020 European Semester Country Report for Romania noted that despite improved implementation, public procurement remained inefficient. According to the report, 97 percent of businesses thought corruption was widespread in Romania, and 87 percent said it was widespread in public procurements managed by national authorities.
The law on direct investment includes a guarantee against nationalization and expropriation or other equivalent actions. The law allows investors to select the court or arbitration body of their choice to settle disputes. Several cases involving investment property nationalized during the Communist era remain unresolved. In doing due diligence, prospective investors should conduct a thorough title search to ensure land or assets are not subject to any pending restitution claims.
Romania’s bankruptcy law contains provisions for liquidation and reorganization that are generally consistent with Western legal standards. These laws usually emphasize enterprise restructuring and job preservation. To mitigate the time and financial cost of bankruptcies, Romanian legislation provides for administrative liquidation as an alternative to bankruptcy. However, investors and creditors have complained that liquidators sometimes lack the incentive to expedite liquidation proceedings and that, in some cases, their decisions have served vested outside interests. Both state-owned and private companies tend to opt for judicial reorganization to avoid bankruptcy.
In December 2009, the debt settlement mechanism Company Voluntary Agreements (CVAs) was introduced as a means for creditors and debtors to establish partial debt service schedules without resorting to bankruptcy proceedings. However, global economic crisis prompted Romania to shorten insolvency proceedings in 2011.
According to the World Bank 2020 Doing Business Report, resolving insolvency in Romania takes 3.3 years on average compared to 2.3 years in Europe and Central Asia. Such cases cost 10.5 percent of the debtor’s estate with the most likely outcome being a piecemeal sale of the company. The average recovery rate is 34.4 cents on the dollar.
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.
In 2007, Romania adopted EU regulations on regional investment aid and instituted state aid schemes for large investments, SMEs, and job creation. 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 European Commission (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 separate from any public support for at least 25 percent of the eligible costs, either through his own resources or through external financing, and must document this financing in strict accordance with Ministry of Finance guidelines. Under amendments passed in 2010, the state aid scheme for regional projects scores 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 equals the state aid granted. Numerous foreign and U.S firms have successfully applied for and received Romanian state aid.
The green certificate system, part of the Renewable Energy Law, provided incentives for certain types of renewable energy. The incentives are not available for renewable energy investments made after January 1, 2017, but investors that qualified under the support system can trade certificates until 2032. Green certificates are traded in parallel with the energy produced. They 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 lowering the mandatory green certificate quota that consumers and suppliers must acquire – have created instability in the renewables investment climate. Energy intensive industrial consumers receive exemptions from acquiring green certificates. The GOR responded to the international energy crisis in winter 2021-2022 by suspending the green certificate system between April and December of 2022.
As an EU member state, Romania must receive 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 EC has launched formal investigations into several privatizations where the state aid grantors failed to properly notify the EC of aid associated with the 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. When planning a project, prospective applicants should note that a 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. 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, Romanian public institutions’ understaffing and lack of management expertise, cumbersome procedures, and applicants’ difficulty obtaining private financing still significantly impede the absorption and implementation of EU funds.
Free Trade Zones (FTZs) received legal authority in Romania in 1992 under the authority of the Ministry of Transportation. 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 six FTZs, primarily located on the Danube River or close to the Black Sea, operate in 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.
The government generally does not mandate local employment. A notable exception is the Offshore Law (Law 256/2018), which requires that at least 25 percent of the employees of offshore titleholders be Romanian citizens with fiscal residence in Romania. No excessively onerous visa, residence, work permit, or similar requirements inhibit mobility of foreign investors or their employees. The government imposed no conditions on permission to invest. The government does not require investors to establish or maintain data storage in Romania. Romania neither follows nor has legislation requiring localization in relation to goods, technology, or data. Romania does not require foreign IT providers to turn over source code or provide access for government surveillance. Romania has no measures preventing or unduly impeding companies from freely transmitting customer or other business-related data outside the country. The government imposed no performance requirements as a condition for establishing, maintaining, or expanding an investment.
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. However, legislation passed in Fall 2020 imposed additional restrictions and limitations on the purchase of agricultural land by foreign investors.
The 2006 legislation that regulates the establishment of specialized mortgage banks also makes possible a secondary mortgage market by regulating mortgage bond issuance mechanisms. Commercial banks, specialized mortgage banks, and non-bank mortgage credit institutions offer mortgage loans. Romania’s mortgage market is now almost entirely private; the state-owned savings bank (CEC Bank) also offers mortgage loans. Since 2000, the Electronic Archives of Security Interests in Movable Property (AEGRM) has overseen 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 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, the cadaster registry contained 1.9 million hectares of land and 37.7 percent of the estimated real estate assets (buildings) as of March 2020.
Romania has marginally improved implementing digital records of real estate assets, including land. However, the cadaster property registry is far from complete; inaccurate and incomplete information for land ownership continues to challenge private investors and SOEs alike.
Romania was removed from the Watch List of the U.S. Trade Representative’s Special 301 Report in 2022 due to taking significant actions to improve IP protection and enforcement. In January 2022, Romania appointed its first-ever national IP enforcement coordinator, who has been charged with developing a national IP strategy and coordinating interagency efforts. Romania has also taken other actions to improve efforts to investigate and prosecute IP crime. For example, last year, the economic police established a new department dedicated to online piracy cases and also dedicated a minimum of two additional officers per county to IP investigations. Moreover, the General Prosecutor Office’s Intellectual Property Coordination Department resumed coordination of IP working group sessions, holding meetings last year with representatives of different ministries involved in IP as well as private sector representatives. The United States will continue to monitor Romania’s efforts to finalize a national IP strategy, to implement that strategy, and to take specific actions to prioritize IP protection and enforcement.
Romania is a signatory to international IPR-related conventions, including the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), and has enacted legislation protecting patents, trademarks, and copyrights. Romania passed broad IPR protection enforcement provisions as required by the WTO, yet gaps remain in enforcement. Romania signed the Internet Convention to protect online authorship. In January 2020, Romania passed a law to enhance the transparency of collective rights management of copyrights. In July 2020, Romania passed legislation implementing the EU Trademark Directive, and in October 2021, approved draft legislation to implement the EU Copyright Directive. The new legislation introduced a series of changes, including removal of requirements for graphic representation of trademarks and allowing for registration of sound marks, multimedia marks, and holograms. To increase transparency, the law included provisions to clarify dates of completed trademark registration and their entry into force.
Romania is both a transit and destination country for counterfeit goods. The People’s Republic of China is the top country of origin for counterfeit goods. Customs officers can seize counterfeit products ex-officio and destroy them upon inspection and declaration by the rights holder. The government is responsible for paying for the storage and destruction of the counterfeit goods. The National Customs Directorate reported the seizure of 3.79 million items of counterfeited goods in 2021, compared to 0.74 million items in 2020. The value of seized goods decreased from USD 6.84 million in 2019 to USD 3.59 million in 2020, but jumped to USD 12.09 million in 2021. Customs authorities closely coordinate their efforts with the European Commission’s Anti-Fraud Office (OLAF), the European Observatory on Infringements of Intellectual Property Rights, and other stakeholders to increase transborder cooperation in line with the EU’s IPR action plan.
Romania is a party to the World Intellectual Property Organization (WIPO) Patent Cooperation Treaty and the Paris Convention. 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 party to the European Patent Convention since 2002. Patent applications 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.
Romania is party to the Madrid Agreement, the Singapore Treaty, and the Trademark Law Treaty. Romania’s trademark and geographical indications law was amended in 2010 to make it fully consistent with equivalent EU legislation at that time. The EU has since adopted the Trademark and Geographic Indications Directive (EU Directive 2436/2015). Romania implemented the law under Law 84/1998, which entered force in July 2020.
Romania is a member of the Berne Convention, the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty. The Romanian Copyright Office (ORDA) promotes and monitors copyright legislation. The General Prosecutor’s Office (GPO) provides national coordination of IPR enforcement. Many magistrates still tend to view copyright piracy as a victimless crime, and this attitude has resulted in weak enforcement of copyright law.
For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .
6. Financial Sector
Romania welcomes portfolio investment. In September 2019, the Financial Times and the London Stock Exchange (FTSE Russell) promoted the Bucharest Stock Exchange (BVB) to Emerging Secondary Capital Market status from Frontier Capital Market classification. The Financial Supervision Authority (ASF) regulates and supervises securities and insurance markets as well as private pension funds. The ASF implements the registration and licensing of brokers and financial intermediaries, the filing and approval of prospectuses, and the approval of capital market mechanisms.
The BVB resumed operations in 1995 after a nearly 50-year hiatus. The BVB operates a two-tier system with the main market consisting of 83 companies. The official main index, BET, is based on an index of the 19 most active stocks. BET-TR is the total return on market capitalization index, adjusted for the dividends distributed by the companies included in the index. Overall, the BVB calculates and distributes in real time 11 indexes. In 2015, the BVB opened an alternative trading system (MTS-AeRO) with relaxed listing criteria. MTS-AeRO has 298 listed companies, which are mostly small- and medium-sized enterprises (SMEs). The BVB allows trade in corporate, municipal, and international bonds. Investors can use gross basis trade settlements, and trades can be settled in two net settlement cycles. The BVB’s integrated group includes trading, clearing, settlement, and registry systems. The BVB’s Multilateral Trading System (MTS) allows trading in local currency of 15 foreign stocks listed on international capital markets.
Public institutions do not impose restrictions on payments and transfers. Country funds, hedge funds, private pension 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 complies with EU standards with accounting regulations incorporating EC Directives IV and VII.
Thirty-three banks and one credit cooperative national union currently operate in Romania. The largest is the privately-owned Transilvania Bank (19.5 percent market share), followed by Austrian-owned Romanian Commercial Bank (BCR-Erste, 13.9 percent); French-owned Romanian Bank for Development (BRD-Société Générale, 10.5 percent); Dutch-owned ING (9.3 percent); Austrian-owned Raiffeisen (9.2 percent); state-owned National Savings Bank (CEC Bank) (7.9 percent); and Italian-owned UniCredit (7.8 percent).
The banking system is stable, well-provisioned, and profitable relative to its European peers. According to the National Bank of Romania (BNR), despite the COVID-19 pandemic, NPLs accounted for 3.35 percent of total bank loans as of December 31, 2021. As of September 2021, the banking system’s solvency rate was 23.07 percent, which has remained steady over recent years, while the banking system’s return on equity was 13.6 percent compared to an EU average of only 7.4 percent.
The government and the BNR have encouraged foreign investment in the banking sector, and mergers and acquisitions are not restricted. The only remaining state-owned banks are the CEC Bank and EximBank, comprising 11.43 percent of the market combined, which grew after the latter’s 2020 acquisition of Banca Romaneasca from Greek-owned NBG.
While the BNR must authorize all new non-EU banking entities, banks and non-banking financial institutions already authorized in other EU countries need only notify the BNR of plans to provide local services based on the EU passport.
In response to the COVID-19 pandemic, the government instituted a credit/lease installment moratorium in 2020 and extended it to March 15, 2021. Borrowers were permitted a total of nine months of non-payment of their installments. About 240,838 borrowers applied and were approved for the installment moratorium. The residual stock at the end of the application period represented 12.7 percent of the total non-government credit balance.
In January 2020, the government repealed plans to establish a Sovereign Development and Investment Fund (SDIF).
7. State-Owned Enterprises
According to the World Bank, Romania has approximately 1,200 state-owned enterprises (SOEs) of which around 300 are majority-owned by the Romanian government. There is no published list of all SOEs, as some are subordinated to the national government and some to local authorities. SOEs are governed by executive boards under the supervision of administration boards. Implementation of the Corporate Governance Code (Law 111/2016) remains incomplete and uneven.
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. Many SOEs are currently managed by interim boards, often with politically appointed members that lack sector and business expertise. The EC’s 2020 European Semester Country Report for Romania noted that the Corporate Governance Law is still only loosely applied. The appointment of interim boards has become standard practice. Administrative offenses carry symbolic penalties, which do not change behavior. The operational and financial results of most SOEs deteriorated in 2019 and 2020. Successive governments have resorted to distributing the dividends of profitable SOEs to increase state budget revenues.
Privatization has stalled since 2014. The government has repeatedly postponed the initial public offering (IPO) for hydropower producer Hidroelectrica. Fondul Proprietatea, a minority owner in Hidroelectrica, announced its intent to divest its 15 percent stake of the company through a separate IPO.
As a member of the EU, Romania is required to notify the EC’s General Directorate for Competition of significant privatizations and related state aid. Prospective investors should seek legal counsel to ensure compliance with relevant legislation. In previous privatizations, the government’s failure to consult with, and then formally notify the EC resulted in delays and complications. 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.
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. The GOR retains majority equity in electricity and natural gas transmission. The Ministry of Energy has authority over energy generation assets and natural gas production. According to the EU’s 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). Consequently, natural gas carrier Transgaz and national electricity carrier Transelectrica are under the Government’s General Secretariat. The Ministry of Transport and Infrastructure has authority over the entities in the transportation sector, including rail carrier CFR Marfa, national air carrier Tarom, and the Constanta Port Administration. Romania currently has no plans to privatize companies in the transportation sector.
Romanian law allows for the inclusion of confidentiality clauses in privatization and public-private partnership contracts to protect business proprietary and other information. In some high-profile privatizations, Parliament 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 government 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, InvestRomania, currently serves as the contact point.
Several NGOs in Romania monitor, advocate, and raise concerns on RBC issues. No high-profile cases of private sector impact on human rights were recorded in 2020. However, the National Council for Combating Discrimination (CNCD), 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 discrimination based on gender, disability, HIV status, or ethnicity and harassment over labor union membership and childcare 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. Romania does not participate in the Extractive Industries Transparency Initiative (EITI) but has adhered to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas since 2012.
Organized crime investigators conducted inquiries related to lack of due diligence and non-transparent supply chains for timber and other wood products. In 2021, prosecutors investigated non-compliant wood shipments transitioning the port of Constanta. Violence against environmentalists and journalists monitoring the forestry sector has been well-documented. On September 16, 2021, a group attacked two journalists and an environmental activist while they were documenting illegal logging in Romania. Forestry worker unions claimed that more than 650 rangers and technical workers were attacked, threatened, or had their property destroyed between 2017-2019, and that six died during the same period.
As an EU member state, Romania’s climate objectives align with EU strategies, including the 2030 Agenda and the European Green Deal. In 2019, Romania had the third lowest greenhouse gas emissions (GHG) in the EU (4.3 tons per capita compared to an EU average of 7.8 tons). However, when calculating the carbon intensity rate as emissions per GDP, Romania’s emissions were the fifth highest in the EU. Romania’s draft Integrated National Energy and Climate Change Plan for 2021-2030 targeted a 43.9 percent reduction in European Trading System (ETS) emissions and a two percent reduction in non-ETS emissions for 2030 compared to 2005. In December 2020, the European Commission submitted updated and enhanced Nationally Determined Contributions (NDC) targeting emissions reductions of at least 55 percent by 2030 from 1990 levels. The new NDCs significantly updated the previous 40 percent target included under the 2030 Climate and Energy Framework.
Romania is currently updating its biodiversity strategy for 2020-2030, which should reflect objectives identified by the EU’s biodiversity strategy for 2030. Romania boasts a diverse geography and has many protected areas in biologically diverse areas such as mountains, plains, and coastal wetlands. Romania has more than 300 square miles of old-growth forests, the most in the EU. Romanian forests and woodlands represent a substantial carbon sink and cover six percent of the total forest and woodland carbon dioxide uptake at the EU level.
However, Romania struggles with an extensive list of legacy environmental challenges, such as poor air quality, inadequate waste management practices, and insufficient protective measures for natural areas. These legacies may hamper Romania’s ability to achieve policy outcomes that preserve biodiversity and clean air.
Recurrent and underreported illegal logging remains a concern despite progress by the government to improve wood traceability. In 2018, the Romanian government excluded non-governmental organizations from the management of protected natural areas, which diminished the quality of management of affected sites. Unpredictability remains a concern as environmental legislation can be amended with insufficient consultation, and sometimes leads to a lack of alignment and compliance with EU biodiversity provisions and goals. In 2022, parliament considered legislation to replace existing national hunting quotas per species with individual daily quotas per hunter, potentially affecting migratory and protected song-bird populations.
Overall environmental taxes remain low, representing 1.92 percent of GDP and 5.57 percent of Romanian tax revenue in 2020, down from 2.12 percent and 5.89 percent in 2019. Sectoral regulatory incentives are in place to limit carbon emissions and promote more sustainable business and consumer practices. Romanian legislation upholds the EU principle of extended producer responsibility, applicable to all waste generated via the purchases of electric and electrical appliances as well as for plastic, glass, metal, and paper packaging. Producers and municipalities need to uphold recycling quotas and targets. On October 4, 2021, the GOR adopted a legislative framework to create a Deposit Return System (DRS) for beverage packaging. The DRS, which is expected to become fully operational by 2025, requires consumers to pay a guarantee as part of the purchase price which they recover when they return the packaging to retailers.
Romania aims to replace 250,000 cars older than 15 years by 2026. Companies or individuals that trade in older vehicles are eligible to receive vouchers up to RON 15,000 (USD 3,454) to purchase a hybrid vehicle or up to RON 57,000 (USD 13,126) to purchase an electric vehicle. Romania has used EU-funded programs to improve energy efficiency in buildings, both privately and publicly owned. It also has run programs to incentivize replacement of low-efficiency household appliances with new energy-efficient ones.
In 2022, the EC Complementary Delegated Act defined technical screening criteria for specific nuclear and gas activities covered by EU taxonomy. Inclusion of these activities, under strict conditions, created opportunities for Romania to further adopt advanced technologies, construct and operate new nuclear power plants (NPPs), and upgrade existing NPPs. The Delegated Act recognized nuclear energy to play a role in the green energy transition beyond 2050, though limited permits to 2045 for new NPPs and 2040 for NPP upgrades. It stipulated that gas-fired power generation should transition to renewable gas or low carbon emissions by 2035. Covered natural gas activities included gas-fired power generation, high efficiency cogeneration, and centralized heating and cooling. The Delegated Act affirmed the right of the EU member states to develop energy programs based on national priorities and available energy resources.
Department of State
- Country Reports on Human Rights Practices;
- Trafficking in Persons Report;
- Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
- U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
- Xinjiang Supply Chain Business Advisory
Department of the Treasury
Department of Labor
Romania’s fight against high- and medium-level corruption, a model in Southeastern Europe over the past decade, suffered significant setbacks between 2017 and late 2019 due to a concerted campaign under a previous Social Democratic Party (PSD)-led government that aimed to weaken anti-corruption efforts, the criminal and judicial legislative framework, and judicial independence. Professional associations, NGOs, the EU, and NATO-allied governments raised concerns about legislative initiatives that furthered this trend during that period. In Transparency International’s 2021 Corruption Perceptions Index, Romania placed 45 out of 100, up one spot since 2020, placing Romania among the lowest ranked of the EU member states. The current governing coalition lists justice reform and the fight against corruption among its official priorities, but it remains to be seen whether it will achieve tangible results.
Domestic and international rule-of-law experts and law enforcement observe that many of the amendments to the criminal code introduced by the former PSD-led government between 2017-2019 remain in place today and continue to weaken the investigative tool kit in the fight against corruption. The current governing coalition (PSD-PNL-UDMR) has said it hopes to bring the new “Justice Laws” to parliament for debate in 2022 with the aim of reversing most of these provisions of the 2017-2019 Justice Laws.
The European Commission under the Cooperation and Verification Mechanism (CVM), and the Council of Europe’s (COE) Group of States Against Corruption (GRECO) prepared 2021 reports that leave some room for optimism. The June 2021 CVM report, which covered activities from October 2019, noted the GOR committed to reaching all CVM objectives in 2020, but progress has been limited. A May 18, 2021, ruling by the EU’s Court of Justice confirmed that the recommendations of the CVM are mandatory for Romania. GRECO’s 2021 report, while acknowledging some progress, assessed Romania’s compliance with its recommendations for fighting corruption as “very low.” The OECD 2022 economic survey also warned that corruption remained a major problem in Romania, arguing that past modifications of Justice Laws and the pressures targeting DNA prosecutors have weakened anticorruption efforts.
A major issue signaled by the CVM, GRECO, and the Venice Commission remains the controversial Section to Investigate Offenses in the Judiciary (SIIJ). The DNA’s 2020 performance report for the National Anti-Corruption Directorate (DNA) showed that the failure to incorporate Constitutional Court decisions in the legislative framework has negatively affected the agency’s efficiency. The existence of the SIIJ continued to be a source of discontent for DNA and civil society. In March 2022, President Iohannis signed into law a bill passed by Parliament that aimed to dismantle the structure. The Venice Commission published a subsequent opinion criticizing the GOR’s hasty adoption of the bill. Against international recommendations, the law dismantled the SIIJ and created a new structure to handle the cases, rather than returning the corruption and organized crime files to DNA and DIICOT. Civil society representatives and the main opposition party, Save Romania Union (USR), warned that the new structure envisioned to take the place of SIIJ could be even more damaging to judicial independence. The Romania chapter of the EC’s 2020 report on rule of law within the EU, mentioned in the 2021 CVM, noted that in 2020 the government continued to affirm its commitment to judicial reform after the reversals between 2017 and 2019.
In December 2021, the Government adopted an Anticorruption Strategy for 2021-2025. The document represents a political commitment to support all relevant institutions fighting corruption and was also a milestone in Romania’s National Recovery and Resilience Plan. The strategy focuses on asset recovery and strengthening the National Agency for Managing Seized Assets (ANABI). Conflicts of interest, respect for standards of ethical conduct, and integrity in public office remained concerns for all three branches of government. Individual executive agencies enforced sanctions slowly, and agencies’ inspection bodies were generally inactive.
Romania implemented the revised EU Public Procurement Directives in 2016 by passing new laws to improve and make public procurements more transparent. The National Agency for Public Procurement (ANAP) has general oversight over procurements and can draft legislation, but procurement decisions remain with the procuring entities. 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. Sectoral procurements, including private companies in energy and transportation, must follow the public procurement laws and tender via the e-procurement website. The April 2021 EU Country Report for Romania, which included data on the public procurement system in Romania for the period between 2018-2020, noted that the practical application of innovation-driven public procurement solutions remained a challenge.
In October 2016, the “Prevent” IT system, an initiative sponsored by the National Integrity Agency (ANI) for ex-ante checks of conflicts of interests in public procurement, was signed into law. The mechanism aims to avoid conflicts of interest by automatically detecting conflicts of interest in public procurement before the selection and contract award procedure. According to ANI, between January-December 2021, the system checked over 7,800 public procurement procedures to prevent conflicts of interest.
National laws prohibit bribery and other acts of corruption, both domestically and for Romanian companies doing business abroad. The judiciary remains mostly paper-based and inefficient although digitization progressed some during the pandemic. Romania loses several cases each year in the European Court of Human Rights (ECHR) due to excessive trial length. The National Agency for Fiscal Administration (ANAF) has a mandate to ensure that all taxes are collected and prevent fiscal and customs frauds. Asset forfeiture laws exist, but a functioning regime remains under development.
While private joint stock companies use internal controls, ethics, and compliance programs to detect and prevent bribery, since 2017 the government has rolled back corporate governance rules for state-owned enterprises and has repeatedly resorted to profit and reserves distribution in dividends to bolster the budget. U.S. investors have complained of both government and business corruption in Romania, most frequently naming the customs service, municipal officials, and local financial authorities. According to the EC’s February 2020 European Semester Country Report for Romania, corruption continued to be a major problem for the business environment in Romania. A 2019 business Eurobarometer survey showed that 88 percent of businesses consider corruption to be a serious problem for their company when doing business in Romania. Since 2013, the share of companies that perceived corruption as a problem increased in Romania by 23 percentage points, the largest increase in the EU and in stark contrast with the EU average which continued to decrease (to 37 percent). Overall, 97 percent of businesses thought that corruption was widespread in Romania and 87 percent said it was widespread in public procurement managed by national authorities.
Romania is a member of the Southeast European Law Enforcement Center (SELEC). NGOs enjoy the same legal protections as any other organizations, but NGOs involved in investigating corruption receive no additional protections. The United States welcomes participation from private and public sector entities on anti-corruption programs and trainings.
Romania is a member of the UN Anticorruption Convention and the Council of Europe’s Group of States Against Corruption (GRECO). Romania is not a member of the OECD Anti-Bribery Convention.
As of March 2002, Romania was implementing 12 commitments from their 2020-2022 action plan. This action plan featured commitments related to civic space, participation, consultation, social services, anti-corruption, fiscal transparency, justice and integrity, health and social accountability, de-bureaucratization, and open data.
Contact at government agency responsible for combating corruption:
National Anticorruption Directorate (DNA)
Str. Stirbei Voda nr. 79-81, Bucuresti
+40 21 312 73 99
Contacts at “watchdog” organizations:
Strada Semilunei, apt 1, Sector 2, Bucuresti
+40 21 211 7400
Freedom House Romania
Bd. Ferdinand 125, Bucuresti
+40 21 253 2838 email@example.com
Colivia, Pache Protopopescu 9
+40 723 627 448
10. Political and Security Environment
Romania does not have a history of politically motivated damage to foreign investors’ projects or installations. Major civil disturbances are rare, though some have occurred in past years. In 2021, the extreme-right party Alliance for the Unity of Romanians (AUR) capitalized on widespread discontent with the government’s response to the pandemic, a sluggish economy, and surging energy prices to organize a series of protests. The current coalition, one in a series of coalitions over the past two years, supports economic reform and a business-friendly environment, but it is uncertain how much progress the coalition will make on its goals.
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 and health sectors, due to emigration and a deteriorating primary and secondary education system that fails to adequately prepare many graduates, particularly in rural areas, for university. 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. As a result, an estimated 25 to 30 percent of the labor force works in the underground economy as “independent contractors” where their salaries are neither recorded, nor taxed. Even for registered workers, underreporting of actual salaries is common.
The total unemployment rate in Romania increased during the COVID-19 pandemic from 4.9 percent in 2019 to 6.1 percent in 2020, and was 5.3 percent as of Q3 2021. The registered unemployment rate, which covers jobless individuals registered with the labor offices, stood at 2.8 percent in October 2021, down from 3.3 the previous year. At 69.2 percent in 2020, the labor force participation rate – the portion of the working age population (15-64 years) who are employed or actively seeking employment – remained among the lowest in the EU. Romanian employers in the engineering, machinery, IT services, and healthcare sectors reported difficulties in hiring and retaining employees as Romania faces a shortage of medium- to high-skill workers. As Romania’s emigration crisis deepens, other industries, including food service and construction, also face worker shortages. According to the EC, Romanians were the largest working age group of EU citizens residing in other member states in 2020 (18.6 percent of the working age resident population, up from 11.5 in 2010). Many emigrants are young and well- qualified, constraining the supply of skilled labor remaining in Romania. The World Bank estimated that between 2000 and 2018, Romania’s population fell from 22.5 million to 19.5 million with emigration accounting for more than 75 percent of the decline. Romania faces a shortage of healthcare staff as doctors and nurses continue to seek work abroad, motivated not only by the higher salaries, but also by the country’s antiquated medical system. According to the Ministry of Health, roughly 10,000 doctors left Romania between 2017 and 2018.
The government lacks a comprehensive strategy to remedy labor shortages despite taking steps in recent years to attract and retain talent. Employees in some sectors benefit from fiscal incentives. For example, IT professionals are eligible for certain income tax exemptions. In 2018, the GOR introduced an additional income tax and social contributions exemption for a period of ten years for construction sector employees. The provision also introduced a specific minimum wage of RON 3,000 (USD 728) for construction workers. In 2017, the GOR adopted a unitary wage law to establish a more consistent framework for wages across the public sector. The law provided for a salary increase of at least 25 percent for most public sector employees; wages for some workers in the healthcare sector doubled in nominal terms as of March 2018. Unions and businesses continue to debate specific applications of the Unitary Wage Law.
The Labor Code regulates the labor market in Romania, controlling contracting, jurisdiction, and the application of regulations. 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 it has annual work permit quotas for other non-EU nationals. As of 2020, employers are exempt from obtaining General Immigration Inspectorate (IGI) approval for nationals from Moldova, Ukraine, and Serbia for full-time labor contracts of up to nine months per year. For 2022, the government increased the annual work permits to 100,000, up from 50,000 permits approved for 2021. Work permits are valid for one year and are renewable with an individual work contract. Employers pay a EUR 100 tax for most foreign workers, except for seasonal workers and those present in Romania on student visas, for whom the tax is EUR 25. The government also reduced the cost of employing non-EU citizens in 2018, no longer requiring employers to pay a minimum wage equivalent to the gross average wage. Normal minimum wage law applies with the exception that highly skilled non-EU workers must receive at least twice the gross minimum wage. Foreign companies still resort to expensive staff rotations, special consulting contracts, and non-cash benefits.
Since the 1989 revolution, 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, company terms and conditions, and the applicable collective bargaining agreements. The Labor Code discerns 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. Labor unions are independent of the government. Unions and employee representatives must typically notify the employer before striking and must take specific steps provided by law before launching a general strike, including holding discussions and attempting reconciliation with management representatives. Companies may claim damages from strike organizers if a court deems a strike illegal. Labor dispute mechanisms are in place to mediate any conflicts between employers and employees regarding economic, social, and professional interests. Unresolved conflicts are adjudicated in court according to the civil code. An employee, employer, or labor union may initiate proceedings. In 2021, employees from auto manufacturing, transportation, and the medical sectors went on strike or protested publicly. They sought higher pay, better working conditions, and sufficient staffing.
Union representatives allege that few incidents of anti-union discrimination are officially reported because it is difficult to prove 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 are complicated, but generally reasonable. The current law permits, but it does not impose, collective labor agreements for groups of employers or sectors of activity. Companies with more than 21 employees may use collective bargaining, which provides for written agreements between employees and the employer or employers’ association. According to the Ministry of Labor, companies and employees had finalized 3,829 collective labor agreements as of Q3 2021 compared to 5,742 in 2020. Since 2014, parliament has periodically considered reintroducing collective bargaining nationwide, a practice that previously established minimum pay and working conditions for the entire economy, but which the Social Dialogue Act eliminated in 2011.
As an EU and International Labor Organization (ILO) member state, Romania observes international labor rights. National law prohibits all forms of forced or compulsory labor, but enforcement is not uniform or effective. As penalties are insufficient to deter violations, reports indicated that such practices continued to occur, often involving Roma, disabled persons, and children. The minimum age for most forms of employment is 16, but children may work with the consent of parents or guardians at age 15, provided the tasks correlate with their abilities. Employment in harmful or dangerous jobs is forbidden for those under the age of 18; the government maintains a list of dangerous jobs in which the employment of minors is restricted.
Romania does not waive or derogate labor laws and regulations to attract or retain investments. Since 2011, employers have had more flexibility to evaluate employees based on performance, and hiring and firing procedures have been significantly relaxed. Romania aims to ensure that its labor market is dynamic, sustainable, resilient, pro-active, and based on social innovation by 2027 with a 75 percent employment rate for of people aged 20-64. As of March 2022, Romania had yet to finalize its National Labor Strategy for 2021-2027.
The minimum wage has more than tripled in nominal terms since 2012, rising from RON 700 (USD 170) to RON 2,550 (USD 583) per month in 2022. Romania no longer requires a differentiated minimum wage for employees with a university degree. Starting in 2022, employers can only pay the minimum wage for the first two years of an employment contract. The measure has a transition period of two years, and employees currently paid the minimum wage will be eligible for wage growth in 2024. Despite these measures, Romania had the highest rate of employed persons at risk of poverty among EU member states: 14.9 percent in 2020.
Wage increases have outpaced productivity growth since 2016. This led to a marked growth in hourly labor costs, which posted a 6.39 percent nominal increase in Q3 2021 as compared with the same period in 2020. On January 31, the Romanian Competition Council opened an investigation into unlawful wage setting practices by the automotive industry. The Council investigated informal “no-poach” agreements that decreased competition among companies and created artificial labor market access barriers, particularly for automotive engineers.
In December 2017, the GOR shifted the burden of mandatory payroll deductions for pensions, healthcare, and income taxes from employers to employees. To avoid reductions in employee net pay and retain labor in a tight market, many companies increased salaries to offset employee losses. Other companies, wary of further possible changes, offered monthly bonuses rather than formally amending employee contracts.
Separately, in December 2019, parliament reduced payroll taxes for part-time workers. The bill reversed 2017 provisions when, in an effort to curtail underreporting of work, the government increased the minimum payroll taxes that employers must pay for their part-time employees to equal those for a full-time employee earning minimum wage. Coupled with the change in the legal tax incidence of social contributions described above, the law had the unintended consequence that some employees owed more in social contributions than their monthly earnings. In February 2018, the GOR issued an ordinance allowing part-time workers to pay social contributions for their actual gross income only, mandating that the employer make up the difference. Effective January 1, 2020, part-time employees are taxed based on their actual earnings, and employers do not cover additional charges. In 2018, the GOR passed new legislation specifying how the labor code applies to companies employing teleworkers and defining the distinction between teleworkers and employees who work full-time from home.
In response to COVID-19 restrictions, the GOR extended the categories of employees eligible for unemployment benefits to independently registered businesspeople, lawyers, and individuals with income deriving from copyright and sports activities. In August 2020, the GOR adopted a flexible work scheme model that required employers to cover half of full-time wages. In turn, the GOR paid 75 percent of the difference between the gross wage and the basic wage paid to the employee based on actual working hours. The law also allows for one caretaker of school-age children to receive paid days off during school closures. As of 2022, the GOR had extended furlough provisions for businesses affected by COVID-19 restrictions. The GOR has announced plans to ensure that additional medical staff hired on temporary contracts since the onset of the pandemic can remain in the medical system in the long run to cover staff gaps. On March 9, 2022, Romania lifted all COVID-19 pandemic restrictions.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
|Host Country Statistical Source*||USG or International Statistical Source||USG or International Source of Data|
|Host Country Gross Domestic Product (GDP) (USD)||2020||$249B||2020||$249B||www.worldbank.org/en/country|
|Foreign Direct Investment||Host Country Statistical Source*||USG or International Statistical Source||USG or International Source of Data|
|U.S. FDI in 2020 partner country (stock positions, USD)**||2020||
|2020||$3.93B||BEA data available at https://apps.bea.gov/international/factsheet/|
|Host country’s FDI in the United States (stock positions, USD)||N/A||N/A||2020||$80M||BEA data available at ttps://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data|
|Total inbound stock of FDI as % of host GDP||N/A||N/A||2020||0.93%||UNCTAD data available at|
* Host Country Data Sources:
BNR: https://www.bnr.ro/ ONRC: https://www.onrc.ro/
** The BNR calculated 2020 U.S. FDI in Romania at USD 1.26 billion when using the immediate investor origin principle, and at USD 7.52 billion when using the final investor origin principle. Separately, the Romanian National Trade Register Office (ONRC) calculated 2021 U.S. FDI in Romania at USD 1.22 billion when using only registered capital.
|Direct Investment from Counterpart Economy Data|
|From Top Five Sources (US Dollars, Millions)|
|Inward Direct Investment (as of December 31, 2020)|
|1. The Netherlands||$24,392||22.0%|
|“0” reflects amounts rounded to +/- USD 500,000.
* The BNR estimated the United States to be #5 when accounting for investments made by foreign subsidiaries of origin country companies.
14. Contact for More Information
B-dul Dr. Liviu Librescu 4-6