2011 Investment Climate Statement - Romania

2011 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2011

Encouraging Investment

Romania actively seeks direct foreign investment. Romania's marketplace offers 21.5 million consumers, a well-educated workforce, a strategic geographical location, and abundant natural resources, making it an attractive destination for investment. To date, favored areas for American investment include IT and telecommunications, energy, services, manufacturing, 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. Romania's accession to the European Union (EU) on January 1, 2007 has helped solidify institutional reform. However, judicial, legislative, and regulatory unpredictability continue to affect the investment climate.

Prospective U.S. investors should exercise careful due diligence, including consultation with competent legal counsel, when considering any investment. The Government of Romania (GOR) has, on occasion, allowed political interests to supersede accepted Western business practices in ways harmful to investor interests. Struggling to reduce its budget deficit, the GOR in 2010 instructed state-owned energy companies, including those with private shareholder interests, to transfer a portion of their cash reserves to the state budget as a “donation,” without consulting private shareholders in advance.

U.S. companies establish a local presence in the Romanian market in several ways. Many sign distribution agreements with local Romanian firms, which bring experience, expertise and access to the partnerships. Other firms cover Romania through a regional distributor or sales representative. Still other American companies choose Romania as a base for manufacturing or distribution, and establish a subsidiary directly in the country. The choice of strategy depends on the industry, the nature of the customer (government buyer or retail trade), and the business case. Companies relying on regular access to the GOR, or that have a significant service component, generally seek to establish a subsidiary, sometimes through acquisitions.

Investments involving the public authorities (central government ministries, county governments, or city administrations) are generally more complicated than investments or joint ventures with private Romanian companies. Large deals involving the government – particularly public-private partnerships and privatizations of key state-owned enterprises – can become stymied by vested political and economic interests, or bogged down due to a lack of coordination between government ministries. While a Public-Private Partnership (PPP) Law was passed by the GOR in 2010, there are concerns that the new law – which allows public authorities to award PPP projects without competition – may not facilitate private investment as originally anticipated. How the new PPP law will be implemented will be of considerable interest in the next few years. Investors have generally encountered greater success with less complex agreements, involving small- to medium-sized private and state enterprises.

EU Accession

Romania became a member of the European Union on January 1, 2007. The country has worked assiduously to create a legal framework consistent with a market economy and investment promotion, and has largely concluded its efforts to enact EU-compatible legislation. At the same time, implementation of these laws and regulations frequently lags or is inconsistent. The U.S. Department of Commerce recognized Romania as a market economy for anti-dumping investigation purposes beginning in March 2003.

Legal Framework

Romania's legal framework for foreign investment is encompassed within a substantial body of law, largely enacted in the late 1990s, and has been subject to frequent revision. Investors are strongly encouraged to engage local counsel to navigate the various laws, decrees, and regulations, as several pieces of investor-relevant legislation were challenged in both local courts and the Constitutional Court in 2010.

This body of legislation and regulation provides national treatment for foreign investors, guarantees free access to domestic markets, and allows 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% of after-tax profits. 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.

Foreign investors may engage in business activities in Romania by any of the following methods:

· Setting up new commercial companies, subsidiaries or branches, either wholly-owned or in partnership with Romanian natural or legal persons;

· Participating in the increase of capital of an existing company or the acquisition of shares, bonds, or other securities of such companies;

· Acquiring concessions, leases or agreements to manage economic activities, public services, or the production of subsidiaries belonging to commercial companies or state-owned public corporations;

· Acquiring ownership rights over non-residential real estate improvements, including land, via establishment of a Romanian company;

· Acquiring industrial or other intellectual property rights;

· Concluding exploration and production-sharing agreements related to the development of natural resources.

Foreign investor participation can take the form of: foreign capital, equipment, means of transport, spare parts and other goods, services, intellectual property rights, technical know-how and management expertise, or proceeds and profits from other businesses carried out in Romania. Foreign investment must comply with environmental protection, national security, defense, public order, and public health interests and regulations.

There have been few hostile take-over attempts reported in Romania, and as a result Romanian law has not focused on limiting potential mergers or acquisitions. There are no Romanian laws prohibiting or restricting private firms' free association with foreign investors.

In 2010, Romania extensively revised its competition legislation, bringing it closer to the EU acquis communautaire and best corporate practices. Companies with a market share below 40% are no longer considered to have a dominant market position, thus avoiding a full investigation by the Romanian Competition Council (RCC) of new agreements, 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. In an effort to reduce the number of frivolous legal challenges to fines imposed for anti-competitive practices, the law now requires companies to front a deposit equal to 30% of the fine while awaiting a court decision on the merits of the complaint.

In an effort to increase the absorption of EU funds, revisions to the public procurement law in December 2010 increased the open tender threshold for public projects to 4.485 million euro from 1 million euro. Government projects falling under the 4.485 million euro threshold have the option of being tendered through a “call for bids” to at least three companies. Additionally, the amendments stipulate that public procurement awards can only be challenged with the National Complaint Council (NCC). The NCC’s decision is binding, even if the contracting authority or a bidder challenges the decision in court.


The State Asset Resolution Authority (AVAS) is responsible for privatizing state-owned industrial assets and managing them during the privatization process. The Ministry of Economy, Trade and the Business Environment oversees energy assets. 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.

Major energy sector privatizations remain stalled. After having successfully privatized 87 of its micro hydropower plants (HPP) to Romanian and foreign investors, the state-owned hydro power producer, Hidroelectrica, has halted divestiture of the remaining 63 micro HPPs. In the meantime, the GOR is attempting to consolidate its remaining energy assets into two fully integrated, state-owned companies, which makes any further privatizations in the energy sector unlikely in the near term.

As an alternative to privatization, however, state-owned energy companies are seeking joint ventures with private investors for electric power production, as well as onshore and offshore oil and gas exploration. In order to raise money for the state budget, the Ministry of Economy has begun the process of selling 9.84% of the GOR’s minority stake in OMV/Petrom, Romania’s largest oil company, in 2011.

Prospective investors are strongly advised to conduct thorough due diligence before any acquisition, particularly of state-owned assets. Some firms have found it advantageous to purchase industrial assets through AVAS's budget arrears recovery process rather than through direct privatization. When utilized, this method may avoid assuming historical debt or encumbering labor agreements.

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 by relevant government entities. GOR failure to consult with, and then formally notify, the European Commission properly has resulted in delays and complications in some previous privatizations. Some investors have also 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 confidential 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.

Property and Contractual Rights

Property and contractual rights are recognized, but enforcement through the judicial process can be lengthy, costly, and difficult. Foreign companies engaged in trade or investment in Romania often express concern regarding the Romanian courts' lack of expertise in commercial issues. 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. Even when court judgments are favorable, enforcement of judgments is inconsistent and can require further lengthy appeals.

The Heritage Foundation's Economic Freedom Report ranked Romania 29th out of 43 countries in the Europe region in 2010, with an overall score higher than the world average; Romania has demonstrated slow but steady improvement in the index in recent years. The report points out, however, that labor freedom, property rights, and freedom from corruption lag behind other countries in the region, and that Romania's judiciary remains vulnerable to corruption and inefficiency. In Transparency International's Corruption Perception Index, Romania lost ground in 2008-2009 after steady improvement leading up to EU accession in 2007.




Transparency International Corruption Perception Index













Heritage Foundation Index of Economic Freedom score













World Bank Doing Business ranking







Conversion and Transfer Policies

Romanian legislation 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. Proceeds from the sale of shares, bonds, or other securities, as well as from the conclusion of an investment, can also be repatriated. 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.

In 1997, the GOR implemented new regulations that liberalized foreign exchange markets. 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 free from restraint, as well. 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.

Expropriation and Compensation

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. Five cases against Romania are pending with the International Center for Settlement of Investment Disputes (ICSID). Several cases involving investment property nationalized during the Communist era also remain unresolved.

Dispute Settlement


Romania increasingly recognizes the importance of arbitration in the settlement of commercial disputes. Many agreements involving international companies and Romanian counterparts provide for the resolution of disputes through third-party arbitration. Romania is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Romania is also a party to the European Convention on International Commercial Arbitration concluded in Geneva in 1961 and is a member of ICSID.

Romanian law and practice recognize applications to other internationally-known arbitration institutions, such as the ICC Paris Court of Arbitration and the Vienna United Nations Commission on International Trade Law (UNCITRAL). Romania also has an International Commerce Arbitration Court administered by the Chamber of Commerce and Industry of Romania. Arbitration awards are enforceable through Romanian courts under circumstances similar to those in other Western countries, although legal proceedings can be protracted.


Mediation as a tool to resolve disputes is gradually becoming more common in Romania. Mediation became a legal profession in 2006 when the Romanian Parliament passed legislation recognizing it and establishing a certifying body, the Mediation Council, to set standards and practices. The professional association, The Union of Mediation Centers in Romania, is the umbrella organization for mediators throughout the county. There are recognized mediation centers in every county seat where court-sanctioned and private mediation is available.

There is no legal mechanism for court-ordered mediation in Romania, but judges can encourage litigants to use mediation to resolve their cases. If litigants opt for mediation, then upon completion of the mediation process they must present their proposed resolution to the judge who must approve the agreement. The Union of Mediation Centers is a member of the European Mediation Network Initiative and is recognized by the European Union and other regional bodies.


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. Legal and economic education and the training of judges and lawyers lag behind law-making, which often results in inconsistent outcomes. To mitigate the time and financial costs of bankruptcies, Romanian legislation provides for administrative liquidation as an alternative to bankruptcy. However, investors and creditors have complained that the 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.

A law passed in December 2009 institutes a debt settlement mechanism, Company Voluntary Agreements (CVAs), as a means for creditors and debtors to establish partial debt service schedules without resorting to bankruptcy proceedings.

Performance Requirements and Incentives


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. Large companies may receive aid up to 50% of their eligible costs (limited to 40% in Bucharest and surrounding Ilfov County), while small- and medium-sized enterprises (SMEs) may receive assistance of up to 65% of their eligible costs. 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. To benefit from state aid under these schemes, the applicant must secure financing that is separate from any public support for at least 25% of the eligible costs, either through their own resources or through external financing. The applicant 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 country of intended investment. In practice, unfortunately, GOR budget constraints and a less-than-fully transparent application process have limited access to these forms of state aid. Different ministries and government entities manage the various state aid schemes, and the rules and procedures are complex. Companies interested in state aid are encouraged to seek competent counsel.

To reduce initial startup costs, a system of industrial and technological parks is being created. Tax incentives are available for the park operator, while companies establishing themselves in the park benefit from access to utility hookups and infrastructure, as well as from potential local tax rebates under regional development aid schemes. There are 62 such parks throughout Romania.

In 2010, the GOR revised the Green Certificate System by amending the Renewable Energy Law to provide incentives to certain types of renewable energy. The Green Certificates are traded in parallel with the energy produced, providing an additional source of revenue for renewable energy producers. The changes, once in effect, will repeal currently available incentives, such as splitting grid connection costs between the producer and the grid operator, and the possibility of applying for a government guarantee of up to 50% of the value of a medium- or long-term investment. The revised law is currently undergoing review by the European Commission due to concerns that the revised Green Certificate System will unfairly compensate certain renewable technologies, such as solar, over others.

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. Specifically, the Council screens state aid notifications and provides an initial opinion to state aid grantors as to whether the request is consistent with EU directives, allowing for an opportunity to revise or withdraw a request before it is submitted to the Commission. Even after submission, the Council retains jurisdiction over competition and antitrust matters. 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. When planning the 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 up front by the investor – is often very slow. In an effort to increase the rate of EU funds absorption, Romania has amended the 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 as significant obstacles to improved EU funds absorption by Romania.

Tax System

Since 1999, Romania has revised its tax system to bring it closer both to EU models and to the recommendations of the World Bank and IMF. In 2004, Romania adopted a flat tax of 16% on both personal income and corporate profit taxes, and simplified the tax code. The GOR reduced employers' payroll taxes by 2% in 2007 and by an additional 6%, in three stages, in 2008. In 2009, the newly-elected Government rolled back some of these reductions. For employment taking place in normal working conditions, payroll taxes are now 31.3%, with 10.5% payable by the employee and 20.8% by the employer (up from 27.5%, 9.5%, and 18%, respectively). For jobs with high mortality or disease rates, total payroll taxes are 36.3%, with employees paying 10.5% and employers 25.8% (compared to 32.5%, 9.5%, and 23% previously). For certain professions such as mining and aviation, where workers may be exposed to high levels of radiation, the current rate is 41.3%, with 10.5% paid by the employee and 30.8% by the employer (an increase from 37.5%, 9.5%, and 28% respectively). Accident and risk fund contributions range from 0.15% to 0.85%, depending on the company risk class (previously 0.4% to 2%). Rates for medical and unemployment insurance have remained unchanged.

Beginning in July 2010, Romania increased the standard value added tax (VAT) rate from 19% to 24%. Investors should be aware that, due to budget constraints, the GOR has regularly delayed VAT reimbursements owed to foreign companies for extended periods of time, especially if the amount to be reimbursed is large. The country is fully integrated with EU customs, excise tax, and VAT transfer systems.

Tariff Preferences

Upon EU accession, Romania implemented the EU Common Customs Tariff, the Generalized Preference Scheme, EU commercial safeguards, preference agreements and cooperation agreements concluded by the EU with third countries, as well as other EU commercial commitments vis-à-vis the World Trade Organization (WTO).

Right to Private Ownership and Establishment

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 now 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. For a period of seven years after Romania's accession to the EU, foreign investors may not purchase agricultural land, forests, or forestry land (except for farmers acting as commercial entities). Investors can purchase shares in agricultural companies that lease land in the public domain from the State Land Agency.


In early 2006, the Parliament passed legislation that regulates the establishment of specialized mortgage banks, including the possibility of transforming existing non-banking mortgage credit institutions into specialized mortgage banks. The law 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 (although the state-owned National Savings Bank, or CEC, also offers mortgage loans).

The primary mortgage market demonstrated robust growth until the third quarter of 2008. Since then, credit has tightened in response to the international financial crisis and the implementation of much stricter national regulations on borrower qualifications. For loans denominated in Romanian lei (RON), standard banks charge three-month ROBOR (currently 6.6%), plus a spread of interest and commission fees, for up to 30 years. For euro-denominated loans, banks currently charge three-month EURIBOR, plus a spread of interest and commission fees, for up to 30 years. In response to the international financial crisis, many banks have cut back on mortgage lending and tightened qualifying conditions for prospective borrowers.

Protection of Property Rights

Romania is a signatory to international conventions concerning intellectual property rights (IPR), including TRIPS, and has enacted legislation protecting patents, trademarks, and copyrights. Romania signed the Internet Convention to protect online authorship. While the IPR legal framework is generally good, enforcement in some areas remains weak and ineffectual. The 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 control enforcement provisions, as required by the WTO, yet judicial enforcement remains lax.


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.


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. 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, coupled with a lack of resources, has resulted in weak enforcement of copyright law. Due to increasing online piracy, copyright infringement of music and film is widespread throughout Romania.

Semiconductor Chip Layout Design

Romanian law protects semiconductor chip layout design. In order to benefit, designs must be registered with the Romanian Inventions and Trademark Office. Romania is a signatory to the Washington Treaty.

Transparency of the Regulatory System

Cumbersome and non-transparent bureaucratic procedures are a major problem in Romania. Foreign investors point to the excessive time it takes to secure necessary zoning permits, environmental approvals, property titles, licenses, and utility hook-ups. National and local officials often cannot provide potential investors with clear and comprehensive information on what permits or approvals are needed, or how they are to be obtained. Set fees for certain services, such as utilities, may not exist or may be subject to “negotiation” with local authorities. Romania enacted a "Silent Approval" Law in 2003 to reduce bureaucratic delays, but it has yet to be universally enforced or recognized. Additionally, regulations change frequently, often without advance notice, and may be vaguely worded and poorly explained. These changes, which can significantly add to the costs of doing business, can complicate investors' business plans.

Romanian law requires consultations with the private sector and a 30-day comment period on legislation or regulation affecting the business environment (the "Sunshine Law"). Unfortunately, not all government entities adhere to this requirement consistently. In many cases, even when the comment period is respected, public input does not appear to be considered seriously or incorporated into the final version. There have also been cases of authorities posting one version for public comment, but adopting a different version in the final instance.

Both Romanian and EU state aid regulations (directly applicable to Romania after January 1, 2007) 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.

Efficient Capital Markets and Portfolio Investment

Capital Markets

Romania seeks to develop efficient capital markets. The National Securities Commission (CNVM) is responsible for regulating the securities market. In order to protect investors, the CNVM 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 three-tier system that, at present, lists a total of 100 companies, with 21 companies in the highest tier. The official index, BET, is based on a basket of the 10 most active stocks listed, while the BET-C index follows the trend of all stocks listed on the BVB. The BVB also has a RASDAQ (OTC) market segment that currently lists 1,331different stocks. The BVB allows trade in corporate, municipal, and international bonds, and in 2007, the BVB opened derivatives trading.

Despite lower trading fees and a diversified securities listing, the situation on the international capital and financial markets has adversely affected the Romanian capital market. Country funds, hedge funds and venture capital funds continue to participate in the capital markets, yet on a decreasing scale.

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.

Banking Sector

There are 42 banks and credit cooperative unions currently operating in Romania. The largest, Romanian Commercial Bank (BCR), was privatized in 2006 to Erste Bank of Austria and has a 19% market share. The second-largest is French-owned Romanian Bank for Development (BRD-Société Générale) with 14.1% market share, followed by Austrian-owned Volksbank (6.6%) and Greece’s Alpha Bank (6.4%). Other large banks include state-owned CEC Bank (6.3%), Italy’s UniCreditTiriac Bank (6.1%), Austrian-owned Raiffeisen Bank (6.0%), and the privately-owned Romanian Banca Transilvania (5.9%).

According to the National Bank of Romania, overdue and doubtful loans now account for 2.67% of total bank loans, and 1.82% of total banking assets.

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% of the market combined.

While the National Bank of Romania must approve 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 plans to provide local services.

Competition from State-Owned Enterprises (SOEs)

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, while the government retains a monopoly on electricity and natural gas distribution.

While state-owned oil and gas companies received exploration and extraction licenses through direct allocation before 1989, they are now required to compete in transparent tenders organized by the National Agency for Mineral Resources. The most recent tender was held in May 2010, and foreign companies successfully competed for awards against consortia including Romanian state companies. Improved transparency in decision making will help ensure fair access to state aid for both private enterprises and state-owned enterprises (SOEs).

SOE senior management reports directly to the relevant ministry, and board seats are specifically allocated to ministry representatives. 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.

Corporate Social Responsibility (CSR)

Corporate social responsibility (CSR), as a concept, is becoming increasingly common in Romanian business, driven primarily by multinational companies infusing their corporate culture into the local market. Virtually all foreign enterprises in Romania have some kind of CSR program, and most follow generally accepted CSR principles, such as the OECD Guidelines for Multinational Enterprises. Romanian legislation allows companies to allocate part of their corporate income tax (a maximum of 0.3% of turnover and 20% of total corporate income tax due) for CSR under the sponsorship law.

Political Violence

There have been no reported incidents of politically-motivated damage to foreign investments (projects and/or installations) in Romania. Major civil disturbances are not expected to occur in the country in the near future.


Despite some improvement, corruption remains a serious problem. Romania was the second-lowest ranked among EU member states in Transparency International's (TI) 2010 Corruption Perception Index. According to the EC’s 2010 Report on Progress under the Cooperation and Verification Mechanism in Romania, the efficiency of the judicial process and the consistency of jurisprudence remain fundamental weaknesses of the Romanian judicial system. International organizations such as TI and local non-governmental "watchdog" organizations are present in the country.

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 payoffs by low- to mid-level officials reach the point of harassment.

Romanian law and regulations contain provisions intended to prevent corruption, but enforcement is generally weak. Corruption is currently punishable under a variety of statutes in the penal code. Prison sentences are sometimes imposed, but powerful and influential individuals have often evaded prosecution or conviction. Under pressure from the EU, the GOR is attempting to prosecute several high-level political officials from previous governments, including a former Prime Minister.

The Government announced a National Anti-Corruption Plan and passed an anti-corruption law in April 2003. The plan contains an impressive list of measures and benchmarks for evaluating the GOR's commitment to combating corruption. A national strategy to combat corruption in local public administration was adopted in June 2008, but implementation of these measures and commitments has lagged.

In December 2002, Romania passed an anti-money laundering and terrorism financing law, which was amended in April 2008. With U.S. assistance, in September 2002 the GOR established the National Anti-Corruption Prosecutors' Office (PNA) under the Prosecutor General, staffed by prosecutors and police; the PNA was upgraded to the National Anti-Corruption Directorate (DNA) in 2005 and given significant autonomy, though it still formally reports to the Prosecutor General. A new criminal code and civil code were passed in 2003; these substantive codes were followed in late 2010 by passage of new versions of the respective procedural codes, which should take effect in early 2012 once prosecutors, judges and attorneys are fully familiarized with them. In 2007 Romania also established the National Integrity Agency (ANI), which is tasked with collecting, managing and auditing compulsory comprehensive financial disclosure statements submitted annually by some 100,000 politicians and public sector employees at all levels. ANI has administrative powers only to identify conflicts of interest and questionable increases in personal assets. It must then forward such cases to prosecutorial authorities for further legal action. In 2010 a Constitutional Court ruling brought into question ANI's legal status, but after a contentious battle involving all three branches of government the GOR succeeded in passing legislation that allowed ANI to retain its jurisdiction and authority.

Bucharest hosts the 13-member Southeast European Cooperation Initiative (SECI) Regional Center for Combating Corruption and Organized Crime, which will eventually become the Southeast European Law Enforcement Center (SELEC) once two thirds of the Member States have deposited their instruments of ratification, acceptance, and approval. Romania is one of the three members of the SELEC Joint Cooperation Committee. Romania has signed and ratified the Agreement on Cooperation to Prevent and Combat Trans-border Crime of May 1999.

In March 2002, to reduce corrupt practices in public procurement, the GOR inaugurated a web-based e-procurement system (http://www.e-licitatie.ro/). Initiated with seed money from the U.S. Agency for International Development (USAID), the system provides 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. E-procurement has grown from 159 government clients and 600 suppliers in its initial months, to 222 contracting entities (including state entities, and public and private beneficiaries of EU funds, which are required by law to abide by public procurement legislation) and 30,106 suppliers. At first the system was used solely for basic, straightforward procurements but now more complex projects are included, such as EU-funded programs.

Romania's public procurement law, passed in 2006 and amended on several occasions, establishes ex-ante controls on public procurement processes, stricter rules on eligible participants, and an appeals mechanism for complaints against the process. The National Agency for Public Procurement has general oversight over procurements and can draft legislation, but procurement decisions remain with the procuring entities. Notably, procurements of goods and services for projects that receive EU funding have to comply with the public procurement law.

Court System

The Romanian judicial system suffers from corruption, inefficiency, lack of expertise, and excessive workloads. Divergent and often contradictory rulings are not uncommon, complicating normal commercial activities. Companies routinely complain that commercial disputes take too long to resolve through the court system and, once a verdict is reached, court orders may not be enforced. Errors in court procedures, whether peripheral to the outcome or not, may result in complete retrials, further delaying verdicts. Courts are overburdened and the number of magistrates and judges is too small. Litigants in virtually all cases have a right to two appeals, contributing to clogs in court dockets throughout the system and lengthy delays. Final judgments are not binding until all appeals are exhausted. Clerks, attorneys and judges reportedly remain susceptible to bribes or other "extra-judicial" payments, most commonly to "speed up" litigation, to assure a particular judge is assigned to a case, or to create intentional procedural errors leading to retrial. Magistrates across Romania went on strike for several weeks in fall 2009 to protest proposed changes to their wages and bonus payments, paralyzing the court system and adding to already lengthy case backlogs.

Cyber Crime

Romania has one of the world's highest occurrences of Internet fraud. The problem is illustrated by a growing stream of complaints, some of which involve U.S. companies and their customers being defrauded of millions of dollars. The most common problems result from the use of stolen credit card numbers for the purchase of goods online, fraudulent use of online auction platforms, and sophisticated phishing schemes to defraud customers of legitimate e-commerce companies.

Romanian hackers also have gained notoriety for hacking into U.S. companies' servers and stealing proprietary information, including customer credit card data. There have been cases where Romanian hackers have offered to sell the method by which they hacked into a U.S. company's server back to the victim. On other occasions, hackers have attempted blackmail by threatening to release sensitive data or the means to hack the system, unless a specific amount of money is paid.

An e-commerce law that defines and punishes cyber crime came into force in July 2002. Law enforcement efforts are still not commensurate with the scale of the problem, but enforcement activities have increased notably, thanks in part to substantial assistance U.S. law enforcement agencies are providing their Romanian counterparts. Several recent investigations into cyber crime, and continuing arrests by Romanian authorities, may serve as a deterrent to new cyber criminals.

Bilateral Investment Agreements

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. The U.S. Government negotiated an agreement with the EU and eight accession countries, including Romania, to cover any possible inconsistencies between pre-existing BITs and the countries' future EU obligations. This 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.

OPIC and Other Investment Insurance Programs

The Overseas Private Investment Corporation (OPIC) began operations in Romania in late 1992, and continues to actively finance projects in the country. Romania has been a member of the Multilateral Investment Guarantee Agency (MIGA) since 1992.


Romania has traditionally offered a large, skilled labor force at comparatively low wage rates in most sectors, although the labor pool has tightened in highly skilled professions, despite growing unemployment overall. 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.

The quality of work of Romanian craftsmen, engineers, and software designers is well regarded by foreign managers. With appropriate on-the-job training, local labor performs well with new technologies and more exacting quality requirements. However, labor shortages have appeared in certain sectors, resulting in strong upward pressure on wages in recent years. Before the onset of the global economic downturn, analysts estimated that as many as 600,000 additional skilled workers would be needed in the construction industry alone. Outward labor migration and the number of students graduating without the practical skills needed for the modern workplace are considered the main causes for this trend. Slowing growth and recession in Western Europe were expected to alleviate domestic labor market shortages somewhat, as some Romanian workers returned from abroad. Although Romanians have not returned in large numbers, the country has experienced a marked increase in unemployment as the recession has deepened. Unemployment officially stood at 7.35% in September 2010, representing 640,247 workers, down from 7.8% at the end of 2009. Analysts predict that the unemployment rate will remain flat in 2010. Underemployment is also a significant problem.

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. The national minimum wage was set at RON 600 per month (about USD 210) on January 1, 2009, after extensive negotiations between unions, employers associations, and the Government. The GOR adheres to the International Labor Organization (ILO) convention on protecting workers' rights. According to Eurostat, Romania's minimum wage of 232 points (adjusted for purchasing power parity) is next to last among the 27 EU member states, ahead only of Bulgaria.

Employers consider the Labor Code, passed in 2003, to be overly rigid for a market economy, making it more difficult for employers to dismiss employees for poor performance. While foreign investors consider the June 2005 Labor Code amendments an improvement, the Code still favors trade unions and retains provisions restricting labor flexibility.

Payroll taxes remain steep, resulting in an estimated 25-30% 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.

Current law makes it very costly to engage non-EU citizen staff in Romania. Foreign companies often resort to expensive staff rotations, special consulting contracts, and non-cash benefits. Work permits are issued for a maximum of one year (except for seasonal work), for a fee of 200 euro (payable in the RON equivalent of that day’s exchange rate). These permits are automatically renewable with a valid individual work contract. There are 41 Romanian Immigration Authority offices – one in each county – to issue work permits for foreign citizens. After acceding to the EU, citizens of other EU countries can work in Romania without work permits if their own country does not impose restrictions on Romanian citizens. Although several companies hire non-EU citizen employees, mainly from Turkey, China, India, Pakistan or Moldova, most Romanian businesses are still reluctant to bring in large numbers of foreign employees. In 2011, Romania will issue 5,500 work permits, 2,500 fewer than the previous year.

Foreign Trade Zones/Free Ports

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 lands 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.

Foreign Direct Investment Statistics

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 September 2010 totaled USD 37.75 billion, about 23.4% of Romania’s GDP. Romanian direct investments abroad from January to August 2010 totaled USD 113 million.

Major sectors for foreign investment include:

-- Automobile and automotive components (Renault, Daimler Benz, Ford, Siemens, Continental, Alcoa, Delphi Packard, Johnson Controls, Honeywell Garrett, Michelin, Pirelli);

-- Banking and finance (Citibank, Société Générale, AIG, ING, Generali, Volksbank, Raiffeisen, Erste Bank, Unicredit, Alpha Bank, National Bank of Greece, Intesa Sanpaolo, Millenium Bank, Garanti Bank/ GE Money);

-- Information Technology (Hewlett Packard, Intel, Microsoft, Oracle, Cisco Systems, IBM);

-- Telecommunications (France Telecom, OTE, Telesystem International Wireless Services, Airtouch-Vodafone, Liberty Media/UPC);

-- Hotels (Hilton, Marriott, Best Western, Howard Johnson, Sofitel, Crowne Plaza, Accor, Ramada, Radisson);

-- Manufacturing (Timken, General Electric, Cameron, LNM, Marco, Flextronics, Holcim, Lafarge, Heidelberg);

-- Consumer products (Procter and Gamble, Unilever, Henkel, Coca-Cola, Parmalat, Danone, Smithfield Foods);

-- Retail chains (Metro, Delhaize, Carrefour, Cora, Billa, Selgros, Auchan, Kaufland).

Officially, the value of U.S. direct investment in Romania as of September 2010 was USD 990.3 million. The U.S. is the tenth-ranked foreign investor nation, after the Netherlands, Austria, Germany, France, Greece, Cyprus, Italy, Switzerland, and Spain. U.S.-source investment represented 2.6% of Romania's total FDI. However, because official statistics do not fully account for the tendency of U.S. firms to invest through foreign, especially European-based, subsidiaries, the actual amount is higher. Romanian statistics also over-emphasize physical, capital-intensive investments, such as brownfield 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 - AIG - general insurance;

- Met Life - life insurance;

- AIG New Europe Fund - investment fund;

- 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 Packard - automotive parts;

- EuroTire – mining and heavy equipment tires

- Ford - automotive assembly;

- General Electric - diversified industrial products;

- GE Money - non-banking financial services;

- Hewlett Packard - IT equipment, services;

- Hoeganaes - iron powder for automotive;

- Honeywell Garrett - automotive;

- IBM - IT equipment;

- Johnson Controls - automotive;

- Kodak - film processing;

- 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;

- Sigma Bleyzer - investment fund;

- Smithfield Foods - pork production;

- Timken - industrial bearings;

- UPC - cable television operator;

- Visa - financial services;

- Washington International Group/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 USD 6.6 billion invested. The current stand-by agreement with the International Monetary Fund (IMF) includes a one billion euro loan from the EBRD, European Investment Bank (EIB), and the International Finance Corporation (IFC). The U.S. is a 10% shareholder in the EBRD.

Romania's biggest investors are:

- The Netherlands - USD 6.58 billion (17.5% of total FDI): IT, banking, insurance, consumer products, food;

- Austria - USD 5.38 billion (14.3%): banking, insurance, construction materials;

- Germany - USD 5.34 billion (14.2%): insurance, food, machine construction, chemicals, cement, banking;

- France - USD 2.73 billion (7.24%): food, IT, automotive, manufacturing, cement, agriculture, banking, hypermarkets;

- Greece - USD 2.38 billion (6.3%): banking, food, consumer products, retail;

- Cyprus - USD 2.09 billion (5.6%): banking, retail, services;

- Italy - USD 1.78 billion (4.7%): footwear, textiles, food, banking, insurance;

- Switzerland - USD 1.28 billion (3.4%): food, manufacturing, consumer products;

- Spain - USD 1.15 billion (3%): manufacturing, consumer products, banking;

- U.S. - USD 990.3 million (2.6%): IT, automotive, banking, insurance, hospitality, manufacturing, consumer products.

Web Resources

Romanian Government


The Authority for State Assets Recovery


Ministry of Public Finance


Ministry of Economy, Trade and Business Climate


International Centre for Settlement of Investment Disputes


Romanian Copyright Office


Ministry of Communications and Information Technology


National Securities Commission


Bucharest Stock Exchange


National Bank of Romania


National Anti-Corruption Prosecutors' Office


Romanian Government's Web-Based e-Procurement System


Overseas Private Investment Corporation


Ministry of Labor, Social Solidarity and Family