Romania is in the opinion of many business people one of the top 3 countries in central and eastern Europe for starting a business. Reasons for this range from its location (proximity to the Middle Eastern Markets through its ports on the Black Sea) to its resources (timber, oil, gas) and of course, the population itself: Romania has the 2nd largest number of foreign language speakers after Holland. Through this article we would like to outline the main reasons why a foreign investor would prefer Romania as a destination of his investments.
1. Advantageous geographical location for transportation of goods
Romania is situated at the crossroads between the Europe and Asia (Middle East) and a very large part is of border is constituted by the Danube River. The best example would be the Constanta Port (which is both a Maritime and a River Port), having a very favorable geographic position, situated on the routes of three pan-European transport corridors: Corridor IV and Corridor IX Corridor VII (Danube) - which links the North Sea to the Black Sea via the Rhine-Main-Danube corridor. Constanta Port has a major role in the European transport network, favorably located at the intersection of trade routes linking landlocked country markets in Central and Eastern Transcaucasus region, Central Asia and the Far East.
2. A large number of natural resources
Romania is a rich country when it comes to its natural resource. Still probably its most important potential remains agriculture: it is estimated that Romania could easily feed more than 80 mil people (its population is of approx. 20 mil). Other important resources include oil, timber (Romania is known for its large forests and one the last virgin forests in Europe), mineral waters, natural gas, coal (resources of 9.7 billion tons), gold & silver (RoÅŸia MontanÄƒ, Certej ÅŸi BÄƒiÅ£a CrÄƒciuneÅŸti), salts, marble: 25 fields with 37 million cubic meters, of which exploitable reserve of 15 million cubic meters in 16 fields etc.
3. Low Corporate Taxes and a large number of Double Taxation Treaties
Romania has one of the lowest corporate taxes in Europe, respectively 16% and an important number of double taxation avoidance treaties. This combination of factors makes it a very interesting destination for starting or moving a business from abroad (especially those businesses that are easily managed from abroad such as IT, transportation etc.).
4. Low Costs for Business Operations
The fact that the income in Romania is one of the lowest in Europe has a bright side to it: it also implies one of the lowest costs in the EU for business operations. This means everything from office rents to the cost of an accountant and of course the salaries of employees (Romania arguably has the 2nd smallest salaries in the EU).
5. Foreign languages spoken on a large scale
Romania comes 2nd after the Netherlands for the number of people speaking a foreign language; however the diversity of spoken languages exceeds those of Holland: in Romania you will easily find a good number of people speaking English as well as French (Romania is member of the Francophonie (OIF), Italian and Spanish, Russian or even Turkish (especially in the South Eastern Romania). This has made Romania the center of European expansion of outsourcing firms. Apparently there are over 30,000 people working for the biggest outsourcing companies such as Genpact, HP, Microsoft, Office Depot, Oracle, Wipro and WNS.
6. Large number of different types of specialists
While Romania’s education system is often criticized by the local press, it does still seem to produce well-trained specialists in many fields; the best example probably being Romania’s renowned IT specialists. A good example of development in this field would the IT Technology Park in Cluj, a city which is lately known as “Romania’s Silicone Valley”. Other examples of valuable Romanian specialists would be constructors of vessels, workers in the car industry etc.
7. General openness to foreign investors
While this is a factor often overlooked by foreign investors, it’s very important in the long run. Romanian banks for instance are very open to new clients, state institutions are perhaps more careful to those companies owned by foreign shareholders and the largest Romanian firms are owned by foreign shareholders (companies or natural persons). Most clerks will do their best to speak English and generally foreign investors are very well seen by the population.
Are there any general downsides to starting a business in Romania?
While in the 90’s the most important hindrance was corruption in the view of foreign investors, things have changed. The top 3 problems would be:
For any details related to how to start and how to conduct business in Romania please contact our law firm.