Romania WT/TPR/S/155 
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I. ECONOMIC ENVIRONMENT 
(1) MAJOR FEATURES OF THE ECONOMY  
1. Romania has a landmass of 238,391 square  kilometres (about 40% is arable)1; around 55% of 
its 22.2 million people live in urban areas.  It has borders with Bulgaria, Hungary, Republic of 
Moldova, Serbia and Montenegro, Ukraine, and the Black Sea. The capital, Bucharest, is by far its 
most populated city (about 2 million); Romania's annua l population growth rate was -0.4% in 2003    
(-0.2% in 1999); 40% of its population is concentrated  in the 15-39 age group, and 16.2% is in the 0-
14 group.2  In 2002, Romania ranked 69th out of 177 countries in terms of UNDP Human 
Development Indicators.3 
2. Romania's transformation from a centrally planned to a market economy began in 
December 1989 within a very difficult economic, soci al, and political context, and in the absence of 
any previous market-based economic reform.  Th e communist regime in power throughout the post-
war period had nationalized land and industry, and instituted strict central control of economic 
decisions.  Development of energy-intensive h eavy industries and self-su fficient agriculture was 
emphasized, drawing on Romania's resources of agricultural land and primary energy inputs.  
Between 1979 and 1989, Romania entir ely repaid its foreign debt by, inter alia , severely compressing 
imports, reducing consumption, and halting imports of machinery and equipment. Therefore, Romania 
began its transition lagging behind ot her countries in the region, with a largely obsolete capital stock. 4 
3. The economic reforms implemented by Romania during its transition helped to increase its 
GDP per capita to US$2,638 in 2003 (up from US$1,585 in 1999). However, Romania remains a 
lower-middle income country. Some 25% of  its population lives below the poverty line.5 Romania has 
a relatively diversified economy, with services being the most important sector in terms of contribution to GDP (about 54%). Manufacturing accounts for around 23% of GDP, and over 80% of 
the total value of merchandise exports. Agriculture is a key sector of the economy, contributing 13% 
to GDP and employing  more than 30% of the labour force. The mining, quarrying, and energy sector 
is being restructured; Romania has significant natura l resources, such as crude oil, natural gas, and 
coal. 
4. The national currency is the Leu (Lei in plural).  On 1 July 2005, the Leu was redenominated, 
dropping four zeros
6:  all amounts in Romanian currency in this report are expressed in new Lei 
(RON), unless otherwise specified (in old Lei (ROL)). Romania accepted the obligations of Article VIII of the Agreement of the IMF on 25 March 1998. As from November 2004, Romania maintains a 
managed floating exchange rate regime.
7  An exchange-rate based m onetary policy was implemented 
in 1999 to reduce inflation to a single digit; in flation targeting was introduced in July 2005. In 
                                                      
1 The surface includes some 3,500 lakes, of which ab out 30 exceed one square  kilometre. Romania is 
the second largest country in Central and Eastern Europe (a fter Poland), and is larger  than 19 of the 25 current 
EC members (World Bank, 2004). 
2 US Bureau of the Census online informati on.  Available at: http://www.census.gov/cgi-
bin/ipc/idbagg. 
3 UNDP (2004). 
4 WTO (2000). 
5 World Bank (2004). 
6 One new Leu (RON) is equivalent to 10,000 old Lei (ROL). The redenomination of the Leu is 
intended to, inter alia , simplify monetary transactions, mark the en d of the inflationary cycle and the start of 
price stability, and facilitate the future conversion to the euro. Holders of ROL will be able to exchange them for 
RON at banks until 2009 (Economist Intelligence Unit, 2005). 
7 Previously, Romania had a de jure  managed floating exchange rate with no pre-announced exchange 
path, while the de facto  regime was an unannounced crawling band (IMF, 2005). WT/TPR/S/155 Trade Policy Review 
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preparation for its accession to the European Commun ities (EC) and its participation in the Economic 
and Monetary Union (EMU), Romania has recently  taken further steps towards full capital-account 
convertibility.  Non-residents' access to operations in Lei-denominated deposits were liberalized on 
11 April 2005, while restrictions on operations  in current and deposit accounts opened by non-
residents were eliminated as from 1 July 2005.8 
(2) RECENT ECONOMIC DEVELOPMENTS  
5. At the time of its previous Trade Policy Re view, in October 1999, Romania was experiencing 
its third consecutive year of recession;  its growing current account deficits were financed mainly by 
an accumulation of short-term external debt9 and, in general, doubts had been expressed about the 
sustainability of its macroeconomic policy progr amme. Since then, Romania has made renewed 
stabilization efforts10, which have contributed to a combina tion of high growth, falling inflation, 
reduced fiscal deficit, and generally manageable indi cators of external vulnerability.  Romania's real 
GDP growth rate jumped from an annual average of 0.7% during 1992-99 to 5.3% over 2000-04, spurred by productivity gains due to a gradually acc elerating process of privatization and economic 
restructuring.  Robust economic growth has resulte d in a downward trend in the unemployment rate, 
which went from 11.8% in 1999 to around 6.2% in 2004 (Table I.1). Nevertheless, regional disparities 
in unemployment have intensified.
11  Real GDP growth rate is exp ected to decelerate from 8.3% in 
2004 to 5.5% in 2005, reflecting a slowdown in the expansion of domestic demand and exports. 
6. The strategy of anchoring monetary policy on th e exchange rate, sterilizing short-term capital 
inflows, keeping interest rates high12, and tightening fiscal policy proved effective in reducing 
inflation from 54.8% in 1999 to 9.3% in 2004, as measured by the end-of-period consumer price 
index (CPI). The Central Bank, National Bank of Ro mania (NBR), moved to an inflation targeting 
strategy in July 2005; the year-end inflation targets are 7% in 2005 and 5% in 2006.13 However, high 
world oil prices, and the periodic adjustment of ad ministered prices for 16 items (accounting for 23% 
of the CPI basket), might complicate the disinflation process over 2005-06.  
7. Over the last few years, Romania has achieved an important improvement in its fiscal 
position, a main source of macroeconomic imbalanc es in the past. The public deficit was reduced 
from 4% of GDP in 2000 to 1.1% of GDP in 2004, and to an estimated 0.8% for 2005.  The fiscal 
improvement has been largely the result of the dow nsizing of the public sector through an acceleration 
of the privatization process (Cha pter III(4)(ii)), although tax collection has deteriorated in recent 
years, and now represents only 30%  of GDP, down from 33% in 1999.14 Furthermore, the authorities 
envisage a revenue loss relative to GDP of about 1.3 percentage points by 200715, mainly because of 
lower dividends as privatization progresses, and reduction of some taxes (Chapter III(4)(i)). To 
                                                      
8 Restrictions on operations in securities and other open market instruments in Romania are scheduled 
to be removed by 1 September 2006 (National Bank of Romania, 2005). 
9 One third of Romania's total external debt (US$9.6 billion at the end of 1998) was subject to 
repayment or rescheduling in 1999 (WTO, 2000). 
10 Romania has signed seven SBAs with the IMF since 1991 (IMF, 2004b). 
11 In general, persistent high rates of unemployment are being recorded in counties that are undergoing 
factory closures and restructuring (e .g. Brasov, Hunedoara); whereas unem ployment is falling in counties where 
it was already low, particularly in Bu charest and in the Hungarian border regions, such as Satu Mare, and Bihor 
(Economist Intelligence Unit, 2005). 
12 The NBR sets the basic interest rate. The treasury  bill rate averaged 33.4% during 2000-03, while the 
inflation rate averaged 25.7%. 
13 Once inflation was reduced to si ngle digits, the NBR opted for inflation targeting to allow more 
flexibility of the exchange rate, and to furt her strengthen its independence (IMF, 2004a). 
14 EC online information.  Available at: http://europa.eu.int/scadplus/leg/en/lvb/e10108.htm. 
15 IMF (2004a). Romania WT/TPR/S/155 
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compensate for part of the revenue loss, the end-user prices of, inter alia , gas, electricity, and heating, 
have been increased periodically to cost-recovery levels (Chapter III(4)(iii)). The authorities also 
raised excise duties in Apri l 2005 (Chapter III(2)(iv)(d)). 
Table I.1 
Main economic indicators, 1999-04 
 1999 2000 2001 2002 2003 2004a
Miscellaneous      
Nominal GDP (US$ billion) 35.6 37.0 40.2 45.8 57.3 73.2
GDP per capita (US$) 1,585 1,650 1,793 2,100 2,638 ..
Real GDP (annual percentage change) -1.2 2.1 5.7 5.1 5.2 8.3
Gross national saving (per cent of GDP) 11.9 15.6 17.0 20.1 18.7 19.6
Gross domestic investment (per cent of GDP) 16.1 19.5 22.6 27.1 22.9 23.1
Unemployment rate (end of period; per cent) 11.8 10.5 8.8 8.4 7.4 6.2
Consumer price index (end of period; per centage change) 54.8 40.7 30.3 17.8 14.1 9.3
Consumer price index (period average; percentage change) 45.8 45.7 34.5 22.5 15.3 11.9
Real effective exchange rate (CP I-based; annual average in per cent)b -15.0 9.3 1.5 2.6 0.4 ..
Exchange rate (ROL per US$; end of period) 18,250 25,811 31,597 33,500 32,798 28,941
Treasury bill rate (per cent; end of  period) 104.8 59. 4 38.4 17.4 18.4 ..
Monetary sector (percentage change, end of year) 
Broad money  45.0 38.0 46.2 38.2 23.3 39.9
Share of GDP  (per cent)  
Agriculture, forestry, fishery 13.3 11.1 13.4 11.3 11.7 13.0
Industryc 29.8 32.2 33.0 33.9 33.3 33.1
Manufacturing 19.0 21.9 23.0 22.6 .. ..
Mining, quarrying, and energy 5.8 5.4 4.7 5.5 .. ..
   Servicesd 56.9 56.7 53.7 54.7 55.0 53.9
Government finance  (percentage of GDP) 
Overall balance -3.6 -4.0 -3.2 -2.6 -2.3 -1.1
Total public debt   30.5 29.9 27.4 26.8 26.2 26.5
National accounts  (real percentage change)  
Total consumption -2.5 1.5 6.3 4.9 6.9 10.3
Gross fixed capital formation -4.8 5.5 10.1 8.2 9.1 10.1
Exports of goods and non-factor services 10.5 23.4 12.1 17.5 11.4 14.1
Imports of goods and non-factor services -1.5 27.1 18.4 12.0 16.4 17.8
Memorandum      
Current account balance (percentage of GDP) -4.0 -3.7 -5.5 -3.3e -6.0e -7.6e
Total external debt (percentage of GDP) 28.4 29.7 32.7 33.4 35.2 36.7
Gross official reserves (€ m illion) 2,483 3,644 5, 509 7,009 7,492 11,933
Gross official reserves (months of total imports) 2.6 2.7 3.4 4.0 3.7 4.9
Import cover (ratio of exports to imports) 87.1 85.8 79.3 84.2 79.8 78.1
Trade in goods and services (percentage of GDP) 59.9 70.7 74.5 76.5 79.8 83.5
Terms of trade (percentage change) 0.2 2.7 2.3 1.5 0.2 1.6
.. Not available. 
a Provisional data. 
b (+) indicates real appreciation of the ROL. 
c Including construction, electric and thermal energy, gas and water.  
d Including financial intermediation services indirectly measured (FISIM) and net taxes on product. 
e Including reinvested profits. 
Source:  IMF, International Financial Statistics , various issues;  and information pr ovided by the Romanian authorities.  
8. External debt exposure, a key source of exte rnal vulnerability, has also increased; total 
external debt, as a percentage of GDP, rose from 28.4% in 1999 to 36.7% in 2004. Nevertheless, WT/TPR/S/155 Trade Policy Review 
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strengthened FDI inflows over the last few years h as allowed the build-up of international reserves, 
which increased from the equivalent of 2.6 months  of imports of goods and services in 1999 to 
4.9 months in 2004. In general, Romania's indicator s of external vulnerability seem manageable, and 
are low compared with most other transition economies.16 
9. Romania is in the middle of an ambitious economic reform progra mme supported by the 
2004-06 Stand-By Arrangement (SBA) with the IMF17, and the World Bank's Programmatic 
Adjustment Loan (PAL).18 The programme is aimed at, inter alia , stabilizing the economy, 
particularly continuing the gradual reduction of in flation, while addressing some of the deep-rooted 
structural problems built-up over previous decades. The problems include the practice of non-payment 
and arrears accumulation of public and private co mpanies, which have imposed a big burden on the 
budget19; relatively low levels of foreign direct investment (FDI)20; a fragile financial sector, where 
bank credit to private enterprises is very limited21; as well as governance and corruption problems.22  
The programme is also aimed at preparing Romania for EC accession in 2007. 
(3) TRADE PERFORMANCE AND INVESTMENT  
(i) Trade in goods and services 
10. Romania's balance-of-payments has fluctuated in recent years: in some years, capital and 
financial accounts surpluses have offset external curr ent account deficits (Table I.2). In line with the 
country's economic performance, and the evolution of th e real effective exchange rate (Table I.1), the 
external current account deficit, as a percentage of GDP, has fluctuated, with a peak of 7.6% in 2004. 
It is now well above the range of 5.5-5.75% of GDP considered by the Romanian authorities as 
sustainable in light of recent trends in other transition economies.23 Further strengthening of its fiscal 
policy is deemed necessary to redu ce the external current account deficit, expected by the authorities 
to decline somewhat to 7-7.5% of GDP in 2005. 
11. Romania has continued to run a merchandise trade deficit since its last TPR. In 1999, the 
deficit represented 4.6% of GDP, its lowest level in  recent years, due to the contraction in economic 
activity and the 15% real depreciation of the ROL.   Since then, the merchandise trade deficit has 
fluctuated, peaking at €5.3 billion in 2004 (about 9%  of GDP), largely as a result of the robust GDP 
growth rate, and the rapid growth in impor ted cars and commercial vehicles in the year. 
 
                                                      
16 IMF (2004a). 
17 The 24-month SBA for Romania in the amount of SDR 250 million was approved on 7 July 2004. 
The Romanian authorities have not made use of this amount so far, and intend to treat this SBA as a 
precautionary arrangement (IMF, 2004b). 
18 The PAL focuses on civil service and judicial reform, public services, and the business environment. 
19 The Ministry of Public Finance defines arrears as all payments overdue by 30 days, according to 
contracts or legal obligations. Widespread arrears reflect the slow pace of restructuring in Romania, and delayed 
the transition to a market economy. De spite some success in addressing arr ears over the last few years, they 
represented almost 40% of GDP in June 2003 (IMF, 2004c). 
20 In 2003, Romania's FDI stock represented 23.4% of GDP. The equivalent figure for Hungary and the 
Czech Republic were 51.8%, and 48% (UNCTA D, 2004). 
21 In 2001, arrears represented 35% of total financing for enterprises, compared with only 8% of bank 
credit (IMF, 2004c). 
22 IMF (2004b). 
23 IMF (2004b). Romania WT/TPR/S/155 
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Table I.2 
Balance of payments, 1995-04 
(€ million) 
 1995 2000 2001 2002 2003 2004 
Current account -1368.0 -1,494.0 -2 ,488.0 -1,623.0 -3 ,060.0 -4,460.0 
A. Goods and services -1,454.0 -2,127.0 -3,452.0 -2,747.0 -3,893.0 -5,536.0 
  Goods -1,215.0 -1,867.0 -3,323.0 2,753.0 -3,955.0 -5,323.0 
  Exports 6,112.0 11,273.0 12,722.0 14,675.0 15,614.0 18,935.0 
  Imports 7,327.0 13,140.0 16,045.0 17,427.0 19,569.0 24,258.0 
 Services -253.0 -260.0 -129.0 5.0 62.0 -213.0 
  Credit 1,154.0 1,910.0 2,273.0 2,468.0 2,671.0 2,903.0 
  Transportation 365.0 689.0 925.0 1,013.0 1,063.0 1,252.0 
  Tourism 455.0 393.0 405.0 352.0 396.0 406.0 
  Other services 334.0 828.0 943.0 1,103.0 1,212.0 1,245.0 
  Debit 1,407.0 2,170.0 2,402.0 2,463.0 2,609.0 3,116.0 
  Transportation 467.0 682.0 819.0 881.0 997.0 1,206.0 
  Tourism 539.0 466.0 503.0 416.0 423.0 434.0 
  Other services 401.0 1,022.0 1,080.0 1,166.0 1,189.0 1,476.0 
B. Incomes -185.0 -304.0 -315.0 -488.0 -1,195.0 -1,421.0 
 Credit 64.0 358.0 510.0 435.0 327.0 326.0 
  Compensation of employees 4.0 102.0 126.0 146.0 98.0 91.0 
  Direct investment income 5.0 8.0 17.0 12.0 10.0 5.0 
  Portfolio investment income 5.0 112.0 200.0 193.0 153.0 167.0 
  Other capital income 50.0 136.0 167.0 84.0 66.0 63.0 
 Debit 249.0 662.0 825.0 923.0 1,522.0 1,747.0 
  Compensation of employees 1.0 5.0 4.0 6.0 6.0 5.0 
  Direct investment income 21.0 77.0 131.0 212.0 796.0 901.0 
  Portfolio investment income 0.0 81.0 118.0 188.0 228.0 258.0 
  Other capital income 50.0 499.0 572.0 517.0 492.0 583.0 
C. Current transfers 285.0 937.0 1,279.0 1,612.0 2,028.0 2,497.0 
 Credit 371.0 1,175.0 1,583.0 1,896.0 2,328.0 2,891.0 
  Public administration 71.0 108.0 282.0 308.0 235.0 171.0 
  Other sectors 300.0 1,067.0 1,301.0 1,588.0 2,093.0 2,720.0 
 Debit 86.0 238.0 304.0 284.0 300.0 394.0 
  Public administration 23.0 32.0 34.0 18.0 36.0 45.0 
  Other sectors 63.0 206.0 270.0 266.0 264.0 349.0 
Capital and financial accounts 1,024.0 1,402.0 1,672.0 2,493.0 3,471.0 3,422.0 
A. Capital account 188.0 38.0 106.0 95.0 188.0 512.0 
  Credit 188.0 39.0 120.0 102.0 188.0 532.0 
  Debit 0.0 1.0 14.0 7.0 0.0 20.0 
B. Financial accounts 836.0 1,364.0 1,566.0 2,398.0 3,283.0 2,910.0 
 Direct investment (net) 319.0 1,161.0 1,312.0 1,194.0 1,910.0 4,153.0 
  Credit 322.0 1,224.0 1,457.0 1,448.0 2,782.0 4,561.0 
  Debit 3.0 63.0 145.0 254.0 872.0 408.0 
 Portfolio investment (net) 26.0 137.0 657.0 406.0 529.0 34.0 
 Other capital investment (net) 720.0 1,091.0 1,248.0 2,672.0 1,864.0 3,423.0 
 In transit accounts (net) -40.0 5.0 8.0 14.0 -9.0 -10.0 
 Barter and clearing accounts -392.0 -8.0 7.0 7.0 9.0 11.0 
 Reserve assets (NBR) (net) 203.0 -1,022.0 -1,666.0 -1,895.0 -1,020.0 -4,701.0 
Net errors and omissions 344.0 92.0 816.0 870.0 -411.0 1,038.0 
Source:  Information provided by the National Bank of Romania. 
12. Romania's trade (exports and imports) in goods and services as a percentage of GDP rose to 
83.5% in 2004, from 60.9% in 1999. In 2003, Romania ranked 39th among world merchandise WT/TPR/S/155 Trade Policy Review 
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exporters (considering the countries of the EC together and excluding intra-EC trade), and 31st among 
importers.  For trade in services, the country ranked 45th among exporters and 50th among importers.24 
13. Romania has a relatively diversified export base.  In general, the importance of manufactured 
goods has increased since 2000;  while the shares of f ood and, to a lesser extent, mining products have 
declined (Table AI.1).  Machinery and transport equipment, textiles and cl othing products, and iron 
and steel are the main exports (Chart I.1).  The share of machinery and transport equipment in total exports rose from 18.8% in 2000 to 23.7% in 2004, and that of iron and steel from 7.8% to 9.2%;  the share of textiles and clothing declined from 24.4% to 22.5%. 
14. About two thirds of Romania's exports go to the EC; Italy is still the major single export 
market (21.4% of total merchandise exports in  2004, down from 25.1% in 2001), followed by 
Germany, France, and the United Kingdom.  Romani a's goods exports to the United States decreased 
from 3.7% of total merchandise exports in 2000 to 2.8% in 2004, whereas the share exported to Turkey rose from 6.1% to 7% over the same period (Chart I.2 and Table AI.2). 
15. Romania's imports have moved in  parallel with its economic pe rformance.  Total merchandise 
imports have increased constantly over the last few years, reaching a peak of €24,258 million in 2004 
(up from €13,140 million in 2000), due to stro ng GDP growth.  Manufactured goods represented 
77.8% of total merchandise imports in 2004, up from 75.2% in 2000:  the share of machinery and transport equipment in the total rose from 29.2% in  2000 to 32.6% in 2004, while the share of textiles 
and clothing decreased from 15.6% to 12.2%.  Despite th e increase in oil prices, the share of fuels in 
total merchandise imports remained relatively st able at around 11-12% over 2000-04 (Table AI.3). 
16. Romania's goods imports originate largely in the EC, which accounted for 55.4% of total 
merchandise imports in 2004 (down from 56.7% in 2000).
25  Italy remains the leading source of 
Romania's imports, supplying 17.2% of total me rchandise imports in 2004 (down from 18.8% in 
2000), followed by Germany, France, and the Russian Federation. Goods imports from Turkey rose from 2.1% in 2000 to 4.2% in 2004; the United States' share remained stable at around 3% during the period (Chart I.2 and Table AI.4). 
17. Balance-of-payments data indicate that Roma nia became a net exporter of services in 2002 
and 2003 when services surpluses were €5 million and €62 million, respectively (Table I.2).  In 2004, 
however, a services deficit of €213 million was registered. Total services exports increased from €1,910 million in 2000 to €2,903 million in 2004, and total im ports rose from €2,170 million to 
€3,116 million.  In 2004, tourism revenues acc ounted for €406 million (14% of total services 
receipts), and tourism expenditure reached €434  million (13.9% of total services debits). 
 
 
                                                     
 
24 WTO (2004a). 
25 All figures for the EC refer to the EC-15 up to 2003, and to the EC-25 for 2004.  Romania WT/TPR/S/155 
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0%20%40%60%80%100%
1995 2000 2001 2002 2003 2004
0%10%20%30%40%50%60%70%80%90%100%
1995 2000 2001 2002 2003 2004Chart I.1
Structure of merchandise ex ports and imports, 1995-04
(a) Exports
(b) Imports
Source: WTO Secretariat calculations, based on UNSD, Comtrade database (SITC Rev.3).Chemicals Agriculture Textiles and clothing
Other semi-manufactures Other consumer goods Mining
Machinery and transport 
equipmentIron and steel Other
 WT/TPR/S/155 Trade Policy Review 
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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%199520002001200220032004Chart I.2
Direction of merchandise trade, 1995-04
0% 20% 40% 60% 80% 100%199520002001200220032004(a) Exports
(b) Imports
Source: WTO Secretariat calculations, based on UNSD, Comtrade database.Russian Federation China OtherAustria TurkeyItaly United States United Kingdom
Hungary Germany Greece
Hungary Turkey Italy
United States Germany Austria
France United Kingdom PolandNetherlands France Other
 
 Romania WT/TPR/S/155 
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(ii) Foreign direct investment 
18. Romania's annual inflows of foreign direct i nvestment (FDI) jumped from an average of 
€425.4 million during 1990-98 to about €1,154 million over 1999-02, peaking at €4,209 million in 2004 (Table I.3). This was largely the result of the positive developments in the economy, and an 
increasing number of privatizations (Chapter III(4)(ii)).
26 Nevertheless, Romania's FDI stock 
(€13,546 million in 2004) remains low compared with  some Central and Eastern European countries. 
On the basis of UNCTAD's Inward FDI Performance Index, during the period 2001-03, Romania ranked 62
nd out of 140 countries; its previous rank was 73rd (2000-02), and its best ever ranking was 
51st (1997-99).27 
Table I.3 
Foreign direct investment, 1999-04 
(€ million) 
 1999 2000 2001 2002 2003 2004 
FDI inflows 964 1,147 1,294 1,212 1,946 4,209 
FDI inward stock 5,446 6,966 8,656 7,482 10,159 13,546 
FDI inward stock (% of GDP) 16.3 17.3 19.3 15.4 20.0 23.0 
FDI outflows 15 -14 -18 18 36 56 
FDI outward stock 102 146 132 138 165 220 
FDI outward stock (% of GDP) 0.3 0.4 0.3 0.3 0.3 0.4 
Source:  Information provided by the National Bank of Romania.  
19. The authorities have recently been implementi ng measures to improve Romania's investment 
climate, which is characterized by : (i) burdensome administrative regulations; (ii) frequently changing 
tax and accounting rules and procedures; (iii) widespr ead red tape; (iv) weak protection of intellectual 
property rights; and (v) lack of enforcement of competition policy. The measures include the 
establishment of both a "one-stop-office" for the regi stration of companies, and the Romanian Agency 
for Foreign Investment (ARIS) (Chapter II(5)).  According to ARIS, Romania's main advantages for 
attracting FDI include: the largest market in the region, after Poland; strategic location for goods 
transiting between the Caspian and Black Seas, and Western Europe; well-developed industrial 
infrastructure, telecommunications network, and tr ansport facilities; skilled labour force and relatively 
low wages28; non-discriminatory investment legislati on; and attractive investment incentives 
(Chapter III(4)(i)). 
20. Spread among 107,392 firms, FDI is considered to be integrated into the Romanian economy. 
During 1991-04, the manufacturing sector attracted 56 .3% of FDI inflows, followed by professional 
services (16.7%), retail and wholesale trade (15.4%),  transport (7.1%), construction (1.8%), tourism 
(1.7%), and agriculture (1%).29 Foreign firms have invested mainly in the capital-intensive steel and 
chemical industries, as well as the labour-intensive clothing and footwear industries. In addition, 
                                                      
26 Up to 2002, privatizations acco unted for nearly half of Romani a's FDI stock (OECD, 2003).  In 
2004, Romania's FDI inflow record was partly due to the privatization of Petrom (€1.5 billion). 
27 UNCTAD's Inward FDI Performance Index measures  the extent to which host countries receive 
inward FDI, and ranks countries by the amount of FDI they receive rela tive to their econo mic size. It is 
calculated as the ratio of a country's share in global FDI inflows to its share in global GDP. 
28 Wage costs in Romania are the lowest in the region. In 2004, companies in Romania paid US$0.95, 
on average, for one hour's work, compared with US$7.71 in Slovenia and US$4.37 in Hungary (ARIS, 2004). 
29 The National Trade Register Office (2005). WT/TPR/S/155 Trade Policy Review 
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several electrical machinery and automotive manufactu rers have invested in Romania because of its 
strategic location (Chapter IV(4)(ii)(c)).30 
21. The EC remains, by far, the largest investor in Romania, accounting for two thirds of FDI 
stock over 1991-04. The Netherlands is Romania's largest single investor (15.6%), followed by 
Austria (12.2%), France (11.1%), Germany (8%), and the United States (6.5%). Other EC countries, 
particularly Italy and the United Kingdom, and As ian countries (e.g. Republic of Korea and China) 
complete the list of investors.  According to the authorities, important investment projects are expected over the period 2005-15, including with investments amounting to US$10 billion in the energy subsector, and US$4 billion in gas.
31  IMF projections show average annual FDI inflows at 
US$2.4 billion until 2008.32 This is to be welcomed as Romania is  in great need of foreign capital to 
pursue its economic development. 
(4) OUTLOOK  
22. In the coming years, Romania is expected to  continue its comprehensive economic reform 
programme with a view to joining the EC in 2007.  To achieve this, the authorities seek to build a 
competitive market economy capable of withstandi ng the pressures of EC integration, through an 
acceleration of structural reforms, including comp letion of the privatization agenda and sectoral 
reforms (e.g. restructuring the large loss-making mining and railway subsectors).33 On the basis of 
IMF (2004) projections, Romania's real GDP growth and inflation rates are expected to average 5% 
per year each during 2005-07, while the annual extern al current account deficit is estimated to exceed 
5% of GDP.34 
23. Romania is expected to benefit from its accession to the EC.35  Economic growth in Romania, 
once it becomes member, is expected to be further promoted by, inter alia , a more efficient allocation 
of resources; strong boosts to FDI resulting fro m increased business opportunities; as well as higher 
productivity due to increased trade and competiti on with other member States. Moreover, the 
empirical literature supports the view that trade lib eralization among countries that trade extensively 
with one another contributes to income convergence.36 
24. The Government regards exports as a major for ce underlying Romania's future GDP growth.  
It expects Romania's EC membership to strengthen its strong export platform built over the last few years.  However, Romania's export performance w ill depend on recovery in the world economy and, 
in particular, in the euro-zone on which its tr ade increasingly depends. Recent improvements in 
Romania's credit ratings are likely to attract furthe r FDI inflows, which, in turn, should improve the 
competitiveness of its economy and its ability to access new markets. 
 
                                                     
 
30 Since these foreign firms sell over 50% of their production abroad, Romania has become a 
significant export plat form (OECD, 2005b). 
31 Ministry of Economy and Commerce online information. Available at: www.minind.ro/International/ 
economy_investments.html. 
32 OECD (2005b). 
33 The strategy is aimed at phasing out state support for minerals by 2007 and for coal by 2010. 
34 IMF (2004b). 
35 World Bank (2004). 
36 Ben-David, Nordstrom, and Winters (1999).