HomeReportsBureau of Economic and Business Affairs2019 Investment Climate Statements…Romania

# 					2019 Investment Climate Statements: Romania			

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													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

Romania welcomes all forms of foreign investment.  The government provides national treatment for foreign investors and does not differentiate treatment by source of capital.  Romania’s strategic location, membership in the European Union, relatively well-educated workforce, competitive wages, and abundant natural resources make it a desirable location for firms seeking to access European, Central Asian, and Near East markets.  U.S. investors have found opportunities in the information technology, automotive, telecommunication, energy, services, manufacturing, consumer products sectors, and banking.

The investment climate in Romania is a mixed picture, and potential investors should undertake due diligence when considering any investment.  The March 2019 EU Country Report for Romania points to persistent legislative instability, unpredictable decision-making, low institutional quality, and the continued weakening of the fight against corruption as factors eroding investor confidence.  The EU noted that important legislation was adopted without proper stakeholder consultation and often lacked impact assessments.

The pace of economic reforms has slowed, and since January 2017, efforts to undermine Romania’s anti-corruption prosecutors and weaken judicial independence have shaken investor confidence in the government’s commitment to combat corruption.  Political rhetoric has reportedly taken an increasingly nationalist tone, with political leaders occasionally accusing foreign companies of not paying taxes, taking advantage of Romanian workers and resources, and sponsoring anti-government protests.

The Government of Romania’s (GOR) mandatory transfer of payroll taxes from employers to employees in January 2018 negatively affected all companies through additional administrative costs resulting from negotiation and registration of new labor contracts.  The government’s sale of minority stakes in SOEs in key sectors, such as energy generation and exploitation, has stalled since 2014. The GOR has weakened enforcement of its state-owned enterprise (SOE) corporate governance code, exempting several SOEs from the code in December 2017 and weakening SOEs’ capability to invest through regular and exceptional dividend distributions.

Consultations with stakeholders and impact assessments are required before enactment of legislation.  However, this requirement has been unevenly followed, and public entities generally do not conduct impact assessments.  Since 2017, frequent government changes have led to rapidly changing policies and priorities that can serve to complicate the business climate.  Romania has made significant strides to combat corruption, but corruption remains an ongoing challenge and recent actions by the government could have in fact hindered anti-corruption efforts.Inconsistent enforcement of existing laws, including those related to the protection of intellectual property rights, also serves as a disincentive to investment.  Fiscal changes, passed through Emergency Ordinance (EO114) on December 21, 2018 without prior consultation, imposed taxes on the banking, energy, and telecommunications sectors.  The measure shocked markets, causing private sector backlash. On March 29, the Government of Romania softened the bank tax, upholding taxes on energy and telecommunication companies.

Although women in Romania have equal access under the law to investment development and protections, women have been reported to face societal challenges.  The problem is worse in rural areas and for Roma women. According to the World Bank, almost half of rural women in Romania have not completed upper secondary education and 43 percent are in the poorest quintile.

*Table 1: Key Metrics and Rankings*