The fast economic growth pace, EU accession prospects and several key privatizations have stirred Romania's foreign direct investments in the last two years to new heights. Besides these aspects, the highly qualified and cheap labour force have also stimulated the interest of the foreign investors. During 2001 and 2002, the FDI inflows reached around EUR 1.2bln, while throughout 2003 the investments, with major impact on the economy, extended to EUR 1.9bln, representing 5.5% of the GDP.

The highest level of the FDI was reached in 2004, spreading to EUR 4,209mln, around 7.7% of GDP, as the most valuable privatization deals were established. In the first eight months of 2005, foreign investments totaled EUR 1,914mln, higher by 16% as compared to the same timeframe of 2004. In addition to all the advantages mentioned above, the introduction of the flat tax and the growth of the purchase power of the population have propelled the foreign investments in 2005 to a record level. There have been also disruptions in the FDIs flows, like in August 2005, when FDIs attracted by Romania stood at EUR 118mln, diminishing sharply by 34% vs. the same period last year.

The lacks in the business environment that the foreign investors blame are the fiscal and legislative frameworks which are rather volatile, as well as the corruption of the public sector employees. The Government should be more aware of the risk of maintaining a complicated and bureaucratic system which could determine the foreign investors to redirect their money to other countries.



Melania Hancila
Research Analyst Treasury Division

Finansbank (Romania) S.A.
Phone : +40 21 301 73 42
Fax : +40 21 318 09 61