11

MINISTRY OF ECONOMY MINISTRY OF ECONOMY AND COMMERCE AND COMMERCE

ROMANIAROMANIA Member of the European UnionMember of the European Union

ECONOMIC DEVELOPMENTS AND ECONOMIC DEVELOPMENTS AND OPPORTUNITIES IN ROMANIAOPPORTUNITIES IN ROMANIA

byby Varujan VOSGANIAN , MinisterVarujan VOSGANIAN , Minister

22

Benefits of EU AccessionBenefits of EU Accession

• Removal of any obstacles in the trade with EU Removal of any obstacles in the trade with EU Member StatesMember States

• Common trade policy with third countriesCommon trade policy with third countries• Harmonization of Harmonization of entire legislation, entire legislation, capital capital

market regulations, taxation, accounting rules market regulations, taxation, accounting rules => higher transparency and simplification=> higher transparency and simplification

• Structural fundsStructural funds (31 billion euro for 2007-(31 billion euro for 2007-2013)2013)

• Open gate for EU towards CIS, Asia, Middle Open gate for EU towards CIS, Asia, Middle East, Northern AfricaEast, Northern Africa

• Participation in major projects in the Black Sea Participation in major projects in the Black Sea Extended Area and in the Central Extended Area and in the Central & & Eastern Eastern European RegionEuropean Region

• Romania-important role in assuring the energy Romania-important role in assuring the energy security for Europe (major transit pipelines, security for Europe (major transit pipelines, energy production energy production & supply& supply))

FLATFLAT TAX TAX 16%16%VATVAT 19%19%

DIVIDENT DIVIDENT TAXTAX 10%10%

SOCIAL SOCIAL SECURITYSECURITY

4433.5.5%%

39.5%39.5% by the by the end of 2008end of 2008

AVERAGE AVERAGE WAGE WAGE (netto)(netto)

272272 euroeuro

MINIMUM MINIMUM WAGE WAGE

115115 euroeuro

Competitive TaxationCompetitive TaxationCountrCountr

yyCorporatCorporat

e Taxe Tax

RomanRomaniaia

16%16%

HungaHungaryry

16%16%

SlovakiSlovakiaa

19%19%

PolandPoland 19%19%

CroatiaCroatia 20.32%20.32%

SloveniSloveniaa

25%25%

Czech Czech Rep.Rep.

28%28%

44

Macroeconomic Macroeconomic Performance Performance

GDP real growthGDP real growth

4,9 4,9

8,3

4,1

87

7,1

-6,1-5,4

-3,2

2,1

5,73,93,9

1,5

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

55

40,7%

30,3%

14,1%

3,0%4,8%

8,6%9,3%

17,8%

2000 2001 2002 2003 2004 2005 2006 2008

Macroeconomic Macroeconomic Performance Performance Inflation rateInflation rate

66

Macroeconomic Macroeconomic Performance Performance

Unemployment rateUnemployment rate

9,5

6,6

8,910,4

11,810,5

8,8 8,1

7 6,2

5,5 5,2 5

0

2

4

6

8

10

12

%

1995 1997 1999 2001 2003 2005 2007

77

COUNTRY COUNTRY RATINGSRATINGS ROMANIA ROMANIA

• Fitch Fitch - A- - A- (August (August 2006)2006)

• CofaceCoface - A4 - A4 (January 2006)(January 2006)

• JCRJCR - BBB+ - BBB+ (November 2006)(November 2006) • MoodyMoody’’ s s - Baa3 - Baa3 (September 2006)(September 2006)

• Standard & PoorStandard & Poorss - BBB-- BBB- (September 2006)(September 2006)

World Bank Report 2006: Romania – the World Bank Report 2006: Romania – the most reforming country in the business most reforming country in the business fieldfield

88

Foreign direct investmentsForeign direct investments - million Euro -- million Euro -

1294 1212 1627

40985197

9100

0

2000

4000

6000

8000

10000

2001 2002 2003 2004 2005 2006

FOREIGN DIRECT FOREIGN DIRECT INVESTMENTINVESTMENT

Total Total FDI’s until 31.12.2006FDI’s until 31.12.2006: : 3131 billion euro billion euro

1. The Netherlands - 21,06%2. Austria - 12,94%3. France - 10,27%4. Germany - 10,24%5 . Italy - 5,56%6. U.S.A. - 4,72%7. United Kingdom - 4,43%8. Netherlands Antilles – 3,65%9. Greece – 3,61%

Source: National Trade Register Office

NNoo..

Country of Country of originorigin

Number Number of of

companicompanieses

Share-capital Share-capital in Romanian in Romanian companiescompanies

- - mil. EUROmil. EURO - -

11NetherlanNetherlandsds 26552655 31123112

22 AuAustriastria 41419292 19197979

33 FranceFrance 46444644 15831583

44 GermanyGermany 1411614116 15161516

55 ItalItalyy 2125221252 845845

66 USAUSA 48714871 705705

77 UK UK 26572657 681681

88Dutch Dutch AntillesAntilles 1212 567567

99 GrGreeeecece 35693569 543543

1010

DIRECT INVESTMENT WITH SIGNIFICANT DIRECT INVESTMENT WITH SIGNIFICANT IMPACT ON ROMANIAN ECONOMY, IMPACT ON ROMANIAN ECONOMY,

BY MAIN FIELDS, IN 2006 BY MAIN FIELDS, IN 2006

Telecomunications, 22.0%

Services12.3%

Trade11.1%Machine building

9.9%

Wood procesing 10.2%

Energy sector7.7%

Constructions, 5.6%

Electonics and electrotehnics

3.5%

Metalurgy 3.5%

Others 14.2%

Source: Romanian Agency for Foreign Investment

1111

Foreign Investor Foreign Investor AdvantagesAdvantages

• foreign investment allowed in all sectors of foreign investment allowed in all sectors of economyeconomy

• possibility to freely manage the company with possibility to freely manage the company with full ownership rightsfull ownership rights

• full repatriation of capital and profitsfull repatriation of capital and profits

• protection against expropriation and protection against expropriation and nationalizationnationalization

• national treatment for foreign investorsnational treatment for foreign investors

New Investment LawNew Investment LawDraft under public debate

Objectives:Objectives: DDetermines the principles, terms and modalities of stimulating etermines the principles, terms and modalities of stimulating

investments in Romaniainvestments in Romania, , ai aiming atming at contribut contributing toing to the the sustainable country development sustainable country development

FFullull compliance compliance with the EU legislation with the EU legislation

The Government will issue also legal/administrative acts in The Government will issue also legal/administrative acts in order to regulate the state aids schemes for each objectiveorder to regulate the state aids schemes for each objective

TThe goalhe goalss, objective, objectivess, tim, timinging, budget, budgetss, beneficiaries, eligibility , beneficiaries, eligibility and selection criteriaand selection criteria, , competent authorities responsible to competent authorities responsible to grant incentives grant incentives will be establishedwill be established

A rA responsible esponsible aauthority for implementing and monitoring the uthority for implementing and monitoring the legal provisions legal provisions will be set upwill be set up

1313

FOREIGN TRADE, IN THE PERIOD 2001 – 2006

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

Exports 12,722 14,675 15,614 18,935 22,255 25,850

Imports 17,383 18,881 21,201 26,281 32,569 40,745

Balance -4,661 -4,206 -5,587 -7,346 -10,314 -14,895

2001 2002 2003 2004 2005 2006

EURO mill.

Source: National Institute of Statistics (www.insse.ro)

GEOGRAPHICAL ORIENTATION OF GEOGRAPHICAL ORIENTATION OF THE ROMANIAN EXPORTS, IN 2006THE ROMANIAN EXPORTS, IN 2006

Top export marketsTop export marketsppercentageercentage of total export of total export

ItalyItaly 17,917,9

GermanyGermany 15.715.7

TurkeyTurkey 7.77.7

FranceFrance 7.57.5

HungaryHungary 4.94.9

Great BritainGreat Britain 4.74.7

BulgariaBulgaria 2.82.8

AustriaAustria 2.62.6

USAUSA 2.52.5

NetherlandsNetherlands 2.42.4

SpainSpain 2.32.3

GreeceGreece 1.91.9

PolandPoland 1.81.8

BelgiumBelgium 1.61.6

SerbiaSerbia 1.51.5

Source: National Institute of Statistics (www.insse.ro)

Africa - Middle East6,3%

America3,4%

Asia - Oceania2,5%

Europe 87,8%

1515

GEOGRAPHICAL ORIENTATION OF THE GEOGRAPHICAL ORIENTATION OF THE

ROMANIAN IMPORTS, IN 2006ROMANIAN IMPORTS, IN 2006Top import partner countriesTop import partner countries

percentage percentage of total import of total import

GermanyGermany 15.0615.06

ItalyItaly 14.614.6

Russian FederationRussian Federation 7.97.9

FranceFrance 6.56.5

TurkeyTurkey 4.94.9

ChinaChina 4.24.2

AustriaAustria 3.73.7

HungaryHungary 3.23.2

KazahstanKazahstan 3.23.2

PolandPoland 2,72,7

Great BritainGreat Britain 2.52.5

Czech RepublicCzech Republic 2.52.5

USAUSA 2.42.4

SpainSpain 2.32.3

NetherlandsNetherlands 1.81.8

Source: National Institute of Statistics (www.insse.ro)

Europe84.1%

Asia - Oceania9.5%

America4.6%

Africa - Middle East1.8%

1616

TRADE BETWEEN ROMANIA AND TRADE BETWEEN ROMANIA AND AUSTRIAAUSTRIA,, IN THE PERIOD 1999 – 2006 IN THE PERIOD 1999 – 2006

-1000

-500

0

500

1000

1500

2000

Exports 227,5 271,3 502,3 589,9 691,81 685,15

I mports 284,3 359 748,6 918,74 1205,67 1535,33

Balance -56,8 -87,7 -246,4 -328,7 -513,86 -850,18

1999 2000 2003 2004 2005 2006

EURO mill.

1717

STRUCTURE OF THE BILATERAL STRUCTURE OF THE BILATERAL COMMERCE, BY MAIN GROUPS OF COMMERCE, BY MAIN GROUPS OF

PRODUCTS, IN 2006PRODUCTS, IN 2006

Romanian ExportRomanian Exportss

• Machinery and electrical Machinery and electrical equipment – 42,5 %equipment – 42,5 %

• Furniture, toys and otherFurniture, toys and other – – 10,8 %10,8 %

• Textile and garments Textile and garments - - 8,9 % 8,9 %

• Metals and articles thereof – Metals and articles thereof – 7,9 7,9 %%

• Transport equipment - 7,6Transport equipment - 7,6 %%

Romanian ImportRomanian Importss

• Machinery and electrical Machinery and electrical equipment – equipment – 35,1 35,1 %%

• PlasticsPlastics and rubber and rubber – 1 – 144,,9 9 %%

• Metals and articles thereof – Metals and articles thereof – 9,5 9,5 %%

• Transport equipment - 7,Transport equipment - 7,3 3 %%

• Chemical products – Chemical products – 5,3 5,3 %%

1818

AustrianAustrian FDI’s in Romania FDI’s in Romania

AustriaAustria – ranking – ranking 2nd2nd among the foreign investors among the foreign investors in Romaniain Romania – 2 billion euro share-capital in – 2 billion euro share-capital in Romanian companies / 7 billion euro effective Romanian companies / 7 billion euro effective investments, according to Austrian sourcesinvestments, according to Austrian sources

41924192 companies with Austrian capital registered companies with Austrian capital registered in Romania in Romania

Main sectors for Austrian investments:Main sectors for Austrian investments: banking, banking, petrochemical industry, wood procesingpetrochemical industry, wood procesing, , food food industryindustry

1919

Market & Location Advantage : • Second largest market in Central and Eastern Europe (over 21

million inhabitants)                     • Easy access to the countries of the former CIS countries,

Balkans, the Middle East and Northern Africa • Junction of three prospective European transportation

corridors nos. 4, 7 & 9

Market & Location Advantage : • Second largest market in Central and Eastern Europe (over 21

million inhabitants)                     • Easy access to the countries of the former CIS countries,

Balkans, the Middle East and Northern Africa • Junction of three prospective European transportation

corridors nos. 4, 7 & 9

Resource Advantage: • Skilled labor force, with solid knowledge in technology, IT and engineering • Rich natural resources, including fertile agricultural land, oil and gas • Important potential for tourism

Resource Advantage: • Skilled labor force, with solid knowledge in technology, IT and engineering • Rich natural resources, including fertile agricultural land, oil and gas • Important potential for tourism

TOP TOP REASONS TO INVEST IN ROMANIAREASONS TO INVEST IN ROMANIA (1) (1)

2020

Economic Advantage• Sustainable economic growth • Functional Market Economy status • Competitive tax policy• Decreasing inflation • Permanent financial assistance for SME's Development • Structural funds

Economic Advantage• Sustainable economic growth • Functional Market Economy status • Competitive tax policy• Decreasing inflation • Permanent financial assistance for SME's Development • Structural funds

Improving Infrastructure Advantage• Well-developed networks of mobile telecommunications in GSM systems • Highly developed industrial infrastructure, including oil and petrochemicals • Branch offices and representatives of various well-known international banks • Newly developed highway infrastructure • Commitment to improve the highway infrastructure to EU standards • Extensive maritime and river navigation facilities

Improving Infrastructure Advantage• Well-developed networks of mobile telecommunications in GSM systems • Highly developed industrial infrastructure, including oil and petrochemicals • Branch offices and representatives of various well-known international banks • Newly developed highway infrastructure • Commitment to improve the highway infrastructure to EU standards • Extensive maritime and river navigation facilities

TOP TOP REASONS TO INVEST IN ROMANIAREASONS TO INVEST IN ROMANIA (2) (2)

2121

Potential Sectors for Potential Sectors for InvestmentInvestment

ManufacturingManufacturing Automotive partsAutomotive parts IT & IT &

CommunicationCommunication Electric & Electric &

ElectronicsElectronics Wood processingWood processing

Construction Construction materialsmaterials

TextileTextile Food processingFood processing InfrastructureInfrastructure Outsourcing and Outsourcing and

logisticslogistics

2222

MINISTMINISTEER OF ECONOMY AND COMMERCER OF ECONOMY AND COMMERCE

ROMANIAROMANIA

Phone: +40 21 Phone: +40 21 220022 51 51 40 40

Fax: +40 21 Fax: +40 21 202 51 77202 51 77

E-mail: E-mail: varujan_vosganianvarujan_vosganian@@minindminind.ro.ro

Website: www.Website: www.minindminind.ro.ro

THANK YOU !THANK YOU !