Romania A Strategic Choice

June, 2020

2004 - NATO membership

2007 - EU membership

2019 - EU Presidency

Strategic US-Romanian partnership

Area: 238,391 km2

Capital: Bucharest

Population:19.4M

(1st Jan 2019) BucharestMetropolitan Area: ~3M

Currency: RONRON/EUR: 4.75

(2019)

Bridge between East and Westfor 500M consumers market

GDP Growth 4.1%

FDI flows € 5.3B

FDI stock € 86.4B

Romania - Country overview

20

19

▪ 2nd largest country in CEE

▪ Largest country in SEE interms of size (the 9th in EU28)and population (the 7th inEU28)

▪ At the crossroads of 3 greatmarkets: the European Union,the CIS (Commonwealth ofIndependent States) and theMiddle East

At a glance

4.7

8.07.2

9.3

-5.5

-3.9

2.0 2.13.5 3.4 3.9

4.8

7.1

4.4 4.1

2005 2006 2007 2008 2011 2012 2013 2014 2015 2016 2017 2018 2019

Forecast

2020: 4.1%

GDP growth (%)

(Source: National Commission of Strategy and Prognosis)

2009 2010

Potential for growth

(Source: National Institute of Statistics)

10.0 15.0 21.9 34.5 42.8 48.8 48.8 51.4 53.7 57.9 60.0 60.2 64.4 70.1 75.9 81.1 86.4

1.9

5.2 5.2

9.1

7.3

9.5

3.4

2.31.7

2.52.7

2.4

3.5

4.54.8

5.3 5.3

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

FDI stock FDI flows(Source: National Bank of Romania)

FDI stocks for 2009-2018 were recalculated based on the BPM6 methodological framework

(EUR Bn)

FDI Flows and Stock

4.8

7.9

5.6 6.1 5.8 3.3

4.0

1.1

-0.6-1.5

1.3

4.63.8

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Forecast

2020: 3.1 %(Source: National Commission of Strategy and Prognosis)

Inflation started to be on a positive trend at the beginning of 2017 due to the persistence of the internal inflationary pressures associated with the increase of aggregate demand and the rise in wage costs.

(Source: National Institute of Statistics)

Inflation rate (%)

Inflation

7.1 7.26.4

5.66.5 7.0 7.2 6.8 7.1 6.8 6.8

5.94.9

4.2 3.9

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Forecast 2020: 3.8%(Source: National Commission of Strategy and Prognosis)

(Source: National Institute of Statistics)

Unemployment rate (%)

Unemployment

Note: Denmark, Italy, Cyprus, Finland and Sweden have no national minimum wage

(Source: Eurostat)

312430 466 487 546 575 580 584 607 611

741 758 777

9411,050

1,539 1,584 1,594 1,599 1,636 1,656

2,142Minimum Monthly Gross Wage in EUJanuary 2020 (EUR)

Minimum Wage in EU

(Source: ABSL, NIS, Eurostat)

Languages studied by Romanian students

99%• 99% of Romanian high school students study two or more foreign languages

• Predominant languages: English, French, German and Spanish, yet initiatives for teaching Japanese, Nordic languages or the entire Latin language family (Spanish, Italian, French) exist

University students in Romania are proficient in [% of total]:

Skilled labor force

90% 26% 17% 8% 5%

Skilled labor force

RO

UKR

MD

BG

SRB

HU

Ahead of Italy, Bulgaria, Luxembourg, Greece or Malta

World Bank ease of doing business

One of the most competitive labor force in the CEE (€7.7)

Hourly labor costs 2019Natural gas & Electricity prices

EU27 ranking (S2 2019)*

14th lowest naturalgas prices

*Excluding VAT and other recoverable taxes and levies

14th lowest electricity prices

(Source: Eurostat, March 2020)

(Source: World Bank Report, 2019)

(Source: Eurostat)

Romania, the largest market in the SEE

55

214

14

(Source: Numbeo, May, 2020)

Value for money

Consumer Prices

BERLIN PARIS

Rent Prices

Restaurant Prices

Groceries Prices

Standard of living equivalency net salary

BUCHAREST

€155

€1,966 €3,600

€170

€152

€163

€4,898

€140€100

€100

€100

€100

€158

€131

€138

Tax System

The Romanian tax system

Social Security

EmployerEmployee

35%

R&D - 0 % income tax for employeesDeduction of R&D eligible expenses:▪ depreciation of R&D equipment, salaries for R&D

personnel; 50% of these expenses can be deducted fromthe taxable income

Dividends are distributed to shareholders each trimester

based on interim financial statements and annually

2.25%

Dividend Tax RateCorporate Tax

16% 5%

2015 2016

VAT

▪ 9% - foodstuffs, pharmaceutical products, water supplies, some agricultural supplies

▪ 5% - hotel accommodation, restaurants & catering services

2017/2019

IT&C - 0 % income tax for employees▪ BA -14 technical specializations available▪ Employee is hired on a software engineer/programmer/

software analyst position▪ Annual revenue per exempted employee must be over

USD 10,000

24% 20% 19%

Income Tax Reinvested Profit tax

10% 0%

STATE AID - GD 807/ 2014

Minimum EUR 1M investment▪ Construction of new buildings▪ Renting costs for existing buildings▪ CAPEX aimed at technical installations and tools▪ Acquisition of intellectual property

FISCAL INCENTIVESInvestors that set up manufacturing locations or offices in an industrial, scientific or technological park benefit from:

▪ Exemption on land, building and urban planning tax ▪ Taxes charged for changing land destination

STATE AID 2014-2020 Total Budget EUR 925M

Investment Support

North-West50%

West35%

North-East50%

Center50%

South-East50%

South-West50%

South50%

10%

35%

State aid intensity, according to development region:

North West – 50%

North East – 50%

South East – 50%

South – 50%

South West – 50%

West – 35%

Ilfov County – 35%

Bucharest – 10%

(Source: Ministry of Public Finance)

State Aid intensity 2018-2020

International Fligths

Ports

Under construction

SATU MARE

ORADEA

SUCEAVA

TIMISOARA

CRAIOVA

SIBIU

TARGU MURESCLUJ-

NAPOCA

BACAU

IASI

BUCURESTI OTOPENI

M.KOGALNICEANU

DROBETA TR. SEVERIN

GIURGIU

MANGALIA

CONSTANTA

SULINATULCEABRAILA

GALATI

BAIA MARE

ARAD

BRASOV

▪ 130 direct flights leading to 76 destinations in 31 countries worldwide

▪ 14 international airports and 8 major ports

▪ Constanta Port - the deepest and largest port at the Black Sea

Aircraft traffic reached over21,8M passengers in 2018, upby 7.9% compared to 2017

(Source: National Institute of Statistics)

Ports and Airports

▪ 92 industrial parks spread across Romania - both private and public ownership▪ Access to utilities & benefits packages according to their focus ▪ Exemption on land, building and urban planning taxes

North West Region: 23 parks

West Region: 6 parks

South West Region: 7 parks

South Region: 24 parks

South East Region: 2 parks

North East Region: 8 parks

Center: 18 parks

Bucharest-Ilfov Region: 4 parks

Status at regional level(April, 2020)2

71

1

1

3

1

1

23

2

415

13

21

23

12

3 10

11

112

1

2

3

(Source: Ministry of Regional Development and Public Administration)

Industrial Parks

In Romania there are currently five Free

Zones

▪ Arad

▪ Giurgiu

▪ Braila

▪ Galati

▪ Sulina

Romania’s five free zones

By economic activity, FDI stock was channeled primarily to manufacturing (30.9% of total FDI), out of which the largest recipients were:• 6.7% transport equipment• 6.4% oil processing, chemical, rubber & plastic

products• 3.9% metallurgy

Apart from industry, other activities that also attracted significant FDI were:• 16.8% construction & real estate transactions• 15.8% trade• 11.5% financial intermediation & insurance

(Source: National Bank of Romania)

SectorsEUR

million

% of total

FDITOTAL 81,124 100.0Manufacturing 25,032 30.9Construction & real estate transactions 13,651 16.8Trade 12,865 15.8Financial intermediation and insurance 9,308 11.5Electricity, gas and water supply 6,006 7.4Professional, scientific, technical and

administrative activities and support

services

3,991 4.9

IT&C 3,321 4.1Agriculture, forestry and fishing 2,406 3.0Mining 2,273 2.8Transportation 1,281 1.6Accommodation & food service activities 528 0.6Other 524 0.7

FDI Stock by Field of Activity at 31 December 2018

(Source: OPIAR Report 2018, ANIS Report 2018 - estimation, ACAROM Report Feb 2019)

AUTOMOTIVE

INDUSTRY SIZE KEY PLAYERS KEY PROJECTS

• Premium Aerotec EUR 100M investment

• Sonaca EUR 100M investment• Airbus Helicopters EUR 15M

investment• UAC Europe 100M investment

EUR

580M

EUR

4.5B

EUR

28.8B

• Siemens software dev. worked on the Mars Rover

• Deutsche Bank EUR 40M investment

• LiveRail was acquired by Facebook for EUR 600M

• Continental EUR 175M investment in 2017

• Daimler EUR 250M in 2018 investment for gear boxes

• Ford EUR 200M investment for production of new model

Key facts for top tech oriented industries in Romania (2018)

IT&C

AEROSPACE

“one-stop-shop” for foreign investors, assisting and advising international

companies for project implementation in the country

Promoting and facilitating foreign investment in Romania

Main interface between foreign companies and central / local authorities

Assisting worldwide entrepreneurs in project implementation

Tailored and individually custom-made solutions for developing new or

current units

Consultancy and guidance during all stages of the decisional process (state aid

& fiscal incentives)

InvestRomania in a nutshell

GOVERNMENT OF ROMANIAMinistry of Economy, Energy and Business Environment

152 Victoriei Av.District 1, Bucharest, Romania

www.investromania.gov.roE-mail: office@investromania.gov.ro

investromania@investromania.gov.ro