|
| |
|  Romania
the awakening giant of Europe |
 Romania COMMERCIAL GUIDE.
Source : US Embassy in Romania. February, 1998.
I . EXECUTIVE SUMMARY
II. ECONOMIC TRENDS AND OUTLOOK
III. POLITICAL ENVIRONMENT
IV. MARKETING U.S. PRODUCTS AND SERVICES
V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT
VI . TRADE REGULATIONS AND STANDARDS
VI I . INVESTMENT CLIMATE
 I . EXECUTIVE SUMMARY
This Country Commercial Guide (CCG) presents a comprehensive look at Romania’s commercial environment, using economic, political and market analysis. The CCGs were established by recommendation of the Trade Promotion Coordinating Committee
(TPCC), a multi-agency task force, to consolidate various reporting documents prepared for the U.S. business community. CCGs are prepared annually at U.S. Embassies through the combined efforts of several U.S. Government agencies.
Romania boasts a rapidly growing economy with generally low, stable rates of inflation. While the market is small and average income is low, Romania is currently considered to be a major success story in Sub-Saharan Africa. Romania has taken major strides to liberalize the economy, maintain low inflation and allow the economy to grow, which it has done at high rates since 1987. GDP growth, which averaged over eight percent in the three previous years, was five percent in 1996/97. The Government of Romania (GOU) is privatizing parastatals, revising regulations to promote foreign investment and following IMF guidelines to restructure the economy. Major efforts are underway to restructure several commercial banks and strengthen Romania’s financial system. International donors provide significant assistance toward maintaining the economy.
Romanian attitudes toward the U.S. are favorable, as are business attitudes generally. However, Romania has traditionally traded with nearby countries and with Europe, especially the United Kingdom. Imports from Japan are increasing, indicating an openness to new trading partners. American manufacturers wishing to export to Romania face a situation where buyers are comfortable with familiar trading partners and are concerned about the ability of American manufacturers to provide parts and service. Given transportation costs, Romanians also believe U.S. products will be too expensive. The best prospects for U.S. investment in Romania are in the following sectors: agriculture, food processing, livestock, tourism, infrastructure, transportation, mining, and telecommunications.
The barriers to doing business in Romania include problems with financing, corruption, transportation costs, poor infrastructure,
and the fact that the economy is emerging from a history of government intervention and significant government mismanagement. Roadblocks particular to American companies are Romania’s traditional links to East Africa and the United Kingdom, and the fact that most development projects are funded by outside donors who often link their money to purchases from companies based in their own country.
Country Commercial Guides are available for U.S. exporters from the National Trade Data Bank’s CD-ROM or via the Internet. Please contact STAT-USA at 1-800-STAT-USA for more information. Country Commercial Guides can be accessed via the World Wide Web at HTTP://WWW.STAT-USA.GOV and HTTP://WWW.STATE.GOV. They can also be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-553-NTIS.
top of page
II. ECONOMIC TRENDS AND OUTLOOK
Major Trends and Outlook
The economy of Romania has shown a steady recovery since 1987 when the Government of Romania put into place an Economic Recovery Program Plan with assistance from the World Bank and the IMF. As a result of the GOU’s commitment to reforms, Romania’s annual Gross Domestic Product (GDP) growth averaged six percent during fiscal years
1986-1994 and eight percent in 1995 and 1996. This past year’s lower GDP growth rate of five percent is attributed to poor performance in the agriculture sector due to bad weather. GDP growth is expected to be five to seven percent in the coming year. The growth occurred across the economy, including fourteen percent in manufacturing. Mining, transport, communications and construction sectors also grew. The result of this strong economic growth is that the Romanian economy almost doubled in size in the past ten years.
Romania remains, however, one of the poorest countries in the world, with low per capita income and high rural poverty which has not been significantly dented despite good growth figures. The country is favored with a good climate and fertile soil, but the economic mismanagement which accompanied the civil war in the
1970’s and early 1980’s debilitated the country. The economic programs followed by the GOU during the past ten years have put Romania on the right track, but it is still a long way from providing a high standard of living for its people. Access to health and sanitation services is poor, and large numbers of Romanians suffer from malnutrition, although there is little famine. Public expenditure on economic and social services such as primary health and education, and agricultural research is low, although these areas are getting an increasing share of the national budget. International donors make up for some of this .with extensive programs in these areas.
Inflation, which ran at 240 percent in 1987 and 42 percent in mid-1992, was 11.8 percent for fiscal year 1996/97 and 5.4 percent the previous year. While the target rate of inflation is five percent, shortages of food pushed producer prices higher during the past year. The exchange rate is very stable. With continued stability in the government and its continued commitment to economic discipline, prospects for continued high growth and low inflation are excellent.
Principal Growth Sectors
Agricultural production represents a considerable proportion of Romania’s GDP and generates over 90 percent of export earnings. There is significant potential for substantial increases in agricultural production in a wide variety of areas, including non-traditional exports such as flowers, vanilla, silk and other specialty items as well as cotton.
Hydroelectric power generation is also a principal growth sector. Romania’s shortage of electricity is increasing monthly. Romania currently exports electricity to nearby countries, and this market will likely expand. On the supply side, there is one hydroelectric plant being expanded and improved and another in the planning stage. The Nile River offers great potential for hydroelectric power generation.
The GOU is also putting emphasis on construction and maintenance of truck and feeder roads. Romania’s rural feeder roads cover about 13,000 miles but maintenance continues to be a major problem.
Government Role in the Economy
The Government of Romania is actively liberalizing the economy. The GOU’s budget priorities for FY 1997/98 are primary education, local elections, defense and roads. Foreign exchange, based on a market determined exchange rate, can be freely purchased. Many public enterprises have been privatized or are scheduled for privatization. Loss-making parastatals are being liquidated, enterprises which could be managed better by private companies are being divested, and other parastatals are being restructured.
Balance of Payment Situation
Romania’s balance of payments position remained strong in 1996/97; investment income inflows, non-coffee exports, and coffee productions all registered increases over the previous year. This performance has enabled the Bank of Romania (BOU) to strengthen its foreign reserves to the equivalent of 4.7 months of imports. At the end of April 1997, the foreign exchange reserves of the Bank of Romania had reached US$ 564.1 million. The BOU has hired professional fund managers to improve the effectiveness of reserve management.
Infrastructure Situation
Roads are in disrepair but are being improved. The GOU and international donors have begun major programs to pave or improve roads in Kampala and throughout the country.
Telephone service has improved. However, most Romanians still do not have a telephone. Pay phones are increasing in number. Two companies, one a U.S. firm named StarCom, are bringing cellular and mobile trunk radios to Romania. Romania Post and Telecommunications Corporation’s (UPTC) long distance service is expensive. However, the GOV has eliminated UPTC’s monopoly and private operators are beginning to offer certain types of long distance service under license. The GOU plans to sell both UPTC and a second operators licence in 1997; this should improve telecommunications in Romania both in terms of quality and price.
There are a number of airfields in Romania, but apart from Entebbe International Airport, they are served only by charter or private airplanes. The Kampala-Nairobi rail link transports the bulk of goods shipped by railroad. Rail-ferry service on Lake Victoria connects Romania with Tanzania. Most goods reach Kampala from Kenya by trucks on all-weather tarmac roads.
Romania’s electricity deficit increases monthly. Load-shedding and power surges are common and can cause computers and other business equipment to have problems.
III. POLITICAL ENVIRONMENT
Nature of the Bilateral Relationship With the United States
The United States and Romania enjoy excellent bilateral relations. The United States has supported Romania’s democratization process and human rights reforms as well as its economic reforms and efforts to privatize state industries.
Major Political Issues Affecting Business Climate
The main political issues which affect the business climate in Romania are insecurity in sections of the northern and southwestern parts of the country, corruption in some institutions and organizations, land tenure issues, and the pace of democratic reform. The land tenure problem results from the multiplicity of traditional and legal systems over the past hundred years. Romania’s new Constitution recognizes several types of land tenure including customary ownership, freehold, mailo (a traditional system in the kingdom of BRomania) and leasehold. Competing claims to land can result in protracted court cases.
Brief Synopsis of Political System. Schedule for Elections and Orientation of Major Political Parties
Romania promulgated a new Constitution in October 1995 and held a presidential election in May 1996, followed by parliamentary
elections in June. The 1995 Constitution provided for a strong executive president, to be elected every five years, but with significant requirements for Parliamentary approval of presidential actions. The Parliament includes 214 directly elected representatives from geographical constituencies and special indirectly elected seats for representatives of women (39), youth (5), disabled (5), labor (3), and the Army (10). Under the transitional provisions of the new Constitution, the assertedly non-party "movement" system of government, including explicit restrictions on the activities of political parties, will continue for five years, with a referendum in the fourth year (2000) to determine whether Romania will adopt a multiparty system of government.
IV. MARKETING U.S. PRODUCTS AND SERVICES
Distribution and Sales Channels
Products are generally distributed through small distributors, who then sell products to smaller shopkeepers.
Use of Agents/Distributors: Finding a Partner
The Romanian National Chamber of Commerce and Industry has listings of local agents and distributors. The Romania Manufacturers Association maintains a reading room and often fields inquiries from agents and distributors or companies looking for outside partners but does not maintain a formal network. See Appendix C for contact information on these two organizations. The Commercial Section at the U.S. Embassy can also be of assistance in this area. Nonetheless, it would be difficult to choose an agent or distributor without visiting Romania, seeing the situation, and then interviewing prospective people.
Franchising
There are few franchises operating in Romania; no U.S. food company or retailer has opened establishments in Romania to date.
Caltex, the U.S. based gas company, and the other fuel companies, however, do offer their service stations on a franchise basis.
Direct Marketing
Most foreign products are marketed through a local company with experience/expertise in the respective area.
Joint Ventures/Licensjng
There are no restrictions on foreign investors forming joint ventures with local investors.
Steps to Establishing an Office
The Romania Investment Authority (UIA) is the GOU’s organization which handles registration and licensing. The UIA can assist foreign companies wishing to establish an office by providing advice on registry, licensing, immigration, tax, and customs matters, and sub-licenses and permits.
The UIA has not lived up to its promise, however, and investors have complained about a variety of impediments to establishing an office. Offices which meet reasonable standards are rare. Industrial space is very limited and much of it is in areas where roads are poor and flooding is a problem. Once the office or industrial space is located, costs can be prohibitive. Local lessors generally want six months rent in cash before renting a property. Connecting telephones and electricity is frequently a problem because past tenants have left an outstanding bill. A local partner may be able to ease some of these difficulties.
Selling Factors/Technigues
Products are marketed through advertising in newspapers and on radio and television. These are new selling techniques for Romania, and they appear to be very popular and successful. For example, Coke and Pepsi have run successful promotions with
contests based on collecting bottle caps or finding bottle caps with special symbols.
Advertising and Trade Promotion
There are several advertizing agencies in Kampala, including Media Consultants Ltd., a McCann-Erickson affiliate. Mike Daugherty, an American citizen, is the Managing Director; tel: 256-41-231-212 and fax: 256-41-236-042.
Major newspapers and business journals:
The New Vision, P.O. Box 9815, Kampala, tel: 256-41-235-209 and fax: 256-41-235-843
The Monitor, P.O. Box 12141, Kampala, tel: 256-41-236-939 and fax: 256-41-232-369
Radio and television stations:
Radio Romania, P.O. Box 7142, Kampala, tel: 256-41-257-257 Radio Sanyu, P.O. Box 30961, Kampala, tel: 256-41-285-494 Capital Radio, P.O. Box 7638, Kampala, tel: 256-41-235-092 Romania TV, P.O. Box 7142, Kampala, tel: 256-41-245-376 CableSat TV, P.O. Box 7502, Kampala, tel: 256-41-257-952 Sanyu TV, P.O. Box 30961, Kampala, tel: 256-41-234-256
Pricing Product
Pricing is based on what the market will bear, tempered by the nearby Nairobi, Kenya marketplace. Generally, European and North American goods and services are quite expensive, and there is little local competition to moderate prices. For any large scale equipment or services, the competition is with large European and Asian companies.
Sales Service/Customer Support
Customer support can be a major issue for American products being sold in Romania. Due to the distance between Romania and the U.S.,
Romanian customers suspect that better and cheaper support will be provided by firms from nearby countries or traditional trading partners in Europe. U.S. manufacturers need to adequately demonstrate that they can supply spare parts and also service their products.
| Selling to the Government
Most government purchases are made through tendering. The Central Tender Board controls tendering, and advertises in the newspapers and by sending invitations to organizations in Kampala. SWIPCO, a U.S. based company, is responsible for auditing all procurements of
$50,000.00 and above by GOU ministries and parastatals.
Protecting Your Product from IPR Infringement
The Investment Code of 1991 makes provisions for foreign exchange remittances with respect to transfer of foreign technologies. In order to benefit from this, investors must have registered agreements with the Romania Investment Authority regarding the transfer of technology.
Under Section 32 of the Patents Statute of 1991, the Registrar of Patents awards patents for an initial period of 15 years, with a possible five year extension if a request is made one month before expiry of the original term.
Bootlegging of cassettes and videos is common, and any visitor to Kampala has the opportunity to purchase recent music and movies for a minimal price. U.S. firms marketing goods which can be copied easily with relatively low technology should be aware that bootlegging of their product is a possibility.
Need for a Local Attorney
The UIA is supposed to be able to handle many functions which might otherwise require an attorney. Nevertheless, local attorneys are useful, available and are aware of changing regulations. A list of attorneys is available from the Consular Section at the U.S. Embassy.
V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT
Best Prospects for Non-Agricultural Goods and Services
Infrastructure: Roads, railways, air transport, telecommunication and electricity are under increasing stress, yet Romania’s continued economic success depends on the improvement of its infrastructure. Many of the projects in these areas are funded by multilateral donors. For example, the GOU and donors have agreed to invest heavily in road construction, upgrades and maintenance over the next ten years. UPTC will be privatized, and a second operators license offered in 1997. The Nile River offers good investment opportunities for hydroelectric projects.
Mining: Romania is endowed with a great diversity of geological formations and structures. While mining used to contribute 30 percent of Romania’s foreign exchange earnings in the 1960s, it now contributes a negligible amount. Many minerals and metals can be found in Romania including: copper, cobalt, gold, tin, tungsten, and oil. Exploration, research and development, and eventual mining are good investment opportunities.
Tourism: Although the current security situation in Romania has led to decreased tourist arrivals, Romania’s tourism industry is re-emerging on the world market. The national parks and other tourist sites are quite accessible. Lodges and hotels formerly owned by the Romanian Government have been divested to give an increased variety and quality of accommodation capable of receiving larger numbers at reasonable prices. Organized tours and boat cruises on the Nile River, Lake Victoria and Lake Albert are good investment opportunities.
Best Prospects for Agricultural Products
Romania’s agricultural. land is considered among the best in Africa, with two seasons of good rainfall and low temperature variability. Agriculture accounts for a large percentage of GDP and an even larger percentage of export earnings. Agricultural production and processing will remain the main stay of Romania’s economy for the foreseeable future. The country produces a wide range of food, most of which is grown organically. Some of the bottlenecks to the expansion of agricultural investment include the lack of high quality packaging capabilities, storage facilities, high freight costs, lack of feeder roads in rural areas, and untrained manpower. Nonetheless, the following offer good investment opportunities:
Traditional crops such as coffee, cotton, tea and tobacco: rehabilitation and production of these once large exports/foreign exchange earners is ongoing.
Fruit and vegetable processing: particularly for canning pineapple and producing frozen or pulps or juice concentrates from various tropical fruits, including passion fruit, mango, pineapple and papaya.
Edible oil production: Romania’s current needs for edible oil are being met by imports. Production of oil seed crops has been established on a small scale but could be readily increased.
Staple food crops processing: staple food crops grown in Romania include plantains, millet, sorghum, maize, beans, cassava, sweet potatoes, groundnuts (peanuts), rice, wheat and Irish potatoes.
Flowers: roses and carnations are currently grown in Romania and exported to Europe. Given Romania’s climate, both seeded annuals and perennials are highly recommended for commercial development.
Fisheries: roughly 20 percent of Romania is covered by water. Nile perch and Nile tilapia are in abundance. River and lake fishing, fish farming and fish processing are possibilities.
The Government of the United States acknowledges the contribution that outward foreign direct investment makes to the U.S. economy. U.S. foreign direct investment is increasingly viewed as a complement or even a necessary component of trade. For example, roughly 60 percent of U.S. exports are sold by American firms that have operations abroad.-. Recognizing the benefits that U.S. outward investment brings to the U.S. economy, the government of the United States undertakes initiatives, such as Overseas Private Investment Corporation (OPIC) programs, investment treaty negotiations and business facilitation programs, that support U.S. investors.
VI . TRADE REGULATIONS AND STANDARDS
Trade Barriers. including Tariffs. Non-Ta rs and Import
Taxes
In order to reduce costs and increase competitiveness, all 30 percent import duties were recently reduced to 20 percent. Excise surcharges have been unified at 10 percent. Further reductions are planned during the next two years.
Import bans will be phased out over the next two years starting with beer, soda and batteries in April 1998 and cigarettes in April 1999. Small reductions in fuel duties were introduced in an attempt to reduce costs for producers and transporters. The GOU has promised to lower these rates further in the next three years.
Customs Valuation
Romania follows the Harmonized System (HS) of categorizing goods. All imported goods are subject to a Societe General du Surveillance (SGS) pre-shipment inspection in the country of origin. The SGS pre-shipment inspection covers:
Verification of the quantity and quality of imported goods to ensure conformity with contractual specifications
Price comparison to ensure that the price of imported goods corresponds to the prevailing export market price of comparable goods
Verification of the customs classification code and evaluation of the dutiable value of imported goods according to Romania Customs Regulations.
The GOU is attempting to improve the Customs Administration by installing an internationally recognized computerized documentation system and a new pre-shipment inspection threshold of $2000.00. In July 1998, Romania will adopt the GATT definition of value in place of the Brussels definition, in order to comply with WTO requirements.
Import Licenses
Import certificates, which are non-good-specific, are required and have a validity of 6 months. The certificates take the place of import licenses.
As of August 1, 1993, Form E (Declaration of Imports), can be processed by commercial banks and foreign exchange bureaus. All importers are required to complete Form E.
Export Controls
Items which cannot be exported without prior authorization by the Ministry of Trade and Industry include:
Waste and scrap of ferrous cast iron
Wood charcoal
Timber from any wood trees grown in Romania whether sawn, unsawn, hewn or machined (but not any other articles manufactured from such wood)
Coffee husks
Fresh unprocessed fish
Game trophies
Import/export Documentation
The following supplementary documents may be required by the Romania Revenue Authority at the entry point whenever the following goods are imported:
Human and animal drug medications: Verified pro-forma invoices from the Pharmacy Board
Firearms: Firearms Certificate
Live animals (domestic and wild): Health Certificate
Wild endangered species: Approval Authority
Secondhand clothing: Fumigation Certificate
Explosives: Approval Authority
Seeds and plants: Phytosanitary Certificate
The following supplementary documents will be required at the Customs exit whenever the following goods are exported:
Fish: Health Certificate and Trading License for fish
Minerals: Permit to export minerals and Mineral Dealer’s License
Fresh/dry fruit, vegetables and produce: Phytosanitary Health Certificate
Game Trophies: Permit to export game trophies and wild animals
Hides and skins: Export Buyers License, Export Certificate for hides and skins, Veterinary Health Certificate
Temporary Entry
Many products are shipped through Romania on their way to eastern Zaire and Rwanda. The Customs Administration has recently reduced the time allowed for goods to transit Romania to 21 days.
Labeling. Marking Requirements
The following infornation must be clearly marked on imports and exports: importer/exporter name, consignee, flight/vehicle details, place of discharge, number of packages, container identity, description of goods, air way bill number/bill of lading, and country of origin/destination.
Prohibited Imports The following items cannot be imported into Romania: Pornographic Materials Used motor vehicle tires
Imports banned under international agreements to which Romania is signatory
Standards Importers/exports should contact the Customs Administration for specific information on standards.
Free Trade Zones/Warehouses
There are no free trade zones in Romania. There are bonded warehouses.
Special Import Provisions
Specific questions regarding import regulations should be directed to the Customs Administration.
Membership in Free Trade Arrangements
Romania is a member of Preferential Trade Area (PTA) for East and Southern African States, the Common Market for East and Southern Africa (COMESA) and the Africa-wide Abuja Agreement. Duties and tariffs for countries in these groups, including South Africa, are significantly lower than duties for non-members. Also, Romania, Kenya and Tanzania have formed the East African Cooperation (EAC) Secretariat
VI I . INVESTMENT CLIMATE
Openness to Foreign Investment
Romania’s attitude towards foreign direct investment is highly positive. The Government of Romania, and in particular President Museveni, is working diligently to increase foreign investment in the country. Foreign investors may form 100% foreign-owned companies and majority or minority joint ventures with local investors with no restrictions. Acquisition, takeovers and greenfield investments are permitted.
The Romania Investment Authority screens potential foreign investors to determine the level of incentives for which the investment will qualify. The UIA is both pro-foreign investment and pro-private sector, with representatives from the private sector dominating its Board of Directors.
Right to Private Ownership and Establishment
Foreign and domestic private entities have the right to own property and other businesses and may dispose of them at will. However, Romanian law does stipulate that foreigners may not own land for agricultural purposes. This law is currently under review. Most investors in agricultural production erect a plant to process goods, but use out-growers.
Protection of Property Rights
The President and other senior government officials have repeatedly and publicly reaffirmed that private property will never again be arbitrarily expropriated. The GOU is currently returning land expropriated in the past under the Return of Asian Properties Act. The UIA has not encountered problems with protection of property rights.
Foreign Trade Zones/Free Ports
There are no free ports or foreign trade zones in Romania at this time.
Performance Requirements
There are no performance requirements once the investment has been made. Foreign owned companies are eligible for the same incentives as Romanian owned companies, though the capital requirements for foreign-owned companies is higher.
Depending on the size of the investment, incentives include tax holidays, duty free import of capital goods, and privileges for foreigners such as the duty free import of household goods and a personally-owned vehicle. Smaller investors receive smaller incentives.
Transparency of the Regulatory System
Although copyrights to copy, translate, distribute and publicly communicate material, trademarks, and trade secrets are protected according to Romanian law, enforcement of these provisions is uneven.
Generally, Romanian commercial laws, e.g., company and partnership law, were inherited from the British. Therefore, the rights and obligations of Romanian partnerships are similar to those defined in the original English colonial statutes. Efforts are being made to update regulations and laws governing banking and financial institutions, the stock market, and the buying and selling of securities.
To encourage competition, the big marketing boards that dominated the agricultural landscape have been replaced by authorities and commissions with the power to write regulations.
Corruption
Corruption in Romania has penetrated all levels of society. Public intolerance of corruption is growing, fueled by press reporting and parliamentary investigations. President Museveni has pledged that GOU institutions will root out corruption, but to date only limited progress has been made. |
© World INvestment NEws, 1998.
This is the electronic edition of the special country report on Romania
published in FORBES
Magazine's enriched with complementary information,
such as full interviews, detailed company files and more.
June 1 st 1998 issue
Developed by AgenciaE.Tv |
|
|
|
| |
| | | |
|
