about us | newsletter | contact | archive | members area
"Romania managed to develop services that are sought out all around the world"
Lorian Vintila, ZTE Romania»
  Features:      COUNTRY FOCUS   |   SECTOR ANALYSIS   |

US investments in Romania: Tremendous potential

One of the fastest growing economies in Europe, Romania is an attractive market for foreign investors in several industries, with potential yet to be developed. The Diplomat - Bucharest talked with several major companies, representative institutions and the U.S. Embassy to take the pulse of investment trends, strategic bonds and prospects on the local market. By Petre Barac

2017-06-20 16:44:26 - From the Print Edition

8 Photos
According to statistics published by the National Bank of Romania, US investment in Romania amounted to 1.627 billion Euro, ranked tenth after the Netherlands, Austria, Germany, Cyprus, France, Italy, Luxembourg, Switzerland and Greece, representing 2.5 per cent of total FDI.

"The Romanian economic environment has tremendous potential," Hans Klemm, U.S. Ambassador to Romania told The Diplomat-Bucharest. "It is one of the fastest growing economies in the EU and has distinguished itself in several sectors. Romania attracts significant U.S. investment in the automotive parts, energy, IT and agricultural sectors, and we'd like to see that grow. At the same time, there are challenges that must be confronted. Infrastructure is but one example. There's no question that the potential to expand the U.S.-Romania economic relationship is there, but economic reforms are needed to fully develop that potential. One way we are encouraging the development of this relationship is by bringing the largest ever U.S. government-led trade mission to Romania in October. It's called ′Trade Winds′ and it will connect U.S. companies and organizations to business and government leaders in Romania."

According to Klemm, Romania's economic situation will all depend on what Romania does, but he hopes to see a more transparent, predictable, and stable economic policy environment that will allow Romania to continue to grow rapidly.
"U.S. investors tell us that a stable tax regime is also an important factor when considering where to invest," Klemm continued. "Romania undoubtedly has an impressively skilled workforce and one challenge Romania will face across sectors in the economy will be how to retain Romanian talent."
The Ambassador also stated that legislative changes which broadly affect wages, destabilize or threaten to destabilize the fiscal regime - particularly for investment in the energy sector - are issues U.S. businesses track closely.

"Another area that U.S. businesses watch is infrastructure development," said Klemm. "While Romania has many infrastructure projects on the books, and even has EU funds approved for many such projects, the government's ability to absorb those EU funds and advance the projects has been slower that many U.S. businesses would have liked. In some cases, we know that some investors have decided against investment in Romania based on the infrastructure challenge alone. In all policy areas that affect investment, what the United States hopes is that the government will uphold a policy of transparency and close consultation with stakeholders before implementing changes. In the end, the United States seeks a strong Romania, with robust and sustainable economic growth, and we want to partner with Romania to achieve that."

Google Romania to focus on digital education



In the last few years, a special focus in Google's activity in Romania was on digital education, as Elisabeta Moraru, country manager Google Romania, told The Diplomat-Bucharest. "We have been supporting digital skills in Romania since the opening of the office six years ago, focusing on providing support and training to contribute to reducing the digital skills gap and boosting the local entrepreneurial spirit."

In spring 2016, Google Romania started a special project targeting digital literacy - ′Atelierul Digital′. The programme is aimed at helping Romanians take full advantage of the digital economy, by developing their online digital knowledge and skills which can later be used to enrich their resumes and increase their chances in job placements, as well as encouraging their entrepreneurial endeavours. The program offers a digital platform where people can take digital knowledge courses. In addition, in collaboration with different educational institutions, Google organizes offline training programs through the country.

"We've already trained more than 40,000 people across Romania through our digital workshops, with more than half (54 per cent) being women," said Moraru. "We′ll increase our efforts this year because we believe that more needs to be done to help Romania succeed in the digital world, and we want to be part of that. Last year, we also continued to localize and develop our products and services for Romania. We started with the launch of new Romanian collections on Google Cultural Institute. The most important of them was the Palace of Parliament. Starting with the beginning of 2016, the Palace of Parliament building can be visited virtually with Street View images by any internet user, anytime, from anywhere."

According to Moraru, 2016 also brought a premiere in Romania: the first Chromebook launched in Romania. "Another important step in our effort of localization was made in spring 2017, when Google Translate for Romanian got a very important update: neural translations. This new technology makes Romanian - English translations (and vice-versa) much more accurate and precise."
In the following years, Google wants to foster the growth of digital skills and the creation of more jobs, to invest time and resources to better promote Romania and help companies go global.

Citi Romania is very keen to focus on capital markets



The primarily-consumption-driven economic growth has picked up and the first quarter results that we heard recently give us reasons to be optimistic, as Tibor Pandi, CEO Citi Romania, told The Diplomat-Bucharest. "It gives us reasons to be optimistic about the country's potential to indeed deliver the growth target closer to what the government has projected. It's a first quarter, we need to see the numbers, we need to see their base effects; but from the messages we are getting from the Ministry of Finance they seem to be quite confident that they will be able to deliver this."

According to Pandi, the country is growing, people are getting more confident and that means they are ready to spend, ready to invest, maybe a new car, apartment, a new TV set.
"We also see that exports seem to be doing reasonably well," Pandi continued. "It is a sign that western European markets are doing still reasonably well in the environment which continues to be dominated by the accommodative policies of the European Central Bank which of course is keeping its interest rate environment low and seems to be saying that for the foreseeable future they will not be raising rates."

Citi Romania's CEO also talked about that "shift which was missing from the growth equation two years ago, the awakening of the consumers." He said there is good news but we should be careful at the Central Bank, who already signalled in a sense that the latest measures the Government has introduced for reducing taxes introduces potential risks.

"The first immediate impact is the potential rise in inflation and inflation is of course good up to a certain extent but then it should be controlled," said Pandi. "The second challenge is that all the growth that is driven by consumption but not accompanied by productivity - which apparently is not the case – it is not healthier on the long run. On the short run, it is good because it gives a boost to the economy when we need to invest. For years, people were saving rather than spending so that savings can now be used."

Pandi added that if we look at the industries, there is a crowding out effect currently happening and companies and entrepreneurs are already aware of this.
"The Government crowds out the employment market in a sense that people in small and medium-sized businesses start to feel pressured to find the right workforce," Pandi continued. "Because they try to keep the salaries in sync with their productivity and try to remain competitive. Suddenly, the corporate sector has a problem in securing talent and retaining workforce because the Government becomes a competitor. This is not going to happen in the sectors which are above average in terms of salaries. It will be crowding out in the sectors where the wages are lower. We have to be always conscious of how dependent we are on Western Europe."

According to Pandi, good news for Romania may be the outcome of the French election and the Dutch election. "By the look of things, Merkel seems to be on the good track, but never say never after Trump and Brexit. It seems like there will be no continuation of the Brexit and Trump-like elections in the core of Europe which is good news because these are core export markets for Romania. It means that if these markets remain stable the economy will not change dramatically."

He said that the Romanian banking industry is going through a certain phase of consolidation. "There is a commitment by the top ten banks to try to use this whole period to consolidate and try to become one of the top five players maybe because there is this view amongst universal banks to grab as much as possible of the market share as quickly as possible and then be able to dominate or be reasonably profitable, which probably makes sense from their perspective."

In 2012, Citi decided to become a corporate bank and that turned out to be a very good decision because the parameters of the bank have improved dramatically, according to its CEO.
"That means we are continuing to focus on the corporate segment. We are very keen to focus on capital markets. Romania has the largest potential in the region, only because of its sheer size. Its capital market has a very large potential. Should more companies be listed, we′d definitely like to be part of that process."

According to Pandi, there is consensus that the market should grow and there is huge interest in the stock exchange to finally achieve the status of emerging market. "We need the listing of Hidroelectrica, something of that size or maybe some more listings to reach the MSCI criteria. We are on the verge of getting there but there needs to be a lot of patience and work."

Xerox: We always adapt technology to customer needs



Xerox Romania registered an increase of its sales of multifunction equipment and laser printers in the first quarter of 2017, Gabriel Pantelimon, general manager of the company, told The Diplomat-Bucharest.
"The company's strategy is to increase sales on the hardware segment," said Pantelimon. "Romania is on the same business trend as Poland, Czech Republic or Hungary. In Central and Eastern Europe, things are evolving pretty much the same in all countries. There are business opportunities for both hardware and software segments, including document management for companies."

Xerox is in the middle of the largest product launch in history, with 29 new products to enter the markets. "We launched 29 new products, both in the A4 laser printer area and in the A3 multifunction product range," said Pantelimon. "These new machines are meant to be workplace assistants and they already come with included technologies such as Google Drive or Dropbox. Design looks a lot better and the touch-screen is like a tablet. They even have a tutorial that guides you through how to use the printer."

Many of the products have already been brought to Romania. It is one of the major investments of Xerox and soon all these products will be available on the Romanian market.
"The SME area is the most dynamic, but we also have projects with larger clients," said Pantelimon. "The usual business comes from the area of small and medium enterprises and that is the reason why our investments go to that area. Many of the newly-launched products are addressed to these companies. Xerox wants to gain more market share on the SME segment at a global level. Our industry is trying to keep up with the user′s way of working: digital documents, social media, cloud, etc. Xerox had and has close contact with the customer. We do not invent something and push the clients in that direction. We always adapt our technology to meet customer needs."

Pfizer is looking at expanding their footprint in Romania



Pfizer Romania is encouraged by the fact that health has been elevated to the level of national priority and successive Governments have had the topic high on their agenda, Mirela Iordan, Country Manager of the company, told The Diplomat-Bucharest.

"We expect policy measures aimed at increasing the health status of the population to be put in place. In a country like Romania, where financial resources are strained, putting more emphasis on prevention rather than treatment is key. One such much awaited measure is the availability of the pneumococcal vaccine for children as part of the National Immunization Program, ensuring the prevention of pneumonia, a leading cause of death in children under age five. While the pneumococcal vaccine was included in the National Immunization Program in 2013, it has not been acquired by the health authorities to date. Meanwhile, every year 600 children die from pneumonia. In the context of Romania having the highest infant mortality in the EU, our country cannot afford to spend another day limiting access to the pneumococcal vaccine with the highest coverage, and which has proved its efficiency in over 150 countries around the world."

The company is also encouraged by the progress made in tobacco control policies, with Romania adopting the indoor smoking ban legislation. "The progress was recognized at European level, Romania jumping 12 places in the Tobacco Control Scale reaching seventh ranking (from 19th in 2013)," said Iordan. "This hopefully will lead to a reduction in smoking levels and a reduction in disease associated with smoking. Pfizer has a safe and efficacious product against tobacco dependency, offered freely as part of the Stop Smoking National program run by the Ministry of Health. We hope the program to restart functioning and tobacco dependency treatment and counselling to be widely available."

Pfizer Romania is in the midst of an extensive recruiting process for 40 specialists that would by next year make up the team of a new logistics services hub.
"Basically, we are talking about a centre that will serve as an interface between the sales teams of all Pfizer offices across Europe and our 16 production units around the world, in an effort to increase the efficiency of our production and stock planning and make our business run more smoothly," stated Iordan. "Selecting the headquarters for this important new element of our global organization was a long process, that analysed in great detail a lot of locations and looked very carefully at all pros and cons. Yet, in the end, Romania was considered the best option for the company. It was a decision that made sense from a stability point of view, thanks to our steady economic growth over the years and our membership in the EU, but very importantly from the point of view of the workforce. The global project team responsible for putting the hub in place appreciated the great mix of skills we can find in Romania, the high quality tertiary education and last but by no means least, the excellent language skills. I would imagine that these benefits I have just mentioned are not something we alone have noticed, but something that all potential investors factor into their decisions."

According to Iordan, there is also a lot of further potential for development in the health industry, and a lot of place for start-ups and disruptive business models that can mix providing high levels of quality medical services with technology-based platforms to increase patient accessibility at national level.

"So far, the outlook for the year is positive and we envision a single-digit growth in line with the market – the latest estimates point to an advance of no more than four per cent this year," added Iordan. "We are committed to enhancing our local portfolio with the latest, most innovative products, treatments that can make a real difference in patients' lives. "Our main objective is very clear: to increase patients' access to the latest generation of medication and to help Romania's population be healthier, while also being conscious of the need to keep spending in check. To accomplish this, we are always looking at how we can expand our local portfolio with the newest treatments to come out of Pfizer R&D departments across the world, how to grow our team to be excellent professionals and how to cooperate with other players in the health system, both institutional and private."

Furthermore, Pfizer is looking at expanding their footprint in Romania. "One opportunity in this direction is the new hub, which we hope to see grow and thrive in coming years," Iordan told The Diplomat. "At the same time, in 2014, we initiated a 5.4 million USD investment program design to extend our facility in Cluj with the final purpose of growing its production capabilities. Thus, we hope to grow from three million packages in 2013 to 11 million next year and also to extend the reach of our exports beyond the 35 countries we currently ship to."

In 2016, Pfizer Romania reported a growing turnover of 644 million RON (around 143 million Euro), thanks to the performance of the Established Products division, which is responsible for those products that have lost their patent protection.
"However, if we were to look in a consolidated manner at Pfizer's entire activity in Romania and thus also consider our unit in Cluj Napoca, which is a separate legal entity, the cumulated turnover would increase to 708 million RON (157 million euro)," underlined Iordan. "Our profit, on the other hand, following the numerous changes on the pharma market since 2015, as well as the high level of the clawback tax (which alone accounted for 10.5 per cent of our turnover), our year on year profit halved to ten million RON in 2016.

In terms of employees, Pfizer Romania has a team of 330 people, including 130 working in the Cluj unit, and the team will grow with another 40 specialists in the logistics hub over the coming year.

Colliers to expand their turnover and profit by 50 per cent this year



Romania has become a two-speed economy, with consumer spending being fuelled by fiscal spending in recent years and it would be unsustainable for this trend to continue, Ilinca Paun, Managing Partner Colliers International, told The Diplomat-Bucharest.

"At the same time, we are seeing a renaissance in the services industry. Romania has become one of the prime locations for IT or BPO/SSC companies to set up shop and this evolution is closely reflected in the office leasing numbers. Young people in Romania are well educated, they are willing to adapt to an unpredictable work environment and are eager to learn. All these factors help generate a critical mass of smart creatives that can push the country forward. The main issue is that this creativity needs to be followed up with investments in the long-term development potential of the country."

According to the quoted source, Romania continues to present great opportunities for foreign investors. "Investors already have a proven track record of the existing companies and we are seeing an increasing number of firms expanding their local capabilities," said Paun. "In addition, the country benefits from skilled professionals, low levels of taxation as well as a renewed commitment towards the rule of law and a EU-centered future. One of the main challenges faced by investors is workforce availability in some sectors/ regions of the country. This issue is particularly binding for manufacturing and construction jobs in the western regions. In this case, the lack of infrastructure has generated an agglomeration of investments in a condensed area, which in turn is exerting pressures on workforce availability.

"The second challenge for this year is that Romania risks overshooting the deficit target of three per cent of GDP, which in turn may lead to higher taxes in the future. The unpredictability associated with this scenario is certainly taking a toll on investors' prospects."

Paun also said that political turbulences at the beginning of the year were a turning point for Romania. "The country risked jeopardizing its international credibility, but ultimately emerged with a renewed commitment towards the rule of law and its European values. From that point onwards, we have observed a more balanced position from political leaders. At the same time, we are quite concerned with the potential impact of some of the legislation proposed for discussion."

In her opinion, the biggest concern for the time being is the impact that these measures may have on the budget and, ultimately, the long-term development prospects for the country.
Talking about Colliers' development, she underlined that agility and flexibility of the company are the attributes to use in order to anticipate clients' needs. "Millennials are becoming the predominant generation in Romanian office spaces, which results in a series of new requirements," said Paun.

"They want a more connected life, with a more fluid boundary on what an office space should be. We are striving to offer a new vision for companies in this respect."
Colliers currently has approximately 80 employees and they are looking to expand their turnover and profit by approximately 50 per cent during the current year. "We believe the market is very active at this point in time and intend to capitalize on these conditions," Paun concluded.

Federal-Mogul wants to expand its operations in Romania



Bogdan Dimitriu, Plant Manager, Federal-Mogul Motorparts Ploiesti, told The Diplomat-Bucharest that the automotive industry will continue to grow, but at a slower pace compared to the period between 2008 and the present.

"The local industry is more competitive now in terms of both operators and labour force needs," said Dimitriu. "As the market matured, the level of growth, which characterized the previous years will be more difficult to achieve, but I am positive about the evolution of the Romanian automotive industry.
In his opinion, the main challenge they are facing nowadays is actually derived from what used to be Romania's main assets, namely competitive labour force costs and skilled professionals. "On the one hand, the recruitment process has become more complex and it engages more resources from the companies who are competing over a limited number of potential candidates which continues to decrease. On the other hand, labour force mobility has increased and this affects the relations between employers and current employees. The employers face challenges to retain the needed personnel while the employees might be missing some opportunities offered by companies for those who pursue longer tenures with the firm."

The company has now more than 50 jobs open at both the production site and the shared services centre and they encounter difficulties filling them in.

"In the past years, the Romanian automotive industry has been very attractive for both existing investors and those who took the decision to open facilities in the country," added Dimitriu. "We can be included in both these categories due to the strategy we implemented in Romania. We entered the market in 2015, started with around 250 employees and constantly expanded our operations here. In the meantime, we almost tripled the personnel, expanded production at the brake pads plant, started a new business division, wipers, in 2016, and developed the shared services centre in Bucharest that is now a very important services hub for our clients all over the world."

Federal-Mogul completed the expansion of the brake plant in order to accommodate two new production lines.
"We will continue the ambitious recruiting process already in place since 2015," Dimitriu underlined. "As such, by the end of 2017, we will be close to 1,000 employees at the two facilities in Ploiesti and the shared services centre in Bucharest, not mentioning the outsourced services (cleaning, warehouse and logistic, guarding, other) that are adding more than 100 jobs."

Federal-Mogul wants to expand its operations in Romania and will pursue the same strategy in upcoming years.
"Ever since opening our first production facility, we have constantly developed and integrated new strategies to secure our clients' satisfaction with our products. In addition, we plan to obtain new certifications for the operating systems we use in our facilities," Dimitriu concluded.

Kimball Electronics looking to consolidate its Romanian business in the nearest future



US companies are bringing to Romania a different way of thinking, a new type of business behaviour and a different working environment based on performance and continuous improvement, Dan Copocean, general manager of Kimball Electronics Romania, told The Diplomat-Bucharest.

"There are numerous US companies present in Romania and especially in the region of Timisoara, which has become a high-tech investment area for foreign companies in general, and US companies in particular. Relying on the figures published by media, I believe that the Romanian economy continues its development, but there are still many aspects to be improved. One of these is the rapid development of the infrastructure, which should be a priority. Another aspect is the overall predictability and stability. Companies need stable legislation to develop strong business cases."
In his opinion, Romania might benefit from several opportunities. "Firstly, I believe that the manufacturing sector will continue to be of interest for investors due to competitive labour costs, especially in relation to Asian countries - which are considered as options - but where wages are increasing at a higher speed than in the EU," said Copocean. "Romania remains attractive from the labour force perspective and it will probably maintain this advantage. Our country still has skilled professionals, but they are concentrated in certain areas. There, people are very skilled but the labour costs are also higher in comparison with the other regions."

Another major opportunity, according to Dan Copocean, is to eliminate logistics costs implied by the fact that, to a high extent, production from Romania is exported and imported afterwards. As such, we should enhance and support direct relations between companies with local manufacturing operations. "On the challenges side, companies have to conduct their businesses and address legislative and political changes at the same time," he added. "Predictability would be of great value for those generating added value to the Romanian economy."

According to the quoted source, Kimball Electronics is in the early stages of consolidating its operations in Romania so the changes occurred between this year and last year are significant. "We plan to continue our growth and to extend our activity," stated Copocean. "Yet, the dimensions of our prospective growth are highly dependent on the existing skilled human resources in our area. We are active in three end markets: Automotive, Public Safety, and Industrial. The major accomplishment will be to shift the operations more towards the automotive market, as we will activate two more customers. Today we have two industrial customers, one public safety customer and two from the automotive sector."

The objectives for the company in the coming years are to further develop their business in Romania and generate sustainable results for our shareholders.
"As we are in a start-up phase, we still need to consolidate the business in the nearest future," added Copocean. "Therefore, we will continue ramping up in 2017. For the time being, we have almost 250 employees and we expect to grow our employee base by 30 per cent at the end of 2017."
Kimball Electronics is a global contract electronic manufacturing services company that specializes in durable electronics for the medical, automotive, industrial, and public safety end markets. From its manufacturing operations in the United States, China, Mexico, Poland, Romania, and Thailand, Kimball Electronics provides engineering, manufacturing, and supply chain services which utilize common production and support capabilities to a variety of industries globally. Kimball Electronics is headquartered in Jasper, Indiana.



COMMENTS
There are 0 comments:

 
ADD A COMMENT
 
Name
Email
Comment
Validation Code
   
 
 

0 Comments  |  30375 Views
Daily Info
AFI Europe Romania posts net operating income of over 37 million Euro in the first nine months

AFI Europe Romania published its financial results, with the net operating income from its income producing assets in Romania of over 37 million Euro in the first nine months ...

Openville Timisoara to open in the fourth quarter of 2018

The Openville Timisoara development, the largest mixed-use project in the west of Romania will be opened in the fourth quarter of next year, upon completion of the first phase...

URBB posts record production figure in 2017

United Romanian Breweries Bereprod (URBB) registered a record production figure exceeding two million hectolitres for the period January-November 2017, representing a 10 per c...

Cristian Busu has been reappointed president of Electrica's board

Cristian Busu has been reappointed president of Electrica board, the electric energy supplier. He is a member of the board since 2014 and was chosen in this position during th...

Transelectrica inaugurated the Campia Turzii station, fully refurbished with 9 million Euro

Transelectrica inaugurated the 220/110/20 kV Campia Turzii (Cluj County) electricity station, after an investment of about 42 million RON (9 million Euro).

 
 
   
advertising

advertising

advertising

advertising

advertising

advertising

advertising

More on Features
Principles Governing Foreign Investments in Romania

The legal regime of foreign investments in Romania is governed by the principle of equal treatment, which means that, subject to the principle of most-favoured-nation treat...

Austrian investments in Romania: Companies are generally happy with market development

Austrian investors see Romania as an excellent investment destination and the largest market in South-Eastern Europe. Romania represents a resourceful country, dominated by...

German investments in Romania: Companies are worried about fiscal measures and infrastructure

Romania still offers good business opportunities, but in order to continue foreign investments and job creation, companies need a stable economic environment, legal stabili...

Chinese investments in Romania: Aiming potential

For many years, China has had only several large companies present and active in Romania, mainly in technology, energy, trade, farming and several newly announced ones in a...

Operational leasing on the road to growth

The Romanian operational leasing market went up by 7.5 per cent in the first semester of the year compared with the end of 2016, exceeding 64,350 units. During this period,...

French investments in Romania: Building on solid foundation

France and Romania became business partners in the early '90s and since then the bonds have been built on trust and mutual commitment. Currently, French investors have gain...

Transport and Logistics: Plenty more to come

The vacancy rate for logistics and industrial spaces in Bucharest is close to zero, with low deliveries of new projects and high demand in the first quarter. According to d...