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Compared to Central and Eastern European countries Romania was a late bloomer as an FDI destination in the region. The Romanian government's cautious approach to privatization and to transition in general had led to relatively slow FDI inflows during the early 1990s. The situation changed dramatically in 1997 when substantial privatization efforts along with changes in the legislative framework provided new opportunities for foreign investors. As a result, the volume of FDI inflows in 1997 and 1998 was thirteen and twenty-one times larger, respectively, than the amount received in 1993_ In the following two years a slowdown was registered as FDI inflows as a percentage of GDP decreased from 4.9 percent in 1998 to 10 percent in 1999 and 2.8 percent in 2000.

Nevertheless, the total FDI stock accumulated between 1993 and 2000, equal to 6,429 million dollars, made Romania the fourth largest FDI recipient among ten countries in the region.34

At the end of 2000, there were 77,241 companies with foreign capital in Romania, which represented about 9 percent of all companies registered in the country.35 Transnational companies played an important role in the Romanian economy accounting for two-fifths of sales and exports. FDI is mainly concentrated in labor intensive industries and have been primarily export-driven (Dumitriu and Hunya, 2002, Voinea, 2002). About 45 percent of FDI stock in 2000 was concentrated in manufacturing industries, with the rest found mainly in trade and financial services

(Hunya, 2002).
In terms of the distribution of FDI by the source country, at the end of 2000, 61 percent of the FDI stock was accounted for by investors from the European Union, 10 percent by the Asian capital and 8 percent by American investors ( Hunya, 2002). The largest source countries included the Netherlands, France, Italy, Germany, the United States, the United Kingdom and Greece.
In 2005 Romania attached EUR 5.2 billion in FDI. In 2006, foreign investors showed a special appetite for the automotives sector, electronics and household appliances, constructions, pharmaceuticals and bio-diesel production. Automotives was appealing to investors because of its long tradition in Romania. Production of customer electronics and household appliances benefits from the ample availability of skilled workforce the construction sector flourished due to the continuing boom in the real estate market and bio-diesel production benefited from large areas put to fuel-yielding crops. The informational technology and communications sector has also attracted foreign investment due to the availability of highly qualified IT specialists.

In 2006 inward FDI reached EURO 9/082 billion, registering at 74.24% increase against the same period last year (EURO 5.213 billion), including the amount of EUR 2.2 billion from the acquisition of 36.8% in BCR capital by ERSTE Bank.
The most important share as far as the inward FDI is concerned belongs to the “equity shares” amounting EURO 4098 million as 45.1% of inwards FDI, secondly coming is the “other capitals” as inter company transactions amounting EURO 3029 millions as 33.3% of inwards FDI, followed closely by “reinvested earnings” amounting EURO 1956 millions 21.5% of inward FDI.
During October 2001 and December 2006, the Regional Development Agencies registered 535 investment projects, exceeding the equivalent of USD 1 million (benefiting of the incentives granted by Law no. 332/2001 regarding the direct investment with significant impact on Romanian economy). The total value assumed for these projects is more than USD 6.615 billion, the foreign share representing USD 4.749 billion representing 71.79% of the total. From this projects until the end of December 2006, 350 were finalized, with a value of USD 3.334 billion.

In December 2006, foreign direct investment with significant impact in economy were USD 210 million, out of which:
- Greenfield investment USD 39.5 million
- Brownfield investment USD 169.6 million
The investments were registered in the following mail fields:
- telecommunications: 62 projects with assumed value of USD 1.457 million, representing 22.01% from total,

- wood processing: 22 projects with assumed value of USD 657 million, representing 10.15% from the total,

- services: 69 projects with assumed vale of USD 811 million, representing 12.26% form the total,

- Trade- 97 projects with assumed value of USD 737 million, representing 11.13% from the total;

- Energy sector- 25 projects with assumed value of USD 509 million, representing 7.7% from the total;

- Machine building- 44 projects with assumed value of USD 693 million, representing 9.94% from the total;

- Constructions and constructions materials- 42 projects with assumed value of USD 366 million, representing 5.55% from the total;

- Electronics and electro techniques - 16 projects with assumed value of USD 232 million, representing 3.51% from the total;

- Metallurgy- 19 projects with assumed value of USD 234 million, representing 3.54% from the total; 37

A classification by value, indicates that were registered 7 projects over USD 100 million, 17

projects with value between USD 50 and 100 million, 165 projects with value between USD 10 and 50 million, the rest until 535 being projects with value between USD 1 and 10 million.

As concerns the regional spreading, most projects were registered in:

1. Bucuresti-Ilfov Development Region - 298 projects, with assumed value of USD 4.007 million, representing 60.58% from the total, of which foreign investment 2.969 million USD, representing 44.07%;

2. Centru Development Region (counties Alba, Brasov, Covasna, Harghita, Mures, Sibiu) - 81 investment projects, with assumed value of USD 972 million, representing 15.18%, of which foreign investment USD 657 million, representing 44.88% from general total;

3. South-Muntenia Development Region (counties Arges, Calarasi, Dambovita, Giurgiu) - 40 projects, with assumed value of USD 607 million, representing 9.18% from the total, of which foreign investment USD 485 million, representing 7.33%

As concerns the country of origin, foreign investors that registered investment projects in value exceeding USD 1 million, are coming from the Netherlands, with USD 1,479 million, representing 22.35% of total investment, followed by Austria with USD 722 million, representing 10.91%, from Germany with USD 634 million, representing 9.59% and from France, with USD 507 million, representing 7.66% from the total investment_

According the World Investment Report -2007 issued by United Nations Conference on Trade and Development UNCTAD, in 2006 Romania represented foreign investor's top destination in SE Europe, with 43.2% out of the total attracted FDI in the region.

W I R also recorded Romania highest position in attracting foreign investment with USD 11.4 billion, as a consequence of EU membership, big privatizations, and low production costs.

Comparing Romania's performance in attracting foreign direct investment with the ten state's that became EU members in 2004, our country attracted 29.2% out of the total foreign capital placing us on the second position after Poland in new wave countries entering the EU.

Joining the EU gradually transformed the business environment, having a significant impact on attracted FN. Consequently to this evolution Romania's rank in the UNCTAD Performance Index significantly improved from 101st position in '90 -C92 to the 21st in '04-'06 .

As far as the number of announced and implemented Greenfield projects is concerned, Romania attracted 46.1% out of the total number in SEE, holding the highest position with 362 projects. At the same time, comparing Romania' s performance with that of the ten countries that joined the EU in may 2004, we rank first ahead of Poland (322 Greenfield projects) Hungary (233) and Czech Republic (174).

According to UNCTAD experts, the future evolution of the FDI still indicate high rates as a consequence of EU membership, competitive labor costs as important factors for efficiency seeking FDI also in high value -added industries. EU accession helps anchor the ongoing reforms and support the convergence of the economy, the increase of judicial independence, transparency in public administration, for enhancing Romania competitiveness as destination for foreign direct
investment.

During the first 8 months of 2007 inward FDI reached EUAO 4139 million. The most important share as far as the inward FDI is concerned, belongs to the "other capitals" as inter company transactions amounting EURO 2095 millions as 50.6% of inward FDI, secondly coming is `"reinvested earnings" amounting EURO 1534 million as 37.1% of inward FDI, followed by "equity shares" amounting EURO 510 million as 121% of inward FDI.38
Foreign direct investment flow attracted by Romania in the first 3 months of the current year reached aprox. Euro 1.7 billion, thus registering a 27.5% increase against same period 2007. Considering the FDI structure, capital participation and reinvested profit amounted to 57.2 percent of total FDI, while infra-group loans made up for the remaining 42.8 percent.

The FDI development in Ql 2008 proves once again that Romania is one of the most attractive destinations in the pool for placing foreign capital.

Article Source: http://depositarticles.com/

www.registrufirme.ro/

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