Economy of Romania

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Economy of Romania
Currency	Leu (Leu or RON)
Fiscal year	Calendar year
Trade organisations	European Union, WTO
Statistics
GDP (PPP)	$274.0 billion (IMF 2008 est.)[1] (41th)
GDP growth	5.4% (IMF, 2008 est.)
GDP per capita	$12,285[2] (IMF 2008 est.)
GDP by sector	agriculture (8.3%), industry (37.1%), services (55.2%) (2008 est.)
Inflation (CPI)	6.67% (November 2007[3])
Population below poverty line	6.6% (2008 est.)
Labour force	10.012 million (2008 est.)
Labour force by occupation	services (37.7%), industry (36.7%), agriculture (8.6%),(2008)
Unemployment	3.9% (May 2008)[4]
Main industries	iron, steel, nonferrous metals, chemicals, food processing, machinery and transportation equipment, textiles and clothing, electronics, construction, furniture and other wood products, shipbuilding and refurbishment, windmills, pharmaceuticals, medical equipment, textiles and footwear, light machinery and auto assembly, mining, timber, construction materials, metallurgy, petroleum refining, computers
External
Exports	$93 billion f.o.b. (2008)
Export goods	-
Main export partners	Italy 15.5%, Germany 14.0%, Turkey 7.9%, France 7.4%, UK 5.5%, Hungary 4.2%, U.S. 4.1%, Austria 3.1%, Netherlands 2.1%, Bulgaria 2.7%, Spain 2.4%, Greece 2.1% (2005)
Imports	$123 billion f.o.b. (2008)
Import goods	-
Main import partners	Italy 19.8%, Germany 14.0%, Russia 8.3%, France 6.7%, Turkey 4.9%, China 4.1%, Austria 3.7%, Hungary 3.3%, Kazakhstan 3.3%, Poland 2.9%, UK 2.9%, U.S. 2.8% (2005)
Public finances
Public debt	$61.76 billion (2008 est.)
Revenues	$77 billion (2008 est.)
Expenses	$82.1 billion (2008 est.)
Economic aid	NA
Main data source: CIA World Factbook All values, unless otherwise stated, are in US dollars
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Romania is an upper-income EU member economy of Central-Eastern Europe,^[5] Romania is also known as a Carpat Tiger because of its high growth rates and rapid development. Romania has the 11th largest in European Union by total nominal GDP and the 8th largest based on purchasing power parity and is one of the fastest growing major nation in recent history with consistent annual GDP growth rates above 6% (+8% for 2008 ^{[6] [7]}). Romania is a member of the European Union (7th largest country), its most important trading partner. Its capital, Bucharest (with 2.6 million people - metropolitan area), is one of the largest financial centres in the region. Romania has experienced growth in foreign investment with a cumulative foreign direct investment totaling more than $115 billion since 1989.

Certain forecasts indicate that Romanian GDP will double by 2011.^{[8][9][10][11]} Romania is one of the most stable and prosperous states of Central, Eastern and South Europe. Preliminary estimates for 2008 show a real GDP growth of 7.2%, while the forecasts for 2009-10 indicate an average of 6-6.5% per year^[12] Future prospects are tied to the country's increasingly important integration with the European Union member states. Romania will overtake Italy in 2020 (GDP per capita). ^{[13][14] [15]} The country is expected to join the Eurozone in 2014.

Romania also has a strategic port which makes it more competitive than many of its neighbors to carry out such entrepreneurship activities. The Port of Constanta is the busiest on the Black Sea, surpassing others. In addition, Constanta's port infrastructure and skilled workforce, which is due to the success of Romania's education policy in producing skilled workers, is also fundamental in this aspect as they provide easier access to markets for both importing and exporting, and also provide the skill(s) needed to refine imports into exports.

Due to the dynamic boom economy in 2008, Romania now has 10 billionaires (in US dollars), compared to 2 in 2006. ^[16]. Romania is experiencing decline in mass emigration as the large difference in standards of living are decreasing. ^[17]

Contents 1 History 1.1 Before World War II 1.2 Economy during 1944 - 1989 1.3 Transition towards a market economy 1.4 Developed market economy within the EU 2 Tiger economy 2.1 Romania's economic strength 2.2 National budget 2.3 Economic growth 2.4 Diversification 3 Currency system 3.1 Romanian leu 3.2 Exchange rates 4 Natural resources 4.1 Energy 5 The fulfillment of the Maastricht criteria 6 Physical infrastructure 7 Primary sectors of the economy 7.1 Agriculture 7.2 Industry 7.2.1 Construction 7.2.2 Manufacturing 7.2.3 Car manufacturing 7.2.3.1 Automobiles 7.2.4 High technology 7.2.5 Arms industry 7.2.6 Fishing 7.3 Services 7.4 Biotechnology 7.5 Tourism 7.6 Banking and finance 7.6.1 Stocks 7.6.2 Investment 8 Socio-economic characteristics 8.1 Labour force 8.2 Wages 8.3 Taxation and borrowing 8.4 Regional variation 8.4.1 Economy of Bucharest 8.5 Growing middle class 8.6 Information Technology 9 Romanian-Moldovan economic relations 10 Economic relations with the United States 11 Economic Structure and Sustained Growth 12 External trade and investment 12.1 Global trade relations 12.2 Balance of payments 12.3 Foreign direct investment 12.4 Romanian investments abroad 13 Environmental concerns 13.1 Post-industrial economic developments 14 Institutional membership 15 See also 15.1 Wikitravel 16 References

[edit] History

[edit] Before World War II

After World War I, the application of a radical agricultural reform, the passing of a new constitution, one of the most democratic on the Continent, created a general-democratic framework and allowed for a fast economic growth (the industrial production doubled between 1923-1938). With an oil production of 7.2 million tons in 1937, Romania placed second in Europe and the seventh in the world.^[18]

[edit] Economy during 1944 - 1989

On the negative side, the legacy of the Ceausescu's period was a bloated heavy industry using archaic production methods, consuming lots of resources, and producing low-value goods (the refining capacity is over ten times what was needed, the steel production capabilities two-and-a-half times, the aluminum production facilities five times). Most of what was produced could not be sold anywhere, and ended up sitting and deteriorating outside the factories where it was made, while light industries were ridiculously undersized (Romanians had to wait 3 years for a washing machine, 2–3 years for a color TV, 5–10 years for a car), and technologically obsolete. The communication network was, with the exception of the modernization of the trunk railway lines, left at the 1950s' level. Romania had, in 1989, only a 100 km (68 mile) stretch, of motorway, and even that in a very poor state.

[edit] Transition towards a market economy

(1990-2006)

Economy of Romania
National economic indicators
Unemployment	3.6% August 2007
GDP growth	7.7% 2005–2006
CPI inflation	3.4%
National debt	$42 billion
Poverty	12.6% 2005
Monetary value
Exchange rate (per 1 €)	3.5971 January 3, 2008
Exchange rate (per 1 $)	2.4377 January 3, 2008
Exchange rate (per 1 CHF)	2.1911 January 3, 2008
Exchange rate (per 1 £)	4.8096 January 3, 2008
Exchange rate (per 100 ¥)	2.2444 January 3, 2008

Privatization of industry was pursued with the transfer in 1992 of 30% of the shares of some 6,000 state-owned enterprises to five private ownership funds, in which each adult citizen received certificates of ownership. The remaining 70% ownership of the enterprises was transferred to a state ownership fund, with a mandate to sell off its shares at the rate of at least 10% per year. The privatization law also called for direct sale of some 30 specially selected enterprises and the sale of "assets" (i.e., commercially viable component units) of larger enterprises.

Nowadays, the inflation rate is around 8% annually, although estimated^[19] by the BNR at coming within 6% for the year 2006 (the year-on-year CPI, published in March 2007, is 3,66%). Also, since 2001, the economy has grown steadily at around 6-8%. Therefore, the PPP per capita GDP of Romania is $12,285.

Financial and technical assistance continued to flow in from the U.S., European Union, other industrial nations, and international financial institutions facilitating Romania's reintegration into the world economy. The International Monetary Fund (IMF), World Bank (IBRD), the European Bank for Reconstruction and Development (EBRD), and the U.S. Agency for International Development (USAID) all had programs and resident representatives in Romania. Romania also attracted foreign direct investment, which in 1997 rose to $2.5 billion.

Romania was the largest U.S. trading partner in Central-Eastern Europe until Ceauşescu's 1988 renunciation of Most Favored Nation (non-discriminatory) trading status resulted in high U.S. tariffs on Romanian products. Congress approved restoration of MFN status effective 8 November 1993, as part of a new bilateral trade agreement. Tariffs on most Romanian products dropped to zero in February 1994 with the inclusion of Romania in the Generalized System of Preferences (GSP). Major Romanian exports to the U.S. included shoes and clothing, steel, and chemicals. Romania signed an Association Agreement with the EU in 1992 and a free trade agreement with the European Free Trade Association (EFTA) in 1993, codifying Romania's access to European markets and creating the basic framework for further economic integration. At its Helsinki Summit in December 1999, the European Union invited Romania to formally begin accession negotiations. In 2002, the target date of 2007 was set for Romania, along with Bulgaria, for its accession efforts. This was confirmed in 2003 at the Thessaloniki Summit and then in early 2005 Romania and Bulgaria signed the adherence treaty to EU. They formally joined the EU on January 1, 2007.

During the latter part of the Ceauşescu period, Romania earned significant credits from several Arab countries, notably Iraq, for work related to the oil industry. In August 2005, Romania agreed to forgive 43% of the US$1.7 billion debt owed by an Iraq still largely occupied by the military forces of the U.S.-led "Coalition of the Willing", making Romania the first country outside of the Paris Club of wealthy creditor nations to forgive Iraqi debts.^[20]

Nevertheless, it is expected that the Romanian economy will continue fast growing based on a bigger strength of the industry, the growth of the global economy and the biggest trade with Russia, Latin America and Asia.

(2000-2007)

Growth in 2000-07 was supported by exports to the EU, primarily to Italy and Germany, and a strong recovery of foreign and domestic investment. Domestic demand is playing an ever more important role in underpinning growth as interest rates drop and the availability of credit cards and mortgages increases. Current account deficits of around 2% of GDP are beginning to decline as demand for Romanian products in the European Union increases. Inflation is under control. Recent accession to the EU gives further impetus and direction to structural reform. In early 2004 the government passed increases in the Value Added Tax (VAT) and tightened eligibility for social benefits with the intention to bring the public finance gap down to 4% of GDP by 2006, but more difficult pension and healthcare reforms will have to wait until after the next elections. Privatization of the state-owned bank BCR took place in 2005. Intensified restructuring among large enterprises, improvements in the financial sector, and effective use of available EU funds should strengthen output growth.

[edit] Developed market economy within the EU

(after January 1, 2007)

On 1 January 2007 Romania entered the European Union. This led to some immediate international trade liberalization, but there was no shock to the economy. The government is running annual surpluses of above 2%.

This is to be contrasted with enormous current account deficits. Low interest rates guarantee availability of funds for investment and consumption. For example, a boom in the real estate market started around 2000 and has not subsided yet. At the same time annual inflation in the economy is variable and during the last five years (2003-2007) has seen a low of 2.3% and high of 6.3%.

Most importantly, this poses a threat to the country's accession to the Eurozone. The Romanian government plans for the euro to replace the leu in 2010. However, experts predict that this might happen as late as in 2012. From a political point of view, there is a trade-off between Romania's economic growth and the stability required for early accession to the monetary union. Romania's per-capita PPP GDP is still only about a 60% of the EU25 average, while the country's nominal GDP per capita is about 53% of the EU25 average.

In the winter of 2004 the political leadership of the current government introduced a flat tax of 16% that was introduced on January 1, 2005. This is done in hope for higher GDP growth and greater tax collection rates. The reform, which some called a "revolution" in taxation, was met with mild discussions and some protests by affected working classes.

The accession of Romania into the European Union has brought about new geographical dimensions as the EU has opened up to the Black Sea.

Member State sorted by GDP	GDP in billions of US $ (2007)	GDP % of EU (2007)	Annual change  % of GDP	GDP per capita in PPP US $ (2007)	Public Debt % of GDP (2006)	Deficit % of GDP (2006)	Inflation % Annual (2007)	Unemp. % (2006)
European Union [10]	15,183.4	100.0%	2.8	29 342	63.8	-2.6	2.2	7.5
Romania	276.6	2.0%	7.7	12,285	21.2	-4.0	4.5	4.5

[edit] Tiger economy

This is a chart of trend of gross domestic product of Romania at market prices by the International Monetary Fund with figures in millions of USD.

Macroeconomic indicators
Romanian coins
GDP (PPP)	276 billion USD (2007)
GDP (Nominal)	220 billion USD (2007)
GNP	249.7 billion USD (2007)
GDP growth	7.7% (2006)
GDP per capita	12,285 USD (2008)
GNI per capita	11,710 USD (2007)
Inflation (CPI)	3.1% (2006)
Gini index	52.2
Unemployment	3.6% (2007)
HDI	▲0.805
Labour force	10.86 million

Year	Gross domestic product	US dollar exchange	Inflation index (2007=100)
2007	276,334	2.34	100
2008	290,122	2.14 (est.)	103
2009	329,765	1.84 (est.)	105

For purchasing power parity comparisons, the US dollar is exchanged at 1.24. Romania is a country of considerable potential: rich agricultural lands; diverse energy sources (coal, oil, natural gas, hydro, and nuclear); a substantial, if aging, industrial base encompassing almost the full range of manufacturing activities; well-trained work force; and opportunities for expanded development in tourism on the Black Sea and in the mountains.

[edit] Romania's economic strength

Major industries in Romania are precision machinery, motor vehicles, chemicals, pharmaceuticals, electric goods (especially home appliances), food, fashion and clothing.

Financial indicators
The National Bank of Romania (BNR)
Currency exchange rate	2.25 RON per 1 USD (May, 2007)
Reserves including gold	US $40 billion (2007) [21]
Government budget	US $96.5 billion (revenues)
Public debt	20.7% of GDP (2007)
External debt	US $45.3 billion (2007)
Bank funding rate	9% (2/2007)

Romania's economic strength is in the processing and the manufacturing of goods, primarily in small and medium-sized family-owned firms. The country has been less successful in terms of developing world class multinational corporations. In addition, the small and medium-sized firms typically manufacture products that are technologically moderately advanced and therefore increasingly face crushing international competition.

Romania's main industries are clothing and shoe manufacturing, metal, extracting and processing of primary goods (timber, marble, rock), food processing, oil refining and chemical derivates, and to a lesser extent pharmaceuticals, heavy machinery, household electronics, etc. In recent years vehicle manufacturing (see Dacia Logan) has become an important industry. The information-technology-related industry is also growing.

Romania has a number of fashion houses, such as Agnes Toma, Steil, Steilmann. Dacia Logan (by Renault), Ford, ARO and Daewoo Romania are some car models manufactured in Romania. The Dacia Logan led sales in Romania in the first six months, ahead of the Skoda Fabia, Skoda Octavia (up 20% on a new model introduction), Opel Astra and Renault Mégane. Logan was also the top selling car in the region in Q2 2005, ahead of Skoda Fabia and Octavia (up 14.4%), Renault Mégane and Suzuki Ignis (up 5.1%).

Several positive growth factors for Romania:

• GDP: $264.89 billion (IMF 2008 est.)^[22] and increasing
• 75% of economic output from private sector
• 70% of companies experienced profit growth in last 3 years
• Profit margins in Romania are higher than in Poland, Bulgaria and Hungary ^[23]
• Growth factors include: private consumption, consumer credit, corporate investment and exports
• Second largest consumer market in Central and Eastern Europe
• 90% of companies expect sales and profits to grow over next 3 years
• GDP growth has been fastest in the CEE region in 2003-2007, and is expected to grow over next 3 years
• Growth factors include: private consumption, consumer credit, corporate investment and exports

Romania is in such a momentum that it will certainly surpass Hungary in respect of the standard of living - GDP per capita - the rate of economic growth and the size of capital influx already in this decade, Demján said. ^[24], ^[25]

[edit] National budget

Main article: National budget in Romania

The national budget for 2008 is $78.5 billion dollars ^[26], which represents 40.2% from GDP estimated by $274.8 billion according to the Prime-Minister Tariceanu. National budget is increasing rapidly about 8 billion dollars each year for the interval of time 2005-2009. About 7 billion dollars per year are spent on national defense.

National budget of Romania:

#		2007	2008	2009	2010	2011
1.	National Budget	51 Bn$	78 Bn$	95Bn$ [27]	130 Bn$ (est.)	180 Bn$ (est.)
2.	Percentage of GDP%	34%	40%	42% (est.)	44% (est.)	51% (est.)

[edit] Economic growth

Main article: Economic growth of Romania

GDP growth reached 8.3% in 2006 according to the statistical office of the Romania (the year-to-year growth amounted to unexpected 9.8% in the 3rd quarter of 2006 and stayed high at 9.5% year-to-year change in the 4th quarter of 2006), and 8.0% in 2007. In 2007, Romania reached the highest economic growth among the members of OECD and the second highest in the EU (just behind Estonia). Romania's GDP over 2009-2015 is expected to go up by 56 billion dollars per year.

Table showing selected PPP GDPs and growth - 2007 to 2009 estimations:

Year	GDP in billions of USD PPP	% GDP Growth
2007	264 [28]	+8
2008	290.411 [29]	+8
2009	320 (est.)	+7 (est.)

Average annual GDP growth by year
2006	8.4%
2007	7.9%
2008	7.7%

Romania's Gross Domestic Product at purchasing power parity (PPP) is predicted to stand at USD 13,970 in 2011, up 44 percent from the current figures, according to a recent study of the Economist Intelligence Unit (EIU) and the Columbia Program on International Investment. ^[30]

[edit] Diversification

Recently, Romania has started to look for other sources of revenue. High-class tourism and international finance are the new sectors starting to be developed. In line with this initiative, the Bucharest International Financial Centre was announced, offering 100% foreign ownership, no withholding tax, freehold land and office space and a tailor-made financial regulatory system with laws taken from best practice in other leading financial centres like New York, London, Zürich and Singapore. A new stock market for regional companies and other initiatives were announced in BIFC. Bucharest has also developed Internet and Media free zones, offering 100% foreign ownership, no tax office space for the worlds leading ICT and media companies, with the latest communications infrastructure to service them. Many of the world's leading companies have now set up shop there. Recent liberalisation in the property market allowing non citizens to buy freehold land has resulted in a major boom in the construction and real estate sectors, with several signature developments, and a number of other developments, offering villas and high rise apartments and office space.

[edit] Currency system

Main article: Romanian currency system

Economic reforms brought foreign competition, led to privatisation of certain public sector industries, opened up sectors hitherto reserved for the public sector and led to an expansion in the production of fast-moving consumer goods.

[edit] Romanian leu

Main articles: Romanian leu and Euro

The leu (pronounced [lew], plural: lei ([lej]; ISO 4217 code RON; numeric code 946) is the currency of Romania. It is subdivided into 100 bani (singular: ban). On 1 July 2005, Romania underwent a currency reform, switching from the previous leu (ROL) to a new leu (RON). 1 RON is equal to 10,000 ROL. Romania joined the European Union on 1 January 2007 and it is expected to adopt the euro in 2014^[31]

Reserves of foreign exchange & gold: €34.67 billion (May 2008). The leu has been among the world's top five performing currencies for much of the past two years.^[32]

[edit] Exchange rates

Exchange rates:

• new lei (RON) per US dollar - 2.3420 (2008)^[33]

[edit] Natural resources

Main article: Mining industry in Romania

Romania ranks tenth in the world in terms of the diversity of minerals produced in the country. Around 60 different minerals are currently produced in Romania. The richest mineral deposits in the country are boron salts and Romania's reserves amount to 63% of the world's total.

Romania is an oil producer, but the level of production isn't enough to make the country self sufficient. As a result, it is a net oil and gas importer.

The pipeline network in Romania included 1,738 km for crude oil, 2,321 km for petroleum products, and 708 km for natural gas in 1999. Several major new pipelines are planned, especially the Nabbuco pipeline for Caspian oilfields, the longest one in the world. Romania could cash in four billion dollars from the Constanta-Trieste pipeline. ^[34]

According to the CIA World Factbook, other natural resources include coal, iron ore, copper, chromium, uranium, antimony, mercury, gold, barite, borate, celestine (strontium), emery, feldspar, limestone, magnesite, marble, perlite, pumice, pyrites (sulfur), clay, arable land, hydropower.

The ore borax, from which boron is extracted is very abundant in Romania. Romania along with the United States, is one of the world's largest producers of boron.

Romania's mineral production is adequate to supply its manufacturing output. Energy needs are also met by importing bituminous and anthracite coal and crude petroleum. In 2007 approximately 13.4 million tons of anthracite coal, approximately 4,000 tons of tungsten, 565,000 tons of iron ore, and 47,000 tons of zinc ore were mined. Lesser amounts of copper, lead, molybdenum, gold, silver, kaolin, and fluorite also were mined.

[edit] Energy

Main article: Energy industry in Romania

Energy producers were dominated by government enterprises, although privately operated coal mines and oil refineries also existed. Accordingly, Romania placed an increasingly heavy emphasis on developing nuclear power generation. Electric power was provided by the Romanian Electric Power Corporation (CONEL). Energy used in electric power generation consisted primarily of nuclear, coal, oil, and liquefied natural gas (LNG). Of the 54,885 million kwhr of electricity generated in 2005, 22 percent came from nuclear plants then in operation, 54 percent from thermal plants (oil and coal), and 14 percent from hydroelectric sites. It was predicted in 2007 that the generation structure by the year 2010 would be 10.2 percent hydroelectric, 12.2 percent oil, 22.9 percent coal, 10.2 percent LNG, and 44.5 percent nuclear.

Romania has significant oil and gas reserves, substantial coal deposits and it has substantial hydroelectric power installed. However, Romania imports oil and gas from Russia and other countries. To ease this dependency Romania seeks to use nuclear power as an alternative to electricity generation. So far, the country has two nuclear reactors, located at Cernavodă, accounting for about 18-20%% of the country's electricity production, with the second one online in 2007. Nuclear waste is stored on site at reprocessing facilities. Romania has chosen Candu nuclear reactors because they use natural unenriched uranium which is cheap and available locally and because they can be refueled online.

Possessing substantial oil refining capacities, Romania is particularly interested in the Central Asia-Europe pipelines and seeks to strengthen its relations with some Persian Gulf states. With 10 refineries and an overall refining capacity of approximately 5,504,000 bbl/d (875,100 m³/d), Romania has the largest refining industry in the region. Romania's refining capacity far exceeds domestic demand for refined petroleum products, allowing the country to export a wide range of oil products and petrochemicals, -- such as lubricants, bitumen, and fertilizers -- throughout the region. ^[35]

In the decade between 1989 and 1999, Romania saw decrease of its greenhouse gas emissions by 55%. This can be accounted for by a 45% decrease in energy use due to languishing economy, and a 15% decrease in its carbon intensity of energy use. In this period of time the carbon intensity of Romania's economy decreased by 40%, while Romania's GDP declined 15%. Romania's GDP has recovered significantly since then.^[36]

From CIA Factbook^[37]:

Electricity:

• production: 63.91 TWh (2006)
• consumption: 57.21 TWh (2006)
• exports: 5.224 TWh (2005)
• imports: 2.321 TWh (2005)

Oil:^[38]

• production: 113,840 barrel/day (2006)
• consumption: 238,230 barrel/day (2006)
• exports: NA
• imports: 124,390 barrel/day (2006)
• proved reserves: 956 million barrels (2006)
• refinery capacity: 517,000 barrel/day (2006)

Natural gas:

• production: 11.22 billion m³ (2005 est.)
• consumption: 17.46 billion m³ (2005 est.)
• exports: 0 m³ (2005 est.)
• imports: 6.2 billion m³ (2005 est.)
• proved reserves: 96.4 billion m³ (1 January 2006)

Electricity - production by source:

• fossil fuel: 62.5%
• hydro: 27.6%
• other: 0% (2001)
• nuclear: 9.9%

Electricity (Gwh)

Plant		2008	2009	2010	2011	2012
1.	Lignite and Hard coal	23,734	25,514	27,377	29,293	31,285
2.	Gas and Fuel Oil	11,456	11,571	11,687	11,804	11,922
3.	Hydro	17,534	17,534	17,534	17,534	17,534
4.	Nuclear	10,710	10,710	10,710	10,710	10,710
5.	Total	63,435	65,330	67,400	70,010	71,790

[edit] The fulfillment of the Maastricht criteria

Romania, as a member state of the European Union is liable for the adoption of the common European currency, the Euro. For this reason Romania must fulfill the Maastricht criteria.

	Convergence criteria					Obligation to adopt 4	Target date		Euro coins design
Country 1	Inflation rate²	Government finances		ERM II membership	Interest rate ³		set by the country	recommended by the Commission
		annual government deficit to GDP	gross government debt to GDP
Reference value 5	max 3.0%	max. 3%	max. 60%	min. 2 years	max 6.4%	NA	NA	NA	NA
Romania	5%	5%	23%	0 years	4%	yes	2010-2014	NA	in progress

¹ Current EU member states that have not yet adopted the Euro, candidates and official potential candidates.
² No more than 1.5% higher than the 3 best-performing EU member states.
³ No more than 2% higher than the 3 best-performing EU member states.
⁴ Formal obligation for Euro adoption in the country EU Treaty of Accession or the Framework for membership negotiations.
⁵ Values from May 2007 report [11]. To be updated each year.

[edit] Physical infrastructure

Transport in Romania

Roads Automobiles Railways Metro Civil Aviation

Companies

CFR Metrorex TAROM BlueAir Carpatair Poşta Română NAVROM

Main article: Transport in Romania

The volume of traffic in Romania, especially goods transportation, is at a very high level due to its central location in Europe. In the past few decades, much of the freight traffic shifted from rail to road. Individual traffic increased resulting in a traffic density very high by international comparison. A further strong increase of traffic is expected in the future.

• Blue Air Romanian low cost company
• TAROM (the national airline)
• Carpatair (regional airline)
• CFR railway transport

Bucharest is the only city in Romania which as of 2007 has an underground railway system, comprising both the Bucharest Metro and the light rail system Regia Autonomă de Transport Bucureşti. Although construction was planned to begin in 1941, due to geo-political factors, the Bucharest Metro was only opened in 1979. Now is one of the most accessed systems of the Bucharest public transport network with an average ridership of 600,000 ^[39] passengers during the workweek. In total, the network is 63 km long and has 45 stations.

[edit] Primary sectors of the economy

Economy of Romania
Infrastructure Natural resources Energy
Main Sectors
Services Industry Agriculture
Finances
Romanian leu National Bank Banks International reserves Foreign trade
Other
Companies Bucharest Stock Exchange Bucharest FDI in Romania Tourism Communications

[edit] Agriculture

Main article: Agriculture in Romania

Romania is one of the European major agricultural producers. Agriculture is intensive, highly mechanized, and efficient by European standards, producing about 60% of food needs with only 5% of the labor force. It contributes around 2% of GDP. The Bărăgan is characterized by large wheat farms. Dairy products, pork, poultry, and apple production are concentrated in the western region. Beef production is located in central Romania, while the production of fruits, vegetables, and wine ranges from central to southern Romania. Romania is a large producer of many agricultural products and is currently expanding its forestry and fishery industries. The implementation of the reforms and the Uruguay Round of the GATT Agreement have resulted in reforms in the agricultural sector of the economy.

Romania is the world's eleventh-largest agricultural producer and the sixth-largest agricultural exporter. Romania is a major producer of grain, sugar, meat and milk products. However, the destination of 75% of its exports are other EU member states. Wheat, beef, pork, poultry, and dairy products are the principal exports. U.S. agricultural exports to Romania, totalling some $200 million annually, consist primarily of soybeans and products, feeds and fodders, seafood, and consumer oriented products, especially snack foods and nuts. Romania exports to the United States are mainly cheese, processed products and wine. They amount to more than $150 million annually.

The Romanian agricultural sector is heavily dependent upon subsidies from the European Union, which account for $1bn. Specific government policies, such as the infamous reclassification of French wine as a 'health food' to avoid VAT, also goes a long way to create a thriving domestic sector.

As with all other developed nations the proportion of the population and GDP devoted to agriculture fell dramatically over the 20th century, but still accounts to around 30%.

Unlike the agricultural industries of many developed nations, Romanian farmers have to compete internationally without large subsidies. The Romanian Government does subsidize farmers with aid in times of disaster, but does not usually give farmers "base" support. Dairy and poultry farmers are distributed across the country, but most of the production in the agricultural industry are found in central Romania. Farmers earn their living from market sales only, and they focus mainly on the Romanian market; because they lack government subsidies, farmers rely on tariffs to limit the amount of agricultural imports.

The northern part of Romania produces primarily grains, rice, corn, sugarbeets, soybeans, meat, fruits and dairy products, while the south specializes in producing fruits, vegetables, olive oil and durum wheat. Romania is the second producer of wine in the Europe and one of the leading in fruits (apples, pears, apricots, peaches, cherries), flowers and horticulture vegetables.

[edit] Industry

Main article: Industry in Romania

Industrial production
Dacia Logan
Main industries	Automobile industry, petrochemicals, cement and construction, aircraft, textiles, food and beverages, mining, consumer durables, tourism
Industrial growth rate	10.1% (2007)
Labor force	15% of total labor force
GDP of sector	39.6% of total GDP

Romania has been very successful in developing dynamic telecommunications, industrial robots, aerospace, and weapons sectors. Industry and construction accounted for 32% of gross domestic product (GDP) in 2003, a comparatively large share even without taking into account related services. The sector employed 26.4% of the workforce. Romania excels in the production of automobiles, machine tools, and chemicals. With the manufacture of 0.5 million vehicles in 2003, Romania was the Europe's third largest producer of automobiles. In 2004 Romania enjoyed one of the largest world market share in machine tools (5.3%). Romanian-based multinationals such as Dacia Logan, Igero bus, Petrom, Rompetrol, Bitdefender are brand names throughout the world. What is less well known is the vital role of small- to medium-sized manufacturing firms, which specialize in niche products and often are owned by management. These firms employ two-thirds of the Romanian workforce.

Romania's industrial output is expected to advance 9% in 2007, while agriculture output is projected to grow 12%. Final consumption is also expected to increase by 11% overall - individual consumption by 14.4% and collective consumption by 10.4%. Domestic demand is expected to go up 12.7%.

The growth of the industrial sector was the principal stimulus to economic development. In 2007 manufacturing industries accounted for approximately 35 percent of the gross domestic product and 29 percent of the work force. Benefiting from strong domestic encouragement and foreign aid, Bucharest's industrialists introduced modern technologies into outmoded or newly built facilities at a rapid pace, increased the production of commodities--especially those for sale in foreign markets--and plowed the proceeds back into further industrial expansion. As a result, industry altered the country's landscape, drawing millions of laborers to urban manufacturing centers.

Factory automation systems were introduced to reduce dependence on labor, to boost productivity with a much smaller work force, and to improve competitiveness. It was estimated that over two-thirds of Romania's manufacturers spent over half of the funds available for facility investments on automation.

Except for mining, most industries were located in the urban areas of the northwest and southeast. Heavy industries generally were located in the south of the country. Factories in Bucharest contributed over 25 percent of all manufacturing value-added in 1998; taken together with factories in surrounding Ilfov, factories in the Bucharest area produced 26 percent of all manufacturing that year. Factories in Bucharest employed 12 percent of the nation's 2.1 million factory workers.

[edit] Construction

Main article: Construction industry in Romania

Construction activity (about 10% of GDP) has increased due to recent tax incentives. Romania is becoming an increasingly popular choice for British property investors, according to recent research from Currencies Direct. ^[40] The latest Global Emerging Markets Index from the foreign exchange company shows that Romania has made the top ten for the first time, reaching number nine. The monthly index is based on the number of foreign exchange transfers undertaken by the firm to emerging market regions for property purchases. According to Currencies Direct, Romania has seen significant increases in house prices in recent years and its interest rate has dropped from a level of 154 per cent in 1997 to 8.9 per cent in 2005.

The construction industry in Romania contributed an estimated 5.95% in 2006 to the country's gross domestic product (GDP). Business Monitor International released Romania Infrastructure Report Q2 2007 in which they forecast an average industry growth rate of 6.84% over the 2007-2011 period.^[41]

The construction industry has been receiving funds from foreign institutions including European Bank for Reconstruction and Development (EBRD) and European Investment Bank (EIB). Furthermore, the Romanian Ministry of Environment and Water Management is making efforts to align the Romanian environment standards with the European standards. One of the ongoing projects in the country is the construction work on the various sections of the Bucharest-Brasov motorway. An increasing number of foreign companies are showing interest in electrical production capacities in the country. Companies include Germany's Siemens, U.S-based AES Corporation and Geneva-based Societe Bancaire Private.

However, the construction industry is subject to a number of risks, which can affect its growth. The rising budgetary deficit, for example, has had an increasingly adverse impact on the availability of funds for the infrastructure sector.

Despite the drawbacks, BMI ranked Romania 12th out of the 13 states included from the Emerging Europe for the infrastructure business environment. The construction industry is forecast to reach a value of RON36.2bn (US$13.41bn) by 2011, from an estimated RON20.88bn (US$7.43bn) in 2006.^[42]

[edit] Manufacturing

Main article: Manufacturing in Romania

The general pattern of development for wealthy nations was a transition from a primary industry based economy to a manufacturing based one, and then to a service based economy. Romania did not follow this pattern, manufacturing has always been secondary, though certainly not unimportant. In part because of this, Romania did not suffer as greatly from the pains of deindustrialization in the 1970s and 1980s. Manufacturers have been attracted to Romania due to the highly educated population with lower labour costs than the EU. Romania's government-run healthcare system is also an important attraction, as it exempts companies from the high health insurance costs they must pay in the EU. Romania is also perceived as a dynamic market for machine tools, especially in the backdrop of growth in the domestic automobile and mechanical engineering sectors. Romanian machine tool exports abroad have been growing at double digit figure since 2002. Moreover, Romanian exports saw an increase of 23 percent in the first half of 2007 compared to the same period last year. The exports comprised mainly machining centres, grinding, honing, lapping machines, gear cutting machines, lathes and milling machines, presses and other metal forming machine tools.

[edit] Car manufacturing

Main article: Car manufacturing in Romania

Much of the Romanian manufacturing industry consists of branch plants of EU firms, though there are some important domestic manufacturers, such as Dacia, Daewoo, Roman Braşov, Igero bus ^[43]. This has raised several concerns for Romanians. Branch plants provide mainly blue collar jobs, with research and executive positions confined to the EU. About half a million cars are produced each year in Romania.

Ford bought Daewoo Romania company for € 57 millions to produce Ford automobiles to a car production estimated to be over 300,000 by 2010. ^{[44] [45] [46]} Ford will invest €675 million (US$923 million) in the former Daewoo car factory. Ford also said it would buy supplies from the Romanian market worth €1 billion (US$1.39 billion). ^[47]

The Dacia Logan was the top-selling new car in Central and Eastern Europe in the first half of 2007 with 52,750 units sold, ahead of Skoda Fabia (41,227 units), Skoda Octavia (33,483 units), Opel Astra (16,442 units) and Ford Focus (14,909 units), shows a market survey of JATO Dynamics, the leading supplier of automotive market intelligence. ^[48] Romania lead the regional auto market growth in the first half of 2007, both up 25 percent as against the similar period last year, said the local weekly Capital in its latest issue Wednesday.

[edit] Automobiles

Main article: Automobiles in Romania

• Total number of cars: 10,100,000
• Cars per 1,000 capita: 489

The Romanian automotive industry ranks second in Central Eastern Europe, closely behind that of the Czech Republic and well ahead of those of other nations with over 0.5 million vehicles produced in 2007. Romanian automakers and parts manufacturers continue to develop many of the industry's most innovative features, presenting significant business opportunities for foreign firms with applicable products and technologies.

In Romania are produced a wide range of automobiles, minivans, sport utility vehicles, buses, and trucks. In 2007 Romania exported US$3.7 billion worth of vehicles and components. The vehicle export was 264,000 units in 2007. It's expected that for 2008 are exported about 350,000 units. The vehicle and component export is targeted to reach US$20 billion by 2010.

[edit] High technology

Main article: High technology in Romania

Romania planners realized that the country needed to advance quickly in such areas as high technology if the economy were to grow while matching foreign competition. In 1997 the Romania Development Institute issued a report, Romania Year 2000, that profiled Romania economic development in 2000. The Romania Development Institute noted that the industrial structure would be highly developed and would resemble that of advanced countries inasmuch as high value-added industries, high-technology industries, and soft industries grew relatively rapidly. Further, changes in industrial structure were expected rapidly to reduce the demand for unskilled workers while simultaneously increasing the demand for professional and technical manpower, resulting in further change of the employment structure.

The Romania Development Institute also noted that the Ministry of Science and Technology had prepared a long-range plan of science and technology for the twenty-first century that took into account limited available resources. Accordingly, Romania selected its comparative advantage areas, including informatics-- particularly information storage and retrieval and electronic data processing, fine chemicals, and precision machinery in the short term; biotechnology and new materials in the mid-term; public benefit areas, such as the environment, health, and welfare, as another group; and oceanography and aeronautics for the medium and long term.

In 2000 Romania announced an ambitious plan to promote science and technology so that high-technology activities would dominate the economy by the year 2007. The Ministry of Science and Technology intended to coordinate technology-related projects between government and industry in a variety of fields including semiconductors, computers, chemistry, and new materials.

Finnish mobile phone maker Nokia is planning to start the production at its two new plants in Jucu and Cluj-Napoca in Romania. This project was called the Nokia Village concept. In 2009 the Jucu plant is estimated to operate at full capacity. The production in Cluj will also begin sometime during 2008.^{[49] [50] [51]}

[edit] Arms industry

Main article: Arms industry in Romania

Romania is the 11th largest arms supplier in the world. The Romanian arms industry's main customer, for whom they mainly build warships, guns, and equipment, is the Romanian Government. Furthermore, record high defense expenditure (currently at 5 billion €), which was considerably increased under the government of Prime Minister Calin Popescu Tariceanu, have contributed to the success of the Romanian arms industries. In addition, external demand plays a big part in the growth of this sector: for example, Romanian exports great quantities of weaponry to the Middle East.

In recent years, the Romanian Government has called, unsuccessfully, for the lifting of the EU weapons trade embargo on China.

[edit] Fishing

Main article: Fishing industry in Romania

The waters surrounding Romania are some of the richest in Europe. Fishing is an economic mainstay in parts of the East of Romania and along the Black Sea coast, with important fish markets in places such as Constanta and Galati. Fish such as herring, crab, lobster, haddock and cod are landed at ports such as Constanta. There has been a large scale decrease in employment in the fishing industry within Romania due to the EU's Common Fisheries Policy, which places restrictions on the total tonnage of catch that can be landed, caused by overfishing in the Black Sea. In tandem with the decline of sea-fishing, commercial fish farms - especially in salmon, have increased in prominence in the rivers and lochs of the east of Romania. Inland waters are rich in fresh water fish such as salmon and trout.

[edit] Services

Main article: Services in Romania

In 2003 service sector constituted 55% of gross domestic product (GDP), and the sector employed 51.3% of the workforce. The subcomponents of services are financial, renting, and business activities (20.5%); trade, hotels and restaurants, and transport (18%); and other service activities (21.7%).

The service sector in Romania is vast and multifaceted, employing some three quarters of Romanians and accounting for two thirds of GDP. The largest employer is the retail sector, employing almost 12% of Romanians. The retail industry is mainly concentrated in a relatively small number of chain stores clustered together in shopping malls. In recent years the rise of big-box stores, such as Cora (hypermarket) (of the France) and Carrefour (a subsidiary of the French), have led to fewer workers in this sector and a migration of retail jobs to the suburbs.

The second largest portion of the service sector is the business services, employing only a slightly smaller percentage of the population. This includes the financial services, real estate, and communications industries. This portion of the economy has been rapidly growing in recent years. It is largely concentrated in the major urban centres, especially Bucharest (see Banking in Romania).

The education and health sectors are two of Romania's largest, but both are largely under the purview of the government. The health care industry has been rapidly growing, and is the third largest in Romania. Its rapid growth has led to problems for governments who must find money to fund it.

Romania has an important high tech industry, and also an entertainment industry creating content both for local and international consumption. Tourism is of ever increasing importance, with the vast majority of international visitors coming from the EU, though the recent strength of the Romanian leu has damaged this sector.

[edit] Biotechnology

Main article: Biotechnology in Romania

Romania is aggressively promoting and developing its biotechnology industry. Hundred of millions of dollars were invested into the sector to build up infrastructure, fund research and development and to recruit top international scientists to Romania. Romania features one of the world's newest competitive bio-industries, in key areas as pharmacogenomics, protein engineering, glyco-engineering, tissue engineering, bio-informatics, genome medicine and preventive medicine. Romania is devoting substantial resources to developing universities and R&D facilities, increasing bioventure startups, growing bio-clusters (communities of biotechnology companies and institutions) and developing human resources, all with the goal of making it one of the world's most advanced biotechnology regions.

[edit] Tourism

Main article: Tourism in Romania

Tourism is a significant contributor to the Romania Economy. In the 1990s the government heavily promoted the development of skiing in the Romanian Carpathians. Domestic and international tourism generates about 6% of gross domestic product (GDP) and 0.8 million jobs. Following commerce, tourism is the second largest component of the services sector. In 2006 Romania registered 20 million overnight stays by international tourists, 4% higher than in the previous year and an all-time record. Two-thirds of all major trade fairs from Central Europe are held in Romania, and each year they attract 2 to 3 million business travelers, about 20% of whom are foreigners. The four most important trade fairs take place in Bucharest, Cluj-Napoca, Iaşi, Timişoara.

In the year 2007, 18,345,667 tourists vacationed in Romania. The total revenue was $4.2 billion and with an average expenditure of $679 per tourist. Over the years, Romania has emerged as a popular tourist destination for many Europeans, often competing with Greece, Italy and Spain. Romania destinations such as Constanta and Mamaia (sometimes called the Romanian Riviera) have become very popular among European tourists.

Romania has a highly developed tourism infrastructure, making it a good market for tourism-related equipment and services.

In 2006 it is reported that the hotel and restaurant industry added gross value of $8,074 million to the Romanian economy in 2005.

[edit] Banking and finance

Main articles: Banks in Romania and Bucharest Stock Exchange

Romania's capital is Bucharest. The City of Bucharest is Bucharest's major financial district, and one of the regional's leading financial centres. The city is where the Bucharest Stock Exchange, as well as many other exchanges, are based. Service industries, particularly banking, insurance, and business services, account by far for the largest proportion of GDP and employ around 55% of the working population. Many other international banks are beginning to operate bases in Romania, as the sector expands. In 2007 there were 52 banks.

[edit] Stocks

Main article: Stocks in Romania

In the first four years of the twenty-first century, Romania's BET Index was the best-performing stock market index in the world as declared by the international magazine “Business Week”.

The stock market capitalisation of listed companies in Romania was valued at $285,937 million in 2006 by the World Bank. As a result, the corporate sector of Romania has grown dramatically in significance in recent times.

[edit] Investment

The stock market capitalisation of listed companies in Romania was valued at $225,568 million in 2007 by the World Bank.

Stock exchanges

• Bucharest Stock Exchange
• Rasdaq
• Sibiu Stock Exchange

Stock indices Bucharest Stock Exchange has four indices:

• BET(Bucharest Exchange Trading index (BET)) which was created first, reflects the evolution of the most liquid 10 stocks (except Investment Funds); it is the most followed index of the exchange
• BET-C (BET Composite) reflects the evolution of all listed stocks (except Investment Funds)
• BET-FI reflects the evolution of the five large Investment Funds created in the Mass Privatisation Program
• ROTX (Romanian Traded Index) reflects the evolution of the most liquid blue chips

[edit] Socio-economic characteristics

[edit] Labour force

Main article: Labour force in Romania

The distribution of Romania's workforce by sector is very similar to the relative output of each sector. In 2006 the workforce was distributed as follows: agriculture, 5.2%; industry, 32.4%; and services, 56.3%. Participants in the workforce totaled almost 10 million.

[edit] Wages

Main article: Wages in Romania

Romania's gross average wage for 2007 was 500 euro ($718.38). ^[52] On the other hand, the net average wage in March 2008 was 1192 lei or 500 USD ^[53]. The income from salaries in Romania had the highest growth rate in the region during the last year 2006. The level of the minimum wage depends on the country and the standard of living within that state. In Romania its below €200. ^[54] A higher minimum wage can reduce poverty by increasing the income of people on the minimum wage in poor households by more than the average rate. The majority of people on the minimum wage, however, live in medium or higher-income households. Most poor people are not affected by any increase in the minimum wage since they are unemployed.

[edit] Taxation and borrowing

Main article: Taxation in Romania

Taxation in Romania may involve payments to at least two different levels of government: local government and central government. Local government is financed by grants from central government funds, business rates, council tax and increasingly from fees and charges such as those from on-street parking. Central government revenues are mainly income tax, national insurance contributions, value added tax, corporation tax and fuel duty.

These data show the tax burden (personal and corporate) and national debt as a percentage of GDP. Samples are taken at 10 year intervals (snapshots, but the rolling averages are very close).

[edit] Regional variation

The strength of the Romanian economy varies from region to region. GDP, and GDP per capita is highest in Bucharest. The following table shows the GDP (2005) per capita of the 4 counties and 2 areas, with data supplied by Eurostat.

Rank	Place	GDP per capita in dollars
1	Bucharest	27,344
2	Cluj	26,934
3	Timiş	25,121
4	Braşov	24,788
5	Constanţa	24,696

Inner Bucharest has a GDP per capita about $31,400.

[edit] Economy of Bucharest

Main article: Economy of Bucharest

Bucharest is the most economically-developed and industrialised city in Romania, producing around 21% of the country's GDP and about one-quarter of its industrial production, while only accounting for 9% of the country's population.^[56] Almost one third of national taxes is paid by Bucharest's citizens and companies. Based on local purchasing power, Bucharest has a per-capita GDP of 104.5% that of the European Union average (2008), and more than twice the Romanian average.^[57] Based on the fact that Bucharest produces around 21% of Romanian GDP for a population of around 2 million, the GDP (PPP) per capita of the city would be US$30,057. The city's strong economic growth has revitalised infrastructure and led to the development of many shopping malls and modern residential towers and high-rise office buildings. In September 2005, Bucharest had an unemployment rate of 2.6%, significantly lower than the national unemployment rate of 3.6%.^[58]

Bucharest's economy is mainly centred on industry and services, with services particularly growing in importance in the last ten years. The city serves as the headquarters of 186,000 firms, including nearly all large Romanian companies.^[59] An important source for growth since 2000 has been the city's property and construction boom, which has resulted in a significant growth in the construction sector. Bucharest is also Romania's largest centre for information technology and communications and is home to several software companies, including Softwin, which operates internationally. Bucharest contains Romania's largest stock exchange, the Bucharest Stock Exchange, which was merged in December 2005 with the Bucharest-based electronic stock exchange, Rasdaq.

The city has a number of international supermarket chains such as Carrefour, Cora and METRO. At the moment, the city is undergoing a retail boom, with a large number of supermarkets, and hypermarkets, constructed every year. For more information, see supermarkets in Romania. The biggest modern shopping centres in Bucharest are Bucharest Mall, Plaza Romania, City Mall, Jolie Ville Galleria and Unirea Shopping Center. However, there are also a large number of traditional markets; the one at Obor covers about a dozen city blocks, and numerous large stores that are not officially part of the market effectively add up to a market district almost twice that size.

[edit] Growing middle class

Romania has a growing middle and upper class with relatively high per capita incomes.

World Bank estimated that in 2002 99% of the urban and 94% of the rural population had access to electricity. In 2004, 91% of the urban and only 16% of the rural population had access to improved water supply and 94% of the urban population had access to improved sanitation.^[60]

In 2008 there were about 23 millions mobile phone users in Romania. ^[61], ^[62] and about 17.8 millions internet users.

[edit] Information Technology

Romania is one of the fastest-growing information technology (IT) markets in Central and Eastern Europe. The country has made significant progress in all of the information and communications technology (ICT) subsectors, including basic telephony, mobile telephony, the Internet and IT. The country's telecoms sector has been deregulated, expanded and modernised over the past 15 years. ^[63]

Romania is the leader in Europe, and sixth in the world, in terms of the number of certified IT specialists, with density rates per 1,000 inhabitants greater than in the US or Russia. There are about 64,000 specialists in the IT sector. Approximately 5,000 of the 30,000 engineers graduating every year in Romania are trained in ICT. ^[64] Microsoft acquired Romanian Antivirus Technology in 2003. According to Microsoft, Romania has a clear potential in information technology, an area in which Romanian students, researchers and entrepreneurs excel. ^[65] Its western-oriented culture and the high educational degree of its youth bring Romania forward as a huge potential market (the second largest software producer in Eastern Europe). In terms of IT outsourcing services Romania is ranked in the third place worldwide successfully challenging India. ^[66]

The IT market is one of the most dynamic sectors of the Romanian economy. Since the year 1994 the IT market has demonstrated growth rates of 40-60 percent a year. The biggest sector in terms of revenue is system and network integration, which accounts for 28,3% of the total market revenues. Meanwhile the fastest growing segment of the IT market is offshore programming. The industry of software development outsourcing crossed the mark of $3 billion of total revenues in 2005 and reached $4.8 billion in 2006. Currently Romania controls 5 percent of the offshore software development market and is the third leading country (after India and China) among software exporters. Such growth of software outsourcing in Romania is caused by a number of factors. One of them is the supporting role of the Romanian Government. The Government has launched a program promoting construction of IT-oriented technology parks - special zones that have an established infrastructure and enjoy a favorable tax and customs regime. Another factor stimulating the IT sector growth in Romania is the presence of global technology corporations such as Intel, Motorola, Sun Microsystems, Boeing, Nokia and others, which have intensified their software development activities and opened their R&D centers in Romania.

The ICT industry has broadened its focus beyond manufacturing equipment to maintenance and management services as well as creating audio, video, print and digital content. These developments are anticipated to create a variety of new opportunities in Romania's ICT market. On the occasion of the World Electronics Forum (Paris 2000), the “Worldwide ICT Professionals Market Situation Study” showed that, by 2008, Romania will be the only European country to have excellent IT specialists. ^[67] Romania's main competitive advantage in software development consists of its highly qualified, cost-effective human resources. Currently, about 25,000 software professionals work in the industry and almost 1/5 of them are involved in software export activities. Romania ranks the 6th in the world by number of certified professionals ("2003 Global Skills IQ Report", Brainbench) and has been awarded a bronze certificate in the category of "Most Certified Nation (Overall)" during the first annual Bench Games 2005 ("2005 Bench Games Report", Brainbench). Vicepresident for EMEA, showed that Oracle is committed to encourage this country to take advantage of its potential: "Oracle aims to help push Romania into becoming the Silicon Valley of Central and Eastern Europe."

[edit] Romanian-Moldovan economic relations

Main articles: Romanian-Moldovan economic relations and Economy of Moldova

EU membership gives Romania new economic opportunities in its relations with Moldova, a former part of Romania. Moldova's exports remain highly dependent on the Romanian markets. The EU is currently the second largest export market for Moldova accounting for a 28% market share. Moldovan exports are dominated by wine, fruit & vegetables, prepared food and apparel products. Wine is the single most important export item, comprising 28.8% of total exports in 2005, while nuts account for about 6% of total exports. The prepared food products make up about 5% of exports and other fruit and vegetables contribute for an additional 12%, while apparel accounts for 15.6% of exports. Other significant products are skin and leather (6.6% of exports), cereals (3.9%), vegetable oils and fats (3.5%) and equipment (2.8%). Moldova has imported mostly garnishes, breeches and similar goods (by 196.9 times more than the same period of 2006), as well as petroleum oils and oils made of bituminous materials (+34%). ^[68] Simultaneously, the value of Moldovan imports from Romania went up to USD 101.6 mln (by 2.1 times more), more by USD 52.1 mln compared with the first two months of 2006.

[edit] Economic relations with the United States

U.S. exports to Romania in 2006 totaled $4.0 billion. The main exports were construction equipment, machinery, aviation parts, chemicals, and agricultural products. U.S. imports from Romania in 2006 totaled $5.5 billion and consisted primarily of clothing, machinery and transportation equipment, petroleum, natural rubber, and footwear. Economic assistance to Romania is coordinated through the Consultative Group on Romania (CGR), formed in 1991. It includes 19 donor countries and 13 international organizations that meet annually to coordinate donor assistance.

The U.S. Agency for International Development (USAID) has provided development assistance to Romania since 1970. Initial assistance focused on the most urgent needs of the new republic, including food aid, infrastructure rehabilitation, health care, and training. Through the 1970s, a time of great economic growth in Romania, USAID played a major role in helping the country achieve self-sufficiency in grain production.

[edit] Economic Structure and Sustained Growth

The emergence of Romania as a software & IT-exporting country has raised a number of issues for Romanian economic policy. There has been concern that much of Romania's human capital investment has been concentrated in IT-related industries. Critics have pointed out that Romania's economic structure is highly dependent on human resources that do require skilled labor, making economic growth highly vulnerable to fluctuations in the demand and pricing for these IT % software resources. The Government Pension Fund of Romania is part of several efforts to hedge against dependence on IT & software revenue.

[edit] External trade and investment

Main article: Foreign trade of Romania

[edit] Global trade relations

Italy is Romania's largest trading partner; two-way trade totalled some $22.6 billion in 2007. The principal Italy exports to Romania include computers, integrated circuits, aircraft parts and other defense equipment, wheat, and automobiles. Romania's chief exports to Italy include cut diamonds, jewelry, integrated circuits, printing machinery, and telecommunications equipment.

2.8% of the country's GDP is derived from Agricultural activity. While Romania imports substantial quantities of grain, it is largely self-sufficient in other agricultural products and food stuffs, due to the fact that food must be regulated for sell in the Romania retail market, and hence imports almost no food products from other countries. Romania imported in 2006 food products of 2.4 billion euros, up almost 20% versus 2005, when the imports were worth slightly more than 2 billion euros. The EU is Romania's main partner in the trade with agri-food products. The exports to this destination represent 64%, and the imports from the EU countries represent 54%. Other important partners are the CEFTA countries, Turkey, Republic of Moldova and the USA.^[69]

Romania is one of the world's major exporters of military equipment, accounting for 3-4% of the world total in 2007. EU members are represented by a single official at the WTO.

International trade
Bucharest Financial Plaza
Exports	US $68.8 billion f.o.b. (2007)
Imports	US $83.1 billion f.o.b. (2007)
Current account	▼ US $14400.1 million (2007)
Export partners	Italy 20.4%, Germany 17%, France 14% (2007)
Import partners	Italy 23.4%, Germany 16%, France 12% (2007)

[edit] Balance of payments

Current account balance: $-14.000 billion (2007 est.)

[edit] Foreign direct investment

Main article: Foreign direct investment in Romania

(FDI) in Romania has increased dramatically. Romania is the 2-nd place in the Central Europe for FDI. ^[70] Foreign direct investment flow attracted by Romania in the first 2 months of the year 2008, reached Euro 1.2 million, thus registering a 40% increase against January and February 2007. Considering the FDI structure, the predominant was „other capitals” (loans granted by mother company to affiliate structures in Romania) representing 50.8% out of January and February total, followed by „reinvested profit” and „capital participation” amounting 49,2 %. ^[71]

In 2006 net foreign direct investment was inbound US$12 billion (EUR 9.1 billion). Skilled labor force, low taxes, a 16% flat tax for corporations and individuals, no dividend taxes, liberal labor code and a favorable geographical location are Romania's main advantages for foreign investors. FDI has grown by 600% since 2000 to around $13.6 billion or $2,540 per capita by the end of 2004. In October 2005 new investment stimuli introduced – more favorable conditions to IT and research centers, especially to be located in the east part of the country (where there is more unemployment), to bring more added value and not to be logistically demanding.

Origin of direct foreign investment 1996-2005 – the Netherlands 24.3%; Germany 19.4%, Austria 14.1%; Italy 7.5%, United States (8th largest investor) 4.0%. Top investors from countries, by companies: Erste Bank (Austria), OMV (Austria), Gaz de France (France), Orange (France), Vodafone (U.K.), Ford (U.S.A.), MOL (Hungary), ENEL (Italy), E.ON (Germany), Nokia (Finland) ... General Motors considers Romania for plant ^[72]. General Motors could shortly begin investments in order to develop a production centre in Romania, with Cluj-Napoca as a potential location for the future plant, close to the Nokia Village. Nokia invested $100 mn in a plant near Cluj-Napoca. ^[73] SABMiller is set to invest EUR50m (US$69m) in expanding production at one of its breweries in Romania (Ursus (beer)). ^[74] Czech-based investor and developer CTP Invest plans to allocate EUR 60 mln next year in industrial property development in Romania.^[75] Snowmobile and motorcycle maker Polaris Industries Inc. will invest 50 million euros ($69.41 million) in a snowmobile plant in Romania. ^[76] British investments in the Romanian economy currently exceed 5 billion euros, with more than 3,200 British companies operating in key sectors, including telecommunications, information technology, financial services, and water and environmental protection. ^[77]

Sectors of direct foreign investment - industry 38.4%; banking and insurance 22.2%; wholesale and retail trade 13.1%; production of electricity, gas and water 10.5%; transportation and telecommunications 9.2%. Foreign capital is attracted by skilled and relatively inexpensive labor, tax incentives, modern infrastructure, and a good telecommunications system. Romania has strength in information technology and other significant areas such as auto components, chemicals, apparels, pharmaceuticals and jewellery.

EU approves €143 million aid to Ford plants in Romania. The government aid will be part of a total investment of €600 million (US$934 million) in the plants to make engines and complete vehicles in the Craiova region of southwest Romania. ^[78]

In 2008, Procter&Gamble (P&G) intends to allocate EUR 50 mln for construction of cosmetics factory in Romania. This would be the first greenfield in cosmetics industry in Romania. ^[79]. PSA Peugeot is interested in opening an engine factory in Romania of a total investment of EUR600 million.^[80]

[edit] Romanian investments abroad

Romanian furniture chain opens hypermarket in Bulgaria's capital. Romanian furniture company Mobexpert opened its first hypermarket in Bulgaria in Sofia's residential district of Lyulin. Ten million euro was invested, of which 80 per cent were provided as a bank credit from Alpha Bank. ^[81] Annual profit of Mobexpert's hypermarkets was 200 million euro. The company has 4500 employees. The Romanian electronics producer Altex, which is considered the largest one in the country, plans to enter the Bulgarian market in 2008. ^[82] Altex has 90 stores in Romania's largest cities. In Bucharest alone there are ten stores. The company previously announced its plans to enter the Serbian market as well. Romanian sanitary and electric equipment distributor Romstal has entered the Serbian market, acquiring local equipment distributor Doming for 10 million euro ($14.7 million). ^[83]

[edit] Environmental concerns

As with most of the fast developing countries, there is an environmental issue and a concern that Romania's model of economic growth (based on the construction industry, manufacturing sectors, and mass tourism). Although Romania's population decrease by less than 5% between 1990 and 2000, urban areas expanded by no less than 25% over the same period. Meanwhile, Romania's energy consumption has doubled over the last 15 years and is currently rising by 6% per annum. This is particularly worrying for a country whose dependence on imported oil (meeting roughly 40% of Romania's energy needs) is one of the greatest in the European Union. Large-scale housing and tourism development are placing strain on local land and water resources.

[edit] Post-industrial economic developments

Several issues have dominated the debate on Romania's economy since the 1970s:

• Cost of living - Romania is among the most expensive countries in the Europe, as reflected in the Big Mac Index and other indexes. Historically, transportation costs and barriers to free trade had caused the disparity, but in recent years, Romanian policy with respect to labor relations, taxation, etc., have contributed significantly.
• Competitiveness of "mainland" industries - the high cost of labor and other structural features of the Romanian environment have caused concern about Romania's ability to maintain its cost of living in a post-petroleum era. There is a clear trend toward ending the practice of "protecting" certain industries and making more of them "exposed to competition". In addition to interest in information technology, a number of small- to medium-sized companies have been formed to develop and market highly specialized technology solutions.
• The role of the public sector - the ideological divide between socialist and non-socialist views on public ownership has decreased over time. The Romanian government has sought to reduce its ownership over companies that require access to private capital markets, and there is an increasing emphasis on government facilitating entrepreneurship rather than controlling (or restricting) capital formation. A residual distrust of the "profit motive" persists, and Romanian companies are heavily regulated, especially with respect to labor relations.
• The future of the welfare state - since World War II, successive Romanian governments have sought to broaden and extend public benefits to its citizens, in the form of sickness and disability benefits, minimum guaranteed pensions, heavily subsidized or free universal health care, unemployment insurance, etc. Public policy still favors the provision of such benefits, but there is increasing debate on making them more equitable and needs-based.
• Urbanization - for several decades, agricultural policy in Romanian was based on the premise of minimal self-sufficiency. In later years, this has given way to a greater emphasis on maintaining population patterns outside of major urban areas. The term "district policy" has come to mean the demand that old and largely rural population centers should be allowed to persist, ideally by providing them with a sustainable economic basis.
• Taxation - the primary purpose of the Romanian tax system has been to raise revenue for public expenditures; but it is also viewed as a means to achieve social objectives, such as redistribution of income, reduction in alcohol and tobacco consumption, and as a disincentive against certain behaviors. Three elements of the tax system seem to attract the most debate:
  • Value-added tax. The largest source of government revenue. The current standard rate is 19%, food and drink is 19%, and movie theater tickets and public transportation 19%.
  • Special surcharges and taxes. The government has established a number of taxes related to specific purchases, including cars, alcohol, tobacco, and various kinds of benefits.
• Environmental concerns. A number of political issues have had their origins in economic concerns.

Ecobusinesses that provide technology, products, or services that contribute to the protection of the environment play a vital role in the creation of a sustainable socioeconomic system with a low environmental impact, and the government will continue to actively promote and foster these businesses in the future.

[edit] Institutional membership

Romania is a member of a number of international economic organizations, including the United Nations, the World Trade Organization.

[edit] See also

• List of Romanian companies
• Trade unions in Romania
• Taxation in Romania
• Bank of Romania
• List of companies in Romania
• Common Agricultural Policy
• Economy of Europe
• Dacia Logan
• Ministery of finance
• Official site of National Bank of Romania
• GDP of Romania
• Private
  • List of Romanian companies
  • Bucharest Stock Exchange
• Government
  • Government finance
    • Central bank of Romania
    • Currency
    • List of Romanian government enterprises
    • Monetary policy of Romania
    • Ministry of Finance
    • Romanian National Institute of Economic Research
    • Romanian National Financial Management Authority
  • Spending
    • Social Security (Romania)
  • Agencies, unions
    • Government agencies in Romania
    • Confederation of Romanian Enterprise
    • Romanian Confederation of Professional Associations
    • Romanian Confederation of Professional Employees
    • Romanian Trade Union Confederation
  • Energy policy
    • Nuclear power in Romania

Other links

• Economy of Europe
• European Union
• History of copper currency in Romania

[edit] Wikitravel

• Romania at Wikitravel - guide to traveling to, from, and in Romania

[edit] References

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Geographic locale
v • d • e Countries of Europe Albania · Andorra · Armenia2 · Austria · Azerbaijan1 · Belarus · Belgium · Bosnia and Herzegovina · Bulgaria · Croatia · Cyprus2 · Czech Republic · Denmark3 · Estonia · Finland · France1 · Georgia1 · Germany · Greece  · Hungary · Iceland · Ireland · Italy1 · Kazakhstan1 · Kosovo5 · Latvia · Liechtenstein · Lithuania · Luxembourg · Macedonia4 · Malta · Moldova · Monaco · Montenegro · Netherlands3 · Norway3 · Poland · Portugal3 · Romania · Russia1 · San Marino · Serbia · Slovakia · Slovenia · Spain1 · Sweden · Switzerland · Turkey1 · Ukraine · United Kingdom3 · Vatican City 1 Has part of its territory outside Europe.  2 Entirely in West Asia but having socio-political connections with Europe.  3 Has dependencies or similar territories outside Europe. 4 Name disputed by Greece; see Macedonia naming dispute. 5 Declared independence from Serbia on February 17 and is recognised by 42 countries including Taiwan. Coordinates: 49°45′N, 15°45′E

International membership
v • d • e  Member States of the European Union Austria · Belgium · Bulgaria · Cyprus · Czech Republic · Denmark · Estonia · Finland · France · Germany · Greece · Hungary · Ireland · Italy · Latvia · Lithuania · Luxembourg · Malta · Netherlands · Poland · Portugal · Romania · Slovakia · Slovenia · Spain · Sweden · United Kingdom by accession · by political system · by population · by GDP v • d • e Members of the Council of Europe Albania · Andorra · Armenia · Austria · Azerbaijan · Belgium · Bosnia and Herzegovina · Bulgaria · Croatia · Cyprus · Czech Republic · Denmark · Estonia · Finland · France · Georgia · Germany · Greece · Hungary · Iceland · Ireland · Italy · Latvia · Liechtenstein · Lithuania · Luxembourg · Malta · Moldova · Monaco · Montenegro · Netherlands · Norway · Poland · Portugal · Romania · Russia · San Marino · Serbia · Slovakia · Slovenia · Spain · Sweden · Switzerland · The former Yugoslav Republic of Macedonia · Turkey · Ukraine · United Kingdom v • d • e Members and candidates of the North Atlantic Treaty Organization (NATO) Members Belgium · Bulgaria · Canada · Czech Republic · Denmark · Estonia · France · Germany · Greece · Hungary · Iceland · Italy · Latvia · Lithuania · Luxembourg · Netherlands · Norway · Poland · Portugal · Romania · Slovakia · Slovenia · Spain · Turkey · United Kingdom · United States Candidates Albania · Croatia · the former Yugoslav Republic of Macedonia v • d • e Organisation for Economic Co-operation and Development (OECD) Australia · Austria · Belgium · Canada · Czech Republic · Denmark · Finland · France · Germany · Greece · Hungary · Iceland · Ireland · Italy · Japan · South Korea · Luxembourg · Mexico · Netherlands · New Zealand · Norway · Poland · Portugal · Slovakia · Spain · Sweden · Switzerland · Turkey · United Kingdom · United States Observer: Republic of China v • d • e Members of the World Trade Organization (WTO) Albania · Angola · Antigua and Barbuda · Argentina · Armenia · Australia · Bahrain · Bangladesh · Barbados · Belize · Benin · Bolivia · Botswana · Brazil · Brunei (Brunei Darussalam) · Burkina Faso · Burma · Burundi · Cambodia · Cameroon · Canada · Central African Republic · Chad · Chile · China (PRC) · Colombia · Democratic Republic of the Congo · Republic of the Congo · Costa Rica · Côte d'Ivoire · Croatia · Cuba · Djibouti · Dominica · Dominican Republic · Ecuador · Egypt · El Salvador · European Union¹ · Former Yugoslav Republic of Macedonia (FYROM) · Fiji · Gabon · The Gambia · Georgia · Ghana · Grenada · Guatemala · Guinea · Guinea-Bissau · Guyana · Haiti · Honduras · Hong Kong² · Iceland · India · Indonesia · Israel · Jamaica · Japan · Jordan · Kenya · South Korea · Kuwait · Kyrgyzstan · Lesotho · Liechtenstein · Macau² · Madagascar · Malawi · Malaysia · Maldives · Mali · Mauritania · Mauritius · Mexico · Moldova · Mongolia · Morocco · Mozambique · Namibia · Nepal · New Zealand · Nicaragua · Niger · Nigeria · Norway · Oman · Pakistan · Panama · Papua New Guinea · Paraguay · Peru · Philippines · Qatar · Rwanda · St. Kitts and Nevis · St. Lucia · St. Vincent and the Grenadines · Saudi Arabia · Senegal · Sierra Leone · Singapore · Solomon Islands · South Africa · Sri Lanka · Suriname · Swaziland · Switzerland · Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu³ · Tanzania · Thailand · Togo · Tonga · Trinidad and Tobago · Tunisia · Turkey · Uganda · Ukraine · United Arab Emirates · United States · Uruguay · Venezuela · Vietnam · Zambia · Zimbabwe All twenty-seven member states of the European Union are also members of the WTO in their own right: Austria • Belgium • Bulgaria • Cyprus • Czech Republic • Denmark • Estonia • Finland • France • Germany • Greece • Hungary • Ireland • Italy • Latvia • Lithuania • Luxembourg • Malta • Netherlands and Netherlands Antilles • Poland • Portugal • Romania • Slovakia • Slovenia • Spain • Sweden • United Kingdom. Special Administrative Region of the People's Republic of China. Designated name for the Republic of China (Chinese Taipei) v • d • e Member states and observers of La Francophonie Members Albania · Andorra · Belgium (French Community) · Benin · Bulgaria · Burkina Faso · Burundi · Cambodia · Cameroon · Canada (New Brunswick · Quebec) · Cape Verde · Central African Republic · Chad · Cyprus1 · Comoros · Democratic Republic of the Congo · Republic of the Congo · Côte d'Ivoire · Djibouti · Dominica · Egypt · Equatorial Guinea · French minority in U.S. state of Louisiana  · Former Yugoslav Republic of Macedonia · France (including French Guiana · Guadeloupe · Martinique · Saint Pierre and Miquelon) · Gabon · Ghana1 · Greece · Guinea · Guinea-Bissau · Haiti · Laos · Luxembourg · Lebanon · Madagascar · Mali · Mauritania · Mauritius · Moldova · Monaco · Morocco · Niger · Romania · Rwanda · St. Lucia · São Tomé and Príncipe · Senegal · Seychelles · Switzerland · Togo · Tunisia · Vanuatu · Vietnam Observers Armenia · Austria · Chile  · Croatia · Czech Republic · Georgia · Hungary · Lithuania · Mozambique · Poland · Serbia · Slovakia · Slovenia · Ukraine 1 Associate member.     v • d • e Economy of Europe Sovereign states Albania · Andorra · Armenia1 · Austria · Azerbaijan2 · Belarus · Belgium · Bosnia and Herzegovina · Bulgaria · Croatia · Cyprus1 · Czech Republic · Denmark4 · Estonia · Finland · France4, 5, 6 · Georgia2 · Germany · Greece · Hungary · Iceland · Republic of Ireland · Italy · Kazakhstan3 · Latvia · Liechtenstein · Lithuania · Luxembourg · Republic of Macedonia · Malta · Moldova · Monaco · Montenegro · Netherlands · Norway · Poland · Portugal · Romania · Russia3 · San Marino · Serbia · Slovakia · Slovenia · Spain6 · Sweden · Switzerland · Turkey3 · Ukraine · United Kingdom (England • Northern Ireland • Scotland • Wales) · Vatican City Dependencies, autonomies, other territories Abkhazia 2 · Adjara1 · Akrotiri and Dhekelia · Åland · Azores · Crimea · Faroe Islands · Gagauzia · Gibraltar · Greenland7 · Guernsey · Jan Mayen · Jersey · Kosovo · Isle of Man · Madeira8 · Nagorno-Karabakh1 · Nakhchivan1 · Northern Cyprus1 · South Ossetia 2 · Svalbard · Transnistria Italics indicates an unrecognised or partially recognised country. 1 Entirely in Southwest Asia.  2 Partially or entirely in Asia, depending on the border definitions.  3 / 4 / 5 / 6 Has part of its territory in Asia / North America / South America / Africa.  7 / 8 Entirely on the North American Plate / African Plate.