Transcript Doing business in Romania

Doing Business in Romania
February 2016
Why to invest in Romania? (I)
•
Economic & political stability
•
EU membership: gateway to a 500
million consumers market
•
Second largest country in CEE and
the largest in SEE offering
significant market potential in
terms of size (the 9th in EU28) and
population (the 7th in EU28),
•
Geo-strategic location, at the
crossroads of three great markets:
the European Union, the CIS states
and the Middle East
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Why to invest in Romania? (II)
Romania is ranked 1st in the EU for:
• Growth of agricultural exports and
IT services
• Naval vessels exports
• Total investment share in GDP
• Speed of internet connectivity
• Export growth rate for the past
decade
Romania is ranked 2nd in the EU for:
• Number of certified IT specialists
• Office space availability in
metropolitan areas
• Wind energy potential
• Low labor cost
• Growth rate of automotive industry
in the past decade
Romania is ranked 3rd in the EU for:
• Oil reserves (with 600 million
barrels)
• Export growth rate of R&D
services
• Energy independence
Romania is lagging in EU for:
• Waste recycling
• Highway buildup
• Size of mutual fund industry
• GDP and Insurance premium per
capita
• Healthcare services (doctor
salaries, fertility, life expectancy)
Source: Ernst&Young
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Why to invest in Romania (III)- Potential for
growth
GDP Growth
Rate
**
2014
Romania
2.8%
Serbia
-1.8%
Poland
3.3%
Hungary
3.7%
Slovakia
2.5%
Bulgaria
1.5%
Czech Republic
2.0%
Croatia
-0.4%
Slovenia
3.0%
EU28
1.4%
Last update: January 2016
• 2013: 3.4% (the highest in CEE
and 2nd in EU)
• 2014: 2.8% (the 4th growth in
CEE
and 9th in EU)
• 2015: 3.6% (estimated)
• 2016 (4.1%), 2017 (4.2%) Forecasts
Source: National Institut of Statistics, Eurostat,
National Commission for Prognosis,
National Bank of Serbia
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Why now? What is new? (I)
Lowest taxes
ever in the past
15 years
VAT rate cut
from 24% to
20%
Romania's
corporate tax
rate for 2015
is 16%
(stable)
Total tax rate
in RO stands
at 42%, in
contrast to
122% in the
CZ, 95% in
HU and 58%
in POL
The dividend tax
rate is 5% on
dividends paid to
Romanian
companies and to
non-resident
companies
Last update: December
5 2015
Why now? What is new? (II)
Potential for growth
3,6% growth in Q3, 2015
the 3nd highest GDP growth in CEE
after Czech Republic
Best performe country in EU28
against the previous quarter
1,4%
3,4%
2,8%
2013
2014
3,6%
2015- Q3 *
GDP Growth Rate
*compared with the same quarter 2014
• 2013: 3.4% (the highest in CEE and 2nd in EU)
• 2014: 2,8% (the 4th growth in CEE and 9th in EU)
Last update: January 2016
Source: National Institut of Statistics, Eurostat
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Why now? What is new? (III)
Decreased corruption:
“Street effect” - the people is pressing for a more responsible
government and this is causing politicians to rethink how they approach
things
Unfortunately, Romania is still 58th in the 2015 Corruption Perceptions
Index (Transparency International), with 46 points on a 0-to-100 scale,
below the European Union average of 65.36.
Source: National Institute for Statistic
World bank doing business 2015
Global Competitiveness Report – World Economic7 Forum
Why now? What is new? (IV)
Unemployment in Europe
Unemployment rates
(age: from 15 to 74 years)
Source: 8Eurostat
Why now? What is new? (V)
Human Capital
• 20 million people / young population (almost 50% under
40 years old)
• 103 universities, 590 faculties
• Over 400,000 Romanian students
• Over 100,000 university graduates /year
• Availability of technical engineers (15%
of the graduates has engineering degrees)
• High industrial experience
• Foreign language skills (English, French,
German, Spanish, Italian)
• English language studied by 90% of students
Source: National Institut of Statistics
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Why now? What is new? (VI)
Better communication between Government and
business environment
•
CRD (Coalition for Romania's development, a
business lobby group which includes all relevant
business groups for the first time in 25 years,
including that of foreign investors) was created
and has in 2015 started pushing for greater
investment in infrastructure
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Why now? What is new? (VII)
Competitive Labour Cost
Gross average monthly wages (EUR)
Last update: January2016
Source: Vienna Institute for International Economic Studies
• Romania will maintain its competitive advantage related to labor cost.
• The employers enjoy a flexible labor code.
• Romania has the second-lowest wage in EU.
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Why now? What is new? (VIII)
Competitive Taxation
Corporate &
Income Tax
10%
15%
Romania
Slovenia
Czech Republic
Poland
Hungary
Croatia
Slovakia
Source: KPMG
Bulgaria
Serbia
VAT
Social security
Employer
Employee
20%
20%
17.9%
17.9%
12.9%
19.9%
16%
20%
23.45%
16.5%
17%
19%
19%
19%
20%
22%
22%
21%
23%
27%
25%
20%
16.1%
34%
20.74%
28.5%
17.2%
35.2%
22.1%
11%
13.71%
18.5%
20%
13.4%
• 16% corporate tax - one of the lowest in EU28
• 9% VAT for tourism and food products
• Starting with 1st of January 2016 standard VAT rate decreased to 20%
from 24% and dividend tax rate to 5% from 16%
• Romania is committed to reduce standard VAT rate from 20% to 19% in
2017 and corporate & income tax from 16% to 14% in 2019
Last update: January122016
I heard a lot of terrible things about
Romania. What is true and what is not?
• political instability
What is, actually, the reality:
- (elections in 2016)
- previous government lasted for about 3 years
- government resigned after 2 days of demonstrations
- a new government was named in about 2 weeks
current Prime Minister is a former UE commissioner
• fiscal legislation instability
-infrastructure investment is still moving slowly, but ...
special infrastructure tax was already lowered and will
be removed starting Jan. 1, 2017
- certain requirements for VAT registration were
changed but it was implemented as a way to diminish
VAT fraud
- the Minister of Finance is a former EU specialist
Source: Ministry of Transportation and Infrastructure
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What kind of returns should I expect? What to invest
into in Romania?
• RO, the 8th largest component of the MSCI Frontier Markets Index
• we believe the country is under-priced on the equity markets
• currency exchange rate stability
• at 38% in terms of debt/GDP, RO looks much better than POL (57%), HR
(67%) or HU (79%)
• Central Bank independence has been a cornerstone of the economy for the
past 25 years
•
recent investments by foreign investors included banks, NPL (nonperforming loans), large industrial factories, information technology, real
estate
• a variety of private companies stand ready for foreign investments
anywhere between 1 and 100 million euro
Source: National Institut of Statistics
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#1 challenge for you: IPA Romania
#2 challenge for you: Investment
Fair in Bucharest
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