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BUCHAREST (Romania), March 7 (SeeNews) - With its robust economic growth, skilled workforce and low taxes, Romania is Southeast Europe's top destination for US investors, as its agriculture and energy sectors in particular hold a big potential, a senior official at consultancy McGuireWoods said.
“Romania is the most attractive nation in the region, it has the fastest economic growth, and the strategic partnership with the US clearly helps,” McGuireWoods senior vice president for international government relations Nadia Crisan told SeeNews in a video interview. Crisan is also the managing director of McGuireWoods Romania.
Romania's economy expanded by 7% in 2017 on the back of rising consumption and strong performance of agriculture and industry, according to latest official data.
The country's multilingual skilled labour force is another key advantage for investors, according to Crisan.
“In 2007, when I came here, we would have our personnel trained abroad. Eleven years later we have the capability to train individuals and professional workers from other countries here,” she commented.
From this perspective, Romania can become a regional player in terms of training workers from non-EU countries in areas such as the industrial sector, Crisan also said. To achieve this, the country needs to adopt more flexible work force legislation that would allow individuals from non-EU states to work on a temporary basis in Romania, she added.
Romania's greatest appeal for investors, however, is its lax fiscal regime. Personal income is taxed a flat 16% and dividend tax is 5%. Standard VAT rate is 19%, as a reduced rate of 9% applies to certain products and services.
Recent political stammering, according to Crisan, has left investors unperturbed.
“Our experience has been one that indicates that short term political changes do not impact strategic decisions. Investors are looking at long-term, mid-term [prospects], and changes that occur for the short term are not those that make the final call on an investment so I would say from that perspective Romania is still in a very good position,” Crisan said.
Official statistics back this claim. Foreign direct investment (FDI) into Romania last year increased 1.5% to an estimated 4.586 billion euro ($5.649 billion), the country's central bank, BNR, has said. According to the statistical data published by the National Trade Register Office at the end of June, the US accounted for 3.49% of total foreign investments.
Romania is also the leader in M&A activity within SEE, accounting for more than a third of the number of deals in the region, according to an analysis by Raiffeisen Bank International. M&A activity is taking place in many sectors of the economy – the energy sector, financial services, real estate, transportation and consumer goods being among the main drivers.
As another key sector for investors Crisan pointed to agriculture. In fact, the reason McGuireWoods opened its Bucharest office back in 2007 was to advise US food giant Smithfield in establishing its business.
“I think Romania has a great agribusiness potential, it is a very attractive destination from that perspective. Also, I think we need to see land consolations so that we have increased interest from new investors.”
Last year in April, German-owned cereal trader BayWa Group paid 1.85 million euro for Cargill Cereale, one of the Romanian divisions of US agribusiness giant Cargill. A month later, US-based PHI Group signed a definitive agreement to acquire a 51% stake in Romanian farming company Maxagro.
The energy sector too offers big opportunities for partnerships and development, considering the richness of natural resources in Romania, the official added.
However, to tap on its investment potential, the country needs to overhaul its legislation, especially in the mining sector, Crisan commented.
DEFICIENT LAWS, OBSOLETE INFRASTRUCTURE THWART INVESTORS
Romania has not revised its mining law since 2003, making this sector an almost no-go area for investments, due to the lack of political consent on the matter. Draft amendments elaborated by the economy ministry were stalled by opposition parties, which claimed that they could open the door for abuse and illegal advantages for some of the actors involved.
Amendments to the legislation could lead to reopening over five hundred closed mines in areas that are largely ignored by investors, Crisan said. Investors would also have at their disposal trained personnel for mining services and mine production.
“We have North American, European clients that are interested in mining, but in the absence of the changes to the mining law we will not be in a position to advise our clients to take a more proactive interest,” the official said.
The lack of adequate infrastructure is also a major deterrent for investors, according to Crisan.
The government has still not delivered on its promise to one of the big foreign investors in the country - US carmaker Ford - for the construction of road infrastructure which Ford requested during negotiations in which Crisan participated, the official said.
“The Craiova-Pitesti road needs to be extended, so that traffic and speed can increase, we also need to have two specific bypasses in Bals and Slatina. We cannot go through the city, these are heavy duty trucks and they go 24/7, we need to have those basic infrastructure resources in order to function according to the existing business plan,” Crisan said.
In September, the government pledged that it will complete the construction of the Pitesti-Sibiu highway by the end of 2020, adding that the road link between Pitesti and Craiova, where Ford has a manufacturing plant, is also a priority for the government.
Another car maker - Dacia, a unit of France's Renault - too has been pushing for the construction of road links which would offer easier access to Western markets.
Noting the extremely pro-American sentiment in Romania, Crisan also said a boost to trade could also come from a decision by the US Congress to waive visas for Romanians.
"I think it is important to give this recognition to a strategic partner or ally," Crisan said. "First of all, I think it would increase confidence that Romania is treated equally with the other nations that have the visa waiver. Secondly it would increase the engagement of commercial partners as well."
An important step to boosting US investment in Romania could be made in September when US Secretary of Commerce Wilbur Ross may visit the country. This would be the first visit by a U.S. official of this rank since 1969.