New Europe College Regional Program Yearbook 2001-2002

N.E.C. Yearbook 2001-2002
Foreign investors are selective concerning which sub-sectors to enter
(OECD, 1998). In Romania, we see foreign investment mainly in edibleoil,
confectionery, sugar, beer, and tobacco, but not much in primaryprocessing
sub-sectors like dairy, bakery, and meat. They have chosen
the industries that are profitable, are state monopolies, or have easily
obtainable market share, and in which brand ownership is decisive. At
least at the beginning of the transition, they stayed away from the subsectors
where the exportation to the CMEA was high since these subsectors
experienced overcapacity problems.
A phenomenon worthy of special attention is the expansion of (already
penetrated) foreign investors’ operations by the continuous acquisition of
new firms. This does not leave any room for newcomers and makes it
difficult for the Romanian firms to compete in the market. Finally,
Duponcel (1998) argues that the industries where less cooperation with
the agricultural suppliers is required are also preferred by foreign investors
in the food-processing industry. But four years later, our data provide
evidence to counter this claim.
3.3 Significance of the Food Processing Industry in the Romanian
Manufacturing Sector
Although the significance of the food processing industry varies from
country to country within Central and Eastern Europe (CEE) (Duponcel,
1998), in general terms, it is a central part of manufacturing, both in
terms of production and employment (Hanzl, 2000). In 1989, the food
processing industry played a major role in almost all the CEECs, while in
1999 only Poland, Romania, and Bulgaria 12 have remained specialized
in this industry. In Romania, after 1990 almost one fifth of the
manufacturing industry has been composed of food and beverage industry
(Table 1). However, after 1993 it has shown negative growth in contrast
to other CEECs, which can be explained by supply and demand side
effects, i.e., the stagnation in agricultural production due to late
privatization or restitution on the supply side, and restricted access to the
foreign markets due to quality factors and the low purchasing power of
the Romanian consumer in the domestic market on the demand side.
Romania has become a net importer in agro-food sector while it was a
net agro-food exporter under the communist regime (OECD, 2000).
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