REGIONAL COOPERATION AND ECONOMIC INTEGRATION

PART V:
stability and macroeconomic stabilization, including institutional development, low labor
cost but educated labor (Masso et. al, 2007), relative high growth rate and increasing
market potential, market access considerations (Boeri and Bruecker, 2001), existence of
conditions for competitive clusters and innovatory activities (Dunning, 2007). Most of
these countries registered in the FDI field a transition from low-cost advantages towards
higher value-added production.
Romania has become an appealing target for a large number of foreign investors, in the
last years. This is partially due to privatization, but also to the new investment projects
in financial services, trade and real estate (Giurca et. al, 2008) and to the integration to
European Union (Bevan et al, 2006). The same positive trend was registered by the CEE
countries as result of increasing economic growth and progress of transformation. In these
countries, FDI has played an important role in the privatization of the state sector, in
promoting the market economy and competition (Birsan and Buiga, 2008).
The recent international financial crisis proved that the external disturbing factors should
be also considered. The impact on FDI is different, depending on region and sector.
Developed countries have so far been the most affected, with a decline in FDI inflows in
2008, due mainly to sluggish market prospects. Flows into developing economies continued
to grow in 2008, but at a much lower rate than the year before (UNCTAD, 2009). Among
industries, FDI flows to financial services, automotive industries, building materials,
intermediate goods and some consumption goods have been the most significantly affected
by the financial crisis.
1. Recent evolutions of FDI in Romania
Before 2004, the slow progress in the reform of the public sector and the volatile legislative
framework eroded the credibility of the Romanian economy and kept the foreign investors
away. Accordingly, FDI remained below its potential level, with inflows derived mainly
from the privatization process. But since 2004, Romania has become one of the most
important beneficiaries of FDI in the region. After 1 st January 2007, when Romania
becomes part of the European Union, it has been created a legal framework consistent with
a market economy and investment promotion.
The accelerated economic growth in the last years has placed Romania among the leading
FDI destinations in the region. Therefore, the investor’s interest for Romania increased in
the last years constantly. The cheap and skilled labor force, one of the lowest corporate
tax level in the region (16%), the improvements in the business environment, a flexible
labor market, a positive attitude from foreign partners, a liberal labor code and a favorable
geographical location are Romania’s main advantages for foreign investors. Also, the foreign
investors in Romania are stimulated and attracted by free access to domestic markets, the
possibility of taking part in privatizations, no imposed limits on foreign participation in
commercial enterprises.
As result of these measures, in 2006, Romania received about 9,059 million Euro as
net inflows (figure 1). But in 2007, even Romania has become the main destination for
the foreign direct investments among the new EU member countries, the international
circumstances (global crisis and political instability) determined a decrease of FDI to 7,250
million Euro which includes the followings:
- 2,220 million Euro accounted for stakes held in companies (31% of the FDI flows);
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