Romania – A Strategic Choice
Manuel Costescu – State Secretary, Invest Romania
April 2016, Madrid
Romania is one of the most promissing investment destinations in
Europe, boasting features that set it apart as a growth opportunity
Economic growth in Romania is among the
highest in the EU and is forecast to remain above
potential in 2016 and 2017
3
EUR
BN
NET FDI INFLOW
160
Romania has been a member of EU since 2007
and a member of NATO since 2004
Romania is ranked 1st in the EU for maximum
speed of internet connectivity and 2nd for high
speed broadband adoption
In 2021, Romania will host the European Capital
of Culture for the second time, after Sibiu in 2007.
Baia Mare, Bucharest, Cluj and Timisoara have
been shortlisted for this role
2016 The Government of Romania
Area: 238,391
km2
EUR
BN
NOMINAL GDP
Capital:
Bucharest
Currency:
LEU (RON)
55
EUR
BN
EXPORTS
S&P
Moody’s
Fitch
BBBStable
Baa3Positive
BBBStable
Population:
19,5 mn ppl
S-E Europe
2
Romania is now more connected than ever, boasting a transport
network of 14 international & domestic airports and 8 major ports
SUCEAVA
SATU MARE
ORADEA
IASI
BAIA MARE
CLUJ-NAPOCA
BACAU
TARGU MURES
GALATI
ARAD
SIBIU
BRASOV
BRAILA
TIMISOARA
TULCEA
M. KOGALNICEANU
CONSTANTA
MANGALIA
CRAIOVA
GIURGIU
International Fligths
Domestic Fligths
BUCURESTI OTOPENI
DROBETA TR. SEVERIN
2016 The Government of Romania
SULINA
Under construction
Ports
3
130 direct flights can be accessed from 4 Romanian international
airports, leading to 76 destinations in 31 countries worldwide
Barcelona
Bari
Basel
Bologna
Brussels
Bucharest
Cologne
Dortmund
Dubai
Eindhoven
Geneva
London
Madrid
Malmö
Memmingen
Milan
Munich
Nuremberg
Paris
Rome
Tel Aviv-Yafo
Valencia
Venice
Vienna
Warsaw
Zaragoza
IASI
14 direct flights
CLUJ-NAPOCA
26 direct flights
Madrid
Memmingen
Milan
Munich
Paris
Rome
Valencia
Venice
2016 The Government of Romania
Alghero
Alicante
Amman
Amsterdam
Athens
Barcelona
Bari
Basel
Beirut
Belgrade
Berlin
Birmingham
Bologna
Brussels
Budapest
Catani
Chisinau
Cluj-Napoca
Munich
Paris
Rome
Tel Aviv-Yafo
Turin
Venice
Vienna
BUCURESTI OTOPENI
73 direct flights
TIMISOARA
17 direct flights
Barcelona
Bari
Bologna
Brussels
Bucharest
Dortmund
Eindhoven
Frankfurt
London
Barcelona
Bologna
Brussels
Bucharest
Istanbul
London
Milan
Copenhagen
Doha
Doncaster
Dortmund
Dubai
Dublin
Düsseldorf
Eindhoven
Florence
Frankfurt
Geneva
Glasgow
Hamburg
Iași
Istanbul
Larnaca
Liverpool
London
Madrid
Málaga
Malmö
Malta
Milan
Moscow
Munich
Naples
Nice
Nuremberg
Oradea
Oslo
Paris
Perugia
Pescara
Pisa
Prague
Rome
Satu Mare
Sibiu
Sofia
Stockholm
Strasbourg
Stuttgart
Suceava
Tel Aviv
Thessaloniki
Timisoara
Turin
Valencia
Venice
Verona
Vienna
Warsaw
Zaragoza
Zürich
4
70 industrial parks are spread across Romania, most offering
capabilities suited for industries like aerospace, IT&C and industry
Industrial parks in Romania
Status at regional level
1
North West Region: 15 parks
1
3
1
9
1
1
1
West Region: 3 parks
1
1
1
South West Region: 6 parks
1
South Region: 22 parks
2
3
1
10
South East Region: 2 parks
1
North East Region: 4 parks
1
2
1
14
4
2
•
•
•
2
1
2
Center: 16 parks
1
1
Bucharest: 2 parks
There are 70 industrial parks spread across Romania, placed under both private and public ownership
All offer access to utilities, particular benefits packages according to their focus and potential for synergies
Also, investors are exempted from land, building and urban planning taxes as well as for land destination changing
2016 The Government of Romania
5
Technology is becoming a significant part of Romania’s backbone
infrastructure, being leveraged by a talented pool of developers
Top 10 EMEA countries by avg. speed (Q2 2015, Mbps)
Top 10 EMEA countries by top speed (Q2 2015, Mbps)
16.1 15.6 15.2
14.3 14.0 13.9 12.9 12.8
12.4 12.1
72.1 71.4
SE
RO
CH
NL
NO
FI
CZ
DK
RO
BE
IL
IL
62.8 60.9 59.4 57.3
54.2 53.2 51.7 50.9
SE
NL
CH
BE
RU
FI
HU
UK
Top 10 EMEA countries by Mbps Broadband adoption (Q2 2015, % > 4 Mbps)
95.0
95.0
94.0
93.0
93.0
92.0
91.0
60.0
47.0
57.0
49.0
60.0
53.0
53.0
35.0
48.0
37.0
44.0
33.0
39.0
38.0
NL
IL
RO
DK
CH
SE
BE
Share above 10 Mbps
•
90.0
90.0
88.0
31.0
48.0
35.0
59.0
42.0
53.0
AU
FI
HU
Share between 4 - 10 Mbps
The internet infrastructure has developed along with the developers, who are leveraging the network to offer high quality outsourcing services, although the
focus is now shifting towards product design and, consequently, startups
2016 The Government of Romania
Source: Akamai Technologies; Invest Romania
6
Historically, investing in Romania has never been easier, with the
government becoming a partner for businesses and entrepreneurs
World Bank ease of doing business rank
37
EU labor costs rank
Ahead of Bulgaria,
Croatia, Hungary,
Italy, Turkey, Serbia or
Greece
2
UKR
MD
HU
RO
EU gas prices rank
Romania has the 2nd
cheapest labor force
in the EU
Maximum broadband speed
SRB
1
Cheapest gas and 5th
cheapest electricity in
Europe
2016 The Government of Romania
BG
1
Romania’s maximum
broadband ranks first
in the EU
Source: World Banks, Doing Business Report 2016
7
Romania has some of the lowest energy prices in the EU, coming
cheapest in gas and 5th cheapest in electricity
Electricity prices in the EU (EUR/ 1000 kWh, 2015)
156
MT
144 132
129
UK
CY
IE
112 108 104 99
ES
SK
EL
94
PT
IT
91
LV
90
BE
87
84
83
82
81
78
76
76
76
73
72
71
71
68
64
62
61
HR
LU
PL
LT
DE
HU
CZ
EE
FR
AT
NL
SI
RO
BG
FI
SE
DK
9
9
9
9
9
Medium sized industry - electricity prices
Gas prices in the EU (EUR/ gigajoule, 2015)
11
PT
11
LU
11
HR
10
ES
10
IE
10
SE
10
EL
10
DE
10
PL
10
HU
10
FR
EE
UK
SK
LV
IT
9
SI
9
BG
9
FI
8
AT
8
8
8
8
8
CZ
LT
DK
BE
NL
6
RO
Medium sized industry - gas prices
2016 The Government of Romania
Source: Eurostat
8
With the local taxes already low compared to European peers, the
government plans future tax cuts through the new fiscal code
Overview of the Romanian tax system
VAT
Social Security
•
20%
•
The government is committed to
reducing the tax burden – 2016
marked the drop in VAT to 20%,
which will be followed by
another drop to 19% in 2017
VAT on food products is 9%
Employee
Employer
16%
23%
Tax System of Romania
•
16%
•
The individual tax rate does not
have any planned cuts for the
near future
However, the new fiscal code
planned a reduction of the
dividend tax from 16% to 5%
Individual Tax Rate
2016 The Government of Romania
•
The government’s
commitment to lower the
tax burden covers the
corporate tax rate as well,
with a reduction to 14%
planned for 2019
16%
Corporate Tax Rate
Source: Invest Romania
9
The taxes are some of the lowest in the EU, with planned policies
aiming to reduce them even further in the favor of businesses (1)
VAT in the EU (2015, %)
27
25
25
25
24
23
23
23
23
22
22
21
21
21
21
21
21
20
20
20
20
20
20
20
19
19
18
17
HU
DK
HR
SE
FI
GR
IE
PL
PT
IT
SI
BE
CZ
ES
LT
LV
NL
AT
BG
EE
FR
RO
SK
UK
CY
DE
MT
LU
25
24
22
22
21
20
20
20
20
19
19
19
17
16
15
15
13
13
10
CZ
SI
RO
LT
LV
IE
CY
BG
25
23
22
20
16
16
15
10
LV
CZ
EE
HU
RO
LT
BG
Corporate tax rate in the EU (2015, %)
35
MT
34
BE
33
FR
31
IT
30
DE
29
LU
29
GR
28
ES
25
NL
AT
DK
SE
SK
PT
HR
FI
EE
UK
HU
PL
47
45
45
45
44
43
42
40
35
35
32
Individual tax rate in the EU (2015, %)
57
SE
55
DK
52
FI
52
NL
50
BE
50
AT
2016 The Government of Romania
50
SI
48
PT
48
IE
ES
FR
DE
UK
LU
IT
GR
HR
MT
CY
PL
SK
Source: KPMG
10
Over a 25% of graduating students will have a technical degree,
followed by approx. another quarter in business and economics
Percentage of university graduates by subject of degree (2014)
10%
2%
Science and humanities
Technical
Economics
Law
Medical
Arts
28%
11%
•
The quality of education in Romania is
recognized internationally, local students
consistently ranking in the top 10 in
International Olympiad competitions in math
and informatics, better than any other
country in the EU
•
The focus on technical subjects is
significant, with the number of engineers/
capita – higher than the US, India, China or
Russia
•
With 5 polytechnic universities, 59 domain
specific universities and 174 private
colleges, the most successful students tend
to pick high tech industries, such as IT – the
local education system supplies over 7,000
IT&C engineers every year
•
99% of Romanian students learn two or
more languages in upper secondary
education
23%
26%
433
Number of students by subject of degree (‘000, 2014)
112
134
80
43
57
8
* Includes: mathematics, physics, biology, chemistry, geography, journalism, history, political and administrative science, philosophy
2016 The Government of Romania
Source: NIS, Eurostat
11
The top university centers in Romania are Bucharest, Cluj – Napoca
and Iasi, followed by Timisoara, Sibiu, Brasov and Constanta
Top 3 University Centers
Botosani
Baia Mare
Suceava
Iasi
Satu Mare
Roman
Bistrita
Zalau
Oradea
Targu Mures
Turda
Medias
Alba Iulia
Arad
Vaslui
Piatra Neamt
Cluj-Napoca
Bucharest - 33 Universities
Cluj - 10 Universities
Iasi - 10 Universities
Bacau
Human Capital Index 2015 - Rank 39
Upper-middle income Country - Rank 3
Onesti
Sfantul Gheorghe
Focsani
Deva
Galati
Brasov
Sibiu
Braila
Hunedoara
Timisoara
Ramnicu Valcea
Resita
Targu Jiu
Targoviste
Ploiesti
Buzau
Bucuresti
Slatina
Craiova
Giurgiu
Tulcea
Slobozia
Pitesti
Drobeta-Turnu Severin
Human Capital Index
Birlad
Calarasi
Constanta
Age group rankings
25 – 54
Rank 36
15 – 24
Rank 45
55 – 64
Rank 29
Number of graduates by University Center [‘000]
29
10
9
6
5
4
4
3
3
CJ
IS
TM
CT
DJ
BV
AR
SB
= City >100,000 inhabitants
= City 50,000 – 100,000 inhabitants
2016 The Government of Romania
B
Sources: NIS, World Economic Forum
12
9 out of 10 university students are proficient in English, as a result of
the fact that almost all students study 2 languages in high school
Languages studied by Romanian students (2014)
97%
•
97% of Romanian high school students study 2 or more foreign languages while in secondary education
•
The predominant languages are English, French, German and Spanish, yet initiatives for teaching Japanese, Nordic
languages or the entire Latin language family (Spanish, Italian, French) exist
University students in Romania are proficient in (% of total):
90%
2016 The Government of Romania
26%
17%
8%
5%
Source: Assoc. of Business Services Leaders, NIS, Eurostat
13
Life in Romania is cheap, yet the culture, the people and the places
make it quite rich in great experiences for expats
In Bucharest, you need a
monthly salary of…
… to maintain the same
standard of living from…
… with a salary of:
46 580 Czech Koruna
Prague
57 000 Czech Koruna
7 381 Zlotys
Warsaw
8 800 Zlotys
1 700 Euro
Vienna
3 300 Euro
1 365 Pounds
London
4 500 Pounds
1 714 Euro
Berlin
3 100 Euro
1 738 Euro
Paris
4 400 Euro
538 500 Forints
Budapest
610 000 Forints
2016 The Government of Romania
Sources: Numbeo
14
Romania’s current status recommends it as a potential candidate for
a regional technology and R&D hub in several industries
Fiscal incentives
Exemption from
profit tax
Accelerated
depreciation of R&D
equipment
Income tax exemption
for IT&C employees
Deduction of R&D
eligible expenses
•
•
•
Human capital (2014)
9 000 medical grads
(medicine and pharma
chemistry)
Financing opportunities
State aid (covering through two schemes
both CAPEX investments and salary
costs, respectively)
7 000 IT&C grads
Investment Plan for Europe
(Juncker Plan)
2 000 math & physics grads
1 000 bio-chemistry grads
EU funds
(structural funds, Horizon 2020)
There is huge R&D potential, considering the fiscal incentives and the availability and quality of local human capital
There are multiple financing options available, including state aid and a wide palette of EU funds
Educational institutions have become more and more opened to external partners regarding development of R&D
projects, which is a direct pipeline of infrastructure and human capital
2016 The Government of Romania
Sources: NIS, Invest Romania
17
Fiscal incentives are aimed at leveraging the local technology and
R&D capabilities by incentivizing investors and employers (1)
Fiscal incentive
Short description
Exemption from
profit tax
•
16% profit tax exemption for the reinvested profit in new technological equipment
used for business purposes
Income tax exemption for
IT&C employees
•
An exemption on the 16% income tax is available in Romania for employees
activating in IT, under conditions including:
o Bachelor’s degree in one of the 14 technical specializations available
o Employee is hired on a software engineer/ programmer/ software analyst
position
o Annual revenue per exempted employee must be over USD 10 000
Deduction of R&D eligible
expenses
•
Eligible R&D expenses include: depreciation of R&D equipment, salaries for R&D
personnel
50% of these expenses can be deducted from the taxable income
Accelerated depreciation
of machinery, equipment
and real estate used for
R&D purposes
•
•
•
•
2016 The Government of Romania
A deduction of 50% from the fiscal value of the assets during the first year of use,
while the remaining value may be depreciated linearly along the expected remaining
lifespan
Accelerated depreciation can be used also for equipment and/ or for research and
development activities
If a company benefits from exemption of the income tax for reinvestment it will not
benefit from accelerated depreciation
18
Fiscal incentives are aimed at leveraging the local technology and
R&D capabilities by incentivizing investors and employers (2)
Fiscal incentive
Foreign tax credit
Industrial parks incentives
Facilities for people with
serious disabilities
2016 The Government of Romania
Short description
•
International income derived by Romanian residents is tax exempted under the
following conditions:
o There is a valid tax treaty between Romania and the relevant jurisdiction
(from where the income is derived by the Romanian resident)
o The interested party (taxpayer) can demonstrate that income tax was paid
abroad on the respective income
o The tax credit cannot exceed the Romanian tax applicable for the respective
income
•
Investors that set up manufacturing locations or offices in an industrial, scientific or
technological park benefit from
o Exemption on land, building and urban planning tax
o Taxes charged for changing land destination
•
Income received by people with serious disabilities can benefit from income tax
exemption (e.g., for salary income, income from freelancing activities)
19