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FM AMEMBASSY BUCHAREST
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INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 13 BUCHAREST 000022 
 
STATE FOR EUR/CE ASCHIEBE, EB/IFD/OIA DJAHN AND TJWALSH 
STATE PLEASE PASS TO USTR 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ETRD ELAB KTDB PGOV OPIC USTR RO
SUBJECT: ROMANIA: INVESTMENT CLIMATE STATEMENT, 2010 
 
REF: 09 STATE 124006 
 
BUCHAREST 00000022  001.2 OF 013 
 
 
¶1.  Following is Embassy Bucharest's submission for the 2010 
Investment Climate Statement, in response to tasking reftel. 
 
¶A. OPENNESS TO FOREIGN INVESTMENT 
 
ENCOURAGING INVESTMENT 
 
Romania actively seeks direct foreign investment.  Romania's 
marketplace offers 21.5 million consumers, a well-educated 
workforce, a strategic geographic location, and abundant natural 
resources, making it an increasingly attractive destination for 
investment.  To date, favored areas for American investment include 
IT and telecommunications, energy, services, manufacturing, and 
consumer products. 
 
Romania has taken steps to strengthen tax administration, enhance 
transparency, and create legal means to resolve contract disputes 
expeditiously.  Mergers and acquisitions are subject to review by 
the Competition Council.  Romania's accession to the European Union 
on January 1, 2007 has helped solidify institutional reform. 
However, judicial and legislative unpredictability continues to 
affect the investment climate.  Prospective U.S. investors should 
exercise careful due diligence, including consultation with 
competent legal counsel, when considering any investment. 
 
U.S. companies establish a local presence in the Romanian market in 
several forms.  Many sign distribution agreements with a local 
Romanian firm which brings experience, expertise and access to the 
partnership.  Other firms cover Romania from a distributor or sales 
representative in the region.  Still other American companies choose 
Romania as a base of manufacturing or distribution and establish a 
subsidiary.  The choice of strategy depends on the industry, the 
nature of the customer (government buyer or retail trade), and the 
business case.  Companies that rely on regular access to the 
Government of Romania, or have a significant service component, 
generally seek to establish a subsidiary, sometimes through 
acquisitions. 
 
Investments that involve the public authorities (central government 
ministries, county governments, and city administrations) are 
generally more complicated than investments or joint ventures with 
private Romanian companies.  Large deals involving the 
government--particularly public-private partnerships and 
privatizations of key state-owned enterprises-- can become stymied 
by vested political and economic interests or bogged down due to a 
lack of coordination among governmental ministries.  Investors have 
generally encountered greater success with less complex deals 
involving small- to medium-sized private and state enterprises. 
 
EU ACCESSION 
 
Romania became a member of the European Union on January 1, 2007. 
The country has worked assiduously to create a legal framework 
consistent with a market economy and investment promotion, and has 
largely concluded its efforts to enact EU-compatible legislation. 
At the same time, implementation of these regulations sometimes 
lags.  The U.S. Department of Commerce recognized Romania as a 
market economy for anti-dumping investigation purposes beginning in 
March 2003. 
 
LEGAL FRAMEWORK 
 
Romania's legal framework for foreign investment is encompassed 
within a substantial body of law, largely enacted in the late 1990s 
and subject to frequent revision since.  Investors are strongly 
encouraged to engage local counsel to navigate through the various 
laws, decrees, and regulations. 
 
This body of legislation and regulation provides national treatment 
for foreign investors, guarantees free access to domestic markets, 
and allows foreign investors to participate in privatizations. 
There is no limit on foreign participation in commercial 
enterprises.  Foreign investors are entitled to establish wholly 
foreign-owned enterprises in Romania (although joint ventures are 
more typical) and to convert and repatriate 100 percent of after-tax 
profits.  Foreign firms are allowed to participate in the management 
and administration of the investment, as well as to assign their 
contractual obligations and rights to other Romanian or foreign 
investors. 
 
Foreign investors may engage in business activities in Romania by 
any of the following methods: 
 
-- Setting up new commercial companies, subsidiaries or branches, 
either wholly owned or in partnership with Romanian natural or legal 
 
BUCHAREST 00000022  002.2 OF 013 
 
 
persons; 
-- Participating in the increase of capital of an existing company 
or the acquisition of shares, bonds, or other securities of such 
companies; 
-- Acquiring concessions, leases or agreements to manage economic 
activities, public services, or the production of subsidiaries 
belonging to commercial companies or state-owned public 
corporations; 
-- Acquiring ownership rights over non-residential real estate 
improvements, including land, via establishment of a Romanian 
company; 
-- Acquiring industrial or other intellectual property rights; 
-- Concluding exploration and production-sharing agreements related 
to the development of natural resources. 
 
Foreign investor participation can take the form of: foreign 
capital, equipment, means of transport, spare parts and other goods, 
services, intellectual property rights, technical know-how and 
management expertise, or proceeds and profits from other businesses 
carried out in Romania.  Foreign investment must comply with 
environmental protection, national security, defense, public order, 
and public health interests and regulations. 
 
There have been few hostile take-over attempts reported in Romania, 
and as a result Romanian law has not focused on limiting potential 
mergers or acquisitions.  There are no Romanian laws prohibiting or 
restricting private firms' free association with foreign investors. 
 
 
PRIVATIZATION 
 
The State Asset Resolution Authority (AVAS) is responsible for 
privatizing state-owned industrial assets and managing them during 
the privatization process.  The Ministry of Economy oversees energy 
assets.  Romania's privatization law permits the responsible 
authority to hire an agent to handle the entire privatization 
process, though ultimate decision-making authority remains with the 
Government. 
 
Major energy sector privatization remained largely stalled in 2008 
and 2009.  After having successfully privatized 87 of its micro 
hydropower plants (HPP) to Romanian and foreign investors, the 
state-owned hydro power producer, Hidroelectrica, has halted 
divestiture of the remaining 63 micro HPPs.  Additional 
privatizations are not currently contemplated for the energy sector; 
rather, the Government seeks to combine remaining assets into two 
fully integrated, state-owned companies. 
 
State-owned energy companies are seeking joint ventures with private 
investors for electric power production, as well as onshore and 
offshore oil and gas exploration, as an alternative to 
privatization. 
 
Prospective investors are strongly advised to conduct thorough due 
diligence before any acquisition, particularly of state-owned 
assets.  Some firms have found it advantageous to purchase 
industrial assets through AVAS's budget arrears recovery process 
rather than through direct privatization.  When utilized, this 
method may avoid assuming historical debt or encumbering labor 
agreements.  As a member of the European Union, Romania is required 
to notify the European Commission's General Directorate for 
Competition regarding significant privatizations and related state 
aid.  Prospective investors should seek assistance from legal 
counsel to ensure compliance by relevant government entities.  GOR 
failure to consult with, and then formally notify, the European 
Commission properly has resulted in delays and complications in some 
past privatizations.  Some investors have also experienced problems 
due to the occasional failure of GOR entities to fully honor 
contractual obligations following conclusion of privatization 
agreements. 
 
Romanian law allows for the inclusion of confidential clauses in 
privatization and public-private partnership contracts to protect 
business proprietary and other information.  However, in certain 
high-profile privatizations, Parliamentary action has compelled the 
public disclosure of such provisions. 
 
PROPERTY AND CONTRACTUAL RIGHTS 
 
Property and contractual rights are recognized, but enforcement 
through the judicial process can be lengthy, costly, and difficult. 
Foreign companies engaged in trade or investment in Romania often 
express concern regarding Romanian courts' lack of expertise in 
commercial issues.  Judges generally have limited experience in the 
functioning of a market economy, international business methods, 
intellectual property rights, or the application of Romanian 
commercial and competition laws.  Even when court judgments are 
 
BUCHAREST 00000022  003.2 OF 013 
 
 
favorable, enforcement of judgments is inconsistent and can require 
further lengthy appeals. 
 
The Heritage Foundation's Economic Freedom report ranked Romania 
29th out of 43 countries in Europe in 2009, with an overall score 
higher than the world average; Romania has demonstrated slow but 
steady improvement in the index in recent years.  The report points 
out, however, that labor freedom, property rights, and freedom from 
corruption lag behind other countries in the region, and that 
Romania's judiciary remains vulnerable to corruption and 
inefficiency.  In Transparency International's Corruption Perception 
Index, Romania lost ground in 2008-2009 after steady improvement 
leading up to EU accession in 2007. 
 
Heritage Foundation Index of Economic Freedom score 
- 2009:  63.2 
- 2008:  61.7 
- 2007:  61.2 
- 2006:  58.2 
- 2005:  52.1 
 
Transparency International Corruption Perception Index: 
- 2009:  71 
- 2008:  70 
- 2007:  69 
- 2006:  84 
- 2005:  85 
 
 
World Bank Doing Business ranking 
- 2010:  55 
- 2009:  45 
 
 
 
¶B. CONVERSION AND TRANSFER POLICIES 
 
Romanian legislation does not restrict the conversion or transfer of 
funds associated with direct investment.  All profits made by 
foreign investors in Romania may be converted into another currency 
and transferred abroad at the market exchange rate after payment of 
taxes. 
 
Romania's national currency, the Leu, is freely convertible in 
current account transactions, in accordance with the International 
Monetary Fund's (IMF) Article VII.  Proceeds from the sale of 
shares, bonds, or other securities, as well as from the conclusion 
of an investment, can also be repatriated.  There is no limitation 
on the inflow or outflow of funds for remittances of profits, debt 
service, capital gains, returns on intellectual property, or 
imported inputs. 
 
In 1997, the Romanian Government implemented new regulations that 
liberalized foreign exchange markets.  The inter-bank electronic 
settlement system became fully operational in 2006, eliminating past 
procedural delays in processing capital outflows.  Commission fees 
for real-time electronic banking settlements have gradually been 
reduced. 
 
Capital inflows are free from restraint as well.  Romania concluded 
capital account liberalization in September 2006 with the decision 
to permit non-residents and residents abroad to purchase 
derivatives, treasury bills and other monetary instruments. 
 
¶C. EXPROPRIATION AND COMPENSATION 
 
The law on direct investment includes a guarantee against 
nationalization and expropriation or other equivalent actions.  The 
law allows investors to select the court or arbitration body of 
their choice to settle potential litigation.  Four cases against 
Romania are pending with the International Center for Settlement of 
Investment Disputes (ICSID).  Several cases involving investment 
property nationalized during the Communist era also remain 
unresolved. 
 
¶D. DISPUTE SETTLEMENT 
 
ARBITRATION 
 
Romania recognizes the importance of arbitration in the settlement 
of commercial disputes.  Many agreements involving international 
companies and Romanian counterparts provide for the resolution of 
disputes through third-party arbitration.  Romania is a signatory to 
the 1958 New York Convention on the Recognition and Enforcement of 
Foreign Arbitral Awards.  Romania is also a party to the European 
Convention on International Commercial Arbitration concluded in 
Geneva in 1961 and is a member of ICSID. 
 
BUCHAREST 00000022  004.2 OF 013 
 
 
 
Romanian law and practice recognize applications to other 
internationally-known arbitration institutions, such as the ICC 
Paris Court of Arbitration and the Vienna United Nations Commission 
on International Trade Law (UNCITRAL).  Romania also has an 
International Commerce Arbitration Court administered by the Chamber 
of Commerce and Industry of Romania.  Arbitration awards are 
enforceable through Romanian courts under circumstances similar to 
those in other Western countries, although legal proceedings can be 
protracted. 
 
MEDIATION 
 
Mediation as a tool to resolve disputes is gradually becoming more 
common in Romania.  Mediation became a legal profession in 2006 when 
the Romanian Parliament passed legislation recognizing it and 
establishing a certifying body, the Mediation Council, to set 
standards and practices.  The professional association, The Union of 
Mediation Centers in Romania, is the umbrella organization for 
mediators throughout the county.  There are recognized mediation 
centers in every county seat where court-sanctioned and private 
mediation is available. 
 
There is no legal mechanism for court-ordered mediation in Romania, 
but judges can encourage litigants to use mediation to resolve their 
cases.  If litigants opt for mediation, then upon completion of the 
mediation process they must present their proposed resolution to the 
judge who must approve the agreement. 
 
The Union of Mediation Centers is a member of the European Mediation 
Network Initiative and is recognized by the European Union and other 
regional bodies. 
 
BANKRUPTCY 
 
Romania's bankruptcy law contains provisions for liquidation and 
reorganization that are generally consistent with Western legal 
standards.  These laws usually emphasize enterprise restructuring 
and job preservation.  Legal and economic education and the training 
of judges and lawyers lag behind law-making, which often results in 
inconsistent outcomes.  To mitigate the time and financial costs of 
bankruptcies, Romanian legislation provides for administrative 
liquidation as an alternative to bankruptcy.  However, investors and 
creditors have complained that the liquidators sometimes lack the 
incentive to expedite liquidation proceedings, and that, in some 
cases, their decisions have served vested outside interests.  Both 
state-owned and private companies tend to opt for judicial 
reorganization to avoid bankruptcy. 
 
A law passed in December 2009 institutes a debt settlement 
mechanism, Company Voluntary Agreements (CVAs), as a means for 
creditors and debtors to establish partial debt service schedules 
without resorting to bankruptcy proceedings. 
 
¶E. PERFORMANCE REQUIREMENTS AND INCENTIVES 
 
INCENTIVES 
 
Currently, customs and tax incentives are available for investors in 
six free trade zones and 36 regions of the country designated as 
economically disadvantaged.  State aid is available for investments 
in free trade zones under EU regional development assistance rules. 
Large companies may receive aid up to 50 percent of their eligible 
costs (limited to 40 percent in Bucharest and surrounding Ilfov 
County), while small- and medium-sized enterprises (SMEs) may 
receive assistance with up to 65 percent of their eligible costs. 
To mitigate the effects of the economic crisis, the GOR can offer 
individual aid up to 500,000 euros until December 2010 under a state 
aid scheme approved under the EU's Temporary Framework.  Prospective 
investors are advised to investigate thoroughly the current status 
of fiscal incentives. 
 
In 2007 Romania adopted EU regulations on regional investment aid 
and instituted state aid schemes for large investments.  To benefit 
from state aid under these schemes, the applicant must secure 
financing for at least 25 percent of the eligible costs, either 
through its own resources or by external financing, in a form which 
is free of any public support.  The applicant must document this 
financing in strict accordance with Ministry of Finance guidelines. 
In practice, unfortunately, GOR budget constraints and a 
less-than-fully transparent application process have limited access 
to these forms of state aid. 
Different ministries and government entities manage the various 
state aid schemes, and rules and procedures are complex.  Companies 
interested in state aid are encouraged to seek competent counsel. 
 
To reduce initial startup costs, a system of industrial and 
 
BUCHAREST 00000022  005.2 OF 013 
 
 
technological parks is being created.  Tax incentives are available 
for the park operator, while companies that establish themselves in 
the park benefit from access to utility hookups and infrastructure 
and from potential local tax rebates under regional development aid 
schemes.  There were 62 such parks throughout Romania as of December 
¶2009. 
 
As a member of the EU, Romania must receive European Commission (EC) 
approval for any state aid it grants which is not covered by the 
EU's block exemption regulations.  The Romanian Competition Council 
acts as a clearinghouse for the exchange of information between the 
Romanian authorities and the EC.  Specifically, the Council screens 
state aid notifications and provides an initial opinion to state aid 
grantors as to whether the request is consistent with EU directives, 
allowing for an opportunity to revise or withdraw a request before 
it is submitted to the Commission.  Even after submission, the 
Council retains jurisdiction over competition and antitrust matters. 
 The failure of state aid grantors to notify the EC properly of aid 
associated with privatizations has resulted in the Commission 
launching formal investigations into several privatizations. 
Investors should ensure that government entities with which they 
work fully understand and fulfill their duty to notify competition 
authorities.  Investors may wish to consult with EU and Romanian 
competition authorities in advance to ensure a proper understanding 
of notification requirements. 
 
Companies operating in Romania can also apply for aid under 
EU-funded programs that are co-financed by Romania.  When planning 
the project, prospective applicants have to bear in mind that they 
cannot start the project before finalizing the financing agreement, 
and the application, selection and negotiation process can be 
lengthy.  They also need to secure financing for the non-eligible 
expenses and for their co-financing of the eligible expenses. 
Finally, EU reimbursement of eligible expenses--which must be 
financed up front by the investor--is often very slow. 
 
TAX SYSTEM 
 
Since 1999, Romania has revised its tax system to bring it closer 
both to EU models and to the recommendations of the World Bank and 
IMF.  In 2004, Romania adopted a flat tax of 16 percent on personal 
income and corporate profits and simplified the tax code.  The GOR 
reduced employers' payroll taxes by two percent in 2007 and by an 
additional six percent in three stages in 2008.  In 2009, the 
newly-elected GOR reversed some of these reductions.  For normal 
working conditions, payroll taxes are now 31.3 percent, with 10.5 
percent payable by the employee and 20.8 percent by the employer (up 
from 27.5 percent, 9.5 percent, and 18.0 percent, respectively). 
For careers with high morbidity or disease rates, the total payroll 
taxes are 36.3 percent,  with employees paying 10.5 percent and 
employers 25.8 percent (as compared to 32.5 percent, 9.5 percent, 
and 23.0 percent previously).  For certain professions such as 
mining and aviation, where workers may be exposed to high levels of 
radiation, the current rate is 41.3 percent, with 10.5 percent paid 
by the employee and 30.8 percent by the employer (an increase from 
37.5 percent, 9.5 percent, and 28.0 percent respectively).  Accident 
and risk fund contributions range from 0.15 percent to 0.85 percent 
depending on the risk class of the company (previously 0.4 to 2.0 
percent.)  Rates for medical and unemployment insurance have 
remained unchanged. 
 
Romania has a 19 percent value added tax (VAT).  Investors should be 
aware that, due to budget constraints, the GOR has regularly delayed 
VAT reimbursements due to foreign companies for extended periods, 
especially if the reimbursement amount is large.  The country is 
fully integrated into EU customs, excise tax, and VAT transfer 
systems.  While there has been some discussion of raising tax rates 
to boost revenues and reduce the fiscal deficit, the government 
which took office in late December 2009 has proposed in its 2010 
budget to keep the flat tax and VAT rates unchanged. 
 
TARIFF PREFERENCES 
 
Upon EU accession, Romania implemented the EU Common Customs Tariff, 
the Generalized Preference Scheme, EU commercial safeguards, 
preference agreements and cooperation agreements concluded by the EU 
with third countries, as well as other EU commercial commitments 
vis-a-vis the WTO. 
 
¶F. RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT 
 
The Romanian Constitution, adopted in December 1991 and revised in 
2003, guarantees the right to ownership of private property. 
Mineral and air rights, and similar rights, are excluded from 
private ownership.  Under the revised Constitution, foreign citizens 
can gain land ownership through inheritance.  With EU accession, 
citizens of EU member states can now own land in Romania subject to 
 
BUCHAREST 00000022  006.2 OF 013 
 
 
reciprocity in their home country. 
 
Companies having foreign capital may acquire land or property 
necessary for fulfilling or developing company goals.  If the 
company is dissolved or liquidated, the land must be sold within one 
year of closure and may only be sold to a buyer(s) with the legal 
right to purchase such assets.  For a transition period of seven 
years after Romania's accession to the EU, foreign investors cannot 
purchase agricultural land or forests and forestry land (except for 
farmers acting as commercial entities).  Investors can purchase 
shares in agricultural companies that can lease land in the public 
domain from the State Land Agency. 
 
¶G. PROTECTION OF PROPERTY RIGHTS 
 
MORTGAGES 
 
In early 2006, the Parliament passed a legislative package that 
regulates the establishment of specialized mortgage banks, including 
the possibility of transforming existing non-banking mortgage credit 
institutions into specialized mortgage banks.  The law also makes 
possible a secondary mortgage market by regulating mortgage bond 
issuance mechanisms.  Mortgage lending is offered by commercial 
banks, specialized mortgage banks, and non-bank mortgage credit 
institutions.  Romania's mortgage market is now almost entirely 
private (although the state-owned National Savings Bank, or CEC, 
also offers mortgage loans). 
 
The primary mortgage market demonstrated robust growth until the 
third quarter of 2008.  Since then, credit has tightened in response 
to the international financial crisis and the implementation of much 
stricter national regulations on borrower qualifications.  For loans 
denominated in Romanian lei (RON), standard banks charge one-month 
ROBOR (currently 9.5 percent) plus a 6-7 percent spread of interest 
and commission fees for up to 30 years.  For euro-denominated loans, 
banks currently charge three-month EURIBOR plus 6-7 percent interest 
and commission fees for up to 30 years.  Due to the financial 
crisis, however, many banks have reduced euro-denominated lending. 
 
 
INTELLECTUAL PROPERTY RIGHTS 
 
Romania is a signatory to international conventions concerning 
intellectual property rights (IPR), including TRIPS, and has enacted 
legislation protecting patents, trademarks, and copyrights.  Romania 
signed the Internet Convention to protect online authorship.  While 
the IPR legal framework is generally good, enforcement in some areas 
remains weak and ineffectual.  The flagrant trade of retail pirated 
goods has largely been eliminated, but personal use of pirated 
products and software remains high.  The recording, video, and 
software industries have expressed concerns over increasing levels 
of Internet-based piracy of electronic media.  Romania has passed 
broader IPR control enforcement provisions as required under the 
WTO, yet judicial enforcement remains lax. 
 
PATENTS 
 
Romania is a party to the Paris Convention for the Protection of 
Industrial Property and subscribes to all of its amendments. 
Romanian patent legislation generally meets international standards, 
with foreign investors accorded equal treatment with Romanian 
citizens under the law.  Patents are valid for 20 years.  Romania 
has been a party to the European Patent Protection Convention since 
¶2002. 
 
TRADEMARKS 
 
In 1998, Romania passed a trademark and geographic indicators law 
which is generally consistent with international standards.  Areas 
that require improvement are in administrative procedures and 
sanctions.  Romania is a signatory to the Madrid Agreement relating 
to the international registration of trademarks and the Geneva 
Treaty on Trademarks.  Trademark registrations are valid for ten 
years from the date of application and renewable for similar 
periods.  In 2007, Romania ratified the Singapore Treaty on 
Trademarks Registration. 
 
COPYRIGHTS 
 
Romania is a member of the Bern Convention on Copyrights.  Its 1996 
law on the protection of copyrights and related rights was among the 
most modern in this field when enacted.  The Romanian Parliament has 
ratified the latest versions of the Bern and Rome conventions.  The 
Romanian Copyright Office (ORDA) was established in 1996 and 
promotes and monitors copyright legislation.  The General 
Prosecutor's Office (GPO) provides national coordination of IPR 
enforcement.  However, copyright law enforcement is often a low 
 
BUCHAREST 00000022  007.2 OF 013 
 
 
priority for Romanian prosecutors and judges.  Some magistrates 
still tend to view copyright piracy as a "victimless crime."  This 
attitude, coupled with a lack of resources, has resulted in weak 
enforcement of copyright law.  Copyright infringement in software, 
music, and video is prevalent throughout Romania.  Although they 
have declined over the past few years, piracy rates remain high 
largely due to widespread cyber-piracy.  The latest industry 
estimates of piracy rates by sector are 66 percent of business 
software and 40 percent of music. 
 
SEMICONDUCTOR CHIP LAYOUT DESIGN 
 
Romanian law protects semiconductor chip layout design.  In order to 
benefit, designs must be registered with the Romanian Inventions and 
Trademark Office.  Romania is a signatory to the Washington Treaty. 
 
 
¶H. TRANSPARENCY OF THE REGULATORY SYSTEM 
 
Cumbersome and non-transparent bureaucratic procedures are a major 
problem in Romania.  Foreign investors point to the excessive time 
it takes to secure necessary zoning permits, environmental 
approvals, property titles, licenses, and utility hook-ups.  Romania 
enacted a "Silent Approval" Law in 2003 to reduce bureaucratic 
delays, but it has yet to be universally enforced or recognized. 
Furthermore, regulations change frequently, often without advance 
notice, and may be vaguely worded and poorly explained.  These 
changes, which can significantly add to the costs of doing business, 
can complicate investors' business plans. 
 
Romanian law requires consultations with the private sector and a 
30-day comment period on legislation affecting the business 
environment (the "Sunshine Law").  However, not all ministries 
adhere consistently to this requirement.  Even when they do observe 
the comment period, in many cases public input does not appear to be 
considered seriously or incorporated into the final legislation. 
 
State aid legislation and EU state aid regulations (directly 
applicable to Romania after January 1, 2007) aim to limit state aid 
in any form, such as direct state subsidies, debt rescheduling 
schemes, debt for equity swaps, or discounted land prices.  The 
European Commission must be notified of and must approve GOR state 
aid above the pre-approved monetary threshold for the corresponding 
category of aid. 
 
¶I. EFFICIENT CAPITAL MARKET AND PORTFOLIO INVESTMENT 
 
CAPITAL MARKETS 
 
Romania seeks to develop efficient capital markets.  The National 
Securities Commission (CNVM) is responsible for regulating the 
securities market in order to protect investors.  The process 
provides for the registration and licensing of brokers and financial 
intermediaries, filing and approval of prospectuses, and approval of 
market mechanisms. 
 
The Bucharest Stock Exchange (BVB) resumed operations in 1995 after 
a hiatus of 50 years.  The BVB operates a three-tier system that, at 
present, lists a total of 70 companies, with 21 companies in the 
highest tier.  The official index, BET, is based on a basket of the 
10 most active stocks listed, while the BET-C index follows the 
trend of all stocks listed on the BVB.  The BVB also has a RASDAQ 
(OTC) market segment that currently lists 1,570 different stocks. 
The BVB additionally allows trade in corporate, municipal, and 
international bonds.  In 2007, the BVB opened derivatives trading. 
 
Despite lower trading fees and a diversified securities listing, the 
situation on the international capital and financial markets has 
adversely affected the Romanian capital market.  Country funds, 
hedge funds and venture capital funds continue to participate in the 
capital markets, yet on a decreasing scale. 
 
Minority shareholders have the right to participate in any capital 
increase.  Romanian capital market regulation is now EU-consistent, 
with accounting regulations reflecting EC Directives IV and VII. 
 
BANKING SECTOR 
 
There are 42 banks and credit cooperative unions currently operating 
in Romania.  The largest, Romanian Commercial Bank (BCR), was 
privatized in 2006 through sale to Erste Bank of Austria and has a 
20.8 percent market share.  The second-largest is French-owned 
Romanian Bank for Development (BRD-Societe Generale) with 16 percent 
market share, followed by Austrian-owned Volksbank (7 percent) and 
Raiffeisen Bank (6 percent).  Other large banks include the 
Greek-owned Alpha Bank (5.7 percent), Italy's UniCredit Tiriac (5.6 
percent), and domestically-owned Banca Transylvania (5.5 percent). 
 
BUCHAREST 00000022  008.2 OF 013 
 
 
 
According to Romania's Central Bank, overdue and doubtful loans now 
amount to 3.13 percent of total non-bank loans, 10.5 percent of the 
bank's own capital, and 0.92 percent of total banking assets. 
 
The GOR actively encourages foreign investment in the banking 
sector, and there are no restrictions on mergers and acquisitions. 
The only remaining state-owned banks are the National Savings Bank 
(CEC Bank), with a market share of 4.4 percent, and Eximbank with 
1.7 percent. 
 
While Romania's Central Bank must approve the operation of all new 
non-EU banking entities in the country, banks and non-banking 
financial institutions with existing approval in other EU countries 
need merely notify the Central Bank of plans to provide local 
services. 
 
¶J. COMPETITION FROM STATE-OWNED ENTERPRISES 
 
Private enterprises are allowed to compete with public enterprises 
under the same terms and conditions with respect to access to 
markets and credit.  Energy production and transportation, along 
with mining, are majority state-owned sectors, while the state holds 
a monopoly in transportation of electricity and natural gas. 
 
While state-owned oil and gas companies received exploration and 
extraction licenses through direct allocation before 1989, they are 
now required to compete in transparently advertized bidding rounds 
organized by the National Agency for Mineral Resources.  Improved 
transparency in decision making will help ensure fair access to 
state aid for both private enterprises and State-owned Enterprises 
(SOEs). 
 
SOE senior management reports directly to the relevant ministry. 
Board seats are specifically allocated to ministry representatives. 
SOEs are required by law to publish an annual report.  Majority 
state-owned companies listed on the capital market, as well as 
state-owned banks, are required to submit their books for 
independent audit. 
 
¶K. CORPORATE SOCIAL RESPONSIBILITY 
 
There is increasing awareness of corporate social responsibility 
(CSR) among producers and consumers in Romania.  CSR, as a concept, 
is increasingly common in Romanian business, driven primarily by 
multinational companies that have transferred their corporate 
culture to the local level.  Virtually all foreign enterprises in 
Romania have some kind of CSR program, and most follow generally 
accepted CSR principles such as the OECD Guidelines for 
Multinational Enterprises.  Romanian legislation allows companies to 
allocate part of their corporate income tax (a maximum of 0.3 
percent of turnover and 20 percent of total corporate income tax 
due) for CSR under the sponsorship law. 
 
¶L. POLITICAL VIOLENCE 
 
There have been no reported incidents in Romania involving 
politically motivated damage to foreign investments (projects and/or 
installations).  Major civil disturbances are not expected to occur 
in Romania in the near future. 
 
¶M. CORRUPTION 
 
Despite some improvements, corruption remains a serious problem. 
Romania and Bulgaria shared the lowest ranking among EU member 
states in Transparency International's (TI) 2009 Corruption 
Perception Index.  TI's 2007 report on judicial corruption pointed 
to poor judicial decision making and weak ethical values. 
International organizations such as TI and local non-governmental 
"watchdog" organizations operate in Romania. 
 
U.S. investors have complained of government and business corruption 
in Romania, with the customs service, municipal zoning offices and 
local financial authorities most frequently named.  In some cases, 
demands for payoffs by low- to mid-level officials reach the point 
of harassment. 
 
Romanian law and regulations contain provisions intended to prevent 
corruption, but enforcement is generally weak.  Corruption is 
currently punishable under a variety of statutes in the penal code. 
Prison sentences are sometimes imposed, but powerful and influential 
individuals have often evaded prosecution or conviction.  Under 
pressure from the EU, the GOR is attempting to prosecute several 
high-level political officials from previous governments, including 
a former Prime Minister. 
 
The Government announced a National Anti-Corruption Plan and passed 
 
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an anti-corruption law in April 2003.  The plan contains an 
impressive list of measures and benchmarks for judging the 
Government's commitment to combating corruption.  A national 
strategy to combat corruption in local public administration was 
adopted in June 2008.  However, the implementation of these measures 
and commitments has lagged. 
 
In December 2002, Romania passed an anti-money laundering and 
terrorism financing law, which was amended in April 2008.  With U.S. 
help, the Romanian Government established a new institution in 
September 2002--the National Anti-Corruption Prosecutors' Office 
(DNA)--staffed by prosecutors and police.  A new criminal code came 
into effect in 2003.  In the first half of 2008, Romania also 
established the National Integrity Agency, which is designed to 
monitor financial asset flows, limit conflicts of interest, and 
sanction unjustified increases in the personal assets of politicians 
and public sector employees. 
 
Bucharest hosts the Southeast European Law Enforcement Center 
(SELEC), previously known as the Southeast European Cooperation 
Initiative (SECI) Regional Center for Combating Corruption and 
Organized Crime.  Romania is one of the three members of the SELEC 
Joint Cooperation Committee.  Romania has signed and ratified the 
Agreement on Cooperation to Prevent and Combat Trans-border Crime of 
May 1999. 
 
In March 2002, to reduce corrupt practices in public procurement, 
the GOR inaugurated a web-based e-procurement system 
(http://www.e-licitatie.ro/).  Initiated with seed money from USAID, 
the system is a transparent listing of both ongoing and closed 
solicitations, with the names of the winners and the closing prices 
made available to the public.  The use of "e-licitatie" has 
increased government efficiency, reduced vulnerability to 
corruption, and improved fiscal responsibility in government 
procurement.  E-procurement has increased from 159 government 
clients and 600 suppliers in its initial months to 11,535 state 
entities and 21,563 suppliers currently listed.  Initially used 
solely for basic, standard procurements, the program is also now 
applied to more complex projects. 
 
Romania's public procurement law, passed in 2006 and repeatedly 
amended since, establishes ex-ante controls on public procurement 
processes, stricter rules on eligible participants, and an appeals 
mechanism for complaints against the process.  The National Agency 
for Public Procurement has general oversight over procurements and 
can draft legislation, but procurement decisions remain with the 
procuring entities.  Notably, procurements of goods and services for 
projects that receive EU funding have to comply with the public 
procurement law. 
 
COURT SYSTEM 
 
The Romanian judicial system suffers from corruption, inefficiency, 
lack of expertise, and excessive workloads.  Divergent and often 
contradictory rulings are not uncommon, complicating normal 
commercial activities.  Companies routinely complain that commercial 
disputes take too long to resolve through the court system and, once 
a verdict is reached, court orders may not be enforced.  Errors in 
court procedures, whether peripheral to the outcome or not, may 
result in complete retrials, further delaying verdicts.  Courts are 
overburdened and the number of magistrates and judges is too small. 
Litigants in virtually all cases have a right to two appeals, 
contributing to clogs in court dockets throughout the system and 
lengthy delays.  Final judgments are not binding until all appeals 
are exhausted.  Clerks, attorneys and judges reportedly remain 
susceptible to bribes or other "extra-judicial" payments, most 
commonly to "speed up" litigation, to assure a particular judge is 
assigned to a case, or to create intentional procedural errors 
leading to retrial.  Magistrates across Romania went on strike for 
several weeks in fall 2009 to protest proposed changes to their 
wages and bonus payments, paralyzing the court system and adding to 
already lengthy case backlogs. 
 
CYBER CRIME 
 
Romania has one of the world's highest occurrences of Internet 
fraud.  The problem is illustrated by a growing stream of 
complaints, some of which involve U.S. companies and their customers 
being defrauded of millions of dollars.  The most common problems 
result from the use of stolen credit card numbers for the purchase 
of goods on-line, fraudulent use of on-line auction platforms, and 
sophisticated phishing schemes to defraud customers of legitimate 
e-commerce companies. 
 
Romanian hackers also have gained notoriety for hacking into U.S. 
companies' servers and stealing proprietary information, including 
customer credit card data.  There have been cases where Romanian 
 
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hackers have offered to sell the means by which they hacked the 
company's server back to the victimized U.S. company.  On other 
occasions, hackers have attempted blackmail by threatening to 
release sensitive data or the means to hack the system unless a 
specific amount of money is paid. 
 
An e-commerce law that defines and punishes cyber crime came into 
force in July 2002.  Law enforcement efforts are still not 
commensurate with the scale of the problem, but enforcement 
activities have increased notably, thanks in part to the substantial 
assistance U.S. law enforcement agencies have provided to their 
Romanian counterparts.  Several recent investigations into cyber 
crime, and continuing successful arrests by Romanian authorities, 
may serve as a deterrent to new cyber criminals. 
 
¶N. BILATERAL INVESTMENT AGREEMENTS 
 
The U.S.-Romanian Bilateral Investment Treaty (BIT) on the 
Reciprocal Encouragement and Protection of Investment (signed May 
1992, ratified by the U.S. in 1994) guarantees national treatment 
for U.S. and Romanian investors.  It provides a dispute resolution 
mechanism, liberal capital transfer, prompt and adequate 
compensation in the event of an expropriation, and the avoidance of 
trade-distorting performance requirements.  The U.S. Government 
negotiated an agreement with the EU and eight accession countries, 
including Romania, to cover any possible inconsistencies between the 
pre-existing BITs and the countries' future EU obligations.  This 
revised BIT was ratified by the U.S. Senate and the Romanian 
Parliament in 2004, and went into effect on February 9, 2007.  Other 
bilateral trade agreements with third countries were terminated upon 
Romania's EU accession. 
 
¶O. OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS 
 
The Overseas Private Investment Corporation (OPIC) began operations 
in Romania in late 1992 and continues to actively finance projects 
in Romania.  Romania has been a member of the Multilateral 
Investment Guarantee Agency (MIGA) since 1992. 
 
¶P. LABOR 
 
Romania has traditionally offered a large, skilled labor force at 
comparatively low wage rates in most sectors, although the labor 
pool has tightened  in highly skilled professions, despite growing 
unemployment overall.  The university system is generally regarded 
as good, particularly in technical fields, though foreign and 
Romanian business leaders have urged reform of outdated higher 
education curricula to better meet the needs of a modern, 
innovation-driven market. 
 
The quality of work of Romanian craftsmen, engineers, and software 
designers is well regarded by foreign managers.  With appropriate 
on-the-job training, local labor performs well with new technologies 
and more exacting quality requirements.  However, labor shortages 
have appeared in certain sectors, resulting in strong upward 
pressure on wages in recent years.  Before the onset of the global 
economic downturn, analysts estimated that as many as 600,000 
additional skilled workers would be needed in the construction 
industry alone.  Outward labor migration and the number of students 
graduating without the practical skills needed in the modern 
workplace are considered the main causes for this trend.  Slowing 
growth and recession in West European countries were expected to 
alleviate domestic labor market shortages somewhat as some Romanian 
workers return from abroad.  Although Romanian workers have not 
returned in large numbers, Romania has experienced a marked increase 
in unemployment as the recession has deepened.  Unemployment 
officially stood at 7.5 percent in November 2009, representing some 
680,000 workers, up from 4.4 percent at the end of 2008.  Analysts 
forecast the unemployment rate to peak around 10 percent in 2010. 
 
Since the revolution of December 1989, labor-management relations 
have occasionally been tense as a result of economic restructuring 
efforts and personnel layoffs.  Trade unions, much better organized 
than employers' associations, are vocal defenders of their rights 
and benefits.  The national minimum wage was set at RON 600 per 
month (about USD 210) on January 1, 2009 after extensive 
negotiations between unions, employers associations, and government. 
 The GOR adheres to the ILO convention protecting workers' rights. 
 
According to Eurostat, Romania's minimum wage (as adjusted for 
purchasing power parity) of 232 points is next to last among the 27 
EU member states, ahead only of Bulgaria.  However, Romania 
registered the EU's biggest growth of the minimum salary in real 
terms, 12.2 percent, from 2000-2008. 
 
Employers consider the Labor Code passed in 2003 to be overly rigid 
for a market economy, as it makes it harder for employers to dismiss 
 
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employees for poor performance.  In June 2005 the GOR approved 
several amendments to the Code which foreign investors consider to 
be an improvement, but the Code still favors trade unions and 
retains provisions restricting labor flexibility. 
 
Payroll taxes remain steep.  As a result, an estimated 25-30 percent 
of the labor force works in the "underground economy" as 
"independent contractors" where their salaries are neither recorded 
nor taxed.  Even for registered workers, under-reporting of actual 
salaries is common. 
 
Current law makes it very costly to locate non-EU citizen expatriate 
staff in Romania.  Foreign companies often resort to expensive staff 
rotations, special consulting contracts, and non-cash benefits. 
Work permits are issued for a maximum one-year period (except for 
seasonal work) for a fee of 200 euros (payable in the RON equivalent 
at the daily exchange rate).  These permits are automatically 
renewable with a valid individual work contract.  As of December 
2009, there are 41 offices--one in each county--of the Romanian 
Immigration Authority authorized to issue work permits for foreign 
citizens.  After January 1, 2007, citizens of EU countries that do 
not impose restrictions on Romanian citizens can work in Romania 
without work permits.  Although several companies hire foreign 
workers, mainly from Turkey, China, India, Pakistan or Moldova, most 
Romanian businesses are still reluctant to bring in large numbers of 
foreign employees.  In 2010, Romania will issue no more than 8,000 
work permits, 2,000 fewer than in 2009. 
 
¶Q. FREE TRADE ZONES 
 
Free Trade Zones (FTZs) received legal authority in Romania in 1992. 
 General provisions include unrestricted entry and re-export of 
goods and an exemption from customs duties.  The law further permits 
the leasing or transfer of buildings or lands for terms of up to 50 
years to corporations or natural persons, regardless of nationality. 
 Foreign-owned firms have the same investment opportunities as 
Romanian entities in FTZs. 
Currently there are six FTZs, primarily located on the Danube River 
or close to the Black Sea:  Sulina, Constanta-Sud Agigea, Galati, 
Braila, Curtici-Arad, and Giurgiu.  The administrator of each FTZ is 
responsible for all commercial activities performed within the zone. 
 FTZs are under the authority of the Ministry of Transportation. 
 
¶R. FOREIGN DIRECT INVESTMENT STATISTICS 
 
Romania has been an attractive destination for foreign direct 
investment (FDI), and is currently the number one destination in 
Southeastern Europe.  However, Romania did not become a significant 
target of FDI until after 1990s due to delays in post-Communist 
economic reforms.  According to data provided by the National Office 
of the Trade Registry, the cumulative net stock of FDI for the 
period from January 1990 through September 2009 totaled $32.48 
billion, representing 16.2 percent of GDP.  FDI in 2008 amounted to 
$5.9 billion (2.9 percent of GDP).  Romanian direct investments 
abroad for January-September 2009 were $369 million. 
 
Major sectors for foreign investment include: 
-- Automobile and automotive components (Renault, Daimler Benz, 
Ford, Siemens, Continental, Alcoa, Delphi Packard, Johnson Controls, 
Honeywell Garrett, Michelin, Pirelli); 
-- Banking and finance (Citibank, Societe Generale, AIG, ING, 
Generali, Volksbank, Raiffeisen, Erste Bank, Unicredit, Alpha Bank, 
National Bank of Greece, Intesa Sanpaolo, Millenium Bank, GE 
Money); 
-- Information Technology (Hewlett Packard, Microsoft, Oracle, Cisco 
Systems, IBM) 
-- Telecommunications (France Telecom, OTE, Telesystem International 
Wireless Services, Airtouch-Vodafone); 
-- Hotels (Hilton, Marriott, Best Western, Howard Johnson, Sofitel, 
Crowne Plaza, Accor, Ramada, Radisson); 
-- Manufacturing (Timken, General Electric, Cameron, LNM, Marco, 
Flextronics, Holcim, Lafarge, Heidelberg); 
-- Consumer products (Procter and Gamble, Unilever, Henkel, 
Coca-Cola, Parmalat, Danone, Smithfield Foods); 
-- Retail chains (Metro, Delhaize, Carrefour, Cora, Billa, Selgros, 
Auchan, Kaufland). 
 
Officially, the value of U.S. direct investment in Romania as of 
September 2009 was $1.31 billion.  The U.S. is the eighth-ranked 
foreign investor nation after the Netherlands, Austria, Germany, 
France, Cyprus, Greece, and Italy.  U.S.-source investment 
represented 4.0 percent of Romania's total FDI.  However, because 
official statistics do not fully account for the tendency of U.S. 
firms to invest through foreign, especially European-based, 
subsidiaries, the actual amount is higher.  Romanian statistics also 
over-emphasize physical, capital-intensive investments, such as 
brownfield investments, while de-emphasizing the impact of foreign 
 
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investment in services and technology.  Significant U.S. direct 
investors (including investments made through branches or 
representative offices) include: 
 
- Advent Central and Eastern Europe - investment fund 
- AIG - general insurance 
- AIG Life - life insurance 
- AIG New Europe Fund - investment fund 
- Alcoa - automotive, aluminum processing 
- Bunge - food 
- Cargill - grain export and food processing 
- Citibank - banking 
- Coca-Cola - beverage, food 
- Cooper Cameron - gas field equipment manufacturer 
- Delphi Packard - automotive parts 
- Ford - automotive assembly 
- General Electric - aircraft components 
- GE Money - non-banking financial services 
- Hewlett Packard - IT equipment, services 
- Hoeganess - iron powder for automotive 
- Honeywell Garrett - automotive 
- IBM - IT equipment 
- Johnson Controls - automotive 
- Kodak - film processing 
- McDonald's - food 
- Microsoft - software services 
- New Century Holding - investment fund 
- Office Depot - office and business supplies 
- Oracle - IT services, consulting 
- Pepsico - beverage 
- Philip Morris - tobacco products 
- Procter and Gamble - consumer products 
- Qualcomm - telecommunications 
- Sigma Bleyzer - investment fund 
- Smithfield Foods - pork production 
- Flextronics - contract manufacturing (IT) 
- Timken - industrial bearings 
- UPC - cable television operator 
- Visa - financial services 
- Washington International Group/URS - engineering 
 
In addition to these companies, the European Bank for Reconstruction 
and Development (EBRD) remains the single largest investor (debt 
plus equity) in Romania with some $6.1 billion invested.  The 
current stand-by agreement with the IMF also includes a one billion 
euro loan from the EBRD, European Investment Bank (EIB), and 
International Finance Corporation (IFC).  The U.S. is a 10 percent 
shareholder in the EBRD. 
 
Romania's biggest investors are: 
 
- The Netherlands - $5.96 billion (18.4 percent of total FDI): IT, 
banking, insurance, consumer products, food; 
- Austria - $4.45 billion (13.7 percent): banking, insurance, 
construction materials, etc. 
- Germany - $3.80 billion (11.7 percent): insurance, food, machine 
construction, chemicals, cement, banking; 
- France - $3.10 billion (9.6 percent): food, IT, automotive, 
manufacturing, cement, agriculture, banking, hypermarkets; 
- Cyprus - $1.76 billion (5.4 percent): banking, retail, services; 
- Greece - $1.65 billion (5.1 percent): banking, food, consumer 
products, retail; 
- Italy - $1.38 billion (4.3 percent): footwear, textiles, food, 
banking, insurance; 
- U.S. - $1.31 billion (4.0 percent): IT, automotive, banking, 
insurance, hospitality, manufacturing, consumer products. 
 
Web Resources 
 
Romanian Government 
http://www.guv.ro 
 
Romanian Agency for Foreign Investments 
http://www.arisinvest.ro 
 
The Authority for State Assets Recovery 
http://www.avas.gov.ro/ 
 
Ministry of Public Finance 
http://www.mfinante.ro 
 
Ministry of Economy 
http://www.minind.ro 
 
International Centre for Settlement of Investment Disputes 
http://www.worldbank.org/icsid 
 
 
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Romanian Copyright Office 
http://www.orda.ro 
 
Ministry of Communications and Information Technology 
http://www.mcti.ro 
 
National Securities Commission 
http://www.cnvmr.ro 
 
Bucharest Stock Exchange 
http://www.bvb.ro 
 
National Bank of Romania 
http://www.bnro.ro 
 
National Anti-Corruption Prosecutors' Office 
http://www.pna.ro 
 
Romanian Government's Web-Based e-Procurement System 
http://www.e-licitatie.ro 
 
Overseas Private Investment Corporation 
http://www.opic.gov 
 
Ministry of Labor, Social Solidarity and Family 
http://www.mmuncii.ro 
 
GUTHRIE-CORN