Andrei Badiu, explains how doing business in Romania can be richly rewarding if approached in the right way.

Welcome to Romania

A marketplace of 22 million, 37 million acres of arable land, a vibrant oil and gas industry, breathtaking landscapes, an expanding economy, a well-educated workforce with more than 50,000 specialists in information technology, access to the Black Sea and Asia.

These features of Romania have attracted investors in banking, energy, biotechnology, manufacturing, electronic components, cable operation, consumer products, telecommunications and film production, among others.

They have discovered that western management and capital works profitably in Romania. Global exports in Romanian are growing as well, fueled by Romania’s economic expansion and new reductions in trade barriers.

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Doing business in Romania

Romania offers significant opportunities to international businesses with products, services, or technologies that either meet growing private demand or contribute to the country’s development priorities.

The country’s entry into the European Union in January 2007 was preceded by a series of government reforms in order to satisfy the conditions of EU membership. Now the requirements of membership – including EU directives – make up one of the driving forces in Romania’s program of reform, modernization and investment in infrastructure.

European Union member since 1st of January 2007

More significantly, these directives are accompanied by funding from the EU in the form of Structural Adjustment Funds and other programs to enable the new members to align their economies with the rest of the EU.

At the same time, Romania’s membership in NATO has supported demand for defense and security products, and foreign vendors are well-regarded and active in this market.

A local business presence is essential to success in the Romanian market

Private demand has been strong and provided a market for a wide variety of products, and Romanian businesses regularly express interest in foreign suppliers as alternatives to internal competitors.

The effects of the slowing world economy arrived late to Romania, but are now beginning to announce themselves in the form of rising unemployment, a drop in demand from Romania’s export markets, and a growing budget deficit.

Romania has not yet entered the “Eurozone,” but has set 2014 as the target year to adopt the euro.

In the meantime, many Romanian companies with debts denominated in euros but income in the local currency, the leu, are exposed to exchange rates losses as the value of the leu has fallen against both the dollar and euro.

2014 - the target year to adopt the Euro

As a result, both consumer and corporate purchasing power have fallen, and investment plans are being reconsidered. So exporters should be attuned to an environment of heightened commercial risks and consider their terms of trade carefully. Adequate due diligence can make the difference between a successful investment or distribution agreement, and a costly mistake.

Access to the Black Sea and Asia

Despite these caveats and conditions, numerous foreign companies continue to operate successful subsidiaries in Romania. While the tide of foreign investment may have ebbed, it has not dried up completely. Romania’s natural and human resources will continue to prove attractive to companies contemplating a business presence in the region.

A marketplace of 22 million

The strongest areas of opportunity for exports and investment potential include the following sectors: infrastructure, building materials, energy, environmental technologies, IT&C, defense, and packaging equipment.

Romania’s rate of economic growth in 2008 stood at an impressive 7.1%, but has decelerated and is now expected to be 1% or even negative in the year ahead. Against this backdrop, we advise businesses to investigate and pursue opportunities – both public and private sector -- in which the funding sources and prospects for payment are reliable.

The public sector plays a major role as purchaser and procurer of products and services, and projects in areas such as ICT, infrastructure, water and wastewater treatment, energy, and agriculture are supported by funds from external sources such as the EU or development banks such as the European Bank for Reconstruction and Development (EBRD) or World Bank.

Overview, Opportunities and Entry Strategy

A local business presence is essential to success in the Romanian market, and this can take the form of a distributor agreement, subsidiary, joint venture or acquisition.

Regardless of the form of investment or entry strategy, foreign businesses considering the Romanian market should research their specific prospects thoroughly, perform due diligence, and be prepared to adapt their business models as necessary. Retaining legal counsel with solid knowledge of Romanian law is extremely important, and relationships with other service providers such as banks and accountants can provide excellent value as well.

Selling through a local Romanian partner is a standard element of most entry strategies. Therefore, a foreign company’s success can hinge on identifying, qualifying and selecting a partner with the resources and expertise to help accomplish its objectives.