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Conclusions of the Foreign Direct Investment Report – FIC and ASE 2020

In 2017, the Foreign Investors Council (FIC) started a project designed to evaluate the contribution of foreign direct investments (FDI) to the development of the economy in Romania, compared to the countries in the Central and Eastern European region. Therefore, the result of this initiative materialized in: the report on foreign direct investment in Romania, made in collaboration with the Academy of Economic Studies (ASE) in Bucharest.

The FDI report provides information regarding the impact of foreign investment in our country through a detailed analysis on foreign investment flows, and how they have contributed to Romania's economic growth in recent years.

FIC continued this initiative in 2020, when the analysis on foreign investments was updated by the team of experts of FIC and ASE. For preparing the second edition of the FDI report, the teams used the data available during the first months of 2020, at the national and European level, as well as data provided by a representative sample of FIC member companies from three significant sectors of the economy - energy, telecommunications and car production.

Initially, the report was scheduled to be published in early 2020, but the outbreak of the epidemiological crisis delayed its release. Thus, the study mainly captures the post-crisis panoramic situation, but also  some short and medium-term trends, with the intention to incorporate an updated perspective on FDI although at the time of the publication it was too early to draw firm conclusions from preliminary data.

Among the most important conclusions of the report, we mention:

  • Romania benefited from 0.45% of total FDI flows globally, i.e. 81.12 billion Euros in 2018. Data from the National Bank of Romania (BNR) show that FDI companies made 75% of exports and 68% of total imports. The number of employees in FDI companies represents 26% of the total number of employees in Romania, slightly decreasing compared to previous years.
  • Even if FDI stocks have increased in Romania every year since 2008, the differences remain significant compared to other countries in the region, if the FDI level is related to GDP or the number of inhabitants.
  • The services sector has the largest share of FDI stocks in Romania, approximately 47% of the total. However, in 2016, Romania attracted only 5% of the total volume of FDI related to high-tech industries and knowledge-intensive services in the region. Instead, 52% of the stocks were directed to Hungary, 18% to Poland and 14% to the Czech Republic, the regional specialization thus acting to the detriment of Romania.
  • It is important to determine the direction in which Romania is heading, and to identify the ways of action. Public policy measures could focus on encouraging higher value-added FDI and facilitating the reorientation of FDI in high-tech and knowledge-intensive industries in the services areas. In the absence of concrete measures to increase competitiveness, focused on attracting a certain type of FDI, Romania risks becoming specialized in industries with low added value and low technological intensity.
  • The case study from the energy, automotive and telecommunications industries shows that the impact of companies with foreign capital in the Romanian economy is significant.

As a conclusion of the second FDI Report and considering the recent data issued by the NBR which shows that FDI decreased in 2020 by 60.38% compared to 2019, the FIC considers that the Romanian authorities should add to the list of priorities the attraction of higher volumes of foreign direct investment, by increasing the absorption capacity and developing medium and long-term strategies, taking into account the economic reality. The use of FDI is favourable to long-term economic development, especially in the current context, when we face limited resources for large investment projects and the government's ability to mobilize such resources is narrowed by significant budgetary constraints.

FIC believes Romania must focus on its strengths which could put it on the map of foreign investors. Given the benefits of foreign investment in communities and improving the standard of living of the population, as well as the economic advancement of the countries in which they are present, FIC will remain an active and available partner for the authorities in outlining the direction in which Romania wants to be heading in the next period, in order to attract foreign investment with high added value.

The full report on foreign direct investment in Romania is available at: https://fic.ro/Documents/view/Foreign-Direct-Investment-in-Romania