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4.1.4 Business Surveys



Further insight in the Romanian business environment can be gained through business surveys. These might be of different quality but nonetheless contribute to the big picture.At first, most investors seem to be satisfied with their location decision. AHK (2006: 1) found 85 % of German investors satisfied with their business in Romania, though it should be mentioned that only 55 enterprises were interviewed. The next report (AHK 2007) found even 94.5 % of 66 interviewed firms happy with their location decision.

The Business Environment in Romania according to Earnst & Young

Ernst & Young (2008) took a primarily cross-country perspective and interviewed investors from all over the globe with a focus on Western European CEOs with regard to investments in South-Eastern-Europe (SEE). Romania was found to be the most attractive country for investment (52 %), followed by Turkey (50 %). Distinguishing between already active investors and potential investors revealed a huge gap between the evaluations of several location factors for FDI in Romania.

Especially production growth prospects are often underestimated by potential investors as well as human capital and infrastructure. Distinguishing location factors for the eight best ranked countries left a positive impression for Romania in virtually all categories, only challenged by Greece and Turkey. Nonetheless, the weak points were “quality of live”, “transport infrastructure and logistics” and “telecommunication infrastructure” which were clearly outperformed by Turkey and Greece. Overall 19 % appreciated the availability of qualified labor, 25 % the productivity growth prospects and 26 % labor costs. Areas to improve were telecommunication and transport infrastructure (cumulated 27 %) followed by red tape and corruption (cumulated 19 %). This leads to the conclusion that potential investors tend to underestimate human capital and infrastructure but that they nonetheless are mentioned first when it comes to the need for further upgrades. 15 % suggested a flexibilization of labor regulations and improvements of living conditions. The most attractive FDI-opportunities were industrial (56 %), followed by the tertiary sector (44 %) what was comparable to Poland.

Business in Romania according to the Enterprise Survey

The interviewees in the likewise cross-country orientated Enterprise Survey (2005), yet another World Bank project, identified tax rates and administration as major constraints to business (34 % and 36 % respectively), followed by corruption (30 %) and labor regulations (16.35 %). Some 15.32 % reported “crime, theft and disorder” as major constraints, on the other hand, the amount of damages reported was absolutely insignificant (0.15 % of sales) when assessed against regional (0.41 %) and world standards (1.88 %), despite security costs (0.43 % of sales) being less than half of the regional standard (1.02 %) and much smaller as the world standard (1.66 %).[1] Infrastructure was not dealt with, except the delays in telecommunication and energy connections. The respective figures were low by world standards and average by regional standards.

The Business Environment and Enterprise Performance Survey

The EBRD-World Bank “Business Environment and Enterprise Performance survey” (BEEPS 2005) identifies similar areas of concern for Romania. Though it detected clear improvements when assessed against the 2002 survey, the unchallenged worrying areas were macroeconomic stability and uncertainty about regulatory policies (both about 60 %), followed by tax and financing issues (60 % and 50 % respectively) or other kinds of regulations (about 25 %).

Assessed against them were infrastructure and land title issues (both about 20 %) less important but belonged on the other hand to the few domains which did not significantly improve since 2002. Corruption remains an important area of concern as 20 % of firms reported that bribes were frequent. On the other hand, this value included a decrease by nearly 50 % against the 2002 value. The reported bribe tax decreased from 2.5 % of annual sales to some 0.50 % – 0.75 %. This development represents a good progress and success of the anti-corruption measures as Romania turned from being regional champion in this regard (among the SEE-countries) into the best reformer of SEE. However, red tape and regulations remain major constraints and unofficial payments persist.

The perception of labor regulations has even worsened (about 20 % in 2002 vs. some 40 % in 2005). The availability of qualified labor worries an increased share of interviewees (about 35 % in 2005 vs. some 30 % in 2002). Concerning infrastructure some 19 % report problems with regard to transportation followed by electricity (about 16 %) and telecommunications (about 14 %). This is broadly in line with the AHK (2006) survey, which figured out the efficiency of public administration, public infrastructure, rule of law and corruption (in this order) as the most problematic fields.[2] This impression was confirmed in the subsequent survey (AHK 2007).

The labor market of Romania is overall positively assessed but critical points were labor market regulations and the availability of specialists. Nonetheless, when assessed against other CEECs and China the interviewed investors ranked Romania as most attractive (even when assessed against Germany or Austria).[3] The most frequent suggestions were to improve the fight against corruption, to reduce red tape, to increase the efficiency of public administration and to improve infrastructure.

Business Surveys Summary

Academic Research paper and Study of the Economy of Romania and Romanian Business

To sum up, the used surveys qualify Romania as an attractive destination for FDI. The evaluation gap between investors and potential investors suggest that the business environment is much better than commonly expected but nevertheless, the answers of both domestic firms and actual investors in Romania indicate the need for further improvements. Unchallenged main concerns are the macroeconomic stability, followed by institutional quality and public administration, labor-related issues and infrastructure.

Footnotes

[1] This is also much less as the damages and security costs reported for e.g. Germany. Concerning corruption it should be mentioned that in e.g. Hungary, Czechia or Bulgaria a higher percentage expects the need of bribes and gifts in order to get things done than in Romania. But curiously, a significant smaller share of firms considers corruption as a “major constraint” to (their?) business activities. The reasons for these incoherent seeming judgments remain unclear and leave sometimes rather an impression of sophisticated whining when compared to other CEECs.

[2] The problematic areas were expressed in grades of satisfaction between 1 and 6, with 1 representing the highest degree of satisfaction. The four mentioned areas were graded between 3.93 and 4.14.

[3] The ranking order is of course not too thrilling but should be expected when companies are interviewed which already have chosen Romania as location for their business, thereby expressing their very preferences. However, this result illustrates well that few investors were disappointed in Romania or many even positively surprised.