India and Romania: Advancing synergies
HE Ms. Daniela Sezonov Tane, Ambassador of Romania, deliberates on advancing trade and investment synergies for Indian IT companies in Romania, and opportunities sought by Romanian companies in the Indian market. She opines that both Romania & India will benefit from the India-EU FTA.
Image credit: Touropia
As part of the European Union, Romania stands for an incredible market opportunity in terms of size (the 9th in EU27) and population (the 7th in EU27), offering investors a strong market potential as the second largest country in Central and Eastern Europe and the largest in South Eastern Europe. Following the country’s EU accession in 2007, investors here find themselves within a single market of 500 million consumers, as one of the largest in the world, providing enormous advantages for non-EU companies seeking new markets for development and growth.
It has a strategic position as it is located at the crossroads of traditional commercial and energy routes between EU, Asia and the community of the independent state (CIS). Besides its belonging to the great European family, Romania enjoys yet another significant international affiliation – NATO membership – standing as a pillar of strength in maintaining stability and security in the region.
Over the years, Romania and India have emerged as important trade partners with fruitful mutual benefits and positive economic developments.
Romania as an investment hub
Romania’s GDP growth was one of the highest in EU in the past few years before the COVID crisis. Back in 2008, 2009, and 2010, it was affected, like other European countries, by an economic crisis, after which it saw a steady growth. Similarly, the COVID crisis derailed the economic growth somehow, but the forecast for this year seems encouraging, with 5% positive economic growth. The COVID crisis led to a marginal rise in unemployment and the inflation rate is under control, given the situation.
Romania has a lower minimum wage rate compared to other countries of the EU, but it is slowly growing. On the bright side, though, this acts as an advantage because lower labour cost attracts more foreign investment as it becomes even more competitive to produce in Romania, than in other countries with higher wage rates.
Romania has succeeded in maintaining its position as one of the leading foreign direct investment recipients in Europe. The foreign direct investments are channeled primarily to manufacturing, from which the largest recipients were transport equipment, oil processing, chemicals, rubber and plastic products, metallurgy etc. Apart from industry, other sectors which attracted significant FDI were: Construction, real estate transactions, trade financial inter-mediation, insurance, electricity, gas, and water supply.
Romania has an edge in language skills. Around 99% of its students are in high school, studying two or more foreign languages. It is considered among the most competitive nations when it comes to speaking different languages, the predominant language being English, followed by French, German and Spanish. At present, there is also a growing interest in Japanese, Nordic languages and Chinese.
Natural gas and electricity prices in Romania are also reasonable as compared to the other EU countries (8th rank in EU for natural gas price and 11th rank for electricity price). Romania is home to 96 modern industrial parks geographically spread across the country. These industrial parks are exempted from land, building and urban planning taxes, which represent an important facility for foreign investors.
With a standard 19% VAT, which is among the lowest rates compared to other EU countries, Romania has a competitive tax system. In addition to this, it has 16% corporate tax, which is also very attractive for foreign investors. The labour cost in 2020 was € 8 per hour, being one of the most competitive labour costs in the EU. In terms of doing business, it was ranked 55th by the World Bank ahead of Italy, Bulgaria, Luxemburg, Greece, and Malta.
The Romanian Government is supportive of foreign investors, particularly for investments exceeding € 1 million and/or for the companies creating a minimum of 100 jobs. In the decade 2014-2023, state-supported investments are estimated to rise to € 1.5 billion. Companies that have received aids from the state budget include Dacia-Renault, Sogefi, and Sonaca Belgium. There are great investment opportunities in most of the sectors including agriculture, automotive sector, service sector, research & development, and aerospace.
India & Romania as trusted trade partners
Over the years, Romania and India have emerged as important trade partners, with fruitful benefits and positive economic developments. Trade between Romania and India has been growing in the last 7 years, with a peak of more than US$ 700 million in 2018. The pandemic demarcates a decrease in the bilateral trade in 2020, but things seem to be turning around in 2021. The bilateral trade in the first 6 months of 2021 increased by more than 80% as compared to the same period last year.
In 2020, exports from Romania to India included automotive components, machinery, electrical, IT components, metals, fuel, minerals, chemicals, and the imports from India were mineral products, chemical products, plastics, and articles from plastic, metals, textiles and garments, fruit seeds, pharmaceutical products, tractors, agricultural equipment, machinery and electrical equipment.
With regards to the supply market, India is doing well and the Indian exports are growing. There is an increasing interest in importing products from India. India has a cost advantage. During the same year, India’s top exports to Romania included machinery, mineral products, textiles, edible vegetables, tea, coffee, spices, cereals, oil seeds, tobacco and so forth.
There are 563 Indian companies or Romanian-Indian joint ventures registered in Romania. The invested capital is around US$ 9.72 million. But many Indian companies invested in Romania through branches in Europe or Asia. Therefore, the estimates are that real figures are almost at a value of US$ 1.7 billion. Amongst the main investors in Romania are Wipro, Sun Pharma, Infosys, Genpact, Tata Consultancy Services, Tech Mahindra and Interglobe Technologies.
India-EU FTA: A win-win situation
India and the EU are set to negotiate a Free Trade Agreement after a gap of 8 years. The EU-India FTA would be of great benefit to both India as well as EU. The FTA can help in the reduction of tariffs by the two regions and result in liberalization of trade between them.
Romania is keen to enter the Indian market, especially in the IT sector as it has some of the best IT programmers in the world. The other domain which could be profitable to both sides would be machinery and defense. In addition to this, complementarities in hi-tech research and development, tourism, engineering services, environmental and agricultural services, energy and academic studies can be explored.
The author is Ambassador of Romania in India. Views expressed are personal.