The attractiveness of Romanias economy for potential Korean investors

Anca Elena Budu

The Republic of Korea and Romania celebrate this year 25 years since the establishment of their
diplomatic relations, on March 30, 1990. In September, 2008, the presidents of the two countries have
signed, in Seoul, the Declaration regarding the establishment of a Strategic Partnership between the
Republic of Korea and Romania and, two years later, in July 2010, the Ministers of Foreign Affairs have
signed the Common Action Plan for the implementation of the Strategic Partnership. Also in 2008 the
Bilateral Commerce and Industry Chamber Romania-Republic of Korea has been created, opening its
headquarters in Bucharest.
The relations between the two countries have been very fruitful for the two sides in many areas, but the
economic ones have been, by far, the most important ones. According to the Romanian statistics, only in
2014 the total amount of the Korean-Romanian exchanges has been of 1.03 billion USD, with a
commercial bilateral balance of 212.74 million USD in favor of the Korean side. In terms of investments,
there are 224 companies with Korean capital operating now in Romania. On December 31, 2014, the total
amount of the Korean investments was of 202 million USD, occupying the 25 th place among the foreign
investors on the Romanian market. The real value of the Korean investment is actually higher (about 500
million USD), as some investments, such as that of Samsung or STX figure as German and, namely,
Norwegian, because the Samsung regional center from Germany and the STX regional center in Norway
coordinate the Romanian subsidiaries. The principal domains of the Korean investments are automobile
production, shipyards, chemical industry and IT&C, the most important companies established in
Romania being Daewoo Shipbuilding & Marine Engineering (vessel building), Hanjin Shipping Co., Ltd.
(agriculture), Dongyang E&P Inc. (motors, generators and electric transformers production), Hanil
Electronics Co., Ltd. (computers and peripherals), Joongbo Chemical Ind. Co. (non-metal waste
recycling), Doosan (heavy machines production), Samsung (steel and LCD screens production, through
Hanil Electronics), STX (ship building).
As we may see, the economic relations between the Republic of Korea and Romanian are fruitful and
announce to be in a continuous growth. However, the question we shall ask is why Romania represents an
attractive destination for Korean potential investors.
1. How is Romania rated according to its economic attractiveness?
On September 30, World Economic Forum (WEF) presented the Global Competitiveness Report 20152016, containing the competitive ranking of 140 countries worldwide, based on criteria such as

institutions and government policies and labor market efficiency and financial markets. Romania ranks
53, ascending six positions since the former survey. The survey was conducted by interviewing 120
executives of companies operating in Romania. The overall score obtained by Romania is 4.32 points
(after receiving 4.30 points last year) on a scale of one to seven. Romania has high scores in indicators of
macroeconomic environment, where it reached the 34 th position in the world, and market size, 43rd.
At a European level, according to the EY annual report European Attractiveness Survey 2015, published
on May 27, 2015, Romania climbs for the first time in top 15 most attractive countries in Europe
regarding the number of FDI (Foreign Direct Investment) projects attracted in 2014. In 2014, Romania
succeeded in attracting 62 FDI projects, 19% more than in 2013. Furthermore, Romania became the
sixth country in Europe considering the number of FDI jobs created (10,892), exceeding Spain, Turkey
and Slovakia.
2. Why is Romania economically attractive for the Republic of Korea?
All above being said, we understand that Romanias economy is on an accessional pace and we can
expect improvements in time. However, we shall point out the specific characteristics of the Romanian
economy that make it a good destination for investments and exports from the Republic of Korea.
When making an investment abroad, any business person shall firstly look at how affordable will the
resources in the destination country be, so that he could maximize the profit and minimize the investment.
From this standpoint, Romania has a very strong asset: the cheap qualified labor force. According to the
Romanian National Institute of Statistics, the net average salary registered in 2015 was USD 434. The
National Commission for Prognosis estimates an average net salary of USD 462 for the end of this year
and, for 2016, the amount of USD 493. In Korea, the average monthly wage is of USD 2634.5, making
the employment of a Romanian worker more convenient for the Korean employer. Moreover, according
to the latest population measurement in 2011, 41.4% of the Romanian stable population has graduated
from professional or technical school programs, while 14.4% have graduated from bachelor studies. This
makes a total of 55.8% of qualified working force, more than half of the Romanian population.
Another important asset is Romanias geo-strategic position. Since 2007, Romania is a member state of
the European Union. Due to this statute, it is a lot cheaper to export from Romania to other member
states, as, according to the EC regulation no. 1186/2009, imports and exports within the EU are exempted
from several custom taxes. Moreover, exports from Romania arrive very fast within Europe, both in the
Western part and in the Eastern Europe, firstly because of its central location inside Europe and, than,
because of its big and significant ports to the Black Sea and to the Danube. These geo-political aspects

directly connect Romania to many countries, excluding its direct neighbors, such as Ukraine, Russia and
Turkey, through the Black Sea and Austria and Germany, through Danube.
Romanias financial sector has a lot of potential, being is bank-based and 80 % of the banks are foreign
owned. Overall, credit institutions hold the largest share of the financial systems assets (roughly 80 %).
Banks with Austrian capital have dominated the market since 2000, followed by French and Greek banks.
The Romanian banking sector has weathered well the economic and financial crisis and capitalization
remains strong. No public intervention measures to support the banking sector were needed.
Both the Foreign Policy and the Interior Policy for implementing the Government Plan is favorable for
new investments. In its directions of action for implementing the Government Program, a priority for
Romania's foreign policy will be to develop the traditional relationships with emerging powers in Asia,
Latin America and Africa and, within Asia, the Republic of Korea is the second most important country
with whom Romania has developed partnerships.
From the interior standpoint, in the 2013-2016 Government Program, the national competitiveness
strategy focuses on ten priority sectors: tourism and ecotourism, textile and leather industry, wood and
furniture, creative industries, automobiles and auto parts, IT&C, Food and Beverage Processing, Health
and Pharmacy Products, Energy and Environmental Management, Bio pharmacy and Biotechnologies. As
mentioned before, Automobiles and auto parts, as well as IT&C are two of the main industries of the
Korean companies operating in Romania. Moreover, the Romanian Government is trying to reduce the
level of bureaucracy and make the economic environment friendlier for investors. Therefore, from 39
taxes paid in 2015, the contributor will only have to pay 13 taxes in 2020.

Romania is a favorable environment for foreign investors, from an economic standpoint. Another
important aspect, this time from a social point of view, is the intercultural understanding by the Romanian
people, proven by the many minorities living on the Romanian territory, such as the Hungarian minority
and the Rroma minority, among others. Moreover, the President of Romania is a Transylvanian Saxon,
part of Romanias German minority, being the first Romanian President to come from an ethnic minority.

References:
The Romanian Ministry of Foreign Affairs website:
http://www.mae.ro/bilateral-relations/2042
http://www.mae.ro/node/1606
The World Economic Forum Global Competitiveness Report 2015-2016:
http://reports.weforum.org/global-competitiveness-report-2015-2016/
The EY Annual European Attractiveness Survey 2015:
http://www.ey.com/GL/en/Issues/Business-environment/ey-european-attractiveness-survey-2015
Romanian Population Measurement 2011:
http://www.recensamantromania.ro/rezultate-2/
The OECS statistics, Average Annual Wages:
http://stats.oecd.org//Index.aspx?QueryId=64116#
European Union custom relief system:
http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=URISERV:l11002
Romanias Economic Situation and Outlook, European Commission:
http://ec.europa.eu/economy_finance/publications/occasional_paper/2015/pdf/ocp223_en.pdf
Romanias Government Plan 2013-2016:
http://gov.ro/ro/obiective/programul-de-guvernare-2013-2016