How can Romania attract the next generation of foreign direct investments? | EY Attractiveness Survey Romania

In recent years, the world’s economies have been impacted by successive global crises, from the unprecedented challenges of the Covid-19 pandemic to geopolitical tensions and the war in Ukraine, generating economic instability on one hand, and increasing risk scenarios, on the other.

Although Romania is by no means insulated from the global economic and geopolitical turbulence, it has shown greater resilience than many neighboring countries in recent years. Despite the global uncertainty of the economic environment, 63% of respondents to the EY Romania Attractiveness Survey 2023 plan to establish or expand operations in Romania, compared to 53% in the previous year, executives surveyed being more positive regarding their outlook for investment in Romania.

The appetite of investors for Romania was also demonstrated by the increase in the number of executives who plan to commit more than EUR100 million of investment in 2023. Although the majority (72%) still intend to invest less than EUR10 million, the proportion planning to invest over EUR100 million practically doubled to almost 14% compared to just 7% in 2022. Furthermore, nearly 5% of those surveyed said they planned to invest between EUR500 million and EUR1 billion, compared to none in 2022. 

In 2023, over 60% of respondents believed that the main drivers of economic growth in Romania in the years ahead will be: software & IT services (30%), consumer products (11%), telecommunications (11%), and utility supply (10%). Developing the high-tech sector and driving the digital transformation of the public sector are central to maintaining Romania’s competitiveness in the coming years, which in turn, will attract investment to develop the skills needed.

According to the European Investment Bank [1], small and medium sized enterprises (SME) play a central role in the Romanian economy, accounting for 99.7% of active companies, 66% of non-financial private sector employment and 56% of gross value added. Therefore, not surprisingly, slightly less than half (45%) of executives surveyed believe that support for SMEs is the most critical area where Romania should focus its efforts in order to maintain its competitive position in the global economy. Support for high-tech industries and innovation, including cleantech, technology, healthcare, and smart electricity grids ranked second (38%) among those surveyed. While just over one-third (34%) of respondents believe more should be done to encourage environmental policies and attitudes to improve Romania’s ESG credentials.

Skills and availability of workforce only ranked joint ninth among factors most likely to influence executives to choose to invest in Romania. When assessing the comparative performance of Romania to other countries in relation to talent, the main areas where investors see a need for improvement are: promoting more business related curricula (27%), providing a flexible, healthy workplace and culture for employees (24%), providing businesses with people with technical and vocational skills (21%) and reskilling and training people throughout their careers (21%).

Romania is viewed to have a certain competitive advantage when it comes to preparing learners for the working world (41%), investing in digital skills and a digital culture for all stakeholders, including students, teachers, employees, and citizens (34%), and the availability of talent resources (33%). This investment into digital skills has been and will continue to be a key driver behind FDI into the software and IT services sector in the years to come.

Given the war in Ukraine and its proximity to Romania’s borders, it is not unsurprising that executives cited Romania’s membership of the European Union and NATO as the country’s most important asset when considering FDI (28%). Romania’s access to the Black Sea (18%) and its legislative and political regime (18%) were viewed as equally important by those surveyed. The availability of the workforce was ranked second to last (7%) by respondents in 2023. This may in part reflect the challenges of hiring in a tight labor market, with unemployment consistently at around 5% in Romania but only 1% in Bucharest, where most investment has historically been concentrated.

[1] Digitalisation of SMEs in Romania, European Investment Bank June 2023