Steadily navigating the currents: How will Romania continue to win investors’ trust?

In 2023, the profile of the main sectors attracting Foreign Direct Investment in Romania reflects key trends observed across Europe. The leader was the Software and IT services sector, while the Electronics sector held a secondary position, in contrast with the European situation. Transport and logistics saw a remarkable rise, moving to third place in the ranking of FDI in Romania, compared to ninth place the previous year.

Alongside sectoral changes, investors have also started reconsidering their priorities regarding future business activities. Consequently, they prioritized manufacturing projects, establishing 24 new enterprises, thereby solidifying Romania's position as a strong center for manufacturing and logistics, driven mainly by cost competitiveness. These changes indicate a global trend fueled by reshoring and nearshoring strategies, prompted by geopolitical factors and recent disruptions in supply chains.

Investors are motivated by a multitude of factors when choosing their capital destination, and Romania stands out with several key advantages. The most crucial factor is the promising outlook for accessing untapped markets and expanding the customer base, mentioned by 52% of executive leaders. This expansion drive is supported by the attractiveness of a favorable tax system (37%) and opportunities offered by emerging technologies (35%). Particularly, Romania's robust network of tech startups and research institutions has seen remarkable growth, with appreciation of this aspect reaching 45% this year, compared to just 13% last year.

Additionally, the quality and availability of the workforce have become decisive factors for investments, with 26% of investors placing them among the top priorities, a significant increase from last year when these aspects were nearly at the bottom of preferences.

For 72% of investors, the availability of non-reimbursable funding is an essential factor in deciding to invest in Romania. Our country stands out in this field, offering a variety of state aid programs and access to EU funds to support large capital investment projects, with an estimated value of 2 billion euros available over the next three years. Unlike other countries in Central and Eastern Europe, Romania allows investors to obtain non-repayable cash funds, instead of combinations of repayable and non-repayable financing or only fiscal incentives.

However, Romania faces challenges in terms of the execution and continuous monitoring of these funding mechanisms. Approximately 60% of investors believe its performance is either inferior or at par with that of other European countries. One of the reasons is the significant time required for the analysis and disbursement of funds for certain funding programs. Moreover, some beneficiaries encounter difficulties in implementing projects according to commitments, due to macroeconomic conditions or strategic changes at the group level.

In the current context, 14% of executive leaders consider high inflation as the main risk to Romania's attractiveness, reflecting a cautious attitude among investors. Greece and Lithuania are the only other countries where investors prioritize inflation similarly, underscoring the importance of this risk for Romania. In addition to inflation, 10% of respondents view high public debt levels as a major concern, while geopolitical tensions are cited by 9% of investors as a significant risk factor.

To maintain its competitive edge in the global economy, Romania must focus on specific strategic areas for potential investors. Thirty-one percent of executive leaders have emphasized the importance of developing education and skills, as well as facilitating access to human capital, a significant increase from 7% last year. This rise reflects the need for a workforce with specialized and digital skills, essential for the development of the business support sector and manufacturing industry. Additionally, 24% of respondents, up from 9% last year, have highlighted the need for investments in infrastructure. Transport infrastructure, especially in less developed regions, is crucial for increasing productivity in transport and logistics sectors and for progressing towards decarbonizing the road system. Supporting small and medium-sized enterprises (SMEs) remains an important area, although the proportion of respondents supporting this has decreased to 23%, compared to nearly half of investors who considered it a top priority last year.

Romania must prioritize these areas to ensure continued attractiveness on the foreign investment stage. By proactively addressing these critical areas, Romania can not only reverse the recent decline in FDI but also position itself as an increasingly attractive center for sustainable and future-oriented investments.