EY Romania Attractiveness Survey: The appetite for investment is still high in 2022

• 42% of respondents said they want to start new logistics and supply chain projects in Romania in the next year
• Almost a quarter of future investments in Romania (24%) will be attracted by the West region
• All large companies said that the Recovery and Resilience Mechanism was a decisive factor in their decision to maintain or expand their activities in Europe, compared to 54% of small companies

After two years of pandemic and the situation in Ukraine, Romania remained a preferred location for investors in Eastern Europe. Positioning itself on the 16th place (4%) out of 32 as most attractive to invest country in 2022, Romania overtook countries such as Hungary (2%), Czech Republic (2%) and it is close to Poland, whose percentage is set to 6%.

For 2022, 56% of surveyed foreign businesses intend to establish or extend operations in

Romania, putting the country on the 4th with 56%, on the same spot with France, and after Portugal (62%), Lithuania (60%), UK (58%). Romania overpassed the European average which is 53%.

Nevertheless, Romania should focus its attention on the long term, where the attractiveness is anticipated to decrease from 41% in 2021 to 34% in 2022 in terms of how the attractivity will look like over the next three years. However, the current situation could create a paradox as this country has many opportunities ahead. One of them is the relocation of multinational companies from Ukraine and Russia. Romania is on pole-position at the European level when it comes to executives’ plans to relocate their business support services and supply chain functions into Europe (re-shore and near-shore) to minimize future disruptions.

Across Europe, Bucharest is positioned on the 25th position out of 44 cities, overpassing capitals such as Budapest, Vilnius, Riga, but also important cities from Europe, namely, Munich, Porto, Rotterdam, Geneva, Valencia.

In 2021 Bucharest was clearly the most targeted city in Romania for FDIs, leading the top with 38,9%, while the Western region summed up 19,5% from the FDIs, the only representants being Bihor and Timiș counties.

However, the gap between the Western region and Bucharest can be almost equal in terms of investors' plans for this year. Almost a quarter of future investments (24%) in Romania will be attracted by the Western region, the leading county from the area being Salaj County with 9% of the investments, followed by Arad, Timiș and Bihor, all with 5%.

The pandemic has impacted the supply chain & logistics operations across Europe making the companies desire to relocate their activities close to their parent market and to their local customers. Compared to 2020 when 595 projects were recorded, in 2021 there were 655 projects registered in terms of logistics. In 2021, the number of industrial projects exceeded its pre-level crisis, reflecting a rebound effect and a global reorganization of the supply chains.

The “back to Europe” movement doubled in 2021: in 2020, only 20% of executives were thinking to repatriate operations to their home regions, compared to 53% in 2022.

Furthermore, smaller and mid-sized companies are looking to deliver more cost-effective and faster results by transitioning to lean manufacturing. Meanwhile, larger companies are looking to reshore or nearshore closer to their operations and customers.

The prediction from the Romania Attractiveness 2021 imagined Romania as a growing logistics and manufacturing hub in Eastern Europe. This can attract important players from industry due to its cost-competitiveness and labor supply. This aspect became a reality, being boosted by the event from Ukraine. Currently, Romania is the most desired location for investing in 2022 in terms of supply chains and logistics.

Related to supply chains and logistics, the percentage is the same as last year’s, the difference being unsignificant – 0,1%. The major difference from last year originated from the increased popularity of businesses’ support services, which overtake manufacturing. The highest jump is given by the R&D projects, from 7th place in 2021, to 4th place in 2022.

SMEs and environmental policies should be Romania’s priorities

In 2021, investors considered the top 3 priorities that Romania should focus its efforts to be: support small and medium-sized enterprises, encourage environmental policies and attitudes, and improve quality of its products and the value added.

For 2022, the top two priorities remained the same and underlined a strong message for the Romanian private and public sectors, that SMEs and environment should remain the most important subjects to focus on. However, for 2022 the 3rd position is occupied by high-tech industries and innovation. It gained eight positions compared to last year.

The perception and outlook of executives of SMEs is less positive than managers of multinational companies. Only 26% of small companies reported that their investment

plans have increased due to the pandemic, compared to 64% of large companies.

44% of SMEs intend to invest in Europe in the next year or over the next three years and 58% believe Europe’s attractiveness will increase at the same time. In addition, 83% of large businesses are planning to invest in Europe. For SMEs it is important to have the government’s support. For example, all large companies stated that Recovery and Resilience Facility had been a deciding factor in their decision to keep or to expand their activities in Europe, compared to 54% of small companies.

Encouraging environmental policies and attitudes were selected for the second year in a row as the 2nd main important aspect that Romania should focus on the future in order to remain competitive within the global economies. However, being asked how Romania can remain attractive in terms of sustainability, around 59% of the executives said that there is a need of regulation to support sustainable business practices (e.g., recycling obligations, biodiversity protection regulation, green building standards). 45% of them believed that Romania should improve its location’s potential to decarbonize the supply chains (e.g., through transport reduction, access to sustainable materials).

Almost the same percentage of managers (43%), stated that it is important to increase the numbers of renewables in the electricity supply and 42% of them mentioned that Romania should ensure a presence of workforce skills and competencies needed to facilitate sustainability projects.

Attractiveness Survey Romania 2022

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The perceived attractiveness of Romania

We define the attractiveness of a location as a combination of image, investors’ confidence and the perception of a countries or area’s ability to provide the most competitive benefits for FDI. For the Romania Attractiveness Survey, the field research was conducted by Euromoney from 2 March to 31 March through online interviews with 101 relevant international business leaders, 50% located in Romania, while 50% located outside the country.

EY30 for Romania

To mark 30 years of continuous activity in Romania, the EY: 30 for Romania campaign was launched and will run throughout 2022. Projects, personalities and moments that have marked Romania's progress in 30 years will be brought to the public's attention, collaborative community engagement initiatives will be carried out with EY partners and collaborators.

About EY Romania

EY is one of the world's largest global professional services firms, with 312,250 employees in more than 700 offices in 150 countries and revenues of approximately $40 billion in the fiscal year ending June 30, 2021. Their network is the most integrated globally, and the resources within it help them provide clients with services that enable them to take advantage of opportunities around the world.

Present in Romania since 1992, EY is the market leader in professional services. Its more than 800 employees in Romania and the Republic of Moldova provide integrated audit, tax, legal, strategy and transaction advisory services to multinational and local companies. We have offices in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau. EY Romania joined in 2014 the only worldwide competition dedicated to entrepreneurs, EY Entrepreneur Of The Year. The winner of the local edition represents Romania in the world finals that take place every year in June in Monte Carlo. The World Entrepreneur Of The Year title is awarded in the global final.