Romania has a lot to give to integrating businesses in the region, particularly to its position and EU membership. However, it is still somewhat difficult to conduct business activities in the region, as the world still faces problems associated with developed nations. Companies wishing to invest in the economy have to consider certain advantages and challenges before continuing.
We’ve gathered the key benefits and drawbacks of selecting the country to help you determine if Romania is the perfect place for your business plans. Romania was verified as the fastest-growing country in the EU in 2017 – a position that surpassed financial predictions and gained a lot of interest from overseas business.
|Benefits of Doing Business in Romania||The Drawbacks of Doing Business in Romania|
|Economic Stability||Corruption rate is High|
|Better quality of life||Infrastructural Problems|
|Starting the business is easy||Fixed Deadlines|
|Low Rental Cost||High Penalties|
Advantages of Doing Business in Romania
- Strong Economic System
Romania has reported one of Europe’s highest market participants. The nation experienced a rise of about 6 percent from 2000 until the economic crisis of 2008. The country has recovered and developed at a rate of 3 percent-4 percent annually since the recession.
Most of the rise was driven by the increase in personal spending, which is predicted to remain in the years that follow.
- Feasible Location of Doing Business
Romania places geographically between Eastern and Western Europe. Romania, which entered the EU in 2007, has the benefit of being part of the agreement allowing free exchange of goods and services in the country. This ensures that any business established in Romania would have free entry to other countries such as Germany, France, and Spain.
On the other hand, Romania is on the side of the EU bloc, leaning on non-members including Ukraine, Serbia, Moldova, and so on. Romania is just a few miles away from Moscow, in addition. Thus, businesses seeking to enter markets far beyond the European Union would be able to take full advantage of this role.
- Strong and Hardworking Labour Force
Romania is Europe’s 7th most populated country, with a total population of nearly 20 million. Most of the population is educated, and nearly all young Romanians are skilled in at least two languages, the most common being English.
The greatest advantage is that it is relatively inexpensive for such top quality labor force. Romania has the second-lowest average income in Europe, an annual average of €2.668 in 2014, compared to €16.507 for the EU, as per the European Union.
- Corporate Advantages
Most Romanian companies are organized as Limited Liability Companies (LLC) – which, from a financial standpoint, paying the same flat the corporate rate of 16 percent as all other company structures.
This means owners founded in Romania benefit from some structural advantages such as the likelihood of 100 percent foreign ownership, relatively low start-up capital requirements (RON 200/45 EURO), and of course the guarantee that shareholder liabilities are restricted to their invested capital only.
- Easy to commence business
Romania ranks 36 out of 190 countries in the World Bank’s Doing Business index, a position achieved thanks to reforms made by the Romanian government to encourage and attract investments in the region.
For example, in the past years, the government has streamlined the process of incorporating a company, shortening the time taken to incorporate the business from 29 days in 2004 to 12 days in 2016.
- Running a business is not expensive
In Romania, everyday business isn’t coming at a high price. Any corporation that is based in the country would be able to conduct its business at a lower cost than the rest of the European Union however will.
- Good Quality of Life
In Romania, the quality of life is very good, especially in Bucharest, the capital of Romania. The city was ranked by Mercer’s Standard of Living ranking 109th out of 230 cities across the globe.
While Romania is still synonymous with Dracula’s stories, Bucharest was once known as the “Paris of the East” or “Little Paris” due to the architectural style in the city center. Romania has many medieval villages, with scenic views and fantastic communities apart from the capital.
Disadvantages of Doing Business in Romania
- Corruption and Bureaucracy is widespread in Romania
According to the 2015 Corruption Perception Index Romania has the 3rd highest perceived corruption among European countries, only ahead of Bulgaria and Italy. This has a direct impact on the daily lives of citizens and businesses operating in the country, who are dealing with government inefficiency and bureaucracy, as well as unfinished public projects.
The National Anti-Corruption Directorate, the agency responsible for the prevention, investigation, and prosecution of cases of corruption, has made considerable progress, especially in the last year. In 2015, the number of files sent to the NAD hit a new high, most of which are against top politicians and businessmen. The nation has yet to go a long way to improve its international picture, though.
- Lack of good infrastructure
Unfortunately, in terms of the efficiency of its infrastructure, Romania ranks very poorly. It is one of the lowest-ranked European countries in the World Economic Forum in terms of transport infrastructure.
Transportation was dominated by declared owned companies, thus a very corrupt section. Most of the transportation budget ended up in private pockets, and many of the planned programs were left unfinished. The two above problems are tied together, and the system would continue to be dysfunctional in the country before corruption has been properly addressed.
- The poverty level is high
Romania has the greatest poverty levels in the EU, with approximately 40 percent of the population at risk of poverty and social exclusion, which in recent years has been one of the key drivers of immigration to the rest of the European Union.
In the less affluent population, especially those in the countryside, where 45 percent of the population still lives, the financial crisis of 2008 had a severe impact. Despite the country’s strong economic success over the past few years, it has still not been able to spread those benefits into these segments of society.
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