Benefits of EU Accession

Slide 1: MINISTRY OF ECONOMY  AND COMMERCE

ROMANIA Member of the European Union ECONOMIC DEVELOPMENTS AND OPPORTUNITIES IN ROMANIA by Varujan VOSGANIAN , Minister

Slide 2:Benefits of EU Accession

Removal of any obstacles in the trade with EU Member States Common trade policy with third countries Harmonization of entire legislation, capital market regulations, taxation, accounting rules => higher transparency and simplification Structural funds (31 billion euro for 2007-2013) Open gate for EU towards CIS, Asia, Middle East, Northern Africa Participation in major projects in the Black Sea Extended Area and in the Central & Eastern European Region Romania-important role in assuring the energy security for Europe (major transit pipelines, energy production & supply)

Slide 3:Most industrial countries have pursued tax reforms to ensure that their economies remain attractive for investment. Starting January this year, Romania introduced a 16% flat tax on profit, which means in fact a reduction by 9 percent as against the previous tax rate. What all this shows is that tax competition is working in Central and Eastern European countries and most of them are trying to follow the successful Irish example – to have faster economic growth through low taxes and free economy. The CEE countries with the lowest rates for 2004 are Serbia (14%), Macedonia (15%), Romania (16%) and Hungary (16%).Most industrial countries have pursued tax reforms to ensure that their economies remain attractive for investment. Starting January this year, Romania introduced a 16% flat tax on profit, which means in fact a reduction by 9 percent as against the previous tax rate. What all this shows is that tax competition is working in Central and Eastern European countries and most of them are trying to follow the successful Irish example – to have faster economic growth through low taxes and free economy. The CEE countries with the lowest rates for 2004 are Serbia (14%), Macedonia (15%), Romania (16%) and Hungary (16%).

Slide 4:Macroeconomic Performance GDP real growth

Slide 5:Macroeconomic Performance Inflation rate

Slide 6:Macroeconomic Performance Unemployment rate

Slide 7: COUNTRY RATINGS ROMANIA

Fitch - A- (August 2006) Coface - A4 (January 2006) JCR - BBB+ (November 2006) Moody’ s - Baa3 (September 2006) Standard & Poors - BBB- (September 2006) World Bank Report 2006: Romania – the most reforming country in the business field

Slide 8:Foreign direct investments - million Euro -

Slide 9: FOREIGN DIRECT INVESTMENT

Total FDI’s until 31.12.2006: 31 billion euro 1. The Netherlands - 21,06% 2. Austria - 12,94% 3. France - 10,27% 4. Germany - 10,24% 5 . Italy - 5,56% 6. U.S.A. - 4,72% 7. United Kingdom - 4,43% 8. Netherlands Antilles – 3,65% 9. Greece – 3,61% Source: National Trade Register Office

Slide 10:DIRECT INVESTMENT WITH SIGNIFICANT IMPACT ON ROMANIAN ECONOMY,  BY MAIN FIELDS, IN 2006

Source: Romanian Agency for Foreign Investment

Slide 11:Foreign Investor Advantages

foreign investment allowed in all sectors of economy possibility to freely manage the company with full ownership rights full repatriation of capital and profits protection against expropriation and nationalization national treatment for foreign investors

Slide 12:New Investment LawDraft under public debate

Objectives: Determines the principles, terms and modalities of stimulating investments in Romania, aiming at contributing to the sustainable country development Full compliance with the EU legislation The Government will issue also legal/administrative acts in order to regulate the state aids schemes for each objective The goals, objectives, timing, budgets, beneficiaries, eligibility and selection criteria, competent authorities responsible to grant incentives will be established A responsible authority for implementing and monitoring the legal provisions will be set up

Slide 13:FOREIGN TRADE, IN THE PERIOD 2001 – 2006 

Source: National Institute of Statistics (www.insse.ro)

Slide 16:TRADE BETWEEN ROMANIA AND AUSTRIA, IN THE PERIOD 1999 – 2006

Slide 17:STRUCTURE OF THE BILATERAL COMMERCE, BY MAIN GROUPS OF PRODUCTS, IN 2006

Romanian Exports Machinery and electrical equipment – 42,5 % Furniture, toys and other – 10,8 % Textile and garments - 8,9 % Metals and articles thereof – 7,9 % Transport equipment - 7,6 % Romanian Imports Machinery and electrical equipment – 35,1 % Plastics and rubber – 14,9 % Metals and articles thereof – 9,5 % Transport equipment - 7,3 % Chemical products – 5,3 %

Slide 18:Austrian FDI’s in Romania

Austria – ranking 2nd among the foreign investors in Romania – 2 billion euro share-capital in Romanian companies / 7 billion euro effective investments, according to Austrian sources 4192 companies with Austrian capital registered in Romania Main sectors for Austrian investments: banking, petrochemical industry, wood procesing, food industry

Slide 19:Concluding, I would like to draw your attention to the top 5 reasons to invest in our country: the strong market potential, the functional market economy status, high skilled labor force, significant economic growth and the competitive tax policy. All the reasons I mentioned in my brief presentation are the proof that Romania can favorably compete with other countries in the region for foreign direct investment. I hope I succeeded in convincing you to take a closer and fresh look at Romania. Concluding, I would like to draw your attention to the top 5 reasons to invest in our country: the strong market potential, the functional market economy status, high skilled labor force, significant economic growth and the competitive tax policy. All the reasons I mentioned in my brief presentation are the proof that Romania can favorably compete with other countries in the region for foreign direct investment. I hope I succeeded in convincing you to take a closer and fresh look at Romania.

Slide 20:Concluding, I would like to draw your attention to the top 5 reasons to invest in our country: the strong market potential, the functional market economy status, high skilled labor force, significant economic growth and the competitive tax policy. All the reasons I mentioned in my brief presentation are the proof that Romania can favorably compete with other countries in the region for foreign direct investment. I hope I succeeded in convincing you to take a closer and fresh look at Romania. Concluding, I would like to draw your attention to the top 5 reasons to invest in our country: the strong market potential, the functional market economy status, high skilled labor force, significant economic growth and the competitive tax policy. All the reasons I mentioned in my brief presentation are the proof that Romania can favorably compete with other countries in the region for foreign direct investment. I hope I succeeded in convincing you to take a closer and fresh look at Romania.

Slide 21:Potential Sectors for Investment

Manufacturing Automotive parts IT & Communication Electric & Electronics Wood processing Construction materials Textile Food processing Infrastructure Outsourcing and logistics