Romania’s Competitive Future [Team Erasmus]

1. IoanaPetrescu (Team Leader, Romania, Academia de StudiiEconomice) Roel Hengeveld (The Netherlands, Rijksuniversiteit Groningen) FlorianTutza (mentor) Romania’sCompetitiveFuture[Team Erasmus]

2. Eastern Europe & Romania now Eastern Europe Romania In Romania the unemployment rate was brought down last year with 0.4% to 7% and more improvement is expected. However, Romania also still struggles with a political crisis, politicians are considered corrupt and not caring about the people. Part of this is because of the low GDP per head which is 50% below EU average, for 2013, however, GDP growth of 1,6% is expected for 2013 and 2,5% for 2014. Furthermore the government deficit was reduced to below 3% of the GDP in 2012. • Eastern Europe still has to recover from the recession, unemployment rates are at an average of 10% now. • This bad economic situation leads to political instability and riots in EE (e.g. Georgia, Latvia, Ukraine & Bulgaria). • Another reason for the political instability is the slow growth of GDP per capita which stays behind that of Romania. • EE countries however are working to reduce their deficits.

3. Competitiveness: IT & Outsourcing Eastern Europe Romania Of all Eastern European countries Romania shows one of the highest spending amounts. For instance, Romania invested enormously in Adobe, Intel, IBM, EA Games and Oracle. Secondly, Romania has a lively start-up culture. 3 start-ups were listed amongst the top 100 emerging technology businesses of Europe. Lastly, Bucharest, the capital is considered to be a major customer service and business processes outsourcing hub. • The focus for Eastern Europe should be on IT. • The reason for this is that the IT sector in Eastern Europe shows huge growth. • Part of this is because of the lower costs incurred and the higher efficiency. • Furthermore, in the past two years spending in the IT sector can be observed, plus Eastern Europe is very technologically minded. • Another important competitive factor is that Eastern European students show higher test scores than for instance Germany, United States, Sweden and Italy. IT spending in 2011 & 2012

4. Interview Questions • Romania has good investment possibilities in many domains due to the fact that the market is not saturated so it can still grow to its full potential. • On the other hand, there is still the situation of economic underdevelopment which has to be taken into account. • Furthermore it is culturally different and interesting for investors. • However, these cultural differences lead to stereotypes. • Another good point is the fact that real estate and business development in general are cheaper than in Western Europe. • The reason that this is cheaper though, is because of the underpaid work force, which is making the young smart people emigrate. • When taking these strengths and weaknesses into account we asked which industries Romania should focus on. • Most people mentioned the IT industry. • Secondly, the pharmaceutical industry was mentioned combined with agribusiness because of the large amounts of lands and favorable weather for cultivation of the right plants. • Important to mention here is that SME’s are the way to go for these industries, considering the fact that in the future 99% of all business will be SME’s. • Thirdly, we asked for the most wanted profession 10 years from now, and these answers combined show the focus for IT and agribusiness. • The majority gave an answer related to the IT industry. • IT developer, software developer, IT specialist, computer technician/operator. • Other answers included the medicine or agribusiness industries. • Exporter of medicinal plants/products, doctor, medicine expert.

5. Interview Questions • The most important question, which we used to create our vision for the future of Eastern Europe was about how EE could escape the bind between the West and the Far East. • Almost everyone gave the same answer; education. • Eastern Europe (Romania in our case) can try and bridge the gap between Western Europe by investing in a good and efficient education system. • A well educated and ambitious population means better industries, developments and products. • However, also important is to increase the living conditions (e.g. improve healthcare, infrastructure, minimum wages), because having an educated population is not enough. • As said before, the current living conditions is making the smart young people emigrate on a large scale, something that has to be stopped in order to truly compete with the West. • Currently, Romania is already following an upward trend (GDP increases, unemployment level decreasing), it is believed that by keep sailing the current course the economic gap might be bridged.

6. The Future Vision • Taking all the previous mentioned perspectives into account, we believe that the future for EE lies in the IT industry and (pharmaceutical) agribusiness and that outsourcing will emerge as a strong force. • A reason for the focus on agribusiness is, as mentioned, the large amount of land available and the good weather conditions for cultivating plants needed for medicines. • Because Romania wants to improve its healthcare section over the coming 10 years, there will be an increase in demand of medicines. • This increase in demand of medicines will increase the demand of well educated students which are able to fabricate these medicines. • An increase in demand of students means that more places will be needed at educational institutions and with a high level of quality. • A higher quality level also means the universities will become more competitive on an international scale, improving the perspective of Western Europe towards Romania.

7. The Future Vision • As said in the previous slide, there will be an increase in the level of education in the future. • The skilled labor force coming from this will help give Romania a competitive edge. • In the IT industry we will especially notice a good educated workforce. • Romanians have IT classes starting from 1stgrade. • Currently there are 4 specialized information high schools in Romania. • All other high schools will be giving classes specifically designed for informatics with information classes of up to 8 hours per week. • Universities will start internationalizing, increasing the places for informatics students all over the country. • University of Bucharest. • Technical University of Cluj-Napoca.

8. The Future Vision • With the new, improved, well educated workforce we will also spot growth in the already existing companies in the IT and pharmaceutics industries e.g.. • Bitdefender, an antivirus program already winning many prizes and certificates. • Laropharm, a pharmaceutical company, well-know in Romania. • Within these companies we will see that the most important sectors will be marketing and IT, in order to save costs after the recession and to stick more to the core activities of the company. • We will also notice that all newly created companies will be in the form of a SME, and that they will funded through international capital.

9. Conclusion • The future of the Romanian company will be that in the IT sector and (pharmaceutical) agribusiness. • They will be competitive in this field because of good cultivation possibilities, their well educated workforce, and lively start-up culture. • 99% Of the newly founded companies will be SME’s, with an in-house focus on marketing and IT.