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COUNTRY PROFILE

IV Trimester – Part Time
MBA 2009-12

Prepared for
Prof. Dr. Pinaki Dasgupta

Prepared by
Saurabh Agarwala
Roll No. 44

Preamble: This paper is submitted as part of International Marketing Management course.
The course has developed an appreciation for fundamentals in International marketing
scenario.The fundamentals gains relevance especially for the fact that the nature of most of
the businesses is becoming global.
During selection of a country for market profiling I was tempted to look for countries which
have recently gone for branding themselves and opening their markets to the world.
Singapore has been a success story in terms of attracting tourists with its “Uniquely
Singapore” campaign and adding to its tourists’ attractions events like F-1 racing (night-time
event). “Incredible India” with roadshows in countries like Germany and UK was also an
attempt in the similar direction. Romania after its inclusion in European Union block ( in year
2007) got funded for its “Branding Romania” campaign. Important to note is that Romania
is emerging quickly as a potential exporter and importer for various products and services.

Romania experienced negative growth though consensus is for between 1-1. Romania intends to enter the euro-zone in 2014. Romania is much admired for its beautiful and diverse natural landscape. Bulgaria in the South and Hungary and Serbia in the West. due to the impact of the global recession. In 2009. ROMANIA Introduction Romania is the 9th largest member of the EU 27 by size (238. Located within the confluence of the Carpathians-Danube and Danube-Black Sea ecosystems.7 billion and the inflation rate estimated at 5. Republic of Moldavia in the East.5% growth this year. In 2009 Romania’ Nominal GDP was €115.7 million) and is located in South-Eastern Europe. Romania's main foreign policy priority is to join the Schengen agreement in 2011. . Romania joined the EU on 1 January 2007 and had one of the fastest growing economies in Europe until 2008.931 square kilometeres) and the 7th largest by population (21. Neighbouring countries are Ukraine in the North. Key Figures at a glance Financial assistance from the EU will play a crucial role in stimulating economic recovery in 2011 and after.16%.

80 Exchange Rate US$:Euro (av) 3.63 Exchange Rate US$:Euro(year-end) 2.64 Source: Country Forecast Romania June 2010 Year GDP in Billions of USD PPP % GDP Growth 2005 202.08 -7.84 8.20 2009 253.60 -6.32 3.10 Source: EIU Country Data Romania: risk assessment Risk September 2010 Sovereign risk BB Currency risk B Banking sector risk B Political risk BB Economic structure risk BB Source: Romania: Country risk summary Country’s Imports .20 2008 269.59 6.10 3.10 2007 246.41 -7.00 5.64 2006 225.50 Consumer Price Inflation (av.%) 5.70 4.05 3.24 6.00 Current-Account Balance (% of GDP) -4. Country Forecast Overview (3 Year) Key Indicators 2009 2010 2011 Real GDP Growth (%) -7.10 -1.20 Budget Balance (% of GDP) -7.36 7.69 3.94 3.00 -5.43 -5.

to help foreign investors Opportunities in Romania • Energy . motorways and railway rehabilitation (network. the Middle East and Northern Africa. Balkans. bridges.6 billion to be allocated to construction/rehabilitation of national roads.€4. • Transport . navigation. tunnels and services). 100 million when taking into account neighbouring countries • A young.the National Energy Strategy has set the following objective: electricity from renewable sources to reach 33% of the total energy consumption in 2010. accountants and consultants. ports . • The EU Climate Change/Energy package includes the following objective for Romania: • 24% of total energy consumption in 2020 to come from renewable sources. already well established in Romania. by-passes. Romania – a Latin Island in a Slavic Sea • Stability factor in South Eastern Europe (EU. junction of 3 prospective European transportation corridors 4. well trained and educated work force.Country’s Exports Strengths of the market • A strategic location . English is widely spoken • The availability of support from foreign lawyers. 35% in 2015 and 38% in 2020. NATO and UN) • Beneficiary of EUR billion 31 of structural and agricultural funds over the period 2007-2013 • An important domestic market of 22 million consumers.7 and 9.access to countries of former CIS.

a former communist. the fall of the communist regime was marked by the execution of the emblematic leader of the communist party Nicolae Ceausescu on the Christmas Day of 1989. UK has extensive experience in these sectors and could offer support especially in the potential privatisation process of CFR Freight and CFR Passengers. the new leaders .5 bn. the automotive manufacturing sector forecasts €10bn turnover. based on a total investment of €8bn. • Automotive. a €500m increase on previous year. in April 2005 Bucharest signed the European Union accession treaty and since January 2007 the country has been an official member of the EU. • Rail/Road Transport & Logistics. Over 40 foreign manufacturers of components have established manufacturing facilities in Romania to take advantage of lower wages (up to 8 times less than some EU countries) and very good technical skills. at the end of Iliescu’s mandate. Another failure of a successful execution of key economic and social reforms meant that the country was not put on the list of the countries to join the EU in 2004.€5. took over the power in the country and was elected as a president. failed to implement their economic reforms which led to the re-election of Ion Iliescu in 2000. Romania was admitted to NATO. waste management & rehabilitation of contaminated sites. Political Factors Romania is an independent parliamentary republic with judicial.Emil Constantinescu as a president and Victor Ciorbea as a prime minister. By 2010. In March 2004. Dacia’s exports 3rd qtr 2009 reached €1. About 50% to be devoted to rail sector. The Prime Minister serves as the head of the government and is appointed by the president with the consent of the Parliament. The seat of the government is in the capital of the country – Bucharest. Romania has low political risk. Main market Western Europe • Consultancy: Accessing and absorbing EU structural funds has been recognised as a priority by the Romanian Government. However.€5bn of EU funding available for road and rail projects until 2013. and airports • Environment . .Sector is developing fast both in terms of new cars sales and investment mainly by 1st and 2nd tier foreign manufacturers. For instance. Despite all the hardships. It was not until 1996 when the communist era ended in reality in the country and a centre-right government came into power. According to the reputable Ducroire/Delcredere agency for risk assessment. executive and legislative branches of government.6 billion to be allocated to water /wastewater systems. Political background In Romania. The president serves as Romania’s chief of state. nature protection and risk prevention. Ion Iliescu.

It joined the International Monetary Fund and the World Bank in 1972. Economic Performance Following the collapse of communist rule in 1989. Romania also is a founding member of the Black Sea Consortium for Economic Development and has been a positive force in supporting stability and cooperation in the area Furthermore. Compared to its Central and Eastern European neighbours. After 15 years of slow progress. An extensive programme of economic reforms has included the privatisation of a large number of state-owned enterprises and the restructuring of Romania’s energy. However. Significant amounts of structural funding have been allocated for the 2007-2013 timeframe and despite a slow start in absorbing them. The reform programme closely followed IMF requirements for fiscal restraints and economic restructuring. despite being largely in private hands. The country is part of the Southeast Europe Cooperation Initiative (SECI) and the Stability Pact for Southeast Europe.1% in 2009. World Health Organization (WHO) and UNESCO are other international organizations in which Romania is a member. 2007 and an active member in the North Atlantic Treaty Organization (NATO) since 2004. with a peak of 8. Romania is a member of more than 60 international and regional organizations. Direct payments from CAP and rural development funds are likely to raise living standards in the poor countryside as farmers and local authorities are eagerly applying for funding. In 2004. The Balkan country was an active participant in the negotiations after the Gulf conflict in 1991. cars. Agriculture has remained a weakness. the reform of the sector has been sped up in the last couple of years. The country is part of the European Union since January 1. The construction sector went into . Since 2000 there has been more progress. Romania is an active member in regional organizations as well. Since the fall of communist regime in 1989. There has been rising demand for Romanian exports of steel. Israel in particular.5% in 2004.1% in 2008 to -7. and included two periods of economic recession. United Nations (UN). at the beginning of 2009. but hard. this process has been neither smooth nor particularly well-managed. Romania has good relations with the Middle East. Economic growth dropped from 7. The economy grew at an average annual rate of 6% between 2000 and 2008. World Trade Organisations (WTO).1% of GDP but it is mainly of a subsistence nature. particularly in the energy sector. the European Commission gave Romania 'functioning market economy' status. Romania is expected to reap the benefits and develop its underdeveloped infrastructure. it is still characterised by low productivity and small land- holdings. mainly driven by strong domestic demand. mining and industrial sector. It represents about 8. and light machinery. The global financial and economic crisis hit Romania late. Romania underwent a long period of economic transition to a market economy. Romania has pursued a policy of strengthening its relations with the other European countries and the United States.

9% in 2010 and at least 30 000 public sector jobs need to be cut.8%). The IMF agreement had a positive impact on investors’ confidence that was eventually cancelled by the political instability that preceded the Presidential elections in December 2009. an increase of 14% compared to the first quarter of 2007. are Italy and Germany.6%). in both import and export terms. Italy (16. particularly in sectors such as environment and renewable energies. However. The short-term picture is thus not very optimistic. with a population of 21. Struggling with rising public expenditure and lower revenues. In addition. dramatic decline.4%) and France (6. Romania emerged as the leading Eastern/Central European economy in attracting FDI with 150 projects taking it to sixth position in The Ernst & Young European Investment Monitor (EIM) league table. The top five partner countries are Germany (16. France (7.95 bn.3%). The top five partner countries are Germany (16. Both the trade and current account deficits adjusted rapidly. R o mania hopes to adopt the euro by 20 14.9%). Italy (11.3%). ranked higher than other countries in the region such as Hungary. Imports from the EU weight 70% of overall imports. For the IMF agreement to continue it has to be cut to 5.9 billion euros. second largest market in Central and Eastern Europe. and credit activity slowed. Trade Partners The two main trade partners of Romania.7%) and Hungary (5. Public spending on wages still represents 9% of GDP. It remains an attractive destination for foreign investment. the Government requested IMF and EC financial assistance in March 2009. FDI Over the past few years. Getting a grip on public expenditure remains a tough challenge but the Government needs to reduce the public wage bill in order to continue the IMF agreement.7 Million. The agreed package totalled €19. The value of imports in the first three months of 2008 reached 12. the Czech Republic and Poland.5%). Romania remains well placed to resume a path of above average economic growth once the global crisis ends. as it has many incentives for it: . Hungary (6.7%). Romania has experienced a steady increase in FDI flows. What happens in the months to come depends partly on the ability of the new Government to cut spending and restructure the public sector. Romania is more and more appreciated as a destination of investment. IT and infrastructure. The value of exports in the first three months of 2008 got close to EUR 8 billion. The quality of the business environment has improved significantly and in 2007 Romania progressed from 55th to 48th place in the World Bank's Doing Business report. Turkey (7. an increase of 12% compared to the same quarter of 2007. Exports to the EU weight 71% of overall exports.3%). Russia (6. .

the foreign capital comes from many countries. Germany with 930 million. and is predicted to stay the cheapest in Europe for at least next 15 years.4 billion.which is opening more and more . flat tax of 16% As a relatively new member of the EU. at crossroads of traditional commercial routes. . Figure: Percentage of foreign currency invested capital in companies as of 31 December 2007 Stable FDI inflows have been concentrated in export-oriented industries. targeting over 200 million people . French and German) . minerals and fuels. came from European countries. geographically in a strategic position. metals and metal products. Netherlands being on the first place. which amounted to EUR 7 076 million. with investments of over 1. industry potential. UK. establishing a link between Central and Eastern Europe. Austria is next with 1. such as machinery and equipment. wide range of natural resources . EU membership . highly skilled and able to communicate in foreign languages (English. Turkey. Netherlands being on the first place. Fiscal reforms. which shows strong interest and profitability in Romania’s export-oriented industries and suggests that potential for future real economic growth is present. More than 80% of the total invested capital in 2007. Austria is next with 1. agriculture and tourism . the foreign capital comes from many countries. Romania shows a strong integration into the European economic life. and others like Italy. textiles and footwear. At the moment. USA.9 billion EUR.4 billion. Switzerland and Greece. At the moment. with investments of over 1. Germany with 930 million.9 billion EUR. labor is very cheap.

the aim of which is to provide an umbrella framework in which processes of application and allocation of state aids will be made more consistent and transparent.The fact that the population is a conglomerate has also an effect on the Romanian language. Unilever. UK. Microsoft. 2008 the Romanian Government approved the latest investment law. There are sizeable populations of ethnic Hungarians and Germans living mainly in Transylvania. Figure: Population by Age Group (1975-2025) The majority of Romanians are of Latin origin. On June 27. Nokia. are Kodak. To mention some of the global players already present in Romania. Life expectancy in the country is calculated to be 72.000 population and 11. USA. Philips. full repatriation of capital and profits. Oracle. OMV. and others like Italy.84 deaths/1. and equal treatment of residents and non-residents investors. Romania has been gradually liberalizing its trade regulations and incentives and now follows the guidelines set by the EU.18 years.61 births/1. Other business incentives that the country offers are no limits of foreign participation in commercial companies (a foreign investor may establish a 100% owned enterprise in Romania). birth rate and death rate being 10. but there are different accents . Orange and many others. MAN Trucks. km. Foreign Investors Incentives Since the fall of the communist regime. The population growth rate is -0. Siemens. Switzerland and Greece.136%. Vodafone. Population It is estimated that Romania had a population of 22 246 862 in 2008 with an average population density of 94 people per sq. which is the official language.000 population respectively. Procter and Gamble. Turkey. Bosch. The ruling government is constantly updating the laws and financial conditions for doing business in Romania in order to maintain the positive growth of the economy.

. Baptist.2% of total household expenses. the Romanians dominate by far the ethnic composition in the country.33% of the Britons.92 people. The average size of a Romanian household in 2007 was 2. Standard house expenditures. 15-64 years: 69.7%. The lack of diversity in the ethnic composition is due to the restricting policy of movement of people in Romania forced by the communist party during the second half of last century. In a region of predominantly Slav linguistic base. Households Household expenditures on food. Romania has extremely high proportion of young adults in its population. Demographics Naturally. water. after the fall of the communist regime.4% and expenditures for clothing equals 6. amount to 19.7% and 65 years and over: 14. 7% 2% 2% Romanians Hungarians Roma Others 89% Figure: Ethnic Composition of the Romanian The age structure of the country is as follows: 0-14 years: 15.55% of the Romanian population was born in the period from 1976 to 1980. beverages and tobacco amount to 50% of the total household expenditures in Romania. 8. the rest being adherents to the Muslim and Jewish faiths. including rent. compared with 6. The second largest group is Hungarians with near 7% of the population and the rest are Roma. The Hungarian minority makes up almost the entire group of followers of the Roman Catholic Church. Reformed Protestant. in Wallachia influences of Turkish and Slavic languages. Due to the ex-communist regime policies. however.6%. and the center the accent has influences from Hungarian language. electricity and other furnishings and fuels. Hungarian and German are also widely spread. and Pentecostal add up to 5% of the population. from region to another: to the West. Nearly 87% of the population belongs to the Romanian Orthodox Church. the country has been experiencing a downturn in this trend. German. in Moldova – North. The only Western country with higher ratio is Slovenia. and to the south.East of Romania – influences of Russian language. and Ukrainian. Romania is the only country having Latinity.

Romania has built up technological capability -a crucial determinant of industrialization. and product development. top tier investors and a friendly business environment. The Romanian IT market is. Software Exports: . As the fastest grouwing and top IT market in Europe.Export Potential . following Poland’s.in the production of both hardware and software. call center support. business process outsourcing. the second largest market in Central and Eastern Europe. romanian companies serve the world’s most demanding offshore customers in IT outsourcing. competitive costs. Romania is one of the strongest markets in Europe for technology investment and trade. with a highly skilled technology workforce.IT Industry Development The IT sector is of strategic importance for the Romanian economy as it can function as an engine for the development of every other industry.

which have created synergy for .000 software companies and more than 5. companies to start projects and Iasi and Timisoara develop supports • Sound software industry base employing • Insufficient resources for marketing over 25. R&D. Over 1. Cluj. enforcement of copyright • Well-developed education system law producing out 5.000 hardware.000 graduates in other disciplines systems • Naturally developed industry around • Lack of financial resources for IT centres of excellence in Bucharest. • Lack of market information Lack of a governance and the developing domestic market to enable industry to information society develop expertise • Fast growing West Europe IT market • Lack of communication between having cultural similarities government and industry • Large emerging global IT market for off • Lack of support programmes for shore development. services and telecommunications companies have formed a Bucharest software industry cluster.g. IT-enabled industry promotion services • Lack of networking in industry • E-commerce necessitating skilled • Lack of a coherent industry image professionals • Growing unemployment due to closure • Telecom privatization market opportunity of state enterprises and lack of job IT deployment improving productivity of opportunities other sectors Industry in Romania has become linked to the new technologies through companies from developed countries which have established local operations to take advantage of the qualified labour that has graduated from technical institutes in Bucharest. rendering IT-enabled services such as management and quality.000 people and brand building • Strategic market location to serve EU • Lack of skilled manpower for Workforce with knowledge of English. The cluster also includes ten specialised professional associations and three trade associations. call centers Opportunities Threats • Romanian market for e-business. software French and German quality.SWOT analysis Strengths Weakness • Highly qualified human resources • Business environment lacks credibility • Company productivity comparable with • High cost of telecommunications and that of developed countries IPLC infrastructure • Low cost of human resources • Lack of credible investment policies • High mobility and flexibility of keeping foreign investors and manpower companies at bay • Lack of IT development entities such • Presence of IT companies from US and as freedom of information. or data Europe protection. managing software projects. e. US$3-5 for assembly of • Lack of domestic IT projects to CTV sets) develop credentials and experience • Inherent cultural and linguistic ability for • Lack of IT training facilities. certification and development • Attractive contract manufacturing methodologies facilities (e.000 IT graduates and • Lack of integration of information 2. Cluj. Iasi and Timisoara.

The non-availability of electronic components is one weakness of the industry. as the local market is too small. Some successful companies are those which have set up manufacturing facilities in alliance with overseas companies with the aim of exporting. Romania has more than 75. A successful migration took place in the telecommunications sector where Alcatel and Siemens entered into joint ventures with local units to manufacture telecommunications equipment for the domestic and export markets.000 researchers. PCs and computer peripherals. but have not been successful in export markets because of their technological obsolescence.000 professionals and is expanding facilities to accommodate up to 10. For example.000 workers for the production of sub-systems for network equipment. NEI Bucharest has emerged as another successful company. Companies which have followed the cluster approach have succeeded in utilizing the low cost production base in Romania. which has led to the erosion of the industrial base. Renault France integrated DACHIA into its global production programme to cater to the EU and Central and East European markets and also initiated an R&D programme to design and develop a small car at a unit price of Euro 5. which has developed an attractive brand of computers and delivered complete solutions to its clients. Many Romanian IT companies have been successfully transformed by splitting into smaller entities and divesting non-core businesses. Flamingo Computers is another success story. which are deployed in state enterprises. the whole group. Solectron is by far the largest single investment that has been made in Romania. In the process control and automation sector. mobile phones. Others have survived by selling space for manufacturing activities to foreign partners. Intraron produces switching and terminal equipment in Greece and entered the Romanian market after the participation of OTE in RomTelecom.000 trained workers in the hardware sector. but is now facing competition from Goldstar and Daewoo. Romania’s Research and Development (R&D) system is currently recovering after the decline in the transition years when he number of R&D employees recorded a loss of about 10. A few successful companies which have emerged. It employs about 5. They have good capabilities. The government is increasing with a . NEI Bucharest and AUTOMATICA Bucharest produce systems for the local market. which has diversified into a vibrant multi-product company. A striking example is that of Electromagnetica. Research & Development Closely related with its excellent economic growth.000. have been taken over by foreign investors or local entrepreneurs. which manufactures CTVs. servers. Most of them are underemployed as the major state companies are on the verge of closure.

000 economic migrants. and frontier sciences. representing one of the most important migration flows at the European level. which is the main area of activity for Romanian workers. thousands of companies in Italy and Spain are laying off their employees.with numbers estimated at 800. Now that the global economic crisis has hit Europe. According to the 2007-2013 National Strategy for R&D and Innovation (RDI). This has not happened yet and the prediction is that the economic migrants will not return during the recession. after the fall of communism. such as the ones created by Renault. While during the first years. public investment in RDI will be oriented towards priority RDI fields such as information and communication technologies. chain migration) and are used to a higher compensation for the same amount of work they would perform in Romania. Romanian workers preferred countries like Hungary. Therefore. these measures have not been effective. Prime Minister Calin Popescu said that the current government has introduced numerous fiscal advantages for private companies performing in the field of R&D in Romania. Such examples are the centers of excellence. sustainable development (including bio. chain migration effects are formed in these regions. Microsoft or Ericsson. its natural resources and its workforce . The Schengen Agreement (2002) and the European Union accession (2007) made it easier for Romanians to work abroad. However. stable pace the public R&D expenditures achieving 0. Endnote Romania with its new forged alliance with EU countries. and improved social programs. The expected result was that the migrants would prefer to come back home and start small local businesses with the money they earned working abroad than to live on employment insurance abroad. health. agriculture and food safety. things are changing. Although the Romanian government has organized employment fairs in Italy and Spain to attract migrants back home. as well as better services for the taxes they pay: competitive schools.000 and respectively 450. new materials in industry. energy. as Romanian workers have developed family ties in the host country (inter-ethnic marriages. The final aim is to meet the Lisbon Strategy criteria of 3%. nowadays Italy and Spain represent the two most “attractive” countries. advanced technologies and innovative products. Germany or Israel as their main destinations. The most affected is the construction industry. environment and transportation.and eco-technologies).7% of GDP in 2008. respectful institutions. Usually. Most of the Romanian migrants that work in Italy and Spain come from the poorest rural areas of the country. in the sense that if someone leaves to work abroad he/she will certainly help someone else to come in the same place for a similar job. Challenges Romanian labor migration has become a widespread phenomenon in the last 16 years. the estimation for 2010 is that R&D expenditures will be 1% of GDP.

Public spending on wages still represents 9% of GDP. IT and infrastructure. environment and renewable energies.seems to have great economic potential. Romania remains well placed to resume a path of above average economic growth once the global crisis ends. However. What happens in time to come depends partly on the ability of the Government to cut spending and restructure the public sector. . For the IMF agreement to continue it has to be cut to 5. Getting a grip on public expenditure remains a tough challenge but the Government needs to reduce the public wage bill in order to continue the IMF agreement.9% in 2010 and at least 30 000 public sector jobs need to be cut. The short-term picture is thus not very optimistic. It remains an attractive destination for foreign investment. particularly in sectors such as tourism.