Romania's dependence on foreign capital has increased due to the growing need for external financing (a combined increase in the current account deficit and debt repayment), and the country is lagging behind in restructuring and privatizing its productive sector. Its institutional framework is insufficiently developed. Thus, support from international organizations and market confidence are contingent upon sustained efforts in reform.
Despite the economic slowdown in the European Union, the country recorded very respectable growth results in 2002. These results were achieved thanks to a prudent monetary policy, relatively strong export performance, rising productivity, and slowing inflation. Foreign demand and investment should sustain this activity in 2003.
Similarly, the need for external financing is increasing, but the issuance of public debt by local entities and foreign direct investment allow it to be covered without major difficulties and increase the level of foreign exchange reserves.
The entry into force of the Association Agreement between Romania and the European Union in 1995 and the accession negotiations initiated in 2000 have contributed to maintaining a dynamic of liberalization in the Romanian market. In 2002, 64% of Romania's foreign trade was with the European Union.
Transactions involving goods can be carried out freely, as import/export licenses are only required for certain goods (agricultural products, used materials). Certain agricultural products are subject to deterrent customs duties, ranging from 9% to 45%. However, duty exemptions are provided for quotas. For industrial products originating from the European Union, customs duties range from 0% to 15%.
The payment system is being modernized. New payment methods, such as bank transfers and bills of exchange, have been adopted. Checks are almost obsolete. Letters of credit are becoming increasingly common. When initiating business relationships, it is recommended to use documentary credit. Documentary remittances are also used. Factoring options are also available, offered by some of the major banks.
The restructuring process in the banking sector is already quite advanced, and leasing should develop significantly in the coming years.
The legal framework for foreign investments exceeding one million dollars is defined by a law from July 2001 that reaffirms the principle of non-discrimination between foreign and domestic investments. Investments by SMEs are also governed by a law dating from July 2001. Foreign investments exceeding 10 million dollars are eligible for specific provisions.
Since August 1993, all profits have been transferable. Repatriation of profits in the form of dividends received by a foreign investor is subject to a 10% tax. The amount paid entitles the investor to a tax deduction in France, according to the double taxation treaty signed between the two countries.
Economic agents and individuals may open foreign currency bank accounts at authorized Romanian and foreign banks. All economic agents, Romanian or foreign, registered and operating in Romania, may retain their foreign currency income in full and use it freely.
Coface rates Romania with a B rating in the short term and a moderately high risk in the medium term.
Coface Ibérica
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