More than 60% of the foreign companies in Romania expect their revenues and business to grow in the next year, but most foreign investors are worried that the trend is not sustainable due to negative evolution in the local business environment, according to a survey carried out by the Foreign Investors Council (FIC).

“The sentiment of FIC members regarding the business environment in Romania, especially on the predictability of the legislative framework, and the stability of fiscal and regulatory frameworks is deteriorating considerably,” according to a FIC press release.

Some 90% of the respondents to the FIC survey say the constant changing legislation is affecting their business planning, up from only 25% in 2015. About 65% report that the fiscal burden has increased, up from 35% in 2015, and 75% say that the business environment in Romania has worsened recently and that current developments have lowered their trust.

"Constantly changing fiscal policy with measures being announced and then dropped has had a powerful negative effect on the trust of investors."

Moreover, the number of FIC members reporting that infrastructure, bureaucracy or availability of workforce are an increasing problem has been constantly growing in the past two years. Thus, 42% companies report that Romania is losing its competitiveness in terms of labor force, up from only 6% in 2015, and 90% say that infrastructure and bureaucracy have a negative impact on their competitiveness, which is truly worrying.

“Continued lack of infrastructure, increased shortage of adequate workforce, regulatory and fiscal uncertainty and a sentiment that the business environment is deteriorating will lead to less investments, local or foreign and this in turn will lower growth and take the economy below its potential,” reads the FIC report.

According to Romania’s National Bank (BNR), the foreign direct investment (FDI) in the first eight months of 2017 was EUR 2.5 billion, EUR 600 million lower than in the same period last year.

“To talk about this difference as a result of a diminishing trust of foreign investors in Romania would be premature, because an investment decision is usually made after two years. However, some recent public policies tend to worry the current foreign investors, as the sentiment index shows and to possibly intimidate the new ones,” the report says.

The authorities should develop a coherent policy of attracting FDIs, because greenfield projects represented only EUR 78 million (only 2.4% out of the total foreign equity) in 2016, which means few companies are entering the market according to FIC.

“Constantly changing fiscal policy with measures being announced and then dropped has had a powerful negative effect on the trust of investors. Equally, perceived or real dangers for the rule of law in Romania, translate into less trust on behalf of investors. Last but not least some of the public discourse that tries to play foreign against local, large against small investors has lowered trust and increased uncertainty. Equally worrying are the increased number of instances when officials are using misleading or false information in order to slander certain industries or economic sectors.” the report concludes.

The Foreign Investors Council (FIC) publishes twice a year the results of the Business sentiment index survey conducted among its members. FIC member companies represent a significant share of foreign direct investment in Romania. They have more than 180,000 employees and a total turnover that is approximately 25% of GDP.

editor@romania-insider.com