The victory of Klaus Iohannis – the first ethnic minority candidate to become president in a Eastern European country – is giving rise to hopes that more German companies might turn their attention to Romania. We talked about this hopes and many other topics with Mr. Sebastian Metz, General Director of the Romanian-German Chamber of Commerce and Industry (AHK Romania).
How many members does AHK Romania have?
The Romanian-German Chamber of Commerce and Industry is the official representative of the German economy in Romania and was established as Chamber of Commerce and Industry in September 2002. So, for over 10 years, it is the central actor in Romanian-German economic relations and actively contribute to their development. AHK Romania has over 530 Romanian and German member companies.
Since January 2014, Romanian construction companies decided to open branches in Germany
Are there any Romanian companies operating in Germany?
Trade relations between Romania and Germany are very good. For some years now, Germany is the most important trading partner. Around 8,000 companies with German capital are registered in Romania, and lately there are also Romanian companies interested in entering the German market. As a bilateral chambers of commerce, AHK Romania provides advice to both German companies wishing to invest in Romania and Romanian companies wishing to undertake business activities in Germany. Up to 10% of the inquiries that we receive daily are from Romanian companies interested to open a branch in Germany. We do not have an exact number of Romanian companies registered in Germany. But we can say that the majority of Romanian companies go to southern Germany – i.e. lands of Bavaria and Baden-Württemberg. In fact, here lives the biggest Romanian community in Germany. I noticed that the Romanian firms usually open small businesses in Germany, for example in trade, IT consultancy or machinery and equipment maintenance. The construction field is a special case: since January 2014, along with freedom of movement for Romanian labor in Germany, various Romanian construction companies (some having finished prestigious projects in Romania) decided to open branches in Germany
What should a Romanian entrepreneur know before entering the German market?
First of all, a Romanian entrepreneur should know that the German market is very lar ge and it is a saturated one, therefore niches must be sought. The Romanian-German Chamber of Commerce, along with its partners in Germany, supports Romanian companies wishing to start a business in Germany. Given that GDP per capita of Germany is five times higher than Romania, population is educated to consume quality products and services. Overall, consumer behaviour, savings and leisure differ from those of Romanians. There are also differences in mentality between German regions, so it is recommended a regional approach to the German market. The branches are often regionally focused, which is good to know, in order to start in the region with the most potential clients.
How does AHK Romania assists the German companies willing to invest in Romania?
AHK Romania offers a platform for networking through monthly meetings, specialized conferences and other events, where members get to know each other better and exchange ideas and experiences. We provided consulting services in the last 10 years, especially focusing on small and medium enterprises in Germany and Romania who wish to enter the Romanian market or the German one, but concerns are among our customers as well. Market Counseling Department offers advice regarding acquisitions, business partnerships and conducts market research. Investors Counseling Department provides analysis on investment sites, recruitment, and VAT refunds. In addition to these services, we provide a reliable alternative to the judicial system, through the Court of Arbitration attached to the Romanian-German Chamber of Commerce and Industry. The German know-how in the energy field is transferred to Romania through the GreenTech platform Econet Romania (www.econet-romania.com). From experience, we know that German manufacturing companies are facing a lack of qualified personnel on the labor market and that there is a need for counseling companies and vocational schools. So we try to implement in Romania a vocational training system modeled after the German system and we want to point out its benefits. As a member of the Coalition for the Development of Romania, the Romanian-German Chamber of Commerce and Industry actively engages in long-term projects for professional training.
What makes Romania attractive to investors, compared with other East-Central European countries?
Romania’s advantages in attracting foreign investors certainly include the EU membership and the implementation of EU legislation. Because the geographical position and the population (about 20 million) Romania is an interesting market for South Eastern Europe. Wage level is also an advantage for investors and the 16% flat tax rate contributes to an attractive economic climate.
In the automotive industry, German investors tend to focus mainly on Western and Central areas of the country. Daimler inaugurated the construction of a new plant in Sebeş, Bosch has expanded it’s operations to Jucu, Continental is headquartered near Braşov. Why do automotive investors choose Transilvania and Banat over, say, Oltenia or Moldova?
German investors are choosing the Central and Western areas due to their proximity to the western border, through which much of the exported products go. So, in terms of logistics, is ideal. Another reason is the labor from these parts of the country, taking into account the existing university centres here. Culture also plays an important role, considering the German minority in these regions and the numerous German language schools.
Infrastructure, fiscal policy, predictability and transparency are still far below expectations
Infrastructure, fiscal policy, predictability and transparency in decision making have always posed real challenges for investors. Since your arrival in Romania, have any of these improved?
Given the current developments in the fight against corruption we can say that some progress has been made in this area. However, the points listed – infrastructure, fiscal policies, predictability and transparency – are still far below the expectations and the needs of businessmen. Predictability of the tax legislation is of great importance for investors. A decision that’s implemented through Government Emergency Ordinance does not ensure enough time for businessmen to prepare. Another important aspect for German investors is the rehabilitation of road infrastructure. With only 650 km of highway, Romania is at the bottom of European rankings. Public procurement in Romania remains an area where urgent action regarding transparency is needed and there must be created clear and effective framework conditions. In this area, Romania is below the Central and Eastern Europe zone average.
How would you describe the dialogue between Romanian authorities and investors?
We have had various experiences in dialogue with the Romanian authorities. Authorities’ interest and openness are generally there, but often there’s a lack of professionalism and sustainability. In specific areas, the collaboration goes well. Through various actions such as a position paper on transparency in public procurement, the Romanian-German Chamber of Commerce and Industry wants to raise authorities’ awareness and contribute to improving framework conditions.
From an investor’s perspective, which industries in Romania have untapped potential?
In Romania there are many branches that have development potential, depending on what investors want to do and what is their profile. Commerce, IT, environment, food and manufacturing sector, especially automotive have the greatest potential.
It is necessary to improve the collaboration between companies and state education system
Does Romanian public educational system keep up with the private sector’s needs?
Education is an issue that concerned us for a long time. We are in an active dialogue with all those involved in education, decision-makers, authorities, schools, companies. It is necessary to improve the collaboration between companies and state education system. The first positive signs have emerged through initiatives to introduce dual system vocational education similar to the one in Germany. The first success stories have already happened. We hope they multiply.
Can Romania become a major centre for research and development (R&D)?
Romania has the potential to become a major centre for research and development. A positive development in this respect is the adoption of the law on service inventions, especially important for the automotive industry in which several German companies operate. This law establishes a new relationship between Romanian employees and employers and provide all employers in Romania an opportunity to encourage inventive activities, pay them properly and fully protect them nationally and internationally by registering the patent and utility model. This will make Romania a stronger investment location and more a more attractive destination, especially for foreign investors whose main activity is research and development. However, it requires financial support from the state, because in Romania research and development represents only 0.4% of GDP, compared to Germany’s almost 3% contribution to GDP.
In your opinion, what is Romania’s number one priority?
The priority for Romania should be the implementation, in a consistent manner, of proposed strategies and long-term planning.
Do you think the result of the recent Romanian elections will influence the bilateral trade with Germany?
Through the election of Mr. Klaus Iohannis as President of Romania, positive signals were sent in Germany. The elected President must now demonstrate that the confidence which has been granted to him is justified and he must contribute to the development of economic and political relations between Romania and Germany. We hope that the new elected President will aim to improve Romania’s image abroad and attract foreign investment.
What do you love most about Romania?
In Romania people are open and friendly, curious to discover and learn new things. I find this generally positive attitude beneficial.
Germany is currently the second-largest foreign investor in Romania turnoverwise, after the Netherlands. The 10,371 companies with German capital registered locally have had a turnover of approximately € 9 billion in 2013, compared to a turnover of € 33 billion registered by Dutch companies. The more than 10,000 German companies have registered a profit of € 800 million and have approximately 200,000 employees.