Guidance

Overseas business risk: Romania

Updated 18 February 2021

Information on key security and political risks which UK businesses may face when operating in Romania.

Political and economic

President

Klaus Iohannis, from the National Liberal Party (PNL), a centre-right party is the current Head of State. He was re-elected in 2019, with 66.09% of the vote. Iohannis was previously the mayor of the Transylvanian city of Sibiu.

Executive

The National Liberal Party (PNL) formed a coalition government with USR-Plus and UDMR after the General Election of December 2020. The Social Democratic Party (PSD) have the largest number of seats in Parliament, but the coalition commands a slim majority. PNL had previously formed a minority Government since November 2019, after the PSD Government was ousted through a vote of no confidence.

PNL is a longstanding historical party, re-established after 1989, which occupies a centre-right position in Romanian politics.

PSD is the largest opposition party, with historical links to the Romanian Communist Party. Its policies are broadly centre-left.

USR-Plus is a centre right alliance of two parties, which together are the third largest in the Romanian Parliament. USR was founded in 2016 from a civil society organisation in Bucharest. The party is well known for its reformist, anti-corruption platform. Plus is a centre-right party founded in 2018, by former Prime Minister Dacian Ciolos, with a centre-right doctrine and a strong pro-European agenda. It established an alliance with USR in 2019, and they have run together in elections since.

The Democratic Union of Hungarians (UDMR), founded in 1990, is the main political organisation representing ethnic Hungarians in Romania. Its main mandate is to promote ethnic Hungarian rights.

Among smaller parties, AUR, a right-wing party with a nationalist agenda, emerged for the first time. The PNL coalition took office on 23 December 2020. The Prime Minister is Florin Citu. Ministerial portfolios were divided between the four coalition members based on seats won.

The Government announced its new programme. Priorities include economic recovery and the justice sector. Digitalization of the administration and economy underlines the entire economic programme. The Government also has ambitious fiscal goals, aiming to bring the deficit to under 3% by 2024, while also planning to accelerate it EU absorption rate.

Parliament

The bicameral Parliament consists of a Senate (136 seats) and a Chamber of Deputies (329 seats). Elections to both Chambers of Parliament are held simultaneously every four years – the most recent in December 2020 and the next in 2024. The voting system has now returned to proportional representation (PR) on party lists from a mixed first past the post (FPP) system used in 2012.

County level

Romania is divided into 41 counties (Judete), with the city of Bucharest forming a 42nd area. Each county is governed by a County Council (Consiliul Judetean) consisting of members elected by universal suffrage for a 4 year term. The President of the County Council is elected directly by citizens, due to a change in legislation in 2019.

Central Government appoints a Prefect to each county, which functions as its representative at local level. Prefects direct public services of the Ministries and other central agencies at county level. A Prefect may block action by a local authority if s/he deems it unlawful or unconstitutional. The Government adopted an Emergency Ordinance in January 2021, according to which prefects can now be members of political parties and politically appointed.

Counties have responsibility for development planning, water supply, sewage, public transport, roads, social assistance for children, education.

Economy

Basic Economic Facts - 2020 unless stated

• GDP Growth: -4.8%
• annualized inflation: 3.3%
• unemployment: 3.38%
• debt-to-GDP: 44%
• budget deficit: -9.5% of GDP
• minimum gross wage (month): €471/month
• major industries: food and beverages, energy, metallurgy, crude oil processing, chemicals, light machinery and textiles
• exports (2019) – EUR 69 bn, EU 88%, out of which Germany 22.5%, Italy 11.3%, France 6.9%, Hungary 4.8%, UK 3.7%, Poland 3.5%, Bulgaria 3.5%, Turkey 3.2%, Czech Republic 3.1%, Netherlands 3.1%
• imports (2019) – EU 86.29%, out of which Germany 20.2%, Italy 9.1%, Hungary 7.%, Poland 6%, China 5.3%, France 4.9%, Turkey 4.5%, , The Netherlands 3.9%, Russian Federation 3.6%, Austria 3.1%
• trade deficit: EUR 17.28 bn (2019)
• current account balance: deficit of 10.4 bn. Euro (December 2020)
• Foreign Direct Investment: 88.3bn. Euro (2019)
• exchange rates (January 2021): 1 GBP= 5.42 RON; 1 EUR = 4.87 RON; 1 USD = 3.96 RON

Economic developments

Following the collapse of communist rule in 1989, Romania has undergone a long period of economic transition to a market economy, not always smooth. The country has seen an extensive programme of economic reforms included the privatisation of several state-owned enterprises and the restructuring of Romania’s energy, mining and industrial sectors. Growth was at an average annual rate of 6% until the economic crisis of 2008.

Since 2012, Romania’s economy had been growing robustly at more than 3% per year, reaching 4.4% in 2018, and 4.1% in 2019, but was estimated to have decreased by 4.8% in 2020 due to the COVID-19 pandemic. Services represents 62% of GDP; industry 33%; and agriculture about 4%, yet it employs around 30% of the workforce, mainly in subsistence farming.

Romania is considered a secondary emerging market, high income country with a gross national income (GNI) per capita of USD 12,630.

Outlook for 2021

Real GDP is forecast to grow between 3.8% and 5.4% in 2021 and by around 4% in 2022. It is expected that private consumtion will recover sharply in 2021 as the rollout of vaccinations should allow for a gradual lifting of restrictions, especially in the HoReCa segments.

Consumption is expected to remain strong in 2022 as well. Investment will continue to grow strongly for the medium term. Export will continue to grow as the economy recovered, however net exports will remain negative.

Human Rights

Romania has ratified most of the European and universal human rights treaties and counts human rights as an official foreign policy priority. Issues remain with human trafficking, including forced labour, and discrimination against minority groups.

Romania remains a source, transit, and destination country for men, women, and children trafficked for the purposes of commercial sexual exploitation and forced labour in the agriculture, construction, and service sectors.

This is particularly worrying for the UK, where Romania remains the first EU country of origin for potential victims recorded by the NRM, with 371 potential Romanian victims reported in 2019. The current Romanian Government is committed to tackling the issue by addressing underlying causes, such as poverty, lack of access to education or discrimination. Government objectives on trafficking include the strengthening of the institutional capacity of the National Agency against Trafficking in Persons (ANITP) and more structured support and funding of the NGOs working with victims of trafficking.

Public attitudes towards the Roma remain negative and they still face structural discrimination, including enjoyment of equal access to housing, education, jobs or health care. Accepting diversity remains a major issue in Romania, particularly regarding sexual orientation. Romania does not allow civil partnerships, nor does it recognize civil partnerships signed in another country.

The Coalition for the Family collection of organisations launched a petition in 2016 to change the Romanian Constitution to state that family is based on the marriage “between a man and a woman” (instead of “between spouses” as it is now). A referendum was held in 2018 regarding the definition of the family in the Romanian Constitution. Due to a low turnout rate (below the 30% threshold needed), the referendum failed.

Bribery and corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, or a body incorporated in the UK, to bribe anywhere in the world. The Romanian Criminal Code and other laws criminalize active and passive bribery, in both the public and private sectors, including bribery of foreign officials.

Romanian criminal law distinguishes between four main categories of corruption offences of active and passive bribery: receiving bribery, giving bribery, influence peddling and buying influence. Under Romanian criminal law, no distinction is made between bribes and ‘facilitation payments’, which are also prohibited.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

Since its EU accession in 2007, the Romanian judiciary has been monitored by the European Commission under the Cooperation and Verification Mechanism. Romania has made significant progress since 2007. Key legislation has now been put in place, including key measures to reform the civil and criminal judicial Codes. A criminal code and a criminal procedure code entered into force in 2014 aiming at increased efficiency and a more coherent practice of the judiciary. Further amendments to criminal and civil codes are in parliament for further debates as of early 2017 and might result in significant changes to the legislative framework.

Following the 2019 CVM report, Romania has become more ambitious in fulfilling the CVM recommendations. The current Government is already taking active measures to address these, having set itself the ambition of graduating from the CVM in 2021.

The adoption of a National Anti-Corruption Strategy in 2012 marked another important step in Romania’s effort to prevent corruption. A revised Strategy for 2016-2020, including more effective tools to prevent corruption in the public sector (including state-owned enterprises) entered into force in August 2016. An extensive institutional anti-corruption framework is in place and is demonstrating a convincing track record. A new Anticorruption Strategy is due for the 2021-2024 period. Romania needs to continue to take action to ensure the independence of the judiciary is respected, promote high standards of integrity in a consistent manner and improve the consistency of jurisprudence.

The level of perceived corruption in Romania remains relatively high. Transparency International’s 2020 Corruption Perception Index ranked Romania among the most corrupt countries in the EU, at 69th out of 179 among countries.

Visit the Business Anti-Corruption portal page providing advice and guidance about corruption and some basic effective procedures you can establish to protect your company from them.

Read the information provided on our bribery and corruption page.

Terrorism threat

Please read the information provided on the terrorism page of the FCDO Travel Advice for Romania.

Protective Security Advice

The Centre for the Protection of National Infrastructure also provides protective security advice to businesses. You are advised to maintain at least the same level of personal security awareness in Romania as in the UK. You should follow the advice set out in the FCDO Travel Advice for Romania.

Intellectual Property

IP rights are territorial, that is they only give protection in the countries where they are granted or registered. If you are thinking about trading internationally, then you should consider registering your IP rights in your export markets.

For information on obtaining a patent in Romania, you should contact:

$A State Office for Inventions and Trademarks 5 Ion Ghica Street Sector 3 Bucharest 030044 Romania

T: +40 21 3060800 F: +40 21 3123819

Email: [email protected]

For information on registering your Trademark in Romania, you should contact the Office for Harmonisation in the Internal Market.

Refer also to the website of the World Intellectual Property Organisation (WIPO), and the Madrid Protocol for the international registration of marks.

Read the information provided on our Intellectual Property page.

UK Export Finance

The government can provide finance or credit insurance specifically to support UK exports through UK Export Finance – the UK’s export credit agency.

For up-to-date country specific information on the support available see UK Export Finance’s country cover policy and indicators. Details for Romania are available here.

Organised crime

Romania’s location in South East Europe with large land and sea borders make it an ideal transit route for the trafficking of drugs and human beings. Romania is on the Balkans route for the smuggling of South West Asian Heroin from Turkey and Bulgaria and/or the Black Sea coast to Western Europe.

Romania has the largest proportion of HGV drivers in Europe. Romanian HGV drivers are continually detected at UK Borders with illegal commodities (illegal firearms and ammunition, drugs and fiscal items) or immigrants concealed within their loads.

Romania is also a nexus point for migration flows from the north (Moldova, Ukraine, FSU) and the South (Turkey, Iran, Iraq, Afghanistan).

Romania is a source country for victims of human trafficking for labour exploitation, sexual exploitation and organised acquisitive crime.

Romania is the direct source of cyber crime attacks on private and public sectors and is also a threat for cyber enabled crime such as false job offers and false sales through internet auction sites. Romanian infrastructure (due to its high quality and low price) is also used by criminals who are not based in Romania to conduct attacks on UK infrastructure.

Romania is also a source country for child sexual abuse and exploitation. This includes the generation, profit from and distribution of indecent images of children, as well as the development and maintenance of closed paedophile groups online, and a largely hidden contact abuse problem. There are also significant crossovers into sexual exploitation and modern slavery and human trafficking

The banking sector in the UK and Romania is vulnerable to money laundering from Romanian Organised Crime Groups (OCG), with proceeds of crime .being laundered through UK and Romanian financial institutions, while Money Service Bureaus in Romania experience high volumes of Sterling exchanges indicating cash is exported by OCG from the UK to Romania for exchange into LEI due to weaker regulations in Romania.

Romania’s position at the external border of the EU makes it a target for fiscal crime, including but not exclusively, cigarette smuggling and infringements of Intellectual Property Rights (IPR offences). When added to the possibility of VAT (MTIC) fraud and emerging fiscal crimes (e.g. Carbon Credit fraud), the country suffers serious losses to its Treasury.

Read the information provided on our organised crime page.

Contact

Contact the Department for Business and Trade (DBT) Team for more information regarding conducting business in Romania.