#FIS2023 | Charting the Future: German Investments and Romania’s Evolving Market Landscape

“Germany and Romania share a robust partnership that extends beyond political and cultural ties to a vital economic cooperation, which serves as a true jewel and significant benefit to both countries.

The trade statistics between our two countries are genuinely impressive. Germany stands as Romania’s largest trading partner, with a bilateral trade volume reaching up to 40 billion this year – a substantial figure for Romania. As the top investor in Romania, based on the country of origin of investments, Germany contributed 16 billion last year. Our close connection is further strengthened by our infrastructure, including the largest bilateral chamber of commerce and eight local business clubs in various city regions. Moreover, the 10,000 German companies operating in Romania have created a quarter of a million jobs, illustrating the intensity and success of our partnership.

What I find particularly noteworthy is that this partnership transcends mere numbers. German companies are here for the long haul, consistently reinforcing their investments, indicating a fruitful and sustained cooperation. German investments have evolved from focusing on low-wage jobs to encompassing a diverse range of highly skilled positions. This includes roles in research and development, autonomous driving (as seen with Continental), sustainable building, and a strong presence in the IT sector. This remarkable transformation has occurred over the last two decades.

German companies are also deeply committed to social aspects, ensuring their presence in Romania is mutually beneficial. This includes corporate social responsibility initiatives and the signature dual education system, exemplified by a pilot project in Constanța by a regional business club. This sets a standard for the business sector in Romania.

As we come together to discuss the future perspectives of this partnership, it’s important to recognize that the success of one economy in this relationship often leads to the success of the other. The German and Romanian economies are intricately linked, and their mutual growth is essential.

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Dr. Christian von Albrichsfeld, Continental Automotive: We saw that all the projects presented represent our values

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Like other major economies, Germany has faced its share of challenges in recent years, including the pandemic’s impact and disruptions in global supply chains. The shift in thinking and restructuring still underway, particularly in relation to China, highlights the need for diversified markets and suppliers. The Russian aggression against Ukraine has also caused economic turmoil, especially in the energy sector. Despite these challenges, I am confident that both our economies are moving in the right direction, with a bright future ahead.

The innovative power of the business sectors in both Germany and Romania is remarkable. Our companies have consistently found ways to advance despite challenging circumstances. The famous German ‘Mittelstand,’ or medium-sized enterprises, are known as often hidden champions, demonstrating resilience and adaptability.”

“I can confirm that the past three years have been excellent. As the Ambassador noted, the relationship between Germany and Romania has been fruitful. Our company has been active here for 25 years, witnessing the evolution of the construction and infrastructure sectors. I can attest that in recent years, there has been a significant increase in investments, particularly with a heightened focus on infrastructure.

Currently, we are experiencing a record number of highway projects under execution and numerous tenders. These results have contributed to our growth. This year, we are poised to reach a turnover of 100 million euros and currently employ 650 people.

We are involved in a major highway project, which is on track to be completed earlier than the scheduled deadline. This achievement was made possible due to the factors we emphasized in the project. Over the past years, we’ve undertaken numerous projects aimed at enhancing our project implementation performance.

The key to success lies in thorough project preparation, from feasibility studies and design to securing financing and relocating utilities. When these preparatory tasks are well-executed, as was the case with this project, outstanding performance is achievable.

The improvement in contract preparation in recent years has been notable, though there is still room for further enhancement. The situation has certainly improved compared to 15 or 20 years ago when investments were hindered by the lack of roads, utilities, and clear planning.

Despite the good performance in the last three years, we faced several challenges. The pandemic impacted the demand for office buildings, and then the war in Ukraine, along with the economic situation, led to increased prices in raw materials and energy – all of which posed challenges for the construction industry. Looking ahead, we have new concerns due to recent changes in taxation that could potentially affect the construction industry in the future.”

Christian von Albrichsfeld, Country Manager at Continental Romania:

“Mr. Ambassador highlighted the opportunities for nearshoring and de-risking in Romania, yet it’s crucial to acknowledge that Romania faces competition from neighboring countries. Over the past few years, the trend indicates that Romania’s competitiveness may be diminishing.

Romania, undeniably a developing country, has achieved an impressive eightfold growth in GDP over the last 20 years, largely propelled by regulatory changes. A key example is the significant increase in the minimum wage, which has nearly tripled in less than a decade. However, this increase has not been matched by a corresponding rise in productivity, posing a challenge for businesses.

Romania’s budget relies on a relatively small workforce. According to recent census data, out of a population of 19 million, only about 5.5 million, including self-employed individuals, are actively working. This is less than a third of the population, a stark contrast to countries like Germany, where a much larger proportion of the population contributes to the tax base.

The current fiscal strategy, heavily dependent on a limited working population, lacks long-term stability. The recent policy changes have raised concerns, particularly in sectors like IT, which Romania heavily relies on. The increase in minimum salary necessitates the creation of higher-value jobs, moving away from industries with intensive labor requirements, such as textile manufacturing, which has nearly vanished. The focus now needs to shift towards sectors like research and development, which offer greater value creation.

Recent events have highlighted the need for a more stable and predictable fiscal environment, as assured by officials at this event. Companies like ours are committed to long-term development and partnerships, not merely short-term incentives. As we plan our investments, we closely monitor the trends in costs, infrastructure, workforce quality, and availability. We assess where these factors are headed in the next few years to determine whether Romania or its neighboring countries offer a more competitive environment for business growth and development.”