Foreign direct investments four times higher in the West of Romania compared to the rest of the country

The West of the Romania is closer to the European Union and the highways that connect the country with the Western European markets. Unsurprisingly, foreign investments in the region are significantly higher than in the rest of the country. This is highly visible in the auto industry, in which major companies have opened production sites for components that get shipped to factories in other countries.

The stock of foreign direct investments in the four counties in the western region of the country (Timis, Arad, Hunedoara and Caras-Severin) doubled between 2008 and 2016 to EUR 5.6 billion, most of them concentrated in the automotive sector, according to an analysis of PwC Romania, presented at an automotive sector conference held today in Timisoara.

Of these, most foreign direct investments were attracted by Timis County (EUR 3.5 billion) and Arad County (EUR 1 billion).

“We decided to organize a car conference in Timisoara because the western part of the country brings together a large part of the car parts manufacturers present in Romania. In fact, this sector is the region’s development engine, and perhaps the whole country’s, given that the auto industry has a 13 percent share in Romania’s GDP formation and an even larger contribution from exports. We want to turn this into a recurring event to take the market pulse and meet the challenges our customers face in this sector,” said Monica Biota, PwC Romania audit partner and office coordinator in Timisoara.

This concentration of foreign investment has led to sustained GDP growth in the western region, of almost 27 percent between 2008 and 2018, as well as higher wage levels. For example, the net average salary in Timis County in 2017 (RON 2,562) was 25 percent above the national average (RON 2,061).

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While Romania’s population has decreased by about 5 percent over the past 10 years and labor resources are down by 9 percent, the population of Timis county has increased by 4 percent, from 720,000 to about 750,000. The number of employees rose at the same rates, while the number of the unemployed across the western region fell by 45 percent over the same period.

In contrast, Caras-Severin and Hunedoara counties have salary levels below the national average, making them attractive in terms of wage costs for investors interested in expanding their production capacity.

“In order to encourage economic development in these two counties, a very important role is played by the improvement of the transport infrastructure, so that investors can conveniently deliver their production, which is largely headed for the European Union market,” said Andreea Mitirita, tax partner at PwC Romania and tax advisory team coordinator from the Timisoara office.

The PwC analysis shows that Timis County is ranked 4th nationwide in terms of labor demand, while Arad County is on the last place at the national level in terms of labor supply.

“In the western region of the country, companies are facing serious difficulties in attracting the necessary workforce to support or expand their production, with a need for a series of coordinated national measures to encourage internal labor migration from the counties with a shortage of jobs to the regions facing a shortage of workers. During this conference we presented some of PwC’s proposals for measures to mitigate labor shortages such as boosting dual education or reforming the National Employment Agency and turning it into a true partner for Romanian companies in the recruitment of human resources,” added Mitirita.

The conference, which was attended by more than 70 representatives of the automotive sector from Western companies in the country, has reached a number of topics relevant to the automotive industry, such as tax and accounting regulations impacting the sector, tax incentives for research and development, labor market issues and potential solutions proposed by PwC Romania to mitigate the problem of skilled labor force.