Romania faces fiercer regional fight for Austrian investments

In the past couple of years Austrian investments in Romania have declined, in part because of the economic downturn but also because after the strong wave of newcomers between 2000 and 2008, existing players have been focusing on consolidating their position. As for future investments, Romania is now facing tougher competition from neighboring countries, Rudolf Lukavsky, commercial counselor of the Austrian Embassy in Romania, told BR.

Simona Bazavan

How much did Austrian-owned companies invest in Romania in 2010 compared to the previous year, and what are the estimates for 2011?
After the very good years of 2000-2008, overall foreign direct investment in Romania dampened significantly in 2009 and 2010. Direct foreign investors’ net revenues in 2009 amounted to EUR 694 million, down EUR 2,244 million year on year. Nevertheless, Austria’s FDI could still register a growth of EUR 363 million, despite the difficult overall economic situation.

According to official data, Austria’s FDI in Romania amounted to EUR 9.2 billion at the end of 2010. For the first half of 2011 BNR registered a surplus of EUR 158 million. In 2010 we saw a lot of re-investment of earnings by larger companies already present in the Romanian market, including retail chains (bauMax, Hervis, Billa etc.), processing companies such as those in the wood-processing industry (Kronospan, Egger and Schweighofer) as well as new investments in the field of renewable energy (e.g. the Verbund wind park in the Dobrogea region).

How do you see the future of Austrian investments in Romania in the years to come?
Before the downturn Romania had proved to be the hotspot for Austrian investments in the region. Now it is facing fierce competition from highly attractive neighboring countries. What is most important for Romania as a business location is a clear and strictly respected legal framework, competitive business environment and transparency for investors, and further infrastructure upgrades.

Has the local business environment improved or worsened in the past year?
Romania is an important market for Austrian companies. We sense a lot of interest in terms of enquiries, event participation and so on. Nevertheless, it is crucial for the Romanian government to work on the business environment with zero tolerance for the lack of transparency and mismanagement, better law enforcement and more investment in infrastructure. At present

Romania has a difficult market situation but there is high potential for growth, especially in the fields of alternative energy (wind, biomass and biogas), R&D, industrial supplies, tourism infrastructure and the automotive industry.

Any investment decision is based on a mix of criteria: labor costs, competition, market potential, the legal environment and so on. Unexpected changes in legal and political conditions are disadvantageous for everyone. It is crucial for the further development of the market that

Romania can ensure a stable business environment. Generally speaking, Austrian companies are calling for more transparency, efficiency and consistency in the public administration, in particular in public procurement, and improvement of the legal system in order to better facilitate their investments.

What can you tell us about bilateral trade between the two countries last year?
Austria and Romania share a long common history, which is also reflected in intense business relations. Bilateral trade is driven by Austrian exports to Romania, which peaked in 2008, reaching close to EUR 2.4 billion, and remained above the average level of the last five years in 2009, at EUR 1.6 billion.

Austrian imports from Romania had registered a steady course over the past five years in the range of EUR 722 million in 2004 and EUR 645 million in 2009. In 2010 we saw a dramatic increase in Austrian imports from Romania, which rose 55 percent (EUR 996 million), and a hike in exports from Austria to Romania of almost 5 percent (EUR 1.68 billion). The latest figures for the first half of 2011 also show a strong growth trend: an increase of 12.9 percent in exports from Austria and a growth of 34.8 percent of imports to Austria. So, the overall trade volume is increasing.

How many new Austrian-capitalized companies were registered last year in Romania?
According to the latest official BNR statistics, total Austrian net investment stands at EUR 9.2 billion, which corresponds to 18.1 percent of total FDI. Today we have over 6,000 companies with Austrian equity. Austrian companies are active in almost every field of business in Romania. The country is particularly strong in the service sector (banking, insurance, transportation etc.), but also in the wood-processing industry and building materials. Did you know that Gottfried Schenker, founder of the logistic company Schenker & Comp. Wien, opened his first subsidiary
abroad in Bucharest in 1879? Today DB Schenker Romtrans is the biggest player on the Romanian transport and logistics market.

Is Romania’s delay in entering the Schengen area a setback for them when it comes to doing business here?
Signing the Schengen Agreement means another step in the direction of a joint Europe, allowing individuals to travel freely between member states. In this respect Austria supports the expansion of the Schengen area to Romania and Bulgaria. Schengen entry would make travelling for Austrian and Romanian tourists and business travelers more convenient, but a short delay would not be an obstacle to doing business. In practice, Romania joining Schengen would for example mean faster access to connecting flights for passengers at Vienna airport.

CV Rudolf Lukavsky

2009 – present Commercial counselor for Romania and Moldova, Austrian Embassy, Commercial Office Bucharest
2008 – 2009 Head of division (human resource, finance) Austrian Federal Economic Chamber, Foreign Trade Department, Vienna
2001 – 2008 Commercial counselor for Egypt, Sudan, Ethiopia, Eritrea, Djibouti, Somalia, Austrian Embassy, Commercial Office Cairo
1996 – 1999 Commercial attaché for Southern Africa, Austrian Embassy, Commercial Office Johannesburg

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