Romania

	Score	Rank
Financial Standards Index	50.00 out of 100	38
Business Indicator Index	9.98 out of 12	33

Business Indicators Summary

With an overall score of 9.98/12, Romania is at standard on the economic, legal, and political indicators that make up our Business Index. Romania joined the EU in January 2007 and is a market based economy with a strong statist component. State-owned enterprises (SOEs) operate in many sectors, including retail sales, and government investment was between 40 percent and 50 percent of the total in 2008. Foreign investment laws were passed in the 1990s (and have been frequently revised) covering guaranteed national treatment for foreign investors and there are no are no formal foreign ownership limitations. Low tax rates and a number of incentives make Romania attractive for foreign investment. The U.S. Department of Commerce notes that property and contract rights are recognized, but the judicial process is long, costly and unpredictable. Corruption is perceived to be significant, as Romania ranks 70th out of 180 countries in Transparency International's 2008 Corruption Perception Index.

Business Indicators

Economic Model
Forex Regulations
- Capital Controls
- Exchange Controls
Foreign Investment Law
Trade Regulation
Tax Regime
Tax Rates
Bankruptcy Indicators
International Dispute Settlement
Political Environment
Political Stability
Corruption
Adherence to global labor standards

Economic ModelMarket-based statist economy

The 2008 Economic Freedom of the World Annual Report by J. Gwartney et al. awards Romania a score of 2.0 for the factor "Government Enterprises and Investment" as a percentage of total investment. The range for this score is from 0 to 10, with a higher value signifying greater economic freedom. Countries received a score of 2.0 when numerous state-owned enterprises (SOEs) operated in many sectors, including retail sales, and government investment was between 40 percent and 50 percent of the total. Meanwhile, the 2009 Heritage Foundation Index of Economic Freedom indicates that "total government expenditure, including consumption and transfer payments, are moderate." Government spending equaled 31.6 percent of GDP. According to the report, "most small and medium-size public enterprises have been privatized, but privatization of large-scale companies has been sluggish."

According to the 2008 Background Note on Romania by U.S. Department of State (U.S. DoS), "successive governments (have) sought to build a Western-style market economy" since 1989. In 1992, 30 percent of shares from approximately 6000 SOEs were transferred to 5 private ownership funds (of which each adult citizen received shares) and 70 percent were transferred to a state-ownership fund. The legal basis for a market economy was largely in place by 1994. The coalition government that emerged after the 1996 elections attempted to eliminate consumer subsidies, float prices, liberalize exchange rates, and put in place a tight monetary policy. The U.S. DoS report also states that Romania has privatized most industrial SOEs, including some energy companies. Four out of eight energy distributors have been privatized, as well as the two largest gas distributors. In 2006, the largest commercial bank was privatized, with the majority of stock going to foreign investors. However, the government has delayed further privatization in the energy sector while it re-evaluates its strategy in several energy complexes, "contemplating the creation of an integrated, state-owned energy producer." Meanwhile, the privatization of the last state-owned bank--the National Savings Bank (CEC)--was stopped in 2006 and has been indefinitely postponed. According to the U.S. Department of Commerce, Romania achieved about 6% GDP growth in 2007, marking the 8th consecutive year of economic expansion. Romania joined the European Union in January 2007.

Sources

U.S. Department of State, "Background Note: Romania," 2008. Available from U.S. Department of State website. Accessed on February 23, 2009. (U.S. DoS 2008)
Link

U.S. Department of Commerce, "Doing Business in Romania: 2008 Country Commercial Guide for U.S. Companies," 2008. Available from U.S. & Foreign Commercial Service and U.S. Department of State website. Accessed on February 23, 2009. (U.S. DoC 2008)
Link

Heritage Foundation, "2009 Index of Economic Freedom," 2009. Available from Heritage Foundation website. Accessed on February 13, 2009. (HF 2009)
Link

Gwartney, J., et al., "Economic Freedom of the World: 2008 Annual Report," 2008. Available from Frazer Institute website. Accessed on February 13, 2009. (Gwartney et al. 2008)
Link