Romania – Top Destination for Investment by Sorin VASILESCU Director Luxembourg, February 27, 2008 romanian agency for foreign investment

Romania – Top Romania – Top Destination for Destination for

Investment Investment by Sorin VASILESCU

Director Luxembourg, February 27, 2008

romanian agency for foreign investmentromanian agency for foreign investment

2

Structure of the Structure of the PresentationPresentation1.Geo-strategic position

2.Macroeconomic outlook

3.Valuable human potential

4.FDI performance

5.Infrastructure development

6.Investment legal framework

7.Potential sectors for development

8.ARIS – one stop shop

1. Geo-strategic position1. Geo-strategic position

4

Romania’s Geo-strategic PositionRomania’s Geo-strategic Position

Our friend the wind

AreaArea

238,391 km2

92,043 sq mi.

the 9th in the 9th in EUEU

PopulatioPopulationn

21.6 mill inhabitantsthe 7th in the 7th in

EUEU

Capital Capital citycity

Bucharest1.9 mill inh

Member Member ofof

EU, WTO, IMF, WB, NATO

5

Romania’s Strategic LocationRomania’s Strategic Location

Helsinki – Kiev - Bucharest –Odessa/Alexandropoulos

IXIX

The Danube river2,300 km long

VIIVII

Dresden/Nuremberg - BucharestConstanta/Thessaloniki/Istanbul

IVIV

Pan European Pan European

Transport CorridorsTransport Corridors

The Eastern border of The Eastern border of the inland European the inland European

Union Union

Strategic position at Strategic position at the turning point where the turning point where EU meets the Balkans EU meets the Balkans

and CIS countriesand CIS countries

2. Macroeconomic outlook2. Macroeconomic outlook

7

4.1%

7.7%

6.1%

8.4%

5.2%5.1%5.7%

2.1%

2000 2001 2002 2003 2004 2005 2006 2007e

Significant Potential for Significant Potential for GrowthGrowth

Q3 2007

Rapid & sustainable GDP growth; 6.5% forecast for 2008;

5.7% in Q3 2007, based on increases in final consumption by 7.7% and decrease in net export by 8.6%;

EU27 GDP growth rate of 3% in Q3 2007.

Source: EUROSTAT, *forecast Source: National Institute of Statistics

GDP Growth RateSlovakia 9.4%

Slovenia 6.3%

Czech Republic*

6.1%

Poland 5.8%

Romania 5.7%

Bulgaria 4.5%

Hungary 1.1%

8

Inflation RateInflation Rate

EU annual inflation was 3.2% in December 2007;Sustainable disinflation since 2000 to continue in the

following years;

Higher rate in 2007 due to drought, wage raising and significant increased of oil, technical plants and cereals prices.

Source: EUROSTAT Source: National Bank of Romania

Inflation Rate

6.7% 5.9%9.3%14.1%

17.8%

30.3%

40.7%

8.6%4.86%

2000 2001 2002 2003 2004 2005 2006 2007 2008e

Annual Inflation Annual Inflation RateRate

Dec'07/Dec'06

BulgariaBulgaria 11.611.6%%

HungaryHungary 7.4%7.4%

Romania 6.7%

SloveniaSlovenia 5.7%5.7%

Czech RepCzech Rep 5.5%5.5%

PolandPoland 4.2%4.2%

SlovakiaSlovakia 2.5%2.5%

3. Valuable Human Potential3. Valuable Human Potential

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Availability of Human CapitalAvailability of Human Capital

Young population (more than 55% is under the age of 40 and 37% is between 25 and 49 years old)Almost 21.7 million people

Demographics

Talent pool104 higher education institutions112 thou university graduatesAvailability of technical engineersHigh industrial experienceFlexibility

Cities with more than 100,000 inhabitants

more than 1,000,000 inhabitants

300,000 – 400,000 inhabitants

200,000 – 300,000 inhabitants

100,000 – 200,000 inhabitants

Source: National Institute of Statistics

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Law9%

Arts2%

Engineering23%

Education31%

Medicine5%Economy

30%

University graduates in Romania

(by education field)

ValuableValuable Human PotentialHuman Potential

high performances in international competitions

high percentage of technically competent professionals (23% are engineering graduates out of 720 students enrolled)

highest growth rate of IT specialists in the region (Annually 7000 university graduates in the software field & More then 3.000 students in 105 local Cisco academies)

Source: National Institute of Statistics

strong language skills (English, French, German, Italian, Spanish, Russian, etc.)

large skilled labor force at comparatively low wage rates

12

181326

504637648

713

1213

Slovenia Czech Rep Ungaria Poland Slovakia Romania Bulgaria

Labor Cost – A debated Labor Cost – A debated topictopic

174 179 204267

326428

2002 2003 2004 2005 2006 2007

Regional ComparisonRegional Comparison2006 - EUR2006 - EUR

Gross monthly wagesGross monthly wagesEUREUR

Source: Vienna Institute of International Economic Studies; National Institutes of Statistics

Significant discrepancies in terms of sectors (1120 euro in banking and 186 euro in wood processing) and different regions of Romania

It was expected to grow by 12.3% in 2008, and to reach 580 by 2010

Productivity in industrial sector increased by more than 10%

4. FDI Performance4. FDI Performance

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1147 1294 1212

1946

5183 5213

9060

22007076

2000 2001 2002 2003 2004 2005 2006 2007

BCR privatization

Inward FDI FlowsInward FDI Flows

Q3 2007

FDI Stock over EUR 41 bill (1990 –2007);

The forecast for 2008 refers to over 7 bill euro;

Source: Vienna Institute of International Economic Studies

Source: National Bank of Romania

Annual Inward FDI1 Poland 5721

2 Romania 5138

3 Bulgaria 4117

4 Czech Republic

3547

5 Hungary 1828

6 Slovakia 1315

7 Slovenia 665

EU

R

million

15

13.3%

8.9% 4.5% 6.7%4.0%

1.1%24.2%

37.3%

Manufacturing Trade

Financial services Communication

Services Mining

Utilities Others

FDI by Field of ActivityFDI by Field of Activity(1990-2006)(1990-2006)

28%

19% 14%

10%

8%

7%6%4%4%

Methalurgy Food processing

Transport means Chemicals

Wood processing Textile

IT&C Machinery

Others

Manufacturing – 8.2 bill EUR

Main Activities – 21.9 bill EUR


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AustriaAustriathe the

NetherlandsNetherlands GermanyGermany FranceFrance GreeceGreece

7.947.94bill EURbill EUR





SwitzerlandSwitzerland ItalyItaly CyprusCyprus HungaryHungary USAUSA






Major Investing CountriesMajor Investing Countries(1990-2006)(1990-2006)

1 2 3 4 5

6 7 8 9 10


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LuxembourgLuxembourg Investment in Investment in RomaniaRomania

Nr of companies 521

% of the total no. of companies

0.35%

Ranking by no. of companies 31

Social capital subscribed in companies with German participation

251 mill EUR

% of the total value of capital 1.44%

Ranking 16

Source: National Trade Register Office; 1990 – November 2007

5. Infrastructure Development5. Infrastructure Development

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BUCURESTIFETESTI

CERNAVODA

GIURGIU

DROBETA TR. SEVERIN

ARAD

TIMISOARA

DRAJNA

ORADEA

BORS

NADLAC

LUGOJ

DEVA

ORASTIE

SEBES

SIBIU

PITESTI

CONSTANTA

MIHAILESTI

CAMPIATURZII

TARGU MURES

SIGHISOARA

FAGARAS

BRASOV

PREDEAL

COMARNIC

PLOIESTI

BUZAU

FOCSANICRISTIAN GHIMBAV

BICAZ

PRAID

SOVATA

PIATRA NEAMT

GHEORGHIENI

SABAOANI

ALBITA

CRAIOVA

CALAFAT

IASI

Highway Infrastructure Development - 2013

CLUJ NAPOCA

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ARADARAD

CRAIOVCRAIOVAA

TIMISOATIMISOARARA

BAIA MAREBAIA MARESATU SATU MAREMARE

CLUJ CLUJ NAPOCANAPOCA

ORADEAORADEA

TARGU TARGU MURESMURES

SIBIUSIBIU

OTOPEOTOPENINI

IASIIASI

BACAUBACAU

SUCEAVSUCEAVAA

M. M. KOGALNICEANKOGALNICEAN

UU

BANEABANEASASA

MANGAMANGALIALIA

CONSTANCONSTANTATA

BRAILABRAILA

GALAGALATITI

OLTENIOLTENITATAGIURGIGIURGI

UU

SULINSULINAA

CORABICORABIAA

DROBETA TR. DROBETA TR. SEVERINSEVERIN

Ports and AirportsPorts and Airports

International flights

Domestic flights

TULCEATULCEA

CARAS-CARAS-SEVERINSEVERIN

ORSOVORSOVAA

CALARACALARASISI

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Map of Industrial ParksMap of Industrial Parks

More than 40 Industrial Parks

Both private & public

Greenfield & Brownfield

Access to utilities

Package of services offered by the park administration

Wide variety of activities to be developed

Some created for high-tech activities

6. Investment Legal Framework6. Investment Legal Framework

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CompetitiveCompetitive TaxationTaxation

Corporate Corporate TaxTax VATVAT

Social ContributionsSocial Contributions

EmployeeEmployee EmployerEmployer

BulgariaBulgaria 10% 20% 12.43% 24-24.7%

Romania 16% 19% 17% 29.34%

HungaryHungary 16% 20% 13.5% 33.5%

PolandPoland 19% 22% 18.71% 17.23-20.12%

SlovakiaSlovakia 19% 19% 13.4% 34.4%

Czech Rep.Czech Rep. 24% 19% 12.5% 35%

SloveniaSlovenia 25% 20% 22.1% 16.10%Source: CEE-CIS Tax Notes - Source: CEE-CIS Tax Notes - PriceWaterhouseCoopersPriceWaterhouseCoopers

Many Central and Eastern European countries reduced Many Central and Eastern European countries reduced considerably their corporate tax in order to diminish the considerably their corporate tax in order to diminish the fiscal burdenfiscal burden

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Structural funds channeled by Structural funds channeled by Operational ProgrammesOperational Programmes

Operational Programme

Managing Authority

IncreasingCompetitiveness

Ministry of Economy and Finance

Regional Tourism

Ministry of Development,Public Works and

DwellingsMinistry of SMEs, Trade,

Tourism and Self-Employed

Development of HumanResources

Ministry of Labour, Family

and Equal Opportunities Transport Inter-modal transport

Ministry of Transport Operational Programmes of interest toOperational Programmes of interest to

businessbusiness

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State AidState Aid

1. State Aid granted for stimulating investments; granted to enterprises for achieving an initial

investment of more than Euro 30 million, creating at least 300 new jobs

2. Regional state aid schemes granted for investments in industrial parks;

3. “de minimis” state aid for developing and modernizing enterprises and developing activities in the SMS sector

7. Potential Sectors for 7. Potential Sectors for DevelopmentDevelopment

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Potential Sectors for Potential Sectors for InvestmentInvestment

Manufacturing Wood processing

Automotive components

Construction materials

IT & Communication Textile industry

Energy (non-conventional)

Food processing

Electric & Electronics Pharmaceuticals

Real Estate Infrastructure

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AutomotiveAutomotive Industry Industry OpportunitiesOpportunities

Experience in the field of car makers

Automotive component parts – rapidly growing sector: currently over 175 major manufacturers175 major manufacturers

Availability of labor force– Labor cost: monthly average salary approx. Euro 250;– Total number employed: 600.000;

Trained work force– 7 colleges in vehicle technology – 500 graduates each

year;– 25 colleges in mechanical engineering – 1.000 graduates /

year;

Availability of suppliers and subcontractors

Presence of R&D centers

Successful investment stories in the field

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AutomotiveAutomotive top-tier investorstop-tier investors

20062006 1 bill €

investment 1.6 bill €

turnover 12 thou

employees20072007 230.500 cars

sold

New projectsNew projects

A gear boxes facility 217 mill € of Renault-Nissan Alliance

A R&D Centre "Renault Tehnologie Roumanie" – 456 mill € - 2012

Ford took over the state-owned shares of Automobile Craiova (72.4 %) for €57 million, and pledged to invest €675 mill to modernize the factory and increase the number of employees

Ford is awaiting for the results of the EC investigation on the Romanian government helping the takeover

Automotive component parts sector Automotive component parts sector the fastest growing sector in Romania; 5.8 bill € investment inflows to increase up to 9-10 bill until

2010; Huge presence of international top-tier players: TYRES

(Michelin, Pirelli, Continental); WIRES (Yazaki, SEWS, Leoni, Lear, Valeo, Delphi); BEARINGS (SNR, Ina Schaeffler, Koyo), SOFTWARE (Siemens VDO); SEATS (Johnson Controls), etc.

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GermanyGermany

CONTINENTAL AUTOMOTIVE PRODUCTS – (Timisoara, Sibiu)CONTINENTAL AUTOMOTIVE SYSTEM tyres, softwareCONTI TECHLISA DRAXLMAIER – (Pitesti, Satu-Mare, Timisoara) cable and

wires PHOENIX AG - (Carei) - rubber car parts KROMBERG & SCHUBERT - (Timisoara)-car cables DAIMLER-CHRYSLER – (Cugir) gear boxesINA SCHEAFFER – (Brasov) – bearings;LEONI WIRING SYSTEMS - (Arad, Bistrita) – wires&cables

BAUMEISTER & OSTLER - (Arad) – aluminium and plastic car parts SIEMENS AUTOMOTIVE – (Timisoara, Iasi ) – softwareSCHLEMMER – (Satu Mare)MARQUARD SCHALTSYSTEME – (Sibiu)HELLA – (Timisoara) electronics

Major Foreign Major Foreign InvestmentInvestment

In Automotive IndustryIn Automotive Industry

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FRANCEFRANCEMICHELINMICHELIN - (Floresti, Zalau, Bucharest) - tiresVALEOVALEO - (Pitesti) - electric wiring systemsSNR ROULEMENTSSNR ROULEMENTS - (Sibiu) - bearings FAURECIAFAURECIA - (Sibiu) - seats coversAUTO CHASSIS INTL.AUTO CHASSIS INTL. – (Mioveni) - auto chassisRENAULT-NISSANRENAULT-NISSAN – (Pitesti) – gear boxes

JAPANJAPANSUMITOMO ELECTRIC WIRING SYST. -SUMITOMO ELECTRIC WIRING SYST. - (Hunedoara, Deva, Orastie) - wiring systemsYAZAKI CORP. -YAZAKI CORP. - (Ploiesti, Arad) - wiring systemsKOYO SEIKO KOYO SEIKO - (Alexandria) - ball bearings TAKATA CORP. -TAKATA CORP. - (Arad) - airbags and steering wheelsCALSONIC KANSEI –CALSONIC KANSEI – (Poiesti) - air condition and cooling units



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USAUSAJOHNSON CONTROLSJOHNSON CONTROLS - (Mioveni, Ploiesti) - seats

HONEYWELL GARETTHONEYWELL GARETT - (Bucharest)- spare parts for turbochargers

ALCOA FUJIKURA INCALCOA FUJIKURA INC. - (Chisineu-Cris and Caransebes) - wire harnesses

DOW AUTOMOTIVEDOW AUTOMOTIVE - (Pitesti) - chemical compounds

BORLA ROMCATBORLA ROMCAT - (Curtea de Arges) - mufflers, catalizers

LEAR CORPORATIONLEAR CORPORATION - (Pitesti) - wiring systems

DELPHI PACKARDDELPHI PACKARD - (Sannicolau) - wiring systems

TRWTRW – (Timisoara) – steering wheels

DURA AUTOMOTIVEDURA AUTOMOTIVE - (Timisoara)

ITALYITALYMAGNETTO GROUPMAGNETTO GROUP - (Dragasani) - wheelsMOMOMOMO - (Brad) - steering wheelsPIRELLI PIRELLI - (Slatina) – steel cord and tires



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OTHEROTHER COUNTRIES:COUNTRIES:

EYBL INTL.EYBL INTL. - Austria (Timisoara) - steering wheels

SOLVAY INERGISOLVAY INERGI - Belgium (Pitesti) - plastic components

AUTOLIV INCAUTOLIV INC. - Sweden (Brasov) - seat belts

COFICABCOFICAB – Tunis (Arad) – wire harnesses

COINDUCOINDU – Portugal (Arad)

CAUCHO METAL PRODUCTOSCAUCHO METAL PRODUCTOS – Spain (Sibiu)

MANUFACTURA MODERNA DE METALESMANUFACTURA MODERNA DE METALES – Spain (Turda)

BAMESA-ARCELORBAMESA-ARCELOR – Spain (Topoloveni)



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High density of Romanian IT specialists (five times higher than in Russia, and seven times than in India).

Romanian Olympic students are usually placed in top 4 with China, US and Russia.

In Microsoft the second spoken language is Romanian;

Low brain drain phenomenon in Romania;

IT sector is constantly growing;

Major multinational IT companies such as Microsoft, HP, Oracle, Cisco, Intel and Motorola are present in Romania - many of them use Romania as regional headquarters.

RomanianRomanian ITC Industry ITC Industry TrendsTrends

35

A Top European Location for A Top European Location for product R&D, outsourcing, product R&D, outsourcing, customer service and BPOcustomer service and BPO

In 2006 Microsoft opened a Global Technical Support Center creating around 700 jobs

One GE group companies established an IT outsourcing, financial services and supply chain BPO

HP set up a BPO in Bucharest for financial and administrative services, dedicated to EMEA region - up to 1200 employees

In 2006 WIPRO decided to set up a BPO center in Bucharest for IT services covering the East European market - 700 employees

Ericsson will open in Romania, in July this year, a New Global Service Delivery Center - 70% of the employees will be young graduates

BPO aiming to offer outsourcing services in HR, finance and procurement to work

8. ARIS – one stop shop 8. ARIS – one stop shop for foreign investorsfor foreign investors

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Who is A.R.I.S?Who is A.R.I.S?

Governmental body under

the authority of Prime Minister

In charge with attracting and

retaining foreign direct investment

Interface between

investors and central & local

authorities

Providing free of charge

SERVICESSERVICES for foreign

investors in Romania

Search and advice on the best location in Romania to fulfill the company' needs

including site search, analysis &

touring around

Search for industrial

and service suppliers

Value added information on

incentives and other

administrative procedures

SERVICES

Thank you Thank you for your attention!for your attention!

tel: +40 21 233.91.03tel: +40 21 233.91.03

fax: +40 21 233.91.04fax: +40 21 233.91.04

email: [email protected]: [email protected]

website: www.arisinvest.rowebsite: www.arisinvest.ro

Documents

Romania – Top Destination for Investment by Sorin VASILESCU Director Luxembourg, February 27, 2008 romanian agency for foreign investment