FDI is a key factor for economic modernization through changes in production patterns, technology transfer and greater competition pressures. In the latest years, Romania has benefited from important FDI flows, mainly due to the privatization process, but also due to the advantages of cheap labor force and a big internal market. From the beginning of the transition period, Romania went through a rapid opening-up process of its economy, which has resulted, among others, in attracting significant foreign direct investment (FDI). The presence of foreign firms has grown significantly, which is a sign of increasing economic integration. In this paper we shall make an analysis of the FDI evolution in Romania using the data provided by the National Trade Register Office of Romania for the period 1990-2009 and National Institute of Statistics.economic development regions, regional disparities, foreign direct investments

Danciu Aniela Raluca

Gruiescu Mihaela

English

Research Papers in Economics

Romanian Economic and Business Review – Vol. 6, No. 1  97 
THE EVOLUTION OF FDI IN ROMANIA DURING  
THE PERIOD 1990-2009 
 
Danciu Aniela Raluca,  
Gruiescu Mihaela
* 
 
Abstract 
FDI  is  a  key factor for  economic  modernization  through  changes  in production patterns, 
technology transfer and greater competition pressures. In the latest years, Romania has benefited from 
important FDI flows, mainly due to the privatization process, but also due to the advantages of 
cheap labor force and a big internal market. From the beginning of the transition period, Romania 
went  through  a  rapid  opening-up  process  of  its  economy,  which  has  resulted,  among  others,  in 
attracting  significant  foreign  direct  investment  (FDI).  The  presence  of  foreign  firms  has  grown 
significantly, which is a sign of increasing economic integration. 
In this paper we shall make an analysis of the FDI evolution in Romania using the data 
provided  by  the  National  Trade  Register  Office  of  Romania  for  the  period  1990-2009  and 
National Institute of Statistics. 
 
Keywords: economic development regions, regional disparities,  foreign direct 
investments. 
 
JEL Classification: O1, R12 
 
1. Evolution of foreign direct investments in Romania from the beginning 
of the transition period 
For  a  post-communist  country,  Romania  has  made  significant  progress  in 
attracting foreign direct investment, taking into account the fact that foreign direct 
investment is impetuous required in order to straighten up the "significant gap with 
industrialized countries (Negritoiu, 1996). 
After the change of its political and economic system in 1989, Romania opened 
its market to foreign investment. However, for most of the 1990s annual foreign 
direct investment flows remained rather modest. They started to increase significantly 
only after 2003. 
Regarding the evolution of FDI in Romania during 1991-2009 we can distingue 
three main period: the first period is between 1991 and 1997, the second period is 
between 1998 and 2003 and the third period is between 2003 and 2008 
 
                                                 
*  Aniela Raluca Danciu is Professor of Statistics at the Academy of Economic Studies Bucharest, E-
mail:  anielaco@hotmail.com; 
   Mihaela Gruiescu is Professor of Statistics at the Romanian American University in Bucharest, E-
mail:  mgruiescu@yahoo.com;  
This work was supported by CNCSIS, project number TE code 349/2010. The Evolution of FDI in Romania During the Period 1990-2009  98 
Dimension and evolution of FDI are presented in the following table and graph: 
Table  1:  Evolution  of  FDI  attracted  by  Romania  and  number  of 
commercial  companies  with  foreign  participation  to  social  capital  during 
1991-1997  
Year  1991  1992  1993  1994  1995  1996  1997 
FDI 
(thousand 
dollars) 
1058260.8  573271.2  417844.8  881673.3  237717.0  573594.2  359912.8 
Number  5499  11765  10583  11053  3400  3630  5251 
 
Table  2:  Evolution  of  FDI  attracted  by  Romania  and  number  of 
commercial  companies  with  foreign  participation  to  social  capital  during 
1998-2002  
Year  1998  1999  2000  2001  2002 
FDI 
(thousand 
dollars)   
755475.3  944365.3  839143.8  1540810.8  1078746.2 
Number  8801  7383  8567  7175  7518 
 
Table  3:  Evolution  of  FDI  attracted  by  Romania  and  number  of 
commercial companies with foreign participation to social capitalduring 2003-
2009  
Year  2003  2004  2005  2006  2007  2008  2009 
FDI 
(thousand 
dollars)   
1288885.0  3032218.4  3149681.6  3127314.6  3314201.6  5924852.8  4817293.2 
Number  6609  10167  11719  12823  15720  12264  6801 
 
Graph  1:  Evolution  of  FDI  attracted  by  Romania  during  1991-2009 
(thousand dollars) 
 
Source of data: http://www.onrc.ro/statistici/sr_2010_09.pdf Romanian Economic and Business Review – Vol. 6, No. 1  99 
Graph  2:  Evolution  of  the  number  of  multinational  companies  in  
Romania during 1991-2009 
 
 
The graphs presented above clearly show a very low amount of FDI during the 
first period, namely between 1991 and 1997. This happened because the economic 
reform, including the privatization of the state sector, started later than in the other 
CEECs  and  has  progressed  slowly  and  hesitatingly.  The  specificity  of  the 
privatization process (mass privatization) was not favorable to FDI participation, and 
there was no strategy towards attracting FDI; on the contrary, the slogan was  we do 
not sell our country‗. Mainly trial investment entered the country. We may say that at 
that  time,  Romania  missed  the  initially  favorable  conditions  due  to  the  lack  of 
political will to reform the economy.  
Starting with 1998, the situation has changed and the stock of FDI started to 
ascend, even though evolution was a fluctuating one. Large scale privatizations and 
positive changes in the business climate were among the determinants of this new 
evolution trend. Certainly, the progress in fulfilling the criteria of adhesion to the EU 
has substantially contributed to the increase of the investors‗confidence. We may 
even notice several peak years of FDI amount, which are related to the privatization 
of  several  huge  state  owned  companies.  Until  the  end  of  2003,  the  Romanian 
Government  has  privatized  most  of  the  sectors  of  economy.  The  largest 
privatizations  deals  yet  concluded:  Romanian  Developed  Bank  (sold  to  Societe 
Generale), Dacia car manufacturer (sold to Renault), Sidex (sold to LNM Ispat in 
2000)  and  Agricultural  Bank  (sold  to  Raiffeisen  Bank  in  2001).  In  2003  the 
Privatization Authority (APAPS) finalized 309 sale- purchased contracts, bringing 
almost USD 300 millions to the state budget. 
An accelerated growth during the period 2003-2008 has placed Romania among 
attractive  FDI  destinations  as  a  consequence  of  proximity  of  accession  and  the 
improvement of country‘s rating and economic performance.  The Evolution of FDI in Romania During the Period 1990-2009  100 
The  amount  of  foreign  direct  investments  is  dependent  also  upon  the 
privatization strategy adopted by the government during the period 2003-2008.. The 
important privatization in this period are:  Petrom (OMV acquired 33% in 2004), 
Electrica Banat and Electrica Dobrogea (Italian company Enel acquired in  2004), 
Romanian Commercial Bank (Erste acquired in 2005). 
In 2006, Romania was located in the third place among the New Member States 
(NMS), after Hungary and Poland, in total value of FDI stock. In 2007, Romania's 
FDI  flows  decreased,  as  a  consequence  of  the  finalization  of  the  privatization 
process.  EU  enlargement  has  contributed  significantly  to  raising  Romania‘s 
attractiveness  for  foreign  investments.  Romania  has  conformed  to  European 
regulations, shows records of economic growth and has a market economy status. 
The transition towards ERM II has created institutional instruments for a controlled 
inflation and computational pressures have strengthened monetary discipline. 
Consequently, the investors‘ interest in Romania has increased steadily in this 
period. Cheap and skilled workforce, low taxes, improving the business environment, 
the positive attitude of foreign partners and favorable geographical location are the 
main advantages of Romania for foreign investors. Thereby, as can be seen above, 
Romania has registered an upward trend in attracting foreign direct investment. In 
2008,  Romania  attracted  investments  worth  dollars  5924.8  billion  placing  her  an 
enviable position on the statistics that analyzes foreign direct investment flows in 
South Eastern Europe.  
As expected, the economic crisis has affected the amount of FDI attracted by 
Romania, in 2009 recorded a drop regard previous year, leading to the 4817.2 billion 
dollars. 
 
2. Economic Development Regions in Romania  
After 1990, Romania shifted its spatial policy from a central-based policy to a 
regional-based policy, in compliance with EU-standards. According to four criteria 
(number  of  inhabitants,  surface,  cultural  identity  and  functional-spatial  relations;) 
Romania was divided 1998 into eight Development Regions. The eight regions serve 
as NUTS-II units and as a framework for development policies while the counties 
serve as NUTS-III units. The NUTS-II units are: North-East development region 
(Bacau County, Botosani County, Iasi County,Neamt County, Suceava County,Vaslui 
County),  South-East  development  region  (Braila  County,  Buzau  County, 
Constanta  County,  Galati  County,  Tulcea  County,  Vrancea  County),  South 
development region (Arges County, Calarasi County, Dambovita County,Giurgiu 
County,  Ialomita  County,  Prahova  County,  Teleorman  County  ),  South-West 
development region (Dolj County, Gorj County, Mehedinti County, Olt County, 
Valcea County), West development region (Arad County, Caras Severin County, 
Hunedoara  County,  Timis  County),  North-West  development  region  (Bihor 
County, Bistrita County, Cluj County, Maramures County, Satu Mare County, Salaj 
County),  Center  development  region  (Alba  County,  Brasov  County,Covasna 
County,  Harghita  County,  Mures  County,  Sibiu  County),  Bucharest-Ilfov 
development region (Ilfov County, Bucharest). Romanian Economic and Business Review – Vol. 6, No. 1  101 
3.  The  analyze  of  the  distribution  of  foreign  direct  investments  on 
economic development regions  
A regional analysis in Romania shows major differences at all levels and in many 
fields. Among the eight Romanian economic development regions, there are a few 
which  have  closer  indicators  with  the  level  of  other  countries  in  EU  (especially 
among New Member States), but still many other far from the requirements of an 
EU member.  
The territorial repartition of the FDI for all activity sectors of the economy puts 
into evidence some of the trends manifested by the investors in 90s. As result, there 
are emerging centers of concentration for the foreign investors in those geographical 
areas and historical provinces with a rich economic and infrastructure potential or 
with historical traditions in certain activity branches.  
 
Table 4 - FDI in Romania by economic development regions (1990-2009) 
Development 
regions 
Investors  Capital  Rural 
population 
Regional 
population 
Number  %  Mil. $  %  %  % 
Northeast   7281  4.4  1743919.6  5.1  59.5   17.1  
Southeast   9653  5.8  2092494.9  6.2  44.8   13.2  
South   7713  4.6  2454882.7  7.2  59.5   15.6  
Southwest   4441  2.7  1302562.8  3.8  55.8   10.8  
West   18665  11.2  2498239.2  7.4  38.4   8.9  
Northwest   18617  11.2  2244324.2  6.6  49.9   12.6  
Center   17041  10.2  2764922.9  8.2  41.5   11.6  
Bucharest-Ilfov  83317  50  18813916.5  55.5  11.3   10.2  
Total   166728  100  33915262.8  100  46.7   100 
Source: http://www.onrc.ro/statistici/is_septembrie_2010.pdf, www.insse.ro 
 
When  we  analyze  the  distribution  of  the  foreign  investors  taking  into 
consideration the number of the commercial companies (Table 1), we can see that 
about half (50%) have been founded in Bucharest, which anyhow has the supremacy 
regarding the value of the invested capital, with almost 55,5%. The second group of 
regions, on the subsequent place is: the West Region, Northwest Region and Center 
Region  (between  9-12%).  The  fewest  commercial  companies  were  founded  in 
Southwest Region (only 2.7%). If we have in view the value of the investments, after 
Bucharest is following the Center Region, West Region and South Region. These for 
regions gather almost 80% of the total FDI in Romania. On the last place is the 
Southwest Region.  
Following  these  two  criteria,  we  can  conclude  that  the  Bucharest  Region  is 
concentrating the greatest part of the foreign investments in Romania, the rest (50%) 
being shared by the other seven regions of economic development, existing a great 
economic imbalance manifested in all domains of activity. The least attractive region 
for the foreign investors is Southwest, which is on the last position in function of 
both criteria. It is in fact one of the poorest regions in Romania, together with the The Evolution of FDI in Romania During the Period 1990-2009  102 
Northeast Region, with a rural majority and a strong agrarian character (almost 60% 
from the population is rural). Both regions have 28% from the Romanian population 
but they cumulate only 4.7% from the total FDI. An exception is the South Region, 
which has a rural character, over 15% from the Romanian population but high level 
of investments.  
Two  important  conclusions  could  be  derived  from  these  findings.  Firstly,  
physical  and  cultural  distance  remain  important  in  influencing  the  geographical 
dynamics of foreign direct investments. Secondly, these regions that where already 
more developed have attracted more foreign direct investments and more investors. 
This had contributed significantly to the widening development gap between regions. 
Generally, the foreign investors avoided the poorest regions in Romania, the 
rural  environment,  preferring  the  towns  or  the  adjacent  areas.  The  regional 
distribution of the FDI in Romania is characterized by great inequalities, the one 
between the Bucharest Region and the other regions being most obvious and the 
second between rural and urban area. 
 
Conclusion 
At  the  regions  level,  there  are  disparities  determined  by  heterogeneous 
development areas, due to small, mono-industrial towns, strongly affected by the 
restructuring, reduced economical diversification of some big cities and due to the 
incapacity  of  some urban  centers of becoming  development vectors for adjacent 
areas. The under-developed regions are those dependant on agriculture, with great 
rural population where trans-border transport, is little developed, comparing to those 
in the opposed corner, whose dependence on the primary sector is reduced. 
The evolution of foreign direct investment at the regional level had the same 
trend as the evolution of foreign direct investment in Romania. In recent years there 
has been registered an upward trend of investment flows to Romania, especially in 
the  followings  regions:  Bucharest-Ilfov,  Center  Region,  West  Region  and  South 
Region , which may mean that our country is on up track. Of course, the effects of 
recession have had an impact on foreign investments, they are decreasing by nearly 
half compared to the so-called boom that Romania is the record of 2007 and 2008. 
An extremely important role in eliminating intra and inter-regional disparities is 
the help Romania shall  receive from the European Community. For the operational 
programs  that  benefit  from  European  cofinancing, for  the  timeframe  2007-2013, 
Romania shall receive 17,264 Millions Euro from Structural and Cohesion Funds of 
the European Union. From this amount, 3,275 Millions Euro shall be allocated to the 
Regional  Operational  Program  destined  for  the  FEDR  development,  that  shall 
support the financing from national public funds of 549,04 Millions of Euro and 
national private funds of 28,90 Millions of Euro. 
 Romanian Economic and Business Review – Vol. 6, No. 1  103 
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THE EVOLUTION OF FDI IN ROMANIA DURING THE PERIOD 1990-2009

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THE EVOLUTION OF FDI IN ROMANIA DURING THE PERIOD 1990-2009

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