Bridges: How would you anticipate the Romanian economy in 2022? (Set out Challenges and Opportunities).
Vernon: The COVID-19 pandemic has affected the entire world and Romania is no exception. Although Romania is still dealing with the health crisis, the economy has remained resilient. For instance, Romania’s economy has performed better than expected in 2021 (over 7% growth) and economic progress is anticipated to remain strong at 5.1% in 2022. This follows a strong history of growth in Romania over the last few years. For example, during the years 2015 to 2019 (pre-Covid), economic growth averaged over 4.7%, one of the strongest in the European Union (EU) during that time.
In our view, over the next year or two, a key consideration for investors is the EU Recovery and Resilience Plan. This plan, put in place by the EU to help countries economically impacted by the Covid pandemic, is intended to inject over EUR 29 billion into the Romanian economy by 2026.
Key elements of Romania’s Recovery and Resilience Plan are:
- 40% of the funds are to be used for helping Romania’s “green” transition. Projects would include:
- railway modernization, including electrification and/or zero-emission railways and rolling stock (EUR 3.9 billion).
- improvement of the urban transport infrastructure (EUR 1.8 billion).
- expanding clean energy production and phasing-out of coal and lignite power production, as well as deployment of renewable energy (EUR 855 million).
- increase energy efficiency of buildings, including energy-efficient renovations emissions. This also includes renovations for improving seismic resistance, since Romania is an active earthquake zone (EUR 2.7 billion).
- support and increase biodiversity and environmental protection (EUR 1.1 billion).
- 20% of the funds are to be used for supporting digital integration and improvements, including:
- digitalization of public administration in key areas such as justice, employment and social protection, environment and cybersecurity (EUR 1.5 billion).
- improve the digitalization of health care (EUR 470 million).
- digitalization of education and improving digital methods for teaching, including upgrading equipment and infrastructure (EUR 881 million).
- Other funds are to be used for a variety of projects and improvements, including strengthening the resilience of the national health system and investing in modern hospital infrastructure (EUR 2 billion).
Bridges: How important do you think Japanese and other Asian investors will be to the future of the Romanian economy?
Vernon: We believe Japanese and other Asian investors to be crucial to Romania. This was highlighted by former Japanese Prime Minister Shinzo Abe, who recognized in 2018 the special and growing interest of Japan in Romania, given the latter’s strategic geographical position in Europe. A high number of Japanese companies have already established offices and factories in Romania, creating close to 40,000 jobs, making Japan one of Romania’s largest Asian investors.
For instance, there are several recent success stories, including:
- Konica Minolta Business Solutions Romania, which is one of the largest players in the printing systems market and leading provider of IT solutions and services. From its latest reports, the company had a market share of 63% of the digital printing systems segment and 41% of the A3 color laser multifunctional office equipment segment. Konica Minolta has been operating on the local market for over 30 years.
- Automotive components manufacturer Yazaki Romania, in 2017, had over 10,000 employees in Romania with a sales increase of 42% that same year. Currently, Yazaki has 4 factories in Romania, as well as a design center in Timisoara.
- Japan Tobacco International (JTI) was the first multinational tobacco company established in Romania. In 2019, it was the most profitable tobacco company in Romania with a profit of RON 543 million (approximately EUR 110 million).
- JTEKT Corporation, via its Romanian subsidiary Koyo Romania, invested EUR 125 million in a Romanian bearing plant. It was one of the largest investments in the Romanian auto sector in 2019.
- GMB Romania Auto Industry, member of the Korean group GMB Korea, opened in 2020 a factory for the production of automobile engine components and water pumps. The investment was worth over EUR 9 million and benefited from state aid amounting to more than EUR 2 million.
- Japanese companies are also key players in Romania’s construction industry, as major projects include (i) the modernization and rehabilitation of the railway line between Bucharest and Constanta (project value over EUR 322.5 million) and (ii) the ongoing construction of the Braila cable suspension bridge over the Danube river by IHI Group (Ishikawajima-Harima Heavy Industries) which, when finished, will be one of largest suspension bridges ever built in Eastern Europe.
Bridges: How does Vernon | David support and advise clients looking to do business in Romania?
Vernon: We are boutique law firm specializing in complex commercial transactions, regulatory matters and compliance issues. With offices in Bucharest, Romania and Chisinau, Republic of Moldova, we provide high-end bespoke legal advice to a wide array of international clients ranging from start-ups to large multinational companies and foreign governments. We support our clients from the initial idea, through the transaction (including the due diligence, structuring, drafting, negotiations, regulatory compliance and employment issues) to signing, closing and post-closing activities.
Each client is unique and we take the time to get to know their business, economic interests and goals, as well as their corporate culture. Armed with that knowledge, we tailor our services to suit the specific clients’ needs and assist them with their objectives. We know from experience that clients can successfully implement their ideas and projects, but only need accurate and up-to-date advice and counsel to have success. We provide that assistance.
Bridges: What role does Vernon | David currently play in advising businesses (within Romania and cross border)?
Vernon: We have worked on some of the largest deals and transactions in Romanian and Moldovan history.
From helping to find the right local partner and experts to closing the transaction or project, we stand beside our clients through all aspects of their endeavors. A key goal of our firm is to identify potential problems and to develop strategies and methods to lessen our client’s risks.
Put simply, our role is to use our extensive experience and industry expertise, as well as our “can do” attitude, to get things done. We have a strong interest in our clients’ success with the aim of providing timely, effective and cost-efficient services. We pride ourselves on structuring transactions to maximize profits and to minimize regulatory and compliance burdens.
Working with foreign investors in Romania for more than 25 years, we understand and meet their local or cross-border needs with dedicated professionalism, cultural sensitivity, commitment to quality and service excellence. Our approach is to deliver the assistance that clients can count on to guide them through difficult and complex matters.
Bridges: What message do you have for our readers across Asia regarding the capabilities of Vernon | David?
Vernon: Romania is the 6th largest country in the EU in terms of population, and 8th in terms of area. With a growing economy, a bright future and billions of Euros in investments arriving over the next few years, Romania should be on every investor’s list for consideration.
With decades of experience in helping and advising foreign investors on the Romanian market, we can help each client achieve its goals. In addition, we have worked on and been involved with a vast array of projects, industries and, equally importantly, clients and cultures. We are professionals who bring awareness, enthusiasm, passion, innovation, entrepreneurial zeal, and commitment to the needs and wants of our clients. We strive to maintain a firm culture, which reflects our values (hard work, integrity and dedication), while bringing a much-needed human touch to the formal world of cross-border transactions. Our goal is to go beyond the ordinary activities of lawyers, seeking to advance the interest of our clients from all business angles.
After all, we believe that our client’s success is our success.