Has Romania gained an advantage?
2022-10-17
Back in 1990, Austria was perceived as the farthest East that Western businesses and law firms could realistically work without too many complications and regulations. Austrian lawyers, therefore, saw themselves as the frontier of Western legal business and practice. Fast forward thirty years and the boundary has now moved. Recent political events have brought about a renewed interest in Eastern European Countries and surrounding blocks. This impacted the business drawn into the region.
Poland thirty years ago was more advanced and had an edge in the early days over other countries in the region. It had a bigger population – an active ex-pat community in the United Kingdom and the United States and it was therefore on the business agenda of many companies. It is probably true to say that Poland was in fact ten years ahead of development in comparison to all other countries in the former Warsaw Pact countries and the region.
Indeed, it had a head start over other countries. The recent events in Ukraine have resulted in businesses and individuals moving into neighbouring countries, including Romania. Even up to a year ago Romania was still seen by many businesses and law firms in Western Europe and the United States as being “over there”, wherever “over there” was. It was invisible to many people and businesses, but now the position has changed.
The War in Ukraine has brought an invisible benefit to Romania which is now beginning to be converted that are now being seen by the population. Whilst some people had heard of Romania not many of them could realistically place Romania on a map. Now the position is changed. Romania is seen as a front-line state not only because of its handling of many refugees who have come from Ukraine but also because of its business and strategic position. It has now become again present in people’s minds for the right reasons rather than the reasons it was known thirty years ago.
As Global Expansion experts, we have seen an increase in interest in Romania both from individuals and companies. The spectrum of companies interested in Romania has expanded far beyond agriculture and hi-tech. Romania is now seen as a country where products can be manufactured quickly and brought into the market as the supply chain is shorter. The length of time taken to have something produced in Romania and moved into Europe is short compared to outsourcing in the Far East. Supply chain issues are therefore considerably reduced.
See article on how to acquire a company in Romania
Many companies especially in the high-tech area are now seriously looking to move from Ukraine and Russia and to set up a new company in Romania or they are choosing to open a new office in Romania. We have dealt with a number of companies due diligence reports as well as assisted in negotiating company purchases in Romania.
The differences between the Romanian way of doing business and the Ukrainian/Russian way of doing business are quite marked and can lead to many misunderstandings. It is very important for us as lawyers in Romania to be able to properly advise Ukrainian/Russian companies on the very different approaches that there are to doing business in Romania. Business cultural issues are very apparent and all parties need to recognise these and deal with them early in any relationship.
Romania for many companies is the country of choice because of the lower cost than the rest of Europe, but there are also a number of practical difficulties which have to have overcome. One of the most striking things for our Romania lawyers is the apparent lack of usage of the English language in respect of those trying to do business in Romania and indeed Europe as a whole. This is an issue that has to be faced and there are ways of dealing with this.
See article on how to close a company in Romania
Romania is though now capitalising on its unique position next to Ukraine. Provided peace is established and Ukraine continues as an independent state, as it appears to be doing then Romania must look to this advantage. We have written before about the advantages of Romania and all businesses in Romania should look to encourage foreign trade both with the West and the East. The border used so expertly by Austria has now moved. Romania is open for business with both the East and the West.
There are many opportunities in Romania for businesses to flourish. The country has a lot to offer not only as a base for European operations but also as an excellent gateway into the East. We strongly believe that more and more businesses will choose to operate from Romania in the future using this advantage.
For more information from a legal perspective please contact one of our team of specialists.
