Context
Despite the turbulent context of an unyielding economic crisis, Romania continues to be a market with tremendous potential, a strategic location, a skilled workforce, an emerging economy and major EU funding possibilities for the next decade. In short, a business environment that offers a wide range of opportunities.
After several years of strong growth, followed by the sudden plunge into deep recession in 2009, Romania managed to show material progress in 2011, especially in the third quarter. A growth of 12% in the agricultural sector, 19% in tourism, a slightly increased demand for consumer goods – a strengthening of the population’s purchasing power as a result of – all worked together towards Romania’s success in reaching the forecasted target of 1.5% economic growth in 2011. In the same emerging trend, the construction sector resumed its development, while the inflation level was lower than expected.
All in all, 2011 proved to be a positive year for Romania. Industry and agriculture supported GDP growth, and the country managed to open its gates even wider for foreign investors, who might have feared economic instability in Romania, in the context of the crisis.
Trends
Although compared to the period before the financial crisis, the number and value of transactions significantly decreased, 2011 proved that the Romanian real state sector has begun to recover, new shopping centre and mall projects continuing to be launched.
Furthermore, since Romania is a market offering an incredible range of opportunities - thanks to the substantial need for development in order to reach EU standards - sectors like infrastructure, agriculture and renewable energy appear to be very promising and attractive targets for interested investors.
Remedies
During 2011 Romania sought to facilitate access to investments and accelerate recovery from the crisis through new enactments and the amendment of already existing legal regulations. In this respect, 2011 witnessed the enforcement of the New Civil Code, enacted by Law no. 287/2009, which came into force in October 2011, in accordance with Law no. 71/2011.
This paramount codification is serviceable both as regards the scope of the relevant areas, and in view of the unity and cohesion added to the legal system. What the New Civil Code does is to unify civil and commercial law, incorporating and synchronising elements of private law with the European regulations, thus bringing Romanian laws in line with the requirements and needs of the developing modern European society. Furthermore, its most important benefit is that it clarifies, by express rules, the divergences between the rules imposed by the old Civil Code and the actual realities in practice, thus settling various controversies in case-law and doctrine. By way of example, please note the novelty of the constitutive effect of the registration of the real estate rights with the land book or the institution of fiducia, well-known in Anglo-Saxon law as the trust, but also of certain matters already established in international deeds, such as the protection of fundamental civil human rights and freedoms.
Good news for wind and photovoltaic energy projects came in July 2011, when the European Commission approved the implementation of the aid scheme for the production of renewable energy, proposed by Romania through Energy Law no. 220/2008. The version endorsed by the EC contained substantial amendments concerning the number of green certificates, granting green certificates for a trial period as well as the implementation of a new certification procedure for renewable energy producers. In addition, secondary legislation facilitating the immediate enactment of the Energy Law was adopted.
In order to attract private investments in public local and national projects, it was imperative to adopt an enactment establishing a simple and transparent legal framework for endorsing PPP projects in Romania. In this respect, PPP regulations contained by PPP Law no. 178/2010 were consistently amended at the beginning of 2011 so as to reflect the continuously changing economic circumstances. The aim was to combine co-financing aspects of PPP projects with structural and cohesion funds. Such partnerships can only act based on PPP agreements concluded between a contracting authority (public central or local authority) and any Romanian or foreign business entity, further to the incorporation of a project company, which shall enforce the provisions of the PPP agreement.
In 2011, the legislative system underwent notable and long-expected amendments that will transform legal practice.
Forecasts
The IMF’s and the European Bank for Reconstruction and Development’s forecasts for Romania’s economic growth were very optimistic at the beginning of 2011, but unfortunately expectations lowered towards the end of the year, due to the international economic turbulence, specifically the high exposure to the Greek economy.
However, since any crisis brings not only dramatic changes but also opportunities, the chances brought by sectoral crises, such as that of the food industry, inflation and the increase in the price of petrol could be availed of by investors. Industries proving to be resistant to economic challenges, such as the production of basic goods, as well as the medicine industry and agriculture, remain fields of major interest for potential investors.