Intelligence

Netherlands and Romania’s Love-Match Continues

romania netherlands emerging europe

For Frederic Beigbeder, the author of L’amour dure trois ans, love lasts three years but things are rather different in the case of the love that the Netherlands and Romania enjoy. Their relationship started in 1880, when the two countries began a diplomatic dialogue. Fast forward to 2017, and the Netherlands is the largest foreign investor in Romania with some 4,400 firms with Dutch capital.

“The fact that the Netherlands is the biggest foreign direct investor in Romania is well publicised,” says Gerke Witteveen, president of the Board at the Netherlands Romanian Chamber of Commerce (NRCC). “Obviously, this is a relevant measurement of the level of Dutch investments in Romania and is mostly driven by a number of large corporations. However, that is only part of the story, since the large number of small and medium-sized Dutch companies and individual entrepreneurs which are active in Romania, is equally relevant. More than 1,000 companies have Dutch roots,” he says.

The pioneers

Statistics also show that 25 per cent of foreign direct investment comes from the Netherlands, which reinforces the relationship between the two countries. Compared to Romania, with its 41,500 square km, the Netherlands is almost six times smaller but its population is only 15 per cent smaller.

“It is logical that we look for countries close by where maintenance costs are lower but, at the same time, where mentality and culture is not so far from ours,” says Han In ‘t Veld, general director at NetRom.

But the Netherlands has never been stopped by its size: it started colonising not only Europe but Asia and Africa as well, before most of the other European countries, and established the first-ever multinational corporation, the Dutch East India Company.

“It appears that the Dutch are faster, more entrepreneurial, pioneering, and opportunistic than others nations in Western Europe,” says Daniel Ionescu, managing partner of consulting company Larive, which, when initially set up in 1994, was a majority owned Dutch company. “On the other hand, most of the Dutch businesses made and are still making good money in Romania. So why should they leave?” he asks.

“I came to Romania by coincidence. This country has a bad reputation abroad, but as soon as I arrived here I met well-educated people with huge mathematical knowledge and ambitious workers,” NetRom’s Mr In ‘t Veld tells Emerging Europe. Operating in Romania since 1998, NetRom is now a leading software developer. “People do not always expect such things from Romania, especially concerning the IT sector, but there are a huge number of good and various initiatives being made by people who like to work hard,” he adds.

According to the NRCC, the general public in the Netherland’s knowledge about Romania is still limited, but it is growing. Most people probably have a rather neutral view of the country, due to this lack of knowledge. However, Dutch citizens who have had the opportunity to visit Romania, either for business or privately, generally have a much more positive opinion of the country, built on their first-hand experiences: they see Romania as a welcoming, energetic and rapidly developing society.

What’s on offer?

Today, Romania is internationally acknowledged as a profitable business destination, assuring very attractive and competitive return on investment rates.

“By coming to Romania, investors get access to a creative, diverse and highly skilled workforce, at competitive prices, and with reduced cultural and language barriers,” says Harry Ilan Laufer, secretary of state at the Ministry for the Business Community, Trade and Entrepreneurship and the head of Invest Romania.

“Also, we are one of the largest markets in Central and Eastern Europe, being strategically positioned at the junction of the traditional commercial and energy routes between Europe, Asia and the Balkans. It is worth mentioning that a third of the Danube River flows through Romania and it has the largest and deepest port on the Black Sea, in Constanța.”

“Romania is a great partner where international banks are concerned. Then it has a big chemical and oil industry. All of this combined represents an opportunity for the Netherlands, to open themselves up to new possibilities,” says Patrick Arens, general manager at Rubitech, a metallurgy company, which established its Romanian branch in 2004.

Industrial tradition

“Being a market with low entry barriers — as part of the EU — and having cost advantages compared to the Dutch home market, obviously makes Romania an attractive proposition for potential newcomers,” says the NRCC’s Mr Witteveen. “However, this is not entirely unique to Romania. Many Dutch companies mention Romania’s geographical position and the availability of skilled, English speaking labour as real differentiators compared to other countries,” he adds.

Education and high skilled workers seem to represent a key factor for many firms. Rubitech’s Mr Arens says the reason why they chose Romania lies in the high demand of such elements: lower costs compared to other European countries and the presence of a highly qualified technical labour force.

The same applies to the aerospace company, Fokker, which has been active in Romania since 2005. Fokker is currently involved in some of the biggest aircraft platforms in the world, engaging engineers in the full design process. When asked about the reasons Fokker came to Romania, director, Bas Van Hese, mentioned the EU and NATO membership, apart from the human capital, and also the two faculties of aerospace engineering in and around Bucharest, not to forget Romania’s rich history in aviation.

“We have grown steadily over the years,” Mr Van Hese tells Emerging Europe. “We currently employ 50 Romanian aerospace engineers, and the majority of them hold Master’s degrees. Our workforce is motivated and dedicated, which characterises Romanian workers. In Romania, we find educational institutes and research institutes that are willing to cooperate to further the development and innovation of the aerospace industry in Romania. I don’t want to speculate about the future, but we have complete confidence and dedication in our Romanian operation.”

Incentives in place

Another factor that makes Romania an attractive destination for investment and business expansion is the very competitive tax system that it has in place.

“We have the second lowest rate of VAT and one of the lowest corporate tax rates in the European Union. In addition to that, Romania has issued generous state aid schemes for supporting investment and job creation, adding up to a total amount of €1.5 billion, by the end of 2020,” says Invest Romania’s Mr Laufer.

Fokker’s Van Hese highlights the competitive market that Romania offers. “It presents a competitive price level, that is not just limited to salary, and it possesses a highly qualified and skilled workforce. It lies at the crossroads between East and West and could act as a logistical hub for both nautical and road transportation, with its access to the Black Sea and the European inland. It has a relatively stable political environment and the upcoming generation is motivated, skilled, speaks multiple languages and is closely aligned in mentality to Western Europe, more so than in the surrounding countries. It still has a lot of available and affordable land for agriculture and farming,” he explains.

“The government shows a business-friendly attitude, positioning itself as a true partner for the business community. Therefore, the Governmental Program 2017-2020 is designed to foster growth through tax cuts, red tape reduction, public investment and an increased commitment to attract FDI’s,” says Laufer.

Challenges to overcome

Investors appreciate the cultural similarities but they also see a different approach to doing business. For NetRom bureaucracy represented the biggest challenge to get through. In 1998, local bureaucracy was difficult to deal with and laws were continually changing, sometimes retroactively.

“The poor urban planning and connectivity in the cities and the lack of a solid infrastructure in the country represented a huge obstacle for us, as well as some of the bureaucracy in governmental procedures,” says Mr Van Hese.

Investors say the situation is improving and so is the country’s image as an interesting FDI destination.

“Within the Dutch business community, Romania is seen as a country of great economic potential, which is strongly oriented towards further integration into the European Union. Although people do perceive some fundamental challenges, for instance in the development of infrastructure and reduction of bureaucracy, the overall perception is of a country that is on a structural and long-term growth trajectory,” says Witteveen.

Does it mean that the affection between Romania and the Netherlands will last for ever?