After two years of pandemic and the situation in Ukraine, Romania remained a preferred location for investors in Eastern Europe. Positioning itself on the 16th place (4%) out of 32 as most attractive to invest country in 2022, Romania overtook countries such as Hungary (2%), Czech Republic (2%) and it is close to Poland, whose percentage is set to 6%, according to EY Romania Attractiveness Survey.

For 2022, 56% of surveyed foreign businesses intend to establish or extend operations in Romania, putting the country on the 4th with 56%, on the same spot with France, and after Portugal (62%), Lithuania (60%), UK (58%). Romania overpassed the European average which is 53%.

Nevertheless, Romania should focus its attention on the long term, where the attractiveness is anticipated to decrease from 41% in 2021 to 34% in 2022 in terms of how the attractivity will look like over the next three years. However, the current situation could create a paradox as this country has many opportunities ahead. One of them is the relocation of multinational companies from Ukraine and Russia. Romania is on pole-position at the European level when it comes to executives’ plans to relocate their business support services and supply chain functions into Europe (re-shore and near-shore) to minimize future disruptions.

“With one crisis at its closure – the pandemic and one in full effect – the war in Ukraine, our economy is once again tested, but we are also faced with an opportunity to support as many businesses possible from affected areas, businesses which might seek to move abroad and choose our country as a possible destination. At the same time, the European support packages destined for member countries will help Romania to ensure the necessary means in creating a stable environment which should attract even more foreign investors”, says Bogdan Ion, Country Managing Partner EY Romania & Moldova and Chief Operating Officer for EY South-East & Central Europe and Central Asia (CESA).

The western region of Romania is chasing the first place

Across Europe, Bucharest is positioned on the 25th position out of 44 cities, overpassing capitals such as Budapest, Vilnius, Riga, but also important cities from Europe, namely, Munich, Porto, Rotterdam, Geneva, Valencia.

In 2021 Bucharest was clearly the most targeted city in Romania for FDIs, leading the top with 38,9%, while the Western region summed up 19,5% from the FDIs, the only representants being Bihor and Timiș counties.

However, the gap between the Western region and Bucharest can be almost equal in terms of investors’ plans for this year. Almost a quarter of future investments (24%) in Romania will be attracted by the Western region, the leading county from the area being Salaj County with 9% of the investments, followed by Arad, Timiș and Bihor, all with 5%.

Supply chains and logistics for the second year in a row in the preferences of investors

The pandemic has impacted the supply chain & logistics operations across Europe making the companies desire to relocate their activities close to their parent market and to their local customers. Compared to 2020 when 595 projects were recorded, in 2021 there were 655 projects registered in terms of logistics. In 2021, the number of industrial projects exceeded its pre-level crisis, reflecting a rebound effect and a global reorganization of the supply chains.

The “back to Europe” movement doubled in 2021: in 2020, only 20% of executives were thinking to repatriate operations to their home regions, compared to 53% in 2022.

Furthermore, smaller and mid-sized companies are looking to deliver more cost-effective and faster results by transitioning to lean manufacturing. Meanwhile, larger companies are looking to reshore or nearshore closer to their operations and customers.

The prediction from the Romania Attractiveness 2021 imagined Romania as a growing logistics and manufacturing hub in Eastern Europe. This can attract important players from industry due to its cost-competitiveness and labor supply. This aspect became a reality, being boosted by the event from Ukraine. Currently, Romania is the most desired location for investing in 2022 in terms of supply chains and logistics.

Related to supply chains and logistics, the percentage is the same as last year’s, the difference being unsignificant – 0,1%. The major difference from last year originated from the increased popularity of businesses’ support services, which overtake manufacturing. The highest jump is given by the R&D projects, from 7th place in 2021, to 4th place in 2022.

SMEs and environmental policies should be Romania’s priorities

In 2021, investors considered the top 3 priorities that Romania should focus its efforts to be: support small and medium-sized enterprises, encourage environmental policies and attitudes, and improve quality of its products and the value added.

For 2022, the top two priorities remained the same and underlined a strong message for the Romanian private and public sectors, that SMEs and environment should remain the most important subjects to focus on. However, for 2022 the 3rd position is occupied by high-tech industries and innovation. It gained eight positions compared to last year.

The perception and outlook of executives of SMEs is less positive than managers of multinational companies. Only 26% of small companies reported that their investment

plans have increased due to the pandemic, compared to 64% of large companies.

44% of SMEs intend to invest in Europe in the next year or over the next three years and 58% believe Europe’s attractiveness will increase at the same time. In addition, 83% of large businesses are planning to invest in Europe. For SMEs it is important to have the government’s support. For example, all large companies stated that Recovery and Resilience Facility had been a deciding factor in their decision to keep or to expand their activities in Europe, compared to 54% of small companies.

Sustainability – a primary concern for Romania

Encouraging environmental policies and attitudes were selected for the second year in a row as the 2nd main important aspect that Romania should focus on the future in order to remain competitive within the global economies. However, being asked how Romania can remain attractive in terms of sustainability, around 59% of the executives said that there is a need of regulation to support sustainable business practices (e.g., recycling obligations, biodiversity protection regulation, green building standards). 45% of them believed that Romania should improve its location’s potential to decarbonize the supply chains (e.g., through transport reduction, access to sustainable materials).

Almost the same percentage of managers (43%), stated that it is important to increase the numbers of renewables in the electricity supply and 42% of them mentioned that Romania should ensure a presence of workforce skills and competencies needed to facilitate sustainability projects.