OUTSOURCE WORLD

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MINISTRY OF ECONOMY AND COMMERCE Export Promotion
Department ROMANIA

• OUTSOURCE WORLD
• TECHXNY - NEW YORK
• 5-7 October 2004

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IT C sectorOne of the Romanian economy
priorities

• Dumitru ANCA, Counselor
• Export Promotion Department

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Area 238,391 sq.km. Population
21,700,000 Counties 41
Capital Bucharest - Area 228 sq.km. -
Population 1.9 million
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Macroeconomic Performance
GDP Real Growth
Source National Institute of Statistics, NBR
Pre-accession Economic Program 2003
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Macroeconomic Performance
Source National Institute of Statistics, NBR
Pre-accession Economic Program 2003
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Macroeconomic Performance
Source National Institute of Statistics, NBR
Pre-accession Economic Program 2003
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Economy on the Move
Credit rating convergence
Source ING Bank, Rating agencies
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Foreign promotion of the economy

• Among the totality of targets of economic
  promotion meant to improve the business
  environment of the companies, foreign economic
  promotion policy in Romania has, as major
  objectives
• - to put in touch businesses,
• - to give consultancy and information to the
  economy,
• - to promote it abroad .. and
• - mainly, to boost exports.

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Export promotion, key issue for economic promotion

• Export is considered an engine for the Romanian
  economic growth and a chance for sustainable
  development
• More export means enhanced competitiveness for
  Romanian companies
• More exports may improve the balance of payment
  situation
• Export in EU is an indicator of more economic
  integration for Romania and the beginning of a
  intra-region specialization.

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Romanian trade exchanges 2003/2002
Source CRPC
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Geographical distribution of the Romanian exports
2003/2002
Source CRPC
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Geographical distribution of the Romanian imports
2003/2002
Source CRPC
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Top 10 Romanias trade partners( from total
2003)

• IMPORTS
• 1. ITALY- 19.5
• 2. GERMANY- 14.8
• 3. RUSSIA 8.3
• 4. FRANCE 7.3
• 5. TURKEY 3.8
• 6. HUNGARY - 3.6
• 7. AUSTRIA 3.5
• 8. UK 3.3
• 9. CHINA 2.8
• 10. Poland 2.3
• TOTAL 10 - 69.2

• EXPORTS
• 1. ITALY 24.1
• 2. GERMANY-15.7
• 3. FRANCE 7.4
• 4. U.K. 6.7
• 5. TURKEY 5.1
• 6. HOLLAND 3.6
• 7. USA - 3.5
• 8. HUNGARY 3.5
• 9. AUSTRIA 3.2
• 10. GREECE 1.8TOTAL 10 - 74.6

Source CRPC
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Structure of the Romanian exports to USA - 2003 -
- USD 619.1 million -
Source CRPC
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Structure of the Romanian imports from USA -
2003 -
- USD 554.1 million -
Source CRPC
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Structure of the Romanian exports to USA - July
31st 2004 -
- USD 352.5 million -
Source CRPC
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Structure of the Romanian imports from USA -
July 31st 2004 -
- USD 491.0 million -
Source CRPC
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CONCLUSIONS - related to figures -

• trade flows concentrated with European countries
  on two levels
• a) general European
• b) sub regional for central and south-eastern
  countries
• need for more added-value exports and Romanian
  brands
• enlarging the base of Romanian export companies,
  especially the SME-s
• increasing the competitiveness of Romanian
  companies
• better access to the foreign markets and more
  knowledge about them
• better diversification of exports, geographically
  (off-shore outsourcing in the US market, a viable
  solution).

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FDI Annual Inflows1999 2003
At the end of July 2004, FDI Inflow increased by
37 as against the same period of 2003, reaching
around USD 1600 million.
Source ARIS
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Number of Projects and Value of Engaged
Investments over 1 million USDQ4/ 2001 - Q2/2004

Source ARIS
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ITC sector in Romania

• Expansion of the internal market 15-20 per
  year, higher than the GDP growth (4.5 last
  year)
• Expansion of the IT export 50-60 per year,
  higher than total export growth rate (21.8 last
  year)
• Targets USD 1 billion, export in 2004 through
  more aggressive marketing
• Export is a big chance for this sector and for
  Romanian economy

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SWOT Analysis ITC sector

• STRENGHTS
• Good quality human resource in the sector
• High qualification level of the working force
  in big number among the first in the world as
  number of certified specialists in informatics
  according to Brain-Bench-Global IT IQ report
  (16 122 diplomas in 2001)
• Labor force relatively cheap
• The economy adapting to EU integration and more
  and more interconnected with the European
  economic flows
• National infrastructure sufficiently developed
• Universities centres dynamics and spread
  uniformly in the regions
• Supportive Government for the sector in certain
  key areas.

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SWOT Analysis ITC sector

• OPPORTUNITIES
•  Romania is part of EU integration and extension
  process
•  EU attaches great importance to the new economy
  and to the ITC sector
•  Increase of the managerial and marketing
  abilities
•  Existence of relatively developed electronic and
  automatic industries which can be integrated in
  the sector to meet the digitalization challenges
•  Good knowledge of foreign languages which might
  give opportunities to develop delocalized call
  centers and other ITC services.

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SWOT Analysis

• WEAKNESSES
• Romanian business environment still to be
  improved
• Lack of synchronization between companies,
  research institutions and public sector
• Little knowledge about foreign markets
• Lack of coagulation at national level of the
  associations of industries
• Lack of understanding about quality and
  certification
• Lack of Romanian brands and a national brand for
  this sector
• THREATS
• Lack of market information and marketing skills
• Lack of coherent sector image
• Brain drain
• Lack of networking within the industry

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ITC market
USD million
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Legal framework

• In force (regulations and laws, consistent with
  those in the EU)
• electronic commerce
• electronic signature
• e-tax and e-procurement
• intellectual property rights
• protection of private data
• access to public information
• cyber crime
• transparency at governmental level through
  electronic means
• To follow
• Web Accessibility Initiative
• Look and Feel Standard for governmental web
  sites

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Acknowledged human resources

• 2000, 2001 and 2002 - Romania won first place
  among nations at the World Innovations Research
  and New Technology EUREKA Show
• 2002 - a team of students from the POLITEHNICA
  University
• Bucharest won the Computer Society International
  Design
• Competition
• 2002 - 34 Romanian pupils gained international
  Olympic prizes in IT and mathematics
• By 2008, Romania will be the only country in
  Europe which will dispose of excellent IT
  specialists - World Electronics Forum (Paris
  2000), Worldwide ICT Professionals Market
  Situation Study
• Romania holds first place in Europe regarding the
  number of certified IT persons - Brainbench
  study

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Absence of linguistic barriers

• English language spoken by everyone working in
  the
• ITC sector
• Good knowledge of German language due to cultural
  and historical reasons ( German minority in
  Transylvania etc)
• The French, Spanish and Italian languages
  Romanian language has Latin origin
• Good frequency of persons speaking Russian,
  Hungarian, Greek, Turkish, Ukrainian, Bulgarian,
  Serbian and other European languages

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Human Resources for off-shore outsourcing

• Workforce engaged in software export activities
  3,460 (2000) and 4,700 (2002), around 1/4 of
  total industry employees
• Total software and services industry personnel
  25,000 (2004)
• Universities IT graduates yearly 5,000-6,000
• 50- 66 join the IT industry 4,800 companies -
  software and services industry
• 370 companies exporting IT services
• 250 companies exclusively dedicated to export (gt
  90 of turnover)
• 70 of total export.

Source ARIES
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Experienced and dynamic companies

• 2001 - OMNIS GROUP was the winner of the
  Microsoft
• Retail Application Developers European Contest
• 2002 - The European Commission declared SOFTWIN
  the most innovative high-tech company in Eastern
  Europe
• 2003 - Microsoft acquired RAV product of GeCAD,
  for its utilization in the Microsoft Security
  Solutions.
• 2003 - National Electronic System
  (www.e-guvernare.ro) was the only European
  e-Government application that received the World
  Summit Award (WSA) at the World Summit for
  Information Society (WSIS).
• 2004 - Romsys is the only enterprise in Central
  Eastern Europe, which has received the
  certification Star Supplier from the American
  corporation Lockhead Martin

Source ARIES
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Attractive and competitive business environment

• Romania is ranked before Poland - International
  Institute for Development Management, IDM
  (Laussane, Switzerland), worlds competitiveness
  ranking study
• GDPs rate of growth 5.
• Software industry rate of growth gt 25
• Software exports rate of growth gt 50
• Standards of mobile telecommunications GSM,
  CDMA, UMTS
• Decrease of piracy rate by 20 Romanian
  Microsoft branch holds one of the first places in
  the world in terms of rate of growth

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Developing the infrastructure through industrial
parks

• Purpose stimulate the investments for the
  improvement of the regional economic
  infrastructure, especially industrial, scientific
  and technological parks
• Period of implementation 2002-2005
• Funds allocated from the state budget ROL 583
  billion
• Program type co-financing
• The state offers
• - Grants for the beneficiaries
• - Technical assistance for implementing and
  monitoring the project.

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Scientific and technological parks
Cities where the process of building scientific
and technological parks has already started -
Brasov - Cluj - Galati - Sibiu - Slobozia
- Bacau

• Benefits for entrepreneurs
• Good location
• Facilities when using the infrastructure and
  communications
• Payment rates guaranteed by the administrator for
  a determined period
• Lower fees or free of charge policy for certain
  services

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Export promotion services for ITC

• Efficient management of the outside commercial
  representatives and of the business flows in
  out and out- in
• Putting in touch outside businesses with inside
  companies, mainly exporters
• Assisting in many ways participation in
  international fairs and exhibition
• Assisting or organizing trade missions abroad
• Study of markets, strategies for target markets
• Regional or branch marketing
• Benchmarking for best promotional practices
• Advisory and consultancy activities for
  exporters
• Partnerships for export promotion
• Attracting foreign assistance in export promotion
  activities
• Trade agreements and turning into account of
  their provisions in the benefits of exporters.

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Instruments to stimulate ITC exports by the
public sector

• From the budget (bounds, direct or indirect
  payments to exporters)
• Fiscal instruments (exemptions, reduction of
  taxes)
• Banking and financial instruments of Eximbank
• Macro-intervention for legal framework
  (international agreements), trade representation
  network, assistance to the businesses etc.

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The program of DFT to support ITC

• Assisting participation in fairs and exhibition
  by paying part of the expenses from the budget
• Organizing foreign trade missions and paying part
  of the expenses
• Helping creating outside marketing centers as
  private-public partnerships with the businesses
  (others that the ones existing in the diplomatic
  representations) by paying part of the expenses
• Paying part of the expenses for market studies at
  the request of the businesses
• Total budget funding for printing, disseminating
  and advertising promotional materials with the
  export offer

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Branding ITC since May 20, 2002

• A Committee of initiative (AURO IT) for branding
  was settled with the associations in the sector
  along with the public sector (Department of
  Foreign Trade and ITC Ministry)
• An agenda of promotional activities was
  discussed.
• Branding seminars with the participation of
  companies started

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Steps in brand building

• Distinctive credible proposals were discussed
  with the associations
• Platform of promotion and common activities were
  accepted
• The Coalition Tech 21, bringing together all the
  national association in the branch
• Mark of the coalition the brand

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ITC- Investments Promoting Legislation
Target boosting investments in the sector

• Telecom and IT related investments considered as
  having significant economic impact
• Incentives available to small and medium
  enterprises (SMEs)
• Income tax exemption for software developers
• Special facilities for underdeveloped zones
  investments
• Law on profit tax exemption for hardware
  production enterprises with sales of over USD 1
  billion/year

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Industrial Park Incentives

• Exemption from payment of taxes
• - For converting agricultural land to industrial
  
• Deduction of 20 of the value of the new
  investments
• - For construction, transport and distribution
  of electric and thermal power, natural gas and
  water
• Carrying forward the fiscal loss from the
  taxable profit, during the following 5
  years
• Other incentives granted by the local
  authorities

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Incentives for investments over USD 1 million

• Exemption from paying custom duties
• - Technological machinery, installations,
  equipment, measuring and control apparatus,
  automation equipment and software products
  purchased
• Deduction of 20 of the value of the new
  investments
• - Fiscally registered in the month the investment
  is completed
• Carrying forward the fiscal loss from the taxable
  profit, during the following 5 years
• Accelerated depreciation
• The Local Council may approve the exemption or
  reduction of the tax on land, no more than 3
  years from the works starting date

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Foreign Investor Rights

• foreign investment allowed in all sectors of the
  economy
• possibility to freely manage the company with
  full ownership rights
• full repatriation of capital and profits
• protection against expropriation and
  nationalization
• national treatment for foreign investors

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TOP 10 REASONS TO INVEST IN ROMANIA
ROMANIA represents the largest market in SE Europe
ROMANIA characterized by political stability and
consensus for EU accession
ROMANIA has sustainable economic growth and
declining inflation
ROMANIA has the highest GDP growth rate in the
region
ROMANIA is committed to develop a modern economy
ROMANIA was granted by the USA the Market
Economy status and Country of the year by
USTDA
ROMANIA possess competitive high skilled labor
force
ROMANIA is committed to continuously improve the
infrastructure quality
ROMANIA is granting incentives to foreign
investors
ROMANIA has a competitive location, bridging East
West, North South
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THANK YOU !
MINISTRY OF ECONOMY AND COMMERCE Export Promotion
Department Phone [phone] Fax [phone]
0961 E-mail doe_at_dce.gov.ro Website
www.dce.gov.ro