Poor infrastructure chasing away two thirds of foreign investments

McKinsey is the largest strategic consulting company worldwide. Most of the firm’s clients, or over 800 of the top 1,000 companies in the world, see Romania as one of the major 4-5 investments targets globally.

“Romania’s advantages are related to labor costs and sales market, but the country looses when it comes to infrastructure. Logistical costs are so high, that investors in certain industries have cheaper production costs in Poland or the Czech Republic, even though the labor force is twice as expensive,” Caramitru said. This also explains a focus on foreign investments close to Romania’s border with Hungary, he added.

A recent investment which was lost due to poor infrastructure was that of German Daimler group, which chose Hungary over Romania for a Mercedes Benz factory, worth €800 million.

Speaking of labor force, Caramitru said one of the most important factors for Romania’s economic growth is making good use of work force in rural areas, given some 30 percent of the country’s population works in a totally inefficient agricultural system. “If we manage to direct the migration flux from the countryside to Romania’s cities, we can provide some 50,000-100,000 people every year to developing sectors, which means relatively a cheap available labor force for foreign investors,” according to Caramitru.

He told Business Standard that Romanians have become increasingly sophisticated consumers, similar to western consumers, and Romania is the largest sales and consumption market in the region. The country does not have production capacities for such a market, however, and many products are imported. “I expect that, in the medium term, increasingly more companies will produce goods here that are consumed locally,” Caramitru said.