ROMANIAN BUSINESS ENVIRONMENT OVERVIEW

Eastern Europe’s rapid growth and economic expansion creates unique opportunities. Romania’s inclusion into the European Union in January 2007 is strengthening it’s role as important player within the European large single market for business, because of it’s central geographic location, relatively inexpensive – yet very well-educated – labor force, available for development land and attractive tax structures for companies.

Romania - "favorite" target of foreign investments in SE Europe

Construction Sector Outlook**

Romania leads in constructions sector growth*
Romania recorded in December one of the highest growth rates in the constructions' production, 24.2% more year over year and 2.7% more, compared to November.
Romania ranked above countries like Germany (16.1%), Belgium (10%), France (6%) and Poland (19.4%). The production in 2006' Q4 was 22.2% above Q3.

One of the most important drivers for the construction sector is represented by government investment programs. An analysis of the Associations of Owners of Construction companies from 2006 revealed that, out of about 800 tenders organized monthly at national level, about 85% are infrastructure works. Development of infrastructure will trigger auxiliary developments in residential and industrial sector.

After many years with little progress, starting 2006, major infrastructural development programs are finally given green light, and the Government points this as a major priority. A large number of environmental infrastructure works – sewage, flood control works, etc. started in 2006, having a total cumulated value of EUR 1.6 billion.

Residential constructions
The residential sector is the main driver behind the development of the construction sector. In 2005, 43% of the total investment in the economy consisted in investment in constructions. In 2005, about 90% of the total number of new constructions on a national level consisted in residential constructions.
Bucharest, the capital city concentrates 15% of the total construction works.
The industry estimations show that the demand for new dwellings on national level is of approximately 800,000 while in Bucharest the demand reaches 100,000 dwellings. The annual additions to the dwelling stock should be in excess of 100,000 in order to satisfy the high demand and avoid a social crisis.

On a horizon of 14-15 years, the experts estimate that half of the huge demand for dwellings (approximately 400,000 new dwellings) is solvable demand, based on either own financial resources of the population or state budget subsidies.

New residential projects often come with financing packages offered in partnership with local banks. As of March 2006, the total balance of real estate credits contracted by population amounted to EUR 1.52 billion, a growth of 65% over the similar period of 2005.

*Source : Romanian Properties Ltd ,133 High Street, Northwood, Middlesex, HA6 1ED, UK

**Source Larive Romania (www.larive.ro)