Overview on the Romanian Business Environment - Edition Dec 2012 by AIMS International Romania

OVERVIEW ON THE ROMANIAN BUSINESS ENVIRONMENT December 2012

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About us As Artisans of Common Purpose, our mission is to harmonize people (with their individual talents, values and aspirations) and organizations (with their systems, culture, values and business objectives), for maximizing both purpose and profit in the same time. For companies in search of middle and top managers, AIMS EXECUTIVE SEARCH & CONSULTING is the long-term partner who first understands people and motivations in order to contribute afterwards to the identification and retention of the best matches. We support people and organizations in the continuous process of individual and organizational development, by designing and shaping organizational culture, values and systems through effective consulting projects. Starting with 2000, AIMS consultants have also developed ambitious training programs that aim to increase the efficiency and effectiveness of human resources processes (recruitment and selection, performance management, career management, assessment and development) and, on the other hand, to develop leaders in a different way. For more information, please go to www.aims.ro.

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Table of Contents 1. ROMANIA â&#x20AC;&#x201C; GENERAL COUNTRY PROFILE ...................................................................... 4 2. RECENT DEVELOPMENTS IN ROMANIAN ECONOMY...................................................... 6 2.1. Extensive Growth (2004-2008) ................................................................................ 6 2.2. Severe Economic Downturn (2009-2011) ................................................................ 8 2.3. Slow Economic Recovery (2011-2012)................................................................... 10 3. DOING BUSINESS IN ROMANIA ..................................................................................... 13 3.1. Starting a New Business ......................................................................................... 13 3.2. Property and Real Estate ....................................................................................... 17 3.3. Paying Taxes ........................................................................................................... 19 3.4. The Legal System.................................................................................................... 22 3.5. Infrastructure and Energy ...................................................................................... 24 3.6. Banking System and the Stock Market .................................................................. 28 3.6. Public Administration ............................................................................................. 31 4. THE LABOR MARKET ..................................................................................................... 34 4.1. Romanian Labor Market Profile ............................................................................. 34 4.2. Salary Levels in Romania ........................................................................................ 37 4.3. Key Romanian Labor Code Information................................................................. 41 4.4. Foreign Language Skills in Romania ....................................................................... 47 4.5. Insight into Romanian Work Mentalities ............................................................... 48 4.6. Recruitment and Selection .................................................................................... 51 5. EDUCATION IN ROMANIA ............................................................................................. 54 5.1. University Centers .................................................................................................. 55 5.2. Master Studies ....................................................................................................... 57 5.3. MBA Programs ....................................................................................................... 58 6. COMPENSATION AND BENEFITS ................................................................................... 61 6.1. Brief Salary and Benefits Report for Key Positions ................................................ 61 6.2. Current Compensation and Benefits Best Practices .............................................. 70 7. FURTHER PERSPECTIVES ON THE ROMANIAN BUSINESS ENVIRONMENT ................... 72 8. BIBLIOGRAPHY .............................................................................................................. 75

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1. ROMANIA – GENERAL COUNTRY PROFILE Romania is situated in the geographical center of Europe (south-east of Central Europe) in the north of the Balkan Peninsula, at half the distance between the Atlantic Coast and the Urals, inside and outside the Carpathians Arch, on the Danube lower course (1075 km) and is bathed by the Black Sea. At the border between Balkan Peninsula and Central Europe, Romania is a part of South-East Europe area and the Black Sea region. The geopolitical position has had a huge influence in the course of history; the Romanian people were always torn between the influences of Western civilization and, for a long time, the political and military domination of the Turk Empire (and later Soviet Union). The Romanian kingdom rose in the second half of XIX history, from the political union between historical provinces of Wallachia and Moldavia, as a constitutional monarchy under the German house of Hohenzollern-Sigmaringen. After the World War I, the new state incorporated the historical provinces of Transylvania, Banat, Bessarabia and Bucovina from the dying states of Austro-Hungarian and Russian Empires – thus the modern state of Romania was born. After the World War II, Romania lost the provinces of Bessarabia (which is now the independent state Republic of Moldavia) and Bucovina in favor of the Soviet Union, abandoned the constitutional monarchy and became a socialist Republic and integral part of Eastern Block, for over half a century. Romania was the last European country that overthrew the communist regime in what is now called the “Autumn of Nations”, or the “Fall of the Communism” in 1989. In December 1989 the Romanian people parted with the dictatorship of Ceausescu family in a dramatic manner. During the bloody events, over 1.000 people lost their lives (including the former communist leaders – Nicolae and Elena Ceausescu). With the fall of the Iron Curtain and the 1989 Revolution, Romania began its transition towards democracy and a capitalist market economy. After a decade of post-revolution economic problems and a decline in living standards, extensive reforms fostered economic recovery. Romania joined NATO on the 29th of March 2004, the European Union on the 1st of January 2007 and is also a member of the Latin Union, the OSCE, the WTO, the BSEC and the United Nations. Today, Romania is a unitary semi-presidential republic, in which the executive branch consists of the President and the Government.

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Romania shares a border with Hungary and Serbia to the west, Ukraine and Moldova to the north-east and east, and Bulgaria to the south. At 238,400 square kilometers (92,000 SQ miles), Romania is the ninth largest country of the European Union by area, and has the seventh largest population of the European Union with over 21 million people. According to the 2002 census, Romanians constitute about 89.5% of the total population in the country. Hungarians make up the largest minority group with about 6.6% of the total population. Roma account for about 2.5% of the population according to census figures; however, international groups estimate that the actual number of Roma may include up to 10% of the population (despite government efforts for improvement, the Romani community continues to face discrimination and harassment.) Lesser minority groups include Ukrainians (0.3%), Germans (0.3%), and Russians (0.2%). Others include Turks, Serbs, Croats, Jews, Poles, Bulgarians, Czechs, Greeks, Armenians, Tatars, and Slovaks. Romania is divided into 41 counties (judete ), as well as the municipality of Bucharest, which has separate status. Below the counties, there are three other categories of local authority: approximately 2,800 communes (with populations up to 5,000), 280 towns (orase) (with populations of approximately 5,000–20,000) and 86 municipalities. The UN estimated that 53% of the population lived in urban areas in 2005, and that urban areas were growing at an annual rate of 0.09%. The capital city, Bucharest, has a population of 1,853,000 and is the tenth largest city in the European Union. While more than 40% of the Romanian population lives in the rural countryside, attending to a highly fragmented agricultural system, almost 40% of the national wealth is concentrated in Bucharest. As a result, prominent figures from all of Romania's main provinces have pleaded for a more decentralized government system. To date, all 41 counties are led by a prefect who is appointed by the government. Other major cities and their population estimates are Constanţa, 350,581; Iaşi, 348,000; Timişoara, 334,115; Cluj-Napoca, 332,000; Galați, 326,141; Braşov, 323,736; Craiova, 313,000; Ploiești, 253,623; and Brăila, 235,763. The official language in Romania is Romanian (part of the Latin language group) and over 80% of the population claim that they belong to Romanian Orthodox Church.

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2. RECENT DEVELOPMENTS IN ROMANIAN ECONOMY 2.1. Extensive Growth (2004-2008) The recent evolution of the Romanian economy took the same path as other countries in the region; Romania began the transition from communism to a free market economy in 1989. The country’s industrial base was largely obsolete and the output was unsuited to the nation’s needs. The transition to a market economy also proved extremely painful. By 1992, grain production was only two-thirds of the 1989 level, GDP had fallen by 30%, industrial production had fallen by 47% and inflation had reached 300%. Growth returned weakly in 1993, with GDP increasing 1%, but then gained some momentum, rising 3.9% in 1994, 6.9% in 1995 and 4% in 1996. After years of deep recession in the 90’s, Romania emerged as a stronger country in 2000, aided by a strong demand in the EU export markets. With the main objective of the foreign policy being the integration in NATO and the European Union, Romania received the support and assistance of International Institutions and Organizations. Financial and technical assistance continued to flow in from the U.S., the European Union, other industrial nations, and international financial institutions facilitating Romania's reintegration into the world economy. The International Monetary Fund (IMF), World Bank (IBRD), the European Bank for Reconstruction and Development (EBRD), and the U.S. Agency for International Development (USAID), all had programs and resident representatives in Romania. One of the most important targets of the monetary policy at the beginning of 2000 was to fight against high inflation and provide a balanced currency. In 2005 Romania underwent a currency reform, switching from the previous Leu (ROL) to a new Leu (RON). 1 RON equals 10,000 ROL. Since 2004, the annual inflation has been under 10% (8,60% in 2006, 6,57% in 2007, 6,30% in 2008 and 4,37 in 2009) in comparison with 15% in 2003. The currency exchange rate remained stable over the following years (3,5 – 4 RON/EUR on average). Romania’s investment attractiveness was fueled by the enforcement of the single tax rate (16%) in 2004, the constant low cost of local labor (after Albania, Bulgaria and some countries in former Yugoslavia, Romanian average labor cost is still the lowest among European countries), and by successful privatization of most important state-owned companies. Until the end of 2005, the Romanian Government had privatized most economy sectors. The largest privatization deals concluded are: BCR (sold to Erste Bank in 2005), Petrom (sold to OMV

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in 2004), The Agricultural Bank (sold to Raiffeisen Bank in 2001), Sidex (sold to LNM Ispat in 2000), BRD (sold to Société Générale in 1998), and Dacia (sold to Renault in 1997). The privatization of the largest Romanian bank, BCR, finalized at the end of 2005, is by far the largest ever done in Romania. The amount obtained by the Romanian state, approximately 3.75 billion EUR for 61.88% of shares, is so large, that it is about equal to the value of all other privatizations of the last 15 years. The newly-acquired EU membership status in 2007 provides a further boost in economic development, but also in the commitment of the Romanian political establishment to adopt important reforms in major areas, such as public administration, finance, security and legal system. As a result of major changes, Romania has experienced a major growth in foreign investment with a cumulative FDI totaling more than 100 billion EUR since 1989 until 2012; over 90% of this figure was made after 2004. The most important foreign investors in Romania are EU countries. Among the most important foreign investors in Romania are European countries. The first place in the FDI top is held by the Netherlands, with 20,7% of the total FDI (Unilever, ING Bank, Heineken, Friesland, KPMG), followed by Austria with 17,8% of the total FDI (Erste Bank, OMV, Strabag, Raiffeisen Bank, Vienna Insurance Group, Billa), Germany – 12,2% of the total FDI (Continental Automotive, Bosch, Siemens AG, Hella Electronics, Metro, Lidl & Schwarz, E.ON), France – 8,3% of the total FDI (Renault, Société Générale, Alcatel, Michelin, Valeo) and Greece with 5,5% of the total FDI (OTE, Alpha Bank, Piraeus Bank, Olympus dairy products, etc.). Besides multinational players, a new generation of local businesses started to emerge: RCS-RDS (telecommunication), Scandia, Argus, Transavia (food industry), Dedeman (DYI Retail), UTI Systems (IT), Interbrands (FMCG Distribution), Transilvania Bank (Financial Services), Edy Spedition (transport), Rompetrol (oil & gas). As a result of these changes, between 2003 and 2009, Romanian economic growth was among the fastest in Europe (officially 8.4% in 2008 and more than three times the EU average), and has been referred to as a "Tiger" due to its high growth rates and rapid development. During that time, the unemployment rate fell from 9,5% to less than 4%. Among the sectors with the highest development rates were: the automotive industry, research and development, real estate, banking & financial services and retail. Another direct consequence of the EU membership was the accelerated emigration process of Romanian citizens in Western countries. Right now, it is estimated that over 2,2 million Romanian citizens (over 20% of the active population) are working and living in the Schengen area – especially in countries such as Italy and Spain.

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The Romanian economic development is, however, unequal and there are still important gaps between different regions. In general, the Capital and its surrounding county Ilfov are described as better developed, followed by Transylvania and Banat (the Western part of Transylvania along the Hungarian-Serbian border). The North-East of the country especially and its SouthWest are considered the least developed. The economic development of Romania is asymmetrically driven by FDI-flows, which follow the main traffic roads.

2.2. Severe Economic Downturn (2009-2011) First time acknowledged in Romania in the summer of 2008, the global economic downturn hit Romania hard, as well as the other countries from emerging markets. With capital inflows to the CEE economies slowing to a trickle in Eastern Europe, a sharp correction was underway in most countries' external imbalances and in particular in their current account deficits. For the CEE-6 (Poland, Czech Republic, Hungary, Romania, Bulgaria, Turkey), net private capital flows started to slow down in the early part of 2009 and 2010. As a direct result of global economic downturn, the FDI volume started to drop dramatically from the record of 9 billion EUR to only 1,9 billion in 2011. In this interval, the unemployment rate increased dramatically from 4,8% in 2008 to a record of 8% in 2010 (mainly in the private sector). After 7 years of growth, the country GDP dropped with 7,1% in 2009, a European record (after Ukraine, Greece and Baltic countries Romania had the biggest GDP fall in Europe), leaving the government with a public budget deficit over 6%. As a direct effect of lesser foreign currency in the country, there were additional pressures on the national currency, that devalued with almost 15% in a couple of weeks (from 3,81 Lei/EUR in October 2008 to 4,28 Lei/EUR in January 2009). As in most countries, the construction, real estate and trade sectors were drastically affected. The construction field plummeted from a positive 30% increase at the peak level to a 16-17% compared to prior quarters. For instance, retail fell with over 9%, the banking system with 15%, the automotive sales with over 30% and real estate business with 50% in 2009. The National Institute of Statistics, that regularly publishes the figures presented in the graph below, collects a high amount of figures in the effort to prepare a more complex and up-to-date radiography of the Romanian economy. With all these figures, it is clear that most of the economic sectors were simply trying to survive. Heavily dependent on loans and investments, the local companies were harshly put to trial in 2009-2010. Many Romanian companies, such as Leonardo, Trident, MIC.ro or PIC, went bankrupt, as well as some real estate developers and manufacturing companies. At the same

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time, some important multinational companies left the country for other opportunities elsewhere. At the beginning of 2011, one of the major foreign investments in Romania, Nokia, announced the exit from the Romanian market, sending shockwaves through the Romanian economy. The Nokia exit was followed shortly after by Tnuva (a major Israeli FMCG company active in dairy product business) and Bunge (an important American FMCG manufacturer). These important events sent a clear message – Romania is no longer a safe country in term of foreign investments. To avoid the default risk, the Romanian Government and the Romanian National Bank decided to ask for IMF assistance. The International Monetary Fund (IMF) and other lenders have agreed to provide Romania 20bn EUR (£18.4bn; $27bn) in aid in the spring of 2009. As part of a reform package, IMF officials discussed about tax reform and cost cutting. The measures included a VAT growth from 19% to 24%, other excises increasing (for gasoline, tobacco, luxury goods), with a regressive impact on growth and social equality, and potential future raises of other taxes. With unemployment rate at about 8 % and inflation running way ahead of earnings growth, the Finance Minister was under heavy pressure from employee representatives to abandon the flat tax and restore progressive income taxes. After a very difficult year in 2009, the Romanian authorities were forced to take other drastic measures in 2010. In the summer of 2010 the Romanian Government announced a pay cut of 25% for all public sector employees and important reforms in the public pension system. This strategy led to a wave of public protests and heated the political debates on current government policies and middle-term strategy. The cutting cost policies aimed at balancing the public deficit, but the side effects of this approach (lesser governmental investments, increasing inflation, decrease of internal consumption) brought another year of recession – the Romanian GDP dropped with 1,2% in 2010. Due to the devaluation of the national currency, cost cutting in the public sector, rising unemployment levels in the private sector and tax increases, the income and standard of living for over 90% of the Romanian active population declined in 2009 and 2010. In terms of human capital, this means that the labor market of 2011 became an employers’ market. The national average salary decreased with 12% to the amount of 411 EUR/gross/month in 2011.

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2.3. Slow Economic Recovery (2011-2012) After two years of negative readings and a cumulated GDP contraction of more than 8%, the economic recovery resumed in 2011 with the economy growing slightly above potential by 2.5%. Growth was mainly driven by a robust increase in industrial output and an exceptional agricultural year. On the demand side, the main drivers of growth were gross fixed capital formation and, in the second half of the year, a modest recovery in private consumption. The main reason for the economic growth was a better performance of the Romanian industry and the spectacular rise of the exports – with an increase of 20,5% over the previous year – which put Romania at the summit of European export growth table in 2011. Moreover, as a direct result of a very good harvest in 2011, cereal exports grew spectacularly in 2012. This year Romania exported over 1.448 million tons of wheat and corn in the first 4 months of 2012, twice as much as the amount exported in the similar period of 2011, according to the Ministry of Agriculture and Rural Development (MADR). The fundaments of the Romanian economy improved in the last two years. The general government deficit decreased from 6.8% in 2010 to 5.2% of GDP in 2011 and close to 2% in 2012, but it would have been significantly below 5% without the inclusion of a substantial oneoff item, worth 1.1% of GDP, due to payment obligations related to court decisions which became definitive in 2011. The deficit is expected to come down to 2,3% of GDP this year. The measures implemented by the authorities to continue fiscal consolidation include: (i) a pension freeze; (Ii) the introduction of a new social assistance code; (iii) excise rate hikes for cigarettes and diesel; and (iv) an increase in royalties for the use of resources necessary to produce construction materials. Besides, the trade balance was adjusted in a more balanced manner. There has been progress on the country’s trade deficit, which was about 11 % of GDP before the global recession, but has since settled around 4 % of GDP in 2011. The performance of 2011 was influenced by the improvement of the global financial climate and the increase in demand for finished goods in EU countries. Many analysts praise the impact of the successful partnership with IMF, as well, and the strong commitment of the Romanian Government to austerity measures. The IMF noted at the end of 2011 that “Romania’s economic performance under the program remains strong”. The IMF also urged “strict spending discipline” and renewed commitment to structural reform, including to the tax administration, health system and the transportation and energy sectors, as well as privatization.

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However, the harsh economic measures taken under this partnership were widely unpopular in Romanian society. Under the aegis of the IMF, Romania has adopted austerity measures including job losses and a 25% cut in wages in the public sector, as well as an increase in VAT from 19% to 24%. In 2011, Romania was forced to get another strategic loan of 5 billion from IMF, the second in three years. These have proved deeply unpopular, and helped fuel street protests earlier this year that eventually led to the fall of two successive governments in the first half of 2012. As the former Government party coalition lost the support of the Parliament, a political crisis has gripped Romania as its left-leaning Prime Minister Victor Ponta and the new government coalition (USL), forced their way through constitutional institutions in an effort to eliminate the current Romanian President from his office. The clash between political parties also has to do with austerity measures meant to tackle the crisis, set up by Romanian President Basescu, but hated by former leader of the opposition, Ponta. One of the most sensitive issues in the current crisis of Romanian leadership is the question of public sector wages, and this whole question has a long history in the political agenda over the last decade. In July 2012, Victor Ponta and his center-left Social Liberal Union (USL) party have sacked the speakers of both Chambers of Parliament, fired the ombudsman, threatened the constitutional court judges with impeachment and prohibited constitutional court from reviewing acts of parliament – all with the aim of making it easier for the new Governmental coalition to remove President Traian Basescu from office. The events in Romania grabbed the headlines of international press, all for the wrong reasons. Many international leaders, such as German Chancellor Angela Merkel, President of European Commission Jose Manuel Barroso or US Foreign Secretary Hillary Clinton – publicly spoke against what was perceived as “the negative developments of Romanian politics” and a failure of the Romanian political system to comply with the constitutional principles and the core values of democracy. The Romanian Government representatives were subject to stern inquiries in European Parliament and the strategic target of Romanian accession to Schengen area in 2012 took a severe setback. The effects of the political instability in the economic sector were instant. The Romanian LEU reached record lows against the EURO as Parliament voted to suspend the President, in what opponents called a power grab by the Prime Minister’s ruling coalition. The currency remained under pressure for some time, even after the reconfirmation of President Basescu in the office

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after a general referendum failed to provide the required number of votes necessary for his definitive removal. The political crisis sent a warning to financial markets and to potential foreign investors. Due to the political instability and financial market uncertainty, some of the investments initially planned for 2012 are likely to be delayed to the second half of 2013. Romanian economy was also affected in 2012 by the return of recession in EU area (due to sovereign public debt crisis) and Romania’s proximity to Greece. External demand continued to contribute negatively in 2012 due to the worsening of economic outlook for the EU, which accounts for about 70% of Romanian exports. Weaker external demand slowed down the export growth, while the slowdown in import growth will be less pronounced as domestic demand keeps up. The political failure to increase the absorption of EU funds (the current figure is close to 10%) hit the peak in October 2012, when the EU decided to suspend further payments to Romania until corrective measures are taken against bad management and corruption. The balance of risks to the 2012 growth baseline scenario remains tilted to the downside although risks become more balanced over the medium term. Downside risks include additional needs to repair household balance sheets, coupled with tighter credit standards for consumer lending that may result in lower-than-currently-forecasted private consumption. Upside risks include a stronger contribution of investment from higher EU funds absorption and of domestic demand linked to possible pre-electoral fiscal slippages. Romania still scores risk due to the size of its external financing needs relative to its foreignexchange earnings, as well as on the size of its banking sector’s liabilities to BIS [Bank of International Settlement] – area banks relative to assets vis-à-vis those banks. Critically, export growth has dropped to near zero, causing a slowdown in industrial production and exposing “a weaker underlying picture in the economy’’. However, not all financial news in 2012 was bad. After a slow start, Romania’s economy rebounded in the second quarter after two consecutive quarters of decline, gross domestic product for April through June grew 0.5 % from the previous three months and 1.2 % from the same period a year earlier. There are also some positive signs regarding foreign investments. The Foreign Direct Investments (FDI) attracted by Romania amounted to a total 941 million EUR during the first eight months of the year, up 55% against the similar interval of 2011, and the foreign capital inflow to Romania increased for the first time since the end of 2008.

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The capital participations consolidated with the estimated net loss reached 140 million EUR, while intra-group loans amounted to 801 million EUR, the National Bank of Romania (BNR) reports. In the same interval of last year, FDI reached 607 million EUR. The FDI attracted by Romania were on a declining trend starting with late 2008 and had a 9-year minimum in 2011, under the level registered in 2003, of 1,946 billion EUR. The forecasts show that Romania’s economic growth will slow this year to less than 1%, as the crisis in the EURO area, the country’s main trading partner, and domestic political turmoil hold back investors. The patchy recovery Romania has seen so far, coupled with treacherous market conditions, both domestic and external, have led to a lower growth outlook for the country in the short and medium term. The prospect of general elections at the end of this year will have an instant impact regarding the economic targets for 2013 – all the political parties which have a fair chance to be part of the next governmental coalition are committed to ease the austerity measures and improve the standard of living.

3. DOING BUSINESS IN ROMANIA 3.1. Starting a New Business After the rebirth of market economy structures in 1990, the legal regulation of corporate entities generally enjoyed a stability lacking in other fields. Business activities in Romania may be carried out either by individuals performing acts of commerce as befits their profession, or by legal entities, which according to their statutory documents have the capacity to engage in such activities. When incorporating a commercial company in Romania, its founders may choose between five types of companies:  unlimited guarantee collective company  limited partnership  limited stock partnership  joint stock company  limited liability company However, the most frequent forms of business in Romania are joint stock companies and limited liability companies. This section will therefore focus mainly on the formation and operation of these types of companies.

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In World Bank’s “Doing Business 2013” Report Romania held the 72nd place in the top of the countries with the most friendly business environment, no change for the last year statistics: TOPIC RANKINGS Starting a Business Dealing with Construction Permits Getting Electricity Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Resolving Insolvency

DB 2013 Rank 68

DB 2012 Rank 61

129

125

168 72 12 49 136 72 60 102

167 72 9 46 157 69 60 101

The procedures for starting a new business in Romania are considerably easier today than five years ago. Indicator

Romania

Eastern Europe & Central Asia

OECD

Procedures Days Cost* Minimum capital**

6 10 2.8 0.8

6 14 6.8 5.0

5 12 4.5 13.3

Legend * Cost (% of income per capita) **Minimum capital (% of income per capita) To start a new business, the future entrepreneur must take the next few steps: 1) Obtain a certificate from the Trade Registry proving the availability of the proposed company name and make a reservation of the name. The time to complete is 1 day and the cost is 64 lei (13 EUR).  The reservation of the company name is valid at national level – thus, companies will have the guarantee that the names under which they choose to perform their trade activity will be protected at national level.

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A company name is available when it does not belong to another company by its previous registration with the Trade Registry, irrespective of the county in which this company was registered. The certificate obtained is valid for a period of 3 months.

2) Deposit funds in a bank and obtain a document confirming bank deposit of sufficient funds. This will take 1 day. The cost of this operation if around 45 lei (10 EUR). 3) Obtain a certificate from the Fiscal Administration Agency giving clearance for the headquarters of the offices – 1 day, no charge. When submitting the incorporation file with the Trade Registry, the applicant should also provide:  the relevant lease agreement bearing the registration stamp of the Fiscal Administration Agency which is competent in the district where the headquarters are located;  a certificate issued from the aforementioned Fiscal Agency ascertaining the fact that there have not been other similar agreements registered with the fiscal authorities with respect to the building/premises where the headquarters are located;  If the certificate mentioned at point (ii) above provides that there have been similar agreements registered for the respective building/premises, then the applicant should provide a notarized affidavit providing that the structure of the respective building/ premises permits the functioning of several companies. 4) Register with the Unique Office of Trade Registry (BASC), with office in any major city; obtain court registration, publication of notice, and registration for statistical purposes and social security. The procedure will take 3 days, with the following costs: 120 lei (26 EUR) registration fee + 30 lei (7 EUR) for each mandatory element of the basic information of the company to be registered, such as social capital, firm, associates, administrators, headquarters, main object of activity + 104 lei (24 EUR) for each 2,000 characters publication fee in the Romanian Official Gazette + 30 lei (7 EUR) for filing with the Trade Registry ("ascertaining certificate") + liquidation fund fee (50% of taxes applied by the Trade Registry offices) + 10 lei (2,4 EUR) – Single Registration Code + bulletin fund tax (5% of taxes applied by the Trade Registry offices) + 10 lei (2,4 EUR) – the fee for Trade Registry to send the documents that need publishing to the Romanian Official Gazette. The registration certificate also comprises the unique code of fiscal registration, granted by the Ministry of Public Finance. The issuing of the code of fiscal registration attests if the respective commercial company is recorded as payer of the corporate and income tax. To obtain the unique code of registration, the data contained in the registration request is transmitted per officio to the Ministry of Public Finances; the Ministry of Public Finances grants the unique code of registration within 8 hours.

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According to the law, together with the performance of the registration, an excerpt of the certificate of the appointed judge is sent, per officio, to the Official Gazette for publication in part IV. The registration formalities as a VAT payer are not accomplished with the Trade Registry, but with the Fiscal Administrations within the area of the company’s registered office. 5) Register for VAT – 3 days, no charge A person subject to taxation established in Romania, having or intending to have an economic activity which implies operations that can be taxed and/or exempted from VAT with deduction rights, must request the registration for VAT purposes from the qualified fiscal authority. The registration code for VAT purpose has the RO prefix, in concordance with the International Standard ISO 3166 - alpha 2 and is obtained by the qualified fiscal authority in a 3-day period from the moment the documentation is submitted. The Trade Registry notifies the Ministry of Finance with regard to the request for VAT registration and the Ministry of Finance issues a separate certificate evidencing the VAT number and the start date for VAT purposes. In addition to this, a Tax Registration Form (Form 010) must be submitted to the Ministry of Finance within the next 30 days as from the company’s registration in order for the new company to register as profit tax and social contributions payer. 6) Register the employees’ individual labor contracts with the Territorial Labor Inspectorate (TLI) online – will take 1 day, with no charge. Since January 01, 2011 the individual employment contracts should be registered within the internal general register recording the employees, which is conveyed in electronic format to the competent Labor Territorial Inspectorate, at the latest on the working day prior to the commencement of the activity.

Shareholders of a commercial company may be both individuals and legal entities, regardless of their citizenship, respectively their nationality. Joint stock companies should have at least two shareholders, with no restriction as to the maximum number of shareholders. Limited liability companies may be established by one up to 50 shareholders. An individual or legal entity may be a sole shareholder of only one limited liability company, and a limited liability company may not have as sole shareholder another limited liability company with sole shareholder.

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Buying shares in a Romanian company is achieved through the Shares Assignment Contract concluded between the two parties, namely the actual shareholder who is going to cease the shares in question and the future shareholder who will take over the shares in the Romanian company. The shares assignment can be performed at the shares' nominal value, mentioned in the companyâ&#x20AC;&#x2122;s articles of incorporation, or can be performed at a higher value than the nominal one. In this case the new shareholder has the obligation to discharge to the state the tax in amount of 16%, percentage which applies to the difference between the nominal value and the purchase value. For the shares assignment to be demurral to third parties unknown to the contract, it has to be registered with the Trade Register Office, and consequently published in the Official Gazette. The shares assignment agreement shall contain a clause inserted by which the value of the assignment will be established (they will mention respectively if the assignment remains to the shares nominal value or to another value convened by the parties). In the spring of 2012 over 900.000 companies were registered in Romania, but we estimate that only about 30% of them are active.

3.2. Property and Real Estate Foreign individuals and legal persons from the EU or stateless individuals domiciled in an EU Member State may own land in Romania provided that they reside in Romania. With respect to citizens and legal entities from EU Member States, Law no. 312/2005 provides that they can acquire land in Romania, under the same terms and conditions as Romanian citizens and legal entities, upon Romaniaâ&#x20AC;&#x2122;s accession to EU. However, the enactment sets forth different stages for the commencement of the capacity to acquire lands, as follows: (I) since 2012, for non-residents acquiring land for residential purposes or for setting up secondary headquarters and (II) since 2014, for agricultural land, forests and forestry land (except for farmers acting as commercial entities). Foreign individuals and companies outside the EU and stateless individuals not domiciled in an EU Member State may only acquire ownership over lands in Romania in accordance with international treaties and to the reciprocity principle, under conditions not more favorable than those set for EU citizens, EU legal persons and, respectively, Romanian citizens.

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The real estate owner is compelled to annually pay a real estate tax towards the local budget. According to World Bank Report – the procedures of registering property in Romania are better than in the neighboring areas: Indicator

Romania

No. of procedures 8 Days 26 Cost* 1,2 Legend – Cost= % of property value

East Europe& Central Asia 6 30 2,7

OECD 5 26 4,5

To register a new real estate property, the new owner must take the next few steps: 1. Obtain information from the Cadastre Time to complete: 1. Consultation of archives – on the spot. 2. Land Book information excerpt – 3 days. 3. Certified copies of documents – the same day Cost: Consultation of archives on the spot – 10 lei (2,4 EUR) for 15 minutes; Land Book information excerpt – 20 lei (4,4 EUR) per property; certified copies of documents from the document files and land books – 5 lei (1,1 EUR) per page (3 pages); certificate for the identification of the topographic/cadastre number and land book number according to the name of the owner – 100 lei (22 EUR) per owner/land book office; cadastre plan excerpts – 15 lei (3,4 EUR) per property. 2. Obtain a fiscal certificate from Local Fiscal Authority – 1-5 days, 4 lei (0,8 EUR). 3. Obtain a fiscal certificate from the Direction for Public Taxes of the Municipality – 1-5 days, 4 lei (0,8 EUR). 4. Obtain a Land Registry extract (non-encumbrance certificate) from the Land Registry Office – 1-3 days; authentication excerpt – 40 lei (8 EUR) in regular procedure, 200 lei (45 EUR) in expedited procedure; information excerpt – 20 lei (4,4 EUR) in regular procedure, 100 lei (22 EUR) in expedited procedure. 5. The notary authenticates the transfer deed – 1-2 days, 5,080 lei (1.100 EUR) + 0,44%, of the transaction value exceeding 600.001 lei (140.000 EUR) (notary fees). 6. Register title in the Land Registry Office – 9 days (regular procedure) or 3 days (expedited procedure). The cost is 0.5% of property value (regular); 2% of property value (expedited); minimum 60 lei (13 EUR); extra fee cannot exceed 5,000 lei (1.090 EUR).

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7. File fiscal declaration of acquiring the property – 1 day time, with a cost of up to 10 lei (2,2 EUR). 8. Registration of the work place with the Trade Register Office – 5 days, 350 – 420 lei (75-90 EUR). As a matter of principle, the law does not prohibit Romanian individuals and legal persons to acquire or transfer rights over real estate. However, individuals may enter sale-purchase contracts only if they have full legal capacity, whilst individuals lacking legal capacity or having restricted legal capacity may enter such contracts through their legal protector and with the consent of the guardian authority. According to the New Civil Code, the authentic form of the sale-purchase contract is not sufficient to ensure the acquiring of the ownership right over real estate. Thus, registration with the relevant land book of the ownership transfer is necessary. Nevertheless, until finalization of the cadastral works for each territorial unit, 357 Property and Construction registrations shall be performed for third parties acknowledgement purposes only, as of the entering into force of the New Civil Code. For the sake of clarity, the Land Book is a recording system of all legal acts and deeds regarding real estates. Registrations with the real estate registry are performed by the relevant Cadastrial and real estate publicity offices subordinated to the National Agency for Cadastre and Real Estate Publicity.

3.3. Paying Taxes Taxes in Romania are governed by the Fiscal Code. The main tax that companies must pay to the state is the tax on profit (difference between taxable income and deductible expenses). The tax rate on taxable profits is 16%, with several exceptions: certain state-owned enterprises are tax-exempt, and the tax rate applicable to the revenue of micro-businesses is 2-3%. Income taxes are paid annually. Salary is defined as income in cash and/or in kind received by individuals based on employment agreements and is taxed at a flat rate of 16%. Income related to salaries includes remuneration paid according to non-competition clauses and taxable benefits expressly stipulated by the relevant Romanian legislation. Taxable benefits include: meal tickets, gift tickets, nursery tickets, holiday tickets, amounts representing compensatory payments, private use of company cars and telephones. Moreover, administrators’ incentives, fees received by members of the General Meeting of Shareholders, the Management Council, the Board of Directors and the Supervision Council are treated as salaries.

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Excise duties are special consumer taxes on the following domestically-produced or imported products:    

beer, wines and other fermented beverages, and ethyl alcohol intermediate products processed tobacco energy products and electricity

Value-added tax (VAT) is an indirect tax owed to the state budget. The standard VAT rate is 24%, whilst the reduced rate is 9% and applies to certain services provided and/or goods supplied. Rules determining the place of supply for goods and services (and hence the place for VAT taxation) are fully harmonized with EU Directive 112/2006 and EU Directive 8/2008 regarding VAT). Generally, a firm may choose not to pay VAT if the nature of its work is providing services for individuals. This means that customers who are individuals pay the same amount for a product. There are two options:  

if the company does not pay VAT, the customer pays a price without VAT, which is then increased by 19%, with VAT being included in this price; if the company does pay VAT, the customer still pays the same amount, but the price of the product without VAT is a different and smaller amount.

Foreign individuals are generally subject to the same tax treatment as Romanian individuals. However, based on the fiscal residence of the individual, treaty relief may be available. Depending on the details of the transaction, the taxpayer has the obligation to compute, withhold and pay the capital gain tax from sale of shares. To fulfill this requirement, nonresidents may appoint a Romanian fiscal representative or a tax agent. Ways of paying taxes:  in cash at the regional offices of the Directorate of Local Taxes and Dues  by payment order  by credit card held by the taxpayer at the Directorate of Local Taxes and Duties  by postal payment order Information about the deadlines and ways of paying taxes and duties in Romania can be found in the Tax Register available on-line. The ANAF (National Agency for Fiscal Administration) is the main mechanism that collects revenue for the state budget. Tax declarations can be filed on-line by accessing the ANAF portal. Taxpayers who register on this portal will receive a digital certificate for their digital signature, which may only be used for identification and electronic signing of declarations. On-line filing of tax declarations is available to all categories of taxpayers who are obliged to submit the

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following: a declaration of their liabilities to the consolidated general budget, tax on profit, VAT deductions, special VAT deductions, excise duty deductions and revised declarations. According to World Bank report, Romania is a competitive country regarding taxation. Indicator Payments (number per year) Time (hours per year) Profit tax (%) Labor tax and contributions (%) Other taxes (%) Total tax rate (% profit)

Romania

East Europe and Central Asia

OECD

216 10.5

260 9.1

176 15.2

31.5

22.1

23.8

2.2

9.3

3.7

44.2

40.5

42.7

Foreign individuals (including Romanians with a domicile outside Romania), are generally subject to Romanian taxation only for income earned in Romania. However, as of 2007, foreign individuals are taxed on their worldwide income if specific criteria are met. Individuals employed abroad and performing employment activities in Romania, who meet Romanian tax residency criteria, may be required each month to calculate, declare and pay individual income taxes, as well as contributions to the Romanian Social Security System (observing specific criteria), for income received for employment activities performed in Romania. Standard corporate income tax rate is 16%. The minimum tax was abolished during the 2010 tax year (applied to part of year). Dividend tax rate is 16% on dividends paid to Romanian companies and to non-resident companies. Non-residents may be eligible for a reduced rate under double tax treaties. Dividend tax is reduced to zero if the beneficiary is a company resident in an EU (including Romania) or EEA member state that holds, for at least two years, at least 10% of the shares of the company distributing the dividends. Standard withholding tax on interest and royalties paid to non-residents is 16%, which can be reduced under favorable treaties. From January 2011 these payments are also exempt from withholding tax if the beneficiary of the income is a company resident in the EU or EEA and holds at least 25% of the taxpayerâ&#x20AC;&#x2122;s shares for a minimum period of two years. Income from freelance activities is assessed on the basis of entries in the single entry bookkeeping ledgers that providers of independent activities are obliged to keep. Net income is

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calculated as gross income minus deductible expenses. For freelancers, the following are nondeductible: fines, late-payment penalties (other than contractual penalties), donations; private scholarships, sponsorship and protocol expenses in excess of the upper limits set by law; per diem and other expenses exceeding limits provided by current law. As an EU member, Romania applies the EU Common Customs Tariff & EU customs regulations.

3.4. The Legal System The Romanian Law has evolved a lot in the last years, in multiple directions: it has to reflect the Romanian reality requirements, and it has to be in compliance with the European Community Legislation. This process is sustained by both Parliament Laws and/or Governmental Decrees, so a Romanian Law specialist has to be always aware of the latest law updates. It's a difficult task, but the past years showed that Romanian society is evolving and adapting to all these changes. In recent years Romania has changed the Constitution (in 2003), the Civil Code (in 2011) and the new Penal Legislation will be updated until 2014. The activity of companies and business ventures is regulated by the Commercial Code. Even if the legal framework is updated and modernized, the Romanian judicial system is still underperforming accordingly with EU standards. The 1992 law on reorganization of the judiciary established a four-tier legal system, including the reestablishment of appellate courts, which existed prior to Communist Rule in 1952. The principles, the structure and the manner of organization of the Romanian judiciary are established by the Romanian Constitution and Law no.304/2004 regarding the judicial organization, republished. Justice is made in the name of law and is accomplished through the following courts: 1. High Court of Cassation and Justice 2. Courts of Appeal 3. Tribunals, specialized tribunals 4. Military Courts 5. First Instance Courts

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The High Court of Cassation and Justice is the only supreme court that functions in Romania, located in the capital, and has 4 sections (civil and intellectual property, criminal, commercial and fiscal and administrative claims), a 9 judges panel and joint sections. The Supreme Court was reorganized under a separate law in 1993; its members are appointed by the President of Romania and exercise ultimate authority over all other courts in the country. The judges of the Supreme Court are appointed for a term of six years and may serve consecutive terms. The Courts of Appeal have in jurisdiction tribunals and specialized tribunals. At present, there are 15 Courts of Appeal. Within the Appeal Courts there are sections or, as the case may be, specialized panels for civil cases, criminal, commercial, minors and family cases, fiscal and administrative claims, labor conflicts and social insurances, as well as maritime or fluvial cases or for other matters. The tribunals are organized at county level, as well as in Bucharest, and are located in the county residence city. In the jurisdiction of every tribunal there are First Instance Courts. Of the 42 tribunals established by law, there are sections, or panels for civil cases, criminal, commercial, minors and family cases, fiscal and administrative claims, labor conflicts and social insurances, as well as maritime or fluvial cases or for other matters. In the mentioned fields, specialized tribunals can be established at county level or in Bucharest. At present, there are 4 specialized tribunals: Brasov Tribunal for minors and family cases, Cluj Commercial Tribunal, Mures Commercial Tribunal and Arges Commercial Tribunal. First Instance Courts are organized at county level and in the districts of Bucharest. Of a number of 188 First Instance Courts, 11 are not functioning. In relation with the nature and number of cases, within the First Instance Courts sections or specialized tribunals could be established. At First Instance Courts level, the law provides the organization of sections and specialized panels for minors and family cases. Under the law, the courts are independent of the executive branch. The constitution vests authority for selection and promotion of judges in the Ministry of Justice. Judges are appointed for life by the President upon recommendation from a panel of judges and prosecutors selected by Parliament. Attached to every Court of Appeal, tribunal for minors and family cases and First Instance Court there is a Prosecutors’ Office. Similarly, attached to every Military Court there is a Military Prosecutors’ Office. The Prosecutors’ Offices are located in the cities where the courts function. The Prosecutors’ Offices which have judicial personality are those attached to Courts of Appeal

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and tribunals. The Prosecutors’ Offices attached to Courts of Appeal and tribunals have sections, services and offices. In relation to the nature and number of cases, within Prosecutors’ Offices attached to First Instance Courts there can be established maritime or fluvial sections. The activity of all Prosecutors’ Offices is coordinated by the Prosecutors’ Office attached to the High Court of Cassation and Justice, which has judicial personality and manages the budget of the Public Ministry. The National Anti-Corruption Department (NAD) is coordinated by the General Prosecutor of the Prosecutors’ Office attached to the High Court of Cassation and Justice. The NAD has a central structure and a territorial structure, composed of 15 territorial services and 3 territorial offices. There are some critical issues regarding the Romanian Legal System. The administrative centralization of decisions concerning Romanian justice (for instance, those of appointments for a position, appointments of the President of the court, budgetary decisions regarding the distribution of money needed for the functioning of the courts), left in the hands of the central administrative power (the Ministry of Justice), obscured the way of the Romanian System of Justice towards its own independence. The excessive centralization of the judiciary’s administrative apparatus in the hands of the executive power, including the budget of the courts, made political programs, such as the “fight against corruption” and the “independence of justice” high-minded language without practical consequences, since the political power, no matter its nature (left-wing, right-wing, coalitions of parties, etc.) combined its own interest with the interests of the Court Presidents. As a matter of fact, each major political change (when a new political majority was elected, and a new government was appointed based on this new majority) caused the replacement of Court Presidents by the Minister of Justice, according to the legal mechanism presented above, and the maintenance of only those who proved that they were able to be obedient to the new politicians as well.

3.5. Infrastructure and Energy A. Road Infrastructure and Railways Romania is strategically located at the crossroads of Europe and Asia. In 2007, Romania's railroad network totaled 11,385 km (7,074 mi), of standard, broad and narrow gauge lines, of which 3,888 km (2,416 mi) were electrified. Standard gauge railways predominate at 10,898 km (6,779 mi), followed by narrow gauge at 427 km (266 mi), and broad gauge railways making up the remainder.

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There were 198,755 km (123,625 mi) of roads at the end of 2007, of which 100,173 km (62,307 mi) were paved, including 113 km (70 mi) of express ways. In 2011 there were over 4 million passenger cars and 750.000 commercial vehicles in use. Romanian road infrastructure has been the subject of significant debate for many years and the progress made towards improving its systemic infrastructure problems continues to be limited. Weak infrastructure is both a huge disincentive when foreign investment decisions are made and a financial burden for all companies operating in Romania, as transportation continues to be more expensive because of poor road conditions. According to a report by the World Economic Forum, cited by Mediafax, Romania is ranked 134 out of 139 countries regarding the quality of its roads. Despite being the ninth largest country in the EU, Romania has only 505 km of motorways, which is less than 4% of the German motorway network. Meanwhile, in Hungary, for example, the State Motorway Management Co. Ltd., founded in August 2000 by the merger of three companies, is responsible for the operation and maintenance of roughly three quarters of the country’s highway system. This totals more than 700 km of highway, some 200 km of motorway and roads and a 366 km long road junction branch. Specialists estimate that it would take tens of years to close the gap at the current pace of development, especially as we are talking about two key components: extension and improvement of the existing infrastructure. One of the main problems that Romania faces is the degree of funding absorption for developing its infrastructure. According to the World Economic Forum report, Romania will receive EUR 4.6 billion for transport infrastructure by 2013. Romania risks falling behind in the global race to develop efficient and sustainable economic infrastructure and the nation’s future economic growth depends on the success of a rapid and coordinated national revitalization of Romanian infrastructure.

B. Water Navigation Only the Danube and, to a lesser extent, the Prut rivers are suitable for inland navigation, which accounts for only about 1% of the total freight traffic. The main Danube ports include Galați, Brăila, and Giurgiu. In Giurgiu, on the main transportation line between Romania and Bulgaria, a road-and-rail bridge was completed in 1954, replacing the former Danube ferry to Ruse, Bulgaria. A major project, the Danube-Black Sea Canal, designed to bypass the shallow, silted arms of the Danube Delta, was started in 1949 but abandoned in 1953. It was revived in the early 1980s and opened in 1984. The canal is 64 km (40 mi) long and connects Cernavodă with Constanţa.

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Overall, in 2004 Romania had 1,731 km (1,076 mi) of navigable inland water-ways, the Romanian merchant fleet consisted of 34 vessels of 1,000 GRT or more, totaling 395,350 GRT in 2005, and was based in Constanţa, the nation's chief Black Sea port.

C. Air Traffic A better figure is reported on air traffic. Romania has 16 international airports – in comparison with the larger Poland, which only has 12. However, most of them are small and obsolete. Almost 90% of the aerial traffic is made through 4 of them: Bucharest Otopeni, Bucharest Băneasa, Timișoara and Cluj. Among them, only Bucharest Otopeni is a major airport, with a top class infrastructure (which underwent major investments in 2010-2012). The air traffic is increasing each year. The general figure for Romanian airports was over 11 million passengers in 2011, an 8% increase from 2010.

D. Power and Energy Although Romania is the largest producer of oil in Central and Eastern Europe, the oil production does not satisfy the internal consumption needs entirely. The country also dominates the downstream petroleum industry in South-Eastern Europe. Romania has significant oil and gas reserves, substantial coal deposits and hydroelectric power installed. However, Romania imports oil and gas from Russia and other countries. To ease this dependency Romania seeks to use nuclear power as an alternative to electricity generation. So far, the country has two nuclear reactors, located at Cernavodă, accounting for about 18-20% of the country's electricity production, with the second one functional in 2007. Nuclear waste is stored on site at reprocessing facilities. Possessing substantial oil refining capacities, Romania is particularly interested in the Central Asia-Europe pipelines and seeks to strengthen its relations with some Persian Gulf states. With 10 refineries and an overall refining capacity of approximately 550,400 bbl/d (87,510 m3/d), Romania has the largest refining industry in the region. Romania's refining capacity far exceeds domestic demand for refined petroleum products, allowing the country to export a wide range of oil products and petrochemicals – such as lubricants, bitumen, and fertilizers – throughout the region. Romania placed a heavy emphasis on nuclear power generation. The country's first nuclear power plant, the Cernavodă Number One located near Cernavodă, opened in 1993. Two reactors were operational in 2007 when atomic power generation was an estimated 21,158 million kilowatts, or 23.1 percent of total electric power.

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To cover the increasing energy needs of its population and ensure the continued raising of its living standard, Romania plans several nuclear power plants. Nuclear power proposals were presented as early as the 1990s, but plans were repeatedly canceled even after bids were made by interested manufacturers because of high costs and safety concerns. Besides the nuclear power plant in Cernavodă, which consists of two nuclear reactors, the Government has recently announced that it plans to build another nuclear power plant which would most likely be located near one of the major rivers in Transylvania. The new nuclear power plant would consist of two or four nuclear reactors and would have a total output of 2,400 MW. In the last couple of years, Romania met rapid developments in green energy. In 2011, wind power in Romania had an installed capacity of 982 MW, up from the 14.1 MW installed capacity in 2009. Romania has the highest wind potential in South-Eastern Europe of 14,000 MW, and investors already have connection requests of 12,000 MW, although the national electricity transport company Transelectrica offered permits for only 2,200 MW. Romania and especially the Dobrogea Region with Constanţa and Tulcea counties are widely regarded by the international experts as the second best place in Europe to construct wind farms due to its large wind potential. Another study made by the Romanian Energy Institute (REI) said that wind farms could contribute with 13 GW to the national power generation capacity by 2020, and between 2009 and 2017 total wind farm capacity will be 4,000 MW with investments of US$ 5.6 billion.

E. Internet Access In Romania, broadband internet has been available since 2000, through coaxial cable, from RCS&RDS, Romtelecom and UPC. Recent speed ranges between 2 Mbit/s and 120 Mbit/s for household targeted plans, and the data traffic is unmetered. There were 7.8 million connections to the Internet, out of which 4 million were broadband at the end of 2010, and the number is growing fast. The Country code is (Top level domain): .ro. According to the statistics, over 50% of the internet users in Romania are young people (from 15 to 34 years of age). In 2008 there were over 750.000 internet pages in Romanian and the number could be double until now. Based on Akamai report in January 2011, Constanţa, Iaşi and Timişoara are in the top 100 cities at the world level with the highest average Internet speed.

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Based on Pando networks content delivery service released in September 2011, Romania has the second fastest Internet speed in the world at 15.27 Mbit/s, slightly behind South Korea at 17.62 Mbit/s. Romania surpassed Bulgaria, Lithuania and Latvia in the top five, while the United States was only the 26th.

3.6. Banking System and the Stock Market A. The Banking System Banking system reform in Romania started at the end of 1990, when a two tier banking system was implemented: the National Bank of Romania, on one hand, acting as the Central Bank of the Romanian State, and the commercial banks, on the other hand. The National Bank of Romania (NBR) is the Central Bank of Romania. NBR is an independent central bank, its main goal being to ensure the stability of the domestic currency in order to contribute to price stability. NBR draws up and implements the monetary policy and foreign exchange, credit and payment policies. NBR has the role of licensing and supervising the banking system. GEO no. 99/2006 has been set in place with a view to implement in the Romanian legislation the Directive 2006/48/CE of the European Parliament and of the Council of 14th of June 2006 related to the taking up and pursuit of the business of credit institutions and of the Directive 2006/49/CE of the European Parliament and of the Council of 14th of June 2006 on the capital adequacy of investment firms and credit institutions. Made up of 41 banks, the commercial banking sector was growing fast until the international financial turmoil. The banks compete for a highly fragmented market with modest financial penetration. The Romanian Commercial Bank, currently owned by the Austrian group Erste, managed to preserve its position as leader in terms of banking assets, with a market share of 19.8% in December 2011. At the same time, the Romanian Bank for Development BRD Groupe Societe Generale kept its status as the most profitable bank after reporting a profit of nearly 110 million euros. For that matter, half the banks in the Romanian sector yielded profit, while the rest were lossmaking banks. Of the latter, Volksbank Romania reported the largest losses, with 151 million euro in the red. In terms of assets, the leader is BRD Groupe Societe Generale, followed by Transylvania Bank with main Romanian capital, the state-owned Savings Bank (CEC), Raiffeisen, UniCredit Tiriac

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Bank, Volksbank, Alpha Bank, ING and Bancpost. The best 10 profit-making banks were BRD, Raiffeisen, Transylvania Bank, ING, Citibank, UniCredit Tiriac Bank, the Romanian Commercial Bank, Royal Bank of Scotland, The Italian-Romanian Bank and the state-owned Eximbank. The Romanian banking sector is one of the most competitive segments of the local economic landscape, even in the context of the global financial crisis. In 2010 banks had a net loss of 304 million lei, compared with a cumulative net gain of 815 million in 2009, given that 20 banks registered profit, and 22 credit institutions recorded losses. Net assets of the banking system advanced 3.53% last year due to the transactions and investments in securities. The crisis hit Romania with a delay of one year, but the effects were very strong, changing the structure of banksâ&#x20AC;&#x2122; balance sheets. The decrease of external resources caused the decrease of banksâ&#x20AC;&#x2122; dependence on external financing. Concurrently, parent banks supported subsidiaries in their effort to attract local market deposits. Romanian banking sector was adequately capitalized, but credit risk intensified in the context of economic recession and increasing unemployment. The trend of nonperforming loans called for a close monitoring and further provision efforts. The tendencies in the structure of liabilities were: the prevalence of short-term maturities of deposits, the growth of own funds and the drop in foreign liabilities, mainly deposits and short-term financial loans. Despite the reduction in aggregate loans relative to bank deposits, credit institutionsâ&#x20AC;&#x2122; own sources increased due to: capital increases performed by shareholders, new subordinated loans granted by parent banks and the allocation of profit to the reserve fund. Foreign currency financing, its level and high dependence on foreign central banks are the main weaknesses of the banking system in Romania, according to financial experts. Unfortunately, Romania depends on the savings achieved by other states, as it currently has an external debt of 100 billion euros. Another increasing vulnerability of the Romanian banking system is the worsening quality of the loan portfolio. The significant depreciation of the currency, the excessive growth of interest rates for credits, inflation, and unemployment had an impact on population income and on its possibilities regarding repayment of loans and interests. The number of individuals experiencing significant delays in reimbursement rates increased, so the bad debts of population rose. The Romanian banking system is largely dependent on the economic and financial market dynamics of the euro area and as such, the escalation of the European banking and sovereign debt crisis negatively affect the Romanian banking system, according to Moody's Investors Service. The Romanian banks face an increasing likelihood that their foreign parent banks will reduce their operations in the country, which would affect the banks' capital positions and suppress

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lending growth. Deleveraging would be further exacerbated by the banks' significant reliance on funding from the parent banks, especially for their foreign-currency loans. Within the local market, the banks would have to realign their business models, which would likely suppress profits due to slower growth and more intense competition on lending and deposit margins.

B. The Stock Exchange The Romanian capital market, while still young, has progressed over recent years from being an incipient market to a fairly regulated and complex one. The Bucharest Stock Exchange was reopened on 21st of April 1995 in the building of the National Bank of Romania. The exchange started trading in November, with only 9 quoted stocks and weekly trading sessions. The exchange turned to a bull market in 2001, strong growth in capitalization, trading volume and stock prices lasting up to the present. In the next years, stock prices soared, registering record increases. In 2002, BET index increased by 117.5% and, according to Financial Times, BSE has grown fastest among world exchanges that year. New instruments were introduced by a management of Vienna Stock Exchange in 2001 with a new listing structure and listing of the first municipal bonds. However, bond trading has been very thin until now, partly because of repeated postponing of the listing of government bonds. Thanks to the EU accession process, Romanian securities legislation experienced numerous changes which culminated in a new, consolidated Capital Market Law that was enacted in 2004. The Capital Market Law (Law No. 297/2004) is aimed at bringing the Romanian capital market in line with the EU Legislation by implementing several EU directives. This law covers the following: a) regulated markets and their operation and b) ďŹ nancial investment services companies and other intermediaries and their activities on the market. The Bucharest Stock Exchange RASDAQ merged with the Bucharest Stock Exchange in 2005. The trading volume increased by almost 20 times between April 2000 and April 2008 and the trading value increased by almost 300 times.

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On 14 February 2008, the first foreign company was listed: Erste Bank Sparkassen AG (EBS). In 2012, the exchange was declared by Bespoke Investment Group, a UK-based brokerage firm, as the 4th fastest growing stock exchange in the world, with a growth of 21.4 %. Since 2008 Romania has experienced, like many other markets in the European Union, a prolonged ﬁnancial crisis, and valuations of Romanian stocks continue to be low compared with peers in the region. The total capitalisation of the Bucharest Stock Exchange was around €11 billion in 2011, making it a medium CEE stock exchange.

3.6. Public administration In 2007, Romania accessed the European Union, thus fulfilling several long-standing desires of the political elite, joining a powerful supra-national organization, achieving the status of a ‘developed’ country, and re-joining the European geo-political equation, considered unattainable since the end of World War II and up to the end of the Socialist regime in 1989. With a legacy of highly centralized administration from the communist era, a major administrative reform was high on the country’s agenda and favored the professionalization of current bureaucracy. In order to sustain the reform process a Strategy for the Reform in Public Administration was adopted in 2004. According to this strategy, the reform of public administration was seen as a

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process of transformation of central and local administration to address the needs of beneficiaries and of the accession to the European Union. Three main components were identified from this perspective:  Civil service reform, aiming to improve the management of civil service and to develop life-long learning of civil servants;  The reform of local public administration through the decentralization process;  The improvement of public policy formulation process. The reform strategy implies a set of reform measures that are taken at the civil service level, of local public administration, by continuing the decentralization process, and in the field of public policy formulation. However, the successful transition to a functional and a performing administrative system is hard to achieve instantly. A SIGMA (2002) Assessment Report of Romania was particularly revealing and summarized the important contextual factors that hindered the content of policy learning and transfer that would result in a shift from bureaucratic personnel administration to a modern Human Resources Management:  The State is captured by vested interests that block reform, while the current Government wants to press ahead.  Policy capacities must be strengthened (the report alludes to low professionalism in the civil service, a high degree of political influences, secrecy, compartmentalization and fragmented policy making).  The regulatory framework is too complex and unstable (the report mentions the propensity to legislate caused by the ‘troubled relationship between political and administrative levels’ resulting in unnecessary complexity going beyond EU requirements).  There is a chronic implementation deficit (compounded by a lack of policy analysis and evaluation).  Corruption is endemic.  The reform process relies too much on external pressures and a legalistic approach (the report notes that reform ‘focused on the production of legislation or creation of institutions which were – rightly or wrongly – perceived by successive governments as a priority of international donors, including the EU). A recurrent feature in the Romanian context is corruption. After the collapse of communism, bureaucracy and corruption have dramatically increased in Eastern Europe and the former Soviet Union. Since both of them are "symptoms of fundamental institutional weakness", their extent may be attributed to the specificity of the process of institutional change in a transition economy.

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Public distrust in the bureaucracy is added by civil servants being recruited by informal connections and political influences. However, public distrust in governance is more extreme in Romania when compared to its neighbors. Institutional reforms did not target this situation (corruption) specifically and civil service reform acts prompted by the European Commission include practically no reward and punishment mechanism to promote a change in the administrative culture. In 2008, Romania was once again rated by Transparency International among the most corrupt nations in the EU â&#x20AC;&#x201C; 27, with a Corruption Perception Index (CPI) score of 3,8, meaning that the country has a serious corruption problem. According to a Euro-Barometer from April 2008, 75% of the Romanian respondents consider corruption a major problem in their country (European Commission, 2008). At the same time, the Governance Indicators released last year by the World Bank point out that Romania scores last among EU members, equal to Trinidad Tobago when it comes to Control of Corruption and to Guyana if we take into consideration the score for Government Effectiveness (Kaufmann et al., 2008). The Romanian bureaucratic system is still driving away not only Romanian entrepreneurs, but also many foreign investors and EU funding opportunities. According to Romania's President Traian Basescu, from a total of 9 billion EUR funded by the EU, a total of 5,5 billion has not been used, covering the years 2007, 2008 and 2009 (according to Romania News Watch, 13 th of March, 2009). Unfortunately, the Romanian authorities managed to attract less than 12% of the European funds available; this poor result is a clear indicator of the lack of performance and efficiency in the administrative process and represents a redundant issue in public debates. In the last year however, Romania has had some significant progress in fighting against corruption, with former ministers sentenced to jail and a doubling of final convictions in highlevel cases. Things have changed; there is a new atmosphere in the justice system. A total of 298 people including lawmakers, mayors and directors of public institutions were convicted for high-level corruption offences with a final ruling in 2011, up from 154 in 2010, according to figures released by the anti-graft prosecutor's office DNA. In a February 2012 assessment, European Commission praised Romanian authorities for "accelerating the trial of high-level corruption cases". In the first 6 months of 2012, trial chambers have handed jail sentences to a former prime minister (between 2000 and 2004), Adrian Nastase (a case intensely mediatized in the Romanian media), and to two agriculture ministers found guilty of corruption and accepting bribes.

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4. THE LABOR MARKET 4.1. Romanian Labor Market Profile A. Demographic Profile On July 1, 2010, Romania’s population amounted to 21.431.298 inhabitants, of which 10.4 million men (48.7%) and 11.0 million women (51.3%). 11.8 million persons were living in the urban area, accounting for more than half of the country’s population. On July 1, 2010, of the 320 municipalities and towns, 86.3% had a population under 50.000 inhabitants, accounting for 18.4% of the country’s population and 33.3% of the urban population. Big towns hold 29.9% of the country’s population and 54.3% of the urban population. On July 1, 2010, 9.6 million persons were living in the rural area, accounting for 44.9% of the country’s population. The communes with 1000 up to 5000 inhabitants represented 81.2% of the total number of communes. The adult population (15-59 years) accounts for 64.6% of the total, decreasing by 227.5 thousand persons compared with mid-2007. In the adult population, the share of the age groups 40-44 years, 30-34 years and 20-24 years increased, while the share of those aged 15-19 years, 35-39 years and 45-49 years decreased. The population’s average age increased from 39.0 years (in 2007) to 39.7 years (in 2010), an average age characterizing countries with an “adult” population. The female population, with an average age of 41.1 years, was, on July 1, 2010, 2.9 years older than the male population. In 2010, 459.0 thousand persons changed their domicile, and the internal migration rate amounted to 21.4 domicile changes per 1000 inhabitants. As in the previous year, the migration flows from the urban area (to rural and urban areas) held the highest weights in the structure of migration.

B. Labor Market Development & Unemployment In the context of economic transition, the Romanian labor market experienced significant changes in terms of volume and structure of the main labor force indicators. This process was characterized by the reduction of the economically active population and of employment, with a relatively steady level of the unemployment rate. If in the second half of the ’90s, the economically active population was kept at a high level, i.e. over 11 million persons, the new millennium began with a significant decrease in the indicator. Since 2002, economically active population fluctuated at around 10 million. In 2010,

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the economically active population amounted to 9965 thousand persons, of which 95.8% belonged to the working age group (15-64 years). Employment and the unemployment rate in Romania is hard to understand if not related to the general employment structure and other labor market indicators such as the occupation and activity rate or the role of (short term) migration. Even during the hard recession of the nineties and their aftermath, official unemployment rates in Romania were relatively low when compared to other Eastern European countries. The answer is to be found in a sharp decline of the activity rate (as low as some 65%) and a large share of the agricultural sector of the employment structure in Romania. The agricultural sector, thus, served as a buffer, but should be seen better as a form of hidden unemployment. If we take 1990 as a reference point, until 2005 some 2.5 million jobs disappeared, what is still an equivalent of over 10% of the total population or nearly 23 % of the working population from 1990. The labor market recovered somewhat later as GDP recovery might suggest and a relaxation of the labor market in Romania started beginning in 2004-2005. This having been said, we can conclude that unemployment had been in a sharp decline after 2002 until the outbreak of the financial crisis. More than that, after 2005 the Romanian labor market, at least for skilled labor in economic centers, was far from being crowded but characterized by a surging demand for labor supply and sharp competition for labor among enterprises. In some economic centers such as Bucharest or Timisoara, one might even be tempted to speak of full employment. But the financial crisis, especially in the second half of 2008, had an important effect on the labor force structure, generating an increase of the unemployment phenomenon. The average number of employees in 2009 was 4.774.000 persons, by 272.000 persons less than the previous year. The biggest drops in employment were registered in manufacturing, construction and trade. The breakdown of employees by economic sector in 2009 shows that 60.5% worked in services (tertiary sector), an increase of 3.5 percentage points as compared to 2008 and 5.1 percentage points as compared to 2007. 37.2% of the total employees worked in the secondary sector (industry + construction), 3.7 percentage points less than in 2008 and 4.9 percentage points less than in 2007. The share of the number of employees involved in agriculture (primary sector) was only 2.3%, an increase of 0.2 percentage points as compared to the previous year and a decrease of 0.2 percentage points as compared to 2007.

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Activity Agriculture Industry Construction Retail Logistics Hotels and Restaurants IT& Communications Finance & Banking Public Sector

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2008 2,698* 2,212* 749* 1166* 454* 154* 119* 110* 466*

2009 2,670* 2,048* 726* 1157* 455* 165* 123* 122* 490*

2010 2,780* 1,945* 705* 1134* 444* 180* 126* 132* 471*

Legend: *= one thousand employees ILO unemployment rate (ratio of ILO unemployed in economically active population) registered at national level 7.3% in 2010 â&#x20AC;&#x201C; more than previous years (by 0.9 percentage points against 2007 and 1.5 percentage points against 2008, when, in fact, the lowest unemployment rates in the last four analyzed years were recorded) and by 0.4 percentage points against 2009. An unemployment rate of 6.5% was recorded for women, a lower rate than that recorded for men, which was 7.9%, both increasing as compared to previous years. The unemployment rate in the urban area was significantly higher than that recorded in the rural area (in 2010: 9.1% as compared to 5.0%). Young persons aged 15-24 yeas were the most affected by unemployment. Thus, in 2010, the unemployment rate was 22.1% among the youth (15-24 years), with sharp discrepancies between areas (30.5% in the urban area as against 15.3% in the rural area). This indicator amounted to 5.8% for the unemployed persons aged 25 years and over. Another report of NIS emphasizes the difficulties of young people to become integrated on the labor market. The survey results indicate that about 2.590.000 young graduates aged 15â&#x20AC;&#x201C;34 years (66.4% in all) failed to find salaried employment for at least three consecutive months, more than one year after leaving the educational system. Of these people, 9.8% held an academic degree, 54.1% of them had completed secondary and post-secondary education, and 36.1% had a low level of education. The large number of young people aged 15â&#x20AC;&#x201C;34 years who failed to find significant employment proves the lack of employment opportunities on the Romanian labor market. On the other hand, it is necessary to establish a better match between the school curricula and labor market developments and demands. The unemployment is much higher in rural areas, but from other reasons. Romania has the largest share of rural population among Central and Eastern Europe countries and its rural areas are poor, with deteriorating infrastructure and inadequate water and sanitation services.

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Studies suggest that social passivity, a common problem in post-socialist communities, is a hurdle to development in rural areas.

4.2. Salary Levels in Romania Real wages in Romania followed largely the evolution of the Romanian GDP and exhibited since the nineties a W-shaped development path. After a sharp fall all during the 90s, interrupted just for a short period of artificial recovery, real wages began rising after 2000 when Romania overcame the recession of transition and enjoyed high GDP growth rates. Only in 2006 the Romanian real wage reached the starting level of 1990. However, salaries in Romania belong to the lowest of Europe and even the double digit growth rates experienced during the last years of economic boom did not raise them to a European average level. Faster rising have been nominal gross and net salaries in Romania and reached some 457 EUR (gross), respectively 350 EUR (net) in 2008 after some years of double digit growth. These times seem to have come to an end after the outbreak of the crisis. Growth rates of the average salary in Romania have been modest during 2009 and are likely to remain modest, not even making up for inflation and the loss in purchasing power due to the deprecation of the Romanian currency. The economic and financial crisis had a major impact on pay levels and pay trends, particularly during 2009 - 2010. As a consequence, the year-on-year nominal growth of the monthly average salary went down from 29.6% in 2006, to 15.2% in 2007, 17.6% in 2008, to -0.8% in 2009, and 1.3% in 2010. In real terms, the annual salary growth rates were 21.7% in 2006, 9.9% in 2007, 9.0% in 2008, -6.1% in 2009, and -4.5% in 2010. In practice, salaries switched from substantive nominal raises to a progressive every-year wage loss.

Romania â&#x20AC;&#x201C; Average Gross and Net Salary Data and their Growth Year Average Salary (Gross) Average Salary (Gross) Average Salary (Net)

2008

2009

2010

2011

2012

2013

2014

RON

1,682

1,767

1,836

1,920

2,020

2,130

2,282

26.40%

5.05%

3.90%

4.58%

5.21%

5.45%

7.14%

EUR

457

416

432

457

487

520

563

RON

1,309

1,350

1,403

1,464

1,539

1,620

1,734

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Average Real Salary Growth

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16.50% -2.30%

0.20%

1.10%

2.30%

2.70%

4.60%

The data represents the current estimate of the CNP (National Commission of Forecast) Romania. Faster rising are labour costs, as an employee will receive some 75% of the gross salary, yet an enterprise will actually pay 1.81 as much the sum of the gross salary due to high payroll taxes in Romania. GROSS SALARY STRUCTURE â&#x20AC;&#x201C; Taxes paid by the EMPLOYER in 2012:

Title CAS (contribution to Social Insurance)

Percentage of the gross salary 20.80%

Unemployment Fund

0.5%

Health Insurance

5,20%

Health Contribution

0.15% or 0,85%

Comments Cannot be higher than 5 times the national gross average salary; goes to the State Budget. Goes to the National Unemployment Insurance Budget. Goes to the National Health Insurance Budget. Depending on the risk level of the labor conditions.

Taxes paid by the EMPLOYEE in 2012:

Title

Percentage of the gross salary

Unemployment Fund

0.5%

Health Insurance

5,5%

CAS (contribution to Social Insurance)

10.5%

Salary Tax

16%

Comments Goes to the National Unemployment Insurance Budget. Goes to the National Health Insurance Budget. Cannot be higher than 5 times the national gross average salary; goes to the State Budget. Goes to the State Budget.

The successive pay cuts of the recent years did not save all the jobs; no studies have been conducted to shed light on how creation or destruction of jobs influenced pay trends or other aspects of working conditions.

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The total number of employees fluctuated from 4,501,200 in December 2005, to 4,738,600 in December 2008, 4,367,700 in December 2009, and, respectively, 4,101,600 in December 2010. The evolution of salary and labour productivity in different fields:

Specific data for the MANUFACTURING sector Year 1. Annual average gross monthly earnings (RON) 2. Annual average gross monthly earnings, Male (RON) 3. Annual average gross monthly earnings, Female (RON) 4. Total employment (thousands pers.) 5. Average weekly working time (hours) 6. % Productivity yearly increase

2006 950

2007 1,205

2008 1,475

2009 1,567

2010 1,531

1,087

1,354

1,667

1,757

1,724

807

1,035

1,254

1,350

1,318

1,178.5 41.5 13.9

1,115.6 41.6 12.7

1,013.4 41.4 6.2

823.9 41.1 12.2

821.2 41.3 18.6

According to AIMS SalaryMap 2012 (a compensation and benefits survey for manufacturing companies in Western Romania) the gross average salary for January 2012 was 1.665 lei (384 EUR), a 6,6% increase from January 2011. This is 22% lower that general gross average salary for the same month (which is 2022 lei). For 2012 most of the manufacturing companies forecasted an average rate of salary increase of 5,7% compared to 2011.

Specific data for the CONSTRUCTION sector Year 1. Annual average gross monthly earnings (RON) 2. Annual average gross monthly earnings, Male (RON) 3. Annual average gross monthly earnings, Female (RON) 4. Total employment (thousands pers.) 5. Average weekly working time (hours)

2006

2007

2008

2009

2010

936

1,410

1,527

1,604

1,517

931

1,400

1,500

1,572

1,482

966

1,483

1,724

1,810

1,739

314.3 43.3

343.1 43.5

354.6 43.3

279.6 42.6

264.5 42.3

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Specific data for the HORECA sector Year 1. Annual average gross monthly earnings (RON) 2. Annual average gross monthly earnings, Male (RON) 3. Annual average gross monthly earnings, Female (RON) 4. Total employment (thousands pers.) 5. Average weekly working time (hours)

2006

2007

2008

2009

2010

693

883

1,000

1,024

1,044

767

991

1,145

1,091

1,127

649

819

924

982

992

68.2 43.7

81.0 43.4

90.6 43.1

86.9 42.9

82.3 42.8

Specific data for the FINANCIAL SERVICES sector Year 1. Annual average gross monthly earnings (RON) 2. Annual average gross monthly earnings, Male (RON) 3. Annual average gross monthly earnings, Female (RON) 4. Total employment (thousands pers.) 5. Average weekly working time (hours) 6. % Productivity yearly increase

2006

2007

2008

2009

2010

3,078

3,316

3,724

4,054

3,887

3,581

3,860

4,459

4,978

4,529

2,846

3,071

3,395

3,645

3,600

77.4 41.2 -4.0

87.0 41.2 2.0

96.6 41.1 5.2

88.6 40.9 -5.6

88.7 40.7 -15.3

Specific data for PUBLIC ADMINISTRATION Year 1. Annual average gross monthly earnings (RON) 2. Annual average gross monthly earnings, Male (RON) 3. Annual average gross monthly earnings, Female (RON) 4. Total employment (thousands pers.) 5. Average weekly working time (hours)

2006

2007

2008

2009

2010

2,112

1,840

2,146

1,983

1,512

2,125

1,863

2,150

2,013

1,568

2,103

1,823

2,142

1,961

1,473

271.7 41.1

286.3 41.2

301.5 40.9

325.9 41.0

283.0 40.7

In Romania, collective bargaining on salary matters is limited to the national minimum wage at national, sectorial level, group of units and company level, and to minimum salary differentials proportional to qualification and education levels.

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The last National Unique Collective Agreement, applicable till the end of 2010, established a six-tier wage scale, which started from 1, the lowest step, and covering all unskilled labor, indexed successively with the following coefficients: 1.2 for skilled labor and for administrative personnel with secondary education; 1.3 for graduates of foremen post-vocational training courses; 1.5 for holders of a bachelor's degree; and 2.0 for holders of a master's degree. According to the EWCS 2010 survey, compared with January 2009, 33% of the interviewed employees stated that their salaries were diminished; 57% said that their salaries had not been changed, and 10 % said that that their salaries had been raised. The Romanian Labor Code does not stipulate any particular clauses related to salary negotiation. The only constraint is for the negotiated salary not to be lower than the minimum agreed salary, currently at the level of 670 LEI gross/month. In case of employees with higher education, the minimum agreed salary is 1.204 LEI gross/ month. As far as the benefits package is concerned, this is a relatively new notion that has only lately gained ground on the labor market. The way in which benefits are granted to various employee categories is primarily a direct consequence of internal company policies and is not regulated by the labor code in terms of absolute necessity for certain positions. According to AIMS SalaryMap 2012 (compensation and benefits survey for manufacturing companies with 114 participants and over 60.000 jobholders), the average monthly gross salary for a management position is 8.921 lei (1.970 EUR) â&#x20AC;&#x201C; a 6,7% improvement compared with the previous year. According to this survey, the variable component of the salary package (performance bonuses and other financial benefits) added a 16% to this level. The Research & Development field remains at the top of the salary market for 2012. According to AIMS SalaryMap IT (compensation and benefits survey for R&D companies in Western part of Romania) the average gross monthly salary in software development in January 2012 was 5.276 lei (1160 EUR). This represents an increase of 2,8 % compared to January 2011, and at the same time, it is 2,5 times higher than the Romanian national average gross salary. The average salary increase percentage for 2012 in Romanian R&D industry has been forecasted by participant companies at 7,5%. Over 30% of the Romanian labor force is employed in low productivity areas, such as agriculture.

4.3. Key Romanian Labor Code Information In 2003 the Romanian Parliament approved the first post-communist Labor Code. The Labor Code from 2003 was still heavily unbalanced in favor of the employeesâ&#x20AC;&#x2122; rights. For instance,

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the Labor Code acknowledges 304 legal rights â&#x20AC;&#x201C; 248 for the employees and 56 for the employers. As a direct result, the number of civil cases grew with 32% in the first year. In 2007 and 2008, the Foreign Investors Council pleaded for amending the old Labor Code on various legislative aspects. The request for the Labor Code amendments to include, first of all, labor market flexibility â&#x20AC;&#x201C; people should be easier to recruit and dismiss. Also, companies wanted a legislative stimulation for temporary work, and the notice period for resignations or dismissals to be raised to two months, so that the employee could find a new job and the employer a replacement. Foreign investors wanted to eliminate collective labor agreements at branch or national level, when there is already an existing individual labor agreement. They also demanded that the law include performance expectations, so they could keep efficient employees and not the ones with seniority. After virulent public debates and struggles, the new Romanian Labor Code came into effect on the 1st of May 2011, aiming to increase the flexibility of working relations and combat illegal work. The latest changes in employment regulations are aimed at more flexible working relations and their adjustment to the dynamics of the labor market, ensuring the conditions for development of the business environment and also the adaptation of the Romanian legislation to that of the European Community. With the new Labor Code, the quality of work plays a more important role. Thus, the employer is assigned an explicit right to set individual performance goals. Furthermore, employers are required to establish criteria and procedures for the evaluation of their workersâ&#x20AC;&#x2122; activity. This provision can, for example, play a role in mass lay-offs. The selection of employees to be dismissed will be first done according to the criteria of goal achievement and only afterwards will the collective agreement regarding specific social criteria be applied. The new provisions in the Romanian Labour Code (hereinafter: the Labour Code) are also referred to as a step in the right direction, especially because labour law in Romania was previously considered to be extremely friendly to employees. A large part of the amendments to the Labour Code which came into force on May 1st, 2011 is now viewed as more employerfriendly. We shall hereafter examine more closely the most important changes of the Labour Code.

A. The Individual Labor Contract Under Romanian law, all employment relations are governed by a contract, which must be in writing, concluded in Romanian and agreed prior to the commencement of employment.

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At a minimum, the contract must spell out key terms such as salary, required job duties, entitlement to annual leave (generally 21 days), the duration of the agreement, and whether there are any specific risks associated with the performance of job duties. The maximum statutory working time may not exceed 48 hours per week, overtime included. As an exception, the maximum working time may exceed 48 hours per week, provided that the average number of hours worked during a reference period of up to 4 months does not exceed 48 hours per week. In certain circumstances, reference periods ranging between 4 months and 6 or 12 months can be established under collective bargaining agreements. Part-time workers must work a minimum of ten hours per week, two hours per day. Other negotiable terms may be included in the contract, but employees may not contract away any rights provided under Romanian law. Employers who fail to have a written contract in place within 30 days after the employment relationship has begun may be sued for damages. Non-competition provisions may be included in the contract, but to be enforceable, the employee must receive a monthly non-competition benefit as part of his / her compensation. The non-competition agreement is limited to a maximum of two years and the geographic scope must be specified. The contract should also provide a list of prohibited competitive activities, the third parties for whom the employee may not work, and the amount of the monthly non-competition compensation. The contract may be lawfully cancelled at the date when the employee’s authorization, permit, license or certificate required for the exercise of his/her profession expires, unless the employee renews it within six months of the expiry date of such authorization, permit, license or certificate. An individual labor contract may be terminated only through “lawful” dismissal or resignation. Dismissals are generally “lawful” only in the following circumstances:     

The employee has repeatedly violated a work rule or committed a serious violation of a work rule; The employee has been shown (by a competent medical examiner) to have a physical or mental disability that prevents him / her from carrying out assigned job duties; The employee is “unfit” for his / her job; The employee has been taken into police custody for more than 30 days pursuant to the Code of Criminal Procedure; The dissolution of the employee’s position based on financial reasons, reorganization, etc.

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Please note that prior to a dismissal based on an alleged violation of work rules, the employee is entitled to take part in a preliminary hearing regarding the alleged violation. Where the employee will be dismissed for a physical or mental disability or general lack of fitness for a position, the employer must first consult with an occupational medicine physician to determine whether there are other, more suitable positions within the company, given the employeeâ&#x20AC;&#x2122;s disabilities or limitations. For dismissals based on company reorganization or financial reasons, the employer is liable for damages if the reorganization or financial reasons are determined to be groundless or contrary to law. According to the new Labor Code, the notice period to be granted by an employer has been extended to a minimum of 20 working days, whereas the notice period for employeesâ&#x20AC;&#x2122; resignation may not be longer than 20 working days for non-management positions and 45 working days for management positions.

B. Fixed-term Labor Contracts Fixed-term employment contracts have hardly played any role in Romania so far. First of all, before the crisis that began in 2008, there was already a great shortage of workers, so that employers did not necessarily have a great interest in fixed-term labor contracts. On the other hand, the statutory regulations regarding fixed-term contracts were also rather strict.

The new Labour Code relaxes the previously strict requirements, at least partially. The maximum duration of a fixed-term employment contract has been extended, for example from 24 to 36 months, and two more consecutive contracts, which may not exceed one year, may be completed after the expiration of the first fixed-term employment contract (article 82, paragraph 5 Labour Code). It should be noted however, that this limitation in time concerning the period for which a fixed-term employment contract can be concluded is an "innovation" of the Romanian law, being able to restrict the application of such a contract. Thus, the EU fixed-term work directive (hereinafter: Directive 1999/70/EC) provides that the end of the contract or employment relationship is determined by objective conditions such as reaching a specific date, fulfilling a specific task or the occurrence of a specific event (paragraph 3 section 1 Directive 1999/70/EC). At least, the regulation, which previously explicitly stated that after expiry of the maximum period of (under previous legislation) 24 months, respectively after the third consecutive employment contract, only an employee on a permanent contract can be employed at the respective workplace, has been overridden.

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Despite attempts of the Romanian legislator to harmonize the Romanian legislation with the Community legislation related to fixed-term employment contracts, the comparative analysis of the Romanian law and Directive 1999/70/EC results in a conclusion which we appreciate as being important. Namely, unlike the Community provisions, the Labour Code limits the situations in which a fixed-term employment contract may be concluded. The legislative solution chosen by the Romanian law is counterproductive, being able to reduce labour mobility in a labour market affected by economic restructuring. Thus, although Directive 1999/70/EC provides that Member States may introduce provisions which are more conducive to the workers concerned, our perception is that the Romanian law has taken over the institution of fixed-term employment in a restrictive manner rather than in a general non-discriminatory one. C. Temporary Employment The subject of temporary employment, similar to fixed-term work, previously played hardly any role in Romania, particularly because of the rather inflexible regulations. However, temporary employment is a matter of interest for companies, since it is able to satisfy a temporary staffing need, e.g. during temporary heavy workload or a temporary need for specialists. Temporary employees are only entitled to the statutory minimum wage of currently RON 670 (approximately EUR 160) and not the usual salary of the company where they are deployed. Herewith, the principle of equal treatment is, however in our judgment, grossly violated. The provision under article 5, paragraph 2 of Directive 2008/104/EC , which was conceived as a deviation in wage matters, has been implemented by the Romanian legislator rather as a basic rule. According to the new regulations, employers will no longer have restrictions in resorting to temporary employment agencies. Thus, an employee made redundant under a collective layoff will have priority, for 45 calendar days after employment termination, to be reinstated on the same position, with no test, contest or probation period. D. Illegal work Recent changes to the Romanian Labor Code mean that illegal work will now be treated as both a civil and criminal offence. Act 40/2011 makes substantive amendments to the Labor Code provisions for the control of illegal (undeclared) work. Under civil law, both employer and employee are now considered liable. ď&#x201A;ˇ Employers who use the services of up to five persons without a valid individual employment contract are liable for fines of between RON 10,000 and RON 20,000

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

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(about €2,350 to €4,700 as of 10 August 2011) for each person illegally hired. This is around five times higher than the fines imposed by previous regulations. Individuals found working without a valid individual employment contract are liable for fines of RON 500 to RON 1,000 (€117 to €235).

Under criminal law, employers are liable for using illegal/undeclared workers. The new regulations provide for:  jail sentences of one up to two years or a criminal fine for the use, without a valid employment contract, of more than five individuals, irrespective of their citizenship;  the same penalties for hiring an individual illegally staying in Romania, while knowing that the person is a victim of human trafficking, and where the type of work they are performing is of a nature that could jeopardize their life or health, the jail sentence may go up to three years;  jail sentences of 6 to 12 months, or a fine, for repeated denial of access to company premises for labor inspectors, or the refusal to produce company records on request. For any of these offences, a court may also impose one of the following punishments:  total or partial forfeiture by the employer of the right to receive public services, aid, or subsidies, including European Union (EU) funding managed by the Romanian authorities, for a period of up to five years;  loss, by the employer, of the right to take part in public procurement tenders, for a period of up to five years;  total or partial payback by the employer of public services, aid or subsidies, including EU funding managed by the Romanian authorities, paid to the employer over a period of up to 12 months prior to the offence;  temporary or final closure of the outlet(s) where the offence was committed, or the temporary or final withdrawal of a license for the scope of business concerned, if the seriousness of the offence so recommends. In addition, the employer is required to pay:  any outstanding wages owed to the illegal workers (presumed to be equivalent to the gross national average salary);  all charges, taxes and social insurance contributions that the employer would have paid if the persons had been hired legally, including surcharges for overdue payment;  any related administrative fines. If the offence(s) were perpetrated by a subcontractor, the contractor may be held liable jointly with the subcontractor. Employers are also committing a criminal offence, punishable by imprisonment or fine, if they repeatedly pay workers below the gross national minimum wage as set by law.

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4.4. Foreign Language Skills in Romania All schools in Romania have foreign language programs. Students must study at least one language to an advanced level and a second one at a more basic level. In other cases there are more than two foreign languages available to study and the student can choose from several. Many schools also offer bilingual courses. During the communist period, the main language taught was Russian and German was the second most common. However, nowadays the school curriculum is very different. According to the results of 2008â&#x20AC;&#x2122;s â&#x20AC;&#x153;Key Data on Teaching Languages in Schools in Europeâ&#x20AC;? published by The Education, Audiovisual and Culture Executive Agency (EACEA), the top language taught in Romania is English. Some children start learning it in kindergarten, but usually public schools have a language program which starts in the 2nd grade. The explanation is simple: as we can see on the World Language Map, English is very popular all around the world and nowadays it is necessary to have at least a basic command of the language. In an EU report on foreign language skills it is estimated that over 29% of Romanian natives speak English at an average level (and 10% fluent). The level of English language knowledge is probably higher in urban areas, with a higher concentration of University graduates and foreign investments. Proficiency, however, is most likely to be defined as comprehension capacity with an ability to render ideas in an understandable manner. As far as the active labor force is concerned, the level of knowledge of foreign languages, and especially English, has typically improved among employees of international/multinational companies, without being more specifically related to a hierarchical level within the organizational structure. According to Bestjobs statistics in 2012 (Bestjobs.ro is one of the most popular job sites in Romania), 83% of the candidates from their database (almost 1,9 million) are familiar with English language and 41% (around 1 million) have French language skills. According to the cited study, the second most popular language is French. It is estimated that less than 24% can use French (especially older generations). French is less popular for the vast majority of the active population. The third foreign language is German, with 6% of the population speaking it. Most people who speak German are to be found in Western Romania, Central Transylvania (Sibiu-Brasov), and Banat region (Timisoara and Arad areas). Italian and Spanish are the next most commonly taught languages in the educational system. However, after the intense immigration process of Romanian workforce in EU after 2005, a large portion of the 2.5 million Romanians that live abroad has developed Spain and Italian language skills.

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There is a wide variety of options available and many children choose a specialized public school or high-school because they want to study a certain language and they continue to learn it throughout the curriculum. In the areas highly populated with minority groups, languages like Hungarian, Ukrainian, Serbian, Slovak, Czech or Croatian are taught too (especially in Transylvania). They do not necessarily classify as foreign languages in these circumstances, as they are taught as a result of the structure of society. The challenge of finding experienced professionals in their field of activity with a good level of French is a bit less difficult than identifying speakers of German, Italian or Spanish. The past years have undoubtedly educated generations into a more flexible and internationally oriented mentality. Thus, it is more and more probable for fresh graduates to have better language skills than already established professionals, thus providing a fresh influx of competencies and enthusiasm in the local business world.

4.5. Insight into Romanian Work Mentalities From many points of view, Romanians are seen as obedient to more powerful levels of authority. Romanian employees prefer to have a strong relationship with a single manager, in order to benefit from protection, thus avoiding expressing of opinions that are different from those of the higher power. Generally, they follow the directions of their managers without questioning or asking for further explanations. There is fear of exposure and failure; failure can be viewed as a personal short-coming and can cause long-term loss of confidence by the individual as well as by the group. This attitude proves that Romania needs powerful leaders, centralized decisions, and that the population prefers to follow the rules established by its leaders. In Romania, managers may take a somewhat paternalistic attitude towards their employees. They may demonstrate a concern for employees that goes beyond the workplace and strictly professional concerns. This may include involvement in their family, health, and other practical life issues. Most of the times, the employees of Romanian companies do not have perspective on their work. The high level of uncertainty in the social, political and economic environment generated a focus on short-term issues, rather than on taking the long-term view. This is one of the reasons why the saving rate is very low in Romania and most people choose to apply for loans. The managerial style practiced in Romania is a combination of a familiar management style which emphasizes the welfare and personal interests of employees and an autocratic German

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management style where honor, company’s interests and reputation are the main values. Generally, Romanian employees prefer the type of manager who takes risks and responsibilities and consider that the best leaders are the ones who protect them and provide advantages. In “Business in CEE 20 Years after the Fall of the Iron Curtain” – a survey conducted by TARGET International Executive Search and Henley Business School, there were some very interesting findings regarding Romanian work mentalities. Many of the items where Romania was ranked first or second relate to the energy and dynamism of the people. For example: active and dynamic business environment; ambition is admired; managers tend to be excellent at selling; there is a strong entrepreneurial spirit. By contrast, some negative features were underlined as well: business is not well organized and efficient; deadlines and timetables are not always taken seriously; teamwork is poor; managers do not prefer to work in a planned way. In post-communist countries, there is a tradition of teamwork inherited from the communal aspects of the previous era where groups and work units commonly met together to discuss ideas and create plans. However, those plans seldom resulted in implementation or results, leading to apathy and cynicism among the workers. Today, the side-effects are still evident among much of the older generation, resulting in a lack of drive and energy. However, there is vibrancy among the younger generation, who seems to be eager to tackle many of the challenges and take the opportunities presented. They will participate in teams and share ideas, but intercultural sensitivity will be needed and it should be understood that they will need to be coached in the process. In order to achieve successful cross-cultural management in Romania it is important to understand that there is still a great deal of bureaucracy. Business moves at a slow pace, and patience will be a necessary cross-cultural attribute; therefore, personal relationships are crucial if you want to cut through the red tape. Business is hierarchical and the decision-making power is held at the top of the company. Most decisions require several layers of approval. At times it may appear that no one wants to accept responsibility for making the decision. Formality was part of the country’s work ethic for a long time. Thus, the “first name” fashion has only managed to contaminate the environment in a gradual manner. Again, the multinational environment is a champion in this respect, as the culture disseminated is one more oriented towards a more relaxed approach (without affecting efficiency and professionalism). Formality is also manifested in what the dress code is concerned. Romanians have a tendency to dress in such a way as to reflect their position (social and professional status). Though the dress code for business is a very strict one, “casual Fridays” and less formal attire tend to gain more ground in industries/fields where creativity and innovation are more praised than rigidity and structure.

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Although the collective type of culture prevails in Romania, specialists estimate that in the future the level of individualism will grow and the individual type of culture will predominate. The main factors that contribute to the process of cultural change towards individualism are the presence of the multinational companies on the Romanian market and external financing. The two factors essentially determined the socio-economic development of Romania. Still, the work mentalities have undergone significant changes during the past years, the private sector being less and less indebted to the former paradigms. Romanians’ interest in working for multinational companies has increased consistently during the transition years and maintains a healthy percentage of growth these days as well. Multinational organizations have cultivated an employer image interested in their employees’ development and professional enrichment. Furthermore, they are expected to bring about systems and procedures, the exactness and correctness of which encourages and acknowledges professionalism and quality work. The concept of “corporate culture” is no longer a novelty among Romanian professionals and is lately supported by a concern for human resources policies that ensure personal and professional development in an environment oriented towards transparent opportunities rather than political merit. However, it is important to notice the fact that as far as interest towards working with multinational companies is concerned, the change as compared to the beginning of the 90’s is to be found in the way in which potential employees analyze the exact characteristics of the opportunities offered, their market awareness level increasing and reputations of companies being more or less established. To conclude, the status of multinational does not necessarily guarantee the professionals’ interest; reputation, however, does. Relocation availability is probably one of the signs of normality of the Western work force. When analyzing this value upon the background of the current Romanian work environment, one easily notices an increasing openness towards this, especially as far as the local managerial elite is concerned. Still, stability (defined as strong bonding with a certain place) remains a Romanian trait and family-related issues may still have preeminence over career opportunities. When relocation is considered, Romanians have also increased their awareness of its financial implications and may be expected to negotiate substantial packages in this respect. The message here is clear – Romanians must apply their undoubted energy and entrepreneurial spirit to clearing up the mess – planning, structuring, strategizing and, most importantly, learning to work in teams. The good news is that Romanian labor force can compete with other countries with success. After 3 years of stagnation (2007/2009) the current productivity of the average Romanian

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employee is growing again. Each Romanian employee in a multinational generated an annual gross profit of 5,898 EUR in 2009 to foreign investors, surprisingly nearly 8% higher than that generated by a Western European employee, shows a survey conducted by the audit and consulting firm PricewaterhouseCoopers (PwC) Romania. In the preceding year, the annual gross profit per employee had been 2.910 EUR, but the redundancies led to a profit increase. The results are unexpected, considering that the GDP per capita in Germany, for instance, is four times higher as in Romania. Return on human capital in Romania went up 20% against 2008 because labor costs are over 50% lower than the European average. Each Romanian employee in a multinational generated a 102% higher gross profit against 2008. The survey involved 58 companies of which 76% were private foreign companies. Nearly half of them had at least 1,000 employees and revenues above 100 million EUR.

4.6. Recruitment and Selection According to Government Emergency Ordinance No. 56/2007, citizens coming from EU and EEA countries enjoy the same status regarding employment in Romania as do Romanian citizens. Jobseekers who are EU and EEA citizens can contact the National Employment Agency, which is Romania’s public employment office. Interested persons may inquire and register with the 215 local employment agencies situated all over the country. Local agencies provide information, counseling and mediation services for jobseekers or unemployed persons, as well as information and mediation services for potential employers. The services offered are free of charge. A county and national level database contains all jobs offered by employers, who are required by law to declare all their vacancies. Detailed information can be found on the National Employment Agency website. The specialized Internet sites have become the most useful recruitment tool in the last years. The cyber space has produced a major change in the personnel recruitment algorithm, radically influencing employment offers and demands. The classified newspaper ads and also the specialized magazines have lost, and continue to constantly lose ground ahead of dozen websites dedicated to online recruitment. The decline of the “paper” supremacy has been proportional to the growing penetration rate of the internet, but also with the visibility of advantages offered by the “virtual solution”. The Romanian online recruitment market has known an accelerated growth in the past few years due to some well-determined advantages it has in comparison with the classic means of personnel selection. The Romanian recruiting portals build their offers based on two basic

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services that they can offer: posting jobs and searching for CVs; the fee paid by the employer depends on the number of units bought. Among the numerous HR sites today, the most popular, both for employers and candidates, are www.bestjobs.ro, www.ejobs.ro and www.myjob.ro. E-Jobs was launched in 1999, the first online recruitment service in Romania and Eastern Europe. They are the current leader of the online recruitment market. With a database of over 2.4 million CVs and hundreds of daily published jobs, E-Jobs attracts approximately 1.6 million unique visitors/month and over 27 million pages viewed, according to Sati.ro. Currently, 198.000 employers (Romanian and foreign companies) are listed in the E-Jobs database. Over 36% of the candidates from E-Jobs database have University degree, 39% secondary education and 25% basic education. 32% of them are young candidates (under 25 years old) and 40% are between 25 and 34 years old. In November 2012 www.ejobs.ro had over 14. 500 jobs listed in various areas, such as Sales (19,59%), Finance & Banking (15,13%), Public Relations (13,92%), Administration (13,39%) Advertising (12,69%), Logistics (10,11%) or Finance & Accounting (10,59%). Most of the jobs are from main cities, such as Bucharest (6062), Cluj-Napoca (2151), Brasov (1898), Timisoara (1699), Constanta (1659), Iasi (1494) but also from Chisinau, Republic of Moldavia (522). Bestjobs was launched in 2000 as a project of Neogen. With over 2,3 million candidates profile in their resume database and over 70.000 registered employers, Bestjobs is in top 3 Romanian job sites. One of the most popular job sites in Eastern Europe, in October 2012 they had over 1,3 million visitors. Over 35% of the candidates in their database are University graduates and around 1% MBA graduates. 21% of them are senior candidates (with more than 10 years professional experience). The process of finding qualified candidates with specific experience is simple and the costs and time for recruitment is reduced. Posting an ad costs over 69 EUR and it is displayed for 30 days. Resumes are received shortly after posting the ad and the system offers multiple tools for resume sorting/listing, communication with the applicants and administration of the whole recruiting process. Myjob – With more than 10 years of expertise, Myjob.ro aims to support companies’ recruitment process through valuable candidates, multiple functionalities and professional support. With over 1,300,000 resumes, myjob.ro is the third largest recruitment website on the market. They are growing fast – with over 1,000,000 visits and 5,650,000 monthly views (in

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2012), they had a 40% increase in resume number during last two years. Over 50% of the candidates in their database have over 3 years of experience. Over 2% of the Myjob candidates have MBA education, 14% Master diploma, 38% are University graduates, and 20% are students (University in progress). Only 22% of the accounts have no University background! 130.000 of the Myjob candidates have background in sales, 96.000 in retail, 71.000 are active in construction industry, 65.000 in IT and telecom, 41.500 in logistics and 41.300 in engineering. The registered candidates are from all over the country: 432 098 from Bucharest, 52 349 from Constanța, 52 102 from Brașov, Cluj with 48 634, Iași with 59 460, Sibiu with 23 253 CVs and Timișoara with 61 386. Social networks (LinkedIn, Xing, Twitter and Facebook) and other channels are also used for recruitment projects, especially for middle management and management positions. It is estimated that over 700.000 Romanian professionals have LinkedIn accounts, 1.500% more than in 2009. Facebook is another social network with a large penetration in Romania – It is estimated that over 4,72 million Romanians have a Facebook account, almost 30% of them in the three biggest cities: Bucharest, Timisoara and Cluj-Napoca. Xing and Twitter are other social platforms that are growing in the Romanian internet community. In April 2011 over 60.000 Romanians had Twitter accounts and the number was growing fast in the last 12 months.

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5. EDUCATION IN ROMANIA After the collapse of communism, Romania faced an education crisis that it has not tackled yet. Since 1989, the minister of education has been changed 19 times. Each of these ministers argued vehemently for reform, but their different visions only created confusion. One of the reasons for their failure is that education in Romania has never been properly financed. The education budget has dropped to just 3.6% of GDP this year, while the average European rate is 5% of GDP. The education-related requirements of the society and economy have been radically changed by the transition to democracy and market economy, which began in 1990, after the fall of the communist regime. Today, the Romanian educational system has the following structure:  Pre-school education;  Primary education (compulsory);  Secondary education (high-school, apprenticeship school, post high-school education);  Higher education – undergraduate studies;  Graduate studies (MA – Master’s degree, Ph.D) Higher education is provided in Universities, Institutions, Academies, colleges and postuniversity studies schools. The higher education sector in Romania comprises 56 public Universities with 511 faculties and other 28 private Universities. Public education remains the core of the system, with better quality standards. General information about the Romanian higher education system:  The first Romanian universities were established by Alexandru Ioan Cuza: the University of Iasi (1860) and the University of Bucharest (1864).  Higher education is organized in short-term (3 years) and long-term education, the duration of the last varies according to the specialization: 3 years for sciences, humanities, economic, political or social sciences, arts, sports, law, 4 years for engineering, technical, pharmacy studies and 5 years for medicine and architecture.  The academic year runs from the 1st of October till June and it is commonly divided into 2 semesters.  The Romanian grading system is from 1 (minimum) to 10 (highest mark), 5 being the minimum pass mark.  There are several types of institutions in the higher education system: Universities (including a large number of faculties with different specializations), Academies (focusing on a single general field), Polytechnic Universities (technical field of study),

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Institutes (limited specializations), postgraduate schools (other than those included in the Universities) and colleges (offering 2-3 years of studies).

5.1. University Centers Bucharest, the capital city, attracts almost one-third of all public University students, the most prestigious public Universities being the Bucharest University, the Academy of Economic Studies, the Polytechnic University, the Academy of Arts, University of Agronomy and the University of Medicine and Pharmacy. Bucharest University is generally considered the leading educational institution in Romania, mostly because it provides a large variety of courses: short and long-duration programs, distance learning programs, Master’s degree and Ph.D programs, advanced postgraduate studies and research programs. The University consists of 23 faculties, each with several specializations, training thousands new students each year. The educational program covers mostly sciences: Biology, Chemistry, Physics, Mathematics, Geography, Geology, History, Psychology etc. The Academy of Economic Studies is the most significant education institution for economy and administration in the country due to the content of its courses and the constant involvement in the national and international economic field. The Academy consists of 11 faculties, covering several specializations and enrolling over 26.000 students. Some of the specific economic areas covered are Marketing, Management, Commerce, Accounting, Cybernetics, Statistics, Finance and Banking. The Polytechnic University of Bucharest is the largest and oldest technical University in Romania, being the main source of technical specialists in our country. The major fields of study are Electrical Engineering, Industrial Engineering and Management and Applied Engineering Studies, covered in 15 faculties (some being the Faculty of Electrical Engineering, Faculty of Automation and Computer Science, Faculty of Electronics, Telecommunication and Information Technology, Faculty of Mechanical Engineering, Faculty of Aerospace Engineering, Faculty of Entrepreneurship, Business Engineering and Management). The University of Medicine and Pharmacy “Carol Davila” is among the best medical Universities in the country. Students are trained on General Medicine, Dental Medicine, Pharmacy and Nursing. Other prestigious Medical Universities in Romania are the University of Medicine and Pharmacy “Iuliu Hatieganu” located in Cluj-Napoca and the University of Medicine and Pharmacy located in Targu-Mures.

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Representing the Western part of the country, Timisoara is an important educational center, gathering thousands of students each year, not only Romanians, but from abroad as well. The most prestigious public institution is The West University of Timisoara. Undergraduate courses are offered in 11 faculties with more than 80 specializations. Students can choose from a large variety of courses: Mathematics and Computer Science, Physics, Chemistry, Biology, Geography, Sociology, Economic Science, Law, Political Science, etc. The Polytechnic University of Timisoara is one of the largest Technical Universities in Romania, the academic studies being delivered in its 10 faculties (Automation and Computer Science, Electronics and Telecommunication Engineering, Civil Engineering, Architecture, Management in Production and Transportation, etc.). One of the most important universities in Transylvania (located in Cluj-Napoca) is "Babes-Bolyai" University, an educational institution that provides services for more than 35.000 students in the 21 faculties. The University offers study programs in three languages (Romanian, Hungarian and German) for several specializations: Mathematics and Computer Science, Physics, Chemistry and Chemical Engineering, Biology and Geology, Geography, but also Law, History, Philosophy, Sociology, Social Assistance, Political Science and Economics. Through its 140 years of activity, as well as the 30.000 students and over 800 academic staff, "Alexandru Ioan Cuza" University is a prestigious institution in the Eastern part of Romania, located in Iasi. At present, the University has 16 faculties, ensuring training for over 40 fields of specialization, such as: Computer Science, Economics and Business Administration, Biology, Chemistry, Physics, Law, Philosophy etc. Other higher education centers in Romania are Craiova, Brasov, Constanta, Arad, Oradea, TarguMures and Sibiu. One of the visible effects of Romaniaâ&#x20AC;&#x2122;s EU accession is the acknowledgement and recognition of Romanian educational degrees in other member countries. This will inevitably challenge the local educational system, as competitiveness on a European market will probably dictate an adequate update of curricula and a modification of teaching approach. However, there are many concerns regarding the competitiveness of the Romanian educational systems in comparison with the most prestigious University centers worldwide. In 2012, for the first time in history, a Romanian university, the University of Bucharest, was included in Top 200 Universities of the World (151-200 band). According to the prestigious QS World University Rankings, another three were included in the first 700 Top Universities

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worldwide (601-700 band): the Alexandru Ioan Cuza University, the Babeș-Bolyai University and the West University of Timişoara. Similar to other European countries, Romania has developed post-graduate education as an extension of higher education provided in Universities, Academies and Institutes. The local graduate study programs include:  Master studies, with a duration of 1 up to 2 years, the certification being a Master’s Diploma or a Diploma of Advanced Studies.  Doctoral studies, with a duration of 4 up to 6 years, organized by universities. The title of doctor (Ph.D.) granted by the institution is validated by the National Council for the Attestation of Academic Titles, University Diplomas and Certificates. The Doctoral Diploma is the highest academic degree awarded after extensive study and research and requires the submission of an original thesis.  MBA (Master of Business Administration) is a professional degree that aims at training those who work in the business and management environment. Graduate education in Romania has several forms: regular courses, low frequency courses and open distance learning.

5.2. Master Studies Bucharest University offers over 180 Master’s degrees and advanced study programs, over 50 doctoral programs, advanced postgraduate programs, and programs of professional conversion and development. The Master’s Programs train students in several areas of specialization: Biology, Mathematics, Chemistry, Law, Physics, and History. The Bucharest Academy of Economic Studies offers in its 11 faculties 86 Master’s courses, with different economic specializations: Accounting, Finance, Trade, Marketing, Management, etc. One of the largest public universities offering postgraduate courses is the National School of Political and Administrative Studies, located in Bucharest. The main study areas are: Administration, Communication and Public Relations, Political Sciences, Management and European Integration. Prestigious Universities all over the country include in their educational programs several postgraduate courses, covering a large area of specializations.

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5.3. MBA Programs In a survey of the best MBA programs in Romania (made by the daily newspaper “Ziarul Financiar” in the summer of 2012) over the last 5 years, the winners are: 2012 – The Romanian- Canadian MBA For 17 years now, the Romanian-Canadian MBA program, organized in partnership with the University of Ottawa, Telfer School of Management from Canada, has prepared over 800 specialists – the majority of them now top managers in important companies. The Faculty includes 38 Romanian and Canadian professors and 10 lecturers with extended experience in the business environment. With over 1.000 graduates in the last 15 years, The Romanian-Canadian MBA is one of the largest MBA programs in the Romania. The tuition fee includes a business trip to Canada and amounts to 13.500 EUR. The Romanian-Canadian MBA is concentrated on study considering the Romanian business environment specificities. Romanian-Canadian MBA Program offers its students, in an organized and professional way, the courses for career development, offering them huge opportunities after graduation. 2011 – EMBA Tiffin University The Executive MBA Program is offered by Tiffin University in partnership with Bucharest University. The Tiffin University Executive MBA Program is widely recognized by various institutions and corporations as providing students with a level of skills and knowledge which enables them to assume positions of greater responsibility and reward. The Executive MBA Program is focused on developing competencies in communication skills, leadership and teamwork, information technology, and problem solving. Tiffin University’s Executive MBA program at the Bucharest University in Romania is the only program that has achieved the highest position on most criteria, six in a year, out of 12 proposed by the “Ziarul Financiar” publication, in the top MBA/EMBA in Romania. The tuition fee is to 17.000 EUR. 2010 and 2008 – EMBA Wu Executive Academy The Executive MBA (Bucharest) provides immediately applicable, cutting-edge business expertise. It is tailored to the rapidly evolving challenges faced by executives in today‘s dynamic, globalized economy. An acclaimed international faculty works alongside high profile executives

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of global business. The aim is to transmit a combination of research-tested theoretical content, real-world business tools and case studies to impart a deep understanding of management and leadership best practice. The focus of the program is General Management (Managing People and Organizations, Accounting, Financial Management, Data Analysis & Decision Making, Marketing Management, Change Management, Competitive Analysis & Strategy) and Global Leadership (Business, Government and Macroeconomics, Managing Globalization, Advanced Financial Management for Global Markets, Information Technology Management, Negotiation & Conflict Management) The target group of the program is made up of managers and executives with a university degree and at least 5 years management experience. The program fee is 35,000 EUR (including tuition, course materials, catering during the modules and residencies). Over the last 4 years the program had 120 graduates in Romania. 2009 – EMBA CEU Business School CEU Business School was the first educational institution in the Central-Eastern Europe region to train managers by offering a Western graduate business program leading to an American MBA. Since its very beginning, the school has pursued the goal of developing standards in line with Western institutions, while ensuring timely and relevant consideration of the changes within the region’s transforming economies. CEU Business School offers various programs, including a full-time MBA, an Executive MBA (part-time), several tailored Executive Education Programs, and, together with three other top global Business Schools, offers the International Masters in Management (IMM) Executive MBA which has been ranked #1 in “International Course Experience” and #2 in "Career Advancement" by Financial Times in their 2010 worldwide EMBA-Ranking. Central European University (CEU) is organized as an American graduate institution, governed by a Board of Trustees. It was incorporated in the State of New York. The University has an absolute charter from the Board of Regents of the University of the State of New York, for and on behalf of the New York State Education Department. In 2010, over 85 Romanian professionals graduated EMBA CEU Business School in Budapest. There are many voices that raised concerns regarding the lowering of standards in Romanian Educational Systems. The salary level for employees in education is amongst the lowest on the market (an average financial package is around 250 EUR net/month; 50% under the average

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level). Earning less than €400 monthly, many highly ranked teachers left the system and were often replaced by under-qualified beginners. Corruption invaded the education system, as bribes became promotion tools for many students. Poverty is another scourge: the number of children who dropped out of school tripled between 2000 and 2007 according to UNICEF. The financial crisis in 2008 made this worse. Budget cuts shut down schools in rural areas, making it hard for children living in isolated villages to reach school. One in two teenagers failed the Baccalaureate exam in Romania in 2012 after 12 years of study. This means that more than 100.000 young people could end up unemployed, negatively influencing the country’s already fragile economy. On the other hand, many of the thousands of smart young people who emigrate for better education remain abroad after graduation, get a job and live as immigrants for the rest of their lives. The brain drain phenomenon has been developing in Romania especially since the country joined the European Union. University fees were significantly reduced for Romanian students and work permits could be obtained more easily. Emigrants who return to Romania after graduation and get a job are usually overqualified compared to other entry-level colleagues, but their income is lower than what they expected. While the state-funded system is facing financial problems, some private Universities in Romania are making a huge profit. Also known as “diploma factories”, these institutions are enrolling a large number of students each year. The quality of education in these private establishments is usually even lower than in the state system. Many of their graduates end up unemployed.

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6. COMPENSATION AND BENEFITS 6.1. Brief Salary and Benefits Report for Key Positions Note: The information below is intended to provide an overview of specifics of the mentioned positions and does not claim to be an exhaustive salary and benefits analysis. Position Title

GENERAL MANAGER

Equivalent titles (depending on the type of company and industry sectors)

Managing Director Chief Operating Officer Chief Executive Officer General Manager positions held by locals are more and more wide-spread in Romania as far as international/multinational companies are concerned. In the last couple of years there is an obvious increase in the level of trust granted to local competencies for these strategic positions, and many expatriates have left Romania in favor of a local management class. While there are companies in which the administrative and coordination roles take pre-eminence over the strategic planning part, local General Managers might in time prove their ability not only to implement policies, but also to develop and adapt them to market specifics. This actually represents the added value of a local professional in this role and cannot be underestimated.

How the position has evolved over time

Professionals that have reached this position usually have a background in sales with well-known multinational companies. It is only rarely that such positions are occupied by previous Finance or Marketing Managers. Most often than not, the educational background of these professionals will include graduation of an MBA (either with a local school or abroad) as well as of other high-quality training sessions. Their competencies are necessarily multi-functional, comprising an understanding of financial implications of business decisions, but not being limited to this. Their personality profile is usually that of a risk taker with a constant orientation towards results and an innovative thinking pattern in terms of strategic design. As far as the motivational patterns of candidates accessing these positions are concerned, one should expect a particular interest in the size of the business, strategic investment plans and image on the international market. Last but not least, these candidates are particularly motivated by the degree of freedom in

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making decisions and by the level of trust with which they are invested, becoming increasingly frustrated should the environment prove to be a limiting and excessively controlling one.  Typical Key Responsibility Areas

Typical subordinate areas (usually specific, depending on the industry sector) Salary ranges

Specific benefits

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Achievement of organizational goals (establish and achieve organizational goals in accordance with group interests) Strategy and policy formulation (define strategies and formulate policies to ensure organizational objectives are met) Operational management Public relations (representation of the company)

  

Finance Sales/ Business Development, Marketing Production, IT, Logistics

         

Small organizations: 2.000 – 4.000 EUR net/month Medium organizations: 3.500 – 6.000 EUR net/month Large organizations: over 6.000 EUR net/month Company car, mobile phone, laptop Insurance (life + medical) Performance related bonuses Budget for relocation and transport Company shares Private pension Medical services



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Position Title

FINANCE MANAGER

Equivalent titles (depending on the type of company and industry sectors)

Finance Director Chief Financial Officer Finance Managers continue to be highly valued in the Romanian business environment. This has led in the past years to the creation of a professional elite in this field, with an analytical approach to career changes. While at the beginning of the 90’s local finance professionals were mainly dealing with the administration of documents according to active legal constraints, the increasing number of multinational companies with complicated reporting structures as well as the settling in Romania of wellknown audit companies have changed the ways in which the finance profession is viewed and acknowledged.

How the position has evolved over time

Finance professionals have increased their role in the strategic management of the business, in the development of risk analyses and adequate subsequent planning. Responsibilities now include reporting according to international standards, strategic investment coordination and implementation of efficient financial procedures according to new market realities. While a significant number of finance professionals have embarked upon ACCA courses, those that have not yet finished the program might consider support from the company in this respect as a motivational issue. Furthermore, finance professionals might now be more motivated than ever to acquire a strategic position within a well-established company (or one under a solid growth pattern). Interestingly, many of them confess an active interest in being part of a start-up company, thus being given the possibility of a fresh start in terms of policies, procedures and strategies. Last but not least, their interest in regional responsibilities is not to be overlooked.

Typical Key Responsibility Areas

Typical subordinate

  

 

Management of accounting and financial departments Consolidated reporting according to group/company standards Development and implementation of specific procedures in areas such as: accounting, revenue control and investments, budget, contract administration. etc. Interaction with internal and external audit staff Accounting

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areas (usually specific, depending on the industry sector)

Salary ranges

Specific benefits

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 Financial Analysis  Reporting and cost controlling Possible:  Payroll  IT  Security  Human resources  Legal  Small organizations: 1.500 – 2.500 EUR net/month  Medium organizations: 2.000 – 4.000 EUR net/month  Large organizations: over 4.000 EUR net/month  Company car, mobile phone, laptop  Insurance (life, health etc.)  Performance bonus  Budget for relocation and transport  Sport budget  Private pension  Medical services

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Position Title

HUMAN RESOURCES MANAGER

Equivalent titles (depending on the type of company and industry sectors)

Human Resources Coordinator/ Supervisor/ Responsible

How the position has evolved over time

Professionals in this field have mainly been formed in multinational companies, because the local companies did not have this role. When looking for an HR Manager, one should consider evaluating professionals based on their exposure to concrete areas of practice and not just theoretical knowledge. Despite the relatively low positioning of this function within organizations during the 90’s, the evolving business environment has managed to create an elite of professionals in this field (competence not being necessarily related to the graduation of specific courses). The current role of the HR Manager necessarily includes participation in strategic development planning, implementation of HR policies and strategies consistent with the company’s culture and local market environment. The shift in this case will be from administrator to trusted advisor.

Typical Key Responsibility Areas

     

Typical subordinate areas (usually specific, depending on the industry sector) Salary ranges

Specific benefits

Human Resources planning within an agreed budget Develop staffing plans, coordinate recruitment and selection Intermediate work relations between employees and company management Ensure the development of adequate HR instruments (performance management, training and development, payroll etc.) Ensure the legal compliance of all personnel related documents Maintain the relation with the Trade Union, participate in the negotiation of the collective work agreement (if applicable)

 Training, Recruitment, Payroll Possible:  Health& Safety, Legal, Office assistant  Small organizations: 1,000 – 1,500 EUR net/month  Medium organizations: 1,500 – 3,000 EUR net/month  Large organizations: 3.000 – 6.000 EUR net/month  Company car, mobile, laptop  Insurance (health, life)  Performance bonus  Budget for relocation and transport  Sport budget  Private pension  Medical services

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Position Title

MARKETING MANAGER

Equivalent titles (depending on the type of company and industry sectors)

Marketing Coordinator/ Responsible While at the beginning of the 90’s the concept of “locally developed brand” was almost non-existent and the marketing profession was more limited to the implementation and adaptation of international strategies into an immature market, with the further development of multinational organizations and the take-over of production facilities, marketing professionals have in time moved from a position of execution to one of conception, playing a major strategic role in the development of the business as such. Market research has also gained significant ground, as well as the active interest in trade marketing initiatives (in order to better bridge the forever existing gap between marketing objectives and sales strategies).

How the position has evolved over time

Thus, nowadays, a marketing professional is expected to possess a varied range of competencies that would help him/ her project marketing-related decisions into such areas as finance and sales. Top professionals in this field will also have a background of achievement in product development (coupled therefore with an understanding of production constraints) with such specific areas as labeling and packaging design, as well as development of price strategies. The motivation of such professionals comes from the opportunity of being exposed to the rigors of an international environment while also being offered the possibility to manifest creativity and innovation in an increasingly competitive market. When considering accepting a position, they will be extensively concerned with the future development plans, with the size of the allocated budget and last, but not least, with the driving force of the business. 

Typical Key Responsibility Areas

Typical subordinate areas

     

Development of the marketing strategy, advertising/ promotion campaigns, launch campaigns Forecasting profitability rates and market share performance New brand/product development Managing marketing mix Monitoring brand performance Price strategy recommendations Brand Managers

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(usually specific, depending on the industry sector)

Salary ranges

Specific benefits

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             

Market Research Analysts Trade Marketing Events Promotion Small organizations: 1.000 – 1.800 EUR net/month Medium organizations: 1.500 – 3.000 EUR net/month Large organizations: 3.000 – 5.000 EUR net/month Insurance Specific training Performance related bonuses Budget for relocation and transport Sport budget Private pension Medical services

Position Title

SALES MANAGER

Equivalent titles (depending on the type of company and industry sectors)

National Sales Manager Country Sales Manager Business Development Manager The sales profession has been one of the areas attracting the highest level of interest from the beginning of the transition period. Entering sales was one of the most inspired decisions of many graduates of Technical Universities at the start of the 90’s. Being mostly engaged in a growth period, companies were at that moment open towards employing candidates with potential rather than experience and supporting them in the development process. This is the generation that has currently reached the level of National Sales Manager and even General Manager.

How the position has evolved over time

The competencies that this professional elite has developed were to a large extent related to a thorough understanding of the Western concept of commerce, the management of complex distribution systems, the understanding and practice of merchandising techniques, sales planning and routing, etc. In time, these specific skills were enriched with openness towards other sides of the business that implied a better understanding of the marketing and financial aspects. A significant number of Sales Managers considered at some time the necessity of enrolling in specialized MBA courses in order to further their knowledge and help position their expertise upon a more valuable level. These days, the notion of sales as such is more often than not surpassed by the idea of business development as a concept which accommodates

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a larger understanding of sales in terms of strategic planning in organizations, whose activity aims at internationalization of endeavors and ultimately recognition of products on an international scale. The motivation of professionals in this field, while still significantly related to the financial side, has lately undergone some changes. Sales Managers will be concerned about company image and reputation, autonomy of decision-making processes and coherent career development opportunities.

Typical Key Responsibility Areas

Typical subordinate areas (usually specific, depending on the industry sector)

Salary ranges

Specific benefits

 Strategic sales plan development  Establishing objective  Progress evaluation and monitoring  Distribution and volume targets forecasting  Negotiations  Team management and development  Field sales  Distribution  Sales support Possible  Supply chain  Marketing  Customer care  Small organizations: 1.200 – 2.000 EUR net/month  Medium organizations: 2.000 – 3.500 EUR net/month  Large organizations: over 4.000 EUR net/month  Company car, mobile, laptop  Insurance  Specific training  Performance related bonus  Budget for relocation and transport  Sport budget  Private pension  Medical services  13th salary Note: the salary usually includes fixed and variable pay (the percentage being 70% - 30% most of the time).

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Position Title

PRODUCTION MANAGER

Equivalent titles (depending on the type of company and industry sectors)

Manufacturing Manager Plant Manager Operations Manager Technical Manager One of the main challenges for professionals in this field of activity has been a widening and enrichment of their understanding of production flow and related managerial responsibilities. The necessity to accommodate within their everyday activities such initiatives as efficiency and effectiveness improvement prompted them into enriching their knowledge and implementing novel systems and solutions.

How the position has evolved over time

The production professional’s profile is now seen as strategic within the organization’s structure. His/her responsibilities are now strongly related to the management of quality-related initiatives, as well as to the provision of an efficient interaction with other key business areas, such as finance, sales and marketing. While traditionally the production-related positions were considered less flexible in terms of relocation or undertaking of a more varied range of activities, the late trends indicate openness towards positions not necessarily within the comfort-related geographical areas. However, financial packages have also adjusted themselves in order to accommodate this flexibility and provide a necessary balance.

Typical Key Responsibility Areas

Typical subordinate areas (usually specific, depending on the industry sector) Salary ranges

Specific benefits

 Production  Maintenance  Facility management  Volume, quality and cost objectives  Investments  Ensure the transfer of new projects  Production, Maintenance, Production Planning Possible  Process & Engineering, Quality Assurance, Warehouse  Small organizations: 800 – 1,500 EUR net/month  Medium organizations: 1,500 – 3,000 EUR net/month  Large organizations: over 3.000 EUR net/month  Company car, mobile, laptop  Budget for relocation  Sport budget  Private pension  Medical services, insurance

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6.2. Current Compensation and Benefits Best Practices The compensation and benefits policy has evolved significantly in the last couple of years in Romania and became a strategic part of HR system. Today, an important part of the companies on the market have competitive compensation & benefits strategies in order to ensure employee retention and satisfaction. According to AIMS SalaryMap 2012 survey, 39% of manufacturing companies offer more than 12 salaries per year. Just 35 % of these companies include the additional salaries in the base annual salary. The rest consider additional salaries as part of total income. The percentage is quite similar in R&D field, where 37% of the R&D companies in the Western part of Romania (Timisoara, Cluj-Napoca, Sibiu) do offer more than 12 salaries per year. Almost half of them are included in base pay. The annual increase of the salary package is a current practice on the market – AIMS SalaryMap 2012 survey indicates that 86% of the participant companies (98 manufacturing companies from Western and Central part of Romania) stated that they have a policy for annual collective base pay increases. 83% of these companies declared that this collective increase takes place once a year. Besides the base salary, many companies are paying bonuses. Variable Pay most often consists of:  Performance-related bonus – monthly (for workers) or annual (for specialists and management)  Holidays Bonus  Other bonus (for exceptional achivements, for example)  Paid Overtime  Meal Vouchers The great achievements of employees are also rewarded. According to AIMS SalaryMap IT 2012 (a survey conducted among 34 R&D companies from the Western part of Romania) 84% of the participants are rewarding their employees with cash prizes for special achievements. According to the same survey, many companies that want to differentiate themselves in terms of rewarding special achievements may choose some of the less frequent recognition options: tickets for special events, trips abroad, goods gifts. The no. of vacation days/year is most common between 21 and 30 days. AIMS SalaryMap 2012 report shows that many companies from the manufacturing field allows extra vacation days for their employees.

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Zile de concediu pe an/ Vacation Days per Year

21 zile/ days 22 - 25 zile/ days 26 - 30 zile/ days

100% 80% 60% 40% 20%

39%

57%

56%

40%

40% 51%

0% Management

Specialiști / Specialists

Muncitori / Workers

Another current practice on the market is related to private medical services. In a country where the public health system is still poor, private medical services are highly rated by the Romanian employees and employers. AIMS SalaryMap IT 2012 report shows that more than 3/4 of participant companies (84%) mentioned that they offer employees additional medical services, other than those mandatory by law. Beyond granting meal vouchers (88% of companies in R&D provide this kind of benefit), only few companies cover their employees’ lunch. The average training budget/employee/year for 2012 is forecasted at 761 lei (over 165 EUR) in manufacturing area, while in R&D the training budget is more generous – the average training budget/employee/year for 2012 is forecasted at 1.630 lei (over 360 EUR).

Do you offer company car for management? 2% 20%

78%

Da / Yes

Nu / No

Nu știu / I don't know

The company car for management level is also a common practice on the market. According to AIMS SalaryMap 2012 survey, over 70% of participant companies provide this benefit.

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7. FURTHER PERSPECTIVES ON THE ROMANIAN BUSINESS ENVIRONMENT Romania has been through difficult times in the past three years, marked by harsh austerity measures that culminated in a 25% cut in public sector wages, a reduction of 15% of pensions and an increase in VAT from 19% to 24% in 2010. Romania started to emerge from global recession later than other East-European countries, only in the second quarter of 2011. After a good year in 2011 (with a GDP growth of 2,5%, beyond expectations), the year 2012 could be another year of economic stagnation and political turmoil. The international debt crisis and the economic collapse of Greece put additional pressure on Romanian economy, which is heavily interconnected with the EU area. Romania’s latest projections estimate a real GDP growth rate around 1% in 2012 mostly due to exports and last year’s better agriculture harvests. Romania’s unemployment rate has remained at around 7.2% for the past three years. At the end of 2012, inflation rose to over 5%. On a short and middle term, challenges to maintaining growth include uncertainty in the euro area and export markets, political developments in the context of local and parliamentary elections at the end of this year, and absorption of EU funds. There are many structural problems that put additional pressure on the Romanian Government. Romania’s energy sector is still dominated by state-owned enterprises (SOEs), which the Government has initiated measures to improve, as well as to enhance competition, and attract private capital needed to boost competitiveness in the sector. Access to healthcare in Romania is skewed towards the wealthy. Almost half of the poor do not seek care when needed, and of the public funds allocated for healthcare, much is wasted on inefficient and unnecessary services or treatments. The current health system is heavily biased towards costly inpatient hospital care. The Government’s health reforms try to promote costeffective outpatient and primary care services, introduce co-payments, rationalize hospital infrastructure, regulate the introduction of new drugs and technologies, and review the basic benefit package reimbursed by the public health insurance system. Once considered a breadbasket for Europe, agriculture plays an important role in Romania, however the sector is underdeveloped. Despite having the highest proportion of rural population in the EU (45%), Romania has the highest incidence of rural poverty (over 70%), and one of the largest gaps in living and social standards between rural and urban areas. Romania imports an increasing proportion of its food needs, even though almost 30% of employment is in agriculture.

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Romania's entry in the Schengen Area, within which borderless travel is possible, has been postponed again in 2012. Several Western European countries' hesitance to allow Romania and Bulgaria into the Schengen Area is due to their poor progress in tackling corruption since their EU accession. Another potential risk for the future is the demographic decrease and the ageing process of the population. The low birth rate, associated with a total fertility rate fewer than 2 after 1990, caused a decrease in the youth proportion. The 1st of January 2000 was the first time when the young population was exceeded in number and percent by the elderly. The children aged 0-14 years were 3% less than the population of 60 years and over. As in other countries in Europe, this phenomenon will put additional pressure on the Public Pension System and human resources labor after the year 2025. However, in the long run, there are some positive signs and many financial analysts estimate that, even if another wave of economic crisis would hit back, the Romanian economy is now better prepared to deal with it, after the heavy cost-cutting from last years. The crisis finally prompted long-needed reforms, with support from the international financial institutions, in health, education system, the financial sector, public financial management, public administration, social insurance, social assistance and legal system. Some of these reforms address short-term responses to the crisis, while others are anchored in a longer-term strategy. The infrastructure is still poor, but some progresses are made in the development of Romanian highway system. In the last two years over 200 km of highway were finalized, more than in the previous 20 years and ambitious projects were started in an effort to raise the Romanian infrastructure to European standards. Romanian export-oriented manufacturing industries continue to grow slightly in 2012, whereas sectors such as retail and construction are on the path of slow recovery. Among the most competitive and dynamic sectors are R&D, automotive industry, energy sector, telecommunication, wood industry, transport & logistics and BPO Centers. Romania is one of the strongest markets in Europe for technology investment and trade, with a highly skilled technology workforce, competitive costs, top-tier investors and a friendly business environment. As the fastest growing and top IT market in Europe, Romanian companies serve the world's most demanding offshore customers in IT outsourcing, business process outsourcing, call center support, and product development. The Romanian IT market follows that of Poland, the second largest market in Central and Eastern Europe.

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According to a technical study made by Vesta Wind Systems in 2011, Romania has the greatest potential for growth in the wind energy industry in Eastern Europe in the next five years. Romania may produce as much as 14,000 megawatts of wind energy and may develop into a sustainable market. Romania is attracting investors in wind power because of its location along the Western shore of the Black Sea, where the average wind speed is about 25.2 kilometers per hour. The local industry has the potential to generate as much as 30.7 billion kilowatt-hours a year, powering the equivalent of Ireland, Serbia and Peru and giving Romania an edge against other East-European nations. For the first time after 2008, Romania could record a bigger economic growth then Poland’s in 2013, Poland being the only EU member state that did not fall into recession during the crisis, according to the forecast of the International Monetary Fund (IMF). The Fund maintains its forecast of 0.9 % growth this year and 2.5 % for next year for Romania, which were announced by the mission visiting Bucharest mid-August for the sixth review of the precautionary agreement between the Fund and Romanian authorities. The last growth bigger than Poland’s was recorded in Romania in 2008 (the year when the global financial crisis sharpened) – when the economy grew by 7.3 % compared to 5.1 % for Poland. With the salary costs levels well beyond the EU average and a good position on the geopolitical map (near the Black Sea and the Danube, close to Central Europe countries, part of EU area, full member of NATO security treaty), some areas such as Agriculture and Tourism with current performance way beyond their potential, which will improve in the future, Romania has positive perspectives for development in the future.

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8. BIBLIOGRAPHY 1. STUDIES:  Human Resources Management in Romania – Virgil Cristian Marinaş,  Business in CEE 20 years after the fall of the Iron Curtain – a study by TARGET International Executive Search and Henley Business School,  Financial crisis effect on Romanian Banking System- Rosu Anca Maria,

 Romanian Company Formation- Vlad Cuc,  Types of Romanian Companies- Vlad Cuc,  Real Estate Due Diligence in Romania- Vlad Cuc,  Diagnostic Surveys of Corruption in Romania - World Bank,  Industrial relations in Romania during economic crisis- Aurelian Muntean,  Impact of direct foreign investments on Romanian economy- Gianina Dragota, Adriana Horablaga,  Organization of the education system in Romania - European Commission Report, 2009,  Changes occurring on the labor market in the context of Romania’s EU accession Tiberiu Cristian Avrămescu,  Demographic changes and the labor market in Romania - Dr. Valentina Vasile,  Youth insertion on the Romanian Labor Market - Carmen Ionescu,  Romanian Snapshots- World Bank report,  IMF Report for Romania - 2010, 2011,  Doing business in Romania 2012- UHY,  Country Report- Romania 2011- Atradius,  Doing Business in Romania- PKF,  Romania Tax Guide- PKF,  Employment Guidebook- Tuca Zbarcea & Asociatii,  Real Estate Guidebook- Tuca Zbarcea & Asociatii,  Doing business in Romania, 9-th edition- Musat and Asociatii,  External competitiveness of the Romanian regions and counties - Mihaela Nona Chilian,

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 Productivity and the regional employment in services. Econometric estimations for Romania - Doina Jula, Nicoleta Jula,  Program for economic growth - Foreign Investors Council, Bucharest, 2010,  Forecast on the stability of the Romanian financial system using a stochastic simulation model - Claudiu Tiberiu Albulescu,  Cross Border Employers- Overview of Romanian Employment Law - Danielle Urban.

2. LEGAL FRAME -Romanian Labour Code (2011), 3. MEDIA: 

Ziarul Financiar - 2009/2012,

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Business Magazin -2011,

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Bloomberg -2011 ,

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Capital -2011, 2012,

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Romanian Business Week - 2009,

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Romanian Times,

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Biz -2009, 2010,

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Adevarul - 2011, 2012,

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http://www.doingbusiness.org



http://www.romanianeducation.com