Friday, May 2, 2008

Eastern Europe Capitalizes on Growing EU Membership

World Trade Magazine

by Lara L. Sowinski
May 1, 2008

If there’s one question that Cynthia Biggs, Commercial Attaché for the U.S. Commercial Service in Bucharest, Romania, gets more often than not, it’s ‘Why Romania?’

Last month’s NATO meeting in Romania, the largest NATO summit in history, may help get the word out, but Biggs points out that a recent ambassadorial ‘road show’ to the U.S. will likely answer that question for American companies a little better.

“We’re the best-kept secret in the EU,” she says, listing an impressive group of statistics—a population of over 22 million, eight consecutive years of GDP growth, low inflation and labor rates, and an educated workforce that posses excellent foreign language skills.

And, having joined the EU on January 1, 2007, together with Bulgaria, Romania is eligible for roughly 20 million euros in structural and cohesion funds from 2007 through 2013. While this is clearly a boon for the country, it also represents an opportunity for U.S. companies who can partner with a Romanian company, Biggs explains.

One company that has already gotten in on the action is San Francisco-based Bechtel Group, which is heading up construction of a $3.2 billion, 258-mile divided highway (the Autostrada Transilvania) that will become a vital link in the country’s infrastructure when it’s completed in 2011. The highway is significant on several fronts. For starters, it will nearly halve the driving time from Cluj-Napoca (an industrial hub in the center of Romania) to Vienna, which is a major gateway to Western Europe. Currently, the trip takes about 9 hours.

The project is also laying the groundwork for major foreign investments. Nokia already announced the closing of a German factory in favor of relocating it to Cluj, says Biggs, while St. Louis-based Emerson Electric has plans to build a major manufacturing facility there too. “It’s a win-win for everyone,” she says. “All of the earth-moving equipment is coming from Caterpillar and you’ve got a huge transfer of knowledge. There are also about 3,200 people working on the project, most of them Romanians.”

While the project itself may not have figured prominently in Ford Motor’s decision to take over Romania’s Automobile Craiova plant in March, there’s an obvious synergy to the development. According to John Fleming, president of Ford of Europe, the company’s $1 billion investment would position Romania as the biggest auto producer in southeastern Europe. The first vehicles are expected to roll off the assembly line in 2009, and beginning in 2010, Ford will manufacture a small, spacious, and inexpensive car that will only be made in Romania. In four years’ time, Ford expects to produce 300,000 vehicles annually.

Biggs says there will be substantial benefits for other companies as well, considering that Ford will continue to procure auto parts and components from U.S. manufacturers.

Although the road and rail links are in need of upgrading, the country’s Port of Constantza on the Black Sea is a modern facility that some say is on its way to becoming the ‘Rotterdam of Eastern Europe.’ The claim may not be too far-fetched given that Constantza ranks as the largest port on the Black Sea and handles millions of tons annually of coal, oil, metals, grain and other goods, both bulk and containerized. The port also enjoys a strategic location between Western Europe and the former Communist bloc and Turkey.

Biggs says the country’s three international airports are also fairly modern, but that with the EU accession, they are undergoing significant upgrades to comply with international safety and security regulations.

Another sector that is very attractive to U.S. exporters and investors is Information Technology. “About 85 percent of the products on the market are of U.S. origin,” notes Biggs. Indeed, Romania’s potential in this sector was not lost on one of the world’s most well known leaders in the field—Bill Gates. Last year, Gates traveled to Romania to inaugurate Microsoft’s Global Technical Support Centre in Bucharest. “When asked why he chose Romania, Gates said the country had a great geographic location, and a workforce that possessed great IT skills and language skills,” says Biggs. “It’s interesting to note that there are over 300 Romanians working on Microsoft’s campus in Seattle,” she adds. “This is quite a testament to Romanians’ IT skills. Oracle, IBM, you name them, they’re here.”

In fact, the country was also chosen to receive a grant from the Bill & Melinda Gates Foundation, which will provide Romanians with free access to computers, the Internet, and technology training in public libraries and reading rooms. According to the Foundation, only 20 percent of Romanians have Internet connections at home—and most people with access live in cities. Biggs says the grant will also have positive effects for Romanian businesses.

Biggs offers some advice for U.S. companies interested in Romania. “Start with your local Export Assistance Center (the U.S. Commercial Services’ network of trade specialists located in more than 100 U.S. cities and over 80 countries worldwide). You can access a wealth of information and intelligence on a variety of markets. We’ve just uploaded the Country Commercial Guides to the Web site, too. These are in-depth market research reports that are updated each year. You can also find out about the Gold Key matchmaking service or participate on a trade mission. There are so many resources available to U.S. companies.”

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