Revenues of Foreign Direct Investment: Economic questions, figures’ answer

de Dordia Tereza | 3.1.2017 .

investitii-straineDuring the time since joining the European Union, dividends distributed to foreign investors exceeded EUR 20 billion and interest paid on loans to their local enterprises from Romania have also brought them about EUR 6.5 billion.

In almost all the nine years analysed, the amounts obtained from the investments made here exceeded 2% of GDP.

What about the reinvested profit?

About the reinvested profit, the loss cumulated in the period 2007 – 2015 was about EUR 8.3 billion, after only in the years from the two ends of this interval the indicator was within the positive range.

The explanation is that, otherwise, dividends paid were higher than the net revenues based on the equity participation in the companies established locally.

Revenues from foreign direct investment

Net revenues earned by foreign direct investors consist of:

– revenues from equity participations

– net interest revenues

Revenues from the equity participations represent the profits of the FDI enterprises, diminished by their losses.

By diminishing the revenues from the equity participation by the dividend distributed to the foreign direct investors, it is obtained the amount of the reinvested profit, calculated according to the corresponding international methodology.

The net interest revenues are the amounts that foreign direct investors receive from the loans granted to their local enterprises from Romania, both directly and through other non-resident companies from the group.

The reinvested profits are negative when the amounts distributed as dividends are higher than the net profits obtained by the FDI enterprises, diminished by their losses, according to their tax returns submitted.

tabel1-e1483375855592

*

  • Revenues from FDI (million euros, 2007-2015)
  • Year
  • Total
  • From equity participations
  • – dividends
  • – reinvested profit
  • Interests
  • – Dividends+interests
  • %of GDP
  • * Average for 9 years

*

It is noteworthy that the part resulted from the loan granted to the FDI companies has increased from only 6% of the total revenues recorded by the official statistics in 2007, to 53% in 2014, to shrink back to 22% in 2015.

In other words, data say that foreign investors earned in 2014 more money from loans granted to the enterprises than the activity of these enterprises, which is quite remarkable.

When the sums above relate to the size of the Romanian economy, to get an idea of what can be obtained from the investments made here, it starts from 2.43% “promotional” in 2007, descends to 1.76% in the crisis’ peak (thanks for understanding), then the share of the ever-existing debt level (not foreign) stabilizes somewhere over 2% of GDP per year (average of 2.17%).

How much trouble for less than one billion euros per year

If we considered the data available since 2008 related to the FDI businesses on profit and those that reported losses, we reach the astonishing conclusion that net result of the foreign investors in Romania from their activity would be weaker than EUR 1 billion per year (see table).

tabel2-e1483375893473

*

  • Year
  • From equity participations
  • – businesses on profit
  • – businesses with losses

*

Overall, statistics show that profits amounted EUR 41.6 billion but at the same time, there were cumulated losses of nearly EUR 34 billion. Ironically, in 2011 and 2012, FDI enterprises even obtained overall a negative result. This is the reason why they can only be pitied for their lack of inspiration and dedication to remain in a so little profitable country.

Interesting is the fact that although the Romanian economy as a whole passed through the crisis and returned even since 2014 at the level of 2008, the FDI enterprises’ profits have failed to follow the same trend. Although that is true, they obtained last year a record, to bring losses down to just EUR 3.13 billion. We look forward to new investments and thank them for their stoicism to bear such losses.

Publicat la data de 3.1.2017 .

Lasa un comentariu


SIMILAR ARTICLES

Mariana Bechir

Horrifying draft of new fight against corruption: granting pardon to convicts, disguised amnesty for prosecuted people. A small list of famous beneficiaries

After olving the wage increa e and amending the Tax Code, the parliamentary majority tarted the econd week of exerci ing the governance: amending the criminal legi lation, e pecially that part relating to the ituation of pro ecuted and convicted people The government draft ordinance on granting pardon and amending the criminal code eem "tailor-made" like – at the client’ reque t ...
Read more »

Adrian N Ionescu

How Romania entered again the top league of most innovative economies in the world: We rank 38th out of 50

Romania ha achieved a core of 5706 point following the calculation for the global 2017 Bloomberg Innovation Index and ranked 38th out of 50 po ition in the top innovative economie Our country mi ed the 2016 ranking and in 2015 ranked 37th The Bloomberg ranking core economie ba ed on factor including re earch and development pending and the concentration of high-tech public ...
Read more »

Marin Pana

Average national gross salary exceeded 3,000 lei: structure of incomes by fields of activity

The average national gro alary announced by INS for November 2016 exceeded the p ychological thre hold of 3,000 lei by five lei, after an increa e of 3% in the previou month The average net wage had al o a three percent advance and reached 2,172 lei or 481 euro , calculated at the average exchange rate from December, the month when money have actually been received In term of purcha ing ...
Read more »

Marin Pana

Social security and budget spending, after 10 years in EU

The ocial ecurity pending increa ed over the ten year of EU member hip by lightly more than two percent of GDP and about a quarter of the allocation for pre-acce ion, all in relation to the country' economic outcome Thi change took place almo t entirely in 2009, the increa e from 2008 being off et by the negative change from 2012-2015 ( ee table) &nb p; Social ...
Read more »

Marin Pana

Beware of industry! And take it easier with redistributing an alleged increase – take a look at Germany

In a time when all public attention ha been focu ed on redi tributing the benefit of a robu t economic growth, pre umed to happen by it elf, almo t nobody i looking at the ector of activity which et , in fact, the general tone: the indu try Even if it only account for a quarter of GDP, it determine the olid, long-term u tainable re ult Or, the re ult announced by the National ...
Read more »


NEWS

Prime Minister Grindeanu about 2017 budget: 5.2% economic growth, 815 billion lei GDP, 253 billion revenues

Prime Minister Sorin Grindeanu said on Sunday evening on Romania TV that the budget deficit in 2017 will fall within the set target of 3%, ... Read more

Liquidity of Romanian banking system - the lowest from Central and Eastern Europe, relative to GDP

The excess liquidity of the Romanian banking system was 4.5 billion lei in December, or 1.3% of GDP, excepting the minimum reserve holdings from the ... Read more

President Iohannis: Power and opposition should reach agreement on parliamentary oversight over intelligence services. Warning on amnesty and pardon!

President Klaus Iohannis announced Tuesday that he signed the two decrees regarding Florian Coldea: the removal from post and placing him in reserve. In his ... Read more

The government is preparing a law on prevention. Companies will no longer be penalized unless they have previously been guided to correct certain mistakes

The Minister of Business, Trade and Entrepreneurship, Florin Jianu submitted for examination in the Government meeting on Thursday, the principles and operation mechanism for a ... Read more

”Civil war between ranks”: SRI First Deputy suspended from office. An internal committee to check any failures to comply with professional ethics

The Romanian Intelligence Service released Thursday a statement announcing that Lieutenant General Florian Coldea will be placed “at the disposal of the SRI Director”. According ... Read more

Deputy Prime Minister Daniel Constantin announced discussions about differentiated tax on some types of income

Deputy Prime Minister Daniel Constantin told Digi24 that flat tax will not be repealed, but there are discussions about the possibility of introducing, as of ... Read more

Official excuse launched for cutting investment: Dragnea criticizes Ciolos for 10 billion lei, precisely the impact of the Government measures decided on Friday

PSD Chairman Liviu Dragnea announced on Sunday evening at Romania TV that “it is very likely” to initiate an inquiry parliamentary commission before which former ... Read more

New Minister of Education changes the rules: School principals who failed the exam may remain in office

The new Minister of Education, Pavel Nastase, changed one of the principles of the competition organised for principals from secondary school. Principals and deputies who ... Read more

Quota of green energy reduced to 8.3% of the final consumption of electricity

The Government decided to cut down from 12.15% to 8.3% of the gross final consumption of electricity the mandatory quota of electricity from renewable energy ... Read more

Hornbach to boycott the wood from Holzindustrie Schweighofer

German DIY retailer Hornbach will waive, starting January 2017, the contract with the Austrian company Holzindustrie for the trade of timber and planed wood. Hornbach ... Read more

Erste Research: Fiscal instruments designed to stimulate the economy have reached their limits. Countermeasures to fiscal loosening to follow in 2017

Romania and Poland “have a very limited room for manoeuvre in the tax area” – if needed, in case that the budget deficit would exceed ... Read more

Profit for the state: not even EUR6 million from 278 companies, overseen by 220 AAAS employees

  The situation of the companies monitored or managed by the State Asset Administration Authority (AAAS) – the successor of former post-communist institutions in charge ... Read more

Emergency Ordinance: Ciolos Government makes room for the future government’s budget

The Government approved on Thursday an Emergency Ordinance to postpone some measures that would have entered into force on 01 January 2017 and had a ... Read more

Firm agreement between KazMunayGas and Chinese CEFC for 51% of Rompetrol shares

KMG International NV (KMGI), the major shareholder of Rompetrol Rafinare, announces that negotiations between the National Company KazMunayGas from Kazakhstan (KMG NC) and Chinese company ... Read more

Top 10 measures of economic impact to be taken if PSD keeps its promises

Many of the economic promises from the government program that PSD launched during the election campaign repeat older themes from the collection of economic policies ... Read more

Business environment: Two of the tax law changes bring taxpayers in the position to no longer be able to obtain cancellation of the notices of assessment

  The Coalition for the Development of Romania (CDR) points out that the legislative package for simplifying and improving the tax legislation, recently approved by ... Read more

Country ‘s residents owning agricultural land equal to 2/3 of the territory - the lowest consumption of fruits and vegetables

Regular consumption of fruits and vegetables is considered an important factor of health and balanced diet. However, an Eurostat report warned that more than one ... Read more

Up to EUR 7 million aid for those who forest the agricultural land in the areas exposed to erosion

Agricultural and non-agricultural land owners, either public and private, can receive up to 7 million euros for creating windbreaks and plantations to combat soil erosion ... Read more

Prime Minister Ciolos's draft budget for 2017: realistic growth of over 4%, deficit below 3% of GDP

The budget draft prepared by the Ministry of Finance is based on an economic growth of over 4% and a budget deficit below 3% – ... Read more

Minister of Defence: There are signals that give us food for thought – antiaircraft protection from Deveselu must be strengthened

“We obviously have to think, and we do that together with our partners and allies, to some elements for strengthening the antiaircraft protection of the ... Read more