SIMILAR ARTICLES

Salaries in companies with domestic capital increase faster but remain half the level in foreign companies. Why

Salaries in domestic companies continue to grow as staff shortage widens, but remain half the level registered in foreign firms, according to an analysis by… Mai mult

BNR meeting minutes: Six comments on local economic development

Although gross fixed capital formation had a surprising positive contribution to the economic growth in the first part of the year, members of the National… Mai mult

Public deficit, out of European practice: How others stand

Romania recorded the largest public deficit among the EU states in 2018, according to data published by Eurostat, except for Cyprus (-4.8% of GDP last… Mai mult

IMF report – Conclusions show that Romania has become a new and atypical growth model: through imbalances. Which will soon get to be paid

Romania’s macroeconomic imbalances have increased in the past year, and economic and fiscal policies have to change so that the population’s incomes and prospects of… Mai mult

Discharging imbalances on RON exchange rate could start even this year. Analysts’ scenarios and BNR’s uncertainty

Analysts’ scenarios on the evolution of the exchange rate are rather prudent for the coming months, but severe for the beginning of the next year… Mai mult

Cronicile

Foreign capital in Romania and the EU – proportion of added value. Observations, lessons, calculations

de Marin Pana , 15.4.2019

Romania ranks fourth among the EU member states in terms of foreign-controlled enterprises’ added value share in the national economy, according to a recently concluded analysis published by Eurostat.

With a level of 44%, we are right behind the podium occupied by Hungary (51.4%), Slovakia (48.1%) and Luxembourg (44.6%).

Behind us and above the level 40% are the Czech Republic (43.3%) and Ireland (43.0%), while the EU average is 25% and the minimum is recorded in France (16.4%), Greece (16.3%), Italy (15.8%) and Cyprus (13.4%). It should be noted, though, that Eurostat statistics refer only to the non-financial sector.

The development trend in the economy segment under foreign control has deepened during this decade, with an increase of 2.3 percentage points at the EU level. Even the European locomotive, Germany, is very close to the EU average, with 24.8%.

Although, at EU level, it holds only 1.2% of the total number of enterprises, foreign capital provides 15.3% of the jobs. Which implies (given the result of 25% of added value in the economy) a productivity of 163% of the national average across all EU countries, showing the extra dynamism and also explaining the interest for investment outside the country of origin.

Eurostat’s more detailed data show that there are almost one-tenth of the EU foreign-controlled companies in Romania (27,662 enterprises compared to a total of 280,808 European enterprises) and the gross operating surplus amounts to nearly EUR 13 billion, a value placed between about EUR 8.5 billion in Portugal and EUR 20 billion in the Czech Republic, countries that have a GDP very close to Romania.

Related to the value of production obtained by foreign-controlled enterprises in the three countries (about EUR 88.6 billion at us, EUR 157.2 billion at Czechs and EUR 53.1 billion at Portuguese), we see values obtained very close to profitability, with the 14% from Romania slightly above the 13% level in the Czech Republic but below the level of 16% in Portugal.

Europe’s giants and fundamental differences between them

Beyond the presence of other countries’ capital in an own economy, the balance of these investments is what counts very much, which is best expressed by the net investment position as a share of GDP (otherwise, a criterion on the EU’s macroeconomic scoreboard, with a requirement of maximum – 35%).

For example, Germany has 25% of the gross added value produced under foreign control, but in fact by investing in other states, it also had a positive net position of around 51% of GDP in 2016 (the year on which Eurostat completed the analysis at the beginning of 2019), further increased to 61% in 2018.

By comparison, although the foreign presence in the French economy was significantly lower (see the above about 16%), France had a negative net position of -15% of GDP, diminished to -12% last year.

Romania and other colleagues

Going back to the Czech Republic, Romania, Portugal trio, net investment position is the one that makes the difference and explains the Czech economic dynamism (moderate but solid) compared to the Portuguese stagnation.

Therefore, the Czech Republic checked the European criterion with -27%, Romania was striving around -49% (later improved toward 45% based on the GDP growth, but we would also need some Romanian investments abroad) and Portugal more or less missed the opportunity with -105% of GDP.

On the other hand, in the context of the globalization expansion and the integration into the EU single market, perhaps we should learn something and start using the difference between the “Romanian economy” and the “economy in Romania”.

Obviously, if we consider that four fifths of the financial sector is under foreign control, the simple majority of gross added value in Romania depends (whether we like it or not) on decisions taken outside the country. Decisions on which we should pay more attention when adopting internal policies concerning the “local” economy.

*

Methodological note

Statistics on foreign-controlled enterprises (abbreviated as FATS from Foreign AffiliaTes Statistics) are standardized at the EU level and imply a direct or indirect control, materialized in the ability to decide the company’s strategy, the way of managing the business, and the ability to appoint the majority of directors.

In most cases, this approach involves a foreign investor holding more than 50% of the shares or voting rights, directly or indirectly (through another affiliated entity).

There is also the possibility for a control minority to exist, which owns no more than half of the shares or voting rights.

Mergeți în homepage ›

Publicat la data de 15.4.2019

Lăsați un comentariu


NEWS

Laura Codruta Kovesi remains alone in the race for European Chief Prosecutor

French Prosecutor Jean-Francois Bohnert will be appointed as head of the European Financial Prosecutor's Office, a position for which he was heard on Thursday, 11… Mai mult

Romania - EU country with highest risk of dying in a road accident, Bulgaria is quickly decreasing number of victims since it built motorways

Romania recorded the highest road deaths in the EU also last year, with 96 deaths per one million inhabitants in 2018, almost double the EU… Mai mult

Latest developments in progress at Health Ministry: Differentiated wages based on performance, competitions organised at a regional level not by hospitals

Sorina Pintea announced on Thursday further new changes that will be brought to the functioning of the health care system, including new rules for employment… Mai mult

ANAF changes selection procedure for liquidators. Main changes

The new order on approval and selection procedures for insolvency practitioners is an important step to a very good direction, industry experts say. ANAF is… Mai mult

Romania loses competition for a seat at UN Security Council. MAE Excuse: Campaign started too late

Romania lost to Estonia in the final vote to get the non-permanent member position within the UN Security Council for the period 2020-2021. On Friday,… Mai mult

Business internationalization / eMAG makes a step to entry five new international markets and targets a business of EUR 2 billion

eMAG hopes to get the opinion of the Hungarian Competition Council over the next two months for the acquisition of Extreme Digital, the market leader… Mai mult

"At a distance from books": 85,000 teachers (one third of educational staff) are graduates of distance learning

Approximately 85,000 teachers are graduates of distance learning (ID) programs, Education Minister Ecaterina Andronescu said at a meeting with school inspectors from Caras-Severin County. The… Mai mult

Mugur Isarescu: We should make a film for Viasat History about treasure in Moscow

A book should be written or a movie should be made and sent to Viasat History about a treasure evacuated to Moscow, as it is… Mai mult

Rhythm of commercial vehicle registration increases 3 times faster in Romania than EU average

Today, the European Automobile Manufacturers Association (ACEA) announced the status of commercial vehicle registrations in EU member states + EFTA in April and cumulated after… Mai mult

4.2%, from 3%: BNR has increased inflation forecast for 2019

The National Bank increased the inflation forecast for 2019 by 1.2 percentage points, from 3% to 4.2%. Also, the forecast for 2020 goes up by… Mai mult

Emergency procedure at European Court of Justice for Romania’s question: Are MCV recommendations mandatory?

The Court of Justice of the European Union (CJEU) has decided that Bihor Court’s request to be discussed under the emergency procedure, which is a… Mai mult

Government decides to increase external borrowing ceiling by EUR 4bn. It has consumed program resources for two years

The Government's agenda for Wednesday also includes the draft decision to increase the foreign loans ceiling for 2019 and 2020 by EUR 4 billion, up… Mai mult

Preparations for Summit in Sibiu - European Commission’s recommendations for EU's strategic agenda

On Tuesday, the European Commission presented a series of policy recommendations on how Europe can shape its future within an increasingly uncertain and multipolar world.… Mai mult

Meeting between Prime Minister Viorica Dancila and Chinese Prime Minister Li Keqiang: talks on a possible involvement of Chinese companies in PPP projects in Romania

On Friday, Prime Minister Viorica Dancila had a meeting with Chinese Prime Minister Li Keqiang, during which she stated her interest in involving Chinese companies… Mai mult