Teodora Sanda Chetan

st
IBM, 1 year

Foreign Direct Investment in Cluj Napoca

December 2010

Introduction

Romania as a country has been and still is a place with major advantages when it comes to
investing and foreign direct investments. It is one of the largest markets in CEE with a very
attractive location. It has also important resource advantages, such as highly skilled labor
force at a competitive price (solid knowledge in foreign languages, technology, IT,
engineering, etc), rich natural resources and a pretty high potential for tourism.

The fact that Romania is part of NATO and EU guarantees political stability, while the
adherence to UN, free trade agreements and WTO and bilateral agreements with some
countries on investments promotion and protection are some other plus points that makes
Romania an attractive country to invest in. Except all this, there are several tax, economical,
social, legislative and different technological and infrastructure developments that complete
the picture.

Foreign Direct Investment in Romania – some facts

As we can see in the table below, the growth of the FDI in Romania increased substantially till
2008, after that it took a slower pace and decreased, mainly because of reasons such as the
financial crisis, increased competition with some other parts of the world with regards to FDI
advantages and the finalized process of privatization of the big state owned companies that
happened till 2008.

The next table shows the situation of the FDI attracted by Romania in the first semester of
2010. We can observe a constant total growth of the FDI (stock and monthly flow) per month.

The table below presents the number of foreign companies that invested in Romania in the
first semester of 2010.
 Teodora Sanda Chetan
st
IBM, 1 year

Cluj Napoca – city introduction

Cluj Napoca is one of the biggest cities in Romania and the capital city of the Cluj county, and
it has historically been one of the largest Romanian academic, cultural and commercial hub.

The city is the historical capital of Transylvania, with more than 10 Universities and 58
specialization fields of study and colleges, one of the most cultural, economical and industrial
cities of Romania. It lies in the centre of the country, at the crossroads of many national and
international highways. The Cluj county is the access gate to the Western Carpathians, an
area with a great tourist potential due to the beautiful landscapes, the picturesque villages,
the geological phenomena and rare flowers.

Key things that make Cluj Napoca a good FDI destination

• Cluj Napoca is an important financial and university center of Romania

• The city has the largest pool of students (in percentages), and that means it has a
good pool of qualified personnel
• The talent pool can speak multiple languages, such as Italian and French, therefore
is suited to provide multi-lingual services
• The talent pool in the city is also suited to provide research and development
services
• The city has both an established manufacturing and a service industry
• Cluj Napoca is becoming a tier II alternative for companies situated in Bucharest
• The time zone difference makes the city suited to deliver near shore services to
Western Europe
• The country offers relatively a cost advantage over other Western and Eastern
Europe cities
 Teodora Sanda Chetan
st
IBM, 1 year

Why to invest in Cluj Napoca?

The Mayor of Cluj Napoca published on the municipality website the following 10 reasons
why a company should invest in Cluj Napoca:
1. Important European academic center
2. High qualified labor force
3. Significant economic resources
4. Developing infrastructure
5. Advantageous geographic location
6. High-potential for research, development and innovation
7. Dynamic and developing economic environment
8. Successful investments, renowned investors
9. Central European culture, authentic cultural and historical values
10. Excellency. Magnetism. Openness

One of the reasons why companies choose Cluj Napoca for FDI is the pretty well developed
infrastructure: the highway project to connect Budapest with Bucharest, the E60 European
road, the International Airport which is one of the biggest and most important in Romania.

Cluj Napoca is an important IT hub in Romania. It is considered as an alternative outsourcing

location to Bucharest, due to increasing competition. Except IT, the services offered by Cluj
Napoca are the research and data analytics, order management, finance and accounting,
engineering services, software development and IT services.

With two prestigious universities (Babes Bolyai and Technical University), there is an annual
pool of 12 000 students which provides a steady inflow of entry-level work force. Romanian
youth also speak good English and a lot of Latin languages that companies can benefit from.

KPMG Advisory recently published the "Exploring Global Frontiers" study, which places Cluj-
Napoca amongst the first 31 word destinations for investments in the field of information
technology (IT), highlighting the key aspects which make it attractive: the specialists, the
costs and the geographic position.

Other key elements are the fact that there are developing office spaces (IT platforms) and
network telecommunications in order to sustain the business growth and performance in Cluj
Napoca.

Business Opportunities

A niche that can be exploited largely is the medical tourism. Cluj-Napoca is a renowned
medical centre, and the professional services provided are attractive not only to the locals,
but also to those from outside the city.

The schools and universities in Cluj-Napoca also have their share in raising the number of
visitors. The services provided attract thousands of students every year, both from Romania
and from abroad; as for the national and international conferences organized by the academic
structures, they contribute to the prestige of the city and place it on the agenda of scientists.

Last, but not least, cultural tourism develops around events organized in the city. The
Transilvania International Film Festival, Cluj Musical Autumn Festival, The Mozart Festival
and Transilvania Jazz Festival highlight this opportunity.
 Teodora Sanda Chetan
st
IBM, 1 year

FDI in Cluj Napoca by sectors

The main sectors of development and FDI, according to the Cluj Town Hall, in Cluj Napoca
are the following:
- Machinery and electric apparel
- Financial activities and outsourcing
- Informatics, especially IT&C
- Chemical industry (pharmaceuticals, cosmetics etc.)
- Machinery and equipment, particularly automotive supplier companies

According to the most recent BNR (National Bank of Romania) statistics, the value of the
foreign direct investment in Cluj Napoca was 183.1 million euro in 2008.

Following, there is a short presentation of the main companies that invested in Cluj Napoca in
the last few years, grouped by sectors. The majority of these companies are Greenfield
investments.

1. Services sector:

• Nokia Enterprise Solutions Romania

• Siemens Program and System Engineering
• Genpact
• Deloitte
• Nivis Romania S.R.L.
• Evalueserve
• Millenium Bank
• RE/MAX
• KPMG
• Lugera&Makler
• SESCA Technologies
• Groupama
• Trilulilu (aquisition by a French investor)

2. Industry

• Nokia
• Office Depot
• Emerson
• Terapia Ranbaxy (aquisition)
• Friesland Foods
• Gima
• EVW Holding S.R.L.
• Michelin
• Mecelec Plastic Compozit (MPC)

3. Infrastructure

• Bechtel
• Garboli Conicos Tirena Scavi
• Siemens Elin Buildings & Infrastructure GMBH & CO
• WizzAir
• Malev
• Lufthansa

4. Malls, Supermarkets, Hypermarkets

• Immoeast Immobilien Anlagen AG Dawnay Day

• Baumax
• Auchan
• Cora
 Teodora Sanda Chetan
st
IBM, 1 year

• Carrefour
• Praktiker
• Kaufland
• Metro
• Real

Conclusions

Even throughout the economical crisis, choosing Romania as a FDI destination was for many
companies a very good decision. Romania, and in this case, Cluj Napoca are a preferred FDI
destination mainly because of the qualified cost effective work force, advantageous
geographical location and time zone, developing infrastructure and economy.

I think that even with the development of even more cost effective work force in different
countries in Asia or Latin America, Romania and Cluj Napoca won’t loose their attractiveness
for FDIs mainly because of the competitive differentiators mentioned above that won’t
disappear with the arising competition.

Bibliography:

1. http://www.arisinvest.ro/en/why-romania/fdi-statistics/
2. http://www.arisinvest.ro/en/why-romania/reasons-to-invest/
3. http://www.primariaclujnapoca.ro/en/?business-opportunities
4. http://www.primariaclujnapoca.ro/en/?10reasons
5. http://www.primariaclujnapoca.ro/informatii-utile/informatii-pentru-investitori.html
6. “Exploring Global Frontiers”, 2009, KPMG report