Romania
Romania is among the emerging central and eastern European nations building an industry focused on mobile communications, IT, and information and communications technology (ICT). For the period of 2007-2010, its ICT market value has reached an estimated EUR 400 million and its IT services market, around EUR 340 million. The public sector for Software and IT Services in Romania is seeing the greatest expansion, and is predicted to increase its market share in coming years.
Romania is strong in the following areas: mechanical engineering sourcing; research and development; systems integration and; security and embedded software development outsourcing (particularly in embedded software, information security, and chip design). One of its fastest growing IT market segments is offshore programming which reached $4.8 billion in total revenue by 2006. Romania is becoming popular destination for antivirus software development, in particular Bitdefender, created by Softwin (Bucharest) and RAV Antivirus from GECad, which is an intellectual property of Microsoft.
Romania has low labor costs compared to other EU states. Romanians are adept in foreign languages, and have a high level of engineering and economics education. Some of the companies that have established their businesses in Romania include: Wipro, Siemens, Motorola, Alcatel, HP, Oracle, Xerox, Bosch, and Unicredit.
Despite its growing status as a rising outsourcing provider, Romania needs to improve on its reputation as one of the most corrupt. Although not always fully justified, many companies still believe that it is more corrupt than other European locations, such as Czech Republic and Poland. Other disadvantages include lack of incentives from the government, and nominal financial investment in customer service, and a significant shortage of IT labor base.
Country overview
Romania entered the European Union in 2007, enabling improvements via numerous programs and funds invested to help transform Romania into the “EU’s information society”. One sector currently boosting its economy is outsourcing; Romania, which was the first producer of computers and computer networks in the Communist bloc is now becoming one of the largest electronic outsourcing industries in Central and Eastern Europe today.
Romania is located between Bulgaria and Ukraine and has a population of around 22 million, with Romanians making up 90%. The official language is Romanian, followed by Hungarian and Romani. There are an estimated ten million people who speak English and French, with some who also speak Spanish, Italian, and German. Romania is a secular state, however 87 percent are members of the Romanian Orthodox Church Roman Catholics and Protestants only make up about four to five percent of the population.
When Romania joined the European Union in 2007, the nation had a virtually obsolete industrial base with a lagging economy. In 2005, the government changed its progressive tax system into a flat tax of 16% for its corporate profit and personal income, making Romania the nation with the lowest fiscal burdens in the EU. 2009 saw major economic hardships in Romania, but through major budgetary cutbacks, the nation is once again seeing improvement and is expected to resume growth by the end of 2011.
Source: CIA Factbook, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Cost competitiveness
The 1990's saw a wave of skilled Romanian IT workers leaving the country to earn better salaries. However, many of them have returned home due to the increase in salaries and exemption to the income tax rate. The government's action to eliminate the 16% salary tax for software developers and other IT positions have resulted in an increase of 40% in wages and around 30 to 50% increase in the number of employees for multinationals who transferred their outsourcing centers to the country.
Employee compensation
Salaries of software engineers or web developers are about 38 percent of U.S. resources, and those with one to four years of experience earning on average USD $22,200. This is relatively high compared to the Philippines (10 percent), India (12 percent), but on par with its neighbors like Russia (36%) and Ukraine (33%).
Senior Software Engineers or Web Developers have an average salary between $24,000 to $49,000 USD, 37 percent of their US counterparts. IT Project Managers average 31 percent of US salaries.
BPO sectors have varied costs. Junior, non-voice resources are about 41 percent of the U.S., while highly skilled BPO Managers average around 45 percent of US salaries. The cost for Operations Managers is high with salaries at 77% of those in the US.
Taxes
Romania offers tax exemption to IT project managers, software engineers, data base administrators, engineers/IT system designers, programmers, and analysts.
Romania's corporate tax rates are relatively low, with around 16 percent compared to Canada (33 percent), India (34 percent), and Russia (20%). Romania follows Bulgaria and Hungary in the top three countries with the lowest tax rate.
Source: PayScale, SourcingLine, February 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: KPMG, October 2009
Source: KPMG, October 2009
Source: Doing Business (World Bank), 2010
Resources and skills
Romania has a total workforce of 9.35 million with an estimated 64,000 IT specialists, placing it sixth in the world for its number of certified IT specialists. Microsoft has recognized Romania's clear potential to become one of the leaders in information technology, and attribute this to the ability to excel by students, researchers and entrepreneurs in information technology.
Outsourcing sector
Romania exports USD $988 million in computer and information services, followed by Poland, Argentina, the Philippines, and Ukraine. Other miscellaneous exports such as research and development, management consulting, accounting, and legal services are approximately $2.5 billion, with China, India, and Canada leading as the countries with the highest profit in exported miscellaneous business services. Many of Romania's human capital investments are focused on IT-related sectors requiring skilled labor. Scholars believe that this can make Romania’s economic growth very vulnerable to IT software demand and pricing fluctuations.
Technological readiness
Internet access and broadband subscriptions are good indicators that a country is open to technology. Romania has relatively average Internet access, with 29 per 100 inhabitants connected. Its broadband Internet subscription rate is 12 percent, which places it among the top ten globally (Hungary is the only other European nation on the list).
Education
Romania has a highly-literate population, placing ninth globally. Its expenditure on education is just four percent of its GDP, and compared to Mexico (6.4), Malaysia (6.2), and Canada (5.2). Nine percent of its population is university-educated, and science and technology graduates are around 20 percent of total graduates annually. Romania produces around 8000 computer science and electrical engineering graduates per year, many excelling in advanced research and development.
Source: CIA Factbook, 2009
Source: IMF, 2008
Source: IMF, 2008
Source: UNESCO, 2009
Source: UNESCO, 2009
Source: OECD PISA, 2006
Source: OECD PISA, 2006
Source: OECD PISA, 2006
Source: UNESCO, 2009
Source: UNESCO, NASSCOM, SourcingLine, 2009
Source: UNESCO, 2009
Source: International Telecommunications Union, 2009
Business and economic environment
Romania was once named "Tiger" due to its fast development and high growth rates. Its capital, Bucharest, is one of the largest industrial centers in the region, with a metropolitan area that inhabits nearly 2.6 million people. The global economic downturn has contracted its economy 7.2%, but is expected to see positive growth by the end of 2011.
Economic competitiveness and stability
The Global Competitive Index has given Romania a score of 4.2. respectively. Similarly, its macroeconomic stability is also average at 4.5, comparable Philippines, Hungary, Poland, and India.
Infrastructure
Romania ranks low for its roadway infrastructure, with road quality indexed at just 2.1. The quality of roads in the country varies from fair to good, although most of the roads are in bad condition. Most are poorly lit, with narrow and unmarked lanes. Electric supply fares better with an index of 4.5, comparable to Russia and Ukraine but well below Poland and the Czech Republic.
Regulation
Romania's overall ease of doing business is high, ranking eleventh in the top twenty countries with the easiest business environment. The top five countries are the U.S., Canada, Thailand, Malaysia, and Israel. It takes on average ten days to start a business, and 222 hours per year in preparing and filing taxes.
Corruption
Romania has a problem with corruption, and according to the Transparency International its Corruption Perception Index is 3.7 - better than Russia and Bulgaria.
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: International Telecommunications Union, 2009
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Transparency International, 2009
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: The Global Competitiveness Report, 2009
Source: BSE-IDC Global Software Piracy Study, 2009