2.3. Free trade zones

The legal framework setting up the activity of Free Trade Zones in Romania is represented by Law no.84/1992, concerning the regime of free zones in Romania and Romanian Government Urgency Ordinance no.31/1997, concerning the regime of foreign investments in Romania.

Incentives offered by the Romanian legislation are:

	the means of transport, merchandise or other goods coming from abroad or bound to other countries which enter or exit the Free Zone  shall be exempted of custom duties and taxes;
	for the activities carried out within the free zone, the companies will be exempted from the payment of VAT, excises and income taxes throughout the period of their activity;
	the means of transport, the merchandise and other goods of Romanian origin or imported entering the free zone from the Romanian customs territory may be introduced in the free zones providing that the legal formalities regarding export or temporary export are fulfilled;
	the materials and accessories that enter the free zones in order to be used for manufacturing other goods for export shall be exempted from customs duties, proving that formalities for export are carried out;
	the goods of Romanian origin used for constructions, repairing and maintenance of objectives within the free zones are free of customs duties;
	the goods may be transported from one free zone to another without any customs duties;
	upon liquidation or reduction of the activity carried out within the free zone, foreign natural or legal persons may transfer abroad the capital and the profit, after having paid all their debits to the Romanian state and to their contractual partners. 100% foreign ownership is possible.

Explosives, drugs, arms, ammunitions, psychotropic substances, radioactive and toxic substances, as well as any other substance or material prohibited by Romanian law are forbidden to enter into the free trade zones.

The activities which may be carried out within Free Trade Zones are: handling, storing, sorting, measuring, packing, conditioning, processing, assembling, manufacturing, testing, auctioning, buying, selling, hiring and concession of land and buildings (concession may be done for a period of up to 50 years), the quantitative and qualitative control of goods, surveying, repairing, dismantling, exhibitions, stock's exchange operations, commercial-financial operations, inner or international transports or forwarding, brokerage, agency and ship-chartering services, as well as other free zones specific activities. For all of these activities and for the goods entering or leaving the free zone, all documents, requested by Romanian laws in force, are necessary to be issued. Any natural or legal persons may carry out all mentioned activities; foreign or Romanian, on grounds of a license issued by the Free Trade Zone Administration.

At the national level, the activity of the Free Trade Zones is co-ordinated by the "Free Trade Zone Agency", within the Ministry of Public Works, Transport and Lodging.

Constanzta-South Free Zone - 37.5 ha. 

The Constantza-South port, one of the biggest ports in Europe, is located along the fourth and seventh pan-European transport corridors. Moreover, it has the privilege of being the Black Sea largest harbour, allowing big tonnage ships to operate easily in the wharf area with depth of 13.5 meters. Due to its position and dimension, the Constantza port has a particular prospect for the attraction of the port traffic and the development of the economic activities, as well as for the international carriage of goods by sea. Only 6 hectares out of about 37 hectares are not yet leased. 

Basarabi Free Zone

It is a branch of Constantza South Free Zone, with an area of 11 hectares. This zone became operational by the end of March 1999. Feasibility studies have been elaborated for setting up other three branches in Constantza, Medgidia, Cernavoda and Mihail Kogalniceanu airport. 

Giurgiu Free Zone

This free zone includes a lot of commercial companies, the Industrial park of Giurgiu County and 40 hectares of forest. The area to be leased is very small, of only 25 hectares, out of which 80-85 % of the entire area has already been leased. 

Arad-Curtici Free Zone

It is the first such zone in the Western part of the country. Its main advantage lies in fact that it is situated along the fourth pan - European corridor. The first enclosure of the free zone has an area of 15 hectares and is located near Arad airport. The second enclosure of 75 hectares is close to the international marshalling yard in Curtici. The advantage of that free zone lies in its flat land, which does not need special arrangements because the necessary utilities for beginning the activity are already in place. 

Sulina Free Zone -101 ha

The river and the sea are the only available transport ways for Sulina Free Zone. At the same time, those who are using Sulina Free Trade Zone have access -through International Sulina Channel - to Western and Northern Europe and to the Middle East region- through Black Sea. 

The Sulina Free Zone has over 70,000 sq.m of platforms, fenced and equipped for open storage, more than 5,000 sq.m covered areas, in warehouses, fit to accommodate any general cargo, 3 floating cranes of 16 ft capacity, provided also with grabs, 2 floating cranes of 32 ft, perfectly fit for 20 ft and 40 ft containers handling (all cranes are self-propelled), 2 river pushers, each of 840 HP and one sea/river tugboat of 630 HP, 2 covered river barges Europe 2A-type of 1500 MTS capacity, each, several 3.5-10 ft forklifts, bobcats for bulk cargo trimming, tractors and trailers etc., all serving 5 operational berths. These can accommodate any sea vessel, whose draft does not exceed the 23-ft limit, still imposed by Sulina Bar.

Galati Free Zone - 262.81 ha  

Is located inside the area of Galati harbor, very near to the Romanian border with the Republic of Moldova and Ukraine. The Galati harbor is the gateway to the Community of the Independent State. It has direct access to the Danube. Galati Free Trade Zone is connected, through the Black Sea, with the Mediterranean Sea and with the Western Europe on the route Danube-Main-Rhine.

Within Galati Free Trade Zone there is the connection point of the Romanian railway network with the wide gauge railway system from the CIS territory. Here a large railway network with ordinary gauge assures the connection with Western Europe.

Roads: The access ways inside Galati Free Zone are connected with the Romanian road network, being connected, at the same time, with all the countries from Eastern and Western Europe.

Braila Free Zone - It covers a 110.4-hectares area divided into three enclosures, with necessary utilities (electricity, water and telecommunication). 20 % of total area is leased. 

2.4. Foreign exchange system 

The inter-bank currency market in Romania began operations in 1995. In early 1997, the Government lifted all forex dealership restrictions. In 1998, the Romanian government implemented new regulations that liberalised the foreign exchange market on the current account. New fore rules, consistent with the IMF's article VIII, were issued by the National Bank of Romania (1 February 1998) regarding the domestic current-account convertibility of the ROL. 

The ROL is fully convertible for business purposes. Foreign investors may freely repatriate profits and dividends in hard currency. Proceeds from the sale of shares, bonds, or other securities, as well as from winding-up an investment can also be repatriated. There is no limitation on the inflow or outflow of funds for remittances of profits, debt service, capital gains, returns on intellectual property or imported inputs. Foreign investors are permitted to maintain ROL accounts to purchase goods domestically. Capital exports, although permitted by law, with a few exceptions, are generally discouraged.

2.5. Privatization 

The State Ownership Fund (SOF) established in 1991, with the task to administrate and to sell the shares it holds in state owned companies, was transformed in December 2000 in "Authority for Privatisation and State Equity Administration" 

During the period December 1992 – December 2000, the SOF performed the privatization of 7,244 companies, of which 270 big, 1,664 medium and 5,310 small sized. 

At present, in certain industrial branches, the privatization process is almost completed: 

	the manufacturing of cement, leather and articles, fur products, oils and fats;
	the recovering of wastes and recycling materials;
	the manufacturing of varnishes and paints;
	the building and building upgrade;
	printing;
	wood processing industry;
	metal constructions and metal products industry;
	medical and precision instruments and apparatus, optics and watchmaker industry.

The Government of Romania has applied for a Public Institution Building Loan from the International Bank for Reconstruction and Development (IBDR) under which the services of investment banks and sales agents will be sought.
SOF organizes international tenders for the selection of privatization agents for:

	5 large state owned enterprises to be privatized by investment banks;
	5 large state owned enterprises for work-out/liquidation, by work-out firms/agents in charge of closing down;
	50 large/medium-sized state owned enterprises offered in pools to privatization agents.

Prestigious International companies have already been short-listed for the tendering process: Merrill Lynch, Salomon Smith Barney, Citibank, Chase Manhattan Bank, Credit Suisse First Boston, Deutsche Bank, Flemings, and Societe Generale. 

2.6. Foreign investments

Foreign investors may invest in all Romanian economic sectors, excepting some strategic branches, internationally acknowledged, such as health services, education and public administration. 

Foreign investments alternatives: 

	establishment of a new company, subsidiary or a branch;
	participation to the equity increase of an already existing company or the purchase of equity shares of such companies;
	concessions, leases or agreements to manage the economic activities;
	purchase of ownership rights on chattels and land property, excepting for the land and residential buildings not related to the investment;
	purchase of industrial and intellectual property rights;
	exploration, exploitation and production sharing agreements related to the extraction of natural resources.

Legal type of business organizations: 

	general partnership,
	limited partnership,
	limited partnership with shares,
	joint-stock company,
	limited liabilities companies.

2.6.1.Evolution of foreign investments (at the capital incorporated of setting-up companies)

 Source: National Trade Register Office

Registered capital: 

	joint-stock company – not lower than 25,000,000 lei;
	limited liability company – not lower than 2,000,000 lei and it shall be divided into equal participation shares which can not be less than 100,000 lei each.

Procedure to register a corporation in Romania: It was significantly simplified. The investor comes into contact with only one institution – The National Trade Register Office within which the company will be located.

2.6.2. Foreign investors participation to the Romanian capital December 1990 -December 2001

                Note> ***  Less then  0,01%

                Source: National Trade Register Office 

  2.6.3.  The number of companies with foreign participation of capital and the value of their registered capital, during 1991- 2001

Source:  National Trade Register Office 

2.6.4. Number of companies with foreign participation of capital and the value of their registered capital, during 1991- December 2001

2.6.5. Number of companies with foreign participation of capital and the value of the registered capital, during January -December 2001/2000

  Source: National Trade Register Office

 2.6.6. Companies with foreign participation of capital and the value of their subscribed capital, during 1991 - 2001 (sequence of the counties)