As in all emerging markets the financing of infrastructure projects requires a good understanding of both the legal and the financial solutions associated with them. This is why the Romanian authorities needed and continue to understand the process adopted by domestic and international investors. As part of this process the Romanian authorities have passed the laws to facilitate foreign investment in Infrastructure projects and also has signed a number of Investment Treaties.
Romania is a country that has suffered from years of corruption, which resulted in the need for there to be a clear infrastructure development strategy to attract foreign investors, as well as a clear understanding of the process.
Many foreign investors have been attracted by Romania’s cheap labour and its low-cost infrastructure projects which has resulted in an increasing number of such projects. The country is attracting more and more international investment due to the rising numbers of infrastructure contracts being awarded to developers. Developers who are often part of a consortium of both local and foreign players.
Romanian government has also been able to attract much-needed investments through taxation incentives on real estate and capital gains, as well as low corporate taxes.
How Foreign Investors are Funding Romanian Infrastructure Projects
Many foreign investors are interested in investing in Romania’s infrastructure projects. They want to create jobs and make the country a better place at the same time benefiting from profitable projects.
The policy of the Romanian government has been focusing on attracting foreign investment and has shown positive effects on the economy overall. The government wants to attract even more investments in the future, using these policies as a foundation for success. Foreign investors have invested in Romania because it has been seen as a safe place for investments. The interest rates are also low, local banks will lend on the right project making investments beneficial and profitable.
Why Should European Funding be Used for Romanian Infrastructure Projects?
There are many reasons that European funding should be used for the Romanian infrastructure projects. Firstly, the European cooperation policy is defined in terms of solidarity, which means that all member states must contribute to the development of other member states. Secondly, EU funds have been allocated for Romania and its infrastructure to facilitate a more robust economy. Thirdly, Romania has signed up to a series of international agreements concerning climate change and air pollution and treaties concerning migration and asylum seekers. All these acts show Romania’s commitment to the future. Although the changes in Government may have caused delays this has not stopped the development of future projects and the desire to have them implemented.
As is well known to build a successful infrastructure project, one must have a sound financial plan and funding. Often, it is hard to predict the revenue model of an infrastructure project. This is primarily because it is hard to predict how the market will change after implementing the project. It is clear however that financial donors and funds see Romania as an economy which will develop over the next few years and will need and continue to need strong infrastructure development.
The European Union has been investing in Romania since 2007 by providing access to financial support for infrastructure development. This investment has been vital in promoting economic growth and catching up on the insufficient infrastructural developments.
Financing and investing in Romanian infrastructure projects with Private Equity and the EU Funds
The European Union (EU) funding is currently one of the most attractive funding sources for infrastructure projects. The Romanian economy despite COVID-19 is continuing to boom and in 2021 all parties are looking to the Romanian economy to continue to be one of the strongest in emerging markets in Europe. This is leading investors to look to put their money into its newly emerged infrastructure projects.
Private equity is currently the most effective type of funding for these projects because it is long-term, stable, and flexible. Non-Romanian private equity funds make the majority of private equity investments in Romania, with Romanian funds having a small presence. Institutional rather than private funding sources include the European Bank for Reconstruction and Development (EBRD), the International Finance Corporation (IFC), and other financial organizations and pension funds.
Private equity provides capital at a lower cost than other types of capital and comes with less risk and more significant returns. And finally, private equity is also a vehicle for long-term investments that are not possible with public funds.
How to make the most of an investment in a Romanian infrastructure project
Romania is in need of foreign investors and the potential gains are immense when it comes to the development of diverse projects. There are also benefits for individuals willing to take a chance on Romania’s developing economy with affordable prices, a stable political climate, and high quality of life.
It is essential to have a robust infrastructure that would benefit society in the modern era. If a company wants to invest in a Romanian infrastructure project, it must be prepared for all possible risks and have in place contingency plans to cover these risks
The first step in making the most of this investment is being aware of all possible risks that could happen along the way. One must also know how to cooperate with local authorities and take advantage of opportunities when they arise.
Investing in Romania can be rewarding, but it requires careful planning and obtaining the best advice before committing funds to Romania. As Romanian lawyers we see not only the positive but also the negative sides of any venture. Romania is open to many proposals and will continue to be a valuable market in Eastern and Central Europe.