- Observatory: EMCC
- Published on: 02 March 2008
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This report explores the employment impact of globalisation and reviews the attitudes and responses of national governments and the European social partners to this phenomenon in Romania.
So far, Romania has not been confronted with the phenomenon of relocation, either in the case of former, local companies or of foreign companies investing in Romania.
The foremost issue of Romanian governments over the past 18 years has not been the relocation of local or foreign companies but rather how to keep certain national companies operational. The companies under discussion have had neither the resources nor sufficient demand for their products to remain operational on the domestic market, let alone to migrate to other locations or external markets, respectively.
In this sense, by promoting a number of advantages, fiscal ones included, prior to EU accession, the government attempted to create a business environment attractive for investors from other countries: we are referring to the law on foreign investments, amended in the course of time, the law regarding the establishment and functioning of industrial parks, the regulation on disadvantaged zones, a number of successive regulations encouraging the privatisation of state-owned companies, through acquisition by foreign investors included.
In general, apart from fiscal facilities, foreign companies were also attracted by the low cost of labour, compared to the significantly high level of skills (see Eurostat statistics on the level of wage cost and the minimum wage in Romania respectively, in Romania and other EU member countries).
An aspect specific to the benefits of relocation in Romania, is the Inward Processing Trade (IPT) dimension. For instance, in the period 1999-2002, export after IPT ranged from 53.4% (in 1999) to 55.9% (in 2002) of the total Romanian exports, and the import for IPT represented 31.4% and 31.0% respectively of the total imports. Income from IPT totalled a net amount of USD 1.2 billion in 1999 and USD 2.2 billion in 2002. Out of the total exports after IPT, light industry products accounted for 612% and 58.7% respectively in the two years. In recent years, the decrease of IPT in the light industry has been compensated by the growth in machine building, notably components for the motor vehicles industry, in the total exports after IPT from 18.2% in 2000 to close to 30% in 2002.
The main EU member countries involved in the IPT system in din Romania include: Italy, Germany, France, UK and the Netherlands, which together account for more than 90% of the total exports after IPT of Romania in the EU.
The main advantage of IPT is manifest in job retention.
Finally, another aspect worth mentioning, related to the impact of globalisation on employment, is the relocation of the local work force through external migration. Lacking job opportunities on the domestic labour market, around 2 million Romanians have found employment on the labour markets of EU countries. We are referring to: Italy, Spain, Greece, Ireland, France, etc.
These workers generate monetary flows to Romania totalling approximately EUR 4 billion annually. These flows are almost equal to the annual volume of foreign direct investments in Romania. In other words, Romania exports human capital and imports financial capital.
Under the circumstances, the remaining answers to the queries in the questionnaire are negative.
Institutional responses to globalisation
Government action to prevent or reduce the extent of off shoring/relocation
Are there any recent examples in your country (i.e. over the past 3-4 years) of the government intervening to prevent particular activities from being relocated abroad or to reduce the scale of this?
If so, please give summary details and indicate the activities concerned
Social partner attitudes towards off-shoring/relocation
Have there been cases over the past 3-4 years where the possibility – or threat – of relocation of production has featured as a factor in collective bargaining?
If so, please indicate the cases concerned, how the possibility has been used and whether its use has become a more frequent occurrence.
Are there any cases over the past 3-4 years where trade unions have successfully resisted plans to relocate production abroad or have managed to reduce the extent of this?
No. Not the case.
If so, please indicate the cases concerned and outline their main features Are there any cases where trade unions have accepted the need for the relocation of production – or part of it – abroad as a means of maintaining or improving the viability of companies and so of preserving some jobs and even ultimately expanding them?
No. Not the case.
If so, please briefly describe the cases concerned
Government policy on foreign-owned firms controlling significant sections of the economy
Does the Government in your country have an explicit policy on restricting the acquisition of domestic companies in certain sectors by foreign-owned firms?
If so, please give summary details and indicate which sectors this applies to as well as whether any distinction is made between companies according to their nationality (e.g. whether non-European companies are treated differently from European ones)
Are there any restrictions on foreign-owned companies setting up branches or subsidiaries in your country either generally or in specific sectors?
Please indicate the sectors concerned and the stated reasons for the restrictions. Please also indicate whether the restriction apply to companies from other parts of the EU as well as from outside
Are there any sectors of the economy in which the acquisition of a domestic company has not been allowed over the past 3-4 years?
If so, please indicate the sectors concerned and the nationality of the foreign companies involved as well as the reasons given for the decision
Social partner responses to the take-over of domestic firms by foreign-owned ones
Have there been any recent cases (i.e. over the past 3-4 years) where trade unions have resisted foreign acquisition of domestic companies explicitly because of the nationality of the company concerned?
If so, please give summary details, indicating whether there is any evidence of different attitudes being shown towards European firms as opposed to companies from outside Europe
Have there been any recent cases (i.e. over the past 3-4 years) where domestic companies have resisted acquisition by a foreign-owned firm on the grounds of its nationality?
If so, please give summary details, indicating the nationality of the company concerned and whether there is any evidence of European and non-European companies being regarded differently in this regard.
Attitudes to globalisation
Have employers’ associations in your country adopted a stated position as regards the main aspects of globalisation – i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones?
Have trade unions in your country adopted a stated position as regards the main aspects of globalisation – i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones?
*A Eurobarometer survey on globalisation was carried out in 2003 in the EU-15 Member States. This might serve as a useful point of reference for the countries concerned, to see, for example, whether or not national attitudes expressed in the survey are in line with similar surveys which have been conducted nationally. The survey findings are available at:
Have there been any surveys of public opinion in your country over the past 3-4 years on attitudes towards globalisation or on the various dimensions of this (as listed above)?
If so, please summarise the main findings of these. Please give a breakdown, where possible, in terms of the characteristics of respondents (e.g. by sex, age, socio-economic group, education level, occupation, sector of employment or region).
Have these surveys made a distinction between the different dimensions of globalisation (as listed above) or have separate surveys been carried out on these dimensions?
Not the case.
If so, please summarise the main findings of these as regards:
Off-shoring (or the relocation of production abroad;
the take-over of domestic companies by foreign-owned ones and/or the growing extent of control by foreign companies of parts of the domestic economy
the establishment of new plants and offices by foreign-owned companies
Where possible, please give a breakdown in each case in terms of the characteristics of respondents (e.g. by sex, age, socio-economic group, education level, occupation, sector of employment or region)
Have these surveys made an explicit distinction between globalisation and the process of European integration, by, for example, distinguishing between relocation of production to other EU Member States and relocation to countries outside the EU or between the take-over of domestic companies by EU-owned firms and take-over by a non-EU companies?
Not the case.
If so, please give summary details of the differences in response to EU integration as opposed to globalisation.
PhD Constantin Ciutacu, Institute of National Economy