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Restructuring Through FDI in Romanian Manufacturing

Author

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  • Gabor Hunya

    () (The Vienna Institute for International Economic Studies, wiiw)

Abstract

Romania has experienced a drawn-out transformation process and received relatively low amounts of foreign direct investment (FDI). But it has become competitive in labour-intensive manufacturing industries through the integration into European company networks by processing trade. The country has also achieved economic growth supported by a massive export expansion for the third year running in 2002, after long and deep setbacks. The FDI inflows of the last five years have decisively contributed to the resumption of economic growth and the recovery of exports. But flowing at the current speed and in the current structure, FDI will not be able to restructure the Romanian economy in a way for it to stay on a rapid economic growth path. Despite the low amount of FDI in Romania as compared with the more advanced transition countries, foreign penetration in the manufacturing industry is high. With a database relying on company balance sheets, the performance of foreign affiliates in manufacturing industries was analysed. An important finding is that significant foreign presence in an industry coincides with increasing export performance. Foreign affiliates have so far had a conserving rather than restructuring effect on Romanias foreign trade structure. FDI reinforced Romanias traditional specialization in clothing, footwear and metals. They are also the driving force behind the emergence of exports in the electrical machinery and electronics sector. We can foresee a similar development in the car industry in the future. More success in new export industries was hindered by unfavourable conditions for green-field investments.

Suggested Citation

  • Gabor Hunya, 2002. "Restructuring Through FDI in Romanian Manufacturing," wiiw Research Reports 287, The Vienna Institute for International Economic Studies, wiiw.
  • Handle: RePEc:wii:rpaper:rr:287
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    Cited by:

    1. Hasanat Shah, Syed & Li, Jun Jiang, 2013. "Does Chinese Investment Contribute to The US Economy? An Analysis of Selected US States’ Growth, Employment and Exports," MPRA Paper 52575, University Library of Munich, Germany.
    2. Kaminski, Bartlomiej & Ng, Francis, 2004. "Romania's integration into European markets : implications for sustainability of the current export boom," Policy Research Working Paper Series 3451, The World Bank.
    3. repec:bla:worlde:v:39:y:2016:i:12:p:1947-1973 is not listed on IDEAS
    4. Harry G. Broadman, 2005. "From Disintegration to Reintegration : Eastern Europe and the Former Soviet Union in International Trade," World Bank Publications, The World Bank, number 7511.
    5. Cristina JUDE, 2012. "Horizontal and Vertical Technology Spillovers from FDI in Eastern Europe," LEO Working Papers / DR LEO 710, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    6. Frenkel, Michael & Funke, Katja & Stadtmann, Georg, 2004. "A panel analysis of bilateral FDI flows to emerging economies," Economic Systems, Elsevier, vol. 28(3), pages 281-300, September.
    7. Xu, WeiGuo & Hu, DaiPing & Lei, AiZhong & Shen, HuiZhang, 2008. "FDI chaos and control in China," Research in International Business and Finance, Elsevier, vol. 22(1), pages 17-28, January.
    8. MASCA Simona-Gabriela & JUDE Cristina, 2009. "The Vicious Circle Of Fdi And Consumption In Romania," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 2(1), pages 417-423, May.

    More about this item

    Keywords

    foreign direct investment; restructuring; foreign investment enterprises; foreign trade; privatization;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform
    • P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects

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