Regional Factbooks

The year 1997 finds the Romanian economy in the middle of an important process of restructuring. The final aim is to finish off the infrastructure as a preparation for the future market-economy,
as well as in the middle of the start-off process for a massive privatization of the state-owned Romanian ventures.

In this network of changes the Romanian economy is going through, a very important transformation affects the Manufacturing Industry for Packaging material and equipment. The research regarding the necessity, production and consumption of packaging materials in the Romanian economy for the period 1995-2000 has highlighted the particular direction which investors have to strive for. It is no longer a piece of news the fact that in 1992, when the first major foreign investments took place in Romanian economy, one of the key-problems was the one concerning the packaging of materials. At that time there was only one state-owned venture which produced paper and carton-based packaging materials, two states enterprises specialized in metallic-packaging and four divisions specialized in the production of carton boxes for micro-wave within a big Romanian company producing paper and carton.

The quick development of some industrial branches-such as the Food Industry (sweets, drinks), the Chemical Industry (cosmetics, medicines, soaps), the Textile Industry (fabrics, clothes) - have brought in private investors with Romanian or foreign capital who have tried to fill this gap existing within the packaging market.

Presently, the Romanian consumption of pulp and paper is 15.3 kg/inhabitant. The total production capacity of the existing 15 enterprises is of 905,000 tons/year but only 43% of this capacity was used in 1996.

The domestic consumption of corrugated card board for packaging is only 4.4kg/inhabitant, much lower than 9 kg/inhabitant in Hungary, 8.5 kg in Poland or 10-12 in other European countries. This means that there is an important potential market for this product.

The output of glass packaging (bottles) has also registered a decline in the last seven years.

The 30 million jars produced in 1996 representing only 10% of the 1989 output.

The lack of demand for glass packaging from domestic consumer products is the result of a growing interest for metal, plastic and cardboard packaging as substitutes for glass as well as of the non-competitivity of Romanian glass packaging on the foreign market.

Romanians metal packaging output is produced by only two companies:

AMCO S.A. Buftea and AMEP Tecuci, which are covering most of the domestic consumption. Some producers of canned food have their own canning lines.

Presently AMCO S.A. is undergoing a modernization program of their production facilities.

After 1989, some new, private-owned companies for packaging materials have been established, some of them being joint ventures with an important influx of foreign capital: Romcarton 7,378,000 USD; Rambon 3,250,500 USD.

Most of these new companies are in the area of paper, board and plastic products. New producers of PET packaging have occurred: PET CILP SRL and ROMGER PLASTIC SRL which are important suppliers for companies of the drug, foodstuff and cosmetic industries.

Besides the development of these companies and almost simultaneously, the Romanian legal-framework has changed in the sense of paying more attention to the consumers and of the environment, changes which have led to an increased need for packaging material in all the areas of the Romanian Industrial environment.

In this context the following statistical-data will be relevant for the "packages and packaging"-issue: 1995, the demand for flexible-packaging materials for the Dairy Industry amounted to 1,100 tones; for the Bakery-Industry - 16,000 tones; sugar-based products - 3,500 tones; the Beer and Mineral Waters Industry-2,300
tones (paper and cardboard) wines and alcoholic drinks-300 million labels; Pharmaceutical Industry - about 50 million labels, 39 million prospectuses, 50 million folding-boxes; cosmetics, soaps and detergents - 590 self-sticking labels, 600 million duplex-carton boxes, 1,1 billion paper envelopes for soaps, 10 million prospectuses, 18 million laminated-tubes; 10 million flexible packaging materials; Electrotechnical Industry - 4,5 million micro-waves carton boxes.

This brief presentation includes only a part of the data referring to the great need for packaging materials on the Romanian market. The Industry of Packaging Materials has become one of the dynamic areas of the economy since 1990, and one must not overlook the fact that, according to investors, the initial investment may be covered after a relatively short period of time 2 to 4 years.

The Romanian legal-framework is auspicious especially to the foreign investment in the productive domain of activity, where the production of packaging materials is also included.

Investors such as Coca-Cola, Pepsi-Cola, Colgate-Palmolive, Procter & Gable, McDonalds' Reynolds Tobacco have already entered the market. Together with other potential investors in the packaging industry, many are optimistic of mutually advantageous the potential of their business ventures.

A very interesting subject for the investor concerned with packaging products would be the diversity of the products, regarding both the brands and the range of materials. At the same time, the offer of raw materials for this particular industrial branch should be improved.

Under the conditions of the Romanian economy -- the Romanian food industry has a vital need to expand and modernize its capacities for bottling and packaging.

Romanian demand for equipment for the food industry will also be stimulated by:

The priority given by the government to agriculture, the food industry and tourism;

The need to secure sure outlets for agri-business exports, a goal that cannot be attained with present packaging and presentation of products.

The new investment law passed in June, 1997.

The receptivity score regarding the Romanian market for U.S. bottling and packaging equipment is "fairly receptive". This prudent assessment takes into account the competitive advantages which West European producers have on the Romanian market.

These advantage include:

Geographical proximity;

Existence of traditional links and a better knowledge on the part of Romanian importers of West European firms; and

More rapid reaction of these firms to the change taking place in Romania, and the lead they have gained in presenting offers and establishing contacts.

Considering that in the next years Romania will have to import great quantities of equipment for the food industry and that U.S. suppliers can be competitive on the level and in terms of payment, the receptivity score "fairly receptive" is the closest to reality.

The current legal framework offers interesting facilities to the foreign investors for production activities, like: exemptions of customs-tax for the equipment, exemptions of customs-tax for the raw materials in the first two years of production, as well as other tax exemption.

In Romania, the Stock Exchange started its activity one year ago (currently there is only one company 100% private-owned quoted on the Bucharest Stock Exchange). There is also a second market (OTC) that recently started that includes over 3,000 firms that are being privatized by the State Ownership Fund.

Investments: direct investments (like Mc Donald's, Coca-Cola, Metro and other), or joint ventures (buying shares with or without the control of the company, or through an addition of capital).

The Romanian banking network is growing. Some well-established banks, like Chase, Citibank, ABN Amro Bank, ING Bank, Societe General, have opened branches in Romania for commercial and credit activities. At the same time, the European Bank for Reconstruction and Development (EBRD) holds shares (20%) in two Romanian banks: Banca Ion Tiriac and Banca Bucuresti.

Demographics & Economic Situation

Source: Factbook.net