Field: Finances and financial capital

Subfield: Financial capital

Details:

When a nation does not save enough, it needs to connect to international capital markets. It is not easy to attract foreign investors whose resources can complete the internal offer of capital and cover the internal demand for capital. Compared to local investors, foreign investors face supplementary risks (country risk, political risk, transfer risk, sovereign risk, exchange rate risk, etc.). In practice there is a distinction between greenfield investment and portfolio investment (in running companies /businesses). Foreign investment plays an essential role in technology transfer, the improvement of the production and export capacity and the increase in the processing of internal resources. The associated problems for foreign direct investment are transfer costs, profit transfer, loss of control over resources or factors of production. The indicator reflects foreign direct investment relative to GDP. Romania has not recovered the FDIs attracted before the crisis (8.9% of GDP in 2006) and withdrawn during the crisis (the lowest was 1.27% of GDP in 2011, amounting to 2.9% of GDP in 2015). Recently, Romania has come closer to European average (4% of GDP in 2015), but it is still modestly placed in the region behind Poland (3%), Slovakia (4%) or the Czech Republic (3.9%).