October 3, 2008

Thoughts on Romanian EU Membership, Exploitation, Car Acquisition
Periş (Mureş), Romania

Romania joined the European Union on January 1, 2007. This has brought with it many opportunities and quite obviously more than its fare share of painful growth.

Hearing firsthand impressions of what it's like as a foreigner to start up a business in Romania (from our Danish host, Martin) as well from Romanians themselves (hosts Teodora, Marius and Alex's sister, Irene), I'm starting to get a clearer understanding of how EU membership is transforming the country.

Exploitation?

According to a recent World Bank report, Romania currently ranks 47th out of 181 economies in the ease of doing business, though still scoring lower than other neighboring countries in the region (such as Hungary, 41st; Bulgaria, 45th; and Slovakia, 36th). The average gross wage per month in Romania was 1769 lei in July 2008, equating to €498.75 (US$724.33) based on international exchange rates, and $986.94 based on purchasing power parity.

Simply put, Romania is categorized as an 'upper middle income' country, but I'm being told that many Romanians disapprove of the way their country—or more specifically, it's labor force—is being "exploited" by foreign EU-based business opening up shop inside the country.

The comparably inexpensive wages of the local workforce is naturally a strong incentive (despite myriad cultural, skill set and communication barriers), and when coupled with EU membership (that's effectively taken down many of the bureaucratic obstacles to establishing satellite offices and manufacturing plants inside Romania's borders), the resultant is a "cheap labor" vacuum that I'm sure has repeated itself many times over as European Union membership has grown (to include more and more Eastern European countries).

But is this really a bad thing?

I'd say no, it's certainly not. These foreign entities are creating large numbers of employment opportunities within Romania, and comparing their local wages against those of their counterparts in Norway or Germany is silly. These folks aren't getting paid sweatshop wages after all.

Economic stimulation is a good thing, and within a few years I'm sure the country will find a balance within the Union.

Infrastructure Issues

Ah, but then there's the painfully overwhelmingly obvious problem with vehicle congestion. Romania's roads are absolutely saturated with cars and trucks, many of whom are still fighting with horse-drawn carts for road space.

Less than half of all Romania's roads are even paved, with small arterial roadways suddenly supporting the traffic levels of a California freeway.

And speaking of highways, there really aren't any in Romania. Two-lane roads are the de facto standard in the country, with each and every one of them slicing through the middle cities and villages. The road noise from passing semitrailer trucks and cars is almost unbearable (when outside) here at the Oprea home. It's unrelenting noise pollution that's become a problem in most every part of the country.

There are no highways, and city bypasses are practically nonexistent (or at least a good 20 years away for major metro areas—seriously). That means that the full fury of convoy and personal traffic must pass through the center of every city and village on the way towards their destination.

Fueling the crisis, purchasing a foreign-made car in Romania has become significantly easier with EU adoption. There's a massive market (and likewise huge demand) in the country for aging cars that are of little value in Western Europe. Truth is, there's a staggering difference between a 25-year-old VW and a 25-year-old Russian Lada.

Foreign vehicle import taxes (many of which revolved around emissions) have been throttled way back since 2007, resulting in a greater number of vehicle ownership and the subsequent choking level of automobiles on the roadways.

Good luck with the roads Romania, you're gonna need it.

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