ROMÂNIA-CHINA Why invest in Romania?

• Laurentiu Pachiu, Founder and Managing Partner, Pachiu & Associates | www.pachiu.com

Reporter: Has your firm been involved in any China-related deals, either inbound or outbound, in the past 12 months?

Laurentiu Pachiu: Chinese strategic investors are not very much present in Romania (as compared to other foreign investment). There have been certain attempts in the past to involve Chinese investors in large projects and our firm did have some involvement in this regard. Some years ago we have assisted both Huawei and ZTE groups in starting up business in Romania in the high tech and telecom industries (supply of high tech equipment and development of a mobile phone operator, as a joint venture with the Romanian Post, project which unfortunately did not succeed). During the past 12 months we have assisted a Romanian inves-tor in developing a major green field operation in China in the field of wine production, as a joint venture with a Chinese local authority. Our activity consisted in reviewing and negotiating the joint venture agreements, the By-laws of the JV entity, advising client on competition and know how transfer matters, liaising with our correspondent law firm in China.

Reporter: Why should Chinese companies choose to invest in Romania? What particular opportunities and benefits can the country offer?

Laurentiu Pachiu: First, it is the geo-strategic position of Romania that should be mentioned. Romania is the eastern entry gate to the EU, does benefit of sea access and related port infrastructure, and provides a politically and economical stable environment (both EU and NATO membership). The growth potential is one of the largest in the EU, considering material discrepancies between urban and rural areas, undeveloped road and railway infrastructure, certain traditional industries which may be activated again on a competitive basis (e.g. agriculture, research and development, pharma and health, tourism, construction etc.), but also considering highly qualified labor force, large and full of appetite consumer market, a competitive private business and banking environment, large EU funding absorption needs and opportunities. Strong and actual growth potential (and need) is manifest in the energy, infrastructure, agriculture, health, research and development and real estate fields.

Reporter: What legal and practical challenges does Romania present to potential investors from China?

Laurentiu Pachiu: Apart from the differences in legal systems (Romanian legal system being a civil/continental law based system), one may consider that legal and practical challenges are one and same for all investors (there is no discrimination, in principle, except - and not to a material/prohibitive extent - of the impact that EU legislation does have on intra/extra-EU dealings). There are 3 jurisdictional degrees. Judicial procedures are usually lengthy and are shadowed, in certain cases, by suspicions of corruption. The administration is bureaucratic and, despite constitutionally set principles of local autonomy, there is not yet a clear practical separation between local and central authorities. In general terms, however, Romania does benefit of a favorable business environment (assistance of specialized advisors - lawyers, accountants etc. is a must) which has enabled multiple businesses (particularly before the crisis) to reach extremely high profit margins. As regards the relationship with China (that has a long lasting tradition which, unfortunately, during past 10-15 years has lost in strength), there are political signals that a more active presence of Chinese investors in Romania is very much desirable.

Reporter: Please list any Chinese law firms you have worked with. What role did they play, and how well did they perform?

Laurentiu Pachiu: We have worked with the office of Fresh-fields (global law firm) in China. Our Chinese colleagues were extremely efficient, friendly and professional and provided best advice to our client which led to an operational facility in less than half a year. They were advising one of our clients in developing a Greenfield operation in China.

We are also members of Primerus, an international law firm society, which has also a presence in China (Hong Kong and Shanghai).