Business leaders in Romania are hopeful that partial accession to the border-free Schengen area will boost business cooperation with other EU member states, but there are concerns it could encourage foreign workers in Romania to relocate to higher paid jobs elsewhere in the bloc.

Romania joined the EU in 2007, but not the Schengen area, which guarantees free movement of people without border checks. That will change on March 31, when air travellers to and from Romania and Bulgaria will no longer be subject to passport checks within the Schengen area. The same will apply to travellers on ferries and other boats. However, the lifting of land border checks, which is still awaiting final approval from the European Council, is seen as more significant given the long road and rail border queues in the region.

Investors in the central and eastern Europe (CEE) region are hopeful that ease of travel will open up opportunities for Romania, particularly in tourism and related sectors. 

Joining Schengen has the potential to “enhance the business performance” in Romania, like in other CEE countries, says Robert Knorr, the managing partner of MidEuropa, a private equity group focused on the region. 

Industries such as medical tourism were boosted in Slovenia and Croatia, Mr Knorr adds, as Germans and Austrians could more easily travel across the border to access these services after they joined Schengen.

But Romania has a history of brain drain. Its population has fallen from 23.2 million in 1990 to 19 million today as young Romanian sought better opportunities in western Europe and elsewhere as soon as the Communist years came to an end. Joining Schengen now raises questions about whether more people will now leave the country. 

However, Cristian Sporiș, the vice president of the corporate banking division at Raiffeisen Bank in Romania, disagrees.  

“The brain drain already happened and had nothing to do with Schengen,” he says. “In terms of Schengen, there are only opportunities coming in, not threats.”

Other business leaders point to a different type of brain drain risk. 

“Romania has benefited in the past five years from an influx of non-European workers, largely to compensate for the migration of Romanians to Western Europe,” says Alexander Milcev, the head of tax and legal services for consultancy EY in Romania. 

According to Eurostat figures, the overall number of resident permits issued to non-EU nationals for employment reasons reached a record high of 31,079 in 2022, up from only 1542 in 2013. In the whole of the EU, only Croatia and Malta saw biggest increases in the period. Non-EU workers moved to Romania from countries like Nepal, Sri Lanka and the Philippines.

“Once in Schengen, this workforce will have absolutely no restriction of travelling abroad and getting a job [which is] better paid, be it in Hungary, Germany or France,” Mr Milcev says. 

This risks undermining the competitiveness of Romania if a shortage of labour forces the country to raise wages to attract more workers, adds Mr Milcev. 

There are already examples of appetite among foreign workers to leave. A hotel worker in Bucharest from Sri Lanka speaking to fDi said he would consider moving to another EU country should there be a good enough job opportunity.

“It is already happening, even now when Romania is not in Schengen,” says Mr Knorr, who notes that some of MidEuropa’s portfolio companies in Romania have had foreign workers leave for Germany, France or Austria.

Aside from the threat of workers leaving via air or sea, the greater concern is around Romania easing restrictions for truck drivers, whose passports also have to be checked at land borders with other EU countries. This is a contention among many companies that complain of slow logistics to and from the country and the rest of the bloc.

“One of the biggest problems [companies in Romania face] is the [land] border control,” says Dinu Bumbăcea, the managing partner of consultancy PwC in Romania. Reducing the time that trucks are forced to wait at the Hungarian border “would incentivise companies to establish in Romania because the movement of goods would be easier,” he adds.

Government officials are hopeful that Romania will join Schengen by the end of 2024 and are bullish about maritime routes. Ștefan-Radu Oprea, Romania’s minister of economy, entrepreneurship and tourism, told fDi that joining the maritime Schengen area will reduce bureaucracy when shipping goods from the port of Constanța through the Danube river to the EU. 

“[Not being in] Schengen was an economical cost,” he says, adding that cars exported from Romania to the EU had an average additional cost of €100 due to time waiting at the border. “It will be a very good opportunity for [companies] intending to produce in Romania [to access] the single market,” Mr Oprea adds.

A 2016 paper by the IFO Institute in Munich found that getting rid of identity checks and associated waiting times boosted trade in goods and services by 3% on average across the Schengen members. 

Do you want more FDI stories delivered directly to your inbox? Subscribe to our newsletters.