When Briton Raymond Breden arrived in Romania in 2002, there was little doubt where the country's FDI epicentre was located. Bucharest was well developed with a business-oriented infrastructure and its residents had good language skills, particularly in English. But when it came to cities outside the capital, investors were concerned they might not have such advantages, says Mr Breden, who works as a director of taxation services at the Bucharest office of professional services company KPMG. He is also executive chairman of the British Romanian Chamber of Commerce.

Yet since Mr Breden started his job 12 years ago, KPMG has grown from two offices in Romania to five branches across the country. “The situation has changed. Cities outside of Bucharest are growing and so does their commercial and industrial capacity, and their supply of skilled workers and English speakers in them,” he says.


Life outside Bucharest

KPMG is not the only company that has realised there is life outside the Romanian capital. According to greenfield foreign investments monitor fDi Markets, in the past 10 years 970 foreign companies coming to Romania or expanding in the country chose cities other than Bucharest. Between 2003 and 2013, these companies launched more than 2000 projects and spent an estimated $66.7bn. This compares with Bucharest, which had 599 companies investing in 735 projects and spending $15.3bn.

Timisoara, the largest city in western Romania and historically one of the most economically advanced in the country, was the second most popular destination for crossborder investments into Romania, with 112 greenfield projects launched between 2003 and 2013, fDi Markets data shows. The city did particularly well attracting projects related to automotive components, capturing nearly 10% of all automotive crossborder investments coming into the country in the past 10 years.

Among the companies investing into this sector in Timisoara are TRW Automotive, the US-based steering-wheel manufacturer, and Hella, a Germany-headquartered vehicle lighting and electronics manufacturer. Consequently, Timisoara attracted foreign companies operating in the transportation sector, with FM Logistic, a French logistics contractor, and TNT Express, the Holland-based delivery services company, among foreign investors taking advantage of the region's growing production of car components and Timisoara's strategic location by Romania's western border.

University attraction

Cluj Napoca, Romania's largest city after Bucharest, closely follows Timisoara with 111 greenfield projects attracted between 2003 and 2013. The city that promotes itself as the heart of Transylvania is the home of Babes-Bolyai University, the largest academic institution in Romania, and home to 10 other higher education institutions and more than 100,000 students.

For that reason, Cluj Napoca has established itself as a cluster for knowledge-intensive sectors such as software and IT, and business services. One in five projects launched in the city between 2003 and 2013 was in these sectors, predominantly in sub-sectors such as shared services, design and development and sales.

Among the companies investing in Cluj Napoca is US tech giant Hewlett-Packard, which in September 2011 announced plans to hire 500 people for its development centre, and UK language services provider SDL Language Weaver, which in 2010 earmarked $2.6m for project expansion, only two years after establishing its presence in the city.

Brasov, located in the centre of the country, attracted 96 projects and ranked as the fourth most popular destination for FDI between 2003 and 2013. The majority of projects launched in Brasov – a city of 253,000 people that during the Communist era underwent heavy industrialisation – are connected with retail and real estate, and aimed at servicing the needs of the local population.

Thanks to these capital-intensive projects, between 2003 and 2013, Brasov recorded an inflow of $2.7bn in FDI, significantly more than Cluj Napoca and Timisoara, which received $1.7bn and $910m, respectively. Investment into Brasov included more than $1bn in manufacturing projects, mainly in automotive components ventures.

The biggest investment into manufacturing projects in Brasov came in August 2006, when Schaeffler Group, a German tool and auto parts manufacturer, announced a $122.6m expansion of its Brasov factory. That investment broke the record set a year earlier by Autoliv, a Swedish developer of automotive safety systems, which decided to double the capacity of its Brasov plant at $62m.

Financial services hub

While Brasov was the third biggest recipient of FDI capital in Romania between 2003 and 2013, this was topped by the historical city of Constanta. Romania's largest city on the Black Sea coast, Constanta attracted more than $3bn, split mostly between the real estate and coal, oil and natural gas sectors. Constanta's largest greenfield investment over the 2003 to 2013 period was announced in 2007 by Electrabel, a subsidiary of French energy group Suez, which designated $1.4bn for a new heating plant in the country.

Constanta was also a hub for financial services projects, with nearly one-quarter of all crossborder ventures launched in the city in the past 10 years connected with this sector. Big banks such as the US's Citigroup, Austria’s Raiffeisen and Italy’s UniCredit have all invested in Constanta in this period.

Lower production costs might seem the most obvious explanation as to why investors choose Romania, searching out even lower costs by settling outside Bucharest. However, when asked for reasons behind their site selection, 37.2% of investors who settled outside the capital between 2003 and 2013 pointed to the domestic growth potential compared with 22.2% who chose lower costs, according to fDi Markets data.

Mr Breden cites similar reasons for KPMG's growth from initial outposts in Bucharest and Timisoara, to offices in Cluj Napoca, Constanta and Iasi. “Being only in Bucharest is like trying to serve customers in Manchester out of London,” he says. “In the past, without so many regional offices, this presented challenges and that is why we opened new offices. There is a lot of economic activity out there.”