Investors in kingdom pump $2.2bn into EU member state, country's ambassador says.
Saudi investors have made total investments of $2.2 billion in Romania up to date, the country's ambassador to Saudi Arabia Ion Dobreci told the press on Wednesday in Riyadh.
Dobreci said his country is all set to boost ties in different sectors with the kingdom and other Gulf states following its entry into the EU. Romania became a member of the EU at the beginning of this year.
The ambassador highlighted the success of the recent acquisition of a 63% stake in Romania's Electroputere Craiova by the Saudi Al-Arrab Contracting Company (ACC).
ACC, part of Mada Group, an industrial and commercial investment vehicle of the wealthy Al-Rajhi family, bought the controlling stake in the Romanian manufacturer of train engines, generators and electrical transformers in June for $174 million.
Mada intends to invest $1 billion through ACC to modernise the existing facilities of Electroputere Craiova and to turn it into a profitable company by 2009.
Mada is one of the four qualified consortiums working on the $4 billion cargo railway project in Saudi Arabia, and it is also working on the $5 billion high speed passenger railway project between Mecca and Medina, the two holly Muslim cities of Saudi Arabia.
Dobreci said the move to buy a majority stake in Electroputere was significant because Saudi Arabia intends to develop its railway infrastructure and the company's engines will help in achieving this.
Doberci said that $64 million debts Electroputere carries forced it to look for investors outside of Romania like ACC to bail it out.
There are many poor-performing state-owned companies like Electroputere in Romania that have been sold to foreign investors and seen their fortunes turn around.
Five years ago an Austrian-based bank bought Casa Agricola, a struggling state-owned Romanian bank, for $45 million and invested about $250 million in its modernisation. Today analysts estimate the bank could be sold for $2.5 billion.
Dobreci also said that the Saudi Zamil Group and Amiantit are also working to invest in Romania’s steel and pipe projects. He said a major housing project of 25,000 units in Romania is being developed by a Saudi-Romanian joint venture.
The economic growth and reforms made by Romania in the last two years have been praised by the World Bank.
The World Bank’s International Finance Corporation (IFC) ranked Romania 55th out of the 178 economies in its Doing Business 2007 Index, mainly due to the significant changes Romania made to its taxation system.
The IMF, the World Bank’s sister institution, however, warned that Romania is becoming too attractive to the extent that its economy might overheat.
Foreign investors have piled into Romania, attracted by its market of 20 million, Eastern Europe’s second largest after Poland, and opportunities to establish low-cost export bases.
The privatisation of state-owned enterprises helped in attracting foreign direct investment last year that exceeded 10 billion euros, the region’s highest.
The ambassador said Saudi businessmen can benefits from a flat tax rate with greater incentives offered by Romania.
Dobreci said that Romania’s large market, cheap labour and cheap utilities, as well as economic and political stability, were good reasons why Saudis should increase their investments in the country.
According to the embassy figures, the bilateral trade between Saudi and Romania stands at about $200 million annually.