Some nations are born of exports, some achieve exports and some have exports thrust upon them. Romania is in the latter category.
Trading nations such as Lebanon have their entire history interwoven with trade, developing one of the first alphabets in the world partially to perform trade accounting. Nations such as Germany, Japan, Korea and China have adopted exports as nothing less than a route to modernity, such that it would today be difficult to imagine them without this aspect.
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Then there are countries who were actually lukewarm about external trade for most of their history, until the situation very much encouraged spotting opportunity for trading.
The best example is Britain. While others were busy building empires, the British were just coming together after Richard III’s winter of, reportedly, discontent. At that point in time it is safe to say it must have been known primarily for wool, its main export. It was also the point in time when Henry VII expanded the role of the Merchant Adventurers with the explicit goal of increasing exports and in many respects re-defined Britain as an exporting, trading nation. Over the next few decades followed by a flurry of other joint-stock companies which eventually came to form what came to be known as Britain’s trading empire.
Now it’s time for Romania to go British and go global.
Why It’s Time
Contrary to the popular narrative, Romania does export, just like Britain did at the start of the 1500s. But it does so poorly: below its economic capacity, with below average value-add and with a limited set of countries.
About 74% of Romanian exports go to European Union countries – with Germany accounting for a full 23% - and only 42% of GDP is accounted for by exports, lagging behind similar countries such as Poland, which boasts a figure of 61%. Perhaps even more worrying is the low volume of value-added exports: high-technology exports amount to only USD 8 billion for Romania, compared to Hungary's near USD 20 billion, Poland’s USD 23 billion. The same picture holds for IT goods, which Romania otherwise prides itself in: just 3% of Romania’s GDP is accounted for by ICT exports, shockingly low when compared to Hungary's 12%.
None of these issues would necessarily raise alarm in isolation if not for the fact that they are very much interrelated: the proportion of exports to GDP shot up from 26% in 2008 to a high of 42.6% in 2016 with integration in Western European companies’ supply chains. Without that integration, Romania’s actual exports might still be hovering at about 25%.
Meanwhile, that critical link is dwindling: if most of the European Union would be heading for a recession in the short-term, and while historical stickiness has softened any shock it also left many countries flatining. Meanwhile, Romania’s main trading partner hasn’t actually found an economic engine that completely dispenses with cheap energy imports.
Go British, Go Global
Cognizant of that, it might be time to look beyond these trading partners, just as Britain once did. And it’s a good time to do so: there is a global middle class rising and there are demand-fuelling demographic changes in many emerging markets, while trading hubs such as Singapore or Abu Dhabi offer an off-the-shelf network to conduct business.
Countries such as France might boast an average GDP per capita of USD PPP 46,000 and 65,250,000 people but represents a fundamentally saturated market in relative decline and only lukewarm growth. Meanwhile countries such as Indonesia represent over four times as many people with an average GDP per capita of USD PPP 12,100, rapid growth and a rising middle class very much looking to spend on everything from affordable sedans and dishwashers to English tutors and accounting software.
Quite simply, if the G7 isn’t an opportune export market for Romanian exports, remember the E7 and emerging markets are. For starters, the E7, comprising countries such as China, India, Indonesia, Russia and Brazil currently represent about the same GDP as the G7 and are expected to be double the G7 by 2050. Secondly, many emerging markets such as Viet Nam represent under-reported economic success stories that are expected to grow at nothing less than 5% per year for the next decades. Third, many countries such as Pakistan, Egypt or Nigeria are experiencing tremendous demographic growth that add up to 400 million, 150 million and 377 million potential consumers – they need not spend much to create a scalable business opportunity.
Takeaway
The declining economic situation of Romania’s traditional trading partners might be the push Romanian businesses need to look beyond Europe and go British: the world economy is changing, hundreds of millions of new customers with plenty of spending power are rising and global hubs such as Singapore and Abu Dhabi stand ready for business. There are businesses moving in that direction, Alexandrion Group being one of them, but not enough are seizing the opportunity to look beyond the near-abroad.
It’s time and it’s time for Romania to take the British solution: go global.
PS: Dincolo de rațiuni de suveranitate, este bine ca și toată clasa politică - și tot marele business local/ național - să înțeleagă că limba engleză este un “must” și că trebuie să acumuleze experiență și expresii-cheie și în limba engleză, mai ales pe teme sensibile din zona de “statecraft” sau “business-craft” global. It îs time for all political and business Romania to go British, Romania Globală e o necesitate, să nu ne trezim după ce nu mai avem fonduri europene că nu mai avem economie parțial.
Radu Magdin este CEO al Smartlink Communications și consultant și analist de risc (geo)politic
