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Business

'Nokia effect' lures investors to Romania

More than 2,000 Germans lost their jobs when Nokia shifted its Bochum plant to Romania in 2008. While German politicians cried foul, the city of Cluj hoped for an economic upswing. What's the situation there like today?

Romanians ride a cart past a road sign pointing to the new Nokia factory

The city of Cluj has benefitted from the Nokia plant

Election campaigns often bring out the best and the worst in politicians.

In 2009 Christian Democrat Juergen Ruettgers found himself struggling to defend his leadership of the German state of North-Rhine Westphalia.

As the global financial crisis unfolded, his government had been unable to convince Finnish mobile phone manufacturer Nokia to keep producing in Bochum instead of moving operations to Romania.

In an attempt to highlight his state's importance as a center of industrial expertise, Ruettgers unleashed a verbal broadside against Nokia's Romanian workers, saying "they come and go as they please and they don't know what they're doing."

Juergen Ruettgers

Juergen Ruettgers used old stereotypes to try and stop Nokia from leaving Germany

Ruettgers lost that election. Despite his harsh words about cheap labor, Nokia appears satisfied with the way things are going in Romania and has actually expanded its presence there.

What Ruettgers did not know: The Romanian staff at Nokia can't be late for work - they're driven there every morning with a factory-owned bus.

Working conditions

Nokia's Romanian factory is located just a few kilometers outside Cluj. While some of the workers live in the city, many others come from remote villages and use the company bus to travel routes of up to 100 kilometers every day to get to work.

Few workers can afford their own cars. When the plant opened in 2008, most staff worked 12 hours a day and earned less than 300 euros a month – conditions that had German workers crying foul.

A lot of things have improved since then, according to Grigore Pop. He's the Cluj district chairman of the labor union "Cartel Alfa" and has been lobbying hard to improve conditions for Nokia's Romanian staff.

"Back then we weren't even recognized by the Nokia management as a labor union," Pop recalls. "But today we're being consulted in every matter that concerns staff."

He says cooperation with Nokia is "pretty good". Wages have risen, for instance. Today, a Nokia employee earns 400 euros a month. That may not seem like a lot, but it is what the Romanian Office of Statistics has listed as the current average income in Romania. It's also more than the average salary of a local teacher or a doctor.

The new Nokia plant near Cluj (AP Photo/Liviu Szecsi)

Unions leaders at the Nokia plant near Cluj say working conditions are improving

Employees' daily shifts are expected to be reduced from 12 to eight hours in the near future, Pop says.

In addition, the number of staff at the Nokia plant has been rising: Today, it employs 1,200 workers with unlimited contracts and another 1,800 short-term staff. The plant was not affected by the big layoffs that occurred elsewhere during the recent economic crisis.

Cluj cluster

The Nokia plant has also changed its concept of production: It was originally built for the production of cheap mobile phones for markets in Eastern Europe, Asia and Africa. But as multimedia phones gained popularity around the world, the Finnish company launched smartphone production in Cluj earlier this year as well.

Cluj is a good location for complex technologies, says city mayor Sorin Apostu, referring to Nokia's software development center, which the company built in the city ten years ago. But it was only after Nokia closed its plant in Bochum that Cluj became known internationally.

"We must admit that the media campaign in the course of Nokia's move from the Ruhr area to Romania was essential for the story to become known all across Europe," Apostu says, adding that the shift highlighted the region's openness towards foreign investors.

Come one, come all

Nokia smartphone N8

Nokia's Romanian factory produces smartphones as well as cheaper cell phones

This "Nokia effect" has helped attract additional companies to the city. Dutch finance service company ING, for instance, opened its regional headquarters for Central and South East Europe in Cluj this year.

Other multinational companies such as Emerson and Office Depot are also settled in Cluj.Apostu says Samsung and Daewoo are also looking at the city as a potential base of operations.

"Fortunately things went just as economic experts had predicted," the mayor says. "When a big company like Nokia moved to our city we gained a good reputation internationally - and we're still benefitting from that."

According to a recent study by consultant group KPMG, Cluj may well become one of the most attractive locations for investment in Europe - especially in the IT sector. The study attributes this fact not to the low wages, but to the highly qualified engineers and computer experts available there.

Report: Alexandra Scherle (nh)
Editor: Sam Edmonds

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