One of the most important tasks facing national governance and the business environment over the medium term is reducing corruption. Romania ranks as the most corrupt country in the European Union according to Transparency International's 2007 Corruption Perception Index. We are concerned that Romania's limited progress in introducing anti-corruption measures has meant that tainted officials have been re-elected in Romania's municipal elections, held on June 1. This will very likely hinder the country's ability to tackle corruption in the immediate future. One of the more strategically located NATO and EU members due to its location in the Black Sea region, Romania suffers from few internal security threats and its overall security has improved with its membership of NATO.

Internally, there are no insurgent groups that could threaten Romania’s relatively stable internal security situation. However, there are several insurgent groups in neighbouring countries still exhibiting low-level activity that may, in turn, spill over into Romania. Due to its location, Romania has a traditional long-term security commitment to the Balkan region and is also bordered by Moldova and Ukraine to its north. Moldova suffers from extreme poverty, crime and illegal immigration: according to the International Organisation for Migration, Moldova is a major exporter of sex workers to Western Europe, as well as being the centre of the human organ-trafficking trade. In addition, since 1992 Slav separatists within the Transdniestr region in Moldova have attempted to establish a de facto state, bolstered with huge stockpiles of arms and munitions. Transdniestr has become a major base for illegal arms exports.

Along with many of its East European neighbours, the Romanian government faces considerable challenges in modernising its armed forces. As a member of NATO, Romania is expected to meet minimum NATO interoperability standards, which ensure that exercises and joint operations can take place. However, Romania’s capabilities are ageing rapidly, which places increased pressure on the defence budget. Although Romania was an integral member of the Warsaw Pact during the Cold War, the country had strong nationalist tendencies. Consequently, it attempted to follow a policy of self-sufficiency in its defence industry. By the end of the communist, Ceausescu regime in 1989, the industry employed over 200,000 staff, was capable of producing a number of complex systems (including fighter aircraft and helicopters), and was a major exporter. In Q407, Eurofighter announced that it was considering producing 48 Typhoon multi-role combat aircraft in Romania in order to secure a US$5bn contract. The question is whether the local defence industry can take advantage of the growing international interest in Romania’s defence industry.