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ROMANIA



REPUBLICAN REFERENCE

Area (sq.km)
230,300

Population
22,364,022

Capital
Bucharest

Currency
Leu

President
Ion Iliescu

Private sector
% of GDP

40%

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Background:
Soviet occupation following World War II led to the formation of a communist "peoples republic" in 1947 and the abdication of the king. The decades-long rule of President Nicolae CEAUSESCU became increasingly draconian through the 1980s. He was overthrown and executed in late 1989. Former communists dominated the government until 1996 when they were swept from power. Much economic restructuring remains to be carried out before Romania can achieve its hope of joining the EU.

Update No: 059

The Romanians are doing better than before, but from such a low base that the population is still highly disaffected. GDP grew by 4.9% in 2001, after growth of 1.6 % in 2000. 
The former communists are back in Romania, as people are nostalgic for the old days. The communist dictator then, Nicolae Ceaucescu, was pretty ghastly, but he had the sense to create a welfare state of a sort and cultivate the West as independent of Moscow. 
Everything began to fall apart with the overthrow of Ceaucescu; he had at least provided order. The subsequent decade was one of disarray. No-one knew quite what to do. A dismal period ensued. Nobody's advice seemed to work, inflation in colossal double figures and a stagnant economy. None of the elected politicians wanted the unpopularity implicit in marketisation of the economy with its inevitable hardships.
But the governments of the time did engage in privatisation; they did tentatively embrace the vision of a market economy. They were laying the way for a recovery in time. They also espoused the monetarist philosophy of the time, cutting monetary growth. 
Signs of recovery began to come. Inflation, which was in horrendous three figures on an annual basis in the late 1990s, was brought down to under 30% this year, a precondition for the restart of an IMF programme of US$550m. The banking system has shown signs of recovery, with bad loans coming down.
There is a new government since an unwieldy coalition one fell in November 2000. An extraordinary nostalgia has developed for the communist period. The country has gone back to the ex-communists, the reborn Social Democrats, led by Premier Adrian Nastase. The figurehead is Ion Iliescu, the new president, an ageing hangover from communist times who presided over the first five years of inaction after the collapse of communism. 
There is going to be no serious attempt to turn back the clock. The IMF remains the key interlocutor. The ex-communists may prove more effective in introducing reforms because they do not have to worry about a communist opposition. Time will tell.

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AUTOMOBILES

ContiTech acquires land in Freidorf industrial park


ContiTech, a global supplier of spare parts and a member of the German consortium Continental, announced it has purchased more than two hectares within the industrial park Freidorf, located near Timisoara, according to Bluebull.
The subsidiary said it intends to pay another 12m Euros to set up two production lines making transmission belts for two international carmaker giants - BMW and General Motors.
The German consortium already controls a tyre facility in Timisoara, where investments are expected to amount to 100m Euros.
ContiTech focuses on producing spare parts made from plastic, rubber and other materials.

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AVIATION

Romania approves memorandum on air service agreement with Russia


The Romanian government on 15th February approved a memorandum on the signing of an agreement between Romania and the government of the Russian Federation over air transportation services, Rompres News Agency has reported. 
The document provides for the right of each side to assign one or several air companies to operate international flights on a regular basis between the two countries. The document also provides for each air company assigned by the sides to fly over and stop over in the territory of the other side, load and unload passengers, luggage, cargo and post matter, within international regular air services under the agreement. 
The document also provides the conditions under which aircraft, fuel and lubricants, spare parts, board equipment, supplies, cargo and luggage in direct transit are exempted from customs duties, inspection taxes and other similar taxes. 
The document regulates the right of the air companies assigned by each side to establish agencies on the territory of the other side, and provide and maintain its own staff to secure air services under the agreement. 
The document also provides for right of the air companies assigned by each side to sell on the other state's territory transport documents for the international air services and transfer revenues and spending in excess made on the territory of the other state. 
Based on the recommendations concerning the civil aviation safety clauses adopted by the International Civil Aviation Organization, the sides agreed upon measures to increase air safety conditions.

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EU ACCESSION

Romania intends to open eight new negotiation chapters with EU

Romania submitted the papers for nine new negotiation chapters to the European Commission this year, Rompres News Agency reported quoting Romania's deputy chief negotiator with the European Union, Leonard Orban. 
Orban said Romania intends to open an important number of negotiation chapters with the European Union on the occasion of the accession conference to take place on 22nd March. The Romanian official pointed out that Romania's minimal objective during the Spanish chair of the EU is to open eight negotiation chapters and it intends to open all the chapters by the end of the year. 
Romania opened 17 chapters of negotiation with the EU at present, of which nine have been momentarily closed. At the same time, Romania submitted the official papers for all the 29 chapters whose content has been concluded by the EU. 
At present, Romania is working at eight chapters on free movement of capital, competition policy, transport, taxation, social policies, telecommunications and information technology, cultural and audiovisual policy and Customs Union.

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FINANCIAL NEWS

Romanian government anticipates 4.5-5 per cent economic growth in 2002

The Gross Domestic Product in 2002 is expected to grow by 4.5-5 per cent, mainly due to an increase in goods manufacturing, Minister of Development and Forecast, Leonard Cazan said at the news conference of the ruling Social Democratic Party [PSD] 12th March, Rompres News Agency has reported. 
"The goal of the macroeconomic prognosis for the year 2002 is to secure the economic growth, based on a rise in the investment rate through a considerable participation of the national capital and the attraction of external resources, particularly in direct investments, to US$1.8bn," Minister Cazan said. 
Industrial production is predicted to rise in 2002 by about 6.1-6.8 per cent and the processing industry to hit a 8 per cent rise. 
The VAT in agriculture is expected to rise by nearly 3.6 per cent. 
The domestic demand will increase by 4.8-5.4 per cent and the individual consumption will go up at a rate lower than the GDP growth, 3.4-3.6 per cent. 
The current account deficit of the balance of foreign payments will stand at US$2.35-2.4bn.

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FOREIGN ECONOMIC RELATIONS

Russia, Romania to sign gas contract, boost bilateral trade

Romanian Prime Minister Adrian Nastase has visited Moscow in a move to revitalise economic ties with Russia. In addition, a number of political issues are to be discussed, Pro TV in Bucharest has reported. 
Carmen Avram from the TV station reported: Romania has apparently solved its natural gas supply problem. The prime minister discussed with Russian officials and identified ways for Romania to import natural gas in sufficient quantities and at lower prices. Moreover, Adrian Nastase appears to have his heart set on regaining the Russian market. Talks between Mr Nastase and his counterpart, Mikhail Kasyanov, covered ways to boost exports, as Romania maintains a rather insignificant export share on the enormous Russian market.
On the political front, both parties claim they are forging ahead with negotiations over the basic political treaty to have the document signed very soon.
The highlight of Mr Nastase's visit to Moscow was the meeting with the Russian prime minister, Mikhail Kasyanov. The two politicians discussed ways to put trade between their countries on an upward trend, the bilateral agreement to be concluded and the reconciliation of views on the Moldovan situation. Prime Minister Kasyanov backs the Chisinau cabinet and claims demonstrators are misinformed. 
Kasyanov said: "I am no expert in linguistics, and I can't tell the difference between Romanian and the Moldovan language. During talks with Prime Minister Nastase I learned that Romania was not worried about the Russification itself, since Russian had already been a well-established language in the Republic of Moldova, but rather about the status of the Romanian language. Demonstrators need to understand that we want to make official a language that is already in use in their country." 
Nastase replied: "I believe the talks we had today have taken us very close to a solution. As far as the political issues are concerned, I would like to emphasize the new approach we are putting forward, and the need to look to the future." 
Within about a month, Romgaz and the Russian gas production company Rosnet will establish a joint venture expected to ensure Romania's natural gas supply. The imports will reach approximately 2bn cubic metres per year, ensuring the needed supplement of industrial and household gas.
According to Prime Minister Nastase, gas supplies will be cheaper than the gas purchased via the Russian-German company formed by Gazprom and Bitterschaft.

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INDUSTRIAL INVESTMENT

Statistics institute reports investments in Romania rise to 5.2bn in 2001

Investments in the Romanian economy in 2001 amounted to 152,412.3bn lei (around US$5.2bn) up by 5.1 per cent as compared with 2000, the National Institute for Statistics informs, Rompres News Agency has reported. 
Investments in construction works totalled 60,965.3bn lei (40 per cent in the total), up by 4.3 per cent as compared with 2000, whereas the investments in equipment and transportation means stood at 72,894.2bn lei (47.8 per cent in the total), by 7.2 per cent more than the level in 2000.
The investments in the majority private-owned sector stood at 97,252.9bn lei, up by 6.1 per cent as compared with 2000.

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TELECOMMUNICATIONS

Romanian minister says privatisation of national telecom operator to continue

The privatisation of Romtelecom hard telephony operator will continue irrespective of whether or not the OTE Greek company, owner of a 35 per cent stake in Romtelecom, gets involved in the second stage of the company's privatisation, IT and Communications Minister, Dan Nica, stated, Rompres News Agency reported. 
The Romanian minister's statement comes after a recent statements by OTE executive director, Nikos Manasis, that the Greek company does not want to increase its stake in Romtelecom, as long as the Romanian telephone operator is faced with profitability problems. 
Nica pointed out that the Romanian state holds 65 per cent of votes in Romtelecom's General Shareholders' Meeting, which allows it to decide both on the issue of privatisation and about investments. 
Asked about the strategies related to Romtelecom, OTE officials announced that a restructuring plan for the Romanian national phone operator had already been drawn up and was awaiting the approval of the Romanian government. 
In December 1998, OTE bought over 35 per cent of Romtelecom's share capital for US$675m. Under the privatisation contract, it is also granted the usufruct right over 16 per cent of shares. In mid-2001, OTE management announced that it intended to increase its participation quota in Romtelecom's capital of up to 51 per cent. 
Romtelecom registered 2001 a net profit worth 8.6m Euros in the year to September 2001, down 55.7 per cent from the similar period of 2000, the financial results being the consequence of costs related to launching a DCS 1800 network for its Cosmorom mobile telephony arms.

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