% of GDP
a free service
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
Update No: 061 - (23/05/02)
Closer to NATO
The Romanians are rightly regarded by the Americans and Europeans as crucial to Balkan stability. The Romanians have stuck to their pledges to restructure
the military, greatly improving their chances of joining up in NATO. They are intending to slash their force numbers from 130,000 to 90,000 by 2007-10.
Romania is likely to join NATO only with Bulgaria.
Romania is earning brownie points here by proposing to send combat troops to Afghanistan to help US-led forces flush out Taliban and al-Qaeda fighters. Yet
the proposal has to be accepted by both the parliament and NATO before it can go ahead.
The other main international organisation to which the Romanians are wishing to appeal is the IMF. The IMF is releasing tranches under a US$383m stand-by
agreement. Vital here is the need to retain IMF approval by restructuring loss-making industries. A fall in inflation from 30.3% in 2001 even below the
estimated 22% for 2002 looks likely, gratifying the IMF's monitors of monetary matters. Nevertheless, the IMF felt compelled to defer a US$107m tranche in
May, which makes Romanian officials apprehensive since none of the previous five agreements with the IMF were ever completed.
EBRD meet in Bucharest
The annual meeting of the EBRD began in Bucharest on May 19th. Romania's hosting of the get-together has been overshadowed by delays in the country
fulfilling the terms of loans extended by the major international banks and institutions.
Not just the IMF, but the World Bank, the European Investment Bank and the EBRD itself have recently postponed loans totalling about US$700m because of
inter-party discord on how the money should be spent, delays in public sector job reductions and concerns about state asset sales and procedures. The US$700m
figure here includes the US$107m tranche delayed by the IMF.
The World Bank announced that talks have been postponed on a US$300m restructuring loan because of "developments in the country." It is understood that the
bank acted because of deferments in the IMF programme and concerns about the procedures used in the privatisation of Alro, the aluminium producer.
Meanwhile, Trajan Basecu, the populist mayor of Bucharest has warned that a €300m package of loans from the European Investment Bank and the EBRD is at risk
due to a dispute over who will control the money at the city council.
The economy is just about recovering from a decade of contraction after the collapse of the communist regime in December 1989. GDP growth, which was 1.8% in
2000 and 5.3% in 2001, is now a prospective 3.5% in 2002. Never has there been such a devastating event in Romanian history as the overthrow of the Ceaucescu
tyranny. But it led to a decade of recession and retraction, making many of the population nostalgic for the tyrant and his grim consort, who at least
created and supported a rudimentary welfare state.
The backwardness of the reform effort is shown by the fact that 66% of the country's industry is still owned by the state. Clearly, there is massive scope
for improvement, with sales of energy and telecoms to the fore. This is now on the agenda.
The Romanians are in fact introducing some bold reform measures at last. One such is to sell off unprofitable state enterprises for a symbolic one Euro if
the purchaser promises to bring investment.
Left wingers back
The ex-communists have got back in, President Ion Iliescu being a long-time functionary of the former Ceausescu regime, as is Premier Adrian Nastase. But
they have clean records all the same and are assured bureaucrats. They know how Romania functions.
The ex-communists, the Social Democrats, are in power for a second time. First time round in the early 1990s they did little. Being unprepared to pay the
electoral costs of the pain involved in transition to a market economy, it was an exercise in populist-inspired 'masterly activity.' But so was the constantly
bickering coalition of centrist and right wing parties that succeeded them that could not agree what to do, and so did little. There is just a possibility
that they have learned their lesson and will forge ahead with reform, as is happening in Poland. They say they are going to. But they would of course,
Turbomecanica, CE jv gets off the ground
Aircraft engine manufacturer, Turbomecanica has finally inked an agreement with the US giant, General Electrics (GE), for the joint production of jet engines,
according to BBW.
A new entity, with a share capital of US$10,000 will be established and it will make burning chambers for Airbus and Boeing aircraft.
Turbomecanica and GE will share the company equally. Operations are scheduled to begin after October 2002. At first, the new company will have a staff of
80. Turnover is expected to amount to US$20m with three to four years.
Romanian eurobonds attract 700m euros on foreign capital market
Romania has successfully concluded the eurobonds issue launched on the foreign capital market, by attracting 700m euros, Public Finance Minister Mihail
Tanasescu told Rompres News Agency.
The eurobonds have a 10-year maturity and a coupon of 8.5 per cent. The foreign investors' appetite for the Romanian eurobonds was very high as the demand
stood at 2.5bn euros.
"It is the largest issue ever registered by Romania. We stopped at 700m euros because this is the necessary level for financing in a non-inflationary way the
budgetary deficit. We will not enter the foreign capital market again this year because we have covered integrally the foreign component of financing the
deficit," Tanasescu said...
The Romanian eurobonds were bought by investment funds (55 per cent), banking system (21 per cent), retail banks (5 per cent) and insurance companies (6 per
As regards the investors' geographical distribution, Germany ranks first (27 per cent), followed by Great Britain (17 per cent) and Italy (17 per cent). US
investors occupy an important position (11 per cent), thus demonstrating the US market's increased appetite for the Central and East European states'
eurobonds. The USA had only 2-3 per cent at the previous issue of Romanian eurobonds...
LUKoil to upgrade Romanian refinery
The LUKoil-Petrotel refinery in Romania has been shut down for a period of up to 18 months as it undergoes an upgrade which will enable it to produce
gasoline in compliance with Euro III and IV quality standards. LUKoil owns a majority stake in the refinery, based in Ploiesti, 60 km north of Bucharest. It
bought the stake (and inherited the refinery's debts) in 1998.
LUKoil-Petrotel has a maximum capacity of 104 bpd (5.2 mt/y), but financial difficulties have forced it to operate at a minimum safety level since last June.
The news, which is considered positive, offers further proof of LUKoil's consistency in its strategic of long-term expansion in Central and South Europe.
Romanian premier opens new hydro-power station
On 23rd April, Romania's Prime Minister Adrian Nastase inaugurated a hydro power station at Cornetu, the southern county of Valcea, and pushed the button that
started off the station's first generator and connected the plant to Romania's national power grid, Rompres News Agency has reported.
The building of the station started before 1989 and required investments in excess of 200bn lei. "The government is contemplating the completion of other 21
such projects in which at least 56 foreign investors have shown interest," Prime Minister Nastase stressed.
The Cornetu hydro power station belongs to the hydro power system on the Olt river and it uses the power potentials along 8.1 km of the river. The station's
generating capacity is 30.5 MW and provides 62.4 GWh yearly. The first generator of the plant is completely automated. The second generator will become
operational in December.
Premier pleads for Caspian oil route to run via Romania
The transportation of oil from the Caspian Sea to the European Union through Romania offers the advantage of using an infrastructure which is already largely
in place, supplying refineries in Hungary, the Czech Republic and Slovakia, and connecting Germany and Austria to the system, Prime Minister Adrian Nastase
said at the opening of the Black Sea Oil and Gas summit in Bucharest 23rd April, Rompres News Agency has reported.
The Constanta-Omisalj (Croatia), a transportation route running 1,500 km, will run across Yugoslavia and will be added to a 430 km segment between Pitesti and
Pancevo. Prime Minister Nastase said the construction of the pipeline running through Romania has the advantage of friendly terrain conditions and offers
routes to a connection with the Transalpine Pipeline linking the Caspian Sea to Germany and Austria through to the Trieste (Italy) terminal.
Prime Minister Nastase said that the alternative Romania-Croatia route would not compete with the other projects, it would just be complementary to them.
Moreover, the pipeline would contribute to the materialization of the Southeast Stability Pact Initiative and was consistent with the European Strategy for
Romania in 2002 will commission a project for the development of transiting capacity of the natural gas through a new pipeline to supply Turkey. It will also
come up with a set of projects for energy cooperation in the Black Sea zone and connection with the European transport systems. By 2004, Romania will increase
underground capacity for natural gas stock-piling to at least 4.5bn cu. m. from the present 1.5bn, Nastase said.
According to Nastase, Romania has the advantage of already having harmonized its legislation in the field with the EU institutional and legal framework. He
said that at present, Romania was working on perfecting its secondary legislation in this regard..
Prime Minister Nastase welcomed the Bucharest summit, saying that it was as important as the World Oil Congress that took place in Romania in 1903.
He said the year 2002 marked the 145th anniversary of Romania's oil extraction and the 95th of its natural gas exploitation.
"Through tradition, experience, infrastructure and geographic position, Romania becomes an increasingly important player at regional and European level,"
The Black Sea Oil and Gas summit gathers together 11 states from the Black Sea rim to debate the problematic issues of primary energy sources, particularly of
oil and natural gas.
FOREIGN ECONOMIC RELATIONS
Bucharest, London to collaborate
The Romanian Ministry of Industry and Resources will collaborate with the British Department of Trade and Industry to introduce industrial policies that will
help boost the competitiveness of the Romanian economy, according to BBW.
Valued at 630,000 Euros, the project is scheduled for completion within 12 to 15 months. Of the total amount of funds, 600,000 will originate from the Phare
The remaining funds will be provided by the Romanian ministry, which is an integrator for three of the country's 31 EU accession negotiation chapters on the
free movement of goods, energy and industrial policy.
BBW reported that the first two of these chapters were recently opened, while a new version of the chapter on industrial policy was to be presented to the
European Commission by the end of April.
"We hope to open admission talks on industrial policy under the current Spanish presidency of the European Union," Minister of Industry and Resources, Dan
Ioan Popescu was quoted as saying.
EBRD official says investments in Romania might double this year
The investments by European Bank for Reconstruction and Development (EBRD) in Romania might double this year, in comparison with the level registered in year
2001, when the amounts signed for Romanian projects reached 282m euro, Antonio Maria Costa, secretary-general of the international financial institution,
stated on 17th April, at a press conference, Mediafax News Agency has reported.
The secretary-general of EBRD pointed out that projects for Romania, subject to preliminary debates within the EBRD Board beginning this year, were valued at
about 250m euro. Total financing by the EBRD in Romania is over 2bn euro, of which almost 60 per cent is aimed at projects in the private sector.
Minister of Public Finances Mihai Tanasescu said that annual meeting of EBRD Governors' Board, which is to took place on 19th-20th May in Bucharest, is a sign
of the acknowledgement that Romania "is taking adequate steps in accessing European Union".
Furthermore, the minister of finance says that for few days Bucharest is to become "international capital city of finances" because the meeting is to be
attended by 3,000 delegates from 65 countries.
According to EBRD officials, the meeting will also include a series of conventions, such as Businessmen Forum, Romanian Investments Forum, as well as Reunion
of Finance Ministers of the EU candidate states. Finance ministers from these countries will meet at the second reunion of the Group of 13, currently chaired
Antonio Costa mentioned that the region of Central and Eastern Europe, as well as the former Soviet Union had registered a good economic progression in the
past two years, after having negotiated an economic crisis. In addition, the states of this region poorly felt the effects of world economy recession. As for
Romania, Costa says that economic evolution was positive, chiefly evidenced in the last year.
The EBRD official thinks that Romania faced one of the most totalitarian regimes in this region during the communist period, and registered a deep economic
crisis in the first half of the year 1990, accompanied by significant political changes. "Presently, especially in the last year, things seem to have gone
right for Romania, but it could have been better," added Costa.
The investments made by the EBRD in the region amount to 16bn euro, from its own sources, while 55-60bn euro came from private sources.
INVESTMENT BACKGROUND REPORTS
Our analysts and editorial staff have many years experience in analysing and reporting events in these nations. This knowledge is available
in the form of geopolitical and/or economic country reports on any individual or grouping of countries. Such reports may be bespoke to the specification of
clients or by access to one of our existing specialised reports.
For further information email:
Considering an investment or a trip to any newnation? First order our Investment Pack which will give you by e-mail the last three monthly
newnation reports and the complete worldaudit democracy check for the low price of US$12. The print-out would be a good companion to take with you. Having
read it, you might even decide not to go!
To order please click here:
Investment background report