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ROMANIA



REPUBLICAN REFERENCE

Area (sq.km)
230,300

Population
23,200,000

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: 058

The Romanians are doing better than might be expected This should not preclude recognition of widespread abject poverty. Hence why the proud Romanians have become the beggars of Europe.
The reasons for this are not hard to find. Their experience under communism was easily the worst in Europe, with the possible exception of the Albanians. The Ceaucescu regime had a literally monumental stupidity about it. It destroyed the heart of one of Europe's most beautiful capitals, Bucharest. Monuments to socialism and the dictator went up in place of some of the best classical and neo-classical buildings on the continent. 
Nevertheless, Ceaucescu had the sense to create a welfare state of a sort and cultivate the West as independent of Moscow. But, none of this cuts much ice right now.
The Romanians half-heartedly tried pro-Western reforms in the 1990s with the government shying away from 'painful' policies, but nothing worked. It is therefore not surprising that the following ex-communists are now back in power.
A new president, Ion Iliescu, is also having a second chance, having been an effective president in the early 1990s and being a hangover from the Ceaucescu years. But he is largely a figurehead; the real power resides now with Nastase.
He is forging a new relationship with the IMF as a key means to acquire respectability in the West, a necessary forerunner of EU membership eventually. The IMF suspended an earlier agreement, but is now talking of an over $500 million credit package. It is premised on projections of GDP growth of 4.1% this year and 4.5% next year. Inflation is expected to be 33.8% in 2001, and to fall to 26% in 2002. The current account balance is likely to remain over 5% of GDP. But this is manageable in an economy in transition, with IMF loans coming in. 
What the new government would like to see is foreign investment funding any external deficit. A privatisation programme is due to get under way in 2002. But the government wants to attract 'greenfield' site investment as its top priority, involving high- tech sectors that scarcely exist yet. 'Greenfield investment' refers to setting up a new operation from scratch. IT and telecoms are prime areas for it.
They have always had one huge plus in EU affairs, the total support of the French. This has now been extended to NATO membership as well.
France has announced its full support for Romanian membership of NATO ahead of the coming meeting of the organisation in Prague.

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AUTOMOBILES

Dacia secures ISO certificate on quality management system


Romania's System Certification Body (Registrul Auto Roman) granted local car maker Dacia the re-licensing documents for the SR EN ISO 9001:1995/ISO 9001:1994 international standards. Under this licence, the company secures the "Quality Management System," according to Bursa.
"I think that the licence renewal for the Dacia Quality Management System according to ISO 9001 standards could be perceived by our customers as a guarantee that we are on the right path and that Dacia - together with Renault - can develop a range of cars meeting any expectancies, that we provide international quality for an affordable price," Dacia's general manager Constantin Stroe was quoted as saying.
This licence is part of the plan followed by Dacia's majority shareholder, French Renault, in the field of quality, the company said.

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BANKING

Romania to sell off remaining state shares in two banks


The Authority for Privatisation announced that it would put up for sale in March the packages of shares it still held with Banca pentru Dezvoltare, BRD, (32 per cent of the total) and Banc Post (17 per cent). Privatisation Minister Ovidiu Musetescu said that all methods can be used for sale, including on the Stock Exchange, Rompres web site has reported.
At present only the BRD is listed on the bourse. The BRD main shareholder is the French group Societe Generale, which holds 51 per cent of the capital. The other BRD shareholders are the European Bank for Reconstruction and Development (4.99 per cent), the Financial Investment Company, SIF Oltenia (5.55 per cent), SIF Muntenia (5.26 per cent), SIF Banat-Crisana (5 per cent), SIF Moldova (5 per cent), SIF Transilvania (5 per cent). Private investors and the bank's employees hold 10.8 per cent of the shares. 
On 8th February, the trading of the BRD shares on the Bucharest Stock Exchange closed at 25,900 lei per share. At this price, the BRD has a bourse capitalisation of US$276.35m, and the state's package would be worth US$20.22m.
According to financial market sources, several international financial groups are interested to take over the 7.32 per cent package of BRD shares. The French bank Paribas, a rival of Societe Generale, and the Belgian financial group Fortis are interested in the package, said the daily 'Ziarul Financiar.' 
The state holds 17 per cent of the Banc Post shares. The bank's main shareholder is the Greek group EFG Eurobank, that holds 19.25 per cent, and which has the first option to buy the 17 per cent package the Romanian state puts up for sale now. The other Banc Post shareholders are Banco Portugues de Investimento - 17 per cent, General Electric Capital Corporation - 8.75 per cent, the bank's employees and pensioners - 8 per cent, SIF Banat-Crisana - 6 per cent, SIF Moldova - 6 per cent, SIF Muntenia - 6 per cent, SIF Oltenia - 6 per cent, SIF Transilvania - 6 per cent. The Banc Post shares are no traded on thebourse...

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FINANCIAL NEWS 

Romanian premier says economic growth amounts to 4.9 per cent in 2001


Romania's economy rose by 4.9 per cent in 2001, and continued steadily as in the previous year, considering the increase of exports up to a record level, in conformity with the forecasts, said Prime Minister Adrian Nastase in an interview for Reuters, Mediafax News Agency has reported .
"We have recorded the highest economic growth among Central and Eastern European states, of 5 per cent in 2001," pointed out Nastase. 
Asked to mention if this is the final level confirmed for the increase of the Gross Domestic Product (GDP) for the whole year, Nastase said: "Yes . . . it is 4.9 per cent." 
The National Statistics Institute presents the official data referring to the Gross Domestic Product at the beginning of March. 
The Romanian officials had initially forecast a 4.1 per cent economic growth for 2001, after the 1.6 per cent rate registered in 2000.

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FOREIGN ECONOMIC RELATIONS

Romanian, Ukrainian officials sign economic, trade cooperation protocol


President Ion Iliescu is confident that good neighbourly relations will develop with Ukraine in the future. Following talks held in Bucharest with Ukrainian Prime Minister Anatoliy Kinakh, the Romanian head of state said that there were suitable conditions in place for developing bilateral economic relations and the two countries could play an active role in developing economic relations at regional level, Romanian Radio has reported. 
Ukraine's Prime Minister Anatoliy Kinakh, said in turn that, during his visit to Bucharest, solutions to most of the discussed issues were sought in a democratic spirit and to the benefit of both countries. 
Also Prime Ministers Adrian Nastase and Anatoliy Kinakh, signed the protocol of the Intergovernmental Council for Economic and Trade Cooperation between Romania and Ukraine. Particular attention will be paid to transborder cooperation, which includes the fight against drug and arms trafficking. Prime Minister Kinakh said that Ukraine was in favour of European Union and NATO expansion. 
Prime Minister Nastase said that signing this protocol represents the first major cooperative event in the past 10 years and sensitive issues between the two countries, such as the problems of minorities and limiting the boundary of the continental shelf [Black Sea], will represent important tests, and must be approached from a European perspective. 
The Ukrainian prime minister also attended a forum of Romanian and Ukrainian businessmen, held at the headquarters of the Romanian Chamber of Commerce and Industry.

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FOREIGN LOANS

IMF chief negotiator returns to Bucharest, starts assessment


A week after the arrival of IMF technical team, the chief negotiator arrived as well. Until the arrival of Mathes the IMF envoys had analysed the financial results from October to date regarding wages policy, utility prices and inflation rate as well as the budget deficit, increase of GDP and the restructuring of the state sector, Pro TV has reported. At last year end the rate of inflation exceeded by almost one per cent the threshold set at the beginning of the year. The new law on profit tax and the VAT law were late in being issued. They should have been in force at the end of last year, but they are now before parliament only in the draft phase. 
On the other hand, the economic growth was point four per cent bigger than the executive had planned. Also the tariffs for energy, heat and gas were increased and will be modified monthly depending on the devaluation of the exchange rate. Moreover the pension law and the law on the minimum guaranteed income entered into force according to the commitment. It is expected that from 1st March minimum salaries should increase from 1.400.000 lei to 1.750.000 lei. 
If the government is successful in the IMF examination, not only will it receive the second transfer of the loan of over US$52.5m, but it will also be able to issue foreign currency bonds under much more advantageous conditions, paying much lower interest. The executive may use this money to cover the trade balance deficit, i.e the difference between imports and exports, and for the programme of energy sector modernisation. So far, Romania has received from the IMF the first instalment of a loan of US$66m in November last year. The total sum of the loan is US$383m.

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