% of GDP
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
Update No: 079 - (01/12/03)
The Romanians are none too happy with things right now. They may have a government which is receiving international acclaim, but there is little to rejoice about for the population for the most part.
Popular president and premier
The president, Ion Ilescu, and the premier, Adrian Nastase, are reasonably popular, despite being former communist apparatchiks. Ilescu is a veteran of the old days under Ceaucescu when he was in the upper echelons of the regime for years. This has not rebounded against him because he was known to be the one figure who told the former dictator when he was doing something stupid, which was pretty often.
He could get away with it where it cost others their life since he was known by Ceaucescu to have a special link to the Russians, especially Brezhnev and then Gorbachev, having been educated and trained in the USSR. Even Ceaucescu feared the reaction of the Russians, the one and only people who could topple him he thought. He was wrong of course. The Romanians themselves could too and did in memorable style in December1989. Ilescu hails from the region of Bukovina in the north adjacent to Moldova and has a certain disdain for the Bucharesti and southerners in general, a measure of which underlay his scorn for the southern cobbler's son, Ceaucescu.
Nastase belongs to a much younger generation. He was a communist functionary in his time, but then everybody had to be who wanted to get ahead. He is generally respected as a competent operator and a nice man by all accounts.
Moldovan troubles ahead
The Moldovans are causing the government some headaches right now. Romania is historically wedded to Moldova, which as Bessarabia was once part of it, until detached by Stalin in 1940 as the result of an infamous pact with Hitler. The Russians have just enforced a draconian deal on the Moldovans, making them in effect a Russian protectorate once again.
Bucharest can at least derive the satisfaction from this affair that it puts a stop once and probably for all to any idea of a merger of the two countries. The Moldovans, or rather the two thirds of the population there which are ethnically Moldovan, are Romanian-speaking and regard themselves as belonging to greater Romania. They are now the poorest people in Europe, a basket case of a country. The Romanians are better off without them.
Economy in recovery
Romania itself had a difficult time of it in the 1990s. Governments were torn for years between the need to put the economy on a sound footing and the populist need to look after the population to curry electoral support. Four consecutive agreements with the IMF were broken. The country trailed badly behind other countries with transition economies.
It reached rock bottom in 1999 when it faced a possibility of defaulting on its foreign debt. Things have improved subsequently, GDP growing by only 1.6% in 2000, but by 5.3% in 2001, 4.9% in 2002, a prospective 4.6% in 2003 and is expected to exceed 5% in 2004.
Inflation remains high, but fell to an all-time low last year at 17.8%. It is expected to fall to about 14% this year, and it is hoped to single figures in 2004 and beyond. Budget deficits stand at around 3% of GDP, while trade deficits narrowed as exports posted double digit growth, notching 22% last year.
The central bank's reserves exceed 7bn Euro ($8.18bn), supporting the recent credit upgrades of Standard & Poor's and Fitch. A referendum on October 19th was held on various constitutional changes, including allowing the sale of land to foreigners. It was won.
Romania is due to join NATO in 2004 and to join the EU in 2007. It has so far closed 19 out of the 30 chapters of the agenda on the accession negotiations. The country's chief negotiator, Vasile Puskas, says that another six chapters will be completed by the end of 2003, while the toughest ones, including those on the environment and agriculture, should be concluded by 2004.
Romania hosted a conference of South-Eastern European countries, an investment summit, 'Expanding the European Investment Frontier,' on October 14th and 15th, including representation from all the main Balkan states. This was well attended. It was pointed out by the hosts that FDI into the countries of South-East Europe rose by 21% last year, compared with an 11% drop in EU projects. Further progress will be needed in privatisation and combating corruption. But the economy is heading in the right direction.
International ratings agency assigns a (P) B2 rating to senior unsecured notes
International ratings agency, Moody's Investors Service, recently assigned a (P) B2 rating to some 120m Euros of senior unsecured notes to be distributed by Compania Nationala de Cai Ferate (CRF), a railway company in Romania. Moody's also assigned a (P) B2 Senior Implied Rating. The outlook rating is stable. The Moody's report said the (P) B2 rating indicates: 1. CFR's legal status and ownership, 2. Moody's expectation that the Romanian government would, if required, provide funds to CFR to enable it to meet its obligations under the notes and 3. CFR's weak financial standing and poor liquidity, InvestRomania reported.
The notes are to be senior unsecured obligations of CFR and are the first debt issued by CFR that will not benefit from a guarantee by the government, InvestRomania said. CFR's guaranteed debts are also senior unsecured obligations.
Romania to open energy, methane markets by 2007
Romanian authorities intend to free up completely the energy and methane markets by 2007, the year when Romania hopes to join the EU. With an energy market and methane one deregulated 33 per cent and 30 per cent, respectively, Romania is currently one of the candidate countries with the highest deregulation level, Rompres News Agency has reported.
According to the energy roadmap, the energy market will be deregulated as of 2004 faster than the methane one, 55 per cent in late 2004 (as against 50 per cent in methane market), 80 per cent in mid-2006 (versus 75 per cent methane one), respectively.
The deregulation of the energy market started in 2000 with the electricity market (10 per cent in a first phase). In the following year, the methane market opened 10 per cent and the energy one -15 per cent.
Russia's Gazprom interested in privatisation of Romanian power industry
The Russian company, Gazprom, is interested in the privatisation process of the Romanian power industry, managing director of the Moscow-based Gazexport company A. D. Medvedev said, during a meeting with the Romanian Minister of Economy and Trade Dan Ioan Popescu, Rompres News Agency has reported.
Popescu, Medvedev and a member of the Gazprom Board of Directors S. E. Tigankov, discussed issues regarding the cooperation between Gazprom and the Romanian companies, officials of the Ministry of Economy and Trade inform.
After the period of 1998-2000, when the direct relations between Gazprom-Gazexport and the Romanian companies were cut off, the sides reiterated the good cooperation relations with Romgaz, Transgaz and Distrigaz gas companies, as well as the Russian companies' interest in making some investments in the Romanian methane field.
Romania, Ukraine sign protocol on border water management
Romania and Ukraine signed in Piatra-Neamt (northeastern Romania) on 7th November, the protocol of the third session of the representatives on the implementation of the agreement between the governments of Romania and Ukraine on cooperation in the management of border waters, Rompres News Agency has reported.
The document was signed by Florin Stadiu, State Secretary for Water Management at the Ministry of Agriculture, Forests, Waters and the Environment (MAPAM), who is the Romanian government's representative for the implementation of the agreement, and by Ivanitchi Orest Mihailovych, representative of the Ukrainian Cabinet of Ministers.
Invited to attend the session was Philip Weller, executive secretary of the International Commission for the Protection of the Danube River (ICPDR).
"The presence of the ICPDR Executive Secretary at the session proves the special interest paid by this body to the cooperation relations between Romania and Ukraine in the field of border waters management, taking into account that both countries are signatories of the convention on cooperation for the protection and sustainable use of the Danube River," Stadiu said.
During the session, the Romanian delegation of experts of MAPAM, the Foreign Affairs Ministry, the Romanian Waters National Administration and the Ukrainian delegation of the State Committee on Water Management and Water Directorates examined aspects of the implementation of the Bilateral Cooperation Regulations on the hydrographic basin of the rivers Tisa, Siret, Prut and Danube. Such aspects include defence against floods, exchange of hydrological and weather information between the two countries, means of assessment of the quality of border waters and procedures used in the case of dangerous accidental pollution impossible to avoid.
New measures were established for efficient qualitative and quantitative water management.
MINERALS & METALS
Russian group only bidder for Romanian steel plant stocks purchase
Sinaia Handel, a commercial representative of the Russian TMK group, the most important pipes producer in Russia and the second largest producer in the world, filed the only offer to purchase the major stock held by the state at the Iron and Steel Plant Resita (CSR), Mediafax News Agency has reported.
The offers for CSR, put up for privatisation in November by the Authority for Privatisation could have been filed until 10th November. The pre-qualification documents will be opened in the presence of Sinara's delegates.
TMK group holds the major stock of Artrom Slatina and has recently announced that it wanted to take over CSR and to create an iron holding made up of several companies in Romania.
One of the TMK's aimed companies is Republica Plant in Bucharest. The officials of the TMK announced they were waiting for the finalization of the privatisation contract of the CSR to resume negotiations on taking over Republica.
The privatisation contract of the CSR with the former owner, the American Noble Ventures, became null in January 2003 as the buyer did not pay two running instalments.
The TMK group is a holding, with the headquarters in Moscow, which holds four plants in Russia and Artrom company. The commercial branch of the TMK is represented by Sinara Handel company, registered in Germany, which is also the official provider of the TMK.
The TMK is the main provider on the market in Russia for the oil and gas companies Gazprom, LukOil, Yukos, Transneft. Among the customers on the international level there are Exxon, Agip and Mitsui.
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