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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: 069 - (28/01/03)

The Romanians, as their name suggests, consider themselves to be Western, indeed they make a point of this. They are the descendents of the Roman legions, so they claim, who occupied Dacia, as their land was then called in the beginning of the first millennium AD. Their language is certainly based on Latin.
But we know so little about the long expanse of Romanian history between the third and the thirteenth centuries that it is difficult to establish a definite continuity. This absence of evidence should not preclude the possibility that such awful things were going on that it is as well for our peace of mind that we know nothing about them. One is dealing with the haunts of Dracula and Vlad the Impaler after all, whose names have come down to us because are associated with the early modern epoch.
The Romanians aligned themselves towards France as the beacon of progress and civilisation, which to the Wallachian Nobility was a matter of course. French is still widely spoken by educated people and the country is striving to overcome the baleful legacy of communism, which under the Ceaucescus (1965-89) was a truly awful affair, a recrudescence on modern lines of something murky deep down in the Romanian psyche from those ten hidden centuries.

Communist revival
Yet, despite it the people are nostalgic for the days of communism, when there was at least security in a common penury. Everybody had a job, some accommodation, a right to education, health services and at the end of it all a pension. None of this applies anymore; it is claimed that people are selling their own children abroad for cash.
Only next-door Moldova, the Romanian - speaking former Bessarabia, is in a worse plight, where people are selling their bodily organs for cash and their daughters into prostitution in the West. The communists, who are seen as not corrupt, won a great victory there in March 2001; and last year the ex - communists won in Romania. President Ion Iliescu is a former stalwart of the old Ceausescu regime, as is Premier Adrian Nastase, albeit in a lowlier position as befitted his youth. The ex - communists at least know why the people are dissatisfied.

Fight against crime and corruption
There is rampant gangsterism and venality in Romania that are not the least of the reasons why foreign investors are fighting shy of it. FDI is far less in Romania, a few billion dollars, than in Hungary and former communist countries to the north.
It is not clear how to tackle the law and order issues. The police and security services are themselves infiltrated by the crooks and the corrupt. Quis custodies custodient?
President Iliescu is, nevertheless, fully aware of the urgent need to address the problems as Romania's number one public priority, if it is to join NATO, as it has now been invited to do, and the EU likewise by 2007. He called in a speech to parliament recently for a campaign to break down "the suffocating bureaucracy" and to commence "shock therapy against corruption." 
The problem is a new raft of legislation or decrees against them can end up providing new means for miscreants to circumvent justice by reason of cumbersomeness. As Iliescu says, "the excess of emergency ordinances, enforcing methodological norms, instructions and order of the ministers, allows discretionary paths for the investigating bodies, for random and fluid interpretations, often in favour of personal or group interests." Exactly so.

Economy recovers even if slowly
Given the poor economic climate in Europe as a whole, Romania is not doing too badly, from of course its excruciatingly low base. GDP is growing by 3.4% per year and inflation is falling, although, at 18-19% at end 2002, it is still far too high.
The IMF and World Bank are being supportive. The IMF is committed to a long-term credit of over US$500m; an IMF mission is due in town in February. Another positive note is that Standard & Poors are due to raise the country's credit rating in March. But the time is not yet ripe for a flood of FDI, which is what Romania ultimately needs.

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AVIATION

IAR to deliver Puma helicopters to Ivory Coast

IAR, a Romanian aircraft maker based in Brasov, said it will deliver four Puma 330L helicopters to the Ivory Coast; Budapest Business Journal quoted the National Agency for Strategic Exports and Chemical Weapon Interdiction as saying. The agreement is worth US$11.5m. According to the agency, the deal would be carried out via an exclusive export licence with a six-month validity period. Ivory Coast officials will not be permitted to resell or lease the helicopters to a third party without gaining written approval from the Romanian agency.

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BANKING

Citibank Romania gears up for improved services

The Romanian subsidiary of Citibank announced it will spend millions of US dollars in 2003 to boost its banking services network for individuals, and small- and medium-sized enterprises. Citibank Romania is prepared to hire more experts, buy improved software and boost logistics costs, acting Chairman, Meelad Khokhar, was quoted as saying by Budapest Business Journal. "We will continue the organic growth of the bank in 2003, capitalising on the launch this year of two business initiatives: consumer banking and middle market corporate banking," Khorkhar said. According to him, Citibank Romania's overall assets would top US$500m by year-end, with the bank employing around 200 people in its six branches.

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BONDS

Romania to issue bonds worth 500m euro on foreign markets

In the first quarter of this year the Ministry of Public Finance will issue foreign bonds worth 500m euro, Finance Minister, Mihai Tanasescu, announced on 7th January, Rompres News Agency has reported. 
At the moment the ministry has three options to choose from: releasing an issue in euro, extending the latest joining of the foreign markets and joining the US market for the first time. Another question the ministry has to answer is whether it is still necessary for the bonds to be 10 years old, Tanasescu said and added that the answer to such questions would be given by the end of January. Anyway, Minister Tanasescu said that the bonds released by the Romanian state were over-quoted in foreign markets at present. 
The sums obtained from this issue will cover about one half of the budget deficit predicted for 2003 and the remaining part is to be covered from funds attracted from the domestic market.

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DEFENCE INDUSTRY

Romanian defence minister signs document on purchase of two frigates from UK

British minister for upgrades in defence, Lord William Bach of Lutterworth and the Romanian Minister of Defence Ioan Mircea Pascu, signed on 14th January the Purchasing Agreement for two type 22 frigates formerly belonging to the British Navy, Mediafax News Agency has reported. 
The agreement was concluded between the Romanian and British government and is to be run by the ministries of defence in the two countries. 
The document stipulates the acquisition of two multi-purpose type 22 frigates, "restoration and upgrade" of the ships, providing the initial logistic support and defining the logistic long term support, personnel training, according to the training programme of the Royal British Navy. 
For the first stage of the programme, the purchase by the Romanian Naval Force of the HMS Coventry and HMS London frigates, completely interoperable with the NATO ships, and the initiation of a long term logistic programme (March 2003-June 2005) the final price is £116m. The second stage of the programme is to be held according to the operational demands of the Romanian Naval Forces for developing ship capabilities (between 2008-2009).
The price for the ships (without the existing equipment onboard, equipment to be modernized, and the new upgrades to be purchased) is £200,000, pointed out the state secretary in the MApN [National Defence Ministry], Gheorghe Matache. 
The first ship is to be delivered in December 2004, and the second one in June 2005. Financing for the purchase agreement comes from foreign credits guaranteed for by the government. 
The agreement is to be run in a programme for "industrial offset" compensations 80-90 per cent indirect offset for the Romanian industry (out of which 60 per cent for the defence industry and 20-30 per cent for the civil industry), and 10-20 per cent direct offset for Romanian National Defence Ministry for training and maintenance and for the defence industry for logistic support and design. 
The two frigates will be able to execute various missions being in charge of naval groups, to take part in collective operations as independent naval units, to supervise the naval status and traffic in territorial waters, continuous and Romanian exclusive waters, to support the marine water pollution prevention teams, to fight smuggling, gun running or drug imports, and also to take part in national or international rescue-and-save maritime activities or humanity aid... 
Lord Bach of Lutterworth, was "delighted" that Romania chose type 22 frigates for modernizing its fleet. He claims the ships are "very capable" and successfully served the Royal British Navy for several years in the world oceans. 
"I am convinced they will perform an excellent service in the service of the Romanian Navy. The trade is profitable both for Romania and the Great Britain," he said, pointing out that his country is to keep on supporting Romania and to provide practical training for NATO and EU integration.

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ENERGY

Romania kicks off energy sell-offs

The Romanian government has announced that it will begin the privatisation process for its energy sector. The first companies slated for sale are the domestic energy distributors Electrica Banat and Dobrogea, according to Bluebull News Agency.
Interested parties must submit their offers by the end of February 2003. All sale agreements are scheduled to be finalised a month later.
The World Bank approved recently the launch of the privatisation programme of the two units. The government, which finalised the privatisation scheme in October, said majority stakes (no less than 51%) in Electrica Banat and Dobrogea would be sold to strategic investors. BNP Paribas has the role as advisor to the sales.
Elctrica Banat believes it will report a profit of 1,500bn lei in 2002 (€44m), while revenues will total €1.7bn. Electrica Banat has been in the red for the last two years. Turnover in 2001 reached some €1.4bn.

Romania, Algeria interested in joint oil, natural gas-related projects

Romania is interested in developing, together with Algeria, medium and long term projects in the energy domain, especially in exploring and using the oil and natural gas, it was stated on 14th January Mediafax News Agency has reported. 
Romanian Minister of Industries, Dan Ioan Popescu, who accompanied President Ion Iliescu on his official visit to Algeria, mentioned that he had talks with the Algerian party about the possibility of extending the natural gas pipe connecting Algeria to Slovenia, all the way to Romania. According to Dan Ioan Popescu, there are technical possibilities to achieve this project. 
Dan Ioan Popescu said the Romanian party was also interested in capitalizing some oil perimeters from Algeria. He added that the possibility for Romania to import oil at good prices from Algeria should be carefully examined. 
Romanian and Algerian officials also discussed cooperation in the drilling construction, dwelling construction, chemical industry, medicines, cement industry, fertilizers and textile industry. 
Romania, as a founding member of the World Trade Organization (WTO), will provide consultancy to Algeria, which intends to join WTO. Romania wants to relaunch, after 20 years, the Romanian-Algerian joint commission. 
Algeria owns important oil resources, natural gas, iron and phosphates. The oil reserves are amounted to 1.7bn tons, and the natural gas resources to 3,700bn cu. m.

Romania's oil, gas exports over US$500m in 2002

The exports of Romania's National Oil Company Petrom, the largest company in the Romanian market, are put at, US$572m for this year, up by 83 per cent compared with 2001, daily 'Ziarul Financiar' said on 23rd December, Rompres News Agency has reported. 
The Petrom exports go to the European Union, Italy, Greece, Belgium, France, Spain/ Central and Southeastern Europe, Turkey, Poland, Hungary, Yugoslavia, Bulgaria. Petrom expects its fuel sales abroad to stand at about 922 thousand tons of petrol and 1,232 tonnes of Diesel.
Petrom is one of the most important oil companies in Central and Eastern Europe, with 63 per cent of the production of crude oil of the entire area and 35 per cent of the production of gas. The company is active in the distribution of fuels in Hungary and the Republic of Moldova and in oil exploitation and production in Kazakstan, India and Iran. 
In 2003, Petrom intends to work in the distribution of fuel in two more markets, i.e. in Yugoslavia and Bulgaria. The Romanian state, that holds 93 per cent of Petrom, intends to transfer it into private hands by December 2003, with consulting from a consortium made up by Credit Suisse First Boston Bank and ING Barings Bank.

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EU ACCESSION

Romania to close "at least" four chapters during Greek EU presidency

Greece (which took over the presidency of the European Union on 1st January) thinks that Romania can make progress with several negotiation chapters, including the ones on financial matters. During her six-month mandate, Athens thinks Romania can close at least four chapters, Greece's Ambassador to Bucharest, Theodora Grossomanidou, said on 8th January, Rompres News Agency has reported. 
"We are much more optimistic about the number of chapters to be temporarily closed, yet everything depends on the real progress made by Romania. The decision to close these chapters is not a political one; it takes into account the concrete successes in adopting and enforcing the community legislation specific to each sector," said Theodora Grossomanidou, who also spelled-out the priorities of the Greek EU presidency. 
Athens will not restrain Romania's capacity to negotiate and close chapters, as long as Bucharest lives up to its commitments. 
About the recent statements made by Minister delegate Vasile Puscas, Romania's EU chief-negotiator, the Greek official said it was quite reasonable for Romania to close at least three of the four chapters on free circulation of goods, services, persons and capital, which makes the structure of a functioning market economy. 
According to Ambassador Theodora Grossomanidou, the Greek presidency appreciates last year's performances of Romania and Bulgaria and is willing to help them both as much as possible to make progress with the EU negotiations. 
So far, Romania has opened all the 30 negotiation chapters and has temporarily closed 16 of them.

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FINANCIAL NEWS

Romanian minister anticipates 7 per cent industrial growth in 2003

Romania's industrial growth will stay at round seven per cent in 2003 as well, and the industry will continue to be the engine of the economic growth, Industry and Resources Minister, Dan Ioan Popescu, told Radio Romania Actualitati on 8th January, Rompres News Agency has reported. 
"We expect a significant increase in the Romanian industry and in the GDP for the year 2003 as well. If last year's growth stood at seven per cent, the same rate is expected in 2003, for us to have an economic growth of 5-5.2 per cent, as the governmental programme says," the dignitary said.
There are a few extremely important branches which will tangibly back up this growth, namely the oil industry, the oil-processing industry the iron and steel industry, the machine building industry, the software industry - which are starting to contribute more and more significantly to the industrial growth, and the traditional textile industry, Minister Popescu stressed. 
Romania is in a favourable state, as almost 60 per cent of its exports go to the EU, the Industry Minister pointed out, referring to the European market in the context of the EU enlargement and the presence of the Romanian companies in this market. "We'll actually have to analyse each branch and we have to hold many integration talks related to the iron and steel industry's problems, the production bulk, on what products should be manufactured, the textile industry, to what extent we can develop the petrochemical industry, or how much crude oil we are to process during the coming period," the minister said.

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INDUSTRY

Former arms industry firm to make bicycles

The former arms maker, Tohan Zarnesti, will from now on produce bicycles, in a modern factory to be built for this purpose by a German company, informed the 'Cotidianul' daily on 9th January. 
According to the leader of the trade union within Tohan, Mircea Tantau, the bicycle factory would create some 300 jobs and would have an output capacity of 200,000 bicycles annually. "Tohan plant already has 150,000 orders for this year and we hope that the first bicycle will leave the plant in June. The prospects are extremely positive but we will have to work hard to revive the Zarnesti industry. Of course, we need sustained support from authorities to successfully complete what we have started," said Tantau. 
As of 1st February 2003, almost 600 employees of Tohan plant will be laid-off. However, the leader of Tohan trade union is confident in the future prospects of economic development of Zarnesti, so that the laid-off could be re-integrated in the economic activity.

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MINERALS & METALS

Romanian steel company rebuffs US investor, returns under state ownership

On 1st January 2003, after two years of being managed by US investor Noble Ventures, the Resita Iron and Steel company (CSR) passed back to state ownership, Rompres News Agency has reported quoting the daily 'Curentul.' The formalities to reinvest the Romanian State with majority shareholdership should start shortly. The Authority for Privatisation and Management of State Shareholdings (APAPS) now possesses all the necessary controls to cancel the privatisation contract concluded with the US company two years ago. 
The single resolutory condition of the contract refers to the fact that the investor failed to pay two successive instalments of the shares taken over from the Romanian State. The first instalment had been left unpaid in 2001, and the deadline for the second was 31st December 2002. 
Noble Ventures won the tender staged by the former State Ownership Fund for the majority share package in 2000, but it failed to fulfil any of the assumed duties stipulated under the privatisation contract, says 'Curentul.' 
Immediately after the taking over the works, Noble Ventures was expected to increase its capital to US$6m and bring in a working capital worth US$10m, in addition to performing investments worth US$11.5m by 5th June 2001. CSR contracted a foreign loan of US$35m backed by state guarantees for upgrading an electric furnace. The loan should have been disbursed by 15 September 2001. None of the dollars the US company officials had promised, ever entered CSR. 
The US investors in Resita benefited, during this entire time span, from the unprecedented grace of the Romanian authorities, the paper says. Last July, the Romanian State became again the majority shareholder in CSR, holding an 83 per cent stake that resulted from the conversion of CSR debts into shares. But this time again, Noble Ventures was entrusted with the management of CSR, as the privatisation contract could not be annulled until the second instalment's payment deadline expired.

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