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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: 073 - (27/05/03)

Grim history
The Romanians are a curious people with an unusual history. In the second century AD they were occupied by the Romans, who called it Dacia at the time. But it was evacuated in the third century and the Visigoths moved in, the vanguard of the barbarians who were to engulf the Roman Empire. There is no tangible historical record for the thousand years between the third and the thirteenth centuries. The long night of the Dark Ages supervened.
Romania had a vibrant civilisation subsequently. But in the communist period it had a new Dark Age under Caucescu and his ghoulish wife, Elena. That ended on Christmas Day, 1989, the beginning of Romania's independence. Once the dictatorship had gone, problems abounded. The regime had ensured a modicum of social security and full employment. The transition to capitalism has been painful in the extreme, with whole industries being wiped out and the towns and villages dependant on them becoming destitute.
Not surprisingly the communists are back in power, both President Ion Ilescu and premier Nastase being former stalwarts of the old regime, as anyone who wanted a political career had to be. In fact they have been doing rather well in trying circumstances.

The west extends help
Romania has received a US$76m loan tranche from the International Monetary Fund (IMF). However, the global financial institution said the government must adhere to cautious wage policies to ensure the economy follows a steady trend. Overall IMF projected credit to the former communist state stands at about US$413m. Of that total, Romania has actually obtained US$186m.
The country's macroeconomic performance last year was good but worries have already surfaced thanks to the higher minimum wage agreed in January and the sluggish global economy, the IMF said in a statement.
"Against this background, full and firm implementation of cautious wage policies will be vital to preserve macroeconomic stability and avoid a significant deterioration in Romania's external competitiveness in the medium term," Anne Krueger, first deputy managing director at the IMF, was quoted as saying.
Macroeconomic policies must become stricter because of the current account figure and the sudden pressures on prices, the IMF said in a statement. The government must adopt stronger measures in terms of revenue collection; restructuring the tax and social security system may do this, the Fund said. The IMF official noted the country's "commendable" effort to modernise state-controlled companies. However, the government must do more with respect to collection rates at energy utilities and move forward with plans to finalise the privatisation of the energy sector, namely gas and electricity distribution enterprises. In the statement, Krueger noted Romania is prepared to sell a minority stake in Banca Comerciala Romania (BCR), the number one bank in the country, and to finalise the bank's privatisation once market conditions improve.

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DEFENCE INDUSTRY

Government privatises defence industry unit

The employers' association of MFA Mizil company has purchased all the shares owned by the state in this company, the total value of the transaction standing at 101bn lei; the amount includes the price of the shares, the technological and environment investments and the payment of the state debt and penalties, Rompres News Agency has reported. 
MFA Mizil mainly deals in the manufacture, repair, upgrading and sale of armoured hardware, engineering equipment, utility vehicles for defence use, sub-assemblies, engines, and spare parts; it also manufactures metal constructions, auto components and accessories, and offers services for agriculture. 
Under the privatisation agreement the buyer pledges to maintain the main activity of the company, make technological and environment investments for a four-year term, and carry out a business plan that should develop the company by expanding civilian production, among other things; the buyer also pledges not to lay off staff. 
The new owner pledged to pay all the company debts that stand at 33bn lei, of which 15bn lei are debts to the state budget and other budgets. 
At present, MFA Mizil has orders and contracts worth some US$4m, managing director Constantin Cazacu, said. 
Industry and Resources Minister, Dan Ioan Popescu, said another two defence industry companies would be privatised shortly.

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ENERGY

Romania to set up JV with Gazprom for direct supplies

Romanian Prime Minister Adrian Nastase, has announced that Bucharest hopes to set up a joint venture with Russia's Gazprom by the end of the year to supply gas directly from Russia to Romania. "We hope that this venture will be set up by the end of the year. Bucharest is interested in establishing direct links with Russia (for fuel supplies) and does not feel the need for any intermediaries between Moscow and Bucharest in the gas sphere," Nastase said after a meeting with Russian Foreign Minister, Igor Ivanov, in Bucharest.
He also said he is confident that Gazprom would participate in the privatisation of the Romanian gas distribution network and also of gas sales companies, New Europe reported.
In turn, Ivanov said that during his meeting with the co-Chairman of the Russian-Romanian economic commission, Economics Minister, Dan Ioan Popescu, the Romanian side confirmed its interest in Gazprom's presence in Romania.
"The Romanian side stressed that it has very good business relations with Gazprom and all that is required is cooperation from the governments of both countries to develop these relations," Ivanov said.

Romania to shut down 120 unprofitable mines, coal quarries

The Romanian government has plans to shut down about 120 mines and coal quarries that are failing to turn in a profit. The closures will likely happen by the end of 2003, BBW reported. 
The funds earmarked for the operation are more than 550bn lei (US$16.4m). The money will be used primarily to support the social security programmes for staff that will be laid off. Just two years ago, the government drafted a proposal with respect to the shutdowns in order to cut losses at unsuccessful mines and coal quarries.

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FOREIGN INVESTMENT

Musetescu welcomes cooperation with Japan's Mitsui & Co

Romanian Privatisation Minister, Ovidiu Musetescu, said he was pleased with the ongoing talks between regional companies and representatives of the Japanese company Mitsui & Co, according to BBW. Musetescu said he believes activities related to Mitsui's plan to revamp 57 diesel locomotives in partnership with Electroputere and UCM Resita would represent a fruitful effort and a basis for stronger ties between them. 
The government is hopeful the Japanese group would present Romania's investment opportunities to Japanese investors, Musetescu was quoted as saying. Takehiro Togo, a senior consultant at Mitsui, was quoted as saying Romania's business sector offered many opportunities that could benefit Japanese enterprises.

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NUCLEAR ENERGY

Romania's nuclear power plant given new two-year operation authorization

Minister of Water and Environmental Protection, Petru Lificiu, and President of the National Commission for the Control of Nuclear Activities, Lucian Biro, on 7th May, attended a ceremony in which the nuclear power plant of Cernavoda (southeastern Romania) was given a new two-year operation authorization, Rompres News Agency has reported. 
Managing Director of Nuclear Electrica Company, Ion Rotaru, told those present at the event that the implementation of the project had become effective as of 24 March, when the financing contract was ratified; commercial commissioning of the plant is planned to take place in the first quarter of 2007, he added. 
"Romania is participating in this investment project with equipment and nuclear fuel worth US$320m, but we are in very advanced talks with Euroatom to extend to us an equivalent credit that would ease the budgetary effort," Rotaru said. 
The Cernavoda nuclear power plant employs more than 1,300 staff and supports 15 sub-contractor companies - 12 of which are based at Cernavoda - that employs more than 350 staff. The Cernavoda nuclear power plant supplies thermal power to more than 60 per cent of the town's population at the lowest price in Romania; it contributes taxes and duties worth US$284,000 annually to the local budget, while it pays to the state budget US$9.4m from direct taxes and duties.

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TELECOMMUNICATIONS

SSSB collects US$550,000 for Romtelecom privatisation

Schroeder Salomon Smith Barney (SSSB), the consultant for the privatisation of Romtelecom, received 18.17bn lei (US$550,000) for its work in completing the sell-off process for the company, based on a government decree regarding the budget for privatisation activity this year, BBW reported. 
The decree noted that the privatisation revenue of MCTI for this year stands at US$30m. "Services like accounting, fiscal accounting, study of the market, consultancy for business and management will be guaranteed," SSSB said in a statement. Romtelecom was finally privatised at the start of 2003, and its overall value totalled US$520m. A 19% stake, worth US$274m, is included in the deal, while the remaining shares are represented by foreign credits that the company will collect. 
James Hubley, the newly appointed chief executive of Romtelecom, was due to arrive at the company's office at end-March. Romtelecom's board will convene in the coming months to decide what investments will be made this year. Romtelecom posted a €64.6m loss in 2002. 

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