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ROMANIA


 

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 44,428 38,700 38,200 52
         
GNI per capita
 US $ 1,850 1,720 1,610 108
Ranking is given out of 208 nations - (data from the World Bank)

REPUBLICAN REFERENCE

Area (sq.km)
230,300

Population
22,364,022 

Capital 
Bucharest 

Currency 
Leu

President 
Ion Iliescu

Private sector 
% of GDP 
40%

  

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: 078 - (27/10/03)

The Roman heritage.
Romania, as its name implies, is of Roman origin, with a Latin language, akin to Italian, although French is the second language. The province of Dacia, modern Romania, was incorporated into the Romanian empire by the Emperor Trajan in 108AD. It was the first Roman province to be occupied by a barbarian tribe, the Visigoths, after the Romans lost the battle of Adrianople in 378AD. The Visigoths were allowed by pious Christian emperors to settle under arms, a fatal breach of Roman defences.
The Visigoths moved on in the fifth century to sack Rome and settle in Spain. The history of Romania for a millennium thereafter is largely shrouded in obscurity.
The Roman heritage came to the fore again in the twentieth century when Romania fell under the spell of fascism, like Italy. Mussolini wanted to imitate the Roman Empire by his conquests in Africa and Europe, but of course became a caricature of it. The truncated spell of fascism in Romania under General Antonescu, who ousted the monarchy at the outset of the war, was an even more crass affair. But the idea of a direct bond between a popular leader and the people, unmediated by democratic institutions and enforced by a close inner militia of security acting directly at the behest of the leader, was embodied in Antonescu's doomed regime. 
The rule of Ceaucescu under communism curiously echoed Antonescu's in this regard. Ceaucescu had an obsession about new buildings, architecture being a fascist obsession too. His regime was the grimmest in Eastern Europe and its fall the conclusion of the year of revolutions of 1989.

Recovery on the way?
The subsequent decade and a half have been devastating for the Romanians. No one seemed to have the answer. But the return of the left two years ago promised a change. The government of Adrian Nastase appeared at first to be doing well in its second year of office. The former communist appeared in tune with the popular mood and on the figures the economy were recovering.
But it is now clear problems are abounding. The economy will grow by only 4.8% this year, instead of the earlier projected 5.2%, according to Public Finance Minister Mihai Tanascescu.
The minister was optimistic that the budget deficit would be kept to 2.7% of GDP and therefore the inflation rate to 14%. But the sinister conclusion was that GDP will decline by 2.4% in real terms.
The decline is attributed to drought and a bad harvest. 2004's summer was exceptionally dry right across southern Europe and Romania's agriculture was in a worse condition to take it than most Only sunflower and maize output are expected to resist the trend.
In these circumstances it is not so surprising that the government is highlighting its higher international standing.

US envoy praises Romania's role
"Romania has become the United States and NATO's most important partner in Europe, during the latest years, and its fame as a regional leader has got greater and more outlined," US permanent representative to NATO Ambassador, Nicholas Burns, said rather excessively, at the yearly meeting of the Romanian ambassadors, in Bucharest recently.
"Last year, before the Prague summit, on the occasion of the assessment of the countries seeking NATO membership, Romania proved it was, militarily speaking, the best prepared country to join the North Atlantic Alliance, and the decision could not be other but to join the Alliance," Burns was quoted as saying by RomPress.
The NATO official went on to say that Romania already plays an influential part within the Alliance and that "it is part of the Alliance's strategic outlook as a result of the successful operations conducted in areas such as Bosnia, Kosovo, Afghanistan or Iraq." Burns emphasised: "By sending peacekeeping troops to so many places throughout the world, Romania certified it can do things that few others manage."

The US the new ally
What accounts for this extraordinary praise is that the Romanians sided totally with the Americans over the Iraq war. Having had to endure a ghastly tyranny themselves for decades, they understood rather better than the Western Europeans what was involved. Had somebody come to liberate them from it under Ceaucescu they would have been delighted. But of course they didn't, but rather gave the tyrant the red carpet treatment for the anti-Moscow tilt of his foreign policy.
Bucharest gave full backing to the war, letting US planes use bases in the south-east, notably one just north Constanta, for flights to Iraq. This was the more valuable because the Turks had refused to allow US troops to deploy from their territory. Almost overnight, the airport became a key route for refuelling and supply of US aircraft carrying troops into Iraq and neighbouring countries Up to 3,000 troops could operate there at any time
The question now arises of forging a regular alliance, with permanent US bases in Romania. The Turks have shown themselves to be not fully reliable in a crisis, while the Romanians are shaping up as exactly that. When 9:11 came about Romania sent troops to Afghanistan. After close cooperation over Iraq Romania is now expected to join NATO as early as next May.
"The major concern is to speed up the Americans coming here," says Gheorghe Martin, the prefect of the Constanta area. "We've been waiting for the Americans for 50 years. Now that they are here, can we really ask ourselves if they are welcome?"

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ENERGY

ConocoPhillips considers setting up consortium to purchase Romanian oil company

ConocoPhillips has voiced interest in establishing a consortium to run in the race for the privatisation of Romania's National Oil Corporation Petrom, Romanian national dailies reported on 8th October, quoting sources with the company, Rompres News Agency has reported. 
ConocoPhillips is interested in the existing 690 Petrom petrol stations and possibly the Arpechim of Ploiesti and Petrogaz of Ploiesti oil refineries. 
According the newspapers, the company would also like to enter a business partnership with one of the companies having qualified for the next stage in the privatisation of Petrom, in order to develop the upstream business of Petrom that relates to crude oil and natural gas drilling. 
The plans unveiled by the company is part of the ConocoPhillips's business development strategy in Central and Eastern Europe that will complement its existing operations in the Czech Republic, Slovakia and Turkey. 
OMV of Austria and Polski Koncern Naftowy (PKN) Orlen of Poland, both included among the 11 companies having qualified for the next stage in the privatisation of Petrom, have voiced readiness to setting up consortiums with other oil groups, their main interests being in crude oil and natural gas extraction. The fuel distribution business and the two refineries of Petrom would be left to potential business partners to deal with. 
The privatisation of Petrom has reached the stage in which non-committal bids are submitted, a process that will end on 10 November 2003. 
The Romanian Ministry of Economy and Trade announced having selected 11 companies or consortiums that qualify for the next stage of the privatisation process. These are OMV of Austria, ENI of Italy, MOL of Hungary, the consortium of TNK of Russia and BP of the UK, PKN Orlen of Poland, Gazprom of Russia, Hellenic Petroleum of Greece, ConocoPhillips of the UK, Occidental Oil and Gas Holding Corporation of the US, Alon Inc of the US and Glencore of Switzerland. 
Final bids are expected by 31st January 2004 and the privatisation process is expected to end late in March 2003. 
In August 2003, the Romanian government put a 33.34 per cent stake in Petrom up for sale. The buyer will be allowed to augment the stake to 51 per cent in a capital increase.

Balkan Petroleum becomes majority shareholder of Romanian Rafo Onesti

Balkan Petroleum has bought a 48.91 per cent stake in Rafo Onesti refinery from Canyon Servicos, Rompres News Agency has reported. 
Under the contract, Balkan Petroleum assumed the pledges made by Canyon Servicos in October 2001, when the refinery was privatised. 
Imperial Oil and Canyon Servicos in 2001 bought a 59.96 per cent stake in Rafo for US$7.48m. Afterwards, the consortium's participation reached 94.5 per cent by the purchase of some shares resulting from the conversion of debts to budgetary creditors.

USTDA subsidises Romgaz upgrading feasibility study

The US Trade and Development Agency (USTDA) awarded a US$248,000 grant to Romgaz SA to fund a feasibility study on the development of an underground gas storage facility in Romania, 'investromania' reported recently.
"The grant illustrates the USTDA commitment to assist Romania in modernising and redeveloping Romgaz underground storage facilities. This upgrade will make Romgaz's standards consistent with European Union requirements in this area," the agency said in its recent statements.
The agreement was signed by the senior commercial officer at the US embassy in Bucharest, Jonathan Marks, on behalf of the US government and Romgaz Director, Pantelimon Avram, on behalf of the grantee.
The USTDA-funded study will review and analyse depleted oil wells and make recommendations on how best to expand storage capacity. The study will seek to minimise the consequences of disruptions in gas deliveries from abroad, improve the efficiency of natural gas transportation, and optimise the economic value of natural gas purchased during periods of low demand.

Wintershall to exploit Romanian gas

Wintershall, a unit of Germany's BASF group, is to become the first foreign company to exploit Romanian natural gas with production to begin by the end of the year, dpa News Agency reported recently. The German oil and gas company disclosed no financial details of the 50:50 joint venture with Romgaz. The Kassel-based Wintershall said Romania was keen to reduce its dependence on imported gas. Wintershall has been active for 12 years in the eastern European nation, where one of its businesses is gas wholesaling.

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FINANCIAL NEWS

IMF sees no major problem on flat tax

The International Monetary Fund (IMF) has no objections to the issue of Romania enacting the flat tax on income in Romania, as far as the budget stays balanced, according to Finance Minister, Mihai Tanasescus.
The flat tax amounting to 23% for the whole global income could come in force on January 1st, 2004, when the Fiscal Code is due to become efficient, Rompress News Agency has reported. The gradual switch to the new taxation on the budgetary incomes, namely 18, 23, 28, 34 and 40%, will bring about the drop in the budgetary incomes by around 4,300bn lei, estimates say.
Nevertheless, this budgetary loss will be recouped by decreasing the social insurance fees by 2%, only as against 3% as initially announced, the Romanian finance minister noted.

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FOREIGN INVESTMENT

Lebanese businessmen interested to invest in Romania

Lebanese companies are interested to invest in Romania, in several domains, such as tourism, telecommunications, constructions, pharmaceutical industry and finances, stated Wajih Bizri, the president of a Lebanese businessmen delegation present in Bucharest, Mediafax News Agency has reported. 
"We believe the Romanian market has a lot to offer to the Lebanese market and we want to take this opportunity for the benefit of both parties," said Bizri, who is also the president of the Lebanese Business Forum. He also said he did not exclude the possibility of Lebanese investors getting involved in privatizing the companies owned by the Privatization Authority. 
The Lebanese investors met in Bucharest on 6th October, with the representatives of some Romanian companies, among which were Roman Brasov, Policolour Bucuresti, Sarcomex Bucuresti, Plafar, Chimexim Bucuresti. 
"The Lebanese businessmen are good traders. We appreciate their experience and we expect them to come to Romania to use it," stated Petrisor Peiu, the vice-chairman of the Romanian Agency for Foreign Investments. 
So far, the Lebanese companies have invested in Romania nearly US$475m, mainly in the tourism domain. 
During the first four months of this year, Lebanon has imported Romanian products amounting to US$25.44m, while Romania's imports reached a US$0.28m.

Romanian president urges foreign investors to support Eastern Europe

On 14th October, at the opening of the summit for investments in Eastern Europe, President Ion Iliescu stated that the efforts of the countries in the region deserve more consistent support from foreign investors, especially in the critical moments of the privatization process, Mediafax News Agency has reported. 
The same support should be equally given in setting up new classes of entrepreneurs, stated the president. 
The head of state said the countries that attended the summit belong to a complex geopolitical and economic area, with important development differences, with diverse social and economic problems, the unifying elements being their firms' wish and desire to overcome the slowdowns historically determined regarding the economic-social development. 
The president also said these two elements have added to the difficulties caused by the transition towards the democracy and market economy. 
Ion Iliescu said it is high time this situation was corrected, to integrate the positive changes made in the states from the regions, which in less than a decade built functional democratic systems. 
The head of state said these efforts deserve more consistent support from the foreign investors but unfortunately, up to now, except for Poland, the Czech Republic and Hungary that attracted a higher volume of foreign investments, this volume is rather low in the other countries in the area, including in Romania. 
Iliescu said that some visible progress had been made in fighting against bureaucracy, corruption, immoral competition and fiscal evasion. 
The stable economical situation in the area, the population's increasing buying power, the development of the transport and IT infrastructures, the qualified work force and the decreased costs are some strong arguments for investing in the countries from this area, said the president. 
Ion Iliescu said the countries within this area need long-term investments that are capable of generating technological progress and jobs for the citizens.

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INFORMATION TECHNOLOGY

Romanian Communications Ministry launches e-governing portal

The Ministry of Communications and IT (MCTI), on 29th September, launched the e-guvernare.ro portal of electronic governing, which is considered to be an essential stage in the "reform at the booth" programme, Rompres News Agency has reported. "The system has been functional, one way or the other, for 3 months. I believe it is the most developed national electronic system in Europe. Only Great Britain may represent a model for us," said Communications Minister Dan Nica. 
E-governing is defined as a sole access point to public information and services for naturalised persons and legal entities. The section of online application forms allows the unloading of forms used in relation to different public institutions, whereas the online service section entails filling in application forms through the Internet. 
As many as 164 forms are available at present, belonging to 4675 administration institutions, and their number will amount to a few thousands by end-year. Moreover, 7 online services for companies may be accessed. "The system will be the perfect servant, at the disposal of citizens 24 hours a day, 7 days a week, regardless of their location" said Nica. He added that in Romania there are 5 million persons and 500,000 companies accessing the Internet and thus they have access to the e-guvernare.ro. 
The MCTI also presented the electronic system of allocating authorisations for international freight transport. "As far as I know, it is the first time in Europe when such a system functions 100 per cent through a computer, without human intervention," Nica said. 
He announced that several computerisation projects had been approved in the last week's session of the IT Promotion Group. Among these is the launch of a portal devoted to healthcare services, in November, which will be the first stage of an integrated system to provide interactive information on the availability of the services in different medical institutions, online medical appointments and payments. 
Another approved project refers to the computerisation of Romania's customs system, which will allow the electronic entering and sending of the information on the customs declarations, and also the connection of the customs system with the banking one for making online payments. 

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SHIPPING

Romania to start two projects to improve Danube traffic

Two projects aimed at rehabilitating the Danube river traffic will be started in 2004, the first one referring to the improvement of the Sulina navigable channel's topo-hydrographic characteristics, the second one for the improvement of the navigation conditions on the lower Danube, Traian Panait, state secretary at the Ministry of Transport, Constructions and Tourism, said on 9th October, Rompres News Agency has reported. 
At the end of the Danube Business Conference, Panait said that the first project will cost US$76m, of which US$38m will be covered by a loan given by the European Investment Bank and the remainder from the national budget. The project is aimed at strengthening the banks of the navigable channel, reconditioning river beacons and one positive effect is the biological preservation of the Danube delta ecosystem. 
The second project, worth US$43.5m, will be implemented on the lower Danube, between the towns of Calarasi and Braila. By means of ISPA (a programme for the development of environment infrastructure and transport in the EU candidate states), the European Union will provide US$2m and the remainder will be covered by foreign loans if the degree of Romania's foreign indebtedness allows it, Panait added. 
As part of the second project, the Danube navigation depths will be deepened, which will enable ships to stop taking detours, a situation imposed by the Danube's low levels following this year's drought, the state secretary said.

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