% 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: 076 - (28/08/03)
The US the new ally
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 the Western powers 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?"
New AIBO terminal costs 10.5m Euro
The Otopeni International Airport (AIBO) recently inaugurated its new terminal for domestic flights, whose cost reached 10.5m Euro. The works were carried out by Romairport, an Italian-Romanian association including Italstrade Italia, SEA Milano and CCCF SA Bucuresti. The new terminal is an important objective of the AIBO investment programme for the last decade and its main quality is flexibility.
During the fist phase, the terminal will be used exclusively for domestic flights. Without further changes, it can be easily adapted for international flights. Expecting Romania to join the EU, the infrastructure is already up to European standards, Bursa reported. The design was provided by SEA Milano and Iptana SA. The overall size of the terminal is 8,500 square metres.
AIBB seeks relaunch of international flights
Romania's international airport, Baneasa (AIBB), has announced it is looking for a partner to set up an airline company able to operate both international and domestic flights. According to reports by investromania, officials at AIBB said talks with several foreign airline operators have been going on since last year.
The airport is also seeking a grant worth up to US$8m to acquire a 30-seat airplane. AIBB operates some 50 flights per day with a monthly average of 1,500 flights. Most of them are charters for destinations like Spain, Malta, and Tunisia as well as business flights.
Baneasa airport was built some 70 years ago, being the main flight gate of the country for many years. However, once the Otopeni International Airport entered service some 35 years ago, Baneasa airport operated only domestic flights.
In 2000, the transport ministry decided to close Baneasa airport and move the domestic flights to Otopeni but trade union opposition on the Baneasa closure was strong and the government decided to keep it for charter and private business flights.
According to the latest AIBB estimates, 2003 turnover is expected to rise by 25 per cent to 2.5m Euro. It also forecast a turnover of 4m Euro next year following the management decision to rent out some acres of airport property which are not currently in use.
Tiriac Bank founder puts shares on sale
A major share package of Ion Tiriac Bank is soon to be put on sale. According to reports by evenimentulzilei, President of the bank, Anthony Van de Heijden announced recently Ion Tiriac's intention to sell part of or the entire share package held in the bank which he founded with his own money. Heijden said that the bank was seeking strong partners that did not intend to sell the shares quickly.
Tiriac holds 67.5% of the bank's shares and the European Bank for Reconstruction and Development holds 5.9% of the capital. "The bank had a profit of over 333bn lei last year and its management is seeking strategic investors to abandon the fifth rank banks that have limited access to funds," evenimentulzilei quoted Heijden as saying.
IFC aids Petrom post-privatisation era
The International Finance Corporation (IFC), the World Bank's investment division, said it considered the merits of financing Romanian's national oil company in its post-privatisation period, Economy and Trade Ministry officials said recently, reported New Europe.
"IFC representatives have said they will help the investor that acquires the majority stake in Petrom, by offering long-term financing for investments and working capital," the Economy and Trade Ministry press release said. The statement also said the Ministry would send the IFC offer to all investors willing to submit bids for the Petrom stake.
The Petrom sell-off strategy envisages the sale of a 40% stake followed by an increase of share capital aimed to raise the new main shareholders stake towards 51%. The strategy also said the state would keep for a short period of time, a 35% Petrom stake to see if the investor would observe his obligations as stipulated under the sale contract.
Under the agreements with western lenders, the government was expected to officially launch the Petrom privatisation on June 30th. Bids from potential investors are expected by September, while the bids selection and negotiations are expected to be finalised by the end of the year
Power producers urge government support
Electricity and thermal power producers want the government to support them in the 2003-2004 winter, guaranteeing foreign loans higher than those taken out last year, evenimentulzilei has reported.
According to the daily's report, during the last cabinet meeting, the Economy and Trade Ministry pledged that until August 1st, it would take out loans of about US$525m altogether, with the loans being guaranteed by the state. The sum is much higher than the loan which the Romanian state guaranteed last winter when Termoelectrica, the main thermal power supplier and the 18 power plants subordinated to the town councils, took out foreign loans of US$320m. For the period from October 2003-March 2004, Termoelectrica needs 766,000 tonnes of crude oil; the quantities to be imported are to be set depending on the capacity of domestic producers.
Hidroelectrica present ambitious revamping plan
Romania's hydropower producer, Hidroelectica, aiming at developing and modernising all its facilities, has heralded ambitious plans. The industry's 10-year programme comes in a bid to make the company one of the most significant players on the country's energy market, New Europe has reported.
"This month we will start a programmed design to put on stream all our production capacities now in various stages of construction," Hidroelectica's general manager, Eugen Pena, was quoted as saying in investromania.
According to Pena, some 2bn Euro will be invested over the next 10 years to complete the programme. He added that USB Warburg investment bank would start to assess Hidroelectica in order to get a company rating needed to raise financing from the international capital markets at lower costs and without the state guarantee.
"Such a rating will help Hidroelectica to raise money for a healthy development," Pena said, adding that further energy market liberalisation will allow the company to supply extensive amounts of energy at higher prices triggering a boost in profits. The company is expected to select soon an international consultant for its planned non-government backed US$150m club loan. Hidroelectica received four offers from JP Morgan, Austria's Triple-A and Germany's Deutsche Bank and UBS-Warburg for managing the fund raising, investromania said. Pena said many international companies, as well as local ones have shown interest in striking private-public partnerships for several hydropower plans across Romania. "Italy's Enel, France's Mecadimi, the Czech Republic's Montizola as well as Romania's Romenergo and Neptun companies want to conclude build-operate-transfer partnerships for Hidroelectica 21 power plants which are in different stages of completion," Pena said.
Last year, Hidroelectica launched a tender for the privatisation of these 21 hydropower plants with a capacity of 666 MW. These projects had been at various stages of construction in 1989 when the communist regime was ousted and have remained inactive over the past 12 years. Should they be completed, these 21 plants could produce an additional 2,700GwH per year, reducing the cost of electricity imports from Bulgaria by US$150m. Foreign investors are also interested in starting greenfield hydropower plants, as Romania has a good hydrologic potential. With a well-developed river system, Romania has a total hydroelectric power potential of about 40 TWh in a normal hydrological year, 12 TWh per year has already been developed.
From horror to highbrow in Romania
It being Romania, and all that implies for foggy forests and the undead, there was perhaps no other way for the early days of foreign filmmaking there. In 1992 there was "Subspecies 2," followed closely by "Subspecies 3." Then came "Leaping Leprechauns," parts 1 and 2, "The Human pets," "The Planet of the Dino Knights," "Frankenstein Reborn" and something called, simply, "Hideous."
"Vampires and stuff - horror of course," said Bogdan Moncea, marketing director for Romania's biggest film studio, Castel. "I would say the Americans were attracted here - maybe, maybe - by Dracula and Vlad the Impaler."
That, maybe, along with the fact that Romania, more than a few steps behind the rest of Eastern Europe, was also one of the cheapest places in Europe to make movies. These days, the cheapness has not much changed but the movies, both the number and quality, slowly have, the International Herald Tribune reported recently.
Just south of the capital sits a sleek set, a stunning reproduction of a Paris street, where Andy Garcia has been starring in a film about the life of Modigliani. The big fright, on a recent day of shooting, was decidedly highbrow. In a crowd of jugglers, stilt-walkers and a Roman charioteer, Garcia, as the artist, is having hallucinations that every person in the crowd has the face of his rival, Picasso.
"Years down the road, the potential is there to be another Prague," said the film's director, Mick Davis.
Davis, like everyone else in the business, is quick to add that the moment is not yet here. But Prague, which became Hollywood's favourite place in Eastern Europe to make movies in the 1990's, is the goal - and to some small degree, Romanians hope, the competition. The Romanian film industry is hoping that, with prices in Prague rising and studios often booked, filmmakers will look increasingly to Romania, with its lower labour costs, inexpensive wood for set construction and stunning landscapes, from the Black Sea to the Carpathian Mountains.
Romanians say there are already signs of long-term prosperity in the film industry there. The two major studios, Castel and Media Pro Pictures, where the Modigliani film is being shot, are both reporting huge growth. Media Pro is working on 12 pictures, up from two in 2000. Castel says it has done more business in the first six months of this year than in all of 2001.
Moreover, it is not all schlock. Last year, Franco Zeffirelli made a biography of the opera star Maria Callas there, starring Jeremy Irons. Constantin Costa Gavras shot a film called "Amen." Dennis Hopper just finished starring in a movie there and film people there report that he plans to come back to direct one.
The BBC has signed on for a long series on King James I, taking advantage of the extensive costume collection at Media Pro, heir to the old state-run studio. Elizabeth Hurley is expected soon for a movie, appropriately enough, about making a movie in Romania.
But the biggest undertaking here by far has been "Cold Mountain," a Civil War epic shot last year starring Nicole Kidman and Jude Law and directed by Anthony Minghella. Nearly everything, from ravens to tons of artificial snow and blood, were imported. Entire farms, planted with corn and tobacco, were created. A battle scene called for nearly 1,000 extras - the kind of scene for which Romania, with its low labour costs, may be especially suited.
As a result of "Cold Mountain," said Moncea of Castel, which shot the movie, "people not only became more aware of Romaina as a good film industry destination, but they relised this kind of production was feasible here."
Barry Mulligan, an Irish producer who founded a film production house called Head Set Films in Romania this year with three partners, said he had seen how much the image of filmmaking had changed while at the Cannes festival this year.
His pitch about doing business in Romania - known better for pollution, corruption and orphanages - was met not with blank stares but actual interest.
"It was a nice revelation that it's seen in such a positive light," he said. "It's turned a corner."
But "Cold Mountian," people in the film industry here say, also demonstrated many of the shortcomings of Romania. Customs and the bureaucracy in this former totalitarian state were a challenge. Qualified technicians - like many goods and services in Romania - were not plentiful. Some on the film groused about excessive charges for services like drivers.
Whatever the new sheen on Romania's image for filmmaking, it still attracts a bountiful share of low budget and horror movies. There was an atmosphere of pleasant confusion, for example, on the set of one low-budget film, "Fire," filmed in an as-yet-unburning forest near Bucharest.
A helicopter, on loan from the Romanian Interior Ministry, buzzed overhead for a key scene in which the hero park ranger is dropped into a forest to rescue four motorcycle riders.
A wind machine was caught temporarily in a ditch. A woman on the staff blasted a male colleague with a water cannon, and someone yelled not to get water on the camera.
"In the low-budget area, where I find myself these days, we're always looking for certain advantages," said Michael Flannigan, an American producer on the set who worked last year on a Dracula movie in Romania starring Billy Zane.
Allan Goldstein, the director, seemed to relish making a little history, with the film industry here so new.
"I would say this is the biggest action movie ever made in Romania," he said. "It's massive."
Romania, IMF agree on measures to limit wage increase
Bucharest authorities and representatives of the International Monetary Fund (IMF) have reached common agreement on the supplementary letter of intent and will continue the debates on measures to keep the increase of salaries paid in state enterprises under control , Mediafax News Agency has reported.
"In the first half of 2003, the macroeconomic trends continued to be favourable, with GDP powerful growth and with the inflation's decrease more rapid than anticipated," says a release from the IMF chief negotiator for Romania, Neven Mates.
Some of the problems identified by IMF mission in the fourth and the last revision of the stand-by agreement in Bucharest on 14th July - 1st August, refer to the slowing increase of exports, to the increase in deficit of the current account and to the increase in salaries beyond the output level.
"The rapid rise of salaries over the level justified by the labour's productiveness and by the credit expansion to the private sector also induced more powerful demand from the private sector and applied pressure upon imports. As a result, the deficit of current account increased in comparison with the forecasts. The impact of the powerful increase in real salaries upon the external competitiveness remains a preoccupation," says the release.
FOREIGN ECONOMIC RELATIONS
Romanian government allocates 120bn lei to cooperation with Moldova
Romania's government has allocated for this year almost 120bn lei (1 euro = 37,400 lei) for the implementation of cooperation with the Republic of Moldova, Rompres News Agency has reported.
Published in the Official Gazette on 6th August, a resolution of the Bucharest government provides for the allocation, from the fund at the disposal of the government, of 119.978bn lei, of which 30bn lei is for financing the broadcasting of Programme 1 of the Romanian Television Company in the territory of the Republic of Moldova and 89.978 bn lei for financing some projects of economic and cultural integration between Romania and the Republic of Moldova.
Among the projects, mention should be made of the following: supporting secondary and higher education, training and improved training of staff in various fields of activity, continuing the programmes meant to equip libraries with books in the Pupil's Library collection, sending textbooks, encouraging the presence and distribution of the press in Romanian in the Republic of Moldova, promoting Romanian culture and Romania's history by going on with archaeological excavations, organizing museums, distributing history journals, common cultural events, fine arts exhibitions, galas featuring Romanian films, supporting cooperation in science, technology and environment protection as well as a programme of humanitarian assistance and modernization of primary medical services in the rural areas of the Republic of Moldova.
HP launches new investment schemes
Hewlett-Packard will invest some US$1.5m in Romania over the next few years, targeting mainly the domestic activity development, as well as the improvement of the rendered services, said HP Vice President for Europe, the Middle East and Africa, Kasper Rorsted, in a recent statement.
POSTelecom gains China Export-Import Bank loan
Romanian fixed telephony operator, POSTelectom, will get an US$80m loan from the China Export Import Bank to finance its equipments' acquisition from Zhongxing Telecommunication Equipment (ZTE).
The 11-year loan will bear a three-year grace period, investoromania cited the telecom group as saying. POSTeletom said the equipment to be acquired from ZTE would allow it have tariffs below those of Romtelecom, the country's largest landline telephony operator.
INVESTMENT BACKGROUND REPORTS
Our analysts and editorial staff have many years experience in analysing and reporting events in these nations. This knowledge is available in the form of geopolitical and/or economic country reports on any individual or grouping of countries. Such reports may be bespoke to the specification of clients or by access to one of our existing specialised reports.
For further information email:
Considering an investment or a trip to any newnation? First order our Investment Pack which will give you by e-mail the last three monthly newnation reports and the complete worldaudit democracy check for the low price of
US$12. The print-out would be a good companion to take with you. Having read it, you might even decide not to go!
To order please click here: