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ROMANIA

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REPUBLICAN REFERENCE

Area (sq.km)
237,500

Population
22,271,839 

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: 083 - (19/03/04)

The Romanians are well aware of a sensation of being left out. The EU is expanding with 10 new members on May 1st and they are not amongst them. There are good reasons why they are not.
The primary one is that they had a particularly severe and repressive version of communism, the Ceaucescu regime. It left the country blighted, economically and morally. The work-ethic was eroded, the environment devastated, the best parts of the capital city, Bucharest, replace by concrete monsters and the population demoralised.
A report by the European Parliament's Foreign Affairs Committee says that Romania has need of a new accession strategy. Actual accession is planned for 2007.
The report asks the country to eradicate corruption and to establish a rule of law by separating the judiciary from politics. "Romania's accession to the European Union in 2007 is impossible unless genuine reforms are fully implemented in the fields of justice and administration," Nicholson said. For the first time the commission asked for anti-corruption measures, especially addressing corruption at the political level, an expression to worry politicians in power.
The commission also asked for measures to ensure the "freedom of the media, especially taking decisive action against the harassment and intimidation of journalists and curbing the economic control of the media which has resulted in self censorship."
Prominent journalist, Cristian Tudor Popescu, chairman of the Press Club, agreed with the observations on harassment and intimidation, but explained in a TV show recently that leading national newspapers are quite independent. The adopted report also demands better monitoring of the actual implementation of the acquis communautaire - the body of EU law - in the field of administrative reform and judicial reform. These two areas have been Romanian's weak points since the beginning of the talks with the EU.
In Bucharest the news produced turmoil in the political class. The leaders of the main opposition parties, Liberal and Democrat, urged the government to resign, or they will proceed with a no confidence call in the parliament. Opposition leaders consider that Romania lags behind Bulgaria, and is "united" from the neighbouring country in the process of integration.
In an attempt to minimalise the crisis, government officials are discussing the bright side of the situation. Romanian chief negotiator, Vasile Puscas welcomed the new "word arrangement" and said that the new approach by the European Parliament towards Romania is "constructive."
Foreign Minister, Mircea Geoana said the decision to reorient the strategy for joining the EU, is a "form of earlier warning," and the government will take this seriously into consideration. But he said that this isn't a dramatic moment, it is just a clear message, already heard.

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FOREIGN ECONOMIC COOPERATION

Romania and IMF gear up to negotiate 3-yr agreement

Romanian Finance Minister Tanasescu announced recently that the government will ask for a three-year agreement with the International Monetary Fund (IMF) in support of the much-needed macroeconomic stability and to smooth the European Union (EU) accession process.
Previously he said that Romania will sign a precautionary agreement due to last only 18 months. The government's negotiations with the IMF seem tougher than expected as the Fund is less inclined to strike a quick precautionary agreement, analysts noted. After having tolerated repeated delays and failures regarding certain targets under the previous arrangement completed in October last year, the Fund seems to call for more strictness.
In its turn, Romania needs such an agreement before the EU regular progress report on the country that will be released this fall. The Fund's green light is important for Romania to receive a functioning market economy status this autumn and to meet the economic criteria outlined by the EU. 
Tanasescu also said that the Fund's board will discuss the new arrangement with Romania in May, one month later than expected by the government officials. The Fund's representatives called for a thorough analysis of Romania's macroeconomic stance over the last 14 years of transition before talking about a new arrangement.
The board will not discuss the new arrangement before a report on the efficiency of previous arrangements is analysed, Romanian press reported.
Two IMF delegations were in Bucharest for annual macroeconomic consultations, under Article 4 of the institution's statute, finalisation of a new letter of intent for a precautionary stand-by agreement and for an ex-post analysis of Romania's relationship with the IMF in the past 14 years. Topics included policies addressing inflation and the current account deficit in the medium run, the fiscal policy and structural reforms. 
"In the first talks with IMF officials we maintained our opinion that Romania has the capacity to sustain a 5.5-5.8% current account deficit. Romania is moving towards a real convergence, which means higher investments and higher public spending," Tanasescu explained.
When economic consultations are over, another IMF team, headed by the chief negotiator for Romania, Neven Mates, will discuss with Romanian authorities the new agreement, focusing on fiscal and monetary policies, restructuring programmes scheduled this year, social and social accompaniment policies. The previous stand-by agreement, with US$418m, was finalised last autumn.

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FOREIGN INVESTMENT

Saint Gobain to invest in plant

The French group Saint Gobain, world leader in glass production, will invest at least €100m in a new glass plant for the construction sector to be built in the small town of Calarasi, the company announced recently, New Europe reported.
The project will be finalised in 2006, confirmed Romanian Agency for Foreign Investments recently. The plant will have a production capacity of 180,000 tons per year (600 tons per day), and the output will be sold both home and in South-Eastern Europe. Saint-Gobain operates in Romania through 8 companies, either subsidiaries running on French capital, or dealers and representative offices.

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FOREIGN LOANS

World Bank offers Romania US $1bn in reform aid

World Bank's assistance to Romania over the next three years is likely to be about US$1bn, announced Anand Seth, WB regional director during his recent visit to Romania. Anand Seth, World Bank country director for South Central Europe (Bulgaria, Croatia and Romania) visited Romania recently to discuss with Public Finance Minister, Mihai Tanasescu, the bank's assistance programme for the next three years and to assess progress on the ongoing structural reform programme, the local World Bank mission said recently. World Bank support will be directed at helping Romania complete its structural reform, meeting its EU accession goal, and further improving education, health and social protection services. They also reviewed the progress of the PSAL II (Private Sector Adjustment Loan), which is pending its second tranche release, expected in May this year, New Europe reported.

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INFORMATION TECHNOLOGY

Microsoft, HP to develop activities in Galati

The Romanian subsidiaries of Microsoft, Hewlett-Packard (HP), IBM, Oracle and Cisco will develop activities within the Galati software park, opened recently, said a statement released recently by Ministry of Communications and IT (MCTI), New Europe reported.
The main attractions of the software park are fiscal facilities specially designed to attract investors. Apart from star company in the field, companies located in Bucharest like Softwin, TotalSoft, Siveco, UTI and other 12 companies announced their intention to rent locations in Galati technologies park. There will be 300 employees to work in the park, but the number is expected to grow to 500 in a short period. During the first four years of activity, no rent will be charged for the spaces leased. The total investment in the park exceeds 40bn lei, out of which 10bn lei were allocated by the government.

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IRAQI RECONSTRUCTION

80 companies in poll position for Iraqi contracts

Eighty companies operating in various sectors, mainly in construction, met recently at government offices with leading prime contractors involved in the Iraqi reconstruction process, such as Bechtel and Wasand Parsons, Foreign Minister, Mircea Geoana, said after talks held at ministry headquarters with US Deputy Commerce Secretary, William Lash, New Europe reported recently.
Lash stated that in the competition with the several thousands of other companies worldwide, which want to become contractors of American companies in Iraq projects, Romanian companies have several advantages, including "very good engineering skills." He mentioned that Romanian companies, among which Forest Tehnoexport, a participant in the rehabilitation of schools in Iraq, are already successfully involved in Iraq.
Geoana said that Romania appreciates the series of joint commercial and economic actions that the United States has been promoting in particular since President, George W Bush's visit to Bucharest in November 2002.
"The effects of these actions are now showing, both in terms of the rise in commercial exchanges and of American investments in Romania.
As for Romanian companies' subcontracting works in Iraq, we have a lot of concrete opportunities particularly as regards the export of Romanian engineering to the Middle East. We hope Romanian companies will become important subcontractors for American companies," Geoana noted.
Lash explained that, during talks with the Romanian foreign minister, not only Iraq-related topics were approached, but also steps that should be done after Iraq, attracting additional American investments to Romania and the fight against corruption.
Asked about Bechtel receiving the Brasov-Bors highway contract without a bid, Lash said it was a usual procedure in such cases involving very large jobs to be finalised very quickly and that Bechtel was well known for the first class highways and motorways they had built around the world. The US official paid an official visit to Romania March 2nd-5th, as coordinator of the Group of Inter-Agencies for Iraq reconstruction.
He was accompanied by representatives of the Iraq Interim Governing Council and of the management of important American companies involved. This was the third visit Lash paid to Romania.

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TRANSPORT

Raiffeisen and Bear Stern to finance motorway project

The consortium formed by Raiffeisen Bank and Bear Sterns won the tender for €469m financing of the works at Brasov-Bors motorway, a financial daily reported recently, quoting unnamed sources. The funds would cover the first two years of operations, 2004-2005, while the project is estimated to cost the Romanian state €3.4bn and is expected to end in 2012. According to the Romanian newspaper, the US Eximbank will guarantee €152m and the Romanian government €317m, from the €469m loan. The government confirmed that it received offers from six consortia of banks for the loan, but refused to disclose the winner, New Europe reported recently.

Romanian premier, IMF envoy discuss mining, energy issues

Premier, Adrian Nastase, has met with the IMF chief negotiator for Romania, Neven Mates, and discussed issues like the energy and mining sectors, Mediafax News Agency reported.
The two officials have analysed the commitment of Romanian authorities in carrying on the economic reform process, without major negative effects on social plan.
"An IMF delegation led by Neven Mates is in Bucharest for the annual macroeconomic consultations, according to Article 4 of the institution statute and for finalization of a new intention letter in the view of concluding a precautionary stand-by agreement."
Among the issues discussed are fiscal and monetary issues, the restructuring programmes scheduled for this year, social support programmes for the laid-off.
The previous agreement, of stand-by type, worth US$418m, was finalized last autumn. The new type of agreement does not stipulate granting of any loans except for emergency cases.

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