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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)

Books on Romania

REPUBLICAN REFERENCE

Area (sq.km)
237,500

Population
22,271,839 

Capital 
Bucharest 

Currency 
Leu

President 
Ion Iliescu

Private sector 
% of GDP 
40%

  

Update No: 088 - (27/08/04)

The Romanians are sizing up their situation with great realism. They have been left out of the recent wave of expansion of the EU. They know that they are regarded as backward, in Western terms.
But then so they are. At least on certain terms. Clearly Romania has had a succession of first fascist and then communist dictators, Antonescu and Ceaucescu, the case resolved. Not quite. The vast bulk of Romanians detested them.

Why this predicament for totalitarianism?
Romania is a remarkable country. It has a splendid climate by most standards, cold in winter, but excellent the rest of the year round. It has magnificent buildings and monuments to its Roman past and a remarkably romantic countryside It is difficult to imagine a better place to be. It was the favoured spot of many a Roman Emperor.
Why did it have it those awful regimes? This is a big question.
Let us leave that to history. But something to do with its vulnerable geography is likely to be involved.

Where is Romania now?
One thing is for certain; Romania is in better hands than ever before. Premier Adrian Nastase is susceptible to Western pressure and wants a Western outcome for his country, there is no doubt of that. His main goal is that Romania should join Europe by 2007.
The Romanians are going to quote their currency, the lei, entirely against the Euro, as of next year. It will, take a 5-6 year transition period before full conversion: but it will happen. Indeed so will EU membership; and why not by 2007?

The country is still struggling to meet criteria for EU accession
According to the European Council's roadmap for Bulgaria and Romania, EU accession negotiations will be concluded in 2004. Provided that the two countries stick to their commitments, the accession treaty will be signed in 2005. 
If so, the EU will be welcoming the two countries as new members as early as Jan. 2007 in what will be the fifth EU enlargement. The EU has, nonetheless, introduced a so-called "safeguard clause", which gives it the possibility of delaying entry for a year, as part of a stringent new monitoring system. It may well end up citing this clause. 

A long way to go
While Bulgaria concluded pre-accession talks in Luxembourg in June and wasted no time accepting the terms, Romania appeared to drag its feet. 
To many, the time-frame is just too ambitious. Romanian Foreign Minister Mircea Geoana said he was surprised by the speed with which Bulgaria accepted the safeguard clause, telling the press it seemed to happen "over the weekend." 
EU enlargement commissioner Günter Verheugen has made clear he would be making the same proposal for Romania, a country whose most pressing problem is still the struggle against widespread corruption, which, he has said, "has curtailed economic reforms and developments." 
Other EU officials said it was up to Romania to make accession happen." The ball is in Romania's court," Roxana Morea from the EU delegation in Romania told DW-WORLD. "Basically, it's on the right path, and if it manages to successfully implement the new legislation across every sector, it will be ready." 

Corruption -- the biggest hurdle
But many feel that three years doesn't give Romania enough time to clean up its act. 
"Bribery is apparent on a daily basis -- simply nothing works without it," said Günter W. Dill, the director of the Bucharest office of the Konrad Adenauer Foundation, a research and education institute connected with Germany's conservative Christian Democratic Union.
He told DW-WORLD that Romania won't be ready to join the EU "until there's been a complete transformation of the prevailing mentality." For now, the population simply lacks trust in its public institutions, Dill said. "Transparency is everything," he added. "We need to see recognizable measures taken to combat corruption."

The political situation ramifies
A simple look at the agenda of the political parties in Romania shows that they are in a similar predicament. A swing against the governing social democrats in local elections has precipitated a crisis. The Romanian parties are reorganising for the final battle, coming parliamentary and presidential elctions.
The first signal was given by the ruling Social Democrat Party (PSD), with the scandal at the Cotroceni presidential palace, after which local barons and party senior members were ousted, as well as vice-presidents responsible for the defeat in the local elections. 
Premier Adrian Nastase dissolved the Permanent Delegation and set up a Leading Bureau, with people from the second and third echelon of the party. The changes have only one purpose: to persuade the electorate that the PSD has learned something from the result of local elections. That they promote young people, they they go rid of barons and life-long senators. That there is another PSD that deserves confidence!
The Liberals also met to decide who will be on the lists. Keeping Viorel Catarama on the list for MPs or removing him really has a symbolic value. Who rules in the National Liberal Party (PNL), Theodor Stolojan or Dinu Patriciu? Removing Viorel Catarama from the PNL lists for Vaslui county (where, on the similar lists of the PSD, there are the big shots in Moldavia) marked the first great victory of Theodor Stolojan. But it doesn't clarify one thing. Who will lead the party in case Theodor Stolojan wins the presidential race? 
What signal does this removal of Viorel Catarama from the lists give? Both the Liberals and the Social Democrats (under different circumstances, of course) are trying to part with controversial people. They also want to tell the electorate that they aren't the same like in the previous governing. That younger combatants have joined their ranks. 
A similar thing happened recently. The Christian Democrats also met to say goodbye to Victor Ciorbea and appoint statutorily the new team proposed by Gheorghe Ciuhandu. Without having a completely new list, the Congress of the Christian Democrats have brought an important change in the leadership. At last, Victor Ciorbea has withdrawn!
What is new is also the fact that PNTCD is going back to the anti-communist attitude of the 1990s and is trying to become a rightist party, claiming that "the time of the paternalist state is over. The overdimensioned and omnipresent state is the main source of corruption". To what extent such a line, coupled with the idea to impose a law of lustration, might lead to the re-launching of this party one cannot yet know. Only the passage of time will bring the answer.
These three attempts of cleansing before the electorate look rather like a last war journal before the hard battles of this autumn. All three of them are trying to show the same thing. That they aren't like they were in the previous wars. Those responsible for disasters were expelled, marginalised, punished. And new guys are now in the lead position.
But if one makes an objective stocktaking, we can indeed see a few major differences. The Christian Democrats have quite a new leadership. The Liberals, by abandoning Viorel Catarama and by attracting young people into the party, wanted to part symbolically with the team led by Mircea Ionescu-Quintus. The PSD has also replaced most of its staff. But President Ion Iliescu and Adrian Nastase remained in the same positions, about which no one knows which is more important.

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AUTOMOBILES

Inchcape to invest in Toyota unit

The Britain-based Inchcape Plc, the sole shareholder in Toyota Romania, has unveiled plans to invest €5m in an auto complex in Bucharest by end-2005, New Europe reported recently. 
Toyota Romania GM, Stratos Vakkas, said the 10,000 sqm complex would be exclusively dedicated to the Toyota and Lexus brands. He added that the company was also planning to build a 25,000sqm centre for preparing cars for delivery. This centre will be ready in February 2006 for a cost of approximately €1m, Vakkas added.

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CREDIT RATINGS

S&P: New legislation renders LRG system more predictable


Recent legislative changes have rendered Romania's system of local and regional government (LRG) more predictable, said Standard & Poor's Ratings Services in a research report, New Europe reported recently. 
Revenues and expenditures are well matched, and likely to continue so, while the equalisation system - under which LRGs receive a share of state taxes - is likely to remain consistent, S&P noted.
Nevertheless, added the report, there is still a need to both increase financial transparency and the involvement of LRGs in framing state legislation. "After years of relative volatility, the structure of Romania's local budget revenues and expenditures is expected to stabilise, at least for the next 2-3 years," said Standard & Poor's credit analyst Felix Ejgel. "Now that the new law on public finance has come into effect, the central government has no further plans to reform the distribution of revenues and expenditures between levels of administrative system, at least in the short term."
Under the new law, which came into effect on January 1st, 2004, Romania's state government retains responsibilities for the potentially heavy burden of health care and social welfare, while a large part of education has already been devolved to local governments. More changes are expected in the long term, however, as Romania adopts EU regulations as part of its accession process.
The state government performs equalisation by allocating shares of state taxes - personal income tax (PIT) and value-added tax (VAT) - to regional and local budgets. Equalisation is based mostly on the collected PIT per capita and, to a lesser extent, on the size of the county. In addition, the funds are not given as general grants, but rather as subsidies for designated purposes.
"Standard & Poor's expects that the LRGs' share of PIT will be less volatile in the future and, in particular, is unlikely to be altered significantly over the next 2-3 years," added Ejgel. The report said the state's firm control over Romanian local finance is extensive: counties and cities cannot affect the national parliament's decisions on the composition of local revenues and expenditures, equalisation mechanisms, or debt limits.
Financial transparency is improving, but remains limited. For instance, since 2004 counties and cities have included off-budget funds in their budget reporting. Accounting, however, remains cash based, limiting the understanding of LRGs' true financial commitments.

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ENERGY

Privatisation blues in energy sector

As of July 20th the Italian firm, EnelL, was the new owner of the first two companies for electricity distribution in Romania, with the Italian investor paying the Romanian state €35.1m for a package of 24.6% of the shares as well as another €76.7m required to become a major shareholder, Evenimentul zilei reported recently. 
Enel will also cover the electricity companies' debts totalling €99m. The representative of the Economy Ministry and those of the privatisation consultant said the transaction was remarkable.
"It was very important for the Economy Ministry to negotiate that, after the process, the impact on price rises be as small as possible," said minister, Dan Ioan Popescu. Herve Hascoet, the representative of BNP PariBas, who provided consultancy for the privatisation of the two Romanian firms, said the price was very good, considering the negotiations started with a €50 price per client.
Italy's giant Enel said it would invest some €1bn over the next 20 years in modernising the distribution network of the two Romanian electricity distributors, said Vincenzo Cannatelli, an Enel official. "We are here to operate the two electricity distribution companies for long term and we want to improve services," said Cannatelli. ENEL was the sole bidder for the Electrica Banat and Electrica Dobrogea and held more than 20 rounds of talks with Romanian authorities over the past 12 months.
The two Romanian power distributors cover some 17% of the country's customers. The Banat Electrica network covers four western region, including the area of Timisoara, and serves 850,000 customers (10% of the country's total customers). The Dobrogea Electrica network covers four eastern regions, including the area of Constanta on the Black Sea, and serves 590,000 customers (7% of total customers).
The Democrat party's vice-president Radu Berceanu, former Industry Minister, said recently that the price paid by Enel for electricity distribution companies Electrica Banat and Electrica Dobrogea is "ridiculously low" compared to the level registered at the privatisations of the similar companies in the region, according to Mediafax news service. "These are companies without financial problems, although some do have collection problems, but this does not mean they are poor companies and we need to get rid of them under any circumstances. The price of €112m for the two branches - Banat, with all the foreign investments in the area, and Dobrogea - with the port, seems to me to be a joke," Berceanu said.
He mentioned that Bulgaria obtained higher prices at the privatisation of electricity distribution firms and the Moldovan Republic received comparable offers, given that the privatised companies were much smaller. The Former Minister of Industry considers that the accepted price would also affect the other privatisations in electricity distribution domain.

Stroitransgaz to build gas pipelines in Romania

A consortium containing Russia's OAO Stroitransgaz and the Romanian construction company Petromservice has won a tender to build 268km of high pressure gas pipelines and 47 gas distribution stations in the Romanian district of Suceava.
Stroitransgaz said in a press release that the project is being organised by the Suceava district administration and should be implemented within two years, New Europe reported recently. 
The project is being financed by a credit provided by Deutsche Bank under guarantees from the Romanian government. The pipelines are to be built in hilly territory, with some difficult mountainous terrain.
Major Romanian construction companies also participated in the tender, including TMUCB, Conmag, Petrocons, Amarad, Inspet and Tim. However, the Stroitransgaz-Petromservice bid was most in line with the client's requirement, the press service said. According to the statement, the gasification of Suceava district will involve supplying gas to four towns and 54 villages in the district.

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TELECOMMUNICATIONS

Mobileway moves into Romania

Mobileway, the global leader in mobile messaging, marketing and entertainment, announced recently that Romanian GSM operators are connected to its Global Hub, New Europe reported.
Mobileway's customers will now be able to offer their contents and applications (ring tones, images, information, marketing campaigns, etc) to seven million Romanian mobile phone users. Bernadette Lyons, Mobileway UK managing director, said: "Our strategy is to offer a maximum of direct connections with premium billing capabilities to mobile operators worldwide. These new connections add to the 150 Mobileway manages today. The launch of services into Romania was in response to a strong demand from our customers."

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