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Books on Romania
REPUBLICAN REFERENCE
Area (sq.km)
237,500
Population
22,355,551
Capital
Bucharest
Currency
Leu
President
Traian Basescu
Private sector
% of GDP
40%
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Update No: 103 - (28/11/05)
Political turmoil
In Bucharest, the right-wing government under Calin Popescu Tariceanu could not
implement the reforms of the legal system being demanded by Brussels, resulting
in new elections being called after the government had been in office for only
six months.
Only after pressure from the EU did President Basescu ask Tariceanu to withdraw
his announcement to hold an early poll. Since then, his government has gone from
one crisis to the next. In addition to the continuous conflicts between
Tariceanu and Basescu, the cabinet-largely comprised of representatives of the
country's narrow and extremely privileged upper layers, has been reshuffled
several times.
The government in Bucharest has also faced growing popular opposition. The rise
in Value Added Tax from 19 per cent to 22 per cent planned for 2006 has already
unleashed violent protests. The increase in VAT is supposed to partly offset the
tax break given to big business and the rich, who have profited from the
introduction of a flat tax. In both Bulgaria and Romania, among the poorest
countries in Europe, social and political tensions are clearly increasing.
Leaders less popular
This helps to account for the declining popularity of its leaders. Support for
President Traian Basescu dropped recently, according to a poll by the Centre for
Urban and Regional Sociology. But still, 60 per cent of respondents have a
favourable opinion of the president, even if this is down 11 points since June.
In October 2004, Basescu, who had served as Bucharest's mayor, became the
presidential nominee for the Alliance for Justice and Truth (DA) after former
prime minister Theodor Stolojan withdrew from the race citing health reasons.
Basescu won the presidential run-off in December with 51.23 per cent of the
vote.
The DA, which encompasses the National Liberal Party (PNL) and the Democratic
Party (PD), won last November's parliamentary ballot, electing 132 lawmakers to
the 332-seat Chamber of Deputies. Basescu appointed fellow alliance member Calin
Popescu Tariceanu as prime minister. In his case 42 per cent of respondents have
a favourable opinion of Tariceanu's performance, down 15 points in four months.
His lower rating than the president is not surprising, since he has the tough
job of running the government.
Polling Data
Do you have a favourable opinion of...
Oct. 2005 Jun. 2005 Apr. 2005
President Traian Basescu
60% 71%
66%
Prime minister
Calin Popescu Tariceanu
42% 57%
60%
Source: Centre for Urban and Regional Sociology (CURS)
Methodology: Face-to-face interviews to 1,050 Romanian adults, conducted from
Oct. 1 to Oct. 8, 2005. Margin of error is 3.1 per
Communities work as one
An important rapprochement is taking place between Romania and its neighbour,
Hungary. At the end of the First World War Hungary was dismembered, with its
neighbours acquiring vast territories, in Romania's case, Transylvania, a
beautiful mountainous territory, with a 1.4 million Hungarian population, mainly
Protestant in religion.
Naturally, there are Hungarians who want it back, but this is not serious
politics any more. The days of carving up states were in the first half of the
last century; and everybody knows what that involved!
A first two-day joint Hungarian-Romanian government session was held in the
Transylvania hall of the Romanian government's Victoria palace on October
20th-21st in Bucharest and yielded several achievements for Romania's ethnic
Hungarian community. Two heads of government, 17 Hungarian and 25 Romanian
ministers participated in the session, saying they worked "next to each
other" rather than "in front of each other".
"I feel like I am among friends who work together to make a project
successful," said the Romanian president Calin Popescu Tariceanu, who added
that the session not only marked an important day in the history of the two
countries and the region, but also that of the European Union as well.
According to Romanian deputy prime minister Béla Markó, the leader of the
Hungarian Democratic Union of Romania, the agreements on opening a Hungarian
consulate general in Miercurea Ciuc and on setting up a branch of Bucharest's
Hungarian Institute in Sfantu Gheorghe were the most important results of the
joint meeting. The two countries also agreed to cooperate in areas such as
transportation, healthcare, information technology, culture and social welfare
systems.
Markó also noted that it was equally important that the Romanian government had
made a commitment to support Transylvania's Sapienta University, an institution
created and, thus far, financed by the Hungarian government. Hungarian PM Ferenc
Gyurcsány summed up the results of the session as "more successful than
the previous five to seven years put together." "What we have achieved
today completes the efforts of many years," he said.
Bird-flu combated
Earlier in October, Romania and Turkey slaughtered thousands of birds after
both nations appeared to have detected avian influenza or bird flu. Laboratory
tests later confirmed the presence of the H5N1 strain. The World Health
Organization (WHO) has warned that the virus could mutate into a form that can
be transmitted among people.
On Oct. 17, Tariceanu called for tighter controls on farms in the province of
Dobrogea, saying, "We need locals to get involved in our efforts to stop
the spread of the virus."
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BANKING
Seven banks enter race for Romania's CEC
Romania's season of bank sell-offs continued as seven European banks submitted
non-binding bids for a majority stake in Romanian savings bank Casa de Economil
si Consemnatiuni (CEC) on October 21st, the Financial Times reported.
Romania's fourth-largest bank has 1.3bn Euro (US$1.55bn) in assets and
represents an appealing target for players seeking to grab a chunk of the Balkan
country's fast-growing retail banking sector.
The finance ministry said bids had been received from Erste Bank and Raiffeisen
Bank, both of Austria, Franco-Belgian bank Dexia, the National Bank of Greece,
Hellenic EFG Eurobank, also of Greece, Hungary's OTP Bank and Banca Monte dei
Paschi de Siena, of Italy.
Societe Generale of France, which owns BRD Romania, one of the country's leading
banks, withdrew.
The sale of CEC and the ongoing privatisation of Banca Comerciala Romana (BCR),
Romania's largest bank, represent the last opportunities for multinational banks
to gain a firm foothold banks to gain a firm foothold in the region.
The two bank sales are expected to have a significant impact on Romania's
competitive banking sector. CEC's eventual buyer will inherit a 5.6 per cent
market share and more than 1,400 branches nationwide.
However, the task of modernising and restructuring CEC will be daunting.
The government will also oblige the buyer to retain at least 700 branches, in
cities with 50,000 residents or less.
"It is important for CEC that you know what you want from it," said
Steven van Groningen, head of Raiffeisen's operations in Romania. "As a
rural bank you have to make it a real cost champion."
A final round for binding bids has not been scheduled but was expected in late
November or early December.
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ENERGY
GE signs deal with nuclear-power plant
General Electric signed a first servicing contract with Romania's nuclear-power
plant of Cernavoda, a move that adds up to the GE investment project worth over
80 million Euro for the construction of a business platform in Bucharest that
will generate over 1,500 jobs, New Europe reported.
Under this project, business offices of 4,000 square metres in all are to be
opened inside the Iride Business Park office building, north of the capital city
of Romania, Bucharest. The office space is to be extended to 8,000 square metres.
US General Electric, the world's biggest company in terms of market
capitalisation, with business turnovers of over US$40 billion in Europe, has
announced that Romania and Bulgaria's accession to the EU will strengthen the GE
presence in SE Europe.
Petrom buys share in Rafiserv Petrobrazi, Arpechim
Petrom will acquire a stake in SC Rafiserv Petrobrazi SA and SC Rafiserv
Arpechim SA which provide services for the Petrobrazi and Arpechim refineries,
New Europe reported.
The acquisition of the two companies will help to the improvement of the
maintenance activity in refineries, according to the modernisation and
efficiency-enhancement programme underway till 2010.
Petrom will acquire 89.83 per cent of the social capital of SC Rafiserv
Petrobrazi SA and 98.85 per cent of the social capital of SC Rafiserv Arpechim
SA. The two companies provide services, among which are repair and maintenance
for the two refineries of Petrom; their employees were formerly employed by
Petrom. The Competition Council announced that the change of shareholders
structure was not notified for SC Rafiserv Arpechim SA and SC Rafiserv
Petrobrazi SA, as SC Petrom SA Bucuresti got control over the two companies
through signing the Contracts of Shares Sale-Purchase on September 28, 2005.
The Competition Council has not received any notification so far from the
company Petrom regarding the recent contracts signed with Petromservice,
Rafiserv Arpechim and Rafiserv Petrobrazi, and if the company does not respect
the legal term to make the notification, it risks a fine that might range from 1
to 10 percent of its turnover, said Mihai Berinde, the Competition Council
President. Petrom is a Romanian oil and gas company, with oil and natural gas
deposits of one billion barrel equivalent of oil (bep.), refining capacity of 8
million tonnes and almost 600 filling stations.
Transelectrica posts 27.7 mln Euro profit
The transmission system operator of the entire Romanian power system
Transelectrica registered over the first three quarters of the year a 27.7
million Euro profit, up 151 percent compared to the same period last year, New
Europe reported.
The company reported a 219.1 million Euro turnover, up 44 percent as against the
similar period, as Transelectrica wants to list a 10 per cent stake at Bucharest
Stock Exchange by the end of the year. The electricity operator is developing a
375 million Euro investment programme over 2005-2007, meant to upgrade the
infrastructure. Some 150 million Euro will be allocated by the end of the year.
The main directions are the construction and development of electric energy
market infrastructure and the upgrading of the high voltage network according to
the norms of the Union for the Coordination of Transmission of Electricity (UCTE.)
Rompetrol eyes US$200m operational profit in 2005
Rompetrol expects to reach an operational profit of almost US$200m in 2005,
stated Rompetrol CEO Dinu Patriciu, News Europe reported recently.
Rompetrol registered an operational profit of US$100m in the first half of 2005,
against US$23m for the first quarter of 2004, and a turnover of over US$1bn, up
67% against the same period in 2004. The group achieved a net profit of US$81m,
for the first quarter in 2005 and a turnover of over US$1bn. Initially, the
operational profit was estimated at US$160m for the 2005. Rompetrol Refinery
achieved, for the first 6 months of the year, a net profit of US$71m, the
turnover reaching US$989m, up 65% against the same period last year. Moreover,
the operational profit reached US$97m, against US$24m for the first quarter of
2004. For 2005, Rompetrol expects a turnover of over US$2.1bn, while Rompetrol
Refinery estimates a turnover of US$2bn.
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FOOD & DRINK
Arla to take over Covalact
The Dutch company operating in the milk products industry Campina Arla began
negotiations for the taking over of the major stake of Covalact Sfantu Gheorghe,
New Europe reported.
Covalact has a partnership with Campina Arla, and now negotiates the sell-off of
a major stake. The Sfantu Gheorghe-based milk products producer delivers a part
of its production to the Dutch company. The two sides invested in 2003 a total
of 1.5 million Euro, each participating with half a million, and the rest was
financed from the Dutch state. Covalact was privatised in 1994, and now ten
shareholders own 80 percent of its capital. Covalact currently implements a
SAPARD programme for the modernisation of the milk collection and transport
network as well as for the reception and storage facilities, worth of 1.7
million Euro.
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FOREIGN COOPERATION
Romania, Bulgaria to work together for 2007
Romania and Bulgaria will work together to meet the criteria for EU membership
as planned in 2007, the Romanian Foreign Minister Mihai-Razvan Ungueranu said in
Sofia. The Balkan neighbours must speed up economic and administrative reforms
in order to join as planned, or otherwise face a one-year delay, the European
Union's executive commission said in a report released earlier in the day.
"The reforms must be irreversible in all spheres, independently of
political changes in either state," Ungueranu said after meeting his
Bulgarian counterpart, Ivaylo Kalfin.
Separately, the Bulgarian President Georgi Parvanov described the commission
report as an "additional motive" for the reform effort. "The key
is in our own hands," Parvanov added. Romania and Bulgaria, who missed the
last round of EU expansion, signed the accession treaty last spring, but with a
clause allowing Brussels to postpone their membership in case they fail to
implement the reforms. Romania had to make significant efforts to pursue the
reform of public administration, overhaul the justice system and intensify the
fight against corruption, the EU commission said.
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FOREIGN ECONOMIC COOPERATION
President hopes for stronger economic ties with South Korea
Romania's President, Traian Basescu, expressed hope during his recent 2 day
state visit to South Korea, that South Korea and his Eastern European country
will be active trading partners, Deutsche Presse Agentur (dpa) reported.
"Romania has suffered from a serious trade imbalance since 1990, and I hope
active trading cooperation between South Korea and Romania will be able to help
Romania improve this situation," he told Yonhap news agency in an
interview. According to Basescu trade between Romania and South Korea reached
over US$452m as of last year, but Romanian exports account for less than one
quarter, or US$96m. Basescu singled out diversified areas of electronic
components, software, railway cars and furniture as the most promising items
that Romania hopes to export to South Korea.
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FOREIGN INVESTMENT
MCI to invest 5m Euro in Romania
The largest investment fund in the technological investment field in Eastern
Europe, MCI, estimates for the next few years investments of almost 50m Euro in
this region, 5-10% of them in Romania, New Europe reported recently.
MCI official Michael Scherrer stated investments will be made in the web,
biotechnology and software applications, and President of MCI, Tomasz Czechowicz,
said the research conducted on the Romanian IT market until now offered positive
results. Foreign strategic investments are also being made in mobile telephony,
such as Vodafone, that has now taken over from Telesystem International Wireless
in Canada for 3.5bn dollars its stake in Mobifon Connex, and Oskar Mobile from
the Czech Republic. France Telecom bought some 23% of Orange Romania from
different shareholders for around US$523m. The company now holds 96.63% of
Orange Romania.
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TELECOMMUNICATIONS
Orange reports high 9-month results
Mobile telephony operator Orange Romania, of which 96.8 per cent is owned by
France Telecom, posted in the third quarter of 2005, receipts of 229 million
Euro and a rise in the number of clients to 6.22 million on September 2005, New
Europe reported.
January through September 2005, Orange reported 617 million Euro in receipts,
41.6 per cent more than in the year-ago period. The results almost equal the
operator's receipts in the entire year 2004, of 624 million Euro. The sustained
growth is due to the 42.3 per cent increase in the number of clients from the
same period in 2004. At the beginning of this year, France Telecom, through its
division of mobile telephony Orange, bought from a consortium led by AIG New
Europe Fund, 23.36 per cent of the shares of Romania Orange operator, for 408.5
million Euro in cash. During the transaction, the market value of the operator
was put at roughly 1.776 billion Euro, or 351.5 Euro per subscriber. Orange
Romania targets a turnover of some 770 million Euro in 2005 and an operational
profit of US$540 million (or 415 million Euro).
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