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ROMANIA


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 60,358 44,428 38,700 52
         
GNI per capita
 US $ 2,310 1,850 1,720 100
Ranking is given out of 208 nations - (data from the World Bank)

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%


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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