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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: 106 - (23/03/06)

The fall of a titan
Romania's ex-prime minister Adrian Nastase resigned as speaker of Parliament's lower house and as a leader of the opposition Social Democrats (PSD) on the Ides of March, the very day Julius Caesar was assassinated over two thousand years ago in 57BC.
Things are done more decorously these days, not with daggers in the precincts of the Roman Senate, but by parliamentary votes. He fell after a no-confidence vote by party members. Members of Nastase's PSD party met and voted 37 to 16 against him after he was charged with graft as part of a corruption campaign by Romania's centre-right government, which is aimed at making the country fit to join the European Union next year. "I accepted what I felt was a recommendation from my colleagues," Nastase said. 
Adrian Nastase had everything and is about to lose it all. He was foreign minister, prime minister, Chamber speaker, party president and came close to becoming the president of Romania. 
His Social Democratic Party, or PSD, said "Farewell" to him, which triggered a chain reaction of radical goodbyes, leaving him isolated. Isolation is the end-line for any public figure. 

Adrian Nastase, the politician with a power narcotic in his pocket
(by Indira Crasnea)
It is rather sad and ironic that, at the moment, Adrian Nastase does not seem to realize his condition. He thinks he is a victim, that he is sacrificed and misunderstood, that he is judged by evil and "stupid" adversaries, by ill-famed persons, and maybe he even faces an inside struggle, unable to realize what he did wrong. 
Nevertheless, as he is an intelligent person - and sometimes intelligence is similar to a high capacity of self-persuasion - he probably thought about a series of justifications to disburden him. 
At present, Adrian Nastase is out of the game and it is hard to believe that he will return any time soon. At present, PSD is looking for somebody dull to replace him at the Chamber of Deputies, so to balance his acid presence. 
Adrian Nastase is a character who raised, and still does, people's dislike. In fact, maybe he did not even struggle to make people like him. His personal qualities served him more in isolating himself in his own world of discrete smiles and subtle jokes, which reflected only a misanthropic superiority to others. 
He did not have the dusty charm of Petre Roman, or the honest naivety of Emil Constantinescu. And he wasn't a "king-maker" like Ion Iliescu either. 
And all this is not the result of a diabolical mind trying to set him up at any cost, but a mixture of unfortunate circumstances and his own nature, which made him his own victim. 
However, he still has a faint chance to reinvent himself, since resources are not an issue for him. But one must be a good visionary to foresee how "the new" Adrian Nastase would look in, say, five years. 
But for now, MP Adrian Nastase has not disposed of his pill against convulsions caused by lost power, a pill which creates dependence and gives soothing illusions.

                                     ******

Meanwhile life goes on. Romania is attracting huge amounts of foreign investment, the outcome, it has to be said, partly of Nastase's relatively successful reform efforts and stewardship of the ship of state during his tenure of power. Romania is billed to receive some US$7bn in FDI in 2006, second only to Turkey's US$11bn; and it has under one third of Turkey's population.
It is worth examining an individual case of why Western countries are being attracted to Romania. The UK is the premier foreign investor in Europe, as it so happens, and is second only to the US in the Western world, unless Japan is accounted an honorary member of it. A British angle is of interest, therefore.

UK investors come to town
The business climate has improved considerably in Romania, witnessed by the attraction of an increasingly higher number of foreign investments, British ambassador to Romania Quinton Quayle told Rompres, ACT Media news agency reports. 
There are three things the British investors seek in Romania, he said, namely transparency, efficiency in the public administration and safety, with the last one being decisive for the business climate, Quayle explained. 
He actually implicitly conceded that there was a fourth when he stressed another factor. The fight against graft has improved over the last year and "the corrupt politicians are becoming increasingly frightened." 
Quayle said Britain is the second-largest investor in Romania with investments amounting to 2.5-3 billion euros and nearly 2,000 British-owned companies. One of the biggest investors is mobile phone company Vodafone, while a new British investment in the information technology sector was announced in the eastern city recently, that has created some 400 jobs. British investors showed interest in other sectors of the economy as well, like the textile industry and farming, Quayle underlined. 
He said the foreign investors generally agree with the enactment of the flat tax, but they are dissatisfied with the social taxes, the contributions that employers must give to the state. 
Quayle expressed optimism about the monitoring report the European Commission is to make public in May, saying Romania will join the European Union on January 1, 2007. However, there are still problems in the public administration and the reform should go on, he pointed out. 
Romanian statistical figures revealed that the commercial exchanges between Romania and the UK stood last year at 2.133 billion euros, with Romanian imports totalling 1.2 billion euros and exports 933 billion euros.

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CREDIT RATINGS

Hidroelectrica outlook positive

Standard & Poor's Ratings Services recently revised its outlook on Romania-based hydropower generator S.C. Hidroelectrica S.A to positive from stable, reports New Europe.
At the same time, Standard & Poor's affirmed its `BB-` long-term corporate credit ratings on Hidroelectrica. "The outlook revision is due to the expected positive impact from a faster and more favourable market deregulation development than previously expected," said Standard & Poor's credit analyst, Magnus Pettersson. More than 80 per cent of electricity produced in Romania is now sold at market prices, and this is expected to have a substantial positive impact on Hidroelectrica.

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ENERGY

Transelectrica plans 300m Euro undersea cable link 

Romania will invest about 150 million Euro for the construction of a high-voltage undersea cable linking it to Turkey, Transelectrica SA managing director, Stelian Gal, announced recently, New Europe reported.
The project costs are estimated at 300 million Euro (US$359.4 million), he added. The cable will be connected to the 400-kV station based in Constanta (southeastern Romania) and to the 400-kV station in Pasakoy, Turkey. The cable will have 600-MW capacity, it will be 400-km long and will be placed at a maximal depth of 1,000 metres below the sea level. Transelectrica officials say the project might be finalised in two years, by 2009. "This cable is important for the Romanian energy exports," Gal said.

Eight bidders vie for Electrica Muntenia 

All eight investors who presented their bids for the privatisation of the company Electrica Muntenia Sud were accepted, the participating documents presented being legally acceptable and in accordance with bidding regulations, stated the Ministry of Economy and Trade, New Europe reported.
For the upcoming period, the technical offers will be analysed for the privatisation of the Societatea Comerciala filiala de distributie si Furnizare a Energiei Electrice (Electrica Muntenia Sud) - SA. The eight bidders who presented their bids are - AES Corporation USAm, Eez As - The Czech Republic, Enel SpA - Italy, EVN AG - Austria, GAz de France - France, Iberdrola SA - Spain, RWE Energy AG - Germany, Union Fenosa International - Spain.

Romania promises electricity to Turkey 

Excess electricity from Romania's four planned nuclear energy facilities will provide extra energy to Turkey, economy and trade minister, Ioan Codrut Seres, said at a meeting with Turkish Energy and Natural Resources Minister, Hilmi Guler. A joint project between the two countries includes a 600-1,000 megawatt power line under the Black Sea, connecting Istanbul and Constanta, New Europe reported.

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FOREIGN INVESTMENT

Foreign investment up to 5.19bn Euro 

Foreign direct investment in Romania reached a record 5.19 billion Euro (US$6.18 billion) in 2005, up more than 26 per cent from 2004, a government agency said, citing preliminary data released by the central bank. The final figure is expected to be higher because the bank didn't report some investments, such as reinvested profit by foreign companies, the Agency for Foreign Investment said in a statement, New Europe reported. 
In 2004, the central bank similarly reported that foreign companies and residents invested 4.08 billion Euro (US$4.86 billion) in Romania, which included the sale of state-owned oil company Petrom to Austrian group OMV AG for 1.5 billion Euro (US$1.8 billion) to the government. 
Analysts believe Romania's perspective to join the European Union in 2007 or 2008 and low labour costs have made the country more attractive for foreign investment. The government also overhauled the tax system in January 2005, introducing a flat tax of 16 per cent which replaced taxes of 18 per cent to 40 per cent for individuals and 25 per cent for corporations. 
Investors have complained however, about Romania's inefficient court system and suffocating bureaucracy. 
The foreign direct investment figure for 2004 has recently been adjusted upward to 5.18 billion Euro based on additional data from the National Statistics Institute, which included reinvested profit and other investments not reported by the central bank, the agency said. 
BNR calculates the FDI level by taking into account the capital spent by foreign investors to create participation in a company (the central bank considers only those investors which hold at least ten per cent of a company) and funds inflow as credits from the main international company to the local entity. 
The structure of foreign investments in Romania will considerably change in the years to follow as the state capital still to be privatised is running low, said Adrian Nitu the advisor to State Minister, Gheorghe Pogea,. Greenfield investments will have an increasingly more important share in the structure of foreign direct investments as the rate of privatisations slows down, Nitu explained.

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MINERALS & METALS

Laminorul Steel on sale 

The state privatisation authority (AVAS) said recently it will re-start procedures to privatise the Laminorul iron and steel works of Braila, putting up for sale a stake of 68.80 per cent in the works, this being the sixth attempt to make this company private, said AVAS, New Europe reported.
So far, none of the investors that have shown interest in the deal have met the prerequisites for negotiations. Laminorul has a share capital of 29,397,226.56 RON (some 8.1 million Euro) and it is a sole manufacturer in Romania of knotted chains for the naval industry, various parts of electrical machinery for means of transportation by road and tongs for railroad metal sleepers.

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TELECOMMUNICATIONS

RomTelecom shows growth 

Fixed-line telephone operator in Romania, RomTelecom, part of the Greek OTE Group, posted overall operational earnings of 925.7 million Euro in 2005 up from 839 million Euro last year, registering an annual growth of 10.3 per cent, according to results announced by OTE Group, New Europe reported.
Romtelecom Division posted operational revenues of 235 million Euro in the 2005 fourth quarter, up 6.5 per cent from 220.7 million Euro in the 2004 fourth quarter. OTE's revenues increase came about from results by the fixed-line telephone RomTelecome and the one in Greece, as well as by cell phones' earnings' growth. 
The Greek-owned telecommunication operator, RomTelecom, said recently that the Board has decided to cease planned investments worth approximately 500 million Euro in infrastructure due to the unfavourable and unfair domestic business environment. The company's capital expenditures declined last year to 92.5 million Euro, respectively by more than a third due to the suspension of the next generation network project (NGN). For 2006 RomTelecom's investments in NGN are on hold. They are the only viable investments this year worth slightly more than 100 million Euro being directed towards modernising the access network. 
"The current state of the NGN program is closely linked to the government's and its subordinated institutions, namely the National Communications Regulating Authority (ANRC), attitudes toward the issue. Hardly is this the type of climate in which to invest 0.5 billion Euro in next generation network," James Hubley, RomTelecom's General Manager, said while announcing his company's 2005 financial operating results. The company lost approximately 380,000 fixed telephony lines in 2005 to competitors and is likely to make a loss, according to RomTelecom's officials. Hubley further mentioned that the strategy was odd as less than 20 per cent of the population may access the digital fixed phone lines.
Moreover, he pinpointed the lack of coherence in the strategy approach towards the rural customers, referring to a loss of 38 million Euro incurred by the company from an implemented project started four years ago in Alba, Cluj and Buzau counties that currently has no positive perspectives. "Moving customers from one company to another does not contribute to the enhancement of competition and improvements in infrastructure," Hubley underlined. 

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