Books on Romania
% of GDP
Update No: 108 - (30/05/06)
Into the EU; but when?
That Romania will enter the European Union (EU) is certain. But there have been
doubts about when this great change will take place.
The European Commission country report, released on May 16, over Romania's
preparatory stage of its accession process to the European Union has heated the
spirits both in Bucharest and the major European capitals as sources within the
European Commission said this was a technical report to specify the red flags
that need to become priorities to be resolved by the Romanian government.
However, the date of January 1, 2007, is given as certain for Romania's
accession to the EU.
The EU may withhold aid for Romania (and Bulgaria) even if they join the bloc on
time next year because key reforms have yet to be completed, a draft European
Commission report showed on May 11th. The document, circulated for debate among
senior Commission officials, did not contain a recommendation on whether the two
Balkan countries should join the 25-nation bloc in 2007 or 2008.
The conclusion was left blank, to be filled in before the EU executive issued
the report on May 16th, a Commission source said. EU leaders are now due to take
a decision in June, although there are growing indications the final choice may
Luxembourg Prime Minister Jean-Claude Juncker said in an interview for the
weekly Le Jeudi that the countries will join the EU in 2007. A Reuters poll of
more than 40 analysts showed they were seen as having a good chance of joining
on that date.
The meaning of the EU
The EU is a magnificent idea, but it is arguable that it has not really lived up
to its initial promise. The grand conception behind it is to banish wars between
its member states once and for all by intertwining their economies so intimately
as to render this impossible.
Europe was of course the continent that set off the two world wars of the last
century. It is doubtful that France and Germany would ever have gone to war
again even without the EU's existence. Neither benefited from either dire
conflict. However, balance of power issues, the frequent cause of European wars,
have changed all the time, but with the EU firmly in situ it is now certain that
nothing of the sort will ever happen again.
The downside of the affair is that it has become in practice the excuse for an
agricultural racket and hand-outs of onerous provenance and dubious delivery.
The Common Agricultural Policy (CAP), which began with the excellent idea of
protecting the countryside from depopulation by preserving small farmers, has
become, as everyone knows, a system of vast subsidy for agro-business and big
farmers. It also, by its import tariff regime and exclusion of extra-European
products, impedes the development of world trade and of the wealth of nations,
particularly Third World nations. Mozambique, for instance, could provide sugar
at a tithe of the price that Finland sells its sugar beet.
There are few people who would dispute the foregoing critique of the actual
reality of the EU, save obviously self-interested people such as President
Chirac of France, the greatest beneficiary of CAP. This is why there are grave
misgivings about admitting new members. Every new EU state adds to the financial
burden on Brussels, that is the communality of EU member-states.
What about aid disbursement?
With the foregoing reflections in mind, it is clear why there are
reservations about admitting Romania and Bulgaria right now among cognoscenti in
Romania and Bulgaria have so far failed to set up payment agencies for EU farm
subsidies and neither are really ready to disburse the bloc's multi-billion-euro
regional aid. "If this is not remedied, the Commission may take measures to
... withhold payments to Bulgaria and Romania," the May 11th draft report
of the commission said.
Bulgaria and Romania missed out on the big wave of EU enlargement into former
communist Eastern Europe in 2004, when 10 new members joined, because they were
too slow in political and economic reforms.
Since the Commission's last progress report in October 2005, Romania has reduced
the number of red flags to four from 14 and Bulgaria to six from 16.
However, while Romania's shortcomings concerned technical issues such as a
computer system for tax collection, Bulgaria was told it must make urgent
progress in prosecuting organised crime and fighting corruption. But they are
almost as rife in Romania as Bulgaria. This is the rub. For tackling either task
is much easier said than done.
Russia "Limits" Negative Effects of Bulgaria, Romania EU Entry
There are those outside the club who have grave reservations about the
enlargement too. Russia would like to take precautionary measures to limit the
negative effects of Bulgaria and Romania's entry in the EU in 2007, Vladimir
Chizhov, Russia's ambassador to the EU was cited as saying on May 23rd.
In an interview for the Interfax Agency Vladimir Chizhov explained that Russia
wants to avoid the problem with the synchronisation "just as it happened
two years ago when the ten countries joined the bloc." We have a series of
fears concerning Bulgaria and Romania linked to the necessity of evaluation of
the active agreements. Some of them will have to be changed and some annulled,
Russia's ambassador to the EU added.
He also pointed out that the EU is an important, but difficult partner for
Russia. "Despite being partners, we are also rivals in view of economic
globalisation. The problems will continue emerging and the fight for markets
will go on," Chizhov said in the interview.
Chizov earlier talked to the Financial Times saying that EU's new member states
are spoiling Moscow's relationship with the bloc due to "phantom pains of
"With enlargement, the EU has not become an easier partner for us,"
Vladimir Chizhov told the Financial Times. "Some, not all, of the new
members have brought into the EU their own phantom pains - people who
concentrate on the sores of the past," he added.
Central Bank takes in all bids from commercial banks
The National Bank of Romania accepted all the bids submitted by 21 commercial
banks on April 17th for one-month deposits, having gathered up approximately 4.3
billion lei (some 1.2 billion Euro) in the process, daily Ziarul financiar
The interest paid by BNR stayed at 8.5 per cent per annum, which is the same as
the monetary policy rate of BNR. The Central bank governor had announced early
in March that BNR will conduct a tight monetary policy by sterilising the
surplus of the local currency in the monetary market, while counting on a fall
in inflation that would bring a slight rise in the real interest. BNR recently
sold three-month certificates of deposit (CDs) worth 3.75 billion lei (slightly
over one billion Euro), for which total bids of 4.9 billion lei had been
submitted. Liquidity was high in the market, as pervious issues of certificates
become due. The prospects for BNR sterilising the surplus encouraged currency
dealers to keep interest high, at 8 per cent per annum. In late-March, BNR
reported a cash stock of some 6.5 billion Euro in one-month deposits and
three-month CDs. Compared with March 2005, the volume of sterilized currency
advanced 12 per cent when stated in Euro.
Mindbank to sell shares to international bank
The Mindbank management asked the numerous shareholders of the bank, both
individuals and corporations, to empower representatives to sell the majority
stock of the bank "to an international bank," before the end of 2006,
the Ziarul Financiar daily reported.
The bank's management informed the shareholders last autumn about the intention
to negotiate with some investors to support the bank's future functioning and
development. Mindbank is one of the few Romanian banks running mostly on
Romanian private capital. Although it was set up in 1990, the bank has increased
slowly, its assets reaching almost 80 million Euro in 2005, with the market
share standing at 0.2 per cent. Although it functions as a niche bank, Mindbank
succeeded in making profit, with 2.45 million Euro obtained in 2005, money to be
used to increase the bank's share capital. The operation needs the approval of
the Shareholders General Assembly.
The bank's capital is expected to reach 13.3 million Euro. The bank has a
network of 12 units that covers most of the big cities in Romania. The bank's
shareholding is fragmented, with 2,805 individuals holding 25.51 per cent of the
shares. The main shareholder of the bank is the National Association of the
Cooperative Movement (UCECOM), with a 25.2 per cent market share.
Hidroelectrica asked to reduce exports
The Minister of Economy, Codrut Seres, asked Hidroelectrica company to analyse
and implement a series of decisions regarding the technical possibilities for
electrical energy reduction, especially for the balancing of the system, and
leading to a complete use of the hydro production on the domestic market, New
The requirement comes as a conclusion to the measures taken by ANRE together
with Transelectica and the similar institutions in neighbouring countries with a
view to introducing harmonized procedures of bidding to allocate capacities on
the interconnection lines. Minister Seres had announced at the end of last year
that Hidroelectrica would sell the production estimated for 2006 and would
inform the eligible buyers of the prices, established according to the
conditions on the domestic and international market.
Oil Terminal posts doubled profit in 2005
The Constanta-based company Oil Terminal, the biggest Romanian port operator,
registered 6.9 million lei (about 1.9 million Euro) in net profit last year,
double that forecast and approved in the budget of revenues and expenditures,
stated the company's general manager, Mihai Lupu, New Europe reported.
"We exceeded the budgetary estimates due to the fact that in the economic
field we operated efficiently by diminishing the expenditures, placing the money
exactly where the company needed it," Oil Terminal's general manager said.
The company aims to become more flexible for the customers' needs and to
eliminate the waste of time in operating the goods transited via Oil Terminal.
Some 75 per cent of Romania's crude oil production and the whole production of
chemicals for export are transited through this company. "In 2005, we
weren't late in the operations, not even one minute, and we were not involved in
any commercial litigation," Lupu underlined. In 2006, the company intends
to assure the necessary equipment for the cleaning up of the polluted lands, an
IT integrated managerial system, new storage capacities in the southern part of
the city, as well as the modernization of berths and of the loading-unloading
arms of the ships. Oil Terminal company, a strategic point at Black Sea,
supplies services linked to the receiving, storage, conditioning and shipping of
crude oil, of oil products and liquid chemical products.
FOOD & DRINK
Coca-Cola HBC Romania doubles net profit in 2005
Coca-Cola HBC Romania, the bottler of the Coca-Cola beverages for the Romanian
market posted more than 38 million Euro in net profit January through November
last year, almost double the profit for the entire 2004, Ziarul financiar daily
Coca-Cola HBC's net assets in Romania were 139 million Euro at the end of
November. "The market in Romania has numerous opportunities, as it is a
dynamic market," Mugurel Radulescu, public affairs and communications
manager with Coca-Cola HBC Romania, explained.
Coca-Cola HBC Romania posted a 17 per cent increase in the volume of sales last
year, twice higher than in 2004. If the quantitative pace of growth is the same
in terms of value, Coca-Cola HBC Romania's total sales could exceed 260 million
Euro for the entire last year. As a comparison, the turnover of Coca-Cola HBC
Romania exceeded 220 million Euro in 2004, according to finance ministry data.
The net profit posted by the Romanian subsidiary for January through November
2005 accounts for nearly 12 per cent of the total profit of the Coca-Cola HBC
Greece group. The profit derived by Coca-Cola HBC Greece (the main shareholder
of Coca-Cola HBC Romania) was nearly 320 million Euro, 26 per cent higher than
in the previous year. According to the official financial reports of the Greek
group, the profit continued to grow in Romania at the same pace as in the last
few years, as a result of the large volumes and revenues, given that costs
maintained stable Coca-Cola HBC Romania is a subsidiary of the Greek Coca-Cola
Hellenic Bottling Company (HBC).
Romania borrows US$2.3 billion in 2005
The value of external syndicated credits and bond issues sold on the
international market by the attained US$2.342 billion in 2005, according to a
report published by the International Monetary Fund (IMF) recently.
This figure represents an increase of 76.5 per cent over 2004, say the
representatives of the international institution. As reported by the IMF
analysts, Romania sold bonds last year amounting to US$1.113 billion, of which
US$613.6 million was in the second quarter and US$500 million in the third. At
the same time, syndicated credits granted to Romania advanced by 45 per cent,
from US$846.9 million in 2004 to US$1.228 billion last year. Most of the sum,
US$587.4 million, was borrowed in the first quarter. Between April and June
US$60.7 million were lent to Romania, while in the last two quarters, syndicated
credits attained US$372 million and US$208.5 million respectively. For
comparison, Bulgaria issued bonds totalling US$642 million while Hungary
obtained in the same way US$8.5 billion. According to the IMF study, the share
of bad credits in the Romanian banking system was 8.2 per cent, over 8.1 per
cent the year before. By June 2005, commercial banks established provisions
representing 33.1 per cent of the bad credits. At the same time, return on
assets increased from 2.5 per cent in 2004 to 2.7 per cent last year while the
return on equity progressed from 19.3 per cent to 22.3 per cent. The total
amount of foreign capital that entered emerging economies last year was of
approximately US$407 billion, over US$287 billion in 2004. This evolution was
generated by the increase in the number of investors, increase of liquidities
and the reduction of interest rates at global level.
Trade rise by over 25% year-on-year in Q1
Foreign trade increased by 25.6 per cent in the first three months of this year,
exports exceeded the level registered in the similar period of the previous year
by 21.9 per cent, and imports by 28.4 per cent, said a release of the Romanian
Ministry of Economy and Trade, New Europe reported.
The FOB exports reached 6.21 billion Euro, up 1.12 billion Euro from the same
period last year, mainly due to the capitalisation of the advantages of the
Romanian products on the foreign markets, news agencies reported. In the
exports' structure, the cars and the electric equipment or components increased
by 390.17 million Euro - 46.44 percent, the oil products by 271.4 million Euro -
54.41 per cent, and the cars by 188.5 million Euro - 30.81 per cent.
Microsoft interested in investing in Romania
The board of Microsoft required from the Bucharest authorities data regarding
the costs of the labour force and the training level of the young people working
in the IT sector, Bucharest Daily News reported.
Microsoft wants to open in Romania a research, development and assistance centre,
according to government sources. The company will announce shortly investment
projects that it intends to develop in Central and Eastern Europe, including
Paula Apreutesei, the company's business strategy manager for Southeastern
Europe, said that Microsoft showed its interest in opening a technical support
centre in the Central and Eastern Europe. Microsoft has 20 branches in the
The services department of Microsoft Romania reported for the fiscal year that
ended in June 30th 2005 a 95 per cent revenue increase, to US$2.3 million.
Microsoft will launch an antivirus programme in June making its debut on this
market. The product called Windows OneCare Live, will be supplied on a
subscription basis and is the first step to a full service which would also
include firewall and anti-spyware programmes. Microsoft will charge US$49.95 per
year for a three-computer licence.
MINERALS & METALS
Alro, Alum and Alprom to merge
Alro Slatina, the biggest aluminium producer in Eastern Europe, could merge by
the end of the year with Alprom Slatina - a unit specialising in flat laminated
and extruded products and Alum Tulcea, Economistul daily reported.
Majority shareholder in Alro Slatina is the Marco Industries holding that owns
together with Conef Bucharest 88 per cent of its shares. In its turn, Alro
controls 92.5 per cent of Alum Tulcea stock and 96 per cent of Alprom's capital.
According to Alro vice-president of the administration council, Marian Nastase,
"the merger between Alro and Alprom was voted last year, but it was stopped
due to the lawsuit in which it was opposed to the Authority for State Assets
Realization (AVAS). We are striving to speed up this process, so that the merger
between Alro and Alprom can be carried out." According to preliminary data
for 2005, Alum Tulcea posted a turnover of 200 million dollars, but concluded
that year with losses of some 13.4 million dollars, said Director General of
Alro Slatina Gheorghe Dobra, mentioning at the same time that the annual
production stood at 650,000 tonnes of alumina and starting with 2006 a part is
going to be exported, as well.