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Key Economic Data 
  2003 2002 2001 Ranking(2003)
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


Area (




Traian Basescu

Private sector 
% of GDP 

Update No: 112 - (26/09/06)

EU entry beckons in January
There are very good grounds for questioning the wisdom of the rush to admit Romania, as also Bulgaria. Both are notorious for the scale of their crime and corruption, which are Third World in character. 
The process, however, now seems pretty unstoppable. So far 21 of the existing members have ratified their accession, although one of the four that have not is Germany, the most powerful player in the EU. It would be an extraordinary thing for Berlin to insist on even a delay at this late stage. But Merkel has already expressed opposition to the idea of Turkish adhesion. 
The Romanians are likely to be rather nervous until the entry is an accomplished fact in three months' time. Even then the exact terms of their membership are still not wholly clear. Restrictions on the migration of their people are not impossible even likely in certain quarters of the EU.

The conundrum of corruption
Corruption is the most often cited problem facing Romania. It infects the most mundane of public services and the largest of public contracts. In distorts the economy, twists the administration of justice and contributes significantly to poverty by sapping public and private resources. It is, of course, demoralising for the general public to know that their rulers and rich folk are a lot of shysters and crooks.
In its quest to join the European Union, however, Romania pledged to confront the problem. A government led by the centrist Alliance for Justice and Truth, appears to be taking that pledge seriously. It must, however, pass some important tests before it makes a substantial impact. 
Since taking office in December 2004 Traian Basescu, the president, has repeatedly urged police, prosecutors, regulators and judges to remove politics from their work. "Institutions in Romania have a habit of looking to the ruling party (for direction). What I say now is: 'Look at the law and act accordingly'," he says. 

The novel scourge of the scoundrels
The president surprised his own party and delighted rights groups by appointing Monica Macovei as justice minister in February last year. Ms Macovei, formerly head of the Romanian Association for the Defence of Human Rights, had long called for anti-corruption measures and a more independent judiciary. One generalization in corrupt countries is that women by and large in public life are not corrupt, although many a wife must be turning a blind eye to their husbands' chicanery so long as it brings home the bacon.
Ms Mcovei got the chance to implement "the reforms I was demanding when I was on the other side of the barricades." In February, 2005 the government lifted the immunity from prosecution privilege that former cabinet ministers enjoyed. Concrete cases have also been launched. A former local leader for the Social Democrats, the previous ruling party, was detained and charged with alleged abuse of office and making false written statements. 
In January, 2005 police opened a more important criminal investigation against several executives at Rafo Onesti, an oil refining company. Officials say Rafo evaded Euros 480m in taxes by selling petrol off the books to black market distributors. The company has denied the charge. Calin Tariceanu, the prime minister, says he wants a team of investigators experienced in tackling corporate fraud, possibly from Britain, France or Germany, to help unravel the layers of offshore companies and complex accounting the company has constructed, in his view, to hide corruption. 
According to Jonathan Scheele, head of the European Commission's delegation in Bucharest, the government's handling of Rafo will be watched closely. "This is a very important test case," he says. "It is important for the business environment, for the new government's ability to collect taxes and for fighting corruption." Dorel Sandor, a political analyst, agrees. He believes success in prosecuting Rafo and a few other high-profile cases will have enormous impact. "Basescu doesn't have to win a fight against 200 people, just 20. After that the market for corruption will be changed," he says. 
The Bucharest Court was still investigating matter concerned with Rafo and a business partner, Ovidiu Tender, in August this year.
Mr Tariceanu says his government will also review Euros 3.6bn worth of state contracts with three large Western companies. The contracts are with Germany's EADS to build a border security system for Euros 1bn, France's Vinci in a Euros 500m motorway construction project and with the US company Bechtel for a separate Euros 2.1bn motorway project. 
All three contracts were signed by the previous government, which used loopholes in the public procurement law to award the contracts without competitive tender. Mr Tariceanu has not accused any of the companies of corruption, but says the prices involved are too high. 
At the same time, however, diplomats are warning the new government not to turn the anti-corruption drive into a political vendetta. Then there is the other great issue - the 1989 revolution - that any Romanian government must address if it wants genuinely to come clean with its citizens. Hundreds of millions of dollars in state funds, mostly under the control of security services, are believed to have vanished after the hasty execution of Nicolae Ceausescu. 
But the mystery of the revolution is not only about money, it is also about the truth surrounding the downfall of Ceausescu and the murky and violent transition of power that followed. Most Romanians are convinced the full story has been covered up by political, military and intelligence officials with secrets to hide. Mr Basescu says he is willing to open up classified government files and that much will be revealed in the coming months. 
"For me it is very simple: Ask the state institutions to put the truth on the table," he says. If they resist, Mr Basescu says he "will make it very difficult for them." Asked why he can be trusted to when past presidents have failed, he says "because I was not involved. I watched the revolution on television." 

Booming economy
It is a re-assuring fact that Romania's economy is booming again as it prepares foe EU entry. After several years of deep recession in the 1990s, Romania's economy has grown strongly in recent years. In 2004, it expanded by 8.3 per cent, while in 2005 growth slowed to 4.1 per cent due to floods which cause widespread damage to agriculture. 
It is expected to expand by more than seven percent in 2006, following strong growth in the first two quarters, the head of the country's main statistics agency said on September 8th. 
"Looking at the signs from the first two quarters ... I am convinced that it (Gross Domestic Product growth) will be over seven per cent," said Vergil Voineagu, chairman of the National Statistics Institute. The institute said the GDP expanded by 7.4 per cent in the first half of 2006 as compared with the same period last year.

World Bank shows confidence in economy with RON bond launch
As a sign of confidence in the booming economy the World Bank issued a RON bond launch on September 6th.
Officials said this is the first supranational issue in Romania under local law and domestic clearing systems. It is yet another breakthrough for the Romanians ahead of the big one in January.

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Automobile Craiova to take majority stake from Daewoo

The Romanian car producer Automobile Craiova, in which the state owns 72.4 per cent, is going to take over the majority stake from South Korea's Daewoo Motors in the near future, Economy and Trade Minister, Codrut Seres, said recently, New Europe reported.
"Automobile Craiova will repurchase the 51 per cent stake from the Korean party," Seres said. When the deal has been completed, Automobile Craiova will own 100 per cent in Daewoo Craiova. Then the economy ministry can initiate new privatisation procedures, the minister added. Daewoo Motor controls 51 per cent in Daewoo Automobile Romania, while the remaining 49 per cent of the share capital belongs to Automobile Craiova SA. South Korean President, Roh Moo HyunPrior will pay a three-day visit to Romania, news reports said. The visits are aimed to strengthen economic cooperation, Roh's office said.

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OTP Bank invests 30m Euro in Romanian business 

OTP Bank Nyrt, Hungary's largest financial company, is investing 30 million Euro to expand its business in Romania, the bank said in a statement sent to the Budapest Stock Exchange, New Europe reported. 
The bank on June 23rd had already invested 20 million Euro in the unit to upgrade its computer network and to increase the number of its branch offices in Romania. 
The Budapest-based bank recently disclosed the latest investment in a statement to the stock exchange. 
OTP, Hungary's former banking monopoly, has spent US$2.4 billion to expand in Eastern Europe in the past five years to mitigate a slowdown in revenue growth at home because of competition from the likes of Austria's Erste Bank AG. 
OTP bought the Romanian unit, then-named Robank SA, for US$47.5 million from the UK's Balli Group in 2004. OTP also bought insurer Ceccar Romas SA in November and is bidding for Casa de Economii si Consemnatiuni SA, Romania's largest savings bank.

BRD invests 25m Euro in network

Banca Romana pentru Dezvoltare BRD-SocGen, the second-largest bank in Romanian market, said recently in a statement that it has invested about 25m Euro in the first six months of the year, with the bulk of the money going into the expansion of its territorial network. This significant financial effort resulted in the opening of 115 new branches, which brought the number of branches and agencies operated by BRD to 441 at the end of June, the second-largest network after that of CEC (Romanian Savings Bank) and slightly bigger than that of the BCR (Romanian Commercial Bank).
As the network underwent an aggressive expansion policy, BRD also had to hire personnel that would manage the new branches., In the first half, BRD had 5,723 employees, 1,311 (about a third) more than in June last year. The number of branches has grown by 35 per cent since the beginning of the year alone. The expansion of the bank's network led to an increase in the number of individual clients to 1.8m in June, against 1.5m in the corresponding period of last year. The aggressive expansion of the network led to an increase in expenditures, which grew by 37 per cent against June, to 379m lei. Meanwhile, revenues grew by 15 per cent, to 749m lei. In the financial report, the bank's officials noted that the increase in general expenses is a "natural consequence" of the network's expansion. The bank's cost/income ratio - expressed as a ratio between general expenditures and the net banking income - deteriorated against June last year, increasing by 8 percentage points, to 50.6 per cent.

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Fitch upgrades 4 Romanian banks on sovereign upgrade

Fitch Ratings upgraded on September 1 the ratings of four Romanian banks, after it increased a day prior Romania's long-term foreign and local currency debt ratings to its lowest investment grade level, the rating agency said, New Europe reported.
Banca Comerciala Romania's (BCR) IDR is upgraded to BBB- from BB+, short-term rating to F3 from B and the support rating to 2 from 3. These rating changes result from the improved ability of the Romanian sovereign to provide support to BCR in case of need, and reflect the importance of BCR to the Romanian banking system, Fitch said. Banca Comerciala Ion Tiriac's (Banca Tiriac) IDR is upgraded to A- form BBB+ and its support rating to 1 from 2, following the upgrade of the country ceiling, Fitch said. The bank's Short-term rating is affirmed at F2 and Individual rating at D. UniCredit Romania's (UCR) IDR is upgraded to A- from BBB+ and its support rating to 1 from 2, following the upgrade of the country ceiling. The banks short-term rating is affirmed at F2 and individual rating at D. Banc Post's rating outlook is revised to positive, reflecting the positive outlook on its majority owner EFG Eurobank's (rated A-) ratings and also that the country ceiling is no longer a constraint.

National debt rating gets a Fitch upgrade

Fitch raised on August 31st Romania's long-term foreign and local currency debt ratings to its lowest investment grade level, bringing it on par with India, Croatia and Namibia. It also affirmed the country's short-term foreign currency rating a level to F3. Fitch Ratings has upgraded Romania's foreign currency issuer default rating (IDR) to BBB from BBB- and local currency IDR to BBB+ from BBB, New Europe reported.
The outlooks on both IDRs remain stable. The country ceiling is upgraded to A- from BBB+, Fitch said in an emailed statement. "Romania's sustained real economic growth performance is narrowing the gap in living standards with the EU," Director in Fitch's emerging Europe Sovereigns team, Andrew Colquhoun, said. An impressive pick-up in foreign direct investment is supporting the economy's development and diversification."
Romania's convergence with richer European countries has been driven by impressive real GDP growth, averaging 5.7 per cent per year between 2001 and 2005. Over the same period, FDI inflows averaged 4.7 per cent of GDP per year. EU membership will bring structural aid of up to 17 billion Euro over 2007-2013, equal to 19 per cent of 2006 GDP, and will underpin Romania's progress on structural and institutional reform. Fitch expects Romania to join the EU on schedule in 2007, although a one-year delay to 2008 would not negatively affect the rating. Romania's public finances are a significant rating strength. The government debt burden, of just 20 per cent of GDP at end-2005, compares with a BBB range median of 34 per cent. Fitch expects the debt stock to fall further to 16 per cent of GDP by end-2006.
The modest fiscal loosening the authorities have announced for 2006, while unhelpful in the context of efforts to restrain booming domestic demand, does not imperil the sustainability of the public finances. The external finances remain supportive of the rating. The external debt stock was 14 per cent of GDP at end-2005, against a BBB range median of 19 per cent.
Following years of strong growth in international reserves, Romania was a net public external creditor to the tune of 14 per cent of GDP at end-2005, compared with a BBB range median net debit position of three per cent of GDP. Encouragingly for a country running a high current account deficit, Romania's liquidity ratio of 173 per cent at end-2005 was well above the BBB range median of 136 per cent. The growing current account deficit - 8.7 per cent of GDP in 2005 - increases risks on the external side. But there is little sign that the widening deficit reflects a lack of external competitiveness in the real economy; the country's exports continue to grow faster than the median for comparable economies in Eastern Europe.
The deficit continues to be funded largely through FDI, with 77 per cent coverage in 2005. Credit to the private sector is growing strongly, rising 50 per cent in 2005 alone, but concerns on this score are eased as the increasingly foreign-owned and relatively small banking sector (bank credit was just 20 per cent of GDP at end-2005, compared with a median for comparable Eastern European countries of 44 per cent) remains healthy on the main financial measures, the report said. A key challenge for the authorities will be to lock in low inflation to underpin the economy's competitiveness. Romania's adoption of inflation targeting in 2005 has had an inauspicious start as the target was narrowly missed in its first year of operation. "The economy's external competitiveness and prospects for narrowing the trade deficit could be undermined if higher inflation becomes entrenched through wage bargaining," Colquhoun said. The upgrade may help reduce borrowing costs for Romania's biggest companies and make the country's economy more attractive to overseas investors.

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Rompetrol to invest US$30m for petrol stations 

Rompetrol wants to spend up to US$30 million on 200 mobile gas stations to boost its retail market share to 20 percent by the end of 2007, the company's director general, Paul Pop, said on September 14th. Rompetrol currently has 15 per cent market share with 92 COCO and 118 DOFO stations, New Europe reported. 
Rompetrol's retail fuel sales jumped 39 per cent between June and August versus the same period a year ago. The business model has several advantages. 
With the mobile units, Rompetrol can enter small markets and still make a good profit. Negotiating short-term leases for a site is faster than negotiating to purchase. 
Also, mobile stations are rotated from location to location to gauge market reaction, letting Rompetrol 'test drive' an area before committing to a bricks and mortar station," analysts at investment bank Wood explained. 
Rompetrol Downstream, the retail division of the Rompetrol group, plans to double its gas station network to 500 units by the end of the year, opening 200 mobile stations, Pop said. 
Rompetrol Downstream has a market share of approximately 15 per cent of the retail market and plans to reach 20 per cent by the end of 2007. The company has invested in the past five years about US$150 million in the gas station network it operates in Romania. This year, Rompetrol Downstream estimates revenues of US$685 million, a 37 per cent year-on-year increase.

Petrom's income up to 400 million Euro

Romanian petroleum company Petrom, which is controlled by Austrian OMV group, recently reported a 1.42bn lei (403m Euro) net income for the first half of the year, 2.3 times higher than in the corresponding period of 2005, the company said in a statement. This came as a result of the fast-paced increase in the price of oil worldwide and the rise in the amount of products sold, New Europe reported.
Petrom CEO, Mariana Gheorghe, said that she hopes the company will improve its results by the end of the year, but this depends on the volatility of the prices on the international market. The company estimates a 520m Euro net income and 3bn Euro turnover. The exploration and production unit remains the Romanian petroleum company's bonanza, generating a half-year EBITDA of 2.5bn lei (about 700m Euro).
The refining unit witnessed contrasting fortunes, posting H1 operating losses of 407m lei (some 115m Euro). The losses of Petrom's refining division influenced the results of the MOV group as well. The Austrians reported a net profit of 904 million Euro to the Vienna Stock Exchange. Petrom's personnel have been cut by 25 per cent over the past year to 38,136 employees. This was mainly because of the introduction of a new system for operating filling stations, which takes the related personnel out of the company's structure. Nonetheless, the results posted by Petrom were lower than expected by some of the market's main analysts.

Competition lowers Romtelecom's net profit

Romtelecom, Romania's biggest telecom operator posted a 440 million Euro turnover in the first half of 2006, down 5.9 per cent from the same interval in 2005, OTE Greek telecommunications group said in its recent financial report. Romtelecom's net income reached 14.6 million Euro in the first half, 75.6 per cent lower than in the same period of 2005, OTE Greek telecommunications group said. "The telecommunications company is facing stronger competition, but the delayed implementation of a new stage in the rebalancing process was another factor behind the company's turnover decline," OTE CEO, Panagis Vourloumis, said. In the first quarter of this year, Romtelecom reported total revenues worth 222.8 million Euro, while net income stood at 18.8 million Euro, New Europe reported.
At the same time, the company ended the second quarter of the year with weaker results - revenues worth 217.1 million Euro, down 9.2 per cent from the same period of last year and net losses standing at 4.1 million Euro, a decrease from the 46.8 million Euro net income posted in the second quarter of last year. The operator's long-term debts shrank by 29 million Euro, while Romtelecom's cash volume advanced by 42.5 per cent, to 224.4 million Euro. OTE explained Romtelecom's revenue slide was due to the decline in the number of phone lines, to 3.77 million, and to the diminishing traffic on the segment of individual and legal entity subscribers (retail), amid the rising competition coming from cable TV operators.

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Greek companies invest 30m Euro in dairy sector

Greek companies, Tyras and Olympos, are set to invest 30m Euro in a joint venture to build a dairy production plant in Romania in a bid to establish their brands in the growing market, Ziarul Financiar daily reported recently.
The plant, which will be situated near the town of Brasov, towards the east of the country, is expected to cover around 15 hectares and will be run under a new company called Lactolymp.
According to a report in Ziarul it is believed that the two companies will use the plant as a base to introduce their products to the domestic Romanian diary market. The move follows a similar investment by Tnuva and Yoplait in 2004, where around 40m Euro was spent on building a dairy production plant for the company's operations in the country. The Romanian dairy industry, despite large-scale investment by companies like Yoplait and Danone, still appears to favour smaller producers.
Research analyst Euromonitor stated: "Romania has negotiated with the EU a quota of 3.3 billion litres of milk, out of which only a volume of 1.1-1.2billion litres is generally processed by the industry. The rest is processed, consumed and sold by the small producers directly from the farm or in opened markets." Heavy subsidies from the EU, as part of the Special Accession Programme for Agriculture and Rural Development (SAPARD) and large sales of unprocessed milk through smaller open markets are believed to account for this.
Euromonitor believes that this high demand for domestic unpackaged goods, which consumers deem to be fresher than imported packaged goods, has created "a parallel market that affects legitimate sales of milk."
This "parallel" market is estimated to produce around two billion litres of milk alone, which, according to the Association of Milk Producers, dwarfs the current levels supplied by larger producers in the country. While current Euromonitor estimates growth in the Romanian dairy industry at two to three per cent a year, with further investment into smaller producers and the packaged goods sector, it is believed the figure could rise to 10 to 15 per cent.

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