% of GDP
Soviet occupation following World War II led to the formation of a communist "peoples republic" in 1947 and the abdication of the king. The decades-long rule of President Nicolae CEAUSESCU became increasingly draconian through the 1980s. He was overthrown and executed in late 1989. Former communists dominated the government until 1996 when they were swept from power. Much economic restructuring remains to be carried out before Romania can achieve its hope of joining the
Update No: 081 - (01/02/04)
After a decade of fitful reform and an unsuccessful economy, knocking along the bottom of the league of transition countries, Romania is at last picking up. Foreigners, as we shall see, are showing new interest and FDI is due to boom in 2004.
Romania itself had a difficult time of it in the 1990s. Governments were torn for years between the need to put the economy on a sound footing and the need to look after the electors, a contradiction that persists today. The preceding governments all went for short-term popularity and were condemned abroad. Four consecutive agreements with the IMF were broken. The country trailed badly behind other countries with transition economies.
It reached rock bottom in 1999 when it faced a possibility of defaulting on its foreign debt.
But things have improved subsequently, GDP growing by only 1.6% in 2000, but by 5.3% in 2001, 4.9% in 2002 and probably 4.6% in 2003. It is expected to exceed 5% in 2004.
The central bank's reserves exceed 7bn Euro ($8.18bn), supporting the recent credit upgrades of Standard & Poor's and Fitch. A referendum on October 19th was held on various constitutional changes, including allowing the sale of land to foreigners. It was won.
Romania is due to join NATO in 2004 and to join the EU in 2007. It had closed 19 out of the 30 chapters of the agenda on the accession negotiations by mid-2003. Another six chapters were completed by the end of 2003, while the toughest ones, including those on the environment and agriculture, should be concluded in 2004, according to the country's chief negotiator, Vasile Puskas.
Romania's investment lobby is highly optimistic with respect to investment inflow for the current year. Head of Romania Foreign Investment Agency, Marian Saniuta, said recently, the country may receive as much as US$2bn in foreign direct investment in 2004, a record, as the country prepares to join the European Union in 2007.
A recent Bloomberg news report revealed that 16 foreign investment projects were already under way, totalling almost US$800m, including plants that are being built by Europe's largest tyre maker, Michelin, and a major glassmaker, Saint-Gobain, both France-based entities. Another French giant, the Carrefour supermarket chain, is already operating in the region and executives have praised the business climate of the country. Doing business in Romania "already feels like doing business in Spain or Portugal," Executive Director for Carrefour Romania, Francois Oliver, told Bloomberg. The executive viewed Romania as a secure country, and with prospects for NATO entry next year and EU membership after 2007 the whole climate is reaching highly promising levels, Bloomberg reported.
"Most international studies indicate that foreign direct investment will rise 10% in all of southeast Europe next year," Saniuta said. "From what I see happening in Romania and in countries around us, the region's so-called new tigers, I'm sure such forecasts will be exceeded," she added.
Last November, the European Commission decided against granting Romania the status of a fully functioning market economy until there was more evidence that the government was speeding the sale of state assets in the energy industry. The sale of Petrom SA, Romania's No 1 oil refiner, and of electricity and gas distribution companies probably will pull in more foreign currency, experts have said.
Meanwhile, Finance Minister Mihai Tanasescu said last December that Romania would sell as much as one billion Euro in bonds this year, significantly more than the 700m Euro in bonds it sold in 2003.
Popular president and premier
The key to the transformation in Romania's prospects has been a new dispensation at the helm of government.
There is more of an air of permanency about the present administration. The population have seen the futility of ringing the changes too often. The president, Ion Ilescu, and the premier, Adrian Nastase, are reasonably popular, not despite but partly because they are both former communist apparatchiks. Times were much better for the bulk of the population back then. A nostalgia for the old days has set in and can be partially appeased by having ex-communists back.
Nastase belongs to a much younger generation. He became Prime Minister in December 2000. He was previously a professor of international law who studied at the University of Bucharest and the University of Paris Sorbonne
He also served as Romania's Minister of Foreign Affairs and a representative to the Council of Europe. He is the author of numerous academic and policy articles, and in March 2002, published "The Fight for the Future" (Columbia University Press) on the experience of the Romanian transition..
Ilescu is a veteran of the Ceaucescu period when he was in the upper echelons of the regime for years. This has not rebounded against him because he was known to be the one figure who told the former dictator when he was doing something stupid, which was pretty often.
He could get away with it where it cost others their lives since he was known by Ceaucescu to have a special link to the Russians, especially Brezhnev and then Gorbachev, having been educated and trained in the USSR. Even Ceaucescu feared the reaction of the Russians, the one and only people who could topple him, he thought. He was wrong of course. The Romanians themselves could too and did in memorable style in December 1989. Ilescu hails from the region of Bukovina in the north adjacent to Moldova and has a certain disdain for the Bucharesti and southerners in general, a measure of which underlay his scorn for the southern cobbler's son, Ceaucescu.
Economic recovery; but hardship endures
The Romanians may have a government which is receiving international acclaim, but there is little to rejoice about for the population for the most part.
Inflation remains high, the scourge of living standards, but fell to an all-time low in 2002 at 17.8%.It came in even lower in 2003 at about 14% this year; and it is hoped to be single figures in 2004 and beyond. Budget deficits stand at around 3% of GDP, while trade deficits narrowed as exports posted double digit growth, notching 22% in 2002.
The relatively good record is taking time to translate into higher living standards for all but a few. The pattern of early capitalism of massive conspicuous consumption for the few and exiguous inconspicuous consumption for the mass is strongly present. Bucharest abounds with the signs of a rich consumer society, which is tantalising for the majority of the population. Hence the frequent changes of government hitherto.
Moldovan troubles ahead
The Moldovans are causing the government some headaches right now. Romania is historically wedded to Moldova, which as Bessarabia was once part of it, until detached by Stalin in 1940 as the result of an infamous pact with Hitler. The Russians have just enforced a draconian deal on the Moldovans, making them in effect a Russian protectorate once again.
Bucharest can at least derive the satisfaction from this affair that it puts a stop, once and probably for all, to any idea of a merger of the two countries. The Moldovans, or rather the two thirds of the population there which are ethnically Moldovan, are Romanian-speaking and regard themselves as belonging to greater Romania. They are now the poorest people in Europe, a basket case of a country. The Romanians are better off without them.
Electrica Banat completes two substations
Electrica Banat has put into operation two of its newly designed substations in western Romania, in Lugoj and Curtici respectively, Bucharest Business Week has reported.
The 110/20kV Curtici power substation belongs to Electrica Banat - Arad Branch and will supply electrical power to the tax free zone of Curtici, as well as to other consumers in its neighborhood. "The quick changes taking place in the economy and in the business community, require a permanent preoccupation in the sense of modulating the new developing technologies. The 110/20kV Curtici substation is another important objective of Electrica Banat which was fulfilled with the most up-to-date technology and which is very important for the Arad county and for the tax free zone that it serves," said Livius Milea, general director of Electrica Banat.
The Lugoj substation supplies electrical power to the industrial and domestic consumers in the Lugoj town, as well as the town's neighborhood. "With the very important mission of ensuring the distribution and supply of the electrical power in view, as well as the exploitation and development of distribution systems in a dynamic area which is in permanent evolution, the management concepts applied within Electrica Banat Branch are always following most modern standards, requested by the European Union norms."
"The refurbishment of the 110/20kV Lugoj substation is another significant fulfilled objective of the Electrica Banat branch, aimed to supply power to a relatively wide area, spreading towards Faget and Arad, where we had a low area considering the sources and the power station's reliability. This is the second accomplishment from a series of four power substations from the patrimony of Electrica Banat, included a wide scope program for the substations modernization by the end of 2004, in a similar mode following the 110/20/10kV Fratelia substation in Timisoara and the 110/20kV Bujac substation in Arad," said Livius Milea, another general director of Electrica Banat. Contractor for both substations was Swiss-Swedish utility group, ABB.
Mol Romania goes to Buzau
Mol Romania has opened its first gas station in the city of Buzau, with the current number of similar gas stations nationally reaching 52. The gas station also has a 70-sqm store, both of them being built in the newly adopted design style.
"We are expanding out network in a planned way, thus strengthening our position nationally," said outgoing managing director, Aliz
FOREIGN ECONOMIC RELATIONS
Romania Welcomes Expansion of Ties With Iran
Romania welcomed expansion of relations with Iran, said Romanian Foreign Minister, Mircea Dan Geoana, in Bucharest, the Tehran Times has reported.
In a meeting with Iran's Deputy Foreign Minister for Euro-American Affairs, Ali Ahani, Geoana, pointed to Iran's important role in the region and called for promotion of bilateral cooperation.
He said his country's membership in European bodies and its temporary membership in the UN Security Council can pave the way for further consultations between the two countries on various issues of interest.
Ahani, for his part, expressed appreciation over Romania's humanitarian aid in regards to the recent killer quake in Bam and welcomed the growing trend of mutual relations.
He also outlined Iran's principled policy on developments in Iraq and urged a greater involvement of the United Nations to establish peace and stability in that country.
Meanwhile, the Iranian official voiced his country's readiness to cooperate with Romanian companies to reconstruct Iraq.
"Romania's presence in the UN Security Council paved the way for further consultations between the two countries on regional developments, particularly those of Iraq," he noted.
Nuclear plant to supply 10 percent of Romania's electric power in 2004
The nuclear power plant in Cernavoda (southeastern Romania) will function in 2004 according to predictions, being 87 per cent-charged, and it will provide some 10-11 per cent of Romania's electricity demand, under conditions of optimum safety of equipment, President of the National Commission for the Control of Nuclear Activities (CNCAN) Lucian Biro told Rompres News Agency.
When Cernavoda's Unit 2 is built, the nuclear energy will account for 22-23 per cent of Romania's overall energy and, in the future, with three units, Cernavoda might provide up to 33-35 per cent of the national demand.
"The nuclear sector is welcome and necessary from the point of view of the reduction in gas and coal imports, but also from a social viewpoint, the production of nuclear energy being the cheapest form. However, nuclear energy must permanently have alternative types of energy," Biro said.
The CNCAN president recalled that last summer, because of the low River Danube waters, economic losses caused by the closing of the Cernavoda nuclear plant were 600,000-700,000 dollars a day. According to the technical safety norms, the nuclear power plant cannot function at a charge degree higher than 89 per cent.
TIW to up stakes in Romania, Czech Republic
Canadian company, Telesystem International Wireless, said it will acquire 5.9 percent of Romanian mobile carrier MobiFon from Emerging Markets Partnership Ltd. in exchange for 12.97 million common shares of TIW representing an equity interest of about 11 percent in the Canadian company. Following the transaction, TIW will hold 55.9 percent of MobiFon, up from its previous 50.1 percent.
As part of the transaction, EMP will sell to TIW some of its shares in TIW Czech so its direct and indirect equity ownership in TIW Czech will not change. If other MobiFon and TIW Czech shareholders do not exercise their respective rights of first refusal, TIW will acquire from EMP a 2.9-percent equity interest in TIW Czech for a cash consideration that EMP has agreed to reinvest into 1.65 million additional TIW common shares. This represents an additional equity interest of about 1.2 percent in TIW, bringing EMP's equity interest in TIW to about 12.2 percent.
TIW would increase its equity interest in TIW Czech from 21 percent to 23.9 percent after the transaction closes. TIW controls Czech mobile operator Cesky Mobile.
"We are pleased to have EMP become one of our major shareholders," said Bruno Ducharme, president and chief executive officer of TIW. "This is also an important milestone in the continuing simplification process of TIW's corporate structure, pursuant to which we continue to seek opportunities to increase our economic interest in our subsidiaries."
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