Books on Romania
% of GDP
Update No: 097 - (26/05/05)
To the East
The Romanians were delighted by the outcome in Ukraine, the Orange Revolution,
in December last year around Christmas time. It so reminds them of their own
deliverance at Christmas 1989 that completed a miraculous year in the history of
Europe, to be imitated across the vast expanse of the Soviet empire two years
later in 1991.
President Viktor Yushchenko, a true victor indeed, came to Bucharest in April,
where he conferred with his Romanian counterpart, Trajan Basescu, himself only
recently elected too at the end of 2004. There is something appropriate about
his first name too. Trajan was the Roman emperor who conquered Dacia, as it then
was, in 117 AD, securing Romania's Western destiny.
They hold the same position on the highly sensitive issue of Transnistria, the
breakaway province of Moldova, Romania's long-lost twin. The two leaders went on
to Chishinau, the capital of Moldova, to present their joint position at a
meeting of the heads of state of the so-called GUUAM group, consisting of
Georgia, Ukraine, Uzbekistan, Azerbaijan and Moldova, now GUAM because
Uzbekistan has left it. They did not give details of their peace plan. Diplomacy
is often best conducted privately.
But it is not difficult to conceive of its general outline. Joint pressure is to
be put on the sinister regime of Transnistria leader Igor Smirnov, now
surrounded by democratic powers, to desist from smuggling arms and other
contraband and to hold elections which do not have the result of giving him 103%
of the votes cast, the outcome of elections in certain areas four years ago.
That the Russian-inhabited and Ukrainian-inhabited outpost of the Kremlin, still
a Russian military base, will ever rejoin Moldova may not be unlikely given the
Russian interest in its survivial. But its demilitarisation is a "must
try" goal for its neighbours. Yushchenko is convinced that Romania and
Ukraine have a vital role together to play here.
To the West
A decisive event took place on April 25th when Romania and Bulgaria were
accepted as candidates to join the EU. The target date for entry is January
2000, but it could be delayed for either of them if they do not comply with the
full panoply of l'acquisition communitaire, the set of house-rules of the
When Romania enters the European Union, it will be the fulfilment, at least
officially, of the country's historic dream to be recognised as European. For
centuries the county was part of a geopolitical grey area and between 1965 and
1989 the brutal dictatorship of Nicolae Ceausescu and his policy of isolation
severely damaged Romanians' self image in relation to the outside world.
These emotions and the widespread poverty are the reason for the more than 80%
support among the country's 21.6 million people for EU entry.
Human rights activists and opinion makers hope in addition that pressure from
Brussels will force politicians toward reforms that they could not push through
on their own. President Basescu, the current president since the end of 2004,
has been the first politician to address the fact that EU membership has
disadvantages as well and that economic prosperity will not come automatically.
He was warned against the over optimism that sees "milk and honey flowing
into the potholes of Bucharest" in the proposed accession year of 2007.
Romania for one has still to prove that it is in the position to take in hand
its ubiquitous corruption, a problem that sits high on the EU Commission's list
of priorities. The Commission is also demanding an efficient judiciary. Since
the liberal government of Prime Minister, Calin Popescu-Tariceanu, took office
late last year, and an avalanche of arrests and prosecutions has rolled through
Due to financial manipulation, oil entrepreneurs, provincial politicians,
bureaucrats and ministers have all come under the scrutiny of the
Anti-Corruption State Attorney's Office (PNA) founded in 2002. The justice
system is hopelessly overburdened with the work. Each prosecutor has an average
of 204 cases a year, compared with 27 yearly cases for their colleagues in
Western Europe, the PNA says.
On the positive side, an economic upturn started four years ago that has brought
with it a 2004 growth rate of more than 8%, and many new foreign investors are
setting up shop in the country.
Still the average net monthly wage is only around 177 Euro (US$228). As a
result, many Romanians have been allowed to seek work abroad in the West. The
so-called Employment Migration Office in Bucharest has within the two years of
its existence placed 100,000 Romanians in temporary employment in Germany,
Spain, Hungary and Switzerland. Because of a bilateral agreement, Romanians can
work in these countries as nurses and forestry workers, in construction and in
agriculture, so far sending home 274m Euro.
From information obtained from banks, observers have concluded that a high
amount of illegal work is being done in the West. Between 800,000 to a million
illegal Romanian workers abroad are though to have transferred 1.5bn Euro to
their families. The money earned in the West already had its effect. About 3,000
of a total of 13,000 villages in Romania have become noticeably richer.
In the idyllic village of Marginea in northern Romania, the famous traditional
pottery works has died as almost all the young people (about half of the 10,000
inhabitants) are working abroad. The lovely new one-family homes that grace the
village's lanes were built with their money.
Car sales booming
A sure sign that a country is joining the Western world is when it sees a boom
in car sales. Not only is that happening, Romania is to become a major exporter
The Renault-owned Romanian car producer, Dacia, has announced plans to spend
$24m as a first instalment for its project to build a plant for making
knock-down versions of its Logan model for export. The name of the company is of
course not fortuitous, that of the Roman province it once was, the guarantee
that it has a great European future ahead of it.
BA-CA wants 10% of market
Erich Hampel, chief executive officer at Bank Austria Creditanstalt (BA-CA), a
member of the HVB Group, said recently that the bank intends to bid for a stake
in the Romanian Savings Bank (CEC) and the Romanian Commercial Bank, when the
government will start the privatisation procedures, New Europe reported
recently. "We are going to increase our presence in the Romania at a 10%
market share. We are going to do it either by buying a bank, or by organic
growth," he told journalists in Bucharest. According to Hampel, the bank's
strategy for Romania includes the establishment of a leasing company, of a
brokerage firm and of a company involved in mutual funds administration. He
added that BA-CA could get involved in the management of pension funds.
Lei bonds get longer terms
Romania's Finance Ministry extended the maturity term to 12 and 15 years for
state bonds in local currency sold in the inter-banking market and accepted a 7%
and 7.25%, respectively, interest, the central bank said recently, New Europe
The bond sale by the state recently attracted 3,884bn lei from banks, by means
of four issues maturing in 3, 5, 12 and 15 years. There was a time when the
finance ministry issued on the domestic market bonds with 12 and 15 years
maturity terms. The longest maturity deadlines brought modest levels, a
situation that is normal for maturity terms only recently launched in the
market, as a test for certain interest levels.
Moody's upgrades Raiffeisen's financial strength
Moody's Investors Service raised the financial strength rating (FSR) for
Raiffeisen Bank SA of Romania to D- from E+, the rating agency said recently in
an e-mailed statement, New Europe reported recently.
The foreign currency deposit ratings are not affected by this rating action and
remain unchanged at the Ba2/Not-Prime country ceiling for long- and short-term
foreign currency deposits in Romania, respectively. The Ba2 long-term deposit
rating has a positive outlook and the FSR has a stable outlook.
Raiffeisen Bank SA is 99.4% owned by Raiffeisen International Bank - Holding AG
- a subsidiary owned by Raiffeisen Zentralbank Oesterreich (RZB), the central
institution of the Austrian Raiffeisen Banking Group (86%), Regional Raiffeisen
Banks (6%), the European Bank for Reconstruction and Development (EBRD) 4% and
International Finance Corporation (IFC) 4%.
Moody's said that the FSR upgrade reflects the progress made by Raiffeisen Bank
in developing its infrastructure and internal systems, as well as its improving
financial fundamentals. The bank has adopted IT systems and processes common
with those used at sister banks operating in central/eastern Europe and benefits
from operational support from its parent.
It has a good corporate client base and is growing strongly its personal and
consumer lending, as well as mortgage lending - even though it was late to enter
the mortgage lending market.
Raiffeisen's manifold access to foreign currency funding, from its parent as
well as IFL's (EBRD, IFC) and the international syndicated market, has enabled
it to meet the demand for hard currency loans and grow strongly over the last
couple of years. This trend continues in 2005. Although appreciating the bank's
drive to build up market share, Moody's is concerned about the rapid pace of
lending, especially in foreign currency to borrowers with no foreign currency
Although this remains the overall market practice in Romania, Moody's believes
that if the leu devalues, the currency risk assumed by such borrowers may turn
into increased credit risk for the bank and thus negatively affect the bank's
overall financial health. Raiffeisen Bank is headquartered in Bucharest, Romania
and reported total assets of 82,126bn lei (2.1bn Euro) at end-2004.
Romania and Bulgaria get EU entry go-ahead
The European Parliament recently voted overwhelmingly in favour of European
Union membership for Romania and Bulgaria on January 1st, 2007 but warned both
countries to step up reform efforts to meet the deadline, New Europe has
The EU Parliament voted for the two countries' accession despite last minute
calls by the assembly's Green group for a postponement of the ballot.
A total of 522 deputies voted in favour of Bulgaria's EU entry, with 70 against
and 69 abstentions. Those voting in favour of Romanian accession numbered 497,
with 93 against and 71 abstentions.
European Commission enlargement chief Olli Rehn welcomed the parliamentary green
light, saying the accession treaty for both countries signed on April 25th
provided sufficient safeguard clauses to ensure that Romania and Bulgaria met EU
membership standards. "We must have a fair game. While the jury is still
out, it is now time to give the benefit of the doubt to the two countries,"
"Bulgaria and Romania must use the remaining time until the planned day of
accession to finalise their preparations," he said adding that the
Commission would keep a close watch on developments in both countries.
Martin Schulz, leader of the Parliament's powerful Socialist Group, underlined
that the EU assembly would be fully involved in monitoring progress in the 2
countries. "Many things remain to be done and the governments of both
countries will have to make strong and convincing efforts," said Socialist
group Vice President, Jan Marinus Wiersma.
"Parliament will monitor the process very closely and will make full use of
its rights," he underlined.
The comments made clear that although EU governments have set a January 1st,
2007 date for Romania and Bulgaria's membership of the union, accession could be
delayed by one year if they fail to make key reforms, such as curbing corruption
and reorganising farming. In a debate preceding the vote, there was special
concern that Romania - a country of 23m people - was still lagging behind.
Green group leader Daniel Cohn-Bendit told the Parliament he was concerned about
the state of press freedom and governance in the country. He said his group
wanted to delay the vote.
But those in favour of Romania's membership warned that postponing the vote
would sent a "dangerous" political signal to the country.
Romanian, Italian ministers sign privatisation contract, discuss oil pipeline
Italian Minister for Productive Activities, Claudio Scajola, recently paid a
visit to Romania, whilst there he attended the ceremony for the signing of the
final privatisation papers for Electrica Banat and Electrica Dobrogea with ENEL
along with Romanian Minister of Economy and Trade, Ioan Codrut Seres, the
Ministry of Economy and Trade said, Rompres web site reported.
The two senior officials held a round of talks over the Constanta-Trieste
European oil pipeline project and the economic cooperation between the two
Minister Scajola said that the European oil pipeline is an important aspect of
the bilateral cooperation.
The two ministers mentioned the steps taken in this project, referring to the
wish expressed by the European Bank for Reconstruction and Development (EBRD),
and International Finance Corporation to finance it. The Pan European Oil
Pipeline (PEOP) project has also caught the eye of companies GE Energy Oil and
Gas and China National Oil Corporation, which invited Ministry of Economy and
Trade representatives to China in order to discuss details on the pipeline.
Another step in the PEOP construction is the project for the creation of the
project company, put forward by representatives from Parpinelli Tecnon, for
which a group of Italian private investors intends to earmark 10m Euro.
Romania's industrial output grew by 6.6 per cent in first quarter
The gross index in Romania's processing industry grew by 6.6 per cent in the
first three months of this year as against the similar time span of the previous
year, according to the data centralized by the National Statistics Institute,
Rompres web site reproted.
In March 2005 the gross index of the industrial output increased by four per
cent as against the same month in 2004.
The total turnover of the companies whose main activity is in industry increased
by 1.9 per cent in real terms from 1 January-31 March 2005 as against the
similar period of time of the previous year and in March 2005 it grew by 3.5 per
cent as against March 2004.
France Telecom increases Orange Romanian holding
France Telecom announced it agreed to pay 406m Euro (US$523m) to raise its stake
in Orange Romania, said the company in a statement recently, New Europe has
France Telecom SA, owner of Europe's fourth biggest mobile phone company, signed
an agreement with a group of minority shareholders in mobile operator Orange
Romania to acquire their shares.
The Paris-based France Telecom will increase its holding in the Orange unit to
96.6% from 73.3% in a transaction valuing the Romanian operator at about
US$2.2bn, the company said. Orange Romania has 48% of market share and
experienced revenue growth of 47% between 2003 and 2004. Orange Romania's
earnings before interest, tax, depreciation and amortisation (EBITDA) were 54%
of sales, France Telecom said.
Sellers include a consortium of financial investors led by AIG New Europe Fund.
Other members of the consortium include Polish Enterprise Fund and Polish
Enterprise Fund IV managed by Enterprise Investors, Innova/98 managed by Innova
Capital, Communications Venture Partners, Banc Boston capital, now part of Bank
of America and Societe Generale Romania Fund. The sellers were advised by Ph.
Villin Conseil and Edmond de Rothschild Corporate Finance, France Telecom said.