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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: 102 - (27/10/05)

Bucharest-Ljubljana axis in favour of continued EU enlargement 
Romania and Slovenia are forging a new axis to support further EU enlargement and the need to give countries of the Western Balkans the prospects of joining the Union, Romanian Foreign Minister Mihai-Razvan Ungureanu and his Slovenian host and counterpart Dimitrij Rupel told the press on 28th September. 
Speaking after Ungureanu's first official visit to Slovenia, the ministers praised bilateral ties as excellent. Nevertheless, they would like to see cooperation further strengthen within the EU. Ungureanu and Rupel agreed that the launch of EU accession negotiation with Turkey at the beginning of October would be a step forward, as it would give a political meaning to the enlargement process. They also agreed Croatia must be included in that process as well. 
Asked what Romania expects from the 25th October European Commission annual report, Ungureanu said he believes the report will be an objective evaluation of Romania's progress. He does not expect any political recommendations, but hopes his country will be motivated to continue. According to the Romanian minister, the biggest progress has been made in the field of justice reform and stopping illegal migration, one of the Romania's most pressing issues. 
Romania also hopes it will be able to eradicate corruption by reforming the justice system, and financial and economic markets, pointing out the January implementation of flat tax rate. However, he added, there are no connections between corruption and organised crime in Romania, which if true, would be remarkable for Romania when next door Bulgaria suffers from exactly that, and nearly every previously communist state suffers from this problem.
Ungureanu said Romania is interested in finding a compromise regarding the Transnistria Republic. Rupel pointed out this has been a pressing and complicated issue, for which the OSCE must find a balanced solution. Nevertheless, he fears this solution will not be found so soon which recognises the regrettable fact that Moscow sustains this breakaway entity, whose reputation for illicit arms deals, drug smuggling, and other criminal activities is astonishing. 
Ungureanu was later on also received by President Janez Drnovsek, who he briefed on Romania's interest in economic cooperation and joint expansion to other markets, such as Central Asia, Ukraine and Moldavia. Although Drnovsek sees these areas as interesting for investors, he said the two countries will be able to cooperate better when Romania joins the EU. Moreover, the president accepted Ungureanu's invitation to visit Romania. 

Big European banks seek next frontier in Romania
Several of Europe's biggest banks are expected to make some of the richest offers ever for an Eastern European bank in an effort to secure one of the last great financial prizes in the region: Romania's largest bank. The bank, which is known as BCR, is one of the last takeover opportunities for investors seeking to enter Romania, which is set to join the European Union in 2007 or 2008. The bank has assets totalling 7.3 billion Euro (US$8.8 billion), or about 26% of the assets held by the country's banking system.
A majority stake in BCR is commanding such a lofty price -- estimated at least at 2.5 billion Euro, or US$3 billion -- that some quarters are worrying the banks will overpay when bids are due. Austria's Erste Bank Group is considered a favourite though high bids are expected from others such as Deutsche Bank AG and the National Bank of Greece SA, people familiar with the situation said. 
The privatisation agency said the seven bidders seeking control of the bank are: Germany's Deutsche Bank AG, Erste Bank AG of Austria, Belgium's Dexia SA, Banco Commercial Portugues SA, National Bank of Greece SA, Italy's Banca Intesa SpA, and France's BNP Paribas SA. The privatisation agency hasn't set a deadline for selecting the finalists. 
To be able to sell a majority stake in BCR, the Romanian government, which owns 36.88% of BCR, will work with the European Bank for Reconstruction and Development and the International Finance Corp., which own a joint 25% stake in BCR, plus two shares. The two lenders bought the stake from the government in 2003 for US$222 million, and agreed to sell it back if the government found a strategic investor for BCR.
The government previously has said the winning bid would be determined 90% by price; the next consideration would be the bidder's business plan.
Only a few years ago, such eagerness to buy into Romania's banking system would have been regarded as miraculous.
The bidding for BCR represents the tail end of a foreign gold rush for banks in Central and Eastern Europe since the fall of the Berlin Wall more than 15 years ago. While a Romanian bank may appear an unlikely prize, in fact, to the Western European banks, it offers a stake into a country starved for credit and other bank products. The winner of the auction will claim control of a quarter of Romania's banking market and a chance to boost profits by selling credit cards, mortgages and loans in a country of 22 million.
The sale will be an old-fashioned, high-stakes gamble, as the banks and advisers must come up with a price that won't be so high as to annoy their shareholders but will be high enough to be accepted by Romania's government. The two highest bidders will then be expected to offer a final bid, with a decision expected by year end. 
Banks globally are scouring for every foothold they can obtain in emerging markets. During the past five years, big European banks, facing slow economic growth in their home markets of 1% to 2%, have raced deeper into Eastern Europe, eager for a region growing at twice or more the annual rate of some Western European countries. Romania is expected to grow at more than 5%. After Romania, very little will be left until opportunities open in Ukraine, several investment bankers say.
"Romania is the largest country in the region and one of the last to privatise its banks, resulting in scarcity value," said Paul Mylonas, chief economist and chief of strategy for the National Bank of Greece. The bank confirmed it is one of the bidders.
Still, the auction could drive the price to as high as 3 billion Euro or higher, some analysts say. That price equates to about 3 to 3.7 times BCR's book value, or assets minus liabilities. That valuation is at least twice what some bank stakes have sold for in recent years.
Investors appear to have weighed in with their displeasure on the prospect of an expensive bid by Erste Bank. Erste's stock is down 13% since Erste's top executive showed enthusiasm for BCR on Sept. 16th.
In a report on KBC's bid, which pointed out that 90% of deciding the winner will be price, Credit Suisse First Boston said, "it means that aggressive bidding may make the price unacceptably high."
The bidding banks are being advised by investment banks including Morgan Stanley, Lehman Brothers, Credit Suisse First Boston, Deutsche and J.P. Morgan Chase. Erste, Dexia and the National Bank of Greece confirmed they are bidding. The others were either unavailable for or declined to comment.

Limited exit
There is an excellent article on the subject of Bucharest building a higher wall of red tape to stem illegal migration. It is by Razvan Amariei, who is Tol's correspondent in Bucharest.
New rules meant to cut down on illegal migration are also complicating the lives of Romanian tourists and businesspeople.
The rules were so strict that Bucharest was almost immediately forced to lighten them after complaints from ordinary citizens and the Hungarian government, but only on travel outside the wealthy core of the European Union.
Under the previous system in operation since 2002, Romanians did not need a visa to visit the Schengen countries for up to 90 days provided they had sufficient funds to support themselves during the trip. They also, at least in theory, had to show a return ticket, proof of insurance if travelling by car, travel insurance, and an official invitation or tourist voucher, or a specified sum of money.
The measures were demanded by the countries of the Schengen space - the 13 "old" EU member states of continental Europe, joined by Norway and Iceland, where most interior border checks have been abolished - to cut down on illegal migration and crime. 

Show me the money
For those visiting the EU or other Western countries, the minimum amount required was 500 euros, plus 100 euros per day.
As newspaper columnist Adrian Papahagi, wrote, "you needed 3,000 euros to stay on your own for a month in Western Europe: a year's average income for a Romanian and a monthly salary few Westerners are making."
Even so, most Romanians would bring the money instead of vouchers or an invitation even if they had those documents. "It was easier this way. Booking a hotel through a local agency was many times more expensive than finding a room on the spot. And a strict schedule could ruin your holiday," explains Dan Petre, a 28-year-old journalist who said he always takes his vacations abroad.
"Every summer I go to my sister's in Italy. But why ask her to officially invite me and make her spend a lot of money on paperwork when I could just show some cash on the border?" says Aurora Tarcea, 47, from Craiova.
There was one major flaw with the system though: most people didn't have that kind of money. 
Some would borrow it for the trip and return it later. Others lied about the length of their trip. An officer who patrols the border with Hungary, Vlad S. recalls, "This trick worked better for those leaving by car, but people travelling by train, bus, or plane used it too: they would buy a return ticket for a trip of five days and simply change it upon arrival.
"Or they wouldn't," he adds, "if they were planning to stay abroad for good."
Official sources cite estimates of as many as two million Romanian citizens currently living abroad, most in Italy, Spain, France, Germany, Hungary, the United Kingdom, and Ireland. Even if many have now legal status, most began as illegal immigrants.
Since the beginning of this year, 6,000 Romanians have been found guilty in Western European courts, most for violating immigration rules.

Tough rules
Statistics like these are the main reason why Romanian travellers' carefree days are now over. Under the new rules, it is no longer possible to just produce a wad of cash at the border.
The health and auto insurance requirements still apply, and travellers still have to show a return ticket. The good news is that the monetary minimum has been cut sharply to 30 euros per day for the EU and other rich country destinations and 20 Euro per day for other countries Romanians don't need visas to visit.
The down side for all Romanian travellers in the first days under the new system, whether holidaymakers or business people, was that they had to have a pile of other documents to show where they were headed and for how long.
The authorities seem happy about the new rules. The deputy chief of the Romanian Border Police, Vasile Motoc, said the rules are "an attempt to discipline the Romanians," and Interior Minister Vasile Blaga told the media, "the project is 99.99 percent accepted by civil society."
But others are less sure. Tom Gallagher, an academic specializing in Romania, commented, according to the news portal, "If Romania was a breeding ground for armed terrorists and extremist politicians, some of the restrictions would have been understandable. Romania is, at present, one of the most peaceful countries in Europe."
Many ordinary travellers complained that the regulations became an insurmountable obstacle from day one. In the first four days of the new system, more than 10 percent of Romanians who wanted to cross the border were sent back by border police.
"I was going shopping in Szeged, but our border police in Nadlac asked for an invitation. Maybe I will find a store in Hungary to invite me to shop there!" an infuriated man from Arad county told Realitatea TV after he was turned back by Romanian border guards.
At first, Romanians making brief trips by air to Western capitals were asked to show proof of accommodation even if they had a return ticket for the same day. 
"It's absurd, but it happened. I had to talk with the chief of the checkpoint to let me go through," a Bucharest man who said he was travelling on business told TOL.
The Hungarian authorities, concerned that the new rules would hamper the mobility of the 1.5 million-member Hungarian community in Romania, soon asked Bucharest to look into the situation. Romanian television showed clips of Hungarian Interior Minister Monika Lamperth complaining that "the new restrictions limit the travel possibilities for ethnic Hungarians in Romania and for all Romanian citizens."
Bucharest took notice and modified the new system on only its fourth day of operation. As of 4 October, documents such as invitations, hotel reservations, business certificates and so on are no longer needed for countries outside the Schengen zone. 
Yet this is little solace for the more than half of Romanian travellers who make the Schengen zone their final destination, as statistics for 2004 show. That is, for those who wish to abide by the new rules. Others may take advantage of the fairly relaxed border checks to travel first to one of the new EU members and from there enter the inner core of Schengen countries.
"I was worried I wouldn't be able to return to work in Spain without an invitation. But I will say at the checkpoint that I'm going to Budapest and then I'll take the train to Vienna and further west," one young man from Bistrita-Nasaud county said. The man, who understandably did not wish his name to be used, said he spends most of the year working without papers in the Barcelona region.
And the onerous paperwork demands on business travellers to the Schengen zone, even those on the list of Romania's 300 richest people, have not been lightened. They must have a certificate issued by the local branch of the National Trade Register to prove they are real entrepreneurs. They also need an invitation from a company or institution in the destination country, tickets for trade fairs and similar events, or other documents that demonstrate the existence of business or professional ties.
Mihai Ionescu, secretary general of the National Association of Romanian Importers and Exporters, said, "It's worse than it was before visas were eliminated. At least then we could get a visa for one year. Now, the regulations are unclear and we don't know for how long the certificate issued by the Trade Register is valid."

EU Labour market: closed for business
The new travel rules may be causing frustration and annoyance for many, but all will change in 14 months' time when Romania enters the EU (or in 26 months if the EU applies a safeguard clause in the accession treaty and postpones Romania's entry by a year).
Or will it? From that day on, Romanians will be free to travel throughout the Union with only minimal identity documents. But in all likelihood they won't be able to work without a permit in many countries for at least two years and up to as many as seven years. Such limitations are in effect in most of the EU for workers from the eight former communist countries that joined the Union in 2004.
"Only in seven years' time will we be completely sure our citizens will be free to work anywhere within the EU's borders," a senior official dealing with the Romanian diaspora was quoted as saying in the daily Jurnalul National.
It seems that even becoming a member of the world's biggest and most prosperous economic zone won't bring an end to a condition commonly diagnosed in this country, "the humiliation of being a Romanian." 
The result is all too easy to predict: freedom to travel combined with harsh restrictions on holding a legitimate job will simply swell the ranks of Romanians working in the grey and black markets.



New fighter jets for 2006 

Romania will buy new fighter planes next year to replace its ageing fleet of Soviet-era MiG-21s as the NATO member upgrades its armed forces, Defence Minister, Teodor Atanasiu, said recently, New Europe reported. 
Romania needed at least 24 new planes, to be bought or leased through tender, or by participating in Lockheed Martin's F-35 Joint Strike Fighter (JSF), a US air force project, "We have a very clear vision because in 2008 or 2009 this aircraft should be part of our forces," he said.



Fitch affirms ratings for Banca Comerciala 

Fitch Ratings, the international rating agency, said recently it has affirmed the Romania-based Banca Comerciala Romana's (BCR) ratings at long-term BB+, short-term B, support 3 and individual C/D. The outlook on the long-term rating is stable.
BCR's long-term, short-term and support ratings reflect the potential support it can expect to receive from the Romanian state in case of need, reflecting its large domestic franchise, the group said. The individual rating reflects BCR's strong domestic franchise, continued, albeit pressured, profitability and sound capitalisation. It also represents the restructuring BCR has gone through in association with its shareholders EBRD and IFC, which has improved the risk management framework, it added. However, it also takes into account the difficult operating environment and increased credit risk from a fast-growing loan portfolio. "BCR is by far the largest bank in Romania and this franchise positions it well to benefit from the expected growth in the banking system," said Tim Beck of Fitch's Financial Institutions group. The Romanian state is planning to sell a majority stake of BCR to a foreign strategic investor. The successful bidder should be identified by November 2005 and the transaction is scheduled for completion by first quarter of 2006. Depending on the successful bidder, and the propensity indicated to provide support to BCR, this may lead to positive rating action for BCR's long-term, short-term and support ratings. BCR accounts for approximately 30 per cent of all assets in the banking system. In June 2004, EBRD and IFC each purchased 12.5 per cent plus 1 share of the bank from the state.

Fitch affirms Bancpost's ratings 

Fitch Ratings said recently it affirmed Romania-based Bancpost's (BP) ratings at long-term BBB- (BBBminus), short-term F3, support 2 and individual D. The outlook on the long-term rating is stable. The long-term, short-term and support ratings reflect the strong potential support BP can expect to receive from its majority shareholder EFG Eurobank Ergasias (Eurobank," rated A-(A minus) /positive outlook) of Greece and are constrained by the country ceiling BBB- (BBB minus) for Romania, New Europe reported. 
The individual rating reflects potential asset quality problems from rapid loan growth and low capitalisation. These are balanced by improving profitability and the substantial restructuring it has undergone as a result of the increasing involvement of its parent in its activities. "BP has been undergoing major restructuring following the acquisition by Eurobank, including the implementation of a centralised IT system, network rationalisation and upgrading of risk management procedures," said Gulcin Orgun of Fitch's Financial Institutions group. 
While this has imposed additional short-term costs on BP, Fitch views this positively, and the bank should be better placed to grow lending and further improve its profitability. 
However, margins will be under pressure in the medium-term through both lower nominal interest rates and intensifying competition. BP was established in 1991. 
Eurobank acquired a stake in it in 2000 and it currently holds approximately 63 per cent stake at the bank. Eurobank plans to exercise its call options on the combined 7 per cent interest held by the European Bank for Reconstruction and Development (EBRD) and International Finance Corporation (IFC) by end-2006. BP offers banking products to corporates, small- and medium-sized enterprises and retail clients through its 161 branches and offices throughout Romania and the network of the Romanian Post Office. At the end of 2004, BP stood for 4.75 per cent of system's assets.



E.ON acquires Electrica Moldova for 100m Euro 

Romania's government said recently it had completed the sale of a majority stake in electricity-distribution company Electrica Moldova SA to Germany's E.ON Energie AG for a contract worth 100m Euro (US$120m). E.ON agreed to pay 31.4m Euro for a 24.6 per cent stake in Electrica Moldova. The company will invest another 68.6m Euro to increase its stake to 51 per cent, New Europe reported. 
"We will do our very best to improve our distribution position, maybe by adding Muntenia Sud or Muntenia Nord or maybe the Transylvania distributors," said Walter Hohlefelder, an E.ON board member. According to him, more acquisitions are subject to approval by Romania's Competition Council. Czech energy giant CEZ in February agreed to buy 51 per cent of Electrica Oltenia SA, the biggest of the four power distributors, for 151m Euro. Italy's Enel SpA bought majority stakes in Electrica Banat and Electrica Dobrogea. E.ON is also among 10 companies that filed on September 15 expressions of interest for a majority 67.5 per cent stake in Electrica Muntenia Sud, Romania's most profitable power distributor.



Smithfield Foods to enter Romania 

US Smithfield Foods that has recently bought the former Comtim pork products maker, plans to invest US$850m in Romania and turn the country into a food exporter in the next five years, President Traian Basescu said recently, cited by TV reports. 
The US company will set up and finance about 200 hog farms in Romania. The farms' owners pledged to supply pork to Smithfield Foods in exchange, after getting the finance and putting the business on its feet. Basescu's visit to San Francisco aimed at presenting the big US companies, mainly those of California, which the investment opportunities existing in Romania. Californian companies have 75 per cent of Romanian's foreign trade with the United States.

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