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ROMANIA


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
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

REPUBLICAN REFERENCE

Area (sq.km)
237,500

Population
22,355,551 

Capital 
Bucharest 

Currency 
Leu

President 
Traian Basescu

Private sector 
% of GDP 
40%


Update No: 101 - (27/09/05)

There is a brilliant article worth quoting in full, which puts the case for Romania not to be a baby poodle of the UK and the US, as it were, begat by the former in its own slavish pro-American image. The low case 'ro' in the title is not of course accidental.

romania: In or Out of the Anglo-American Axis?
From the beginning of his mandate as a President of Romania, Traian Basescu declared himself a supporter of the so-called Axis of Washington-London-Bucharest. The idea was received with a cold attitude by the European powers, especially by the Germans and the French - long time friends of the country. Nonetheless, it became the leitmotif of Romania's foreign policy.
But apparently the interest for this friendship axis is almost non-existent from both the UK and the USA. When the Romanian authorities asked for a visa-free entry in England and America for the Romanian citizens, the response was a clear and concise 'no'! But, when the Romanian troops were needed in Afghanistan, Iraq and elsewhere on this globe, the answer was "Yes, Sir!"
Some felt that there is something wrong with this picture. Is Romania a friend of the world powers? Or merely their hobbyhorse?
For over half a year now, the United States delayed sending an Ambassador in Romania. Ever since Ambassador Crouch ended his mission, this official position has been available. Most of the politicians, from both the opposition and the ruling alliance see it at the very least as a sign of indifference towards Romania. What's the point of having an axis, but no Ambassador to work with?
A former Foreign Minister, and member of the Commission for Foreign Affairs of the Senate, Teodor Melescanu, said "the situation we are confronting with is not one that makes us content. The presence of an Ambassador is very important for the diplomatic contacts between the two countries."
Vasile Puscas, opposition deputy and former Minister of European Integration declared "from the point of view of the diplomatic principles, when a state delays the appointment of an Ambassador in another country, it means there is no interest toward that respective country; no geostrategic interest, geopolitical or economic interest. Objectively, between Romania and USA functions a Strategic Partnership that would require the presence of an Ambassador."
Anca Petrescu, member of the PRM nationalist party in Parliament believes that "the axis is not compromise, but we should not count only on this axis, we should not forget the relations we have developed with other states."
Eugen Mihaescu, Vice-President of the Commission of Foreign Affairs in the Senate when asked about this issue said "well, but who is the Romanian Ambassador in Washington? It is the Ambassador of Iliescu! Anyway, the fact that we do not have an American Ambassador in Bucharest is showing the extraordinary interest of the Americans to maintain a good working relation with Romania. 
Generally speaking, despite all the efforts of our young Foreign Minister, the foreign policy of our country is unchanged, frozen into a refrigerator since the times of Gheorghiu Dej, Ceausescu, Iliescu and now, President Basescu."
But, besides being ignored by the USA, Romania is not on good terms with its European partners, either. This summer was an agitated one; there were catastrophic floods, political disagreements between the President and the Prime Minister and between the opposition and the ruling alliance; the economy also suffered because of the euro and dollar fluctuation, the increasing number of the unemployed, and the numerous social and civic frustrations.
Olli Rehn, the EU enlargement Commissioner expressed in various circumstances, that if Romania or Bulgaria cannot or do not want to implement the reforms asked by the EU, then their membership should be postponed.
If this were to happen, Romania will lose more than 2 billion euro, money offered by the EU for the socio-political and economic reform of the country.
In this regard, Mihai Razvan Ungureanu stated that the EU officials in spite of their critiques do not have a plan B in case Romania and Bulgaria fail to join the EU in January 2007. Ungureanu said: "Not even the Brussels bureaucracy has considered the accession of Romania and Bulgaria in 2008. There is much trust that the two states will accomplish missions and become members of the EU in January 1, 2007."
Guenther Beckstein, Interior Minister of Bavaria declared to Reuters that the referendums in France and the Netherlands proved that the accelerated enlargement of the European Union would be further criticized by the European citizens. Therefore, January 2007 or even 2008 is probably premature" for both Romania's and Bulgaria's accession.
With a poor Romanian lobby for the accession, with a political class lacking the stamina to urge clear reforms, with a system of justice obedient to the interests of various politicians and mafia bosses, the chances of seeing an European Romanian any time soon are indeed very low.
Manu ela Paraipan, who is quoted here, received a Political Science degree in Romania, concentrating on Arab/Muslim domestic and external policy. She has been published in The Wall Street Journal, The Washington Times, World Security Network (WSN), World Press, Yemen Times and other publications. She has also been invited as a speaker at multiple political conferences. In addition to Romanian and English, Ms. Paraipan speaks French, Spanish and Italian. Her web site can be found at www.manuelaparaipan.org
One can say in answer to this brilliant piece that it is not only the UK and Romania that can be accused of dubious motives in their obsequiousness to Washington. 
What about the Paris-Berlin-Moscow axis of powers, all with close ties to Baghdad for decades, who in effect before the war became Saddam's useful idiots over the issue, governmental George Galloways, as it were?
There are limits to which this kind of invective is really illuminating.

Solid domestic performance
The economy is doing reasonably well, as is everything else in Romania. At least they are free of the ghastly regime of Nicolae Ceaucescu since 1989, even if free to make their own mistakes.
The Romanians are looking forward to joining the EU in 2007, although growth in the Eurozone has been disappointing for its first six years of operation, and there is a way to go in adopting the Aequi.
Premier Calin Popescu Tariceano on September 20th invited all the main political parties to a general discussion on all that concerns the country's EU bid. It is not a controversial issue, only the extremist party of Vadim Tudor opposing the idea. But having endured communism for so long the Romanians are not going to go in for fascism (which they did most painfully for a time during the war, General Antonescu being a crony of Hitler's to his ultimate chagrin). 

Welcome for the Uzbek refugees
Romania's cause was boosted by a generous act in admitting Uzbek refugees at UN request. They were fleeing the grim dictatorship of President Islam Karimov. Undoubtedly, the Romanians can sympathise with people toiling under despotism, given the living memory of the ghastly regime of Nicolae Ceaucescu. 
This is also why the role of Romanian troops in Iraq is not so much resented as all that, although the sooner it can be terminated of course the better.

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BANKING

HVB, Tiriac finalise merger 

Bank Austria Creditanstalt (BA-CA) and the Commercial Bank Ion Tiriac (BCIT) said recently that they had finalised the merger between HVB Bank Romania and the local financial institution controlled by Romanian businessman and former tennis player, Ion Tiriac, New Europe reported.
"Romania is a strategic market for our bank," said Erich Hampel, president of BA-CA, a member of the HVB group, which coordinates the bank's activities in Central and Eastern Europe. Tiriac said the fusion will allow the banks to take advantage of the dynamic development of the local market and expressed his satisfaction with the deal. The agreement, signed in June, came into effect on August 31st and granted BA-CA control over 50 per cent plus one share of BCIT, while for his part, Tiriac will own 50 per cent minus one share of HVB Bank Romania. 

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ENERGY

Petrom's sales reach 1.3 billion in H1 

Petrom, Romania's biggest oil company, recently posted first half sales of 1.3bn Euro, with some 752m Euro generated in the second quarter. Petrom net income reached 601m lei (some 164m Euro), while turnover reached 4,612m lei (1,259m Euro) 16 per cent higher than in first half of 2004. Petrom's EBIT for the first half year of 2005 was 239m Euro, for the second quarter of 2005, Petrom's earnings before interest and tax (EBIT) was around 103 million Euro. This decrease was caused by a 60 million Euro restructuring charge paid in second quarter of 2005. 
"We have reached a good result. However, in order to secure Petrom's activities, we need to enter a lasting modernisation process. In a number of benchmarks, we do clearly lag behind the industry average in Europe. We have to close this gap and we will do everything necessary to achieve that. We are facing a very competitive environment in the region and we want our company to be up at the top", said Gheorghe Constantinescu, CEO of Petrom.
Petrom prices increased by 19 percent compared with the first quarter. Production at Petrom was 215,000 barrels of oil equivalent a day in the second quarter, compared with OMV's 126,000 barrels a day, OMV said. Romanian production in the third quarter will fall by 10,000 barrels a day, the company said. Petrom contributed 162.9 million Euro to earnings before interest and tax, before one-time items, in the second quarter, OMV said in a statement. OMV, which owns 51 percent of Petrom, said it will reorganise Petrom's operations, shutting unprofitable units and starting a franchise system for the filling stations unit. It has set aside 60 million Euro for the program. 
"The successful implementation of our growth strategy enabled us to capitalise on continuing strong crude prices and healthy refining margins," CEO Ruttenstorfer said in a statement. "OMV is well-positioned to continue delivering on its strategy of profitable growth. Going forward, we will continue strengthening Petrom; our modernisation plans are in place and are being implemented, said Wolfgang Ruttenstorfer the OMV President. "Petrom is already making a significant contribution to profits. We are confident that our clear strategy of profitable growth, combined with our efficient management of the business and our outstanding employees, will deliver record full year's results in 2005", he added. 

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CREDIT RATINGS

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. 

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FOREIGN DEBT

Romania and Iraq reach agreement on debt repayment

Iraq is to repay old debts worth US$799m to Romania following an agreement reached between the 2 countries during negotiations in Amman, said Dragos Neacsu, secretary of state with the ministry of public finance, New Europe reported recently. 
Romania is the first country outside the Paris Club of official creditor nations to agree such a deal with Iraq, Neacsu said.
The Baghdad government will repay Romania US$977m within the next 23 years, he noted. Iraq owes the Romanian government a total of US$2.5bn, 1.6bn of which is core debt, the remainder being interest. Romania has agreed to waive 30% of the debt while another 50% would be gradually written off if Iraq reached and observed an agreement with the International Monetary Fund (IMF).
The debts date back to before 1989 when Romania provided Iraq with installations for oil production.
According to a government of Iraq's statement, the bilateral agreement with Romania cancelled approximately US$2.0bn, amounting to 80% of Romanian claims against Iraq. The accord is comparable to the agreement in principle concluded in November 2004 between Iraq and the governmental creditors comprising the Paris Club, which together hold a plurality of the total outstanding claims against Iraq, it said.
The Romanian accord is the first to be signed with Iraq's non-Paris Club bilateral creditors. The first agreement with a Paris Club creditor was signed in December of last year.
Prior to this agreement, the claims of the Romanian government against Iraq totalled approximately US$2.5bn. When fully phased in, the agreement signed will reduce this debt stock to approximately US$500m. The debt reduction will take effect in 3 instalments.
Approximately US$760m will be cancelled immediately; a second instalment of approximately US$760m of debt cancellation will automatically become effective upon the signing by Iraq of a formal stand-by arrangement with the International Monetary Fund (expected during the fourth quarter of 2005); and a final instalment, equal to approximately US$510m, will automatically take effect upon completion of a stand-by arrangement in 2008.
The residual debt stock will be repayable over a 23-year period with 6 years of grace on principle payments. No principle or interest will be payable during the first 3 years. "The agreement with Romania - the first outside the Paris Club - marks a significant step in Iraq's ongoing debt management programme," said Iraq's Minister of Finance, Ali A Allawi. "Iraq appreciates Romania's prompt and constructive approach to reaching this agreement."

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MINERALS & METALS

ALRO buys ALUM Tulcea for US$9 million 

The aluminium producer ALRO in Slatina (southern Romania) took over the alumina producing company ALUM in Tulcea (eastern Romania), with the total value of the transaction reaching US$9 million, New Europe reported.
The ALUM Tulcea takeover is part of the strategy of vertical integration applied by Marco Industries, the owner of the aluminium producer. Initially, the group included an aluminium producer, ALRO Slatina, a company producing materials derived from aluminium, ALPROM, and now it buys ALUM, the raw material supplier. 
"The ALRO-ALUM transaction was carried out in keeping with the regulations of the capital market and considered the market value of the aluminium producer, it was even higher than it," said Marian Nastase, vice president of the ALRO board of directors. "The higher price paid for ALUM will make the minority shareholders interests better protected," Nastase added. In the last three years, they invested US$145 million in ALRO, especially in modernising production lines and in environment protection. In 2005 the technological investments will go up to 25 million. The aluminium output grew with every passing year. They estimate 260,000 tonnes a year in 2006. ALRO turnover was about US$500 million in 2004. ALRO gross operational revenues reached 401 million Euro and the operational profit was 41.9 million Euro. Net profit was 31.5 million Euro. ALRO is a joint stock company, listed with the Bucharest Stock Exchange. The main markets where the aluminium produced by ALRO is sold are the European Union.

Mittal Steel profits up in H1 

Pipe producer Mittal Steel Roman posted a net income of 4.6m Euro (16.9m lei) in the first half of 2005, compared to the 3.7m Euro loss incurred during the similar period the previous year. The company's turnover reached 107.1m compared to 47.2m Euro a year ago. Mittal Steel Roman is part of Mittal Steel, the world's biggest steel producer, New Europe reported.

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TELECOMMUNICATIONS

RomTelecom revenues surge 16% 

In the second quarter of 2005, RomTelecom posted revenues of 232.4m Euro, up 16.4 per cent from revenues of 199.6m Euro in the same period last year, the company reported recently. 
The increase is primarily due to positive evolution of rental, interconnection and leased lines and data services. Revenues from monthly rental fees increased 38 per cent, primarily reflecting the February 2005 and June 2004 tariff rebalancing rounds. Wholesale revenues rose 21 per cent in the quarter, reflecting a 56 per cent gain in wholesale traffic, a natural consequence of the upward trend characterising the Romanian telecommunications market.

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