Romania: Twenty Years After

18 nov 2009 Ziarul Financiar

Twenty years from the fall of communism, Romania has experienced it all: enthusiasm of elections, miners' movements, mass privatisation, bank bankruptcies, apportionment of land, economic slump to the point of default, flat tax fiscal experiment, EU accession, economy takeoff to rates of 9%, spectacular appreciation and depreciation of the RON and finally, brutal recession.
With all slippages and declines, the reboot has always been done from a higher level, with capitalism working its way into the economy, slowly but steadily: with each major privatisation, with each entry of a multinational on the market, the private sector has become stronger and more important in the economy.
After 1998, tens of billions of euros have entered Romania through acquisitions and investments, which modernised industry and services.
The privatisation of Dacia in 1999, which signalled the rebound of the automotive industry, attracted investments worth billions of euros later. Three more billion euros came from the privatisations in the energy sector, while in the banking sector the sale of BCR alone got the state 2.2 billions.
Romania's entry on the map of the major food retail chains meant another over 2 billion-euro investments, and the booming retail over the last few years has generated no less than 45 malls built from the ground up in major cities over the last ten years, despite the shy start that came as late as 1999.
In 2007, right in its first year as a European Union member, Romania reached a 100 billion euro GDP, but the GDP/capita remained one of the lowest in Europe. Still, half a million people, that is over 10% of the employees in the entire economy, were earning more than 1,000 euro gross salaries in October 2008, a percentage twelve times higher than in 2004.
Neither the EU accession, nor the coming of foreign investors were able to completely modernise Romania: only 166 kilometres of highway have been built in twenty years, with another 42 to be completed by yearend.
Financial markets have not developed much compared with those in Central Europe yet and are subject to foreign shocks. The Stock Exchange has not managed to consolidate, red tape is still hindering the business sector, along with the ambiguous legislation that leaves room for interpretation.
The agricultural sector of all is still underdeveloped, in the absence of a market that would encourage investments in this field and capitalise on the often-mentioned potential of contribution to the economic growth.