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Romania - NEWS BRIEFINGS
Romania | 01.06.2007
A directive from Romania's environmental agency ordering the closure of the country's main refinery could have repercussions throughout the economy.

Romania

Emerging Romania 2007The newest member of enlarged European Union, Romania has finally fulfilled its long term foreign and economic policy goal of joining the exclusive club. This landmark event on January 2007 marks the end of a long period of accession and hopefully puts behind years of difficult transition from communism to market economy. The membership is expected to open up a host of new trade and investment opportunities for both Romanian and EU companies, as the country is expected to follow the same path of economic convergence. “Emerging Romania 2007” provides a comprehensive and in-depth analysis of the developments in all the key economic sectors, against the wider macroeconomic and political background. It contains interviews with key personalities behind Romania’s reform process:
Calin Popescu Tariceanu,Prime Minister, Mihai Razvan Ungureanu, Minister of Foreign Affairs, Olli Rehn, EU Enlargement Commissioner, Monica Macovei, Minister of Justice and Mugur Isarescu, Governor of National Bank of Romania.

ISBN: 1-902339-28-2
ISSN (Online): 1744-4519

TABLE OF CONTENTS

COUNTRY PROFILE

This section provides a quick overview of some facts about the country, its population, geography, culture, education system, religion and climate.

POLITICS

With Romania’s long-awaited EU accession now a fait accompli, the government can look ahead to rising foreign investment and some €30bn in EU structural funds. The EU is likely to keep a close eye on continuing reforms in the justice system and bureaucracy. Despite the shakiness of the ruling coalition and lingering conflicts over the division of powers, the prospect of early elections looks unlikely, at least for the moment. This section includes an interview with Romania’s Prime Minister, Calin Popescu Tariceanu, Minister of Foreign Affairs Mihai Razvan Ungureanu, Minister of Justice Monica Macovei, and Olli Rehn, the EU’s Enlargement Commissioner. Mike Hancock, Chair of the UK’s All-Party Parliamentary Romania Group, contributes a viewpoint article on bilateral relations.

THE ECONOMY

Brick by brick, Romania’s old state-led economy has been dismantled. The country begins 2007 enjoying its strongest period of sustained economic improvement in over a decade, with galloping GDP growth and a flood of new foreign investment. Consumer spending is rising as the population splashes out on imported goods. However, joining the EU has brought with it a new set of challenges. It could be some time before the country achieves real economic parity with its fellow member states. This chapter features interviews with Ioan-Codrut Seres, Minister of Economy and Commerce, Jean Lemierre, President of the European Bank for Reconstruction and Development, Peter Mandelson, the EU’s Trade Commissioner, and Alexandru Paunescu, General Manager of Fondul Proprietatea.

BANKING

Activity in the banking sector reached fever pitch in 2006, with several foreign players purchasing controlling stakes in local banks. As competitors work to draw in customers unused to financial services, consumer credit and banking assets continue to expand fast. Though some worry that the country has become overbanked, the sector is set to perform strongly over the medium term. In addition to a comprehensive sector overview, OBG interviews Mugur Isarescu, Governor of the National Bank of Romania, and a viewpoint is offered by Radu Craciun, Head of Research at ABM AMRO.

CAPITAL MARKETS

Romanian capital markets saw major activity through 2005 and 2006, with booming growth followed by a steep correction, then a return to expansion. Impending EU accession brought capital to the markets but also increased links with other European bourses, adding to the slump. Activity was driven up by economic growth and privatisations, but held back by fiscal and regulatory changes. The section includes an interview with Septimiu Stoica, Chairman of the Bucharest Stock Exchange.

INSURANCE

Growth is exceeding all expectations in the Romanian insurance industry, and the sector has also seen major regulatory reforms. Still, a comparison of penetration rates with those of western countries reveals there is plenty of room for further expansion in what is turning into a fiercely competitive field of business. Meanwhile, more regulatory change is promised by a new pension structure and the introduction of compulsory disaster insurance.

TRANSPORT

Big-budget projects are finally taking off, having been held back by controversy and regulatory obstacles, and are now floating on the rising tide of economic expansion. Large grants for infrastructure from the EU have ministries drafting out proposals. The road network will get the largest volume of funding, with 1200 km of new motorway due to be ready in the next six years. Meanwhile, low-cost airlines are transforming the aviation industry.

ENERGY

Restructuring with a view towards privatisation has been the trend in the energy sector, with the country’s biggest oil company being sold in 2004. Natural gas companies should also be completely out of the government’s hands in 2007 as per EU requirements. The coal market has lagged behind in reforms, although moves towards greater efficiency will keep it in line with other fossil fuels in the country. Also in this chapter, OBG interviews Stelian Gal, General Manager of Transelectrica, and Gianluca Caccialupi, General Manager of Enel Romania.

TOURISM

Romania is a corner of Europe that remains off the beaten path for most international tourists. In recent years, even Romanians have preferred to visit neighbouring countries, feeling services at home are not up to scratch. But plenty of potential for development exists, provided a national strategy can be drawn up that will capitalize on the country’s unique assets and project a brand image to the world. This section includes an interview with Klaus Johannis, Mayor of Sibiu.

CONSTRUCTION & REAL ESTATE

The construction industry is seeing much activity at the moment, thanks to EU grants to make overdue improvements to infrastructure and healthy demand on the housing market. Accordingly, foreign investors are beginning to crowd around the market. There is still much need for more office and industrial developments. This chapter also takes a close look at the capital Bucharest, which is being built up and expanded at a particularly fast pace.

TELECOMS & IT

Telecoms has leapfrogged to a point where industry players are now focusing more on value-added services and diversification. The incumbent fixed-line provider is facing increasing competition from alternative carriers, while mobile providers work to increase rural penetration. The IT sector, too, is enjoying buoyant times. The chapter includes an interview with Richard Moat, CEO of Orange Romania.

INDUSTRY

The industrial sector has seen major developments in the last decade, having overcome the legacy of the communist period – when it was afflicted by overstaffing, underinvestment and outdated products – and the doldrums that followed. Growth, innovation and competitiveness have been helped by foreign investors attracted to Romania’s potential, both as a market and as a base for production and export to the EU.

RETAIL

With a large population, fast growing GDP and currently underdeveloped retail offers, Romania is now attracting large-scale foreign investment. Developers are speedily constructing malls, hypermarkets and cash-and-carry outlets to exploit the opportunities. Romanians are proving to be exacting shoppers, but that is far from the biggest problem facing investors, who must also grapple with complex land-buying regulations and unreliable distribution. The section includes an interview with Ali Ergün Ergen, Retail Development Manager of Baneasa Developments.

MEDIA & ADVERTISING

Consolidation of news outlets and diversification of media offerings will be the key to constructive growth. Yet foreign investment is still low. The internet remains a largely untouched vehicle, with few local news sites that are not just mirrors of print publications. At the same time, the circulation of many print publications is in decline. OBG’s overview of this sector is complemented with a viewpoint article from Simona Fodor, Editor-in-chief of the Business Review.

AGRICULTURE

EU membership will bring greatly increased subsidies to the sector. But the structure of the sector - with millions of owners operating tiny farms - remains inefficient, and recent years have seen agriculture hit hard by floods and the measures necessitated by bird flu. And while Romania is a verdant country, quality issues mean that imports predominate on the home market, resulting in a trade deficit. This chapter includes an interview with Radu Timis, Group President and Co-founder of CRIS-TIM.

HEALTH & EDUCATION

Despite years of underfunding and a lack of the latest equipment, the Romanian education system produces excellent physicians. The healthcare sector is still suffering from inadequate services and drug provision, but increasing health tourism from Europe will inject the capital needed to bring the sector up to EU standards and keep good doctors at home.

HISTORY

Romania’s royal family was forced to step down by the communist government and flee into exile at the end of 1947. Yet its romantic allure has lasted over six decades, still fascinating the country it once ruled. Former King Michael recently returned to his homeland, and Carol I, his grandfather, was voted Romania’s most representative personality of all time.

THE BUSINESS GUIDE

Ernst & Young and Salans, OBG’s partners in Romania, provide an overview of the new accounting standards and legal environment investors will encounter in the country. This includes a special focus on energy laws and real estate ownership regulations. This section also features interviews with Roberto Musneci, President of the American Chamber of Commerce, and Salans Managing Partner Obie Moore. A viewpoint article comes from Camelia Horlaci, Country Managing Partner with Ernst & Young.

THE GUIDE

Despite international acclaim and a burgeoning reputation as an opera diva, Angela Gheorghiu has never forgotten her Romanian roots. OBG charts the life of this star from her humble origins as the daughter of a train driver to her starring role in “Tosca” in 2006 at London’s Royal Opera House. Also in this section, a look at tourism possibilities in Bucovina, Maramures and Timisoara, and hotel listings and top restaurant reviews. Plus a listings section offering a comprehensive directory of government offices, public institutions, foreign missions, law offices, accountancy firms, airlines, car rentals, hospitals and media outlets.

FACTS FOR THE VISITOR

This section offers useful tips for business travellers, on topics like currency, visas, language, communications, dress, business hours and electricity.

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