Laying a red carpet over the cracks
By Quentin Peel and Thomas Escritt
Published: March 6 2008
The once fair but faded city of Bucharest, easternmost capital of the European Union, is bracing itself for an invasion of westerners in April. They are coming to attend the largest summit ever held for Nato, the organisation at the heart of the Atlantic alliance.
For Romania, as the host, the occasion is intended as a great opportunity to celebrate its accession not only to Nato but also to the EU, and underscore its integration into the western world after decades as one of the most oppressed and impoverished communist countries.
President George W. Bush is bringing a delegation of 1,500 from Washington, as part of the 5,000-odd politicians, officials and military personnel attending the summit.
Vladimir Putin is also expected to attend a separate Nato-Russia meeting (his last major event as Russian president) with a more modest entourage of 250. Media and observers will add thousands more.
Rumours abound in the city that the airport will be closed, shops and government offices emptied, and the streets blocked off for days around the vast Palace of Parliament – the gigantic super-Stalinist stone and marble edifice built by the late and unlamented President Nicolae Ceausescu – to accommodate the visitors.
The Romanian government has assembled a 4,000-strong task force to plan the event, but it will put the creaking infrastructure of Bucharest under severe strain, not least because of a rush of foreign investment in recent years that has caused a boom in building – and property prices – in the capital.
On the plus side, Romania has enjoyed eight years of remarkable economic growth, averaging more than 6 per cent a year, since late 1999, when the prospect of EU membership, as well as accession to Nato, started to look more than a distant dream. The recovery followed a decade of half-hearted reform and economic mismanagement after the 1989 revolution when Mr Ceausescu was overthrown.
Economic liberalisation, privatisation of state assets, and spending to prepare for EU membership has underpinned the revival. Foreign direct investment has accelerated sharply in the past two years, combined with a steady inflow of remittances from at least 2m Romanians working abroad.
As a full EU member since January 2007, Romania qualifies for some €30bn ($46bn) from the Brussels budget until 2013, to spend on infrastructure, social schemes and the environment, as well as on a large and backward farm sector. But huge uncertainty lingers over whether the Romanian bureaucracy is capable of drawing up and executing enough projects to qualify for the cash.
The immediate challenge, however, is that the economy is overheating. A soaring current account deficit is estimated at more than 14 per cent of gross domestic product, and a credit-financed boom in consumption is sucking in imports from the rest of the EU. Wages are
rising at 25 per cent a year, with skilled labour in short supply, aggravated by emigration, mainly to Italy and Spain.
The National Bank of Romania, the central bank, has raised interest rates three times since October, by 200 basis points to 9 per cent, to head off inflation that reached 6.6 per cent by the end of 2007, against a target of 3.9 per cent.
The bank still expects growth this year of some 6 per cent, in spite of the effects of the international credit crisis. But it has been urging fiscal restraint on the government, which drafted a budget with a deficit of 2.7 per cent of GDP, including substantial pay rises in
the public sector.
"With Romania now a full EU member, people think prosperity is here to stay, but ensuring sustainability of macro balances is key," says Cristian Popa, deputy governor of the NBR. "We have urged the government to be extremely prudent. Increases in incomes should not be
larger than the catch-up in productivity."
The trouble is that the government has been semi-paralysed for the past year. Just three months after EU accession, the ruling centre-right coalition collapsed in March 2007. Personal relations between Traian Basescu, the president, and Calin Popescu Tariceanu, the prime minister, never recovered. The present government of the Liberal party (PNL) and a Hungarian minority party has no majority, and relies on the left-wing Social Democrats (PSD) for support in
parliament. Pressure for increased spending on wages, health and education is reinforced by the prospect of local and parliamentary elections in the coming months.
Political paralysis is one bottleneck slowing down reform and development. The rivalry is focused on the fight against corruption, which the European Commission has also made a touchstone of Romania's integration into the EU. Mr Basescu accuses the government of dragging its feet. Mr Tariceanu says the president is merely playing politics.
Lack of political decision-making compounds the other problems holding up the Romanian economy. The most fundamental is the lack of decent communications.
"The real structural barrier is infrastructure," says Dorel Sandor, director of the Centre for Political Studies and Comparative Analysis. "In the last 15 years, different governments have been able to build no more than 500km of new highways. This is nothing. Try to drive west
from Bucharest to Hungary. It is a nightmare."
Part of the problem is a lack of experience in project design and management, compounded by an aversion in the bureaucracy to taking initiatives, partly for fear of being charged with corruption. There is also no tradition of forward planning: the EU works with three-year
programmes, but there is no capacity for multi-annual budgeting in the Romanian ministry of finance.
On the Black Sea frontier of the EU and Nato, and coming at the end of the line as a member state, Romania has a different perspective, too.
It is deeply suspicious of Russian influence, and Gazprom's domination of energy supply routes. But it has also refused to support the independence of Kosovo – an attitude shared with Moscow – arguing that such a move could destabilise Serbia and the Balkan region.
"We are unhappy about Kosovo because it is departing from a clearly established pattern," says Teodor Melescanu, defence minister. "Changes of borders should be through negotiation. Foreign investors are nervous going into a region where things are not very clear."
Yet for a country emerging from decades of both Communist and fascist dictatorship in the 20th century, the positive effects of European integration far outweigh the negative.
"The most important change is in the mentality of the population," says Varujan Vosganian, the finance and economy minister. "They understand what it means to have free movement of people, and free movement of commodities. Our people feel themselves more free. They
are more aware of their personal interests. They make comparisons.
"It is very important to make comparisons – of your house, yourself, your society – with others. Then you are aware of the advantages."
Of course, that was something Mr Ceausescu would never have allowed.
***
Politics: Deadlock thwarts progress
By Quentin Peel
Published: March 6 2008 16:49 | Last updated: March 6 2008 16:49
One word probably best describes the political process in Romania,
little more than a year after the country joined the European Union.
It is dysfunctional.
A minority government is forced to scrape together a spendthrift
budget with the erratic support of its sworn opponents. A venal
parliament votes to protect its members from any investigation for
corruption. Political parties baulk at obeying the orders of their
elected leaders. A populist president blocks the prime minister's
decisions and appointments, but lacks the power to sack him. The
bureaucracy itself is paralysed by fear of taking any initiative, lest
it be accused of the very corruption its political masters refuse to
acknowledge. All seem to conspire to undermine any hope of coherent
decision-making.
"Who rules Romania?" is a perfectly valid question to ask. No one can
give a clear answer. The government has been effectively hamstrung for
the past year, ever since the ruling coalition fell apart bitterly in
March last year just 90 days after the heady celebrations that marked
EU accession.
President Traian Basescu, the mercurial head of state, abruptly
withdrew his Democratic Party from the government after Calin Popescu
Tariceanu, the National Liberal party (PNL) prime minister, had
demanded the dismissal of three ministers. They included Monica
Macovei, the non-party Justice Minister whose anti-corruption crusade
had spread anger and alarm amongst parliamentarians.
Mr Tariceanu, with only the minority Hungarian Democratic Union left
in his coalition, has no parliamentary majority. He persuaded the
parliament to impeach the president, but it was a futile gesture. Mr
Basescu won a subsequent referendum handsomely. The president demanded
that parliament and government should themselves resign, but they
declined to do so.
It is unclear whether the real problem lies with the personalities, or
the ambiguous constitution they inherited as part of the erratic
post-Communist transition that Romania has pursued since the violent
overthrow and execution of Nicolae Ceausescu, the country's dictator,
in 1989.
Mr Basescu, a former captain of the merchant marine and erstwhile
mayor of Bucharest, is the most powerful personality involved, a
tireless political campaigner hamstrung by a political office that
lacks the executive authority of the prime minister.
"Romanians like people who talk a lot, aggressively and in a populist
manner," says a leading Romanian banker. "France's president Sarkozy
would be popular here. But Basescu is too destructive."
Mr Tariceanu, on the other hand, lacks both the charisma and the
parliamentary power to oppose the president. Once the senior partner
in the coalition, he has seen his PNL slip in opinion polls to just 14
per cent, unloved for its liberal views on privatisation and flat
taxes. Mr Basescu's Democrats have moved to the right, joining forces
with dissident Liberals to ride high at 36 per cent, on an
anti-corruption crusade.
In the middle are the Social Democrats (PSD), the former Communists
who see themselves as the natural party of power, but who lost office
mired in bribery scandals in 2004. They are stuck at around 25 per
cent popular support, although they are still the largest group in
parliament.
No fewer than four elections loom ahead in 2008 and 2009 – municipal,
parliamentary, presidential and European – but currently all the
speculation is on whether the present deadlock can be broken by
bringing the parliamentary poll forward to June from November. Even
that apparently straightforward decision looks too complicated to
accomplish.
Mircea Geoana, leader of the PSD, says that he is determined to
precipitate an early election, to be held on the same day as the local
polls. It would mean passing a vote of no confidence in the government
in March.
"We must allow the country to start again," he says. "It is blocked.
The president and prime minister are fighting. They have no majority
in parliament."
Yet his own Social Democrats are split on the idea of an early
election, fearful that they might lose seats. As for Mr Basescu, in
spite of repeatedly calling for a poll, he now wants to delay any move
until after the Nato summit in Bucharest in April. He wants a proper
government in office to greet his guests. For his part, Mr Tariceanu
has no interest in resigning for an election he seems bound to lose.
Officially, all the main parties agree that there should be a new
election law before they hold another poll. They want to replace the
present system of proportional representation with a "uni-nominal" one
that ties each individual parliamentarian to a personal constituency.
That way they would get rid of the party list system, too often
exploited by rich businessmen as a way of buying a seat and
parliamentary immunity from prosecution.
Yet plenty of parliamentarians owe their positions to the list system,
and are unwilling to abandon it.
On the face of it, Romania's parties do offer voters an ideological
choice: the PDS as the flag-bearers of the left and centre-left, the
PNL on the centre-right, with the Greater Romania Party, a xenophobic
group, on the far right. Mr Basescu's PDL, once allied to the PDS, has
neatly occupied the centre ground between the other main contenders.
In reality, however, ideology plays little role. "The fight against
corruption is the key to everything that is going on now in Romania,"
says an adviser to the president. It is certainly a popular issue, and
a good reason why Mr Basescu has picked up so much support. It is also
a cause of paralysis.
"There is a poisonous fear of corruption," says one European observer.
"Civil servants are personally liable for any spending decision they
approve. That may be a sound anti-corruption measure, but it means no
one takes a decision. Everything goes up to the politicians, who are
deadlocked. The only hope is that new elections will produce a
parliament that supports the president. It may not make for a better
government, but it might at least be one capable of acting."
***
Judicial reform: Prosecutors caught in tangle of intrigue
By Thomas Escritt
Published: March 6 2008 16:49 | Last updated: March 6 2008 16:49
Last week, Calin Popescu Tariceanu, the prime minister, appointed his
third justice minister in four years after a four-month hiatus during
which the ministry was wholly unhelmed.
The difficulty in finding an acceptable candidate underlines the
sensitivity of a post responsible for reforming an ailing justice
system and confronting widespread corruption.
The explanation lies in a vicious personal rivalry between the
president and prime minister, who used to be political allies.
The facts are reasonably clear. Following the resignation of the
previous justice minister in October last year, Traian Basescu,
Romania's popular president, used his power to veto government
decisions to reject two nominees before finally agreeing last week to
the appointment of Catalin Marian Predoiu, a commercial lawyer.
Mr Tariceanu first proposed Norica Nicolae, a senator for his own
National Liberal party. Mr Basescu rejected her nomination, citing
evidence of impropriety in her earlier career.
The prime minister then nominated Teodor Melescanu, the defence
minister. The president rejected him too, saying it was impossible for
the post of defence minister to be vacant during the Nato summit, to
be held in Bucharest next month.
In January, the European Commission entered the fray, saying that
progress on judicial reform had been too slow, while stopping short of
threatening sanctions.
Some blame the impasse on the collapse of the centrist
Democrat-Liberal party coalition on April 1, 2007, just three months
after the country joined the European Union. But one prominent
reforming lawyer goes as far as to suggest that EU membership itself
is to blame. "I think we made a mistake when we became members of the
EU. We needed the threat of being refused entry to make us do
anything."
Mr Tariceanu's government got off to a good start. Monica Macovei, who
was appointed justice minister in 2005, rapidly earned plaudits for
her tough stance on corruption. A human rights lawyer, she gave fresh
impetus to the work of the country's anti-corruption department,
causing Daniel Morar, the chief prosecutor, to open investigations
into Adrian Nastase, a former prime minister, and members of the
government, including the deputy prime minister.
But her popularity both nationally and in Brussels did nothing to
endear her to her colleagues, and the prime minister sacked her from
the cabinet last March, saying she had failed to recognise the "basic
principle of government solidarity".
Solidarity was much in evidence in parliament when it voted
unanimously at the end of last year for amendments to the criminal
procedure code that critics said made the anti-corruption campaign
practically impossible. Measures proposed would have limited the
duration of investigations to six months and would, under certain
circumstances, have obliged prosecutors to inform the subjects of an
investigation that their phone lines were about to be tapped, or their
houses searched.
Ms Macovei is in no doubt about the motivation behind these
amendments, which were subsequently rejected by the president. "When
the prosecutors wanted to search Adrian Nastase's home in 2005, the
constitutional court ruled they needed approval to do so from
parliament," she says.
Sorin Ionita, who researches legal issues at the Romanian Academic
Society, a reformist think tank, speaks of "interlocking circles of
influence" with groups spanning the corporate, governmental and
parliamentary worlds that have a common interest in preventing
suspicions of corruption from being investigated too zealously.
His colleague Laura Stefan, who works on anti-corruption issues at the
same institute, speaks of a lack of will: "There should be someone
other than the president standing in the way of this kind of
amendment," she says. She points out that the judiciary, though
technically self-regulating, has shown little appetite for tackling
corruption cases.
The Supreme Council of the Magistracy, the body that is elected by and
represents the country's magistrates, for example, spoke in favour of
parliament having a say in authorising investigations against
deputies. "In effect they were saying: 'The politicians should be
protected from us'," she says.
Mr Morar, at the anti-corruption department, tells of having to
negotiate a constantly shifting legal landscape. Instead of contesting
the allegations against them, politicians rely on exploiting legal
loopholes.
The department's investigations into former government ministers
stalled when the constitutional court ruled that the president's
authorisation was needed to investigate former ministers, he says. "We
restarted the investigation, applying for the necessary authorisation
– and then the government dissolved the presidential commission
appointed to decide."
Tudor Chiuariu, Ms Macovei's successor, resigned after the
anti-corruption department opened an investigation into an allegedly
illegal public property transaction that he had authorised as
minister. He now serves as the prime minister's adviser on legal
affairs. He argues that the amendments were slipped through by
parliamentary deputies with an interest.
"As soon as the law had been voted on, I said that the amendments
could not be allowed to stand," he says. Following the president's
decision to refer the amendments back to the senate, even the Romanian
Academic Society acknowledges that the new proposals are an
improvement.
Last month, the government responded to the European Commission's
criticism by issuing a new draft code of criminal procedure. The
debate drags on. All acknowledge that corruption is a problem, and
that the Commission is right to pursue it. But some feel that it is,
as one senior politician put it, "an oriental, Balkan thing" – more a
matter of culture than of a crime that prosecutors can successfully
pursue through the courts.
***
Who's who: Returnees emerge to lead renaissance
By Thomas Escritt
Published: March 6 2008 16:49 | Last updated: March 6 2008 16:49
Mariana Gheorghe
Chief Executive, Petrom
Romania is still recovering from a catastrophic brain drain. In the
1990s many of the country's brightest opted to leave to pursue careers
in academia and finance in Europe and America. Few have returned,
though Ms Gheorghe, chief executive of Petrom, Romania's largest
company, is part of the trickle. Ms Gheorghe graduated in law from
Bucharest University in the 1989. After a stint working at a state
chemicals company and the finance ministry in the early 1990s,she rose
to become a senior banker at the European Bank for Reconstruction and
Development. She was appointed chief executive of Petrom, a subsidiary
of Austria's OMV, in 2006, and is a rare female chief executive in a
country with one of the lowest levels of female participation in the
workforce.
Cristian Mungiu
Film Director
Mr Mungiu won the Palme d'Or for his film 4 Months, 3 Weeks and 2
Days, a harrowing portrayal of a woman seeking an abortion in the last
years of the Ceausescu regime. He was just two years out of film
college during the Romanian film industry's 2000 annus horribilis,
when "not a single Romanian film was made all year". Things have
improved since then, even if the country's film industry is highly
dependent on work for US and German productions. Mobra Films, the
company he owns with two director partners, got its start doing
service production for a big-budget German feature film. The aim has
always been to rely less on contract work – documentaries and adverts
– and survive as an independent creative production company, though Mr
Mungiu acknowledges that Romania's film industry would never survive
without government subsidies.
Gabriel Marin
IT Entrepreneur
Mr Marin quit a steady job with Control Data Corporation in 1992, and,
with just $500 in cash, founded Omnilogic, today one of the largest
systems integrators in south-east Europe. "It was quite a hectic and
wild time," he remembers. The biggest challenge for an importer was
obtaining hard currency. "It's hard to do financial planning when the
currency is depreciating by 300 per cent a year and inflation is
running in three digits." At first, the company focused on importing
PCs and networking gear. Today, the company helps some of the largest
telecommunications companies and banks in the region to roll out
infrastructure. With clients in Bulgaria, Albania and Moldova as well
as Romania, Omnilogic earned €200m last year, and is targeting €1bn in
revenues within five years.
Irina Schrotter
Fashion Designer
Ms Schrotter took a huge gamble in the uncertain environment of
Romania in 1990 when she chose to give up a career as a doctor just
one year after qualifying and set up as an independent fashion
designer. Eighteen years later, she employs 1,000 people and her
company produces clothing both for her own six boutiques and for major
clothing retailers on four continents. "It was hard starting out in
the 1990s. In 1993, banks were charging interest rates of 175 per
cent, so I was dependent on my textiles suppliers, who had faith in
me, for loans." The company cleared its debts after 10 years and today
Ms Schrotter is as often to be found in Paris or Milan as at her
headquarters in the eastern city of Iasi. While much of Romania's
once-strong textiles industry has decamped to cheaper labour markets
such as Ukraine or Moldova, Ms Schrotter still manufactures in
Romania.
Monica Macovei
Anti-corruption Campaigner
Abrasive but popular, Ms Macovei served as Romania's minister of
justice until 2007, when she was dismissed by the prime minister. To
her fans, she was the staunch independent who led a determined
campaign to clean up Romanian public life. While she was justice
minister, investigations were launched into corruption allegations
levelled at many senior political figures. "The political class is
still in shock," says one close ally. Another, describes her as "the
leader of a movement that is new in Romania, advocating justice reform
and integrity." This reformist fervour leads the same ally to describe
her as being "almost like a nun" in her rigid approach to
transparency. Since leaving the government, she has been serving as an
adviser on anti-corruption in Macedonia .
Dan Pascariu
Banker
When he is not running Unicredit Tiriac, the Italian bank's Romanian
subsidiary, Mr Pascariu turns his mind to the pig farm he runs in his
spare time. Mr Pascariu, who began his career as an academic economist
in the 1970s, earned his spurs negotiating with Romania's creditors
following the country's debt crisis in the early 1980s. He headed the
Romanian Bank for Foreign Trade following the 1989 revolution, and has
managed a variety of finance houses since. "By nature I'm an
optimist," he says, explaining that his pig-farming sideline is just
one more business opportunity. "Romania imports 4m pigs a year," he
points out – despite pork being a Romanian staple.
***
Economy: Debt fuels overheating
By Quentin Peel
Published: March 6 2008 16:49 | Last updated: March 6 2008 16:49
The European Union has been good for the Romanian economy. Ever since
the prospect of EU membership started to look plausible – back in 1999
– the growth rate of gross domestic product has averaged around 6 per
cent a year.
"Investors believed the European Union convergence story, and bought
into it in a substantial way," says Cristian Popa, deputy governor of
the National Bank of Romania, the central bank. "Romania is growing
fast also because it is catching up with the other new EU member
states."
Rapid growth from a low base – in 2006 Romania's income per capita was
still less than half that of Hungary – has seen a rising inflow of
foreign direct investment. It hit a high point of €8.7bn ($13.3bn) in
2006, including €2.2bn from the sale of Banca Comerciala Romana to
Austria's Erste Bank, before slipping back to €7bn last year.
"In the past two years we attracted more foreign investment than in
the past decade," says Varujan Vosganian, the minister of economy and
finance. "The increase in FDI has been directly related to our
integration into the EU."
Yet the traditional picture of Romania as a low-wage economy has
changed. Wages and incomes have increased rapidly, at an average
annual rate of 25 per cent in recent years.
Squeezed by the twin pressures of economic growth and continuing
labour migration to the rest of the EU – especially Italy and Spain –
unemployment has dropped to 5 per cent, and skilled labour is in short
supply in many sectors.
"The time when Romania was chosen because of low wages belongs to the
past," Mr Vosganian admits. "Now it is chosen because the market is
quite large, there is fiscal stability, low taxation on incomes, and
because competition is not quite so tough as in other countries.
Compared with other countries, however, Romania is not so cheap."
Indeed, today the danger is quite different: little more than a year
after joining the EU, the Romanian economy is in serious danger of
over-heating. The inflow of capital, both long and short-term, has
fuelled a boom in consumption, a very rapid rise in household
indebtedness – especially in foreign currency – and property prices,
and a soaring current account deficit on the balance of payments. The
question is whether an inevitable slowdown in 2008, as the
international financial crisis starts to squeeze sources of foreign
borrowing, will result in a hard or soft landing for an economy that
has only just begun to enjoy the fruits of EU membership.
The central bank increased interest rates by a full percentage point
to 9 per cent in early February, the third increase in four months, in
a bid to curb inflation running at 6.6 per cent at the end of 2007,
compared with a target for the year of 3.9 per cent. Yet the bank
faces a real dilemma between fighting inflation, controlling credit
expansion, and seeking to cap the rise in the current account deficit,
up by €7bn to €17bn. If a higher interest rate stabilises the leu,
which fell 16 per cent against the euro last year, it would put
further pressure on the trade deficit.
"Domestic demand – and especially consumption – is rising
unsustainably fast," says Mr Popa, based on income growth, increasing
bank credit, and remittances from abroad (more than €6bn according to
official statistics). "This mirrors a large current account deficit
(our estimate for 2007 is 14.3 per cent of GDP) that is too high to be
sustained year-in, year-out. This deficit needs to be contained and
then gradually reduced."
The government has come in for criticism from the International
Monetary Fund and the European Commission for running a lax fiscal
policy, with a forecast budget deficit for 2008 of 2.7 per cent of
GDP.
Although he is defensive, Mr Vosganian has agreed to try to cut the
deficit to 2.2 per cent in an emergency budget revision, trimming
public spending on equipment and cars. That does not tackle the real
concerns of the critics, who are worried that in an election year the
government is pumping too much money into public wage rises, as well
as social spending. Romania is particularly vulnerable to wage-led
inflation because public sector workers have repeatedly succeeded in
winning inflation-busting wage rises.
"I do not see the difficulty regarding public spending," Mr Vosganian
says. "Since 2001 we have kept the deficit under 3 per cent. There is
no other solution to diminish the gap between Romania and other EU
countries than overheating the economy. How is it possible to be a
member of the EU with an average wage of €300? It is essential to
increase wages."
He is likely to hear a very different story at the annual consultation
with the IMF in April.
"We are still betting on a soft landing," says Juan José
Fernandez-Ansola, the resident representative of the Fund. "But that
depends on policies becoming more realistic. If wages are driven by
the private sector, it would be rational. But the public sector has
been taking the lead, crowding out the private sector."
Productivity growth is increasing by around 10 per cent or less per
year, against wage increases above 20 per cent, he says. "That cannot
end in a good place."
The slow process of economic reform in Romania during the 1990s has
left over-manning throughout the public sector. More than 40 per cent
of the workforce is still on the state payroll. In a tight labour
market, many could be absorbed by the private sector.
The other critical bottleneck is infrastructure, where spending on
communications such as roads and railways tends always to be squeezed
by current spending towards the end of the budget year. Poor project
design and management capacity is one factor. Another is the lack of
any tradition of multi-annual budget planning. A third is a lack of
co-ordination between central and local government. Too often they are
at loggerheads.
All those problems are high on the list to be tackled with training
and assistance from Brussels, and from the European Bank for
Reconstruction and Development. Romania must improve its
administrative capacity – not least in the finance ministry – to
qualify for all the funds on offer from the EU budget.
***
Banking: European lenders scent golden opportunity
By Thomas Escritt
Published: March 6 2008 16:49 | Last updated: March 6 2008 16:49
When Austria's Erste Bank bought Banca Comerciala Romana, the
country's largest institution by assets, for €4.25bn ($6.5bn) two
years ago, it not only paid a full price but it also committed itself
to a dramatic shift in its centre of gravity.
Already the largest part of the parent group by headcount, even after
slimming down the former Romanian state savings bank from 11,500 to
8,200 staff, Erste expects BCR to be the dominant contributor of its
profit and revenues in the medium term – such is the optimism about
growth in Romania's banking market that.
"Unless something goes dramatically wrong, BCR will be the largest
single unit within Erste in five years' time," says Manfred Wimmer,
BCR's chief executive.
"It already has implications for our share price, because the outside
world has developed a negative perception of Romania, and they think
we paid a lot for BCR," says Mr Wimmer.
Even if the markets have reservations about Romania's macroeconomic
outlook, there is no shortage of contenders eager to tap an expanding
market.
Forty-one banks already operate in the country. Portugal's Millennium
Bank, the most recent entrant, is sufficiently bullish to plan a €300m
branch network – intended to reach 100 branches by 2009 – from
scratch, rather than taking the more traditional route of buying out
an existing market participant. GE Money, another recent entrant, has
opted to buy three non-bank financial institutions and develop them
into a full-service banking operation.
More may come. The banking regulation department at the National Bank
of Romania, the central bank, has a backlog of 20 applications for
banking licences from other EU institutions.
The expansion in retail banking is most evident: together, the
country's banks opened 1,100 branches last year, with a similar number
expected to open this year.
The attractions of the market are not hard to identify. Beyond
Romania's well-known long-term growth story, its financial
intermediation ratio – banking assets as a percentage of nominal GDP –
remains low, even by regional standards. According to the
International Monetary Fund, penetration stands at about 30 per cent
in Romania, compared with 70 per cent in Poland, which itself pales
beside the UK's 120 per cent. Even a slow convergence towards EU
levels presents enticing growth opportunities.
Still, with so many foreign companies anxious to maintain a toehold in
a growing market, there is a risk of a profit squeeze at the bottom
end of the market.
Dan Pascariu, chairman of the board at Unicredit Tiriac Bank, says
that out of the 40 or so banks, the top 10 probably have 80 per cent
of the market. "Some consolidation is necessary, though some of the
smaller banks will look for niches," he says.
"It can only happen in two ways: either there's consolidation among
the international players, or the remaining independent banks could be
bought out."
Cristian Popa, the long-serving deputy governor of the central bank,
echoes this thought: "The five largest credit institutions together
have about 60 per cent of the market while some of the smaller banks
appear to be successfully exploiting niches. There is still a dearth
of no-frills low-cost banking services," he says.
That banking services still have a long way to develop in Romania is
confirmed by loan growth. Valentin Lazea, chief economist at the
central bank, said in January, that despite tightening global
liquidity, loans were still growing compared with all previous months.
"Credit volumes might expand for a while to come," he said.
Much of the lending growth has been in mortgages, most denominated in
euros, which has driven a real estate boom – although remittances have
also contributed to surging property prices.
Liviu Voinea, executive director at the Group of Applied Economics, a
consultancy, is less bullish, but argues that, with household debt
having started at such low levels, there is still room for growth.
According to Mr Voinea, non-governmental credit has risen from 7 per
cent to 25 per cent of GDP over the past four years. He expects loan
growth to slow markedly in 2008. "One reason for this is the
depreciation of the currency, which has made many aware of the foreign
exchange risk," he says.
The extent of foreign currency lending is causing some jitters.
Patrick Gelin, president and chief executive of BRD, Société
Générale's subsidiary and the second-largest bank by assets, says that
some irresponsible lending has taken place. "BRD represents 40 per
cent of the market, and our foreign currency lending is at about the
average level. But banks who have been making Swiss franc and yen
loans are crazy." The bank is cautious about foreign currency lending
even to small and medium businesses, and will only lend in more exotic
currencies to large corporates. Euro lending in itself is less risky,
Mr Gelin argues, given the euro's extensive penetration of the
economy. "The mortgage market is completely denominated in euros," he
says.
***
Personal view: Sense of direction still lacking after EU accession
By Liviu Voinea
Published: March 6 2008 16:49 | Last updated: March 6 2008 16:49
Romania has made marked progress in the past five to six years from an
economy based on agriculture and cheap labour to one driven by
investment. High rates of growth in gross domestic product, an
increasing share of fixed capital formation, and large inflows of
foreign direct investment point to an economy catching up European
norms. Romania already fulfils three of five Maastricht criteria and
has set 2014 as an indicative target date to join the euro-zone.
However, development is uneven, real convergence is still a long way
ahead, and vulnerabilities have appeared. Economic growth is fuelled
by household consumption, based on a combination of rising wages
(which are outstripping productivity gains) and a credit boom.
This in turn has stimulated imports. The current account deficit has
widened from 5 per cent of GDP in 2002 to 14.2 per cent in 2007. It
would have been around 20 per cent had it not been for foreign
remittances. The current account deficit is increasingly being
financed by private debt, which has tripled over the past three years.
About 40 per cent of the recent inflows of foreign investment are in
fact intra-company loans – which are more likely to be debt-creating.
Most foreign investment in recent years has come in to retail, real
estate and banking – sectors that stimulate consumption. Manufacturing
industry is also dominated by foreign capital, but the share of
high-tech exports in total exports has not changed significantly in
the past decade. Similarly, pockets of unemployment co-exist with
areas of labour shortage, poverty is to be found alongside islands of
wealth, and public money is wasted while public services are
under-financed.
The macroeconomic policy mix, in which revenue policy is out of kilter
with expenditure, is a mess. A flat tax has failed in that the budget
deficit has more than doubled since it was introduced in 2005. It has
also added fuel to the fire, stimulating consumption in an
over-heating economy.
On the expenditure side, state pensions have increased substantially
(and are set to increase further in 2009), while contributions are set
to decrease as some employees are transferred to a new mandatory
private pensions scheme.
Persistent inflation – despite a sharp decline in 2006 and first half
of 2007 – has its roots in unresolved structural imbalances. The
country, despite having one of the largest areas under cultivation of
any EU member, is a large net importer of food; energy intensity is
six times the EU average; and competition enforcement is weak, leading
to high prices for most products and services.
The first year of EU membership did not help to solve these problems.
Romania was a net contributor to the EU's budget in 2007 if
pre-accession funds are excluded. Most worrying, Romania lost the
sense of direction it had during the accession process. Local
ownership of reforms is limited, and a clear post-accession strategy
is still missing.
Nor, as an open economy, can Romania escape the effects of the current
international financial turmoil. The latter acted as a trigger for
currency depreciation of 22.4 per cent between July 2007 and January
2008. On the brighter side, this led the leu exchange rate to become
more closely aligned with economic fundamentals. The depreciation may
contribute to an adjustment in the balance of payments – an option not
open to Bulgaria, for example – although sluggish aggregate demand in
the eurozone will probably limit the extent of this adjustment. On the
other hand, the rising cost of credit, together with the negative
effect of a currency depreciation on incomes, may constrain household
consumption and slow down economic growth. In the short term, the
possibility of a downgrade in the sovereign rating cannot be ruled
out.
However, there is still potential for strong and sustainable growth,
as long as fiscal and budgetary policies are reformed. Multiannual
budget planning is a must to improve the allocation of resources,
particularly for large infrastructure projects. The budget deficit,
forecast by the European Commission to exceed 3 per cent of GDP in
2008, must be reduced.
On the revenue side, a return to a progressive income tax, combined
with large tax allowances for services such as education and health,
would redirect consumption. VAT should also be increased. On the
expenditure side, administrative costs must be cut. Structural reforms
should also be enforced in sensitive sectors such as energy and
agriculture, while research and development should be promoted. Most
importantly, speculative bubbles in the currency and, arguably, real
estate markets need to burst. Only then will the economy start to
catch up again – this time based on fundamentals.
Liviu Voinea is Executive Director, Group of Applied Economics (GEA)
***
Cluj: Buzz grips university town
By Thomas Escritt
Published: March 6 2008 16:49 | Last updated: March 6 2008 16:49
Visitors arriving in Cluj from Romania's capital are often puzzled by
the disapproving looks they get as they hurry about their business. It
takes a local informant to enlighten them.
"We wait for a green light before crossing [the road] in Cluj,"
admonishes Codruta Simina, a local journalist.
Cluj, a city of 400,000 in north west Romania, is more staid than
Bucharest, and its citizens have traditionally looked down on the
wilder, more carefree ways of the rest of the country. Locals take
care to tell visitors that theirs is a central European city, once
part of the Austro-Hungarian empire, and distinct in style and culture
from the rest of the country.
But a bullish optimism has replaced some of the reticence more
recently, with the news of Nokia's decision to establish a €200m
($305m) telephone handset-manufacturing plant in the city sparking a
celebratory mood.
Well before Nokia's arrival, growth was in the air. "Cluj is turning
into a little El Dorado of construction," says Dan Turcea, an estate
agent. Foreign investors over the past few years have included
Missouri-based Emerson Electric, which has based a research facility
employing 400 in the city. After the news of the Nokia deal at the
beginning of the year, it emerged that Daimler was considering Cluj
alongside a location in Poland as a site for manufacturing its new A-
and B-class vehicles.
There is a widely-felt sense in the city that after a decade during
which Cluj lost out on foreign investment to rivals such as Brasov and
Timisoara, the city now heads the list of destinations for foreign
investors looking to capitalise on eastern Europe's relatively cheap,
but rising, labour and ready access to the markets of the European
Union. With labour costs standing at around €4 an hour in Romania
compared with more than €30 in Germany, cities such as Cluj, with
their relative proximity to the markets both of the region and of the
richer countries of western Europe, are still tempting for companies
such as Daimler or Nokia.
"The wave has moved eastwards from Hungary, and now it's reached us
here," says Sandor Kerekes, vice-president of Cluj County council. He
underlines the importance of market access with a joke: "Vienna's the
capital for this region, not Bucharest."
Cluj lost out in the 1990s to Timisoara, its regional rival, its
international reputation suffering from the policies of its mayor of
the time, Gheorghe Funar. Cluj is an ethnically mixed city, with a
Hungarian-speaking minority that makes up almost 20 per cent of the
city's population. As mayor, he was notorious for acts of ethnic
provocation, bedecking the city's streets in the colours of the
Romanian flag and arranging pickets outside the city's Hungarian
consulate. It did much to deter investors.
"You can't have problems with neighbours in Europe," says Mr Tucea,
the estate agent. "You can't be like Bosnia. People took one look at
us and then ran away."
Things have changed since. Sorin Vasilescu, chairman of the foreign
investment promotion agency, says: "Cluj has been leading recently,
but before Cluj it was Timisoara and Arad."
Rapid growth is bringing problems. Cluj has more than 100,000 students
spread over nine universities, and while this attracts employers
tempted by the pool of skilled labour, population growth is projected
to lead to the city's population more than doubling in the next 10
years. This is a source of pride to city fathers. Sorin Apostu, a
manager at City Hall, says: "We are the only growing city developing
between Bucharest and Budapest."
The city lies in a valley, meaning the acreage of land that can be
developed is scarce. There are few empty plots within the existing
city limits, so development is moving west and east along the banks of
the river valley. Nicolae Beuran of the city's chamber of commerce,
says: "It's certainly difficult finding land here in the city, but
head down the river and there is enough space for investments."
Nonetheless, there are challenges. The city and the surrounding county
of the same name were dependent on government financing to upgrade
road links with the neighbouring district of Jucu, where Nokia has
opened its plant, for example, and work is already underway on
securing water and power supplies for a city that could soon grow to
more than twice its current size.
And, for all the allure of cheap labour, the city is facing
increasingly acute labour shortages. Local entrepreneurs complain
their expansion plans are being curtailed by an inability to hire.
"I'm looking for more staff, but I just can't find them," says Florina
Murtish, another property dealer, who says she could easily do more
business as investors rush into the city.
Unemployment is virtually non-existent in the city, even as floods of
students arrive to swell the population and as internal migrants
arrive from around Transylvania and from less developed Romanian
regions such as Moldavia.
Mr Beuran concedes that the buzz around the city may start to crowd
out some of the cost advantages that have made Cluj the focus of
attention it has become. "The average salary in Cluj is a full €60 per
month higher than in the surrounding areas."
He argues that this is not yet a problem, since Cluj's role as a
centre of higher education – it has more students than any other city
in Romania – means the jobs on offer tend to be more skilled. "This
region is becoming an information technology cluster," he says.
"This results in a higher average wage." Average salaries remain lower
than in Bucharest, however.
The challenge for Cluj, according to Sandor Kerekes, of the county
council, is to ensure the investment wave does not move on from Cluj
shortly after it has arrived. Infrastructure is improving. After years
of delay, work has finally started on a motorway to the Hungarian
border, that will bring Vienna within five hours' drive of the city.
Still, increasing competition for land and labour could choke off the
city's boom.
***
Foreign investment: Pioneers find a gateway to new eastern markets
By Thomas Escritt
Published: March 6 2008 16:49 | Last updated: March 6 2008 16:49
Radauti, in Bukovina, on Romania's north-eastern border with Ukraine,
has a harder time attracting investment than the strategically-located
cities of Transylvania.
A look at the map gives part of the explanation: where cities such as
Cluj or Brasov are on the main routes heading west, guaranteeing easy
access both to Romania's large domestic market and to the markets of
the wider European Union, Suceava county looks to the non-EU markets
of Ukraine, the post-Soviet Commonwealth of Independent States, and
Moldova.
Traditionally, timber was the region's dominant industry, and even
today the area around Radauti contains 30 per cent of the soft-wood
timber in Romania, though the small-scale furniture manufacturers that
once made up the bulk of the region's economy employ very few today.
Last year, two private Austrian companies arrived in Radauti with the
aim of turning the region's drawbacks to their advantage.
Schweighofer, which operates sawmills, and Egger, which manufactures
chipboard, decided together to open neighbouring facilities in the
town.
For the two companies, proximity to eastern neighbours was a definite
advantage. Nichifor Tofan, director of Schweighofer's plant in
Radauti, explains: "The decision for the location of Radauti derived
from the availability of raw material in the Suceava area and the
direct connection with the Ukrainian railway system and the
possibility of importing logs more easily."
The neighbouring plants have a private railway siding with parallel
tracks in both European and Russian gauges. Schweighofer imports logs
from Ukraine, while Egger sells its chipboard – used for making
furniture – to neighbouring markets, including those of the CIS. For
them, the local traditions in forestry, and access to the east, are
strong attractions.
Nor was the remoteness necessarily a barrier, for Schweighofer, at
least. "About one quarter of the production will supply the Romanian
market, and the rest is for export – especially to Asian countries.
Japan is the most important market for us, taking about 50 per cent of
our production," Mr Tofan says. Meanwhile, Egger's sales office is
taking orders from throughout the region, selling to Ukraine, Russia,
Azerbaijan, Turkey and Greece, as well as the domestic market.
Schweighofer's primary output is lumber for construction. Waste wood
that is a residue of the cut timber is then passed to Egger's
neighbouring plant where chipboard is manufactured.
Both investments are substantial – Schweighofer's plant in Radauti
will cost €120m, when complete, and will employ some 500 people.
Egger's factory is a €200m investment and will be staffed by 700
workers.
While the companies were to some extent obliged to set up shop near
their raw materials, a remote location poses challenges. The logistics
of getting products to market are proving a headache.
Mr Tofan is particularly dissatisfied with the performance of the
state railway, which has forced Schweighofer to turn to more expensive
solutions for its other Romanian plant, which sells to EU markets.
"The national railway is not competitive enough. Three years ago we
transported 90 per cent of our goods to Europe by rail, but today it
is all transported by trucks."
Amenities can also be lacking in a provincial town. In particular, the
lack of adequate accommodation for visiting staff and customers led
the company to build a four-star hotel to house them, costing a
further €6m. It has proved a blessing in disguise: the venture is
already turning a profit, by providing lodgings for tourists visiting
a region famous for its natural beauty and ancient monasteries.
Staffing is another challenge. Employment prospects are not as bright
in Bukovina as in faster-growing parts of the country as it has
attracted relatively little investment. But Suceava county has
contributed many of the migrant workers who have swelled the Romanian
diaspora in Italy and Spain. Some villages have lost half their
population to the exodus.
Even if employees can easily be found, the kind of highly automated
industry that the two companies are bringing to the area demands very
different skills from the smaller-scale workshops they are replacing.
"It is not difficult to hire enough people," Mr Tofan says. "But it is
difficult to hire qualified personnel. Regardless of educational
background, only a few local people have had the chance to work with
high technology machinery before."
Egger's investment was partially funded by the European Bank for
Reconstruction and Development, which loaned the company €110m and
spent a further €17m acquiring an equity stake in the Egger subsidiary
that operates the plant.
The investment fits well with the bank's new strategy of focusing on
private investments in less-developed parts of Romania. Peter Southie,
the bank's principal economist for Romania, says: "Part of our new
strategy will be to bring more investment to the regions. There's less
scope now for us to do things around Bucharest."
Copyright The Financial Times Limited 2008
Friday, March 7, 2008
Financial Times: Romania Report 2008
Thursday, January 10, 2008
Romania: 2007 Year in Review
Oxford Business Group Latest Briefing
The most significant day for Romania in 2007 was the very first. On January 1, the country joined the EU after several years' wait, completing one of Romania's main goals since the fall of the Ceausescu regime in 1989.
After the difficult accession process, Romania joined with a number of tough clauses limiting the export of agricultural produce, notably meat and dairy products, as well as the threat that EU funding would be cut if the country did not make adequate moves to reform its judiciary, stamp out corruption and spend its current funds effectively. These so-called "security clauses" were partly implemented to assuage the fears of those who felt that Romania had joined too soon, and also to reflect the fact that the country indeed did not meet all the standards required for EU membership. Nonetheless, membership was greeted as a milestone in Romania's history.
However, the news from Brussels did not get much better thereafter. On June 27, the European Commission (EC) produced its first post-accession progress report on Romania, in which it told the new member state in no uncertain terms that it must get its house in order. The report highlighted the issues of corruption and judicial reform in particular. While it praised efforts to establish a National Integrity Agency (ANI) to tackle corruption, fraud remains commonplace, even at a high level, and the lack of a nationwide strategy has made progress slow.
Similarly, the report urged Romania to enhance the professionalism and independence of the judiciary, and to ensure that new laws are actually implemented on the ground, rather than merely passed as cosmetic measures.
Though none of the "security clauses" were enforced, it was not all bad news, and EC Vice President and Justice Commissioner Franco Frattini said he expects Romania will meet the benchmarks.
Tackling the issues raised by the report may prove difficult for two reasons. Firstly, now that it is a member, Romania no longer has the carrot of accession - or the stick of it being delayed by a year or more - to goad it into line. There is widespread scepticism about the "security clauses", which seem unlikely to be activated.
Secondly, Romania has been in political deadlock for some time. In April, a long-running spat between former allies President Traian Basescu of the Democrat Party (PD) and Prime Minister Calin Popescu-Tariceanu of the National Liberal Party (PNL) came to a head, with Tariceanu expelling the PD from his ruling coalition. He currently rules in a minority administration with the largely Hungarian-minority Democratic Union of Hungarians in Romania (UDMR), backed from outside government by the occasional support of the left-of-centre Social Democratic Party (PSD). Tariceanu had already been conducting something of a purge to weed out any remaining supporters of Basescu from the cabinet. Given the instability of the coalition, progress has been hamstrung.
Additionally, legislative elections are scheduled this autumn, when the PNL will be opposed to the PD (combined with a group of its own disillusioned members who have rallied to Basescu) head-on for the first time. Consequently, the government has been reluctant to tighten its fiscal and wages policies, opting instead for increasing the minimum wage by 28%. This fiscal laxity contributed in part to inflation hitting an estimated 5.7%, above its target of 5% and the national bank's forecast of 3.9%.
However, despite the EU's criticism and political bickering, Romania's private sector remains robust and fast-growing. The Bucharest Stock Exchange (BVB) had a particularly good year, despite the global credit crunch and a trend of retreat from many emerging markets. In October, the BVB announced that foreign funds which include names such as JP Morgan, Morgan Stanley and Credit Suisse, owned approximately 1.1bn euros in Romanian shares, an increase of more than 100% on the previous year. This is indicative of global banks' growing interest in Romania and the attractiveness of the investment environment - for example, capital gains are not taxed.
In November, the initial public offering (IPO) of a 10% stake in Transgaz, the technical operator for the national gas transmission system in Romania, was 28 times oversubscribed. The IPO is thought to have attracted around 10,000 investors, a significant coup for the BVB, where trading volumes have been relatively low, at an important time. The excitement generated may well cause an increase in the number of IPOs this year as flourishing medium-sized companies look to boost their capital and visibility. A similar effect was seen in neighbouring Bulgaria, where two very successful IPOs at the end of 2006 triggered a rush of offerings in 2007. The large banks testing the BVB's waters may well want to increase their holdings.
The quiet success of the BVB reflects robust growth in the Romanian economy, despite the continuing political troubles and the EC's criticism. The economy as a whole grew 6.3% in 2007, and is likely to perform as well this year. The banking sector has once again performed impressively, benefitting from the increased wealth of the population and a lively private sector - overall loan portfolios grew 51% in the first ten months of the year and assets totaled $91.3bn. Retail sales growth to the end of October was 17%. In the former communist country, 72% of the economy is now in private hands, a proportion that is likely to increase.
The fact that Romania is one of the EU's fastest-growing economies, and one of its most untapped, kept foreign direct investment (FDI) flowing in; it amounted to $8.7bn in the first ten months of the year.
For all the heat and light on the political stage, Romania's businesspeople keep the economy moving forward at an impressive rate, and will continue to push Romania towards central European levels of development.
Sunday, December 2, 2007
Life in Romania - Telegraph Mentor
Debbie Stowe says Bucharest is a dynamic and exciting city, and many expats’ initial short-term tenures turn into years.
Like many other expats in Bucharest, my initial one-year tenure here seems to have become indefinite, and I am now in my third year.
The influx of western businesses into Romania has put a high premium on native English speakers, and a combination of teaching, journalism and copy-editing gives me the freedom to work on that book that we all believe is in us but lack the time to actually write.
This year I intend to take an MA at the University of Bucharest and involve myself in some local charities. I am also tenuously considering a foray into the Romanian property market.
Introduction to Bucharest: Given that most expats’ preconceptions of Bucharest will be largely negative – stray dogs, gypsies, corrupt officials and the like – settling in can be reasonably pain free if a few rules are borne in mind.
The first is to forget all notions that you have of customer service. Otherwise, after 90 per cent of your dealings with waiters, shopkeepers and members of the public you will be left wondering what you had done to offend the person to make them so curt and rude to you.
Of course you have done nothing wrong: the ostensible hostile way Romanians behave with each other – and most foreigners – is just normal conduct in this country.
Despite their initial demeanour, local people go out of their way to welcome and assist foreigners, anxious to leave you with a good impression and counter some of the pejorative outside perceptions of which they are acutely aware.
Secondly, you must get used to a new traffic system. Drivers have assumed right of way on both road and pavement and routinely park right across the latter, forcing pedestrians into the street where they will then be hooted at by passing cars.
All surfaces have bumps and potholes, an ad hoc style also evident in the town planning, where bland communist blocks have been thrown up next to pretty inter-war villas. Some areas did escape the communist bulldozers, and there are charming pockets to be discovered.
The expat can also escape the general greyness in the city’s clubs and many excellent restaurants, a bargain for any western budget.
The interim seasons are more pleasant than in Britain, warmer and with fewer rainy days. Most locals agree that spring and autumn are shortening, and the switch from bitter cold to summer heat can come particularly suddenly. When bad weather does come, it comes with a vengeance – storms flood the streets and tear down anything from adverts and market stalls to huge trees.
Getting around: Bucharest suffers from a surfeit of cars in a city designed for few. Parking is practically non-existent and drivers stop almost anywhere they spot a space, regardless of pedestrian access.
Driving is characterised by relentless hooting, aggression, gesticulating and hazardous moves. Some junctions are complete chaos. Accidents are frequent.
To drive in Bucharest, the expat must be brave. City police are poorly paid and corrupt and constantly stop motorists for so-called preventative checks, during which they will happen upon a minor infringement and threaten the driver with an extortionate fine in an attempt to elicit a bribe. There is no way to avoid this, so the best idea is to try and bear it with good nature.
The law permits a driver only one alcoholic drink, but neither the police nor the breathalyser can be relied upon, so it’s safer to abstain altogether. For driving between cities, motorists have developed a system of flashing their lights at each other to warn oncoming drivers of police with speed radars parked by the road.
The result is that for much of the way cars bomb along at around 120km/h, before dropping to a surreally slow 50km/h at urban spots where the police are waiting.
Only two highways currently have a central reservation – the number is set to increase – and driving a few metres away from onrushing lorries can be nerve-wracking.
Cheap and usually easy to find, taxis can be booked by phone or hailed in the street, but there are some sharks out there ready to charge a hapless foreigner as much as ten times the real fare, so if picking a car up use only one with a name you know and insist the driver use the metre; most will automatically.
Even drivers from reputable companies may take you the scenic route, so it’s useful to know a smattering of Romanian and show no sign of British hesitancy.
Public transport is extremely cheap. The subway system is fairly civilised but slow and not comprehensive. Buses and trams are more frequent and serve most areas, but in peak hours can become so full they resemble a cattle truck, or, worse, the central line at 7pm.
Pickpocketing is rife, and you are advised to vigilantly guard any bags and pockets. It’s worth taking public transport a few times, if only to remind yourself how lucky you are to be able to afford a car or taxi. The system runs from around 5am to 11.30pm.Expat accommodation: Thanks to Ceausescu’s town-planning ideas, the majority of Bucharest residents, rich and poor, live in apartment blocks. Most expats head for the upmarket north of the city, where many of the ambassadorial residences are situated.
A replica of the Arc de Triomphe, wide boulevards and pleasant green spaces make the area feel more like Western Europe, as does the glut of cafes and restaurants. Those wanting to engage more in the local life – particularly young, single foreigners – often choose to live in more central areas.
Taxis are cheap and plentiful, and the city relatively small, so your location shouldn’t matter too much. However, there are no suburbs in the sense of quieter, greener neighbourhoods on the edge of town – the outer areas are poor and drab – so it makes sense not to venture too far away from the central axis of squares.
Though rising quickly, property prices are still low by our standards, and some long-term expats choose to brave the bureaucracy and buy a place as an investment. The law still currently prevents foreigners from owning land, but there are ways around this. Most people rent at first, although it is advisable to get a local friend to help you. Once the landlord realises a foreigner is involved, the sums involved suddenly leap upwards.
Climate: Like many things in Romania, the temperature is unpredictable: April, for example, could see snow or feel almost tropical. Winter and summer are often extreme. From December to February, lows of –20°C and severe snow are possible, even in the capital.Summers, which can start in May or June and continue to September, often see 40°C and melting pavements – although this is partly due to the poor quality of the tarmac.
Personal safety: Obvious foreigners are in some danger of being the target of a low-level crime – pickpocketing or a scam by which a fake policeman tries to extract a ‘fine’. Most would-be criminals are pretty hapless, and can generally be thwarted with vigilance, scepticism and common sense.
Bucharest doesn’t have Britain’s binge drinking culture, and it is rare to see drunken yobs on the streets. There are glue sniffers, but they are unlikely to harass strangers. Some beggars can be insistent, but they too are usually harmless.
Possibly the greatest hazard, aside from cars, is the stray dogs which the city’s mayor wanted to cull until Brigitte Bardot stepped in. Their aggression is usually limited to barking, but some do bite.
Women, especially young ones, will be the subject of staring and comments. On the whole, though, the city feels much safer and less violent than London, and the expat will rarely feel threatened, even at night.
Bureaucracy: When the country experienced a 6.0 Richter scale earthquake in November, one radio commentator remarked that at least something in Romania was moving.
Bureaucracy can be a huge headache throughout the country, which is still trying to emerge from the communist mentality. Simple, everyday tasks that would not take more than five minutes in Britain, such as getting a receipt or a guarantee for an appliance, require reams of forms and queuing.
Getting a work permit is especially laborious, with low-level officials seemingly taking a perverse pleasure in finding one of your photocopies or translations missing and sending you away to return on multiple occasions.
Sometimes they want a bribe, sometimes it is inefficiency, sometimes pure stubbornness. Unfortunately bureaucracy is an ingrained part of life here, so looking upon it as a cultural experience is probably the best way to keep stress levels down.
While most useful information for foreigners tends to be on the negative side, Bucharest is a dynamic and exciting city, and many expats’ initial short-term tenures turn into years.
After the vibrancy and unpredictability of life here, returning to the comfortable UK holds little immediate appeal. Having experienced some of the country’s ups and downs, I am happy to answer the questions of anyone else thinking of giving Bucharest or Romania a try.
Education: There are two British schools with a UK-based curriculum for children up to the age of 16, as well as an American school. Fees vary according to the age of the pupil, but can reach £7,000 per year and above.
Health: Bucharest has several private clinics with standards ostensibly as high as anything at home. Professionals used by the locals are highly spoken of, but the facilities may seem a bit primitive.
It is possible to follow a very healthy diet in Bucharest, with shops and markets full of fresh fruit and vegetables, tastier and less treated than the oddly perfect looking produce available in Britain.
One omnipresent health hazard is second-hand smoke: Romanians are heavy smokers and there are few venues with non-smoking areas.
Entertainment: Life in Bucharest can be austere and dull, and working hours long, so people like to make the most of their leisure time. The city has many first-class restaurants, covering most international cuisine.
Prices are far lower than in Britain. Service can suffer from post-communism apathy, but places are increasingly catering to foreigners, and realising that some courtesy and efficiency are good for business.
Bars and clubs are numerous and open late. They range from cheap and cheerful to pretentious, upmarket places where you’ll pay the same as in London.
The Romanian Opera is another bargain with ticket prices starting from less than a pound. Its interior is a touch shabby, but the standard of performances is high. The other notable cultural building is the Atheneum, which, when not undergoing renovation, hosts classical concerts.
Theatres are also plentiful but performances in English are rare. The National Theatre, built at the most central point of the city, also hosts exhibitions.
Cinemas broadcast films in their original language with sub-titles. While most stick to Hollywood drivel, some honourable exceptions show an impressive range of classic, challenging and foreign films, some dating from the early twentieth century. There are frequent film festivals.
There is little pleasure to be had from walking in the big cities, owing to a combination of the terrible pavement surfaces dotted with parked cars, stray dogs and the pollution from an excess of old bangers. The countryside, though, is scenic and walkers will find plenty of mountains, lakes and pretty villages.
Romania’s ski resorts are upgrading their facilities to try and attract some of the package holiday business away from other competitive Eastern European destinations such as Bulgaria.
Thursday, October 18, 2007
Cycloprosopon Dobrogea: New 150 Million Year Old Crab Species Discovered
Researchers from Kent State University and the University of Bucharest, Romania, have discovered a new primitive crab species Cycloprosopon dobrogea in eastern Romania. Previously unexamined, these ancient crabs from the Prosopidae family existed more than 150 million years ago during the Jurassic period.
“Studying primitive and extant crabs helps determine various aspects of biodiversity and patterns of evolution, such as when arthropods diversified,” says Dr. Carrie Schweitzer, associate professor of geology at Kent State University. Arthropods, which include crabs, insects, lobsters, spiders, millipedes and ticks, are a large part of the earth’s ecosystem, and they also are important economically in many countries as a source of food.
In addition, crabs have been remarkably resistant against extinction. “Our goal is to determine why they have been so resistant, so we might be able to better fight modern extinctions,” says Schweitzer.
Monday, October 15, 2007
BBC News: Country profile: Romania
It has seen numerous empires come and go from the Roman, to the Ottoman, to the Austro-Hungarian.
After World War II the country was under communist rule although the leadership pursued a foreign policy independent of that of the Soviet Union.
Romania, a slower developer than other former communist countries of eastern Europe, took a major step away from its past when it was one of seven countries to join Nato in late March 2004. Its strategic location and Black Sea air and naval bases make it attractive to the alliance.
There have been several complex exchanges of territory over the years, not least when the area formerly known as Bessarabia went to the USSR following a pact between Hitler and Stalin. That region now forms a large part of the Republic of Moldova. Romanian, a Romance language, is essentially the same as Moldovan although the latter has undergone more influence from Russian.
The legacy of communist-era leader Nicolae Ceausescu, who was feared and loathed in approximately equal measure, lingered long after the uprising which brought his execution on Christmas Day 1989.
Former communists dominated politics until 1996 when a centrist government came to power. It became involved in prolonged political feuding which did little or nothing to promote economic reform. The left returned in 2000 when Ion Iliescu was re-elected president.
Failure to push ahead sufficiently with reforms meant that the country was not on the list of new EU members four years later. However, in April 2005 Bucharest signed the EU accession treaty, paving the way for Romania to join the union in January 2007.
- Full name: Romania
- Population: 21.6 million (via UN, 2006)
- Capital: Bucharest
- Area: 238,391 sq km (92,043 sq miles)
- Major language: Romanian
- Major religion: Christianity
- Life expectancy: 67 years (men), 74 years (women) (UN)
- Monetary unit: 1 new leu = 100 bani
- Main exports: Textiles and footwear, metal products, machinery, minerals
- GNI per capita: US $3,830 (World Bank, 2006)
- Internet domain: .ro
- International dialling code: +40
President: Traian Basescu
Traian Basescu, a former sea captain and mayor of Bucharest, became president following elections in 2004.
The attempt to impeach the president followed tension between him and the government of Prime Minister Calin Tariceanu over the pace of reforms.
Since he came to power, Mr Basescu has drawn international praise for his anti-corruption efforts and for preparing Romania to join the EU.
In 2005 Mr Basescu started the process of opening the files of the feared communist-era secret police - the Securitate. Researchers cleared him of accusations that he collaborated with the Securitate.
Mr Basescu was 53 at the time of his election. He was transport minister between 1996 and 2000.
His predecessor, Ion Iliescu, had dominated Romanian politics since the fall of communist dictator Nicolae Ceausescu in 1989. Under his Social Democrats, Romania entered Nato and moved towards EU membership.
Prime minister: Calin Tariceanu
Calin Tariceanu became prime minister following parliamentary elections in November 2004. His government is an alliance of Liberals and Democrats and has members from four reformist parties.
He said his main aim was to achieve EU membership in 2007 and identified the fight against corruption as one of the key challenges.
His government has won praise from EU officials for its efforts to tackle the problem. Many criminal investigations have been launched into the activities of senior officials and members of the judiciary.
Mr Tariceanu had a successful business career before entering politics. He was 53 when he became prime minister.
Romania has one of the most dynamic media markets in southeastern Europe. TV is the medium of choice for most Romanians. State-owned Romania 1 and the private stations Pro TV and Antena 1 command the lion's share of viewing.
There is a large number of smaller, private stations, some of them part of local networks. The state broadcaster, TVR, operates a second national network, TVR 2, and a pan-European satellite channel. Pay TV channels have a smaller but significant audience.
The first private radio stations appeared in 1990; there are now more than 100 of them. State-run Radio Romania operates four national networks and regional and local stations. BBC World Service is available on 88 FM in the capital.
Most households in Bucharest have cable TV. There are hundreds of cable distributors offering access to Romanian, European and other stations.
Romania's newspaper market thrived after the 1989 revolution, but many newspapers subsequently closed because of rising costs.
The 1991 constitution upholds freedom of expression, but prohibits "defamation of the country".
In 2007 the media rights body Reporters Without Borders praised reforms to the criminal code; journalists can no longer be jailed on defamation charges.
The press
Television
Radio
News agencies
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/f