Romania will be granted market economy status, business told

By David Cronin

Date: 23/09/04

ROMANIA's business elite has been given assurances that the European Commission will confer the country with the status of a functioning market economy.

Gilbert Wood, president of the Foreign Investors' Council (FIC) in Bucharest, said that Commission officials had told him that he would not be disappointed by the report on Romania due to be published on 6 October. He interpreted this as a signal that the FIC's calls for market economy recognition would be heeded.

The country has seen significant transformations to its economy in the past few years. Under pressure from the EU, the current Social Democrat government has sought to privatize the state-owned enterprises, lavished with subsidies. National oil company Petrom, for example, has recently been transferred to private hands, while gas firm Distrigaz Sud is being sold to Gaz de France.

The FIC calculates that the private sector now accounts for 70% of Romania's gross domestic product. But Wood feels that there is still much privatization to be done. He argues that there are about 500 "sharks" in the corporate world who are trying to maintain state control of industry.

"The voices who say Romania is not ready for competitiveness come from people who take advantage of political affiliations, who are not competitive, who are not paying taxes," he said. "I personally look forward to their bankruptcy."

But restructuring of industry will inevitably lead to increased unemployment - now at 8% - at least in the short term.

Indigenous Romanian business leaders appear less sanguine than those who have adopted the country as their home. Constantin Bostina from the Businessmen's Association of Romania told a recent conference in Bucharest that although Romania has a market economy, it is not functioning. "We are often dealing with a dialogue of the deaf here," he said. "On the one hand, there are market rules, yet more often than not they are affected by inadequate political and administrative measures."

The economy has seen a growth rate of 7.5% this year. Foreign direct investment is expected to reach €2 billion by the end of this year, up €600 million from 2003. But Foreign Minister Mircea Geoana said last weekend that the country had been too slow in luring investors.

Romania's main economic success has been having one of the top ten fastest-growing information technology markets in the world. Its burgeoning IT sector has been encouraged by exemptions from income tax granted to computer programmers. But this has not prevented tech-savvy young people from leaving the country. After Indians, Romanians are the biggest ethnic community represented at Microsoft's headquarters in Seattle.

Article previews the European Commission's report on Romania's progress towards accession into the European Union due to be released on 6 October 2004. The Commission is expected to give Romania the status of 'functioning market economy', one of the so called Copenhagen criteria for EU accession.