Countries of the World/COUNTRYS.BIN/dp/0302/03021.txt

Text File | 1991-06-25 | 29KB | 558 lines

$Unique_ID{COW03021}
$Pretitle{360}
$Title{Romania
Chapter 7.    Conducting Business}
$Subtitle{}
$Author{Donald E. deKieffer}
$Affiliation{Embassy of Romania, Washington DC}
$Subject{foreign
romanian
romania
trade
business
goods
western
economic
system
government}
$Date{1990}
$Log{}
Country:     Romania
Book:        Doing Business with the New Romania
Author:      Donald E. deKieffer
Affiliation: Embassy of Romania, Washington DC
Date:        1990

Chapter 7.    Conducting Business

GOVERNMENT ECONOMIC STRUCTURE

     For fifty years, Romania has had a highly-centralized economy. The
government was deeply involved in all aspects of commerce, and a foreign firm
desiring to do business simply had to become more or less a government
contractor. This has changed. Even government agencies are now at pains to
tell a foreign business executive that it is no longer necessary to discuss
matters with a majority of the Ministries, industrial centrals, foreign trade
organizations or the plethora of other institutions which flourished under the
Communists. In fact, most of the major Ministries emphasize the new policy of
encouraging foreign firms to contact local producers directly to arrange
deals.

     Nevertheless, old ways die hard, especially when Romanian "companies"
have so little experience in negotiating contracts or even dealing with
foreigners. Further, many parts of the old system still exist-in technical
"competition" with the "producers." It was these agencies which traditionally
fulfilled the government's economic and trade programs by arranging for the
sale and purchase of goods from abroad. It is therefore important at least to
be aware of these entities. In certain circumstances, it may be wise to
contact these groups, if for no other purpose than to locate the "producers."

     As of late 1990, there was still no comprehensive list of independent
trading companies available in the country, and no index of producers. Various
entities are trying to establish themselves as sources for such information,
but a directory of private sector firms may not be available from the Chamber
of Commerce and Industry until mid-1991 at the earliest.

     Listed below are institutions which still perform important functions in
the operation of the Romanian foreign trade regime. Many of them will continue
to operate with a diminished role for many years to come.

Ministry of Foreign Trade

     The Ministry of Foreign Trade (MFT), formerly known as the Ministry of
Foreign Trade and Economic Cooperation, is still responsible for coordinating
and administering the foreign trade program of the government. In former
years, it was responsible for implementing the Communist Party's international
economic program. Today, it is working toward becoming a "trade policy" agency
similar to the United States Trade Representative in the United States, or
MITI in Japan.

     In addition to its policy role, the MFT also issues licenses which are
still required for all products entering or leaving the country. Since the
revolution, the MFT has seen cause to deny no licenses, but the process still
retains much of its bureaucratic antecedent. Applications must contain the
name and address of the importer and exporter, a description of the nature of
the goods, the value of the transaction (and whether it is denominated in
local currency or hard currency), the approximate time of the export or
import, the port of embarkation, a certificate from a bank known to the MFT
certifying to the financial particulars of the transaction, and a statement
concerning the financial condition of the parties. The MFT has made it clear
that these requirements can change, and that the Romanian partner in any
transaction will be responsible for making sure that all requirements extant
at the time of the transaction are met. The same requirements are applicable
for joint ventures in Romania.

     The MFT is also responsible for Customs regulations. Although Romania is
a member of the Customs Coordination Council in Brussels and a signatory to
the Harmonized System of tariff nomenclature, the country has been slow in
implementing a comprehensive tariff schedule. This is understandable since
tariffs under the old system were largely irrelevant. Since the State was
the only importer, collection of duties (essentially from itself) was not a
high priority. Until at least 1992, it would be prudent for any prospective
exporter of goods to Romania to check with the MFT on the applicable duty
rate, and secure a letter from them concerning the ad valorem rate. These
decisions are likely to be made on an ad hoc basis for the next several years.
Adoption of a comprehensive tariff system-including the possibility of
protective tariffs for some industries-is under review, but is a laborious
process. In the meantime, the MFT has made it clear that it will issue
"interim" advice upon request.

Technical-Production Ministries

     Under the Communists, government Ministries were directly responsible for
implementing the party's economic policies. They were similar to Western-style
conglomerates or holding companies, with direct control over the production
and delivery of products under their jurisdiction. The Ministries maintained
both production units (industrial centrals) and research institutes, as well
as foreign trade organizations (FTOs) which served as the equivalent of an
import-export department in a Western firm.

     One of the most fundamental changes brought about by the December, 1989
revolution was the dismantling of the authority of the Ministries to control
the economy. While their production units, institutes and FTOs are still in
existence, the Ministries themselves have lost their exclusive authority to
determine what will be produced and by whom. This transition has caused more
than a little uncertainty. The Ministry of the National Economy now has a
special division charged with "privatizing" many of the operating divisions
of the other Ministries over a period of years. In the meantime, however, the
Ministries act as at least caretakers for the production units and FTOs under
their jurisdiction, and should not be totally ignored. In fact, many of the
Ministries (especially those involved with agricultural production, food
processing, telecommunications and tourism) are actively seeking foreign
partners for various projects themselves.

Industrial Centrals

     As noted above, Industrial Centrals (ICs) were the production units for
the specialized Ministries under the old system. Most of these still exist
under the nominal authority of their old Ministries, but are now at least
partially independent. Contact the Romanian Chamber of Commerce and Industry
for a current list of ICs. Under the  post-revolutionary reforms, they are
permitted to deal directly with foreign investors, purchasers and sellers. By
1993, many of these will be entirely privatized, but some may remain under
state control (especially in heavy industry where operating losses make
"free-standing" corporations impossible).

     One of the major efforts of the new government is to encourage foreign
investors to establish joint ventures with the "industrial centrals" to speed
the process of privatization and to provide necessary technology to these
enterprises. There are literally hundreds of these ICs, most now in total
control of the disposition of their assets. Among the advantages of doing
business with or through an IC are:

     - The government is actively encouraging the sale or privatization of
these enterprises, and terms can be extremely attractive;

     - The ICs have buildings, equipment and trained work force extant. This
can save considerable hassle for an investor wending his way through the
transitional rules of acquiring property, negotiating labor contracts, etc.;

     - Most ICs are familiar with making products to the specification of
others. Few of them design their own goods, and do not have the "Not Invented
Here" syndrome common in the We