Multimedia Mania/abacus-multimedia-mania.iso/dp/0044/00441.txt

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$Unique_ID{bob00441}
$Pretitle{}
$Title{Romania
Economic Reform}
$Subtitle{}
$Author{Gh. Calin}
$Affiliation{News Agency Rompres}
$Subject{cent
per
foreign
market
production
prices
international
capital
economic
economy}
$Date{1990}
$Log{}
Title:       Romania
Book:        Romania December 1989-December 1990
Author:      Gh. Calin
Affiliation: News Agency Rompres
Date:        1990

Economic Reform

ROMANIAN ECONOMY AS IT IS AND ITS CHANCES TO RECOVER

     Just as the other economies now in a period of transition from communism
to political democracy, in the economic policy the institutional structures
and mechanisms adjust themselves against the background of a discontinuance,
the perturbing elements being released while the new economic interests do not
merge easily, any law, the natural ones included, being rejected as
continuations of the past even if they do not contain ideological or political
elements. That is why over the past eight months the economy has declined
which shows in industrial production, investment, and, in addition, in
exports.

     The falseness of the price system, based also on the economic agents'
underestimation of the role of the exchange rate of the national currency in
regulating the import-national production relationship, arbitrarily supported
by the fear of a collapse that could be caused by autarchy reflected in
horizontal links that cover 45 per cent of the industrial production, made the
economic agents think that any currency reserve should be used for current
imports to maintain the microeconomy functioning without seeing the enterprise
as part of a system, of the macroeconomy. The outcome is the concern for one's
self as a producer, moving in a crystal sphere, no longer in touch with supply
and sale, since price has been seen as an immutable datum, a remnant of
communist infatuation according to which the market was "adjusted" through a
control over prices and quantities, subordinated to the plan and defying
offer, the purchasing power and function of money.

     The question of raw materials and energy - the most important through the
dimension of the currency effort - cannot be solved in the context of the
present structure of the national economy unless firm action is undertaken to
stimulate investment in the direction of another structure of production in
industry, and concern is shown for a productivity-salary equilibrium.

Production and Consumption

     Over January-August 1990, industrial marketable production was 19.9 per
cent below the level recorded a year ago, while productivity in industry
dropped by 22.4 per cent. Benefiting from 10.9 per cent higher pay funds, the
enterprises employed 3.6 per cent more staff in conditions of unchanged
technologies and an almost three-month stagnation of roughly 800 production
units. The regress of the two indices is explained by the reduction of the
work week by 1/6 in general and by 1/3 in the hard labour sectors, a 10.3 per
cent shorter work time following strikes, interruption of production, sickness
and maternity leaves.

     The most serious aspect is the failure to manufacture basic raw and
subsidiary materials which caused problems to industries and exerted pressure
on imports. As to January-August 1989, higher productions were recorded only
with several products of the food industry, while small productions (less than
70 per cent as to January 1989) were recorded with copper, zinc, lead, coal,
lorries, tractors, automobiles, locomotives and railway cars .a.o

     The drastic reduction of activity in this domain is due first of all to
the cessation of wide-scope investment in town planning and infrastructure
which proved inefficient from an economic point of view.

     Investment activities have been reduced on the one hand because the
state, the main investor in the Romanian economy, has substantially diminished
its role in this respect - following the initiation of the transition to the
market economy - and on the other hand because these funds have been used to
meet pay claims under the pressure of trade unions concerned with the
immediate but failing to grasp the medium-term consequences of a dramatic drop
in the accumulation rate.

     Adding to all this is the poor participation of the foreign capital,
discouraged by the violence of social convulsions caused by criteria which
disregarded their economic impact not only on the foreign capital, advised by
several governments to adopt a reserved stands as concerns Romania, but also,
and more particularly, on the internal business subordinated to political
disputes of any other kind than those connected in any way to the consensus of
the market economy.

Trade and Foreign Payment Balance

     As compared to the surpluses of the trade balance recorded over the past
years - forced by a policy pursuing export by all means and by a dramatic
reduction of imports, which has affected for at least ten years any
possibility of technological renewal - in the first eight months of 1990 the
trade balance deficit was 1,100.4 million roubles and 908.6 million dollars.
Contributing to this deficit is the reduction of exports (to 54.9 per cent in
clearing and 55 per cent in convertible currencies from the achievements
scored in the first eight months of 1989) following the failure to manufacture
the home production all while exports contracts worth four billion roubles and
dollars had been concluded, and higher imports, which had to meet both current
requirements and make up for the shortcomings in the home production. As to
the first eight months of last year imports accounted for 86 per cent in
clearing roubles and 150.6 per cent in convertible currencies.

     On 31 August 1990, the balance of payments showed a deficit of 1,145.4
million dollars from a surplus of 1,239.1 million dollars at the beginning of
the year. This situation is the outcome of cash payments for current imports
without allotting funds to investments that in time could yield incomes in
foreign currency. Even more serious is the fact that tourism could not
diminish the loss, which can be blamed on the fear of instability foreign but
also home media have inoculated to potential tourists. The situation of the
balance of payments is also aggravated by outstanding debts that could not be
collected in time, of which half are to be paid by Iraq alone.

     To prevent the deterioration of the balance - which could be accepted
were there a concern to make up for the deficit through technological
investment and attraction of foreign capital - measures are necessary to set
monthly ceilings for imports and allow for further imports only with export
guarantees and stimulation of exports (especially with payment on delivery),
by using the credit lines opened by some states and commercial banks for
investment.

Criteria of Appraising Prospects

     In a Romanian economy dependent on the import of energy and raw materials
to strike an equilibrium presupposes an urgent intervention on at least two
basic components: prices and convertibility.

     In Romania, just as in other countries that have experienced it,
communism led to an administration of the market, in fact of consumption,
through prices and planned production.

     The signals of wrong prices have led for decades to a deficient allotment
of resources, implicit taxes and subsidies among sectors and socioeconomic
groups. The impact is more than often unforeseable, difficult to appraise and
even in contradiction with the objectives set at the beginning of a stage.

     The control with the help of the plan over quantity and prices - the
essence of planning - just as the low interest on the credits for the state
sectors have brought about a rationing of consumption parallelled by an
indirect tax on consumers who had no use for their money. As a matter of
fact, when the price is below the demand-offer balance level, non-stimulating
for production, the quantities of commodities in the market diminish, any
increase of production in conditions of unremunerative prices being
unprofitable. Hence the effective and implicit rationing of quantities.
Consequently the lack of products leads to the appearance of the black
market for all the rationed products.

     An end being put to such an aberration there is no need to adopt a
policy meant only to place prices above the balance level since they would
result in underused productive units increasing unemployment without an
economic reason and, in the case of exports, in their subsidizing.

     Subsidizing through low production prices is also an outcome of an
exchange rate in an anachronic relationship with the market, of interest
unimportant when it comes to expenditure.

     The deficit itself and the lack of materials of enterprises are an
outcome of low prices which, eventually, lead to nominal losses for all
enterprises: some do not have materials, therefore they do not produce,
and those that should produce the respective materials do not do it because
the low prices make their expenses grow.

     In other words, to revitalize the Romanian economy the government should
under no circumstances accept to further inject huge quantities of low-price
imports to enterprises at the expense of which a medium-level production
should be manufactured and sold at non-remunerative prices imposing
subsidizing expenditure on the budget which run counter to Romania's
pledges with the GATT and the IMF. An equilibrium should be stricken based on
a real exchange rate reflected in the price of energy, imported raw and
subsidiary materials, by practising prices mirroring costs conducive
to a gradual elimination of subsidies. An equilibrium should exist between
prices and the exchange rate apt to stimulate home production and make
possible import to make up for the deficit on the market with commodities
meant for both industry and for the population's consumption. With such
parameters one may hope that the enterprises will turn profitable and adjust
their products so as to be able to meet requirements and find resources for
technological renewal.

EUGEN DIJMARESCU
minister of state
in charge with economic guidance

The Government's Outlook on Privatization

     The assets of the commercial company are first of all estimated. The size
of this capital is the summum of its patrimony and of its capacity of making
profit in conditions of initiative and competition.

     The patrimony is not equal with the value of the inventory but with its
updated value determined by its reference to the market, seen as both
internal and international.

     On the basis of the capital thus appraised, the commercial companies
have the obligation to transfer, free of charge, to the National Agency for
Privatization a share worth 30 per cent under the form of bonds which are
to be distributed, also free of charge, to Romania's inhabitants at least
18 years old. In the chargeless distribution formula Romania's Parliament
retained the principle of equal opportunities as the only right at the
beginning of the road we have embraked on.

     The bonds are nominal and not negotiable for 12 months. Before this
term expires they can be exchanged - they can buy - only for shares. After
12 months the bonds can be further changed for shares but they also become
negotiable losing their nominal character, which means that they can be sold
for money between holders or to banks.

     Once the evaluation of the patrimony concluded, the commercial companies
issue shares, either one batch for one hundred per cent of the capital or
several successive batches, the first issue having to be worth at least 30
per cent of the value of the bonds. Therefore, privatization is complete!

     The market economy does not mean rationed distribution, but a market
mechanism. Consequently, the companies issue shares for their entire capital
so that when no one is willing to buy shares for bonds, all the shares are to
be negotiated on the market.

     The purchase of shares on the market (at the stock exchange or, until it
starts operating, through the agency of a secondary interbanking market) is
open to all kinds of investors: natural persons (individuals) or juristic
persons (other companies), banks, insurance companies a.o. Any other share
purchasing or distribution form runs counter to the market economy. The
privatization formula the government had suggested in its 28 June
programme-statement was chargeless distribution in a proportion of
30-to-50 per cent. Parliament opted for the 30 per cent percentage precisely
for the aforementioned reason.

     Therefore, the company has the legal possibility of increasing
its initial capital up to 70 per cent through privatization.

     This option of the government, retained as the Law no. 15/1990, clearly
shows that the government does not want for itself the entire money equivalent
of share sales intending it preponderantly, directly and definitively to
enterprises so that, by accumulating capital, they should have from the very
beginning possibilities to further develop. The quota the state takes from
share sales will be partially invested in social programmes of general
interest but mostly allotted to a fund meant to support the programmes for the
restructuring of the economy which have their correspondent in the social
area - employment and retraining of work force, salaries and consumption.
Privatization cannot be achieved outside capital-formation and is not real
unless the goal of revitalizing and consolidating the enterprise is attained.
Consequently, in consideration of the state of the capital market in Romania,
the government has suggested a programme according to which in three years at
least 50 per cent of the economic activities should be set on privatization.
If the capital market is abundant the percentage might increase above this
limit in the shortest possible time, until privatization becomes complete.

GH CALIN

We Want to Offer an Objective, Cosmetics-Free Image

- excerpts from Foreign Minister ADRIAN NASTASE'S interview to weekly
Globul -

     Q.: In the years of the regime swept away by the Revolution, Romania's
foreign policy was made by one single person, I mean the dictator in most
cases, the diplomat's duty was just to carry out nonsensical, subjective
decisions. What's the situation now, what fundamental changes have been
wrought

     A.: You are right. Unfortunately, the Ministry of Foreign Affairs mainly
served as a channel to deliver abroad messages that were thought out
somewhere else. To be sure, that situation generated a certain mentality. That
is why one of the immediate objectives of changing the Foreign Ministry lies
in creating, on the one hand, the compartments necessary for a diachronic
analysis of international evolutions, and on the other hand, the compartments
responsible for a synchronic examination of these events - or, putting it
otherwise, policy planning compartments. At the same time, we are striving to
reach the point where everybody in this Ministry, no matter whether they work
at its headquarters in Bucharest or at our missions abroad, would use their
creative energies to the best. Many of our people are professionals they are
people who have gathered a rich experience in the field and can contribute a
lot if they feel theirs is a worthwhile work. I'll offer you an example: a
brain storming has started this week, the purpose is to discover new ideas
about the European problems, European models and scenarios and I can tell you
that experts from various departments of the ministry have been involved in
this search. At the same time, we try to involve the ministry in domestic and
international scientific activities, to implement and actually abide by an
important principle - I mean, a person's research activity should be given due
consideration when it comes to his or her promotion in our ministry. A great
deal of attention should also be assigned to the diplomat's professional
training and the renewal of our personnel.

     Q.: As the international practice shows the diplomat is, as a rule, a
professional. The majority of our ambassadors in the past did not have any
qualification for diplomacy, more often than not, they did not even know the
basics of a foreign language. What changes are expected in this sense

     A.: I can tell you that there are probably six or seven ambassadors at
most who have not been recalled yet from their past assignment. So, as far as
ambassadorial appointments are concerned, I can tell you that new people have
been chosen in quite many cases to fill the ambassador's post. There certainly
are difficulties, maybe the choice has not been always the best. Our situation
is difficult, indeed, because in Romania diplomacy was not reckoned as a
profession as such. They thought that activists who could be shuttled between
various jobs, now doing one job, then another, could also make a good
diplomat. That is why the Romanian contingent of career diplomats was and is
very small. Besides, some of them, proving - I'd say - too much zeal
sometimes, are no longer welcome to our ministry. So, the analysis on
principle should be parallelled by practical solutions. While at the level of
principle things are crystal-clear, countless difficulties emerge when it
comes to concrete things. As a result, a certain temptation, I'd say a normal,
even positive one, has made its way in the sense of appointing ambassadors, at
this moment, from among prominent figures of our cultural and scientific
community, people held in high regard both at home and abroad. Having career
diplomats at all our missions abroad would be the most fortunate thing - no
doubt about it. We may hope for it for the coming years. For the time being,
however, we have to choose more flexible solutions and appoint credible
people - especially to embassies in the countries that count the most to us.
Training young people for the diplomatic service will play an important part
and a start has already been made. Our ministry has already sent a number of
students to study in several European countries as well as in countries on
other continents. One more novelty: our ministry offers ten scholarships to
those who will successfully pass the entrance exam at the School of High
Political Studies that is going to open at Bucharest University. So you see,
we try to combine a short-term and a long-term policy for the training of
career diplomats.

     Q.: In the last few months, Romania's image in foreign countries,
especially in the West, has been rather tarnished. Multiple causes are behind
it, it's needless to evoke them here. But I'd ask you what does the Foreign
Ministry intend to do in order to dissipate misgivings, make up for scarce
information and heal the ill-will that continues to be perceived when it comes
to Romanian realities

     A.: True, for the time being Romania does not get quite good press,
especially in the West. Equally true, however, is the fact that the
anti-Romanian ring of the international media in describing and commenting our
realities has been waning. Our ministry will do its best to further contribute
to projecting an objective image of Romania abroad such as would help people
interested in our country get an as accurate as possible perception of the
far-reaching structural transformations in our economic, political and social
life and of their real objectives, of the specific traits of democratization
in Romania - a process that is in full tide of progress in this European
region. Well. also in this regard, I mean the manner of projecting Romania's
image abroad, things have changed significantly. We do not intend to project a
beautified image abounding in cosmetics. We do not pursue an idyllic,
extolling propaganda because we do not have the slightest intention either to
deceive ourselves or cheat anybody else. Transparence, strictly objective
description of reality constitutes the prime commandment of our activity in
this direction.

     We have taken steps for as many as possible contacts with representatives
of the international media free discussions, unfettered from any present
schemes and cliches, between every echelon of authority and Romanian and
foreign journalists now are a reality of my country that nobody can any longer
question. We would be glad to see a large and representative batch of foreign
journalists coming here to see our people and its country.

     We try to do what we can so that the international media should also
reflect our government's stands, untainted by more or less harmful
interpretations, thereby giving world public opinion the chance to shape an
image of the Romanian people's efforts from Romanian sources too. Our
embassies have been working in earnest to this end - there have been meetings
with representatives of the oral and written press, interviews, news
conferences, briefings and the government's official texts have been diffused
on a wide scale.

     This way we have been doing what we can in order to make up for the lack
of information you referred to in your question.

     For another thing, there is the widespread habit of journalists working
as press correspondents in other countries. And I am of the opinion that the
assignment of talented professional pressmen to work in other countries as
correspondents of the ROMPRES news or of different newspapers can doubtlessly
help a lot because whatever efforts our embassies' staff would make,
diplomats, however, cannot supply for the specific activity of I'd say - the
classical press correspondent. So, it meets our interest to revive a past
practice, arbitrarily abandoned at a certain moment under the spur of the
"precious indications" coming from cabinet no. 2, despite the international
acknowledgement of its worth, and support the assignment of Romanian press
correspondents to the major European capitals.

     Q.: And now, a routine question, I'd say. Which are the major guidelines
of Romanian foreign policy at this stage

     A.: I have already shown on other occasions that Romania's foreign policy
has to give sense and significance to the thorough-going transformations
sweeping our domestic life, the national interest, its promotion being all the
time in the focus of our activity. Hence, foreign-policy orientations should
be the fruit of national consensus based on active dialogue with all political
and social forces and groups. The government is open to dialogue and so will
it be.

     Thanks to the December Revolution, Romania, a European country, has
regained its dignity and the right to participate on an equal footing in the
construction of the new Europe and in international affairs. Our relations
with East-European countries aim at identifying which are our common interests
and at setting our links upon new bases for the good of each other and of good
neighbourliness, actually for contributing to the specific processes taking
place on the Continent. We take steps for integrating Romania in the European
bodies as well as for involving it directly in the efforts of the Helsinki
Final Act signatories that aim at deepening this process. We think that
reasonable solutions for defending a country's national security can be
provided by the positive evolutions, in full tide of development now, in the
two military blocs and the directions that will take shape after the C.S.C.E.
summit in Paris this November. Our activity at the European meetings this year
has already proved our full commitment to genuine revival of European
confidence-building, stability and cooperation.

     At the same time, we make a realistic analysis of the possibilities to
develop our relations with all states in the other regions of the globe, in
line with our national priorities, with regional and international shifts.
Romania's stand on present-day global issues subsumes to the concern for
international stability, disarmament, promotion of all states' socio-economic
development, the exercise of human rights in step with the time's
requirements, preservation of a sound ecological equilibrium, exchanges of
genuine spiritual values. My country has confidence in the UN mission and
capability of being something more than just a body of useful discussions. We
believe the world body can actually increase its contribution to shaping the
international relations in the spirit of mutual understanding and tolerance,
and cooperation among states for the continuous progress of civilization and
the affirmation of human freedom and dignity.