Multimedia Mania/abacus-multimedia-mania.iso/dp/0044/00447.txt

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$Unique_ID{bob00447}
$Pretitle{}
$Title{Romania
Chapter 2A.   Economic Scene}
$Subtitle{}
$Author{Donald E. deKieffer}
$Affiliation{Embassy of Romania, Washington DC}
$Subject{romania
industry
romanian
production
steel
chemical
industrial
agricultural
country
economy
see
tables
}
$Date{1990}
$Log{See Table 5.*0044701.tab
See Table 6.*0044702.tab
See Table 7.*0044703.tab
See Table 8.*0044704.tab
See Table 9.*0044705.tab
See Table 10.*0044706.tab
}
Title:       Romania
Book:        Doing Business with the New Romania
Author:      Donald E. deKieffer
Affiliation: Embassy of Romania, Washington DC
Date:        1990

Chapter 2A.   Economic Scene

ECONOMY

     After World War II, nationalization of commercial enterprises in Romania
was followed by planned expansion. Between 1948 and 1955 more than
100 new industrial undertakings were built and 200 more were rebuilt
and expanded.

     Between 1948 and 1960 industrial production increased at an average
annual rate of more than 16 percent. Overall it increased five-fold
between 1938 and 1960.

     This policy of industrialization was intensified in the following three
decades through rigid central planning. The results are now obvious. Huge
industries were capitalized with little or no thought given to demand or
other economic forces. Commitments were made to "favored" industries
and massive development projects at the expense of other sectors-and
consumers. The Romanian steel, chemical and machine-building industries
are gigantic by almost any standard, but they were built by neglecting
agriculture, transportation, services and tourism. The economy was also
dominated by an almost frantic desire to become "debt-free." This resulted
in cuts in imports, first of consumer goods, and later of needed technologies.
This rendered Romania incapable of maintaining world-class
efficiency even in the industries where it had invested the most.

     This resulted in a dramatic decline in the standard of living for the
population and the erosion of Romania's competitive stature throughout much of
the 1980s. In addition, the Romanian economy is almost a caricature of
the old saw about a camel being "a horse designed by a committee."

     Nevertheless, Romania has a young, well-trained work force, substantial
natural resources, and, in some sectors, huge industrial plants. The
restructuring of the economy, however, will take more than political will. It
desperately needs management skills and investment in neglected sectors
such as food processing, communications and transportation. The
consumer sector is a classic example of pent-up demand. Almost anything
can be sold-when it is available.

Capital Goods

     In the course of this industrial growth the balance tipped away from
consumer goods, which in 1938 made up more than one-half of production,
to capital goods, which in the 1980s accounted for more than three-fifths.

     Once a predominantly agrarian country, Romania has experienced high
industrial growth since the 1950s. Since 1970, industrial production has
risen at an average annual rate of more than 12 percent despite numerous
natural disasters, including a devastating earthquake in 1977.

     Industry accounted for more than 60 percent of the country's national
income in 1976 and has remained at approximately this level. The bigger
growth has been experienced in the electronics, machine building,
chemical, and metallurgical sectors. This growth was achieved at the
expense of agricultural development and the Romanian consumer.

GDP

     According to Western estimates the Romanian gross domestic product
(GDP) reached $37.8 billion by 1989. Romanian per capita GDP was
approximately $1,632.

     About two-thirds of Romania's total investment went to industry. Prior to
the December revolution, more than 60% of industrial investment was
devoted to electric power, metallurgy, machine building and chemical
sectors. In recent years, energy and light industry have also been given
priority.

Statistics

     Romania, like many other East European countries, maintained statistics
on an indexed rather than an actual "hard number" basis. Nevertheless,
the charts on the following pages give a general idea of economic
progress in various areas.

     It should be kept in mind, however, that the relative value of the leu
(the Romanian currency unit is the "leu," plural "lei") changed during the
period covered by these charts.

     Even with these caveats, it is still apparent that the growth rates in
almost every sector of the Romanian economy have been impressive
whether calculated in constant dollar terms or on any other basis.

     Since Romania was a state-controlled economy, taxes appear
disproportionately low by Western standards. Further, such expenditures as
national defense also appear low as a proportion of the state budget. However,
such expenditures and income should be compared to gross national
product rather than considered as a percentage of state expenditures.

[See Table 5.: Romanian Economic Indicators]

[See Table 6.: Romanian National Budget]

AGRICULTURE

     The varied natural conditions within Romania are reflected in the
div,rsity of its agricultural pursuits.

     About a third of the country is covered by plains that are well suited
to agriculture. One third is taken up by hilly areas at an average altitude
of 1,300 to 1,600 feet, with slopes usually sufficiently mild to allow most
types of agricultural cultivation.

     The rest consists of the mountainous areas, which have supported a
heavy agricultural population since prehistoric times, containing surfaces
suitable for use as arable land as well as natural alpine pastures.

Agrarian

     Although Romania has traditionally had an agrarian economy, the
agricultural sector had only moderate performance during the period of
extreme centralization.

     For the past 20 years, the major emphasis of economic growth in the
Romanian system has been on the development of heavy industrial, capital
intensive projects. As a result of recent financial problems, however,
the Romanian authorities have renewed their emphasis on agriculture.
Nowadays, Romania actively solicits cooperation agreements in various
fields of agricultural technology, especially food processing.

Exports

     Unlike the consumer product area, where export sales may not yield
hard currency, Romania believes that its climate and large farm population
put it in a good position to be a major exporter of agricultural commodities.

     It is clear, however, that many portions of the agricultural sector are
inefficient and unproductive by international standards. Therefore, renewed
emphasis has been placed not only on the production of food products but also
on processing, transportation and packaging.

     The Romanian government is understandably sensitive about the fact that
it has an economy which can produce world-class electric generating equipment
but lags in agriculture. As this program has a political as well as an
economic backing and has been emphatically endorsed by the government, Western
agribusiness may find Romania a lucrative area for expansion.

Grains

     The climate and relief of the extensive Romanian plains are favorable
to the development of cereal crops. By the late 1980s wheat covered some
5,700,000 acres; maize, 8,200,000 acres. Cereals are also found in the
sub-Carpathian region and in the Transylvanian Tableland, where they occupy
a high proportion of the total arable land. Other cereals include barely, rye
and oats.

[See Table 7.: Production of Agricultural Commodities]

Vegetables

     Vegetables are grown in a relatively small area (some 632,000 acres).
Peas are the predominant crop; capable of an early harvest, they allow a
second crop, usually of fodder plants, to be grown on the same ground.
Vegetable cultivation is particularly marked around Bucharest; there is
specialization in the production of early potatoes, tomatoes, onions,
cabbages and green peppers. Similar peripheral areas are found around
Timisoara, Arad, Craiova, Galati, Braila and other cities. The most important
potato-growing area in the country is found in the Brasov, Sibiu, Harghita
and Mures districts. Other related crops include sugar beets (475,000 acres)
and sunflowers (10,300,000 acres), mostly on the Danube, Tisa and Jijia
plains. Hemp, flax, rapeseed, soybeans and tobacco are also grown.

Viticulture

     With some 534,000 acres under cultivation, Romania is one of the
major wine producing countries in Europe. Romania specializes in the
production of mid-quality wines, using modern methods. With the growth of
the tourist trade, Romanian wines are becoming known to a wider international
public. Large quantities are exported annually.

     The major vineyards are at Cotnari, Tirnave, Murfatlar, Valea
Calugareasca, and Odobesti. Both white (Grasa de Cotnari, Riesling,
Sauvignon, Chardonnay) and red (Pinot Noir, Cabernet, Babeasca)
wines have won international awards.

Fishing

     The river network of Romania, its lakes (especially the complex
around Razelm) and its Black Sea coastal regions provide the basis for
a well-developed fishing industry. The largest quantity of fish is obtained
from the Danube and its delta, and about 80 percent of the annual catch is
consumed fresh. The canneries that process the remainder are located
at Tulcea, Constanta, and Galati.

Livestock

     Animal breeding, especially sheep, has a long history in Romania.
The availability of grass, whether it be in the alpine pastures or the
Danube plain and valley, has been the major factor facilitating sheep
raising.

[See Table 8.: Livestock (1989)(1000)]

MANUFACTURING

Iron and Steel

     In recent years, the Romanian iron and steel industry has been
actively engaged in a much-needed modernization process. One mill is over
212 years old.

     The old plant at Hunedoara has been modernized and extended and the
number of blast furnaces increased; the new steel works, a rolling mill
and a battery of modern coke ovens were also added.

     Another integrated iron and steel plant was recently built at Resita,
and a tube mill at Roman. The capacity of the smaller mills at Otelu Rosu,
Calan, Cimpia Turzii and Calarasi was increased, and a sheet mill built at
Galati (the largest works in the country).

     In the late 1960s and early 1970s, over one-half the pig iron and
five-sixths of the steel came from plants erected since 1950. Production of
specialty steels has been increased with the completion of the new Galati
and Tirgoviste Combines. By 1980, annual specialty steel production was
1.37 million metric tons.

[See Table 9.: Steel Prodcution in 1989 Relative to 1988 and 1985]

     The Romanian steel industry has recently adopted some of the most
modern steel-making technology, including continuous casting, large BOF
furnaces (180 MT) with direct reduction in 40 minutes, two heavy rolling mills
for plates with capacity of 4,000 millimeters and 10 cold rolling mills.

     The Romanian iron and steel industry produces a full range of mill-forms
with all surface preparations. The steel industry emphasizes oil country
goods, flats, rebars, wire, bar (both hot and cold drawn) and tubes.

     It is also capable of producing a full range of specialty steels
including stainless tool steel and high speed tool steel made into various
mill forms such as wire, cord and electrodes. All forms of treatment can be
performed on both specialty and carbon steels including heat treatment,
sizing and cold rolling.

     The Romanian iron and steel industry is both vertically and horizontally
integrated, contributing substantial funds to research and development of its
installations and production. It also incorporates R&D and production in such
ancillary activities as coal products, coking and production of graphite
electrodes (also available for export).

     Despite the ability of the Romanian steel industry to produce a wide
array of products, it is notoriously inefficient. Much of the production
is based upon imported raw materials, and the industry is a voracious
consumer of energy in an energy-poor country. Up to 20 percent of the total
electricity requirements of the nation are devoted to steel production.
Capacity underutilization also plagues the Romanian steel industry. Real
losses from such inefficiencies exceeded 30 billion lei in 1989 alone.

     Despite these inefficiencies, Romania is the fifth largest steel
producer in the world on a per capita basis, and exports over a third of its
total production of steel and aluminum. In the future, substantial funds will
have to be committed to rationalization of the industry and increasing its
efficiency if it is to be competitive in world markets.

Non-Ferrous Metals

     The non-ferrous metallurgical industry in Romania is currently producing
a wide range of industrial products. Aluminum production includes sheet, coil,
aluminum foil and electrotechnical aluminum (5 microns minimum).

Chemical Industry

     The chemical industry, particularly the petrochemical sector, is one of
the fastest-growing industries in Romania. Research and development in the
petrochemical area dates back many generations; it has only been within
the last two decades that the Romanian chemical industry has been able
to successfully utilize the fruits of indigenous R&D.

     Although Romania was an importing country before World War II, the
chemical industry has now been developed to the point where it exports
substantial amounts. Chemical and petroleum products currently
account for more than 25 percent of the country's overall exports.

     Like most other industrial sectors in Romania, the chemical industry is
poorly managed and grossly inefficient. This sector alone consumes almost a
third of the industrial quota of energy resources, while contributing 9.7
percent of the total industrial production. The industry also suffers
from underutilization of capacity, caused in part by the strict central
"control" of the economy over the past several decades.

     The Romanian chemical industry is also a source of world-class
pollution. The new government has undertaken efforts to clean up this mess,
but it will require hundreds of millions of dollars and advanced technology
which is at present unavailable in the country.

[See Table 10.: Chemical Production in 1989 Relative to 1988 and 1985]

     Romania possesses many of the raw materials necessary for a highly
diversified chemical industry (salt, natural gas, crude oil, coal, timber). It
currently produces a wide range of plastics, synthetic rubbers, artificial
fibers and yarns, chemical fertilizers and plant regulators, pesticides,
biostimulators, pharmaceuticals, dyes, sodium and chlorosodium products,
sulphuric acid, carbide and detergents. The Romanian chemical industry now
supplies over one-half of all Romania's basic chemical needs and is
expanding rapidly. Western investment, co-production and joint ventures
are actively sought in this area.

     Romania's major fertilizer works are located at Navodari, Roznov, and
Fagaras; factories for sodium products at Govora and Borzesti, and for manmade
fibers and plastics at Savinesti.

     Although the Romanian chemical industry had relatively high production
over the past several years, the country suffered from chronic shortages
of chemicals in its domestic market. This was accounted for not only by
the heavy emphasis on exporting everything which could be sold overseas,
but also on processing bulk commodities at the expense of fine-synthesis,
small-tonnage products. This, in turn, resulted in a growth of production
of about 6 percent in overall tonnage between 1986 and 1989. However, the
industry increased its energy consumption by over 20 percent during this
same period.

     While Romania remains a major chemical exporter, it is attempting to
become more self-sufficient in some areas. Major targets for self-sufficiency
include chemical and biochemical intergetics technology and alternative
energy sources (biomass and catalytics).

     Also included in this area are organic pigments for textiles,
detergents, etc. Foreign technology is actively sought in these areas. Rubber
and elastomer is currently beyond the R&D stage in Romania and substantial
production is anticipated. Romania hopes to be a net exporter of synthesized
rubber products.