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Vol 2, No 39
13 November 2000
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EC Progress Reports 2000EC 2000 Progress Report on Romania
Catherine Lovatt

Romania has immense potential. With a well-educated population of 22.6 million, it is one of the largest countries of the former East European Communist nations, it has a large agricultural base, and it has the potential for strong industrial growth. But somewhere things are going wrong.

The "2000 Regular Report from the Commission on Romania's Progress towards Accession" was only too clear in pointing out what is wrong. Although there are some positive developments, the conclusions of the Report can only be described as depressing.

Political complications

Political developments seem to be one of Romania's few strong points. The Report emphasises the fact that Romania is committed to democracy and the rule of law, with well-established democratic institutions. The structure is in place, but, unfortunately, the decision-making process is fraught with the complexities of transition.

The fragility of a multi-party ruling coalition showed its true colours in 1999 when the government lost its majority in the Senate, the upper chamber of parliament. The government has, therefore, had to rely on emergency ordinances to pass essential reforming legislation.

The legislature is dogged by bureaucracy and lacks an organised and efficient consultation process. In the past year, only 59 of the 453 draft laws, ordinances and emergency ordinances submitted to parliament were adopted. Delays in the legislation process have had a detrimental knock-on effect on the economy and society.

Nonetheless, the Report did praise Romania for finally enacting the Civil Service Statute. In terms of administrative capacity, Romania has now met its short-term Accession Partnership priorities. However, the structure has to be built upon in order for developments to continue. With the likelihood of former Communist Ion Iliescu and his "leftist" Party for Social Democracy (PDSR) being elected in the 26 November presidential and parliamentary elections, there is some doubt as to whether these reforms will progress.

Wobbly economy

The delays and inefficiencies of the legislative process have severely damaged Romania's macroeconomic development. The Report states: "Romania cannot be regarded as a functioning market economy and is not able to cope with competitve pressure and market forces within the Union in the medium term. It has not substantially improved its future economic prospects." (p 87)

Not through want of trying, Romania's economy is regarded to have slipped backwards during the past year. The EC acknowledges that Romania is aware of the need for economic reform, but the economic infrastructure is not in place for any real progress to be made. The institutions required to oversee and stabilise the economy are either non-existent or too weak to be of any benefit.

The Report emphasises concern over privatisation. Progress has been slow and sporadic, and many enterprises are still awaiting restructuring. The privatisation of the banking sector has been hazardous and is incomplete. "A number of crises in the banking industry demonstrate that the effective supervision of financial services still has to be considerably strengthened." (p 88)

Indeed, the troubled BANCOREX, the third largest bank in Romania, had to be propped up by the Romanian National Bank in order to prevent a devastating national financial crisis, and the collapse of the National Investment Fund (FNI) has destroyed any stability in the sector, with investors losing all confidence in the financial structure.

Although 80 per cent of the agricultural sector is privately owned, the Report stresses the need for major structural reform. The implementation of EC agricultural acquis has not occurred. The Ministry of Agriculture is administratively ineffective and is unable to implement the necessary reforms.

Social ills

The poor state of the economy and the lack of reform has had a detrimental effect on society. Rising unemployment, high inflation and relatively low wages have encouraged the growth of the black market. There have been few social reforms. Education, healthcare and social security improvements have largely been neglected. It is hardly surprising that discontent is growing.

The EC have stressed serious concerns over Romania's discrimination towards the Roma minority, their lack of progress on child welfare issues and Romania's poor environmental record this past year. However, it has been recognised that Romania is trying to resolve these issues.

Corruption is a major area of concern. Corrupt practices at all levels are undermining the legal, economic and political systems, and this is resulting in a general lack of confidence. Although numerous initiatives to control corruption have been implemented, it continues to be rampant and is clearly out of control.

Some good news

Despite its negative stance, the Report is not all doom and gloom. It acknowledges Romania's progress in speeding up legal procedures passing
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through the courts. The judiciary are now financially independent, and the profession is more attractive to newcomers. Training programmes are in place, and new legislation is helping to reduce the backlog of festering cases.

The Report also notes that Romania has made considerable progress on company law and competition, the latter of which has "achieved a high degree of compatibility with the acquis." Progress has also been made in the transportation sector.

Perhaps the most encouraging advancement has been a rise in exports. In other countries around the region, this was the first sign of an economic turnaround. Hopefully, Romania is on the brink of something much more positive.

Accession to the EU is a major priority for Romania. During the next year Romania will have a plethora of challenges to overcome. However, at present, it is difficult to see how Romania can turn itself around in order to accede to the EU within the next ten years. Nonetheless, there is a glimmer of hope on the distant horizon.

Catherine Lovatt, 13 November 2000

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