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|  Romania
the awakening giant of Europe |
 Looking for lost prosperity - 1997 : A mixed performance - Rebuilding the Country -
Major Infrastructure Projects March On - The Tough Game - No Pain, No Gain -
The Young Wolves of the Private Sector - What's Next? 
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Interview with
Mr. Dimitriu
Chairman of the board of administration of State Ownership Fund
November 22, 1997 |
QUESTION : Focusing on the state privatization fund we have seen that SOF has a new part of priorities in privatizing the companies and with a new speed. What are the different means that the SOF is using in order to privatize the companies?
ANSWER : I think that some figures are relevant . Within the ten months time period since the new Board of Administration is in place ,we privatized a number of companies 3 times bigger than the number of the companies privatized in 1996 an
3 times larger with respect to the shared capital than those privatized in1996. We have diversify the methods of privatization. SOF has floated on the Stock Exchange and on the Secondary Stock Exchange equity interests of the companies in our portfolio. Through the USAID we have benefited and we still are benefiting of the assistance of the US Government
.We have also use the privatization through large international investment Banks as an other mean of privatization. This speed was also possible due to the fact that the SOF could sell the company shares at the market price ,not at the book value. And I think that these elements granted us the possibility of achieving a faster speed .We have passed from passive offering to a proactive offering , through our business centers abroad and through conferences and seminaries for presenting the Romanian offer ,organized in European and Asian countries . We did this in Germany, Spain , Italy, Greece, Japan and China. We intend to extend this program to the US and Canada in the next year.
Q : So, we can say the in terms of number of privatized companies the actual leadership of SOF has clearly overcome the former one. But what particular privatization method yielded the best results in terms of speed and also revenues?
A : I think is relevant to make a necessary comment upon privatization
. I think that the revenues are not a special objective of the privatization because the aim of privatization is achieving n efficient , profitable company after it has been privatized ,and there is an investor that has a defined financing for each project .The investor splits the financing among what he pays to SOF for the shares and for the investments he makes in the company. The previous management of SOF laid a great importance on the price get for the shares. We , the present management focus on the investment volume committed by the investors in the company because Romania’s best interest is to have an efficient economic structure. So this is the new vision of privatization . In what concern the most successful mean of privatization , I think that direct negotiation is more successful and more frequently , although , normally, is the Stock Exchange that should have been the most successful method. But the Romanian Stock Exchange is only in the beginning and we can’t speak for the time being about a real market economy in Romania. For this very reason SOF aims that in the beginning of the next year part of privatization will be made by floating companies in our portfolio on the Stock Exchange abroad. Within this respect we are having negotiations with the London Stock Exchange where we have identify the interest for large industry and with the Athens’s and Salonic’s Stock Exchange for agriculture business and part of the light industry. We think that by these means we shall also increase the speed of privatization.
Q : I will think that he SOF is responsible for all the companies that are going to be privatize so there are many different sectors?
A : To be more specific SOF is the manager on behalf of the state for the entire economy starting with the Banking system , the Insurance industry and the entire industry.
Q : That was the focus of my question .Is there a sectorial strategy for the different sectors ,for the Baking System?
A : We have developed specific strategies for each branch , sector and industry in the Romanian economy .So, there is a strategy for the Banking system , for any system in the industry including Development and Privatization strategic sectors. When developing these strategies we have also benefited of the assistance of international consulting companies. Most of these advisers we had have offices here in Romania.
Q : Can we say that is there any selection criteria for submiting to privatization to a particular company?
A : Yes there are specific criteria and they are clearly stated in the tender books we issued for the companies.
By the way , the entire privatization activity in Romania has been organize by benefiting of foreign assistance. And it is in full compliance wit the international norms
, principles , rules and regulations so there is nothing particular to Romania with respect to international customs . And I kindly ask you , and I insist in asking you to state in your report that there is no protection for a Romanian investor , for example there are the same terms and conditions for any investor attending privatization irrespective of his nationality , country ,origin ,either Romanian or foreigner.
Q : Yesterday we were with the Ministry of Trade and Industry and he even said that the foreigner investors have special advantage and they are not very happy that maybe a new decree is going to be done in order to make equal both foreigners and Romanians because Romanians felt discriminated with this law.
A : There has been a certain unsatisfaction on behalf of the Romanian investors because they don’t enjoy a particular treatment and Mr. Minister Tariceanu is one of the Romanian investors , he is a business man , that is the unhappiness. But the Government has taken the political decision of giving an equal and fair treatment to all investors because no investor should have a different treatment . There is a preoccupation of certain parties to promote a new law favoring local investors to be more specific is the National Liberal Party . I am myself a democrat-christian and my Party and I think that within this stage Romania economy can be rehabilitated only with real money , real capital and a real necessary fast speed. The Romanian investors do not have the financial power , they are not to be blame but they do not have the necessary strength . And feelings should have nothing to do when taking economic decisions.
| Q : Focusing now on the different country investors that came to Romania .What is the country structure so far and what is his perception towards American investors?
A : Unfortunately American investors are not very present in Romania , there are present European investors and there is a large number of Asian investors . For example Korea is one of the very attractive countries , making very good offers . Practically speaking America has achieved two important projects namely : Policolor Company which is a painting company and was bought by Romanian-American Fund and the Brasov Helicopters Company bought by BELL HELICOPTERS .These are the significant American participants here in Romania. We hoped for Hyatt to appeared here ,there are negotiations on the way , but the presence of significant American capital in Romania stops here . Maybe one of the reasons is the lack of our offer in America and for this reason we have thought about making next year the proactive offensive.
Q : Those are two cases Policolor and Brasov Helicopters , but how will you describe the business attitude of the American companies towards Romania? Do they study the market , do they compare with other East European countries , are they prepare to invest in other countries or the are not coming at all?
A : I think that American partners are still making prospections about Romanian economy . We have had lots of contacts with American partners , but they haven’t been finalized by initiations and negotiations . For example we are negotiating for large privatization project for Petromidia Refinery , the World Investment News Ltdr of the tender is an American Consortium ,called Petromidia US but this negotiations have been lasting for long and within this time the American partners gathers new data , further information and this incurs delays in negotiations . Privatization is a economic necessity for Romania because by delaying privatization it will become impossible to privatize certain companies within certain industrial fields because they become less and less attractive. And these makes the SOF speed up the privatization and even have to initiate negotiations with the second or third rank investors in the tenders. And usually most of this second or third ranked tenderers came from Asia . It is obvious that even for political reasons Romania doesn’t want the privatization with Asia but from the economic point of view we still have to do it . For example we sold one of the best siderurgical companies , maybe the best one , to the Samsung Group , although highly reputable companies such as Krupp attended the competition . But the Samsung offer was much better and the negotiations with Samsung Team was very serious.
Q : What I think also is that the golden opportunities in Eastern Europe for privatize company are in Romania because all the golden opportunities in Czech Republic , Hungary , Poland, have been sold already . So I may believe that also the investors should see that the golden opportunities for privatize companies are now in Romania .
A : I think there are other elements as well that make Romania an attractive country at least for this area . Romania is the only country that had solve the ethnical , religious and border problems . It is the only country that has non aggression treaties with all its neighbors and this treaties have been concluded this year by the present Government . And another element that renders very attractive the Romanian offer is the market .The Romanian market has 23 millions people. Geographical location is another important element . The presence both to the Danube River and the Black Sea render possible the access to all kind of merchandises and goods to the heart of Europe through the Danube channel and the Danube-Black Sea channel grants direct access to the fluvial channel.
Social and political stability should be added to very these important elements rendering Romania most attractive . Of course there are street movements and is natural to have them where are left-hand forces , is good to have these forces and is good to have them is natural for the people to manifest themselves and is prove of the existence of a real democracy .So , these are no problems these are normal ,natural issues . And there is another aspect related to social stability : Ciorbea’s Government measures are extremely severe . So , apart from the Mining sector reform you are familiar with , I will provide another example : in an industrial city such as Braila we shut down three large industrial complexes , that mean about three quarters of the city’s labor force .
Of course there were slide social movements but for only one day. The Mayor of Braila is a member of the Socialist Party but they still weren’t any union movements. The statistics you have read about prove that the reform enjoy the support of 70% of the population . And I think that all this elements grant attractivity .
Q : In a more personal issue we have been told that you are the rising star of the Romanian political and economic scene . What is the most satisfying personal achievement you have done? You and your team , of course?
A : I will like to share with you my personal achievement. Of course in any country the person leading the privatization is suspected to benefit of certain personal facilities and so on .For example we privatize a Bucharest company with a Greek investor : there were three strikes ,parliament interventions letters were sent by certain parliament commissions for blocking the privatization , there were demonstrations under my windows . But the privatization was made and I ,myself signed the Privatization Agreement
. After one month I have received a letter for the people that were doing the strike , they were thanking me in my letter for having strength and for having signed the privatization contract. So , this was a personal satisfaction . Now coming to the satisfaction of our team , this come out from the fact that during this period we have signed the most significant contracts in Romania in the last 7 years and from the fact that we signed the most important contract in the Central and East European countries : we have privatized about 55% of the Cement industry . It was the French company LAFARGE that won the tender .This project is worth more than 400 millions USD and by this , by our information , it ranks the first among the privatization projects achieved in the Central and Eastern Europe in 1997 . We could even overcome ourselves by achieving the Petromidia project.
Q : So these are good prospects I hope that you will close very soon
.That Petromidia which has been negotiations for a long time .
A : And by closing this project thanks to the size of the project to the size of the project the US will be ranked first among the investing countries .
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© World INvestment NEws, 1998.
This is the electronic edition of the special country report on Romania
published in FORBES
Magazine's enriched with complementary information,
such as full interviews, detailed company files and more.
June 1 st 1998 issue
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