The industrial output has been declining for the last few months of 1999, especially the production of energy. What are your plans to strengthen the industrial sector and to actually increase its production?
First of all, I would like to explain to you that the industrial output has declined because before 1989 we used to produce different kinds of industrial goods based on the COMECON system. This was a special market, with special arrangements for payments which were centralized and decided by some political leaders, not by the market. Because of that our heritage in the industrial field was very inappropriate for the market economy in today's Europe. In light of this, many of the Romanian industrial companies should stop different parts of their production entirely, or change it completely. In some other countries they very quickly understood this idea and they had the power to restructure immediately. In Romania the political forces did not dare to be so tough. So we could say that this was a long illness with very heavy results.
A second factor is that before 1989 Ceausescu decided to pay all his debts. Because of this he did not import anything for a long period. As a result, all the technologies were very old, they were behind the times and did not make the usual repairs. Even the technical status of the Romanian industrial companies was very low in 1989.
Romania did not have any kind of foreign debt in 1989. However, it had an industry which was totally destroyed. This decline was mainly due to these two factors I have mentioned. So, the effort to change almost everything, from the mentality of the managers to the sources for buying products such as raw materials, improved the quality of the products as well as the ability to compete at European levels. It was a very difficult process which is not even finished today, and this is the main reason for the decline in industrial output. Because of the decrease of industrial production, the demand for energy and gas is also very low, which is normal since our domestic consumption of electricity and gas was higher and higher each year for the last ten years. However, the industrial consumption was lower and lower. Because of this combination, production was lower and this is the main problem which affects the Romanian economy.
What we try to do is to force a very low price for energy in order to improve consumption. By setting a very low price for energy, we also help the economy, mainly the heavy industry because in some industries the cost of energy is half of the price.
A second idea is to strongly support industries which are based on different kinds of resources in which Romania is rich, such as wood. We are very good at processing wood, producing furniture and similar thigs. Romania is also very rich in minerals, oil and gas. We have some advantages and we try to focus on them by helping those industries that are in a good position. We hope to reopen our relations with some countries, relations that were interrupted with countries such as Egypt, Algeria, Ukraine or China, countries which are not at a very high level, where our products can find a market because they are of good quality but not expensive.
You mentioned you want to encourage the industries to use Romanian natural resources. Can you be more specific about that? What kind of goods are we taling about?
I am talking about consumer goods, like furniture for example. We try to improve a little bit even in building materials, because Romania will need many constructions, especially housing, and here we have all the raw materials we need, such as cement, etc. We are trying to support them in order to help them grow faster.
Privatization is one of the topics most talked about in Romania. It looks like it has slowed down lately, however there are still a number of companies to be privatized.
The main priority here is to find buyers, because privatization is like a marriage; you can have a daughter who is to be married, but you need a guy to come and ask for her hand. We have many companies to be privatized, but there are not so many foreign investors interested to buy those companies. That is because we did not do the restructuring before offering these companies to be privatized. The idea was to sell the companies as they were, and to leave the restructuring process for the new investors, for the new owners. This is not a very good idea, because the new owners do not dare to kick out many of the employees since they are afraid of strikes and that sort of things. Usually they ask for the restructuring to be made by the Romanian authorities, and only then they start negotiations for buying the company. For nine years this was the main problem. Now we are trying to switch, but in some instances we may be too late, and now we no longer have the financial possibilities. Restructuring means money and it is true that if you invest a small amount of money, you restructure the company and then you privatize it, you can get more money than originally invested. However, we no longer have the capital to invest, so now it is very complicated to restructure and then to sell, because we do not have the necessary funds.
Right after 1989 we had enough money to start restructuring some companies, We could have sold them and with the money from the sale we could have restructured some other corporations. We have come up with some measures at the present, we decentralized the privatization up to the lowest level. That is the privatization is to be made by the local authorities, not by the central one. In each region, (we have 42 regions called "judet") there is a representative of SOF (State Ownership Fund). They have the ability to sell, to privatize all the small and medium enterprises up to a certain level, and only the big enterprises are privatized by the SOF in Bucharest. This proved very helpful because many of the small enterprises were privatized very quickly.
The wars in Yugoslavia have unfortunately affected your economy and trade. How is Romania coping with these losses cause for something it is not responsible for. Is the international community, especially NATO countries, helping at all?
No, for the moment they do not help at all. We would prefer to be a NATO member than to be helped by economical means. And if they would admit us at the right moment, maybe we could advise them better on what to do in Kosovo, in former Yugoslavia, because their decisions were taken at a very high level. They did not know exactly what were the feelings, the history... These kinds of things are important. They decided from above, just like that. Romania is very interested to be a NATO member because in our history we were many times in a weak geopolitical position - a no man's land. We were conquered by the Turks, then by he Russians, then by others, so our geographical position was too many times in our history at the cross-roads of different interests. Thus we want to become members of a powerful force and to remain there. For us, NATO membership means safety for Romania, but for the moment they prefer to introduce Hungary, the Czech Republic and Poland, and we are on the waiting list. Nevertheless, our behavior was exactly as if we were members. We gave them the permission to fly with their planes over Romanian territory, to land, to use some airports, anything they needed. Because of that we have now plenty of problems with the Serbs. | Before this, relations between Romania and Serbia were always neutral. They were our safe neighbors. And now, even after the war, our relations have suffered because they prefer not to trade with us and to pursue reconstruction with other countries rather than with Romania. Yugoslavia is very angry with us because when somebody is striking you, he strikes you. But when a very good and old friend is striking you, it is even worse. So now we have a problem with them and this means more and more losses for Romania. The crisis has stopped but our losses continue.
For centuries Romania has been at the cross-roads between Russia and Turkey, Central and Western Europe, Northern and Southern Europe. How can you use that strategic position to your advantage?
When you have a strategic position and you are wealthy enough you can use your strategic position to your advantage. When you have a strategic position and you are weak everybody is using your strategic position for their advantage, and this is not very helpful for the country. Everybody wants your strategic position. Sometimes, it is not very pleasant to have a very strategic position. When you have all the resources, all the raw materials, everything you can find in Romania, you can imagine that many powerful countries want to get them. We are speaking a Romance language because we were originally conquered by the Romans, and after them everybody else wanted this territory. Now we are trying to use this strategic position to our advantage in the transport area and international trade thanks to our access to the Black Sea and to the Danube.
Romania is interested in becoming a full member of the European Community. What are your prospects regarding the Helsinki summit, if we take into consideration the support given to your country by France, Great Britain, Italy, and others?
We know that for us it will be a very heavy task to accomplish everything we need in order to be members in the E.U. Yet what is important for us is to feel that there is an open door. If E.U. officials say: "OK, you can join, but you have to accomplish these 250 reforms before you can become a member", this is all right. It may take 5 to 10 years, but it depends on Romania. In this case we will have a motivation. And even for the Romanian politicians it will give us the possibility to say: "Look, we should do it like that because we want to be in the E.U., you should work more, you should ask for less", things like that. And it will be a good thing for Romania.
What is your feeling about your membership?
We hope for the best, and we have all the information that they will decide to open the door for many countries, including Romania. And this is good news for us because I am sure that the Romanian people can be more motivated if they have a goal, an important goal. If you take sports as an example, as football and gymnastics, the Romanians have shown to everybody that when Romanians are very motivated, they are capable to put a lot of energy in reaching a target.
What do you think that Romania can actually offer to the E.U.?
We can offer an important market. We can offer a very good, very skilled and highly educated labor force. We can offer stability in the region, which is very important. If Romania is considered for the EU and NATO membership, I can tell you that there will be peace and quiet in the Balkan region, because we know how to handle it. We also have other advantages, for example in tourism, which is also important. So I think it will be a win-win situation if we can make this deal. But the deal will be long enough and it will be very tough for the Romanians.
Petrom is probably the largest Romanian company, and it is in the first stages of its privatization process. However, there have been far too many changes at the top. Why so many changes?
I am afraid that this is a misunderstanding. The changes were only in the board of administration, not in the board of directors. None of the people who run the company have changed for many years, and I have changed only the formula for the board of directors. First of all, I changed them because I was given advice from Rotschild ABN-AMRO, which is our investment bank for the privatization and our consultants. And they even told me very softly that I should make some changes, and place in the board of administration people who are skilled in international relations, negotiation, foreign languages, presentation of the company and similar things. I chose some people, but unfortunately two or three of them were incompatible, so I had to change them after a week. This created the negative impression that every two weeks we change something. When we had a board of administration a month ago, I changed three of them (out of 7) but we found out that they had different kinds of interests in the oil sector, and I had to change them after a week. Replacing them was not very easy, but we found some others and I appointed them yesterday in their respective positions, so now they have the board of administration. The managers, the executives remain the same.
You mentioned certain old markets you intend to reach again. What can you offer to them?
There are markets where Romania was very present before 1989. For example Iran, Egypt, etc. In countries like these, Romanian tractors were sold in the tens of thousands and now we want to reopen relations with them a little bit more. We need to find out if the products we used to export are still competitive, what products they need, and what we can offer them. International cooperation was very high in those countries. We built refineries, even harbors in countries such as Morocco, then we constructed huge plants, cement factories. These types of projects are still possible. We have also been drilling in some countries because we are very strong in the oil field equipment.
From my point of view it is easier to re-establish ourselves in markets in which we were present in the past, rather than to export to France, Germany, and the UK, countries with which we have important export activities. In fact, over 60% of our import-export relations are with the E.U. countries. For instance, we have US$ 4 billion of yearly exchanges with Italy: we import US$2 billion, and we export about the same amount, give or take 10 or 20 US$ million. So we are at the same footing.
Do have any message for our readers?
My message is that those who will come to Romania now, they may encounter small problems, but they will be very glad in a few years. I am sure of that. Some investors are waiting and saying that there are some problems and difficulties, but if they come they will find that Romania is occupied by active and dynamic people |
Ministry of Industry and Trade 