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Monday, 12 August, 2002, 09:59 GMT 10:59 UK
Red tape 'shackles' Romanian firms
Army tanks in Bucharest during the revolution
Romanians found, after the revolution, that their economy was in tatters

Unlike some of the other former Eastern European countries, Romania is still struggling to find its feet 13 years after the collapse of the Ceausescu regime.

Local and foreign investors are critical of the government and the unpredictable way it runs the economy.

Romania is among a list of countries hoping to join the European Union.

But it still has to do more than most to get its name on the membership list.

Empty state coffers

The metro in the Romanian capital, Bucharest, is an efficient way of getting around.


We've achieved a lot over the last 12 years but we face a lot of bureaucracy

Dumitru Simion, Gimsid

It is one of the few beneficial legacies from the times of the communist dictator, Nicolae Ceausescu.

After the revolution in 1989, Romanians discovered the true state of their economy - out-of-date factories and empty state coffers.

Tucked away in a back street is Gimsid, one of the first private companies to set up after the revolution, in 1990.

It is an agent for various Western firms and, using a European Union grant, recently invested in a high pressure water cleaning jet.

But Gimsid's vice-president Dumitru Simion says Romania's government is not doing enough to help.

"We've achieved a lot over the last 12 years but we face a lot of bureaucracy," he says.

"We can't sit down and make a business plan because the law changes half way through.

"We can't even buy another water jet because bank interest rates are too high."

Keeping up

Tourists visiting another Ceausescu legacy - his huge House of the People - have to pay a 19% tax on hotel and restaurant bills.


Foreign overseers such as the World Bank and the IMF put stringent controls on the government of Romania with regard to its budget deficit

Gilbert Wood, consultant

The tax was introduced this summer even though Romania has minimal tourism figures.

The government also says the 5% tax on exports is to increase to 25% by 2004.

Philip Cox, who owns a vineyard near Timisoara, said the legislative framework is changing so often that even the people who work in the tax system do not know what to do.

"Very often we find things have happened, various changes in the way the laws are applied, after the event and then we get penalised retro-actively," Mr Cox says.

Balancing pressures

Some lay the blame at the feet of the international money institutions.

A recent cartoon depicted the Prime Minister being told the IMF was refusing to release a loan because he hadn't yet laid off the whole of Romania - referring to the jobs being lost as companies close or are taken over.

Consultant, Gilbert Wood said Romania has to balance the pressures.

"Foreign overseers such as the World Bank and the IMF put stringent controls on the government of Romania with regard to its budget deficit," he said.

"The government is forced to look backward into their policies and tries to figure out how to generate additional income in order to close the budget gap."

Praise

Romania has won praise for its privatisation programme and for attracting foreign investment.

A Romanian farmer with horse and plough
Romania is a green and fertile country

Jonathan Schaale, head of the European Union delegation in Bucharest, says the country is also working hard to comply with the requirements of joining the EU.

"They recently adopted a programme for improving the business environment which includes a range of issues - one of which is to move all foreign investment issues into a single agency which has been newly set up with a very young and dynamic official leading it," he said.

"So I am hopeful, optimistic even that we shall see some improvements."

Enormous resources

Many Romanians keep livestock and grow their own food.

The animals are fat and healthy and Westerners would queue to buy the vegetables.

It is difficult to comprehend the mismanagement that has left Romania, a green and fertile country, one of the poorest of European countries.

Jonathan Schaale said Romania has enormous resources which need to be developed.

"When you look back before the war, Romania was the granary of this part of Europe," he said.

"So it has a lot to offer in terms of economic development for the European Union."

Romanians are keeping their fingers crossed that the country will be invited to join Nato later this year, and that a prospective date for EU for membership will follow.

They believe this would concentrate the minds of their government and encourage more foreigners to invest.

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 ON THIS STORY
Penny Young, Bucharest
"Many Romanians keep livestock and grow their own food"
See also:

05 Aug 02 | Business
28 Jun 02 | Europe
08 Mar 02 | Country profiles
07 Nov 01 | Business
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