GOVERNMENT OF ROMANIA
NATIONAL REFORM PROGRAMME
ANNUAL IMPLEMENTATION REPORT
1 October 2008 – 1 October 2009
October 2009, Bucharest
Table of Contents
INTRODUCTION
EXECUTIVE SUMMARY
1. STRENGHTENING THE ADMINISTRATIVE CAPACITY
1.1 Efficiency of public administration
The restructuring of government agencies
Defining the reform requirements for the key ministries
Implementation of the Action Plan for Better Regulation
Modernization of the public administration
1.2 Management of Structural Instruments
1.3 Modernising the judicial system
2. MACROECONOMIC POLICIES
2.1 Macroeconomic stability
Macroeconomic Developments
Monetary policy and financial stability
Strengthening budgetary and fiscal policies
2.2 Management of governmental expenditure
Management of public expenditure
Restructuring the public pensions system
Health system reform
3. MICROECONOMIC POLICIES
3.1 Enhancing economic competitiveness
Research, development and innovation
Competitiveness of industrial products
Communications infrastructure and information technology
Transport infrastructure
3.2 Improving the business environment
Administrative capacity of regulatory authorities
Competitive environment
Business infrastructure
Better regulation for investment stimulation
SMEs financing
Facilitating the access to/ exit from the market of the enterprises
4. EMPLOYMENT AND EDUCATION POLICIES
4.1 Policies for Employment Stimulation
Active employment measures
Increasing the adaptability of enterprises and employees
Active social inclusion and equal opportunities
Employment in rural areas
4.2 Developing the administrative capacity of the Public Employment Service (PES)
4.3 Fighting undeclared work
4.4 Developing the continuous vocational training systems (CVT)
4.5 Improving the education system
Education reform
Improving the quality of education
Ensuring the access to education and preventing early school leaving
The education system infrastructure
Education computerization
4.6 Promoting lifelong learning
4.7 Ensuring a smooth transition of youth from school to labour market
5. ENVIRONMENTAL AND ENERGY POLICIES
Energy efficiency and the promotion of renewable resources
Interconnection with European energy networks
Improving the environmental infrastructure (water/waste water)
Preserving biodiversity
Climate change
Protection of the atmosphere
6. CONTAINING THE EFFECTS OF THE ECONOMIC CRISIS
6.1 Anti-crisis measures of the Romanian Government
A. Measures for re-launching and stimulating the economic growth
B. Measures for financing the economy and increasing the liquidity
C. Social measures
6.2 Implementing the provisions of the Memorandum of Understanding between the European Community and Romania
A. Fiscal consolidation
B. Fiscal governance reform
C. Monetary and financial sector policy
D. Structural reforms
LIST OF ABBREVIATION
INTRODUCTION<0}
The National Reform Programme 2007–2010 (NRP) translates at national level the Lisbon Strategy and represents a real post-accession strategy for Romania. The proper use of this instrument, by means of assuming the necessary and realistic reforms in the context of European efforts to achieve the Lisbon Agenda goals, allows the coordination of national approaches to modernise the Romanian economy and society and supports the economic and social convergence with the other EU Member States.
Close monitoring of national implementation of the Lisbon Strategy allows, on one hand, focusing and harmonizing national efforts to ensure compliance with the commitments under the NRP, and on the other hand, facilitates both early warnings on possible delays or slippages in the implementation of planned measures and initiation of corrective actions.
For monitoring needs, the NRP implementation is articulated around the Action Plan for the Implementation of NRP (AP), which covers a period of two years and is updated annually after the publication of Evaluation of the Lisbon Strategy implementation in the EU Member States and the euro area report by the European Commission (COM).Mainly, action plans are designed to lead step by step to the achievement of the reform objectives set out in the NRP, in a controlled and synchronized manner, so that to ensure the efficient use of implementation resources.
The actions defined in the AP include the Romanian authorities' response to country-specific recommendations(CSRs) formulated by the European Commission in the annual evaluation report.
Due to the slow implementation of the NRP in 2008, the country specific recommendations for Romania published by COM on 28 January 2009 remained broadly the same as those formulated in December 2007. They address the following objectives:
a)strengthening the efficiency, effectiveness and independence of the public administration, at both central and local level, by building up effective regulatory control and enforcement capacity;
b)tightening fiscal policy and implementing a binding medium-term fiscal framework; revise the composition of expenditure to increase the share of growth-enhancing spending inter alia by reducing and redirecting state aid to horizontal objectives and keeping wage developments in line with productivity growth;
c)implementing measures to substantially reduce administrative procedures and delays in obtaining authorisations, in order to improve the business environment and reduce sources for corruption;
d)improving the quality and labour market relevance of the education and training systems, including lifelong learning; reduce early school leaving, and facilitate the transition of young people into employment, including through work-based training.
Immediately after the publication of the COM evaluation report, DAE made a first analysis of the country-specific recommendations. The aim of this analysis was to define new actions to be placed in AP, in order to apply the country-specific recommendations and to recover the accumulated implementation delays of 2007 and 2008.
As a result of the analysis process, DAE experts have elaborated a draft Supplementary Actions Plan (SAP) structured according to COM recommendations, consisting in concrete reform measures designed for each institution responsible for NRP implementation. The SAP draft was discussed within the Lisbon Strategy Working Group and agreed with the representatives of institutions responsible for NRP implementation.
During the period March – April 2009, SAP was completed with information describing the stages of actions for which the responsible institutions already started the implementation process since early 2009.
In the same period, DAE issued for public debate the SAP draft.On 3 April, debates were organized in the Romanian Parliament with the Commission for European Affairs of the Parliament.
Following the consultation process and the precise suggestions made by partners in academia, trade unions, employer associations, DAE had several rounds of talks with representatives of the ministries in order to update certain areas of intervention included in the actions plan.
Due to DAE’s initiative, during the month of April, the SAP draft was discussed at sectoral level within the Commissions for Social Dialogue in all ministries. Following these debates the draft actions plan was assumed by the social partners as well. This draft of the SAP was adopted by the Lisbon Committee on 28 June 2009.
Following the completion of this process, the Supplementary Actions Plan was submitted to SG COM in June 2009, for review and comments. SAP provisions were also discussed with some of the implementing institutions in the context of the mission organized by representatives of COM in Romania, on 2 – 3 July 2009.
Following the consultation process with all stakeholders and considering further implementation of actions taken from the Action Plan for implementing NRP in 2008 – 2009, DAE experts have developed a consolidated version of the Action Plan for implementing NRP in 2009 – 2010.
This AP integrates the following components: the actions taken from the Action Plan for Implementing the NRP 2008 – 2009; the actions included in the Supplementary Actions Plan resulting from the analysis of the Country Report (2008) of the COM and the ones derived from the conditionalities of the Memorandum of Understanding signed in June, between Romania and the European Community.
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The hereby Implementation Report of the NRP was elaborated under the coordination of the Department for European Affairs of the Romanian Government with input from all ministries and institutions participating in the Lisbon Strategy Working Group. The draft report wasdebated and approved during the meetings of the above mentioned working group and endorsed by the Romanian Government Cabinet on 14October 2009.
The report covers the period October 1 October 2008 – 1 October 2009 and is structured on intervention areas (public administration, macroeconomy, microeconomy, education and employment, environment and energy, anti-crisis measures); it describes systematically the relevant actions taken by the Romanian authorities to implement reforms under the NRP.
EXECUTIVE SUMMARY
Romania faces a more severe economic downturn than originally anticipated, mainly due to the adversity of the external environment. Although the implementation of the anti-crisis measures – adopted by the Government in February 2009 – led to the normalization of the financial conditions, contraction of economic activity was higher than originally forecasted.
For the whole 2009 year, it is expected a contraction in the economic activity of approximately 8%. Accordingly, for 2009, lower earnings in consolidated revenues by approximately LEI 17.4 BN to the revised budget in April are forecasted, due to lower revenues collected from VAT, social contributions and non-fiscal revenues. Moreover the consolidated public deficit will amount to 7.3% of GDP, respectively 8.1% according to IMF estimations.
Accordingly, the Annual Report of Implementation of National Reform Program (NRP) describes the main achievements recorded by Romania during the period 1 October 1 2008 – 1 October 2009 in the key areas of the Lisbon Strategy: macroeconomy, microeconomy, education and employment, environment and energy efficiency. A specific chapter was devoted to public administration, whose efficiency constitutes the corner stone of the implementation of reforms in other policy areas, and another chapter includes a description of the anti-crisis measures initiated by the Government.
Due to the fact that specific actions regarding the conditionalities of the Memorandum of Understanding between the European Community and Romania were introduced in the Action Plan for NRP implementation, this report comprises a distinct section for the accomplishment of these conditionalities.
As regards strengthening the administrative capacity, the Romanian Government's efforts focused on continuing public administration reform, judicial reform and improving management of structural instruments.
In this respect, the Government has assumed responsibility over the Law on the reorganization of public authorities and institutions, streamlining public expenditure and supporting the business environment; has initiated dialogue with the World Bank to conduct an operational analysis on the efficiency of the activity of central government institutions and continued the steps to achieve administrative coding (Administrative Code and Administrative Procedure Code).
Moreover, in the process of implementing the Better Regulation Strategy and its action plan, the identification of informing obligations was completed in June 2009. Based on this process, the measurement of the administrative costs at national level can start from now on. Another component of this strategy aims to improve the ex-ante impact assessment of regulations, by introducing impact assessment methodologies in the fields of health and education. The development of these methodologies is achieved through a Phare project, and the process is expected to be accomplished in November 2009.
The Romanian authorities have given further impetus to the process of judicial reform, focusing their efforts on measures to improve the courts management and judicial system infrastructure.
In the context of developing information society services, the Romanian authorities have taken action to improve the quality of public services for citizens and businesses by extending the functionalities of the e-governance component within the National Electronic System.
Significant financial efforts were made to increase the administrative capacity of structures involved in the management of structural funds, by the allocation of additional positions, recruitments complemented by training measures.Due to the sustained efforts of the Romanian authorities, the managing and control systems for all seven Operational Programmes financed under the Convergence Objective have received the accreditation of the European Commission.
The actions aimed at increasing the structural funds absorption capacity were focused on the identification and implementation of certain measures for the simplification and acceleration of the implementation process. A special attention was given to the harmonization of procedures, facilitation of beneficiaries’ access to the necessary financial resources for project implementation by pre-financing, and to the simplification of the administrative requirements for the potential beneficiaries.
All these measures allowed a visible intensification of the Operational Programmes implementation process in the reference period, especially in 2009.
Maintainingmacroeconomic stabilityand a closer monitoring of the public deficit evolution represent two of the main priorities of the Romanian Government.At the same time, the coordination of the macroeconomic policies, mainly the fiscal and the revenues one, with that of monetary policy was envisaged.Alongside, the promotion of public investments by earmarking LEI 37.9 BN (amounting to 20% of the total budgetary expenditure for 2009 and 7% of GDP), rationalizing public expenditure and improving the business environment, by reducing tax and tariffs, have become key objectives to ensure a sustainable economic growth.
As a supervisory authority, the National Bank of Romania has responded to the new threats generated by the international financial crisis by adopting a set of specific measures regarding, among others, liquidity requirements, tighter monitoring of banks and improved prudential regulation framework.
Moreover, maintenance of a prudent conduct of monetary policy aimed at helping inflation convergence towards medium-term objectives and adopting a flexible liquidity policy have allowed both a revitalization of credit process and strengthening financial stability in the Romanian economy.
Public procurement legislation was revised to improve access to European funds, to strengthen control and transparency in public expenditure, as well as to reduce deadlines in all stages of the public procurement procedures and in resolving contestations.
Significant deterioration of the macroeconomic context, especially in the first half of this year, has required review of the strategic priorities in the field of microeconomic policies and concentration on the specific directions of action, leading to a better business environment and implicitly increasing the competitiveness of enterprises, especially of SMEs.
To improve the business environment, the Government action was oriented to significantly reducing bureaucracy and increasing funding for enterprises - more than in the previous year, to stimulate business development and job creation.
The elimination,reduction and simplification of authorisations / permits / licenses for business operations identified in 2008 were reassumed politically in 2009, together with an additional set of authorisations proposed for elimination. Important decisions were taken to eliminate bureaucracy in the registration of property and starting construction works. In the same context, the bankruptcy law was decided to be amended. The intended modification aims to shorten the time needed to close a business to less than one year. This approach is complementary to the initiative for promoting composition mechanism (pre-insolvency procedure), which offers the entrepreneurs alternatives to exit from the market.
Steps to cut red tape were accompanied by the e-government solutions for registering businesses, in line with the latest legislative developments in the field and by initiatives meant to render a more flexible access of enterprises to the public procurement.
The prospects of further deepening the reform of business environment and SMEs development have imposed the implementation of specific tools and mechanisms for assessing and monitoring the business environment, and of new financing solutions to SMEs for the period 2009 – 2013, adjusted to the economic context.
Concerning the development of a competitive environment favouring stimulation and developing businesses, the regulatory authorities have provided continuous surveillance of markets, driven by integration into the Single Market. The ex-ante evaluation of regulations was performed in the communications field; the new requirements for solvency and insurance accounting are implemented; the relevant markets are investigated and the anti-competitive behaviour of the firms was sanctioned. A new leniency programme for businesses was launched during this year.
Strengthening the administrative capacity of the regulators was the main institutional objective meant to ensure adequate functioning of markets. To this end, training programmes have been implemented to develop employees’ performances and skills in the adequate use of instruments for monitoring and surveillance of markets.
In order to ensure adequate finance for SMEs, the support given to sustaining their investments through various financial instruments continued – multi-annual national programmes and guarantee instruments – in order to meet the domestic competition and to counter the effects of the economic crisis.
To these ones, the initiative of making simpler and flexible procedures for accessing European funds - as major sources generating growth and jobs was added. This has led, in 2009, to the signing of the first financing contracts with SMEs that have requested funding through SOP IEC.
For the acceleration of the implementation of national and Community funds, the National Network of State Aid has been developed, as an interactive tool for the elaboration and the notification of State aid schemes.
To support SMEs access to market information and to increase their performances, the development of business incubators network funded from the state budget has been continued and the implementation of EU funded projects for developing the business infrastructure of national and regional interest has started.
The efforts for supporting the quality infrastructure and certification of enterprises in quality management system and environmental management system, health and safety at work were carried on in order to enhance competitiveness of industrial products, in accordance with European standards.
Romania intensified the construction and rehabilitation/modernization works in the road and railway transport sectors, in order to accomplish the development and interconnection objective of the Romanian transport infrastructure. Special efforts were made for strengthening administrative capacity of the Managing Authority for SOP-Transport and for revising sectoral guide books in different activity sectors, with the purpose of increasing Romania's capacity to absorb structural funds earmarked to the transport infrastructure.