Grainne Mc DONNELL

Grainne Mc DONNELL

Renaud MAISONNEUVE

Romania

România

Flag:

Coat of arms:

I.Brief identity card of Romania:

• Localisation:

Romania is a country in Southeastern Europe. Romania borders Hungary and Serbia to the west, Ukraine and Moldova to the northeast, and Bulgaria to the south. Romania has a stretch of sea coast along the Black Sea, and the eastern and southern Carpathian Mountains run through its center.

• Capital:Bucharest(Bucureşti)

• Largest city: Bucharest

• Official Language : Romanian

• Government: Republic

- President:Traian Băsescu -Prime Minister: Călin Popescu-Tăriceanu

• Independence:

-Declared: 9 May 1877 -Recognised: 13 July 1878

• Area: 238,391 km²

• Water: 3%

• Population: 22,303,552

• Density: 91/km²

• GDP:

-Total: $204, 4 billion -Per capital: $9,446

• HDI: 0.792 (64th medium)

• Currency: Leu

• Internet TLD: .or

• Calling Code: +40

II.History

Historic Bucharest, a major tourist attraction, is the country’s capital and largest city. Romania has been an active member of NATO since 2004, and is also an acceding country to the European Union. The EU Accession Treaty was signed in early 2005, and Romania is due to join the European Union on January 1, 2007. Starting on January 1, 2007, Romania will have the seventh largest population and the ninth largest territory in the EU. The accession of Romania and Bulgaria, as expected in 2007, will complete the fifth enlargement of the EU that had started in May 2004.

With a GDP per capita (PPP) of $9,446 in 2006 Romania is an upper-middle-income economy. After the Communist regime was overthrown in late 1989, the country experienced a decade of economic instability and decline, led in part by an obsolete industrial base and a lack of structural reform. From 2000 onwards, however, the Romanian economy was transformed into one of relative macroeconomic stability, characterised by high growth and low unemployment.

Background and history of Romania

The principalities of Wallachia and Moldavia - for centuries under the suzerainty of the Turkish Ottoman Empire - secured their autonomy in 1856; they united in 1859 and a few years later adopted the new name of Romania. The country gained recognition of its independence in 1878. It joined the Allied Powers in World War I and acquired new territories following the conflict. In 1940, it allied with the Axis powers and participated in the 1941 German invasion of the USSR. Three years later, overrun by the Soviets, Romania signed an armistice. The post-war Soviet occupation led to the formation of a Communist "people's republic" in 1947 and the abdication of the king. The decades-long rule of dictator Nicolae CEAUSESCU, who took power in 1965, and his Securitate police state became increasingly oppressive and draconian through the 1980s. CEAUSESCU was overthrown and executed in late 1989. Former Communists dominated the government until 1996, when they were swept from power by a fractious coalition of centrist parties. In 2000, the center-left Social Democratic Party (PSD) became Romania's leading party, governing with the support of the Democratic Union of Hungarians in Romania (UDMR). The opposition center-right alliance formed by the National Liberal Party (PNL) and the Democratic Party (PD) scored a surprise victory over the ruling PSD in December 2004 presidential elections. The PNL-PD alliance maintains a parliamentary majority with the support of the UDMR, the Humanist Party (PUR), and various ethnic minority groups. Although Romania completed accession talks with the European Union (EU) in December 2004, it must continue to address rampant corruption - while invigorating lagging economic and democratic reforms - before it can achieve its hope of joining the EU, tentatively set for 2007. Romania joined NATO in March of 2004.

Geography of Romania

It is located South-eastern Europe, bordering the Black Sea, between Bulgaria and Ukraine. It has a coast line of 225km.

Its climate is temperate: cold cloudy winters with frequent snow and fog; sunny summers with frequent showers and thunderstorms

It has natural resources which include petroleumm ,timber, natural gas ,coal, iron ore ,salt ,arable land ,hydropower. It has a population of 22, 329, 977.

It has many religions including Eastern Orthodox (including all sub-denominations) 86.8%, Protestant (various denominations including Reformate and Pentecostal) 7.5%, Roman Catholic 4.7%, other (mostly Muslim) and unspecified 0.9%, none 0.1% (2002 census) It has a population of 22, 329, 977

Political parties and groups:

Conservative Party [Dan VOICULESCU], formerly Humanist Party or PUR; Democratic Party or PD [Emil BOC]; Democratic Union of Hungarians in Romania or UDMR [Bela MARKO]; National Liberal Party or PNL [Calin Popescu TARICEANU]; Romania Mare Party (Greater Romanian Party) or PRM [Corneliu Vadim TUDOR]; Social Democratic Party or PSD [Mircea Dan GEOANA], formerly Party of Social Democracy in Romania or PDSR Political pressure groups and leaders are various human rights and professional associations

Developments over the past ten years

Despite the disappointing track record to date, a cautious optimism has begun to emerge, as many investors believe Romania has turned the corner. The country emerged in 2000 from a punishing three-year recession thanks to competitively priced exports and strong demand for Romanian products in EU markets. Strong domestic activity in construction, agriculture and consumption led to 4.9% growth in 2003 despite the worldwide slowdown. In the first few months of 2004 the growth rates for industry (6.6%) and construction (7.2%) have shown a lot of hope for this year. Inflation is edging down and the state is in the process of selling off inefficient concerns. A standby agreement with the IMF covering the period from October 2001 to March 2003 helped smooth the bumps of privatisation, regulatory reform, deficit reduction, and the curbing of inflation. A new standby agreement was announced May 2004 and was signed in July. The money from this agreement is only to be used in emergency situations. This agreement will last for 24 months, ending June 2006.

III.Short history of the relations between Romania and the European Union

Romania is the first country of Central and Eastern Europe to establish official relations with the European Community:

-In 1967 negotiations were initiated in order to conclude a series of technical-sectoral agreements on certain agro-alimentary products.The aim of exempting Romanian products from supplemental taxes, but also to compel the Romanian party to comply with a certain price level, so they do not cause difficulties on Member States market.

-In 1974, by signing a bilateral agreement, Romania enters the European Community's Generalized System of Preferences. An Agreement on Industrial Products is also signed in 1980.

-In 1990, immediately after the fall of the Berlin wall, Romania establishes diplomatic relations with the European Union, signing a Trade and Co-operation Agreement, in the same year.

-In February 1993, Romania signs the Europe Agreement instituting an association between Romania, on one hand, and the European Communities and their memberStates, on the other. This agreement, which created a free trade zone between Romania and the MemberStates, recognized Romania’s objective to become a member of the European Community and provided financial and technical assistance from the EU.

-In 1993, inCopenhagen, the Member States decide that the associated states from Central and Eastern Europe may become Member States of the European Union. Subsequently, Romania submitted its application for EU membership in June 1995; a few months after the Europe agreement had entered into force (on 1 February 1995).

-In July 1997, the European Commission adopts Agenda 2000, which includes an "Opinion on Romania's Application for Membership of the European Union". In March 1998, the European Union officially launches the enlargement process, and in November of the same year, the European Commission publishes the first report on Romania's progress towards fulfilling the accession criteria.

-In December 1999, the European Council's decision in Helsinki, to start accession negotiations with Romania, followed in February 2000 by the official launching of the negotiations process for Romania’s EU accession, marks a new stage in the consolidation of the relations between Romania and the European Union. The European Councils in Copenhagen (2002), Thessaloniki (2003), Brussels (2003) and Brussels (2004) reconfirm the support of the EU Member States for the finalisation of the negotiations in 2004, the signing of the Accession Treaty as soon as possible, in 2005, and the accession itself in January 2007.

-In December 2004, the accession negotiations are concluded and the European Council in Brussels confirms the accession calendar. At the same time, Romania is recommended to continue reforms and implement its commitments assumed during the negotiations on the Community acquis, especially as regards justice and home affairs, competition and environment policies. The European Union will pursue monitoring the accession preparations and considers Romania will be able to assume its EU membership obligations from 1 January 2007.

-In April 2005, Romania receives the favourable vote of the European Parliament. With the signing of the Treaty on 25 April 2005, Romania has a status of observer to the activity of the EU institutions, being involved in the process of elaborating the Community law, but without the right to vote. To date, the treaty has been ratified by most Member States.

-In October 2005, the European Commission publishes the first Comprehensive Monitoring Report for Romania, which confirms the important progress in the internal preparation and the measures to be taken to ensure accession on 1 January 2007.

IV.Attitude to the New Constitution

Constitutional changes

The constitutional referendum of October 2003 has brought three types of changes to the Constitution with a significant impact on the country.

The first relate to changing the presidential mandate from 4 to 5 years which means that the parliament and the president will not be elected simultaneously anymore. The position of the prime minister has been strengthened and he/she can not be fired by the president anymore. The two Chambers of the Parliament don’t have identical duties as until now.

The second changes brought by the new Constitution strengthen minority rights, and abolish compulsory military service. Another important change, with a profound impact, is that the arrest mandate will be issued only by judges and not by prosecutors as it was until now.

Thirdly, the new Constitution doesn’t only protect property, but also guarantees it. This specific point has been strongly demanded by the civil society. The new Constitution also brings in a series of modern concepts, not present in many other constitutions, such as the right of every citizen to an “ecologically balanced and healthy environment.”

A Majority in Romania Votes To Accept New Constitution

Romanians endorsed a new constitution by a wide margin in a referendum on Sunday, but the country's Hungarian minority rejected it, early returns showed. Two-thirds of Romania's 16 million voters turned out for the vote, in which they were asked to accept or reject a new constitution that makes the country a presidential multiparty republic. Early returns today showed that the constitution was being accepted with 77 percent "yes" votes. But in two Transylvanian counties where ethnic Hungarians are the majority, the "no" votes were 85 percent and 78 percent.

V.Economy of Romania

Romania – Economy

Key Statistics:

Population: 22, 329, 977

Labour Force: 9, 660, 000

land use: arable land: 44% //; - grass land: 21% //; - wooded area: 28%

agriculture: labour force: 31% //; - part of agriculture in GDP: 19%

Unemployment rate:6.2% of the total number of the active civil population

Household Income: Lowest 10% : 2.4%

Highest 10% : 27.6%

Annual Inflation rate: 98%

Currency: The Romanian Leu

Key Industries: The role of agriculture in Romania

A radical land reform, begun in 1921 and completed in 1948, redistributed farmland from large owners to peasant farmers, but the restructuring of the economy after the communist takeover included the compulsory collectivization of agriculture, carried out between 1949 and 1962. Since 1989, state farms have been retained as large units, but collective farms have been broken up into individual peasant holdings—although in the main arable areas they have been replaced by loose cooperative associations. Romania faces major problems in improving the quality of farm production (especially livestock breeding) and in setting up an efficient system formarketing. The climate and relief of the extensive Romanian plains are most favourable to the development of cereal crops, although these also are found in the Subcarpathians and in the TransylvanianBasin, where they occupy a high proportion of the total arable land. Wheat and corn (maize) are most important, followed by barley, rye, and oats. Two-row barley is cultivated in the Brasov, Cluj, and Mures areas, where it is used for brewing. The tendency is for the acreage of cereals to fall as yields increase and industrial crops require more land.

Vegetables—peas, beans, and lentils—are planted on a relatively small area. Peas are the predominant crop; maturing in time for an early harvest, they allow a second crop, usually fodder plants, to be grown on the same ground. Vegetable cultivation is particularly marked around the city of Bucharest, with specialization in the production of early potatoes, tomatoes, onions, cabbages, and green peppers. Similar gardening areas are found around Timisoara, Arad, Craiova, Galati, Braila, and other cities. The most important potato-growing areas are Brasov, Sibiu, Harghita, and Mures districts. Other related crops include sugar beets; sunflower seeds, mostly on the Danube, Tisa, and Jijia plains; hemp; flax; rape; soybeans; and tobacco.

Main trading partners: EU (esp.Germany, Italy, France), USA, Turkey.

Developments over the last decade: Romania is a country with a transition economy. The reconstruction process started in 1990 has determined a decrease of production in all fields of activity in the context of a pronounced lack of financial funds and equipments as well as of an unfavourable international climate. Starting from 1994, a recovery process of industrial production, has been under way accelerated in the last 2 years, based on monetary macro stabilization (inflation decreased from 296% in 1993, to 56,9% in 1996 and 34,5% in 2001). In general, there are substantial changes in GIP structure (gross internal product): a decrease of the industry and construction percent (32,4% in 2000), as well as in agriculture (11,4% including forestry and pisciculture) is accompanied by an increase of services percent, due to the dynamic growth of some activies (mostly trading activities), as well as to primary and secondary sector hard conditions. On the whole, GIP (gross internal product) has been registering positive growth in the last 2 years: 1,3% in 2000 compared to 1999 and 5,3% in 2001 compared to 2000.

With a GDP per capita (PPP) of $9,446 in 2006 Romania is an upper-middle-income economy and will become part of the European Union in 2007. After the Communist regime was overthrown in late 1989, the country experienced a decade of economic instability and decline, led in part by an obsolete industrial base and a lack of structural reform. From 2000 onwards, however, the Romanian economy was transformed into one of relative macroeconomic stability, characterised by high growth and low unemployment. In 2004, GDP growth was 8.4%, one of the highest in Europe, even though this rate was halved in 2005, to 4.1%, mainly due to floods in significant agricultural areas. In 2006, growth is expected to exceed 7%. Unemployment in Romania was at 5.1% in July 2006which is very low compared to other middle-sized or large European countries such as Poland, France, Germany and Spain. Foreign debt is also comparatively low, at 20.3% of GDP.[11] However, high growth and global inflationary pressures have led to Romania having a relatively high inflation rate, recorded at 8.1% in 2005 and expected to fall below 5% by the end of 2007.

Another challenge for the Romanian economy is a persistently-high current account deficit, valued at 8.7% of GDP in 2005.Despite this, exports have increased substantially in the past few years, with a 24.8% year-on-year rise in exports in the first quarter of 2006. Romania's main exports are clothing and textiles, industrial machinery, electrical and electronic equipment, metallurgic products, raw materials, cars, military equipment, software, pharmaceuticals, fine chemicals, and agricultural products (fruits, vegetables, and flowers). Trade is mostly centred on the member states of the European Union, with Germany and Italy being the country's single largest trading partners.

The modern headquarters of the Romanian Development Bank, a symbol of Romania's fast economic growth after 2000

After a series of privatisations and reforms in the late 1990s and early 2000s, government intervention in the Romanian economy is somewhat lower than in other European economies. In 2005, the liberal-democratTăriceanu government replaced Romania's progressive tax system with a flat tax of 16% for both personal income and corporate profit, resulting in the country having one of the lowest fiscal burdens in Europe, a factor which has contributed to the growth of the private sector. The economy is predominantly based on services, which account for 54.9% of GDP, even though industry and agriculture also have significant contributions, making up 35.0% and 10.1% of GDP, respectively. Additionally, 31.6% of the Romanian population is employed in agriculture and primary production, one of the highest rates in Europe.

Since 2000, Romania has attracted increasing amounts of foreign investment, becoming the single largest investment destination in Southeastern Europe. Foreign direct investment was valued at €5.2 billion in 2005, an increase of 26.8% over 2004. According to a 2006 World Bank report, Romania is currently ranked 49th out of 175 economies in the ease of doing business, scoring higher than other countries in the region such as Hungary, Poland and Czechia. Additionally, the same study judged it to be the world's second-fastest economic reformer in 2006. The average gross wage per month in Romania is 1122 lei as of July 2006, equating to € 318.33 based on international exchange rates and € 930 based on purchasing power parity.

PERFORMANCE REQUIREMENTS/INCENTIVES

Since 1991, Romania's legislation has seesawed between granting, amending and suspending investment incentives. The availability of incentives is dependent on the economic situation, with the government at times suspending incentives in order to tighten fiscal policy. To meet the requirements of the EU acquis, Romania has repeatedly revisited its fiscal incentives to bring them in line with the EU state aid regulations. Investors are encouraged to verify the current status of investment incentives. As a general rule, new fiscal regulations do not grandfather past incentives.