January 2004
Curbing the trade deficit is the main objective for 2004
Curbing the trade deficit is the main objective for 2004
Interview with EUGEN
DIJMARESCU, Minister Delegate for Trade
How would you describe year 2003 from the viewpoint of foreign trade
relations?
We can already describe year 2003 as an important year for the
evolution of
During January - October 2003, the total volume of our country's
foreign trade rose by 9.8% compared to 2002 (figures converted into euro, as in
the case of USD-denomination the increase tops 31.4%).
FOB exports stood at 12,995.6m. euro (14.502m.
USD), 7.4% higher than a year ago (when converted in USD, the growth is 28.3%).
In the freight-based structure of exports, five sections account for
70.1% of the total figure (textiles - 25.7%, machinery and equipment - 15.9%,
metallurgy products - 12.7%, footwear - 8.4%, minerals - 7.5%). Export
increases compared to 2002 were registered mainly by processed products:
textiles by 7.2%, machinery and equipment +9.4%, transport means and equipment
+12.2%, general-purpose and furniture +10.1%.
On groups of countries, compared to the same period of last year, the
value of exports - converted into euro - towards developed countries gained
7.1%, with those to European Union states increasing by 7.7%. The shares of
these groups of countries in total exports stood at 74.7% for developed
countries and 68.1% for the EU.
During this period, the first 10 trading partners for export (75.7% of total
exports) were:
Representing an important contribution to final demand,
By specialization and export,
But not only big firms benefit from trade liberalization. Small and
medium-sized firms, whose contribution to export is on the increase, also
benefit from better access to international markets and the flows of ideas,
know-how and new technologies. Higher exposure to international flows of
products and services eventually meant a more effective use of
In their turn, CIF imports during January - October 2003 totaled 17,292.3m. euro (19,343.6m. USD). In FOB
prices, imports totaled 15,961.2m. euro (17,854m. USD), with the euro-denominated value being 11.7% higher.
In the freight-based structure of imports, the first five categories,
which account for 66.6% of the total, were: machinery and equipment - 23.7%,
textiles - 15.0%, minerals - 12.2%, chemicals - 8.0%, and metallurgy products -
7.7%.
The increase in imports during January - October 2003 was mainly
localized to the following categories of products:
* agrifood industry: wheat +163.0m. euro; sugar +21.0m. euro;
* industrial sector: metal and rubber +185.0m. euro;
plastic and items +183.5m. euro; transport means
+161.5m. euro; chemicals +72.2m. euro.
The FOB/CIF trade deficit during January - October 2003 reached 4,296.7m. euro (4,841.0m. USD), by 919.8m. euro higher than in 2002.
In euro figures, October 2003 represented an absolute record both for
exports (1.44 bn euro, or +5.6% over September 2003) and imports (2.16 bn.
euro, or +16.2%). October also brought the biggest monthly deficit: 741.5m. euro.
A first conclusion is that the deficit is generated in a proportion of
20.34% by the import of investment products, 23.72% by the goods destined to
production and only 13.93% by consumer goods.
The import of machinery and equipment is the most important group in
the total of Romanian import, a fact that should result in the update of
Romanian manufacturing enterprises and the export of high added-value products
over the next 18-24 months. Compared to 2002, the import increase amounted to
only 17%, while the exports of this group of merchandise rose by just 9.4%.
Worth noting however is the fact that this group of freight is the second-most
important in
In the minerals sector, the imbalance compared to year 2002 rose from 951m. to 1,100m. euro as a consequence of
importing more crude oil and natural gas at higher prices.
An increasing deficit was reported in the category of chemicals, rubber and
plastic items, although export continues to registered a growth dynamics that
is twice higher for chemicals and by 71% for plastic and rubber items. There is
the prospect of restoring the balance on these categories of products over a
3-4 years interval, given the prospect of some foreign investments, with
Michelin's being the most important.
Which are the main fields of action for export promotion
activity?
The export promotion activity conducted by the general departments
of foreign trade within MEC mainly focused on the following topics:
* Actualizing and further developing the bilateral legal framework of
economic relations between Romania and partner states.
During the period under analysis, Romania negotiated and signed 6 Trade
agreements, 3 Agreements of economic and technical cooperation, and 4 Free
trade agreements. The enacting of Free trade agreements will allow
Romanian-made industrial products to benefit from an important sale market
(about 30 million people), with low custom taxes that will be completely eliminated
in the 2006-2007 period.
The provisions of the Additional protocol to the European Accord, a
consequence of negotiations with the EU for the liberalization of the bilateral
trade with basic agricultural products, came into effect on the 1st of April
2003. We also started negotiations with the European Commission aimed at the
expansion of the liberalization process for the trade in transformed
agricultural products.
Romania actively participated - through the Permanent Mission in Geneva
and via representatives of the General Department for Commercial Policies - in
the special sessions of negotiation carried within the WTO, launched in Doha
during year 2001. It also attended the 5th Ministerial Conference of WTO in
Cancun (September 2003).
We secured the protection of domestic producers against unlawful competition by
foreign partners, through the distribution and operative enforcement of
effective instrument of commercial defence.
* Continuing the high-level dialog, between Government and Ministry representatives
On the occasion of visits made at peak level, MEC secured the organizing and
unfolding of 21 economic delegations (11 in Romania and 10 abroad), each of
them benefiting from the presence of 15-36 companies. During visits at Prime
Minister level, we organized 11 economic delegations. MEC also organized
economic delegations on the occasion of visits paid by other officials, members
of the Government (14 in Romania and 11 abroad).
* Organizing and unfolding the works of the Joint Governmental Commissions for
economic and technical cooperation
The Ministry staged and ran the proceedings of 14 joined commissions in
Romania and 17 abroad. The decisions made and the documents signed during these
events allowed us to identify new practical ways of developing Romania's
exports, to attract foreign investment.
* Organizing new promotional actions to increase and diversify Romanian exports
and attracting foreign investment.
Jointly with employers' associations, MEC ensured the organizing and
unfolding negotiations for 24 specialized economic missions that went abroad.
In addition, negotiations were organized for Romanian firms with 15 foreign
economic missions that visited our country.
Negotiations were accompanied by seminars or colloquia, as well as actions of
the 'week of Romanian goods' type.
We improved the access conditions of Romanian products on foreign
markets, by using the opportunities/incentives provided by the European
Agreement, free trade Agreements, SGP, SGPC, P16 and bilateral trade agreements.
The General Department on Export Promotion permanently worked to
improve the commercial informing activity and to provide expert support to
exporting companies.
In its quality as administrator of export promotion instruments with support
from the state budget, MEC secured the organizing and participation of Romanian
companies in 27 international fairs, in most of them with national pavilions.
The projects selecting commission also approved the creation of 11
virtual exhibitions on computer disk and the printing of a catalog for certain
products specific to priority sectors: electronics, electrics, communications,
IT, chemistry, petrochemistry, cosmetics, furniture, building materials, light
industry, metallurgy, wines.
Based on discussions carried with 14 sectoral employers' organizations
and professional associations, the projects selecting commission approved the
editing of information bulletins on the export offer, on CD-ROM, for 9 economic
sectors.
It became common practice to organize meetings in Romania between
representatives of the import departments within the large firms/associations
from abroad and potential Romanian providers.
In 2003, we secured the increase of CRCE's role in the commercial informing
activity and expert assistance aimed at exporting companies. The usefulness of
the facilities made available by 'Trade Point' in view of export promotion was
confirmed by the increasing interest displayed by trading firms for this
website.
The Ropartners data base with business opportunities outside Romania,
which can be accessed for free, benefits from a permanent actualizing based on
commercial information provided by Romania's economic representatives abroad
and various information sources (catalogs and specialised websites).
The 'Oportunitati de Afaceri si Consultanta' (Business and Consultancy
Opportunities) data base at http://tpb.traderom.ro features foreign business
opportunities provided by the network of 'Trade Point' entities, along with
national regulations and procedures related to conducting commercial
transactions, and similar information referring to foreign markets.
The development of the export promotion network abroad, depending the
importance and prospects of various markets; organizing commercial bureaus and
representative offices with the financial participation and support of
employers' organization, professional associations and interested economic
agents.
Two Government Decisions (HG) were drafted, while a third Government
Decision endorsed the partial financing from the state budget of some expenses
for the organizing and operating two commercial offices that will be set up by
SC Sicomed SA in Moscow (HG 934/14.08.2003) and Chisinau (HG 933/14.08.2003)
We elaborated and sent for approval the draft HG on supporting the
creation, by SC ADREM, of the INVEST SRL commercial office in Moscow, which
will trade industrial equipment manufactured using the vacuum-based technology.
How will our foreign trade be affected by the significant
increase of the euro on international markets, which has been experienced
lately?
If our national currency will continue to lose ground
against the European single currency, Romanian exports will become even more
competitive.
What are the priorities in the evolution, during year
2004, of Romanian imports and exports, including those in curbing the trade
deficit?
As you became aware of, our main concern for next year
obviously remains curbing the trade deficit. And this reduction must be mainly
made by the sustained growth of exports. This however requires a great deal of
effort, especially as - besides this year's difficulties - Romanian efforts
will also be confronted, this year, by two new major problems:
* the profit tax paid by exporting firms will double - from 12.5% to 25% (this
actually is an increase by 4 times compared to year 2002);
* the bonuses on bank interest currently provided to exporters will
disappear.
Faced to this situation, it is obvious that our efforts to promote exports must
be intensified. From the strategy devised for year 2004, I will only mention a
few specific measures:
* Devising country-specific packages of measures, adapted to the specificity of
bilateral trade relations - we have in mind the so-called 'target markets.' We
will focus on balancing exchanges by intensifying promotion actions, founding
joint-venture banks, distribution networks etc.
* The accelerated development of the export of goods and services
specific to IT, under a program elaborated jointly with the pertinent
companies.
* Drafting strategies to increase the contribution of international
services (studies and projects, tourism, transport, construction etc.)
* The commercial officers working in Romania's embassies will regularly
make market analyses and studies, providing Romanian operators with information
about prices, competition, auctions, the import regime etc. from the respective
countries.
* Re-examining and improving the acting export incentives, so that to bring the
corrections necessary in order to eliminate some dysfunctions that are negatively
influencing the trade balance deficit.
* Boosting the use of export supporting and promotion instruments with
financing from the state budget.
To all of these, one must add an intensification of the dialog with employers' organizations and professional associations, allowing us to appreciate that our approaches will yield the projected results.
(source: Romanian Business Journal)
15 pc more
foreign tourists could visit Romania in 2004
Travel agencies estimate a 15% rise in the number
of foreign tourists who will visit Romania this year, which will trigger a rise
in agencies’ revenues. “The number of foreign tourists who will visit Romania
in 2004 could go up by 15%, and receipts of travel agencies from this segment
is likely to increase by 15-20%,” said Cornel Gaina, Chairman of the National
Association of Travel Agencies in Romania (ANAT).
As far as the number of Romanian tourists who intend to travel abroad is
concerned, the ANAT official expects it to maintain current levels or even to
decrease.The explanation is that 2004 is an election year, and a drop in the
number of Romanian tourists abroad was noticed every electoral year so far.
According to the ANAT representative, the ascending trend in the number of
foreign visitors to Romania will be a consequence of several factors. The main
incentive is the more favorable attitude of EU states towards Romania, the drop
in the VAT quota applied to accommodation services (to 9%) and Romania’s being
acknowledged as both a business destination and future EU Member.
According to data released by the Ministry of Public Works, Transports and
Tourism, Romania was visited by 4.23 million foreign citizens in the first 9
months of 2003, of which 5.4% came from European countries. The number of
tourists from EU Member states in the first 9 months of 2003 reached 893.800,
most of them coming from Germany and Italy. In terms of their country of
origin, the most foreign tourists arrived from Hungary (26.6% of the total),
the Republic of Moldova (18%), Germany (7.4%), Ukraine (6.3%) and Bulgaria
(6.1%).
(source: Nine O’Clock)
Romanian banks are safe and shock resistant
The Romanian banking sector is fairly safe, being able to successfully resist
shocks such as the devaluation of the national currency and massive deposit
withdrawals, says a survey carried out by the IMF in cooperation with the World
Bank.
Romanian banks have a fairly good capacity to deal with market and loan risks,
especially because their loan portfolio, although on a rapid increase, is
relatively small.
The systemic risk is low, because inter-banking loans are limited. If the leu,
were devalued by 20% following massive capital outflows, and interest rates for
the national currency rose by 10%, most banks would not feel a direct impact.
Thus, the ratio of the banks' own funds to the assets adjusted to the
risk degree would drop to 21.9% for the whole system down from 25% in late
March 2003.
More affected would be the former state banks currently owned by foreign
groups, the above-mentioned indicator dropping by 5.3% down to 12,8%. The norms
set by the National Bank of Romania (BNR) impose a minimum rate of 12% on
banks.
If 10% of the loans given by banks were bad, and provisions increased by 50%
for loans considered bad, the impact would be serious, the privatized banks
being most affected, but the debt-equity ratio of the capital would stay above
the minimum limit set by the BNR.
Another possibility brought up by the IMF experts is a reduction in the
difference between the interests paid by banks for deposits and those charged
for loans, an effect of a possible strategy to enlarge the loan portfolio or
the competition within the system.
A drop by 2.5% in the margin was taken into account for interest rates to
foreign currency deposits and by 5% for lei deposits. In this case, the banks'
profitability would slide by 9-20%, and the capital profitability would become
negative, but the debt-equity ratio of the capital would remain favourable in
the whole system.
(source: Romanian Business Journal)
Standard & Poor's Ratings Services said today it raised its long-term counterparty credit rating on Romania-based Banca Comerciala Romana (BCR) to 'B+' from 'B', following improvements in its operating environment and steps toward privatization. The outlook is positive. "The upgrade reflects the continued restructuring and modernization of the economy of Romania (foreign currency, BB/Positive/B; local currency, BB+/Positive/B), which is underpinning robust growth, driven by exports and investment," said Standard & Poor's credit analyst Magar Kouyoumdjian. "In addition, the upgrade reflects initial steps in the privatization of BCR, which is likely to aid the bank's development by bringing in new technologies and improving financial flexibility," added Mr Kouyoumdjian. Privatization is one of the conditions that the IMF has set for funding Romania. As the first step, 25% plus two shares in the bank were sold to the European Bank for Reconstruction and Development (AAA/Stable/A-1+) and the International Finance Corporation (AAA/Stable/A-1+), in November 2003. Previously, several attempts to attract a suitable strategic investor failed due to the unfavorable international investment environment, but the latest sale should speed up this process. The ratings on BCR are constrained by the increasing competition in the sector, particularly from foreign banks; the still fragile economic environment; pressurized earnings; and information risk. The ratings are supported by the banks's dominant position in the Romanian financial market, good capitalization and liquidity, prudent management, and the strong implicit support for the bank from the Republic of Romania. Given BCR's dominant position in the Romanian financial markets, it is considered to be very important to the ongoing development of the Romanian economy, and Standard & Poor's believes that there is a strong incentive for the government to support the bank in times of crisis. The positive outlook reflects Standard & Poor's expectation that recent significant progress in the economic restructuring of Romania, particularly the strengthening of the banking system and modernization of the industrial base, will continue. Gradual disinflation and macrostability should help improve the bank's exposure to troubled state-owned enterprises, although BCR's exposure to such entities is continuously decreasing. The bank's privatization, particularly when a strategic investor is found, should help enhance corporate governance, modernization, and competitiveness. (source: Standard & Poor’s)
Transelectrica signs upgrading contract with GE worth USD 22 M
Bucharest
- American corporation General Electric (GE) Power Systems yesterday signed a
memorandum of understanding with Transelectrica for the partial upgrading of 11
power stations managed by Transelectrica. The upgrade project is valued at
nearly 22 M USD and the funds will be provided in the shape of a long-term loan
to be raised by Transelectrica without government or bank guarantees. General
Electric has won financial coverage from Eximbank of the US.
“GE is bent on significantly developing its Romanian business and will use any
opportunity it can,” GE Executive Director for South-Eastern Europe Dan Ionescu
told Mediafax news agency. He did not disclose any details of the contracts or
project the company has in mind, but said that Romania’s infrastructures need
upgrading and the investment climate is now much improved.
The project is designed for partial upgrading of the protection and command
systems of some Transelectrica power stations that do not need full replacement
of their primary equipment. This is an additional project to fully upgrading 15
stations in the key hubs of Romania’ national power grid. The programme of
investment in Romania’s electricity transportation and dispatching aims to
increase safety in electricity supply to end consumers as well as bringing
operation standards in line with the norms of the European Union electricity
carriers. The memorandum provides for both parties’ pledge to find out together
competitive technical and commercial solutions as well as securing funds for
the rehabilitation of the important hubs of the Romanian national electricity
transportation system. At the same time, Transelectrica Director General Jean
Constantinescu announced that procedures had started for the implementation of
GE technology in three stations operated by Transelectrica.
Transelectrica has a business turnover of ROL 9,000bn. In 2003, the company
reported a gross profit of ROL 250bn.
(source: Nine O’Clock)
USA
and OECD improve Romania’s rating
Eximbank
USA and the Organisation for Economic Cooperation and Development (OECD)
improved Romania’s rating from level 5 to level 4. “Exposure fees of US
Export-Import Bank financed transactions have recently been reduced, due to an
upgrade from fee level 5 to
fee level 4. As a result, the cost of financing has been significantly reduced. This reflects an improvement in Romania’s macroeconomic conditions,” the Commercial Attache of the US Embassy to Bucharest, Jonathan L. Marks declared for Nine O’Clock. According to his statements, the institutions will also take under consideration the possibility of loans without direct guarantee from the state.
(source: Nine O’Clock)