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July 3, 2022

Gitenstein: Profits of state companies are diverted towards well-connected individuals

Growth is not going to come from cutting costs alone – it must come from private and public investment, the US Ambassador in Bucharest says.

The US Ambassador to Romania, Mark Gitenstein, attending the Bucharest Stock Exchange conference dedicated to the One Year Anniversary of Fondul Proprietatea (Proprietatea Fund) Listing, yesterday blamed the lack of investors in the Romanian energy sector on “the profits of publicly-owned enterprises being too often diverted back to state coffers or into the pockets of well-connected individuals,” Mediafax reports. Asked whether there are US companies willing to buy assets in the energy sector, Gitenstein reminded that oil giants ExxonMobil and Chevron already expressed their interest for investing huge sums in Romania. Plus, GE is interested by power grids, but these companies will not make investments until they are convinced that the government is acting the way it should, in order to protect their investments, the US diplomat warned. If this will not be the case, there will be some investments, but far from the potential they might reach, he added, quoted by Adevarul.ro. Gitenstein also mentioned that the 760 state-controlled enterprises in Romania, whose value is about 11% of your GDP, could be doing the same as Australian company Zeta Petroleum, becoming a driver of Romania’s economic recovery.

The ambassador reminded that, in the past too, he spoke about the need to obtain private investments in order to make vital improvements in the energy or transportation sectors. “Around EUR 10 bln is needed for modernisation of the energy sector alone. The state-owned enterprises that dominate these areas, some of which are struggling to make a profit, could use a private injection of cash to improve electricity grids, build highways and overall, provide better services for Romanians,” he stated. According to the US diplomat, “how enthusiastically investors respond to Romania’s public offerings will indicate their level of confidence in the government as a partner. They will be looking forward to progress in key sectors such as energy, both in sound policy making and in ensuring stability and sustainability.”

Ambassador Mark Gitenstein sees the stock exchange as an insufficiently used resource, despite the fact that the results achieved last year demonstrate the investors’ interest for Romania. “Even though we saw healthy growth, Romania’s market capitalization still has enormous room to grow,” he mentioned. In support of his ideas, the diplomat explained that the capitalization of the market is 45 pc of the GDP in Germany, 36 pc in Austria and 40 pc in Poland, compared to just 11.9 pc of the GDP in Romania. “With attracting more foreign investors as top government priority, the BVB should be aggressively employed as a vehicle for growth, providing liquidity – resources – for investors of all types: domestic, foreign, large, small and even the public sector,” Ambassador Gitenstein said. He “enthusiastically welcomes” the initial public offerings the government has announced for Romgaz, Hidroelectrica and Nuclearelectrica this year, as well as the secondary public offerings in Petrom, Transelectrica and Transgaz. “The government should look at these offerings not just as a way to privatise and help fill government accounts, but as means for the companies to raise capital for investments,” Gitenstein explained.

People are entitled to protest against the government, but without violence

The US Ambassador in Bucharest, Mark Gitenstein also said yesterday that it is normal and proper for people to express their disapproval for the politicians of the government, but violence is not part of the right to free speech. “We, Americans, sincerely trust in the divine right of citizens to protest peacefully. And I must stress it: peacefully.” According to Gitenstein, the Constitution of the USA guarantees the right to free speech, in its First Amendment, but this “does not include the right to throw stones at gendarmes.” “This can get them arrested in the USA, too,” he added. On the other hand, it is understandable that people express their disagreement with the policies of the government, as this is the essence of democracy, Gitenstein explained.

The US diplomat also said yesterday that it is vital for Romania to continue economic reforms, especially at this time of social unrest, but cutting costs alone will not secure economic growth. “There is no denying that the austerity measures – while necessary – have been difficult to bear,” but they are the most “likely to produce sustainable improvement in the standard of living of average Romanians,” he stated.

On the other hand, the ambassador warned that “growth is not going to come from cutting costs alone, as it must come from private and public investment, through the government and business working together as partners.” “It is not just critical to the stability and strength of your democracy and your free markets but to the standard of living of every man, woman and child in Romania,” he added.

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