EC: State-run companies privatization, limited success and still incomplete

According to the international institution, Romania has to continue the structural reforms to use its potential for growth.
The restructuring and privatisation of the sector of state-run companies was made in Romania with limited success, the sustainable financing of the health system will necessitate fundamental reforms, and the actions plans for the reduction of deficiencies in the public administration are implemented in a reduced rhythm, fact which affects the absorption of EU funds, a document made by the services of the European Commission says and published on its website. The document was drawn up by the General Directorship of Economic and Financial Affairs of the EC and by external experts and analyses the way in which the last two agreements Romania had with international finance people the EU, the IMF and the World Bank in 2009 – 2011 and 2011 – 2013 respectively. Although boards were installed and a professional private management was made for a number of companies, in several cases this thing lasted very little, and in other cases there are signs that political reasons were more important than the professional ones. The sale of shares in the state-run companies had a limited success as well, since the beginning of the second agreement in 2011 being sold only two packages of 15% as the state kept in both cases the majority package of shares. The reform of the considerable sector of state-run companies was made in general with limited success and is still incomplete. The 900 companies run by the state in Romania represent almost 9 pc of the national production and 10 pc of the hired work force. Their debts, which represented 90 pc of the debts in the public sector were reduced at half in the four years, representing at the end of May 2013 over 2 pc of the GDP.
The privatisation of the Romanian Post which had to take place in June failed due to the lack of bidders, and the procedure was postponed again. On the other hand, an important step was taken in the sale of the majority package of CFR Marfa by the agreement signed on 21 June between the Romanian state and the only bidder left Grup Feroviar Roman. The finalisation of the trading means several steps and will be final when the rights of property are transferred. However, European experts observe, it is hard to see how the situation of several state-run companies could be improved, without the improvement of the restructuring policy of the Romanian state.
Favourable environment for structural reforms
On the other hand, the report notes that, at present, the macroeconomic conditions which continue to improve and the solid majority of the coalition ruling the country ensures a favourable environment for the implementation of the structural reforms, in order to use the growth potential of Romania. The report notes that the balance of the two financing agreements was a mixed one, with reasonable progress in the zone of regulation but with reduced progress as regards the concrete changes as such. Although the majority of the conditions connected to the regulation framework were implemented on paper, they will produce real effects only by their implementation in practice, the authors of the document say. Moreover, some structural reforms which were avoided until now must be taken seriously, to offer perspectives to the improved economy.
The persistence of debts indicates the fact that the budgetary mechanisms and control of the commitments are still insufficient. The governmental debts continue to represent about 0.5 pc of GDP. While the debts at governmental level and social security system have been relatively well controlled, the attempts to control these debts at the level of local administration had limited success.
EU funds absorption remains the lowest in the EU
Moreover, the document shows that absorption of EU funds, although improved, remains the lowest in the EU and was far behind the targets. The absorption is affected by the lack of coordination to the highest levels, which leads to the absence of prioritising, too complicated regulations, a legislation regarding acquisitions which is inefficient and unclear, together with difficult procedures. However, the absorption of structural funds, cohesion and agriculture grew from 0.9 pc in March 2009 to 25 pc in May 2013 the document says, underlying the fact that the community executive does its best to help Romania to correct these mistakes.

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