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EBRD aims to accelerate investment in Romania
New country strategy calls industrial restructuring and private sector growth key
The European Bank for Reconstruction and Development will support steps taken by Romania to tackle the difficult but essential restructuring of industry, including steel and oil. Concerted restructuring and privatisation of industry will provide an enormous boost to the country, encourage foreign direct investment and remove a critical obstacle to Romania's transition to a market economy, according to the Bank's new strategy for Romania published today.
The EBRD recently approved a €100 million loan to support the privatisation of steel-mill Sidex and is considering a pre-privatisation package for SNP Petrom, the state-owned national oil-company. The EBRD has a pipeline of projects in Romania totalling €900 million.
The EBRD's new strategy, updating the 1999 strategy, says that with the macroeconomy improving significantly and the country experiencing growth for the second year in a row, it is crucial to implement structural reforms and take action to improve the investment climate. Past failures to deal with the country's loss-making state-owned industrial sectors have led to unpaid bills saddling the private sector with massive arrears estimated at almost 45 per cent of GDP in 2000.
The EBRD will focus on restructuring large enterprises, developing the private sector, rebuilding infrastructure and strengthening the financial sector and small and medium-sized enterprises (SMEs). In rebuilding infrastructure, the EBRD will place particular emphasis on regional municipal and environmental projects and promote an enhanced role for the private sector.
The strategy prescribes a more pronounced role in the private sector. More than 70 per cent of projects in the EBRD pipeline are in the private sector. But the strategy warns that success will largely depend on the investment climate in Romania and on the Government's commitment to accelerate reform and progress in transition.
To date, the EBRD has committed €1.8 billion towards more than 60 projects in Romania. In total, the Bank has mobilised €6.4 billion of investment in private and public sector projects, making it the largest investor in the country. The level of EBRD investment in 1999 and 2000 was low, due mainly to a lack of reform and the falling levels of foreign direct investment. However, investment has increased in 2001.
EBRD President Jean Lemierre said it is clear that Romania is making progress and has enormous potential but that a great deal more still needs to be done to improve living conditions and the economy. The EBRD is committed to continuing to help Romania plan and carry out difficult but crucial reforms, such as industrial restructuring and improving investment conditions.
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