REVIEW OF THE SECTORS TRANSPORT, INFRASTRUCTURE AND COMMUNICATIONS IN ROMANIA
MAIN REPORT
(D20010458\23021)
Submitted to: Senter Internationaal
Submitted by: NEA Transport research and training
Rijswijk, The Netherlands, May 2001
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D20010458.doc
May 2001
CONTENTS
page
1 executive summary 5
1.1 Transport, Infrastructure and communication 6
1.2 Donors and Financing 8
1.3 Business opportunities for Dutch enterprises 9
2 general introduction and background 15
2.1 Objectives of the study 16
2.2 Purposes of the study 16
2.3 Results of the project 16
2.4 Activities 17
2.5 Methodology and Approach 18
2.5.1 Desk research 18
2.5.2 Field research 18
2.6 Organisation of a seminar 19
2.7 Project Team 19
3 General dAta on romania 21
3.1 Foreign investment 21
1.2 Privatisation process in Romania 27
4 Transport, infrastructure and communications 31
4.1 Transport and infrastructure 31
4.1.1 General overview 31
4.1.2 General policy 35
4.1.3 Development of transport means and facilities (2001-2004) 36
4.2 Communications and information technology 38
4.2.1 Communications and information technology policy 38
4.2.2 Present situation regarding telecommunication 41
5 priorities of investment by the romanian authorities 45
5.1 Investment priorities in the sectors transport, infrastructure and telecommunication 45
5.2 Investment opportunities as obtained by the CCIR 48
6 existing donor activities in romania 51
6.1 European Union 51
6.1.1 Phare 51
1.1.2 ISPA 56
1.1.3 SAPARD 58
1.2 EBRD 59
1.3 World Bank 61
7 market opportunities per sub sector 65
8 dutch business opportunities in romania 71
9 conclusions 85
9.1 Transport, Infrastructure and communication 86
9.2 Investments priorities in the sectors transport, infrastructure and telecommunication 88
9.3 Donors and Financing 89
9.4 Business opportunities for Dutch enterprises 91
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D20010458.doc
May 2001
1 executive summary
The Programme for Co-operation with Countries in Central and Eastern Europe (PSO) aims at supporting the transition of central and Eastern European countries to a market-oriented and sustainable economy. Under this programme, the Netherlands government funds projects, assigned to enterprises in The Netherlands, for the transfer of knowledge and expertise, which should lead to sustainable investment and/or trade relations on a business to business basis.
It was decided to carry out a Transport Sector study for Bulgaria, Romania and Ukraine in order to develop a framework for the development of new transport projects in these countries within the PSO framework.
The main findings for Romania are:
· Romania’s economy in the 1980’s was affected by economic policies under which resources were misdirected and maintenance was delayed and deferred. Romania managed to settle its external debt, but the burden that fell on the nation was tremendous.
Currently, Romania is working to overcome the difficulties faced ever since the events of December 1989. The economy is moving towards a market economy. The recent change of government may lead to more emphasis on revitalising state-owned enterprises and a deceleration of the privatisation process.
· Foreign investment has been considered a key economic factor since 1990 when the Romanian economy started the change towards a market economy. Romania offers many comparative advantages such as:
- A large domestic market (almost 23 million consumers), the second largest in Central Europe;
- A good location at the cross-roads of traditional commercial routes, allowing access to over 200 million consumers in a 1000 kilometre radius; Romania is also located at the junction of three prospective European transportation corridors;
- A skilled, relatively low cost labour force, well trained particularly in technology and engineering;
- A wide range of natural resources, including fertile agricultural land, oil and gas and a significant tourist potential;
- Liberal investment legislation based on free, non-discriminatory access to markets and economic sectors.
· Subject to the legislation in force, investment is allowed in almost all-economic sectors.
· The volume of foreign direct investment recorded by Romania between December 1990- April 2000, was about 4.6 billion USD. The high number of Romanian companies with foreign investment, 74,025, shows that numerous small and medium sized foreign investors discovered the economic potential of the Romanian market and decided to invest there.
· The Netherlands is among the top five investors in Romania.
· Starting with the last months of 1998, Romania has been speeding up the restructuring process and, by consequence, several large-scale privatisation operations were completed.
· Even if the present level of foreign investment is below the Romanian economy potential, mainly due to slower start of the privatisation process, foreign investment has already an important impact in several industrial branches.
· In 2000, one of the major targets was the accomplishment of PSAL provisions negotiated by the Romanian Government with the World Bank. The Private Structural Adjustment Loan (PSAL) is a loan agreement worth USD 300 million, which includes major objectives regarding the privatisation. Under the PSAL agreement, 63 Romanian state-owned companies are to be privatised by privatisation agents.
1.1 Transport, Infrastructure and communication
· The Romanian road network is in a deteriorated stage due to the low quality of the road construction works and the enormous backlog in repair and maintenance.
Romania is pursuing a strategic plan for the development of its road network until 2006, comprising rehabilitation of international routes, modernisation of national routes and motorway construction.
· It is projected that 13 highways are to be built covering 3,000 Km, as well as 1,200 Km of new railway lines, new bridges over the Danube and the Prut river and 4 new airports at Brasov, Galati, Alba – Iulia and Bistrita. The existing railways will be upgraded to suit high – speed trains. The territory of Romania will be crossed by several pan-European corridors: the Danube connected to the Rhine-Maine –Danube Canal, a lot of main railway lines, the highway and the Bucharest-Chisinau-Kiev road.
· The report specifies the development of transport means and facilities planned for the period 2001-2004 and emphasising quality of services, traffic safety and transport security.
· The state railways’ company, SNCFR, has been split into five separate companies. New train operators are also to be given access to the network.
A two-stage railway modernisation and rehabilitation programme is being implemented.
· The construction of the Danube-Black Sea canal created an important waterway that connects the Black Sea to the North Sea through the Rhine-Main-Danube canal.
The main problem of inland waterway transport over the Danube is the fact that the river still has to be cleaned nearby Novi Sad by removing remaining parts of the destroyed bridges.
This operation is planned to be completed by the end of 2001. Further problems concern the need for dredging on several places. The Romanian dredging industry is still not privatised.
Finally, agreement with Bulgaria should be reached regarding the planning and use of the terminals in the river ports in both countries.
· About 60% of the Romania’s imports and exports pass through the port of Constanta, the most important maritime port of the country.
· Romania plans to sell a maximum stake of 66 per cent of the Tarom airline, with the state keeping a 34 per cent controlling share.
· The strategy of telecommunication development was drawn up as a priority field of the country’s macroeconomic infrastructure. A long term Development Program was devised, with strategic objectives. Part of the Program has already been accomplished through the commissioning of digital transit telephone exchanges, local and international.
· Mobile telephony evolves very fast. In only three years it reached an average penetration rate of 10%. In comparison, Romtelecom, the fixed telephony network and active for decades, has an average penetration rate of 17%.
· The quality of the fixed telecommunication infrastructure is below standards and the future for the fixed telecommunications network is very uncertain because of the increasing competition from the mobile operators.
· The penetration rate of Internet is still low: less than 1%. In this field there still is a large potential for growth.
· There is an extensive list of investment priorities and covers all transport modes. A distinction has been made between investment priorities in the sectors transport, infrastructure and water by the public sector (listed in the report) and those as indicated by the Romanian Chamber of Commerce and Industry (CCIR). The latter are not priorities for investment, but should be considered as business opportunities (CD-ROM).
1.2 Donors and Financing
· The Accession Partnership continues to provide the single framework through which the priority areas for further work are identified regarding progress to be made by Romania towards membership of the European Union, the financial means available to implement these priorities and the conditions which will apply to that assistance. The 1999 Accession Partnership with Romania was adopted by the Council in December 1999 and remained the framework on which the programming for the year 2001 has been based.
· Indicative allocations for Romania in 2001 are as follows (in million EURO):
Phare: 298.7
ISPA: 243.9 (mid-point of range)
SAPARD: 153.6
Total: 696.2
· A Working Document on priorities for Phare 2001 was prepared by the Commission in consultation with the Romanian authorities in early 2001.
The institution building priorities identified for Phare support under the 2001 programme for Romania (which will represent about 30 % of the total Phare budget) indicate for transport: The adoption of EC norms as regards driving/resting hours for road transport and the implementation of maritime safety acquis as regards State Flag Control.
The main priorities identified for investment in the acquis (expected to receive about 30% of the Phare budget) and selected for the transport sector are Maritime safety equipment and testing equipment for railway safety.
Investments in economic and social cohesion are expected to receive up to 40 % of the overall Phare budget allocation and include: road worthiness enforcement, railway rehabilitation, cross border co-operation and waste water treatment projects.
· ISPA: For Romania, Community aid in the framework of ISPA will be between 20% and 26% of the total allocation. The average mid-range allocation is €243.9million a year (at 1999 prices), equivalent to € 1,674 million for the 20002006 period. Guidance is that half of the support - €121.9million a year - will be used to finance transport infrastructure projects, the other half for environment projects.
Strategic Objectives in the field of transport are stemming from serious weaknesses in its network of roads, railways and waterways. At the same time, there is a necessity of upgrading to European standards and of increased traffic capacity around urban areas.
During the year 2000, the Commission has approved four transport-related projects.
· The EBRD’s pipeline of projects is concentrating on:
- large-scale privatisation and restructuring with strategic investors;
- private sector investment in either local private or joint-venture projects;
- SME financing, banking and non-banking financial sector;
- national and municipal infrastructure privatisation and public-private partnerships;
- Significant additional levels of investment (read private capital and finance by IFI) are needed in order to achieve acceptable standards.
· Since 1991 the World Bank has built up a portfolio of 29 IBRD-financed projects, of which 22 are currently active, and two Global Environmental Facility (GEF) projects, of which one is currently active. Since 1991, World Bank commitments to Romania total over US$3 billion. Priority is given to advice and financing for EU accession-related programmes.
In 2000 one transport sector project has been approved (Trade and Transport Facilitation Project, worth US$ 17 million).
1.3 Business opportunities for Dutch enterprises
Romania offers many business opportunities for Dutch enterprises as can also be concluded from the large number of Dutch companies active there already. The liberal investment climate, the huge market potential, a skilled and low cost labour force, the influx of international assistance and capital and a consistent harmonisation policy with EU legislation and regulations have resulted in an interesting business climate for large, medium and small enterprises.
However, the new government elected ultimo 2000 may change some priorities in economic policy and slow down the privatisation process. Moreover the persistent bureaucracy on all public levels may remain a time consuming element the near future.
There are and will be many business opportunities in Romania. The project ideas identified implicitly prove the relevance of the current PSO+ programme. Given the emphasis the authorities put on improving transport and infrastructure the PSO budget for the theme “Transport” is likely to remain too small.
The following table shows an assessment of the business opportunities in the different sub sectors for possible PSO+ projects. Sometimes the expression "no key area" has been used to indicate that the relevant sub sectors do not really qualify for PSO+ projects. This does not necessarily mean that there are no sound business opportunities in the mentioned sub sectors.
Sector / Goods / Freight / PassengersRoad transport
Supply industry / Good opportunities in special and heavy transport.
Towing services and mobile service stations.
Supply and use of rescue vehicles/equipment for fire brigade and traffic police.
Manufacturing of components for automotive industry in Pitesti.
Production of on-board computers for commercial vehicles. / Harmonisation public transport regulations with EC rules; no key area.
International bus lines; no key area.
Manufacturing of buses Timisoara.
Transport by rail
Supply Industry / Opportunities for forwarders;
shuttle services container transport. / Government controlled;
no key area
Inland water transport
Supply industry / Improvement conditions navigation Danube (dredging; terminal development; shipping); still no key area. / Not relevant
Sea transport and ports
Supply industry / Establishment offshore company tug boats.
Construction rescue boats; shrimps vessels.
Manufacturing steel components for shipbuilding industry.
Maritime navigation and safety systems.
Air transport / Opportunities in forwarding and storage activities.
Disinfecting station; plants to divide petroleum products from rainwater; pyrolytic incinerator for Bucharest Otopeni International Airport; no key area.
Noise monitoring systems and solid waste incinateror for Bucharest Baneasa International Airport; no key area.
Public works & water management / Massive investments planned in road construction and maintenance; Opportunities in supply of modern road building machinery and technology.
Public works projects at the municipality of Pitesti; no key area.
Telecommunication and ICT / Provision of internet services; no key area.
Postal services / Development integrated postal services.
Key areas for PSO projects