Romania
ROMANIA* 1.
DEVELOPMENT DISPARITIES AND ISSUES
Since mid-2000, macroeconomic trends in Romania have distinctly improved, building on the cumulative impact of successive rounds of structural reform attempts, increased openness and competition in the economy, and the adoption of a more balanced and responsive policy mix. Economic growth has remained robust, inflation declined steadily and, although current account developments remained at times a source of concern, external vulnerability decreased over the period. The industrial sector has been undergoing reform, with the privatisation of larger state-owned enterprises advancing at an increasing pace, although considerable progress is needed to reduce losses and subsidies. The weight of the private sector has increased gradually due to privatisation and entrepreneurship. Nevertheless, the economy has been hampered by weak financial discipline and complex procedures. Uncertainty in the application of law by the public administration and the judiciary also continued to impede the business environment. Despite solid economic growth, Romania has only recently made progress towards convergence with EU per capita income levels. In 2003, GDP per capita increased to 30 percent of the EU-25 average, up from 27 percent in 1998. The economic activity rate was 63 percent and the employment rate 56 percent, but both have declined since 1997. The unemployment rate was 6.3 percent of the active population. Unemployment was increasingly of a long-term nature and considerably higher among the young. 1
Figure 1: Romania
Source: http://europa.eu.int/abc/maps/applicants/romania_en.htm
1
European Commission, Regular Report on Romania’s progress towards accession (European Commission, Brussels, 2004).
Benchmarking Regional Policy in Europe
1
European Policies Research Centre
Romania
Romania entered the transition process with a relatively low degree of regional economic disparities when compared to other candidate countries. However, this reflected the underdevelopment of a majority of the regions, rather than balanced territorial development. Moreover, these disparities have been increasing in the post-communist period. One of the most notable features of Romania’s recent economic growth has been the dramatically growing importance of the Bucharest region in development terms. At 46 percent of the EU average over the period 1999-2001, per capita income in the Bucharest region was nearly twice the national average and some 140 percent above the level in the poorest region. The dynamics of economic growth have followed a broad east-west direction, with proximity to western markets acting as a key factor, and the biggest disparities based on the urban/rural cleavage. Underdevelopment is concentrated in the North and Northeast where there is traditionally a heavy dependence on agriculture. The Southern part of the country also depends heavily on agriculture. Development trends to date suggest that a current group of moderately developed areas are likely to decline and become less well developed. This is particularly the case for regions dependent upon large-scale, inefficient heavy industry. The western and central parts have benefited more from proximity to western markets and from their historically lower dependence on the primary sector. There are signs of structural underdevelopment in several parts of the country with many regions losing economically active population and experiencing urban decline.
Table 1: Socio-economic indicators in Romania (NUTS II) Romania
Population
GDP
Employment by sector
Unemployment
(000) 2001
Per Capita, PPS 2001
(% of total) 2002
Rate (%)
EU15=100
EU25=100
Agric.
Ind.
Services
2001
2003
Regions Nord-Est
3836
17.2
18.9
51.3
23.6
25.1
5.9
6.3
Sud-Est
2935
21.3
23.4
38.1
26.1
35.9
7.9
8.3
Sud
3463
20.6
22.6
44.3
28.0
27.7
6.8
7.8
Sud-Vest
2397
21.6
23.7
51.3
23.2
25.5
5.5
6.0
Vest
2032
26.4
29.0
27.9
34.7
37.4
5.6
5.9
Nord-Vest
2839
21.6
23.7
34.2
32.3
33.5
6.6
6.0
Centru
2640
23.5
25.8
26.1
41.1
32.8
6.6
7.2
Bucuresti
2269
52.3
57.3
2.7
35.0
62.4
8.5
8.6
Total 22408 24.4 26.8 36.8 29.7 33.5 6.6 7.0 Source: Eurostat (unemployment rates) and Third Report on Economic and Social Cohesion (European Commission, Brussels , 2004).
Benchmarking Regional Policy in Europe
2
European Policies Research Centre
Romania
2.
NATIONAL REGIONAL POLICY OBJECTIVES
The basic objectives of Romanian regional development policy are set out in Law 151/1998, which is undergoing a revision process to comply with the requirements of Chapter 21 negotiations. The Pre-accession Economic Programme (PEP) clearly states that regional development principles are based on de-centralisation, concentration of funds, partnership and planning, and that the regional development policy is aimed at strengthening responsibilities of local public administrations. The PEP also sets out the regional development policy orientations, namely to stimulate the competitiveness of various areas and their capacity to adapt to new activities, with a focus on capitalizing on their local potential, and not only to target the poorest areas. Romanian regional development policy substantiates the National Strategy for Regional Development, currently being drawn on the basis of Regional Development Strategies contained in Regional Development Plans. The latter have been prepared in broad partnerships at regional level, and help to inform the types and scope of specific local and regional measures for the fifth priority of the NDP 2004-06. This priority consists of ensuring that all Romania’s regions contribute to the development process in a balanced manner. The need for a balanced urban growth is detailed in the present National Spatial Plan (Plan national d’amenagement du territoire). The Plan will be updated and expanded based on eight regional territorial plans. The establishment of industrial parks will be a key component of Romania’s urban policy and will be explicitly envisaged in its National Spatial Plan. 2
3.
INSTITUTIONAL ARRANGEMENTS
3.1
Territorial Administrative Structures
The basic levels involved in regional development are summarised in Table 2.
Table 2: Territorial Administrative Structures in Romania Unit Type
Designation
Number of Units
Development regions
NUTS II
8
Counties
NUTS III
42
At the sub-national level, Romania is divided into 41 counties and the capital city of Bucharest. Effective regional development and policy have been difficult within this territorial administrative structure, as the sub-national level is too small and corresponds only to NUTS III of the European Union categorisation. 3 Law 151/1998 on Regional Development Policy and related amendments have addressed this issue, creating eight new macro-regions, established through voluntary association of the County councils and corresponding to the NUTS II level. This regional level has, in part, been based on a historical territorial unit, the province, and comprises the regions of Moldavia,
2 3
Ministry of European Integration, Romania National Development Plan 2004-2006 (2004), p.201. Ianos (2000).
Benchmarking Regional Policy in Europe
3
European Policies Research Centre
Romania
Transylvania, Muntenia, Banat, Oltenia, Bucovina, Crisana-Maramures and Dobrogea. These regions do not have administrative status or legal personality, but provide a framework for the implementation of regional policies and for the preparation of regional programmes.
3.2
Institutional Structure for Regional Policy4
National Level In 2000 and 2003, Law 151 was amended 5 to establish decision-making bodies at the national and regional level. To accomplish national policy objectives for regional development, the National Council for Regional Development (NCRD) was established. This is a deliberative body, chaired by the Minister of European Integration and consisting of State Secretaries of participating Ministries, and Presidents and Vice-Presidents of Regional Development Boards (RDBs). It is without legal personality, but approves the National Strategy for Regional Development and the National Programme for Regional Development, priorities of financing from the National Fund for Regional Development (NFRD - an annual special-purpose fund within the State budget) and the eligibility and selection criteria of the investment projects to be financed from this fund, as well as the use of the Preaccession funds allocated to Romania from the European Commission. The NCRD submits proposals to the Government concerning the establishment of the NFRD, and monitors the accomplishment of regional development objectives, within the framework of national and international cooperation activities, among development regions and also at the Euroregions level. The executive body of the NCRD is the Ministry of European Integration (MEI). The General Direction on Regional Development within the MEI is the body responsible for all aspects of regional development programming and for coordinating regional policy implementation. It also initiates drafts, in cooperation with relevant ministries/institutions, and proposals for new legislation in the regional development field. The Ministry of Public Finances (MPF) also plays an important role, as it cooperates with ministries and RDAs in identifying sources for the public financing of proposed objectives and measures, both from the State Budget and loans from international financing institutions, as well as from EU financial assistance (see Table 3).
4 5
See also V.P. Valeri, Regiunile Administrative in Istoria Romaniei 1862-2002 (2003). GEO 268/2000 as approved by Law 226/2001 and GEO 27/2003.
Benchmarking Regional Policy in Europe
4
European Policies Research Centre
Romania
Table 3: National Coordination of Regional Policy Ministry
Regional Policy Competence
The Ministry for European Integration
draws up the draft of the National Development Plan and submits it to the NBRD for endorsement and to the Government for approval; draws up the regional development programmes and proposes them to the NBRD for financing; elaborates the necessary criteria, priorities and procedures for financing the programmes and projects in its field of activity; provides the financial and technical management of the NFRD; is the Implementing and Payment Agency for the Phare – Economic and Social Cohesion Component, ensuring the financial and technical management of the sub-programmes; is the Implementation Authority for the Phare – Cross-Border Co-operation.
Ministry of Public Finances
identifies sources for the public financing of proposed objectives and measures; designated the future Managing Authority for Economic and Social Cohesion.
The National Council for Regional Development
approves the National strategy for Regional Development and the National Programme for Regional Development; formulates proposals to the Government for allocations from the National Fund for Regional Development.
Regional Level Law 151/1998 and subsequent amendments currently represents the basic legal and institutional framework for regional policy in Romania, including the definition of Development Regions, Regional Development Boards, Regional Development Agencies and national coordination bodies. The law is broadly inspired by the UK model of delivering regional development policy without the need to have administrative regions. The main sub-national units are: •
Development Regions - have been established through voluntary association of County councils. Although the establishment of regions is clear, it is not apparent whether County councils are allowed to leave a given region and join another on a mutual, voluntary basis, or if these regions are fixed.
•
Regional Development Boards (RDBs) - have been established as self-governing bodies composed of elected representatives from counties and municipalities.
Their tasks
include steering regional develo pment strategies and programmes, approving regional development projects, and allocating resources from the Regional Development Fund (RDF) established for each region, as we ll as supervising the activity of the Regional Development Agencies that operate as branches of the RDB for policy implementation. Reflecting the nature of the Development Regions, RDBs have the status of ‘decisionmaking bodies without legal personality’. •
Regional Development Agencies (RDAs) - are the implementing bodies of regional policy, under the supervision of RDBs on which they depend. Their tasks include regional policy preparation, implementation, and the identification of particularly disadvantaged areas. They also act to attract supplementary funds to the RDF. The RDAs have the status of private NGOs, but are nevertheless auditable organisations
Benchmarking Regional Policy in Europe
5
European Policies Research Centre
Romania
because they manage public funds. RDAs also act as the Implementing Authorities for PHARE Programmes. It is worth noting that a number of government ministries and agencies have recently set up regional offices (e.g. Regional Environmental Agencies, Regional Employment Agencies). These offices are at an early stage in their development and are beginning to develop active links with the RDAs.
4.
NATIONAL REGIONAL POLICY INSTRUMENTS
Law 151/98 initially conceived regional development as the concentration of various forms of State Aid, including grants and active labour market measures targeting so-called ‘disadvantaged zones’. The definition of these zones was never made through recourse to objective indicators, but left to the discretion of Parliament. In practice, the instrument became a policy tool to cope with sudden labour market shocks in areas affected by unemployment in the mining industry. The regional development fund mechanism was abandoned in favour of more traditional forms of Government financing. Although the identification of ‘disadvantaged zones’ was discarded, the principle of concentrating regional development aid based on discretionary geographical principles continued with special programmes approved for the North East region and for particular Counties. Since
2002,
the
Romanian
Government
has
abandoned
the
original
geographical
concentration principle as the main rationale behind regional policy interventions. There is now a more sophisticated and complex approach, aimed at fostering economic links within regions and exploiting the opportunities presented by underdeveloped regional and local economies. First, an annual €5-8 million programme6 has been approved to provide support financing to selected small and medium-sized towns, with the aim of spurring urban industrial growth at the local level and attracting workers from surrounding rural areas. Second, a specific programme has been approved to foster inter-County cooperation in devising and implementing development projects.7 For the first time, an explicitly regional dimension to economic development has been encouraged through a financial incentive mechanism, with projects involving two counties given support worth 30 percent, up to a threshold of Lei 2 billion, and projects involving three or more counties up to 70 percent, with a Lei 4.5 billion threshold. These two measures are complemented by two other programmes, aimed more generically at accompanying and assisting the devolution process in the field of social services 8 and local government capacity to implement local development policies through the support of ad hoc financing. 9 These four programmes are managed by the Ministry of European Integration in collaboration with the RDAs and the County Councils.
6
Government Decree 322/202. Figures reported are estimations. Government Decree 350/2003. 8 Government Decree 93/2003. 9 Government Decree 251/2003. 7
Benchmarking Regional Policy in Europe
6
European Policies Research Centre
Romania
5.
EU PROGRAMMES
5.1
Objectives
Romania appears to be on track to become a member of the EU on 1 January 2007. Negotiations on the accession chapters were completed on 14 December 2004. The Brussels Council of December 2004 decided that the country's Accession Treaty should be signed in April 2005. Romania is receiving pre-accession aid for the period 2004-2006 of approximately €3,078 million of European funding (Phare accounting for €1,539 million, ISPA for €1,026 million and SAPARD for €513 million.) 10 In 2004, The Ministry of Public Finance was designated as the Managing Authority for the Community Support Framework and for the Cohesion Fund. In terms of planning, economic and social cohesion support is provided in close conjunction with the three-year National Development Plan (NDP), adopted by the Romanian Government in December 2003. The NDP sets out five key development priorities: •
Priority 1 - Improving the competitiveness of the productive sector;
•
Priority 2 - Improving and developing transport and energy infrastructure and ensuring environmental protection;
•
Priority 3 - Human resources development, increasing employability and fighting social exclusion;
•
Priority 4 - Diversifying the rural economy and increasing productivity in agriculture;
•
Priority 5 - Promoting a balanced participation of all Romania’s regions in the socioeconomic development process.
The EU contribution to these priorities is outlined in Table 4.
Table 4: Community contribution to NDP National Development Plan 2004-2006
Community contribution
Priorities Improving competitiveness of the productive sector
€ 2million
Improving and infrastructure
€ 1014.72 million
developing
transport
and
energy
Developing human resources
€ 65 million
Supporting agriculture and rural development
€ 482.26 million
Developing regional and local potential
€ 395 million
Source: Romania National Development Plan 2004-2006, p.203. The regional development priority overall objective is articulated into three specific objectives:
10
European Commission, The European Structural Funds (2000-2006): Romania factsheet (2004).
Benchmarking Regional Policy in Europe
7
European Policies Research Centre
Romania
•
contrast growing regional and sub-regional disparities through tailored public support;
•
contrast and reverse urban decline phenomena;
•
provide job opportunities in marginal/disadvantaged areas.
6.
REFERENCES
European Commission, The European Structural Funds (2000-2006): Romania factsheet (2004). European Commission, Regular Report on Romania’s progress towards accession, (European Commission, Brussels, 2004). I. Ianos, ‘Romania’ in Bachtler, J, Downes, R and Gorzelak, G (Eds) Transition, Cohesion and Regional Policy in Central and Eastern Europe (Ashgate Publishers, Aldershot, 2004). Ministry of European Integration, Romania National Development Plan 2004-2006 (2004). V. P. Valeri, Regiunile Administrative in Istoria Romaniei 1862-2002 (2003).
*
This paper has been prepared by Dr Martin Ferry with Chiara Polverari, based on EPRC
desk research and fieldwork material provided by Richard Harding.
Benchmarking Regional Policy in Europe
8
European Policies Research Centre
