By Maria Ahmed
Romania’s prime minister Calin Popescu Tariceanu is adamant his country’s anti-corruption drive has transformed the country. He tells Emerging Markets why
The European Commission’s lukewarm endorsement of Romania’s EU bid has done little to dampen the Balkan nation’s satisfaction with its turnaround. Since coming to power 18 months ago, prime minister Calin Popescu Tariceanu and his government have dug in to tackle the biggest obstacle to the country’s accession – corruption.
While Brussels has mulled over when to admit Romania, the authorities have gone after the former untouchables – the political elite themselves. A deputy prime minister, George Copos, an ex-prime minister, Adrian Nastase, and a former economy minister are under investigation.
Tariceanu remains undeterred by renewed EU vacillation. “Let’s make things clear,” he says in an exclusive interview with Emerging Markets. “My government has implemented a deep reform which has set up an independent and functioning judiciary. We have also set up an anti-corruption department, which investigates especially high corruption cases,” he says.
“[These departments] have started working and, for the first time, investigate key political figures: MPs, a former prime minister, ministers. Tough steps have been taken in order to prevent corruption in the public administration.”
Top level corruption has long been the bane of Romania’s EU bid. In a huge criminal justice shake-up, Romania is replacing most of its judges and prosecutors. Last year 1,200, nearly a third of the total, quit. Transparency has also been brought to bear: judges, for example, are now required to publish their assets on the internet.
Hard work
But Tariceanu shrugs off talk that his country’s bid could be delayed by another year after additional assessment in the autumn. The 54 year old is confident that his country will enter the EU as planned on January 1, 2007. Compared to last year’s Monitoring Report by the European Commission, he says, “we will be able to succeed in fulfilling our obligations up to January 1, 2007. We have worked very hard until now to tackle all the sensitive areas – so that the accession calendar is entirely followed.”
Romania, and neighbouring Bulgaria – also in line to join the union at the same time – have been warned with red flags from the Commission 40 times times already. Although both countries have now got the go ahead to join the union, in theory the EU could still decide to postpone membership. However unlikely this is, analysts are confident that the fallout for the country would in any case be limited. The country, after all, is in the throes of an investment boom and the impact of a delay would be on Tariceanu’s ruling Justice and Truth coalition, which his National Liberal Party dominates.
“Many of the areas which have been considered challenging in the past are no longer a source of concern for the EU: reform of the judiciary, public procurement, intellectual and industrial property, environment, border control”, says Tariceanu.
“I am aware and – frankly speaking – satisfied with the progress achieved,” he adds, pointing out that EU officials recently sent two “key messages” about Romania: that the country has made “major progress” in its accession preparation, and that reforms must carry on “at high pace”. “I am determined to carry on putting pressure on the ministries and the public administration to meet European standards.”
A delay, says Spyros Economides, senior lecturer at the London School of Economics’ European Institute, will not be disastrous: “It could only be of benefit to the Romanian economy to have further time to make some of these painful reforms.”
Other analysts agree. “In our view, Romania will go into the European Union in 2007,” says Matthew Vogel, head of emerging markets research at Barclays Capital. “Clearly the EU wants to keep pressure on these economies while they still have leverage.”
Breakthrough
Romania made its breakthrough reforms 18 months ago, Vogel points out. Tariceanu’s government, and president Traian Basescu, both in power since December 2004, have made “a serious effort” to address the judiciary and corruption issues that the EU highlighted. According to the EBRD’s report of December 2005, the corruption perceptions fell from 2.6% in 2004 to 0.7% in 2005, compared to a European average of 0.5%. Deeper reforms, such as implementing new laws, “are going to take years to achieve”, but are “not necessarily felt in current business conditions”, and therefore would not get in the way of Romania’s economic boom.
The country’s fortunes have also been spurred on by a favourable investment climate. The economy is growing at 5.9%, and has attracted over E19 billion in foreign direct investment (FDI), since 2000. Last December, Austria’s Erste Bank paid a record amount for an eastern European bank when it bought a majority stake in Banca Comerciala Romana from the government for k3.75 billion, valuing the country’s largest bank at nearly five times book value.
Investment perceptions of Romania are encouraging, says Vogel, because of the overall macroeconomic stability achieved by the government. A more robust policy framework and a wide-ranging privatization programme, together with a hard-working and inexpensive workforce by European standards, have done a “tremendous job” of attracting FDI. As it diversifies into more greenfield projects, Romania’s range of competitive export industries will also grow, he adds.
Jacob Grapengiesser, fund manager at Stockholm-based East Capital, gives Romania a favourable economic outlook, regardless of when it joins the EU. “The current account deficit and inflation seem to be under control. In general it’s a decent situation.”
“It’s not a big deal if Romania does not enter in six months ... if they’ve been a bit sloppy in implementing their reforms then they can address that before entering.”
“For the time being some of the large investors dedicated to eastern Europe are waiting,” says Grapengiesser. But he praises the government’s ambition to double the value of the Bucharest Stock Exchange, with a number of firms set to come to the market in the second half of this year. “One way to bring investors into the market is to have a large number of IPOs. Then they can’t ignore it,” he says.