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The European Commission has found Romania's plan to support the production of energy from renewable energy sources in line with EU state aid rules, in particular, because it creates clear incentives for an increased use of renewable energy such as, for example, the system of green certificates.

"The green certificate scheme is a market based mechanism, which will encourage investments in renewable energy in Romania. It will thus support Romania's objective to reach the 2020 renewable energy targets without unduly distorting competition" says European Commission Vice-President in charge of competition policy Joaquin Almunia.

Green certificates are granted to electricity producers for each MWh generated from wind, hydro, biomass, landfill gas,

sewage plant treatment gas or solar.If the energy is produced in high efficiency co-generation plants, a bonus is applied.
The number of green certificates will vary depending on the type of source used to produce energy, in fact it goes: one,

for energy produced from anaerobic digestion of sewage sludge and waste, two, for wind and hydro energy, three, for biomass from energy crops and six, for solar energy.


The certificates issued by the state to the producers can be sold to the energy suppliers on a specific market (independent

of the electricity market). The electricity suppliers have the obligation to acquire annually a certain number of green

certificates. If they fail to do so they must pay a penalty.The penalties are collected by the transmission system operator and transferred to the Romanian Environmental Fund, which will use them for support to small individual producers of electricity from renewable sources. The beneficiaries of green certificates will be able to enter the scheme until 31 December 2016, Agerpres informs.

The European Commissioner for Agriculture, Dacian Ciolos has said ”Romania will be one of the few member states to benefit from the future budget of the common agricultural policy, that is, it will enjoy a larger financial allocation than now, both for pillar one and for rural development, but it will have to define its objectives in agriculture, and pay special heed to the three major objectives: food safety, the good management of natural resources and the cohesion of the rural territory.”

Romanian agriculture minister, Valeriu Tabara has set the main objective as redressing the trade balance for foodstuffs. He has said ”Romania has the potential to produce and not to demand, to export and not to import wheat and corn. I am confident that in two-three years’ time, Romania’s agriculture will find itself in an area that won’t just boast high potential, but will also boast a basis for partnerships, in the Romanian and foreign markets.”

The balance of payments deficit in agricultural products fell last year. Sources with the Agriculture Ministry say imports in 2010 amounted to 3.8 billion Euros and exports, 3 billion Euros.

Analysts predict the Romanian economy to grow by some 0.7 to 2 percent over the course of 2011. The IMF, the European Commission and the Romanian Government through its state budget law for this year forecast a growth of 1.5 percent. The same law also predicts a budget deficit of 4.4 percent of the GDP and an inflation rate of 5.3 percent. In addition, for 2012, experts estimate an economic growth of some 4 percent.

According to a study by UniCredit, the Romanian economy will grow by 1.7 percent this year, mostly as a result of the solid increase in exports. This may improve the country’s credit ranking. UniCredit experts also say domestic demand will make a slight comeback in the second half of the year, contributing to the predicted 1.7 economic growth.

Foreign investments can also contribute to economic growth in Romania, according to Eugen Radulescu, a director with the National Bank of Romania: “Foreign investments should normally increase in 2011, because the measures adopted in 2010 as well as the Labour Code, which is now more flexible, should have a favourable impact on investors’ interest in investing in Romania. They should have a favourable impact on the unemployment rate as well.”

Mention should be made that a report made public by the Austrian group Erste, direct foreign investments could be resumed in Romania concurrently with the global economic recovery, particularly in sectors like industrial goods, agriculture and the food industry, the IT& C area and renewable energy.

In 2010, direct foreign investment in Romania amounted to 2.6 billion Euros, registering a 25.5% drop as compared to the previous year. A report issued by the Austrian Group Erste shows direct foreign investment in Romania will go up when global economy picks up, and it will be channeled towards such sectors as industrial goods, agriculture, the food industry, and the IT&C and renewable energy industry.

Labour productivity in the processing industry increased by over 12% in both 2009 and 2010, while the real increase in wages was smaller”, the Erste analysts say. Some of the main trump cards which make Romania an area of interest for foreign investors are its size, as it is one of the largest markets in Central and Eastern Europe, as well as its location at the crossroads of three European transport routes- namely corridors no. 4, 7 and 9. Additionally, the labor force is generally well trained, boasting thorough technological, IT and engineering knowledge. Other advantages are natural resources, including farmland, oil and natural gas reserves, and a huge tourist potential.

At a recent meeting with potential investors from Gulf countries, the governor of the National Bank of Romania, Mugur Isarescu said that our country offers many, diverse and solid profit-making investment opportunities on long term. Isarescu said Romania’s economy has stabilized.
Mugur Isarescu:”I think that infrastructure in general, and not only road, but also naval infrastructure, such as the port of Constanta and Galatz, offer important business opportunities. They are the extremely efficient gateway to Europe. The Danube is a navigation channel which takes us to the heart of Europe. A second area is, undoubtedly, agriculture, and I’m not referring only to all those forecasts on the deterioration of the food situation at world level, but also to Romania’s still unused potential: tracts of land, tradition, labour force and the European funds it can attract. I think legislation in the field of agriculture should be improved, because both Romanian and foreign partners, as well as banks, will be reticent to fund small or very small properties, which stand low chances of becoming profitable. Finally, energy is the third area. Romania boasts a longstanding tradition in this field, and I think it can be successfully capitalized on.”

In turn, Andreea Paul Vass, the counselor of PM Emil Boc, has made public some of the methods the Romanian state is using to support the business sector and investors. First of all, the state uses state assistance schemes for investments exceeding 5 million Euros and which lead to the creation of at least 50 jobs: ”The state assistance scheme has been improved and it became significantly more flexible during the economic crisis, because it was extremely difficult to find investment to create minimum 300 jobs, as had been the case before and it was equally difficult to draft investment plans worth at least 100 million Euros. This state assistance scheme allows for the return of 50% of the value of the investment plan, but no more than 28 million Euros.”

Thanks to this scheme, 10 major projects worth over 700 million Euros have received funding worth 215 million Euros. Approximately 5,000 jobs have been created.

Romania has entered a new period of economic growth, but it needs to take things slowly so as not to go through another traumatising experience. This statement was made by the governor of the National Bank of Romania, Mugur Isarescu, in a meeting with Arab investors attending a forum of cooperation between Persian Gulf states and Romania, hosted by Bucharest.

According to Isarescu, Romania’s economy has made the necessary adjustments with regard to its deficits and is now prepared for a new cycle of sustainable growth. The National Bank’s estimates for this year point to a 1.5% economic growth, but the figure could be higher if significant investment were made in infrastructure and agriculture. These are precisely the areas in which the governor of the National Bank believes the Persian Gulf investors could become involved. Mugur Isarescu: “I believe infrastructure, in general, not only road, but also maritime infrastructure such as the port of Constanta and Galati, offers significant investment opportunities. Constanta is an extremely efficient gate to Europe. The Danube is also a navigation route that takes us to the heart of Europe. Agriculture is another good area for investment. By agriculture I am referring not only to the forecasts regarding the deterioration of the global food situation, but also to Romania’s untapped potential, including land, tradition, labour, and European funds.”

In other words, Romania is a country with a stable economy providing many investment opportunities. What else does it need? Governor Isarescu again:  “I don’t necessarily think it needs money, but entrepreneurs, viable projects and people capable of carrying these projects through. We are a country with many unfinished projects. 40,000 budget investment projects are unfinished. For me, as an economist, this almost says it all. It explains the economic growth and the high inflation rate, and why you can’t feel the difference despite the 5% of GDP allocated to investment.”

Mugur Isarescu told investors that the Central Bank in Bucharest will try to keep the inflation rate in check, and that it

hopes to reduce it to less than 4% by the end of the year, through this is dependent upon international food and oil

prices.

Coming back at the helm of the Transport Ministry has expressed intention to promote a new policy, meant to attract larger investments in infrastructure and to absorb more European funds for transport projects in Romania.
Going ahead with the upgrading of the road infrastructure in Romania continues to be a priority, the minister has said and added that projects worth over 5.5 billion Euros will be launched by the end of next year.These sums include the funds already allotted for the bids organized this year. Anca Boagiu has said several sectors of highways, measuring 243 Kms, are under construction. The total value of the project is 2.5 billion Euros and should be completed by 2011 –2012.

By the end of next year, bids should be organized for the construction of some other 290 km of highway, worth 2.5 billion Euros. Other projects are related to the construction of 11 ring roads. All these ring roads have a total length of 138 km and a total value of 540 million Euros.
The Transport Ministry also intends to modernize 950 km of national roads, an investment worth 848 million Euros, that is obtained by a credit from the European Investment Bank.

As regards railway infrastructure, special heed will be paid to the upgrading of the Pan-European Corridor IV.
Bids for three segments will be organized in the west of the country. They have a total length of 166 km and are worth 1.8 billion Euros.

As regards naval transport, the ministry envisages important projects, with a total value of 200 million Euros, which include the building of a road bridge over the Danube-Black Sea canal, including the necessary infrastructure works to offer access to the Constanta port. The deadline of the project is 2012-2013. Last but not least, on December the 20th, the ministry will launch a project meant to rehabilitate bridges over the Danube.

According to the same data, between January and July 2010, revenues went up by 1.2%, especially due to the collection of VAT and excises, while general expenditure increased by 3.2%. Personnel expenses went down by 4.7% and, goods and services expenditure also diminished by 2.2% as compared to the same period last year. The most significant drop was registered in the state budget, 24.8%, while local budget expenditure grew by 7.8%.
In another move, the National Statistics Institute has recently announced that in the second quarter of the year, Romania’s GDP registered a slight increase of 0.3%, as compared to the first quarter, but it’s still dropping if we compare it with the corresponding period of last year, therefore the economy as a whole actually contracted by 1.5% in the first six months of 2010.

PM Emil Boc has commented the recent statistics, according to which Romania is about to overcome recession. He has stated that although this growth is timid, it is the first after several quarters of recession. Boc believes that the situation would have been better if flooding had not hit and the Constitutional Court had not overturned the Government’s decision to cut pensions by 15%. As a result, the executive decided to increase the VAT from 19 to 24%. Emil Boc:

Standard and Poor’s analysts improved Romania’s ratings as a result of general estimates that the economy will slightly recover this year, especially due to the expected increase in the foreign market’s demand.
Romania’s ratings for the national and foreign currency short and long term loans remain the same. Standard and Poor’s has also termed as positive the Romanian government’s intention to cut the budget deficit from 7.8% of the GDP, as it was in 2009, to 6.4% in 2010.

The disbursement of the overdue payments of the loan given by the IMF, following evaluations of the way in which the provisions of the stand by agreement concluded with Romanian have been met, is another major factor that experts take into account when conducting such an analysis. The expected measures aimed at diminishing the state salary fund and the reforming of the pension system in 2010 also contributed to improving Romania’s ratings.

Foreign direct investment attracted by Romania in the first 8 months 2009 continue to have a strong macroeconomic impact Foreign direct investment attracted by Romania during January-August 2009 registered a value of Euro 3154 million, fully covering Romania’s current account deficit for the eighth month in a row.

FDI structure for the period referred to was:
Intra-group credits : Euro 1690 million
Reinvested profit : Euro 1464 million.

According to the latest letter of intent made public by the IMF in early October, the budget deficit target for late September the Romanian officials and the Fund’s delegates jointly agreed upon was 6.4 billion Euros, the budget deficit standing at 5.4% of the GDP. In the wake of the IMF’s evaluation mission in late August, for the end of 2009, Romanian officials and the IMF experts agreed upon a new budget deficit target, accounting for 7.3% of the GDP, and related to an 8.5% economic contraction for 2009 and the GDP standing at about 120 billion Euros. Last year, Romania’s GDP stood at more than 137 billion Euros.

In another development, data provided by the Central Bank reveal that the share of the arrears for the loans given to the Romanian population has tripled over the last year to 3.25% (1.55 Billion Euros) after arrears for hard currency credits soared 4.5 times, while domestic currency arrears went up 2.5 times for the October 2008 – September 2009 period. Official data also reveal that the population’s and the companies’ arrears from Transylvanian counties (Central Romania) are the highest across the country.

We should also add that according to an index compiled by the Legatum Institute, an independent world development consultancy and research institution, Romania ranks 48th in terms of population prosperity. The survey has placed Finland on top position, out of a pool of 104 countries world wide, Romania being outclassed by most of the European countries.

Mugur Isarescu has been appointed for yet another 5-year term in office as Governor of the National Bank of Romania, after the Parliament validated the Central Bank's new Board of Directors. Former Finance Minister Florin Georgescu has been appointed first deputy governor. Attending the Parliament's validation session, Isarescu highlighted the National Bank's forthcoming objectives.

"Rest assured that we are going to promote policies capable of securing stable prices and financial stability in Romania. Also, I do believe in a good cooperation with the Romanian Government, we are going to do what is needed to fulfill the objective of adopting the single European currency in 2014-2015."

Isarescu also said the aim of adopting the European currency could act as a catalyst for a series of coherent macroeconomic policies. According to Isarescu, besides the National Bank of Romania's main objective of adopting the Euro, the National Bank's Board of Directors will have to provide financial and price stability, the sanity of the national currency, of the credit and monetary circulation.

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