The reform of the state-owned enterprises has been met with limited success and remains incomplete, said the European Commission (EC), the executive arm of the EU, in a report published on Tuesday.
The report tracked Romania’s progress under the two balance-of-payments assistance programs worth EUR 6.4 billion with the EC, which have been carried out between 2009 and 2013. Romania fully disbursed the EUR 5 billion loan and hasn’t tapped the second financing agreement.
“The programs have generally been successful in restoring macroeconomic stability, in reestablishing market access for the sovereign, and in safeguarding financial stability. The programs’ track record in promoting structural reforms has been mixed with reasonable progress on the regulatory side but relatively little progress in terms of concrete changes on the ground,” said the EC in a statement.
Although the government enforced a corporate governance code for SMEs and halved the arrears generated by these companies, the EC said that the reform process had shortcomings.
The report notes that that some of professional managers and boards that were named in state-owned enterprises (SOEs) lasted very shortly, while some appointments were made on political grounds.
It added the sale of stakes in SOEs has met “with very limited success”, as the government sold minority stakes in only two companies in the past two years. Romania raised roughly EUR 100 million from the secondary public offerings (SPO) in Transelectrica – the grid operator – and Transgaz – the gas pipeline operator.
The majority privatization of the Romanian Post has failed because there were no interested bidders and the Commission is currently waiting for the outcome of the privatization of CFR Marfa, the rail freight operator.
“Given important vested interests, it is very hard to see how the situation of the many remaining SOEs can improve without a dramatic increase in ownership in the SOE restructuring policy on the part of the Romanian authorities,” said the report.
There are currently more than 900 SOEs in Romania, generating 9 percent of the economic output yearly and accounting for 10 percent of the employed labor force.
The report is drawn up by the Directorate General for Economic and Financial Affairs (DG ECFIN) and external experts.
Romania is currently negociating a new precautionary loan worth EUR 3 to 5 billion with the IMF, EC and World Bank, which could be signed this Autumn. The new deal will focus on strenghtening the SOEs and maintaining fiscal discipline, according to PM Ponta.