by Vladimir Rodina
BUCHAREST - Last to shake off communism in December 1989, Romania has embarked on the ambitious journey from a command economy to a market-oriented system, but indecisiveness and half measures have prolonged the painful transition.
An unwieldy heavy industry which accounted for 59 percent of industrial production and a host of rundown factories employing two thirds of the labor force has plunged Romania into a difficult dilemma.
Unlike Poland, Romania chose a careful, slow-paced approach, with three successive leftist administrations in search of a "middle way."
But gradualism in price liberalization and the state's increasing reluctance to cover up $2.5 billion inter-enterprise arrears, or nearly one quarter of the Gross National Product (GNP), has played havoc with an already derelict economy.
An annual inflation rate of 300 percent and 12 percent unemployment were reason enough for Prime Minister Nicoale Vacaroiu to put the breaks on to an already slow reform process shortly after his election in November 1993.
However, frightened by a hyper-inflationary free-fall, and faced by the International Monetary Fund's (IMF) refusal to release new loans until financial discipline was enthroned, Vacaroiu's cabinet switched to iron-fist tactics.
As efforts to control inflationary pressures and to ameliorate an over 50 percent production downfall began to yield fruits, some redeeming prospects began appearing on the horizon.
The Central Bank managed to level the official exchange rate with black market rates by forging a mortifying 200 percent short-term interest rate, while increasing exports tripled a nearly extinct hard currency reserve.
A World Bank report released in June described the Romanian economy as "changing in expected ways", with industry accounting for 40 percent of the output, down from 54 percent in 1989.
Mass privatization, vigorously pursued in neighboring Eastern European countries, has hardly begun in Romania, with merely one percent of 6,300 state-run enterprises passed into private hands.
But the authorities' dire need for international credits seems to have vanquished fears of closing down big loss-makers and cutting payrolls.
A $700 million International Monetary Fund (IMF) loan finally landed in the wake of 18 months of hard negotiations, with Romania pledging to fight inflation and pass nearly 2,000 enterprises into private hands by the end 1994.
Eager to capitalize on the frail but somewhat positive trend, the Romanian government launched a mass privatization program, with 15 million share vouchers freely distributed to the population.
Although the vouchers were handed out in 1992, public mistrust and a lack of interest have encouraged a flourishing black market with vouchers sold at 10 percent of their official value of $100.
"We shall offer equal chances to everyone to avoid social turbulence," said Minister of Economy Mircea Cosea.
By the fall of 1994, each company will have to present a so-called "business card" listing its assets and profits made over the last three years, so as to help people make their own choices.
The bulk of the companies left out will be either revamped through a government program or closed down.
Outside the state's property, the rapid rise of private sector activity has been the most encouraging aspect of the transition, with nearly 31,000 companies accounting for 54 percent of Romania's trading.
At the end of 1993, the private sector's contribution to the GNP reached 30 percent, with its payroll accounting for about 41 percent of Romania's gainfully employed population.
The largest part of this expansion occurred in agriculture following the 1990 privatization of arable land.
According to data released by the National Statistics Commission, 80 percent of the agricultural land was distributed among farmers.
Benefits were soon posted. The 1993 GNP tilted by one percent , with most credits going to a 14-percent-high farm output.
With most Romanian private investors starting from scratch, post-communist authorities are struggling to offer the best possible bargain to wealthy companies eager to tap on its resources.
A $10,000 investment in a joint venture wins a five year tax break, and if profits are reinvested in Romania, tax rates are cut back by 50 percent.
Romania has so far registered 30,000 joint ventures with an overall capital of $800 million, accounting for 6 percent of the GNP.
An estimated 90 percent of the investments have been poured into industry, with Western Europe leading with 67 percent, followed by the U.S. with 18 percent and the Middle East with 6 percent.
However, red tape and mistrust in the leftist ruling Social Democracy Party's erratic policy have deterred a massive foreign deployment of cash.
The question still lingers whether Romania will sustain its macro-economic policy with deeper, structural changes at the micro level.
As for the World Bank, the answer seems simple.
"We shall not move in until we see real signs of recovery and acceleration of privatization," World Bank resident representative Arntraud Hartman has said.
