Located in southeastern Europe on the Black Sea, Romania covers an area of 238,500 square kilometers (92,085 square miles), making it slightly smaller than Oregon. It borders Hungary, Yugoslavia, Bulgaria, Moldova, and Ukraine, and has a coastline of 225 kilometers (140 miles). The capital, Bucharest, is towards the south of the country.
The population of Romania was estimated at 22,334,312 in July 2000, having fallen 2.6 percent since its peak in 1988. The population is expected to continue falling for the next decade thanks to net emigration and low birth rates, a fact that worries the government. But improved health care should slow the rate of decline as infant mortality falls from its current 19.8 deaths per 1,000 live births.
Meanwhile, the proportion of retired people is rising. By 2005, 14.6 percent of the Romanian population will be aged 65 or over, compared to 11.8 percent in 1995. For this reason, Romania has recently reformed its state pension system because rising unemployment has combined with the aging population to make the former payas-you-go system unaffordable. The plan is to encourage complementary private pensions, allowing younger citizens to save for their own old age while maintaining payments to those that are already pensioners.
Romania's population is remarkably homogenous. Almost 90 percent are ethnic Romanians, claiming descent from Latin-speaking Romans who settled among the local Dacians in 100-200 A.D. As a result, Roman-ian is a Romance language related to French and Italian, in contrast to the Slav languages spoken in surrounding countries. Around 70 percent of Romania's population is Romanian Orthodox.
The biggest minority group is Hungarian, which is particularly strong in the western region of Transylvania. Hungarian-Romanians have automatic rights to parliamentary representation and Hungarian-language education. There are also sizeable Roma, Turkish, and Croat populations, as well as Ukrainians, Greeks, Russians, Armenians, and Serbs. Romania used to have a Jewish population of around 300,000. Most of them survived World War II but emigrated to Israel, leaving only a few thousand now. During the 1990s, two-thirds of Romania's German population also emigrated to Germany.
Romania is well-endowed with natural resources. It has large reserves of petroleum, timber, natural gas, coal, iron ore, and salt, as well as facilities for hydropower. But lack of investment is causing the output of everything from coal to oil to fall.
The coal sector has been among the hardest-hit by the transition to a market economy. Coal production fell by 57 percent between 1989 and 1998, to 28.6 million short tons, as the economy shrank and use of other, less-polluting fuels increased. Over the past 5 years, the World Bank and the International Monetary Fund have pushed Romania to close inefficient mines, in order to stop the sector from gobbling up state subsidies. The social impact of this has been huge, with tens of thousand of miners losing their jobs, pushing unemployment in some regions to 70 percent. The current leftist government has promised that the pit closures will soon stop. It is hoping to boost electricity exports, which will mean more demand for coal.
Romania has proven oil reserves of 1.4 billion barrels, the largest in Eastern Europe. The country used to be a major oil exporter, but lack of investment has caused production to steadily fall over the last 2 decades. Romania now relies on imports to cover half its domestic needs. The government has started to attract foreign investment for oil exploration and production, both on land and in the Black Sea. There are also long-standing plans to privatize the state oil company SNP Petrom, although the attitude of the government remains unclear. Gas production has also fallen, with little money for exploration. Proven reserves of natural gas stood at 13.2 trillion cubic feet in 1998, but Romania still imports gas from Russia.
Romania's manufacturing sector is dominated by machine-building, metals, chemicals, and textiles, all of which have had to turn from supplying the domestic market to finding export markets. Investment has been a key issue, as they try to update the outdated equipment many of them were left with when communism fell. Many of the previously state-owned firms have also been sold to private owners in an attempt to bring in money and improve management. Some of the biggest firms, seen by the government as strategic, have still to be sold, however.
The textile and footwear industries have been among the most successful in the past decade, as Western European and U.S. clothes-makers subcontract work to Romanian firms. As a result, textile exports accounted for 24.2 percent of 2000 exports, while footwear accounted for 7.6 percent. But such work depends on low wages, which is why Romania is anxious to progress from sub-contracting to selling its own clothing designs. At present, the gross monthly wage in the textiles sector is just US$130 a month.
The metals sector has enjoyed a boom in the past 2 years, thanks to high world prices. The aluminum plant Alro is now Romania's biggest exporter and tripled its net profits in 2000. The country's biggest steelworks, Sidex, has also benefitted from the high prices, despite its outdated equipment and competition from stronger steel firms in Slovakia. Sidex is said to employ, directly and indirectly, over a million Romanian workers, both in and outside its home town of Galati. Both Alro and Sidex are still mainly state-owned and are expected to be sold to private owners by 2003.
During the 1990s, many of the largest firms in the machine-building sector were split up into smaller units in an attempt to boost efficiency and speed up their privatization. The disruption has been immense, and Romanian firms, long protected in an isolated market, have also found it hard to raise their production to the standard needed for export. Nevertheless, there has been some recovery in the sector. Exports rose nearly 50 percent during 2000, and it accounted for 14 percent of the total.
Romanian firms in both the metals and machine-building sectors lay great hopes on becoming subcon-tractors for major European manufacturers. That is why the 1999 acquisition of the Dacia car plant by France's Renault is seen as so important to Romania's future. Renault plans to use Dacia to develop, for emerging markets, cars selling for around US$5,000 apiece. To do that, it will have to build up a network of local, cheap suppliers such as the Sidex steelmaker. Renault's entry into Romania has also brought in other foreign investors, among them its international suppliers, such as the United States's Johnson Controls.
Romania's chemicals sector consists of both petro-chemicals, based on its oil industry, and on pharmaceuticals. The pharmaceutical firms, such as Terapia, have found a niche for themselves in producing cheap versions of international drugs to sell both to Romanian hospitals and to EU countries. But they face problems as Romania moves towards EU membership because its patent laws will have to be made stricter, which will limit the drugs they can produce. Like the oil sector, the petro-chemicals sector has revived in the past year due to rising world prices.
Tourism has always been an important part of Romania's economy. A combination of beautiful mountain regions, a warm sea coast, and Dracula's castles lure tourists. But the development of the industry has been hampered by a lack of money for infrastructure and tourist facilities. Service is still patchy in several parts of the country.
These factors, combined with the wars in neighboring Yugoslavia, mean that tourism numbers more than have halved since communism ended. In 1990, some 6.5 million foreigners visited the country; by 1998, that figure was down to 2.9 million. The collapse of the state tourism monopolies are partly to blame, combined with Romania's rising reputation for corruption. The number of domestic tourists has also slumped, with many Romanians no longer able to afford holidays.
Nevertheless, there are signs of a revival since the mid-1990s. Some limited foreign investment has come into the sector, particularly into Bucharest. Privatization of tourism facilities has speeded up. And the government has made development of the industry one of its prime medium-term objectives.
The development of Romania's banking sector is seen as crucial to economic growth, because it will determine whether companies can get the loans and investment they need to become competitive. In 1990, the market was dominated by a handful of state banks. In 2000, there were 54 banks registered in the country, many of which were subsidiaries of foreign banks.
But Romanian financial services remain small in international terms. And the locally-owned banks in particular are also vulnerable to collapse because of a lack of experience in selecting borrowers, the effects of the 2 recessions, and their limited access to international capital. Several banks and funds collapsed during 2000, leaving thousands of deposit-holders demanding compensation from the government. Altogether, the government has had to spend US$3 billion in the past decade propping up the country's banks.
To overcome these problems, Romania is in the process of privatizing its remaining state banks. The aim is to find foreign strategic investors who can provide both capital and expertise and stop the banks from collapsing. The Romanian Bank for Development was sold to France's Societe Generale, while several financial investors, including America's GE Capital, have bought into Banc Post. In April 2001, Banka Agricola, the agricultural bank, was sold to the Romanian-American Enterprise Fund and Austria's Raiffeisen bank.
Much of the growth of Romania's service sector stems from the growth of trade, both international and domestic. Trade employed 9.5 percent of Romania's workforce by 1998, compared with 5 percent in 1990. And it accounts for an estimated 90 percent of small businesses in the country, many of which operate in the grey economy. Many of these firms are one-person companies with a van to ship goods. Others are small shops or even street-traders.
The retail trade in particular was underdeveloped in the communist era when all shops were state-owned. Now a multitude of small shops have sprung up and are increasingly having to compete with the new supermarkets. Some of the investment has come from foreign countries, with retailers such as Austria's Billa, Germany's Metro, and France's Carrefour building supermarkets and hypermarkets in the major towns. The investors seem unconcerned by the low purchasing power of Romanians. They see fast growth for the sector because it is so underdeveloped, and are keen to establish their position.
Romania has no territories or colonies.
—Ana Nicholls
Bucharest.
Romania leu (L). One leu equals 100 bani, though bani are seldom used, thanks to devaluation. There are notes of 1,000, 2,000, 5,000, 10,000, 50,000, 100,000, and 500,000 lei (plural of leu), and coins of 1, 5, 10, 20, 50, 100, 500, and 1,000 lei.
Textiles and footwear, metals and metal products, machinery and equipment, minerals, fuels.
Machinery and equipment, minerals and fuels, chemicals, textiles, footwear.
US$36.7 billion (2000). [ CIA World Factbook 2000 reports GDP at purchasing power parity to be US$87.4 billion (1999 est.).]
Exports: US$10.4 billion (2000). Imports: US$12.0 billion (2000). [ CIA World Factbook 2000 reports exports to be US$8.4 billion (f.o.b., 1999 est.) and imports to be US$9.6 billion (f.o.b., 1999 est.).]