Romania's Privatization Program: Is It Progressing?
Abstract
The purpose of this project is to reach an understanding of Romania's privatization program and to analyze the problems and difficulties the government has in accomplishing a successful privatization. It attempts to demonstrate that
Romania's privatization process is actually slowing down, while it should, in fact, be accelerated. After the December 1989 revolution, following 44 years
of Communist Party rule, Romania joined the other Eastern European countries in implementing a long and difficult
transition to a market economy. Under the harsh control of
Communist dictator, Nicolae Ceausescu, Romania became one of
the most centralized power structures in Eastern Europe.
The later Ceausescu years were a tragedy for Romania,
socially and economically. Ceausescu's drive to pay off all
foreign debt by the end of the 1980s exported most of the
nation's food and halted imports of new technologies and raw
materials. As a result economic growth slowed down
drastically. By the end of the decade, Romania had the lowest
standard of living and was one of the poorest communist
countries in Eastern Europe.
In December 1989, Ceausescu was overthrown and executed,
and a new democratic government was formed. As Romania began
its change from a socialist to a capitalist economy, the new
government faced many obstacles. Romania's output continued
to decline, the industrial capital was highly obsolete and
old, and the country lacked market-oriented institutions and
management experiences. Immediately after the revolution, the
government embarked upon a rigorous economic reform program
to facilitate the transition to a market economy. The
transfer of most of the state-owned property to private
owners became the government's top priority.
The objective of this paper is two-fold. The first part
of this project deals with a detailed analysis of Romania's
privatization process. The discussion proceeds as follows: In
Section I, an historical background of Romania is presented.
Section II discusses Romania's macro-stabilization program
which is essential for a successful privatization. Section
III illustrates a theoretical model, "optimal sequencing of
privatization, " and this theoretical model is applied to
Romania's agricultural industry. In Section IV, Romania's
effort to privatize the state-owned enterprises is discussed.
Section V contains a summary and conclusions. This is
followed by personal observations and conclusions about my
experience in Romania.