Report No. 492a-RO Current Economic Position and Prospects of Romania WLE COPJ (In Three Volumes) Volume I October 11, 1974 Europe, Middle East and North Africa Region Not for Public Use Document of the International Bank for Reconstruction and Development This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. CURRENCY EQUIVALENTS 1 Official Rate lei 4.97 = US$1.00 lei 1 = US$0.20 2. Official Rate With Premium Up to 2 Oct. 74: lei 14.38 = US$1.00 After 2 Oct. 74: lei 1 = US$.0.07 lei 12.00 = US$1.00 lei 1.00 = US$0.08 Conversion Coefficient for Foreign Trade Transactions lei 20 = US$1.00 lei 1 = US$0.05 Fiscal Year -- January 1 - December 31 CURRENT ECONOMIC POSITION AND PROSPECTS OF ROMANIA TABLE OF CONTENTS Page No. COUNTRY DATA IMAP PREFACE SUMMARY AND CONCLUSIONS ....... ..................... i-vilii I. RECENT INSTITUTIONAL DEVELOPMENTS .................. 1 Introduction.. 1 Reorganization of Industrial Centrals . . 1 Changes in Plan Indicators and Incentives . . 2 Improvements in Financial Control . . 3 Domestic Price Review and Resetting . . 4 The New Customs Tariff . . 5 International Cooperation and Joint Ventures ....... 6 II. RECENT ECONOMIC GROWTI. 7 Fulfillment of the Annual Plan for 1973 . . 7 Investment in 1973. 9 The State Budget for 1973 . .10 Factors Contributing to Growth . . 11 Human Resources and Employment. 12 Incomes and Income Distribution . .14 III. INDUSTRY .........15 III IDUSRY...................................... 1 Industrial Growth and Plan Fulfillment in 1973 15 Investment in Industry . .18 Constraints to Industrial Growth . . 20 IV. RFCENT DEVELOPMENTS IN AGRICULTURE ................. 21 Agricultural Growth in 1973 . .21 Agriculture in the National Economy . .22 State Farms and Cooperative Agriculture . .23 Institutional Change in Agriculture . .24 V. ENERGY .25 Trend of Primary Energy Usage ...................... 25 Energy Resources .27 TABLE OF CONTENTS (Continued) Energy.Pqlicy and Deyelopment.Strategy .... ......... 29 CostS and 'Prices; ............................ 30 Investment and Employment in the Energy Sector ..... 31 Conclusions ................ ........................ 33 VI. REGIONAL DEVELOPMENT ................................ 32 Postwar Regional Development Policy .... .............. 32 The Present Structure of Regional Development .... ... 33 Regional Development in the Five-Year Plan 1.971-75... 35 Conclusions ........... .............................. 35 VII. FOREIGN TRADE AND PAYME,NTS .......................... 37 Recent Institutional Developments ..... .............. 37 The New Foreign Trade Regime ..................... 38 Merchandise Trade in 1973 ...... ...................... 39 The Commodity Structure of Trade by Regions .... ..... 40 The Impact of World Price Changes on Romaniats Trade. 41 The Balance of Payments ............................. 42 Tourism ......... .................................... 43 External Debt ....................................... 44 Trade Prospects ..................................... 44 Conclusions ......................................... 45 VIII. DEVELOPMENT PROSPECTS ............................... 47 The Annual Plan for 1974 ...... ...................... 47 The Five-Year Plan 1971-75 ...... .................... 48 Industry . ........................................... 48 Agriculture ........... .............................. 50 Energy . ............................................. 51 Other Sectors .......... ............................. 52 The Five-Year Plan for 1976-80 ..... ................. 53 Conclusions .......... ............................... 54 APPENDICES I. List of Centrals by ttinistry and Location II. Ministries and Other Organs Represented in the Council of Ministers as of Mav 1, 1974 III. Methodology and Implications of the New System of Customs Tariffs IV. Export and Import Price Projections V. Price Adjustments Made on January 1, 1974 VI. Statistical Appendix ANNEXES A. Planning and the Planning System in Romania B. Pricing and Price Policy in Romania Page 1 of 2 pages COUNTRY DATA - ROMANIA AREA POPULATION DENSITY (1973) 237,500 km2 20.83 million (mid-1973) d7.7 per km Rate of Growth 1.0% p.a. (1960-73) 215 per km2 of arable land POPULATION CHARACTERISTICS (1973) HEALTH (1972) Crude Birth Rate (per 1,000) 18.1 Population per physician 645 Crude Death Rate (per 1,000) 9.8 Population per hospital bed 92 Infant Mortality (per 1,000 live births) 38.1 INCOME DISTRIBUTION (1972) Per cent of Salaried Workers earning less than 1,100 lei 22.9 Per cent of Salaried Workers earning more than 2,500 lei 6.7 ACCESS TO PIPED WATER (1966) ACCESS TO ELECTRICITY (1966) % of dwellings - urban 12 % of dwellings - urban 86 - rural 32 - rural 27 NUTRITION (1971) EDUCATION (1972) Calorie intake as % of requirements-' 112 Adult literacy rate % 100 Per capita protein intake 81 Primary school enrollment % 100 GNP PER CAPITA IN 1973: US $890 GROSS NATIONAL PRODUCT IN 1973 ANNUAL RATE OF GROWTH (%, constant prices) us $ Mln. % of GNP 1961-65 1966-70 1973 GNP at Market Prices 18,585 100 9.0 / 7.7-J" 108 Gross Fixed Domestic Investment 5,283 28 11.3 11.2 9.1 Gross National Saving 5,351 29 .. O. 9.2 Current Account Balance 136 0.7 Exports of Goods 3,738 20 9.2 10 3/ 43"9j Imports of Goods 3,505 19 10.72/ 12.7p 33.9 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1973 GNP Labor Force Productivity US $Mln _%_ Mln. (US $/ man) % Agriculture - .2 42.0 Industry .. .. 2.8 28.0 Other . 3.0 -30.0 Total/Average 10.0 10030 GO-VERNMENT FINANCE The State Bucle i- 93 (Le-i bill.) _% of Nat. Income 1973 1969-71 Total Receipts 176.0 60.9 65.2 Total Expenditures 168.1 58.2 47.4 Budget Surplus 7.9 2.7 1.8 Capital Expenditures 42.2 14.1 16.0 External Assistance (net) 1/ Using the FAO Standard Criterion. J Net National Income 3/ Current Prices J/ The State Finances the major part of economic investment and working capital. Page 2 of 2 pages COUNTRY DATA - ROMANIA MONEY, CREDIT, and PRICES 1965 1269 1970 1972 1973 Money and Quasi Money (Percentages or Index Numbers) Money and Quasi Money as % of GDP .. Retail Price Index (1966 = 100.0) .. 100.6 101.0 101.6 102.4 Annual Percentage Change Retail Price Index o. 0.6 0.4 o.6 o.8 BALANCE OF PAYMENTS MERCHANDISE EXPORTS IN 1973 1967 1972 1973 (US $ Million) US $ Mln % Exports of Goods Capital Goods 913 24 Imports uf Goods - Consumer Goods 70h 19 Resource Gap (deficit = -) Foodstuffs 506 13 Intermediate Goods 396 11 Interest Payments (net) Raw Materials 1219 33 Worker's Remittances industrial 647 (18) Other Factor Payments (net) ;; agricultural 572 (15) Net Transfers .. Total 3,737 100.0 Balance on Current Account EXTERNAL DEBT, DECEMBER 31, 1973 Direct Foreign Investment New MLT Borrowing .. .. .. US $ Mln Disbursements Amortization .. .. Public Debt, incl. guaranteed Subtotal Non-Guaranteed Private Debt Capital Grants - - Total Outstanding and Disbursed Other Capital (net) Other items n.e.i. _ - DEBT SERVICE RATIO FOR 1973 Increase in Reserves (+) As % of total goods and Gross Reserves (end year) .. .. .. services exports Net Reserves (end year) As % convertible exports BATE OF EXCHANGE2-/ IBRD LENDING (July 1974) (S$ mill.) US$1.00 = Lei 4.97 Lei 1.00 = US$0.20 SDR 1.00 Lei 6.00 ~~~~~~~Outstanding and Disbursed - SDR 1.00 = Lei 6.00 Undisbursed 190 Lei 1.00 = SDR 0.17 Outstanding md, Undisbursed 190 1/ Official rates of exchange. Merchandise trade and national accounts use a conversion coefficient of Lei 20.0 = US $1.00. Note: - zero or neglible ., not available PREFACE The report is based on the findings of a mission which visited Romania from 22 April to 15 May 1974. The mission was composed of I. HUNE (Chief of Mission) A. ZAMAN (Economist-Prices) B. RUSSELL(Energy Specialist) J. ROY (Quantitative Economist) A. BECHER (Industrial Economist) B. BLAZIC- METZNER (Economist-National Accounts) and Miss J. GRAVES (Economist-Planning). Romania joined the Bank on December 15, 1971. The first economic mission was in March-April 1973 which produced a report entitled The Economy of Romania (No. 181b-RO) issued on November 21, 1973. The present report described the major developments which have occurred since the 1973 economic mission, and attempts to further the Bank's knowledge and understanding of this new member country. SUMMARY AND CONCLUSIONS Recent Institutional Developments i. On the eve of entering the final year of the present Five Year Plan and while the Plan for 1976-80 is being drafted Romania is continuing its efforts to improve its organizatioa and planning system and to increase the efficiency of economic management. The aim is to strengthen the role of econo- mic criteria in decision making within the framework of the system of centra- lized control over economic activity. The pursuit of purely physical goals in production and trade, while still an important element in the system, is to be supplemented by much greater emphasis on productive and investment efficiency, product quality, pricing and foreign competitiveness. ii. Recent measures designed to achieve these goals include a re-organ- ization of the management system involving a reduction in the number of indus- trial centrals (from 217 to 89) and a concentration of their planning, control and research functions. They include also the introduction of net output as a supplementary plan indicator, which is a significant step towards concentrat- ing the enterprise's efforts towards productive efficiency. New measures have also been designed to eliminate wasteful investment and production expenditures, by tightening the system of financial control. A Superior Court of Financial Control has been instituted, and a law has been passed on preventative fi- nancial control. Measures are also being introduced to modify the system of material incentives in ways designed to tie personal income payments more closely to the quality and quantity of production identified to the individual worker. iii. In the field of prices, the general resetting of producer prices (las't adjusted in 1963) has begun with changes in the price of fuels, refined products, transportation and electrical energy. Resettings will be completed on a range of other prices before the end of 1975, in time for the elabora- tion of the Annual Plan for 1976. These changes are being made in accordance with the price policy established under the Law of Prices and Tariffs 1971. The law provides for more frequent price changes than hitherto; it introduces new cost components in the producer price, including taxes on land in use and on fixed and working capital, among others; it also increases the scope for prices changes of imported goods to be more closely reflected in production costs. This is being achieved under a new regime of foreign trade pricing introduced experimentally on January 1, 1974 which institutes a uniform ex- change rate of lei 20 = US$1.00 and a customs tariff on imports. The policy of maintaining stable (or declining) retail prices is being maintained. iv. Romania's position in external economic relations forms an impor- tant part of these domestic developments. This is true both in trade and in other forms of international economic and technical cooperation involving, among other things, the creation of different types of joint ventures as a means of enhancing the transfer of technology and know how to Romanian in- dustry. In 1973 three more joint ventures were created for production in - ii - Romania, bringing the total to four. By the end of 1974 there could be severaL more. Recent Economic Growth v. Romania continued to maintain a high rate of growth in 1973. Na- tional income grew by 10.7 percent, a rate some 1.2 percentage points higher than the average for the previous five years. However, the growth was slight- ly less than the 11.0 percent which was planned for 1973, mainly because agricultural production which was hampered by very unfavorable weather condi- tions, failed to achieve the 1973 planned targets. Gross agricultural produc- tion grew by 1.0% over the level achieved in 1972. The national income growth was sustained by a very rapid growth in industrial production in 1973 which grew by 14.6 percent, some 3 points higher than the previous five year aver- age. The industrial plan for 1973 was fulfilled by 100.2 percent, though not all branches achieved their targets. One factor contributing to the latter was a shortfall in investment targets in some branches. vi. Commensurate with the high rate of national income growth, per- sonal incomes also achieved significant advances in 1973. The total wage fund grew by 8.1 percent while wages increased by 4.3 percent, to an average monthly wage of lei 1,563. The money income of peasants grew by 11.1 percent, in line with official policy that their incomes should grow more rapidly than the national average. The volume of retail sales grew by 7.5 percent and the total provision of services to the population expanded by 11.2 percent. vii. More than a half of Romania's population lives in rural areas, though less than half its labor force is employed in agriculture. This re- flects the fact that the growth in industrial employment has been more rapid than the growth in urbanization. The transformation of the labor force from agricultural to non-agricultural employment is proceeding rapidly, a fact which demands considerable labor mobility. In 1973 employment in the state sector (mostly non-agricultural) expanded by 3.6 percent. Industrial employ- ment grew by 6.8 percent. Since the rate of growth in the labor force is relatively slow (0.4 percent per annum over the period 1960-73), and since there is no unemployment, most of the labor for industrial growth comes from agriculture. In the period 1960-72 about 1.95 million jobs were created out- side agriculture of which about 0.43 million were filled from growth in the labor force and 1.52 million from labor transfer out of agriculture, a ratio of 1:4.5. Industry viii. Since the nationalization of industry in 1948 industrial growth has been the major force of Romania's economic development. Driven by high in- vestments and expanding trade, industry has grown to produce about half the nation's GNP in 1973. Most of Romania's exports are from industry, about 20 percent of total industrial production being exported. The major emphasis in industry has been on developing the branches of basic industry, including ferrous metallurgy, machine building and chemicals. These branches accounted for 48 percent of total industrial production in 1973. By contrast, Romania's traditional industries (food processing, textiles, lumbering and oil extrac- tion) which in 1950 accounted for over 50 percent of industrial output, accounted for about 30 percent in 1973. ix. In the machine building industry production grew bv 20.7 percent and in chemicals by 18.3 percent, reflecting thie continued emphasis in these sectors. The share of industrial investments going to machine building and the ferrous metallurgy branches was 45.8 percent in 1973. The annual production plan for industry was surpassed by a margin of 0.2 percent although some branches signi- ficantly overfilled the plan, while others fell short of doing so. The reasons for underfulfillment included a shortfall in investments, delays in installation of capacities and some difficulties in mobilizing and training labor. Bearing in mind that the targets set are ambitious, underfulfillment of the plan does not necessarily imply low rates of growth. Both the machine building and che- mical industry branches in which production grew more rapidly than in most other branches failed to achieve the plan targets. x. Despite Romania's emphasis on capital intensive expansion in indus- try this has not resulted either in slow employment growth or in secularly rising capital-output ratios. Industrial employment growth in the last seven years has been more than 5 percent a year on average. While the capital-out- put ratio in industry increased quite sharply during the period 1965-70 this was as much due to slower production growth as to more rapid expansion in the capital stock. This tendency, however, has been reversed in the period 1970- 72, following efforts to expand the degree of capacity utilization in industry. xi. The major constraints to further industrial development are essen- tially qualitative in nature. The sector receives the major share of total investments and industrial growth has been rapid. The quality of output produced, however, is in some cases of a standard where competition in the most advanced markets of the world is difficult. An increased infusion of new technology is one element needed to improve this aspect of Romanian in- dustrial development, and this is being given considerable emphasis in current plans. Recent Developments in Agriculture xii. Agricultural production in 1973 suffered from poor weather condi- tions involving a combination of flooding in some areas, drought in others. Although livestock production grew by 7.1 percent, and vegetable output was at an all time high, the index for total production of crops declined by 3.1 points. As a consequence, Romania could not achieve the production and e%- port targets set for agriculture, and this led to an IMF drawing of SDR 47.5 million in order to ensure the maintenance of the import program. xiii. Agriculture is of key importance to the national economy, and an increased level of agricultural productivity is a prerequisite of further - iv - rapid industrialization. Despite marked progress in recent years, agricul- ture-employed 42 percent of the labor force in 1973 to produce about 16 per- cent of the national income, reflecting the relatively low level of product- ivity in this sector. For these reasons, the present development plans place considerable emphasis on agricultural development not only in terms of in- vestments and modernization but also in terms of institutional development and the improvement of incentives through pricing and income agreements. Re- cently, increased attention has also been given to promoting cooperative production both between existing agricultural cooperatives and between the latter and the state farms. The differentials in investments, chemical inputs, degree of mechanization and general productivity as between the state farms and the cooperatives is a major feature of Romanian agriculture which current plans are aiming to eliminate. Energy xii. Romania is a country relatively well endowed with energy resources and for this reason has been in a strong position to withstand the impact of recent developments in this sector. Romania is a marginal (but growing) im- porter of crude oil but is not dependent on this for fuel. Romania has sub- stantial deposits of natural gas, crude oil and solid fuels (mainly lignite) as well as some limited hydropower, uranium and geothermal energy. There has been a long standing policy to reduce the use of gas and oil as fuels, conserv- ing these for higher value uses while expanding the use of lignite as a com- bustible. This policy was devised before the so-called "energy crisis" though priorities were intensified as a result of the latter in the form of a decree on energy use and development issued in November 1973. Among other things, the decree imposed rationing of gasoline, though this was suspended in March 1974, following an increase in the domestic selling price of gasoline. One of the implications of the strategies set forth in the decree is that invest- ment needs in the sector will be greater than before, mainly because tech- nical options favored by the decree for electrical power development, such as lignite based hydro and nuclear stations, are all relatively more capital in- tensive than the alternatives of gas and oil fired stations. The plan for 1976-80, will contain provision for an increased share of investments for energy development. Regional Development xiii. During the last decade Romania has maintained an explicit and well executed regional development polio; designed both to make for a balanced industrial profile and to expand employment opportunities and incomes in less developed regions of the country. Despite this policy and the success it has already achieved, there remains a continued need to consider the regional dimension of development since there are some regions which are still sig- nificantly less developed than the national average. The mission's analysis suggests that a group of judets comprising about a fifth of Romania's popula- tion with an estimated per capita income not much more than half the national average, can be identified as the least developed group. Romania's positive regional policy directed towards the least developed regions could be a frame- work to guide the framing of the Bank's lending program to Romania. Agricul- tural development in the least developed regions could be an important vehicle for this. Foreign Trade and Payments xiv. Romania's policy in the foreign trade sector has been to seek new trade outlets by setting up framework trade agreements with a wide range of countries, of which there are 120 at present. Some new agreements were made in 1973 and several protocols were concluded within the framework of existing agreements. President Ceausescu visited several countries during the last year partly to stimulate and expand trade contacts. Despite some progress in gaining the generalized preference status in some foreign markets, notably that of the EEC which gave Romania developing country status (effective January 1, 1974), Romania still suffers from tariff discrimination by some countries. The United States has not yet granted Most Favored Nation Status to Romania, though the issue has been discussed. Also, some members of the GATT which undertook to eliminate discriminatory policies against Romania by end 1974 have declared they cannot meet this undertaking. However, the pros- pects are that progress will be made, starting in 1975 when a new meeting of GATT members will discuss the issue. xv. The combined effect of both a sharply rIsing volume of trade and rapid price increases for many-commodities led to very rapid growth in the total value of merchandise trade in 1973. Exportd grew by 43.9 percent to US$3,737.5 million, imports by 33.9 percent to US$3,504.6 million. While the total trade balance finished with a surplus of US$,232 million, the account with the non-CMEA countries was in deficit by $44 million. Since most of the price effect on the growth in trade was felt with the trade in non-Socialist countries (CMEA countries trade at periodically fixed prices) the growth in trade with non-Socialist countries was 62.7 percent, significantly more rapid than the growth in total trade. The share of trade with the developed market economy countries, partly as a result of these price changes, grew from 33.6 percent of total trade in 1972 to 41.7 percent in 1973. The only major change in the commodity structure of trade was a decline in imports of capital goods (whose share fell from 46 percent in 1972 to 42 percent in 1973) matched by an increase in the share of raw material imports from 40 percent to 43 percent. This can be explained by relative rates of price inflation, by efforts during 1973 to expand domestic capacity utilization and to some extent by the invest- ment shortfall in 1973 (See para v). xvi. Recent data has been released to show the commodity structure of trade by major trading regions. The major features of this structure are, on the exports side, the low share of machines and equipment in exports to the developed market economy countries and, on the imports side, the high share of machinery imports from the latter. Long range policy is to achieve a more balanced structure in this trade. - vi - xvii. The commodity composition of Romania's trade has placed the country in a-relatively favorable position with regard to world price trends in 1973. This is so because the petroleum sector was in positive balance in 1973 and because price increases for raw material imports were offset by similar in- creases on the exports side. In 1973 Romania imported 4.15 million tons of crude oil valued at about US$95 million. In the same year petroleum derivative exports to the convertible area were 3.5 million tons valued at about US$140 million. With regard to other commodities, no precise information is avail- able on price movements, but IBRD estimates suggest that these were marginal- ly positive during 1973, a fact which is consistent with a smaller convertible trade deficit in that year. The estimates suggest that in trade with non- CMEA countries import prices increased some 27 percent in 1973, export prices some 31 percent. xviii. The balance of payments with the non-convertible area in 1973 closed with a surplus on current account and a deficit on capital account while with the convertible area the reverse applies. In the case of the non-convertible area, the current account surplus results from a surplus in merchandise trade, only marginally offset by small deficits on the invisibles account. The deficit on the capital account results from the granting of some short-term trade clearing credits to the non-convertible area. In the balance with the convertible area the current account deficit arises from deficits in merchan- dise trade, transport and other invisibles with an offsetting surplus from tourism. On the capital account the surplus arises from the drawings of IMF credits and net medium- and long-term borrowings offset by a net repayment of short-term credits. xix. The positive price trends imply a positive outlook for the country's short term balance of trade. If mission estimates are correct, and if the 1974 Foreign Trade Plan is met, Romania will for the first time in recent years end the year with a balance of trade surplus with the convertible area as well as with the non-convertible area. Romania's debt management policy, in line with a markedly strengthening foreign debt position brought about by the recent expansion of convertible earnings, is to improve the structure of the country's external debt by borrowing on long-term and repatriating short- term debts. Development Prospects xx. Achievements in recent years have shown that Romania has been suc- cessful in pursuing rapid economic growth. Also, it is apparent that there' is considerable potential for furthez growth and the country is in a strong position with regard to energy resources. The organization of economic man- agement and the rigorous elaboration and execution of development plans have in the past ensured high rates of domestic saving and capital formation. The investment and production targets set for 1974 are ambitious, but within reach. Fulfillment of the 1974 Plan will ensure that most targets in the Plan for 1971-75 will be achieved or surpassed. - vii - xxi. Investments planned for 1974, representing about 35 percent of na- tional income, total lei 118 billion out of which lei 107.9 billion are from state funds. This represents a growth of 18.3 percent over 1973, and is about lei 15 billion or 14.5 percent greater than that originally planned for 1974. The target for industrial growth in 1974 is 16.7 percent, the second highest rate in Romania's history. Foreign trade is planned to grow by 41.3 percent in total volume (i.e. exports plus imports). Exports to the convertible area are planned to grow by 76 percent, imports by 51 percent. In agriculture, assuming conditions of a "normal" year, production is expected to reach lei 113 billion (of which lei 24.4 billion is to be from state agriculture). This would represent an increase of 25.5 percent over production achieved in 1973. Commensurate with these targets, national income is planned to grow by 14.6 percent in 1974, some 3.0 percent more rapidly than initially planned. Achieve- ment of this growth will imply that Romania's income growth, initially planned at 11-12 percent a year on average for the five-year period 1971-75, may ex- ceed 12 percent on account of more rapid growth in industry and foreign trade than originally planned. The 1971-75 targets for industrial growth (11-12 percent per year on average) and for foreign trade (10.0-11.5 percent per year increase in constant prices) are both likely to be exceeded. Consequently, the planned increase in real personal incomes, set at 7.0-7.9 percent a year on average will be surpassed. xxii. Romania has a relatively rich resource endowment. In the energy sector future plans will exploit as yet untapped sources of hydro power, lignite, geothermal energy and some uranium. In addition, the substantial reserves of natural gas provide a strong base for the further development of the petrochemical sector in industry. While some inputs to heavy industry (e.g. ores and coking coal) have to be imported in large quantities, the country's growing strength in the export sector should continue to allow for a growing expansion of imports needed for industrial growth. In terms of human resources, the present labor reserve in agriculture will provide the absolute numbers of workers required for the growth in industry and plans exist for training this manpower and for a regional placement of industry in line with labor supplies. xxiii. In a period of its history when Romania is building a transition in its economic system to enhance the role of quality, efficiency and compe- titiveness in production decisions, the country's major development need is an infusion of new technologies and know-how which would raise the level of domestic productivity. This is most specific to industry but it refers con- jointly to agriculture. The place of agriculture is of key importance to Romania's development because, apart from the domestic needs for agricultural advance, the country still remains dependent on agricultural commodities and foodstuffs to earn convertible currencies needed to buy some of the new technologies for industry. Agriculture, however, continues to be a relatively - viii - low productivity sector at present, with output growth often interrupted by Romania's erratic weather conditions. For this reason (as testified by the current development plans) the development of an improved infrastructure and increased modernization in the sector is of equal importance to the pursuit of modern industry. xxiv. With regard to Romania's external financing needs, no major change has been brought about as a result of recent changes in oil and other commo- dity prices. The marginal positive balance shown by the projections made in this report, while beneficial to the balance of payments, will unlikely be sufficient to alleviate Romania's trading on credit for some share of her import needs. In this light, the Romanian authorities are following the sound policy of attempting to improve the structure of these credits by expanding those taken on long-term. Funds available from the IBRD are a major source of long-term finance available to Romania. CHAPTER I: RECENT INSTITUTIONAL DEVELOPMENTS Introduction 1.01 Recent developments relating to the economy in Romania have been characterized by a continuing series of institutional and economic changes designed to improve the organization and planning system, to improve the efficiency of economic management and to strengthen the role of economic criteria in decision making. These measures are a continuation of the ef- forts to implement the Directives of the tenth Congress of the Romanian Communist Party (1969) and the decisions of the National Conferences of the Party in 1967 and 1972. The changes instituted in this context are far- reaching and cover all aspects of the national economy, and have led to new laws such as those on planned development, investment, financing, foreign trade and pricing which were described in the 1973 Economic Report. 1/ A detailed account of the nature and system of planning in Romania as it has presently evolved is given in the special annex on this subject, accompanying this report (Annex A: Planning and the Planning System in Romania). The most important developments in recent months include: (a) the reorganization of industrial centrals, (b) improvements in the system of plan indicators, (c) new measures to improve financial control,'(f) the new system of prices and pricing, and (g) changes in foreign trade regime, together with continued emphasis on seeking foreign cooperation and trade. Reorganization of Industrial Centrals 1.02 The industrial centrals were initially established in 1968 to assist the Ministries in the management of their constituent enterprises. This they did by decentralizing some of the administrative, planning and control func- tions from the Ministries in an attempt to bring management of the economy closer to the production units. In 1971 there were 217 centrals, or similar agencies. Following two recent decrees 2/ which aimed to increase the central's efficiency and effective control over economic activity, they were reorganized and their number was reduced to 89. A list of the centrals as organized at present can be found in Appendix I. 1.03 The number of centrals was reduced for several reasons. Most im- portant were the need to eliminate some existing duplication of effort; the need to foster both horizontal and vertical integration of industry branches, with accompanying benefits from economies of scale in supply and marketing, research, and development of new techniques and new products; and the need to foster a concentration of effort in the field of foreign trade. Reducing the number of centrals also had the beneficial effect of releasing some re- latively highly qualified manpower for productive re-employment elsewhere in the economy. 1/ The Economy of Romania, IBRD Report No. 1810-RO, November 21, 1973. A list of some of 'the laws passed is given in Annex A para 3. 2/ Decrees No. 1962-1973 and 367/1973 of Official Bulletins No. 65/1973 and 128/1973, respectively. -2- 1.04 The reorganization was also accompanied by a geographical redistri- bution of the centrals. In part, this was a result of pursuing the logic of either vertical or horizontal integration, where regional resource endowments dictated that a central be best located in a particular area. In addition, however, the regional development objective was also a consideration. Before the reorganization almost all centrals were located in Bucharest whiereas at present 37 percent of the total are located in other centers. 1.05 Some changes have also been introduced in the functions and respon- sibilities of the centrals. In planning and finance, for example, responsi- bility has devolved from the Ministries to the Centrals for drawing up the production, finance, and investment plans (including the striking of material balances where appropriate) for the constituent enterprises. Also, the cen- trals are now the "titulars" of the plan within the realm of the ainistries which implies that they are directly responsible for the fulfillment of those respective plans. 1.06 As these several innovations illustrate, the guiding principle underlying the changes is not one either of "decentralization" or of "re- centralization." In some instances the changes imply a degree of decen- tralization from the Ministries to the Centrals but simultaneously they may also imply some degree of centralization from the enterprises to the Centrals. The major objective of the changes has been to strengthen the Centrals and increase their control over productive activity, which they exercise on behalf of the ministries, as part of the nation's program to pursue improvements in the quality and efficiency of economic activity. Changes in Plan Indicators and Incentives 1.07 One recent change in the set of plan indicators, which illustrates Romania's present emphasis on efficiency criteria, is the introduction, as of January 1, 1974, of net output as a target indicator for al]. republicari iri- dustrial enterprises. This follows the successful application of this indi- cator on an experimental basis in a selected group of enterprises silnce 1973. The use of net output as a target indicator differs from gross production (whlich includes both material inputs, goods in process, services and deprecia- tion) 1/ because it emphasizes the efficient achievement of a firtished product, net of inputs. At present, although applied to all enterprises,, the net out- put indicator is supplementary to the gross output (or global production) indicator which is still retained as the principal target for the enterprise. With regard to personal income pavments and bonuses these are related to achievement of gross production targets but beginning this year a niumber of enterprises have payments systems related to net output achievement), on an experimental basis. 1/ See Annex A for a precise definition of these concepts. - 3 - 1.08 As part of the program to improve the motivation of individuals within the enterprise, recent modifications have also been made in the regime of the disposal of enterprise benefits, personal remuneration and bonus pay- ments. Some of the changes include an increased scale of rewards for the overfulfillment of plan targets in both quantitative terms and in terms of efficiency indicators. A new draft law on incomes (to be finalized during the course of this year) introduces changes in the system of personal income pay- ments in which remuneration will be more closely correlated with productive achievement, both quantitative and qualitative. 1/ Improvements in Financial Control 1.09 Following discussions held on this subject at the National Party Conference of July 1972, some institutional and legislative measures were taken to improve the system of financial control in the economy. The issue is of major importance since the achievement of increased efficiency in both investments and production, and the fulfillment of the new policy goals for development, depend largely on the degree to which planned financial indi- cators are met. The adoption in 1972 of the Law of Finance (No. 9/1972) was designed to intensify the control function of the financial system with a view to improving economic efficiency. In March 1974 a new law on Preventive Financial Control (No. 9/1974) was passed in oraer to further tighten the observance of financial discipline and to increase the effective application of the Law of Finance. 1.10 In Marcy 1973, the Superior Court for Financial Control was estab- lished as the State's highest authority for the exercise of financial control. The Court which is an organ of the Council of State, has the power of finan- cial control over all socialist units. 2/ In exercising its functions it operates both through its own organs and through the other units with respons- ibility for financial control (the Ministry of Finance, the Banks, etc.). The Court has punitive power in that it can suspend the execution of certain activities or block the release of funds in cases where the pattern of expend- itures appear to be either illegal, not in conformity with the Financial Plan, or inefficient in terms of economic criteria. 1.11 The concept of preventive financial control as embodied in the 1974 law is an extension of the principles underlying the existing finance law. The law on preventive control establishes pre-emptive procedures to avoid wasteful expenditures before their occurrence. Under the law, expenditures have therefore not only to be 'legal' but also 'efficient' in terms of stated criteria. The law provides for the implementation of preventive control by assigning specific responsibility for the pre-approval of expenditures to 1/ An account of the system of material incentives, including wages is given in Annex A. 2/ 'Socialist' includes all state and all cooperative units. -4 individuals (chief accountants and their subordinates in enterprises, centrals, Ministries, the banking system and, the Superior Court. The law also provides for a specific scale of financial and other penalties to be borne (in some cases by individuals) in the case of infringement. Domestic Price Review and Resetting 1.12 A key requisite for the 'Ouilding of an economic balsis for the planned economy is an improvement in the pre-existing system of pricing of factors, goods and services. In an economic system prices should reflect social costs of production, they should act in some degree as efficiency levers and they should play some part in stimulating some production lines and hence should have a significant allocative role. It was largely to meet requirements of this kind that the Law on Prices and Tariffs,(19/1971) was passed in December 1971. 1.13 In outline, the 1971 law provides for a resetting of producer prices, most of which have remained fixed since the last resetting in 1963; 1/ it provides for a change in the cost components of the producer's price, both by introducing notional taxes on land in use and on fixed and working capital engaged in production, and to account for various social contributions, including social security and payments to a central fund to develop new tech- nologies; it allows for more frequent producer price adjustments than hither- to; also, through the introduction of a new regime of converting foreign cur- rency prices of imported inputs and producer goods into domestic currency prices, it allows for world price changes to be more closely reflected in domestic production costs; 2/ finally, it establishes a hierarchy of competence for price setting which allows for both the central control over price forma- tion in the categories of major importance, and an increased degree of local discretion in the setting of prices for less important categories. 1.14 The resetting of prices and the introduction of the tax on capital has so far been applied only to a limited number of price categories such as coal, crude oil, natural gas and iron ore in the extractive sector, refined petroleum products in the processing sector, to electrical energy and to some transport tariffs. (A full account of these changes is contained 'n Appendix V). The price adjustments are not only intended to reflect recent changes in world prices, though in the energy and petroleum sectors this factor has obviously been of major importance. The adjustments are also intenided to remove distortions which in some cases have developed in the relations between domestic production costs and producer's prices, due to the fact that the latter were fixed in 1963 while production technologies and unit productivities 1/ This resetting would, of course, have occurred at this tima e-ren under the pre-1971 price system. 2/ See the discussion of the new tariff system given in para 1.23 below and in Chapter V. - 5 - have changed markedly since then. On July 1, 1974 new producer and delivery prices were set for lumber, paper, cellulose and construction materials. 1.15 The program of resetting producer prices, therefore, will continue. At present the tentative timetable is for a further round of adjustments for steel and petrochemicals in January 1975 with a final round later in 1975. The total general resetting is intended for completion by the end of 1975 so that the Annual Plan in 1976 can be elaborated with the new price settings. 1.16 An important feature of the 1971 law on prices is that price changes may be used to stimulate or destimulate certain lines of production. 1/ This is true both in industry, and in the agricultural sector where prices, profits and incomes are directly correlated. (This is now true equally of the state farms and the cooperatives). In agriculture in July 1973 the authorities have increased the contract prices for beef, pork, mutton, and tobacco, cotton and linen to stimulate their production while reducing the price of poultry pro- ducts (which had shown excess profits). In the case of beef, the new contract price was accompanied by an increased retail price, but consumers were paid an offsetting subsidy in the form of an equivalent wage increase. 1.17 The general policy on retail prices, even under the 1971 law, is for these to remain fixed in the short run, and to be reduced in the long run so far as possible, so as to improve the real standard of living of the population. This does not rule out some upward changes, for example, of the type mentioned above for agricultural commodities, or for luxury goods to modify the pattern of income distribution or consumption. For consumer durables, price reductions may occur as domestic production expands and costs decline. Also, under the new regime of imports (see para. 1.18 below) there may be annual changes in the domestic retail price of certain imports, accord- ing to the movement of foreign prices. However, imported consumer goods are a small share of the total. The New Customs Tariff 1.18 On January 1, 1974 the Romanians moved, on an experimental basis, to a new regime of imports which involved a new method of translating foreign import prices into domestic lei prices. The method consists of applying a uniform conversion coefficient (set at lei 20 = US$1.00) to the foreign price and adding to this result a predetermined tariff, which varies for different categories of goods, and may vary between imports from different countries according to how the latter impose tariffs on Romanian exports. This gives the final domestic price of the good in lei. More details on the tariff sys- tem, including a precise account of its methodology, can be found in Appendix IV. 1/ Physical output targets are not centrally fixed for all products. There is a range of products which enterprises are free to introduce into the plan (See Annex A para 22). Since profits earned on this range of pro- ducts go towards the fulfillment of the overall profit plan, enterprises will introduce into their production plan those lines which are profit- ably priced. - 6 - 1.19 In the present context the importance of this new regime is that it introduces, in line with the objectives of the 1971 law on prices, a mechanism of directly reflecting world price changes (at least for those goods imported) in the domestic cost structure of Romanian production, or on the retail market for consumer goods. In the initial phase the intention is to apply the new system with caution in the case of consumer goods and raw materials since very rapid movements in world prices may be difficult to_ reconcile with planned domestic prices. Thus, in the early part of 1974 fol- lowing unusually marked increases in some raw materials imported by Romania (ores, phosphates, fuels, minerais and textile raw materials)Ythe new tariff - system was temporarily suspended on all categories of raw materials. 1/ International Cooperation and Joint Ventures 1.20 An important aspect of Romania's present development strategy is the increased amount of international economic and technical cooperation. 2/ It also involves various other cooperative arrangements, including joint ventures, designed to bring capital, technology, know-how and market openings to Romanian production. Efforts to foster this type of cooperation continue. Under the decree of November, 1972, permitting the establishment of joint ventures with foreign companies in Romania, four such companies have now been set up. Many more such joint ventures are under discussion, some of which will be finalized during 1974. 1.21 In 1973, Romania formed one more trading joint venture abroad, bringing the total of such joint ventures to 20. Most of these trading joint ventures are located in the countries of Western Europe. In 1972 and 1973, Romania also set up eight production enterprises as joint ventures in LDC's of Latin America and Africa, in such fields as exploration and mining, lumber industry and agricultural development. In recent years, agreements with foreign firms to cooperate in production have also gained increasing importance, the total of such agreements now having reached about 250 of which about a quarter was signed in 1973. 1/ The pre-existing system is now in force for raw material imports, im- plying either differential conversion ratios and/or automatic off-setting payments to and from the Equalization Fund. 2/ One mark of the importance of international cooperation is that the Ministry of Foreign Trade has recently been renamed the Ministry of Foreign Trade and International Economic Cooperation. CHAPTER II: RECENT ECONOMIC GROW4TH 2.01 Romania is a developing country though it is in the course of a rapid industrial transformation. Its per capita GNP in 1973 is estimated at about US$890, some 20 percent above the level of 1971. High rates of economic growth have been maintained by high investment rates, with particular empha- sis in industry. The share of industrial production in Romania's GNP (i.e. in the UN concept) 1/ increased from 35.7 percent in 1960 to 48.2 percent in 1973, while that of agriculture declined from about 26 percent to less than 18 percent in the same period. Similar trends have occured in the share of the labor force employed in industry and agriculture. In 1960, industry employed about 15 percent of the labor force and this share had increased to about 28 percent in 1973. In agriculture, the share of the labor force declined from 65 percent to 42 percent during this period. 2.02 Despite the significant degrees of transformation as revealed by these figures, they also illustrate an important aspect of Romania's stage of development. This is that, similar to other countries in the process of industrialization, the economy is dualistic in structure: productivity levels are significantly higher in industry than in agriculture. In Romania in 1973, the fact that industry employed about 28 percent of the labor force to produce about 48 percent of GNP, while in agriculture 42 percent of the labor force produced 16 percent of GNP implies that labor productivity in agriculture is some 2-3 times lower than in industry. This structural feature of the economy represents a major aspect of Romania's development problem which present de- velopment efforts are designed to overcome, Fulfillment of the Annual Plan for 1973 2.03 A brief account of achievements in 1973, showing only selected in- dicators, is given in the table below. A more detailed account, showing both plans and achievements in the first three years of the present Five-Year Plan is given in the Statistical Appendix, Table 6.1. The figures below have been arranged so as to compare the achievements in 1973 both with the plan targets for that year and with average performance in previous years. 1/ Calculated by thc IDRD. - 8 - Table II-1: PLANNED TARGETS AND ACHIEVED GROWTH RATES FOR 1973 AND AVERAGE GROWTH RATES, 1968-73 (Annual Percentage Increase) 1973 Average Average Plan Actual 1971-72 1968-73 Social Product n.a. 10.4 10.6 9.4 National Income 11.0 10.7 11.3 9.6 Investment /1 11.9 8.2 9.8 9.1 Industrial Production 14.6 14.6 12.7 i2.1 Agricultural Production 9.2 1.0 9.5 5.1 Foreign Trade /2 21.5 38.8 12.3 14.3 Employment 4.1 3.6 4.5 4.0 Labor Productivity /3 9.2 9.1 7.1 7.1 /1 State Investments. 75 Export Plus Imports, in current (external) prices. Romanian figures in constant dollars show a growth of 24.8%. /3 In Republican Industry. 2.04 The picture that emerges from these data reflects the strength of industry and trade in generating a significant growth in national income in 1973, despite a shortfall in agricultural growth. Industrial production and foreign trade grew at significantly more rapid rates than in the earlier years shown, and plan targets in both these sectors were fulfilled or overful'filled despite the fact that the targets for 1973 had earlier been increased as a result of overfulfillment in 1972. While it is true that world p-rice in- creases were a significant factor determining the growth in tzadce, these fig- ures testify to the continuing strength of industry and foreign trade as major growth sectors. Less successful were the 1973 achievements in agricu'ture, investment and employment where, for reasons described below, plan targets were not fulfilled. Agricultural production, in particular, fell short oi plan expectations and showed little growth in production over the Jevel in 19736 This pattern typifies economic growth in recent years: consietently high growth in industry, relative instability in agriculture where production grows rapidly in some years and not in others, depending on weather condftions. 2.05 Thus, despite the rapid growth in industry the overall growt:h in national income was slightly less than the 11.0 percent set ou,t in the Five- Year Plan. However, a growth in national income of 10.8 percent is high by any standards and is significantly more rapid than achieved in Romania during the last five years. Moreover, achievements in 1973 have in ,Co way reduced the Romanian's determination to achieve ahead of schedule the plan targets for the Five-Year Plan 1971-75. - 9- Investment in 1973 2.06 The figure for total investment in 1973 was lei 105.7 b,llion, of which lei 91.0 billion was from state funds. This was equal to about 27 per- cent of GNP in 1973 using the U.N. concept and represented an increase of about 8.2% over the level of investment in 1972. With regard to state in- vestments the total achieved was some lei 2.8 billion (or 3.0%) less than the figure planned for 1973 (i.e. lei 93.8 billion). This occurred for sev- eral reasons, including delays in delivery of installations and equipment to specified standards, some delays in project design and in a few cases to de- lays in construction. The latter resulted in some degree to difficulties in mobilizing and coordinating adequate labor supplies, a problem to be expected in economies experiencing rapid economic growth in conditions of relatively low population increase and no unemployment. 2.07 The growth and pattern of investments clearly illustrates Romania's determination to maintain high rates of capital formation. In recent years the total volume of investments has formed a rising share of national income. As shown by Table 11-2 below, the volume of investments grew by 10.5 percent per annum on average during the period 1966-73. This was about 1.0 percent more rapid than the average growth in national income during the same period. As the table also shows, the major portion of these investments have been in industry and industry's share of the total has grown, in contrast to the other sectors. This is further evidence of the priority given to industrialization and the reliance on high investments to achieve it (see para. 2.12 below which discusses the factors contributing to economic growth). Table II-2: THE STRUCTURE AND EVOLUTION OF INVESITENTS BY MAJOR SECTOR 1966-73 Total Investiaents Structure Growth Rate (billion lei) (% per annum) 1966 1973 1966 1973 1966-73 Total 51.6 105.7 100.0 100.0 10.5 Industry 27.0 60.1 52.3 56.9 11.7 Agriculture 7.9 13.9 15.3 13.1 8.2 Transport /1 5.4 10.1 10.4 9.5 11.0 Social Sector /2 3.7 6.3 7.1 6.0 10.2 Other 7.6 15.3 14.9 14.5 9.5 /1 And communications. /2 Education, science, culture, health, plus municipal services. Source: Ministry of Finance. 2.08 In Romania an important indication of qualitative improvement in the capital stock is taken to be the extent to which the share of equipment - 10 - and installations in total investments is increasing. This share stood at 36.7 percent in 1965, with buildings and other constructions accounting for 47.2 percent. By 1972 the share of equipment has risen to 42.1 percent and in 1973 the share grew to some 43.6 percent. Of this amount about 71% was supplied by Romania. This serves as a general indication of technological advance, reflecting the recent emphasis on the use of high value machinery and equipment, particularly in industry. 2.09 The financing of investments in Romania is almost all derived from state controlled funds, a major part of which are from the State Budget. Financing is achieved through the elaboration of a financial plan (which is part of the Annual Plan) which coordinates investment needs with the avail- ability of funds from the Budget, from the depreciation fund, retained bene- fits and bank credits (all of which are centrally controlled) and from other sources, including the non-centralized funds available within State enter- prises. Investments are also financed from the own funds of the cooperatives and individual savings. Centralized funds accounted for about 86 percent of all investment financing in 1973, of which about 46 percent was from the Budget. Bank credits which can be used both as part of or in supplement to the Financial Plan, are not a major source of investment financing at present, accounting for less than 2.0 percent of total investments in 1973. 1/ In the cooperative sector, however, they are an important source of funds. Self- financing of investments by individuals (mostly for housing) 'accounted for about 6 percent of the total in 1973. A detailed statement of the financing of investment in the Romanian economy is given in the Statistical Appendix Table 2.4. The State Budget 2.10 The State Budget is elaborated each year in conjunction with the Annual Plan. It provides funds not only for investments but also for working capital in the productive economny and for current expenditures in other sec- tors. Its three major sources of revenue are turnover taxes, returned bene- fits from state enterprises and from a variety of other state contributions. A breakdown of the major sources of revenue and the main divisions of expend- iture in the 1973 budget (both planned and actual) are given in Table II-3 below. 2.11 Budgets in Romania are always planned to balance, generally with a small residual amount allocated to a reserve to allow for contingencies. In the actual budget for 1973 there was a surplus of some lei 7.9 billion. Of this amount lel 5.6 billion was due to higher revenues than planned (as a re- sult of plan overfulfillment in some branches) and the balance results from tile investment shortfall, discussed in para. 2.06 above, and other expenditures. 1/ This figure represents the outstaLlding year-cLud credits. During the ycar roll-over credits are used to finance investments, so the total slhare of credit financed investments is probably 6-7 percent. Table II-3: TIE STATE BUDGET FOR 1973 Actual Planned (lei billion) (Structure) (lei billion) (Structure) REVENUES Turnover Taxes /1 48.0 27.3 Benefits 46.6 26.5 104.3 61.1 Taxes on the Population 15.4 8.8 15.9 9.3 Social Security 12.4 7.0 12.5 7.3 Other 53.6 30.4 8.2 28.3 Total 176.3 10U.0 170.7 100.0 EXPENDITURES Financing the Economy 101.5 60.4 96.9 56.7 Social Expenditures 44.4 26.4 45.3 26.5 Administration 2.7 1.6 2.8 1.6 Defense 7.8 4.6 7.9 4.6 Other - - - - Total 168.0 10C.0 170.7 100.0 /1 Including Regularization tax. Source: Law for the Adoption of the State Budget for 1973, BORSR 137, Nov. 1972; and information supplied by Ministry of Finance. Factors Contributing to Growth 2.12 The growth of Romania's national income reflects the growth in net value added in the productive sectors. The difference between the growth in national income and social product reflects the growth in material expend- itures, including depreciation. Over recent years there has been no clear trend in the relationship between national income and social product growth since the growth in material expenditures has in some years exceeded, in others been less than the growth in social product. As the figures below reveal, the share of material expenditures in the total social product have grown by about 1 percent over the period 1968-72. This reflects either or both a growing capital intensity and increased consumption of materials per unit of output during the period. In agriculture, where the increases are greatest, this is explained by the increase both in capital intensity and in the use of fertilizer and other inputs in recent years. In industry, where the recent trend has shown a decline in unit inputs, this is explained by the successive reduction in the unit consumption of material inputs more than offsetting the increased capital intensity in this sector. - 12 - Table 11-4: EVOLUTION OF THE SHARE OF MATERIAL EXPENDITURES IN THE SOCIAL PRODUCT BY MAJOR SECTOR, 1968-72 (1965 = 100) 1968 1970 1972 1972/1968 Total 103.3 104.5 104.5 101O1 Industry 100.1 98.1 98.8 98.7 Construction 98.2 97.1 100.3 102.1 Agriculture 106.9 120.6 118.2 110.5 Transport 97.4 104.9 104.4 107.1 Source: Anuarul Statistic al Republicii Socialist Romania 2.13 In Romania's present development strategy, capital deepening i.e. the increased use of capital per man employed is the major force for economic growth in all sectors. Employment increases, though a significant contribut- ing factor in some sectors, account for less than the growth in labor product- ivity resulting from the growth in capital intensity. This is illustrated by data for the period 1968-72 in which the social product grew on average by 8.3 percent per annum. In the same period the increase in the labor force was 0.6 percent per annum, thus implying a growth in labor productivity of 7.9 percent each year. The growth in capital intensity during the period is shown by the fact that the stock of fixed assets grew by 9.2 percent a year on average, i.e. by a greater rate than the growth in social product. 1/ A similar pattern is revealed in industry although employment increases make a greater contribution in this sector. In the years mentioned, industrial out- put grew by 11.7 percent a year on average, employment in industry increasing by 6.8 percent, labor productivity therefore growing by 4.9 percent a year (see also the analysis in paras. 3.06-3.08 below). Human Resources and Employment 2.14 Romania is a country in which the growth in industrial employnent has proceeded more rapidly than the growth in urbanization. CDonsequentiy while less than half its labor force is presently employed in agriculture, more than half of its population continues to live in rural areas. in 1973 the total population of Romania was 20.8 million of which about 12.1 million, or 57.9 percent, lived in rural areas. The growth rate in the total population in 1973 was about 0.80 percent, as against about 1.0 percent for the year 1970. Following the spread of economic development, the growth in urban population at 2.0 percent p.a. in the period 1970-73 has been more than double the growth in total population, which has implied a declining share of population in rural areas. In absolute terms, however, the rural population has grown slightly during the period 1966-73 (see Appendix Table 1-3). 1/ See Statistical Appendix Table 2.6. - 13 - 2.15 Given the fact of relatively slow growth in the labor force (which grew at about 0.4 percent a year in the period 1960-73) the fact of rapid industrial growth has been made possible by a high degree of labor mobility. This has involved both occupational mobility as workers shift out of agricul- ture, and regional mobility as workers leave less developed regions to take new jobs elsewhere. A recent study has shown that in 1972 about 12 percent of all wage earners i.e. 650,000 workers were employed in judets (counties) other than that of their domicile. 1/ There is a free movement of labor in Romania but labor needs and placements are coordinated by territorial agencies of the Ministry of Labor, in accordance with the plan. (Annex A describes the system of labor planning). 2.16 As Romania's total labor force surpasses 10 million, as it did in 1973, policy continues to stress the need for more rapid population growth and for a continued expansion in the number of workers in the state sector. In 1973 out of the total labor force about 5.9 million were state employed, most of the remainder being agricultural cooperative and individual workers. 2/ The cooperative sector provides a labor reserve for the expansion of the work force in the state sector. As the table below illustrates, state employment has increased about 75 percent in the period 1960-72. The figures also strik- ingly illustrate the extent to which labor transfer rather than growth in the labor force has contributed to state employment expansion. For every worker supplied by the growth in labor force (433,000 during the whole period) 4.5 workers (or 1.95 million in all) have been found from agriculture. This is a clear measure of the pace of industrial transformation being achieved in tihe labor force. Of the total increase in state employment of over two mil- lion in this period industry itself accounted for over one million. Table II-5: EVOLUTION OF TOTAL LABOR FORCE AND STATE EMPLOYMENT 1960-72 Total Structure Increase 1960-72 1960 1972 1960 1972 (000) (% per annum) (000) Total labor force 9 538 9,971 100.0 100.0 433 0.4 State Ermployment 3,249 5,630 34.0 56.4 2,381 4.7 Other Employment /1 6,289 - 4,341 66.0 43.6 -1,948 -3.1 /1 Mainly Cooperative Agr'Lculture. Source: Anuarul Statistic al Republicii Socialist Romania. 1/ V. TUFESCU and I. STEVANESCU "Deplasarile Interjudetene ale Fortei de Munca" Probleme Ecc)nomice No. 4 April 1974. 2/ State employment ("Salariati") can broadly be equated with non-agricul- tural employment, though state agricultural employment (about 8.0'% of the total) is inc]Luded. - 14 - 2.17 This transformation, however, is not without its problems, both in the mobilization of labor, where matching of regional labor supplies and demands is sometimes difficult, and with regard to the training of labor which places a heavy burden on the nation's educational system. However, the system is geared to these needs and at present there is increasing emphasis given to technical and skills training. In 1974, over 400,000 workers will complete technical training courses of various kinds and enter into production. In 1973 about 2.3 percent of the labor force was in vocational training schools, as against 1.3 percent in 1960. Incomes and Income Distribution 2.18 During 1973 average incomes grew by 4.3 percent, to give an average level of remuneration of lei 1,563 in that year, while the total wage fund grew by 8.1 percent. The money income of peasants in cooperative farms during 1973 grew by 11.1 percent. This reflects a continuing decline in the differ- ential between peasant and industrial incomes. Real income growth in 1973 also led to an expansion of retail sales to the population, which grew by 7.5 percent in 1973. Viewed alongside the growth in employment and urbanization, these figures illustrate a continuing increase in the benefits of economic growth to the population. 2.19 Personal incomes are relatively evenly distributed in Romania. In the state sector in 1972 about 40 percent of all workers had incomes above the average while almost all (i.e. 88 percent) of those below the average had in- comes which were between 60 percent and 90 percent of the average. A percent- ile distribution of wage incomes is given in Appendix Table 9.3. Despite these features, there is a preoccupation to improve income distribution both within the state sector and between the state sector and the cooperative sector. Within the state sector, the aim is to improve the structure of wages in cer- tain branches in order to attract high caliber labor. W1ith regard to the peasant sector, where in some cases (particularly in less-developed regions) average incomes are significantly less than in industry, 1/ there is a need to accelerate peasant income growth to reduce this differential. The new law on incomes makes explicit provision for this objective, although as the evidence described in the previous paragraph shows, the process is already underway. 1/ A rough estimate of peasant incomes can be made by dividing the total aRricultural outDut of the cooperative sector (which has to be inferred from available data on state and cooperative production) by the total peasant labor force. Using 1973 data this estimate gave an average of lei 853 per month, i.e. about 45 percent of the overall industrial wage. This method, of course, would include that amount of output which was self-consumed. - 15 - CHAPTER III: INDUSTRY 3.01 Since the nationalization of industry in 1948 industrial growth has been the major force of Romania's economic development. Driven by high invest- ments and, in recent years, expanding trade, the sector has grown to produce about half the nation's GNP in 1973. Most of Romania's exports are now manufactured goods, about 20 percent of total industrial production being exported. A major objective in this development has been the attainment of self sufficiency in the branches of basic industry, including ferrous metal- lurgy, machine building and chemicals. These branches accounted for about 48 percent of total industrial production in 1973. By contrast, Romania's traditional industries (food processing, textiles, lumbering and woodworking and oil extraction and refining) which in 1950 accounted for over 50 percent of industrial output, accounted for about 30 percent in 1973. These changes reflect the basic orientation in Romanian industrial development in the post- war period. Industrial Growth and Plan Fulfillment in 1973 3.02 Stimulated by continuing high investments and bouyant foreign trade markets, industrial production in 1973 grew by 14.6 percent, some 3 points higher than the average for the previous 5 years and 3.1 points higher than the first 2 years of the present Five-Year Plan. The growth continued to be dominated by the branches of heavy industry, particularly machine building and metallurgy which grew by 18.6 percent over 1972, and the chemical industry which grew by 18.3 percent. These branches alone accounted for over 38 per- cent of investments in industry in 1973. The growth in production of light industry (excluding foodstuffs) 1/ was 16.5 percent which, being a higher rate than for industry as a whole, implies that tthe share of these branches in total industrial output was increased. However, defined to include the food indus- try (where growth was less than expected, on account of shortfalls in agri- cultural production) light industries as a whole grew by 13.4 percent, some- what less than the average for industry as a whole. The figures in Table II-5 give a selected summary of planned and actual growth rates and production shares in the main industry branches. 1/ Light industry here has been defined to include glassware, textiles and clothing, leather goods and footwear. - 16 - Table II-5: PLANNED AND ACTUAL GROWTH RATES, AND SHARE OF INDUSTRIAL OUTPUT OF THE MAIN INDUSTRY BRANCHES IN 1971-75 Growth Rates Plan Production Share 1971-73 1973 1971-75 1970 1973 Total Industry 12.7 14.7 11-12 100.0 100.0 Machine Building /1 18.6 20.7 14.1-15.6 25.0 29.1 Chemical Industry 14.9 18.3 6.3-17.5 10.1 15.1 Light Industry 14.2 16.1 9.2-10.1 14.2 14.8 Ferrous Metallurgy 11.4 12.6 9.0- 9.9 8.5 10.9 Food Industry 7.7 9.7 9.3-10.4 17.3 8.0 Non-Ferrous Metallurgy 2.7 9.6 9.2-10.4 3.3 5-4 Lumber Industry 6.5 8.1 2.9- 3.7 6.4 4.2 Construction Materials 10.4 6.7 2.8-14.3 3.4 3.2 Fuels 4.3 6.6 6.0- 7.0 5.3 4.2 /1 Including metal working. Source: Laws for Five-Year and Annual Plan. 3.03 In the fulfillment of the industrial plan for 1973 (the planned targets were surpassed by 0.2 percent) some industrial ministries significantly overfulfilled the plan, others fell short of doing so. The three ministries which failed to fulfill the plan were in the chemical industry (3.0 percent below plan target), the construction materials industry (0.9 percent below), machine building and metal working (0.5 percent below). Individual products in these categories include fertilizer production (25 percent below plan targets), cement production (12 percent below) and metal cutting tools (22 percent below). A fuller list of major products, showing over- and under- fulfillment is given in Table II-6 below. - 17 - Table II-6: PLANNED TARGETS AND ACHIEVEMENTS IN 1973 FOR SELECTED INDUSTRIAL COMMODITIES Percentage Plan Achieved Growth over 1972 Fulfilled or Overfulfilled Natural Gas extracted (bill. m3) 23.3 29.2 5.5 Edible Oils (000 tons) 320.0 328 4.1 Crude Oil (mill. tons) 14.2 14.3 1.1 Steel (mill. tons) 8.0 8.2 10.3 Tractors (000) 37.3 38.8 11.2 Locomotives (pieces) 287 311 8.7 Cars (000) 47.2 47.2 68.6 Electronic and Electotechnic equipment (bill, lei) 21.3 21.3 26.8 Steel laminates (000 tons) 5,717 5,833 11.3 Radio receivers (000) 600 623 18.1 Synthetic rubber (tons) 80,500 83,022 13.2 Artificial fibers and thread (tons) 63,430 63,741 3.2 Television Receivers (000) 395 397.5 22.3 Underfulfilled Paper and Board (000 tons) 583 578 5.4 Electrical Energy (000 kWh) 48.5 46.7 7.6 Coal extracted (mill. tons) 27.3 24.9 7.3 Trucks (000 pieces) 36.2 34.9 -3.3 Sugar (000 tons) 635 628 20.6 Aluminum and Aluminum alloys (000 tons) 152.0 141.0 16.1 Fertilizers (000 tons) 1,647.6 1,242 3.5 Fabrics (mill. m2) 868 796 8.4 Chemical Fibers and Yarn (000 tons) 117.4 115.9 Cement (000 tons) 12.0 9.8 6.9 Meat (000 tons) 655 583 19.2 Source: Law for the Adoption of the Annual Plan for 1974, and Agerpress No. 5, January 1974. 3.04 Bearing in mind the fact that the targets are very ambitious, the failure to reach fulfillment should not necessarily be interpreted as poor performance. For example, this is the case in both the chemical and machine building industries which, though they failed to achieve the targets, they nevertheless grew by 20.5 percent and 18.3 percent, respectively. Some of the other commodities whose targets were underfulfilled in Table II-6 above, also showed high growth rates in 1973 production. In some cases, notably in electrical energy production, the underfulfillment was a direct result - 18 - of energy savings measures introduced in the latter part of the year. In addition, underfulfillment resulted from some failures for productive capa- cities to come on stream at the planned dates (for reasons relating to the investment shortfall described above), delays in securing supplies and diffi- culties in mobilizing and training an adequate labor force. Investment in Industry 3.05 The maintenance of high investment rates in industry has been necessary both because the Romanian emphasis has been on relatively capital intensive branches of industry and because, within each branch, policy has been to opt for the more capital intensive techniques. Table II-7 below shows how the division of investments has favored the branches of producer good industry (Group A) as against light or consumer good industries (Group B). The major branches of the producer good industries, namely ferrous metallurgy, the chemical industry and machine building. These branches have generally re- ceived 38 percent of total investments in the economy in the period 1966-70. In 1973 they received 45.9 percent of all investments in industry. Table II-7: THE SHAkRE OF INVESTMENTS BY MAJOR INDUSTRY BRANCH 1961-73 1961-65 1970 1972 1973 Total Industry 100.0 100.0 100.0 100.0 (Group A) (89.2) (84.7) (84.7) (82.1) (Group B) (10.8) (15.3) (15.3) (17.9) Machine Building /1 8.8 19.8 19.8 20.8 Chemical Industry 14.1 11.3 17.5 17.4 Light Industry 4.1 6.5 6.0 5.9 Ferrous Metallurgy 10.3 9.0 6.4 7.7 Food Industry 5.1 6.4 5.9 5.3 Non-Ferrous Metallurgy 6.3 3.0 4.7 4.2 Lumber Industry 6.8 4.5 3.2 3.5 Construction Materials 4.0 5.6 6.1 5.7 Fuels 21.0 13.7 12.2 11.4 Other 19.5 20.2 18.2 18.1 /1 Including metal working. Source: Anuarul Statistic R.S.R. 3.06 One implication of the emphasis on a capital intensive growth strategy is often that industrial employment growth may be somewhat less rapid than could be achieved with a different choice of techniques. In Romania this issue is important since it is a stated objective to expand labor productivity and state employment especially in industry. However, the - 19 - growth in employment in industry has averaged more than 5 percent in recent years, as Table II-8 below shows. Further, as the table also shows, of the three major branches of heavy industry only ferrous metallurgy has an employ- ment growth rate below the sector average. Both machine building and the chemical industry have above average growth rates in both employment and productivity. (Machine building, as the figures for investment per job reveal, is in fact relatively labor intensive). It cannot be argued, therefore, that Romania's investment strategy and choice of techniques have resulted in low employment growth in industry. Table II-8: EMPLOYMENT AND PRODUCTIVITY GROWTH AND INVESTMENT PER NEW JOB IN MAJOR BRANCHES OF INDUSTRY Employment Productivity Investment per job Growth 1966-73 Growth 1965-73 Created (000 lei) (000) (% p.a.) (% p.a.) 1961-65 1966-70 Total Industry 709.0 4.5 6.7 220.8 425.0 Ferrous Metallurgy 15.6 2.6 8.8 765.4 1,322.2 Chemicals 70.9 7.5 10.5 348.0 513.0 Machine Building 330.4 7.7 8.4 72.2 171.8 Consumer Goods /1 299.4 6.1 4.7- 82.5 163.0 /1 Glassware, textiles, leather and footwear, clothing, foodstuffs, cosmetics. Source: Anuarul Statistic al Republicii Socialiste Romania. 3.07 Rising capital intensity (i.e. capital labor ratios) also often implies rising capital-output ratios. This may occur when sophisticated techniques are expensive relative to output yields, or when capital investments are inefficiently used, including the case where capacities are underutilized in production. The record in Romania is different for different periods but in recent years the tendency has been for capital-output ratios to decline. This is borne out by Table II-9 which gives the evolution of fixed assets and industrial production over the period 1960-72. It is true, the capital-output ratios rose quite sharply during the period 1965-70, both because fixed assets grew more rapidly than usual and because industrial production grew less rapidly than in the other periods. However, the tendency is reversed in the period after 1970. - 20 - Table II-9: THE EVOLUTION OF FIXED ASSETS AND PRODUCTION IN INDUSTRY 1960-72 - Growth Rates 1960 = 100.00 1965 1970 1972 1960-72 1965-70 1970-72 Fixed assets 158.6 295.1 371.5 11.6 13.2 12.9 Production 191 334 417 12.6 11.9 12.5 Ratio (1)/(2) 0.83 0.88 0.89 0.92 1.11 1.03 Source: Anuarul Statistic al Republicii Socialiste Romania. 3.08 Declining capital-output ratios since 1970 are consistent with an improved utilization of capacity in industry. The plan for 1971-75 has laid considerable stress on this and the Annual Plans for each of the years have contained explicit instructions to plan titulars to expand the utilization of existing capacities. A significant portion of industrial production growth in 1973 was achieved through expanded use of capacity rather than through capacity expansion. Few data are available on capacity utilization but the report on the fulfillment of the 1973 Plan 1/ mentions that the utilization of metal working machine tools in all branches of industry increased from 68.9 percent in 1972 to 73.9 percent in 1973. If this can be taken as an indicator of the trend in utilization in all branches it represents a signifi- cant improvement. Room for further improvement, however, likely remains. Constraints to Industrial Development 3.09 The major constraints to further industrial development are essential- ly qualitative in nature. As the previous discussion has shown, there is little shortage in the quality of material resources and manpower available for rapid industrial growth. The sector receives the major share of a high national allocation of investment resources and it receives an abundant supply of manpower for its expansion. The consistently high rates of growth achieved testify to these availabilities. The quality of output produced, however, is of a standard where competition in world markets i.e. against the most advanced countries is in many cases still difficult. Consequently, while domestic industry has grown and diversified considerably in recent years it has not yet developed a favorable structure of exports to the convertible area. 3.10 To achieve this penetration Romanian industry requires a timely and increased infusion of new technologies to allow still further diversification into the technically more complex branches of activity. This implies a need for greater attention to production efficiencies and product quality which, under the new foreign trade regime are requisites for expanded industrial exports. The authorities recognize all these needs and efforts are being made to meet them. Many of the institutional changes described in Chapter I are intended to serve these objectives. 1/ "Romania - Documents, Events' Agerpress No. 5 January 1974. - 21 - CHAPTER IV: RECENT DEVELOPMENTS IN AGRICULTURE 4.01 Until quite recently agriculture had been the predominant occupa- tion in Romania. It was only in 1970 that the share of the active labor force engaged in agriculture fell to below 50 percent of the total labor force. In terns of land ownership, about 91 percent of all agricultural land is social- ist property, 30 percent being worked by State farms, 61 percent by coop- eratives. Land owned by individuals comprises 9 percent of the total. Coop- erative members also have individual farming rights on the cooperatives. Of total agricultural production, about 24 percent is produced from State farms and 42 percent from cooperatives. 4.02 The pattern of agriculture is intensive with a mixed product. Romania's varied topography includes the extensive and rich plains in the south and west, where most grains are grown, and the foothills and mountains where vineyards and livestock farming predominate. In the country as a whole wheat and maize are the two major crops, with sugar beet, potatoes, grapes, sunflower and tobacco being also important. Livestock is also important, in- cluding meat, milk, wool and egg production. Of the total liveweight tonnage of meat produced at present about half is pork. Agricultural Growth in 1973 4.03 The growth in gross agricultural production in 1973 showed 1.0% in- crease over the level achieved in 1972. This implies that net production may have declined somewhat since there was a growth in fertilizer and other inputs to agriculture in 1973 (see Appendix Table 7.2). This result was almost entirely due to unfavorable weather conditions. In the autumn of 1972, there was late and unusually heavy flooding of the folds in both the northern and western plains, which not only interfered with the harvest for 1972, but also made difficult the autumn ploughing for the 1973 crop. This, therefore, had in many cases to be delayed until the spring of 1973. At that time, however, there were heavy and unusually late snowfalls which led to further swamping in those areas not adequately drained. 1/ Some ground therefore remained unsown, while some was sown very late with fodder crops. Following this, the rainfall during the summer was in some regions very poor, though this was not universal. In the northeast region, which was most hit by drought, some areas had received no rainfall for 14 months by the autumn of 1973. 4.04 Consequent upon these conditions the production of cereals and some industrial crops were less than planned, the index for total crop production declining by 3.3 percent. This included production of 13.8 million 1/ In the southern plain between 5 percent and 10 percent of all agricul- tural land cannot be worked each year because of inadequate fold drain- age. In 1972/73 about 60 percent of this area (i.e. 3-6% of the total) was unworkable. - 22 - tons of grains (as against 16.9 million in 1972), 755,800 tons of sunflower s-eed (as against 850,400 tons in 1972), 4.38 million tons of sugarbeet against 5.58 million the year before. Production of vegetables, however, contrary to this pattern, was at the highest level ever, reflecting the fact of better controlled natural conditions under which vegetables are grown. In the livestock sector overall production was 7.1 percent greater than in 1972, though this would have been greater had not diseases caused some increase in mortality in the beef sector. The count of livestock in 1973 had grown to 5.9 million cattle, 14.3 million sheep, 9.0 million pigs and 67 million head of poultry. Production from the livestock sector in 1973 included about 1.9 million tons liveweight of meat products, 43.7 million hectolitres of milk products and 4.7 billion eggs. 4.05 The product of agriculture in 1973 was sufficient to maintain a growth in domestic needs, but could not fully meet the export targets set for 1973. As a result of this, Romania obtained a second IMF drawing (equivalent to SDR 47.5 million) to compensate for the export shortfall and to ensure the maintenance of imports. Agriculture in the National Economy 4.06 While Romanian development strategy emphasizes industrialization, the development of the agricultural sector remains a key factor in the country's economy. Industrial growth, in fact, itself depends to some extent on the stable growth of agriculture production, both because some inputs to industry derive from agriculture and because agricultural exports are a major source of convertible foreign exchange (about 42 percent of the total earnings in 1973), used to buy industrial inputs. Industrialization also depends on a steady growth in agricultural productivity since agriculture provides the residual labor supply needed for industrial expansion. While productivity in agriculture has grown substantially in recent years, following both relative and absolute reductions in the labor force in agriculture, the absolute level of productivity is still comparatively low by developed country standards and is significantly less than in Romanian industry. Thus, agriculture employed about 42 percent of Romania's labor force in 1973 to produce 16 percent of the country's gross domestic product (according to UN methodology). 4.07 For these reasons, the present development plans place consider- able emphasis on agricultural development not only in terms of investments and modernization but also in terms of institutional development and the improvement of incentives through pricing and the establishing of a system of incomes in which payments are determined by the production obtained (See Annex A Appendix II). Recently, increased attention has also been given to promoting cooperative production both between existing agricultural cooperatives and between the latter and the state farms. The differentials in investments, chemical inputs, degree of mechanization and general productivity as between the state farms and the cooperatives is a major feature of Romanian agricul- ture which current plans are aiming to eliminate (see paras. 3.10-3.11 below). - 23 - 4.08 In the field of investments planned for the Five-Year Plan 1971-75 direct investments in agriculture accounted for 14.3 percent. For the in- vestments actually achieved in the first three years of the Five-Year Plan agriculture's share was 12.3 percent, as against a share of 12.7 percent achieved in the period 1966-70. However, if indirect investments such as the investments in fertilizer production (which are recorded in industrial investments) are added, the overall share of investment related to agricul- tural production has increased in the present Five-Year Plan. Further, in absolute terms, the level of direct investments achieved in agriculture in the three years 1971-73, at around lei 14 billion a year, is some 39 percent greater than the average achieved in the years 1966-70. 4.09 The three principal objectives of the investment program in agricul- ture are mechanization, land reclamation (including irrigation) and the dev- elopnient of infrastructure in the livestock sector. With regard to mechaniza- tion the prime goal is to improve the quality of existing agricultural machinery, and to diversify and expand the number of operations which are mechanized. There are some crops (maize, potatoes and sugarbeet) in which production des- pite recent efforts has not yet been fully mechanized. Also, there remains considerable scope for increasing the quantity of machinery and equipment available--as well as improving the quality--in the cooperative sector (see paras. 4.11 and 4.12 below). 4.10 Of the total agricultural investment program in the present Five- Year Plan about 40 percent has been earmarked for land reclamation, irriga- tion, drainage and flood control and the prevention of soil erosion. This reflects the Romanian's determination to build an infrastructure in agricul- ture sufficient to avoid the sector's dependence on uneven weather conditions which have harshly interrupted production in recent years. In 1973 1.3 mil- lion hectares of land were irrigated (as against 230,000 has in 1965). About 750,000 hectares will be added in 1974 and 1975. The country's total econo- mically irrigable area is about 5.0 million hectares. The present priorities are to complete the irrigable potential in the East (Moldavia) and Southeast (Tulcea), where irrigation is indispensable, and in the center south to reap full advantage of the potential from the Danube. In the western regions considerable emphasis is placed on drainage and flood control which in many areas is essential to any agricultural production. State Farms and Cooperative Agriculture 4.11 The state agricultural enterprise (IAS) and the Cooperative (CAP) are the two major organizations in agricultural production. A principal dif- ference between the IAS and CAP is that the former are given priority. Hlaving access to central budget funds and to the direct organization of the state, they tend to receive higher investments, to be technically more advanced and, as a result, tend to show higher labor and land productivity levels than the CAP. This is well illustrated by the data in Appendix Table 7.5. 4.12 The state farms represent a model of development towards which efforts are being mounted to raise production in the cooperatives, and in this - 24 - direction significant progress has already been made. For example, in the period 1965-72 the expansion of irrigation and fertilizer application, to- gether with the unit yields of cereals has been relatively much more rapid on the cooperatives (see Appendix Table 7.5). There is some evidence that the incremental yield per ton of active substance on the cooperatives may be higher than that on the state farms. Institutional Changes in Agriculture 4.13 Romania continues its efforts to improve the institutional frame- work in agriculture. Recent changes include a modification of the relative price structure for certain agricultural commodities, principally an increase in beef and a reduction in poultry prices, and a modification of the form of income payments on state farms. Beginning in 1974 all workers and management staff on state farms are to be paid not on a salary basis as before but only according to achieved output. Under the new system, failure to achieve the targets planned for the state farms (whatever the reason) will result in all staff being paid salaries proportional to the output achieved but not less than 80 percent of the previous year's basic salary. Conversely, overfulfil-- lnent of the plan is to be rewarded with a corresponding increase in salary payments. On the cooperatives, a guaranteed minimum income was introduced in 1970. In 1973 the minimum was generalized and increased by different amounts in various branches of agriculture. 4.14 One important institutional innovation in agriculture is the decree of April 1974 allowing for the creation of associations between coop- eratives and state farms for the purpose of expanding production capacity, processing and marketing. Under the decree state farms and cooperatives at the approval of the Council of Ministers and following the completion of technical-economic studies, may choose to form a legal association involving the pooling of capital for specific activities. The disbursed income from these activities (not less than 50 percent of total income) would be shared, according to the capital contribution of each unit to the associated activity. A typical form of such activity would be the building of a modern processing plant, large enough to benefit from economies of scale, using inputs supplied by the associated units. The state farms would therefore gain by widening the supply base for processing activities and raising the degree of plant utilization while the cooperatives would benefit from the capital sharing, the access to modern technology and the increase in value added of the marketed product. Since the law is only recently passed no associations of this kind have yet been formed, SLt the expectation is that they will soon develop. Before the new decree there already existed legislation to allow the association between cooperatives, 235 of which are currently operative. - 25 - CHAPTER V: ENERGY 5.01 As a country endowed with considerable energy resources, Romania has been less affected by recent developments in the world energy situation than many other countries. While the increases in crude oil prices and the so-called "energy crisis" occurring towards the close of 1973 did lead the authorities to impose some conservation and rationalization measures, these in most instances represented an intensification of an existing long-term policy to change the structure of the country's primarv energy resource use. The energy resource endowment is clearly illustrated by the figures in Table V-1 below which show the structure of total primary energy supply in 1973, including imports, in million tons standard coal equivalent (mtce). 1/ The imports represented less than 13 percent of total supply, coke and coal (mainly for steel production) accounting for 5.1 percent and crude oil 7.3 percent. Table V-1: TOTAL PRIMARY ENERGY SUPPLY IN 1973 Domestic Imported Total Solid fuels: mtce 11.1 4.1 15.2 % 13.9 5.1 19.0 Oil : mtce 20.0 5.8 25.8 % 25.1 7.3 32.4 Natural gas: mtce 36.1 _ 36.1 % 45.2 - 45.2 Hydropower : mtce 2.6 0.1 2.7 % 3.3 0.1 3.4 Total : mtce 69.8 10.0 79.8 % 87.5 12.5 100.0 Source: Calculated by IBRD from published raaterial. Trend of Primary Energy Usage 5.02 The trend of primary energy usage (including hydropower) is shown in Table V-2 for the period 1960-1973. The average growth rate over the whole period was 7.8 percent p.a. The comparable growth rate of GDP was 9.0 percent p.a., indicating an energy coefficient (i.e. the ratio of energy consumption growth to the growth of GDP) of 0.87. The 1973 figure of per capita consumption of 3.3 tce puts Romania roughly mid-way between the aver- ages for the less developed countries (0.4 tce) and the developed countries (6.0 tce). 1/ 1 tce 7 million kilocalories (kcal) = 27.8 million British thermal units (Btu). - 26 - Table V-2: TRENDS IN TOTAL AND PER CAPITA ENERGY CONSUMPTION 1960-73 1960 1965 1970 1973 /1 Total consumption, mtce 25.8 37.7 56.8 68.8 /2 Consumption, tce/cap 1.4 2.0 2.8 3.3 /1 Provisional. /2 The difference of 11.0 mtce compared with the figure of 79.8 mtce for total supply shown in Table V-1 is largely due to exports, which totalled 7.8 mtce (petroleum products 6.3 mtce, natural gas 0.2 mtce and electricity 1.3 mtce). Source: Calculated by IBRD from published material. 5.03 Within the power subsector there have been significant changes in the pattern of primay energy usage as shown in Table V-3. The main features are the declining shares of natural gas and oil in electricity generation and the corresponding increases in the importance of hydropower and lignite. Table V-3: TREND IN PRIMARY ENERGY USAGE FOR ELECTRICITY GENERATION 1960-73 1960 1965 1970 1973 /1 100.0 100.0 100.0 100.0 Hydropower 5.2 5.8 7.9 16.2 Natural gas 53.8 62.6 55.2 47.4 Solid fuels 23.8 21.5 30.6 28.9 Oil 12.4 5.8 3.1 4.5 Other fuels 4.8 4.3 3.2 3.0 /1 Provisional. Source: Ministry of Finance. Energy Resources 5.04 A precise and detailed account of Romania's energy resources cannot be provided because the exact reserves of some resources are not published. In general magnitudes, however, reserves of coal and lignite account for be- tween 60 percent and 75 percent of the nation's major primary energy resources and natural gas and crude oil for most of the remainder. The total economic - 27 - hydro potential represents a very small part of the total energy reserves. It is possible that there are some economically exploitable uranium deposits, and geothermal energy reserves may be significant, although there are no pre- cise estimates of their size. The figures in Table V-4 below present a broad picture of the structure of Romania's major energy reserves, details of which are given in the following paragraphs. Table V-4: THE STRUCTURE OF MAJOR ENERGY RESERVES /1 1973 Lignite Coal Oil Natural Gas Upper Estimate 33.9 23.3 16.9 25.9 Lower Estimate 44.6 30.8 12.8 11.8 /1 Measured in tons standard coal equivalent. Source: Calculated by IBRD from published material. 5.05 Solid Fuels. Of Romania's total reserves of solid fuels, about 60 percent (measured in tons standard coal equivalent) consists of lignite and brown coal, most of which is found along the length of the Carpathian foot- hills of Oltenia. Of the remainder, most is bituminous coal, although there are also smaller deposits of anthracite and bituminous shale. Table V-5 sum- marizes the latest official estimates of economically exploitable reserves. Lignite is used almost exclusively for thermal power generation. Some bitu- minous coal is used for coking but the bulk of coking coal requirements is imported (0.8 million tons in 1972). Most metallurgical coke is also imported (2.5 million tons in 1972). Table V-5: SOLID FUEL RESERVES million tons Calorific Value Proved Probable Possible Total kcal/kg Lignite/brown coal 2,778 430 70 3,278 1,850 - 1,970 Bituminous coal 56 900 166 1,122 3,600 - 4,700 Anthracite 1 8 9 n.a. Bituminous shale n.a. n.a. n.a. n.a. 800 - 1,200 Source: Ministry of Mines, Petroleum and Geology. 5.06 Crude Oil. :No official estimates of crude oil reserves are publish- ed. Estimates made by non-Romanian sources range from 200 to 350 million tons, i.e. between 14 and 24 years' supply at current extraction rates. Exploration for additional reserves is continuing both onshore and offshore in the Black Sea. Following some years of offshore exploration it is proposed to start test drilling by the end of 1975. - 28 - 5.07 Crude oil imports have increased fairly rapidly in recent years. They consist largely of lighter crudes, required for their higher yield (in comparison with indigenous crude) of the lighter fractions, such as naptha, for the petrochemical industry. In 1968, imports were less than one million tons, in 1973 they were 4.15 million tons, and are expected to reach 5.5 million tons in 1974. This trend reflects the growth in Romania's refining and petrochemical industries at a time when domestic production of crude has stabilized at around 14 million tons per year. Present refinery capacity is about 20 million tons p.a. and is expected to rise to 24 million tons in 1976-77, requiring an increase in imports to about 10 million tons, if do- mestic production remains at its present level. Imports of crude oil have hitherto been more than offset by exports of petroleum products (4.6 million tons in 1973). In the future Romania's petroleum trade balance is expected to become less favorable. Recent agreements with Iran, Iraq and Libya have contributed to the security of future supplies of oil for Romania. Details of the balance of payments impact of petroleum trade, in view of recent price increases, is given in Chapter VII. 5.08 Natural Gas. Romania has a relatively abundant supply of natural methane gas (calorific value 8,500 kcal/m3), found mostly beneath the Transylvania Basin, together with significant amounts of gas associated with petroleum deposits (calorific value 9,000-10,000 kcal/m3). The quality of the "non-associated" gas is as high as any in Europe. Although no exact figures are available, outside estimates suggest reserves to be sufficient for up to 20 years' supply at present production levels. Total gas production in 1973 was over 29 billion m3, including some 5.6 billion m3 of "associated" gas. It is expected that production will increase by about 1 billion m3 an- nually until 1975 and then stabilize in order to conserve reserves. The decree issued by the Council of State in Novenmber 1973 has forbidden any increase in the use of gas as a fuel for electricity generation and, except where absolutely essential, as an industrial fuel, the object being to preserve it for use as chemical feedstock. 5.09 Hydropower. In terms of total energy resources the potential for hydropower is limited, though it provides a significant supplementary source of electrical energy. The economically exploitable hydropower potential is given as 24,000 x 106 kWh (GWh) per annum in an average hydrological year, of which half represents the potential of the internal rivers and half Romania's share of the potential of the Danube. The economic potential of the internal rivers may be increased to possibly over 13,000 GWh as a result of the inten- sified review of the hydropower possibilities following the energy decree of last November (see below). To date about 7,500 GWh has been developed and it is expected that the full potential will be developed by about 1990. The hydropower potential of the internal rivers is being developed in association with multipurpose schemes and is mainly suitable for peaking power (1,500- 2,500 kWh/kW). Only the Danube provides significant run-of-river capability (about 5,000 kWh/kW). - 29 - Energy Policy and Development Strategy 5.10 National energy policy is based on the principles of maximum devel- opment and optimum utilization of indigenous energy resources, supplementing these by imports only where essential to meet the objectives of the national plan. The development strategy for implementing this basic policy has been spelled out in recent years in the following terms: (a) continuation of exploration activity to discover additional indigenous energy sources; (b) rational use of primary energy resources; (c) full utilization of lower-grade fuels, especially lignite, for the production of electricity and heat, in order to conserve natural gas and petroleum for use as feedstock in the chemical industry; (d) continued expansion of combined heat and power production, 1/ and concentration of heat-using industries for this purpose in order to save fuel; (e) development of the hydropower potential of the internal rivers and, in cooperation with other riparian countries, of the Danube, with particular emphasis on multipurpose projects; (f) adoption of technological improvements pari passu with the expansion of the energy sector; (g) progressive extension of electricity supplies to the rural sector and increased used of electricity in agriculture; (h) electrification of railways and public transportation; and (i) development of the fuel and power equipment and construction industries to match modern requirements. 1/ Combined heat/power plants result in more efficient utilization of fuel than separate heat and power plants to supply the same needs. Romania has probably developed these combined plants to a relatively greater extent than any other country in Europe. In 1971 there were about 22 such plants in the public supply system with a generating capacity of 2200 MW, supplying heat to 19 district heating systems. The estimated annual fuel savings compared with separate power and heating plants amounted to 2.5 million tce. - 30 - 5.11 The transformation of the world petroleum situation in the aftermath of the Arab-Israeli war in October 1973, whilst underlining the basic soundness of this strategy, lent added urgency to the need for its effective implementa- tion. This fact was recognized by the issue of the decree of November 18, 1973 on measures for developing energy supplies and ensuring the most effi- cient utilization of all fuel and energy sources. Apart from setting out a series of short-term measures, such as gasoline rationing and other restric- tions on the use of fuel and power, to deal with the immediate situation, the decree redefined and elaborated the principles and objectives of national energy policy described above, translating them into specific action programs for various key ministries and agencies to secure their implementation as rapidly as possible. Details of the specific measures proposed by the minis- tries and agencies concerned to implement the decree and estimates of the re- sulting fuel savings were not available at the time of the mission, except for an indication that 1974 electricity consumption would be 4000 GWh (7%) less than the original forecast, representing a fuel saving of about 1.5 million tce. Electricity consumption in 1973 was also some 1800 GWh (i.e. 3.8 percent) less than originally planned, partly as a result of conservation measures. Costs and Prices 5.12 Comprehensive data on the costs of exploiting the various primary energy sources and on the prices of the various forms of energy are not pub- lished. For lignite the only available figures relate to the existing mines at Rovinari and those to be developed for supplying the Turceni power project. These show a wide range, from 42 lei/ton at Rovinari to 84 lei/ton at Turceni, equivalent (at 20 lei = US$1) to US$2.10 and US$4.20/ton respectively, or 30 and 60 US cents/million Btu. No information is published on the extraction costs of oil and natural gas. Hydropower development costs, based on Mlinistry of Electrical Energy estimates, have shown a marked upward trend; for existing hydropower stations a range of 7,000-10,000 lei/kW (US$350-500) was quoted, compared with 10,000-12,000 lei/kW (US$500-600) for stations under construction and an estimate of 15,000-16,000 lei/kW (US$750-800) for future schemes. 5.13 Fuel producer prices were increased significantly from January 1, 1974. Comparative indices showing the old and new prices are given in Appendix V. For fuels the increases ranged from some 17 percent for coal to 349 percent for imported oil. Electricity prices were virtually unchanged overall, in- creasing only 1.5 percent on average, although the structure of tariffs was changed. The only specific price information obtained was for coal, lignite, crude oil and natural gas. Industry pays 60 lei/million kcal (about 75 US cents/million Btu) for lignite, compared with a price to the population of 38 lei/million kcal (48 cents/million Btu); the comparable figures for bitumi- nous coal are 69 and 260 lei/million kcal (87 cents and US$3.28/million Btu). The price quoted for natural gas delivered to industry was 200 lei/1000 m3, equivalent to about 24 lei/million kcal (30 US cents/million Btu). The cur- rent price for crude oil delivered refinery is 500 lei/ton, 1/ equivalent to US$25.00, which seems low compared with the current world prices. 1/ This price represents a volume-weighted average of the (world) price of imported crude and the adjusted domestic price. - 31 - Investment and Employment in the Energy Sector 5.14 Investments in the energy sector increased by 65-75 percent for each five year period from 1955-70, investments in electrical energy growing more rapidly than the average. The share of total energy investment in total investments has varied between a third and a quarter in the last decade. The share of the power subsector alone (including combined heat/power installations) has remained fairly stable. One effect of the 1973 decree is likely to be even heavier demands for investment in electric power development. This part of the energy sector has already been accounting for 13-15% of total industrial investment in recent years and this share could increase since the technical options favored by the decree, such as hydropower, lignite-fired steam stations and nuclear power, are all more capital intensive than the alternatives of oil or gas fired stations. Some reallocation of investment resources may therefore be required. The foreign exchange component of power investments may also be higher, though no information is published on the past share of foreign ex- change in power investment costs. In the Plan for 1976-80, the total share of investments in energy development will be greater than in the present Five- Year Plan. Conclusions 5.15 Romania's relative self-sufficiency in energy resources and its long-standing adoption of a policy to rationalize the use and development of primary energy resources have placed the country in a strong position to withstand the pressures resulting from recent changes in petroleum prices. Further intensification of these policies, as embodied in the 1973 decree, will consolidate the country's position and provide for its future needs. The decree, however, implies the need for a commitment of investment funds, in greater shares than in recent years, in order to develop relatively more capital intensive forms of electric power generation and to increase the ex- ploration effort designed to supplement the declining reserves of crude oil and natural gas. - 32 - CHAPTER VI: REGIONAL DEVELOPMENT 6.01 From the point of view of achieving an equitable growth in personal incomes and the standard of living, the regional aspect of development is as important in a socialist economy as in any other because income advancement is closely tied to the growth in productive employment opportunities. Through the pursuit of a policy of balanced industrial development Romania has success- fully reduced regional disparities in recent years. There are, nevertheless, some regions which remain significantly less developed than the national aver- age. For this reason regional policy continues to be a major factor in the determination of the national development Plan, and it influences investment priorities in different sectors, the location of industry and the development of social services. Postwar Regional -/ Development Policy 6.02 During the early postwar period, regional criteria as such were secondary in importance to the reconstruction and modernization of the economy as a whole. However, during the 1960's the regional factor was given increas- ing importance in the determination of investments. While the exploitat .on of natural resources and re-equipment and modernization of already advanced re- gions continued to be a major criteria for investments, the Five-Year Plans for 1966-70 and 1971-75 gave more emphasis to the social needs of development than hitherto. Factors such as employment needs, the need for education and health facilities, the need for balanced urban growth were all factors which to some extent influenced the choice of investments. Policy is now explicit that, in the case where economic efficiencies of alternative investments are equal, the investment favoring the least developed of two regions will always be chosen. 6.03 Evidence of this emphasis is that industrialization, which has been the main force for regional development, has proceeded more rapidly in the less-developed regions, and the structure of industry in these regions has been increasingly transformed in favor of heavy industry and away from tradi- tional processsing or light manufacturing. This transformation is well illus- trated by the figures in Table VI-1 below which show the increasing weight of two basic industries in the total industrial output of most judets. 1/ This report will use tIhe term "'regional" as both a general term and as referring to the territorial division of the country into Judets. The Judet is a convenient unit of subdivision since it is politically dis- tinct and it has its own. budget, local industry development plan. - 33 - Table VI-1: THIE EVOLUTION OF THE SHARE OF SELECTED HEAVY INDUSTRIES IN THE TOTAL INDUSTRIAL PRODUCTION OF JIJDETS, 1965-72 Share of Industrial Number of Judets Production in Judet 1965 1972 Machine Building percent: and Metallurgy: less than 10 15 8 10 - 20 8 13 20 - 30 9 6 over 30 8 13 Chemicals: less than 10 34 27 10 - 20 5 8 20 - 30 1 2 over 30 _ 3 Source: Anuarul Statistic al Republicii Socialiste Romania. The Present Structure of Regional Development 6.04 The system of national accounts in Romania does not compile national income statistics by judets, so it is not possible to give an accurate ranking of judets by income levels. However, several other published indicators exist which can be used to group the judets according to levels of development and from which rough estimates may be made of income levels. These indicators, which are displayed in Appendix Tables 11-1, 11-2 and 11-3, serve to define a four-group division of judets with Bucharest as the most developed; two intermediate groups (Groups III and II) comprising about 72 percent of the population; and a group of 9 judets (Group I) comprising about a fifth of the population, the least developed. 6.05 In this least-developed group, the indicators reveal that the devel- opment characteristics are typical of less-developed regions elsewhere, even though in relative terms the differences may not be as marked. In the Group I judets, as clearly shown by the map and by Appendix Table 11-2, less than 25 percent of the population is urbanized, suggesting a high proportion of agricultural employment and some degree of rural labor surplus. In these regions, also, the natural increase in the population is significantly more rapid than the national average while the growth in their total population is less, due to outmigration. This is shown in Table IV-2 below. - 34 - Table VI-2: POPULAT'ION AND EMPLOYMENT BY REGIONAL GROUPINGS 1966-72 Total Natural Population Employment Employment Population Increase Growth Growth Growth: 1972 in 1972 1967-72 1966-72 1966-72 Population (000) (%) (000) (M) (%) Group I 4,118.5 1.5 1.2 319.9 11.9 7.7 Group II 11,504.5 1.3 1.5 1,237.7 9.5 10.7 Group III 3,422.3 1.4 1.3 462.8 8.2 13.5 Bucharest 1,617.8 1.1 1.8 394.3 10.4 24.3 TOTAL 20,662.6 - 1.3 2,414.7 9.8 11.6 Source: Anuarul Statistic. IBRD Calculations. 6.06 In addition to their population characteristics the other indicators of development show the Group I judets to be significantly less developed than the national average. For example, as compared to their share of population, the share of these judets in the total number of wage earners is 58 percent of the national average; their share of fixed assets in industry is 46 percent; of industrial production 38 percent, and of retail sales 61 percent. Only in agriculture is their share above the average (8 percent above for fixed assets in agriculture, 18 percent for agricultural production). However, agriculture is a relatively low income sector and the extent to which these judets are above the average for agricultural production is insufficient to offset the degree to which they are below the average for industrial production. Further, these judets are not those which can count upon significant earnings from tourism and other service sector activities. 6.07 Using a rough method to estimate the income levels in the respective judets 1/ gave the result that the Group I judets had a total share of the na- tional income of 11.3 percent in 1972. This implies that the GNP per capita equivalent in these judets was about US$490 or a little more than half the national average. 1/ The method was as follows: NIi = Xi.A + Y1.I, where Nli is the judets' share of national income; Xi is the judets share of agricultural produc- tion. A is the share of agriculture in total national income; Yi is the judets' share of industrial production; I is the share of industrial pro- duction in national income. The data for Xi, Yi, A, and I are all known for 1972. - 35 - Regional Development in the Five-Year Plan 1971-75 6.08 Particularly heavy emphasis has been placed on the regional factor in the determination of investments in the present Five-Year Plan. This not only refers to industrial investments. The division of investment funds for housing construction, education and health facilities has been decided strictly on the basis of present per capita needs and current rates of popula- tion and employment growth in different judets. In the outcome, the regional division of investments has been such as to give the 9 judets in Group I a share of investments, in relation to existing fixed assets in industry, some 40-50 percent higher than the national average, while in Groups II and III the share of investments is less than the share of fixed assets. (See Appendix Table II-3). This is clear evidence of a successful policy to generate rela- tively more rapid growth in productive assets in the least developed regions of the country. However, the absolute magnitudes, both of the differentials to be reduced and of the investments required to do so, remain substantial. In per capita terms, investments are still lower in the least developed re- gions. In 1972, for example, total investments per capita were lei 3,060 in Group I, lei 4,482 in Groups II and III combined, and lei 7,540 in the muni- cipality of Bucharest. Equally, in terms of employment creation, while the less developed regions have the highest rate of increase (see Table VI-2 above), in absolute numbers and as a share of total population the number of new jobs created in Group I judets in the period 1966-72 is less than in other regions. Out migration of workers to jobs in other regions, of course, may account for some of the difference. 6.09 Regional industrialization often incurs some degree of capital cost to society because, for a variety of reasons, the development of industry in areas not already industrialized involves higher capital output ratios. Romania appears to offer no exception to this rule. Thus, industrial capital-output ratios in the less developed regions (both Group I and Group II) are signifi- cantly higher than, for example, those for Bucharest. This can be seen from Appendix Table II-2 which shows that in the less developed regions the share of fixed assets in industry is higher than their share of industrial produc- tion. In agriculture, by contrast, it is the more developed regions which have the highest capital-output ratios, reflecting their use of more capital- intensive agricultural techniques. In principle, these findings suggest an argument in favor of pursuing an increase in agricultural investments in the less developed regions which, at least in terms of yield on capital, may be socially beneficial both in the short and long term. Conclusions 6.10 The conclusions to be drawn from this analysis are that in recent years Romania has devised and successfully pursued a positive policy of ba- lanced regional development. A major factor in the success of this program has been the authorities' ability, using the development plan and the State budget as instruments, to direct the flow of investments, to have a regional impact. As is often the case with such programs, they may have involved some - 36 - capital cost as the price of improved regional balance. In all events, sig- nificant regional disparities persist between a minority group of judets and the average and the need for a continued regional policy seems fully justified. These conclusions suggest the judgment that the Bank, in its choice of projects, might also give some consideration to the regional factor, in harmony with Romania's owm policy. Agricultural development in the less developed areas, in addition to the expansion of industry, could be an important vehicle for this approach. - 37 - CHAPTER VII: FOREIGN TRADE AND PAYMENTS 7.01 The foreign trade sector continues to be the focus of major attention in Romania and this is reflected in recent performance. Partly on account of a growth in the physical volume of trade but also as a result of price increases, the share of trade in the gross national product has increased significantly in recent years. For example, total exports in 1973 represented 20.1 percent of GNP, as against 13.7 percent in 1970. Measured in constant price terms the share in 1973 would (according to IBRD estimates) be about 14.5 percent, show- ing that the physical volume of exports has grown somewhat more rapidly than the national income. At present Romania exports about 20 percent of its indus- trial production. Recent Institutional Developments 7.02 As has been the practice in recent years, Romania has pursued the expansion of trade within the framework of bilateral trade and cooperative agreements with a wide variety of countries. The recent tendency has been for these agreements to involve multi-lateral (i.e. convertible currency) pay- ments agreements, rather than bilateral clearing arrangements as in the past. This latter form of trading is generally being phased out. In May 1974, for example, the trade agreement with Tunisia was changed from a clearing to a free currency payments basis. This leaves only 25 countries (mostly LDC's) out of a total of 120 trading partners which still retain bilateral clearing agreements. 1/ Some trade agreements were made during 1973 and several pro- tocols were concluded within the framework of existing agreements. Following the visits of President Ceausescu to these countries, cooperative agreements, including trade agreements or protocols were signed with Argentina, Venezuela, Ecuador, Peru, Colombia, and Costa Rica and Sierra Leone in 1973 and with Libya, Syria, Lebanon, Liberia, Guinea and Iran this year. 7.03 Progress has also been made in the granting by several countries of the generalized preference system to Romania. This includes the generalized preference accorded by the EEC to Romania as a developing country, effective January 1, 1974. Under this preference Romania will enjoy a tariff advantage on a range of products, about equal to 20 percent of Romania's total exports to EEC, which were not rated as "sensitive goods" (the latter being textiles, shoes, some chemical and steel products and some agricultural products). Principal exports enjoying the advantage are machine tools, chemicals and wood (though not furniture). It is too early to judge the material advantages to Romania's trade of the preference but in principle it offers the opportunity for an improvement in the structure of Romania's trade by raising the share of manufactured exports to the EEC. About one quarter of Romania's exports are to EEC countries. 1/ Payments with CMEA (Council for Mutual Economic Assistance) countries are on a multilateral clearing basis. - 38 - 7.04 During 1973 Romania entered into general agreements with both the United States and the Federal Republic of Germany to avoid the double taxation of income derived from trade and foreign investment. Under the agreement, en- terprises in either country which pay tax on incomes realized in the partner country, will be granted corresponding domestic tax concessions. By the end of 1974 similar agreements are to be concluded with France, Italy, Holland, the Scandinavian countr-ies and Austria. 7.05 Despite the developments described above, Romania still faces some degree of tariff and other trade discrimination and not all countries (notably the United States) have granted Romania most favored nation status. With regard to trade with member countries of the GATT, it was noted at a meeting in July 1973 that the member countries will be unable to keep fully to their undertaking to eliminate by the end of 1974 all discriminatory policies against Romania, as was agreed at the time of Romania's joining GATT in 1971. A new meeting of the GATT Working Group for Romania which will further discuss this issue is scheduled for January 1975. 7.06 Trade agreements with CMEA countries remain as at present. 1/ During 1975, new discussions will be had to reach agreement on a new setting of "stop" prices which will govern trade between CMEA members for the plan period begin- ning in 1976. The stop prices are adjusted periodically to reflect world price changes but they remain fixed for five year periods. The New Foreign Trade Regime 7.07 Beginning on January 1, 1974 Romania introduced on an experimental basis a major innovation in its foreign trade regime which involved the ending of automatic subsidization of trade, the introduction of a uniform rate of conversion (i.e. lei 20 = US$1.00) of foreign prices to lei and the introduc- tion of a customs tariff. Under the new system the difference between the domestic price and the converted foreign price of a traded good (at lei 20 = US$1.00) is established (and fixed) for each year. The amount involved is paid into or out of the equalization fund. If world prices change during the year any residual over the agreed margin accrues as a profit or loss to the trading enterprise. The equalization fund, an adjunct of the Ministry of Foreign Trade and International Cooperation, is operated to remain in balance each year. This is achieved during plan elaboration by eliminating from ex- port those goods which are less efficiently produced. The central objective of this innovation is to place the rationale for foreign trade on an economic basis where pricing, profits and financial considerations take precedence over the achievement of purely physical goals in the decisions to trade. 7.08 Under the new regime, imports are priced domestically by converting foreign prices at lei 20 = US$1.00, and adding a customs tariff. The tariff 1/ An account of the nature of these agreements is given in the 1973 economic report on Romania. - 39 - rates average 45 percent for machines and equipment, 2-10 percent for raw materials and about 25 percent for final consumer goods. Since these para- meters are fixed, any changes in foreign prices will be reflected in the domestic price of an imported good, and will thus affect the cost structure of Romanian production in which the import is used. This situation will lead either to some temporary change (i.e. suspension or reduction) in the rate of tariff, as a partial offset to the price increase, 1/ or to an adjustment in the domestic selling price. Such price changes would be made periodically, probably annually. 7.09 On the exports side, the new system encourages exporting enterprises to compete by quality rather than price. Coupled with a modification of the retention system of export earnings where enterprises can retain up to the full amount of lei receipts resulting from higher export prices than planned, the new system of pricing thus places on the producing and trading enterprises an incentive to sell at higher rather than at lower prices. Among other things, this will serve to eliminate the tendency for exporting enterprises to be pre-occupied with achieving physical export targets with too little attention to quality, pricing and profit considerations. This tendency was criticized by President Ceausescu at the May 1974 conference on foreign trade. Merchandise Trade in 1973 7.10 The net impact of world commodity price changes on Romania's trade balance was in general favorable, the total account closing with a surplus of US$232.9 million. This was achieved through a current price growth in exports of 43.9 percent to a total of US$3,737.5 million and a growth in imports of 33.9 percent to a total of US$3,504.6 million. The total value of trade (i.e. exports and imports in current prices expressed in dollars) grew by 38.8 per- cent. Since world price movements do not immediately affect trade with CMEA countries, the major impact of commodity price increases was in trade with other countries. This is evident in the fact that the total value of trade with non-CMEA countries grew by 62.7 percent, thus raising their share of trade. Trade with non-CMEA countries ended the year with a deficit of US$43.5 million (somewhat less than in 1972) indicating that the net impact of price movements did not significantly distort the structure of trade with these countries. An account of the principal trade balances and the share of trade by major region is given in Table VII-1 below. 1/ In April this year the new system was suspended in the case of raw material imports following very rapid world commodity price increases. - 40 - Table VII-1: PRINCIPAL TRADE BALANCES AND THE REGIONAL STRUCTURE OF TRADE 1973 Trade Balance Share of Trade (US$ million) Exports Imports Balance 1972 1973 CMEA 1,701.6 1,425.2 276.4 45.9 43.2 Developed Market Economies 1,449.6 1,568.7 -119.1 33.6 41.7 Other Socialist Countries 231.8 233.6 - 1.8 7.1 6.4 Other Countries 354.5 277.1 77.4 13.4 8.7 TOTAL 3,737.5 3,504.6 232.9 100.0 l00.0 Source: Ministry of Foreign Trade. 7.11 The commodity composition of Romania's imports reflects the country's industrial priorities. In 1973, 93 percent of all imports were capital goods, intermediate goods, and raw materials, mostly for industry. On the exports side, fuel, metals, agricultural and other raw materials and foodstuffs account- ed for 46 percent of the total, capital goods for 24 percent and other manu- factures for 30 percent. A significant change occurred in the commodity composition of Romania's trade in 1973 in that the share of capital goods imports declined by 4 points from 1972 to reach 42 percent. At the same time the share of fuel, metals, agricultural and other raw materials increased from 40 percent to 43 percent (see Appendix Table 3.3). Several factors have contributed to this. One reason may have been that raw material price in- creases were relatively more rapid than other goods. Part of the explanation may also be related to the fact that investment grew less rapidly than planned in 1973. The switch in shares between these two categories is also consistent with the efforts made in 1973 to expand the utilization of existing productive capacities and to delay the creation of new capacities where under utilized plant still exists. At any rate, the switch is consistent with the stated long term policy of reducing the share of manufactured goods in imports, in favor of raw materials. The commodity composition of exports remained largely unchanged. The Commodity Structure of Trade by Regions 7.12 Information recently released by the Ministry of Foreign Trade enables a detailed study of the evolution of Romania's trade by both commodity and region. 1/ The statistical Appendix Tables 3.4 and 3.5, and the summary data in Table VII-2 below, show the region-commodity structure of trade in 1973. The major feature of this structure is the relatively even commodity breakdown 1/ Comertul Exterior al Republica Socialiste Romania. Ministry of Foreign Trade, Bucharest 1973. - 41 - of exports to all but the developed market economies, where machinery and equip- ment exports are less than 6 percent and raw material and consumer goods ex- ports are dominant. Of exports to CMEA countries, about two thirds consist of manufactures and machinery. On the import side, the striking feature is that machinery, equipment and raw materials account for the major portion from all countries. This reflects the priority Romania gives to domestic indus- trialization, imports of finished products being kept to a minimum. A prime goal of trade policy is to increase the share of manufactured exports (and machines in particular) to the developed market economy countries and to reduce the share of machinery imports from the latter. Table VII-2: THE REGIONAL AND COMMODITY BREAKDOWN4 OF TRADE IN 1973 TOTAL CMEA DNE /1 Other Exports Imports Exports Imports Exports Imports Exports Imports Machines and Equipment 24.4 42.1 37.8 52.6 5.5 43.0 32.1 10.2 Raw Materials /2 32.5 43.1 20.6 35.4 45.0 43.2 36.3 64.1 Consumer Goods /3 32.3 6.9 30.8 7.1 41.6 3.6 14.1 6.8 Other 10.8 7.9 10.8 4.9 7.9 10.2 17.5 18.9 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 /1 Developed Market Economies. /2 Categories B, D and H in Appendix Tables 3.4 and 3.5 includes some semi- fabricates. /3 Categories E and F in Appendix Tables 3.4 and 3.5. Source: Ministry of Foreign Trade. The Impact of World Price Changes on Romania's Trade 7.13 The commodity composition of Romania's trade has placed the country in a relatively favorable position with regard to world price trends in 1973. This is so because the petroleum sector was in positive balance in 1973 and because price increases for raw material imports were offset by similar in- creases on the exports side. In 1973 Romania imported 4.15 million tons of crude oil valued at about US$95 million. In the same year petroleum deriva- tive exports to the convertible area were 3.5 million tons valued at about US$140 million. With regard to other commodities, no precise information is available on price movements, but IBRD estimates (see Appendix IV) suggest that these were marginally positive during 1973, a fact which is consistent - 42 - with a smaller convertible trade deficit in that year. The estimates con- tained in Appendix IV suggest that in trade with non-socialist countries 1/ import prices increased some 27 percent in 1973, export prices some 31 percent. That is, a terms of trade index based on 1972 = 100 would have, by these estimates, increased to 103.0 in 1973. The price effect on trade with non- socialist countries was not, however, the dominant influence in determining the growth in total value. In the case of both imports and exports to these countries, as shown by Table VII-3 below, the contribution of volume increase accounted for over 50 percent of the growth. Table VII-3: RELATIVE CONTRIBUTION OF PRICE AND VOLUME INCREASES TO THE GROWTH IN TRADE VALUE TO NON-SOCIALIST COUNTRIES 1972-3 Increase 1972-73 1972 1973 (US$ million) (percent) Exports Total Value (US$ million) 1,231 2,036 805 65.3 Price Effect 379 30.8 Volume Effect 426 34.5 Imports Total Value (US$ million) 1,298 2,080 782 60.2 Price Effect 349 26.9 Volume Effect 433 32.3 Source: IBRD mission estimates. The Balance of Payments 7.14 Romania's balance of payments reflects clearly the country's policy of maintaining, as far as possible, a balance in merchandise trade. The sur- pluses or deficits in trade tend to be small in relation to total payments, invisibles are of minor importance and reserves provide only sriiall margins of residual financing. Net borrowings on capital account tend also to be rela- tively small, though gross borrowings and repayments have increased in recent years as a result of a cumulative use of supplier's and financial credits to finance imports from the convertible area. 1/ The price effects on trade with socialist countries was of little impert- ance because trading prices are changed only periodically. The caleula- tions in this section are based on non-CMEA countries. - 43 - 7.15 Romania's balance of payments with the non-convertible area in 1973 was in surplus on current account and in deficit on capital account while in the balance with the convertible area the reverse applied. In the case of the non-convertible area, the current account surplus results from a surplus in merchandise trade, only marginally offset by small deficits on the invisi- bles account. The deficit on the capital account with the non-convertible area results from the granting of some short-term trade clearing credits to the non-convertible area. In the balance with the convertible area the cur- rent account deficit arises from deficits in merchandise trade and transport and other invisibles with an offsetting surplus from tourism. On the capital account the surplus arises from the drawings of IMF credits and net medium- and long-term borrowings, offset bv a net repayment of short-term credits. 7.16 The IMF credits taken in 1973 represent a gold tranche purchase of SDR 47.5 million (US$57.5 million) in May and a purchase of various currencies, also totalling SDR 47.5 million in November. These credits were sought to alleviate balance of payments difficulties resulting from the unfavorable con- ditions in agriculture (described in Chapter III) which prevented the fulfill- ment of the plan for agricultural production and exports. Tourism 7.17 Tourism is a sector in which a signifizant growth in earnings is being achieved at present but which remains relatively underdeveloped relative to the country's potential. Total receipts from tourism in 1973 were US$134 million implying net receipts of about US$21 million in non-convertible and US$75 million in convertible currencies. These figures disguise the fact that most tourists (about 83 percent in 1973) are from neighboring countries rather than the convertible area. Efforts are being mounted to expand the convertible earnings potential and include investments to improve hotels, highways, airports, and resort areas. Investments in recent years have averaged around US$30 million but until 1973 about 70 percent of investments went to develop resorts on the Black Sea Coast. More attention is to be given to im- prove inland facilities at historic towns, health resorts and spas and to im- prove facilities for hunting and fishing. Projections provided by the Ministry of Tourism suggest that earnings from tourism will about double by 1978. This would still be only a small share of total foreign exchange earnings. External Debt 7.18 The total of Romania's outstanding foreign debt at the end of 1973, represented a slight decline over the level outstanding at the end of 1972. Further, given the prospects for rapid export growth to the convertible area (planned at 76 percent increase in 1974), a marked reduction in the relative debt burden over earlier years is expected. Romania intends no more than a gradual expansion in its level of foreign indebtedness, preferring in general to cover imports payments as far as possible by export earnings. Policy is, however, to fund the outstanding debt by eliminating outstanding debts on short-term and expanding the amount of long-term borrowing. The implementa- tion of a positive debt management policy is a new development in Romania, reflecting the country's new found situation vis-a-vis convertible currency financing. - 44 - 7.19 Romania is continuing its efforts to seek new sources of convertible currency financing. Under the joint venture law of 1971 direct foreign in- vestment is being encouraged, four such ventures worth some US$20 million in foreign capital having been signed so far. Access has also been opened to EXIMBANK financing (about US$40 million in loans have been made in the last year) and to Hermes, ECGD and COFACE guaranteed financing. To extend banking and trade relations, joint Anglo-Romanian and Romanian-French banks have been opened in London and Paris respectively. Recently the Manufacturers Hanover Trust of New York opened a branch office in Bucharest. 1/ Trade Prospects- 7.20 The prospect of continuing world price increases, coupled with Romania's ongoing efforts to expand trade, suggest the continuation of rapid growth, particularly with the convertible area. Although price forecasts are difficult to make with accuracy, Bank projections (see Appendix IV) suggest that the positive terms of trade arising from price movements in 1973 will continue through 1974 2/ and, if present trade plans are met, a trade surplus with the convertible area as well as with the non-convertible area, seems assured. The Annual Plan for 1974 sets a growth in the total value of trade of 41.3 percent, with total exports growing at 43.5 percent and imports at 38.8 percent. With the convertible area exports are planned to grow at an unprecedented 76 percent, imports at 50.8 percent. The mission estimates of the price component of these increases suggest that export price increases might be about 35 percent in 1974, import price increases about 30 percent, implying considerable volume growth in each case. 7.21 No details are published on the commodity composition of future trade but on the exports side it is likely that processed goods, including some petroleum goods and chemicals together with processed agricultural commod- ities, will account for an important share of the increase. On the imports side, industrial raw materials including crude oil (imported as feedstock) will show important increases. The balance of trade in petroleum products will depend upon the relative movement of prices of crude oil imports and petro- leum derivative exports. According to Romanian price data, Romania's crude import bill will reach about US$600 million (about 20 percent of convertible imports) in 1974, following a planned increase of crude imports to 5.5 million tons. 3/ Romania plans to export to the convertible area some 3.2 million tons of petroleum derivatives in 1974, valued at about US$300 million. 1/ The analysis in this section is based on a view of Romania's trade prospects at the time the report was first written, i.e. June 1974. Developments since that time, some of wlhich were foreseen in para 7-22 below, suggest that the view taken in the report may have been somewhat optimistic. 2/ The projections suggest that the terms of trade index based 1973 = 100 will move to 103.7 in 1974. 3/ This implies a price of $15.00 a barrel, including transport costs. - 45 - 7.22 No details are yet available for planned trade beyond 1974 and in present circumstances forecasts are difficult to make. However, there seems no reason to believe any major departures from the present trends will occur. The second order effects of the world petroleum situation, in so far as they have affected economic growth in the major western nations, may, however, have an adverse effect on Romania's exports. Problems have already arisen in main- taining export contracts in Italy and Great Britain (Romania's second and fourth western trading partners) in the face of economic downturns in those countries. Italy's recent import restrictions may have a particularly severe eff@et particularly in respect of agricultural commodities and lumber. Never- thelens, in the figures contained in the 1974 plan there is a significant margin for export ahortfalls before the convertible account would be in defit. If the import plan is fulfilled, convertible exports need grow by only 58 percent (an against a planned growth of 76 percent) in order to achieve a convertible trade balance. On recent performance this figure seems likely to be achieved. Oonc lu ions 7.23 Romania's policy in recent years of maintaining a major effort to expand its foreign trade with a wide range of countries, assisted by the fact that the commodity compofition of Romania's trade is favorably structured with regard to present world price trends, has been rewarded by rapid growth in this etor. The introduction of a new regime of trade pricing should engure an increaging Oeficiency in this trade, in economic terms. Due to the impact of pricAincreases growth in the value of trade with the convertible area hag been particularly rapid and has shown declining deficits. If the 1974 Freign Trade Plan is met Romania will for the first time in recent years enter into a trade surplus with the convertible area. This will place the Gountry in a new ituation tin which it will have the option of either or both aMeumulating reserves (which have historically been relatively small) repatriating debt, and expanding imports yet further. Indications are that surplus funds will be used to repatriate short term debt, in line with current d0bt management policy. - 46 - CHAPTER VIII: DEVELOPMENT PROSPECTS 8.01 Romania's development prospects, as outlined in present plans and as foreseen in view of recent achievements, continue to promise high invest- ment, rapid industrial growth and diversification, expanded foreign trade and rapidly rising incomes. The present emphasis on tightening productive effi- ciency, accelerating technological improvement and raising product quality in industry should result in an increasingly sophisticated range of Romanian products with consequent increases in the share of manufacturers in the coun- try's exports. With the present trend in growth and structural change Romania is approaching the threshold of full industrialization, foreseeable in the next decade. In some less developed regions, however, the transformation will take longer. 8.02 The prospects for development during the latter part of this decade are best viewed within the framework of existing plans. In the short term the prospects are defined in the plans for the last two years of the Five-Year Plan for 1971-75, including the Annual Plan for 1974 already being implemented. Beyond that, there are the draft outlines for the forthcoming plan for 1976-80. The Annual Plan for 1974 8.03 The investment and production targets set for 1974 are ambitious, though within reach. Investments planned for 1974, total lei 118 billion out of which lei 107.9 billion are from state funds. This total, which represents a growth in investment of 18.3 percent over 1973, is about lei 15 billion or 14.5 percent greater than that originally planned for 1974. Partly this is to compensate for investment shortfalls in 1973, partly to ensure the economy is placed in a strong position to overfulfill the present Five-Year Plan. The target for industrial growth in 1974 is 16.7 percent, the second highest rate in Romania's history. Foreign trade is planned to grow by 41.3 percent in total volume i.e. exports plus imports. In agriculture, assuming conditions of a "normal" year, production is expected to reach lei 113 billion (of which lei 24.4 billion is to be from state agriculture). This would represent an increase of 25.5 percent over production achieved in 1973. Commensurate with these targets, national income is planned to grow by 14.6 percent in 1974, some 3.0 percent more rapidly than initially planned. Achievement of this growth will imply that Romania's GNP per capita will reach about US$1,000 by the end of this year. 8.04 After the first two quar srs of the year the fulfillment of the 1974 plan in most sectors seems assured. In the first seven months of 1974 indus- trial production grew by 15 percent over the same period in 1973 though in some branches there are some delays in implementing plan targets. In agri- culture, while it is too early to accurately assess the final outcome, the weather conditions have again been unfavorable for some crops. - 47 - The Five-Year Plan 1971-75 8.05 On the basis of the growth achieved during the first three years of the present Five-Year Plan it appears that the targets for most major indica- tors for the period 1971-75 will be achieved or surpassed. This is evident from the data for the major aggregate indicates given in Table VIII-1 below. National income growth, initially planned at 11-12 percent a year on average for the five-year period, may exceed 12 percent on account of more rapid growth in industry and foreign trade than originally planned. The plan targets for industrial growth (11-12 percent per year on average) and for foreign trade (10.1-11.5 percent per year increase, in constant prices) are both likely to be exceeded. Consequently, the planned increase in real personal incomes, set at 7.0-7.9 percent a year on average, will be surpassed. Table VIII-1: THE PRINCIPAL INDICATORS FOR THE FIVE-YEAR PLAN 1971-75 PLANNED AND EXPECTED ACHIEVEMENTS Plan Expected Targets Achievements Social Product (Annual % increase) 10.1 11.5 National Income (Annual % increase) 11-12 12.6 Industrial Production (Annual % increase) 11-12 14.1 Agricultural Production /1 36-49 37.0 Investment (bill lei) 540 558 Foreign Trade /2 (% growth over 1970) 61-72 98 Exports 89 111 Imports 53 86 Labor Productivity (% growth over 1970) 42 42 Growth in labor force (000) 1000 1300 Retail Sales (Annual % increase) 7- 8 8.7 Real Incomes (% grwth over 1970) 20 24 Peasant incomes from agriculture (% growth over 1971) 22-30 35 /1 Average annual growth over the average in the 1966-70. 7T In constant prices. Source: Draft Directives of the XIth Congress of the RCP concerning the Five-Year Plan for 1976-80. Industry 8.06 The overfulfillment of the Five-Year Plan's initial targets for industrial growth, during the first three years of the plan, have led the - 48 - Ronianian authorities to raise the targets still further. The initial targets for gross industrial production in 1975 were set with a lower limit of lei 503.8 billion. This will almost be surpassed by the level achieved in 1974 which is planned to reach lei 501 billion. As presently envisaged, the volume of production reached by the end of 1975 will be some 8-15 percent greater than initially planned, implying a total in the region of lei 590 billion. These additional gains in production are to be achieved both through further invest- ments in productive capacity and through a fuller and more efficient use of existing capacities. Of late, increasing emphasis has been placed on improv- ing capacity utilization as a means of plan fulfillment. The Plan calls for an increase in labor productivity in industry of 42 percent during the five years and a decline of 11-12 percent in total production costs in industry. 8.07 In line with the basic strategy of Romania's industrial development, the Five-Year Plan calls for an increase in the share of heavy industries in overall production. By the end of 1975 the Plan envisaged that the share of machine building, chemicals and ferrous and non-ferrous metallurgy would be 53.0 percent of all industrial production. This figure could be exceeded since, as Table VIII-2 below shows, the machine building and metallurgy sectors were in 1973 already close to the share planned for 1975. The chemical indus- try, however, may not attain the share initially planned for 1975, although thi-i depends on the growth achieved during 1974. Following some delays to expansion in 1973, and spurred also by recent price trends, a major effort is being mounted in the last two years of the Plan to attain all the initial goals. Table VIII-2: THE SHARE OF MAJOR BRANCHES IN TOTAL INDUSTRIAL PRODUCTION 1972-73 AND PLANNED FOR 1975 Planned 1972 1973 1975 Machine Building 27.8 29.1 29.4 Food Industry 15.7 15.1 15.4 Light Industry 14.6 14.8 12.9 Chemicals 10.6 10.9 13.0 Ferrous Metallurgy 8.2 8.0 7.8 Lumber/Furniture 5.7 5.4 4.4 Fuels 4.5 4.2 4.3 Construction Materials 3.4 3.2 3.5 Non-Ferrous Metallurgy 2.6 2.5 2.8 Other 6.9 6.8 6.5 TOTAL 100.0 10(.0 100.0 Source: Annual Statistic al Republicii Socialiste Romania and Law for the Adoption of the Five-Year Plan for 1971-75. - 49 - 8.08 In the engineering and metalworking branch priority is given to the development of more sophisticated technical products, to satisfy growing do- mestic needs and to develop exports. Target annual growth rates for illus- trative products in this branch are: precision instruments, 34 percent; machine tools, 32 percent; electronic equipment, 27 percent. Increasing attention is given to science-based industries which heretofore relied partly on foreign licensing agreements. Future development in this field will in part be undertaken in cooperation with foreign partners who will provide technology, financing and some market outlets for Romanian exports. 8.09 The targets laid out in the Plan for major products include produc- tion of between 9.4 and 9.7 million tons of steel. Production in 1973 was 8.2 million tons. The five year plan also specifies an increase in alloy steels and other high quality steel end products. Production of alloyed steel is planned to grow to about one million tons by the end of 1975. Production of tractors will reach 50,000 pieces in 1975 as compared to an initial target for that year of 37-39,000. Most of this production is destined for export. Two important products for which the 1975 targets are ambitious relative to current production levels are chemical fertilizers and cement. For fertilizers, the Plan calls for production of between 2.6-2.7 million tons active substance by 1975, more than double the level of production in 1973. For cement, the Plan calls for production of 15.0-16.5 million tons in 1975, while production in 1973 was 9.8 million tons. Agriculture 8.10 In agriculture, the plan for 1971-75 called for a growth in global production which -- under normal conditions -- would exceed by 6.3-8.3 percent the average annual production levels achieved during the plan for 1966-70. Average annual growth in agricultural production during 1966-70 was 2.0 per- cent, while for the first three years of the present plan the average was 9.5 percent. These averages, however, conceal considerable fluctuations in the growth in production. The plan targets, together with achievements in 1973, for the major items of agricultural production are given in Table VIII-3 below. For meat production, the figure for 1975 is likely to significantly exceed the target for that year since it was already equalled by production achieved in 1973. - 50 - Table VIII-3: PLAN TARGETS FOR MAJOR AGRICULTURAL PRODUCTS Achieved Annual Plan 5-Year Plan 1973 1974 1975 Grains (mill. tons) 13.8 18.5 16.3 - 17.5 Sugarbeet (mill. tons) 4.4 7.4 4.8 - 4.9 Fruits (mill. tons) 2.5 3.4 3.2 - 3.5 Vegetables (mill. tons) 2.8 3.9 3.6 - 3.9 Meat (mill. tons) 1.9 2.0 1.7 - 1.9 Source: Law for the Adoption of the Annual Plan for 1974 and of the Five- Year Plan for 1971-75; and Agerpress. 8.11 Investments in agriculture during the 1971-75 period, which are planned to increase some 60 percent over investment in the plan for 1966-70, are concentrated heavily on irrigation, land reclamation and drainage. Invest- ments in the latter planned for 1975 account for 45 percent of total invest- ments in agriculture in that year. The total area to be brought under irriga- tion by 1975 is planned to exceed 2 million hectares, which would equal about 21 percent of Romania's arable land. To achieve this goal will require a major effort. In the years 1974-75 it is planned to add 750,000 hectares of new irrigated land. Continuing investments are also planned in agricultural mechanization. It is planned to have a tractor fleet of between 118,000 and 120,000 by 1975, which is well within reach since the fleet in 1973 was 116,500, having increased by about 1,000 pieces a year. Achievement of the plan goal would imply one tractor for each 88 hectares of arable land (in- cluding vineyards and orchards) in 1975, as against one per 91 hectares in 1970. The number of self-propelled combines is to reach about 12,000 by 1975 as against 1,300 in 1970. 8.12 The plan for 1971-75 also stresses the need for increasing the appli- cation of chemical fertilizers, setting ambitious targets for this relative to domestic production possibilities. The plan contains a target for fertilizer application of between 1.9-2.1 million tons active substance in 1975. Fertilizer application in 1973 was 714.6 thousand tons active substance, a little more than half the amount planned for that year. These shortfalls, partly due to delays in developing production capacities in fertilizers, are well recognized by the authorities and major investments are being made (including those partly fi- nanced by the IBRD) to rapidly expand domestic supplies of fertilizers. Energy 8.13 As described in Chapter V, the development of Romania's energy re- sources was given high priority in the present plan, an emphasis whic!i has br!en heightened by the recent world energy situation. Almost one quarter of indu's- trial investment planned for the period 1971-75 is allocated to fuel and Doovl' development. This includes investments in hydro- and thermal power developmtlr_.- - 51 - and extraction of natural gas, crude oil, coal, lignite and uranium. Following the decree of November 1973, which called for strict measures to conserve energy use and to accelerate the development of primary energy resources, there may be some changes in production and use levels initially envisaged in the Five-Year Plan. Production of electrical energy, for example, may be slightly less than planned on account of savings measures instituted by the decree. The Plan targets for electrical energy production in 1975 are 58,000-60,800 GWh (46,779 GWH) was achieved in 1973), while for natural gas (methane) the Plan is for 25.5-26.8 billion m3 extracted, against 23.6 billion m3 extracted in 1973. Domestic extraction of crude oil, in the absence of major new findings, will probably stabilize around 14 million tons in 1975. Production of coal and lignite is expected to increase following recent new investments in this sector. The Plan target for 1975 is for a total of 37.0-38.5 million tons extracted. Its achievement would imply an increase of 39-44 percent over the actual level of production in 1973. Other Sectors 8.14 The growing volume of agricultural production, the development of industry and the requirements of trade and tourism have all imposed the need for extension and improvements in transport and communications. Investments in the latter sector during 1971-75, which equalled 11 percent of total invest- ments, were planned to increase 60 percent over the investment in the previous plan period. The major programs include electrification of the rail system, the reconditioning and modernization of 2000-2100 kms of high density highways, the completion of the Bucharest-Pitesti freeway and the expansion of traffic capacity on the national highway from Bucharest to the Black Sea coast. Im- provements are also being made in the river and sea transportation systems. 8.15 In the social sphere, achievements during the period 1971--75 will provide for a growth in real personal incomes in excess of 40-46 percent, an expansion of employment in the state sector by about 1.3 million new jobs and an expansion of state expenditures on education, health and welfare by about 43 percent (equal to about 35 percent increase on a per capita basis). In accordance with the growth in incomes, the plan allows for an increase in retail trade by 40-47 percent over 1970, and in the provision of services to the population by 55-61 percent. Increasing emphasis has been laid on diversifying the range of consumer goods and improving product quality. In the field of residential construction the Plan called for the construietion of 522,000 residential units, i.e. an average of about 105,000 a year. In the first three years of the Plan an average of about 149,000 apartments was constructed annually. This illustrates the investment effort undertaken to meet the infrastructural needs of a rapidly expanding industrial labor force. - 52 - The Five-Year Plan for 1976-80 8.16 The elaboration of the draft Five-Year Plan for 1976-80 is now in progress. The draft outlines, or "directives" as they are called, 1/ have been published and will be submitted to the XIth Congress of the Romanian Communist Party in November this year. A summary of the main indicators in the draft is given in Table VIII-4 below. Some salient features of the direct- ives are the following: (a) The basic strategy of high investment, rapid industrialization based on the growth in heavy industry will remain unchanged. A similar division of the national income between investment and consumption as in the present Five-Year Plan will be main- tained. Investments in 1976-80 will be some 70 percent greater than in 1971-75. A positive effort is to be made in ensuring an increase in the efficiency of investment and an avoidance of creating excess capacities. The plan will stipulate that invest- ments in production can only be made if the production targets set;cannot be met by the fuller use of existing capacities. (b) Energy development will be particularly stressed. This will involve both the continued development of the electrical energy system (power output is expected to reach 75-80 GWh by 1980, a growth of 7.0-8.0 percent a year over the levels achieved in 1973), and the development of primary energy resources througlh exploration and technological advance. The Plan will stipulate, among other measures in this sphere, the exploitation of bitu- minous slhale for use as fuel in power generation. (c) In agriculture, the Plan will provide for continued investments designed to raise productivity commensurate with the increasing decline in the labor force employed in agriculture, expected to be less than 30 percent by 1980. Also in that year the program of agricultural mechanization is to be substantially completed for all major crops and the hope is to have succeeded in bringing some 3 million hectares of land under irrigation, i.e. about 60 percent of the feasible potential. In the 1976-80 Plan, investments in irrigation, drainage and land reclamation will probably exceed the 40 percent of total agricultural investment. The cropping pattern is to continue to rely on maize and wheat as the major cereals. T'. the livestock sector priority will be given to cattle and sheep breeding. 1/ The full name is The Directives to the XIth Congress of the Romanian Communist Party relating to the Five-Year Plan 1976-80. - 53 - Table VIII-4: PRINCIPAL INDICATORS OF THE FIVE-YEAR PLAN 1976-80 Annual Average 1980 Targets % Increase 1975 = 100 1976 - 1980 Social product 147 - 154 8- 9 National income 154 - 161 9 - 10 Gross industrial output 154 - 161 9 - 10 Gross agricultural output (annual average for five-year period) 125 - 134 4.6 - 6.0 Total investments (five-year period) 165 - 172 10.5 - 11.4 Foreign trade volume (five-year period) 172 - 172 11.5 - 12.5 Employment 116 - 119 3 - 3.5 Labor productivity (with present working week): - in industry 138 - 142 6.7 - 7.2 - in building-assembly 150 - 156 8.4 - 9.4 - in railway transport 120 - 126 3.7 - 4.8 Total real incomes of population 135 - 137 6.2 - 6.5 Remuneration fund 151 - 155 8.6 - 9.2 Real remuneration * 118 - 120 3.4 - 3.7 Real incomes of peasantry per active person, deriving from work in agri- cultural production cooperatives and individual farmsteads 120 - 125 3.7 - 4.6 Volume of goods retail sales 140 - 145 7.0 - 7.7 Source: Draft Directives for the XIth Congress of the RCP concerning the Five-Year Plan 1976-80. 8.17 Other aspects of the plan include the development of bulk transporta- tion, with special emphasis on electrification of the rail system and improve- ment of inland waterways; a continuation of research and development and the infusion of new technologies; continued emphasis on manpower training and in- creasing the standard of living, particularly in less developed regions. Conclusions 8.18 Achievements in recent years have shown that Romania has been success- ful in pursuing rapid economic growth. Also, it is apparent that there is con- siderable potential for further growtlh. The organization of economic management and the rigorous elaboration and execution of development plans have in the past ensured high rates of domestic saving and capital formation. While these trends continue, the recent emphasis has been on increasing the efficiency of investments, expanding the technological base and striving to make Romanian products more competitive internationally, on grounds of quality. Recent - 54 - changes in the system of pricing traded goods will have an important effect on achieving this objective. 8.19 Romania has a relatively rich resource endowment. In the energy sector future plans will continue to exploit existing crude oil deposits and as yet untapped sources of hydro power, lignite, geothermal energy and uranium. In addition, the substantial reserves of natural gas provide a strong base for the further development of the petrochemical sector in industry. While some inputs to heavy industry (e.g. crude oil, ores and coal) have to be imported in large quantities, the country's growing strength in the export sector should, with some qualifications, continue to allow for a growing expansion of imports needed for industrial growth. In terms of human resources, the present labor reserve in agriculture will provide the absolute numbers of workers required for the growth in industry and plans exist for training this manpower and for a regional placement of industry in line with labor supplies. 8.20 In a period of its history when Romania is building a transition in its economic system to enhance the role of quality, efficiency and competitive- ness in production decisions, the country's major development need is a con- tinued infusion of new technologies and know-how which would raise the level of domestic productivity. This is most specific to industry but it refers conjointly to agriculture. The place of agriculture is of key importance to Romania's development because, apart from the domestic needs for agricultural advance, the country still remains heavily dependent on agricultural commodi- ties and foodstuffs to earn convertible currencies needed to buy some of the new technologies for industry. Agriculture, however, continues to be a rela- tively low productivity sector at present, with output growth often inter- rupted by Romania's erratic weather conditions. For this reason (as testified by the current development plans) the development of an improved infrastruc- ture and increased modernization in the sector is of equal importance to the pursuit of modern industry. 8.21 With regard to Romania's external financing needs, no major change has been brought about as a result of recent changes in oil and other commo- dity prices. The marginal positive balance shown by the projections made in this report, while beneficial to the balance of payments, will unlikely be sufficient to alleviate Romania's trading on credit for some share of her import needs. In this light, the Romanian authorities are following the policy of attempting to improve the structure of these credits by expanding those taken on long term while minimizing the use of short term credits. Funds available from the IBRD are at present one of the major sources of long-term finance available to Romania. STATISTICAL APPENDIX AREA, POPULATION, EMPLOYMENT Table 1.1: Total Area by Land Use Table 1.2: Total Population by Age and Sex Table 1.3: Distribution of Population Between Rural and Urban Areas and Growth of Urban Population Table 1.4: Principal Demographic Indicators Table 1.5: The Structure and Growth in the Labor Force by Sector of Activity NATIONAL ACCOUNTS Table 2.1: Gross Social Product, Gross Domestic Product and Nati.onal Income by Industrial Origin Table 2.2: Total Investment in the Economy Table 2.3: Financing of Investment in the Romanian Economy Table 2.4: Main Indicators of the Five Year Plan Table 2.5: The Structure and Evolution of Fixed Assets in the Major Sectors FOREIGN TRADE AND BALANCE OF PAYMENTS Table 3.1: Import and Exports by Country of Destination Table 3.2: Commodity Composition of Imports and Exports Table 3.3: Structure of Imports and Exports by End Use Table 3.4: Exports of Romania by Group of Countries and by Group of Commodities Table 3.5: Imports of Romania by Group of Countries and by Group of Commodities Table 3.6: Romanian Trade with CMEA Countries in 1973 Table 3.7: Romanian Trade with Other Socialist Countries Table 3.8: Rormanian Trade with Developed Market Economies in 1973 Table 3.9: Romanian Trade with Other Countries Table 3.10: Tourism - Major Indicators PUBLIC FINANCE Table 5.1: Revenue and Expenditure of the State Budget AGRICULTURE Table 701: Agricultural Area by Type of Ownership Table 7.2: Agricultural Production Table 7.3: Production of Major Crops Table 7.4: Livestock Production Table 7e5: Comparative Indicators of Development of State Agricultural Enterprises (IAS) and Co-Operatives (CAP) STATISTICAL APPENDIX INDUSTRY Table 8.1: Structure of Gross Industrial Production by Branch Table 8.2: Sector Allocation of Industrial Investment Table 8.3: Electricity, Installed Capacity, Output, Consumption Table 8.4: Transportation of Goods Table 8.5: Passenger Traffic PRICES AND INCOMES Teble 9.1: Retail Price Index, Socialist Trade Table 9.2: Average Monthly Wages by Sectors Table 9.3: Income Distribution of Salary and Wage Earners 3OCIAL INDICATORS Table 10.1: Education Indicators Table 10.2: Vocational School by Branches Table 10.3: Health Indicators Table 10.4: Construction of Apartments REGIONAL DEVELOPMENT Table 11.1: Distribution of Population in Urban and Rural Areas by Judets in 1972 Table 11.2: Indicators of Regional Development by Judets Table 11.3: The Structure of Regional Investment by Judets Table 1.1: TOTAL AREA BY LAND USE, 1960, 1965, 1971 and 1973 1960 1965 1971 1973 1973/1960 Thousand Percent Thousand Percent Thousand Percent Thousand Percent Growth Hectares Hectares Hectares Hectares (Percent) TOTAL AREA 23,750.0 100.0 23,750.0 100.0 23,750.0 100.0 23,750.0 100.0 0.0 of which: (a) Arable Land 9,820.7 41.4 9,814.2 41.3 9,728.3 41.0 9,657.9 40.7 - 1.7 (b) Pastures 2,814.0 11.8 2,945.2 12.4 3,007.1 12.7 3,047.1 12.8 8.3 (c) Meadows 1,386.6 5.8 1,370.9 5.8 1,421.5 6.o 1,431.1 6.0 3.7 (d) Vineyards 311.0 1.3 312.4 1.3 344.9 1.4 334.6 1.4 7.6 (e) Orchards 214.3 0.9 348.7 1.5 433.5 1.8 432.9 1.8 102.0 Agricultural Land 14,546.6 61.2 14,791.4 62,3 14,935.3 62.9 14,903.6 62.7 2.5 (a - e) Forest Land 6,403.3 27.0 6,378.4 26.8 6,313.3 26.6 6,309.2 26.6 1.5 Other 2,800.1 11.8 2,580.2 10.9 2,501.4 10.5 2,537.2 10.7 9.4 Source: Anuarul Statistic Al Republicii Socialiste Romania. Table 1.2: TOTAL POPULATION BY AGE AND SEX, 1956, 1966 AND 1970-73 GROWTH RATES 1956 1966 1970 1971 1972 1973 1956-66 1966-70 1970-73 (Percent Per Annum) TOTAL POPULATION (000) 17,489 19,103 20,253 20,470 20,663 20,828 0.9 1.5 0.9 Male 8,503 9,351 9,945 10,057 10,157 10,244 1.0 1.5 1.0 Female 8,986 9,752 10,308 10,413 10,506 10,584 o.8 1.4 0.9 (Percentage Males) 48.6 49.0 49.1 49.1 49.2 49.2 AGE STRUCTURE Total Population 100.0 100.0 100.0 100.0 100.0 100.0 Under 15 years 27.5 26.0 25.9 25.6 25.4 25.2 15 - 64 years 66.1 66.1 65.5 65.6 65.6 65.6 Over 64 years 6.4 7.9 8.6 8.8 9.0 9.2 Male Population 100.0 100.0 100.0 100.0 100.0 100.0 Under 15 years 28.8 27.2 27.0 26.7 26.4 26.2 15 - 64 years 65.8 66.1 65.5 65.6 65.7 65.7 Over 64 years 5.4 6.7 7.5 7.7 7.9 8.1 Female 100.0 100.0 100.0 100.0 100.0 100.0 Under 15 years 26.3 2h 9 24.9 24.6 24.4 24.2 15 - 64 years 66.4 66 1 65.4 65.5 65.5 65.5 Over 64 years 7.3 9.0 9.7 9.9 10.1 10.3 Dependency Ratio Total 51.3 51.3 52.7 52.5 52.4 52.4 Male 52.1 51.3 52.6 52-3 52.2 52.1 Female 50.6 51.4 52.8 52.6 52.6 52.6 Source; Anuarul Statistic al Republicii Socialiste Romania. Table 1.3 : DISTRIBUTION OF POPULATION BETWEEN RURAL AND URBAN AREAS AND GROWTH OF URBAN POPULATION 1956, 1966, 1970 and 1973 Growth Rates 1956 1966 1970 1973 1956-66 1966-70 1970-73 (percent per-annum) Total Population (thous) 17,489 19,103 20,253 20,828 0.9 1.5 0.9 of which: Urban 5,474 7,306 8,258 8,761 2.9 3.1 2.0 Rural 12,015 11,797 11,995 12,067 -0.5 0.2 0.1 .-,ructure: Total 100.0 100.0 100.0 100.0 Urban 31.3 38.2 40.8 42.1 Rural 68.7 61.8 59.2 57.9 Ratio of Growth in Urban Population/Total Population 3.22 2.07 2.22 Source: Anuarul Statistic Al Republicii Socialiste Romania. Table 1 .4 PRINCIPAL DEMOGRAPHIC INDICATORS 1960-73 1960 1965 1970 1971 1972 1973 Crude Birth Rate (Per 1000) 19.1 14.6 21.1 19.5 18.8 18.2 Crude Death Rate (Per 1000) 8.7 8.6 9.5 9.5 9.2 9.8 Natural Increase (Per l0UU) 10.4 6.0 11.6 10.0 9.6 8.4 Infant Mrtality (Per 1000 live birth) 74.6 44.1 49.4 42.4 40.o 38.1 Marriages (Per 1000) 10.7 8.6 7.2 7.3 7.6 8.2 Divorces (Per 1000) 2.01 1.94 0.39 0.47 0.54 0.69 Structure of Age Specific Fertility Live Births to Mothers: All Ages 100.0 100.0 100.0 100.0 100.0 100.0 Under 25 years 48.5 47.6 48.4 51.4 53.6 55.7 25 - 39 years 49.4 50.1 49.0 46.0 43.9 42.1 Over 39 years 2.1 2.3 2.6 2.6 2.5 2.2 Source: Annual Statistic Al Republicii Socialiste Romania. Table 1.5 : THE STRUCTURE AND GROWTH IN THE LABOR FORCE BY SECTOR OF ACTIVITY 1960-1965-1970 and 1973 TOTAL LABOR FORCE (000) STRUCTURE GROWTH RATES 1960 1965 1970 1973 1960 1965 1970 1973 1960-65 1965-70 1970-73 TOTAL LABOR FORCE 9.537.7 9,684.0 9,875.0 10,020.6 100.0 100.0 100.0 100.0 0.3 004 0.5 Industry 1,440.2 1,862.9 2,276.8 2,797.6 15.1 19.2 23.0 27.9 5.3 4.1 7.1 Construction 470.5 609.3 768.2 826.2 4.9 6.3 7.8 8.2 5.3 4.7 2.5 Agriculture & forestry 6,250.4 5,495.3 4,868.3 4,229.3 65.6 56.7 49.3 42.2 -2.5 -2.4 -4.6 Services & other 1,376.6 1,716.5 1,961.7 2,167.5 14.4 17.8 19.9 21.7 4.5 2.7 3.7 PARTICIPATION RATES /2 TOTAL 51.6 50.7 48.5 47.9 MALE 56.6 54.8 53.4 53.9 FEMALE 46.8 46.8 43.7 42.1 /1 Active population. 72 Ratio of total labor force to total population. Source: Annuarul Statistic Table 2-1: SOCIAL PRODUCT, ':TI(7T1TCEL INCOME AND GROSS DOMESTIC PRODUCT BYf INDUSTRIAL ORIGIN 1970-73 Current Prices Structure Growth Rates 1970 1971 1972 1973 1970 1973 1965-70 1970-73 (million lei) (Annual % Change) Gross Social Productl/ 518.2 576.0 634.1 701.2 100.0 100.0 8.7 10.6 Agriculture and Forestry 16.8 16.4 2.0 9. Industry2/ and Mining 61.8 62.8 11.5 12.1 Construction 10.1 9.0 10.7 6.6 Transport and Telecommunications 4.6 4.4 8.7 8.1 Other 6.7 7.4 n.a. n.a. National Income1/ 209.9 236.7 260.9 289.0 100.0 100.0 7.7 11.3 Agriculture and Forestrry 19.2 19.0 -0.5 9** Industry2/ and Mining 58.L 58.1 12.8 13.8 Construction 9.7 8.1 12.0 6.2 Transport and Telecomunnications 6.0 5.5 9.1 9.8 Other 7.5 9.2 n.a. n.a. Gross Domestic Product3/ n.a. 304.0 n.a. 362.0 1/ According to Romanian methodology. 2/ Includes Power. T/ Based on conversion of -.omanian National Income data to GDP as in the United lIations methodology. Source: General Directorate of Statistics Table 2.2: TOTAL INVESTMENT IN THE EOONOMY, 1966-73 (in billions of 1963 lei) 1966 1970 1971 1972 1971 1972 193 Industry 27.0 41.5 47.2 53.7 45.9 52.3 58.L (Producer goods) (21.6) (32.1;1 (36.0) (41.8) (35.6) (41.3) (45.3) (Consumer goods) ( 3.3) ( 5.8) ( 6.9) ( 7.5) ( 6.1) ( 6.7) (9.0) (Construction) ( 2.1) ( 3.6) ( 4.3) ( 4.4) ( 4.2) ( 4.3) (4.1) Agriculture /1 7.9 12.8 14.2 14.5 10.7 10.6 10.6 Transportation /2 5.4 8.5 8.9 9.7 8.7 9.4 10.0 Housing 5.7 8.2 8.3 8.8 2.5 2.7 3.6 Social sectors /2 3.7 5.5 565 6.5 4.3 4.9 4.9 Trade 1.3 2.8 3.5 3.6 2.8 2.8 2.6 Other /4 0.6 0.7 o.8 0.7 0.8 0.7 0.9 Total Investment 51.6 80.0 88.4 97.5 75.7 83.4 91.0 of which: Buildings 25.3 39.9 44.0 47.2 Equipment 18.1 30.1 33.3 38.6 Other 8.2 10.0 11.1 11.7 /1 Includes forestry. 7f Includes telecommunication. a Education, health, culture, municipal services. Mostly administration. Source: Anuarul Statistic al Republicii Socialste Romania Table 2.3: FINANCING OF INVESTMENT IN THE ROMANIAN ECONOMY, 1966-73 (in billions of 1963 lei) 1966 1970 1971 1292 1973 1. State sector investments 46.o 69.8 76.9 86.1 93.7 2. Gooperative sector investments 3.2 5.0 5.7 5.6 5.5 3. (1 / 2) Socialist sector investment 49.2 74.8 82.6 91.7 99.2 4. Own investments of population 2.4 5.2 5.8 5.8 6.5 5. (3 / 4) Total investment 51.6 80.0 88.4 97.5 105.7 Financed by 6. Centralized state funds 44.9 68.2 75.7 83.4 91.9 7. Of which: State Budget (28.8) (30.3) (33.7) (37.8) 40.7 8. Depreciation funds (13.9) (23.5) (26.5) (28.7) 30.6 9. Retained benefits ( - ) (10.2) (11.0) (13.9) 14.6 10. Bank credits ( 3 ) (3.1) ( 2.0) ( 1.9) 1.8 11. Other sources ( 2.2) ( 1.0) ( 205) ( 1.3) 3.5 12. Non-centralized state funds 1.2 2.9 2.8 4e. 4.1 13. Cooperative organizations funds 2.8 3.3 3.7 3.7 3.7 14. Self-financing of the population 2.7 5.6 6.2 6.3 6.9 15. (6 f 12 / 13 f 14) Total Finance 51.6 80.0
Groupe de la Banque mondiale · Pre-2003 Economic or Sector Report
Romania - Current economic position and prospects (Vol. 1 of 3) : Main report
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Pre-2003 Economic or Sector Report
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