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R Econ -- Romania begins landmark privatisation process

  • Radu Busneag

Bucharest, 10 April 1997 (RFE/RL) -- This week marks some major steps in the drive by Romania's center right government to revitalise the country's economy.

Today the parliament in Bucharest opens debate on the budget, a centerpiece of the national reform effort, and yesterday the government signed a letter of intent with the International Monetary Fund for an anticipated 400 million dollar loan to support reforms.

Parliament is also preparing to consider another key piece of legislation, the draft bill on state bank privatisation sent forward by the government on Monday. This is the first step in the governmen't plan to free three-quarters of the banking system from state control.

RFE/RL's economic correspondent in Bucharest reports that under the draft, 90 per cent of the shares of each of the banks to be privatised will be offered for sale to Romanian or foreign investors. The remaining 10 per cent will be retained by the State Property Fund. Buyers will be able to pay in the national currency, the leu, or in any hard currency. No one will be allowed to acquire more than 20 per cent of the shares of a single bank, except leading international banks or international financial institutions.

The draft, sent forward by reform minister Ulm Spineanu, specifies that the acquisition of more than 5 per cent of the shares of any one bank must be expressly approved by the central bank of Romania. Romanian banks are forbidden to grant loans to an investor in order to buy bank shares. The draft also says that money for the shares must be paid in full immediately, with the lei funds going to the budget and the hard currency to the national reserve.

Spineanu said the first state bank to be privatised will be the Romanian Bank for Development. The other leading state banks to be sold are the Romanian Commercial Bank, BANCOREX and the Agricultural Bank. The president of the Romanian Bank Association, Constantin Duna, told RFE/RL that these four banks control over 75 per cent of the banking operations in Romania.

The exact privatisation methods will have to be established on a case by case basis, by a seven-member commission named by the government. Each commission will be assisted by a specialised company, whose task will be to elaborate an evaluation report and feasibility study. The commission members will not be allowed to buy bank shares at their assigned bank for three years after their mandate expires, and also they will not be able to take up any leading position in any Romanian bank for the same period.

The Romanian Senate has already signalled that it will begin debate on the bank privatisation bill next Monday. Our correspondent quotes senators from the government coalition as saying that the text may be approved the same day, mainly because of the comforatable majority of the coalition in power. The bill must also be adopted by the Chamber of Deputies, and after that, approved by President Emil Constantinescu. Minister Spineanu expressed hope the whole process will be completed by the end of this month.

Bank privatisation is another of the sweeping moves towards a full market economy undertaken by the present government since it came to power in November. So far it has liberalised energy and telecom prices, the foreign exchange market, and the money market, and has also cut the subsidies for basic food products.

Bank privatisation is one of the measures requested for years by the international financial institutions like the IMF. Previous, post-communist, Romanian governments were denied access to important loans for failing to implement, among other measures, this particular legislation.

The present government says it expects 1,000 million dollars in loans this year from the IMF, the World Bank and the European Union to ensure the success of its reform program.