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Romania Faces EU Holdups, but IT Investment Continues

February 15, 2004

By Christopher Deliso

Blaming the government of Adrian Nastase for failing to complete reforms in the judiciary system and the state administration, the EU Enlargement Commission is threatening to suspend aid to Romania. According to the Sofia Morning News, Baroness Emma Nicholson, the EP’s rapporteur for Romania, blamed the existing delay on Romania’s “…administrative incapacity of implementing all the laws it had already adopted.”

The suspension of pre-entry negotiations with Romania could leave the country deprived of a plump financial package for 2007-2009; it and neighbor Bulgaria could receive 9 billion euro of EU assistance between 2007 and 2010, according to the EU Observer.

The successful passage of the package, which would allow Bulgaria and Romania to conclude EU negotiations by early 2005, earmarks over 6 billion euro for Romania and the rest to Bulgaria. The package “…includes regional and farm subsidies for the first three years of EU membership.” Besides the 9 billion euro total, an additional 15.4 billion euro in “commitments” is being promised.

The EU states that Romania could receive 2.4 billion euro in aid for rural development over the next three years, and up to 6 billion euro for 2007-2009.

This, therefore, is Brussels’ dangling carrot. Yet it has other objections in addition to administrative reform shortcomings. By allowing the adoption of Romanian children abroad, the country has raised the ire of the EU and European Commission. Most objectionable, however, is the allegation of cronyism and non-competitive practices with foreign contractors.

The San Francisco Chronicle reported on Wednesday that hometown giant Bechtel, prime recipient of a $2.5 billion contract for highway development, won its contract without a proper bidding process. Bechtel, which faced a similar charge last year in regard to an Iraqi reconstruction contract, insists there was no wrongdoing on its part.

The highway, which will run from Brasov to the Hungarian border, is being built in cooperation with the Turkish company Enka. Viewed as an essential lifeline from the Black Sea to the West, the planned four-lane highway will be “…the largest new road project in Europe, according to Bechtel.”

However, since the Romanians handed down the contract in December without a competitive tender, the EU is displeased with this apparent ignorance of the union’s competitiveness agreement. Reports the paper, “…Romania won’t be obliged to follow the agreement until it joins the EU, something that won’t happen until 2007 at the earliest. But for now, the highway contract award has created friction, with the commission questioning whether Romania has backed away from its commitment to competition.”

Nevertheless, such practices are common to Balkan governments, and Romania’s success will not depend on its politicians’ intentions. The fact that it is a politically stable, non-threatened country of 20 million makes it one of the most attractive FDI destinations in the region. The formerly Communist state has already attracted significant foreign investment in several major sectors. And its unabashed support for American military adventures in Iraq meant that it has come under the Godfather’s protection. Just this week, US officials arrived in Romania on a “scouting” trip, to see if they will in fact move some of their military bases there from Germany and other places.

Apparently, Germany’s “…strict environmental regulations have made it difficult for the U.S. military to find places to train, and the distance from future flash points in Central Asia and Africa are considerable.” Romania- not in the EU yet- can oblige with easier environmental regulations.

One of the strongest sectors for foreign investment is IT. Romania has a talented young pool of IT workers (as is seen by the bizarre commonality of Romanian computer hacking). Besides, the race to the EU means that governments must be “wired” within two years. Microsoft entered the country last year as part of its new European strategy to profit from this policy.

Yesterday was announced a new contract with another foreign company having a similar impetus, Austria’s S&T. The company has signed on to expand a project which created new passports conforming to EU regulations. Now, the company plans to create “…forgery-proof resident’s cards for foreign nationals living in Romania, amounting to approximately 250,000 cards. The value of the project for S&T is somewhat in excess of EUR 5 million.”

The company will accomplish this in tandem with “Bundesdruckerei International Service GmbH” (BIS), a subsidiary of Berlin-based Bundesdruckerei GmbH, and the prime contractor to the Romanian Government:

“…S&T has project responsibility for the communications and data processing infrastructure including the maintenance of the entire system. S&T has planned, designed, will install and configure the necessary hardware and software at the 43 local offices of the Interior Ministry, and protect the ministry’s network with a firewall, anti-virus software and a finger-scan against unauthorised access. The communications infrastructure such as the e-mail system and the network technology will also be supplied and implemented by S&T. S&T will use technology from renowned manufacturers such as Checkpoint, HP, Microsoft and others. In addition, S&T will train ministry employees in the use of the new system and operate a support hotline.

As the data involved is highly sensitive, the main emphasis will be on data security and the identification of the designated ministry staff who are authorised to use the system. Data may only be accessed when employees have identified themselves by means of fingerprints which have already been stored on a central database.”

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