EBRD issues guidelines to Romania

BUCHAREST (Reuters) – Romania needs to reform its rigid labor market, increase transparency and fight corruption to attract foreign direct investment once large-scale privatization is over, the EBRD said. In its latest strategy for Romania, the European Bank for Reconstruction and Development (EBRD) said on Wednesday the Black Sea country, which hopes to join the EU next year, must also tighten economic policies and make them credible. «The business climate needs to further improve in order to attract much-needed larger FDI inflows, which are expected to slow down once current large privatizations come to an end,» the EBRD stated. «Efforts to ensure a stable and more transparent regulatory system must be increased,» it added. Preliminary central bank data showed that foreign direct investment was 5.19 billion euros last year, compared with 5.18 billion euros in 2004. The data do not include around 2.23 billion euros which Romania expects from Austria’s Erste Bank that bought Banca Comerciala Romana (BCR), the biggest bank, in December and which is due to be paid in the first half of this year. The EBRD said the centrist government needs to cut social security contributions and scrap mandatory features included in collective labor contracts, introduced under pressure from trade unions, to make the labor market more flexible. It also said the government needs to raise gas prices to bring them in line with international tariffs, estimating that Romanian gas was 70 percent cheaper than world gas prices. The EBRD added it will continue to support the privatization of the energy sector, focusing on the power generation plants of Rovinari, Turceni and Craiova, whose sale is set for this year. It also said it will focus on greenfield projects with foreign investors, particularly in the forestry, food processing and dairy sectors.

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