For anyone watching the evolution of news headlines during the prior two-to-three years, one characteristic has changed markedly. This is transition from mention of projects, business deals, and revenues once described in Millions of Dollars or Euros to ones now described in the Billions.
This is a sign, albeit unscientific, of a step change in the evolution of the national economy to a new, more mature stage of development. Below are some examples:
- The two largest super stores, Carrefour and Metro, together count $1 billion in revenues from a position of minimal sales just six or seven years ago. Carrefour reported an increase in sales of 64% in just one year in 2005.
- Two real estate projects are announced with investment scales measured in $1 billion plus figures. One is underway at Baneasa (see interview)where a verdant landscape along the road to Otopeni has been obliterated to make way for large (but not so beautiful) mega-stores to be followed by offices and housing. Another project, equal in scale, is proposed for central Bucharest east of Piata Unirii to be developed by TriGranit Development Co.
- The controversial and co-called 'Bechtel' cross-Transylvania highway is being financed by the government in a renegotiated contract at a price tag estimated at $4.4 billion. This is part of a much larger $7.8 billion road construction (265 km of highways, 1900 km of secondary, and 2 ring-roads) effort aimed for completion by 2008.
- Vodafone (Canada) acquired 99% of MobiFon (Connex) for an amount in excess of $2 billion in a package deal that included Oskar Mobil (Czech Republic) totalling $3.5 billion. Connex counts in excess of 6 million subscribers.
- The Mayor of Bucharest has announced plans for fundamental infrastructure improvements estimated to cost $6 billion. A $1 billion is proposed for a city to airport subway financed by Japanese loans with the project to start in 2007.(more)
- Nationally owned Petrom sold a 51% share to OMV (Austria) for $1.75 billion (more). The two largest domestic oil companies, Petrom (privatized) and RomPetrol, count annual revenues in excess of $2 billion each. [RomPetrol: $2.1 billion in 2005 or 40% more than the prior year; Petrom $3.0 billion in 2005 or 24% more than the prior year.
- The Renault owned 'Dacia' car operations will generate a reported $1.8 billion in sales with an estimated 200,000 'Logan' models to be produced, half for export. Unit sales in the domestic car market increased by 40% in 2005. Local production and imports of vehicles totalled $4.1 billion.
- The largest bank privatization deal of the Romanian Commercial Bank was settled with the government's sale of its 61% portion to Erste Bank of Austria for $3.75 billion. BCR itself has an estimated asset value of $9 billion and 4.9 million clients. (more)
- The anticipated entry of Romania into the EU family of nations brings with it an ancipated flow of EU money variously quoted in amounts above or below $31.5 billion in the first seven years of membership. That equals more than $4 billion per year. (more)
- Plans are in discussion for the 1,360 km (780 miles) Constanta to Trieste pipeline estimated to cost $2.2 to $4.6 billion ($1 to $2.1 being Romania's share). The pipeline would transport 112 million tons of oil from the Black Sea Port to Western European markets. Earnings for Romania over 20 years are estimated at $4 billion. (more)
The psychological impact of these numbers can be summarized colloquially: "They get your attention." But more, importantly, they imply fundamental changes in the culture and economy.
What are the implications?
First is the underlying confidence these varied billion dollar events show in the economy. Major players are making big investments based on a measure of the risk and return. This suggests a growing maturity in the financial community (banking) and the ability of the government to stabilize its own monetary affairs.
Second, each of these billion dollar events will have what's termed as a multiplier effect. By this is meant recirculation of these investments into the local economy through purchase of goods, payments of taxes, and secondary investments such as house construction or small business start-ups and expansion. Roughly put this means that a new $1 dollar entering the economic system may generate two, three or four times that impact.
And thirdly, these deals because they are large and complex will all require professional management know-how. This means on one hand that talented young Romanians are entering much more sophisticated professional ranks and, on the other hand, that these large investor entities are prepared to transfer management know-how into the domestic culture. This will not only have beneficial impacts on the vitality of the Romanian economy but will also put competitive pressure on establishments to raise salaries in order to attract and retain highly qualified individuals. A by-product of such a trend is to make Romania attractive to many young people who may have emigrated in search of higher education and employement opportunities - or to others considering the choice.
Copyright © D. Dimancescu, Cambridge, MA.