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                     Key Economic Indicators
         (Million of U.S. dollars unless otherwise noted)

                                      1992      1993      1994

Income, Production and Employment:

Real GDP (billion 1992 lei)        5,982.3   6,060.0   6,181.2
Real GDP Growth (pct.)               -13.8       1.0       2.0
Nominal GDP (billion current lei)  5,982.3  19,737.2  50,000.0
Nominal GDP                       18,407.0  25,901.8  30,300.0
By Sector:  
  Industry                         8,227.3   9,505.9  12,784.0
  Agriculture/Forestry             3,477.5   5,568.7   7,990.0
  Construction                       803.0   2,590.1   1,053.9
  Transport/Telecommunication      1,176.9   1,295.1   1,663.4
  Trade/Tourism                    2,430.7   2,745.5   3,533.2
  Other Services                   2,291.6   4,196.5   3,275.5
Net Exports of Goods & Services     -1,588    -1,239      -300
Real GDP Per Capita (USD)              807     1,136     1,328
Labor Force (millions)                11.4      11.3      11.3
Unemployment (pct.)                    5.4       9.3      10.2

Money and Prices:

Lending Interest Rate (pct.)          39.1      56.7      88.7
Rate on Deposits (pct.)               29.7      34.3      72.5
Retail Inflation                     210.9     256.1      70.0
Official Exchange Rate (lei/USD)
    (annual average)                   325       762     1,652

Balance of Payments and Trade: 

Total Merchandise Exports            4,363     4,892     5,900
  Exports to U.S.                       84        39       144
Total Merchandise Imports            6,260     6,521     6,600
  Imports from U.S.                    223       202       220
Trade Balance                       -1,846    -1,631      -700
  Trade Balance with U.S.             -139      -163       -76
Aid from U.S.                         20.1      34.7      44.1
Aid from Other Countries             156       180       180
Debt Service Payments                185.9     369.2     958.1
Gold and FOREX Reserves Net (1)       44.0     315.0     951.5

(1) Total banking system net foreign assets; end of period. 

1.  General Policy Framework

    With a population of 22.8 Million, a highly educated labor
force, and substantial exploitable natural wealth, Romania
offers a potentially attractive market for U.S. trade and
investment.  For the next several years, however, Romania's 
economic performance -- and thus its demand for imports -- will
continue to be constrained by the slow pace of privatization
and the decline of its traditional heavy industries.

    In the years immediately following the December 1989
revolution, the Romanian economy was buffeted by the shock of
adjustment to international price levels (especially for energy
and raw materials), the elimination of the former central
planning apparatus, and the collapse of its traditional COMECON
markets.  From 1989 to 1992, Romania's GDP contracted by 29
percent; industrial production declined 38 percent; and output
in the transport and telecommunications sector fell 50
percent.  Exports dropped 60 percent (from $10.5 To $4.3
billion), limiting the country's ability to pay for much-needed
imports of fuel and capital goods.  More than one million
workers lost their jobs in the state sector and open
unemployment -- not seen for decades in Romania -- rose to
about 10 percent of the labor force.  Job-holders also suffered
as average monthly wages fell to around $115 per month -- about
one-half the pre-revolution level.

    The economy bottomed out in 1993 and may have grown by up
to 1.0 percent due to a 14-percent weather-related surge in
agricultural output and anemic growth in industry.  However,
declines continued to be registered in construction activity
and especially in services, where the growth of private retail
and service establishments failed to offset the continuing
decline in some consumer services and in goods and passenger
transport volume.

    Preliminary estimates for 1994 indicate that the economy
may have finally turned the corner, to achieve unambiguous
growth in most sectors.  The consensus is that the nation's GDP
will have grown by about 2.0 percent in 1994 due to an
anticipated 5-percent jump in agricultural production, the
small private sector's growth, a revival of building activity,
and a mild export-led recovery in industry.  However, the pace
of growth is unlikely to be sufficient to prevent a further
rise in unemployment, to perhaps 11 percent, by the end of 1994.

    Although Romania is committed to the development of a
market economy, state ownership of most means of production
continues five years after the overthrow of communism. 
Nevertheless, steady -- if slow -- progress toward
privatization is being made.  Ninety-six thousand square
kilometers of arable land have been returned to private farmers
(benefitting over 5 million individuals in the process), nearly
400,000 new private companies have been created, and some 850
state enterprises have been privatized through management and
employee buy-outs.  In September, 1994, the government
submitted its long-awaited mass privatization legislation to
the parliament, proposing the privatization of an additional
3,000 state-owned enterprises via a modified voucher system. 
This law cleared the Senate in December 1994.  If implemented
in its entirety, the bill would transfer an estimated 10-12
percent of Romania's GDP to private hands by the end of 1995.

    Progress has been much more visible in the non-state
sector, which now makes up an estimated 35 percent of Romania's
economy.  In late 1994, private firms and individuals accounted
for about five percent of industrial output, 25 percent of 
construction activity, 40 percent of services turnover, and 80
percent of farm production.  More significantly, the private
sector now employs an estimated 50 percent of Romania's
occupied labor force (5.0 million out of 10.1 million)
including 3.0 million farmers, 1.5 million owners and employees
of private firms, and 0.5 million self-employed individuals.  

    The reintegration of Romania into world markets is a
central feature of the government's economic policy.  Romania
signed an association agreement with the European Union in
December 1992.  The European Union is by far Romania's most
important trading partner.  In 1993, it took 39.3 percent (or
$1.924 billion) of Romania's total FOB merchandise exports of
$4.892 billion, and provided 42 percent ($2.741 billion) of its
total CIF merchandise imports of $6.525 billion.  In contrast,
the United States accounted for only 1.3 percent ($61.9
million) of Romania's exports and 4.3 percent ($282.1 million)
of its imports in 1993.

    Despite this difference in relative trade flows, Romania
places special emphasis on improving bilateral economic
relations with the United States.  As a result of the
restoration of most-favored-nation tariff status with the
United States in November 1993; U.S. ratification of a
bilateral investment treaty in December 1993; and the return to
Romania of the U.S. Export-Import Bank and the U.S. Overseas
Private Investment Corporation; prospects for expanded
bilateral trade and investment are much improved.  For example,
in the first nine months of 1994, Romanian exports to the
United States increased 182 percent, while imports from the
United States rose 12 percent.

    Since late 1993, the National Bank of Romania has
implemented a tough IMF-backed macroeconomic stabilization
package that has succeeded in cutting annual inflation from
around 300 percent in 1993 to less than 70 percent in 1994,
restored real positive interest rates in the financial sector,
increased domestic bank deposits, and stabilized the leu.  A
parallel Government of Romania austerity program is holding the
central government fiscal deficit to about 3.0 percent of GDP. 
In the Fall of 1994, the Romanian government implemented
painful budget-driven personnel reductions in the headquarters
staffs of most non-defense-related ministries.  For example,
the Bucharest staffs of the Ministries of Agriculture and Food,
Industry, Transportation, and Commerce were all reduced between
40-55 percent.

2.  Exchange Rate Policy

    As a part of its macroeconomic stabilization package, the
National Bank of Romania liberalized the foreign exchange
auction system in April 1994.  The reform, which replaced the
former administered rate with a market-clearing rate,
substantially eliminated the gap between the official rate and
that prevailing in the system of legalized exchange houses. 
The relative stability of the leu since that time (it has gone
from lei 1650 to lei 1750/$) has generally restored public
confidence in the national currency and allowed the National
Bank to implement a second-stage liberalization -- involving
the creation of an interbank market -- beginning in August 1994.

    As of November 1994, six commercial banks have been
authorized to freely trade the Romanian currency.  However, any
number of corporate customers can theoretically buy hard
currency through these authorized broker/dealers.  In late
1994, the interbank market appeared to be performing well
without any noticeable shortage of dollars.  Moreover, the
spread between the leu/dollar rate of exchange on the interbank
market and the exchange house rate was holding stable at around
6-8 percent.

    Despite the substantial liberalization of the foreign
exchange regime, the leu is not yet freely convertible.  The
National Bank of Romania maintains a number of restrictions
aimed at preventing capital flight.  Thus, the removal of more
than token amounts of lei from Romania remains illegal. 
Romanians are prohibited from holding foreign bank accounts,
though they are permitted to own U.S. dollar-denominated bank
accounts in local banks.  Foreign exchange restrictions, though
somewhat liberalized, also remain in effect.  For example,
Romanian citizens are allowed to buy only $1,000 worth of hard
currency per year on an unrestricted basis.  For those
traveling abroad, the limit is set at $5,000 per person per
trip.  Furthermore, commercial companies must obtain an import
license prior to buying hard currency, though this appears to
be less of a problem in late 1994.  In September 1994, the
National Bank issued a directive requiring all domestic
transactions between Romanian individuals and/or legal entities
to be conducted in lei. 

3.  Structural Policies

    Economic reform has entailed creating new laws in virtually
every sphere: finance, commerce, privatization, intellectual
property, banking, labor, foreign investment, environment, and
taxation.  Among the more recent developments are the July 1,
1993 introduction of an 18-percent value added tax; the May 24,
1994 government ordinance reforming local taxation, the August
11, 1994 passage by the parliament of a securities and exchange
act; and the August 31, 1994 promulgation of a new tax
ordinance on corporate profits.  Despite these achievements,
several gaps remain in the legal framework.  Chief among these
are the absence of a modern bankruptcy code, a modern copyright
law which includes protection for software, legislation on the
restitution of properties nationalized during the communist
era, and the previously-mentioned mass privatization bill. 
Draft bills on all of these subjects were before the parliament
in late 1994.
    Since 1989, Romania has gradually liberalized prices and
eliminated most direct producer and consumer subsidies.  The
main areas of exception are coal production, public
transportation, and household energy and heating.  In food
products, the principal remaining subsidies by summer 1994 were
on bread and milk.  However, in October 1994, the government
announced its intention to reimpose "temporary" wholesale price
controls on pork, chicken, eggs, cooking oil, and sugar.

    The major sources of central government revenue in Romania
are an 18-percent value added tax, a 38-percent tax on most
corporate profits, and a salaries tax which rises to 60 percent
for the portion of salary in excess of 816,000 lei per month
(about $470).  Together these three taxes accounted for about
83 percent of total central government revenues in the first
half of 1994.  Romania's generally high customs duties make up
only 6 percent of total central government revenues.  Gradual
adjustments to the tariff schedule will be required to bring
Romania into harmony with the European Union by the end of the
decade.  As a result, rate differentials will increasingly
favor imports from the European Union.

4.  Debt Management Policies

    During the 1980's, former dictator Nicolae Ceausescu
directed the liquidation of all foreign debt via accelerated
repayments and forced exports in order to reduce foreign
influence over Romania.  By April 1989, Romania's debt was
virtually zero and the country was a net external creditor. 
After December 1989, foreign borrowing was resumed, and by the
end of 1994, medium and long-term external debt amounted to
about $4.3 billion (and overall the country was again a net
debtor).  Nonetheless, in 1993, debt service payments still
amounted to a mere six percent of Romania's exports of goods
and services.  However, debt service is now growing and in 1994
is expected to reach about 15 percent of exports of goods and

    Romania signed a standby agreement with the IMF in May
1991, which provided for $500 million in balance of payments
assistance plus up to an additional $400 million in contingency
and compensatory assistance.  This program was terminated in
February 1992 by mutual agreement when, as a result of the
buildup of debt among state-owned enterprises (essentially soft
supplier credits), it became evident that Romania would not be
able to meet the IMF target for monetary growth.  Another
standby agreement was negotiated in May 1992, providing for
assistance totaling $440 million.  This program was also
terminated by mutual agreement before the final tranche of
assistance had been drawn.

    Negotiations for a third program began in March 1993.  In
February 1994, the Romanian Parliament approved the draft
"memorandum on economic policies" and a preliminary 1994 budget
in line with the proposed program.  In May 1994, the IMF
approved Romania's request for a 19-month standby arrangement
in the amount of SDR 131.97 million and a first drawing under
an SDR 188.5 million systemic transformation facility.

5.  Significant Barriers to U.S. Exports

    There are no laws which directly prejudice foreign trade,
investment, or business operations in Romania.  Traditionally
defined trade barriers are generally not a major problem,
though there exist areas of exception.  In mid-1994, Romania
imposed a system of reference prices for imports of chicken
parts (about 85 percent of which came from the United States)
in order to protect its largely state-owned chicken industry. 
In fall 1994, Romania also sharply increased import tariffs on
new and used automobiles in order to support its struggling
domestic manufacturers.

    The Government of Romania welcomes foreign investment and
generally makes good faith efforts to assist in resolving
disputes involving U.S. and Romanian firms.  However,
impediments to bilateral trade and investment can arise from
cultural differences, the nature of the reform process, or
attitudes and practices carried over from the days when
Romania's economy was centrally planned.  

    Formal investment barriers are few in Romania.  The foreign
investment law allows up to 100-percent foreign ownership of an
investment project (excluding land), and there are no legal
restrictions on the repatriation of profits and equity
capital.  Foreigners are permitted to lease land, but under the
constitution are prohibited from owning land.  Governmental
approval of joint ventures is required but has not impeded the
formation of such ventures.  The Romanian Development Agency
attempts to match foreign investors with Romanian partners.  In
1994, the Government raised the minimum investment requirements
for registering foreign investment to $10,000 from $100.  

    Despite the best efforts of the Government of Romania, a
number of problems continue to restrict the level of foreign
investment to relatively low levels.  For example, gaining
clear title to property remains problematical and any purchases
are potentially subject to legal challenge by former owners or
managers.  The situation is further complicated by the absence
of bankruptcy legislation and, hence, a means for pressing
claims against debtors.

    The large amount of red tape which accompanies many
transactions and the need to deal with overlapping local
bureaucracies can prove frustrating to foreign investors. 
Corruption is a major problem and, in certain instances, can
pose an actual business risk.

    The changing legal and regulatory environment has created
difficulties which affect foreign participation in the Romanian
economy.  There are few legal specialists qualified to
interpret the commercial implications of recent Romanian legal
developments and there is little experience in Western methods
of negotiating contracts.  Once concluded, there is often no
effective means of enforcing agreements.

    The cost of doing business in Romania can also be
unexpectedly high, particularly rents for offices and charges
for telecommunications and business services.  The lack of an
efficient modern payments system (checking accounts do not yet
exist) further complicates transactions in Romania.  Payments
can only be made in cash.

    Corporate income is generally taxed at a rate of 38
percent.  In addition, the government levies a 10 percent
dividend withholding tax.  The recent revision of the corporate
profits tax eliminates nearly all future investment tax
holidays.  However, foreign companies investing over
$50 million may still qualify for a seven year tax exemption. 
Romania has no income tax, but instead imposes a steeply 
progressive salary tax which rises to a 60 percent marginal tax
rate on all salaries above $470 per month.  

    Since 1990, Romania has registered over 38,000 commercial
companies with foreign capital participation.  The total value
of foreign investment surpassed $940 million in October 1994. 
The overwhelming majority of the investment is small scale. 
U.S. company investments range from a few hundred dollars to
many millions and are increasing in value and number steadily. 
As of October 17, 1994, U.S. investments in Romania were worth
$95.7 million, a virtual tie with the value of investments from
Germany, Italy, and France.

6.  Export Subsidies Policies

    The Romanian government does not provide export subsidies
but does attempt to make exporting attractive to Romanian
companies.  For example, the government provides for the total
or partial refund of import duties for goods that are processed
for export or are incorporated into exported  products.  A
September 1994 government decision permits the Romanian
Export-Import Bank to engage in trade promotion activities on
behalf of Romanian exporters of goods produced in Romania. 

    There are no general licensing requirements for exports
from Romania, but the government does prohibit or control the
export of certain goods and technologies.  For example, the
Government has, on occasion, banned the export of various
commodities (especially foodstuffs) due to domestic shortages. 
There are also export controls of imported or indigenously
produced goods of proliferation concern. 

    Romania is not a signatory to the GATT subsidies code or
government procurement code but has indicated its eventual
intention to subscribe to both codes. 

7.  Protection of U.S. Intellectual Property

    Romania has made significant progress in the area of
intellectual property protection since the end of the communist
era.  New patent and trademark laws have been enacted.  A new
revised copyright law, which will provide protection for
software, is expected to be submitted to the parliament shortly.

    All legislation in this field has been modeled after
international standards and norms and has been reviewed by
international experts.  The Government of Romania has expressed
its intention to have in place in 1995 a complete set of
intellectual property laws consistent with European Union

    Nonetheless, the lack of copyright protection has caused
some American firms to be reluctant to invest in Romania. 
Pirated copies of audio and video cassette recordings are
openly marketed and inexpensive.  Some are apparently produced
locally, but many appear to be imported from elsewhere in the
region.  The U.S. Embassy in Bucharest is not aware of pirated
goods being produced in Romania for export. 

8.  Worker Rights

    a.  The Right to Association

    Current labor legislation adopted in 1991 guarantees all
workers except government employees, police, and military
personnel the right to associate, to engage in collective
bargaining, and to form and join labor unions without previous
authorization.  The right to strike is specifically guaranteed,
although union members have been frustrated with the courts'
propensity to declare illegal the major strikes on which they
have been asked to rule.  Legal limitations on the right to
strike exist only in certain critical industries involving the
public interest, such as defense, health care, transportation,
and telecommunications.

    Union members have continued to criticize certain aspects
of the 1991 legislation, but no consensus has been reached on
how the laws should be amended.  Past studies have indicated
that the legislation falls short of International Labor
Organization (ILO) standards in several areas, including the
free election of union representatives, binding arbitration,
and financial liability of strike organizers.  Although the
legislation is supportive of collective bargaining as an
institution, the contracts that result are not enforceable in a
consistent manner.  This situation is caused in part by
inadequacies in the law itself and by problems created by
continued state ownership of most major industries.  In 1994,
the government and the major labor confederations moved to
promote a new tripartite collective bargaining relationship
among the government, labor, and private sector.  

    Current legislation stipulates that labor unions are
independent bodies, free from government or political party
control, with the right to be consulted on labor issues.  No
worker can be forced to join or withdraw from a union, and
union officials who resign from elected positions and return to
the regular work force are protected against employer
retaliation.  In practice, the government does not seem to
exert any control or influence over labor union activities.  In
1994, however, several steps were taken toward politicization
of the Romanian labor movement.  In July, Miron Mitrea, the
Executive President of CNSLR-Fratia, Romania's largest labor
confederation, was selected as the president of a dormant
political party created by the trade unions.  Fearing that
party might merge with the ruling Party of Social Democracy,
Victor Ciorbea, President of CNSLR-Fratia, announced in August
that he had formed an alliance with the opposition Democratic
Convention and the National Trade Union Bloc, another major
confederation.  In a declaration signed by the three parties,
each pledged to develop joint programs but to maintain
"complete independence."   In October, Ciorbea set up a new
labor confederation, "The Confederation of Democratic Trade
Unions of Romania." 

    The majority of Romanian workers are members of some 18
nationwide trade union confederations and smaller independent
trade unions.  Virtually all unions concentrate on economic
issues to protect their members' standard of living, which has
continued to decline because of increases in consumer prices
and uncertainty caused by the transition to a market economy.

    Labor unions may freely form or join federations, and
affiliate with international bodies.  The Alfa Cartel and
CNSLR-Fratia are affiliated with the World Confederation of
Labor and the International Confederation of Free Trade Unions,
respectively.  Representatives of foreign and international
organizations freely visit and advise Romanian trade unionists.

    The Committee of Experts at the 1994 ILO Conference
observed that the treatment of the Roma and Magyar minorities
continued to be the subject of debate in the UN Human Rights
Committee.  It noted that the government, which asserted there
were no discriminatory standards against the Roma, had reported
that some 22 percent of Roma men and 71 percent of Roma women
were unemployed.  The committee noted with interest the
measures taken by the Government to promote better integration
of the Roma in the society and the government's establishment
of the Council for National Minorities, which monitors the
problems of persons belonging to those minorities.  The
committee urged the Government to supply information about the
work of that council, and information about the programs being
taken to provide education, training, and employment for the
ethnic Hungarian population.

    b.  The Right to Organize and Bargain Collectively

    Current legislation permits workers to organize into unions
and to bargain collectively.  In January, the Locomotive Engine
Drivers Federation lost an appeal in which it tried to overturn
an original court decision that had declared its August 1993
strike illegal.  As a result of that strike, several union
leaders and strikers were summarily fired.  The absence of
effective employer groups, because of continued state control
over most industrial resources, complicates collective
bargaining efforts.

    c.  Prohibition of Forced or Compulsory Labor

    The constitution prohibits forced or compulsory labor.  The
Ministry of Labor and Social Protection (MOLSP) effectively
enforces this prohibition, and no instances of abuse were
recorded in 1994.  

    d.  Minimum Age for Employment of Children

    The minimum age for employment is 16, but children as young
as 14 may work with the consent of their parents or guardians
but only "according to their physical development, aptitude,
and knowledge."  Working children under 16 have the right to
continue their education, and employers are obliged to assist
in this regard.  The MOLSP has the authority to impose fines
and close sections of factories to enforce compliance with the
law.  No violation of this policy was documented in 1994, and
child labor did not appear to be a problem.

    e.  Acceptable Conditions of Work

    Most wage scales are established through collective
bargaining.  However, they are based on minimum wages for given
economic sectors and categories of workers set by the
government after negotiations with industry representatives and
the labor confederations.  Minimum wage rates are generally
observed and enforced, although employers' financial
difficulties often result in nonpayment of wages or
postponement of payment.

    The labor code provides for a work week of 40 hours or five
days, with overtime to be paid for weekend or holiday work or
work in excess of 40 hours.  Paid holidays range from 15 to 24
days annually depending mainly on the employee's length of
service.  Employers are required by law to pay additional
benefits and allowances to workers engaged in particularly
dangerous or difficult occupations.

    Draft legislation regarding occupational health and safety
is still pending in parliament.  The MOLSP has established
safety standards for most industries and is responsible for
enforcing them.  Enforcement, however, is not good because the
MOLSP lacks sufficient trained personnel, and employers
generally ignore its recommendations.  Some labor organizations
have pressed for healthier, safer working conditions on behalf
of their members.  Though they have the right to refuse
dangerous work assignments, workers seldom invoke it in
practice, appearing to value increased pay over a safe and
healthful work environment.  Neither the government nor
industry, still mostly state owned, has the resources necessary
to improve significantly health and safety conditions in the
work place.

    f.  Rights in Sectors with U.S. Investment

    The U.S. Embassy has no information to suggest that
conditions differ in goods-producing sectors in which U.S.
capital is invested with respect to application of the five
worker rights discussed in A through E above. 

  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
              Category                          Amount          

Petroleum                                               0
Total Manufacturing                                   (1)
  Food & Kindred Products                   (1)
  Chemicals and Allied Products             (1)
  Metals, Primary & Fabricated                0
  Machinery, except Electrical              (2)
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                         0
Wholesale Trade                                         0
Banking                                               (1)
Finance/Insurance/Real Estate                           0
Services                                                0
Other Industries                                        0
TOTAL ALL INDUSTRIES                                   25      

(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000

Source: U.S. Department of Commerce, Bureau of Economic Analysis


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