Romania
The Development Challenge
When communism fell in 1989, then-President Ceausescu's draconian policies had left Romania the poorest country in Southeastern Europe. Until 2000, much of Romania's economic progress was hampered by slow privatization and stop-and-start economic reforms. Under the current government, the macro-economy has improved. Growth in 2003 is estimated at 4.5% and is projected to be 5% in 2004 and 2005, despite a severe drought. Inflation has declined from 40.7% in 2000 to an anticipated 14.5% in 2003 and is projected to decline to 8.8% by 2005. Most major privatizations have been completed, with the significant exception of the energy sector.
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Despite this progress, the economic situation remains mixed, with Romania one of the poorest European Union (EU) applicants. Government statistics indicate that almost one in three Romanians lives in poverty. The proportion is much higher in rural areas, where wages are far below Romania's average of $140 per month. GDP per person reached only $2,100 in 2002. Many Romanians are under-employed, and attractive employment options remain limited. Over 40% of the population is engaged in agriculture, most on small subsistence plots. Many young, educated workers continue to leave the country in search of better opportunities elsewhere.
Confidence in democracy is undercut by endemic corruption, low political accountability, and continued high levels of poverty. Civil society remains weak, with little influence on public policy or public opinion. Partly a legacy of communism, the concept of citizenship, including the responsibility of constituent interest and involvement, has yet to take root among much of the population. This is exacerbated by a "party list" system for parliamentary elections, eliminating any real tie between national level office holders and their constituent districts. In the 2000 elections, a large number of disaffected voters turned to an extremist and xenophobic party that offers no sustainable solutions for resolving the country's problems. The central government is transferring responsibility for many services to local governments without providing the necessary fiscal and management resources. Unfunded central government mandates in utilities, education, social welfare, and health are a pressing problem. On the whole, there appears to be no coherent plan for decentralization and no analysis of the impact of decentralization on local governments. Too little attention has been given to the efficient use of local resources, the need to establish community priorities, and the means to enhance local service delivery.
The health and child welfare situation in Romania remains bleak. Life expectancy at birth is 71 years, one of the lowest in Europe. Infant mortality, under-five mortality, and maternal mortality are among the highest in Europe. In 2000, maternal mortality rates were six times the EU average and pediatric AIDS cases are the highest in Europe. More than 34,000 children still live in state-run "children's homes". Romania's nascent community-based services, which care for an additional 60,000 children, require considerable assistance to mature into an effective sustainable system.
The most recent European Commission (EC) Report concludes provisionally that Romania will likely meet EU membership requirements by 2007, despite not yet being recognized by the EC as a functioning market economy. Nevertheless, "overall capacity for programming, operational management and financial control remains insufficient," evidence of the serious challenges facing Romania.
The USAID Program: The USAID program is fully integrated into the Embassy's Mission Performance Plan, which identifies democracy, rule of law, economic development, and regional security as priorities. The prospect of joining NATO and the EU and stronger ties with the U.S. provide the important incentives that keep Romania on the path to reform.
USAID support for economic growth in Romania includes projects to support: capital market reform, energy sector reform, privatization, and improvements in the business climate in order to attract increased foreign direct investment and boost domestic entrepreneurial initiatives. Additionally, USAID will broaden support to agricultural development to move the rural economy from small-plot subsistence agriculture to increased efficiency and competitiveness.
USAID will continue to assist local governments, judicial reform, civil society organizations, and political parties to create and sustain the necessary democratic institutions and behavior. As 2004 is an electoral year, USAID assistance will support increased transparency in campaign financing and reporting, balanced media coverage and equal access to media, issue-oriented public dialogue and debates, and increased voter turnout. The Government of Romania (GOR) recently adopted a strategy for judicial reform; USAID assistance will support the integrity and capabilities of the Romanian judiciary, including activities to strengthen the Superior Council of Magistrates, and enforce an ethics code among judges and court staff.
Corruption is widespread in the health and welfare sector and undermines citizen confidence in democracy in addition to impeding service delivery. USAID will help to develop more transparent and accountable procurement and financing systems to allocate limited resources more appropriately and reduce corruption. Assistance for broader policy and program reforms in the social sector will continue.
Other Program Elements: USAID/Romania's portfolio is supplemented by several regional projects. Most of these activities contribute directly to Mission strategic objectives while some are special initiatives. They include: Agro-industry Competitiveness, Development Credit Authority Mortgage Finance, Southeast Europe and Regional Electricity Market, Regional Energy Efficiency, Regional Mortgage Market Development, Balkan Infrastructure Development Facility, Trans-Balkan Romania Fund, Small and Medium Enterprise Financial Facility, Corruption Assessment of Romania, Fiscal Decentralization Initiative, Local Government Information Network, Tuberculosis Control, RiskNet HIV/AIDS Program, Rational Pharmaceuticals Management, Radiology Training for Early Detection of Breast Cancer, Drug Information Center, and the Global Fund for HIV/AIDS, Malaria and Tuberculosis.
Other Donors: USAID works closely with the European Union, the World Bank, the International Monetary Fund, European Bank for Reconstruction Development, United Nations Development Program, and other donors to ensure coordination and avoid duplication. The EU committed $780 million for pre-accession funding; this funding is expected to increase to approximately US$1 billion annually by 2006. In its last Country Strategy for Romania, the World Bank programmed approximately $995 million for FY 2002 - FY 2004.
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