Oltchim has suspended its activity, Arpechim could be demolished and the closure of Mechel – a steel group with over 6,000 employees – are bringing up for discussion what has happened in the Romanian industry in the past 20 years.
Data published by the Statistics Institute shows a 2.4% industry decline in the 4th quarter of 2012 year-on-year, while in 2010, 2011 and in the first three quarters of 2012 industry was on a continued rise.
Most state-run enterprises have been privatized, but even so, few industrial companies have held out in Romania and now the economy’s leading sector is going through a new wave of closures. How has it come to this?
“In 1989 Romania was one of four countries that tried to produce everything domestically and when you want to make everything you cannot get performance.
The electronics industry was the first to go after ’89, in a year’s time, because Sony, Philips, Panasonic came with lower prices and higher quality and they wiped out everything,” says Petru Ianc, former director in the Economy Ministry.
He says domestic demand, which used to support big plants, relied on investments until 1989.
“[Romania] planned to make five nuclear plants at Cernavoda. After 1990 investment money was spent on social protection and other things instead of being spent on railways, the subway and creating jobs. Three subway stations were built in 23 years.”
While some specialists blame the state for its lack of vision and its industrial policies, others think this was not the biggest problem.
“It is ideal to have industrial policies, but I wouldn’t venture in this direction. Thinking that the state has a vision and will invest at Oltchim when others are closing down and Arabs invest in very large capacities is venturing. We have to create a pool of qualified workforce and a business environment that westerners can be interested in working with and come up with capital because we don’t have capital,” says Florin Pogonaru, president of the Romanian Business People’s Association.
The plant closures had a strong and unfavorable social impact on cities and the industries left are few.
Most employees of the Mechel Campia Turzii plant were laid off last year and production has been suspended in the last few months, with there being no prospects of reopening the plant.
In the last few years the de-industrialization process continued with the closure of Arpechim Pitesti, Oltchim Ramnicu-Valcea and more recently of the Mechel plants, although the country imports gasoline and rebar, which shows that there is demand on the market.
“The special steels plant in Targoviste was created in the ’70s because we had a highly developed weapons industry, rolling stock, trucks, car plants, all of which used special steels. After ’90 all went bankrupt and the plant ended up producing rebar, which is the most basic product of the steel industry,” said Ianc said.
What is happening now at the Mechel plants in Targoviste, Campia Turzii and Braila, where 4,000 people are in danger of losing their jobs, is the result of 20 years of inconsistent industrial policies and of privatizations made just for the sake of international institutions – the IMF and the World Bank – so that Romania would look well in terms of reforms.
“In 1990 the steel sector was criticized for exporting rebar and now we have come to import it from Turkey. Mechel says it can also produce in Turkey and Russia and that it does not have the restrictions imposed by the European Union t, such as pollution regulations,” says Cristian Pirvan, secretary general of the Romanian Businesspeople’s Association.
There are also cases of successful privatizations, such as Dacia, Silcotub and Azomures, which managed to stay on the market, make a name for themselves, create new jobs and contribute to Romania’s economic growth.
But for every success story there are ten other cases of companies that went bankrupt and were scrapped.
“One could not keep all plants going. For instance, given how the aircraft manufacturing sector has evolved internationally, with there being only two major manufacturers, Romania would not have been able to make aircraft production, but there were many industries which could have been updated and brought to European-level performance,” Pirvan believes.
(English version by Daniela Stoican)