Privatization and Deregulation
Privatization and Deregulation
Overview
The process of liberalization has
been gradual rather than revolutionary. In part this can be explained by
the great degree of change required in setting up a market economy, and
to budgetary constraints. In part, too, slow progress with reform was laid
at the door of a lack of political commitment and of administrative incompetence
within government up to 1996. As in a number of other countries, liberalization
was also beset by a series of political and financial scandals. Since
1997, a new coalition government led by President Emil Constantinescu has
been in power. This has voiced a stronger commitment to the process of
liberalization than the previous government, though the process of structural
adjustment remains one of constant challenge and constraint. It has, for
example, been able to make rather more progress in liberalizing foreign
investment than in the process of privatization. (6)
New regulations have been issued
that allow:
• Romania-based companies with either
complete or partial foreign ownership to
own property and have all other
attached rights over land;
• foreign investors to purchase
state bonds; and
• capital gains and initial investment
monies to be repatriated.
Privatization nonetheless remains a central focus of current government resolve and of external agency (e.g. International Monetary Fund) encouragement. The new government has taken direct control of the State Ownership Fund, which still owns and administers most of the country's major industries, and has initiated a program across all industries to break them up into smaller units ready for privatization.
The Romanian government's strategy
aims for full liberalization of the telecommunications sector. The complex
process of liberalization and privatization has already generated, and
will continue to generate, substantial business opportunities for Western
companies. The state operator, Rom Telecom, was scheduled for privatization
in 1998. The 1998 network growth was a respectable 6.8% and approximately
31% of the country's telephone lines are digital. With a population of
23 million the telephone density is
14.4. Despite this, the task of
modernization remains huge.
The government has decided that
independent local operators, including foreign investors, will be permitted
to offer telephone service in the areas where Rom Telecom has not made
substantial investments, and which need urgent upgrading in the provision
of services. In 1996, the Romanian government granted two GSM cellular
operator licenses. The new service proved to be a success. Two
additional licenses for DCS 1800
system operators are to be considered in the very near future.
Regulatory Environment
The new political regime have realized the true size of the task of modernization of the country's infrastructure, and have came to the inevitable conclusion that the task could not be accomplished without financial and managerial help. To do this, Romania's legislative program will have to adapt accordingly, with the result that privatization and market liberalization may take place earlier than previously expected.
It was originally forecasted the Rom Telecom would be privatized by the year 2000. However, according to announcements, during 1997, Rom Telecom is to be transformed into a properly constituted joint stock company so that the first tranche of the company, probably amounting to 35%, could then be privatized in 1999. This will inevitably lead toward the presence of a major foreign investor. (7)
Romanian legislation passed since 1991 has liberalized significant segments of the country's telecommunications system, including terminal equipment (subject to type approval and fair competition on the market), data transmission, broadcasting (except for the operation of the national radio and TV networks), mobile communications (subject to frequency spectrum availability), and the use of VSAT's. The largest segment which has not yet been liberalized is that of wired telephony, which is still the monopoly of the state-owned public operator Rom Telecom would be privatized by the year 2000. However, according to announcements, during 1997, Rom Telecom is to be transformed into a properly constituted joint stock company so that the first tranche of the company, probably amounting to 35%, could then be privatized in 1998. This will inevitably lead toward the presence of a major foreign investor. When the National Privatization Agency announced the commencement of the privatization of Rom telecom, it was announced that the second stage of privatization, after Rom telecom is transformed into a joint stock company, will be the installation of 500,000 new lines and an increase of the subscriber base by 400,000 by the first quarter of 1998, when the actual privatization would start.
National Carrier
Rom Telecom R.A. is a dominant, state-owned monopoly service provider. Since 1990, Romanian telecommunications has had a new administrative structure when Rom Post telecom was split into three operational units:
1. Posta Romana, the
postal service
2. Rom Telecom, the
telecommunications service
3. Radiocommunicatii,
the state broadcasting enterprise
The company offers basic voice telephony over a public fixed network covering the entire territory of Romania. The state has defined Rom Telecom's objectives as accelerating the availability of telephone service and improving its quality, as well as introducing new services. Special attention is paid to achieving full compatibility with the international agreed standards, expanding new integrated digital services, and providing telecommunications services to the business community. Another important objective is to reduce the waiting list and time required to obtain telephone service. (8)
Status of Liberalization Legislation
1. Terminal equipment: liberalized since 1991, subject to type approval
2. Data transmission: liberalized since 1992. Lines are leased from Romtelecom.
3. Mobile communications: liberalized since 1992. License granting is subject to frequency spectrum availability.
4. Broadcasting: liberalized since 1992. Radio and TV broadcasting support is provided by the state-owned public operator Radiocom.
5. VSAT: liberalized since 1992.
6. Basic telephony:
The state-owned public operator Romtelecom has the monopoly of fixed
telephony. Article 63 of the Telecommunications Law (No. 74/1996)
grants Romtelecom exclusivity
rights until December 31, 2002. However, Article 64 of the law accepts
a limited liberalization
of basic telecommunications services for rural regions where telephony
penetration is poor or inexistent. Licenses for network operators
and suppliers for these regions are granted via tender.
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