Regional Factbooks

SUMMARY

Romania has only a relatively recent history of environmental protection. This issue was generally neglected both before and after the 1989 revolution. Prior to 1989, Romania lacked any environmental policy and post 1989 the transition to a market economy took precedence over all other issues. Currently, as a candidate for membership of the European Union (EU), Romania is undertaking various measures to comply with Western standards in regard to environmental issues providing opportunities for American environmental products and services.

Currently, Romania faces acute problems concerning air, water and soil pollution, which requires large investment in the short and the long term and the participation of both the public and the private sector. Essential measures are needed in the fields of waste management, the improvement of water quality, and the enforcement of integrated pollution prevention and control. The environmental compliance costs for the accession to the EU is estimated at 20 billion USD representing approximately 50% for the water sector, and 25% for each of the waste and air sectors. These budget estimates are predicted to be spent in the next 20 years and they are an indication of the seriousness of the environmental problems that Romania has to face.

The best prospect areas are:

For municipalities and local governments: water supply, waste water treatment, solid waste minimization, recycling and disposal, district heating, mining waste.

For business enterprises: emissions and effluent reduction and treatment, pollution prevention measures, hazardous waste disposal, energy utilization.


A. MARKET HIGHLIGHTS & BEST PROSPECTS

Market Profile

As stated above, Romania generally neglected the environment before and after the 1989 revolution. Prior to 1989, Romania lacked any environmental policy and post 1989 the transition to a market economy took precedence over all other issues. Currently, as a candidate for membership of the European Union (EU), Romania is undertaking various measures to comply with Western standards in regard to environmental issues.

The Romanian environmental legislation is relatively new (enacted after 1995). The applicable legislation is: Law no. 137/1995 on environment protection; Law no. 107/1996 on water protection; Forestry Code approved by Law no. 26/1996; and Law no. 111/1996 on the regulation of nuclear activities. In 1999, a draft law for solid wastes was completed and is in approval stage at the relevant ministries.

Currently, Romania faces acute problems concerning air, water and soil pollution, which requires large investment in the short and the long term and the participation of both the public and the private sector. Essential measures are needed in the fields of waste management, the improvement of water quality, and the enforcement of integrated pollution prevention and control. The environmental compliance costs for the accession to the EU is estimated at 20 billion USD representing approximately 50% for the water sector, and 25% for each of the waste and air sectors. These estimates are expected to be spent in the next 20 years and they offer an indication on emergencies of environmental problems that Romania has to face.

Best Sales Prospects

For municipalities and local governments: water supply, waste water treatment, solid waste minimization, recycling and disposal, district heating, mining waste.

For business enterprises: emissions and effluent reduction and treatment, pollution prevention measures, hazardous waste disposal, energy utilization.

Although the well-known French companies (Vivendi and Lyonnaise des Eaux) have won two major projects in the water supply sector, there is still room for the U.S. companies to enter cooperation agreements. The most promising sectors are related to traditional infrastructure technology (i.e. power plants, wastewater treatment facilities); end-of-pipe pollution control systems (baghouses, scrubbers, flue gas desulfurization units); environmental services (feasibility studies, EMS, ISO 14001) and software (database management systems, etc.)

There are a number of private consultants in Romania who now provide environmental services to business enterprises, but these firms tend to specialize in environmental audits. Given the growing interest in industry to implement EMS according to international standards (ISO 14001), this should be a good business opportunity for U.S. consulting companies.

Romanian demand for environmental protection equipment and services is expected to witness a significant increase over the next years. Some of these increases will be linked to major programs for petroleum sub-sector rehabilitation projects for the National Oil Company PETROM; for the national gas company ROMGAZ; for power sector rehabilitation and modernization projects for the National Power Company CONEL, and for mine closing projects and the respective environment rehabilitation that will be required.


B. COMPETITIVE ANALYSIS

Domestic Production

European and Japanese companies are strong competitors of U.S. companies in Romania. In principle, competition should come first from local producers. However, Romanian industry does not manufacture sophisticated equipment, and much of the Romanian equipment manufactured is outdated. Therefore, generally the only competition coming from within Romania is for laboratory equipment such as: glassware weighing equipment, microscopes, ovens, etc. The needs for environmental equipment and services are immense. However, the current economic situation of the country makes it extremely difficult to fill this enormous potential. Financing is the key for any project.

U.S. Market Position

The following U.S. companies are operating on the Romanian market: International Water -- a British-U.S. (Bechtel) joint venture, Raytheon, Chemonics, Lemna Corporation (specialized in the development, financing and turnkey supply of environmental and infrastructure projects), Harza, CEVA, AMSI, and Colt International.

American companies and their equipment and services are well known and well liked by Romanian specialists. Many American companies utilize representatives and/or utilize their European subsidiaries, i.e. Perkin Elmer Corporation, Millipore, and Labsystems. These companies also sell through their subsidiaries in Austria, France, Germany and other European countries.


C. END-USER ANALYSIS

Water/Wastewater Treatment

In the field of water quality protection, one of the main objectives of the government is to improve water quality and increase the supply of water resources, as well as the treatment of wastewater.

Water supply: Romania's water resources are relatively poor and unequally distributed in time and space, being formed of surface waters - inland rivers, lakes and reservoirs, the Danube River and ground waters. The water resources, though technically utilizable, cannot be used without the achievement of certain significant investments in complex development works of the hydrographic basins and in treatment installations because:

- The major water resource, the Danube river, can only be used to a small extent, owing to its position, at the southeastern edge of the country.
- The inland rivers are unequally distributed all over the territory, significant areas remaining with insufficient resources, presenting at the same time important flow variations.
- The pollution of certain inland rivers exceeds the legal limits, which makes their use difficult and sometimes even prohibitive.

Romania's water collection and distribution systems, and urban wastewater sewage and purification systems, is inadequate, because of their old equipment, fragmentation and low revenue base. The population's drinking water supply is in a particularly dangerous situation due to the lack of investments in water delivery, water treatment stations and distribution pipelines. There are no water treatment plants having a tertiary treatment step (for nitrogen and phosphorous elimination) and for this reason eutrophication is present in many lakes and reservoirs. Diffuse pollution due to fertilizer application as well as to that of pesticides and herbicides on the agricultural land is also a major concern. Most major cities in Romania still have no purification system for their urban wastewater, which flows directly into rivers and streams.

In conclusion, the major areas of concern are related to the improvement of the quality of supplied water and water resources and the development of new wastewater treatment plants and the modernization of the existing ones. There is also concern with the accumulations of heavy metals and organic compounds existing in sediments, and the reduction of the nitrogen, pesticides and other degradation product concentration in waters.

Air Pollution Control

There has been a dramatic drop in emissions of polluting substances since 1989. This is largely due to the contraction of the economy during the period 1990-1994 but also to some measures and investments to protect the environment. The major sources of pollutants are: for SO2, thermal-power plants and power plants (70%); for NOx, thermal-power plants and road transport (60-65%); for CO, industry and combustion (75-80%); for CO2, thermal-power and industrial combustion (75-80%). High costs regarding the conversion of existing vehicles to unleaded fuel, conversion to unleaded fuel producing refineries and liquid fuel with low S percentage producing refineries are also a concern.

There are nine major cities with more than 250,000 inhabitants and they are the Romanian government priorities in the field of building-up belt roads in order to protect the population from traffic pollution. Other major areas of concern are related to production of electricity and thermal power, chemical and petrochemical industry, ferrous and non-ferrous metallurgy, urban air degradation by traffic, elimination of ozone depleting substances.

Waste Management and Contaminated Soil Remediation

In the present economic situation, waste materials represent a major problem for environmental protection, due to their accumulation in large quantities and their inappropriate disposal over a long period of time. The deposits of industrial or domestic wastes cover large areas are a permanent pollution threat to the environment (especially for underground waters) and for human health.

In 1998, waste materials totaled around 200 million tons. The proportion of waste categories is as follows: industrial and agricultural wastes - 95%, urban wastes - 3%, agricultural waste - 2%. The main types of industrial and agricultural waste are: sterile from mining and quarrying, ashes from steam-generating stations, metallurgy wastes, industrial sludge, chemical waste, metal waste. Although mining activities have been reduced in recent years, sterile wastes continue to be the most important category.

Other waste materials produced in huge quantities are the ashes from thermal processes (quantity registered in 1998, about 10 mill tons). Ash and slag from steam-generating stations represent 80% of this quantity. Another important category of wastes is the one from the ferrous and non-ferrous metallurgy; about 4 million tons of metallurgic waste registered in 1998 including: metallurgical slug, metal dust and ashes, refractory materials, as well as mould crust, core and forms. Chemical wastes (organic and inorganic), amounting to 2.6 mill tons in 1998, include: residual acids, residues bases, salt waste, waste with metal content, with halogen content, waste with phosphorous, with nitrogen content, etc.

The total quantity of urban waste collected in 1998 was 5.5-6 mill tons, including: 75% proper domestic waste, 12% street waste, 9% sludge from residual urban water cleaning, 4% other, including hospital and construction waste. Disposal of waste in Romania is an activity that does not presently meet EU standards. Municipal, bulk and many other type of waste are disposed of in landfills, none of which meets the EU engineering or operational standards. In addition, fly tipping is very common. There is no system for the safe handling or disposal of hazardous waste; generally, it is the producer who is required to store them. Clinical waste is either dumped in the landfill or burned in inadequate incinerators.

Waste treatment therefore represents a major weakness in the Romanian environmental infrastructure that exposes the population to serious problems of health and general quality of life. It is also a result a major opportunity for American environmental firms.

A major area of opportunity is related to the construction, modernization or extension of domestic landfill sites, for large towns, or villages. Opportunities also exist for the construction of deposits for industrial wastes, the development of opportunities for their profitable re-use, the creation of secure centralized deposits for dangerous waste, and the establishment of incinerators for dangerous and clinical waste.

In conclusion, there is great potential for U.S. companies on the Romanian market taking into account that the demand for environmental equipment in Romania is potentially very large and U.S. companies are very well known and respected for their know-how and technology.


D. MARKET ANALYSIS

Distribution/Business Practices

A long-term strategy with a qualified Romanian partner is recommended, as are experienced country managers with Central European or other developing country experience. Also recommended is that contacts be made with industry and Government. U.S. participation in Romanian trade shows, presence in demonstration projects is highly recommended. Other important strategies could be buying a local firm and using its projects as a base, committing to after-sales service.

Agents and distributors can contribute importantly to a U.S. company's success on the Romanian market. The U.S. Commercial Service, through its Agent/Distributor Service, can help new-to-market U.S. companies find experienced local companies willing to act as agents, distributors or representatives. However, as a general rule, finding a partner in Romania's complex economic situation requires U.S. companies to invest sufficient time on their own to satisfy themselves that the selected partners are fully capable and reliable. Fortunately, well-qualified candidates exist in Romania. Romanian specialists are educated, have a good understanding of technical matters, and, with a minimal training, can rapidly master new marketing techniques.

Quality, price and payment conditions are the most important factors in determining who will succeed in concluding business in Romania. The Romanian market, like all former East-European markets, is still cash poor. A company's willingness to entertain long-term credit arrangements, possibly barter transactions, and concepts like processing contracts will put it in a better competitive situation vis-a-vis others interested in doing business in Romania.

Special note should be made of the fact that U.S. companies face strong competition from E.U. countries on the Romanian market. Goods from the European Union enjoy an average of 15 percent duty rate advantage over similar goods from the United States. Again, price, payment conditions, and service can offset such effects.

Financing

A law setting up an Environmental Fund for Romania has recently passed the Chamber of Deputies and the Senate. The fund could significantly assist and become an important vehicle to develop environmental projects. Such activities might include small infrastructure projects, Danube hot spot projects, climate change projects, and natural resource projects including sustainable forestry.

The Romanian Government entered negotiations with the following large financial institutions, which granted their support: IMF, World Bank, International Bank for Reconstruction and Development (IBRD), European Bank for Reconstruction and Development (EBRD), etc.

Since 1990, the World Bank loan commitments to Romania totaled approximately US$2.5 billion. Over the medium-term, the Bank will give a priority to supporting sector programs related to European Union (EU)- accession, including environmental issues. Since 1991, the European Bank for Reconstruction and Development (EBRD) has invested in Romania over US$1.4 billion in 58 projects, making it the country's single largest investor. The U.S. is the largest single shareholder in the bank. The bank will concentrate among others, on more activity in the area of municipal and environmental infrastructure and is expected to invest in Romania in the forthcoming three years, development programs amounting to US$2 billion.

More money is flowing in from the European Union to help Romania prepare for EU entry. The EU has announced its plans to provide EU accession candidate countries with 1 billion EUR each year beginning in the year 2000 and running through 2006 to assist with environmental and transportation investments, the ISPA program (Instrument for Structural Policies for Preaquisition). Romania is expected to receive 700 million to 900 million EUR for environmental projects.

Romania became eligible for U.S. Trade and Development Agency (TDA) program funding in November 1991. Since then, 31 grants (with a combined value of US$9,500,000) have been provided for feasibility studies. U.S. project financing and insurance can be provided by the Overseas Private Investment Corporation (OPIC), which offers direct loans, loan guarantees, and political risk insurance. In addition, OPIC is currently providing some $60 million in financing and political risk insurance for projects in Bulgaria, Croatia and Romania and there is a strong pipeline of possible finance projects in the region. This program is part of OPIC's effort to support and encourage private sector investment in Southeast Europe in the aftermath of the Kosovo crisis. The Export Import Bank of the United States (Eximbank) opened for short-term (180 days) coverage for exports to Romania in 1992. Currently Romania is eligible for medium-term and long-term coverage for public sector transactions. Eximbank can provide medium-term financing, up to seven years, for environmental transactions by the private sector.

A USG-funded, privately-managed Romanian-American Enterprise Fund was approved in April 1993 and started operations in June 1995. It is capitalized at US$50 million. The purpose of the fund is to promote private sector development in Romania. It has the authority to make equity investments and loans, and offer technical assistance to promote new private initiatives and privatization, with special emphasis on the promotion of small and medium-sized businesses. The Fund may support joint ventures, which match U.S. investors with Romanian partners.

Demographics & Economic Situation

Source: Factbook.net