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F O R
R O M A N I A
F I S C A L   Y E A R   2 0 0 3
July 2002
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8. TRADE AND PROJECT FINANCING

A. The Banking System

Romania made tremendous progress in strengthening its banking sector from virtual collapse in 1995-99 to its current strong position. U.S. firms will find that the number of foreign banks in Romania has increased from 5 (1990) to 38 (2002), and the quality of local banking has improved greatly. Commercial banks are authorized to engage in a full range of traditional banking functions.

Restructuring the Romanian banking system has continued with the technical assistance of the World Bank, IMF, USAID and EBRD. The Asset Resolution Authority has assumed responsibility for non-performing loans, initially from Bancorex, and later for other state-owned banks, including the Agricultural Bank and BCR. To date it has collected $244 million. In the private banking sector, the NBR closed the failing International Bank of Religions (BIR), Albina Bank, Turkish-Romanian Bank (BTR), Romanian Discount Bank (BRS) and Bank for Development and Investment (BID). While cleaning up the Romanian banking system was costly, the risk of a banking collapse is greatly diminished.

All commercial banks now operating in Romania have international correspondent relationships, and all are members of the NBR's domestic interbank payment system. Although this system has reduced float and payment clearance delays, business may still experience delays. Long-term plans for an electronic transfer system are in progress. Because checking accounts are still relatively uncommon, most domestic remittances must be made either through the inter-bank payment system or in cash.

B. Foreign Exchange Controls Affecting Trading

In early 1997, the GOR lifted all forex restrictions. The leu is fully convertible for business purposes, although still a partially pegged currency. Foreign investors may freely repatriate profits and dividends in hard currency. Leu accounts are permitted to purchase goods domestically. Capital exports, although only occasionally permitted at present, will be fully liberalized by the end of 2004.

C. General Financing Availability

The cost of borrowing locally remains extremely high. As of March 2002, the commercial banks' average ROL lending rate for non-banking customers decreased to 39.5%, while the average deposit interest rate was 23.5%.

The Central Bank has fought high inflation (30.3% in 2001) by cutting liquidity in the banking system and issuing money through forex purchases. The effect of the Central Bank's tight monetary policy has severely hit small and medium-sized enterprises. Most foreign companies find that small and medium enterprises in Romania have no access to capital. Preferential credits are no longer granted for seasonal agricultural works or for industrial exports.

A Romanian Export Import Bank manages credit lines opened by the Central Bank. Examples of such credit lines are a long-term credit for an industrial development project sponsored by the World Bank ($175 million) and a short-term credit ($70 million) for imports of materials and equipment needed for production targeted for export. Maximum long-term credits are $8 million, with a repayment period of 3 to 17 years.

D. Methods of Payment for Exports

The most widely accepted method of payment is by confirmed, irrevocable letter of credit, as it provides the greatest protection to the seller against payment delays. Of the other arrangements available, unconfirmed letter of credit terms are preferable to cash-against-documents or open-account terms. Contracts should stipulate interest payments in case the importers are unable to meet their obligations on time.

Barter and counter-trade, co-production arrangements, deferred payment plans, and self-financing packages are also used to facilitate exports.

E. Types of Available Export Financing and Insurance

Financing: The U.S. Ex-Im Bank provides guarantees and direct loans for U.S. exports to Romania. Since opening for business in 1972, it has provided more than $1 billion in financing. Although most of the credit has been for exports to the Romanian government, private sector financing is available as well. Ex-Im Bank's sub-sovereign guarantee program is expected to become available during 2003-4.

To promote U.S. agricultural exports to Romania, the U.S. Department of Agriculture makes export credit guarantees available to Romania. For FY-02, Romania is eligible for $25 million of GSM-102 available through the following banks: Romanian Commercial Bank, Romanian Bank for Development - Group Societe Generale, Banc Post, Romanian Eximbank, Raiffeisenbank Romania, Banca Romaneasca, Finansbank, Piraeus Bank, and Bucharest-Frankfurt Bank.

Insurance: Ex-Im Bank issues short-term (180 days) coverage for exports to Romania. Medium- and long-term coverage is only available for public sector transactions. Ex-Im Bank provides insurance through its affiliated agent, the Foreign Credit Insurance Association.

F. Available Project Financing

Financing packages for Romanian projects generally include one or more multilateral lenders -- the World Bank (or its International Finance Corporation), EBRD, the European Investment Bank -- plus foreign and Romanian commercial banks. Priority projects supported by multilateral institutions are usually related to infrastructure modernization in transportation, power generation, telecommunications, and environmental protection.

The Ministry of Finance issues Romanian government guarantees for projects up to $30 million. The Ministry of Finance must submit guarantees for larger projects to an inter-ministry committee and the cabinet for approval. GOR guarantees are approved on the basis of feasibility studies, which must contain a clear description of the financial package for the project. Viable private sector projects may be jointly supported by the GOR and IFOs.

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, as well as equity financing through OPIC-supported investment funds. OPIC began operations in Romania in 1992. To date, it has provided $23 million in financing for nine projects and $93.7 million in political risk insurance for an additional five projects in Romania. OPIC can co-finance with other bilateral and multilateral development finance institutions, such as the EBRD and IFC.

Romania became eligible for U.S. Trade and Development Agency (TDA) program funding in November 1991. Since then TDA has provided more than $14 million for feasibility studies, pilot projects and orientation visits covering many sectors of the Romanian economy.

The USG-funded, privately-managed Romanian-American Enterprise Fund (RAEF) started operation in June 1995, with a capitalization of $50 million. The purpose of the fund is to promote private sector development in Romania. It has authority to make equity investments and loans, and to offer technical assistance to promote new private initiatives and privatization, with special emphasis on the promotion of small and medium-sized businesses. RAEF may support joint ventures pairing U.S. investors with Romanian partners.

Financing from international sources also includes grants for technical assistance. The most extensive assistance of this type is from the EU's PHARE program and from the United Nations. Individual countries have also initiated technical assistance programs

G. Banks with Correspondent U.S. Banking Arrangements

All major Romanian banks have correspondent banks in the United States. Foreign banks with offices in Bucharest also have correspondent U.S. banking arrangements. For a complete list of major banks in Romania, see Chapter 11.

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9. BUSINESS TRAVEL

Business Customs

Romanians have genuine regard and admiration for Americans. The quality of U.S. products and services, the efficiency of American management practices, and the reliability of U.S. business partners are widely recognized.

Special customs do not figure significantly in business dealings in Romania; Western business standards apply. As in many other countries, exchanging business cards is expected in business meetings.

Shaking hands is the normal form of greeting (although, as in other Eastern-European cultures, a man may kiss the hand of a woman in greeting); normal courtesies are observed when visiting people's homes.

Flowers are very popular in Romanian culture, and are given for almost every occasion, including name day celebrations, weddings, and visits to Romanian homes. Casual wear is the most suitable form of dress for most social occasions, but attire should be more formal when specified for entertaining in the evening or in a restaurant or theater. The Romanians use the formal addresses of "Domnul" (sir) and "Doamna" (madam) when addressing one another, although first names are used among younger people and in business with English-speaking partners. When dining, it is traditional to say "pofta buna" (bon appetit) before eating, and "noroc" (cheers) before drinking.

Visa Requirements

American citizens (whether tourists or business people) do not need Romanian visas for visits of up to 90 days per half year. Visas for longer stays are available from Romanian diplomatic and consular offices. To exit Romania without problem, the visa must be still valid.

If a Romanian visa expires while the traveler is in Romania or if the traveler's visit extends to more than one month, the visa can be extended/obtained at the Visas for Foreigners Office or the Police Headquarters in any large city. In Bucharest, the Visas for Foreigners Office (Serviciul de vize pentru straini) is located at Str. Luigi Cazzavillan no. 11 (behind the Cismigiu Park).

Americans who lose their passports may contact the U.S. Consulate in Bucharest and request a temporary one. Issuance of this passport may take more than one day. Americans who receive a replacement passport must obtain an exit visa in their new passport from the Visas for Foreigners Office or the Police Headquarters.

Travel Advisory

Romania is a relatively safe country for foreigners. Although on the rise, the crime rate is not as high as in other parts of the region. However, pick-pocketing is a problem, as are some money exchanging schemes, which have become increasingly common. Some of the scams are rather sophisticated, involving individuals posing as policemen. U.S. travelers who have questions about crime in Romania may contact the U.S. Embassy's Regional Security Officer (RSO), phone (40-21) 210-4042, ext. 250.

Major hotels accept both credit cards and travelers checks; however, cash will be required or advisable (due to credit card fraud) for most other transactions. ATMs are available in the larger cities and exchange offices proliferate. Romanian law allows foreigners to bring up to $10,000 in cash into Romania, but requires them to declare any amount above $1,000 as well as any checks they might have upon entry. No amount in excess of that declared upon entry may be taken out of Romania upon departure. Sums larger than $10,000 must be transferred through banks. There is no requirement to change any specific amount of money per day while in Romania. Travelers are strongly urged to exchange money only at banks or at official exchange bureaus, including the many private ones, which often offer the best rates.

General and country-specific travel information can be found on the U.S. Department of State's web site http://travel.state.gov.

The U.S. Commercial Service of the U.S. Embassy in Bucharest welcomes appointments made in advance by business travelers to Romania. The Commercial Service can be reached by telephone at (40-21) 210-4042, fax at (40-21) 210-0690, or e-mail at Bucharest.Office.Box@mail.doc.gov. Information about the programs and services of the Commercial Service is available at www.buyusa.gov/romania.

Holidays

-- January 1-2 (New Year's Day)
-- (Orthodox Easter Monday)
-- May 1 (Labor Day)
-- December 1 (Romanian National Day)
-- December 25-26 (Christmas Day)

Business Infrastructure

Language: The official language of Romania is Romanian. This language, which uses the Latin alphabet and is a Romance language, evolved from the Latin used in the Roman colony of Dacia. English, French and German are also widely spoken.

Air and Ground Transportation: Tarom, the Romanian national airline, serves major points in Romania, Europe, Asia, and North America. International carriers currently serving Romania include Aeroflot (Russia), Air France, Alitalia, Austrian Airlines, Balkanair (Bulgaria), British Airways, CSA (Czech Republic and Slovak Republic), El Al (Israel), KLM (The Netherlands), LOT (Poland), Lufthansa (Germany), Malev (Hungary), Northwest Airlines (operated by KLM), Sabena (Belgium), Swissair, Turkish Airlines, and United Airlines (operated by Lufthansa).

All major cities of Romania have airline service nearby and are connected to the Bucharest hub. Bucharest-Otopeni, Bucharest-Baneasa, Timisoara, Constanta-Kogalniceanu, Cluj-Napoca, Sibiu, and Targu Mures airports are also ports of entry.

In Bucharest, such hotels as Marriott, Hilton, Sofitel, and Inter-Continental provide scheduled shuttle bus service to and from the Otopeni airport, as well as rental car service. Pick-up for major hotels can be provided by the Sky Services company at the Otopeni airport. In addition, taxis are readily available at Otopeni airport for $10-15 to downtown Bucharest. Most taxis have meters, but to be safe, price should be agreed upon prior to hiring a taxi.

Romania is well served by an international and domestic rail system. The daily Wiener-Waltzer Express from Vienna takes roughly 20 hours to reach Bucharest. The current domestic highway network is extensive, but the road quality is poor. Inter-city roads are currently being upgraded. Driving to Bucharest in December-February requires navigating sometimes hazardous mountain passes. Driving after dark at any time of year requires care because of pedestrians, animals, or slow-moving vehicles often encountered on the roadway.

Telecommunications: Local wired-telephony service is automatic and reasonably dependable. There are four mobile telephony operators, two of which (Connex and Orange) have extensive coverage of the country and also offer roaming services in a large number of countries, the United States included. International telephone connections via fixed or mobile telephony are generally good. Romania is seven time zones ahead of U.S.-Eastern standard time.

Housing: Romania offers a wide variety of hotels and long-term living accommodations that can be reserved through international travel agents or by direct contact. Payment for accommodation, meals, and other services can be in lei, convertible currency, traveler's checks, or by major credit cards, although credit cards should be used only in the major hotels. U.S. dollars are easily exchanged and very widely accepted as a payment medium. It is advisable to reserve hotel accommodations before arriving in Romania, especially during peak periods.

Office space is available at business centers and from the many real estate agencies active in all major cities. The best-known business centers in Bucharest include the World Trade Center (Sofitel Hotel), Financial Plaza (Calea Victoriei 15), Union Business Center (Union Hotel), Modern Business Center (Modern Hotel), Opera Center, and Europa Business Center.

Health: Due mainly to the lack of modern equipment, medical care in Romania is often below Western standards. However, more private Western-type clinics are opening each year. Major hotels have doctors on call. In case of an emergency, travelers should go to an Emergency Hospital (Spital de urgenta). Address in Bucharest: Calea Floreasca 8 (tel. 212-2468).

Getting Dollars in Romania: The best way to get dollars in Romania is to bring them, but visitors may buy dollars at exchange booths. Traveler's checks will be accepted for payment of hotel, airline, car rental and railroad bills. Traveler's checks can be cashed for dollars for a fee at major commercial banks.

To transfer funds to and from Romania, travelers can use the MoneyGram service offered by the Romanian Commercial Bank and the Ion Tiriac Bank or the Western Union service offered through Banca Romaneasca and the Romanian Development Bank.

Temporary entry of goods

Articles exempted from duty include: Personal effects and medicine required, in rational amounts, for the duration of the trip, personal jewelry, personal laptops, books, publications and recordings of all types, slides and other similar items for personal use, articles received as prizes or distinctions at official events, alcoholic beverages (2 liters of liquor, 4 liters wine, 4 liters beer), cigarettes (200 cigarettes, 50 cigars, 250 gr. tobacco) for use of individuals over 16 years of age, other articles of all kinds with an aggregate value of 100 Euros.

In addition to the above-listed items, travelers may bring into Romania, with payment of duty, goods in accompanied or non-accompanied luggage with an aggregate value of 1,200 Euros.

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