Romania’s parliament voted on June 6 to create an investment and development fund which will see the Romanian state’s shareholdings in 33 companies merged into one administrative unit.
“Similar investment funds in other European countries have helped in the development of new infrastructure,” said Liviu Dragnea, the leader of Romania’s ruling party, the PSD. “The fund will generate many new jobs and will contribute to the development of the economy.”
The fund includes shareholdings in some of Romania’s largest companies, many in the field of energy, including Hidroelectrica, Nuclearelectrica, Romgaz, OMV-Petrom and Engie. Other companies which will come under the umbrella of the fund include the Loteria Romana (the Romanian National Lottery), CFR (Romanian Railways) and Posta Romana (the Romanian Post Office).
Formally known as the Fondului Suveran de Dezvoltare şi Investiţii (FSDI), the new fund – worth 2 billion euros – will be directly controlled by the Romanian cabinet, something which has drawn fierce criticism from the country’s opposition.
“It’s bad,” said Stelian Ion, an MP from the opposition Save Romania Union (USR). “This is the same model used in Greece, when they needed liquidity shortly before their economic crisis. These companies will no longer be subject to rigorous public procurement regulations, meaning that they can borrow as much as they like. The money will then be used to pay public sector salaries for which there is no money left in the kitty. What’s more, this fund can be used to camouflage public debt, allowing the government to make itself look good on paper. In reality, these companies will be loaded with debt they can’t repay and they will end up at the mercy of external creditors.”
Other causes for concern include a lack of any actual investment strategy or performance indicators for the new fund. According to the final version of the law as voted by parliament, these will now be set by the fund’s sole shareholder, the Ministry of Finance. In an earlier version of the law both the Romanian National Bank (BNR) and the Financial Services Supervisory Authority (ASF) would have had a say in how the fund was run. Their involvement was deleted from the draft law before the vote on June 6.
“These are powerful companies which could sustain the Romanian economy for many decades,” said Mr Ion. “Instead, the chances are that they will simply no longer exist in a few years.”