Monday, 18 December 2017

28 years from the bloodiest regime change in Eastern Europe. Has Romania made it?

Twenty-eight years ago the combination of genuine popular anger, regional historical evolution and unacknowledged support from western and eastern intelligence agencies have delivered the most chaotic and violent regime change in Eastern Europe. Over 1,000 people died in the events but Ceausescu, Romania's Stalinist dictator was deposed of power and summary executed (on Christmas Day) and the country entered a long, tortuous and sometimes painful period of transition to a political democracy and a capitalist liberal economy.
All this years later, what many people know about Romania went from "small place behind the Berlin Wall", Ceausescu, Nadia Comaneci and Dracula to "small place in Europe", Ceausescu, Nadia Comaneci, Dracula, Hagi, maybe Simaon Halep (WTA #1 currently), poverty, corruption and not much else. This, a recent read and references to a World Bank report prompted this little posting, a first for me on Facebook.
In spite of disastrous birth rates and devastating emigration (second only to the civil-war torn Siria), Romania is by a margin the seventh largest country in the EU by population, behind the big four (Germany, France, UK and Italy), Spain and Poland. Think Ohio in the US on a relative basis and New York in absolute terms 19 to 20m).
In 1992, GDP per head was $1,100. This year will be in excess of $10,000, a more than respectable increase, up there in top 10 with China, Vietnam, etc., but Romania is significantly more prosperous that any of these (e.g. China is at $8,000 per capita). This 800% increase came in spite of often incompetent and sometimes corrupt leadership, in spite of sometimes challenging regional and international circumstances, in spite of often shattering social evolution. By comparison, there was just few tens of percents expansion in wealthy EU economies (Germany 59% and Italy 32%) and a global weighted average of around 120%. For optimists believing that economic and political transition and reform is an irreversible, ultimately successful process, just look at neighbouring Ukraine (just 54% for this whole quarter of a century, to just $2,200).
Sure, there are meaningful regional differences within Romania. Bucharest and the wealthier regions have grown faster than China and are now around six times wealthier that the poorest region, a regional discrepancy akin to Spain's. The poorest regions have grown even below the global average and have registered incredible losses of population - they all went to pick strawberries in Italy and Spain, paint houses in the UK and write software all over the place. Bucharest is now on a GDP per capita basis similar with Western Europe in the '90ies, while the wealthier parts of the country are at the '80ies level.
Hyper inflation in the '90ies, the recent economic crisis, numerous examples of questionable economic management have all eaten away at the even higher growth potential, but have not altered the fundamentally solid economic foundation. Public debt, in spite of tripling in the last decade or so, is still a fraction of what most other EU countries have.
EU and NATO membership certainly helped, although not always as much as once hoped and certainly sometimes in the wrong direction. Healthcare and education are still below par, infrastructure is often lacking or problematic, yet Romania decided (or was asked to decide) to spend $3.9 billion buying Patriot missiles. Although there are examples showing that rule of law and human rights sometimes seem an afterthought (Romania has a disastrous record at the European Court of Human Rights), the country is unmistakeably European in foundation, but still displaying emerging markets growth and development prospects and potential. Fairly well educated, cosmopolitan urban population, high industrial and consumer potential sustained by productivity and an interesting social and cultural mix make this potential still more attractive.

So, tick the "successful transition" box next to Romania's name and think about spicing up your  diversified investment portfolio. Or even better, go and visit.

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