Romanian Economic Reforms Move Slowly

CARMEN KAPPLER'S voice trails off as the train car pulls out of this Eastern European capital heading West.

"I am not looking forward to heading back to Germany," the 24-year old doctor says. "I want to stay home, but it is a very bad time here. There are no jobs."

In Botosani, 220 miles north of Bucharest, Mayor Dumitru Chiriacescu puts on his best face about the prospects for his city, hit with 20 percent unemployment. "Yes, we've laid people off here, but we haven't closed any factories yet. You have unemployment in the West, too."

Mr. Kappler's resignation and Mr. Chiriacescu's optimism are familiar themes in Romania, where the government's economic reforms are forcing many to make painful decisions.

Three years after the fall of Communist leader Nicolae Ceausescu, reform has proceeded slowly and prosperity for most Romanians remains elusive. Romanians earn an average of $50 a month, one-fourth the average Czech wage. Unemployment is 9.6 percent - three times the Czech figure. Inflation was 200 percent in 1992, and the government projects it will be between 70 and 80 percent this year.

Badly needed foreign aid and investment have only trickled in. Total foreign investment since 1990 is just $600 million, far below the $3 billion-plus figure in Hungary and the Czech Republic.

Many Romanians interviewed said they or their relatives were leaving the country to seek jobs elsewhere.

"The [reform] process has moved slower than we expected," concedes Cristian Popa, a government advisor on privatization. "But we believe we are about to turn the corner."

Western observers puzzled by Romania's difficulties can look to the Ceausescu era for much of the blame. So deep was the desire to pay off its foreign debt, the Ceausescu regime sold domestically produced goods abroad far below cost to obtain hard currency. In doing so, the country ignored renovating factories and increasing wages. Quality and worker productivity now suffer.

"Our economy is going down and down and down," says Trajan Dobrej, editor for social issues at Romania Libera, a Bucharest daily that often takes a critical view of the government reform plan. "Many factories in Romania can't work because they have no market. This is our biggest problem."

Romania's path to privatization differs from other Eastern European countries. It has opted for a slower pace than the Czech Republic and Poland. Prices of most goods have been freed since May, but wages have not kept up with the price hikes. Inefficient industries, such as petroleum and steel, are still subsidized by the government.

Late last year, the government established state and private ownership funds to hold and manage the equity of the 6,300 enterprises due to be privatized. A shortage of revenue from the privatization process, however, has delayed the pace of reform to the point where only four companies had been privatized by last November.

What could also hamper the reforms is a restless labor force, uneasy over price hikes and a growing unemployment rate. More than 1 million Romanians are out of work, and Mr. Popa predicts the jobless rate could reach 14 percent by year's end.

But Finance Minister Florin Georgescu sees no other path for Romania. "We are confident that this is the right way."

Hindering foreign aid is Romania's international image as a backward Balkan country. In the country's first free elections in May 1990 after the fall of Ceausescu, Ion Illiescu, a longtime Communist Party official, was elected president.

Citing fundamental political abuses such as the government monopoly on television, the US Senate has refused to grant most-favored-nation-trading status with its lower tariffs.

Some political observers say the political changes under Illiescu are superficial and many former Ceausescu officials remain in office.

Romanian government officials are nevertheless mounting a drive to woo more foreign investment.

"I'm not so sure the view the West has is based on reality, but based on the situation here 10 years ago," says Marcel Dinu, state secretary in the Ministry of Foreign Affairs.

Mr. Dinu points to the presence of more than 100 political parties and hundreds of publications as proof of a lively, developing democracy.

Finance Minister Georgescu and other government officials will begin negotiating with the European Community this month for a $400-million loan.

Popa says the country is "gaining momentum." He proudly points to 15,000 joint ventures. He calls 1993 "the most crucial year" for Romania's economic reforms, and believes the country is about to cash in on lucrative foreign investments. Romania will attract between $1 billion and $2 billion in foreign investment annually by 1995, Popa predicts.

To lure Western capital, the government is billing the country as politically stable, with a well-trained work force, and an untapped consumer market. Popa, Geogescu, and others say the comparatively low wages Romanians earn are an incentive for Western entrepreneurs.