CFR Marfa, a million-dollar affair

The Government in Bucharest managed to make good on its promises by auctioning off the majority share package in CFR Marfa, the Freight Division of the Romanian Rail Company.

Florentin Căpitănescu, 21.06.2013, 15:41

The Romanian Government can finally take a breather after it managed to find a suitable investor willing and financially able to take over the majority share package in CFR Marfa, the Freight Division of the Romanian Rail Company. The headline-making tender was won by the only bidder remained in the race.

The winning bid was made by a local company, which in exchange for 51% of the shares pledged to pay the state some 200 million euros and to invest approximately the same amount in CFR Marfa. For the Romanian Government, the privatization was not just an effort to get rid of a loss-incurring company.

Economic pundits say the privatization of CFR Marfa was a must, given it ranked high on the list of measures Romania has committed to introducing as part of its standby agreement to be signed with the IMF this summer. In recent years, the International Monetary Fund has had a great say in matters of policy- and decision-making in Bucharest.

Meanwhile, the 10,000 CFR employees fear the privatization, although hailed as a great success by the authorities, especially Prime Minister Victor Ponta, will trigger a massive wave of redundancies.

History shows that in nearly every large-scale privatization process carried out in post-communist Romania the former state-owned companies decided to streamline their activity by laying off some its employees after being passed into private hands. In an attempt to dispel concern, the current Government, unlike its predecessors, has announced it would soon take a decision by means of which some one thousand CFR employees would be given severance payments.

For the time being however, employees continue their protests in front of the Transport Ministry building, accusing the authorities for their lack of transparency in the privatization process. While the deal itself does not raise any questions with regard to its correctness, the remarkable ascending path of the new main shareholder at the Romanian Rail Company on the transport market in Romania has long attracted the media’s attention. Founded in the early 2000s, the company led by the controversial tycoon Gruia Stoica has miraculously managed to take over the entire business at CFR Marfa, from its contracts and employees to its executives and rolling stock.

And so in a very short period of time Stoica’s company turned from a small startup into an influential and very profitable company. Whereas so far the company owned some 30% of the entire transport market, right now its market ownership has risen to some 80%. With this move the Romanian transport market risks turning from an oligopoly into a monopoly, which is why the privatization has also come to the attention of the Competitiveness Council.