A look at the Romanian defense industry.
The global economic crisis has obliged world states, including NATO members, to drastically reduce their spending on defense systems and to replace economic efforts with diplomatic ones. However, as of late, Moscow’s more and more inflexible stand has forced experts to reconsider the role of the defense industry. Recently the Romanian Government has decided, under an emergency ordinance, to cancel the debts of 15 companies dealing in the defense industry that produce and trade weapons, ammunition and military materials. The debts amounted to 250 million euros. The measure was accepted by the European Commission, says Prime Minister Victor Ponta.
The emergency ordinance says that there are no sources of funding to pay off those debts, therefore the debts need to be cancelled in order to avoid the bankruptcy of companies in the defense industry, which will prevent them from providing the capabilities necessary for protecting “in real time” the essential interests and national security. Romanian Economy Minister, Constantin Nita, said the following in an interview on Radio Romania:
“Economic operators in the defense industry report budgetary arrears and that is why there are no financial resources to pay off these debts, especially in the state sector. Secondly, the current geopolitical regional context requires the strengthening of the country’s defense capacity through immediate actions for economic and financial recovery of those economic operators. Consequently, from a financial and organizational point of view, according to the national security strategy, we need to approach this issue with utmost responsibility. That is why the government has adopted this emergency ordinance that benefits only state-owned enterprises that have debts to the state. That will entail a new re-positioning of those companies in the Romanian economic landscape, they will be able to be assessed in terms of efficiency criteria and of course to sell their strategic products both at home and abroad”.
The Minister of Economy has also provided details about the companies in this field.
“There are a total of 15 companies and I would like to mention only the most important ones, Tohan, Carfil, Metrom, Cugir, Plopeni, Sadu, Mija, and Moreni. They produce for both the domestic market and for export. Unfortunately their domestic sales aren’t that big but we hope the government will soon regulate the domestic production in the second half of the year. From an organizational viewpoint, if some of these production units aren’t effective, we’ll either dismantle or include them in larger plants in order to render them economically effective. There is also the pending issue of their business debts, and in this case the government cannot intervene, as the state is the majority shareholder in this case. Our attempt is to streamline these units so that they can get loans from banks and resume their output.”
Economy Minister Constantin Nita has also referred to the new legislation enforced by the government.
“Of course this ordinance and all computation have been done jointly with representatives of the Finance Ministry. That doesn’t mean that the managers of those companies should remain passive and wait for the state to step in again and cancel their debts. They will have to make serious efforts to further streamline those companies.”
In turn, Gheorghe Baleanu CEO with the Mechanical Plant in Mija, explains that the products of the defence industry are in low demand on the domestic market.
“The demand for these products from the armed forces or from the defence sector in general has been quite low. We had the production units as stipulated by a resolution of the Supreme Defence Council and that’s why we have accumulated debts. The Mechanical Plant in Mija didn’t benefit from significant debt exemption. Some of the debts we had to the Dambovita County Employment Agency was cancelled through the payment of redundancy wages following the lay-offs imposed through the streamlining process but that was all.”
Romanian Defense Minister Mircea Dusa himself has admitted that in the past the Romanian Defense Industry was neglected, although after the country’s joining NATO, Romania pledged to earmark 2% of its GDP to defense. Minister Dusa said that in 2014 the budget is bigger than in the previous years and this summer was estimated at reaching around 1.5% of the GDP. The minister said that most part of that money would be used for streamlining and equipping the Romanian Armed Forces and for the Romanian Defense Industry.
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