The Paper Owners

The former owners of the houses nationalized by the communists will receive shares at a new investment fund, instead of money and houses. Under the name of "The Property", the fund will be made of approximately 100 companies whose shares are still owned by the state and of Romania’s book debts. Their value will be set by the Stock Exchange, which is currently in straight fall.

Only a quarter of the buildings abusively taken by the state during the communist regime can be given back. For the rest, more than 80,000, lands, factories etc., the state offers compensations. They are not money but shares from a fund specially created for this. The state should offer the former owners sums between 5 and 8 billion euros. They will be offered shares from companies where the state is the main stockowner. There are also the book debts that Romania has to get back from Iraq, Syria and other states.

THE LAW

In order to show its decision in solving the property problem, the Government included the Property Fund project in the legislative package regarding the property and the reform of justice. For it, the Executive took full responsibility in front of the Parliament last Tuesday. According to the law, the Property Fund will be made of 100 companies, like BCR (the Commercial Bank of Romania), Petrom, the Romanian Post, Electrica, Distrigaz, Romtelecom, CFR (the Romanian Railways), Tarom (the Romanian Airlines) and Alro.

4% FROM BCR

"The Government will sell up to 62% of the Romanian Commercial Bank capital and the Property Fund is to receive 4% of the bank’s shares", the ASAC (Association for the State’s Assets Capitalization) president, Gabriel Zbarcea, stated. He says that if the entire package is sold, the value of the 4% will get to the Property Fund, according to the law.

THE ENERGY

The energetic companies are the safest attraction of the "Property" Fund, the shares of which will serve as the compensation for those that cannot have their buildings back. The 15% packages with the shares from Transelectrica, Transgaz and Romgaz, which are to be transferred to the fund, are remarkable. All the 8 Electrica subsidiaries (Moldova, Oltenia, Dobrogea, Muntenia Nord, Muntenia Sud, Transilvania Sud, Banat, Transilvania Nord), Distrigaz Sud and Distrigaz Nord will contribute with 12% each, Hidroelectrica and Nuclearelectrica with 20%, and the energetic grounds from Turceni, Craiova and Rovinari with 15%. Petrom, Oil Terminal and Conpet will bring 10% of the shares owned by the state.

BOOK DEBTS

On the initial list of the book debts that are to be transferred to the "Property" Fund there is also Romania’s debt coming from the Ukrainian Krivoirog factory, with approximately 10%. There were also the state’s external book debts coming from Sudan, Syria, Mozambique, Libya, the Guinean Republic, the Cent African Republic, Congo, Nigeria, the Democratic Republic of Congo, Somalia, Tanzania, the Korean Republic, Cuba and the Mongolia Republic. Other state’s debts towards Romania, which will finance the investment fund for the compensations of the nationalized buidings’owners, will be recovered in their present market value. For example, Cuba’s debt towards Romania is now half of its real value. Even so, it is very hard to believe that these debts will be recovered soon.

THE IRAQI SURPRISE

By far the debt, which is the most difficult to recover is the one from Iraq. On Tuesday, when the Government took full responsibility for the entire law package regarding the property and justice, Iraq’s debt towards Romania reappeared. In 1990, Iraq owned Romania 1.7 billion US dollars, say the Romanian authorities, and this comes with an interest of 900 million US dollars. If the state benefits from an 80% cutoff, its debt towards the Club in Paris, Romania might get approximately 38.5% of the Iraqi debt, the minimum sum to be recovered reaching 663 million US dollars, including here the capitalized interests. According to a statement of the Ministry of Public Finances (MPF), this evolution will happen if Iraq benefits from three steps of reducing the debt, having a total of 80%, the last one is conditioned by a stand-by agreement with the IMF. In case Iraq benefits from only two discounts, the sum recovered by Romania will be double.

OBJECTIONS

Its potential beneficiaries vehemently contest the "Property" Fund, this solution being regarded as skeptical by the Ministry of Finances itself. The Association of the Owners Abusively Dispossessed by the State (AOADS) contests the way in which the Government is trying to solve this problem, considering the project as unconstitutional. "The Government is leaving the impression it is making a massive repayment in kind when it is actually referring only to those buildings that are stipulated in the 16th article of Law no. 10 in 2001, and these are schools, hospitals, embassy and party headquarters and so on. These buildings, approximately 5,000, are only 5% of the 128,000 buildings requested by the former owners", Maria Teodoru, the AOADS president, said.