|  08.11.2012

Reforming mindsets, starting young

In local financial markets with direct impact into the overall economy, there is the significant threat triggered by the risk of public deficits spinning out of control

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EDUCATION, AN ARROW WITH HARMING LONG-TERM EFFECT IN ECONOMY


In local financial markets with direct impact into the overall economy, there is the significant threat triggered by the risk of public deficits spinning out of control


But, also, equally important, a solid economy cannot be further developed in the more general and volatile context of the erosion of youths' trust in the effectiveness of the Romanian economy. To this, add the reluctance of some to stay, work and save their money in this country along with the lack of motivation of many of them to bother paying the time and effort of studying as our parents and as we did in our teens (see the poorer and poorer baccalaureate results as a major discomforting effect of this ongoing process of quality deterioration in the future Romanian labor-force); this bears the high risk of Romanians losing their current prestige of generally highly trained people; it is well known that the major resource of a country is the quality of its people, the best example being Japan – a country with no relevant natural resources, isolated on an island, which has become a major world power for decades despite its currently aging population thanks to this quality, hence the top importance of this threat for our economy.

 

STARTING ALL OVER: THE IMPERATIVE NEED FOR INSTITUTIONAL REFORM


There are no bypasses to short-circuit these obstacles; they must be taken headlong. This is to say that there is only one recipe: institutional reform. A full fledged such reform means all of the following:


- judicial system fully independent from central executive institutions,

- interdiction for political/party affiliation of the leadership of any public operating institution or agency; political residence should be relevant only at central executive & legislative as well as public local levels of governance;

- merit-based election of staff in operating institutions/agencies, both managers and regulars (for instance proposals for top judges should be made solely out of judges with many years of experience relevant for the job, the head of the national fiscal authority should have a portfolio of large tax evasions uncovered etc. etc.);

- introduction of public servants’ objectives and appraisals on an annual basis;

- effective controls for controllers, e.g. it is known that Accounts Court (Rom, Curtea de Conturi) has a controlling function over the activity of public institutions; thus, to point just one example, there should be somebody under the subordination of the executive power to control what kind of car drives and in what kind of house resides the chief inspector of the Accounts Court (Ro: Curtea de Conturi) in, say, Gorj county, etc;

- IT centralization of all relevant data of the population and of companies made available to all public authorities on a need and restrictive basis (implementation of a national ERP software so to say);

- full financial transparency of public commercial contracts.

Effective EU funds absorption would merely be one ensuing benefit of the many.

 

FIVE MAIN SECTORS DEMANDING REFORMS AND FASTER DEVELOPMENT


The bedrock of Romania’s future stays with institutional reform – the key ingredient so that institutions can cooperate with and service the private sector effectively. Infrastructure development makes a must so requisite that it has already become a cliché. After institutional reform and infrastructure, Romania should set 5 strategic areas of long-term development: First of them, is capitalizing on Romania’s IT human resources and motivating IT people abroad to return to start-up businesses here. The agriculture has a large potential if it is being rightly used, developing high added-value brand food products included. Related to nfrastructure, the developing transport via Corridor IV through the port of Constanta which should be promoted to a major commercial gate of Europe would bring a second major benefit of Corridor IV becoming a "milky way" of burgeoning industrial parks along its way. Another strategic area that has to see an urgent reform is bringing up tourism with a specific focus on the agro and balneal segments. The last but not least, encouraging fiscally SMEs in the manufacturing sector is one of the measures that triggers all the economy benefits with it. Other sectors, education and health care too, would follow through as the 5 above are pushed forward.

 

SUBSTANTIVE LENDING RESUMING, SYSTEMIC-DRIVEN PHENOMENON

 

It means it will occur only when definitive steps are taken by euro-zone governments to relinquish part of their individual sovereignties in order to establish a fiscal union. Romania currently undergoes a foreign currency credit crunch which has been abated by the NBR’s interventions and by the depreciation of the national currency. Therefore, it is my opinion that there is little scope for specific measures that could be taken domestically to revert the current bank borrowing trend, even if the government implements the 1+1+5 vision enlarged upon above which would bear fruits only in the long run. I know this is a frustrating wait-and-see stance that I am implying but that is the reality.

 

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