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World Bank Launched New Partnership Strategy with Romania

The World Bank Board of Directors Thursday discussed a new Country Partnership Strategy (CPS) with Romania, which sets the rationale and framework guiding the program of the World Bank Group in Romania for 2009-2013. As the global financial crisis exerts a huge strain on the Romanian economy and society, the strategy sets out how the World Bank Group will support Romania's efforts to restore sources of sustainable and equitable growth in order to emerge from the crisis on a stronger foothold, while reducing the immediate impact of the crisis on the poor.

According to the WB' statement, in the first few years of the new CPS, the Bank program will center on Advisory and Analytical Activities (AAA) and a programmatic series of Development Policy Loans (DPLs) which will seek to support the government's goals of further EU convergence. Broadly, the CPS puts emphasis on reforming the public sector, encouraging growth and competitiveness, and promoting social inclusion."The new CPS forged out of nationwide consultations with Government and various development partners has a two pronged approach in supporting the Government manage the short-term crisis while restoring the sources of a sustainable and inclusive growth consistent with medium-term EU convergence priorities," said Mr. Benoit Blarel, World Bank Country Manager for Romania. " In times of uncertainty like the current global financial crisis, inclusive growth calls for greater social protection for the poorest of the poor, to help them cope with economic shocks."

The Public Sector Reform aims to reduce fiscal vulnerabilities, modernize and improve the performance of the public administration in providing key public services, in making effective use of public resources, and in responding to the needs of the Romania population, in particular the poor and vulnerable. Further, to foster growth and competitiveness, the CPS will help right away to develop crisis-management measures in the financial sector. The Bank will also offer support for a resumption of growth through an improved business environment, enhanced skills of the labor force, better infrastructure network and more efficient agriculture. Finally, the CPS will seek to protect the poor from the adverse effects of the crisis and work to promote social inclusion and regional development.

The Government of Romania has moved rapidly to take fiscal measures aimed at containing the impact of the crisis, to mobilize an international financial package spearheaded by the IMF, the EU and the World Bank, and to resume the structural reform agenda.The World Bank Group intends to complement and support this program by helping the Government to implement structural reforms to mitigate the crisis by reducing social and economic vulnerabilities, and by putting in place the basis for sustainable economic growth.

The CPS recognizes the leading role of the EU as main partner of Romania, and the lead of the IMF in putting together the crisis-support package. At the same time, the CPS builds on the significant value-added which the Bank can bring to Romania's policy agenda, especially in the design and implementation of structural reforms. The Bank will work in areas not or insufficiently covered by EU cooperation (e.g. health, education, social protection, pensions, public administration); can help the Government assess and design implementation of plans to achieve the acquis; can support cross-sector integrated solutions; and can provide a global perspective on experiences with reform.

IFC will work with other IFIs on helping recapitalize major banks and offer trade finance. Additionally IFC will continue to work closely with clients to help them get through these challenging times and selectively provide support in underserved sectors and activities including climate change, health, agribusiness, micro, small and medium enterprises and frontier regions of the country. These efforts will contribute to speeding up Romania's economic recovery and boost job creation while reducing impact of the financial crisis.

The Bank has played a significant role in supporting Romania's transition up to EU accession, both in terms of its financial and intellectual contribution to the reform efforts. Between 1991 and 2008, the World Bank supported a total of 54 Bank projects in Romania, with a total commitment of about US$5.5 billion. Romania's current World Bank financed portfolio consists of 15 active projects, and several non-lending analytical and advisory activities that are in progress. In addition, a Development Policy Loan series amounting Euro 1 billion over 24 months is envisaged as part of the IMF-led multilateral financial support agreed with Romania.

Over the last five years poverty has been reduced as a result of strong growth, social inclusion has improved as a result of increased services targeted towards vulnerable groups, regional disparities have narrowed in most of Romania's regions over the CPS period. To reduce the disparities in knowledge between lagging and central regions, a Bank-supported Knowledge Economy project has provided about 1.8 million people (or 44 percent of the most knowledge-disadvantaged communities) with access to information communication technology through the establishment of 255 Local Community electronic Networks. The project was championed by local governments and was recently awarded the European Commission's e-Inclusion Medal Award 2008.

Romania has made significant strides in reforming the financial sector, in energy sector reform and restructuring, and in improving the business environment. The Bank played a significant role in the development of Romania's energy sector, helping Romania to become a regional leader in South East Europe in energy sector reform and restructuring. The Government's 2003 Energy Sector Road Map, prepared with the support of the World Bank, was annexed to the EU acquis chapter dealing with energy. A satisfactory regulatory framework was put in place and bill collection issues addressed, allowing Romania to privatize successfully some electricity and gas distribution companies. Electricity markets totaling about 9.5 million consumers were liberalized, and households and companies can now exercise their right to select their energy provider.

A landmark Mining Closure Project helped to reduce the burden of the mining sector on the state budget. Between 2002 and 2006, the Government closed 235 mining units, while coal output barely changed. The savings made will be used to create new jobs and enterprises in more profitable enterprises. The Romanian Government plans to spend EUR411 million in state aid over 2007-2010, while gradually reducing subsidies to the coal sector.