Romania has transformed tremendously in the past decades. Like its neighbors, the former transition economy has decisively committed to European Union (EU) integration. This has opened up great opportunities for both its citizens and its economy.
This transformation has had a positive impact on agriculture and rural areas. The European Common Agricultural Policy provided a sound policy framework, emphasizing investment in agriculture and rewarding environmentally friendly farming. It also drove institutional change by introducing modern IT systems and practices for the management of EU funds, as well as by committing €24 billion for the Romanian farmers and rural dwellers through 2020.
Yet, the transformation has proven unequal in the agriculture and rural sector, as well as in the sector administration.
I was in London last week for a conference hosted by the European Commission and the London School of Economics and Political Science. Its purpose was to take stock of what has worked in regional development in the European Union (EU), look at existing institutional ingredients, and explore the policy mix that could help bring Europe’s lagging regions closer to the center of economic development.
Eight years on from the start of the global economic crisis, close to one quarter of the European Union’s population remains at risk of poverty or social exclusion. But one group in particular stands out: Europe’s growing and marginalized Roma population.
The equivalent figure for Roma children stands at 85 percent in Central and Southeastern Europe. Living conditions of marginalized Roma in this region are often more akin to those in least developed countries than what we expect in Europe.
When development practitioners such as ourselves think of poverty, the EU is not what comes to mind first. While it is true that average incomes are higher in Europe than in most regions of the world, it is also true that the 2008 global financial crisis had a huge impact on the welfare of the most vulnerable in many countries in the region.
Over the past year, people living in Bucharest, the capital of Romania, are seeing more bike lanes and metro stations in their city than before.
There are now about 122 km of cycling paths and four metro lines with 45 stations. It is a welcome sight in a city that suffers from air pollution and where many people tend to use private vehicles. Using bikes and the metro is cleaning up the city and, for some, is a quicker way to get around. And, as its popularity increases, it will likely lead to lower greenhouse gas emissions. Financing for this new development comes in part from the sale of carbon credits to Romanian power companies by the government, a welcome revenue stream for a stretched city budget.
It was the first country-focused launch in an EU member state and brought together academics, business executives, regulators, journalists, former and current policy-makers to discuss the digital agenda and its implications for Romania’s EU2020 targets, growth and development.
But this launch is not the only reason why Romania stands out.
The country actually represents a paradoxical case study in terms of digital transformation.
Romania boasts nine of the world’s top fifteen cities with the fastest broadband internet, yet over 40% of the population is at risk of poverty or social exclusion – the highest rate in the EU.
I first moved to Romania in 1998. It was a very different place back then. Stalls of CDs, clothing, pretzels (“covrigi”), and inexpensive electronic gadgets walled the sidewalks of a street that was the artery connecting my neighborhood with the more central parts of the north-eastern city of Iasi.
A sense of hardship was in the air. The city was grey. The collapse of the communist regime left many struggling for a better life in a new system that was striving for the rule of law, democracy and a free market economy.
As a 15-year old student back in those days, I was able to cross the border between Moldova and Romania with my school card. It had a glued color photo of me and my hand-written grades. One time, a border guard asked me if I was a good student. Modesty was not a choice if you wanted to cross the border, or so I felt at the time. He skipped through my grades, smiled and wished me a safe journey.
I moved back to Romania on February 1st of this year. This time as a 33-year old World Bank staff. It has been 18 years, but now I can call Romania home again.
Reeling from a long year of work and toil, December is the month we turn toward our families and friends with joy and gratitude. December is a month of great generosity. Some of us have so much to give that we also look outside our families and think about those who are hungriest for warmth, joy and support. Here in Bucharest it is common to step-up our efforts and bid for charity. Initiatives to help children, including support for those in foster homes and orphanages, abound.
Romania’s recent history saw the country register very high rates of child abandonment. In the early ‘90s, Romania’s child protection relied on large institutions - which offered poor conditions to more than 100,000 children – and we know these children are some of the least fortunate members of society. Nowadays, Romania has not only halved the number of children in the child protection system but it is also promoting a major shift away from institutional care towards more individualized and efficient forms of care, such as extended family, foster families, and family-like homes.
Still, psychological strains and tragedies persist - even in this newer, more modern system. Recently, a 14 year old girl from a child protection center decided to take her life because she had been returned to the orphanage after living with a foster mother for 11 years. Her foster mother had fallen ill and the family could not manage to care for her and the other children at the same time. In her suicide note, she told her adoptive mother she loved her and that she couldn’t stand the fact that she was taken away.
For me, an adoptive mother of a now 23-year-old daughter who was abandoned at birth and that joined my family from an orphanage in Manila - first as a foster child and then as an adopted child - this story brings home many memories and a stark reminder that the agenda is still out there.
The European Union (EU) has settled into a “new normal” of mediocre growth, with real GDP set to expand by about 2 percent in 2015 and in 2016. With sizeable unemployment and still not full capacity utilization, this weak pace of expansion is a clear reminder that there is a more profound and longer-term crisis in Europe than the economic and financial turmoil of 2007-08, the recession in 2012, and the challenges of the southern cone that required large International Monetary Fund programs.
Few of the challenges that have plagued Europe this century have been resolved. Government spending and debt are up, yet potential growth is weak. Fixed investment has declined substantially to lows not seen in decades. Medium-term risks are elevated, but with fiscal space greatly reduced and with monetary policy in unconventional territory, policymakers have precious little ammunition to tackle any future shocks.
In March 2014, with support of the World Bank, a Delivery Unit (DU) was set up in the Romanian Prime Minister’s Chancellery. Its mission: Get better results quicker for the PM in four priority areas.
Tax administration was one of them. The PM’s concern was the pain of paying taxes. Offering online services, for the first time, was one of the ways to decrease the cost of compliance. The DU estimated that they could save the taxpayer up to 12 days a year of waiting at the tax office.
The DU’s role was to plan for these improvements together with the Romanian Ministry of Public Finance and the Tax Administration Agency (NAFA). In a Delivery Agreement, the specific targets, metrics, activities, deadlines and responsibilities were spelled out. The DU was to then monitor the progress monthly against an agreed trajectory and help unblock problems in implementation.
In September 2014, the NAFA launched the online taxpayer platform called Private Virtual Space (PVS). It allows taxpayers to file their tax returns, get their tax bills and see their payments. The target was to enroll 30% of the eligible taxpayers by December 2015. Though the DU tracked progress monthly, the enrollment rate was still at 0.6% in June 2015. Clearly, the monitoring on its own did not help.