Romania’s another failed state privatization and the political circus around it

Romania’s another failed state privatization and the political circus around it

 

By Daniel Stroe – Bucharest

Romania has failed to privatize CFR Marfa, the state owned rail freight transport company, after the winner in a controversial bid four months ago failed to produce the money within the deadline, leaving politicians trading barbs over the responsibility of another failure in selling state debt-ridden companies.

CFR Marfa was sold in summer to Grup Feroviar Roman (GFR) held by Gruia Stoica who had to pay 170 million Euros for 51 per cent stake until yesterday, in a hasty privatization under the terms of an agreement with the International Monetary Fund.  The deadline was 60 days since the Government published the privatization decision in the official gazette.

In return, the Ministry of Transport warned it is now seeking to keep the 10 million Euros guarantee GFR deposited when the tender started. In his part, Gruia Stoica argued the acquisition failed because the Ministry of Transport did not meet the condition of turning the company’s debts into stakes, even though the ministry refuted this.

Also, he said, CFR Marfa’s creditor banks did not approve the change in the company’s shareholder structure while the state competition watchdog failed to issue a ruling in time. But the Ministry of Transport underlined the state competition watchdog didn’t have its say because Gruia Stoica filed the application too late.

The privatization of CFR Marfa was wrapped in controversy from the very beginning, the Romanian government facing accusations brought by two bidding foreign companies which withdrew from the process. OmniTRAX, the largest private rail operator in Northern American, and the joint venture between the Romanian Transferoviar Grup and the Austrian Donau Finanz GMBH & Co KG both drop out of the race complaining about the lack of transparency of the privatization process and insufficient time to fully prepare the bidding file. Thus, GFR was the only company left in the competition. Many analysts accuses that, for political reasons, the privatization process was well steered so that GFR crosses the finish line alone.

The Romanian President Traian Basescu has constantly voiced distrust about the privatization and warned late September Gruia Stoica doesn’t have the money and therefore is looking for tricks to buy time. He reminded the Romanian Government led by his rival Victor Ponta was supposed to look for a strategic investor, with a strong financial base which can support subsequent investments, in its quest to privatize CFR Marfa.

Romanian PM suggested the privatization failed because state officials feared possible repercussions from the National Anti-Corruption Department (DNA), an institution which he claims is controlled by Basescu and therefore used a means of pressure. But Basescu replied that as long as a state official did not break the law there is no reason he or she fears DNA.

This is the second failed privatization since the Ponta coalition government was installed last spring. Selling CFR Marfa and Oltchim, both botched transactions in the end, was an obligation under the deal with the IMF which puts the government in Bucharest in a weak spot in relation to the international creditor and shows it cannot assume full responsibility for such actions. And certainly this doesn’t bode well for another important privatization scheduled for next year, namely Electrica SA, the state power distribution company.