Romanian subsoil and forests go to export

The over 25% increase in Romanian exports during the first trimester of this year as compared to the same period of last year is far from being a reason for joy, since the structure of this increase merely shows that the Romanian economy has managed to sell on the foreign market even more clothes, non-processed metals, wood and oil.

“The structure of the increase continues to reflect the type of the Romanian economy: extensive development, based on cheap labour,” says economic analyst Alexandru Tasnadi.

Almost 85% of the increase of 535 million dollars, which brought exports on the first quarter to almost 2.4 billion dollars, are given by a larger volume of sales of textile-leather products, common metals, wood and paper products, minerals, chemicals and plastics.

One quarter is due to the growth in sales of textile-leather products, which got to 816 million dollars, equivalent with a third of total exports.

The textile and leather products industry is characterised by the smallest salaries within all economic branches of Romania and this explains the competitiveness of Romanian products, the more so as people work in lohn.

The lohn is a partnership between domestic and foreign companies through which the former provide the labour force and the production space, while the latter supply the raw material, technology and know-how, while products are sold under the brand of the foreign company.

As a result, it is not the product in itself that is sold, the product acknowledged as such by customers, but a manufactured raw material, as commercial battles of the last decades have focused rather on distribution and marketing, that is on the renown of the brand, and not on the substance and quality of products.

Moreover, in the case of exports of common metals and products derived from them, meaning cast iron, steel, aluminum, with a weight of 17 percent in the increase, it is no longer a question of the renown of the make, but at least of the product, considering the newly discovered case of new rail sold as scrap iron, in Constanta.

Exports of iron, cast iron and pure steel increased by 135 million dollars in 1999 year-on-year, and supposing the same structure is to be retained within the statistical group, they rose by 50 million dollars on the first quarter of this year. “Instead of manufacturing planes or cars, we sell aluminum or iron ingots, which, economically, is nonsense,” Tasnadi says.

Mineral products, together with chemicals and plastics, supplied a third of the obtained half a billion, the increase being accounted for by the tripled prices for crude oil on the international markets during the last year. Oil was thus quoted as high as 35 dollars per barrel in March.

The massive orientation of producers of cheap commodities toward exports has two causes, Tasnadi thinks. The depreciation by 10 percent of the domestic currency over inflation, registered last year, led to a drop in prices of Romanian freight and the drastic shrink in consumption, due to the fall by 15 percent in the purchasing power, left Romanian products without a market. Orders lacking, raw materials suppliers looked for foreign outlets. The effects of fiscal easing over exporters had no influence, according to Tasnadi, considering that most foreign trade contracts are concluded several months ahead.

“Unfortunately, this increase in exports only shows our wealth is flowing outside and until the weight of human capital in exports grows, the Romanian economy stands little chances of being efficiently connected to the world economy,” Tasnadi concluded.