Finance  

 

SECONDARY FINANCIAL MARKETS IN ROMANIA

by  Thomas Jared Denslow

As with most elements of Romania's economic reform program, the government has lacked the political will to establish secondary financial markets in the country. Meanwhile, many of Romania's fellow Central European countries have taken bold steps towards modern market economies. While nations like Poland and the Czech Republic are now beginning to reap the rewards of transformation, Romania, in a futile attempt to avoid economic hardship and public dissatisfaction, still has yet to seriously implement any significant changes. There are signs now, however, that the Romanian government, led by Ion Iliescu and his conservative political party and under pressure from the increasingly more popular liberal opposition, may finally be beginning the long delayed transition from communism to capitalism. Late last year, the Romanian National Bank, which is the country's central bank, implemented an austere monetary policy at the behest of the IMF. Likewise, in an attempt to secure western assistance, the government has demonstrated greater discretion in spending, resulting, in conjunction with the central bank's policies, in a more economic stability. For the first time since the 1989 revolution and the subsequent liberalization, inflation in Romania has fallen below 100%. In addition to macro-economic policies, the government has also stepped up its efforts at privatization and institutional reform. Among these new and important reforms, and essential to their success, is the recent establishment of secondary financial institution, namely the Bucharest stock exchange.

Romanian economic transition was begun in earnest shortly after the December 1989 revolution. However, politics soon stalled all attempts at real reform, and securities laws were not considered until the summer of 1992. But the plan drawn up at this time met the same fate as earlier reform efforts. It was not until this May, shortly after the new privatization program was begun, that any serious efforts were made to develop a stock market. With the assistance of the British Know-How Fund and the Toronto Stock Exchange, who contributed expertise and training, regulations and legislation were formulated.(1) Finally in June, the Romanian securities law was adopted (2), and the market itself opened later in August, after a public offer was made for twenty state-owned firms.(3)

The long-awaited christening of the Bucharest Stock Exchange will greatly enhance the countries efforts at transition, particularly by in-stilling new trust in the governments voucher privatization program(3) and encouraging new foreign investment. Indeed, interest in emerging markets is high among investors. Douglas Polunis of Picket & Co. in London predicts that the Bucharest Stock Exchange will be among the top-performing exchanges in the world next year.(4) This kind optimism might be unrealistic, but surely the formation of Romania's first stock market is long overdue and a step in the right direction on the long and difficult road to a market economy.

(1) Rodina,V.1994. "Canada Aids Romanian Stockexchange".
UNITED PRESS INTERNATIONAL.May 18,1994.Financial

(2) Buraff Publications.1994. "Romanian Securities Law Passed".
INTERNATIONAL SECURITIES REGULATION REPORT.July,1994.

(3) Rodina,V.1994. "Romanian Privatization Public Offer".
UNITED PRESS INTERNATIONAL.International

(4) Davidson,H.1994. "Funds Go Nuts About Brazil".
TIMES NEWSPAPERS LIMITED. Oct.30,1994.Features

 

 

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