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3.3.1 Nord-East Region

Image 3.17:
Romania’s Development Region North-East – Nord-Est

Regiunea Nord-Est - The Development Region North East in Romania

Source: ro.wikipedia.org/wiki/Imagine:NE_dr_ro.png

The North-East Region consists of the six counties Bacău, Botoșani, Iași, Neamț, Suceava and Vaslui. This Development Region hosts 17.25 % of Romania’s total population on 15.5 % of the total territory. It contributed 11.81 % to the Romanian GDP in 2005 (own calculations, INS 2008). The population is concentrated in the rural parts of the counties. In 2006, the region North-Est featured the lowest GDP per capita of all in Romania and even Europe, reaching with 3,051 € just 67.8 % of the Romanian average (cf. NewsIn 2008: 10). As already criticized, the North-East Region still disguises considerable regional disparities rather than to reveal them. While the local GDP per capita in Bacău (2005) was just some 7 % lower than the national average, the county Vaslui reached just a mere 52 % of the national average (INS 2007, own calculations for 2005).


The weak economic performance of the North-East Development Region has to be attributed, first to the breakdown of the forced industrialization of the 1960s and 1970s (mainly chemical, petrochemical and car industry).[1] Second, to the low urbanization-level and the hardly developed infrastructure, which both hampered FDI-Inflows and thus, hindered the spread of new economic activities. Accordingly, per capita GDP remained well below the national average in recent years. Agriculture still is the main “occupation”, having a share of 42.7 % of total employment, followed by services (33.7 %), the industry and construction sector (23.6 %). The unemployment rates belong to the highest in Romania and even grew in the last years – against the national trend of shrinking unemployment. Again, Vaslui, might serve as an example as its unemployment rate grew from the 10.1 % to 11.25 % from 2005 to 2006 (though it decreased a bit by 2007).

A considerable part of the North East population migrated to other counties or abroad. This reduced the unemployment rate but left just children and the elderly in many locations of the region, especially the Bucovina. Migration and its effects are hard to quantify, though.[2] Anyhow, main destinations are Western Europe and Israel. Money transfers sent from emigrants from the North-East region cannot be estimated reliable as only a fraction is transferred via the banking system. The banking sector in Romania is still underdeveloped as only some 51 % of the population had a bank account in 2007 (cf. Popa 2008), what also might vary among regions. However, the demand deposit stocks of the population in foreign currencies grew considerable from 2006 to 2007 by 36.6 % and summed up to 143 millions of Euro.

On the contrary, the North-East region failed in attracting considerable FDI-inflows. Up to 2006 just a mere 1.2 % (411 millions of Euros; 110 € per capita; cf. ADRC 2008) of the total FDI-inflows to Romania where destinated to the North-East Region. Accordingly, the regions share of total Romanian Exports was low (6.3 % in 2006) and even decreasing. The low and likewise falling imports (4.2 % of total Romanian imports in 2006) lead on the one hand to a neglectable contribution to the Romanian trade deficit but have to be taken, on the other hand, as an indicator for the exceptional low standard of living in the North-East. Economic activities are concentrated in few economic centers, what might be reflected in the NewsIn ranking of regional leading firms. Out of 30 top rated firms twelve were from Bacău, seven from Iași, further six from Neamț, while the county Suceava contributed just three enterprises, Vaslui and Botoșani each one (cf. NewsIn 2008: 68).

For the next years the Comisia Națională de Prognoză (CNP) estimates an increase of exports and nearly a doubling of GDP per capita up to the still low value of 5.400 € per capita by 2010 (cf. CNP 2008 a: 7). NewsIn sees strong potential for the Region in tourism, wood industries and agriculture. Critical points remain the low productivity of labor, the weak business environment in small and medium sized cities – reflected by a small number of SME – and the poor infrastructure. Especially modern highways and aviation links are missing.

Academic Research paper and Study of the Economy of Romania and Romanian Business

Then again, local administration, as monitored by NewsIn[3], performed rather well and got the second place among all regions, reaching a score of 17.1 points of 20 possible. Here some first doubts about the predominant role of the quality of public administration for a viable business-environment (as suggested by the institutional approach, cf. chapter 4) in Romania could arise.

Footnotes

[1] Unless referenced otherwise, information and the data for 2006 are taken from NewsIn (2008: 10ff.).

[2] For a more detailed discussion of the Romanian migration potential cf. chapter 3.4.

[3] NewsIn monitored 23 local authorities according to four criteria. For more information on the NewsIn monitoring cf. chapter 4.2.1.4.