construction in 1970 amounted to 2.1 billion lei. In 1971 the bank
planned to provide construction loans totaling 2.9 billion lei.
Information on other bank transactions has not been published.
Credit Policy
Interest rates do not reflect the scarcity of money or the element of
risk. They are used by the government as one of the economic levers
intended to motivate enterprises toward greater efficiency. In 1969 the
average rate for short-term operating credits was 2.9 percent; actual
rates ranged from less than 1 percent to a level far above the average.
New regulations issued about mid-1970 raised the interest rates,
established greater uniformity among them, and introduced a
differentiation among penalty rates based on the length of time that
repayments remain in arrears or credits in excess of those planned are
used. As a result of these measures, National Bank officials expected
the average rate of interest to rise to 3.8 percent.
A uniform interest rate of 5 percent was established on all operating
credits for inventory and production purposes in economic sectors other
than agriculture. Preferential rates for artisans' collectives were
abolished on the grounds that the collectives had received enough state
support in the past to place them on an equal footing with state
enterprises with regard to credit. A rate of 3 percent was continued on
credits used in the distribution of goods. Interest rates of 4 percent
and 2 percent, respectively, were established for state and collective
farms.
The government attaches great importance to the penalty feature of the
credit system, which allows it to discriminate between efficient
enterprises that find themselves in temporary difficulties and
enterprises that are poorly managed. Enterprises that require operating
funds in excess of those prescribed by officially determined norms or
are unable to repay credits on time must pay progressively higher
interest rates. Excess and overdue credits carry an interest rate of up
to 10 percent for the first three months and up to 12 percent for the
next three months. Enterprises in the second stage are subject to a
searching examination by a committee of experts and may be denied
further credits. Information is lacking on the procedures followed in
the case of enterprises that would be declared bankrupt in a Western
economy.
According to a National Bank official, the new credit regulations were
to be rigorously applied in order to combat a rising trend in the volume
of overdue credits that became apparent in the first half of 1970. The
credit and interest policies were to be applied in a manner that would
protect the economy from the bad effects of mismanagement and that would
place the onus only on poorly run enterprises. This task was said to
demand a high level of competence from those called upon to resolve the
difficult problems of the enterprises.
CURRENCY
The currency unit of the country is the leu (plural, lei), divided into
100 bani. It is nonconvertible and usable only within the country. The
leu is officially defined to contain 148.112 milligrams of fine gold, so
that 5.53 lei are equivalent to US$1. This basic rate of exchange became
effective on December 23, 1971, in the wake of the agreement reached by
the United States with other major Western trading nations to devalue
the American dollar; before that date the rate was 6 lei per US$1. The
basic rate is used in foreign trade accounting and is also applicable to
nonresident accounts created by a transfer of foreign currencies into
Romania.
A wide range of official noncommercial or tourist exchange rates is in
effect for residents of other communist countries. These rates vary from
about one-third to more than double the basic rate. Tourist rates for
noncommunist country currencies embody a bonus of 189 percent over the
basic rate, making 16 lei equivalent to US$1. In addition to the
official exchange rates there are at least thirty-seven semiofficial
rates resulting from seven multilateral trade and payments agreements
with members of the Council for Mutual Economic Assistance (COMECON) and
thirty bilateral agreements with other communist and noncommunist
states.
The state has a monopoly of foreign exchange. Control over currency and
foreign exchange is vested in the National Bank and administered by the
bank jointly with the Ministry of Finance and the Romanian Foreign Trade
Bank. All foreign exchange realized by state agencies from exports and
other foreign operations must be surrendered to the Romanian Foreign
Trade Bank, which also controls all exchange expenditures abroad.
Transferability of funds by private individuals is strictly limited.
Only 15 to 30 percent of inheritances, royalties, pensions, and support
payments derived from abroad may be used or retransferred; from 70 to 85
percent of the sums received must be surrendered at the tourist rate of
exchange. Residents may send small amounts and get travel allocations to
COMECON and some Western countries. Most currency transactions by
individuals with residents in Western states are prohibited. Residents
may not own foreign currencies or securities or have bank balances
abroad without official permission, nor may they import or export
Romanian banknotes. They are forbidden to own or trade in gold, to
export jewelry and diamonds, and to engage in foreign merchandise trade.
Controls over financial transactions by state agencies in domestic
currency and foreign exchange were tightened by a decree issued in
September 1971. A companion decree also provided for much stricter
border controls over foreign exchange, precious metals, and jewelry
carried by individuals entering or leaving the country. Violations were
more precisely defined, and penalties were substantially increased to
discourage illegal traffic.
FOREIGN TRADE
Foreign trade is of crucial importance to the country's industrial
development because imports must be relied upon for a large part of the
requirements for materials and equipment. Trade has been expanding at a
rapid rate, and imports have been growing faster than exports. In a bid
for economic and political independence from the Soviet Union, the
country's leadership succeeded in reorienting a substantial portion of
its trade toward the industrial nations of Western Europe during the
mid-1960s (see ch. 10). After 1967, however, the inability to generate
enough exports salable in Western markets to balance imports forced the
country to turn increasingly to the Soviet Union and other Eastern
European countries for its import needs.
Foreign trade is a state monopoly. Trade policy is established by the
PCR and the government, and its implementation is the responsibility of
the Ministry of Foreign Trade. Authority to engage in foreign trade
operations has been partially decentralized by a law enacted in March
1971, although initial steps in this direction were taken under
administrative regulations in the beginning of 1970. The main purpose of
the law has been to raise the efficiency of foreign trade and to help
expand exports. These ends are to be attained through greater exposure
of domestic producers to international competition and by providing
incentives for them to meet it. The law was also intended to create
favorable conditions in the country for the establishment of industrial
enterprises with foreign participation.
Before the adoption of the trade reform law, only specialized foreign
trade enterprises directly subordinated to the Ministry of Foreign Trade
were empowered to carry on trade activities. Producing enterprises were
completely divorced from foreign buyers. They delivered their export
goods to the foreign trade enterprises at domestic prices, without
knowing to whom or at what price the goods were sold abroad. Imports
were also obtainable only through foreign trade enterprises at domestic
prices, regardless of their acquisition cost. Foreign trade losses were
covered out of the state budget, and enterprises assumed no risk
whatever in foreign trade transactions. Producing enterprises had no
interest in marketing their output abroad or in making their products
competitive in world markets; neither were they interested in using
domestic substitutes to avoid the need for imports.
Under the new law authority to engage in foreign trade has been granted
to some of the industrial ministries, trusts, and enterprises. Others
must continue to trade through foreign trade enterprises. The delegation
of authority has not involved a transfer of basic decisionmaking powers,
and the continuance of central control is therefore assured. All trade
must be conducted in accordance with binding state plans and guidelines
issued by the minister of foreign trade. Every transaction requires
approval by the Ministry of Foreign Trade in the form of an import or
export license. Central controls have also been retained over foreign
exchange and over export and import prices. The main advantage of the
new regulation lies in the opportunity it provides for producers to
develop direct customer relations, thus enabling them to learn at first
hand the preferences of buyers and the nature of the competition they
must face. It also encourages them to exercise initiative in seeking out
potential customers.
Under the law production for export must be given priority. Failure by
economic units to discharge their export obligations adversely affects
their profits, even if they meet their total output target, because in
these circumstances the production plan is considered underfulfilled by
the value of the undelivered exports. This provision applies equally to
suppliers and subcontractors of export manufacturers. A positive
incentive to exceed export quotas has been provided in the form of
export bonuses. Export manufacturers, however, have a greater interest
than their suppliers in exceeding the export plan because they are
entitled to keep for their own use a portion of the above-plan foreign
exchange earnings, whereas their suppliers have no opportunity to do so.
This difference of interests has been interpreted by foreign observers
as a weakness in the law, in that it may hamper manufacturers' efforts
to maximize export production because the requisite supplies and
components may not be forthcoming.
The decentralization of foreign trade activities necessarily entails an
increased need for well-qualified specialists in foreign trade and
international finance, both at home and abroad. The shortage of experts
in these fields is to be alleviated through an intensive personnel
training program.
Western economists believe the new law to be a step in the right
direction in that it promotes an orientation of the economy toward
exports. They hold the view, however, also shared by some Romanian
economists, that, as long as the country's currency remains
nonconvertible and prices fail to reflect the relative scarcity of
goods, it will not be possible properly to calculate the profitability
of foreign trade nor to improve the structure of the trade on the basis
of such a calculation.
In the 1960-70 period the annual trade turnover increased by 2.8 times
to a volume of 22,8 billion lei. Exports rose at an average annual rate
of 10 percent to 11.1 billion lei, and imports grew by 11.7 percent per
year to 11.7 billion lei. From 1965 to 1970 the rise in trade was more
rapid; the rates of growth were 11 percent for exports and 12.7 percent
for imports.
Although trade relations were officially reported to have expanded from
twenty-nine countries in 1960 to 110 countries in 1970, the bulk of the
trade was carried on with members of COMECON and the industrial
countries of Western Europe (see table 6). Only 15 percent of the trade
in 1970 involved countries outside these areas. Between 1960 and 1967
trade with COMECON members increased by little more than half, whereas
trade with Western so-called capitalist countries rose almost fourfold.
The difference was even more marked in the case of imports from the
West, which increased ninefold, so that imports from this area in 1967
were larger than imports from COMECON. The trend was reversed after
1967, mainly because of increasing balance of payments difficulties with
Western trade partners.
With a turnover of 5.5 billion lei in 1969, the Soviet Union has been by
far the most important of Romania's trading partners. Czechoslovakia and
the German Democratic Republic (East Germany) were next in importance
within COMECON, with a trade volume of 1.5 billion and 1.2 billion lei,
respectively, in 1969. Among trading partners in Western Europe, West
Germany occupied first place, with a trade volume of almost 1.8 billion
lei, followed by Italy with a volume of 1.2 billion lei and France with
0.9 billion lei. The People's Republic of China has been the main
communist trading partner outside Europe, with an annual volume of about
0.5 billion lei in 1968 and 1969.
_Table 6._ _Foreign Trade of Romania, by Groups of Countries, 1960 and
1969_ (in millions of lei)[1]
----------------------------------------------------------------------------
1960[2] 1969[2]
------------------------- ------------------------
Country Group Exports Imports Total Exports Imports Total
----------------------------------------------------------------------------
Western industrial states 918 913 1,831 2,980 4,432 7,412
COMECON[3] 2,821 2,636 5,458 5,042 4,819 9,862
Other communist states 318 206 524 781 506 1,286
Developing countries 245 131 376 996 686 1,682
----- ----- ------ ----- ------ ------
Total 4,302 3,887 8,189 9,799 10,443 20,242
----------------------------------------------------------------------------
1: For value of leu, see Glossary.
2: Totals may not add because of rounding.
3: Council for Mutual Economic Assistance.
Source: Adapted from U.S. Department of Commerce, Office of
Technical Services, Joint Publications Research Service--JPRS
Series (Washington), _Translations on Eastern Europe: Economic
and Scientific Affairs_, "Foreign Trade Reform Analyzed,"
_Vierteljahresshefte zur Wirtschaftsvorschung_, West Berlin,
July-September 1971, (JPRS 54,691, Series No. 580, 1971).
Trade between Romania and the United States has been small because of
legal restrictions in the United States against trade with communist
countries. The trade volume doubled from about US$40 million in 1969 to
US$80 million in 1970 but declined to about US$65 million in 1971.
About 80 percent of the trade in 1969 and 1970 was accounted for by
Romanian imports; in 1971 the trade was more nearly balanced. Comparable
Romanian statistics are available only for 1969. They show a lower
volume of trade and a smaller trade deficit. No explanation of this
discrepancy is available.
Measures to exempt Romania from the restrictions directed against trade
with communist countries have been taken in the United States. In
November 1971 exports to Romania were made eligible for Export-Import
Bank financing. With support from the administration, legislation has
been introduced in both houses of the Congress of the United States to
accord Romania most-favored-nation treatment. Sources in the United
States, however, believe that Romania will not be able to balance its
trade with that country even in the event that the proposed legislation
is enacted into law.
Imports have been overwhelmingly weighted in favor of capital goods.
Machinery and equipment, fuels, and raw and processed materials
constituted about 90 percent of all imports in the 1960s. Manufactured
consumer goods accounted for from 5 to 7 percent of imports. Raw and
processed food products made up the small balance. Machinery and
equipment, including plant installations, were the major single import
category; the share of machinery and equipment in total imports rose
from about 33 percent in 1960 to 49 percent in 1967 but declined to 44
percent in 1969 because of payments difficulties. Imported machinery and
equipment covered about 30 percent of requirements in 1970.
Exports in the 1960s consisted mainly of raw and processed materials and
foodstuffs, about equally divided between products of agricultural and
industrial origin. As a result of progressive industrialization, the
proportion of these products in total exports declined from about 78
percent in 1960 to 63 percent in 1969. During the same period the share
of machinery and equipment rose from about 17 to 22 percent, and that of
manufactured consumer goods increased from about 6 to 16 percent.
Official foreign trade policy is directed toward increasing the
proportion of processed goods in total exports.
In the 1960-70 period the annual balance of trade was negative, with the
exception of the years 1960 and 1965. The cumulative trade deficit at
the end of 1970 amounted to about 5.1 billion lei--the equivalent of
about US$850 million. The overall deficit, however, obscured the
severity of the foreign exchange problem facing the country. Trade with
the communist and developing countries during the period produced an
export surplus that offset, in part, the deficit with Western trading
partners. This surplus, however, could not be used to reduce foreign
indebtedness because it did not generate hard currency earnings. The
cumulative hard currency trade deficit with the West reached US$1.2
billion in 1969 and an estimated US$1.5 billion in 1970.
Information on the country's balance of payments has been kept secret,
so that it is impossible to know how the trade deficit has been
financed. Hard currency receipts from tourism, which could be applied
toward repayment of the debt, equaled only a fraction of the annual
trade deficit. Western sources estimated Romania's indebtedness to her
Western industrial trading partners to have risen from about US$300
million in 1966 to US$800 million in 1968 and to have increased further
by 1970.
CHAPTER 15
AGRICULTURE
As a result of the government's industrialization policy, the relative
importance of agriculture in the economy has declined. During the decade
of the 1960s the contribution of agriculture to national income, in
terms of arbitrarily established official prices, dropped from about 30
to 20 percent, even though half the working population continued to be
employed on farms and farm output was gradually rising. The growth in
output, however, did not keep pace with official plans, mainly because
of a lack of income incentives for farmers under the government's low
farm-price policy and because of inadequate investment and fertilizer
inputs. The farm problem has been exacerbated by the generally low
qualifications of the farm labor force and by the prevalence of
widespread underemployment.
Various revisions in agricultural organization and methods of
compensation made from 1968 to 1971 did not produce any marked
improvement by the end of that period. The failure of agricultural
output, including livestock products, to advance according to plans
created economic difficulties by depriving the country of potential
exports urgently needed to pay for industrial imports. It has also
hampered the improvement of the population's protein-deficient diet.
Substantial advances in all phases of agriculture are planned for the
1971-75 period. In the light of past experience, attainment of the
established goals is uncertain. The full production potential of
agriculture remains largely unexploited.
AGRICULTURAL REGIONS
Natural conditions are generally favorable for agricultural development.
A varied topography has produced diversified regional weather and soil
conditions. The climate is basically continental, with warm summers and
cold winters, but the growing season is relatively long--from 180 to 210
days.
The amount of precipitation fluctuates from year to year, which results
in recurrent droughts. Rainfall averages about twenty-five inches,
ranging from only fifteen inches on the Dobruja plateau to forty inches
in the mountainous regions. In the principal farming regions, annual
precipitation averages about twenty-three inches in the fertile
southern plain but dips below twenty inches in the hilly regions of
Moldavia in the northeastern part of the country. Moisture is generally
sufficient during the spring growing period (see ch. 3).
Soils vary from mountain-type soils to heavy, relatively infertile
podzolic soils in the plateaus and rich chernozem (black earth) soils in
the plains. About 20 percent of the agricultural land is of the
chernozem type. Alluvial soils cover the flood plains of the Danube
River.
Topography and climate divide the country into five agricultural zones,
the most important of which is Walachia. Walachia includes the rich
southern plains, where half the country's grain is grown. Almost half
the vineyards and orchards are located in the foothills surrounding the
plains. Vegetable production is also important in this area, especially
near the city of Bucharest. Despite the fertility of this region's
soils, production in Walachia fluctuates because of recurrent summer
droughts.
Transylvania, the largely mountainous region in the central and
northwestern parts of the country, receives substantial rainfall but has
relatively infertile soils. Livestock production predominates on the
mountain pastures and meadows. Grain and potatoes are the major crops in
the central basin.
Moldavia in northeastern Romania has generally poor soils and receives
scant rainfall. Corn is the main crop in this zone, followed by wheat
and potatoes.
The Banat region on the country's western border has the most favorable
natural conditions for agriculture. Chernozem soils predominate, and the
seasonal distribution of rainfall is more propitious than in Walachia.
Grain, primarily wheat, is the principal crop; fruits and vegetables are
also important.
The Dobruja plateau in southwestern Romania is the country's least
important farming area. Although soils are generally fertile,
cultivation is limited by inadequate rainfall. Grain, sunflowers, and
legumes are grown in this area.
To combat the destructive effects of recurrent droughts, a large-scale
program of irrigation was undertaken by the government. Execution of the
program, however, has consistently lagged behind the plans.
LAND USE
In 1970 agricultural land comprised almost 37 million acres (63 percent
of the country), about two-thirds of which was arable. The balance was
devoted to pastures, meadows, vineyards, and orchards. During the decade
of the 1960s substantial additions to the agricultural area were made
through various land improvement measures. At the same time, however,
large acreages were diverted to industrial and residential uses,
particularly of the more valuable arable land. The net result was an
increase in the total farmland area, mainly in orchards and pastures,
and a decline in the arable acreage (see table 7).
_Table 7._ _Land Use in Romania, Selected Years, 1960-70[1]_ (in
thousands of acres)
-------------------------------------------------------------------
1960 1962 1969 1970
-------------------------------------------------------------------
Agricultural Land
Arable 24,268 24,515 24,146 24,050
Pasture 6,953 6,924 7,426 7,420
Meadow 3,427 3,447 3,506 3,499
Vineyard 768 744 857 857
Orchard 529 662 1,053 1,067
Total Agricultural Land 35,945 36,292 36,988 36,893
------ ------ ------ ------
Forest Land 15,822 15,807 15,607 15,604
-------------------------------------------------------------------
1. Agricultural land by type of use and forest area.
Source: Adapted from _Anuarul Statistic al Republicii Socialiste
Romania_, 1970 (Statistical Yearbook of the Socialist Republic
of Romania, 1970), Bucharest, 1970, pp. 246-247.
Forests occupied an area of 15,604,000 acres in 1970, the equivalent of
about 27 percent of the country's land surface. The forest acreage
declined slowly but steadily after 1961, for a total loss of almost
247,000 acres.
Slightly more than two-thirds of the more than 24 million acres of crop
area in 1969 was under grains. Technical crops for industrial uses,
consisting mainly of oilseeds and sugar beets, and fodder crops occupied
almost one-fourth of the sown area. The remainder of less than 10
percent was devoted to legumes, potatoes, vegetables, and melons and to
seed-producing and experimental plots. Half the grain acreage was
devoted to corn, which is used for food and feed by the farmers; and
more than two-fifths was under wheat, which is the staple food of the
urban population.
The grain acreage declined in absolute and in relative terms after 1960,
when it accounted for almost three-fourths of the sown area. All other
major crop acreages, excluding that under sugar beets, increased during
the 1960-69 period (see table 8). Romanian economists attributed the
shift in the crop pattern to the government's emphasis on adapting crop
production to the economic needs of the country and to the natural
conditions of individual farms. A severe flood in the spring of 1970,
the worst in the country's history, reduced the crop area by nearly 1.25
million acres below the level of 1969.
_Table 8._ _Cultivated Acreage in Romania, by Major Crops, 1960 and
1969_ (in thousands of acres)
--------------------------------------------------------------
Crop 1960 1969
--------------------------------------------------------------
Grain
Wheat 7,008 6,817
Corn 8,826 8,137
Other 1,626 1,263
------ ------
Total 17,460 16,217
Legumes 381 474
Technical crops (for industrial uses)
Oleaginous 1,396 1,576
Sugar beets 494 445
Other 252 341
------ ------
Total 2,142 2,362
Potatoes 722 754
Vegetables and melons 516 591
Fodder crops 2,711 3,356
Seed-producing and experimental plots 119 235
------ ------
Total Cultivated Acreage 24,051 23,989
--------------------------------------------------------------
Source: Adapted from _Anuarul Statistic al Republicii Socialiste
Romania 1970_, (Statistical Yearbook of the Socialist Republic
of Romania, 1970), Bucharest, 1970, pp. 306-307.
Encroachment by builders upon agricultural and, more particularly,
arable land was facilitated by the government's policy, pursued until
the spring of 1968, of treating land as a free good and assigning no
value to it in calculating the cost of industrial and housing investment
projects. Arable land was especially attractive to builders because it
required no expenditure for leveling.
In an attempt to prevent further waste of valuable farmland, a law for
the protection and conservation of agricultural land was passed in May
1968. The law prohibited the diversion of farm acreages to
nonagricultural uses, with the exception of special cases which,
depending upon the nature and location of the land involved, required
the approval of either the Council of State, the Council of Ministers,
or the Superior Council of Agriculture (a government agency that
functioned in lieu of a ministry for several years). Nonagricultural
state organizations that held land that they could not cultivate were
obligated to surrender it without payment to neighboring state or
collective farms.
The conservation law enjoined socialized (collective and state) farms
and private farmers to put all land to optimum use; called for a review
of the building code to reduce the land areas allowed to individual
construction projects; provided for the inclusion of the value of land
in construction costs; and spelled out various other measures to
safeguard and improve agricultural land. The law also directed the
establishment of a land register, excluding lands of the socialized
farms, to facilitate stricter controls over the remaining private
farmers, who held 9.2 percent of the agricultural land and 4.6 percent
of the arable acreage.
Heavy fines and criminal penalties, including imprisonment up to one
year, were provided for infringements of the conservation law by
enterprises and individuals. During the first year of the law's
operation, fines were also to be imposed upon holders of uncultivated
arable land, of improperly maintained orchards and vineyards, and of
meadows and pastures on which maintenance work did not comply with
agrotechnical rules. Like the establishment of the land register, this
provision was also aimed at private farmers. A further provision stated
that lands on which the described conditions continued after the first
year were to be assigned to socialized farms for cultivation. The
transferred land could be subsequently restored to the original owners
under conditions prescribed by the Superior Council of Agriculture. The
effect of the punitive regulations on private farm property was not
apparent from the official statistics for 1968 and 1969.
Shortly after the adoption of the conservation law, the deputy chairman
of the State Committee for Construction, Architecture, and
Systematization published an article in which he stated that mere
administrative regulations by the committee and the Superior Council of
Agriculture could not ensure the proper use of land, particularly on the
collective farms. He called for the development of appropriate economic
levers based on an adaptation of "the systems that limit land waste in
some capitalistic markets." This official's concern about the efficacy
of the new legislation was well based. By 1970 the arable acreage had
declined by 158,000 acres, at an average annual rate more than half
again as large as the annual losses during the 1962-68 period.
ORGANIZATION
Collective and state farms are the principal types of farm organization
(see table 9). Substantial areas of state agricultural land are also
operated as subsidiary farms by various industrial and other economic
organizations. Small private farms survive mainly in the mountainous
regions where collectivization is impractical. In 1970 the state owned
30 percent of the farmland, about half of which was cultivated by state
farms. Almost 61 percent of the land belonged to collective farms,
including 6.6 percent in plots for the personal use of their members.
The collective farm population consisted of almost 3.5 million families,
including more than 10 million collective members. About 9 percent of
the farmland was in the possession of private farmers.
_Table 9. Agricultural Land in Romania, by Type of Ownership, 1969_ (in
thousands of acres)
----------------------------------------------------------------------------
Arable Pasture Meadow Vineyard Orchard Total
----------------------------------------------------------------------------
State agricultural
units 4,959 5,545 264 148 173 11,089
(State farms) (4,129) (688) (170) (133) (148) (5,218)
Collective farms 18,075 1,315 1,712 682 692 22,476
(Private plots) (1,969) (20) (54) (262) (121) (2,426)
Private farms 1,112 566 1,530 27 188 3,423
------ ----- ----- --- ----- ------
Total 24,146 7,426 3,506 857 1,053 36,988
----------------------------------------------------------------------------
Source: Adapted from _Anuaral Statistic al Republicii Socialiste
Romania, 1970_ (Statistical Yearbook of the Socialist Republic
of Romania, 1970), Bucharest, 1970, p. 253.
In order to raise agricultural productivity and output, the state and
collective farm sectors underwent frequent organizational changes, the
latest of which went into effect in February 1971. There was not
sufficient evidence in early 1972 on the extent to which they had been
put into practice and even less information on their economic effects.
Collective Farms
At the beginning of 1971 there were 4,626 collective farms, officially
called agricultural production cooperatives, comprising more than 22
million acres of farmland, about 18 million acres of which were arable.
Their number had declined by 1,800 through consolidation during the
preceding decade. The farms had an average of about 750 families and
1,000 able-bodied members each.
The average acreage of collective farmland per family in 1970 amounted
to 6.4 acres, including a private family plot of about 0.7 acres.
Although the family plots constituted only 6.6 percent of the country's
farmland and 8.2 percent of the arable acreage, they accounted for a
substantially larger share in the output of various crops and livestock
products.
Information on the organization of individual collective farms and of
the collective farm sector as a whole is inadequate, particularly with
regard to the range of responsibilities and authority of the various
administrative entities. The organizational framework has been
complicated by the proliferation of new measures and regulations since
1967. Farm operations are carried out in common, under the direction of
an administrative and management body theoretically accountable to the
general assembly, composed of all the members of a collective farm.
Groups of workers are organized into so-called brigades for the
performance of specialized tasks. The farm management includes a
chairman, a director, a management council, brigade leaders, and trained
technicians specialized in various aspects of farm operation.
Intercooperative councils are charged with responsibility for improving
collective farm management by initiating and coordinating cooperation on
various levels among neighboring farms for better use of their physical
and human resources. Collective farms are subordinated to the National
Union of Agricultural Production Cooperatives and are also subject to
the direction of the Ministry of Agriculture, Food Industry, and Waters
(referred to as the Ministry of Agriculture) and of county authorities.
Collective farm associations are organized for various types of
specialized production.
In theory and according to law, but not in actual practice, collective
farms are jointly owned by their members. The ownership supposedly
extends to the land, other productive resources, and the annual farm
output. About 11 percent of the collective farm land, however, is
allocated for the personal use of members, and almost half the livestock
other than horses is individually owned. No information is available on
the existence of any provision for the compensation of members who are
authorized to leave the farms for employment in other sectors of the
economy.
Regulations concerning the allocation of their income by collective
farms among investment funds and various social and other obligatory
funds and distribution to members were modified in late 1970 or early
1971 with a view to stimulating the members' interest in raising the
efficiency of production. Under the old system, distribution to members
was made from residual funds remaining after all statutory public and
social obligations were met. The revised farm statutes authorize the
farms' general assemblies to allocate net income in ratios ranging from
18 to 25 percent for investment and from 75 to 82 percent for
consumption. In actual practice, however, income distribution is
reported to follow a somewhat different pattern, which tends to reduce
the share available for distribution to members. The new regulations
have not altered the generally acknowledged fact that farm incomes
remain very low, particularly on the poorer farms.
The system of remuneration for collective farmers was also modified in
1970 with a view to strengthening work incentives. The new method
provides for monthly payments on account, in cash and in kind, based on
the farms' planned annual receipts and for a share of profits in excess
of those planned. Payment to individual members is to be based on
centrally established work norms and rates of pay for various categories
of operations, similar to the practice in industry and construction. The
system is intended to relate individual remuneration more closely to the
quantity and quality of the work performed and thereby to eliminate
inequities of the earlier method. It is also meant to provide a steady
and assured income to all members who contribute a specified minimum of
workdays per month. If, for reasons beyond its control, a farm's
receipts turn out to be lower than the amount legally distributed to its
members during the year, the shortage may be covered by a long-term bank
credit. As a further inducement for farmers to remain on the land, their
social security benefits, generally much lower than those of industrial
workers, were substantially liberalized.
The extent to which the new pay system has been put into practice is not
known. Effective January 1, 1971, a minimum wage of 300 lei (for value
of leu, see Glossary) per month was to be paid to all male farmers who
worked regularly at least twenty days and to all women who worked
fifteen days. A survey published by a collective farm organ in March of
that year found that within a single county twenty-one out of twenty-two
farms had not taken the trouble to forward the necessary documents to
the Agricultural Bank and apply for the funds with which to pay their
members. Various excuses were offered by the farm chairmen for their
lack of action. The chairmen, farm directors, and brigade leaders,
however, were reported to have taken appropriate steps to secure their
own minimum pay.
The marketing of farm products by collective farms is based on
officially fixed prices and monopoly-buying powers of state procurement
agencies and the food-processing industry. Products move into government
stocks through contracts between the farms and state agencies for
quantities specified by the government; through payments in kind for
services rendered by agricultural mechanization stations, flour mills,
and other specialized government agencies; and, in the case of meat and
wool, in the form of compulsory deliveries. Any products remaining after
the obligations to the state have been met may be sold in open markets.
State Farms
Through consolidation of 370 previously existing state agricultural
enterprises, the farm reorganization of February 1971 created 145 larger
enterprises subordinated to the Department of State Agriculture in the
Ministry of Agriculture. In addition, seventy-four state agricultural
enterprises for fattening hogs, raising poultry, and producing feeds and
hothouse vegetables were subordinated to four specialized trusts. The
consolidation increased the average size of the state enterprises from
16,000 acres to 34,600 acres of farmland. The enterprises comprised
about 3,000 state farms on an area of over 5 million acres. Romanian
sources reported that the reorganization was intended to bring
management closer to production, to ensure improvement in all aspects of
farm operation, to intensify concentration and specialization of
production, and gradually to attain agro-industrial integration.
In official terminology, state agricultural enterprises will operate on
the principle of economic self-administration. The enterprises will be
responsible for their subordinate farms and will supervise operations
according to the principle of internal economic administration. Briefly,
this means that the agricultural enterprises and the farms must be
financially self-sustaining, that directors of enterprises and farms are
accorded a certain measure of discretion in planning and organizing
production and in the use of resources, and that financial rewards
beyond the normal pay accrue to each farm's managerial personnel and
workers in accordance with the farm's own performance, regardless of the
results obtained by other farms within the enterprise or by the parent
enterprise itself.
Individual state farms, nevertheless, have no juridical status or bank
accounts, nor may they enter into direct relation with other economic
entities outside the state agricultural enterprise of which they are a
part. In large measure, they remain subject to the direction of the
enterprise management. Information on the division of authority between
the agricultural enterprises and the Department of State Agriculture in
the ministry is not available. Complaints have been voiced in the
Romanian press about unwarranted interference by higher authorities in
the management of both the farms and the agricultural enterprises.
Workers on state farms and other state agricultural units are salaried
employees of the state, entitled to paid annual vacations, social
security and medical assistance, allocations for children, age or
disability pensions, and various other benefits provided by law for
employees of state enterprises. During slack periods, workers may be
allowed up to 120 days of unpaid vacation per year, without losing
seniority or other rights.
State farms are the best endowed agricultural units in the country.
Although they included only about 17 percent of the arable land in 1969,
they possessed almost 28 percent of the tractors, 24 percent of the
grain combines, and similar proportions of other major types of farm
machinery. Moreover, they received more than 37 percent of the chemical
fertilizers delivered to agriculture and farmed almost 33 percent of the
irrigated land. As a consequence, per-acre yields on state farms have
been generally higher than yields on collective farms.
Agricultural Mechanization Enterprises
The bulk of the mechanized operations on collective farms has been
performed for payment in cash and in kind by specialized state
enterprises for the mechanization of agriculture, which control a large
share of the country's farm machinery and tractors. This policy has
provided the state with an added lever of control over the farms; it was
used in the past to extract a substantial volume of farm produce for the
state through payments in kind for services rendered. For political
reasons, and also because of the weak financial position of many
collective farms, the government has not followed the example of other
Eastern European states that disbanded their machine-tractor stations
and sold the equipment to the farms.
In 1969 the agricultural mechanization enterprises controlled 70 percent
of the available farm tractor power and an even larger share of the
tractor-drawn and self-propelled farm machinery. State farms owned
virtually all the balance. Collective farms, which cultivated 75 percent
of the arable land, possessed only 1.6 percent of the tractor power and
a still smaller proportion of major farm machinery items.
As of January 1, 1971, the system of agricultural mechanization
enterprises was reorganized with a view to improving the quality of
their operations. Forty enterprises were established throughout the
country--one in each of the thirty-nine counties and one in the
Bucharest area--with 772 subordinate stations to service an equal number
of farm associations and about 4,500 sections to work with individual
collective farms. The main stated task of the mechanization sections is
to introduce and expand the mechanization of plant and animal production
on the farms.
To accomplish the task, each mechanization section is to coordinate the
use of its own equipment with that belonging to the collective. Within
the framework of this cooperation, the state mechanization enterprises
were made increasingly responsible for the agricultural production
process. The planning of mechanized farm operations, the allocation of
equipment for specific purposes, and the timing and supervision of all
operations are joint responsibilities of the section chief and the
farm's chief engineer. Close cooperation and a smooth working
relationship between them is therefore needed for effective performance.
Mechanized work on farms is carried on by permanent teams composed of
agricultural mechanics and collective farm members. They take over
assigned areas in all sectors of the farm and are in charge of all
relevant operations until the crops have been stored. In slack period
the mechanization sections work outside the cooperative farms in order
to utilize more fully their manpower and equipment.
The reorganization of the agricultural mechanization enterprises was
accompanied by a change in the system of pay for mechanics and
maintenance men to provide for greater incentives. For work done on the
farms, these workers receive 80 percent of their annual salary, and the
remainder is paid at the end of the year, in whole or in part, depending
upon the degree to which the production plans of the farm on which they
work are fulfilled. Provision was also made for bonus payments in the
event of over-fulfillment of production plans. The shift in wage policy
was accompanied by a raise in the rates of pay for mechanics,
maintenance men, and personnel operating the equipment in the field on
a piecework basis. This measure increases the burden on the already
strained budgets of many collective farms.
FARM LABOR
The agricultural labor force presents a paradox of substantial
underemployment associated with widespread labor shortages, particularly
of more productive, skilled personnel; the shortages are especially
prevalent during the planting and harvesting seasons. This phenomenon is
an outgrowth primarily of a progressive qualitative deterioration of the
agricultural manpower pool, owing to a continuing transfer of
predominantly young male workers into nonagricultural occupations.
Maldistribution of the labor force and poor management of the available
manpower resources have been important contributing factors. The
outmigration from agriculture has been spurred by a wide disparity in
urban and rural incomes and by the relatively inferior living conditions
on the farms. At the beginning of the 1970s the average income of
farmworkers was only half as high as that of industrial workers.
Only fragmentary information relating to the farm labor force has been
published in official statistics. Agricultural employment in 1969
constituted 51 percent of total employment, compared with 65.4 percent
in 1960 and 74.1 percent in 1950. Published absolute figures bear only
on employment by the state; in 1969 the state employed 431,200 persons,
including 290,000 on state farms and 93,500 in agricultural
mechanization enterprises. Data published in connection with a
conference held by the Romanian Academy of Social and Political
Sciences, however, implied that total agricultural employment in 1968
amounted to 5.2 million persons, including 4.3 million able-bodied
collective farm members. The proportion of women in the collective farm
labor force was reported to be 57.5 percent in 1966; the proportion was
much larger in highly developed industrial zones. More than 70 percent
of the collective farm workers, but only about 10 to 15 percent of the
workers on state farms, were engaged in crop production.
Not all the collective farm members participate in the work of the
collective. Some are permanently employed in nonagricultural branches of
the economy. Others--as many as 25 percent of all farmers in 1969--work
as day laborers in industry and construction, on state farms, and in
other occupations. Housewives with small children and wives of salaried
farm employees also take no part in the collective work. Members who do
participate generally work only a portion of the year because there is
not sufficient work for them to be fully occupied. In the years 1967 to
1969, these members, on the average, contributed only from 139 to 142
man-days per year. In 1968, for example, 22 percent of all collective
farmers put in not more than forty man-days, and 55 percent of the
farmers worked fewer than 120 days. Many farmers work only the minimum
number of days required to keep their personal plots. There are wide
variations in the degree of labor participation between geographic
regions, between individual farms, and among production sectors of a
single farm. At the beginning of the decade of the 1970s about 40
percent of the income of collective farm families was derived from
nonagricultural pursuits.
Underemployment in agriculture is expected to continue at least
throughout the 1970s. Industry, though growing very rapidly, will not be
able to absorb any significant numbers of farmworkers because of the
government's emphasis on mechanization and automation of production. In
the 1971-75 period industrial manpower requirements will be met almost
entirely through natural population increase. Relieving agricultural
underemployment through an expansion of the services sector is not being
given serious consideration on the grounds that "no further expansion of
this sector can be undertaken at the expense of achieving a high level
of productivity in the branches of material production and hence in
agriculture, too."
Raising the low productivity level of collective farm labor through
greater capital inputs, and thereby increasing the incomes of members,
presents a difficult problem not only because of a shortage of
investment funds but also because the magnitude of the collective farm
labor cannot be adjusted to the needs of production, as in the case of
state farms; it is determined by the number of families living on the
farm. The collective farm cannot limit the number of members who may
participate in the work. Each member has the right and, at the same
time, the duty to participate in the work performed for the collective,
and the collective has the duty to provide equal opportunities for all
its members to work and to earn adequate incomes; yet modernization of
production necessarily brings with it an ever smaller need for manpower.
A solution of the farm manpower problem was not in sight by late 1971.
There was general agreement among Romanian economists concerned with the
matter about a need to improve the utilization of the available labor
resources, to increase farm incomes and, above all, to stop the
migration of young people from villages to towns. No concrete program
for attaining these ends, however, emerged from a national conference on
farm labor held in mid-1970. Proposals advanced by a number of
economists to expand industrial activities in the villages,
particularly cottage industries and the processing of farm products,
were questioned by others who feared that these activities would tend to
drain some of the remaining productive elements from the collective farm
labor force.
As expressed by one of the conferees, the search was on for a hybrid
solution that would ensure full employment of the redundant labor force
despite the process of farm modernization--a policy that inevitably
leads to the maintenance of low earnings on many farms because the
available work must be spread among an excessive number of members. In
this context, foreign observers adopted a wait-and-see attitude toward
the changes in collective farm organization and in the method of payment
to farmers introduced in January 1971 (see Organization, this ch.). They
nevertheless expressed doubt about the ultimate efficacy of these
measures because the income of farmers would still remain far below that
of industrial workers.
INVESTMENT AND CREDIT
Investment
Investment in agriculture has been rising steadily, reaching an annual
volume of almost 13 billion lei in 1970. The share of agriculture in
total investment, however, declined from 19.5 percent in the 1961-65
period to 15.8 percent in the years 1966 through 1969. In relation to
industrial investment during the same periods, investment in agriculture
declined from 40 to 30 percent. Under the Five-Year Plan (1971-75),
agriculture is to receive investments of at least 100 billion lei--an
amount that is twice as large as the actual investment in the years 1966
through 1970 and that represents a somewhat larger share of total
investment than was allocated to agriculture in that period.
No information is readily available on the proportion of the total
investment used for the replacement of wornout assets and for the
expansion of productive facilities. In the 1966-69 period replacement
capital constituted about 30 percent of investments; in 1969 alone the
proportion was as high as 46 percent.
The largest part--and a rising proportion--of the agricultural
investment has been financed by the state; collective farms supplied the
balance out of their own income. The share of state funds in the total
agricultural investment increased steadily from about 66 percent in 1963
to 80 percent in 1969; this proportion is to be maintained during the
Five-Year Plan (1971-75). Investment in collective farms has also been
increasingly financed by the state through long-term credits; the share
of government credits rose from 13 percent in 1965 to 35 percent in
1969. Investment out of the collectives' own funds remained stable
during this period, at from 2.2 billion lei to 2.4 billion lei per year.
State farms have received a disproportionate amount of investment--38
percent in the 1965-69 period, as against 34 percent for collective
farms. The investment share of collective farms during this period
declined from about 38 to 30 percent of the total. On the basis of
farmland acreage, investment in collective farms in 1969 amounted to
only 18 percent of the funds invested in state farms. If the state
investment in agricultural mechanization enterprises is included as
investment for the benefit of the collective farms, the ratio of
collective to state farm investment per acre was still only 25 percent.
Collective farm statutes require the farms to devote from 18 to 25
percent of their annual gross income to investment. Some Romanian
economists consider net income to be a more equitable base; under such a
system more of the farms' income would remain for distribution to
members. In calculating gross income, amortization of fixed assets is
generally not included as an expense, which further raises the base used
for the computation of the compulsory investment fund. An official of
the Agricultural Bank reported that, in the last few years of the 1960s,
one-fourth of all collective farms set aside for investment up to 10
percent more than the maximum legal requirement.
Only partial information is available on the use of investment funds.
Roughly 40 percent of the investment in the 1962-69 period was devoted
to construction and assembly work, and 33 percent was used to increase
farm mechanization. It has not been made clear whether land improvement
and irrigation are included in construction, but it seems likely that
this is the case. Substantial funds were also invested in the expansion
of orchards, vineyards, and livestock. Although significant advances
were made in most of these areas, the level of farm mechanization and of
irrigation remained low. In 1969 the equivalent of one fifteen-horsepower
tractor was available for every 136 acres of arable land, and irrigated
acreage constituted 6 percent of the arable area. The use of fertilizers
lagged by comparison with other Eastern European countries.
Credit
Farm credit has been provided by the government through the Agricultural
Bank, which was reconstituted as the Bank for Agriculture and the Food
Industry in May 1971. Available information on the credit operations of
the bank is limited to a few summary data on credits to collective
farms. Information on the financing of state farms is lacking.
As expressed by the bank's president, long-term credits for investment
and short-term credits for production needs have been used by the state
as levers for the economic and organizational development and for the
consolidation of collective farms. Long-term credits granted during the
1962-69 period amounted to 6.4 billion lei, or an average of 800 million
lei per year. During the same period the farms received about 30 billion
lei in short-term production credits, or about 3.75 billion lei per
year. The annual volume of investment credits increased sharply after
1967; it was reported to have reached 1.8 billion lei in 1970 and to
have been planned at more than 2 billion lei for 1971. A rise was also
reported in the yearly volume of production credit.
Investment credits generally carry an annual 3-percent interest charge,
but the interest rate may be reduced to 2 percent for economically
weaker farms. Comparable information on production credit is not
available, except for an official statement that a large part of it has
been granted free of interest.
Postponement of scheduled long-term credit repayments may be authorized
by the bank with the approval of the Ministry of Finance for periods of
up to one year in the case of collective farms that are unable to meet
the due date for reasons beyond their control, such as a crop failure.
At the same time the bank may discontinue credits or demand repayment
before the due date in the event that borrowed funds are improperly or
inefficiently used. Penalties are also provided for short-term borrowers
who fail to respect contractual obligations. As a measure of assistance
to poor cooperatives, the repayment of loans in the amount of 1.15
billion lei, contracted before 1968 and due in 1972, was remitted by
decision of the Central Committee of the Romanian Communist Party in
December 1971.
The distribution of long-term credits to collective farms among
different types of investment projects changed significantly during the
1960s. In 1962 and 1963 more than half the credits were granted for the
expansion of livestock production, and one-fourth of the credits were
devoted to the construction of farm buildings. In the last two years of
the decade, however, only 5 percent and 3 percent of the credits,
respectively, were earmarked for these purposes. Emphasis shifted in the
mid-1960s to land improvement, the extension of orchards and vineyards,
and vegetable production. In the 1967-69 period 83 percent of the
investment credits were used for these projects. A lack of significant
progress in the livestock production of collective farms, despite the
heavy investment, was the main reason for the drastic reduction in
credits to this farm sector.
In mid-1971 the bank was authorized to grant credits to private farmers
and to individual members of collective farms for periods of up to five
years at an annual interest rate of 3 percent. These credits may be used
to purchase for breeding and production purposes a limited number of
cattle, sheep, bee colonies with hives, and fruit tree seedlings for
orchards up to 7.4 acres in size. Credits may be granted up to 70
percent of the purchase value of these items. To ensure repayment of the
loans, recipients must conclude contracts with state procurement
agencies or collective farms for the sale of their products.
Procedures for granting credits to collective farms were tightened in
1969 in a move to ensure a more effective use of borrowed funds and the
timely repayment of outstanding debts. Under the new regulations,
credits may be granted only for investment projects and production
expenditures that guarantee the attainment of planned returns and
unconditionally ensure loan repayment on the due date. The principal
criteria for granting long-term credits are the need for, and the
economic effectiveness of, the investment projects and the outlook for
completing the projects within prescribed time limits. Economic
effectiveness is analyzed in terms of production growth, increase in
output per acre or per head of livestock, and rise in labor productivity
and revenues.
Despite increasingly close supervision by the bank of its borrowers'
activities, the effectiveness of investment credits in many instances
has not measured up to expectations. Inadequate project analysis,
construction delays, cost overruns, dissipation of funds, program
changes that made partially or fully completed projects obsolete, and
various other shortcomings have been cited by bank officials as the
major reasons for this situation. As a means of resolving the problems,
the officials have stressed the need for more profound project
evaluation, greater stringency in granting loans, and increased firmness
in the supervision of borrowers. They have also emphasized the criterion
of ability to repay as being one of basic importance.
PRODUCTION
Total Farm Output
Official statistics on total farm output are limited to a percentage
distribution of the output between crop and livestock production. In the
1965-69 period, for which comparable data are available, crop production
accounted for 62 to 63 percent of output; and livestock production, for
the remaining 37 to 38 percent. This ratio is reported to have prevailed
throughout the 1950-70 period, even though the government has
consistently sought to raise the contribution of the livestock sector to
total output. An increase in the proportion of livestock products to
40.6 percent in 1970, reported by another source, was attributable
mainly to the damage sustained by crops from the spring flood in that
year.
Total gross agricultural output was unofficially reported to have
reached 72.4 billion lei in 1969 and to have fallen to 68.7 billion lei
in 1970 as a result of disastrous spring floods. The 1969 output volume,
equal to that of 1967, represented the highest level attained through
1970. According to official index data, farm output in 1967 and in 1969
was 31 percent larger than it had been in 1960; the 1970 output was only
24 percent larger. These figures are equivalent to annual growth rates
of 3.9 percent for the 1960-67 period and 2.2 percent for the years 1969
through 1970.
Net farm output increased much more slowly because the cost of material
outlays per unit of output was steadily rising. In the 1963-68 period
the increase in material costs amounted to 33 percent.
The growth of farm output during the 1960s was well below the planned
levels of 70 to 80 percent for the years 1960 through 1965 and 26 to 32
percent for the 1966-70 period. Instead of more than doubling, output
increased by barely one-fourth. Unfavorable weather conditions during
some of the years were only partly responsible for the nonfulfillment of
the agricultural output plans. Other major factors included the
government's failure to provide the planned volume of inputs and an
apathetic attitude on the part of farmers owing to inadequate
incentives.
The shortfall in fertilizer deliveries during the 1966-70 period alone
amounted to 1.3 million tons of nutrients, or one-third of the planned
tonnage. For the decade as a whole, the shortfall approached 2 million
tons. Deliveries of tractors and farm machinery also lagged behind
schedule. Although an area of almost 2 million acres was to be irrigated
by 1965 and, under revised plans, an acreage of from 1.6 million to 1.7
million acres by 1970, only 550,000 acres had been actually irrigated by
1965 and 1.45 million acres by 1969. A careful and sympathetic Western
student of Romanian economy concluded that the production targets for
1965 could not have been achieved even if all the planned inputs had
been provided on schedule.
In the view of some Western observers, an attitude of indifference on
the part of farmers, based on the inadequacy of returns from farming,
particularly on the collective farms, was an important contributing
cause for the failure of agriculture to realize its growth potential.
The real income of farmers was scheduled to rise by 20 to 25 percent
during the 1966-70 period; the official announcement of the plan
results, however, merely noted an increase in income, without citing any
figure--a clear indication that the target was missed by a wide margin.
The negative effects of the disparity in incomes on the collective
farmers' sense of responsibility and, hence, on agricultural production
were officially recognized. This recognition led to a revision of the
system of compensation for collective farm work and to a reduction of
farm taxes in early 1971 but did not significantly alter the position of
agriculture within the economy (see Organization, this ch.). The
possibility of alleviating the situation by raising farm incomes through
a general increase in farm prices was rejected on the grounds that such
an increase, without a corresponding rise in productivity per worker and
per acre, would constitute a redistribution of national income
incompatible with the best interests of the economy.
Crop Production and Yields
Production of major crops and of fruits was larger during the 1960s than
it had been in the preceding decade. The greatest advances were made in
the output of industrial and fodder crops, and the smallest were in
potato and vegetable production (see table 10). In large measure, the
rise in output was achieved through greater yields per acre, owing to an
increased use of fertilizers; the introduction of improved varieties;
and some improvement in crop production methods, particularly on state
farms. Crop yields, nevertheless, remained among the lowest in Eastern
Europe.
Livestock and Livestock Products
Livestock numbers increased slowly from 1961 to 1970 but, except for
poultry, were generally lower at the end of that period than the peak
levels reached for the different types between 1965 and 1968. From 1961
to 1965 the number of cows declined but increased steadily thereafter,
without, however, fully regaining the level of 1961.
Development of the livestock economy has been hampered by an inadequate
feed base, poor quality of livestock and livestock breeding, and
inefficient production methods. Significant improvements in the
livestock sector are planned for the 1971-75 period and beyond to 1980.
Although livestock production failed to increase as a proportion of the
total farm output, the volume of livestock products, nevertheless, rose
significantly during the 1960s (see table 11). Compared with the average
annual outputs of individual products attained in the 1962-65 period,
increases in average annual production for the years 1966 through 1969
ranged from 18 percent for wool to 24 percent for meat.
_Table 10. Production of Major Crops in Romania, Selected Years,
1960-69_ (in thousand metric tons)
-------------------------------------------------------------------
Crop 1960 1963 1966 1967 1968 1969
-------------------------------------------------------------------
Grain[1]
Wheat 3,450 3,799 5,065 5,820 4,848 4,349
Corn 5,531 6,023 8,022 6,858 7,105 7,676
Other 845 614 812 834 817 799
----- ------ ------ ------ ------ ------
Total 9,826 10,436 13,899 13,512 12,770 12,824
Oilseeds
Sunflower 522 506 671 720 730 747
Other 93 54 63 61 41 59
----- ----- ----- ----- ----- -----
Total 615 560 734 781 771 806
Sugar beets 3,399 2,298 4,368 3,830 3,936 3,783
Tobacco 16 40 40 35 33 24
Potatoes 3,009 2,692 3,352 3,096 3,707 2,165
Vegetables 1,831 1,702 2,177 2,000 2,296 1,963
Fodder Crops
Hay 2,105 1,872 3,182 3,223 2,472 3,268
Green feed 1,222 2,922 4,749 4,380 3,995 3,885
Silage[2] 4,601 5,296 3,538 2,830 3,728 3,491
Root crops 276 293 371 269 302 420
----- ------ ------ ------ ------ ------
Total 8,204 10,383 11,840 10,702 10,497 11,064
Fruits 829 1,048 1,390 1,206 1,054 1,677
Grapes 874 937 954 910 1,167 1,189
--------------------------------------------------------------------
1. Grain production in 1971 was unofficially reported to have reached
about 14.5 million metric tons.
2. Roughly 90 percent corn.
Source: Adapted from _Anuarul Statistic al Republicii Socialiste
Romania, 1970_ (Statistical Yearbook of the Socialist Republic of
Romania, 1970), Bucharest, 1970, pp. 312 315.
_Table 11. Output of Livestock Products in Romania, Selected Years
1960-69_
------------------------------------------------------
Meat[1] Milk[2] Eggs[3] Wool[4]
------------------------------------------------------
1960 969 856,472 2,355 21,850
1965 1,116 859,061 2,630 25,410
1966 1,265 987,531 2,814 26,072
1967 1,356 1,089,320 3,011 28,626
1968 1,297 1,012,628 3,113 30,583
1969 1,271 992,762 3,315 30,752
-----------------------------------------------------
1: Thousand metric tons live weight.
2: Cow, goat, and buffalo in thousand gallons.
3: In millions.
4: In metric tons.
Source: Adapted from _Anuarul Statistic al Republicii Socialiste
Romania, 1970_ (Statistical Yearbook of the Socialist Republic of
Romania, 1970), Bucharest, 1970, pp. 430 431.
Data on the contribution of the different types of farms to the total
farm output are lacking, but detailed figures are available for
individual products. The most noteworthy aspect of these data is the
light that they shed on the importance of the collective farmers'
personal plots and of the private sector in the production of the higher
valued farm products. On their small personal plots, the collective
farmers in 1969 produced roughly one-third of the wool, vegetables, and
potatoes; two-fifths of the meat, milk, and fruit; and three-fifths of
the eggs (see table 12). Together with the small number of private
farms, they accounted for 35 to 80 percent of the output of these items.
Foreign observers have interpreted this phenomenon as clear evidence of
the inadequacy of incentives for work on state and collective farms.
Exports
Substantial quantities of farm products have been exported in raw and
processed form. In the 1965-69 period exports of grain, fruits,
vegetables, and eggs ranged from 10 to 13 percent of output. Exports of
wool reached almost two-thirds of the total production volume. A wide
range of other vegetable and livestock products were also exported,
including pulses; sugar; sunflower seeds and oil; live cattle; fresh,
frozen, and canned meat; butter; wine; and tobacco (see ch. 14).
_Table 12. Crop Production and Livestock Products in Romania, by Type of
Farm, 1969_ (in percent)
---------------------------------------------------------------------------
State
Product Agricultural State Collective Personal Private
Units Farms[1] Farms Plots Farms
---------------------------------------------------------------------------
Grains 24.5 23.6 63.4 9.0 3.1
Fiber plants 5.2 4.7 92.1 0.6 2.1
Oilseeds 29.2 28.9 70.8 ---[2] ---[2]
Sugar beets 0.4 0.3 99.6 0 0
Tobacco 0.2 0 99.8 0 0
Potatoes 7.1 6.5 39.1 36.4 17.4
Vegetables 11.6 10.6 52.9 29.6 5.9
Perennials for hay 30.2 28.3 64.7 3.2 1.9
Annuals for hay 23.5 19.4 58.9 13.9 3.7
Annuals for green
feed 38.0 35.6 60.1 1.6 0.3
Fodder roots 53.8 50.9 39.8 4.8 1.6
Silage crops 44.5 42.8 55.4 0.1 0
Fruits 11.7 9.9 19.3 40.9 28.1
Meat 27.0 24.2 21.2 39.3 12.5
Milk 16.7 16.0 28.2 38.2 16.9
Eggs 17.0 16.7 3.2 60.0 19.8
Wool 17.7 16.8 38.4 33.1 10.8
---------------------------------------------------------------------------
1. Breakdown included within state agricultural units.
2. Less than 0.1 percent.
Source: Adapted from _Anuarul Statistic al Republicii Socialiste
Romania, 1970_ (Statistical Yearbook of the Socialist Republic of
Romania, 1970), Bucharest, 1970, pp. 329-345, 406, 430-431.
CHAPTER 16
INDUSTRY
Stimulated by a high rate of investment and an infusion of Western
technology, industry has expanded at a rapid rate. A qualitatively
inadequate labor force, poor organization, and insufficiently
experienced management personnel, however, have not been able to attain
levels of efficiency and quality acceptable to the Romanian Communist
Party and the government. Lowering the cost of production and improving
quality are considered to be essential prerequisites for expanding
exports, which are needed to pay for imports of materials and equipment.
Various measures introduced since 1967 have not achieved the
government's objectives. Economic plans for the 1971-75 period call for
raising productivity through greater specialization of production and
better utilization of plants and materials. To this end, several new
economic laws were passed in December 1971, the contents of which were
not yet known in early 1972.
NATURAL RESOURCES
Though widely varied, the country's mineral and agricultural resources
are generally inadequate to maintain the current and planned levels of
industrial production and exports. Natural gas is a major exception.
Formerly plentiful supplies of crude oil are falling off, and the
likelihood of discovering new deposits is considered poor by oil
industry officials. The heavy dependence on outside sources of raw
materials led the government to provide economic and technical
assistance to several developing countries for the exploitation of their
mineral resources in return for shipments of mined products. This
dependence has also been a major determinant of the country's political
relations with other members of the Council for Mutual Economic
Assistance (COMECON), particularly the Soviet Union, and with
noncommunist industrial nations of the West (see ch. 10).
Minerals and Metals
Information on the extent of most mineral reserves is unavailable. A
delegation of Western petroleum experts who surveyed the petroleum
industry at the end of 1970 made a tentative estimate that oil reserves
would be exhausted in roughly eleven years at the current annual
production rate of about 13 million tons. With a view to ensuring
long-term crude oil supplies for the planned expansion of the domestic
petroleum refining and petrochemical industries, the government has
entered into economic cooperation agreements with several small
petroleum-producing countries. The government has also discussed the
possibility for joint exploration of offshore petroleum deposits in the
Black Sea and elsewhere in the world with oil interests of various
countries. In the meantime the government has been importing crude oil
from Iran, Saudi Arabia, and Libya in exchange for industrial machinery
and equipment. Oil imports from these countries in 1970 amounted to 2.1
million tons.
The major natural gas deposits that were exploited in 1970 are located
in the Transylvanian basin and outside the Carpathian arc (see ch. 3).
According to Romanian officials, the annual addition to reserves has
been double the volume of annual production. Gas output has expanded
steadily from about 365 billion cubic feet in 1960 to 845 billion cubic
feet in 1969. Natural gas has been used for electric power production in
thermal plants, for space heating, and as a raw material for the
chemical industry. Less than 1 percent has been exported through a
pipeline to Hungary.
Western observers believe that imports of natural gas from the Soviet
Union may be initiated in the early 1970s. This belief is based on
information that a gas pipeline to be built from the Soviet Union to
Bulgaria will pass through eastern Romania, fairly close to the major
port of Constanta, which is far removed from domestic sources of gas.
Negotiations to this effect are not known to have taken place.
Deposits of coal are small and, with few exceptions, low grade. Known
reserves in 1970 were reported to include less than 1 billion tons of
bituminous and anthracite coal and 3.5 billion tons of lignite. Fields
at Petrosani in the Jiu Valley of the southern Transylvania Alps contain
98 percent of the bituminous coal reserves; 90 percent of the lignite
reserves are located in Oltenia, in the southwestern part of the
country. Open pit mining is possible in much of the lignite area.
In order to conserve crude oil and natural gas, production of coal and
lignite has been substantially increased and is scheduled to rise
rapidly in the 1971-75 period. From 1950 to 1970 total coal output
increased at an annual rate of 9.2 percent, including a growth of more
than 15 percent per year in lignite output. By 1975 coal output is to
reach from 37 million to 38.5 million tons, which corresponds to a
planned annual increase of about 10.6 percent from the level of 22.8
million tons mined in 1970. The production of lignite is scheduled to
advance more rapidly than that of bituminous and anthracite coal.
Two-thirds of the mined coal tonnage with 56 percent of its caloric
content was used in 1970 to fuel electric power plants. Only 1.3 million
tons were usable in the manufacture of coke, in large part as an
admixture to imported coking coals of superior quality. The severe and
growing shortage of domestic coke supplies poses a major obstacle to the
expansion of the iron and steel industry. In 1969 it was necessary to
import 2.1 million tons of metallurgical coke and 633,000 tons of coking
coal.
Workable deposits of iron ore are situated in the vicinity of Resita and
Hunedoara in the southwest. Other known deposits, particularly those at
Ruschita and Lueta, have a low metal content and harmful radioactive
admixtures. Suitable mining and processing methods to handle these ores
have not been developed and are not believed to be economically
feasible. Domestic mines provided about 32 percent of requirements in
1965 but only 17 percent in 1970; by 1975 the importance of native iron
ores will have further declined. Imports of iron ores almost quadrupled
in the 1960s and reached a volume of 3 million tons in 1969. Most of the
imports came from the Soviet Union.
Information on basic nonferrous ore reserves is tenuous and, in part,
conflicting. The tenor of published reports points to a scarcity of
reserves, low metal content of ores, and difficulties in ore processing.
The great majority of existing mines are said to have only enough
reserves left for a few years' production. Consideration has been given
to the recovery of nonferrous metals from industrial wastes, such as
blast furnace slag and metallurgical dross. For the time being, domestic
reserves appear adequate to cover the needs of lead and zinc production
and a portion of the requirements for smelting copper and aluminum. The
bulk of bauxite and alumina and a substantial quantity of copper must be
imported.
Romania is reported to be extracting small amounts of gold and silver.
It is also mining uranium ore, which has been exported to the Soviet
Union in exchange for isotopes and enriched uranium for use in
experimental nuclear installations.
Timber
The country's 6 million acres of forests constitute a valuable source of
raw material. Information on the volume of the annual tree harvests has
not been published. Substantial quantities of lumber and, increasingly,
of lumber products and furniture have been exported, although at the
expense of domestic consumption.
In a program to conserve and rebuild this important resource, which was
severely overexploited during World War II, a strict limitation was
placed in the early 1950s on the annual volume of timber cut. A further
reduction in the amount of timber felling was decreed for the 1971-75
period. Through a more efficient utilization of the timber and the
expansion of wood processing, including the manufacture of plywood,
chipboard, and furniture, the value of the output, nevertheless,
increased substantially. Exports of lumber and wood products accounted
for 13.4 percent of total exports in 1970, but this ratio is scheduled
to decline to 6 percent in 1975, not because of a reduction in the
volume of these exports but as a result of a planned expansion of other
industrial and food product exports.
ELECTRIC POWER
Electrical power development has proceeded at a rapid pace. The
installed generating capacity of 7.3 million kilowatts in 1970 was four
times larger than the capacity available a decade earlier. Eighty-four
percent of the installed capacity in 1970 was in thermal power plants,
and the remaining 16 percent, in hydroelectric stations. Hydroelectric
capacity development had been relatively more rapid, with a sixfold
increase during the decade.
The production of electrical energy increased even faster than installed
capacity because newly built plants operated at greater efficiency. The
output of 35 billion kilowatt-hours in 1970 was 4.6 times greater than
output in 1960. Power output is scheduled to reach 58 billion to 60.8
billion kilowatt-hours in 1975. These figures imply an average annual
increase in power production of 10.5 to 11.7 percent, compared with an
average increase of 16.5 percent in the 1960-70 period. Thermal power
plants accounted for 92 percent of the output in 1970, and hydroelectric
stations, for only 8 percent. Output per unit of thermal capacity was
more than double that of hydroelectric generators. The total
hydroelectric power potential that could be economically developed has
been estimated at 24 billion kilowatt-hours per year.
The Romanian power grid is connected to the power grids of Bulgaria,
Czechoslovakia, and Yugoslavia. This tie-in makes possible a more
efficient use of available power through mutual exchanges to equalize
the load and provides some insurance in the event of regional power
failures.
Almost two-thirds of the thermal energy output in 1970 was based on
natural gas fuel, and one-third, on coal--mostly coal of very low
quality. Less than 3 percent of the fuel used was accounted for by oil.
The proportion of natural gas in the fuel balance was roughly the same
as in 1960 but ten percentage points lower than in 1965. The share of
coal, particularly of low-grade coal, has been rising, in line with the
government's policy of conserving natural gas for use in the
petrochemical industry.
In 1971 construction was virtually completed of a huge hydroelectric
station at the Iron Gate on the Danube River, built jointly with
Yugoslavia and equipped, in part, with turbines made in the Soviet
Union. The station's twelve turbines have a total capacity of 2.1
million kilowatts and are planned to produce about 11 billion
kilowatt-hours of electricity per year. The output is to be evenly
divided between the two participating countries. Nine of the twelve
turbines were reported to have been in operation in September, and six
were reported to have been connected to the Romanian national power grid
in November. Completion of the Romanian portion of the project almost
doubled the country's hydroelectric capacity and increased its power
output potential by about 15 percent.
A second, much smaller, hydroelectric station with a capacity of 400,000
kilowatts and a planned output of 1.5 billion kilowatt-hours per year is
to be built jointly with Yugoslavia on the Danube River below the Iron
Gate plant. Plans for this station were to be initialed by the
negotiators before the end of 1971, but information on the dates for the
start and completion of construction is not available. Plans for the
construction of yet another power station on the Danube River, as a
joint venture with Bulgaria in the Cernavoda-Silistra area, were
announced in the fall of 1971. This station is to have a capacity of
760,000 kilowatts and an annual output of about 3.8 billion
kilowatt-hours. Construction is apparently scheduled to begin in 1975.
An agreement with the Soviet Union to build a 440,000-kilowatt nuclear
power station, using a Soviet reactor, was signed in May 1970.
Construction of the plant is to begin in 1972, and completion is
scheduled for 1978. The agreement culminated extensive negotiations with
the Soviet Union and several noncommunist countries. The ultimate choice
is believed by Western observers to have been dictated primarily by
political considerations.
Initial plans for nuclear power plants called for an installed capacity
of 1 million kilowatts by 1975 and 2.4 million kilowatts by 1980.
Construction was to begin in the 1966-70 period, but this target was not
met. A subsequently revised plan for the 1971-80 period envisaged the
construction of nuclear plants with a total capacity of from 1.8 million
to 2.4 million kilowatts. Construction of the plants was to begin
between 1971 and 1975, and their commissioning was to take place in the
1976-80 period. No information has been made public on the contemplated
source or sources of the equipment for these plants, other than the
agreed-upon Soviet unit. Romania must rely on foreign technical
assistance for its nuclear energy program.
ORGANIZATION
In 1969 industry, excluding construction and small private artisan
shops, comprised 1,151 enterprises employing almost 2 million persons.
Seventy percent of the enterprises, which included 92 percent of the
employed persons, were owned and operated by the state, and the
remaining were run by collectives, including collective farms. State
industry produced 95.7 percent of the gross output; collective
enterprises contributed 4.1 percent; and private establishments
accounted for only 0.2 percent of total production.
Seventy percent of the state industrial enterprises, which included 89
percent of the persons employed by the state, were administered by
central authorities; the remaining were subject to the jurisdiction of
local government bodies. Collective enterprises are subject to
governmental controls; their activities are covered by the annual and
five-year economic plans, and many of the enterprises act as suppliers
of tools, spare parts, and miscellaneous equipment to state enterprises
on a contractual basis. Their main function, however, is to provide
consumer goods and services for the population.
Centrally administered enterprises include the largest and most
important industrial units. A consolidation of these enterprises in 1969
reduced their number by half and correspondingly increased their average
size. Employment per enterprise in 1969 averaged 2,860 persons; it
ranged from 800 persons in printing to more than 8,000 persons in the
leather and footwear industry. Individual enterprises may be composed of
more than one plant, which accounts, in part, for the large number of
workers. Over 60 percent of the enterprises under central government
administration had more than 1,000 workers each, and almost 27 percent
employed more than 3,000 workers per enterprise.
Enterprises under local government jurisdiction were generally
smaller--95 percent of these employed from 200 to 2,000 workers
each--but even in this group there were some enterprises with more than
5,000 workers. Collective enterprises were still smaller--77 percent
employed no more than 500 workers per unit. One collective enterprise,
nevertheless, employed between 2,000 and 3,000 workers.
Employment in construction totaled 648,000 persons in 1969. Information
on the number and organization of construction enterprises is not
available.
The internal management structure of state enterprises has undergone a
transformation. By decision of the party's Central Committee in April
1968, amplified by another decision in May 1970, the principle of
collective management replaced that of one-man management in all
enterprises and state economic organizations. Management committees are
chaired by enterprise directors and consist of the following members:
the managerial personnel, appointed by the ministry; the chairmen of the
trade union, as legal representatives of the enterprise trade union
committees; the secretaries of the party committees and of the communist
youth organizations in the enterprises; and a number of employee
representatives.
The secretaries of the two party organizations were given full
membership in May 1970 in a move to strengthen the control by the party.
Before that date the secretaries of the party committees merely
participated in the discussions, and the secretaries of the communist
youth organizations played no role at all. County and municipal party
organs also provide direction for the management committees' work.
According to party decisions, the management committees are deliberative
organs with powers to make decisions concerning the conduct of the
technical, economic, and social activities of the enterprise. Two-thirds
of the membership constitutes a quorum, and decisions can be adopted by
a simple majority of those present. In cases of disagreement between the
committee chairman (the enterprise director) and a majority of the
management committee, the matter is submitted for resolution to the
higher administrative body.
A lack of legislation to legalize the institution of the management
committees and conflict of the new party directive with earlier
legislation that established the principle of one-man management
hampered the introduction of the new management system. No clear-cut
guidelines were provided for the scope of the management committees'
competence or the numerical strength of employee representation. The
function of the management committees was also undermined by higher
administrative echelons through continued imposition of detailed
directives concerning the work of the enterprises--contrary to the
announced party policy of loosening central controls. Confusion
prevailed about the relationships between management, management
committees, and higher economic bodies.
There is no evidence on the effectiveness of the supplemental party
decision of May 1970 in resolving the problems besetting the functioning
of the management committees. A new law on the organization and
management of state enterprises and institutions was passed by the
General Assembly toward the end of 1971, but information on the
provisions of that law was not available in early 1972.
Another new element in the management of enterprises is the general
assembly of employees, introduced in 1968 along with the management
committees in accordance with the principles of collective management
and socialist democracy. Adequate legislation to formalize the new
institution had not been passed by late 1971, but an appropriate
provision may have been included in the new law on industrial
organization.
As described by a high government official, the general assembly of
employees or, in the case of large enterprises, of employee
representatives is a forum that will assure effective participation by
workers and specialists in the organization and management of the
economy and in decisionmaking concerning the fulfillment of enterprise
plans. General assemblies are supposed to exercise control over the
activities of management committees. Their authority extends beyond the
discussion of problems and evaluation of performance to recommending and
adopting decisions.
General assemblies are convened twice a year. On these occasions the
enterprise management committee must present to the assembly reports on
the committee's activities, on the results of enterprise operations, and
on the fulfillment by the enterprise of its economic and social
obligations. Together with the trade union committee of the enterprise,
the management committee must also present to the assembly for
discussion and approval the draft of a new collective contract listing
mutual obligations of the management committee and of the employees.
Decisions reached by the general assembly are obligatory for the
management committee. Decisions on measures that require action by
higher authorities must be handled by the relevant bodies responsibly
and expeditiously.
Representatives of superior economic organs, including the ministries,
and of county and local party committees participate in the work of the
general assemblies of employees. The reason given for this participation
is the opportunity that it provides for the management to become more
familiar with problems of interest to the enterprise.
Available evidence indicates a wide variation among enterprises in the
degree of influence exercised by the general assemblies of employees.
Toward the end of 1971 some management committees were still reported to
be disregarding or downgrading general assembly proposals, but such
instances were said to be growing progressively fewer.
Industrial enterprises are grouped into combines, trusts, and, since
1969, so-called industrial centrals. The centrals were created in an
attempt to improve the organizational structure of industry, reduce
control by the ministries and other central government agencies, and
provide greater flexibility, in order to increase industrial
efficiency. A major task assigned to the centrals is to introduce
specialization of production.
Neither the organizational forms of the centrals nor their authority and
responsibility vis-à-vis the enterprises and ministries have been
clearly defined or legally established. The resultant uncertainty,
experimentation, and bureaucratic disharmony have created considerable
confusion in the administration of industry, which has been inimical to
the attainment of the efficiency goal. At the same time, a variety of
factors, including a shortage of investment funds, an inflexible price
structure, and the method of evaluating enterprise performance, have
militated against the expansion of specialization. Industry officials
believe that it may require from three to five years to resolve the
organizational problems posed by the creation of the centrals and that
many other problems will have to be solved before specialization can
become a reality.
Industrial combines, trusts, and centrals function under the
jurisdiction of industrial ministries, of which there were eleven at the
end of 1971 (see ch. 8). Industrial ministries have undergone an almost
continuous process of reorganization. New ministries have been created;
old ones, abolished; still others, amalgamated and split. Spheres of the
ministries' activities have been reshuffled, and their internal
structures have been modified--all in the interest of improving
socialist industrial organization and raising the efficiency of
production. One foreign observer remarked that, whenever something went
wrong in the economy, reorganization in one form or another was
undertaken in an effort to solve the problem through administrative
means.
LABOR
The average number of persons employed in industry in 1969 was
1,980,000, or about 40 percent of total employment excluding those
employed on collective farms. Industrial employment had increased by
725,000 persons in the 1960-69 period. Employment in construction grew
more rapidly--from 372,000 persons in 1960 to almost 648,000 in 1969. At
the end of 1969 women constituted 43 percent of employment in industry
and less than 9 percent in construction. In industry, the proportion of
women in blue-collar and white-collar jobs was about equal. In
construction, however, women occupied one-third of the white-collar
positions and only 5 percent of the blue-collar jobs.
A distribution of employment by industry branches is available only for
enterprises under the direct jurisdiction of the central government. Of
these, machine building and metalworking absorbed 27 percent of the
employed; fuels and metallurgy, 15 percent; forestry and woodworking,
15 percent; textile production, 12 percent; and chemicals and food
processing, 7 percent each. Several less important industry branches
accounted for another 11 percent of industrial employment, and an
unlisted residue of fifty enterprises employing almost 100,000 persons,
presumably constituting the defense industry, made up the balance of 6
percent.
The growth of employment in the 1960-69 period varied widely among the
different industry branches. Whereas the number of employed rose by 60
percent for centrally administered industry as a whole, it increased by
almost 2.4 times in the chemical branch, somewhat more than doubled in
the production of cellulose and paper, and grew by 80 percent in
nonferrous metallurgy and in machine building and metalworking. The
lowest increases in employment occurred in the production of fuels, in
ferrous metallurgy, and in the manufacture of glass and china. The
increases in employment did not necessarily correspond to the priority
ratings of the individual branches; high priority branches received
relatively much larger investment.
The labor force is numerically redundant but qualitatively inadequate
for the needs of modern industry. Despite the existence of labor
training programs, there is a shortage of skilled personnel at the
intermediate level, such as technicians and foremen. Few workers have
professional school training; most acquire their skills through short
courses or on-the-job training. The number of skilled workers is too
small to allow efficient two-shift operation of plants throughout most
of industry. The lack of adequate skills and the associated inept
handling and poor maintenance of imported sophisticated machinery have
been responsible for frequent breakdowns. The resultant work stoppages
and the under-utilization of available capacity have had a deleterious
effect on productivity.
Because of a high rate of investment and large-scale imports of advanced
Western technology and equipment, productivity per worker nevertheless
has been rising at a relatively rapid rate. According to official data,
productivity in industry increased by an annual average of 7.5 percent
in the 1960-69 period, but the increase in 1969 was less than 5 percent.
Official plans for the 1971-75 period call for an annual growth in
productivity of at least 7.3 percent. Western economists, however,
estimated the rise in productivity to have been only 5.6 percent per
year in the 1960-67 period, compared to an official figure of 8 percent.
Despite the impressive gains, productivity in industry remains low,
mainly because of the inadequate qualifications and work habits of the
labor force and the shortcomings of industrial organization and
management.
Industrial labor discipline has been a subject of continuing concern to
party and government. Both labor turnover and absenteeism have been
high. During the first nine months of 1969 almost 455,000 workers left
their jobs in centrally administered enterprises, in many instances
without the requisite official permission. During the same period
worktime losses from absenteeism amounted to about 12 million man-hours.
Abuse of the provision for leave without pay and loafing on the job have
also contributed significantly to losses of worktime. For centrally
administered industry as a whole, the loss of worktime from all causes,
including stoppages caused by deficiencies of the supply and
distribution system, amounted to almost 47 million man-hours in the
third quarter of 1969--the equivalent of about 74,400 workers.
Poor labor discipline was officially blamed on the failure of the
prevailing wage system to provide adequate work incentives. After some
experimentation in the food-processing industry during 1968 and 1969 a
new wage system was introduced throughout industry on March 1, 1970,
still on an experimental basis. Some of the changes brought about by the
highly complex new system included: a reduction in the spread between
wage rates in different industry sectors and between the upper and lower
limits within certain wage categories; the establishment of in-grade
wage differentials depending upon the personal achievement of the
worker; a rise in the proportion of basic wages to total pay (which also
includes bonuses); and a tightening of the provisions concerning the
payment of bonuses. Provision was also made for withholding a portion of
the pay in the event that production targets are not fulfilled.
Downgrading the importance of bonuses was intended to stimulate the
raising of skill levels by making higher earnings dependent primarily
upon promotion to higher wage categories, based on qualification rather
than on surpassing quantitative production norms. As a means of reducing
labor turnover, a seniority system was introduced, with wage increases
based on length of service in the same unit. The reform of the wage
system was accompanied by a general rise in wages averaging 12.3
percent.
A further increase in wages is planned for the 1971-75 period. The
minimum wage of 800 lei (for value of leu, see Glossary) is to be raised
to 1,000 lei in September 1972 and to 1,100 lei in 1975. The average
wage is scheduled to reach almost 1,500 lei in 1972 and 1,805 lei at the
end of the five-year period. In accordance with past policy, the rise in
wages will be kept well below the increase in productivity (see ch. 14).
Along with the modification of the wage system, legal measures were
enacted to tighten labor discipline. These measures provide for the
imposition of fines up to 10,000 lei for violations of economic
contracts and fines of from 50 to 1,000 lei for negligence while on
duty; they oblige employees to make good the full amount of any damage
for which they are responsible; and they enable the enterprise
management to reduce workers' wages when standards of social behavior
are not met. Penalties may be imposed by the enterprise director or the
management committee. The only recourse open to workers is an appeal to
the higher administrative bodies.
The broad concept of standards of behavior offers a wide latitude for
the exercise of individual judgment by management. No criteria have been
provided for determining the conditions under which wages may be cut or
the maximum permissible amount of the wage cuts. The new rules thus
introduced an element of discretionary exercise of punitive authority.
They also deprived the accused of recourse to the courts, which had been
available to them under earlier legislation.
INVESTMENT AND CONSTRUCTION
Industry has consistently received more than half the total investment
in the economy. In the 1966-70 period industrial investment out of the
state budget (centralized investment) amounted to 162.1 billion lei--a
volume almost as great as that invested during the preceding fifteen
years. Additional investment out of enterprise resources was only about
1 percent of the total and had been even less in earlier years. From 86
to 90 percent of the industrial investment was channeled into branches
producing capital goods. Centralized investment in industry during the
1971-75 period is planned at 281.2 billion lei, or about 60 percent of
the total planned investment.
Industries producing fuels and energy absorbed the largest share of
investment, but their share declined from 51 percent in the 1951-55
period to 31 percent in the 1966-70 period. The high priority accorded
to the development of the chemical industry was reflected in a doubling
of that industry's investment share from less than 7 percent in the
former period to 14 percent in the 1960s. Similarly, a drive for
qualitative improvement in machine building and metalworking was
accompanied by an increase in the proportion of investment devoted to
that industry from a level of 7 to 8 percent in the 1951-65 period to 14
percent in the second half of the 1960s. Ferrous metallurgy absorbed
about 10 percent of the investment in the fifteen-year period that ended
in 1970. A need to expand exports of manufactured goods and to provide
material incentives for the working population stimulated a rise of
investment in the light and food industries to 13 percent of the total
in the 1966-70 period, compared to a share ranging from 7.5 to 10
percent in earlier five-year periods.
About 48 percent of the industrial investment was absorbed by building
construction and installation work, 37 percent was spent on machinery
and equipment, and 15 percent was devoted to the increase of working
capital. One-third of the investment in machinery and equipment from
1966 to 1969 was used for procurement abroad, that proportion having
increased from about one-fifth in the 1956-60 period.
Although substantial progress has been made in the expansion of
industrial capacity, construction of new industrial plants has been
beset by many problems and has consistently lagged behind official
plans. Inadequate planning, poor design, disregard of the limitations of
the materials base and of potential markets, improper location,
excessive size of projects, and long delays in project development and
in construction have been among the difficulties most frequently
discussed in the country's press. Completed plants often require years
to attain the projected output level, and many plants have never reached
it.
Large losses to the economy have also been caused by long delays in
installing new equipment, much of it imported at a heavy cost in foreign
exchange. At the end of 1969 the Grand National Assembly was officially
informed that the volume of unused equipment amounted to 3.5 billion
lei; some of the equipment had been lying idle for from ten to twelve
years. Government officials realize the urgent need to improve
investment performance, particularly in view of the large investment
program planned for the 1971-75 period.
PRODUCTION
Industrial production in 1970 was 3.8 times larger than it had been ten
years earlier, according to official data. This increase is equivalent
to an average annual growth rate of 12.8 percent. A rise of 11.2 percent
in industrial output was unofficially reported for 1971. In terms of
Western statistical concepts and methods, the annual increase in
industrial output was estimated at 11.5 percent for the 1960-68 period,
compared to an officially reported growth rate of 13.2 percent.
Industrial growth in Romania has been among the highest in countries of
Eastern Europe.
In line with the government's priorities, production of capital goods
increased at an annual (official) rate of 14.2 percent, and that of
consumer goods advanced by 10.2 percent. The proportion of capital goods
in the total output therefore increased from 62.9 percent in 1960 to
70.6 percent in 1970; it is scheduled to reach 72.8 percent by 1975.
Although the output of consumer goods increased 2.6 times during the
ten-year period, the availability of goods to consumers did not rise
proportionately because an increasing volume was exported to pay for
imports of machinery and raw materials. Shortages of consumer goods,
including foodstuffs, were not eliminated by 1971. The output of newly
introduced products, such as chemicals and television sets, increased
more rapidly in the 1960s than did the output of traditional items (see
table 13).
Improving the quality of manufactured products has been a major concern
of the party and government, particularly from the point of view of
competitiveness in foreign markets. With some exceptions, such as men's
and women's knitwear, a lack of competitiveness was clearly demonstrated
in mid-1971 by the results of a giant Romanian trade exhibition in
Duesseldorf, West Germany. This exhibit was reported to have achieved
just the reverse of what was intended and to have demonstrated the
inferiority of Romanian goods compared to Western European and Japanese
products. Quality considerations, however, did not inhibit an attempt to
market a Romanian-built motor vehicle of the jeep type in the United
States.
_Table 13. Output of Selected Industrial Products in Romania, 1960 and
1969_
----------------------------------------------------------------------
Product Unit of Measure 1960 1969
----------------------------------------------------------------------
Pig iron thousand metric tons 1,014 3,477
Steel do 1,806 5,540
Coal and lignite do 6,768 16,976
Crude oil do 11,500 12,346
Natural gas billion cubic feet 365 850
Electricity million kilowatt-hours 7,650 31,509
Fertilizers[1] thousand metric tons 71 720
Artificial fibers do 4 56
Plastics do 12 137
Synthetic rubber do 0 55
Tires thousand units 743 3,166
Paper thousand metric tons 140 398
Tractors units 17,102 24,895
Motor vehicles do 12,123 56,998
Cement thousand metric tons 3,054 7,515
Timber million cubic feet 139 186
Textiles million square yards 393 672
Footwear million pairs 30 63
Radios thousand units 167 428
Television sets do 15 221
Sugar thousand metric tons 391 428
----------------------------------------------------------------------
1. In terms of plant nutrients.
Source: Adapted from _Anuarul Statistic al Republicii Socialiste
Romania, 1970_ (Statistical Yearbook of the Socialist Republic
of Romania, 1970), Bucharest, 1970, pp. 186-195.
By decrees issued in 1970 and 1971 the State Inspectorate General for
Product Quality was established as an organ of the Council of State with
wide powers to establish and enforce quality standards, including the
imposition of economic and criminal sanctions. At the same time, the
decrees provided that extra payments be made to individuals and groups
of workers who turn out products of superior quality. In announcing the
creation of the new agency, Romanian commentators remarked that an
administrative approach to the solution of the quality problem was made
necessary by the failure of other measures.
BIBLIOGRAPHY
Section I. SOCIAL
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U.S. Department of Commerce. Office of Technical Services. Joint
Publications Research Service--JPRS (Washington). The following
items are from the JPRS series _Translations on Eastern Europe:
Political, Sociological, and Military Affairs_.
"Adult Education Program Examined," _Lupta de Clasa_,
Bucharest, August 1970. (JPRS: 51,572, Series No. 272, 1970.)
"Adult Education Program, Examined, Praised," _Munca_,
Bucharest, September 3, 1970. (JPRS: 51,745, Series No. 283,
1970.)
"Better Coordination Between Specialized Schools and
Production," _Scinteia_, Bucharest, April 20, 1971. (JPRS:
53,539, Series No. 377, 1971.)
"Care in Criticism of Past Culture Urged," _Scinteia_,
Bucharest, December 1, 1968. (JPRS: 47,202, Series No. 59,
1969.)
"Center for Education Information and Documentation," _Buletinul
Oficial al Republicii Socialiste Romania_, Bucharest, April
15, 1971. (JPRS: 53,289, Series No. 364, 1971.)
"Changes in the Social Structure, 1960-1969," _Viata Economica_,
XVI, Bucharest, April 16, 1971. (JPRS: 53,159, Series No. 356,
1971.)
"Changes Urged in Policy of Admitting Students to Higher
Education," _Scinteia_, Bucharest, January 12, 1971. (JPRS:
52,452, Series No. 317, 1971.)
"Decree Governing Assignment of Graduates," _Buletinul Oficial
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(JPRS: 51,399, Series No. 261, 1970.)
"Delays in Providing Modern School Equipment Cited," _Scinteia_,
Bucharest, January 8, 1969. (JPRS: 47,598, Series No. 76,
1969.)
"Development of School System Discussed," _Scinteia_, Bucharest,
January 12, 1969. (JPRS: 47,411, Series No. 68, 1969.)
"Economy Modernization Discussed in Relation to
Socioprofessional Mobility," _Lupta de Clasa_, V, Bucharest,
May 1970. (JPRS: 50,830, Series No. 308, 1970.)
"Equality at Law for National Minorities," _Scinteia_,
Bucharest, April 11, 1971. (JPRS: 53,155, Series No. 355,
1971.)
"Government Revises Setup of Education," _Buletinul Oficial al
Republicii Socialiste Romania_, Bucharest, December 29, 1968.
(JPRS: 47,447, Series No. 68, 1969.)
"Harmful Influence of Religion Stressed," _Romania Libera_,
Bucharest, May 9, 1969. (JPRS: 48,249, Series No. 105, 1969.)
"Law on Education in Rumania," _Romania Libera_, Bucharest, May
15, 1968. (JPRS: 45,795, Series No. 8, 1968.)