Ro­ma­nia Suf­fers From A ‘Sig­na­ture Strike’

An anti-bribery cam­paign is de­lay­ing big-ticket projects “In­fra­struc­ture has been a huge area of cor­rup­tion”

Bloomberg Businessweek (Asia) - - GLOBAL ECONOMICS - −Carol Mat­lack, with An­dra Timu and Irina Vilcu

In Au­gust, Ion Tiriac , a for­mer pro­fes­sional ten­nis and hockey player-turned­busi­ness­man, sum­moned re­porters to tell them he was shelv­ing plans to do­nate €2 mil­lion ($2.2 mil­lion) to build a new ice rink in Bucharest. Tiriac told jour­nal­ists he had spent more than two years try­ing to line up the nec­es­sary govern­ment ap­provals, but a sweep­ing crack­down on cor­rup­tion has made civil ser­vants re­luc­tant to sign even rou­tine doc­u­ments. “They are afraid to even breathe be­cause it may lead to the an­ticor­rup­tion pros­e­cu­tors’ of­fice,” the busi­ness­man says he was told.

Ro­ma­nia’s an­ticor­rup­tion agency is re­view­ing more than 10,000 cases, and hun­dreds of pub­lic of­fi­cials are fac­ing crim­i­nal tri­als, the re­sult of a cam­paign spear­headed by Laura Co­druta Kovesi, an ag­gres­sive pros­e­cu­tor who was ap­pointed to lead the depart­ment in 2013. The op­er­a­tion, rem­i­nis­cent of Italy’s na­tion­wide Clean Hands cam­paign in the 1990s, has brought down sev­eral high-rank­ing politi­cians, in­clud­ing for­mer Prime Min­is­ter Vic­tor Ponta, who re­signed in Novem­ber af­ter be­ing charged with money laun­der­ing and com­plic­ity in tax fraud; for­mer Bucharest Mayor Sorin Oprescu, who was ar­rested in Septem­ber and charged with bribe-tak­ing; and for­mer Fi­nance Min­is­ter Dar­ius Val­cov, who re­signed last March amid al­le­ga­tions that he used funds ob­tained through in­flu­ence-ped­dling to amass a hid­den cache of gold bars and paint­ings by Pi­casso and Andy Warhol. All three have de­nied the charges against them.

As the in­ves­ti­ga­tions con­tinue, long-planned pub­lic works projects are stalling. Di­et­mar Dum­lich, the Euro­pean In­vest­ment Bank’s rep­re­sen­ta­tive for Ro­ma­nia, says the bank has ap­proved €1.7 bil­lion in loans for in­fra­struc­ture projects but can’t get any­one to sign the loan doc­u­ments. “We find our­selves in limbo,” he says. The coun­try badly needs the funds: The World Eco­nomic Fo­rum ranks Ro­ma­nia 85th of 144 coun­tries for the qual­ity of its in­fra­struc­ture—the worst of any Euro­pean Union mem­ber state. Its roads are deemed to be in worse shape than those in Bangladesh or Cameroon.

One rea­son for the sorry state of Ro­ma­nian roads is that money al­lo­cated for im­prove­ments has of­ten ended up in the pock­ets of politi­cians and their cronies, says Vic­tor Alistar, who heads the lo­cal chap­ter of an­ticor­rup­tion group Trans­parency In­ter­na­tional. “Pub­lic in­vest­ment re­lated to in­fra­struc­ture has been a huge area of cor­rup­tion,” he says.

Ro­ma­nia’s Fi­nance Min­istry re­ported in Novem­ber that only half the pub­lic funds bud­geted for cap­i­tal in­vest­ment last year had been spent, be­cause of what it called “in­ef­fi­ciency.” Lia Olguta Vasilescu, mayor of Craiova, a city in the coun­try’s south­west, put it more bluntly in a speech last year, say­ing Ro­ma­nia’s may­ors had gone on a “sig­na­ture strike” for fear they’d be ac­cused of vi­o­lat­ing pro­cure­ment laws. Jus­tice Min­is­ter Raluca Pruna, how­ever, told Bloomberg Busi­ness­week: “Any state worker who cor­rectly ap­plies the law has noth­ing to fear in do­ing his job.”

The story of Tiriac’s skat­ing rink il­lus­trates the prob­lem. In an Oc­to­ber in­ter­view on Real­i­tatea TV, the for­mer sports star who coached Wim­ble­don cham­pi­ons Boris Becker and Go­ran Ivani­se­vic said he had ap­proached Oprescu, the for­mer Bucharest mayor, in 2013 with an of­fer to re­place the city’s ex­ist­ing ice rink. More than half a cen­tury old, the rink has been closed for sev­eral years be­cause of un­paid util­ity bills. Tiriac said he pledged the €2 mil­lion on the con­di­tion that the city would pro­vide the land and seek EU fund­ing to cover some of the costs. The mayor was en­thu­si­as­tic and helped iden­tify “a su­perb site near the city hall,” said Tiriac, who has in­ter­ests in bank­ing, real es­tate, and auto deal­er­ships. But the busi­ness­man later learned that a pre­fect ap­pointed by the na­tional govern­ment had balked at ap­prov­ing the plan. It took six months to ob­tain the nec­es­sary sig­na­tures and se­cure ap­proval from the city coun­cil. Yet sev­eral weeks af­ter the vote, the mayor in­formed him that the coun­cil sec­re­tary “for­got to pub­lish” the de­ci­sion, ren­der­ing it in­valid. Tiriac is now plan­ning to build the rink him­self on land he al­ready owns about 10 miles out­side Bucharest. The bot­tom line Ro­ma­nian of­fi­cials’ fear of be­ing charged with cor­rup­tion is de­lay­ing bil­lions in Euro­pean Union loans and other in­vest­ments.

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