Friends of Roumania 1926

ECONOMICALLY Roumania has all the natural elements essential to the development of an industrial structure capable of satisfying a large proportion of its national needs. While it is true that up to the time of the World War Roumania was to be classed among those nations which were largely dependent on its agriculture, immediately after the war this situation was completely modified owing to the acquirement of well-developed industries in the newly-won territories formerly under Austria-Hungary.

Nevertheless, because of the efforts made during the thirty years preceding the war, Roumania had succeeded within limitations in creating several branches of industry connected with the products of agriculture and the natural riches of the soil.

Such pre-war efforts, conducted by the Government with a view to encouraging the creation of a national industry, were eminently justified by the fact that the old economic structure contained most of the elements indispensable to the development of such a national industrial organization. Agricultural products on the one hand and natural wealth of soil on the other, especially in the production of timber and oil, furnished important raw materials capable of being utilized by an "infant" industry.

Besides, Roumania had the advantages of cheap labor and a local market assured by a protectionist policy. The influx of foreign capital, to which Roumanian industry offered a good investment, supplied the deficiency of local capital essential to the creation of a national industry. Under a highly protective tariff and the law of 1886 (modified in 1912), which encouraged national production, in the natural course of events, had there been no war, Roumania would have unfailingly prospered in time and foreign capital, given such favorable conditions, would have flowed into the country.

The extractive industries, developing Roumania's untold mineral riches, did show considerable growth, as for example the stone quarries, the salt, and petroleum mines; also those branches of industry dealing with the raw materials of agriculture and the exploitation of forest land, such as flour mills, tanneries, lumber, and textile mills. But the lack of coal and iron retarded a great development of the metallurgic industries, which in turn are essential to the development of other manufacturing, so that, except in a few cases, we remained economically subservient to foreign countries.

On the eve of the war three branches of industry—petroleum, lumber and flour—had attained such growth that they were able not only to satisfy internal needs but to contribute an important percentage, next to cereals, to the exports of the country. In the span of a few years these three industries had succeeded in gaining a sure outlet in the markets of the Near East, particularly in Turkey, Asia Minor and Egypt, helping appreciably, along with agricultural products, to maintain a favorable balance of trade. Most of the commercial houses established in these industries were organized Avith foreign capital principally from Germany and Austria, and in less degree from England, France, Belgium and Italy.

At the outbreak of the war, as far as industrial equipment was concerned, Roumania was amply prepared for local needs, and at the same time was able to export considerable quantities of other products.

After the war, and the consequent territorial expansion of Roumania, which brought in regions rich in natural resources as well as all sorts of industrial establishments, the economic structure of the country was finally completed, losing in part its exclusively agrarian character and taking on thenceforth a new mixed aspect: agrarian-industrial. Bukovina, Transylvania, and above all, the Banat contributed largely to the industrial development of the country by the number of their industrial establishments and their natural resources. The iron and coal lacking in the old economic order are now furnished us by Transylvania and the Banat. This has had the effect of supplying a great need and overcoming the previous obstacles in the way of national industrial expansion.

The new territories having been for a long period under foreign domination, it is only natural that their industrial enterprises should still show the earmarks of their former rule. As far as the general economic structure of Roumania is concerned, however, this industrial addition means an increase of great value in equipment and production. It must be remembered that at the close of the war our industries were in dire straits as a result of systematic destruction, attempted dismantling, and disorganization by our erstwhile enemy, while in the regained provinces, where machinery was untouched, industrial plants were ready to resume activity as soon as the war was over.

Whatever the final industrial organization of the new State may be, its industries enjoy primarily the great advantage of being self-sufficient as to essential raw materials. In addition, they have conscientious, skilled and cheap labor; are able to depend upon the support of the Government for a really protective tariff; and finally, they are coming to find in the interior market their principal outlet, with an increasing capacity for consumption as the standard of living rises.

The post-war crisis of the exchange prevented the Government from developing a well-defined tariff policy, but the insufficiency of this tariff was offset by continuance of the freight rates on the pre-war level. Subsequently, as the needs of the State required greater funds to meet increasing general expenses, the law for the encouragement of national industry, which offered great fiscal advantages, had to be modified to increase taxation, which bears heavily upon industry in its present state. Allowance being made for general conditions, however, national industry progressed, notwithstanding unfavorable circumstances after the war, thanks to the efforts of the Government in coming to its aid.

The figures quoted below from official statistics refer to industrial stock companies and show the range of industry both as to its territorial distribution and its financial organization.

The following table gives the growth of industrial corporations in the number as well as the capital represented, since 1919:

It will be seen from the figures quoted, above that every industry has progressed both in the number of establishments and in the capital invested. While statistics regarding the output of these industries are not available, all the branches of industry have been able to increase their annual production, thus contributing to the restoration of the country.

Industrial credit demands have been satisfied by numerous commerical banks lending considerable capital on the basis of participating interest, and in particular by the National Bank of Roumania, which by placing these banks in position to issue credit has effectively remedied the shortage of capital.

In addition, as the rate of interest has shown a decided tendency to rise, the Government on its own initiative and with the cooperation of the National Bank and private capital, organized in 1923 a new financial credit institution designed to give effective and exclusive aid to the various Roumanian industries.

This institution, the "National Society of Industrial Credit," with a capital of 500 million lei, of which 300 millions are already paid in, has granted up to date to the responsible industries of the country advances on mortgages and collateral amounting approximately to 2,000,000,000 lei. The National Society is itself largely backed by the National Bank.

The very low rate of 9 to 10% charged by the Society, compared with the high rate of 18 to 25% charged at present by commercial banks, has enabled business men who deal with the Industrial Credit Society to secure part of the necessary money at extremely favorable rates.

It is to be expected that this credit institution, which is only at the beginning of its activity, will grant additional advances and render more effective assistance in proportion to the strengthening and development of Roumanian national industries, notably by the floating of long-term bonds, the proceeds of which will allow loans at equally long terms. The monetary situation at home and the financial markets abroad have for the time being prevented this operation which, it is hoped, will be carried out in the near future.

Foreign underwriters, confident of the capacity for development of Roumanian industries, will thus be able to make investments free of risks through the guarantees offered them by the credit institution and by industry in general. If foreign financiers would obtain assurance of the stability of a great number of Roumanian business houses by preliminary inquiry in Roumania, it could be asserted that the caution which now prevails would disappear and foreign capital would flow into the country as abundantly as before the war. The Government itself, when taking steps lately to reorganize on a business basis its industrial establishments and to utilize the natural power resources of the country, perceived the opportunity for cooperation between Roumanian and foreign capital. A certain amount of this foreign capital is already at work in Roumania. Negotiations now in progress for a further foreign share in the latest development of industries in connection with the work of national defense and aviation augurs well for closer cooperation in the future.

In order to give effective aid to our industry and to do away with conditions of inequality, the Government recently undertook the revision of customs duties, in an effort to harmonize the tariff, the present monetary situation and the necessity for protecting certain branches of industry. This tariff revision represents a preliminary step toward the re-establishment of commercial agreements with other countries. These agreements expired for the most part before the war and their renewal has been delayed on account of the radical and widespread changes which took place after the war.

The fundamental reorganization of chambers of industry and commerce on a new basis befitting the present economic situation is additional proof of the enlightened concern of the Government for the effective representation and protection of the interests of the national industry.

Inasmuch as the State absorbs the greater part of their output, Roumanian industries are assured of an important outlet by the fact that they are naturally given the preference when public contracts are awarded. The marked improvement and consolidation of the State's finances have enabled the Government to discharge many of its obligations towards industrial establishments. These payments have, in turn, enabled the industries to intensify their activity and to direct their efforts in new fields.

Gradually the numerous obstacles and difficulties which checked the natural development of Roumanian industry have been surmounted, and we find in the first place that the Government is capable of giving it more and more effective aid, and in the second place that industry feels itself free to go ahead with the new advantages assured it.

In conclusion, great efforts must still be made not only by business itself but by the Government as well in the form of a broad protectionist policy.

At the present time, more than ever, the effort made within the country deserves the encouragement of foreign cooperation, whether in the form of financial arrangements, or of mechanical improvements, or by suggesting a new orientation, so that Roumanian national industry may play an increasingly greater part in the restoration and consolidation of the country.