Hard Graft in Romania

By bne IntelliNews March 1, 2006

Christopher Condon in Bucharest -

Romania's new justice minister faces an uphill battle against corruption.

Monica Macovei, Romania's justice minister, is feeling confident. Just over a year ago she was the new government's surprise pick to reform the country's rotting judicial system and lead the fight against corruption.

As a former human rights activist who had long called for reform, she suddenly found herself “on the other side of the barricades,” as she puts it. Somewhat overwhelmed, she was not a little unsure of herself: she struggled to find senior staff she could trust and depended entirely on the president for political support for her initiatives.

Those who dismissed her early on have been surprised. Quiet but tough, Macovei has persevered through a difficult 15 months, fighting opponents inside and outside her government to rebuild Romania's legal infrastructure.

And now it is beginning to show results.

Big fish The most impressive impact has come through Daniel Morar, an independent anticorruption prosecutor appointed last October.

In recent weeks, Morar has launched a flurry of investigations into several high-profile politicians. The general prosecutor's office has added to this by opening his own attentiongrabbing cases. Their biggest target by far is Adrian Nastase, the former prime minister who lost the 2004 presidential vote by an electoral hair's breadth. Nastase has been charged with taking bribes and trafficking influence in connection with a 1998 real estate transaction. He is a long way from being convicted of anything and denies any guilt, yet in mid-March his party, the Social Democrats, forced him to resign as speaker of the lower chamber of parliament and as executive president of the party. Pundits have already written his political obituary.

Nastase's downfall has certainly been dramatic.

It has rattled Romania's political elite, especially his Social Democrat party, which earned a particularly bad reputation for sleaze while in government from 2000 to 2004. Says one diplomat: “Suddenly a lot of people are scared they might be next on the list.”

But for all the headlines, the government's newfound zealousness for corruptionbusting has a long way to go before making a real difference to the way politics and business operate in Romania. “It's a good start,” says Gheorghe Musat, one of Bucharest's best connected lawyers. “But I advise my clients not to get too excited. I just don't see the objective impact yet.”


Musat is not alone in his scepticism. For starters, Morar and company are going to have to prove that their efforts are more than window-dressing designed by President Traian Basescu to smooth Romania's accession into the EU.

Romania's treaty with the EU sets an entry date for January 1, 2007, but this can be pushed back a year under so-called “safeguard” clauses.

Should Bucharest stumble on key reforms, the European Commission can invoke these clauses and recommend delay. The most talked about safeguard clause - and the most likely to hold up Romania's accession - is connected to progress on corruption. Brussels and several EU member states are eager to see rapid follow- through on the most prominent investigations, particularly Nastase's - though they avoid explicitly saying so.

Still, even if the government is willing to allow Morar to proceed uninhibited, others may get in his way. In January, the opposition, along with some nervous members of Parliament from the government coalition, nearly blocked a bill necessary for making permanent Morar's authority to investigate high officials. Intense pressure from Brussels and an outcry in the media spurred lastminute talks that saved the measure, but the incident will likely prove a foretaste of political obstructionism to come.


Then there is the judiciary. Romanian judges have long had the reputation for doing what they are told or bribed to do. Morar admits he cannot predict how his cases against powerful figures like Nastase will be handled when they get to court. “The time has come when the magistrates need to show that they are independent,” he says. “We have to challenge them; we will see.”

This is likely to be a critical test. If the judiciary continues to play by the old rules and lets the big fish wriggle free, it could destroy the credibility of the entire anti-corruption drive and harm its chances of joining the EU next year. According to another European diplomat, Romania got used to scoring points with the EU by showing it was at least trying hard, but that won't do any longer. A key assessment by the Commission due in April, the diplomat says, won't be positively influenced by good government intentions.

“What we're talking about is not an assessment of how well the government is doing, but how well Romania is doing.”

Another bone of contention concerns who is exactly being targeted by prosecutors.

The investigations have crossed party lines, but so far the most prominent figures being pursued have one thing in common: they are all enemies of Basescu. This most obviously includes Nastase, whom Basescu narrowly defeated for the presidency, and Dan Popescu, the former economy minister under Nastase, whose financial declarations are being probed by the general prosecutor. But there is also Dinu Patriciu, a senior member of the National Liberal Party, a chief partner in Basescu's coalition.

Patriciu is also chairman and chief executive of RomPetrol, one of Romania's most successful companies. That success is largely down to smart management, but there is also a degree of murkiness to the company's affairs, particularly surrounding the company's 2004 flotation on the Bucharest Stock Exchange. Most Romanians assume Patriciu has been charged with tax evasion, money laundering and fraud because he is a bitter rival to Basescu. He reportedly opposed his party's coalition with Basescu's Democrats from the beginning and sought to arrange an alliance with Nastase's Social Democrats just after the elections.


True or not, the point is that Romania's anti-corruption effort needs to cast a wider net before more people are convinced of its credibility. And only with credibility will the efforts have a wider, preventive impact.

Says Matei Paun, partner at BAC Romania, an investment advisor: “If the average Romanian sees what is going on as a political vendetta, it will not have the effect of forestalling potential corruption. The lesson will be to align yourself properly.” To Paun that means foreign investors should not expect any dramatic changes yet in what they encounter when doing business in Romania.

Asked about such doubts, Macovei remains unfazed. Most of all she preaches patience. Just as politics must not interfere in the selection of cases, she argues, neither must cases be selected in order to create political balance. “When the information comes, cases will come,” she says.

Macovei is also keenly aware that as time passes and the public gets a taste for the anticorruption drive, she has become increasingly protected and less reliant on the president for political support. She concedes that some people, including some of those in government, don't like her, but she doesn't care as long as she has the public's support. “If you ask me if I feel insecure in my position, I would say no. How could they fire a justice minister that is fighting corruption?”


Therein lies the strongest argument that real progress is being made in the country's fight against corruption: even if Macovei and Morar have been allowed to pursue their cause for the sake of impressing the Commission or to settle political scores, there is still a chance that an irreversible process has been started.

“In some ways, they can't go back now,” says Dan Turturica, editor of the weekly newspaper Prezent. “The genie has been let out of the bottle.”

Indeed, there are signs that, far beneath the high-profile cases against top politicians, something is stirring at a more basic level.

Some say pressure is filtering down to junior officials within government and government agencies to halt the most egregious forms of corruption. One businessman tells of being rebuffed by a customs employee when he tried to make a large fine go away by offering a small bribe. “A year ago he would have taken it, but this time he said, 'We're being monitored. Just pay the fine'.”

Stories like that, though still rare, coupled with the more prominent investigations, may be changing the behaviour of business people.

According to Victor Constantinescu, an attorney for the Bucharest office of Salans, an international law firm, many foreign investors are aware that “wheels have to be greased” to do business in Romania. For most, this means ignoring the large “miscellaneous” column in the invoice from consultants and contractors.

But increasingly, such conduct is making businesses pause. “Clients are beginning to think about this now and wonder what is the risk,” says Constantinescu.

If this is the start of a cleaner Romania, it will be good news for companies that refuse or are afraid to play dirty. But in the meantime, it doesn't mean that investors aren't doing well here. “Companies like to complain about bureaucracy and corruption, but I don't hear people complaining that they are not making money here,” says Steven von Groning, head of Raiffeisen Bank in Romania.

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