Ciolos cabinet strategic priorities for 2016

Ciolos cabinets decision to have each ministry release the strategic priorities and the
mapping of internal resources and processes sets an example. It is the first time when
Romanian ministries have released annual plans and priorities. However, the goals ministries
such as the Ministry of Energy (MOE) have set are overly ambitious considering the limited
time and resources they have, and the lack of political support for the Ciolos cabinet. Below
is an outline of the priorities of the main ministries, with a brief analysis for each.
Ministry of Energy (MOE)
MOEs has set its priorities for 2016 along Romanias strategic priorities for the energy
sector.
- security of supply by encouraging domestic energy sources including offshore
natural gas; passing the legislation regarding the fuel stocks in winter; starting a
debate on mandatory gas storage, and
- strategic projects including: the interconnectors with Moldova and the other
neighboring countries; the Bulgaria-Romania-Hungary-Austria (BRUA) pipeline
project, the vertical corridor (Greece-Bulgaria-Romania) pipeline project; reactors 3
and 4
- developing the national energy market including the natural gas exchange
- corporate governance: professional non-political management for energy SOEs;
more active involvement of the state as minority shareholder in the energy SOEs
which were privatized
- completing the draft energy strategy and starting the process to have it approved
through political consensus
- defining the vulnerable energy consumer [which would help move towards more
targeted subsidies and wasteful household consumer support through regulated prices]
and amend the Natural Gas Law and the Electric Energy Law to define the protected
consumer
- continuing privatization preparations for hydro power producer Hidroelectrica and
coal and power producer Oltenia Energy Complex (CE Oltenia). [However, there is
no tentative deadline for privatization because Hidroelectrica can only exit insolvency
pending final resolution of all its ongoing litigations, and CE Oltenia is inefficient and
unrestructured.]
- energy efficiency: implement fully the Energy Efficiency Directive into the National
Legislation
Comment:
The MOE is stretching thin trying to set in motion several pieces of legislation which are
politically sensitive, such as the definition for the vulnerable and protected consumer, and
trying to mediate between the diverging stakeholder interests in drafting the energy strategy.
The MOE has to be both in fire fighting mode to handle the socially sensitive insolvencies of
energy SOEs such as coal and power producer CE Hunedoara, and to think strategically on
security of supply issues in winter time and long-term.
The plan newly includes the Vertical Corridor project mentioned as an explicit priority for
Romania. The wording regarding the interconnectors indicate that Romania continues to
place more importance short-term on the interconnectors to Moldova to contribute to

Moldovas security of supply, than to make the investments that would allow natural gas
exports to Bulgaria, Hungary and on to Europe.
Surprisingly, the priority list does not include the law to implement the Offshore Safety
Directive, which is overdue and is will have a significant influence on offshore oil and gas
operations.
Energy Minister Grigorescu has tentatively indicated September as the target date to
complete the draft energy strategy for cabinet clearance before submission to the parliament
which has the final decision. However, since the working groups were established in January
and the Romanian legislation requires an environmental impact assessment for the strategy, it
is highly unlikely that the strategy will make it to the parliament during Ciolos cabinets
lifetime.
Ministry of Economy, Commerce, Business Climate, and SOEs (MEC)
- Improving management of state assets: restructuring the State Assets
Administration Agency (AAAS) and implementing corporate governance
- Entrepreneurship: identifying priority sectors to fund entrepreneurial initiatives
(IT&C, tourism, agriculture, R&D); establishing a private-public partnership fund to
incentivise Romanians abroad to do business or invest in Romania; creating internship
opportunities for Romanian students studying abroad in Romanias economic offices
abroad
- Drafting a Medium and Long Term Development Plan for Romania
- Passage of the Mining Strategy; revising the Mining Law
- Defense industry: starting investments in upgrading the SOEs in the defense
industry; drafting a ten year plan for the Romanian defense SOEs to supply to the
Romanian Ministry of Defense
- Creating a Consultative Council including ambassadors of the businesses
- Drafting a marketing strategy for Romania
Comment:
Similar to the Ministry of Energy (MOE), the Ministry of Economy (MEC) has overly
ambitious plans for the remaining months until the November elections. It is highly unlikely
that MEC will be able to draft and obtain approval for a strategy for the socially sensitive
mining sector in an election year. It also lacks the time and resources to draft a realistic and
feasible Medium and Long Term Development Plan for Romania. It is unclear who and how
will select the ambassadors of the businesses that will be part of the Consultative Council
and what Councils role would be. It may result in MEC circumventing the public
consultation process. Considering that the Romanian Public-Public Partnership Law is
dysfunctional and places the entire financial and investment risk on the private partner, it is
unclear how the public-private partnership fund will function.
The Ministry of Environment (MENV) priorities include:
- Deforestation, enforcement of the Forestry Code
- Protected areas: owner compensations for restricted land use in these areas; establish
an Agency for Protected Areas
- Waste management: drafting a Waste Management Plan
- Creating an NGO forum to collect environmental NGOs needs, expectations, and
visions, to funnel them into environment policies
- Drafting a Flood Management Plan

Comment
Neither the MOE nor the MENV included in their priority list the law to implement the
Offshore Safety Directive, although the MOE has the lead in drafting the law and the MENV
will oversee the Offshore Safety Authority which will be created under the law.
MENVs priorities are vague and involve producing papers (drafting several plans which the
post-election government will likely disregard).
Chevrons experience has shown that some of the NGOs claiming to be environmentally
focused are funded from Eastern sources and their rhetoric is more in line with Russias
position for the region than with Romanias priorities. Having an environmental NGO forum,
with no consultation with other stakeholders such as business associations, may create
difficulties for investors in energy, particularly in oil and gas.
Ministry of Finance (MOF) priority list includes:
- Simplifying payments of taxes and fines; making possible online payments
- Responsible management of state assets and equity in SOEs
- Improving transparency of public expenses
- Prioritization of public investments. Improving transparency of public project
implementation.
- Restructuring the tax administration (ANAF) with World Bank assistance
- The Public Procurement Strategy
- Implementing the New Fiscal Code
- The draft upstream oil and gas taxation law tentative deadline June 2016
- Taking over the Public-Private Partnership (PPP) unit from Governments General
Secretariat (SGG)
Comment:
The MOF has a key role in many issues outside its traditional portfolio:
- Public procurement
- PPPs
- Corporate governance
The public procurement laws have been with the parliament since Q4, 2015. Despite the
efforts of the Public Procurement Authority (ANAP) to engage the MPs, the parliament has
not treated the implementation of the Public Procurement Directives as a priority. If
implemented properly and transparently, the public procurement laws could result in
spending more accountably and efficiently the public funds and EU funds, moving away from
the lowest cost approach which has been one of the main reasons for poor quality work and
significant delays in infrastructure projects.
As of January 15, 2016, the MOF has not shared with the industry the draft law on upstream
oil and gas taxation. The industry is concerned about rumors about a possible 35% upstream
profit tax, which, combined with the plummeting oil prices, would dampen investments in
Romanias mature and depleting onshore fields, and would be a deterrent for the major
capital investments deep offshore operations require, if the assessment of the exploration data
the Exxon-OMV consortium has gathered result in a commerciality decision. Taxation and
natural gas infrastructure will be significant factors in the commerciality decisions.

Neither the SGG nor the MOF have the capacity and private sector expertise to make PPPs
work. Unless Romania changes its current approach to place the entire financial and
investment risk on the private investors in PPP projects, Romanian PPP projects will continue
to be unappealing for investors.
The MOF has an important role in monitoring enforcement of the Corporate Governance
Code (CGC) for SOEs. It has also had the lead in amending the CGC in consultation with
stakeholders including Fondul Proprietatea (FP), but the final decision lies with the
Parliament.
Ministry of Transportation (MOT) priorities include:
- Improving strategic planning
- Feasibility studies and tenders for infrastructure projects along the European TEN-T
network
- Restructuring the National Road Company (CNADNR), metro carrier Metrorex,
railway infrastructure CFR Infrastructura, and the Constanta Port Administration.
- Moving towards implementing cost management in the SOEs under MOTs purview
- Monitoring the economic and financial performance of the SOEs under MOTs
purview
- Approval of the draft Transportation Master Plan the tentative deadline for
government approval is March 2016. The GOR intends to also ask for parliamentary
approval.
Comment:
Interestingly, despite Transport Minister Costescus earlier statements, MOTs priorities do
not include implementation of the Corporate Governance Code or restructuring rail freight
carrier CFR Marfa.
It is surprising that the SOEs under MOTs purview do not have a cost management system in
place. Appointing professional independent managers and empowering them would render
unnecessary MOTs monitoring of the SOE performance.
It is also surprising that, despite AECOM having completed its work as early as Q3, 2015, the
MOT and the GOR are still delaying a decision on the Transportation Master Plan.