Supervisión y Control de la Operación

3.35 Textile and apparel: Textile in Romania is a US$2.76 billion dollar industry which

grew by 30% from 2001 to 2002 and is expected to have an annual growth rate of 9-10% until 2010, significantly higher than the estimated 5.6% growth rate of the total economy. An average annual increase of US$120 million in the value of exports from the textile industry is expected until 2010.

3.36 SMEs constitute approximately 70% of the total number of textile companies and the majority is engaged in the production of garments. There is a growing trend for existing larger companies to split up their operations into smaller and more flexible units so as to be able to adapt to rapidly changing tastes in the fashion industry. SMEs specialise in only one or two parts of the production process, while they outsource the rest. Increasing differentiation at Western European clothing shop and store level requires many small-to-medium sized manufacturers who are sub- contracted exclusively by stores and produce clothing under strict codes of secrecy. The SMEs provide the agility, quick delivery and security that specialty stores are now demanding. Smaller companies, with a multi-skilled workforce and up-to-date computer assisted design and computer assisted CAD/CAM manufacturing facilities, including Internet connections to main consumer markets in the world, should be given priority in bank lending for investments.

3.37 Wood and furniture: Romania has a long tradition in wood products and furniture

manufacturing and before 1990 was a major exporter of furniture. The sector accounts for an increasing percentage of the total exports of Romania. In 2002, furniture production amounted to US$731 million, of which US$474.2 million were exports (5.6% of the total Romanian exports), generating a net contribution of US$415.5 million to the national trade balance.

3.38 The exports of furniture from Romania have a good competitive potential, witnessed by the significant growth following re-entry into markets like the USA and the Former Soviet Union (FSU). These markets have an estimated demand potential of US$250 million and US$150 million respectively for furniture imported from Romania, of which volume little is currently covered. Increases in furniture production from US$614 million in 2002 to US$1,120 billion in

2010 (as planned) will trigger off corresponding growth in all areas of the sector with positive direct impact on the employment of the rural population. Exports of wood products other than furniture, mostly timber, represent only 30-35% of the production; the rest is absorbed by the domestic market for use in other products, furniture, construction, etc. The volume of exports of these products increased from US$554.7 million in 2001 to US$625.4 million in 2002.

3.39 Notwithstanding the general challenges that the SME sector in Romania faces, small- and medium-sized companies in the wood and furniture industry have significant competitive advantages based on large forests and low labour costs as compared to other countries in the region. Outside Bucharest, where most of the wood and furniture activities are located, unemployment rates are high and enterprises have in general no problems in attracting cheap labour from rural villages. The number of people employed by the wood cutting and processing industry is expected to grow to 75,000 in 2004 and will continue to grow in the next two years due to an expected increase in work and the instalment of new production capacities. Access to bank financing, already difficult and expensive, is especially difficult for SMEs engaged in wood harvesting and cutting, as they use mostly old equipment and technologies and have no valuable fixed assets which they can offer as collateral.

3.40 Glass and ceramics: In Romania, the annual sales of the glass industry amount to

more than US$190 million, while for ceramics they are about US$116 million. Glass and ceramics exports account for about 1.5% of the Romanian total export value with about US$60 million glass tableware exports (mostly hand made) and approximately US$45 million exports of porcelain/ceramics tableware and decorative products. For glass production, Romania disposes of local supplies of sand and soda ash.

3.41 Currently, only 15% of the glass and ceramics products are made by small- or medium- sized enterprises, but their number is growing as former state-owned factories tend to be privatised and downsized. Many SMEs are exporting directly and, while they face numerous challenges, they seem to be able to manage key business issues such as price negotiations, freight options, packaging, and payment options. The tableware glass sector in Romania experienced three consecutive years of negative growth from 1999 to 2001, but in 2002 exports did grow again and surpassed the 1998-sales levels. Growth in exports of float glass indicates that there are good external markets for production expansion.

3.42 Based on sales and employment estimates, the annual productivity per worker in the glass and ceramics industry is approximately US$8,310 which compares favourably with Romania's average industrial productivity of an estimated US$5,296. For textiles the average productivity is US$6,000, for wood products US$7,029, and for tourism US$5,172.

3.43 Tourism: According to the INS, the number of tourists coming to Romania was

4,793,700 in 2002; approximately 2.9% lower than in 2001. The tourism industry in Romania is a US$600 million-dollar industry expected to grow by 4.3 percent p.a. over the next 5 years. Romania offers a wide range of tourism products ranging from rural tourism and cultural visits to key historical sites to beach vacations at the Black Sea.

3.44 Development of rural tourism has benefited from certain incentives that were offered in the context of the “Law on Rural Tourism” that was passed in 1998. The incentives consisted of a tax holiday on profits derived from the running of tourist boarding houses. In rural and eco- tourism, almost all the companies are SMEs which started with small amounts of own capital and

the business is family-owned and -operated. Families who run bed and breakfast facilities have additional sources of income.

3.45 One of the main factors that impede the development of rural tourism is the poor transport infrastructure of roads, rail and air. Other problems are a lack of previous tourism experience of the operators and low business management skills. High collateral requirements of banks are the main constraint for obtaining bank loans in order to finance the refurbishment of accommodation and/or to make other required investments.