ROMANIAN GOVERNMENT SEEKS TO ATTRACT PRIVATE INVESTORS FOR DEFENSE SECTOR, BUT WILL RETAIN CONTROL
WARSAW - In an effort to modernize factories and acquire foreign technologies the Romanian government has drafted plans to attract and secure minority private investors for its state-run defense sector.
The goal will be to bring in minority stakeholders who will provide the know-how to aid in upgrading the military production plants owned by the government. These comprise 15 defense manufacturing facilities (and one research and development institute) folded under state-owned Romarm, including: Tohan Zarnet, Carfil, Metrom, Uzina Mecanica Cugir (The Mechanical Factory in Cugir), Fabrica de Arme Cugir, Uzina Mecanica Plopeni, Uzina Mecanica Sadu, Uzina Mecanica Mija, Uzina Automecanica Moreno, Arsenal-Resita, Uzina Mecanica Bucuresti, Electromecanica Ploiesti, Uzina de Produse Speciale Dragomiresti, Pirochim Victoria, and Frabicii de Pulberi Fagaras.
Altogether these facilities specialize in production, maintenance and upgrade of armored vehicles, infantry weapons and ammunition (to NATO standards), artillery systems (cannon and mortars ranging from 23mm to 152mm in caliber), munitions and missile systems.
Along with the 15 entities held under Romarm the Romanian defense industry is composed of a second large group, that being private PATROMIL, which is an organization made up of 12 private companies.
Romania's defense industry once produced up to 85 percent of the country's military needs and was a major global arms exporter. But with the fall of the Ceausescu regime - and with it the practice of communism - in 1989, the industry began to suffer. No longer required to outfit a large army the defense sectors' state-derived orders dried up. With factories and plants built to sustain a mechanized, heavy-footprint conscripted army totaling over 220,000 troops, the economies of scale no longer matched size and production capability of the industry. Added to the pressures on the home-front was the end of the Cold War, and thus the decline in global arms purchasing as the former Soviet worldwide market dried up.
Different industrial strategies were implemented by Bucharest over the decades following the end of communism in an attempt to stave off the collapse of the defense sector. These included rationalizations, restructurings and privatizations. While some elements of the aerospace and shipbuilding sectors were sold (or were put up for sale) to foreign investors the Romanian government continued to retain a hold over Romarm, however, and in May chose to erase some RON1.1 billion (EUR250 million, $309 million) in debt obligations previously imposed on its 15 companies in an effort to ease their financial situation.
The bill unveiled by the Romanian government calls for the subsidiaries of Romarm to maintain their present specialization and production capabilities for at least five years after minority stakes are sold.
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