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May 26, 2017 www.intellinews.com I Page 2
New law to allow Romania’s “port oligarchs” to cash in
opt for alternative ports with better facilities on the Black Sea and eastern Mediterranean in countries such as Bulgaria, Croatia and Slovenia.
The new law, proposed by a group of MPs and already approved by the senate, would allow the wealthy businesspeople who took over most of Romania’s port operators back in the early days of transition to continue to profit by fixing rents on port land and infrastructure at their current level. Currently these range from RON0.22 to RON0.36 (€0.05-€0.08) per square metre per month. How- ever, there is a sharp divide between the prices paid by the port operators that concluded their contracts 10 to 15 years ago (without a transpar- ent tender process) and those signed more re- cently.
The original draft law amending a 1999 govern- ment decree on ports administration, covered
by bne in December 2016, was declared unconsti- tutional by the Constitutional Court in February. However, a minimally amended version was later rushed through the senate – Romania’s upper house of parliament – on May 15, in an emergency procedure taking less than a week. It is now being assessed by committees in the chamber of depu- ties ahead of a vote.
Property restitution fund Fondul Proprietatea, which holds a minority stake in Constanta and other Romanian port administrations alongside the government as majority shareholder, has argued that adoption of the law will result in lost revenues of at least €26mn from Constanta alone over the next 10 years.
“As a result of this law we will see a huge transfer of wealth from state-controlled ports to privately
owned port operators,” said FP’s fund manager, Greg Konieczny, at a press conference in Bucha- rest on May 24.
Konieczny dubs the owners of the port operators “port oligarchs” given that the operators were pri- vatised “pretty much for free” in the early transi- tion days, and that they continue to benefit from extremely favourable leasing terms and quasi- monopoly positions. He speculates that their sup- port for the new law is partly because it will allow them to sell their businesses to more efficient operators at very inflated prices – because of the low fixed rents – after it comes into effect.
In addition to the lost rental income, FP officials argue that Romania will lose out in terms of lack of development of port infrastructure. Since they pay such low rents, there is little pressure on the “port oligarchs” to invest in new terminals and other infrastructure in order to maximise their profits. Compounding this is the fact that at Con- stanta there is at most two companies handling each type of merchandise, putting the operators in a monopoly position.
“[M]any of the current operators – who do not have the willingness or financial strength to invest in new facilities or refurbish the existing ones – will have less incentive to give up the land they currently occupy at very low rents in very attrac- tive parts of the ports to other operators with the means to develop them faster,” FP warned in a statement on May 24.
This is not to say there is no investment at the port. Earlier this month Raiffeisen Bank and EximBank Romania signed a €33.6mn financing agreement with Comvex to support the construc- tion of a new grain terminal at Constanta, which will allow Romania to considerably increase grain exports.
However, the overall lack of incentive for invest- ment is only likely to continue going forward, forecasts Konieczny. “Constanta Port is important but it has competition. If the operators don’t pro-