April 21, 2008 Today’s conference focuses on how to achieve sustained and inclusive economic growth that will allow real incomes to converge towards the levels enjoyed elsewhere in the EU. Today, Romania’s GDP per capita is 39% of the EU15. This national figure masks important disparities within Romania, with incomes in Bucharest much closer to EU-15 levels than, say, in Eastern Romania. To reach say 90 percent of the EU average, Romania will have to grow 4 percentage points faster than the EU 15, every year, for 20 years. Recently, Romanian GDP has been growing at about 6%, compared to about 2 percent in the EU15, so the 4% differential is already here now. Can it be sustained, where is the growth going to come from, what public policies and programs need to be put in place to sustain growth at a faster pace than the EU15, and one that is also inclusive throughout Romania? This workshop will explore growth and income convergence challenges in Romania. I would like to limit my remarks to two sets of observations. The first observation is that the nature of the challenge ahead and the long time frame involved suggest the need for a clear and a shared national vision of the obstacles and pitfalls that lie ahead, and of the measures it will take to overcome them in order to meet the convergence objective. This workshop has a very important role to play in contributing to the non-partisan debate in the identification of the key challenges ahead and the solutions and national strategies for addressing them. Second, allow me to elaborate very briefly on the five main themes addressed in this workshop: agriculture; labor markets; education; infrastructure and energy. Agriculture: Romania has a larger share of the population in agriculture than any other European country. Large re-allocation of resources (labor, capital, land) within as well as away from agriculture will be necessary or this sector will continue to exert a powerful drag on per capita income growth. Despite significant potential, productivity remains low and a large number of small and medium-sized farms struggle to survive competition. I suspect that addressing these challenges in agriculture will require well coordinated agricultural and non-agricultural strategies and vision. Labor market: Romania suffers already from shortages of labor in segments of the market. Yet, at the same time, labor participation, especially among some groups (young, women, older workers) is too low and acts as a drag on income convergence and growth potential, in particular when taking into account the declining and ageing population. Labor participation needs to increase, as well as internal mobility. Flexibility of the labor market needs to be therefore enhanced. Education: Investment in human capital is needed to sustain productivity enhancements. The evidence of skills mismatches in a general environment of labor shortages points to challenges regarding the relevance and flexibility of the education system for the labor market, including the quality of education and the access to education, especially in rural areas. Infrastructure: Substantial infrastructure investments are required both to meet the demands of the acquis communautaire, but also to secure economic competitiveness and productivity growth. Investment in infrastructure also has important fiscal implications, and enhancing the capacity to absorb Structural and Cohesion Funds should be a clear priority. Energy: Investments in energy, both new capacity and refurbishment, necessary to sustain economic growth, meet at the same time the environmental and climate change imperatives, and ensure the security of supply, will be large and involve complex decisions. This the time to think more deeply about energy efficiency and alternative sources of energy, and understand better the contribution they can make, within a regional framework, to meet the energy challenges. I am looking forward to the presentations and to productive discussions over the next two days to move forward the national debate on income convergence, and wish this conference, its organizers and participants much success. ### For more information on the World Bank's work in Romania, visit: www.worldbank.org.ro |
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