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Press Releases

March 30, 2001

Overseas Economic Cooperation Operation

JBIC SIGNS ODA LOAN AGREEMENT WITH ROMANIA
-- To Help Rehabilitate Pan-European Corridor IV Railway --

Japan Bank for International Cooperation (JBIC; Governor: Hiroshi Yasuda) signed a loan agreement today totaling 25,635 million yen with Romania to support the Railway Rehabilitation Project of the Bucharest-Constanta Line. The signing took place at Bucharest, Romania, between H.E Mihai Nicolae Tanasescu, Minister of Public Finance, Romania and Kohei Nakanishi, Chief Representative in Frankfurt, JBIC.
With this loan, the cumulative ODA loan commitments of JBIC to Romania numbered three, totaling 47,624 million yen.

1. Loan Amount and Conditions

Project NameAmount (Mil. yen)Interest Rate (%/Year)Repayment Period/Grace Period (Years)Tying Status
Goods and ServicesConsulting ServicesGoods and ServicesConsulting Services
Railway Rehabilitation Project of Bucharest-Constanta Line25,6352.20.75*30/1040/10General Untied

* Interest rate for Special Environment Projects

2. Romania's Political and Economic Status

Situated between the former Yugoslavia and the former Soviet Union, Romania is the second largest country in Central and Eastern Europe after Poland in terms of land area and population. As a major country in the Balkan region, its political stability and economic progress play an important role in the stabilization of the region as well as Europe as a whole.
In the political scene, former president Ion Iliescu was elected in the presidential election in November 2000, following the expiration of President Emil Constantinescu's term. The new administration aims to gain EU membership and is expected to adopt policies geared toward social security. The government also faces problems in structural reform to reduce the budget deficit and reduce unemployment .
On the economic front, partial liberalization measures of the exchange rate were introduced at the end of 1996. However, this was immediately followed by a sharp decline in the exchange rate that led to an economic crisis. Therefore, in February 1997, the country agreed on a strict macroeconomic stability program with the IMF and posted negative economic growth in the three years that followed. In 2000, however, the economy revived its growth. Net exports of textile, leather, metal, automobiles and foodstuff sharply rose in response to increased demand in EU; and thus the first half of 2000 posted a growth of 2.1 percent over the corresponding period of the previous year. The growth for the second half of 2000 is expected to be 1.5 percent over the corresponding period of the previous year, in spite of the drop in agricultural output due to a drought.

3. Project Outline

Railway Rehabilitation Project of Bucharest-Constanta Line

1) Background and Necessity of the Project

The EU's policy to expand eastward since the mid 1990s has placed priority on improving the main railways and roads in Central and Eastern Europe, known as the European Corridors, and on unifying standards of the Corridors with those of Western European countries. In 1994, as part of these efforts, the Pan-European Conference on Transport decided on the development of the Pan-European Transport Corridors in view of the expanded international traffic generated in the Eastern European region. Romania undertook the responsibility of developing the sections that passed through its territory of the Pan-European Corridor IV (Berlin-Istanbul), Corridor VII(Danube waterway), and Corridor IX (Helsinki-Provdiv).

Following the collapse of the socialist regime, Romania continued to suffer fiscal deficits due to inefficient operation of the former Romania national railway, which became independent from the Ministry of Transport in 1991. This situation has led to aging of existing railways due to limited new investment, and has slowed down operations due to the aging of the railroad bed infrastructure.

Against this backdrop, the Romanian government divested itself of the former Romania national railway and pushed forward drastic reforms in the organization and legal framework of the railroad sector. The country has recognized the improvement and rehabilitation of the aging railroad infrastructure as an urgent task, and that early action is called for.

2) Purpose and Description of the Project

As part of the modernization of railway equipment, the purpose of this project is to upgrade the existing railway and related facilities between Bucharest and Constanta of the Pan-European Corridor IV to meet EU standards. This project also aims to secure stability and safety, raise transport capacity mainly for cargo, and improve transport efficiency. The rehabilitation of Pan-European Corridor IV that passes through Romania is expected to promote distribution of goods in the region, and at the same time contribute to the growth of Romania and neighboring countries.

The executing agency is the National Railway Company "CFR"-SA (Address: 38, Dinicu Golescu, Bucharest, 77113, Romania; Tel: 40-1-222-36-37; Fax: 40-1-223-19-74).

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