THE BLOG
11/11/2013 07:47 GMT | Updated 23/01/2014 18:58 GMT

Romania: The Importance of Foreign Investment

A series of posts on this website have drawn readers' attention to the Roşia Montană mining project in Romania. The latest of these, by Stephen McGrath, criticized a recent report that I wrote, in which I had come to the conclusion that decisions the Romanian Parliament makes in the near future, including a decision about Roşia Montană, will be pivotal to Romania's economic development and have consequences for the European Union (EU) and the USA.

Now I have been in this game a while and I understand that criticism from people like Mr. McGrath is part of the territory. Even so, it's vital to the public debate that we get the facts right. In this case, the undoubted fact is that the Romanian Parliament's impending decision whether to approve the Roşia Montană project is a political test case for future foreign investment.

You see, Romania's recent free market reforms have propelled this poor country from an economic also-ran to economically competitive. Romania's economic growth is the third fastest in the EU and its unemployment rate is significantly lower than the European average. Add in low inflation and a budget deficit that's the envy of much of the EU, and we have an impressive foundation upon which to build a prosperous future. The thing that is missing is significant and sustained foreign investment.

Romania has a lot to offer, but its Prime Minister, Victor Ponta, knows he must prove his country's trustworthiness to the world before foreign investors act. The problem is, he is up against the opposition of a number of significant foreign and domestic actors who have seized on the Roşia Montană project as cause to advance agendas that are not always clear.

Safeguarding the environment is cited as the paramount concern. In fact, nobody doubts that this opportunity for Romania must be balanced by strong, verifiable guarantees that protect the environment and there is an EU-administered plan to do so that is robust and enforceable.

Despite this, an anti-mining campaign, orchestrated by foreign NGOs and cheered on by Russian state-run media, stands in its way. Moscow's shenanigans are, of course, consistent with its ongoing attempt to sabotage association agreements between the EU and Romania's neighbors, Moldova, Georgia, Armenia, and Ukraine.

These pressures may force Prime Minister Ponta to tread a new path, one that rejects foreign investment in places like Roşia Montană. This would be ruinous for Romania, robbing its people of improved prospects and standards of living, and causing problems for the USA and the EU.

Although a NATO member, a poorer, more insular Romania, geostrategically positioned on the Black Sea and already home to US bases, is likely to move closer to Vladimir Putin's Russia for political, economic, and strategic support. This prospect worries the Americans.

An economically weak Romania would also affect the EU job market. Official figures for the United Kingdom, for example, show that 683,000 people working in Britain are from Eastern Europe. Estimates suggest a further 250,000 will arrive when travel restrictions for Romania and Bulgaria are lifted in January 2014. If Romania fails to thrive, this figure is likely to increase, creating domestic problems in the UK and international tension.

All of this is laid out in our report and is based on meticulous research and technical assessment. To try to rebut it, as Mr. McGrath does, by citing a lack of "independence" is weak, at best, particularly when no evidence is offered in support. It's possible he meant "biased", and to that I hold up my hands.

Think tanks generally operate with philosophical or ideological underpinnings. At the Democracy Institute we believe in free-market economics and personal freedom, but above all, we believe in strong, evidence-based policymaking.

There is no better example of this "bias" in action than a 2009 book I wrote that was highly critical of the tobacco industry (with which Mr. McGrath makes much of my "longstanding association"). This made me Public Enemy Number One with Philip Morris. There isn't an anti-tobacco campaigner who wouldn't kill for that accolade.

So, my advice to Stephen McGrath and his friends is to "play the ball, not the man". Ad hominem attacks on me and the Democracy Institute contribute little to the debate and, in this case, do the people of Romania no favors. The Romanian Parliament has a real opportunity to make a decision that will send strong signals to the international community that Romania is open for business. The fact that it can do this with EU enforced guarantees for environmental protection makes it, as I have said, a win-win situation