Romanian Government 25 th January 2012 Reforms 2009 - 2012 1.

Romanian Government 25 th January 2012 Reforms 2009 - 2012 1

2 SUMMARY I. Economic recovery track………………..…3 II. Reforms taken between 2009 – 2012.........67 III. Economic impact…………………….........90 IV. Short and medium term governmental priorities……………………………..........110

3 I. I.ECONOMIC RECOVERY TRACK 1.Where we started from? 2.Government’s vision in dealing with the economic and financial crisis 2.1 Avoiding major economic slippages 2.2 Measures to reduce the budgetary deficit 2.3 Measures to boost economic recovery

THE ECONOMIC CRISIS – the most severe in the last 60 years BUDGETARY DEFICIT of 5.7% (according to the European methodology) in the year with the highest economic growth (7.3%) that led the EU Commission to trigger the excessive deficit procedure. AN UNREFORMED STATE and UNREASONABLE DECISIONS of the Tariceanu Government, which undertook social spending on debt, without coverage: 7 normative acts which approved salary increases in 2008 increase of the pension point in 2008, from 581,3 RON to 697,5 RON. 1. The Government had three major opponents in 2008 4

2. Government's vision in dealing with the economic and financial crisis 2.1. Avoiding major economic slippages 2.2. Measures for reducing the budget deficit and for the recovery of public finances through a major effort of the Government, out of which :  Two-thirds focused on improving and reducing public expenditure;  One third focused on increasing the revenues. 2.3. Measures for relaunching a healthy economic growth and on the long run, at times of major accumulated macroeconomic imbalances that limited the fiscal space necessary for triggering the economic recovery. 5

2.1. Avoiding major economic slippages The general budget deficit would have been close to 10% of GDP in 2009 and to 14% of GDP in 2010 and 2011, in the absence of the austerity measures taken by the Government: 6

The Government Treasury received 8.15 bn. euro according to the stand - by agreement with IMF, European Commission and World Bank 7 * There is another 1 bn. Euro from EBRD and EIB for investment projects in the private sector (no implication from the state) Total amounts drawn up to present: 17.94 bn. euro, out of which 11.94 bn. euro from IMF. 8,15 bn. euro

The reduction of the gap between public and private sector average gross wage 8 *) Data refers to the statistics from the economic activities (aggregated by homogeneous activity) according to NACE REV2 in public administration, education, health and social care (including the private sector in education – around 3%, respectively in health and social care - around 5%) excluding the armed forces and persons assimilated (MApN, SRI, MAI, etc.). Budgetary sector Total economy Private sector

9 Average net wage in the economy increased by 13% during 2008 – 2011 from 1,309 Ron to 1,478 Ron Source: National Forecast Commission, January 2012 *) forecasts of the National Forecast Commission

10 Real wage growth slightly resumed in 2011 Source: National Institute of Statistics *) Forecasts of the National Forecast Commission, January 2012 If there had not been the irresponsible decision of increasing wages without financial resources coverage in 2008, the actual government would not have been obliged to adopt the severe austerity measures to restore the economy.

Adjusting the public expenditure: 2008 vs. 2012 11 Source: Ministry of Public Finances - bn. Ron -

12 Romania came out of the economic recession Source: National Forecast Commission, January 2012 GDP evolution in 2010 - 2011 - year-on-year basis, unadjusted series - Quarterly GDPAnnual GDP forecast

GDP growth and budgetary deficit in 2009-2012 13

14 Source: National Forecast Commission, January 2012 *) forecasts of the National Forecast Commission GDP/inhabitant increased by 10% during 2008-2011

50% reduction of fuel consumption expenditure for public institutions and 20% spending reduction for goods and services remained to be executed in the second half of 2010. Reduction of 8,000 positions by reorganising institutions, public authorities and 120 governmental agencies. Prohibition to cumulate pension with salaries in the budgetary system, for individuals with pensions higher than the gross average salary per economy. Recalculation of the special pensions – the service and State military pensions – and their inclusion into the public pension system. The pension point value freezing in 2010 and 2011 Blocking the access to vacant positions and allowing the occupancy of 15% only of any positions that subsequently became vacant in the budgetary system. 67 hospitals restructured 25% wage reduction in the public sector, 15% reduction of unemployment benefits and those for child raising. Improvement and reduction of the reduction of thepublicexpenditure 2.2. Measures to reduce the budgetary deficit A. Measures to reduce the public expenditures 15

Increasing the standard rate of VAT from 19% to 24%. Increasing the duty on tobacco, alcohol, petrol and gas oil. Tax increase for individuals owning more buildings and for the means of transport with capacity displacement over 2000 cm³. Increasing charges and tax collection by reducing tax evasion. Broadening tax basis by vouchers taxing and by increasing tax on interest and some local taxes. Extension of the health insurance contribution of 5.5% for pensions higher than740 RON per month. Increasing the social contributions percentage up to the January 2008 level Measures to increase the budgetaryrevenues B. Measures to increase the budgetary revenues 2.2. Measures to reduce the budgetary deficit 16

2.3. Measures to boost economic recovery A.Measures to save jobs and boost the absorption of the unemployed…..18 B.Fostering public investments……………………………………………..21 C.Fostering private investments……………………………………………22 a)Fostering private investments through state aids……………………………....22 b)Fostering private investments through state guarantees……………………….37 D.Programmes to support industry and sustainable development………40 E.“Prima Casă” Programme………………………………………….……43 F.The programme to boost exports…………………………………….…..44 G.Measures to accelerate the absorption of EU funds……………….…....47 H.Diminishing the fiscal and administrative burden………………….…..50 a)Simplifying and improving tax administration…………………………….…..51 b)Measures for supporting taxpayers in difficulty…………………………….…53 c)Tax incentives for the business environment and public institutions……….…55 d)Recent changing of the Accounting Law………………………………………56 I.Measures to fight fiscal evasion.................................................................57 J.Supporting the agriculture.........................................................................61 17

A. Measures to support firms that hire young, redundant and vulnerable people Temporary measures  Regulation of technical unemployment by exempting the employers from paying social security contributions and social insurance, for a period not exceeding three months. The employee receives 75% of the basic salary for his/her job.  Beneficiaries: 548,999 persons employed and 13,459 companies until 31 st December 2010.  Companies hiring unemployed persons are exempt from paying social security contributions.  Beneficiaries: 6,072 persons employed and 3,625 companies until 31 st December 2010. 18

A. Measures to support firms that hire young, redundant and vulnerable people (cont.) 1.Subsidies for companies hiring redundant people aged over 45 years or those that are single parents.  The employers are exempted one year from paying unemployment social contributions for those persons employed on a permanent basis.  Amount of the subsidy: 500 RON/month/employed person, for maximum 12 months.  The employers are obliged to keep the employees in activity at least 2 years.  20,312 beneficiaries until 31 st December 2011 (out of 14,650 estimated for 2011) 2.Subsidies for employers that hire redundant people who have 3 years until retirement  Employers benefit monthly from a subsidy of 500 RON, for maximum 3 years.  266 beneficiaries until 31 st December 2011 (out of 315 estimated for 2011) 3.Companies that hire persons with disabilities on a permanent basis benefit monthly from 500 RON, for 12 months.  The employers are obliged to keep the employees in activity at least 2 years.  233 beneficiaries until 31 st December 2011 19

A. Measures to support firms that hire young, redundant and vulnerable people (cont.) 4.Subsidies for employers that hire young graduates  The employers are exempted one year from paying unemployment social contributions for those persons employed on a permanent basis.  The subsidy period is 12 months (18 months for the graduates – persons with disabilities), and the monthly subsidy depends on the level of studies: 500 RON for primary school and gymnasium; 600 RON for secondary school and post-secondary school; 750 RON for tertiary education.  The employer is obliged to keep in activity the employer for another 2 years after the end of the subsidy period.  6,574 beneficiaries until 31 st December 2011. Budget in 2011 for these 4 measures: 93.4 mil. RON. Fostering the apprenticeship and the young people employment during holidays.  250 RON/month for employers and the monthly value of the services for the theoretical training of the apprentice, not surpassing 100 RON/month.  250 RON/month for student/pupil employed during holidays, for at most 60 days.  947 youngs were employed during holiday until 31 st December 2011.

B. Fostering public investments Increasing the budgetary allocations for public investment:  In 2008: 32.6 bn. Ron  In 2011: 36.1 bn. Ron  In 2012: 38.1 bn. Ron Romania ranks 1 st in the EU, followed by Poland, with the highest share of public investments in GDP in 2010 (5.8%, respectively 5.6% GDP according to Eurostat revision in November 2011). The adoption of the Public-Private Partnership Law  Advantages of PPP Various sources of private financing for public projects. Increased efficiency as a result of private management of projects. Reducing costs for local and central administrations.

C. Fostering private investments a) Fostering private investments through state aids Budget allotted for state aid in 2012: 850 mil. Ron I.First pillar: large investment projects 1. State aid scheme for sustainable economic development 2. State aid scheme for regional development Results of the state aid approved between 2009-2011: 19 investment projects; 4,433 new jobs; approved state aid: 229.13 mil. euro.

1. State aid scheme for sustainable economic development Implementation period: 2009 – 2013 Total budget: 1 bn. euro Conditions to be fulfilled ◦ Investment of 5 - 10 mil. euro  minimum 50 new jobs created ◦ Investment of 10 - 20 mil. euro  minimum 100 new jobs created ◦ Investment of 20 - 30 mil. euro  minimum 200 new jobs created ◦ Investment higher than 30 mil. euro  minimum 300 new jobs created The amount of the state aid ◦ Investment in Bucharest–Ilfov region  max. 40% of the eligible costs (no more than 22.5 mil. euro) ◦ Investment in the other regions  max. 50% of the eligible costs (no more than 28.125 mil. euro) 18 beneficiaries between 2009-2011: Delphi Diesel Systems, Automobile DACIA, Premium Aerotec, LUFKIN Industries, REMAR, International Automotive Components, Toro, Rombat, Styria Arcuri, Gral Medical, Honeywell, Metale International, Altius International, Cord Romania, IPORO, Contitech, Aplast Glass. 23

2. State aid scheme for regional development Implementation period: 2008 – 2012 Total budget: 575 mil. euro Conditions to be fulfilled  Investment of 100 mil. euro with eligible costs of 50 mil. euro  minimum 500 new jobs created;  Beneficiary contribution of at least 50% of eligible costs (not subject to another public aid).  State aids exceeding 30 mil. euro for investments in Bucharest – Ilfov region or 37.5 mil. euro in other regions are individualy notified to the European Commission. 1 beneficiary: Turceni energy efficiency project. The investment amounts to 296,5 mil. euro, out of which 36 mil. euro represents state aid. 24

a) Fostering private investments through state aids (cont.) II. Second pillar: support for SMEs Mihail Kogălniceanu Programme for financing the SMEs  Beneficiaries: out of 3,762 applicants until 25 th of January 2012, 3,661 files were evaluated, 2,822 files were approved by AIPPIMM and 606 contracts were signed with the banks.  Subsidy for maximum 70% of the interest rate, but no more than 6.5% per year.  State guarantees for maximum 80% of the credit amount, but no more than 100,000 RON  The Programme is implemented online to reduce bureaucracy.  Total buget of the subsidies (2011-2013): 165 mil. RON 2011: 24 mil. RON – 4,000 potential beneficiaries 2012: 70 mil. RON – 13,000 potential beneficiaries 2013: 71 mil. RON – 13,000 potential beneficiaries  Total guarantee fund: 400 mil. RON.  The credit line cannot surpass:  125,000 RON/year/beneficiary  30%, respectively 50% of the turnover on the last 12 months for the beneficiaries having other credit lines, respectively the beneficiaries without other credit lines. 25

26 Kogălniceanu Programme – scheme

a) Fostering private investments through state aids (cont.) “Minimis” state aid scheme  Beneficiaries: the projects of 905 SMEs were approved during 2009-2011. The total payments amounted to 330.8 mil. RON. Support for women's entrepreneurship development in the SMEs sector through the multiannual national programme during 2005- 2012  Budget allotted in 2011: 405,000 RON.  8 courses for entrepreneurial training : 295 women  8 informative seminars: 310 women  Budget allotted in 2011: 500,000 RON. Credit for entrepreneur women – EximBank  Credit line with interest rate subsidied for the SMEs that have women as major stakeholders or are managed by women that are also stakeholders.  Interest rate: 5 points under the market interest rate (minimis aid)  Credit value: maximum 100,000 euro. 27

a) Fostering private investments through state aids (cont.) III. Third pillar: microenterprises The “START” Programme for the development of entrepreneurial skills among young people and the facilitation of their access to financing  The Programme is created for microenterprises active for less than 2 years.  Grants of maximum 70% of the eligible expenses for the investment project, but no more than 100,000 RON / beneficiary.  Budget allotted in 2011: 10 mil. RON (almost 30% higher than in 2010).  1 st phase: 800,000 RON – workshops for entrepreneurial training (8 locations)  2 nd phase: 9.2 mil. RON – financing business plans through grants within budget.  Budget allotted in 2012: 10 mil. RON  Beneficiaries: 100 companies (out of 416 aplicants) 28

a) Fostering private investments through state aids (cont.) The Programme for young entrepreneurs  Grants up to 10,000 euro, but no more than 50% of the business plan’s value. Both the young who obtains the credit and the one co- financing the business plan from own sources can benefit from the grant.  The National Guarantee Fund provides guarantees for the loans needed for the business plan, covering 80% of the loan, but no more than 80,000 euro.  The new employer is exempt from the payment of social security contributions for up to 4 employees, but he must employ at least two persons.  1,256 files submitted, out of which 807 files approved (the maximum limit was reached) – up to 11 th October 2011.  Budget allotted in 2012: 21 mil. RON. 29

Programme for young entrepreneurs – scheme 30

a) Fostering private investments through state aids (cont.) The National Multiannual Programme for the creation and development of technological and business incubators.  Budget allotted and spent in 2010: 2.9 mil. RON (absorption rate: 100%).  Budget allotted in 2011: 6.15 mil. RON, double as compared to 2010.  3 incubators created in 2006  Alba Iulia – 13 incubated firms (86 new jobs)  Braşov – 17 incubated firms (37 new jobs)  Sfântu Gheorghe – 17 incubated firms (48 new jobs)  2 incubators created in 2010  Tg-Mureş – 20 incubated firms  Mangalia – 8 incubated firms  1 incubator created in 2011 up until now: Bacău  4 incubators by the end of 2011: Timişoara, Satu Mare, Câmpia Turzii, Dorohoi. 31

Other state aid schemes to boost private investment 1.Regional state aid scheme for capitalization of renewable energy resources 2.Horizontal state aid scheme for regional sustainable development and reduction of emissions 3.Regional state aid scheme “Financing initial investment in research, development and innovation” 4.State aid scheme „Financing RDI projects through Sectoral Operational Programme – Increase of Economic Competitiveness” 32

1. Regional state aid scheme for capitalization of renewable energy resources Implementation period: 2008 – 2013 Total budget: 200 mil. euro  The amount of the state aid ◦ Investment in Bucharest–Ilfov region  max. 40% of the eligible costs ◦ Investment in the other regions  max. 50% of the eligible costs  Beneficiary contribution of at least 30% of eligible costs (not subject to another public aid).  Aid under present scheme is not awarded for investment projects with total expenditure exceeding 50 mil. Euro.  Beneficiaries: 14, out of which 6 projects completed. 33

2. Horizontal state aid scheme for regional sustainable development and reduction of emissions Implementation period: 2008 – 2013 Total budget: 318.8 mil. euro The amount of the state aid  Investment in Bucharest–Ilfov region  max. 40% of the eligible costs  Investment in the other regions  max. 50% of the eligible costs Beneficiary contribution of at least 30% of eligible costs (not subject to another public aid). Aid under present scheme is not awarded for investment projects with total expenditure exceeding 50 mil. euro. Beneficiaries: 3 (2 energy efficiency projects and a sulphuration project). 34

3. Regional state aid scheme “Financing initial investment in research, development and innovation” Implementation period: 2008 – 2013 Total budget: 180 mil. euro The amount of the state aid  Investment in Bucharest–Ilfov region  max. 40% of the eligible costs  Investment in the other regions  max. 50% of the eligible costs Beneficiary contribution of at least 30% of eligible costs (not subject to another public aid). The scheme corresponds to the following operations in the Sectoral Operational Programme - “Increase of Economic Competitiveness”, priority Axis 2: Research, Technological Development and Innovation for Competitiveness:  2.3.2 Development of business R&D infrastructure and creation of new R&D jobs – 44 beneficiaries  2.3.3 Promoting innovation in enterprises – 43 beneficiaries 35

4. State aid scheme „Financing RDI projects by means of Sectoral Operational Programme – Increase of Economic Competitiveness” Implementation period: 2008 – 2013 Total budget: 300 mil. euro The amount of the state aid  industrial research: 50%  experimental development: 25%  activities within projects developed by young innovative enterprises: 100% for the period of time the beneficiary meets the conditions of young innovative enterprise, but not more than 1 mil. euro The scheme corresponds to the following operations in the Sectoral Operational Programme “Increase of Economic Competitiveness”, priority Axis 2: Research, Technological Development and Innovation for Competitiveness:  2.1.1 R&D projects in partnership between universities/ research institutes and enterprises – 29 beneficiaries  2.1.2 R&D projects (high scientific level) with foreign participation – 42 beneficiaries 36

b) Fostering private investments through state guarantees 1.Budget allotted in 2012: 10 bn. Ron (Ministry of Public Finances) 2.Support for SMEs through FNGCIMM 2009-2011: o 240,000 jobs were saved o 1.35 bn. euro guarantees for supporting credits of over 2 bn. euro 2012 (250 mil. Ron raise of the capital fund): o 580 mil. euro for supporting credits of 1.1 bn. euro o 100,000 jobs maintained and created 37

b) Fostering private investments through state guarantees (cont.) 3.Credit Guarantee Fund for Agriculture 2009-2011: 3,6 bn. Ron 2012: 1,6 bn. Ron 4.Guarantees through EximBank 2009-2011: 3.1 bn. Ron 2012: over 550 mil. Ron 5.Providing government guarantees of 80% of the loan for beneficiaries of projects financed from structural funds in priority areas for the Romanian economy, for maximum 4 years  Beneficiaries: FNGCIMM issued guarantees that amount to approx. 19 mil. RON in 2010 for the implementation of investment projects of about 450 mil. RON.  Total ceiling of guarantees that may be issued in 2011 amounts to 300 mil. euro. 38

D. Programmes to support the industry and the sustainable development The programme for the improvement of the industrial products competitiveness  Eligibility criteria: no minimis aid in the last 2 fiscal years and in the current fiscal year that exceed 200,000 euro (equivalent in RON) together with the amount requested in the project.  Funds allotted in 2011: 11.7 mil. RON  Funds allotted in 2012: 19 mil. RON  Submitted projects in 2011: 56, out of which 23 accepted Support for market traders and services through the development and modernization Programme  Eligibility criteria: annual net turnover of max. 50 mil. euro / total assets not exceeding 43 mil. euro and up to 250 employees.  Budget allotted in 2011: 7 mil. RON (40% higher than in 2010)  Beneficiaries in 2011: 78 projects (out of 684 submitted products).  Budget allotted in 2012: 7 mil. lei. 39

D. Programmes to support the industry and the sustainable development (cont.) “Rabla” Programme  2010  Beneficiaries 189,323 used cars traded-in scrappage 62,550 new cars purchased, out of which 25,263 Romanian cars  Total funds: 722 mil. RON  2011  Beneficiaries (until 31 st December 2011) 116,641 cars taken from collectors 39,216 new cars purchased, out of which 15,006 are Romanian cars.  Total funds: 544.5 mil. RON, out of which 88.5 mil. RON payments for 2010 are from the budget allotted for 2011.  2012: The programme has not started yet. 40

“Casa Verde” Programme – for individuals  Potential beneficiaries: owner / co-owner of the property covered by the project and without outstanding obligations to the state budget.  2010 18,361 files submitted, out of which 16,146 files financed Budget: 110.7 mil. RON  2011 (session between 01.06.2011-15.07.2011) Number of files submitted: 23,938, worth 144.4 mil. RON Budget: 100 mil. RON The national multiannual programme for increasing the energy efficiency in residential buildings  Potential beneficiaries: owners associations of residential buildings constructed after projects developed between 1950-1990  Budget allotted in 2011: 137.5 mil. RON.  Budget allotted in 2012: 70 mil. RON  Beneficiaries during 2010-2011: 29,000 flats. D. Programmes to support the industry and the sustainable development (cont.)

42 The programme regarding the growth of energy production from renewables  Eligibility criteria: Legal entities with at least 6 months of economic activity at the date of presenting the financing file and at least a financial year ended. Do not receive and will not receive funding from other public and/or European funds for the same eligible expenditures of the project, if the state aid intensity exceed 50%.  Beneficiaries (9 th January 2012): 76 ongoing projects, worth 1.3 bn. RON. “Buy Romanian” programme  Aims at increasing the institutional capacity of Ministry of Economy to formulate, implement, coordinate and monitor public policies and boosting the Romanian economy.  The funding (5.2 mil. RON) comes from European funds (Operational Programme Administrative Capacity Development).  The programme duration: one year from the signing of the financing contract.

E. “Prima casă” programme has been improved 43 Overall programme Prima Casă (1-4), until 31 st December 2011:  55,106 guarantees, worth approx. 2.2 bn. euro. Prima Casă 4 (from 1 st June 2011):  Beneficiaries: every person who not owns a dwelling in exclusive property or with the husband / wife, no matter how and when it was acquired, or owns at most a dwelling in exclusive property or with husband / wife, acquired in any other way than through the Prima Casă Programme, having a surface area of maximum 50 sqm.  The funders (banks) have the possibility to use a threshold level of 50% of the guarantees provided under the Prima Casă Programme, with a proportional sharing of risks and losses between the state and the funder.

F. The programme to boost exports 44 Promoting the strategic sector for the Romanian export through advertising actions. ◦ Current sectoral brands:  Romania, your reliable trade partner – industrial sector brand  Zoom into Romanian Fashion – clothing sector brand  România IT, creative talent, technical excellence – for the IT industry  Wines of Romania – to promote wines  Romanian furniture, style, durability and comfort – for furniture The information portal for foreign trade, www.portaldecomert.ro ◦ Provides information on business opportunities and is connected to the EU database. ◦ Over 50,000 visitors, one year after the launch. Financing the actions to promote exports: ◦ Budget: 36.4 mil. RON, used to partially or totally cover the costs of necessary actions to promote exports.

F. The programme to boost exports (cont.) 45 Annual participation at approx. 55 international fairs and exhibitions ◦ Hannover Messe – for the industrial sector ◦ Cebit – for the IT sector ◦ Vinexpo – for wine exporters ◦ Koln – for furniture exporters ◦ Pret a Porter – for clothing sector Organizing trade missions to countries concerning the Romanian exporters. Providing market studies, based on proposals from the business environment. ◦ A minimis aid of 50% from the total expenses is granted to the service provider.

Exports are higher than in 2008, reaching record levels in Romania’s history Source: National Institute of Statistics *) forecasts of National Forecast Commission

Strengthening of the public procurement control in case of projects financed from structural instruments:  determine the role and the functions of structures implied in monitoring public procurement, make these structures accountable and increase the efficiency of public procurement monitoring. Accelerating the audit procedures of expenses made by beneficiaries and the reimbursement procedures by management authorities:  introduction of compliance by all management authorities to process a reimbursement demand within 45 working days. Increasing fairness in the management of structural and cohesion funds:  approval of the Code of Conduct by the Government, in order to avoid incompatibility and interest conflicts situations in case of staff implied in the management of programs financed from EU funds. Ensuring a high level of transparency in fund management system  development of the List of priority projects financed from structural and cohesion funds, which includes major importance projects for national social and economic development. 47 G. Measures to accelerate the absorption of EU funds Contact pentru informaţii suplimentare: Dna. Antoaneta Popescu, 021.302.53.40, antoaneta.popescu@mfinante.ro, Direcţia Monitorizare, ACISantoaneta.popescu@mfinante.ro

SOP Environment  The rehabilitation and extension of the water and wastewater systems in Tulcea district – 498 million RON  The extension and rehabilitation of the water supply and sewerage systems in Călăraşi district – 440 million RON  Extension and rehabilitation of water supply and sewerage systems in Giurgiu district – 317 million RON  A system of integrated waste management in Suceava district – 269 million RON  The rehabilitation of the urban heating system in Botoşani (2009-2028) – 192 million RON SOP Transportation  Building the Cernavodă – Constanţa highway – 1.8 billion RON  Building the Arad - Timişoara highway (including the Arad detour) – 1.7 billion RON  Building the Constanţa detour – 946 million RON  Modernization of DN5, Bucharest - Adunaii Copăceni area - 214 million RON  Modernization of railway stations in Bistria, Zalău - 125 million RON 48 Major ongoing investment projects

The Regional Operational Program  Modernization of Dorobantilor Boulevard, Braila Town – 125 million RON  Rehabilitation of county road DJ 108 A : DN 1F - Românaşi-Creaca-Jibou-Benesat, Salaj county - 102.7 million RON  Rehabilitation of county road 252, Huruiesti - Gaiceana - Parancea - Bibiresti - Buhoci, Km 75+300 - 130+100, Bacau county – 98 million RON  Rehabilitation of Vâlcea Emergency Hospital – 73.8 million RON  Modernization of tram line route Manastur - Piata Garii in Cluj Napoca town – 76.8 million RON SOP Increasing Economic Competitiveness  Integrated information system for electronic health file – 164.3 million RON  Efficiency of energy consumption of SC Prefabricate Vest Patru SA – 105 million RON  Competitiveness, extension, development – 96.8 million RON  National electronic access to Scientific Research Literature – 93.3 million RON  Institute of Research – Development – Innovation High Tech Products for sustainable development – 86.2 million RON 49 Major ongoing investment projects (cont.)

H. Diminishing the fiscal and administrative burden Despite the budgetary constraints, the flat tax rate of 16% was maintained. Until now, 237 of taxes and tariffs were reduced/unified, from 491 at the beginning of 2009. The minimum tax was eliminated starting from 1 st October 2010. The Single Statement 112 regarding the social contributions and the record of insured persons was implemented from 1 st January 2011.  At present, the statement is filled in quarterly by small taxpayers, compared with previous monthly filling of the statement.  Beneficiaries: aprox. 237,000 employers, persons and companies (with max. 3 employees and with a maximum turnover of 100,000 euro in the previous year) – 54.7% of those who fill the Single Statement. Flat tax rate of 1% on the hotel tax, irrespective of the accomodation category, compared to 1-5% according to the Local Councils decisions. Central and public administration debt has halved between June 2010 – November 2011, from 1,847 mil. RON to 937.2 mil. RON. Creation of the sole virtual portal One Stop Shop: www.immoss.rowww.immoss.ro 50

51 a) Simplification and improvement of fiscal administration Declaration and payment of social security contributions (SSC) for individual taxpayers to a single institution, The National Agency for Fiscal Administration (ANAF), instead of 4 institutions. o The basis for the SSC calculation is the income declared, that cannot be lower than 35% of the gross average earning, nor higher than the equivalent of 5 times the gross average earning. o If the realized income is below the minimum specified, the taxpayer does not owe any social security contribution. o Budgetary impact: positive influence on estimated budgetary revenues of around 10 million in 2012 as a transitional year, with real growth opportunities in the coming years. 51

52 a) Simplification and improvement of fiscal administration (cont.) The statement and the establishment of income tax based on standard income for the rental of rooms located in privately owned housing (whose accommodation capacity ranges from 1 to 5 rooms) for tourism). Licensing and registration as independent contractor (PFA) is no longer mandatory. A safer and more efficient mechanism for tax collection, through: o The elimination of the requirement to declare one’s income from renting privately owned agricultural tools. o The settlement of the mechanism of tax collection by withholding at source and its payment by the lessee. Advancing the deadline for payment of excise duty for the registered recipient, in order to avoid tax evasion, since the recipient does not benefit of duty suspension while holding the excisable goods. 52

53 b) Measures for supporting taxpayers in difficulty Rescheduling the payment of the fiscal obligations for maximum 5 years. Up to 30 th of November 2011, 3,211 application for installment payments amounting to 2.3 bn. Ron were recorded, out of which 2,162 applications amounting to 996,5 mil. Ron were approved. Other 408 applications are about to be solved and 641 applications were rejected. Incentives for the voluntary payments of outstanding debt obligation through: ◦ cancellation of delay penalties related to these on condition of voluntary payment of principal and interest rate until 31 st December 2011. ◦ 50% reduction in penalties in the case of principal and interest rate payment until 30 th June 2012. Regulation of automatic compensation: the cancellation of state tax receivables and of the taxpayer’s tax receivables if both sides are simultaneously creditor and debtor.

54 b) Measures for supporting taxpayers in difficulty (cont.) Reordering the payment of fiscal obligations: first fulfilling the principal fiscal obligations and the secondary fiscal obligations subsequently, in the order in which they were incurred. In the fiscal certificate there will be written the debts of the taxpayer to the state and the debts of the state to the taxpayers, to provide taxpayers with the possibility to participate to public procurements auctions. VAT collection at the preparation and acceptance of works situations, for services with successive offsetting or payments and elimination of the obligation to collect VAT at the expiration of 1 year from the date when the works began or from the last offset. Reduction of interest rate level due for tax debts to the state budget, social security budget, not paid on time, from the 0.05% (18.25% annually) to 0.04% for each day of delay (14.6% annually). 54

55 c) Tax incentives for the business environment and public institutions Introduction of fiscal rules for the taxpayers who apply the International Financial Reporting Standards (IFRS) o Taxation of income arising from the application of IFRS once they are used. o Deduction of the provisions of IFRS and of the additional provisions due to the prudential filters imposed by the National Bank of Romania (NBR). Deductibility of 50% on fuel expenses when calculating income tax and corporation tax and on VAT on the purchase of road vehicles for the exclusive carriage of passengers and on the fuel necessary for the functioning of the said vehicles. Introducing the possibility of opting either for a quarterly payment system or for an annual payment system of the income tax, with advance payments amounting to 25% of the income tax due for the previous year - from 1 January 2013. Supporting civic activities: sponsorship expenditures are deducted from the corporation tax, up to 20% of corporation tax and 3 ‰ of the turnover. 55

56 d) Recent changing of the Accounting Law  2 specific objectives: reduction of costs for companies drawing up financial statements; reduction of bureaucracy in financial administration.  We introduce a simplified accounting system for small businesses that meet two cumulative conditions: their assets and turnover are less than 35,000 euro: these companies will prepare 2 financial statements instead of 5; these companies do not report the balance sheet biannually, but the annual balance sheet only; the balance sheet and the profit and loss account will be elaborated in the simplified accounting system with a small number of components and a plan of 50 accounts instead of 400 accounts; accounting documents can be signed also by people with higher economic studies, not only by expert accountants, based on a civil convention.  349,000 companies (57% of the total active companies in the market) are benefiting from these measures. 56

I. Measures for fighting fiscal evasion 57 Extending the control of individuals through the implementation of indirect methods of control with a view to taxing the undeclared income or that income with unidentified source. Granting extended competences to tax inspection bodies. Implementing the control of electronic trading. Completion of the integrated border security customs system. Elimination of the illegal trade with cigarettes from the duty-free shops. Creation of the Register of intra-EU operators, comprising all the taxable and non-taxable legal persons who perform intra-EU operations. Development of IT trans-european systems, which exchange information between them, and which support customs functions in the “Electronic Customs” programme.

58 I. Measures for fighting fiscal evasion (cont.) Monitoring the movement of excise products under suspension. Romania was one of the first EU Member States to implement the computer system of surveillance and control of the flow of these products at intra – EU level. Revoking the liability for payment of VAT for the taxpayers not engaged in economic activities, not submitting VAT returns for a certain period or involved in acts of tax evasion. Transition to determining the annual net income in real system, for the taxpayers recording a gross annual income higher than the equivalent in RON of 100,000 euros in the previous fiscal year. Extending the application of reverse charge provided by Article 160 of the Tax Code for all categories of wastes specified in European Directive 2006/112/EC. 58

I. Measures for fighting fiscal evasion (cont.) 59 Results obtained in 2011, by the tax inspection bodies, Garda Financiară and Autoritatea Naţională a Vămilor, following the 265,720 inspection and control actions:  Supplimentary amounts determined: 9.188 bn. RON  Value of established damages: 7.38 bn. RON  Precautionary measures: 4.252 bn. RON The value of outstanding amounts from returns with negative amounts of VAT with refund option, presented by taxpayers, recorded a downward trend: from 3.382 mld. RON in December 2008 to 1.886 mld. RON in November 2011. The number of days which exceeds the legal term for processing the requests for reimbursement has been reduced, and is represented by the decreasing number of requests for reimbursement which exceeded the legal term of 90 days: from 1,814 requests in December 2008 to 985 requests in November 2011.

60 ANAF budget revenues increased by 5.7% in October 2011 ANAF collected budgetary revenues worth 15.1 bn. RON in October 2011. 10.9 bn. RON were collected at the state budget, which is 2.6% higher as compared to the same month of last year: o Profit tax receipts were 2.1 bn. RON. o Income tax receipts were 1.6 bn. RON. o VAT receipts were 4.6% lower, as a consequence of accelerated rise of VAT refunds. o Receipts from excise duties were 1.8 bn. RON. For the social security budgets, in October 2011 as compared to October 2010: o The revenues of the single national health insurance fund rose by 27.7%. o The state social insurance budget increased by 9.3% o The unemployment insurance budget increased by 14.2%. 60

J. Supporting the Agriculture 61 „Primul siloz” Programme  Beneficiaries: 663 certificates of deposit have been issued since 2009 until 13 th January 2012;  At the moment, 370 certificates are in circulation worth 509.8 mil. RON guaranteed by the Rural Credit Guarantee Fund, of the amounts allotted by the Ministry of Agriculture and Rural Development. The National Rural Development Programme (2 nd pillar of the CAP)  Projects completed until 20 th January 2012: 2,432  Submitted projects: 96,821 worth 15.38 bn. euro.  Selected projects : 48,394 worth over 4.8 bn. euro.  Contracted projects: 46,255 worth approx. 4.2 bn. euro.  Payments: 3.4 bn. euro (33% of the 2007-2013 allocation).  For 2012: 15 sessions for the projects’ submission, with a total financial allocation of 1.5 bn. euro.

62 J. Supporting the Agriculture (cont.) 62  Support for the agricultural producers in 2012: 14 bn. RON, out of which 5.9 bn. RON from European funds.  Achievements within the 1 st pillar of the Common Agricultural Policy in 2011:  99.7% of the farmers have submitted on-line applications for direct payments;  an absorption rate of 99.76% of the European fund (EAGF) for direct payments, and of 100% of the European fund (EAGF) for market measures;  payments of over 80% in the first three months of 2011, ensuring considerable sums for farmers at the beginning of the spring;  advance payments from F.E.G.A. - SAPS 2011 of over 99% for 1,071 mil. farmers in the period 16 October – 31 November 2011, ensuring the funds available for farmers for the fall campaign;  performance in Romania: a 9 month advance payment in the period 21-23 December 2011 for the amounts from NRDP Axis II (disadvantaged mountain area, agricultural-environmental measures) for 340,000 farmers;  Total payments: 2.34 bn. Euro, out of which 1.43 bn. Euro from European funds (EAGF + EAFRD);

63 J. Supporting the Agriculture (cont.) 63  Achievements within the 1 st pillar of the Common Agricultural Policy in 2011:  closure of the Action Plan in the relationship with the European Commission, which ensured the continuity of the APIA activity and of the payments from European funds for farmers;  full internalization of the updating process of LPIS - Land Parcel Identification System, in partnership with the Ministry of Defense;  completion with a 5 months advance of the on-site controls for the application of direct payments in 2011 campaign;  an error rate below 5% for SAPS 2010, which ensured the reduction of the on-site control effort and the normal functioning of APIA in terms of regulations and procedure;  an error rate of 2.7% for SAPS 2011, which puts APIA among the most efficient agencies in the EU as regards quality indicators.

64 Main financial support schemes 2011 64 SchemeSourcePayment by unitBudgetBeneficiaries Area Subsidy payments (/ha) EAGF (UE) 100.65 €/ha877.3 mil. € 3.7 bn. RON 1.1 mil. farmers 8,716,370 ha National Budget 73.57 €/ha454.3 mil. € (1.9 bn RON) 6,175,000 ha Subsidy for pig welfare National Budget 415-1376 RON/UVM (if all 7 measures are accessed) 304.1 mil. RON 225 farms Subsidy for bird welfare National Budget 722-2062 RON/UVM (if all 6 measures are accessed) 388.7 mil. RON 180 chicken farms 150 hen farms Subsidy per bovine capita National Budget 410 RON/capita (as in 2010) 593.2 bn. RON 229,545 farmers 1.447 mil. capita Subsidy per ovine/goats capita National Budget 40 RON/capita (as in 2010) 299.1 mil. RON 47,121 farmers 7.5 mil. capita

65 Main financial support schemes 2011 (cont.) 65 SchemeSourcePayment by unitBudgetBeneficiaries Subsidy for diesel duty National Budget1.2 RON/litre 1 July 2010 - 30 Sept. 2011 398.0 mil. RON 11,000 beneficiaries in 2011 Support for insuring the agricultural production National Budget 50% or 70% of the insurance prime, according to the insured risks 19 Aug. 2010 - 31 Dec. 2011 16.87 mil. RON 5,481 beneficiaries in the first half of 2011 Specific aid for cow milk producers EAGF (UE) Up to 250 €/cow capita (2-15 cows) in the disadvantaged areas 22.45 mil. € (94.3 mil. RON) 221,134 dairy cows in the disadvantaged areas (39.2% of the quota beneficiaries)

66 Main financial support schemes 2011 (cont.) 66 SchemeSourcePayment by unitBudgetBeneficiaries Specific support for ecological agriculture / conversion EAGF (UE)500-5800 / exploitation 3.10 mil. € (13.02 mil. RON) 1,067 beneficiaries in 2011 Support for improving the breed and pedigree records management National Budget 8-80 RON/capita12.25 mil. RON1,739 beneficiaries in 2011 Agricultural life annuity National Budget 50-100 €/ha74.8 mil. RON83,000 beneficiaries in 2011

II. REFORMS 2009 - 2012 1.Fiscal Framework reform…………………………………………...68 2.Public Administration reform………………………………………69 3.Reform of the Public Sector Employees’ Payment………………...71 4.The reform of Internal Administration…………………………….73 5.The reform of the Public Pension System………………………….74 6.The reform of the Labour Legislation……………………………...81 7.The reform of the Social Dialogue………………………………….83 8.The reform of the Education System……………………………….84 9.The reform of the Health System…………………………………...85 10.The reform of Social Assistance…………………………………….86 11.The reform of the Legal System…………………………………….88 67

1. Fiscal Framework Reform Objectives:  gradual reduction of the budgetary deficit to 3% in 2012  diminishing the tax and administrative burden. The Fiscal-budgetary responsibility Law establishes the principles, objectives and priorities of the multiannual budgetary and fiscal policy:  introduces expenditure ceilings  reduces the number of budget adjustments  eliminates the risk of populist decisions around election campaigns  sets up The Fiscal Council. 68

2. Public Administration Reform By imposing personnel norms for central and local public authorities, the public apparatus was reduced from 1,398,757 people in December 2008 to 1,202,234 people at the 1 st of December 2011.  The policy of employment in the public sector was restricted: one new employee / 7 vacant positions.  141 governmental agencies were abolished, merged or restructured. E-governance to eliminate bureaucracy:  Development of e-ROMANIA National Platform and National Electronic System.  Electronic Single Point of Contact - sets out the online interaction between public institutions in Romania and service providers.  Results: in 2010 there were savings of around 3 bn. RON as a result of the development of the transparent procedures for electronic procurement SEAP. 69

Number of occupied positions in the public sector decreased by 196,523 from 2008 to December 2011

3. Reform of the Public Sector Employees’ Payment The Unitary Payment System Law provides a coherent payment framework for the personnel paid from public funds, unlike the previous period when this remuneration was comprised in 39 laws. Expected results:  Eliminating the luxury wages from the budgetary system.  Reduction of the distance between the basic minimum and maximum salary to 1 to 15, getting closer to the best European practices.  Harmonization of the payment system according to the responsibilities, complexity of the activity and required level of education;  Salary increases take into account the macroeconomic indicators and the evolution of social indicators. 71

Evolution of personnel expenditure * * Includes social security contributions for the military and policemen worth 1.6 billion RON

4. The reform of Internal Administration  2009 – 2011: the total number of positions foreseen by the job chart of the Ministry decreased by 43,110 (including vacancies).  2011: the total number of positions decreased by 37,762, out of which 10,322 represented personnel reduction. 73

5. The reform of the Public Pension system Under the legislation adopted in the pension system:  the financial sustainability of the pension system on the medium and long term is ensured;  the contributiveness principle is enforced in the public pension system;  special laws regarding retirement have been eliminated (“the luxury pensions");  special pensions were recalculated based on the contributiveness principle;  the retirement age is gradually increased to 65 years for men and to 63 years for women, in 2030;  a minimum social pension of 350 RON was established; 74

5. The reform of the Public Pension system (cont.)  the cumulation of pension incomes with salary incomes in the public sector is prohibited for those with pension incomes higher than the average gross salary in the economy;  reduction of the number of early retirements;  more severe criteria are implemented for granting disability pensions;  starting with the 1 st of January 2011, working groups I and II are entitled to payments, this means 1,541,000 pensioners; the budgetary effort amounts to 403 mil. euro in 2011. 75

76 The average pension in the economy increased to 772 Ron in 2011, 30% higher than in 2008, and the average pension with complete stage of contribution and legal retirement age increased to 1,065 in the same year, 21% higher than in 2008 Source: National Forecast Commission, January 2012 *) Forecasts of the National Forecast Commission - Ron -

77 The populist decisions in 2008 led to an unsustainable structural deficit of the pension fund and threw Romania totally unprepared in the crisis Source: National Forecast Commission, January 2012 *) For 2011 and 2012 data represent forecasts of the National Forecast Commission

78 The evolution of the ratio between the average pension and the average gross wage in the period 2000-2012 Source: National Forecast Commission, January 2012 *) Forecasts of the National Forecast Commission %

Evolution of public pension expenditure between 2008 and 2012 Source: Ministry of Public Finances *) For 2012 data represent forecasts of the Ministry of Public Finances

80 Avoiding unsustainable increase in the structural deficit of the public pension fund The structural deficit of the public pension fund would have been over 40% higher in 2011, reaching 21 bn. RON, without the reform of the public pension system adopted by the Government.

6. The reform of Labour Legislation A new Labour Code was implemented. Main objectives:  adapting the work relationships to the dynamics of the labour market;  increasing the flexibility of the work relationships;  establishing performance as a criteria in the labour contracts and in the work relationships;  discouraging the illegal employment by adopting tougher sanctions:  prison sanction for more than 5 employees working illegally;  fine from 10,000 Ron la 20,000 Ron for person, in case that up to 5 people are working without individual employment contract;  fine from 500 Ron to 1,000 Ron for a person working without individual employment contract.  maintaining the Code’s regulations in line with the European legislation. 5,277,369 active employment contracts at 15 th January 2012  The number of registered active employment contracts are currently 110,012 higher as compared to August 2011.  92,5% of the registered active employment contracts have an indefinite duration. 81

82 The number of registered active employment contracts are currently 110,012 higher as compared to August 2011 * Data are in line with the new registration system of the active employment contracts used by the Ministry of Labour since December 2011.

7. The reform of the Social Dialogue The Government decided to promote the Social Dialogue Law by assuming responsibility, according to art. 114 in the Romanian Constitution. The Social Dialogue Law completes the Labour Code:  it reforms the way the trade unions, the employers unions, the Economic and Social Council are organized;  it abolishes the national employment contracts, keeping only the contracts at the branch and unit level;  it adapts to Romania’s present needs the rules that concern the collective work contracts and labour conflicts solving. 83

8. The reform of the Education System By implementing the National Education Law, the Romanian educational system was fundamentally reformed. The main modifications concern :  the establishment of an educational system based on competencies and not on the assimilation of information  defining categories of universities, university classification and ranking study programs  introducing financing per student, according to the funding follows the student principle;  ensuring a high degree of decentralization in the pre-university education system;  redefining the doctoral studies by establishing the scientific doctoral studies and the professional doctoral studies  modernization of university management;  reorganization of the pupil evaluation system and establishment of an Educational Portfolio;  competitive funding and encouraging excellence at the university level;  fostering lifelong learning;  providing equal education opportunities for disadvantaged groups;  the introduction of the School after School Programme; 84

9. The reform of the Health System Structural measures to reform the system:  the decentralization of the health system and the increase of the degree of participation of the local authorities in the management of the hospitals of the 435 public hospitals subordinated to the Ministry of Health, 370 were transferred to the local public authorities 67 public hospitals were closed in order to channel the financial resources to efficient hospitals.  requiring all pensioners with pensions over 740 lei/month to pay 5.5% as health insurance contribution: the number of health insurance payers increased from 8.5 million to approximately 10 million people  introducing the co-payment mechanism, except for the social vulnerable groups or for those with a small income  the control of the expenditure on medicines by imposing the clawback tax. Measures under preparation:  introduction of a national health card;  introduction of the electronic prescription and the patient electronic file  establishment of the health care service minimum package (within the 5.5% contribution) 85

10. The reform of the Social Assistance System At least the following objectives are envisaged:  restructuring the generous social assistance programs and their orientation to the vulnerable categories  reconsideration of the guaranteed minimum income scheme and imposing a correct assessment scale for those who are subject to guaranteed minimum income  reconsideration of subsidies for covering the heating expenses by eliminating the generalized heating subsidy and by targeting the grants exactly for paying the heating bills.  carrying out the decentralization process of social services.  rethinking the child allowance  resizing the social protection measures for people with special needs and for their families. 86

87 Cold season 2010-2011 Cold season 2011-2012 Observations Beneficiaries of subsidies allotted from central level 200,000330,000The number of beneficiaries will increase by approx. 130,000 people Differentiated subsidy according to the income 120 mil. RON345 mil. RONBudget of Ministry of Work, Family and Social Protection (MMFPS) Total amounts allotted from the central level 474 mil. RON345 mil. RONEconomy of 129 mil. RON at the state budget Aids granted by local authorities 700 mil. RON Local budgets Maximum income threshold for granting the subsidy 615 RON786 RON/family 1082 RON/ single person A new category (2011-2012): single people with incomes between 786 and 1082 RON Change of the heating aid system for home heating

11. The reform of the Legal System Four new codes were implemented – the Civil Code, the Criminal Code, the Civil Procedure Code and the Criminal Procedure Code – in order to restore the judicial system’s credibility, by enhancing the transparency, by simplifying the legal framework and by improving the accessibility degree. Expected results: :  shortening the duration of judicial processes;  the simplification of the procedures;  reducing the judiciary costs  improving the justice system, by increasing the degree of accountability and specialization of judges and prosecutors  a more judicious sharing of material competence, unification of judicial practice and increase of the predictability of the justice system. 88

National Anti-Corruption 2011-2014 89 The National Action Plan is based on three types of interventions: Prevention:  the inventory of mandatory measures for all the public institutions  strengthening the integrity of the legal system and the Parliament  transparent financing of the political parties and the electoral campaigns  public procurements  business environment  local government Education:  training for the employees  public information campaigns Control:  DNA and ANI: the main pillars of the fight against corruption - legislative and institutional stability  protection of the financial interest for the European Union  strengthening administrative mechanisms of control and internal audit  confiscation and turning to advantage of the products of corruption.

90 III.ECONOMIC IMPACT 1. Correcting deficits and vulnerabilities………...91 2. Favourable economic developments…………..98 3.Public and private investments………………..103 4.Completed investment works in infrastructure…………………………………..106 5.Absorption of European funds………………..109

Collected budgetary revenues in GDP reached in 2010 the highest level in the last 6 years: 33% of GDP.  In 2011: 33.3% GDP  In 2012: 33.7% GDP Budgetary deficit is under control  As compared to 7.3% in 2009, the budgetary deficit was 4.2% in 2011.  The budget was elaborated in 2012 in order to reduce the deficit to less than 3% of GDP. Current account deficit is 6.6% lower  In the first 11 months of 2011, it amounted to 4.23 bn. euro, which is 6.6% lower as compared to the first 11 months of 2010. Romania's public debt is one of the lowest in EU  In 2011, public debt was 34% of GDP. 1. Correcting deficits and vulnerabilities 91

Vulnerability caused by the large short – term external debt was corrected  In 2010, the short-term external debt was 19.55 bn. euro, as compared to 20.6 bn. euro irresponsibly engaged in 2008.  The share of short-term external debt in the total external debt decreased from 28.5% in 2008 to 21.1% in 2010.  The share of short-term public debt in the total public debt decreased from 45.1% in 2008 to 32.9% in 2010. Inflation is decreasing  From an average inflation of 7.85% in 2008 to 5.9% in 2011. For 2012, the inflation target is 3%. Credit recovery is taking place through the major cost reduction  Monetary policy interest rate decreased form 10.25% in 2008 to 5.75% at the moment. 1. Correcting deficits and vulnerabilities (cont.) 92

93 Public debt, private debt and total external debt dynamics (dec. 2004 - nov. 2011) *Total external debt include the public debt, the private debt, the medium and long term deposits for non residents and loans from IMF (entered in the National Bank of Romania reserve). Source : National Bank of Romania, http://www.bnro.ro/Raport-statistic-606.aspxhttp://www.bnro.ro/Raport-statistic-606.aspx

94 External debt service* (dec. 2004 - nov. 2011) *External debt service include repayments of external loans rates and the payment of the interests dobânzilor, commissons and another expenses related to the external debt, payable in the considered year. Source : National Bank of Romania, http://www.bnro.ro/Raport-statistic-606.aspxhttp://www.bnro.ro/Raport-statistic-606.aspx

95 Romania wins the battle with inflation Source: National Institute of Statistics *) the target established by the Romanian National Bank

Structure of budgetary revenues in GDP: 2009 – 2012 (%) 96

Structure of public expenditure in GDP: 2009 – 2011 (%) 97

98 2. Favourable economic developments The fourth consecutive quarter of economic growth  In the third quarter of 2011, the GDP has grown by 4.4% (adjusted series), as compared to the same period of 2010, respectively by 1.8% as compared to the second quarter of the current year.  GDP growth in the first 9 months 2011: 2.7%. Romanian industry remains a pillar of economic growth:  Industrial production grew by 5.5 % in 2010 as compared to 2009 and by 6.3% in the first 11 months of 2011, as compared to the same period of last year;  Work productivity is increasing considerably in this sector, by 17% in 2010 as compared to 2009, by 30% as compared to 2008 and by 8% in the first semester of 2011, as compared to the same period of 2010;  The turnover in industry grew by 16,6% in the first 11 months of 2011; new industrial orders increased by 14.9% in the first 11 months of 2011. In 2010, exports recorded their highest level in the whole history of Romania.  The total value of 37.3 bn. euro in 2010 exceeded by 3.6 bn. euro the level recorded in 2008;  Trade deficit (FOB-FOB) in 2010 diminished with 69% as compared to 2008.  In the first 11 months of 2011, goods export was 23% higher than in the same period of 2010, totaling 176.6 bn. RON.

99 The exchange rate remained stable in 2009-2011 Source: National Forecast Commission *) Forecasts of the National Forecast Commission

Evolution of FDI flows attracted by Romania during 2000-2011 Source: National Bank of Romania

FDIs amounted to over 1.639 bn. euro in the first 11 months of 2011, covering 38.7% of the current account deficit. Construction works remain on an upward trend  The volume of construction works increased by 2.1% in the first 11 months of 2011, as compared to the same period of the previous year. The unemployment rate is stabilizing this year at the level recorded in 2008:  After an increase from 4.4% in 2008 to 8.36% in March 2010, the unemployment rate started decreasing, reaching 5.06% in November 2011.  The number of people receiving redundancy payments has diminished by 147.1 thousand people in December 2011 as compared to December 2010.  366,113 people got employed in 2011, exceeding by 40,000 the number of people estimated to be employed (324 thousand people). 2. Favourable economic developments (cont.) 101

The unemployment rate is decreasing towards the level recorded in 2008 102 Source: National Forecast Commission, January 2012 No. of recorded unemployedRecorded unemployment rate Thousand pers.

3. Public and private investments 103 According to Fitch Agency, in July 2011, Romania came back to “investment grade” category. The budgetary allotment for public investments increased to 36.1 bn. RON in 2011 and to 38.1 bn. RON in 2012 compared to 32.6 bn. RON in 2008 (the year with the highest economic growth).  In the first 11 months of 2011, the public investment expenditure was 30 bn. RON, which is 3.2 bn. RON higher as compared to the same period in 2010. The percentage of total investments in GDP was 24% in 2011 (according to Eurostat estimates in January 2012).  In 2011, Romania ranked 2 nd in EU-27, as percentage of total investments in GDP, after the Czech Republic (24.7%). The forecasts for the current year point to a share of total investments in GDP in Romania of 24.2%, the highest level in the EU.

Fitch: Romania rating was upgraded Portugal Romania Greece Data source: Fitch, 16 th of January 2012

Data source: S&P, 16 th January 2012 S&P: Stable rating for Romania

4. Investments in Infrastructure Works completed in 2009-2011 Road infrastructure:  Highways: 106,68 km o 54.18 km Drajna – Feteşti section and Feteşti – Cernavodă section o 52.5 km Câmpia Turzii - Gilău section  Detours of highways: 51.56 km (Sibiu, Pitesti)  Modernized / rehabilitated national roads: 737 km  Detours of national roads: 72.305 km  Roads – thorough repairs: 78.68 km  Bridges: 3.4 km (9 bridges) Railroad infrastructure and Metro:  Railroad infrastructure: o Rehabilitation of railroads: 258.84 km; o Rehabilitated tunnels: 1.37 km; o Reconstruction, rehabilitation of railroad bridges and small bridges: 43 bridges o Thorough repairs: 4 passages, 1 pedestrian tunnel, 18 railway platforms o Modernizing railway stations: 21 stations o Implementing the Schengen demands : 4 border crossing points o Computerization of stations: 7 stations 106

4. Investments in Infrastructure Works completed in 2009-2011 (cont.)  Metro o Line 4 – metro connections - section Nicolae Grigorescu - linia de centură and section 1Mai – Parc Bazilescu 6 stations - 7,3 km; o Modernizing the electric equipment: 9 electric traction substations o Facilities for the access of persons with disabilities: 81 elevators Naval Infrastructure  Refloating the Transilvania wreck  Decontamination area for the de-polluting equipments  Complex pontoon for controlling the border crossing in the Galaţi harbor Airborne Infrastructure  Developing and Modernizing the Henri Coandă International Bucharest Airport  Internal Arrivals Terminal at the Traian Vuia International Timişoara Airport  Building rollways and extending the Traian Vuia International Timişoara Airport  Track for light airplanes at the Strejnic Aerodrome – The High School for Civic Aviation 107

Bucuresti LEGENDA Finished highways Length: 418 km Value: 1,862.96 M EUR FINISHED HIGHWAYS CAMPIA TURZII - GILAU Length: 51,8 KM Financing: The state budget In exploitation BUCURESTI - PITESTI Length 109,66 KM Financing: The state budget In exploitation BUCURESTI - CERNAVODA Length 151,7 KM Financing: The state budget, EIB, ISPA In exploitation Road diversionSIBIU Length: 17,56 KM Financing: ISPA, The state budget In exploitation Road diversion ARAD Length: 12,25 KM Financing: state budget, EIB, CF In exploitation ARAD - TIMISOARA Length:32,25KM Financing: state budget, EIB, CF In exploitation VARIANTA DE OCOLIRE CONSTANTA Length: 10,88 KM Financing : The state budget, EBRD, FC In exploitation MEDGIDIA - CONSTANTA Length: 14,57KM Financing: state budget, EIB, CF In exploitation MOARA VLASIEI – PLOIESTI (sector 1b) Length: 14,29 KM Financing: The state budget In exploitation THE HIGHWAYS CONSTRUCTION PROGRAMME

In the first 11 months of 2011, payments made for projects financed from EU funds have increased by 54.9%, as compared to the same period of 2010. Payments made to beneficiaries: approx. 3.22 bn. euro (15.47% of the 2007-2013 allocation), out of which:  Prefinancing of 1.58 bn. euro  Reimbursements of 1.6 bn. euro Intermediate payments reimbursed by the Commission: 5.55% of the 2007-2013 allocation. Submitted projects: 31,574 worth 56.5 bn. euro Approved projects: 10,022 worth 23.7 bn. euro  EU contribution = 14.7 bn. euro (76% of the 2007-2013 allocation) Contracted projects: 7,868 worth 16.1 bn. euro  EU contribution = approx. 12.8 bn. euro (66% of the 2007-2013 allocation) 5. Absorption of European Funds at 23 rd January 2011 109

IV.Short and Medium Term Governmental Priorities 1.Absorption of the European Funds……………………………..111 2.The prioritization of the multiannual strategic investments…….……………………………………………….....112 3.Implementing the National Infrastructure Development Programme……………………………………………….....….....113 4.Investments in Infrastructure Works started in 2009- 2011……………………………………………………….....…......115 5.Solving the problem of arrears………………………..……........122 6.Restructuring of the state-owned enterprises……………..….....123 7.Priorities in state companies privatization…………….....…......125 8.Public – Private Partnership Law implementation………….…127 9.Further Health System Reform………………………….....…....129 110

1. Absorption of European Funds Main objectives in 2012:  Attracting 6 bn. euro of EU funds 2.5 bn. euro in agriculture  1.2 bn. euro direct payments  1.3 bn. euro rural development 3.5 bn. euro from cohesion funds  Absorption rate of over 20% 111

2. Prioritization of multi-annual strategic investments The creation, by a working group under the authority of the Prime Minister, of a database / a list of primary investment projects to provide fund-raising over the next 3-5 years. The improvement of the monitoring and evaluation for the investment projects, at the central authorities level, in particular by improving the database on equity investments managed by the Minister of Public Finances, which will include information on the state of the projects, such as delays in implementation or cost overruns. The implementation of the Government’s Action Plan in order to accelerate the absorption of EU funds and of the National Infrastructure Development Programme. Capital public expenditure reorientation towards a gradual shift from investments financed entirely from domestic sources to investments cofinanced from EU funds; providing about 4% of GDP for capital expenditures corresponding to the investments cofinanced from EU funds, including those from external loans, in 2012. 112

3. National Infrastructure Development Programme 3 subprogrammes: The 10,000 km roads subprogramme  In all counties there have been auctions for construction works. The first opening bid: the end of June, followed by the opening of all offers in 8 th July.  9,016 km of roads will be repaired. The modernization subprogramme for localities  About 650 nurseries and kindergartens will be built in urban and rural areas (an average of 15 per county) on 3 categories, depending on the number of children groups.  Procurement procedures are in progress for 635 nurseries/kindergartens, valued at approx. 760 mil. RON. Water supply and sewage subprogramme  The approval of the technical and economical indicators for water supply systems of localities is in work.  The amount allotted is 700 mil. euro for almost 600 localities, depending on the volume and type of work. 113

4. Investments in Infrastructure Works started in 2009-2011 Road Infrastructure  Highways: 241.29 km, for parts of the following sections: Orăştie – Sibiu, Timişoara – Lugoj, Lugoj – Deva, Nădlac – Arad, Arad – Timisoara, Cernavodă – Medgidia, Medgidia - Constanţa  Detours: 88.36 km (Sibiu, Deva-Orastie, Arad, Constanţa)  Rehabilitated / Modernized national roads: 1,400.207 km  National Roads – thorough repairs: 5.94 km  Bridges: 0.116 km (1 bridge) Railroad Infrastructure and Metro:  Railroad Infrastructure: o Rehabilitation of railroads: 25.41 km o Reconstruction, rehabilitation of railroad bridges and small railroad bridges: 5 bridges and small bridges o Embankment consolidation, slopes: 4 works o Implementing the Schengen demands: 3 border crossing points o Rehabilitation of railroad infrastructure affected by the 2005 floods: 64 objectives 114

4. Investments in Infrastructure Works started in 2009-2011 (cont.)  Metro: o Line 5: Drumul Taberei – Pantelimon, section Drumul Taberei - Universitate o Modernizing the electric equipments on Lines 1, 2 and the and the connecting metro sections o Facilities for the access of the persons with disabilities to the metro network Naval Infrastructure  Road bridge at km 0+540 of the Danube – Black Sea Chanel and works connected with the road infrastructure and the access in the Constanţa harbor  Quay berth 23 and partly 25 of the Brăila harbor and the vertical berth 31 of the Galaţi Harbor  Management system of the naval traffic on the Danube and on the Danube – Black Sea Chanel and the Poarta Albă – Midia Năvodari Chanel  Modernizing the naval signalizing system on the Danube – Black Sea Chanel  A system for collecting the waste generated by the ships in the Danube harbors 115

Highways in preparation Bucuresti Highways in construction Highways to be started in 2010-2011 LEGEND Finished highways THE HIGHWAYS CONSTRUCTION PROGRAMME Nadlac Timisoara Bors Sibiu Bucuresti Cernavoda Constanta Ploiesti Brasov Albita Ungheni Pitesti Arad Lugoj Deva Orastie Tg. Mures FINISHED 334,40 KM 1.344,54 MEUR IN CONSTRUCTION 433,35 KM 3.015,81 MEUR ABOUT TO BE SIGNED 25,62 KM 131,57 MEUR UNDER AUCTION 72,10 KM 923,07MEUR TOTAL 865,47 KM 5414,99 MEUR

Bucuresti HIGHWAYS UNDER CONSTRUCTION TIMISOARA - LUGOJ Lot 1 – km 44+500 – km 54+000 Length : 9,5 km Value (VAT included): 260,86 mil. Lei Constructor: Asocierea Spedition UMB SRL – Technostrade SRL – Carena SpA Impresa de Construzioni Current status: in execution NADLAC – ARAD and connection road Lot 2 – km 22+180– km 38+882 Length : 16,664 km Value : 510,25 mil. Lei Constructor: Alpine Bau GmbH Current status: in execution ORASTIE – SIBIU si Bypass SEBES Lot 2 –km 24+100 – km 43+855 Length : 19,74 km Value (VAT included): 468,45 mil. Lei Constructor: Asocierea Straco Grup SRL Studio Corona SRL Civil Engineering Current status: in execution ORASTIE – SIBIU si Bypass SEBES Lot 3 – km 43+855 – km 65+965 Length : 22,11 km Value (VAT included): 749,94 mil. Lei Constructor: Impregilo SpA ORASTIE – SIBIU and Bypass SEBES Lot 4 – km 65+965 – km 82+070 Length : 16,1 km Value (VAT included): 601,2 mil. Lei Constructor: Asocierea Astaldi SpA – Euroconstruct ‘98 SRL – Astalrom SA Current status: in execution NADLAC – ARAD connecting road Lot 1 – km 0+000 – km 22+180 Length : 22,218 km Value : 474,87 mil. Lei Constructor: Asocierea Romstrade – Monteadriano Engenharia e Construcao – Donep Construct Current status: in execution LUGOJ - DEVA Lot 1 Lugoj – Dumbrava, km 0+000 – km 27+400 Length: 27,4 km Value (VAT included): 844,49 mil. Lei Constructor: Asocierea Tirena Scavi SpA – Societa Italiana per Condotte d’Acqua SpA – Cossi Constructioni Current status: in execution ORASTIE – SIBIU si Bypass SEBES Lot 1 – km 0+000 – km 24+100 Length : 24,1 km Value (VAT included): 683,29 mil. Lei Constructor: SC STRABAG SRL Current status: in execution AUTOSTRADA BUCURESTI – PLOIESTI Section Bucuresti – Moara Vlasiei Length : 19,5 km Value : 1031,72 mil. lei Constructor: Pizzarotti & Tirrena Scavi Current status: in execution AUTOSTRADA BUCURESTI – PLOIESTI Section Moara Vlasiei – Ploiesti Length : 42,5 km Out of which 14,29 km open to traffic since December 2011 Value : 1073,8 mil. lei Constructor: UMB, PA&CO, Com-Axa,Euroconstruct Current status: in execution AUTOSTRADA BRASOV – BORS Section Suplacu de Barcau – Bors Length: 64 km Value: 1.928,14 mil. lei Constructor: Bechtel Current status: in execution VARIANTA DE OCOLIRE CONSTANTA Constructor: FCC Construction / Astaldi Length : 22,1 km Out of which 10,88 km open to traffic since September 2011 Value : 521,03 mil. lei Current status: in execution CERNAVODA – CONSTANTA Section Medgidia - Constanta Constructor: Astaldi – Max Bogl Length : 31,5 km Out of which 17,56 km open to traffic since September 2011 Value : 709,3 mil. Lei Current status: in execution CERNAVODA – CONSTANTA Section Cernavoda - Medgidia Length : 20,49 km Value : 618,51 mil. lei Current status: auction finalized Constructor : Asocierea Astaldi-Max Boegl Current status: in execution DEVA – ORASTIE Length : 32,80 km Value : 945,13 mil. lei Constructor: Strabag AG / Strabag SRL / Straco Grup Current status: in execution LEGEND Highways under construction Length: 346,07 KM Value: 2.757,46 MEUR

SERBIA NATIONAL ROADS REHABILITATION WITH AGREEMENTS OF CONSTRUCTION SIGNED IN SEPT. 2010 – JAN. 2012 PERIOD 15A DN 15A, Reghin – Saratel km 0+000 – km 46+597 DN 15, Reghin – Tg. Mures km 78+800 – km 103+700 Constructor: Strabag AG Value : 38,80 M EUR Length : 71,5 KM Current status: in execution 15 14 DN 14, Sibiu – Medias – Sighisoara km 3+500 – km 51+100 km 57+500 – km 89+400 Constructor: Strabag SA Value : 38,78 M EUR Length : 79,5 KM Current status: in execution DN 73, Enlargement to 4 lanes between km 7+000 and km 11+100 and connection road with DN 73D Constructor: Genesis & Straco Value : 62,56 M EUR Length: 7,28 KM Current status : in execution DN 5, Bucuresti – Adunatii Copaceni km 7+573 – km 19+220 Constructor: SC ROMSTRADE SA Value : 19,11 M EUR Length : 11,647 KM Current status : in execution DN 6, Alexandria – Craiova Lot 1 – km 90+190 – km 132+435 Constructor: Shapir Structures 1991 Value : 41,53 M EUR Length : 42,245 KM Current status : in execution DN 24 / DN 24B, Limita jud. Galati/Vaslui - Crasna – Albita LOT 1 – DN 24, km 51+000 – km 90+000 Constructor: Asocierea SC Spedition UMB SRL - Tehnostrade Value : 22,03 M EUR Length : 39 KM Current status: in execution 24 24B DN 6, Alexandria – Craiova Lot 2 – km 132+435 – km 185+230 Constructor: Asocierea Romstrade – Ezentis – Euroconstruct Trading 98 SRL Value: 40,32 M EUR Length: 52,8 KM Current status: in execution DN 6, Alexandria – Craiova Lot 3 – km 185+230 – km 222+182 Constructor: Secol SPA – Secol Romania SRL Value : 35,24 M EUR Length : 36,952 KM Stadiul actual: in execution 1H DN 1H, Zalau - Alesd Lot 2 – km 26+510 – km 69+334 Constructor: Asocierea SC SPEDITION UMB SRL- Tehnostrade Value (VAT included): 25,66 M EUR Length : 42,824 KM Stadiul actual: in execution DN 1H, Zalau - Alesd Lot 1 – km 0+000 – km 26+510 Constructor: Asocierea OHL ZS – PEYBER HISPANICA SL – SC Societatea de intretinere si reparatii Drumuri Timisoara Value : 21,41 M EUR Length : 26,51 KM Stadiul actual: in execution DN 24 / DN 24B, Limita jud. Galati/Vaslui - Crasna – Albita LOT 2 – DN 24, km 90+000 – km 105+070 DN 24B, km 0+000 – km 22+000 Constructor: Asocierea SC Spedition UMB SRL - Tehnostrade Value : 23,38 M EUR Length : 37 KM Current status : in execution DN 24 / DN 24B, Limita jud. Galati/Vaslui - Crasna – Albita LOT 3–DN 24B, km 22+000 – km 47+881 Constructor: Asocierea SC Spedition UMB SRL - Tehnostrade Value : 21,02 M EUR Length : 25,8 KM Current status:in execution Rehabilitation DN, with agreements signed: (Sept. 2010 – Jan. 2012): Length: 1076,23 KM Value (VAT included): 938,02 MEURO Out of which: Financing from ERDF Length: 314,78 KM Value (VAT included): 249,69 MEURO Financing from the State Budget Length: 269,54 KM Value (VAT included): 284,08 MEURO Financing from EIB Length: 491,91 KM Value (VAT included): 405,03 MEURO DN 18, Moisei – Iacobeni, km 131+627 – km 220+088 Constructor: Saphir Structures Value: 100,40 M EUR Length : 88,46 km Current status: in execution DN 18, Sighetu Marmatiei – Moisei, Km 62+234 – km 131+627 Constructor: Spedition UMB Value: 40,28 M EUR Length : 69,3 km Current status: in execution DN 18, Baia Mare – Sighetu Marmatiei, Km 3+522 – km 62+234 Constructor: Aktor SA Value : 53,85 M EUR Length : 58,7 km Current status: in execution 18 DN 73, Pitesti – Campulung – Brasov KM 13+800 – KM 42+850; KM 54+050 – KM 128+250 Constructor: As. AZVI SA – STRACO – PIOMAR DEVELOPMENT – TRACTABEL ENGINEERING, lider Asociatie AZVI SA Value : 131,24 M EUR Length : 103,25 KM Current status : in execution DN 29, SUCEAVA – BOTOSANI KM 0+000 – KM 39+071 Constructor: As. SC SPEDITION UMB, Technostrade, ARCADA Company SA, SC Consitrans Value : 38,25 M EUR Length : 39,07 KM Current status : in execution DN 56, Craiova – Galicia Mare Km 0+000 – 47+000 Length: 47 km Value: 75,3 M EUR Constructor: DELTA ACM 93 Current status: in execution DN 71, Baldana – Targoviste – Sinaia Length: 102,99 km Value : 72,83 M EUR Constructor:Spedition UMB/ Consitrans/ IPTANA Current status : in execution DN 21, km 70+900 – km 87+850 Length: 16,95 km Value: 11,11 M EUR

SERBIA NATIONAL ROADS REHABILITATION WITH AUCTIONS IN PROGRESS Rehabilitation DN, under auction: Length: 183,38 KM Value (VAT included): 222,38 MEURO Out of which: Financing from the State Budget Length 64,63 KM Value (VAT included): 71,58 M EURO Financing from EIB Length 118,75 KM Value (VAT included): 150,80 M EURO DN 56, Galicia Mare - Calafat Km 47+000 – 84+020 Length: 37,02 km Value: 44,09 M EUR DN 24, Crasna –Iasi, Km 105+700 – km 197+040 Length: 77,45 km Value DN 25, Tecuci – Sendreni, Km 0+000 – km 68+130 Length: 64,63 km Value: 71,58 M EUR DN 76, Beius - Oradea km 133+660 – km 184+390 Length: 50,73 km Value: 66,75 M EUR DN 76, Stei - Beius Km 102+660 – km 133+660 Length: 31 km Value: 39,96 M EUR

ROADS / BRIDGES / PASSAGES DIVERSIONS WITH AGREEMENTS OF CONSTRUCTION SIGNED IN SEPT. 2010 – JAN. 2012 Uneven passage on the road diversion Arad overCF Brad - CF Curtici - DJ 709B Constructor: SC CCCF Drumuri and Poduri TImisoara SRL Length: 1,37 KM Value (VAT included): 7,18 M EUR Current status: in execution Uneven passage on the road diversion Arad (DN7, KM 540 +248) over CF Arad - Bucuresti Constructor: SC Confort SA Timisoara &SC Vel Service SA Buc. Length: 0,72 KM Value (VAT included): 8,1 M EUR Current status: in execution Bridge on DN 54, KM 67+774 over Sai and the new alternative route DN 54, Turnu Magurele, KM 65+950 – KM 70+600 Constructor: SC TELDRUM SA Length : 4,7 KM Value (VAT included): 6,72 M EUR Current status: in execution Road diversion CARACAL Constructor: ROMSTRADE Length : 10,35 KM Value (VAT included): 13,13 M EUR Current status: in execution Road diversion ALEXANDRIA Constructor: SHAPIR STRUCTURES 1991 Length : 13,276 KM Value (VAT included): 15,60 M EUR Current status: in execution ROADS / BRIDGES/ PASSAGES DIVERSIONS WITH AGREEMENTS OF CONSTRUCTION SIGNED (Sept. 2010 – Jan. 2011): Length: 92,33 KM Value(VAT included): 191,16 MEURO Out of which: Financing from ERDF Length: 47,99 KM Value(VAT included): 63,50 MEURO Financing from the State Budget Length: 42,05 KM Value(VAT included): 99,50 MEURO Financing from EBRD Length: 2,30 KM Value(VAT included): 28,16 MEURO Road diversion RADAUTI Constructor: SC SPEDITION UMB+Technostrade Length : 16,579 KM Value (VAT included): 24,21 M EUR Current status: in execution Road diversion CRAIOVA SUD Constructor: As. SECOL SpA/ SECOL Romania Length : 6,28 KM Value (VAT included): 13,95 M EUR Current status: Works execution contract signed in 12.09.2011 Pod si viaducte pe DN 22C km 1+978 la Cernavoda Constructor: Arcada Company SA Length : 0,566 km Value: 12,05 M EUR Current status: in execution Bridge over Dunare at Giurgeni pe DN 2A km 114+134 Constructor: Bilfinger Berger Baugesellsch AFT MBH Length : 1,463 km Value : 11,28 M EUR Current status: in execution Bridge on DN 39 km 8+988 la Agigea Constructor: Bilfinger Berger Baugesellsch AFT MBH Length : 0,266 km Value : 4,83 M EUR Current status: in execution Uneven passage on DN19 la Moftin Constructor: Betonut ZRT&Alfarom Length: 0,123 km Value: 4,54 M EUR Current status: in execution Craiova Sud-Vest, DN 56 – DN 55 – DN 6 Length: 9,87 KM Value (VAT included): 17,28 M EUR Constructor: Asoc. SCT Bucuresti SA&Doprastrar Current status: in execution, with agreement signed in December 2011 Road diversion CAREI Length: 10,46 KM Value (VAT included): 11,36 M EUR Current status: agreement of construction about to be signed Road diversion SACUIENI Length: 7,62KM Value (VAT included): 9,45 M EUR Current status: agreement of construction about to be signed Modernization of the Bucharest beltway SectionA1 – DN 7 Constructor: Asoc. Delta ACM 93&AZVIRT LLC&MAXIDESIGN Length: 8,7 km Value: 31,48 M EUR Current status: in execution

ROADS / BRIDGES / PASSAGES DIVERSIONS WITH AUCTIONS COMPLETED OR IN PROGRESS ROADS / BRIDGES/ PASSAGES DIVERSIONS WITH AUCTIONS COMPLETED OR IN PROGRESS (Sept. 2010 – Jan. 2011): Length: 50,47 KM Value(VAT included): 231,61 MEURO Out of which: Financing from ERDF Length: 35,36 KM Value(VAT included): 123,91MEURO Financing from the State Budget Length: 11,45 KM Value(VAT included): 69,23 MEURO Financing from EBRD Length: 3,655 KM Value(VAT included): 38,47 MEURO Mihailesti Length: 3,18 KM Value (VAT included): 13,07 M EUR Current status: auction in progress Brasov Length : 13,63 KM Value (VAT included): 61,03 M EUR Current status: auction in progress Tecuci Length : 6,95 KM Value (VAT included): 20,64 M EUR Current status: auction in progress Targu Mures Length : 11,6 KM Value (VAT included): 29,18 M EUR Current status: auction in progress Modernization of Bucharest beltway Section DN 2 – A2 Length: 11,45 km Value: 69,23 M EUR Current status: appealed procedure Bridge on DN 22C km 38+002 at Poarta Alba Bridge on DN 3 km 242+286 at Basarabi Bridge o DN 2A km 196+739 at Ovidiu Bridge on DN 39 km 49+157 at Mangalia Bridge on A2 km 157+600 at Cernavoda Bridge on A2 km 149+680 at Borcea

5. Solving the problem of arrears Implementing the action plan and the improved mechanism for the control of commitments and measures enforcement by the end of April 2011, in order to eliminate the existing arrears and to prevent the accumulation of new ones, both at the level of the consolidated general budget and at the level of the state enterprises. A better control of arrears at local authorities level, by setting an indicative target. Harmonisation of the accounting system with the Treasury system of payments (September 2011). Natural gas price liberalization. Starting with 1 st July 2011, the price of natural gas for the industrial consumers was increased by 10%. For the households, the price remains unchanged until March 2012. 122

6. Restructuring the state-owned enterprises Improving the reporting system for the state-owned enterprises already included in the ESA definition of the consolidated general budget. Prevention of new arrears and losses in case of the companies reclassified by Eurostat as being a part of the consolidated general budget, and of those which will be reclassified in 2011 and 2012. The action plans for a big part of the 154 companies mentioned in the last Letter of Intention to the IMF have been finished. For the rest of the state- owned enterprises the plans will be elaborated by the end of December. In order to solve the governance related problems, we will elaborate (in consultation with the World Bank) and we will adopt the necessary legislation required to improve the governance of these companies; we will introduce the compulsory external, independent and regular audit activity at these companies and the financial control will be transferred from the line ministries to the Ministry of Public Finances by the end of September 2011. 123

124 Private Management in the companies subordinated to the M.E.C.M.A. 1.The dissociation of the position of general director and that of president of the Administration Board – accomplished 2.The selection of the consultant for establishing the technical specifications for the acquisition of the firms for the selection of managers – the selection was completed at 1 st of September 2011 3.The acquisition of the firms for the selection of managers for each company (the first set of 7-10 companies) – by Octomber the 1 st, 2011 4.A short list with the proposals for general directors and the selection criteria for the members of the Administration Board – by December the 1 st, 2011 5.Changes in the specific legislations – by December 31 st, 2011 6.Appointing the selected managers and of the members of the Administration Board – by the end of February 2012

125 1. The sale of a minority stake of the state’s stakes in a company PETROM  The sale of a stake of 9.84% of the social capital Transelectrica, Transgaz Mediaş, Romgaz Mediaş  The sale of a stake of 15% of the social capital Hidroelectrica and Nuclearelectrica  Tender of minority stakes through a 10% raise in equity Complexul Energetic Oltenia (formed through the merger of S.N. Lignitul Oltenia and the 3 energy complexes from Craiova, Rovinari and Turceni). 7. Priorities in the privatization of the state companies

126 Electrocentrale Bucureti The Maintenance and Energy Services Subsidiary of “Electrica Serv” S.C. Electrica S.A. 2. The privatization of the following state companies: S.C. CUPRU MIN S.A. Abrud ISCIR – CERT S.C. OLTCHIM S.A. 7. Priorities in the privatization of the state companies (cont.)

8. Public – Private Partnership Priority Projects 127 Transport and infrastructure  Comarnic – Braşov Highway – under concession  Sibiu – Piteşti Highway– 116 km  Ploieşti – Buzău – Focşani Highway – 133 km  Bucureşti South Beltway and North Beltway  Târgu-Mureş – Iaşi – Ungheni Highway– 307 km Energy  Tarniţa – Lăpuşteşti Hydroelectric Power Plant  3 and 4 Cernavodă Nuclear Facilities  Doiceşti Steam Power Plant  AGRI International Project (Azerbaidjan – Georgia – România)

8. Public – Private Partnership Priority Projects (cont.) 128 Environment and Agriculture  Siret – Bărăgan Channel lanscape Regional Development  Eco Project in Ghencea district  Esplanada Project  Dunăre – Bucureşti Channel  Dunăre Overpass, between Brăila and Tulcea Health Care System  6 regional emergency hospitals in Timişoara, Cluj-Napoca, Târgu-Mureş, Iaşi, Craiova and Bucureşti  Turning to advantage the Health Care Center "Ana Aslan" Justice  Building a penitentiary in PPP.

9. Continuing the health system reform Fixing the government sponsored care package in order to eliminate the coverage for non-essential costly medical services; the services that exceed the basic coverage will be provided through the supplementary insurance schemes, including private packages. Reviewing and rendering the clawback system efficient. Reviewing the formula for National Health Insurance Company by introducing a system where “money follows the patient”; Establishing indicative ceilings for quarterly contracts regarding services developed with hospitals and doctors and creating incentives for doctors who meet the indicative ceilings; Reviewing the list of compensated and free medicines approved by the Government Decision no. 720/2008, in order to amend it, for instance by replacing the products listed therein with generic medicines, wherever possible; Controlling the pharmaceutical costs for the most expensive medicines for 2012, by applying strict protocols for pharmaceutical use and by implementing the new module of electronic prescriptions for the Single Informational Integrated National Health System, in compliance with strict procedures. 129

130 For more information: Andreea PAUL State Adviser of the Prime Minister Lecturer, PhD Faculty of International Business and Economics Academy of Economic Studies Tel: 004021.318.11.86 Fax:004021.318.03.51 E-mail: andreea.vass@gov.ro andreea_vass@yahoo.com

Romanian Government 25 th January 2012 Reforms 2009 - 2012 1.

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