ANNALS Vol.10, nr.2 (12), 2010 Fulltext PDF

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THE ANNALS OF THE

"ŞTEFAN CEL MARE"
UNIVERSITY OF SUCEAVA.
FASCICLE OF THE FACULTY OF
ECONOMICS AND
PUBLIC ADMINISTRATION
VOLUME 10, NO. 2(12), 2010
Editura Universităţii
Ştefan cel Mare
din Suceava
EDITORIAL BOARD:
Editor-in-chief: Carmen NĂSTASE

General editorial secretary: Adrian Liviu SCUTARIU
Editors: Elena HLACIUC, Carmen CHAŞOVSCHI, Mariana LUPAN, Ovidiu Florin HURJUI
SCIENTIFIC COMMITTEE:
Angela ALBU, „Ştefan cel Mare” University of Suceava, Romania

George P. BABU, University of Southern Mississippi, USA
Christian BAUMGARTNER, International Friends of Nature, Austria
Grigore BELOSTECINIC, ASEM, Chi şinău, Republic of Moldova
Ionel BOSTAN, „Alexandru Ioan Cuza” University of Iaşi, Romania
Aurel BURCIU, „Ştefan cel Mare” University of Suceava, Romania
Gheorghe CÂRSTEA, Academ y of Economic Studies, Bucharest , Romania
Slobodan CEROVIC, Singidunum University, Belgrade, Serbia
Simion CERTAN, State University of Chişinău, Republic of Moldova
Carmen CHAŞOVSCHI, „Ştefan cel Mare” University of Suceava, Romania
Liliana ELMAZI, Tirana University, Albania
Cristian Valentin HAPENCIUC, „Ştefan cel Mare” University of Suceava, Romania
Elena HLACIUC, „Ştefan cel Mare” University of Suceava, Romania
Elena IFTIME, „Ştefan cel Mare” University of Suceava, Romania
Marian JALENCU, State University of Chişinău, Republic of Moldova
Miika KAJANUS, Savonia University of Applied Sciences, Iisalmi, Finland
Stefanos KARAGIANNIS, Institute of Tourism Research, Athens, Greece
Maria MUREŞAN, Academy of Economic Studies, Bucuresti, Romania
Carmen NĂSTASE, „Ştefan cel Mare” University of Suceava, Roman ia
Alexandru NEDELEA, „Ştefan cel Mare” University of Suceava, Romania
Ion PÂRŢACHI, ASEM, Chişinău, Republic of Moldova
Rusalim PETRIŞ, „Ştefan cel Mare” University of Suceava, Romania
Abraham PIZAM, University of Central Florida, Orlando, Florida
Ion POHOAŢĂ, „Alexandru Ioan Cuza” University of Iaşi, Romania
Gabriela PRELIPCEAN, „Ştefan cel Mare” University of Suceava, Romania
Gheorghe SANDU, „Ştefan cel Mare” University of Suceava, Romania
Petru SANDU, Elizabethtown College, Pennsylvania, USA
Pavlo SHYLEPNYTSYI, Bucovina State Academy of Finance, Chernivtsi, Ukraine
Doru TILIUŢE, „Ştefan cel Mare” University of Suceava, Romania
Ion TORONCIUC, National University Yuri Fedcovici, Chernivtsi, Ukraine
Viorel ŢURCANU, ASEM, Chişinău, Republic of Moldova
Diego VARELA PEDREIRA, University of A Coruna, Spain
Răzvan VIORESCU, „Ştefan cel Mare” University of Suceava, Romania
Valeriy YEVDOKYMENKO, National University Yuri Fedcovici, Chernivtsi, Ukraine
Text review: Alina HODOROABĂ, Adrian Liviu SCUTARIU. Cover design: Adrian Liviu SCUTARIU
Contact:
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content of their articles.
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The Annals of The "Ştefan cel Mare" University of Suceava. Fascicle of The Faculty of Economics and Public Administration Vol. 10, No. 2(12), 2010
CONTENT
SECTION 1 - ECONOMY, TRADE, SERVICES .................................................................................................................................. 7
ROMANIAN ILLEGAL MARKETS IN THE CONTEXT OF THE CURRENT MACROECONOMIC

EVOLUTION ........................................................................................................................................................................................................... 9
Scientific Researcher PhD. Irina CAUNIC
„Al. I. Cuza” University of Iasi, Romania
Professor PhD. Gabriela PRELIPCEAN
Stefan cel Mare University of Suceava, Romania
Doctoral student Florin Bogdan SUCIU
THE IMPACT OF MOBILE GOVERNMENT IN ORGANIZATIONS: PROMISES AND PITFALLS ................. 15
Ph. D. Professor Mircea GEORGESCU
Business Administration Department, Alexandru Ioan Cuza University of Iasi, Romania
SOCIAL POLICY AND SOCIAL WELLFARE IN SLOVAK REPUBLIC ........................................................................... 23
Iveta HAJDÚCHOVÁ
Igor STADTHERR
Technical University, Faculty of forestry, KERLH, Zvolen, Slovak Republic
EUROPEAN DYNAMICS INFLUENCE ON WORLD CRISIS................................................................................................... 30
Professor PhD. Cristian Valentin HAPENCIUC
Stefan cel Mare University, Suceava, Romania
PhD. Student Elizabeth Lorena TCACIUC
THE EFFECTS OF TRANSITION FROM A TECHNICAL DIVISION OF LABOR TO A COGNITIVE
INTERNATIONAL SPECIALIZATION ................................................................................................................................................. 39
Professor PhD. Ion IGNAT
”Al. I. Cuza” University of Iaşi, Romania
Lecturer PhD. Liviu-George MAHA
TRANSNATIONAL COMPANIES AND FOREIGN DIRECT INVESTMENTS ............................................................... 45
Professor Ph.D.Maria MUREŞAN
Academy of Economic Studies, Bucharest, Romania
EDUCATION - AN ECONOMIC GROWTH FACTOR .................................................................................................................. 53
Associate Prof. PhD. Carmen NĂSTASE
University “Stefan cel Mare”, Suceava, Romania
Highschool Teacher Alina HODOROABĂ
Technical College ”Petru Muşat”, Suceava, Romania
STUDY OF SIGNALLING GAMES ON THE LABOUR FORCE MARKET OF EU-27, THE PURE
STRATEGY CASE ............................................................................................................................................................................................. 61
Prof. Ph. Stelian STANCU
Prof. PhD.Tudorel ANDREI
PhD Candidate Oana Mădălina PREDESCU
PhD Candidate George Viorel VOINESCU
CHANGES OF INNOVATION BEHAVIOUR IN SLOVAKIAN FORESTRY .................................................................... 71
Mgr. JUDr. Zuzana DOBŠINSKÁ
Technical University Zvolen, Slovakia
Ing. PhD. Zuzana SARVAŠOVÁ
National Forest Centre Zvolen, Slovakia
doc. Dr. Ing. Jaroslav ŠÁLKA
ROMANIA’S INVESTMENT POLICY ................................................................................................................................................... 81
Lecturer PhD.Oana CHINDRIS-VASIOIU
The Ecological University in Bucharest, Romania
COHESION POLICY AND GREEN ECONOMY .............................................................................................................................. 88
Professor PhD. Florina BRAN
PhD. Cristina POPA
Associate Professor PhD. Carmen Valentina RADULESCU
Bucharest Academy of Economic Studies, Bucharest, Romania
3
ASPECTS REGARDING HISTORICAL EVOLUTION OF INTERNATIONAL FINANCIAL FLOWS.................. 93

Lecturer PhD. Carmen BOGHEAN
Lecturer PhD. Florin BOGHEAN
Ştefan cel Mare University of Suceava, Romania
LANDMARKS OF REGIONAL DEVELOPMENT IN THE E.U. .............................................................................................. 99
Assistant PhD. Student Adrian Liviu SCUTARIU
Highschool Teacher PhD. Student Lucia Hedviga PASCARIU
Cooperation Highschool Botoşani, Romania
ASPECTS CONCERNING ECONOMIC AND FINANCIAL PERFORMANCES OF SUBSIDIARIES OF
TRANSNATIONAL COMPANIES ACTIVE IN ROMANIA ...................................................................................................... 109
Lecturer PhD. Daniela PÎRVU
Adjunct Professor PhD. Logica BĂNICĂ
Assistant PhD. Candidate Alina HAGIU
University of Piteşti, Romania
THE CRISIS INFLUENCE ON THE UNEMPLOYMENT EVOLUTION ........................................................................... 118
Assistant PhD. Student Gabriela-Liliana CIOBAN
“Ştefan cel Mare” University of Suceava, Romania
PhD. Student Costel-Ioan CIOBAN
“Alexandru Ioan Cuza” University of Iaşi, Romania
EXCEEDING THE RESTRICTION IN AGRICULTURE, ECONOMICAL SPEAKING AFTER ADHERING
TO THE EUROPEN UNION ....................................................................................................................................................................... 124
Professor PhD. Dorina ARDELEAN
Lecturer PhD. Marius BOIŢĂ
University Vasile Goldiş Arad, Romania
COMPARATIVE ECONOMETRIC ANALYSIS ON THE EVOLUTION OF TOURISM TRAFFIC IN
PRAHOVA AND BRASOV COUNTIES ................................................................................................................................................ 130
Professor, PhD. Marian ZAHARIA
Petroleum-Gas University, Ploiesti, Romania
Associate Prof. PhD. Rodica Manuela GOGONEA
IPSAS AGRICULTURE – PROBLEMS OF A START .................................................................................................................. 136
Lecturer Cristina Silvia NISTOR
Babes Bolyai University, Faculty of Economics and Business Administration, Cluj Napoca
Assistant Andreea CIRSTEA
Babes Bolyai University, Faculty of Economics and Business Administration, Cluj Napoca
Diana COZMA IGHIAN
North University, Baia Mare, Romania
INFLUENCE OF BRAND NAME ON CONSUMER DECISION MAKING PROCESS- AN EMPIRICAL
STUDY ON CAR BUYERS. ......................................................................................................................................................................... 142
Assistant Professor Mohammed ALAMGIR
University of Chittagong, Bangladesh, Bangladesh
Lecturer Tasnuba NASIR
University of Science and Technology Chittagong (USTC)
Associate Professor Mohammad SHAMSUDDOHA
University of Chittagong, Bangladesh
Associate Professor Ph.D. Alexandru NEDELEA
IMPLICATIONS OF THE EURO ADOPTION IN THE EU COUNTRIES. CASE STUDY: SLOVAKIA vs
SLOVENIA ........................................................................................................................................................................................................... 154
Assistant PhD. Student Anamaria HLACIUC
”Stefan cel Mare” University of Suceava, Romania
SECTION 2 - MANAGEMENT AND BUSINESS ADMINISTRATION ............................................................................... 160
GLOBAL CRISIS AND MICROCYCLICITY .................................................................................................................................... 161

Professor PhD. Aurel BURCIU
EVALUATION OF INTER-GENERATIONAL KNOWLEDGE TRANSFER BY USING THE ANALYTIC
HIERARCHY PROCESS (AHP)................................................................................................................................................................ 176
Professor PhD. Constantin BRĂTIANU
Lecturer PhD. Adriana AGAPIE
4
MOUNTING E-WASTE OF EUROPE: POLICIES, MANAGEMENT PRACTICES, AND BUSINESS

SOLUTIONS ........................................................................................................................................................................................................ 185
Associate Professor PhD. Ildiko IOAN
PhD. Cristina POPA
TWO PERSONALITIES, TWO SOLUTIONS FOR BUSINESS DEVELOPMENT IN ROMANIA: ROBERT
KIYOSAKI OR JIM COLLINS?................................................................................................................................ 194
Professor PhD. Gheorghe NEGOESCU
“Ovidius” University, Faculty of Economic Sciences, Constanţa, Romania
BUSINESS INCUBATORS. EFFECTIVE MEANS TO SUPPORT PRIVATE INITIATIVE ..................................... 201
PhD. Professor Dănuţ Tiberius EPURE
Teaching Assistant Dorinela CUŞU
„Ovidius” University of Constanta, Romania
OPTIMIZATION OF HUMAN RESOURCES FUNCTION THROUGH KNOWLEDGE MANAGEMENT .... 208
Associate Prof. PhD. Carmen CHAŞOVSCHI
Assistant PhD. Student Ruxandra BEJINARU
Assistant PhD. Student. Otilia BORDEIANU
University “Stefan cel Mare” Suceava, Romania
SECTION 3 - ACCOUNTING - FINANCES ........................................................................................................................................ 216
THE ACCOUNTANT PROFESSION: EVOLUTION AND RUPTURES. THE BIRTH OF THE

ACCOUNTING PARADIGM ...................................................................................................................................................................... 217
Professor Dr. Rusalim PETRIŞ
Professor Dr. Elena HLACIUC
“Stefan cel Mare” University of Suceava, Romania
SYSTEMIC APPROACH TO THE FUNCTIONS OF PUBLIC FINANCES - A NECESSITY FOR THE
ROMANIAN ECONOMY ............................................................................................................................................................................. 228
Professor PhD. Carmen COMANICIU
Junior Teaching Assistant PhD. Student Liliana BUNESCU
"Lucian Blaga" University of Sibiu, Faculty of Economic Sciences, Sibiu, Romania
ESTIMATING THE COST-VALUE RELATIONSHIP USING INSTRUMENTS OF MANAGEMENT
ACCOUNTANCY .............................................................................................................................................................................................. 235
Professor PhD. Iuliana GEORGESCU
Professor PhD. Dorina BUDUGAN
PhD. Student Laura CRETU
Alexandru Ioan Cuza University of Iaşi, Romania
THE ANALYSIS ON THE PREPARATION DEGREE OF THE EASTERN EUROPE BLOCK STATES TO
ADOPT THE UNIQUE CURRENCY ...................................................................................................................................................... 241
Lecturer PhD. Student Anisoara Niculina APETRI
Profesor PhD. Gheorghe SANDU
Lecturer PhD. Irina Stefana CIBOTARIU
Stefan cel Mare Univesity, Suceava, Romania
RATIO BETWEEN ACCOUNTING PRINCIPLES AND INTERIM FINANCIAL REPORTING ......................... 250
Assistant PhD. Student Claudia-Elena GRIGORAS-ICHIM
“Stefan cel Mare” University of Suceava, Faculty of Economics and Public Administration
THE MANAGEMENT OF THE FINANCIAL AND NON-FINANCIAL IMPLICATIONS OF THE SALARIES
GROWTH.............................................................................................................................................................................................................. 255
Assistant PhD. Student Irina CHIRITA
Assistant PhD. Student Raluca ZOLTAN
University „Stefan cel Mare”, Suceava, Romania
SECTION 4 - LAW AND PUBLIC ADMINISTRATION .............................................................................................................. 263
RECENT BENCHMARKS ON WAGES IN THE NATIONAL PUBLIC SYSTEM*** ................................................. 264

Lecturer PhD. Alunica MORARIU
,,Ştefan cel Mare” University of Suceava, Romania
MEDIATION IN COMMERCIAL CONFLICTS .............................................................................................................................. 270
PhD. student Marcela SLUSARCIUC
5
CURRENT GUIDELINES IN THE FIELD OF ADMINISTRATIVE CONTRACTS ..................................................... 278

Lect. PhD. Liana-Teodora PASCARIU
University „Ştefan cel Mare” Suceava, Romania
THE ROLE OF NGOs IN EUROPEAN GOVERNANCE ............................................................................................................. 284
Lecturer PhD. student Ciprian UNGUREANU
Lecturer PhD student Nicoleta IONESCU FLOREA
Lecturer PhD. student Gabriela NEGRU
"Ştefan cel Mare" University of Suceava, Romania
THE APPLICATION OF THE LEGALITY PRINCIPLE IN THE ADMINISTRATIVE ACTIVITY IN THE
EUROPEAN UNION COUNTRIES ......................................................................................................................................................... 290
Lecturer PhD. Student Dumitriţa FLOREA (IONESCU)
Junior Assistant Alina LARION
University”Ştefan cel Mare” Suceava, Romania
BOOK REVIEW ................................................................................................................................................................................................ 297

INSTITUTIONAL ECONOMISTS’ TERRITORY – Professor PhD. Ionel BOSTAN ............................................ 298
INSTRUCTIUNI UTILE PENTRU AUTORI / AUTHOR GUIDELINES............................................................................. 301
6
SECTION 1
ECONOMY, TRADE, SERVICES
7
8
ROMANIAN ILLEGAL MARKETS IN THE CONTEXT OF THE CURRENT

MACROECONOMIC EVOLUTION
Scientific Researcher PhD. Irina CAUNIC

irina_caunic@yahoo.com
Professor PhD. Gabriela PRELIPCEAN
gprelipcean@yahoo.com
Doctoral student Florin Bogdan SUCIU
fbsuciu@yahoo.com
Abstract:
Illegal markets constitute the source of income for organized crime. In the context of contemporary illegal market
conditions, it needs to be noted that with the restrictions of national borders declining and the increasing mobility of
goods, money and services, transnational business opportunities have created new global markets.
The globalization of trade facilitated access of foreign markets and the advantages offered by technological
innovations led many enterprises to expand their activities across international borders.
Key words: illegal markets, drug trafficking, trafficking in human beings, smuggling of persons, cigarette smuggling.
JEL Classification: E26
INTRODUCTION
Analyzing the criminal sphere with certain methods for drawing the economic component
from a series of activities such as drug trafficking, human trafficking, and so on, represent a
particularly difficult scientific approach due to lack of knowledge of the phenomenon` real extent.
The main causes of the emergence and expansion of organized crime have roots in economical nature,
as the driving force is given, in this case, by the possibility of obtaining significant income in
relatively short periods of time.
Currently, organized crime is considered by experts the economic branch having the fastest
expansion in the world. According to calculations the annual profit made by these networks is
estimated between 500 and 1500 billion dollars, the most profitable industries being related to illicit
drugs or weapons trafficking [1] (Engvall, 2006, p. 827). Opening borders facilitated the movement
of people and goods, driving the free market in Romania, but also crime.
Both the illicit activities composing the hard core structure of the underground economy and
those carried out lawfully have some common features, among which may be mentioned:
• expansion into new markets;
• achieving / maximizing a profit from the sale of goods or services;
• diversification of investment in new technology or human resources to increase profits.
The article 1 of UN Convention against organized crime includes in the concept of organized
crime the following issues: the activities of a three or more persons group, with hierarchical links that
allow their leaders to achieve profits or control territories and domestic or foreign markets, using
violence, intimidation or corruption, both to support the criminal activity and to infiltrate the
legitimate economy, in particular, through:
 illicit trafficking in drugs or psychotropic substances and money laundering;
 human trafficking,
 illicit trafficking in weapons, nuclear materials;
 illicit trafficking in stolen vehicles;
 smuggling.
9
1. THE ILLICIT TRAFFICKING IN DRUGS OR PSYCHOTROPIC SUBSTANCES
International drug trafficking is one of the major illegal business, representing the main
attribute of the cross-border organized crime networks. Globalization has led to an increase of the
commercial activities carried on both on the legitimate and especially illegal markets, the dynamics of
the latter being largely determined by the balance between profitability and the large risks involved.
The illegal revenues are significant, an example in this matter concerning those obtained from the
drug industry [2.] (Laegreid, 2004, p. 4.). In recent years, the illegal drug trafficking saw an
unprecedented escalation in Romania, due to the particular context of the markets liberalization or the
movement of people and as a result of extending the phenomenon on new areas, both among
producers and consumers. From the assessments made results that our country is mainly a transit area
and only a part of the quantity of these drugs remained in Romania for consumption. Meanwhile,
Romania has become also a storage area, where the drug entered especially the southern border are
stored in different periodes and finally are directed to high-consuming countries in Western Europe
[3.] (Guvernul Romaniei, 2005, p. 8).
Romania is an active segment of the Balkan route for trafficking drugs, route that includes
Turkey, Bulgaria, Romania (by customs Negru Voda, Vama Veche, Giurgiu, Bechet., Nadlac, Bors or
Petea), Austria, Holland and Great Britain. A second section crosses eastern Romania, drugs coming
out of the country through Ukraine reaching the Poland-Germany or Slovakia-Czech Republic, finally
being consumed on the western European markets [4.] (Alexandru, 2006). In recent years, the case
law claims that it is predicted to develop routes for the synthetic drugs coming from West
(Netherlands, Belgium, Germany) to the East (Romania), but also from the North (Baltics, Ukraine)
for the synthetic drugs (amphetamines, MDMA, LSD and others), which would become active in
Romania. Relatively stable nature of the routes does not exclude other options concerning the
Romanian territory, their detection depending to a large extent of the involved institutions ability in
combating illicit drug trafficking and consumption and, most importantly, how they cooperate with
the similar institutions located in other states [5.] (Guvernul Romaniei, 2005, p. 8).
Heroin and cocaine are considered, overall, the most important drug in terms of involvement
of organized criminal groups or local funding conflicts [6.] (United Nations Office for Drug Control
and Crime Prevention, 2000, p. 33). In Romania, the most common drug is heroin, large quantities
being brought by the Turkish and Iranian citizens by trucks, trains or buses. In Romania, the prices on
these markets depend on the drug consumed, the purchased quantity and its quality [7.] (United
Nations Office for Drug Control and Crime Prevention, 2000, p. 33) as shown in the table below:
Table no. 1. Prices on the drug markets in Romania
Name Retail Price Wholesale Price

(per gram) /US$ (per kilogram) / US$
No.
2007 2007
1. Cocaine 137 58.920.3
2. Opium 22 4717.6
3 Heroin 50.3 20.553.6
4. Cannabis 8.9 1918.3
(herbal)
5. Amphetamine 13.7 6849.3
6. Ecstasy 16.4 5.032.1
7. Marijuana 8.9 1.918.3
Source: UNODC, World Drug Report 2009: Section 3.4 Prices, pp. 215 - 234, June 2009.
http://www.unodc.org/documents/wdr/WDR_2009/WDR2009_Statistical_annex_prices.pdf.
10
Recent estimates of the international institutions (such as United Nations International Drug
Control), claim between 300 and 500 billion of dollars come annually from drug transactions
worldwide.
In Romania, the supply of drugs is influenced by a number of risk factors, among which
may be mentioned [8.] (Guvernul Romaniei, 2005, p. 9):
 geographic location at the intersection of the main traditional routes used by the international
drug traffickers and also, since 2007, our country is the eastern border of the European Union;
 increasing the flow of immigrants to Romania and other European Union member states,
 the development of trade through the border points, with consequences on decreasing the time
control;
 increasing the drug use and, in particular, the synthetic drugs use;
 involvement in corruption of public officials who have direct responsibilities for border
control activities;
 the proliferation of terrorist networks interested in obtaining funds from the illicit drug
trafficking;
 the insufficient cooperation between the responsible institutions in reducing the drug supply.
In this context, the main trend concerning the local phenomenon of the drug crime reffers to:
continuous change of used routes and the types of trafficked drugs, according to the illicit market
demands, the diversification of the money laundering methods, (revenues resulting from the illicit
drug operations), increasing the number of drug users and in particular, of those who prefer the
amphetamines and cannabis [9.] (Guvernul Romaniei, 2005, p. 9).
Currently in our country, the institutional system of drug supply reduction occurs in a
competitive way and not in a complementary one and requires an effective coordination, along with
the reshaping the staff involved, taking into account the operational situation, the professionalization
of staff, improving the institutional cooperation, allowing an adequate response to changing drug-
related organized crime and the management in partnership of the information resources.
2. TRAFFICKING IN HUMAN BEINGS
The phenomenon has recorded positive dynamics especially in the last ten years and is
considering setting up networks in several countries for the exploitation of women, children and
immigrants through prostitution, begging, theft, forced labor, and so on.
After the December 1989 events, the literature highlights even in Romania an increase in
activities of human trafficking, illicit operations facilitated primarily by the persons mobility, the
developing of transport routes and induced by factors such as globalization and scientific or technical
progress. These illegal markets developed, especially in areas affected by economic crisis,
characterized by high vacancy stressed workforce, as shown in Table 2.
Table no. 2. Regions in which there were recorded cases of trafficked victims
No.t.Historical regions Number of Cases - 2005 - Percentage
1. R1 N-E 197 14.8%
2. R 2 S-E 288 21.7%
3. R 3 South Muntenia 194 14.6%
4. R 4 S-V Oltenia 168 12.7%

5. R 5 Banat 36 2.7%
6. R 6 N-V 146 11.0%
7. R 7 Centre 159 12.0%
8. R 8 Bucharest 139 10.5%
TOTAL 1327 100%
Source: UNICEF, Raport Evaluarea Politicilor privind Traficul de Fiinte Umane in Romania, p. 63,
http://www.unicef.ro/&files/evaluarea-politicilor-privind-traficul-fiinteleor-umane-din-romania.pdf
11
Analyzing the existing data in this table, we observe that the numerous cases of trafficked
victims were recorded in the S-E region (Constanta, Tulcea, Braila, Galati, Buzau, Vrancea), in
Moldavia and the South of Muntenia (Prahova, Dambovita, Giurgiu, Ialomita, Teleorman, Arges.
They are followed closely by Oltenia (Mehedinti, Olt, Dolj, Gorj and Valcea) and center zone (Mures,
Alba, Harghita, Covasna, Brasov, Sibiu). According to the competent authorities reports, victims
come mainly from the rural areas or poor families, being involved in this system by the means of
attractive job offers, such as dancers, models, maids and so on.
In Romania, the dynamics of human being trafficking is influenced by several factors of risk
exposure, which is closely related either to social institutions (family) or legal institutions, among
which may be mentioned [10.] (UNICEF, 2006, p. 80):
 family and communication among its members;
 local community affairs, particularly the youth employment problem, but also, the general
problem of the unemployment;
 low social capital, low trust in state institutions as an educational deficit consequence;
 willingness to violate certain rules in the case of immigration or the risk emigration
apperception.
Those persons who acted illegally to the Romanian border (on both input and output) were
mainly originating from: India, Bangladesh, Iraq, Pakistan, Turkey, Georgia, Moldova, Liberia,
Morocco, Algeria, Cote d Ivoire,Russian Federation, China, Sudan, Congo, Nigeria, Chechnya,
Venezuela, Serbia and so on. Thus, foreigners coming from countries with trend of migration
(Indians, Iraqis, Afghans, etc..) use the following routes to reach the West [11.] (Guvernul Romaniei,
2006, p. 23):
 Afghanistan - Iran - Iraq - Turkey - Bulgaria - Romania
 Afghanistan - Iran - Iraq - Turkey - Bulgaria - Serbia - Croatia, at the same time remaining
active the eastern routes.
The traffic developed for sexual exploitation is the most common form of trafficking, where
the victims are sold both within and outside the country in order to maximize profits, exploring new
markets and avoiding controls exercised by the authorities. Human being trafficking generates
substantial profits for the organized crime networks, profits that can be invested in both the traffickers
origin or destination country [12] (Europol, 2009, p. 10) as shown in the below table.
Table no. 3. The costs of human smuggling and trafficking charged by the European
networks
Routes The average costs s in

US$
1. Europe-Asia 16,462
2. Asia-Europe 9,374
3. Europe - Australasia 7,400
4. Africa - Europe 6,533
5. Europe – America 6,389
6. America - Europe 4,528
7. Europe - Europe 2,708
Source: Melanie Petros, The costs of human smuggling and trafficking, Global Migration Perspectives, No. 31, April
2005, p. 4, http://www.gcim.org/attachements/GMP%20No%2031.pdf.
12
Analyzing the existing data it appears in this table that the most expensive route concerning
the human being trafficking and the illegal migration is Europe - Asia, with an average cost of US $
16,462.
We consider that in order to make more visible the phenomenon of trafficking in persons
and also to dismantle the existing stereotypes regarding the trafficked victims, it is necessary to
intensify the awareness campaigns, especially by presenting more case studies. Moreover, according
to the scholars, the presentation of case studies is the only technique that can change the existing
perceptions and social attitudes regarding the human being trafficking.
3. CIGARETTE SMUGGLING
With the European Union integration, Romania has become both a transit country and a
destination for smuggled cigarettes, carried out with great intensity on the eastern, northern and
southwestern country borders.
Specialists in the field claim that high taxes imposed by the authorities in this industry have
created a black market redirecting billions of dollars in the organized crime or extremist networks
accounts [13] (Fleenor, 2003, p. 13).
Organized crime groups traditionally involved in illegal drug trafficking have realized the
potential of cigarette smuggling, in that it can be achieved equally high income and, in addition, it
isn` t so strongly anti-social, the illegal activity undertaken in this context.
Studies based on the government documents and interviews with the experts from the
responsible institutions showing an inextricable link between smuggling and the criminal groups, a
voluntary connection, not infrequently consented by even the producing cigarette companies.
The cigarette smuggling profitability is based on a simple operating mechanism, but very
difficult to refute by the competent authorities as the sale of these products is absolutely legal.
Modus operandi is to acquire a considerable amount of cigarettes in the countries with low
taxes and then selling them with discount in other regions avoiding the high duties applied to such
products [14] (Horwitz, 2004, p. A1). The most common method of smuggling used in Romania is
buying cigarettes from neighboring countries, especially from Ukraine and Moldova, where these
goods are cheaper, and their subsequent placement in Romania, hidden in specially designed places.
According to the Customs Police, cigarette traffickers are organized in real criminal groups with ties
within the country and abroad and even at the border area, each of them having clear and specific
responsibilities.
We appreciate that an important element in having a real image of the phenomenon scale is
given by the manufacturing companies reported losses in this industry.
Generally, in this industry, the opportunity to obtain significant illegal revenues is marked
both by the tendency in saling the counterfeit cigarettes, and the increase of saling these products on
the Internet.
According to officials of the European Commission Anti - Fraud Office, the cigarette
smuggling is widespread in many EU Member States, Britain and Germany being the largest markets
of contraband cigarettes as shown in Table 4.
Table no. 4. Contraband cigarettes markets in the European Union
Markets Contraband % of fees

cigarettes consumed paid by
(million sticks) market
1. Great 18,672.0 36.6
Britain
2. Germany 15,555.3 16.5
3. Greece 12,447.0 37.0
4. Poland 11,735.3 16.2
5. France 6,915.7 12.4
13
6. Cech Republic 5,000.0 21.3

7. Romania 4,761.0 16.7
8. Austria 2,700.0 19.9
Source: Euromonitor International, Illicit Trade. In: Global Report: Tobacco – World, 2008.
In Romania, the actions undertaken by the authorities has considerably increased in the
recent years, multiplying the cases of contraband cigarettes seizures, while, in the early 2010, the
manufacturers of tobacco industry appreciated the one billion euro losses because of the cigarette
smuggling. The criminal groups involved in the tobacco industry obtain significant amounts of money
they use to corrupt and intimidate, which is generating destabilizing consequences on the flows of
money and exchange markets.
CONCLUSION
Continuing to gather information on the financial sources of the organized crime groups can
serve both as a operational support to responsible institutions and in analyzing the long-term
evolution of this phenomenon. We consider that in the current context, it became necessary to
establish a complete image of the illicit activities composing the hard core of the underground
economy in Romania, and achieving a better understanding of these networks evolution.
Also, cooperation between states and, in parallel, establishing a severe legislation in this
area are also, viable solutions to prevent and combat the illegal markets.
REFERENCES:
1. Alexandru, D., “Moartea albă“ înghite miliarde de euro, Revista Bilanţ, nr.21, iunie
2006.
2. Engvall, J., The State Under Siege: The Drug Trade and Organised Crime in Tajikistan,
Europe-Asia Studies, vol. 58, nr. 6, September 2006;
3. Fleenor, P., Cigarette Taxes, Black Markets, and Crime, Policy Analysis, p. 13, February
6, 2003;
4. Horwitz, S., Cigarette Smuggling Linked to Terrorism, Washington Post, June 8, 2004.
5. Laegreid, R., The Links between Transnational Organized Crime & Terrorism: A
theoretical framework and a case study of the Liberation Tigers on Tamil Eelam (LTTE),
SIS-794: Substantial Research Paper, April 29, 2004.
6. Petros, M., The costs of human smuggling and trafficking, Global Migration Perspectives,
No. 31, April 2005, http://www.gcim.org/attachements/GMP%20No%2031.pdf.
7. *** Euromonitor International, Illicit Trade. In: Global Report: Tobacco – World, 2008;
8. *** Europol, Trafficking in Human Beings in the European Union: A Europol
Perspective, June 2009,
http://www.europol.europa.eu/publications/Serious_Crime_Overviews/Trafficking%20in
%20Human%20Beings%20June%202009.pdf.
9. *** Guvernul Romaniei, Strategia Nationala Anti-Drog Romania 2005-2012, Bucuresti
2005, http://www.unicef.ro/&files/strategia_nationala_antidrog_2005-2012.pdf.
10. *** Guvernul Romaniei, Migratia si Azilul in Romania, Bucuresti, martie 2006,
http://ori.mai.gov.ro/api/media/userfilesfile/Proiecte-
Strategii/Migratia%20si%20azilul%202006.pdf.
11. *** UNICEF, Raport - Evaluarea Politicilor privind Traficul de Fiinte Umane in
Romania, martie 2006, http://www.unicef.ro/&files/evaluarea-politicilor-privind-traficul-
fiinteleor-umane-din-romania.pdf.
12. UNODC, World Drug Report 2000 / 2009, New York, NY: Oxford University Press,
http://www.unodc.org/documents/wdr/WDR_2009/WDR2009_Statistical_annex_prices.p
df.
14
THE IMPACT OF MOBILE GOVERNMENT IN ORGANIZATIONS: PROMISES AND

PITFALLS
Ph. D. Professor Mircea GEORGESCU

Business Administration Department, Alexandru Ioan Cuza University of Iasi, Romania
mirceag@uaic.ro
Abstract:
The new developments in ICT along with the growth of mobile communication have developed new ways of
interaction between the governments and the citizens. More and more governments are using information and
communication technology especially Internet or web-based network, to provide services between government agencies
and citizens, businesses, employees and other nongovernmental agencies.
The paper try to present an introduction on the characteristics of mobile government and some major issues that justify
the necessity of the mobile government and identify the potential that it possesses, but also the problems that concerns
such an activity (trust, security risks, privacy risks).
Adoption of mobile technologies by government organizations not only benefits the parties who use these services, but
also has a positive impact in the productivity and costs of these organizations.
Keywords: E-government, m-government, e-trust, mobile technologies
JEL Classification: H11, O33, O 38
INTRODUCTION
Ideas about e-government sometimes amount to not a great deal more than government as
usual plus information and communication technologies. The waves of e-government are rising
through public organizations and public administration across the world. More and more
governments are using information and communication technology especially Internet or web-based
network, to provide services between government agencies and citizens, businesses, employees and
other nongovernmental agencies.
If we want to speak about m-government first of all we must define e-government. It is
defined as “the use of information and communication technologies in public administrations
combined with organizational change and new skills in order to improve public services and
democratic processes and strengthen support to public policies” [COM, 2003]. E-Government does
not mean:
 to equal digitalisation with modernisation;
 to replace analogous bureaucracy by digital bureaucracy.
Almazan and Gil-Garcia after reviewing different ways to present the stages of e-
government, propose the following model :
Table no. 1. Evolutionary approaches to e-government assessment: an overview
E-Government Additional Technological and Organizational Sophistication

Stage
Presence  Limited government information;
 Few Web pages developed by single agencies;
 Static information about government structure and services
Information  More dynamic information (frequent updates);
 Greater number of web pages;
 Statewide portal as the entry point with links to most of the state pages;
Interaction  Forms that can be downloaded;
 Two way communication through electronic mail;
 Use of search engines;
 Use of chats, forums and other forms of interactive communication (service related);
 Some customization (citizen’s profiles, use of passwords)
15
Transaction  Online web services (secure and completely online), including accepting electronic
payments;
 More customization ( use of passwords, citizen’s profiles);
 Portal organized according to people’s needs instead of government structures
Integration  Service portal with a single checkout point
o Multiple agencies, same function, different levels of government;
o Multiple agencies, different functions, same level of government;
o Multiple agencies, different functions, different levels of government.
Political  Political participation;

Participation  Online public forums;
 Opinion surveys;
 Online voting.
E-GOVERNMENT VERSUS M-GOVERNMENT
But, how can we define M-government? Mobile government definitions given in the
literature vary slightly. Many authors describe m-government as “a functional subset of all inclusive
e-government” [Arazyan, 2002], that vision saying also, that technologies used for m-government
“are limited to mobile and/or wireless technologies” [Llalana, 2004]. For others authors, m-
government “is a complex strategy for efficient utilization of all wireless devices” [Zalesak, 2003]
with the goal of improving benefits to the parties involved in e-government.
In conclusion, m-government may be defined as a strategy and its implementation involving
the utilization of all kinds of wireless and mobile technology, services, applications, and devices for
improving benefits to the parties involved in the e-government including citizens, businesses, and
all government units. It`s clearily that m-government is not a replacement for e-government, rather
it complements and completes it. M-government is building upon e-government efforts, and there
are basically two important issues related to the transition from e-government to m-government
[Kuscu, Kushchu, Yu, 2007]:
 M-government is inevitable. The most important reason concern the citizen`s rising
expectations for a better and convenient government services;
 M-government is complementary to e-government (some of the m-government services
are replications of e-government services on the mobile platforms).
According the literature review [Yu, Kushchu, 2004] [Cilingir, Kushchu, 2004] the
principles differencies between m-government and e-government are:
 Convenient accessibility and availability:
 One of the most important characteristic of mobile devices is they are
always “on line”;
 Mobile devices are designed to be mobile, that means the user carried
them all the time;
 The two characteristics mentioned means that citizens can use the online
governmental services not only anytime but also anywhere.
 Precision and personalisation of the delivered content
 Mobile devices are used generally individual, we do not share this
devices like a personal computer – that means we need personalized
informations;
 These type of devices is more friendly and familiar for the users, and the
user don`t need specific skills.
 Larger and wider user base
 Practicaly the mobile devices offers a biger potential number of users of
m-government comparative to Internet user community.
Even smaller towns operate their own Web site with access to general public information,
whereas larger cities and institutions generally offer a wider range of more developed Web based
16
services. The quality of these services can vary significantly, for example, in rural areas, they have
limited financial, technical and human resources in order to implement and deploy services with the
same quality as large institutions [Leenes, Svensson, 2002]. So, we can conclude that the
deployment of an open service platform, that can be shared by networked authorities and
institutions in terms of technical resources as well as comercial exploitation, would armonize the
quality of public services, and provide the conditions for low cost of m-government services.
For developing m-government services a number of conditions are very important:
 critical level of of mobile phone penetration;
 reasonable cost of phone calls and text messages;
 the liberalization of telecommunication sector,
 distributed infrastructure to support mobile technology penetration.
When we talk about m-government, we talk also about mobile tecnologies. The underlying
technologies are dealing with four basic concepts of mobility [Roggenkamp, 2007]:
 device mobility – deals with the continued access to services while
beeing spatially mobile, moving from one physical location to another
(granted for example via locally Wireless LAN access points or via
standards such as GSM);
 user mobility – the citizens must be mobile without physical constraints,
the only requirement is to utilize an identification module;
 service mobility – anytime, anywhere. More appropriately, this concept
includes the idea of service delivery regardless of device and user specific
settings;
 session mobility – describe the capability of starting, pausing if it`
necessary, and resuming a user session while switching between devices
and /or services.
When we try to improve the new Information and Communication Technologies for the
citizens, we must answer at some important questions:
 How technologically feasible are user wishes/needs?
 What are the interdependencies between technological solutions and
usage?
 How can technology adapt to these needs/interdependencies?
Despite substantial, increased investment in information technologies, no significant
increase in productivity was observed. We can appreciate, we need a relatively long period for the
benefits of IT investments to become discernible. Asignificant variability exists across organisations
in regard to their ability to productively use information technologies. Therefore performance
reflects processes and strategies as well as IT investements.
Besides the reengineering of administrative processes to reduce bureaucracy and to improve
the quality of government services, the implementation of m-government solutions requires
organizational and citizen changes.
Centralization vs Structures vs
Decentralization individuals
Team working
Profiles, skills,
competences
Organizational
change
Traditional vs Involvement
Modern channels of processes
Communication
Leadership processes Traditional vs E-

learning processes
Figure no. 1. Organizational and citizen changes for successful M-Government
17
M-Government have the ability to connect previously unconnected areas, information, and
services from the government. It extends the benefits of remote delivery of government services and
information to those who are unable or unwilling to access public services through the Internet, or
who simply prefer to use mobile devices.
In addition, the relatively lower cost of mobile phone technology versus Internet technology
has drastically lowered the entry barriers for citizens in developing countries to be connected to
government services. Mobile phones could be considered now as key technologies in adapting e-
government policies and programs. The actual model of mobile phones allow citizens to get access
to government services virtually in any place covered by a mobile network. For example,
Singapore's mobile penetration rate has reached a high of 98%. Today, the mobile phone can be
used to access information and transact with Goverment while on the move. As part of the Mobile
Government strategy, Singapore government has made many mobile services available to the
citizens so that they can transact with the government while on the move.
What are the services that government could delivered via mobile phone? Are they
traditional services or new services? We can include in m-government services relating to:
 health,
 education,
 employment,
 police,
 tax,
 judicial and legal systems, etc.
In the last years, payments and financial services are also possible through mobile phones,
which drastically expands the opportunities to incorporate m-services into the everyday lives of
citizens.
Another important sector that mobile phone technology can also considerably expand is e-
democracy and e-participation, engaging citizens in democratic decision-making through various
polls, m-voting, and other forms of communication between citizens and the government. The
United Kingdom and Switzerland have pioneered m-voting in local elections. In Asia, Korea leads
the way in m-voting through its use in the selection of Presidential candidates.
It is now estimated that 94% of countries in the world have some form of online services.
The degree of e-government programs varies greatly from country to country but is continuing
growing, like the Mobile conectivity versus Internet conectivity varies also with advantage for
Mobile conectivity.
M-GOVERNMENT PERSPECTIVES
Figure no. 2. Internet conectivity versus Mobile conectivity
18
Why is increasing the demand for mobile services? There are several factors that year by
year are vectors in this area [Riley, 2008]:
 the convergence of wired internet and telecommunication networks, allowing
information once only available on a computer to be received through mobile
phones;
 the penetration of mobile technology and the relative low cost of entry into mobile
connectivity;
 the shift towards higher data transfer rates and 3G services which promises to make
more information available at faster speeds.
However, the debate advantages/disavantages of M-Government, must start from some key
questions, studied in the phase of designing mobile government.
Figure no. 3. Key questions when designing mobile government
Carrying around a mobile has its advantages and its risks. Probably, one of the most
enduring policy issues is privacy. In the development of e-government practices and principles
over the years, privacy and security have become key factors to ensure success of online programs.
Beyond privacy there are the security issues on a broader scale, where we are seeing the rise in
spam, spyware, ad-aware, phishing, identity fraud and a host of other hacker activities (good or bad)
that make people uneasy when going online.
Citizens have a great concern about the privacy and security in m-government. The general
issue is the convincement that their mobile phone numbers might be traced, when they send their
opinions and inquiries to the government.
The government must overcome the mistrust, and assure mobile users that people’s privacy
is protected and the information will not be sold to third parties. Wireless networks are still
considered vulnerable because they use public airwaves to send signals.
For the success of M-Government strategy there are important barriers that are the key
policy and technical issues that must be addressed in order to successfully implement the e-
government initiative.
 Technical Barriers:
19
 Security;
 Digital Signatures;
 System Maintenance & Integration;
 Transition & Systems Interface;
 Online Payment Setup.
 Financial/Economic Barriers:
 Start Up Costs;
 Transaction Costs.
 Other Barriers:
 Customer Expectations;
 Staff Availability, Training, Expertise;
 Language Barriers;
 Universal Access.
Also, lack of standards and optimized data exchange protocols in mobile and wireless
environments inhibit the potential of m-government. In this regard, developing a coherent m-
government framework in the public sector is an important factor. Most of the European countries
placed e-government services development high on their agenda. But even though the initiative is in
its peek, the recent survey shows lack of awareness about m-government among the citizens. In this
fashion, the development of m-government standard unites innovation of architecture, technology,
feasibility and citizen’s education and awareness.
Figure no. 4. Government success In ICT promotion
There are many benefits by using m-government, both for public sector and for citizens. In
next table Casalo, Gunaliu and Flavian summarize the benefits associated with the implementation
of m-government [Casalo, Gunaliu, Flavian, 2007].
20
Table no.2. Benefits associated with the implementation of m-government
Benefits for the public sector Benefits for the citizen

The public sector can reach citizens more easily and The cost for the citizen in time and effort when interacting
directly. Consequently the gap between the public with the government is reduced as the gap between the
sector and citizens is reduced two is decreased
It could be possible to carry out the public services The citizen can interact with the public sector 24 hours a
more efficiently day, 365 days a year
Public activism is promoted
There is an enhancement of the image and reputation The variety of services offered by the public sector to the
of the public administration citizen can be increased
Citizens commitment to their environment and to the Citizen mobility is ennhanced: the opportunity of
public sector is increased accessing government information and services regardless
of location or time is increased
A common mobile public services framework must first and foremost incorporate the
following five principles [Antovski, Lj. & Gusev M.,2003]:
 Interoperability;
 Security;
 Openness;
 Flexibility;
 Scalability
Interoperability is based on bilateral agreements in which the rules for communication are
defined for each new system that is connected. The core of interoperability is the stipulation of
common data models and common protocols for exchanging data.
The openness of the system is considered on several levels: open standards, open interfaces,
open specifications and open source codes. Scalability should be built into a system from the start.
It is important to be able to maintain both the functionality and efficiency of the solution if the need
changes, for example in respect of user numbers, transaction volume or data quantity. Modularity
and scalability must also relate to the nature and scope of the work. The data exchange format is
based on the exiting XML standard.
CONCLUSIONS
In order to foster a successful implementation of m-government, the following key success

factors emerge:
 Descentralization for local m-government diffusion;
 Central government support to local projects in order to promote standardization;
 Soft skills, in particular leadership and communication;
 Skills enhancement on the job rather than formal training;
 Early involvement of people both internal and external;
 Horizontal organizations and bottom-up approaches, but with strong commitment of top
management.
In conclusion, when implementing new technologies, governments should not force citizens
to upgrade their current devices, but rather smart small with applications using current technologies
and current bandwidth for data transfers or services. Starting small, but thinking big – basic m-
government applications should be cornerstones of wireless strategies for governments worldwide.
REFERENCES
1. Almazan-Sandoval, R., Gil-Garcia, R. (2006), E-Government Portals in Mexico, in

Encyclopedia of E-Commerce, E-Government, and Mobile Commerce, Idea Group
Reference, USA;
21
2. Antovski, Lj., Gusev, M., (2003), M-Government Framework, at

http://www.mgovernment.org/resurces/euromgov2005/PDF/5_R368AL.pdf, accessed
19.07.2010;
3. Berce, J., E-Government a window of opportunity for EU NMS, 2005, at
http://fiste.jrc.es, accessed 02.07.2010;
4. Capra, E., Francalanci, C, Marinoni, C., Soft success factors for M-government, in
Kushchu, I., Mobile government an emerging direction in e-government, IGI Publishing,
London, 2007;
5. Casalo, L., Flavian, C., Giunaliu, M., M-Government initiatives at the local level: the
case of Zaragoza, in Kushchu, I., Mobile government an emerging direction in e-
government, IGI Publishing, London, 2007;
6. Chien-Chih, Y., Janssen, M., The need for strategic management and business model
design in government and public administration, Electronic Government, an
International Journal, vol 7, Number 4 / 2010
7. COM, The role of egovernment for Europe`s future, Communication from the
Commission, COM (2003) 576 final, Commission of the European Communities,
September 26, Brussels, 2003;
8. EGov Monitor, from 11 february 2008, Privacy and Mobile Technologies: What are the
risks, By Thomas B. Riley, Commonwealth Centre for Electronic Governance, Canada
9. Leenes, R., E., Svensson, J., S., Size matters – Electronic service delivery by
municipalities? in the Proceedings: Electronic Government: EGOV 2002, Aix-en-
Provence, France, Edition Springer, 2002
10. Roggenkamp, K., Its` the Mobility, Stupid: Designing Mobile Government, in Mobile
Government: an Emerging Direction in E-Government, IGI Publishing, New York,
2007;
11. Song, G., Cornford, T., Mobile Government: Towards a Service Paradigm in the
Proceedings of the 2nd International, Conference on e-Government, University of
Pittsburgh, Pittsburgh, USA, 2006, at
http://mobility.grchina.com/ICEG_2006_paper.pdf, accessed 1.08.2010;
12. Sørensen, C. (2003) Research Issues in Mobile Informatics: Classical Concerns,
Pragmatic Issues and Emerging Discourses, LSE,
http://mobility.is.lse.ac.uk/html/downloads.htm;
13. http://www.insead.edu/v1/gitr/wef/main/fullreport/index.html.
22
SOCIAL POLICY AND SOCIAL WELLFARE IN SLOVAK REPUBLIC
Iveta HAJDÚCHOVÁ
Igor STADTHERR
Technical University
Faculty of forestry, KERLH
Zvolen, Slovak Republic
Abstract:
This article deals with social welfare question in Slovak Republic in historical context of social policy
development as well as with analysing conditions for implementation of social welfare after Slovakia joined European
Union. Our preface brings a survey of basic terminology related to social policy and social welfare. The first part
focuses on historical development of social policy and social welfare. The second part and the conclusion describe
principles applied to social welfare through social insurance and indicates problems with rising levies, going to the
national budget, and other problems with social funds usage and fulfillments.
Key words: social policy, social insurance, levies to insurance funds
JEL Classification: H55
PREFACE
In last decades there has been an abiding conviction that the mechanisms of free market
based on general access to information with no protection of the government interests, represent the
guarantee of rising productivity on the market as well as in whole economy.
Lately it is more likely that free market mechanisms are not successfully used for collective goods.
Due to that fact and because of its heterogeneity, public sector represents the main guarantee and
the provider. This can be applied to various social phenomena such as: unemployment, poverty,
social exclusion that are being permanently unsolved and differently interpreted. Even economic
sciences are not rigid and consensual when presenting their opinions about development rate of
“social guarantee” so that they would keep and improve economic development of national and
perhaps even global economy.
“ Social policy determines objective, legal, institutional assumptions and conditions for
economic development by setting positive working and living environment for creating economic
values, mainly by means of education policy, housing policy, health policy, employment policy etc.
naturally appearing in human activity and as well as cultivation.”
Nowadays mainly in consequence of the recession and unfavourable demographic development, it
is necessary to discuss the theme of social welfare realised through social insurance. This article
deals therefore with social welfare in SR in context of historical development of social policy as
well as conditions for implementation of social welfare after Slovakia joined European Union.
HISTORICAL DEVELOPMENT OF SOCIAL WELFARE
Social welfare is an organic part of social policy, being the means of goals and tasks
realisation in social policy. State economic policy is closely related and linked to social policy.
State social policy is closely related and linked to social policy which provides sources and
impulses for its development. The models of social development in the state are shown in chart
no.1.
23
Mercantilism (15. – 16. century)

1. WELFARE STATE
State of public social services (16. – 19. century)
Classical economy /18th century/
2. SOCIAL STATE
Classical social state (the end of 19th and the
beginning of 20th century)
LIBERAL MODELS INTERVENCIONALISTIC

Social charakter of MODELS
state Social charakter of state
3. PROSPERITY STATE
Prosperity state (2nd half of 20th century)
Nekonzervative economy (70.s – 20.th century)
4. MODERN SOCIAL STATE

Modern social state (beginning of 21st century
Figure no. 1 . The models of social development character in the state
Since the 90’s of the last century European social policy follows the action programs also
known as the Green and White Book (1993, 1995), which recommends certain social
“convergence“. In the years 1992-1999 the process of social policy development, affected by two
different principals, included in the contract of European Society (ES) following the Maastricht
Treaty (1992) and Amsterdam contract of social policy (which Great Britain did not attend), based
on the principles of European Social Charter (1961,1996) and Charter of Fundamental Labor Rights
(1989).
Social policy and social security in EU countries is apart from above stated normative adjustments
influenced by the social policy of individual countries from European economic area (EEA) and
mainly by international organisations such as the United Nations Organisation, the International
Labour Organisation and the Council of Europe.
SOCIAL POLICY OF SLOVAK REPUBLIC
According to the model of Modern social state, the social policy character of Slovakia could
be classified as transitive middle European type, focusing at maintaining employment and
development of economy, where the state represents a guarantee of minimal social network and a
partial employer.
Nowadays the social policy and the social welfare in Slovakia are implemented according to
the act § No. 461/2003 Coll. relating to social insurance legislation, defining social insurance, its
scope, legislation, organisation and state supervision upon administration and legal actions in social
insurance cases. This does not apply to Police Forces, National Security Authority, professional
military soldiers and emergency soldiers whose social welfare is modified according to specific
regulations. The act preserves established Social insurance and its administration. However, the act
has been amended several times enlarging the scope of social insurance for unemployment benefits
24
payments and pension insurance. The latter was divided into a 2nd pillar pension saving system and
a 3rd pillar old-age pension saving system. Social Insurance governs various types of social benefits
illustrated in Table 1.
Table no. 1. Types of social insurance
Type of insurance Reason for insurance

Sickness insurance: - Insurance in case of income loss or
reduction or providing income as a result of
temporary sick leave, pregnancy and
maternity leave.
Pension insurance: - Old age pension is an insurance
providing income at retirement age and in
case of death,
- Invalidity pension is an insurance in case
of reduction of capacity to perform gainful
activity due to a long term unfavorable
health condition and in the case of death
Accident insurance: - The benefit provided to a damaged
employee or death because of the work
accident, occupational disease.
Guarantee - The insurance in case of the employer ´s
insurance: insolvency
- The benefit is provided for the employee
to contribute to basic fund for pension
insurance
Unemployment - Insurance in case of losing job and
insurance: income resulting in unemployment and
therefore the unemployment benefit is
provided
Social Insurance revenues are mainly levies paid for social insurance, annuity assurance and
other benefits from national budget of the Slovak Republic. Other revenues are those coming from
the assets of social insurance as well as administrative funds. Increases of the revenues is due to
increasing minimum and maximum base of assessments, which serve as the bases for the
calculation of fund levies.
Table no. 2. Insurance funds revenues
Revenue in
billions Sk 2004 2005 2006 2007 2008
Revenues in
ordinary year 114,98 113,25 135,01 147,66 159,46
- for sickness
insurance 10,01 8,23 9,43 10,28 11,82
- for pension
insurance 68,59 58,76 74,72 80,30 83,36
- for invalidity
insurance 13,94 20,49 22,18 24,71 27,81
- for accident
insurance 2,48 2,87 3,07 3,42 3,79
- for
guarantee
insurance 0,54 0,85 1,04 1,45 1,55
- for
unemloyment
insurance 6,28 6,25 6,64 7,36 8,28
- for solidarity
reserve fund 7,13 15,38 17,47 19,59 22,16
- other
revenues and
revenues from
administration
funding 6,01 0,42 0,46 0,55 0,69
Social insurence expenses comprise of social insurance and annuity assurance benefits;
benefits for accident insurence and unemployments benefits. Administration funding has been
established for the financing all costs related to all activities of the Social Insurance Intitute. On the
25
basis of expenditures level it is clear that the highest expenditures are benefits for old age pension,
early old age pension and invalidity pension.
The amounts of incomes and expenditures are given in regular values without inflation. The
following table shows regular year expenditures of Social Insurance, without transferring incomes
from previous years.
Table no. 3. Expenses from insurance funds
Expenses in
billions Sk 2004 2005 2006 2007 2008
Expenses in
ordinary year 111,89 120,96 132,19 145,59 152,79
- basic fund
for sickness
insurance 4,76 4,74 5,32 6,03 7,42
- basic fund
for pension
insurance 71,87 89,13 98,16 107,49 115,68
- basic fund
for invalidity
insurance 27,95 20,16 21,80 24,65 20,86
- basic fund
for accident
insurance 0,49 0,71 0,93 1,07 1,09
- basic fund
for guarantee
insurence 0,09 0,70 0,73 0,93 1,01
- basic fund
for
unemloyment
insurence 3,99 2,47 1,93 1,80 1,99
-
administration
fund 2,74 3,05 3,32 3,62 4,74
Expenses paid for fund benefits went beyond the revenue limit only in the year 2005. In
other years the expenses are closely below the yearly limit of the revenues from the levies paid to
Social Insurance.
Comparison of revenues and experes of insurance funds
200
150
100
50
0
2004 2005 2006 2007 2008
expences mld. Sk  revenuesin year
Figure no. 2. Comparison of revenues and expenses of isurance funds.
INSURANCE PAYMENT
Base assessments for Insurance Levy relate to the amount going to insurance funds, not only
for the employee but also for the employer, relative to the gross wage of the employee.
In fact, not all the taxable revenues are base assessments, for example revenues from the
agreement concerning the job performance, jubilee benefit, in-work emergency fund payment,
severance pay, retirement benefit, social fund payments. On the other hand, profit sharing is
included in assessments even though they are not taxable.
26
Base assessments are limited from the “top“. Maximum possible base assessments are used
for sickness insurance and guarantee insurance nowadays amount to 1084,55€.
The highest possible base assessment for pension insurance, invalidity insurance and unemployment
insurance is the amount of 2892,12 €. There is no highest possible base of assessment set for an
accident insurance.
The employee pays from the base assessment together 9,4 % into sikness, pension,
invalidity and unemployment funds. The employer pays together 25,2 % into the same funds as the
employee, plus into a accumulated solidarity surplus, as well as guarantee and accident insurance.
A retired person (beneficiary of old age pension or early age pension) does not pay either invalidity
insurance or unemployment insurance)
A retired person (beneficiary of old age pension or early age pension) does not pay either
invalidity insurance or unemployment insurance. If the beneficiary of invalidity pension is not able
to perform 70% of his gainful activity, he does not pay the insurance of unemployment. These
levies are not even paid for him by the employer.
Not all the free lancers have the compulsory insurance. Only half of the people, registered
as free lancers in tax office, are obliged to pay insurance to Social Insurance. These payments
depends on the their revenue earned in the previous year.
Base assessments of freelancers is a half of the tax base levied in previous year (tax base =
gross incomes lowered by legitimate expenses), while the amount is divided by months of
entrepreneurship in previous year and could be lowered by life insurance payments.
Base assessments are limited from the “top“ the same way as with employees. The
freelancer pays from the base assessment together with 30,4 % for sickness, pension, invalidity
insurance and reserve fund. A retired entrepreneur does not pay invalidity insurance.
In contrast with the employees free lancers can have the lowest base assessment; nowadays it is a
set amount 319,58 €. The lowest possible amount is then 96,90 € per month. This means that this
amount has to be paid to Social Insurance every month also by the freelancer who had a higher
turnover but in total made a loss or reached a symbolic tax base; this also applies when he or she
pays the insurance as an employee.
The social insurance is not paid from profit shares, bonuses paid by the owners of
commercial companies, associations or members of statutory authorities as well as from the bonus
for a Member of Parliament who is not being vacated from his legislative role, capital revenues (e.g.
interests from deposits and loans), occasional revenues, (mandate contracts, contracts of artwork,
other not named contracts), rent incomes and royalties.
EXPECTED CHANGES IN SOCIAL WELLFARE
Canceling the system of insurance funds will be considered after carrying out levy bonus,
which will be paid by the citizens as the only solidarity levy. Compulsory system will stop being
meritorious and will become fully solidarity. Existing benefits from social insurance will be
replaced by a state social benefit set at the amount of minimum living wage. Special benefits will be
paid to mothers with small children (an alternative to existing maternity leave and parental
contribution) and invalids (an alternative to invalidity pension and other existing social
contributions provided)
Base of the assessment for levy bonus payment will be the same as the tax base of the
employee. In gross income of the employee all taxable revenues will be included. A gross income
of the employee will be increased by all the levies previously paid by the employer excluding
guarantee and accidental insurance. For example, if the employee earns gross 1000 € per month
after carrying out levy bonus he or she will have gross 1342 € per month.
The base for tax calculation and solidarity levy will represent new gross income including
an amount of levy bonus (state social contributions), which belongs to the employee and his family.
From this base, solidarity levy will be calculated with the rate 9%.
27
The employer will pay only guarantee insurance and accident insurance. At the same time a
loss of the premium rate is expected due to a fact that nowadays the social funds are highly
“profitable“.
The base assessment of the freelancer will be the same as the tax base. It means that it will
be an income lowered by legitimate expenses (levies will not be considered as legitimate tax
expenses). The amount of levy bonus will then be added (to state social benefits) and it will belong
to the freelancer and his family. The solidarity levy will be calculated with the rate 9% as for the
employees.
Concerning solidary levy calculation the base assessment will be limited. It can only go up
to 10 times the minimum wage. The highest possible base assessment will then be 1 851,90 € per
one month or 22 222,80 € per year. The highest possible amount for solidary levy that can be paid
by the citizen per year will be approximately 2.000 €.
If somebody has an income as an employee and as a freelancer at the same time, he or she
will pay solidarity levy only once from the total base assessments. The lowest possible base
assessments will not exist. The solidarity levy will be paid from all the revenues and all existing
exceptions will be cancelled. The solidarity levy will be paid from all taxable incomes; this includes
salaries of statutory authorities, bonuses of active partners, executive directors, from interests,
occasional incomes, rent incomes or royalties. Base assessment will include profit sharing paid to
personal entities.
CONCLUSION
Existing high insurance rates are excused because the system of the social insurance is
meritorious. In principal a following rule for calculation of benefits is used: the higher the levies the
higher benefits and vice versa. It means that if somebody pays the old age insurance from base
assessments of 2 892,12 €; when he or she retires only the amount of approximately 2 200 € will be
use in calculation. The system of social insurance consists of various funds but in reality it is only a
smokes screen – every year the money from the surplus funds go to deficit funds. Implementation
of the solidarity levy the role of existing social insurance will change a great deal. Solidarity levy
says in its name that the meritorious-ness will not be present any more. The rate of these levies will
be lowered by more than 50% in comparison to existing ones. In case of loss or no incomes, every
citizen older than 15 years will be entitled to receive social benefits. The system with the only levy
and simple rules will replace the existing complicated system of many funds and chaotic rates.
There would be a possibility for the citizens to insure themselves against inability to work or
loss of work with additional comercial insurance, voluntary sickness insurance and unemployment
insurance should be preserved. The basic social security will be guaranteed by the state social
benefit. Therefore the rates of voluntary insurance will be lower than the existing ones.
BIBLIOGRAPHY:
1. Korimová, G. – Jakab, K. 2009. Basic values of modern social state.

2. Korimová, G. 2007. Assumptions for social economy .
3. JUSKO, P Basics of social policy II. issue. Banská Bystrica: Univerzity of Matej Bel,
2002. p.112. ISBN: 80-8035-575-3
4. KREBS,V. a kol. Scial policy. Praha: CODEX Bohemia, 1997. p. 328. ISBN: 80-85963-
33-7
5. MACKOVÁ, Z. and col. Basics of social security law. Bratislava: Prosperity, 2001. p. 299.
ISBN: 80-968219-3-8
6. RIEVAJOVÁ, E. a kol. Social security. Bratislava: SPRINT – vfra Bratislava, 2006. ISBN:
80-89085-62-8
7. STANEK, V. a kol. Social policy. Bratislava: SPRINT – publishings, film and advertisment
agency, 2002. ISBN: 80-88848-92-X
28
8. ŠEBO, J. – ŠTRANGFELDOVÁ, J. Social security. Banská Bystrica: University of Matej

Bel, 2008. str.30. ISBN: 978-80-8083-642-9
Summary
This article we tried to discussed social welfare question in Slovak Republic in historical
context of social policy development by analyzing existing conditions of social welfare after
Slovakia. It brings a survey of basic terminology related to the topic: social policy and social
welfare and the principles applied to social welfare through social insurance. We deal with existing
high levies going to the national budget and other problems with social funds usage and fulfillment.
29
EUROPEAN DYNAMICS INFLUENCE ON WORLD CRISIS
Professor PhD. Cristian Valentin HAPENCIUC

expresedinte@gmail.com
PhD. Student Elizabeth Lorena TCACIUC
lorenacroitor@yahoo.com
Abstract:
Main aspect of the European economy is the one marked by the first stage of evolution of the global financial
crisis. The main current problem for both the EU and each member state is making the calculation and analysis of
complex issues arising from international economic crisis, towards identifying ways and tools useful for prevention or
mitigation. Reform of EU budget in 2008/2009 is a key element within the period of European construction and its
effects will be visible in the next financial perspective from 2014. Naturally, the return will not be uniform in all 27
Member States and will depend on financial and economic particularities of each country and meteorological factors.
However, the Commission believes that EU economic recession ended in the third quarter of 2009, largely due to the
exceptional measures for crisis imposed under the European economic recovery. Actual return will be more slowly,
given the size and strength of the recession. Overall EU unemployment rate is approaching 10% in 2010 - a rate lower
than anticipated - and the budget deficit is almost reaching 7.25% of GDP in 2010. Less optimistic news concerning -
among others - employment of working force will continue to decline by about 1% this year and will begin to rise than
in 2011. Consumption also has not completely recovered. Although increases least, inflation is under control, partly
due to wage stagnation.
Keywords: crisis, economy, evolution, economic depression, crisis aftermath, economic outlook
JEL Classification: G01
INTRODUCTION AND TOPICALITY OF THE THEME
Term crisis was discarded in recent years because of overuse. Medicine, economics,
psychology, sociology, diplomacy, international relations, etc.. each give different meanings of the
concept of "crisis."
The European economy is marked by the strong development of deep crisis and its effects
on a strong shock recession and its member countries. The global economic crisis hit countries like
Latvia, Hungary and Poland very much. Eastern Europe in recent years has been fuelled by large
loans from Western banks. Now the good old days are gone, loans are not granted, the debts
incurred shall be paid, and thus fill the crisis.
Analysts are beginning to talk of a two-speed Europe. In fast Europe, those who have gone
through the economic crisis with strong contractions, but moderate increases in deficit and
uncomfortable.
Daniel Tarullo, a U.S. Federal reserve governor, told the House subcommittee Congress that
the crisis in Europe was a "potentially serious obstacle." Tarullo said financial turmoil in the worst
possible case, but still unlikely - could lead to a resumption of freezing financial markets, witnessed
in 2008."
In the early nineties, no one would have suspected that strong Spain will be the locomotive
of the crisis. Equally strong effects were poured and attributes on Greece, Portugal and Ireland. It is
now possible that the whole Europe could contaminate by the "Greeks" crisis.
Greece is regarded as an unprecedented event for a country that is part of monetary union,
which is accused of falsifying their accounts. Greece's situation is not at this time, comparable to
that of Spaniards. Nobody doubts the reliability of the Spanish government accounts, but some
analysts have identified some common characteristics such as large public deficit, which raises fears
that markets have put in the same package and criminalize the financing of Spanish public debt.
Fears spread for a similar scenario as in Greece to Spain and Portugal, led to a decrease in
confidence over the euro area, which in recent months has lost about 20 percent of its value.
30
European countries and cultures seem to be too different to live under the same set of
economic policies. While none of the European countries want American-style capitalism, some
know better than others to manage their economic affairs in an orderly manner. Germany,
Netherlands and Scandinavian countries, in particular, seem to be very good for sound economic
management. Spain, Portugal, Italy and Greece fail to manage the smooth running of the economy,
while France is in the middle - more competent than its neighbours in the south, but less efficient
than the Germans.
In Germany, inflation is associated with the two great disasters of the twentieth century.
WWI Weimar inflation has led to devastating consequences poured on Germany, after World War
II German currency became similarly worthless, and generations have lost their savings, for the
Germans this event even today remains associated with the worst kind of irresponsibility and
disaster.
More investors need to understand that at least some countries of "PIGS" (Portugal, Italy,
Greece, Spain) may not be willing or able to provide services or to pay existing debt. The spreading
gap between the countries considered credit worthy offering that Germany and countries need credit
and will pay interest.
This is a political crisis for Europe, rather than a financial crisis, the only way "PIGS" have a
rescue plan involving the Nordic countries led by Germany and France. Especially Germans, do not
want to pay for some time because the Greeks were wrong and lied their way into the euro area, and
for years have pursued selfish political and economic interests. Therefore, it is not normal for
Germans that help the economy by paying up to 60 years, when the Greeks can retire at 55.
DEVELOPMENTS OF EUROPEAN ECONOMY
Studying the economic development of Spain looks like it is in a free fall in 2010, though
now in the final quarter feels GDP growth but growth will nevertheless remain negative, between -
0.1% and -1.1 %, "unless the Government will make structural reforms," predicted an economics
professor at ESADE, Francesc Xavier Mena in a press conference. Mena also believes that Spain
will not create jobs by 2013. Unemployment rates continue to rise in 2010, especially in the first
quarter and more than 20% at the end of the year, double the global average.
Spanish financial institutions, is facing "the most difficult year" and requires urgent merge,
which will lead to a reduction of 25% of existing companies. In these conditions will be placed in
the top rankings.
Greek economy for the first time in sixteen years is caught between recession and financial
meltdown. There were ineffective measures taken by government to tackle the crisis. In the first
quarter of 2009, they lost 70,000 jobs, and despite the 28 billion offered by banks, this liquidity has
not led to business support.
Finally, the government implemented measures only managed to make even deeper
recession, and worsen the financial crisis. Thus, growth this year will be negative the first time
since 1993 and a deficit of around 6% of GDP, against a target of 3.7% and public debt will exceed
60 billion euro, against a target of 42 billion. These results represent the failure of government to
strengthen public finances.
The crisis left deep scars on Italy, with Greece having the largest debts in the EU. It has a
debt of 1760 billion representing 117% of GDP.
The dramatic reduction of jobs is another effect of the crisis that feels very hard and leading
Italy to a place one immediately followed by Spain.
Second place in the high number of unemployed, Spain has many unemployed youth - 85%,
this imbalance is considered so serious that it calls for debate on the injustice between generations.
In Italy there is no question of that debate, perhaps because it is not growing. Unemployment in
Spain has followed a rapid avalanche leading to an increase of almost 20%, while the growth rate of
unemployment in Italy was about two points above the European average (8.6% respectively) and
less to the United States, which reach around 10%.
31
In 2008-2009 the number of employees decreased by 11.6% aged between 15 and 24 years,
fell 5.5% in the group age 25-34 years of older adults, working age has not experienced a recession
on the number of employees which has actually increased. This happens because adults are
employed for an indefinite period, and is very expensive to terminate such a contract regardless of
the economic period. And it is due to the fact that it has the oldest population worldwide, according
to CIA Yearbook, ranks third in the world (43.3 years), after Japan and Germany.
International crisis in recent years is primarily the so-called economic crisis of paper. In
many Western countries the crisis is also a crisis of "productive economy" and in this regard is very
significant that the last decade, estimates the International Monetary Fund over the period 2000 -
2010 in 183 countries around the world, Italy, Portugal, Germany and Japan, respectively, occupy
the fourth, seventh, eighth and ninth from the bottom, with a growth rate of 0.6 for Italy and 0.8 for
the other three countries.
German economy will grow by 3% in 2010, according to a review of the Bundesbank's
forecast, issued in circumstances where investors have pushed up financing costs for borrowing by
the government, under the new growth records.
Germany is seen as an isolated success story in the euro area, with its status as a "safe area"
reinforced after the negative estimates related to its surrounding countries and debt crisis that
affected Ireland and southern European countries.
The German government and its plan, is to reduce the budget deficit by 2013, from over 5%
to 3% of GDP and by 2016 is going to reduce budget spending by 10 billion euro per year, to give
an example to others countries in the euro area.
Germany is also struggling with a large number of unemployed that came mainly from the
production of cars. Following trials, the number of cars in 2009 fell by 750,000 to 4,700,000, while
in 2010 the number of cars has fallen by 4.53 million.
Portugal is facing a political crisis, is undergoing a debate regarding its budget. It recorded
in 2009, a budget deficit of 9.3% of GDP but in 2010 it proposed cutting the deficit to 4.6% of
GDP, in this case was forced to reduce costs and increase revenue by waiving the tax privileges and
tax exemptions.
Irish GDP fell at an annualized rate of nearly 5% in the second quarter, raising questions
about the ability of the authorities in Dublin to generate sufficient tax revenues to reduce budget
deficit. Ireland must pay over 4.5% more than Germany in order to borrow from the markets at
maturities of ten years. Ireland, Portugal and Greece together represent only about 6% of GDP in
the euro area, but the crisis in Greece in the spring showed the potential that even the small savings
we have to arouse panic overall.
Of the three, only Portugal's economy has advanced past quarter, although with an
annualized rate of only 1%. The rest of the block appears to be largely a strong position.
The region experienced an increase of almost 4% last quarter, although most economists expect a
significant weakening of growth in this quarter and next quarter.
Measures implemented to crisis:
- Increasing the retirement age
- Growth rate of VAT in Spain from 16 to 18% in Romania from 19 to 24% and in Portugal
from 17.5 to 20 (in 2011)
- Deficit reduction
- Carry out bold and deep structural reforms to ensure a return to growth and future
sustainability of public finances
- Choosing the workplace to use one type of contract and create an emergency social pact to
change the model of industrial relations, less centralized and closer to the company to lead to job
creation.
Greece took the additional steps:
1. To develop an enabling environment for private investment and entrepreneurship, a new
culture in the business-friendly state and the society away from suspicion and mistrust which
currently faces entrepreneurship and private initiative in Greece;
32
2. Promoting a competitive tax framework for businesses to set tax rates low and stable
levels of profits distributed in proportion to the countries of our region
3. Revival of private projects, foreign and domestic private investment and small and large
infrastructure restart;
4. Formation of a national project in Greece for a new way to develop economic openness,
based on value-added products and services, with objectives and a timetable and main lines of the
areas which Greece has or can achieve competitive advantage;
5. Effective use of EU funds (10-12 billion €), which is stagnant government bureaucracy;
6. Normalization of Greece access to international capital markets and development of the
liquidity situation on the Greek market;
7. Implement a comprehensive and bold plan for the use of large public assets, privatization,
lease, rental and long-term strategic partnerships with the private sector. Public property in Greece
is estimated at € 270 billion for use not only to reduce debt, but to strengthen growth prospects.
In his speech, Financial Secretary, Mr John Sachinidis, developed the Government's
economic policy program, which is based on three pillars:
A. Financial Aspect, the goal is to reduce the deficit to below 3% in 2014.
B. Opening of professions closed, eliminating 30 high barriers to entry and operation of
enterprises, structural changes in social security, changes in labour relations, creating
lasting and positive conditions for investment, a guide for policy interventions that will lead
to long term economic development.
C. The bank has already taken several measures to encourage healthy and strong capital base
of banks. New program to support credit growth, by providing guarantees for the banking
system worth 25 billion added to the programs already implemented in connection with the
creation of the Financial Stability Fund.
Conclusions:
European economic prospects are not very optimistic.
In Romania the economy relies on agriculture, leading to an increase in this sector over the
next two years, this will lead to a reduction in construction and trade sectors. Inflation in the coming
period will have a slightly downward trend.
Figure no. 1. Deficit developments in Romania
In Romania has been reduced the budget deficit (as shown in fig.nr.1), which means a lot for
the Romanian economy.
33
Figure no. 2. Public debt developments in Romania
External debt has grown during the installation crisis from 21.8 in 2009 to 27.4% of GDP in
2010 and is expected next year will grow by 2.9% (fig.nr.2), however Romania's public debt will
remain one of the lowest in the European Union.
18 16,1
16 13,3
12,7
14
11,7 11,1
12
9,3
10 7,8 8,3 2009
6,8 7,3
6 7 2010
8 6
5,9 5,3
5,1 5,1 2011
6 4,6
4
2
0
Romania Anglia Grecia Italia Spania Portugalia
Figure no. 3. Developments in the European Union deficit
To reduce the deficit in 2011, Spain's austerity budget provides a 16 percent reduction in
spending ministries and spending 7.9 percent of the state, outside the financial costs. It will also
increase the tax on high incomes.
Italy is the country that has the lowest budget deficit and has maintained such a trend.
Greece has proposed in 2011 to reduce the country's budget deficit to 7.0 percent of GDP, exceeded
the 7.6 percent target agreed in negotiations with the IMF and EU rescue.
Spain had the most dramatic reduction of budget deficit, given that in 2012 plan to reach
3%.
2010
10,6 8,5
Romania
8 Anglia
Grecia
Italia
20,09 Spania
12,1
Portugalia
10,6
Figure no. 4. Unemployment importance of most European Union countries
34
Spain has the most disturbing number of unemployed, and the saddest is that 2011 is not a
reduction in its forecast, more and more Romanian not returning home as jobs and the
unemployment queues for aid are increasingly large.
140
120 118,2
120 123,3 115
100 117 90
113 91
88 85
80 2009
2010
60 59 60 77
2011
49
40 31,3
50
20 21,8
27,4
0
Romania Anglia Grecia Italia Spania Portugalia
Figure no. 5. Evolution of public debt of the most important countries of the European Union
Greece expects the economy to contract by 2.6 percent next year after falling 4.0 percent in
2010, staying in a recession for the third consecutive year.
Evolution of GDP in the European Union Romanian GDP (-0.3%) did not follow the
European trend of recovery as it had very slight growth in the first quarter of 2010 (0.2%) over
fourth quarter 2009 - four times lower than U.S. rate economic recovery (0.8%).
Compared to the first quarter of 2009, Romania’s GDP contracted by 2.5%, compared with
0.3% in the EU-27.
In the first quarter of 2010 compared with the previous quarter, EU-27 GDP grew by 0.2% (in the
U.S. increased by 0.8%);
Also in the first quarter of 2010 compared with the first quarter of 2009, EU-27 GDP grew
by 0.3%;
Romania recorded a decline of 0.3% last quarter and compared to the first quarter of 2009
decreased by 2.5%.
Romanian industrial production arose three times faster (3.6%) than the European average.
CRISIS INFLUENCE ON THE DEVELOPMENT OF MILLENNIUM BANK IN ROMANIA
Millennium Bank, a member of Millennium BCP Group, was founded in Romania on

February 14, 2007 after receiving authorization for operation from the National Bank of Romania to
conduct the full range of banking activities and, in particular monetary and financial operations. The
Bank started its activity on Romanian market on October 11, 2007, simultaneous opening of 39
branches in Bucharest and in eight cities.
Currently, Millennium Bank has 74 units in Romania addressed to individuals and
companies through a wide range of products.
In Romania, the Bank conducted banking and financial services to individuals and legal
persons (internal and external customers), bank offering a wide range of services such as current
account transactions, opening of deposit, VISA card issuing, funds transfer, mortgage loans, cash
loans and other types of loans, financial leasing, operations and other documentation.
Millennium BCP Group was founded in 1985 and operates in Portugal (the home), Poland,
Greece, Romania, Switzerland, Mozambique and Angola.
At the opening conference in Romania in 2007 Jose Toscano said:
- The initial investment is 40 million and strategy development will be another 300 million to be
invested by 2011
-Number of branches will reach 100 by the end of 2009
35
- Assume a total loss of 140 million (-29 million euro in 2007, in 2008 - 45 million euro, from 2009
to 41 million euro and in 2010 to 25 million euro loss).
- In 2011 the banking business will pass the 1 million euro profit and in 2012 will have a profit of
27 million.
Banking activity has developed greatly during the period 2008-2010 and in this period the
Bank has intensified its work and earns more and more customers. Unlike other bank, it has
continued to credit the people and companies to layer-up to the present crisis. Loans grew from
month to month and could be even higher if the 2009 would not have taken the decision to waive
the financing personal loans with a higher risk. Granting this type of loan is best asked of the
population and would have a greater volume of loans.
Figure no. 6. Evolution of monthly average volume of loans in 2008-2010 (in thousand RON)
To calculate the monthly average volume of loans sold together each month and divided by
the number of months. The monthly average has doubled in 2010 compared to 2008 this was due to
the fact that it invested in media campaigns and brand promotion. Loan products offers were all
reinvented and improved, and a great advantage in the placement of amounts is due also to trained
and qualified personnel in various courses. The confidence gained by the bank during this period
was demonstrated by the amounts drawn-saving, no one leaves his only savings but where it has full
confidence. The amounts raised have led to an increase in customer base and popularity.
Figure no. 7. Evolution of monthly average volume of attracted sources in 2008-2010 (in
thousand RON)
Attracting resources is due to the fact that the bank charged an attractive interest rate, the
evolution over the years has increased almost three times compared with 2008, and such amounts
have been placed in funds raised. Millennium Bank's position has strengthened and increased in a
time of crisis because it is part of a strong group with good management.
36
In the period studied Millennium Bank has received the following stories:
Products and services were very well received by both the public and by specialists in
economics and finance. To this end, ATMs and ATMs Safe Deposit have been awarded at the
Awards granted by the Financial Market in the category "Banking Product of the Year", and "Best
Self-Banking solution on the market in Romania." Furthermore, in communication, Millennium
Bank has received two Effie Awards - Gold for the campaign "Inspired Living" category "New
Product” or "Service Introduction" and Bronze for the campaign to retail, "Rings" category
Financial Loans. Project “Millennium Christmas Tree" developed in the winter of 2007, won the
IAA for "the most grandiose event of the year."
After only nine months of operation on the local market, Millennium Bank ranks among the
top nine banking brand recognition indicator than assisted. Millennium Bank has assisted
recognition of 71% and 17% spontaneous awareness, according to market research conducted by
Daedalus Consulting / Millward Brown for Millennium Bank.
The crisis has confused the work and proposed plans at the opening:
- Expansion planned was reduced to 74 branches to be programmed as 100, it was decided to stop
extending on the period of crisis;
- In 2009, the Bank withdrew funding personal loans;
- Number of employees reached 700, although was expected to reach 850;
- The corporate team was reduced because the corporate lending segment was greatly reduced;
- They retreated the cars for branches;
- Set a budget for phones used by employees;
- Was chosen to supply the branch ATMs are forgoing the specialist company;
- Training courses have been made only to directors that they will take them to subordinates.
CONCLUSIONS
Millennium Bank during the crisis has gained notoriety and numerous reviews by products
tailored to customer needs, continuously placing on the podium and compete with the strongest. I
believe that its results would have been much better if the safety would not be abandoned personal
loans that are in high demand and getting the most profit. You can offer under more restrictive
rules, but still have the product on the shelf.
The decision to open branches without cashier and fewer employees I think that was another
idea that has not enjoyed much success. Firstly I think that no customer is happy to receive advice
and gain confidence in a particular employee and then be sent to raise money to pay rates to another
branch. Secondly, I think it is just not likely when a customer has to make a payment and send him
to another branch. Bank management also understood this and in 2009 invested in making these
types of branches in the branch for full time. They spent a lot of money and manpower to
immobilize when the branches were closed.
I consider that the decision of corporate withdrawal and reduction of credits team in this
segment was wrong. Even if large companies were most affected by the financial crisis, they are the
largest in banking and where banks refuse to help then it is clear that they do not like to go further.
But this year they revised their work and began again to give importance to this segment. The
measures they have taken have not affected employees regarding their wages, and it has to be a
silence in this regard. Throughout this period the bank's management has invested in quality
advertising and competitive products and made sure that its employees are being trained.
Appearance of the bank, both inside and outside looks elegant and attractive, differs very much
from its competition. I believe that this bank is successful because it increased its market share,
asset value and reputation in a time of crisis.
37
BIBLIOGRAPHY:
1. Armeanu, Stefan Daniel ; Stancu, Ion, cond. st.. Evaluarea riscului activitatii financiare
cu aplicatii pe economia romaneasca. Bucuresti : A.S.E., 2005,cota 368.006 5 ARM,
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38
THE EFFECTS OF TRANSITION FROM A TECHNICAL DIVISION OF LABOR TO A
COGNITIVE INTERNATIONAL SPECIALIZATION
Professor PhD. Ion IGNAT
ignation@uaic.ro
Lecturer PhD. Liviu-George MAHA
mlg@uaic.ro
Abstract:
The evolution towards an informational society implied mutations in the competitive advantages of countries
of the world, being advantaged those who produce goods with a high content of creativity, those who manage to fit in
the modern patterns of international specialization and disadvantaged those who remain in traditional types. In the
context of the increasing complexity of economy, the productive activity is oriented more and more to combining the
specialized skills, requires strategies for the companies to rapidly acquire skills through a process of transforming
information into knowledge. As a consequence, the very principle of division of labor will be renewed. It will transform
from a technical and efficiency based sense to one based on competence and knowledge.
Keywords: specialization, technology, cognitive, globalization, trade patterns
JEL Classification: F10, F11, F16
INTRODUCTION
In the last two decades of the XXth century and the first decade of the XXIth century in the
world economy have emerged new economic and technical patterns which led to a evolution toward
a society based on the use of technologies based on microelectronics, informatics, biotechnologies,
new materials, Internet and other modern means of communication, a primarily informational
society. The impact of the new technologies is, also, reflected in shifts in competitive advantages of
countries of the world, being advantaged those producing goods with a high content of creativity. It
raises new theoretical and practical questions about the optimal recovery of production factors,
about the international specialization.
The benefits of the international trade are not limited to international trade. Advantages or
disadvantages arise as a result of flows of capital and labor, the last representing the trade with
present goods to produce future goods. International trade with assets (equity or debt securities)
enables each countries wealth diversification. Although, in general, all countries can gain from
international economic flows, not all can benefit, because of the redistribution of income. Usually,
there are advantaged the countries which manage to fit into the modern patterns of international
specialization and there are disadvantaged those remaining in traditional ones.
RESULTS AND DISCUSSIONS
The very deep changes in global economics have occurred as a result of the process of
renewal and modernizing of the economic structures in highly developed countries. The decisive
moments in the acceleration of this process were "the Californian revolution of the microprocessor"
and genetic engineering. These two represent, in the opinion of M. Richonnier, "the most
spectacular component of a new technological revolution, announcing a third industrial revolution
by itself' [4, p. 22]. The new industrial revolution has determined the restructuring of all production
and consumption methods and has given birth to "the informational society, in which science,
technology, educational and research staff play the key role" [4, p. 15].
The structural changes that have taken place in highly developed countries (USA, Japan,
Western European countries) in the context of this revolution have had direct repercussions on the
ways of participation to global labor division through such effects as: the increasingly extensive
implementation of organological specialization models, the renewal and variation of inter and intra-
disciplinary specialization topics, the appearance of a new stage in global labor division based on
technological specialization, etc.
The first effect derives from the fact that the structuring of production in a vertical way, on
stages of the production process and on components of complex products, favors the involvement in
the global labor division through specializations of an organological type. These are concerned with
the typical components of products which were redesigned according to a modular concept. The
standardizing and stylization of composing modules are designed in such a way as to allow the
combination of the advantages of their production on a large scale based on automatization and
robotization with the benefits of the variation of the range of end products obtained through their
assembling.
The renewal and diversifying of international specialization topics is due both to the
redesigning of the technologies and production concept of traditional products and to the emergence
of new activities and products. While certain industrial products which have become traditional
continue to represent the object of international specialization of developed countries, they are
obtained in an ever-growing proportion by the use of the new technologies that are specific to the
third industrial revolution. The new technologies contribute to the revival of the steel industry, of
the chemical industry, of electrical and telecommunications devices, of automobile production, etc.
Nevertheless, within the new structures of international specialization of highly developed
countries, the role of propulsion factor of foreign economic exchange, which has been played by the
steel, automobile and chemical industries until recently, tends to be taken over by the new activities
in the top fields. Out of the new activities, the largest amplitude and implications pertain to
information technology, which has become a real industry in the center of which lies the electronic
computer, as a "prototype of new products". Information technology, through the introduction of
the microprocessor, has given a powerful impulse to telecommunications, air and space industry,
electronics and microelectronics industries, to flexible systems production, to biotechnology, to
semiconductors and new materials industries. In their turn, aeronautics and space ships industry
have stimulated the production of new materials. These are obtained through the combination
between some crystals of a certain metal in pure state (boron, etc.) and organic substances (plastic)
or inorganic substances (silicone, glass, etc.). They are several times more resistant and lighter than
usual metals (iron, aluminium, etc.) and are produced at lower costs. Referring to the importance of
new materials, the director of the American design department of Air Force's Space declared that
"the only huge progress of the past 300 years is the discovery of new space materials" [1, p. 31].
One of the consequences of the new materials and technologies is miniaturization, which is
being practiced on an increasingly large scale not only by the USA and Japan, but also by the
recently industrialized countries in South-Eastern Asia. According to P. Drucker, miniaturization
determines a certain "decoupling" of the production of manufactured goods from the production of
raw materials. This favors the modern ways of industrial specialization against traditional multifold
models such as extraction-processing.
Among other consequences determined by the evolution of the new technologies, several
are worth mentioning here: the acceleration of the spread of information technologies, the
compression of the economic environment, the technical and geographical restructuring of
productive processes, the development of inter-company relations of a partnership type (involving
various cooperative agreements and strategic alliances at the international level), the redefining of
the ways in which the countries of the world insure their economic growth and development (rather
associated with the new technologies than with the natural and energetic resources, production
becoming more and more intensive in professional competences, etc.).
These trigger essential changes in the principle of labor division, both at the company level
and at the inter-company one. In the course of the expansion of information and knowledge
technologies, we witness a de-multiplication of the capacity of transmission and processing of
knowledge and information, as well as a process of specialization in these fields. Along the increase
of the complexity of economic life, the productive activities are increasingly oriented towards the
combination of specialized competencies. The rapid wearing off that competencies arc subjected to
40
because of the acceleration of technical changes imposes on companies the elaboration of strategies
for creating favorable circumstances for quick assimilation of competencies, through a process of
transformation of information into knowledge. As a consequence of these changes at the company
level, the principle of labor division itself will be renewed. It will evolve from a logical foundation
based on technical skills and efficiency to one based on competence and knowledge. Thus, there
will be a change from a technical or "taylorian" labor division to a cognitive labor division. The
separation of the production activity will be increasingly based on segmentation in blocks of
homogeneous scientific knowledge. This knowledge will be subjected to continuous and motivated
evolutionary dynamics for the activity of research and transformation of information into new
knowledge governed by a restrictive community of specialists.
This new manner of separating economic activity according to the criterion of scientific
competencies and knowledge is part of a logic for creating specific resources needed for use in a
dynamic perspective, and not so much in the one of simple combination of production factors which
is specific to the technical labor division. This change, although very unequal among different
countries and economic sectors, will have determining effects on the regional and international
localization of economic activity, including the economic relations among companies. Therefore,
the determining factors of the international localization of activities envisaged by the cognitive
labor division, will evolve from a logic based on comparative costs to a logic of the capacity for
creating specific resources, or from a logic of combining generic factors to a logic of creating
specific resources on a regional scale (meaning the subdivision of a country) or on an international
scale. Any segment of the economic processes in sectors focused intensively on qualified labor and
on scientific knowledge will only be located in regions whose benefits are not limited to the
availability of generic factors (abundant and often poorly qualified workforce, natural resources),
but are able to master the scientific training imposed by the new kind of labor division. (Generic
factors are those which can be extended from one activity to another, while specific factors are
those related to scientific knowledge which are more difficult to spread outside the frame of these
scientific knowledge conglomerates and more easy to spread inside them.)
Taking into account the lack of uniformity in spreading these new labor division patterns,
there emerges the hypothesis that labor intensive sectors that are organized according to the
taylorian labor division principle could now find their place in the process of regional integration,
which will also cover countries that arc in the course of development, rather than in the process of
globalization based on specific research and competencies. In other words, we may witness the
coexistence of two types of capital and trade flow, each having its different nature [2, p.8]:
a.) "globalized" flows among the highly developed countries of the Triad (USA, The
European Union, Japan) and the newly industrialized countries of S-E Asia, which master elements
of monopoly over specific competencies; these flows are largely related to the internal exchanges
within the Triad;
b.) "regionalized" flows among the countries which belong to the same regional area, with
the possibility of extension to less developed countries, but which are endowed with different
resources; the integrated areas may represent privileged locations for actions of international states
and institutions with the purpose of favoring structural convergence of the member states (industrial
and technological policies, financial transfers, investments in sectors that create foreign exchange,
etc.), this kind of actions being able to favor the integration of less developed countries.
Over the last decades, international specialization has developed within a context of ever
increasing standardization of products, of targeting economies of scale, of configuring a relatively
homogeneous demand and in an environment characterized by the capacity of companies to
anticipate the quantitative variations of demand. On the other hand, in a more and more insecure
environment, companies have had to cope with a dynamic flexibility, imposed by the changes in
demand. Because of this fact, some important resources have been directed towards the field of
information technology. This determining factor of international specialization is of a different
nature than the factors which earlier facilitated economic exchanges among countries. The spread of
41
technologies which involve these flexible processes has had two important effects capable of
influencing the dynamics of comparative benefits:
a.) a classical effect of technical progress - in terms of substitution of labor by capital,
which entailed a decrease in work intensity of productive processes and, through this, of the relative
importance of salary expenses in the manufacturing industry;
b.) a specific effect related to the new information technologies - which made it possible to
obtain different products at the same time, or at least to obtain large varieties of the same product,
without involving high capital expenses.
This has resulted in a change of the principle of labor division in production units, implying
its evolution from a logical foundation based on technical skills and efficiency to one based on
competence and scientific knowledge. The increasing role of information and scientific knowledge
in the economic activity has determined a growth of the importance of production based on
homogeneous competencies and sets of knowledge, which resulted in a functional reconstruction of
productive processes. A selection of the relations among companies took place. Vertically
structured integration, sub-contractual agreements and market relations are replaced by long term
contracts or strategic alliances. These alliances will be organized within a coordinated network.
From now on, the criterion of activity location will move from a motivational logic of benefits
resulting from comparative costs to a logic of access to specific factors (qualified workforce,
positive foreign relations, etc.)
The effects of the technical changes favor the new specialization patterns; the criterion is not
anymore simply restricted to cost minimizing. Companies will take into account more and more the
access to specific factors which suppose the mastering of the necessary amount of scientific
knowledge. This is the reason why countries whose only advantages are the availability of abundant
and cheap workforce or of natural resources do not look attractive for the operations of dislocation
performed by multinational companies. Dislocations continue to take place, but their determining
factors take into account more and more the criteria of positive foreign relations, of quality, of
competence and of costs.
Moreover, the innovations of products which are necessary for intennediary consumption
(new materials) generally favor exchange among highly developed countries and strengthen the
positions of international specializations within the same field at the level of intennediary products.
Thus, recent progress in the field of biotechnology already has repercussions over international
trade in agricultural raw materials and first-line processed materials, among highly developed and
poorly developed countries. New biotechnologies which appeared in the 70's and were spread in the
80's stand for a gcneric technology which influences numerous sectors of the economy in general
and the agricultural and food industry in particular. The high level of the expenses for research and
development and the availability of highly qualified staff transfonn biotechnology into a field which
is reserved for the most advanced highly developed countries. These new products that are already
on the market are often substitutes for natural raw materials.
Multinational companies, which represent the key elements of the sector based and
geographical orientation of international exchange of merchandise and capital, aim at the
exploitation of specific competencies rather than at the simple mix of generic factors.
The spread of the new production management patterns and of the new information
technologies, which we have interpreted as a manifestation of the change of the labor division
principle towards a logical foundation of competencies and scientific knowledge, is accompanied
by phenomena of recovery of comparative advantages which used to be obtained by less developed
countries, by the developed countries, in sectors considered traditional from the point of view of the
neo-factorial theories of international exchange.
The reduction of the specialization of the developed countries in such sectors should be
irreversible and, moreover, it should lead to a wide transfer towards less developed countries, which
are able to provide a large amount of work force. However, the recovery of the comparative
advantages in these sectors by the developed countries triggers an international reconstitution of
42
productive processes, of international and sectorial specialization types and of the economic
activities relocation operations.
Thus, the limitation of certain raw materials or any other production factors becomes
relative. These substitution effects will mainly affect the mineral or agricultural raw materials
exports from less developed countries towards developed countries; therefore, a long term
specialization in scientific competencies can be followed by changes in the products specialization
(the erosion of the natural advantages of the less developed countries).
The product life cycle theory (Vernon - 1966, Krugman - 1978, Flam and Helpman - 1987)
does not explain this paradox of the return of the advantages, on the same product, to the innovative
country. We can exemplify here with the recovery of the comparative advantage of Switzerland, in
the field of horology, back in the ‘90s of the previous century, after intense erosion, a decade
before, which occurred as a consequence of the new industrialized countries in South-Eastern Asia.
The revival of the so-called traditional or work-intensive industries demonstrate this transformation:
a country which possesses specific resources which enable the manufacture of a group of products
has a long term advantage. The reversibility of the specialization also occurs at the product level.
The countries which possess specific competencies (innovation, human resources, positive foreign
relations) can recover the once lost advantages in favor of less developed countries, which limited
themselves to imitating these products. Although the above-mentioned theory presupposes a
permanent loss of the innovative country's advantage over the imitated and delocalized product, the
latest transformations demonstrate that the same country may as well recover the advantage over
the product in question. It will introduce two types of innovation which will allow the recovery of
advantage over the new types of the original product: procedure innovation and product innovation.
The source of these innovations is the absolute advantage the country has in terms of research-
development activities and cognitive resources.
CONCLUSIONS
This analysis of internationalization on the basis of specific competencies is mostly verified

through the polarization-concentration of goods and direct foreign investment exchange between
and within the Triad's development poles. The marginalization of the countries endowed with
"natural resources” (work force and primary resources) is expressed by their being increasingly
excluded from the international alliances and agreements regarding technology. At the same time,
the changes in the orientation and the determiners of direct international investments at the
beginning of the 90’s of the previous century, confirm the recoil of the logic of the international
segmentation of the production processes, based on the exploitation of the advantages related to the
comparative costs for the developing countries. As an effect, we witness an intense and rapid
growth of direct foreign investments in the last two decades; however, this faces a double
reorientation- geographical and sectorial- and a triple change- in terms of nature, determiners, and
its forms. Geographically speaking, the developed countries are not only the main direct foreign
investors, but they are also the main receivers. Countless studies demonstrate that the developed
countries have been operating 95% of direct foreign investments since the mid-'80s of the previous
century, and have been receiving over 80% back. This polarization of direct investments between
developed countries is followed by the increase of the direct foreign investments, crossing at the
intra-industrial level; as far as sectors are concerned, the contribution of direct foreign investments
in primary sectors decreases in favor of the manufacturing industry and, more importantly, in favor
of services, which represent over 40% of total investments, in contrast with 25% at the beginning of
the 70’s of the previous century; while the nature of direct foreign investments, by the end of the
70%, used to be of the vertical integration type, at present, most of these investments are horizontal;
some mutations, in terms of main determiners of direct foreign investments, correspond to all these
changes, which took place in the complex context of geographical and sectorial orientation. A
dramatic decrease of the traditional determiner's role, regarding the factorial endowment, can be
noticed. Countless studies emphasize the great importance of technological advantages in the
43
attempt to attract direct foreign investments; as far as the means or types of direct foreign
investments are concerned, we witness an increase in the direct intermediary forms (join venture
agreements, strategic alliances, mergers, acquisitions), at the disadvantage of the creation of
majority subsidiaries. Thus, in the context of these fluxes, the acquisitions increased from 67%, at
the beginning of the 80’s of the previous century, to 80%, at present.
The activity sectors are not so intensely involved in the international segmentation of work
based on specific competencies. While the scientific knowledge intensive sectors are much more
globalized, the less intensive ones may find their own place, cither on a short or on a long term (as
long as this inequality will last), in the context of some regionalized fluxes. The developing
countries (Mexico in NAFTA) may find a means of international insertion on the basis of
comparative advantages. The favorable context created by regional integration may stimulate this
process.
While globalization, determined by the activity of great multinational companies, can
trigger a process of exclusion of the "naturally endowed" countries from the international fluxes,
regionalization creates, at least on a short or medium term, the favorable conditions of a more active
participation, on behalf of developing countries, in the global economic context.
REFERENCES
1. Cocora, E., Globalizare şi management, Ed. Feed Back, 2007, Iaşi

2. Drucker, P., The Age of Discontinuity, Harper and Raw Publishers, New York
3. Payne, R., J., Global Issues. Politics, economics, culture, Ed. Pearson Longman, 2007
4. Richonnier, M., Les metamorphoses de l’Europe de 1969 à 2000, Ed. Flammarion, Paris,
1985
5. ***, Region et developpement 1995. 2 Globalization et integration regionale, Ed.
Harmattan, 1996
6. ***, Structures industrielles et mondialisation, Revuie Innovations Nr. 5, Ed. L'Harmattan,
Paris, 1997.
44
TRANSNATIONAL COMPANIES AND FOREIGN DIRECT INVESTMENTS
Professor Ph.D.Maria MUREŞAN

mar_muresan@yahoo.com
Abstract:
Foreign direct investments (FDI), especially those of transnational companies, take shape through the transfer
of modern technology including machinery and fixtures, precise technical documentation and know-how flows
(technical and managerial assistance) as well as creating new work places. All this make the direct foreign investments
an advantage for both the investing countries and host countries. For the investing countries the advantages materialize
first through the use of cheap technological and human resources and by providing a market for the products in the
host countries. Meanwhile the countries receiving foreign direct investments are ensured full and effective use of
available inputs and the creation of favourable conditions towards the development of their productive capacity for
export and last but not least, to achieve the goal of reducing unemployment by creating new work places.
Key words: transnational corporations, foreign direct investment, capitalization, mother-corporation, host
country
JEL Classification: F2, G1
1. INTRODUCTION
One of the biggest pressure forces that country development and international trade unions
face is the power and influence of the transnational corporations (TNC) as part of their response to
globalization.
Transnationality is a world economy phenomenon that manifested itself strongly in the XX
century and enjoyed a rapid expansion in the early XXI century. Economic agents that have a
decisive role in this process are the transnational corporations. At the end of the twentieth century,
the total of TNC exceeded 60,000 throughout the world with over 800,000 subsidiaries outside the
country of origin.
In the '80, TNC action is characterized by increased regional integration (especially in
Europe), and the investment climate relaxation in terms of legislation. The mid 80s give TNC a new
dimension with the advent of new technologies for processing and transmitting information and
local requirements development in terms of integration into local economic systems while giving
particular value to the governments’ involvement.
2. THE EMERGENCE AND DEVELOPMENT OF TRANSNATIONAL

COMPANIES
The emergence and development of transnational companies is not only due to the industry.
Such companies have expanded in many other sectors: banking, insurance, tourism, advertising, etc.
Particularly intense has become the international activity of large commercial firms that open
branches in more and more countries such as Metro Holding (Switzerland) - the largest wholesale
company in the world, Sears Roebuck (U.S.) - the largest sales company by mail. In advertising, the
most powerful transnational firms are those from the United Kingdom (Saatchi and Saatchi Co.)
and Japan (Dentsu). Japanese companies are particularly strong in banking. In 1995 in the top 10
banks in the world, six were Japanese, including the Industrial Bank of Japan, Sanwa and
Mitsubishi Bank. In life insurance the world leader in the same year was ING Group (Netherlands).
Among the TNC leaders there are some that should be mentioned such as General Electric - for
years at the top of the rankings – the U.S. oil giant Exxon, the Anglo-Dutch Royal-Dutch Shell,
Ford to which U.S nationality is conferred, Toyota with Japan paternity - to call the first five of the
world's industrial hierarchy.
45
The size increase of transnational companies usually happens in the following ways:
international integration horizontally or vertically and international conglomeration. The
international integration on the horizontal is a characteristic of some companies such as General
Motors, Ford, Toyota, General Electric, etc.. Firm size increases by merging or absorbing national
or international firms acting in the same branch. Through such integration, the size and financial
strength of the company increases without leaving the basic branch. American company General
Motors has grown as a TNC by acquiring the companies Adam Opel in Germany and Vauxhall in
Britain and by building assembly companies in various countries. By contrast, General Electric has
expanded across the border through increasing participation in societies such as Bull (France), AEG
(Germany), Olivetti (Italy) - all related to electronics. International integration on the vertical means
increasing the size of the company through the acquisition or construction of companies in other
countries, located in the "downstream" or "upstream" in relation to the mother-society activities.
Exxon (former Standard), initially focused on oil refining business then turned its attention to the
acquisition of crude oil supplies and to establishing oil exploitation companies as well as to
developing its own distribution network across the globe . The pattern of the vertical integration is a
characteristic usually of the companies active in primary products, the diversification of production
characterizing both forms of integration.
Growing by international conglomeration is especially characteristic to American
companies, representing the "union" of companies from different countries, whose activities are
mostly technological unrelated. In most cases the absorption is caused by purely financial reasons.
The most convincing example is provided by International Telegraph and Telephone (ITT), the
number one U.S. conglomerate which makes over 50% of its profit abroad. The forming method of
the transnational corporations is the capital investment in other states economies. These direct
capital investments in other countries may take the form of the acquisition of the control shares, the
rising of a foreign subsidiary, the acquisition of businesses or building new ones. Most American
and Japanese transnational corporations investments abroad are carried out in this way.
Although TNC are companies characterized by a high level of production and capital
concentration once established, they do not automatically turn into monopolies. For a company to
become a transnational monopoly it is necessary that from the mother-society - foreign subsidiaries,
at least two units located in different countries to hold "key" position in a given field. A good
example is the International Business Machines company which is a transnational monopoly that
dominates not only the U.S. market, but also the entire computer global market. A monopoly is the
Anglo-Dutch company Unilever, but only in the margarine industry where it holds the largest share
in world production and Nestle in the production of concentrates of soluble coffee. During its
existence Nestle has focused on production, marketing and wholesale distribution of its products,
avoiding vertical expansion - sales in supermarkets for example. To maintain control over all of
this, headquarter managers handle all company acquisitions and decisions concerning the issue of
new products of whose research is made by the units in Switzerland. Decisions are made based on
groups of products, such as the chocolate group, the confectionery group, etc. In order to operate
efficiently each geographical group must obtain positive financial results. Actually Nestle is trying
to focus all revenues towards the centre in Switzerland, and there it will be decided in what
currency will the revenues be processed and in which country will they be transferred.
An important component of the development of transnational corporations is the products
structure of the international trade which changes from one period to another. In the late '90s, the
most significant international market segments, taking into account the developments in the value
of product exports were in this order, vehicles, crude oil, petroleum products, airplanes, computers,
telecommunications equipment, etc. After the war, the diversification of world trade has increased.
At short intervals there were created new markets (computers, microprocessor, etc.) and currently
we are witnessing the expansion of international markets of the industrial robots. The history of
modern world trade demonstrates that constantly the first place on global market has been held by
an industrialized nation. At the beginning of the 20th Century the supremacy was held by England
46
which has played a long time the role of the industrial workshop of the capitalist world.
Subsequently this place went to the U.S.
International trade does not have the same role for all the industrialized countries. In some,
especially those smaller in population and in territory, the share of exports in GDP is high: 63% in
Ireland, 69% in Belgium, 89% in Luxembourg in 2007. At the other extreme lie the bigger
countries with large domestic resources with a large domestic market, where this proportion is
lower: 11% U.S., 18% in Australia in 2007. In the case of former socialist countries, reality has
shown that in a production economy the role of international trade is a minor one.
3. THE GEOGRAPHICAL SPREAD OF TRANSNATIONAL COMPANIES (TNC)

IN THE CONTEXT OF GLOBALIZATION
At the beginning of the XXI century transnationality in the world economy has specific
characteristics, reflecting on the one hand the degree of participation of different countries to
globalization as well as the opportunities or lack of, specific to these economies (Tanasie, 2002).
Thus we can highlight some features and the geographical distribution of the TNC:
The TNC’s economic power and their degree of trans-nationality are different. The
economic power measurement is usually done according with the volume of assets, while the trans-
nationality depends on an index whose measurement is based on three indicators:
 foreign assets related to total assets;
 foreign sales related to total sales;
 labour force used abroad related to total labour force.
By analyzing the 100 biggest TNC in the world it is noticed that most of them come from
developed countries, except for a single company from countries like Hong Kong, Mexico and
Venezuela. Thus the economic power was held in 2002 at a rate of 91.7% by the world's three
economic poles - U.S. 33.3%, EU 43% and Japan 15.4%. These percentages have changed in recent
years in favour of small states and Japan. After the transnationality term (different than the term
foreign assets) the 10 largest TNC in the world in 2009 were grouped in the following countries:
four Swiss, two Canadian, one British, one Dutch, one Anglo-Dutch and one Swedish. The
presence of small states in this ranking must be seen through the fact that these countries have the
size of the domestic market comparably with the U.S. or Japan ones.
The trans-nationalization process takes place in developing countries, but at a smaller scale
compared to developed countries, highlighting the growth of foreign assets and sales.
Research on the 50 largest TNSs from developing countries shows that they are smaller than
their competitors from developed countries, thus the average of foreign assets from small states in
this ranking has risen from $ 1.5 billion in 2009 to 1.9 billion dollars in 2007 but well below the $
15.2 billion average of the 100 STN. The states considered small that are present in the 100 TNC
group are: Hong Kong (10), Venezuela (1), Mexico (3), Malaysia (4), Republic of Korea (9),
Singapore (8) South Africa (4) Brazil (4), Taiwan (2), Chile (2), the Philippines, Argentina and
India each having one. For these countries, the share in the total of foreign assets is divided as
72.1% in South East Asia, East and South, 21.9% in Latin America and nearly 6% in Africa.
TNC’s foreign assets exceed with almost 500 billion dollars the total GDP of the 49 low-
income economies (GNP per capita of $ 765 and below this value) taken together, including China
and India, having together a population of over 3.1 billion inhabitants. Their sales abroad totals
2.0453 billion U.S. dollars and are 1.8 times higher than the exports of 107 countries with low and
average income per capita put together ($ 1,138,800,000,000).
4. THE METHODS OF THE TRANSNATIONAL COMPANIES’ IMPLANTATION

(TNC) IN THE WORLD ARENA
The new European architecture led the transnational companies, especially American ones,
to increase their investments in the member countries of the European Union. Upon the formation
47
of the European Union, American capital was present in Western Europe since the early years after
the war which represented a solid starting point for future activities. The international role of the
dollar was one factor that facilitated the movement of the American capital. The dollar’s
overvaluation policy, many years in a row on the European financial markets, has created very
favourable conditions for the STN, the purchasing power of each dollar invested in Europe
becoming superior compared to the situation in the U.S. In EU countries the implementation of
American corporations is massive in the top departments where they can exploit their technological
advance best: electronic, optical industry, precision mechanics and it is very low in sectors where
the future is uncertain as steel, the extraction of coal, textiles, etc. In the 'interesting' sectors the
created subsidiaries belong 100% to the American capital. In this category companies such as IBM,
Xerox, Polaroid, etc. are included. There are sectors that traditionally belong to Western European
companies and that have been particularly profitable, and are magnets for American capital:
perfumery, photographic materials, pharmaceuticals. In those areas where French companies
occupy a strong position, many of them are bought by American companies: Coty SA is controlled
by Pfizer, Caron by Robbins Comp., Balmain by Revlon. In the pharmaceutical industry an
example is the Abbott Laboratories which are over 110 years old.
There are cases where American companies heavily implanted 30-40 years ago in certain
domains (oil, automotive, chemicals) attempt to withdraw or to limit their work, by focusing all
investments on highly specialised products. If Europe is an area invaded by the American TNC, the
U.S. economy is also a magnet for Western European companies and especially the Japanese. The
U.S. market advantages are multiple: ultramodern infrastructure, relatively low prices of raw
materials and energy, efficacy of the communication systems, electronic information processing, all
of this in addition to a high purchasing power. The U.S. market is most attractive for foreign capital
and the U.S. Department of Commerce encourages investment in Europe.
Until 1998 Japan, with all the dynamism of its post-war economic development, has not
created a proper framework for foreign investment. The only industry branch under foreign control
in Japan is that of the oil (60%). When the foreign capital is employed, its transfer outside of Japan
is limited for the benefits from investments. The only advantage that the foreign capital has is that
of over three years exemption on income tax, but only when new and important products for the
Japanese economy are manufactured.
Developing countries continue to represent one of the main areas of the TNC. Practical
methods of TNC implantation on the world arena include a wide range, going from minority
participation to full ownership of subsidiary capital. The strategy most favourable for the foreign
implantation of U.S, Japanese and European firms is to acquire companies already functioning (one
native example is that of Orange who took over MobilRom company on the Romanian market).
This method of implantation gives time and financial resources, procuring skilled labour force this
being the result of a management that knows the local market characteristics, etc.. Buying a
corporation is finally determined by the relationship between the paid price and predictable profits.
A unique way to implant a TNC is joint companies with the state agencies representatives (Mixed
joint ventures) or joint enterprises (joint International Business ventures).
Regarding U.E. evolution, companies and management, the forming of the single market
and single currency has a decisive impact. The implementation of the single market had as a goal
from the start the tariff and non tariff barriers elimination which slowed down the fast and efficient
economic development of the EU countries. The influence that the single market and the euro have
on businesses and management can be generally divided into three areas: economic, social and
formative. Creating long-term European markets creates many advantages such as:
 the acceleration and multiplication of investment;
 forming dimensional economies;
 achieving a higher capacity to negotiate with the other two large economic poles: the
Japanese and the U.S.
In terms of the relations of the transnational corporations with national states Dunning
believes that in the post-war period there were three phases (Dunning, 1993):
48
 The "honeymoon" in the '50s and the beginning of the'60s during which there was an
overlap of interests between investors from the U.S. and the West European economies that were in
post-war reconstruction. U.S. TNC at that time were building replicas of the mother-companies
with a high degree of freedom and having as a motivation-the market. The produced output replace
imports and their presence in these markets was desired;The "confrontation" - period regarding the
relationship between transnational corporations and developing countries. The political
independence increase of most developing countries during the ‘60s and ‘70s led to a better
identification of their economic objectives and a greater reluctance regarding the presence of TNC
in their countries. FDI were treated according to their contribution to satisfying basic needs and to
improving the balance of payments and raising the technological level. Large transnational
companies were perceived by the governments of the developing countries as foreign companies
that transfer aboard huge economic rents at the expense of host countries and their investments
introduced a foreign lifestyle to their national cultural traditions. Strategically the large TNCs acted
by an excessive centralized decision of and by the guidance of their policy to a regional and global
scale. During this time some restrictions were introduced for foreign investment and it even
resorted to some expropriations of TNC assets. TNC strategies used a specific reserve to launch
new projects in these countries and at technological transfer restrictions in an attempt to persuade
host governments to change the policy on foreign investment;
 The current phase is one of "reconciliation" in Dunning's vision. In the late '70s
developing countries have felt a certain disappointment in the efficiency of their economic policies,
disappointment that led to a change in the policy on foreign investment, in the attitude towards the
market in general and particularly over TNC operations. Meanwhile TNC strategies have become
more responsive to the socio-cultural characteristics of the host countries, thereby seeking to
promote advantageous policies to both parties. This period proved the beneficial role of FDI and
TNS role in promoting technical progress for the host countries.
5. THE EXPANSION OF TRANSNATIONAL CORPORATIONS (TNC)

THROUGH FOREIGN DIRECT INVESTMENTS (FDI)
The international investment has four characteristic elements: profit - the purpose of
investment, time – as the dimension of the recovery process, risk - as an expression of the
economic decision and the nature of extra-unit international transactions (Popa, 1992). The real
ways through which a trader can make an international investment:
 building on a "vacant place" a company or a subsidiary of an existing one in another
country;
 the acquiring a foreign company or the merger with such a firm;
 the creation of joint ventures;
 the purchase of shares / debentures of a foreign market;
 granting a financial credit to a trader from another country;
 signing international contracts for leasing or franchising.
Through the contact established between a issuing trader and the receiver foreign direct
investment (FDI) and those of portfolio can be distinguished.
FDI includes: the issuing agent transfer of the investment flow of control possibility and the
decision over the receiver’s activity, the control over the transferred resources is of the investor, the
investment is made outside of the country of origin but within the investing company and it
represents a package consisting of finished and intermediated goods, capital, technology,
management, access to markets (Dunning, 1995).
When the existence of such a relationship is not taken for granted, it is about the portfolio
investment which represents a purely financial investment, the control over the resources being
transferred by the issuer to the receiver.
49
Traditionally through FDI was provided the expansion of TNC which are defined by the
IMF as: 'the investment which involve a long-term relationship that reflects the interests of an entity
resident in an entity resident in another country than its investor, the direct investor’s role is to exert
a significant degree of influence over the management of the enterprise resident in another
economy. The minimum percentage of control accepted by most countries is 10-25% (10% U.S.,
20% France and Britain, 25% Germany).
Vice versa TNSs are often a vehicle for FDI. Thus, FDI as an important part of international
capital movements (international lending process) represent the international capital flows in which
a firm in one country creates or increases a subsidiary in another country (Krugman, 1991). The
subsidiary not only has a financial obligation to the mother-company but it is part of the same
organizational structures.
The mother-company often ensures with capital its foreign subsidiaries hoping an eventual
return. To the extent that TNC provides financial subsidiaries abroad, FDI is an alternative way to
achieve the same goals as international loans, but it remains open the question of why FDI is
preferred to other ways to transfer funds. There should be made the indication that the existence of
TNC does not necessarily reflect a net capital flow from one country to another, STN sometimes
collect money for the expansion of their branches in the country where the subsidiary perform better
than in their country of origin.
Moreover, there is a two-way road in the industrialized countries: U.S. firms expand their
subsidiaries in Europe while European firms are expanding their subsidiaries in the U.S.
A strong response to the preference of FDI in international loans is to allow the formation of
multinational organizations, representing an essential goal that control is obtained.
FDI started in the international economy since the early period of capitalism, but recording a
real boom in international transactions in the last decades of the twentieth century, particularly due
to development activities of transnational companies.
The investment flows (Voinea, 2001) generally attached to the direct foreign investments
are usually composed of:
 the capital provided by investors to buy shares in a company abroad;
 the reinvested profits from foreign economic activity (in proportion investor share to the
capital);
 the loans from the company –credits granted by the mother-company to its subsidiaries
abroad.
The foreign subsidiaries of transnational corporations can be funded (besides the sources
mentioned above) through domestic market funds of the host country, but also through foreign
direct financing through loans and by purchasing of bonds from sources other than the mother-
company. All these funding sources increase the transnational corporations subsidiaries
production’s capacity by influencing the dynamics of the local markets but without being recorded
as FDI, but as capital expenditure.
The particularity of FDI is given by the control exercised by the investor over the assets in
which the investment was made. Thus, FDI represented a transfer of an industrial package that
included capital, technology, industrial organization, managerial expertise, marketing, etc.
elements, transfer that allows the investor to exercise his right to control his investment. (Negritoiu,
1997).
The foreign investor’s control depends on the share that he holds in that company. If this
ratio is low, the control is replaced by a direct participation in the management and organization of
production. Experts consider foreign direct investment a company in which the foreign investor
owns or exceed a share of 10-25%, although the foreign investor participation is usually above
50%. Noteworthy is the fundamental difference between the foreign direct investment and the
portfolio investment:
 through the foreign direct investment the investor is directly involved in the management
and organization of production, in the business activity monitoring;
50
the investment portfolio entitles the investor to receive only dividends without the
possibility to control or manage the company he invested.
To place the foreign investment (Vătăşescu and Albu, 1999) somewhere between one of
those two types (foreign direct investment or portfolio investment) is sometimes difficult, between
area there being a cohabitation in which boundaries can be difficult to delineate. Thus, the forms
that foreign investment can take are:
 the purchase of shares on a foreign market or issued by a firm in a third country;
 the purchase of bonds on foreign markets or issued by a firm in a third country;
 the establishing of a new company or opening a subsidiary in another state;
 providing a financial credit for a foreign company or a company that operates on its own
market;
 the acquisition of a foreign company or merging with it;
 the participation with capital in the making of a mix corporation.
FDI are a characteristic feature of large transnational companies, therefore, experts consider
that FDI theory overlaps the theory of transnational corporations, these being the main actors in the
global economy although without FDI representing only the privilege of the transnational
corporations. FDI is not only a capital transfer, "but rather an extension of the corporation from the
country of origin into a foreign host-country. A business activity in a foreign country involves
capital, technological and entrepreneurial experience flows which in combination to local factors,
generate the production of goods or services for the domestic market or export. This package
transfer remains under the control of the investing firm, as in fact the subsequent production and
marketing activities conduced in the host country. "(Negritoiu, 1997)
6. CONCLUSIONS
Business analysts considered the starting point of the theories on FDI is the work of John H.
Dunning in 1958 regarding the U.S. companies investments in the UK manufacturing industry. But
the first major contribution to studying the phenomenon of FDI is given by Stephen H. Hymer
through his Ph.D thesis at the Massachusetts Institute of Technology in the U.S. which was
presented in 1960 but published in 1976.
During the past decades, the FDI phenomenon theorists have divided into two: a first group
of Canadian economists formed by Mc Monis, Calvet, Hymer, Saforian Gordon, Fower, Shapiro,
the other one being of British origin has as representatives Dunning , Buckley, Casson and
Cantwell.
These theories on the place and role of the foreign direct investment (starting from the
causes that determine FDI flows) have been united by the works of AL Calvet (1981), J.A.
Cantwell (1988) and Soul Lizondo J. (1991 - IMF study).
This paper may be assigned into:
 theories of the firm-monopoly advantage, internalization;
 theories on macroeconomic development - market imperfections, the model of oligopolistic
competition, the product life cycle.
The economic literature in Romania the theories and developments on FDI have been
questioned by economists, such as Mişu Negriţoiu, Anda Mazilu, Costea Munteanu, Daniel Dăianu,
Ion Anghel etc.
Some studies show that the investment ensures the increase of fixed and circulating capital
as a movement of capital whose area of influence does not stop at national borders, becoming an
international activity. The process of deepening economic and technological interdependence
among the national economies transforms the investment in a common transnational activity.
51
BIBLIOGRAPHY:
1. Calvet A.L., A Synthesis of Foreign Direct Investment Theories and Theories of the
Multinational Firm, Journal of International Business Studies, Spring/Summer, Vol.12,
no.1, 1981
2. Cantwell J.A., Theories of International Production, University of Readings, Discussion
Papers in International Investment and Business, No.122, September, 1988
3. Dunning J.H., Multinational Enterprises and the Global Economy, Addison-Wesley
Publishing Company, London, 1995
4. Lizondo S.J., Foreign Direct Investment, Determinants and Systemic Consequences of
International Capital Flows, Research Departament Occasional Paper, No.77 International
Monetary Fund, Washington D.C. 1991
5. Krugman P.R. , Obstfeld, M., International Economics – Thecry and Policy, second
edition, Harper Collins Publishers Inc., 1991
6. Negriţoiu M., Salt înainte – dezvoltarea şi investiţiile străine directe, Expert Publishing,
Bucharest,1997
7. Popa I., Tranzacţii internaţionale – politici, tehnici, instrumente, Recif Publishing,
Bucharest, 1992
8. Tănăsie P., Reţelele politicii globale – coaliţie pentru schimbare, „Nicolae Titulescu”
University Annals Bucharest, 2002
9. Vătăşescu M., Albu, C., Relaţii economice internaţionale, Ecologic Publishing, Bucharest,
1999
10. Voinea L., Corporaţiile transnaţionale şi economiile naţionale, I.R.L.I., Bucharest, 2001.
52
EDUCATION - AN ECONOMIC GROWTH FACTOR

Associate Prof. PhD. Carmen NĂSTASE
University “Stefan cel Mare”, Faculty of Economics and Public Administration, Suceava, Romania
ncarmen@usv.ro
Highschool Teacher Alina HODOROABĂ
Technical College ”Petru Muşat”, Suceava, Romania
hodoroaba.alina@yahoo.com
Abstract:
Education is a strategic area of development. As part of the education system, higher education is the
mechanism that can give to a society the resources necessary for its correlation with social and economic developments
at global level.
The truth that education is a factor of economic growth is not a new thing. During time, it was proved that
investment in education, research and development, and health insurance is undoubtedly more profitable than the other
inputs.
The future of every nation depends fundamentally on the extent to which its system is able to provide to their
citizens a performant level of training, which make them competitive worldwide. In higher education must meet the
highest standards, with reference to a multitude of functions and characteristic activities - training, research, teachers,
students, programs, resources, initiation, management etc. - all competing to achieve the major objectives which
converge towards sustainable development of the country.
Thus, the present paper emphasize within an international study, the importance of education in development
and growth.
Keywords: education, economic growth, international study, students, questionnaire
JEL Classification: I23, C83
INTRODUCTION
For the Romanian education system to perform and contribute to the economic development
of the country, we considered that the first step in this respect is an objective analysis of the current
situation of Romanian education. So, we conducted a study which aims to highlight the strengths
and weknesses that are facing the Romanian higher education in terms of students. In this study
were also analyzed options of students from 15 countries to regarding their option to continue their
Masterate studies, and their interest to study in Romania. It highlights several priorities for
improving quality and competitiveness of Romanian higher education.
The study was conducted in two phases. The first phase of the study was conducted between
1.10-21.10.2009 on a sample of 408 students of which 206 Romanian students and 202 students
from other states. After this period, the study was promoted during the Erasmus IP project INNO
Natour - Innovation in Nature Based Tourism Services, held in Romania to the Faculty of
Economics and Public Administration from Suceava, from 26 April to 7 May 2010, and to which
was attended by 21 students from six countries: Austria, Finland, Italy, Bulgaria, Slovakia and
Romania.
For this study we used a random sampling unrepeatable via the Internet. Subjects completed
questionnaires on-line available at the following addresses:
http://spreadsheets.google.com/viewform?hl=en&formkey=dEtlcm9EQVdIeURaaFgxbDJrcTJEZF
E6MA pentru studenţii români şi
http://spreadsheets.google.com/viewform?hl=en&formkey=dGEwQ2xMNFp5dHcwVkFWa25Wd
DlRdVE6MA pentru studenţii străini.
Thus, the final study results are presented in this paper.
OBJECTIVES OF THE RESEARCH:

This research had the purpose to achieve the following objectives:
53
O1: Finding the intention of the students to start a master;

O2: Finding the availability of students to study in other countries;
O3: Highlighting the factors influencing college choice;
O4: Determining image of Romania and its education system from the perspective of
students;
O5: Identify the facilities that should be offered by the Romanian universities in order to be
attractive to Romanian and foreign students.
THE HYPOTHESES OF THE RESEARCH
The hypotheses from which we started this research are:

I1. Romanian modest position in international rankings of universities;
I2. Romanian higher education suffers from a low international visibility;
I3. A lot of students would like to study in another country;
I4. Romanian higher education does not enjoy a good image among the Romanian students,
even among foreign students;
I5. Romanian universities can not provide, yet, the facilities provided by the prestigious
European universities;
SAMPLE CALCULATION
Collectivity researched consists of all students who have studied or have been in contact
with the academic community in Romania, or at least have heard of at least one university in our
country. We clearly defined the two categories of students: Romanian students and the second
group: foreign students. The formula for determining the sample is based on an alternative feature.
z 2  p (1  p )
n (1)
E2
Where,
n = sample size
z = corresponding theoretical probability value that is working with. For the probability of 95%,
theoretical value is 1.96.
p = proportion of individuals who possess the characteristic that is measured.
E = margin of error. For a 95% confidence, the margin of error is set to 0.05.
For a confidence level of 95%, a confidence interval (error) of 4% and a total population
theoretically infinite, sample size is 600 units. For objective reasons of distance and material
resources, human and time, we chose a value of 200 units per subcolectivity investigated, while,
regarding foreign students, we considered a number of 15 countries of origin to ensure an increased
representativeness. The questionnaire was applied on-line, from which we created a database of all
responses recorded. Following the tabulation of responses in the database (in the two periods of
study) have been validated a number of 429 questionnaires.
Regarding the country of the student respondents, we decided to select 17 countries of
origin to ensure a more credible research. Responses came from 22 countries, but given the fact that
some countries such as Vietnam, Serbia, Moldova, Turkey had too few respondents to ensure the
credibility of the study, we reached a total of 15 countries that can be viewed Table. 1.
Regarding Romania, we intend to obtain responses from 10 localities, but after validation of
questionnaires, the number of settlements reached is 9 (see Table. 2).
The sample structure by age and sex can be viewed in Table. 3.
54
Table no. 2 – The number of validated

Table no. 1 – The number of validated questionnaires and city of origin
questionnaires and country of origin No of validated
No. City
No of validated questionnaires
No. Country
questionnaires 1 56 Suceava
1. 15 Hungary 2 25 Galaţi
2. 18 Bulgaria 3 20 Iaşi
3. 15 Ucraina 4 23 Cluj-Napoca
4. 14 Netherlands 5 22 Bucureşti
5. 21 Italy 6 18 Timişoara
6. 14 Germany 7 17 Braşov
7. 16 Czech Republic 8 16 Constanţa
8. 12 USA 9 15 Craiova
9. 12 Austria TOTAL 212
10. 21 Finland
11. 10 Lithuania
12. 12 Slovenia
13. 12 England
14. 15 Spain
15. 10 Poland
TOTAL 217 Tale no. 3 – Sample structure
Age
<25 26-34 >34
Sex
Romanian Foreign Romanian Foreign Romanian Foreign
students students students students students students
Masculin 24,5% 32,81% 0,60% 9,37% 0% 1,56%
Feminin 71,16% 45,31% 3,06 10,95% 0,60% 0%
 Research tool
The questionnaire was designed both in Romanian for Romanian students and in English for
foreign students. The questionnaire in Romanian language was composed of 15 items, including a
filter question, five open questions, 4 closed questions and 5 mixed questions of identification. The
questionnaire that was designed in English had 19 items, including a filter question, 6 open
questions, 6 closed questions and 6 mixed questions of identification.
We considered it appropriate to use a large number of open questions taking into account the
cultural differences that may exist between the 16 countries (including Romania).
INTERPRETATION OF RESULTS
In what follows we shall present the results of research, structured on research method used
and the research objectives pursued.
O1: Finding the intention of the students to start a master

The first question regarding the intention to continue studies with a master degree show
results in unison. 86% of Romanian students and 89% of those foreigners are intending to continue
studies with a masters degree, which indicates the desire for self-improvement, lifelong learning.
(Chart no. 1.). From those who answered "no", the opinions vary a lot between Romanian and
foreign group. Thus, when first told that it makes no sense because the theoretical knowledge and
practice are not covered, and some are disappointed by the conditions and attitude of the teachers,
the second specific desire work and enthusiasm to implement the knowledge already acquired.
55
Foreign
students 89% 11%
YES
NO
Romanian
students 86% 14%
70 80 90 100
Chart no. 1. – Students' intention to continue studies with a Master degree
When asked "In what area you intend to pursue a Master?" answers again are different in
the two target groups. (Table no. 4)
Table no. 4 – Areas in which students would like to study a Master

Area
Social
Computer Engineering
sciences, Arts and Medicine and
Science, and Others
economics Literature Pharmacy
Mathematics construction
and law
Categories
Romanian
61,5% 7% 21,6% 3,5% 1,4% 4,9%
students
Foreign
37% 8% 15% 15% 27% 17%
students
It is noted in the table above a malfunction in the sense that if all foreigners prefer areas
grouped on balanced proportions, we infer that are preferred based on personal preferences or their
abilities; preferences for Romanians go mainly towards the social sciences, economics or as they
are recognized as main areas where revenues are substantial, even though it's hard to believe that all
have the necessary skills.
O2: Finding the availability of students to study in other countries

In terms of study options, 57% of Romanian students prefer to study in another country,
while 34% choose other city in the country, and only 28% wanted to stay to study in the city where
they live. Approximately the same proportions and preferences to foreign students find that 59%
prefer to study in another country than home country, 44% choose another city, while 25% wanted
to remain in the city where they live.
These high percentages come as a result of global factors listed above, but should not be
downplayed the fact that a particularly important role is determined by accessibility studies, travel,
the possibility of a better life and not least the spirit of adventure characteristic to that age are the
reasons for a lot of students.
Regarding the options for foreign students, we find that the majority of foreign students
questioned would not want to go to study in another country because they are satisfied with the
conditions offered by their university, the others stating other private reasons.
Asked which country they would like to study the responses of two target groups are
different. Thus, the first three countries in which Romanians want to study are: England, France and
USA. (See Chart no 2.)
56
As regards foreign students options, preferences among locations in their study are:
Germany (9.41%), USA (6.93%) and Canada (6.44%). Surprisingly, Romania ranks eight in the
preferences of students, on the same level as Finland, Italy and Austria. However, students who
have chosen Romania as a study destination, are mainly those in Bulgaria and Ukraine, which are
neighboring countries. This fact leads us to believe that the hypothesis of this study that the
Romanian higher education suffers from a low international visibility.
Thus, generalizing, we can say about the quality of Romanian higher education that is not so
weak as is evidenced in various international surveys and research, but the problem of Romanian
higher education may be closer to its international visibility and poor promotion. The
internationalization of Romanian higher education was not based on an adequate marketing.
3,15 England
France
3,15 3,15 2,7
3,6 3,6 USA
3,6 1,8
Spain
4,5 7,66 Ge rmany
5,86 Ne the rlands
Italy
De nmark
Norway
8,11 14,41 Canada
Austria
Be lgium
11,26
13,51 Swe de n
Ire land
O the rs
Chart no 2 – The main destinations preferred by Romanian students
O3: Highlighting the factors influencing college choice;

Regarding the general appreciation of Romanian university education after which students
choose the university, in terms of foreign students, the opportunities are first, the second is the
conditions, and the least important criterion seems to be the location. Romanian students believes
that the first two criteria are the opportunities and prestige, and the last place is the same, the
location of the university.
O4: Determining image of Romania and its education system from the perspective of
students;
Regarding the general opinion about Romania, 44% had a neutral opinion, 43% feel good or
very good, 10% believe a bad or very bad, while 3% think they do not know the country well
enough to formulate a general opinion. (Chart no. 3.)
3%
10%
43%
44%
Good or very good Neutral

Bad or very bad I don't know the country
57
Chart no. 3. – Image enjoyed by Romania and its education system from the perspective of
students
If we consider the fact that 44% had an neutral opinion about Romania, we are again at the
issue of promotion. Not only Romanian education, but not Romania as the country is not
sufficiently promoted abroad. So, a lot of students will join the overall picture they have of
Romania with the Romanian education picture.
Asked if they imagined themselves studying in Romania, 49% of them said no, 29%
considered this as a possible option, 13% said that they have imagined studying, and 6% did not
know or refused to answer. (Chart no. 4)
50
45
40
35
30 49%
25
20
15
29%
10
13%
5
6%
0
Yes Maybe No I don't know
Chart no. 4 – Option of foreign students studying in Romania
Among the reasons stated by those who have answered “no”, most foreign students do not
know the Romanian education system. Thus we could identify promotion as one of the main
problems facing higher education in Romania.
From Romanian students questioned about the quality of Romanian education, 36% feel
good or very good, 38% had a bad or very bad opinion, 22% an indifferent opinion about the
Romanian higher education, while 4% believe that depending on the domain studied.
O5: Identify the facilities that should be offered by the Romanian universities in order to be
attractive to Romanian and foreign students.
58
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
High study level Others Studies in an international language

Low taxes Free time activities High-tech labs
Practical studies Cooperation with major undertakings
Chart no 5 – Facilities required by foreign students on higher education
When asked "What features should you offer for the Romanian higher education to make
you study here?" the answers we received were surprisingly similar to a high frequency content. We
have considered all responses received, including multiple ones. The most tempting it seems to be a
high level of research with highly prestigious and competent teachers (22.2%), followed by studies
in a foreign language (14.4%) and studies fees as low (12%), leisure activities offered on campus
and in town and country in general (10%). In other words we can pull off quality as first attraction,
but are also important the possibility to adapt, studies fees and subsistence, and recreational
opportunities as an important part of internships in a foreign country (Chart no. 5.)
0% 20% 40% 60% 80% 100%

Higher scholarships Internationally recognized diploma
Interaction with field work Lower educatio n fees
Practical studies Others
Chart no 6. – Facilities required by Romanian students on higher education
A key point of the research was to highlight the needs of the Romanian students vis-à-vis
the Romanian higher education and what would cause them to stay and study in the country. It
started from the premise that many valuable students prefer to leave the country because the
opportunities there are not up to their expectations. Thus, they believe that to stay to study in
Romania, higher education should offer more scholarships (25.4%), followed by internationally
recognized diplomas (20.2%), interaction with domains employment (15.7%), lower education fees
(14.2%) and practical studies (12.2%). We can see that Romanian students desires overlap to some
extent with those of foreign students, but the priorities are quite different (Chart no. 6).
CONCLUSIONS AND PERSPECTIVE OF RESEARCH IN THIS AREA
This paper starts from the premise that in a society based on knowledge, the university aims
to contribute to the welfare of the individual and socio-economic environment, generating and
transferring them through education, research and innovation. Academic approach, as any socio-
economic approach, it needs to respond by presenting specific life cycle requirements.
As a result of research done, we can identify the international promotion one of the main
problems facing higher education in Romania. Romanian universities should be concerned about
59
their correct position in international rankings, improve inter-university partnerships at European

and international level, participate in international research projects and to attract foreign students
by improving quality of education.
Thus, the study shows that the Romanian education quality is not so weak as is evidenced in
various international surveys and research, but higher education is more a problem of international
visibility, which is based on poor promotion. The internationalization of Romanian higher
education was not based on an adequate marketing.
At present, it becomes increasingly obvious the link between education and professional
training, innovation and correct stimulation of economic development on the one hand, and the
amount and level of economic growth, on the other side. It has been proved beyond doubt that
companies that have invested in education have reformed modernly the economies, recorded high
growth rates and have redefined the foundations of sustainable competitiveness
BIBLIOGRAPHY:
1. Miron, D., Sistemul românesc de învăţământ superior între starea de fapt şi deziderate,
publicat în volumul Partnership in Bologna process. Experiences and future challenges,
Editura Universităţii „Alexandru Ioan Cuza”, Iaşi, 2006
2. Munteanu, R. (coord), Analiza diagnostic – Universităţile şi mediul social-economic
3. Năstase, C., Popescu M., Boghean C., Scutariu A.L., Microeconomie: concepte
fundamentale, Editura Didactică şi Pedagogică, Bucureşti, 2009
4. Popescu, S., Oportunitatea şi importanţa asigurării calităţii în instituţiile de învăţământ
superior din România, publicat în Ghidiul calităţii în învăţământul superior. Proiectul
CALISTRO, Bucureşti, Editura Universităţii, 2004
5. Todorescu L., Calitate în învăţământul superior – oportunitate şi importanţă, publicat în
Buletinul AGIR nr 2-3/2009
6. Vlăsceanu, L., Trends, Developments and Needs of the Higher Education System of the
Central and Eastern European Countries
7. Education Systems in Europe, http://eacea.ec.europa.eu/
8. Publicaţia România în cifre 2009, www.insse.ro
9. The Times Higher Education www.timeshighereducation.co.uk
10. The World Bank Group, Beyond Economic Growth, Meeting the Challenges of Global
Development, http://www.worldbank.org./depweb/beyond/global/chapter 17.html
11. http://spreadsheets.google.com/viewform?formkey=dEtlcm9EQVdIeURaaFgxbDJrcTJEZF
E6MA - chestionarul aplicat studenţior români:
12. http://spreadsheets.google.com/viewform?formkey=dGEwQ2xMNFp5dHcwVkFWa25WdD
lRdVE6MA - chestionarul aplicat studenţior străini.
13. http://www.aracis.ro/
14. http://www.gandul.info
15. http://www.ziare.com
60
STUDY OF SIGNALLING GAMES ON THE LABOUR FORCE MARKET OF EU-27,

THE PURE STRATEGY CASE
Prof. Ph. Stelian STANCU

Department of Economic Cybernetics
Prof. PhD.Tudorel ANDREI
Department of Econometrics
PhD Candidate Oana Mădălina PREDESCU
PhD Candidate George Viorel VOINESCU
Abstract:
The paper addresses several key issues in the field of game theory, namely: determination of the perfect
Bayesian equilibrium for signaling games - the pure strategy case; signaling on the labor force market; application of
the signaling game on the labor force market of EU-27.
The analysis of the perfect Bayesian equilibrium for signaling games - the pure strategy case has lead to the
following conclusion: if the Sender strategy is unifying or separating then the equilibrium will be called unifying or,
respectively separating.
In the section Signaling on the labor force market, there are issues regarding the complete information case,
where we suppose that the worker’s ability is common information for all players, but also issues regarding the
incomplete information case. Three types of perfect Bayesian equilibriums may exist in this last model: unifying
equilibrium, when both types of workers choose a single type of education; separating equilibrium, when the perfect
Bayesian equilibrium is separating by itself, and hybrid equilibrium, if a worker chooses a level of education with
certainty, the other one may randomly choose between joining the fist one (by selecting the level of education of the first
type) and getting separated from him (by selecting a different level of education).
This analysis allows us to draw the following conclusions: in case of signaling games on the labor force
market, the pure strategy case, three types of equilibriums are available: unifying, separating and hybrid; as the
worker’s ability is private information, this allows a low ability worker to pretend to be a high ability worker; the low
ability workers find it more difficult to accumulate additional education requiring higher wages in return; besides the
classical separating equilibrium, same as for the unifying equilibrium, there are other separating equilibriums implying
a different educational choice by the high ability worker; sometimes the separating equilibrium becomes the limit of the
hybrid equilibrium.
The application is meant to strengthen, at least partially, given the lack of consistent data, the theoretical
results.
Key words: signalling games, feasible strategy class, perfect Bayesian equilibrium, incomplete information,
sender, receiver, labour force market, competition among companies
JEL Classification: C71, C72, C73
1. INTRODUCTION
The principles of the game theory have been formulated for the first time during the `40 ties
by J. von Neumann and O. Morgenstern in the paper Theory of Games and Economic Behaviour.
Subsequently, this field has undergone an accelerate development mainly due to the
contributions of Nash, J. F. (1950), Aumann, R. J. (1959), Harsanyi, J. C. (1970), Selten, R. (1975),
Milgrom, P. and Stokey, N. (1982), Kreps, D. and Wilson, R. (1982), Aumann, R.J. (1990),
Fudenberg, D. and Tirole, J. (1991), Reny, P. (1992), Ben-Porath, E. and Dekel, E. (1992), Banks,
J., Camerer, C. and Porter, D. (1994), Kreps, D.M. and Sobel, J. (1994), Ben-Porath, E. (1997),
Abreu, D. and Gul, F. (2000), Binmore K., McCarthy, J., Ponti, G., Samuelson L., and Shaked,
A.(2002), Benaım, M. and Weibull, J. (2003), Benz, A., Joager, G., and Van Rooij R.(2005), Roth,
A. E. (2007), Josephson, J. (2008), Balkenborg, D., Hofbauer, J., and Kuzmics, C. (2009).
61
2. DETERMINATION OF THE PERFECT BAYESIAN EQUILIBRIUM AS FOR THE

SIGNALLING GAMES, THE PURE STRATEGY CASE
These types of games suppose the presence of two players, namely:

- the leader, the one who holds the private information, also called signal sender, E;
- the follower, the one who receives the information sent by the leader (sender), also called
signal receiver, R.
Definition 1. The signalling game is a dynamic game with incomplete information where new data
are added and existing information is completed.
The following steps are taken when performing the game:
P1. Nature chooses a type t i for the signal sender, E, out of a set of feasible types
T  (t1 , t 2 ,..., t i ,..., t I ) according to the probability distribution p (t i ) , where p (t i )  0 for any
i and p (t1 )  p (t 2 )  ...  p (t i )  ..., p (t I )  1 .
P2. The signal sender notice the type t i and chooses a message m j out of a class of feasible
messages M  ( m1 , m 2 ,..., m j ,..., m J ) .
P3. The signal receiver notice the message m j (but not the type t i ) and chooses an action
(strategy) s k out of a class of feasible actions S  ( s1 , s 2 ,..., s k ,..., s K ) .
The results are a function of  E (t i , m j , s k ) , for the signal sender, respectively  R (t i , m j , s k ) , for the
signal receiver.
Remarks: 1. Sometimes the classes T, M and S are intervals;
2. The feasible message class depends on the nature choice type, while the
feasible strategy class depends on the message selected by the signal sender, E.
Figure 1 renders an extended representation of a simple case: T  (t1 , t 2 ) , M  (m1 , m2 ) ,
S  ( s1 , s 2 ) and Pr ob(t1 )  p .
In signalling game:
- a pure strategy for the signal sender, E, is a m(t i ) function specifying the message to be
selected for each type that the environment may choose;
a pure strategy for the signal receiver, R, is a s (m j ) function specifying the action to be
selected for each message that the sender may send.
s1 Signal sender, E s1
[p] m1 t1 m2 [q]
s2 s2
p
Receiver Environment Receiver
s1 1-p s1
[1-p] m1 t2 m2 [1-q]
s2 Signal receiver, R s2
Figure no. 1.
62
Figure 1 renders a simple game where the Sender and the Receiver benefit, each of them, by
four pure strategies:
- Strategy of Sender 1: plays m1 if the environment chooses t1 and plays m1 if the
environment chooses t 2 ;
- Strategy of Receiver 1: plays s1 if the Sender chooses m1 and plays s1 if the
Sender chooses m2 ;
- Strategy of Receiver 2: plays s1 if the Sender chooses m1 and plays s 2 if the
Sender chooses m2 ;
- Strategy of Receiver 3: plays s 2 if the Sender chooses m1 and plays s1 if the
Sender chooses m2 ;
- Strategy of Receiver 4: plays s 2 if the Sender chooses m1 and plays s 2 if the
Sender chooses m2 .
Comments:
- the first and forth strategy, at the Sender level, are called unifying strategies, as each type
sends the same massage;
- the second and third strategies, at the Sender level, are called separating strategies, as
each type sends a different message;
- there are also the models with more than two types to be selected by the environment,
the so-called partially unifying strategies, where all types belonging to a given type set
send the same message, but different type sets send different messages;
- as for the game with two types to be selected by the environment (see Figure 1), we also
have mixed strategies (hybrid strategies), where t1 plays m1 but t 2 randomly chooses
between m1 and m2 .
Signalling criterion 1: After having noticed any massage m j out of M, the Receiver shall have a
certain confidence on the types that could have sent m j . The probability distribution  (ti / m j )
shall be attached to this confidence, where  (ti / m j )  0 , for each ti out of T, and   (t
t i T
i | m j )  1.
Signalling criterion 2R: For any message m j out of M, The Receiver strategy s  (m j ) shall
maximize the expected utility of the Sender, given the confidence  (ti / m j ) on the types that could
have sent mj , this meaning that s (m j ) solves the optimum problem:
max   (ti | m j ) R (ti , m j , sk ).
sk S
ti T
Signalling criterion 2E: For each ti out of T, the Sender message m (ti ) shall maximise his utility,
given the Receiver strategy s  (m j ) , this meaning that m (ti ) solves the optimum problem
max  S (ti , m j , s  (m j )).
m j M
For the messages of the equilibrium class, by applying the third criterion to the Receiver
confidence, we will obtain:
63
Signalling criterion 3: For each message m j out of M, if there is any ti out of T so that
m (ti )  mi j, then the confidence of the Sender as to the set of information corresponding to m j
shall follow the Bayes rule and the Sender strategy, therefore its probability distribution being
p (ti )
rendered by:  (ti | m j )  .
 p(ti ) t i Ti
Definition 2. A pure strategy represents a perfect Bayesian equilibrium in a signalling game, if

the triplet [m (ti ); s  (m j );  (ti / m j )] complies with the signalling requirements (1), (2R), (2E), and
(3).
Conclusions:
1. If the Sender strategy is unifying or separating then the equilibrium will be called
unifying or, respectively, separating.
2. The four possible pure strategies rendered by Figure 1, representing perfect Bayesian
equilibria in this game with two types to be selected by the environment, and two messages are: (1)
unifying on m1 ; (2) unifying on m2 ; (3) separating with t1 playing m1 and t2 playing m2 ; and (4)
separating with t1 playing m2 and t2 playing m1 .
3. SIGNALLING ON THE LABOUR FORCE MARKET
Corroborating with the steps taken in performing the signalling game, described at point 2,
the carrying out of such a game on the labour force market looks as follows:
P1. The environment determines the productive ability of a worker,  , which may be high,
H, or low, L,. The probability for   H is p;
P2. The worker discovers his ability and selects a level of education, e  0;
P3. Two companies notice the worker education (but not his ability) and simultaneously
advances wage offers to the worker;
P4. The worker accepts the biggest of the wage offers.
We go further from the ascertaining that the wages are higher, on average, for those workers
with many years of studies. This tempts us to construe the variable e as years of studies, the
differences within e being seen as differences in the performance quality of a student and not as his
individual length of studies.
As such, e measures the number and types of the subject matters assumed and the calibre of
the marks and distinctions acquired all along an academic programme. The school attendance costs,
if any, are supposed to be independent of e, so that the cost function c( , e) measures non-monetary
or psychical costs.
The main assumption of the model is that the workers with low ability find the signalling
more expensive than those with high ability. Therefore, the education marginal cost is higher for
the low ability workers than for the high ability ones: for each e, ce ( L, e)  ce ( H , e) , where ce ( , e)
represents the marginal cost for a worker with ability  and level of education e.
In order to construe this assumption, we take a worker with the level of education e1 , to
which a wage w1 will be paid. The increase of the wages necessary in order to compensate this
worker for an increase in education from e1 to e2 shall be also calculated. The answer depends on
the ability of the worker: the low ability workers find it more difficult to accumulate additional
education requiring higher wages in return.
Competition between companies turns the expected profits to zero. One way to deal with
this hypothesis is to replace the two companies at P3 with a single player – the market, which makes
just one wage offer w and gets the profit q ( , e)  w .
2
64
In order to maximize the expected earning, as required by the Signalling criterion 2R, the
market shall offer a wage equal to the expected production of a worker with education e, given the
market confidence on the worker ability, after having noticed e:
w(e)   ( H / e)  q( H , e)  1   ( H / e)  q( L, e) (1)
where  ( H / e) is the market assessment on the probability for the worker ability to be H.
Complete information case
We suppose that the worker ability is common information for all players. Thus, the
competition among the two companies at P3 involves the fact that a worker with ability  and
education e, gets a wage w(e)  q ( , e) .
Therefore, a worker with ability  , chooses the level of education e for solving the optimum
problem: max{q ( , e)  c( , e)}
e
With the solution e ( ) and therefore w( )  q ( , e ( )) .

Incomplete information case
Returning to the assumption that the worker ability is private information, this opens the
possibility for a low ability worker to pretend to be a high ability worker.
Two cases may rise:
- the first case where w ( L)  c[ L, e ( L)]  w ( H )  c[ L, e ( H )] ;
- the opposite case, where the low ability worker is supposed to envy the wage offered
within the complete information case and the education level of the high ability
worker, this meaning that:
w  ( L)  c[ L, e  ( L)]  w  ( H )  c[ L, e  ( H )] .
Three types of perfect Bayesian equilibria may exist in this model:
- unifying equilibrium, when both types of workers choose a single type of education,
called ed . The Signalling criterion 3 implies that the company confidence after having noticed ed
shall be the priority confidence,  ( H / e)  p , implying that the wage offered after having noticed
ed shall be
wd  p  q ( H , ed )  (1  p )  q ( L, ed ) (2)
In order to complete the description of a unifying perfect Bayesian equilibrium, we shall:
- specify the confidence of the companies  ( H / e) for educational choices e  e d
outside the steady state, determining the remainder of the strategies of the
companies w(e) by (1);
- demonstrate that the best answer of both types of workers to the strategy w(e) of the
companies is to choose e  ed .
Thse two steps represent the Signalling criterion 1, respectively 2E, as above-mentioned.
If the company confidence is
0 if e  ed
 ( H | e)   (3)
 p if e  ed
Then (1) determines the company strategy as
q ( L, e) if e  ed
w(e)   (4)
 wd if e  ed .
Therefore, a worker with ability  chooses the level of education e to solve the optimum
problem:
max{w(e)  c( , e)} (5)
e
With the solution ed or that e representing the solution of the optimum problem
max{q ( L, e)  c ( , e)} .
e
65
Thus
the triplet [e,  ( ), w(e)] , [e( L)  ed ; e( H )  ed ] representing the strategy of the
-
worker, the confidence  ( H / e) given by relationship (3) and the strategy w(e) , for
companies, given by (4), form a unifying perfect Bayesian equilibrium;
- by replacing ed by e~ within the relationships (3) and (4), the resulting confidence
and the company strategy, beside the strategy [e( L)  e~; e( H )  e~ ] for the workers,
represent another unifying perfect Bayesian equilibrium.
- separating equilibrium, when the perfect Bayesian equilibrium separating by itself implies
the strategy [e( L)  e  ( L); e( H )  e  ( H )] for the worker. The Signalling criterion 3
determines the confidence of the company after having noticed any of the two levels of
education (namely,  ( H / e  ( L))  0 and  ( H / e  ( H ))  1 ), so that (1) implies that
w(e  ( L))  w  ( L) and w(e  ( H ))  w  ( H ) .
In order to describe these separating perfect Bayesian equilibria, we shall:
- specify the confidence of the companies  ( H / e) for educational choices outside the
steady state (values of e different from e (L) or e (H ) ), subsequently determining
the remainder of the strategy w(e) of the companies by (1);
- demonstrate that the best answer for a worker with ability  to the strategy w(e) of
the companies is to choose e  e  ( ) .
A confidence meeting these requirements is given by:
0 if e  e ( H )
 ( H | e)   (6)
1 if e  e ( H ).
And the company strategy becomes:
q(L,e) if e  e ( H )
w(e)   (7)
q(H,e) if e  e ( H ).
As e (H ) is the best answer of the high ability worker to the wage function w  q ( H , e) , this
remains the best answers in this case too.
As for the low ability worker, e  (L) is the best answer of that worker when the wage
function is w  q ( L, e) , so that w  ( L)  c[ L, e  ( L)] represents the biggest earning the worker is able
to reach, out of all choices of e  e  (H ) .
A specification of the confidence of the companies outside the steady state class, supporting
this equilibrium-related behaviour, is that the worker has a high ability if e  ed and a low ability
otherwise, the probability distribution being given by:
0 if e  ed
 ( H | e)  
1 if e  ed .
q(L,e) if e  ed
The company strategy becomes w(e)  
q(H,e) if e  ed .
Given this wage function, the low ability worker answers the best:
- by selecting e (L) and earning w (L) ;
- by selecting ed and earning q(H,ed ) .
Same as for the unifying equilibria, there are other separating equilibria implying a different
educational choice by the high ability worker.
66
For exemplification, let e~ be an educational level higher than ed , but sufficiently low that
the high ability worker would rather signal his ability by choosing e~ than let other believe that he is
a low ability worker: q ( H , e~ )  c ( H , e~ ) is biggest than q ( H , e)  c ( H , e) for any e.
If we replace ed by e~ in  ( H | e) and w(e) , then the resulting confidence and company
strategy, beside the worker strategy [e( L)  e ( L); e( H )  e~ ] are also a separating perfect Bayesian
equilibrium.
Let consider, given the company confidence relating to the educational level,
e  (ed ; e ( H )) , as strictly positive but low enough, so that the resulting strategy w(e) be placed
under the indifference curve of the low ability worker, through point (e ( L); w ( L)) .
- hybrid equilibrium
If a worker chooses a level of education with certainty, the other one may randomly choose
between joining the fist one (by selecting the level of education of the first type) and getting
separated from him (by selecting a different level of education).
We analyse the case when the low ability worker makes a random choice.
We suppose that the high ability worker chooses the level of education eh (where h means
hybrid), but the lo ability worker randomly chooses between eh (with the probability ) and eL
(with the probability 1-). The Signalling criterion 3 (rendered in the extended form in order to
allow for mixed strategies) determines the company confidence after having noticed eh or eL , the
Bayes rule leading to:6
p
 ( H | eh )  (8)
p  (1  p )
and the usual conclusion after separation reduces to  ( H | eL )  0 .
4. APPLICATION OF THE SIGNALLING GAME ON THE LABOUR FORCE

MARKET OF EU-27
Considering, at the level of several countries of EU-27, the following indicators:
Table no. 1.
Education ed H L
index
2007
France 0,978 0,852528 13,692 10,758
Spain 0,975 0,849528 13,65 10,725
Italy 0,965 0,839528 13,51 10,615
United Kingdom 0,957 0,831528 13,398 10,527
Germany 0,954 0,828528 13,356 10,494
Czech Republic 0,938 0,812528 13,132 10,318
Poland 0,952 0,826528 13,328 10,472
Hungary 0,96 0,834528 13,44 10,56
Bulgaria 0,93 0,804528 13,02 10,23
Romania 0,915 0,789528 12,81 10,065
Albania 0,886 0,760528 12,404 9,746
and identifying also the following functions:

q ( , e)  a  e  , for   L , respectively   H ;
be
c( , e)  , for   L , respectively   H .

67
the results below have been obtained:

Complete information case
a2
e ( )  2  3 Table no. 2.
4b
 
 
for a  1 , b  1 for a  1 / 4 , b  3 / 4
France 1,575602 3,277144
Spain 1,57399 3,27379
Italy 1,56859 3,262561
United Kingdom 1,564244 3,253521
Germany 1,562608 3,250118
Czech Republic 1,553824 3,231847
Poland 1,561515 3,247845
Hungary 1,565877 3,256917
Bulgaria 1,549394 3,222634
Romania 1,54102 3,205216
Albania 1,524566 3,170993
The highest level of ability, for both scenarios, is registered by France workers, followed by
Spain, the lowest levels coming to Albania and Romania.
Incomplete information case
Table no. 3.
Unifying equilibrium 1
eL eH roL=p roH=p w
0,852528 0,978 0,5 0,5 3,451499985
0,849528 0,975 0,5 0,5 3,440912561
0,839528 0,965 0,5 0,5 3,40562115
0,831528 0,957 0,5 0,5 3,377388022
0,828528 0,954 0,5 0,5 3,366800598
0,812528 0,938 0,5 0,5 3,310334341
0,826528 0,952 0,5 0,5 3,359742316
0,834528 0,96 0,5 0,5 3,387975445
0,804528 0,93 0,5 0,5 3,282101212
0,789528 0,915 0,5 0,5 3,229164096
0,760528 0,886 0,5 0,5 3,126819004
Table no. 4.
Unifying equilibrium 2
eL eH roL=p roH=p w
0,852528 0,978 0,3 0,3 3,368363609
0,849528 0,975 0,3 0,3 3,358031205
0,839528 0,965 0,3 0,3 3,323589859
0,831528 0,957 0,3 0,3 3,296036783
0,828528 0,954 0,3 0,3 3,285704379
0,812528 0,938 0,3 0,3 3,230598226
0,826528 0,952 0,3 0,3 3,27881611
0,834528 0,96 0,3 0,3 3,306369187
0,804528 0,93 0,3 0,3 3,203045149
0,789528 0,915 0,3 0,3 3,151383131
0,760528 0,886 0,3 0,3 3,051503228
68
Tables 3 and 4 present the unifying equilibrium for two scenarios considered. It is
ascertained that the highest level of w, for both scenarios is registered by France, followed by
Spain, the lowest levels coming to Albania and Romania.
4. CONCLUSIONS
This analysis allows us to draw the following conclusions:

- in case of signalling games on the labour force market, the pure strategy case, three
types of equilibrium are available: unifying, separating and hybrid;
- as the worker ability is private information, this allows for a low ability worker to
pretend to be a high ability worker;
- the low ability workers find it more difficult to accumulate additional education
requiring higher wages in return;
- beside the classical separating equilibria, same as for the unifying equilibria, there are
other separating equilibria implying a different educational choice by the high ability
worker;
- sometimes the separating equilibrium becomes the limit of the hybrid equilibrium.
The above-rendered application is meant to strengthen, at least partially, given the lack of
consistent data, the theoretical results.
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70
CHANGES OF INNOVATION BEHAVIOUR IN SLOVAKIAN FORESTRY
Mgr. JUDr. Zuzana DOBŠINSKÁ

dobsinska@vsld.tuzvo.sk,
Ing. PhD. Zuzana SARVAŠOVÁ
National Forest Centre Zvolen, Slovakia
sarvasova@nlcsk.org,
doc. Dr. Ing. Jaroslav ŠÁLKA
salka@vsld.tuzvo.sk
Abstract:
The present study describes the situation in the Slovak forestry sector comparing innovation activity in two
different periods (2002 and 2009). The ownership type appeared to be important for the innovation activity of forest
holdings. Higher innovation activity was reported by state-owned enterprises, contradicting the hypothesis based on the
theory of property rights, according to which the highest entrepreneurial and innovation activity could be observed in
private holdings. Instead, innovation correlated positively with the holding size.
The results concerning fostering factors for forest holdings to introduce successful innovations indicate the necessity of
cooperation, information exchange and the support of public and EU sources. The main obstacles for adoption and
application of innovation are lack of finances, tax load and environmental legislation.
The comparison between the two periods shows that innovation activity has increased from technological innovation to
products and services. Wood still remains the main product of forest holdings. In comparison with 2002, in present the
importance of bio energy becomes visible.
Key words: innovation, product, service, forestry, product mix, market expectations
JEL Clasification: Q23
INTRODUCTION
Forestry sector is often considered as a mature, “low-tech” industry which invests

comparatively little into research and development and is mainly an innovation user. However,
developments in the sector have led to a widely shared perception that past practice might not
necessarily bring future success. Interest by society in recreation or environmental, including
biodiversity, protection has grown in the last decades (Rametsteiner et al., 2010). This opens up
opportunities for innovations in the forest sector.
Innovation is vital to economic growth and development. Through innovation, new products
are introduced to the market, new production processes are developed and introduced, and
organizational changes are made. Forestry is an important source of income for forest owners and
for employees in rural areas. The future of the people, who make a living in rural areas from
forestry, will considerably depend on how individuals and institutions react in view of the changes,
how forest owners and managers obtain new knowledge and put it into practice in forestry, and how
institutions, especially forest administration, extension services, forest research or other institutions
best deal with emerging changes. The restructuring of forestry and the development of wood prices
tend to have a negative impact on employment. To compensate for the negative impacts, product
and service innovations based on the multifunctional use of forest and the efficient use of the
growing stock of wood can provide new opportunities for rural employment (Rametsteiner and
Weiss, 2004).
The objective of the presented study is to compare the effects of innovation activity and
entrepreneurship behaviour in the Slovak forestry sector in the years 2002 and 2009 with the accent
on the successfulness of the innovation, product mix and market expectations of forest owners. The
study also seeks to identify fostering and impeding factors to innovation.
71
THEORETICAL FRAMEWORK
Entrepreneurship is widely defied as a process by which individuals pursue opportunities

without the regard to the alienable resources they currently control (Hart et al., 1995). Irrespectively
of its opportunity-based or necessity-driven nature, the main features of the entrepreneurship
include an autonomous behaviour of enterprises, creativity, target- orientation, initiative, novel
approaches in nonstandard situations, ability to make decisions in uncertain situations, and the will
to take and carry a risk (Šálka et al., 2006).
The OECD (2005) defines innovation in its Oslo Manual as “[…] the implementation of a
new or significantly improved product (good or service), or process, a new marketing method, or a
new organisational method in business practices, workplace organisation or external relations.”
The minimum requirement for an innovation is that the product, process, marketing method
or organisational method must be new to the firm (or significantly improved). A common feature of
an innovation is that it must have been implemented on the market or when it is
taken into use by customers. New processes, marketing methods or organisational methods are
implemented when they are brought into actual use in the firm’s operations (OECD 2005). The
Oslo Manual distinguishes four main types of innovation – product, process, marketing and
organisational innovations – which are further sub-divided. Institutional innovation as a separate
category was added by Weiss et al. (2010).
A product innovation is the introduction of a good or service that is new or significantly
improved with respect to its characteristics or intended uses. This includes significant
improvements in technical specifications, components and materials, incorporated software, user
friendliness or other functional characteristics.
A process innovation is the implementation of a new or significantly improved production
or delivery method. This includes significant changes in techniques, equipment and/or software.
A marketing innovation is the implementation of a new marketing method involving significant
changes in product design or packaging, product placement, product promotion or pricing.
An organisational innovation is the implementation of a new organisational method in the
firm’s business practices, workplace organisation or external relations. An organisational
innovation is the result of strategic decisions taken by management. Business model innovations
would be included under this category.
Besides the above classified types of innovation that refer to innovations on a firm level, the
concept of institutional innovations is of increasing relevance when analysing policies and
institutions. Institutions are understood here to denote “the rules of the game”. Institutional
innovations refer to innovations in the public/policy sphere. Institutional innovations may include
new or adaptation of existing organizations, new or significantly modified rules as laid down in
laws, decrees or policies as well as new or significantly modified procedures in developing and
implementing policies (Weiss et al., 2010).
There is a growing consensus in the innovation system literature that innovation is an
institutional process (Lundvall et al. 2002, Edquist, 2001,) and that it is not only the entrepreneur
that is responsible for the innovativeness of the firm. They have to be embedded in a system of
institutions that can support them. A system of innovation has, usually in the context of national
innovation system research, been defined by the leading researchers in the field with different areas
of emphasis. Some common characteristics of systems of innovation approaches are their emphasis
on innovations and learning, interdependence and non-linearity, differences between systems and
non-optimality as well as holistic and interdisciplinary approach. Innovation system approaches are
considered a conceptual framework rather than a formal theory. Specific analyses in national
innovation system research are directed to deepening the understanding of certain types of flows or
structures and processes in innovation systems, especially human resource flows, institutional
linkages, industrial clusters and innovative firm behaviour. For researching innovation and
innovation policies in forestry, the approaches of sectoral innovation systems and regional
72
innovation systems are of particular importance, putting emphasis on the sectoral institutional
system in the former or regional networks in the latter (Rametsteiner and Weiss, 2004).
Basic functions of an innovation system are (Edquist and Johnson, 1997): (a) reduction of
uncertainty by means of information, (b) cooperation and conflict management, (c) provision of
pecuniary and nonpecuniary incentives.
The theory of property rights (Notrh and Thomas, 1997; Leiphold, 1980) links the
performance of an economic system with the correspondence between competences and
responsibilities in decision-making regarding economic activities. A large divergence between the
competences and responsibility should reduce motivation to the economic outputs and weaken thus
the functionality of an economic system. This divergence is large in a state property, the medium
one in a common property, and the lowest one in a private property. The state enterprises are
supposed to be the least output-motivated according to this theory, which might influence
negatively their entrepreneurial and innovative activity. The output motivation in collectively held
enterprises depends on the number of co-owners and transaction costs of their cooperation. The
private enterprises are expected to be the most output-motivated thanks to the lowest divergence of
competencies and responsibilities. The above mentioned anticipates a hypothesis that innovation
activities according to the ownership categories are in the following descending order: individually
owned holdings, common properties, state enterprises (Šálka et al., 2006).
MATERIAL AND METHODS
For the analysis of the situation of innovation and entrepreneurship in forestry in Slovakia,
following materials were used: modified questionnaire RPC EFI INNOFORCE from 2002 on the
Survey on innovations and entrepreneurship of forest holdings (Lacko and Vinca, 2002).
Respondents were chosen by random from the database of forest holdings. The non-state
forest holdings and branches of state forest enterprise represented the basic population of the
survey. Their owners and managers who are responsible for the management and product or
process-related decisions, were the target information sources. Questionnaires were sent by regular
mail and email surveys in state and non-state forest holdings during the year 2009. Data collected in
2009 were analyzed by descriptive statistic method. Results from the year 2002 (Lacko and Vinca,
2002) and 2009 were further analysed, compared and evaluated (figure nr. 1).
Database of forest holdings
Questionnaire
Analysis
Results of questionnaire from 2002
Comparison
Evaluation
Figure no. 1. Methodological framework
The questionnaire in 2002 was sent out by mail in the random sample of 1072 forest owners
and managers. The response rate was 25% (in total 268 respondents). In 2009 questionnaires were
sent out by mail: random sample of 500 forest owners and managers and e- mail: 193 email-
73
available forest owners and managers. The response rate was 37% (in total 257 respondents).
Respondents´ structure is shown in the figures (nr. 2 and 3).
The questionnaire was broadly focused on innovation but for the purposes of this study we chose
following areas: innovation activity, successfulness of innovation, product mix and market
expectation of forest owners and managers for the future (medium-term period – 5 years and long-
term period – 30 years).
Figure no. 2. Respondents’ structure according to the form of forest ownership in 2002
Figure no. 3. Respondents’ structure according to the form of forest ownership in 2009
RESULTS
The ownership type appeared to be important for the innovation activity of forest holdings.
The empirical observations contradict the hypothesis on the highest entrepreneurial activity and
innovation in private forests, medium in forests owned by municipalities and land associations, and
low innovation in the state owned holdings, however. The highest overall innovation activity was
revealed in the state-owned enterprises, intermediary in the municipal forests, and lowest in the
holdings owned by land associations and individuals (compare with Šálka et al., 2006). This can be
explained by the lack of disposable financial resources for the non-state forest owners. As we can
see, the innovation activity has slightly increased in 2009. We can state, that there has been a
positive shift towards innovation in forest enterprises (figures nr. 4 and 5).
74
Figure no. 4. Innovation activities in 2002
Figure no. 5. Innovation activities in 2009
The types of innovations which were successful can be divided into three categories:
products, services and technological or organizational innovations (tables 4 and 5). Technological
and organizational innovations have the biggest share on the successful innovations in the year
2002. The higher intensity of technological innovations in 2002 can be explained by the continuing
transition to a market economy, where technological innovations are undertaken continuously as
new technological means or principles become available (Šálka et al. 2006). As the transformation
process in Slovakia continues, innovations become more product oriented (figure nr. 6). Product
innovations have doubled from 17% in 2002 to 34% in 2009.
Figure no. 6. Successful innovations in 2002
75
Figure no. 7. Successful innovations in 2002
Round wood remains the most preferred product in both periods regardless of the managed
area (figures 6 and 7). In enterprises managing a larger area the product mix shows a greater variety
than smaller enterprises. They offer a larger scale of offered products and services.
Small enterprises (less than 500 ha) prefer round wood and rental to other products. Some of
them stated that they do not offer any products because they manage the forest for self-consumption
(17 in 2002 and 21 in 2009).
Figure no. 8. Product mix in forest holdings in 2002
In 2009 small and medium sized enterprises are more engaged in innovation and offering
new products (figure 8). Other wood product, game, non-wood products and services have a bigger
share in the product mix. Recreation and tourism also gained a more important role. The positive
shift towards non-wood products offer is a result of adopted strategic documents (such as NFP,
RDP) which emphasise sustainable forest management and the importance of the forestry sector in
rural development (figure 9).
76
Figure no. 9. Product mix in forest holdings in 2009
Regarding the market expectations of forest owners in 2002 wood and drinking water were
considered as the main gains that forests can provide. In long term period recreation, environmental
services and carbon sequestration was identified (figure 10).
Figure no. 10. Market expectations for forestry in 2002
In the year 2009 (figure 11) bio energy gained a significant role in the market expectations.
This is in accordance with the aspirations on the utilization of alternative energy resources. On a
global level, the forest biomass resource potentially available for energy is vast. Forests are the
main source of energy globally for domestic use & many industries. This opportunity was also
recognized by the Slovak forest owners. Wood still remains the main product but other gain a more
important role.
77
Figure no. 11. Market expectations for forestry in 2009
From the evaluation of both surveys following fostering and impeding factor could be
identified (table 1 and 2). Cooperation remains one of the most important fostering factors in the
innovation process in both periods. In 2002 the lack of information was identified as one of the
impeding factors but changed into fostering factor in 2009.
Table no. 1. Fostering factors in both years
Fostering factors in 2002 Fostering factors in 2009
1. Cooperation with customers, suppliers 1. Organizational changes
2. Supply of technological and organizational services 2. Cooperation
3. Support from public sources 3. Information
4. Opportunities for further education 4. Support from public and EU sources
Lack of financial resources is a permanent issue in the innovation process. EU funding

mechanisms became an important financial tool for innovation implementation. In recent years the
environmental legislation became larger and presents one of the most visible impeding factors for
innovation in forestry.
78
Table no. 2. Impeding factors in both years
Impeding factors in 2002 Impeding factors in 2009
1. Lack of own finances 1. Lack of financial sources
2. Lack of finances from other subjects 2. Tax load
3. High capital costs 3. High investments and operating costs
4. Lack of information about possible new products 4. Laws on nature and environmental conservation
and services
5. High operating costs 5. Risk of sales and marketing
DISCUSSION
Generally, the innovations were more common and usually more sophisticated in the state
forest enterprises branches in Slovakia. Their high innovation activity does not correspond with the
theory of property rights and can be explained by a positive effect of an enterprise size allowing
accumulation of financial resources. The innovation activity of forest holdings in Slovakia and
other Central European countries appeared comparable in general as well as according to the
product, technological and organizational innovations.
There is a limited innovation activity in forest holdings, especially in small ones.
Innovations are often incremental and not new for the sector. Another research on this subject in
Central Europe undertaken by PC INNOFORCE shows that the most important fostering factors as
seen by innovative forest holdings in Central Europe were cooperation, availability of information
on innovations and forestry subsidies (Rametsteiner et al., 2005). Cooperation within the sector is
also important for Slovak forest holdings but information is seen as a fostering factor only in the
2009 being amongst the impediments in 2002.
The most significant impediments for innovative holdings were sale ability risks, lack of
information on sales markets, lack of own funding, high costs and tax load. For non-innovative
forest holdings the main impediments were lack of own funds, high costs and lack of information
(Rametsteiner et al., 2005). The barriers to innovation are similar in Slovakia and other Central
European countries.
CONCLUSION
The ownership type is important for the innovation activity of forest holdings. Large forest
holdings were more engaged in innovation process than smaller holdings.
Innovation correlated positively with the holding size, when forest larger holdings innovated
more than smaller ones. Therefore there is a need for the smaller forest holdings to cooperate
between each other.
Technological – organizational innovations have dominated in 2002 but were overrun by
products and services.
In the future, it is assumed by the forest holdings that an increase of importance of drinking
water and bio energy will be present which was visible from the 2009 results.
Fostering factors for innovations are interactions within and between enterprises and
institutions and the main obstacles for adoption and application of innovations are based on
financial aspects.
There has been a shift towards innovation from 2002 in 2009 which is visible in the
successful innovation cases. Forest holdings in accordance with the strategic objective 4 of the
79
National forest programme of the Slovak republic: Increasing long-term competitiveness and
priorities strive for increased competitiveness and economic viability of multifunctional forestry by
the means of innovating, offering more non-wood forest products, supporting the use of forest
biomass to produce energy and cooperation with other forest land owners.
ACKNOWLEDGEMENTS
This contribution is the result of the project implementation: Centre of Excellence
„Adaptive Forest Ecosystems“, ITMS: 26220120006, supported by the Research & Development
Operational Programme funded by the ERDF and the Slovak Research and Development Agency
under the contract No. APVV-0692-07.
REFERENCES
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Edquist, C. (Ed.), System of Innovation: Technologies, Institutions and Organisations.
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of the state of the art. Lead paper at the Nelson Winter Conference, DRUID Aaborg, June
12– 15, 2001, draft version of paper downloaded from http:// druid.dk/conferences/nw/ on
10.08.2010
3. Lacko, M., Vinca, R. 2002. Innovations and entrepreneurship in Slovakian Forestry. Final
report on results of forest holdings and institutional system surveys. Forest Research
Institute, Zvolen.
4. Leipold, H., 1980. Wirtschafts-und Gesellschaftssysteme im Vergleich. Gustav Fischer
Stuttgart.
5. Lengrand, L. (2002) Innovation tomorrow. Innovation policy and the regulatory framework:
Making innovation an integral part of the broader structural agenda. Innovation papers No
28. Directorate-General for Enterprise. European Communities.
6. Lundvall, B.-A., Johnsson, B., Andersen, E.S., Dalum, B., 2001. National systems of
production, innovation and competence building. Paper at the Nelson Winter Conference,
DRUID Aaborg, June 12–15, 2001, paper downloaded from http://
druid.dk/conferences/nw/ on 10.08.2010
7. North, D.C., Thomas, R.P., 1977. The First Economic Revolution. Economic History
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Europe. Draft paper presented at “Sustain Life – Secure Survival II” Conference, 22-25
September 2004, Prague, Czech Republic, downloaded from
http://www.boku.ac.at/innoforce/publications/I&E_ForestryCE_Prag04.pdf on 07.09.2010
10. Rametsteiner, E., Weiss, G., Kubeczko, K., 2005. Innovation and Entrepreneurship in
Forestry in Central Europe. European Forest.
11. Weiss, G., Salka, J., Dobsinska, Z., Aggestam, F., Tykkä, S., Bauer, A., Rametsteiner, E.
2010. Integrating Innovation in Forest and Development Policies: Comparative Analysis of
National Policies acrossIn: Rametsteiner, E., Weiss, G., Ollonqvist, P. & Slee, B. (eds.).
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80
ROMANIA’S INVESTMENT POLICY
Lecturer PhD. Oana CHINDRIS-VASIOIU

The Ecological University in Bucharest, Romania
oana_vasioiu@yahoo.com
Abstract:
At the moment Romania's economic policy aims to gradually reduce the economic gaps that separate it from
developed world economies. In the current international environment, characterized by the internationalization of
economic processes, output and financial capital flows, foreign direct investments (FDI) are an important source of
profits that can ensure sustainable economic growth.
The increase of FDI inflows both in Romania and in other countries consist of the implementation speed and
success of the market economy. Successful schemes for privatization and economic restructuring as part of a successful
transition from better economic performance would certainly enhance any type of investment, including FDI.
Key words: investment policy, foreign direct investment, gross domestic product, private company, European
integration
JEL Classification: F21, O16
1. INTRODUCTION
Analysing economic performances expressed through the GDP recorded by transition

economies in the past years, in general, and by Romanian economy, in particular, and using the
result to project a trend for the next few years it is very clear that the private sector is still
alarmingly below national needs and an economic recovery can not be achieved without this sector.
The transition towards a market economy is accompanied by a dangerous instability and uncertainty
management especially for companies with wholly or partially owned state capital.
The physical and moral usage of the fixed assets is pretty advanced in these businesses,
many of them are still being made using machines from the 70s generation, which highlights the
acute need of an upgrade, the need for urgent projects and investment activities to ensure the
replacement of old equipment with other more modern and state of the art.
International investments have had a strong impact in the last three decades over economic
growth, foreign trade and over the productive structures in almost all countries. In a broad sense,
the investment is any use of an asset as capital for a profit. As the assets are real or financial,
investments as well can be real (in property, capital goods, etc.) or financial (securities). To be more
accurate the investment represents the purchase of property, shares, bonds or depositing money at
financial institutions to ensure an income (interest, dividends, rent etc.) and capital growth.
An option on prioritising between FDI and domestic investment can only be in favour for
the absolute priority of domestic investment. Any economist must be convinced from the beginning
that only the endogenous factor - domestic capital accumulation and encouraging local investors -
may give national economy content and a future in terms of independence, sovereignty and equality
in global economic relations. This strategy is closely linked to the taxing policy and the national
concept of macroeconomic strategy. It is also an attribute of power and a component of the
transition to a market full of integration opportunities into the economic and political European and
Euro-Atlantic structures (Andrew, 2009).
On the other hand paid capital is located mainly in non-strategic areas (trade, banking,
services, tourism and hotels) while in production and especially the basic industries, the paid capital
is not paid according to the one paid-in. Not paying this capital is either the expression of the
uncertainty of the foreign investor conception or the questionable quality of some investors easily
accepted by the Romanian partners, or their lack of information on the basic rules of foreign
economic or cooperation relations. All this reveals in fact the areas where the resuscitated structures
in Romania should be empowered to participate effectively and competently and support the
Romanian investor.
81
2. CONCERNS REGARDING THE INVESTMENT POLICY OF ROMANIA
Romania has serious drawbacks compared to neighbouring states with a similar political
situation and economic system and especially with the very developed states of the EU. Yet it is
easy to understand that joining the EU and being in the same group with some powerful states
involves and requires a genuine training which would give the right of a genuine partnership.
Integration without an improvement of the major gaps, at least technological, legislative and
structural is not acceptable both for the undeveloped states and the EU.
Besides some research circles give Romania a number of sanctions regarding the analysis of
opportunities for integration, reported in the current situation. In the studies of a South-Eastern
European Company near the University of Munich, a reference institution for political and
economic circles in West - Europe, Romania is not portrayed in appositive light its economic
situation being described as "a desolate picture... hardly able to feed its people."
Romania, as all countries in Central and Eastern Europe, also has a series of objective and
subjective reasons behind the interest in foreign direct investment from which we can especially
learn the following:
 The need for capital technological upgrade, economic recovery after the restructuring imposed
by the transition to a different economic system, the market economy is a first big motivation to
attract foreign interest. The transition to a market economy requires several essential moves in the
economic structures. The implementation of private property as preponderant in the economy
becomes a request of the first degree of the transition. Without a rapid alignment of the global
economy modern requirements, the economies of the former communist states are likely to enter a
dangerous setback.
 Enforcing and using new leading methods is a necessary component of a successful
restructuring transition. Among the synergist factors with determining effects in the economic
growth and development, a young and innovative management is considered to have a positive role
according to the Japan Economic Research Centre. Also, former German chancellor and renowned
economist Helmut Schmit stated years ago that the rapid progression of the post-war German
economy was based on a good organization of the economic activity and production as well as the
specific discipline of these people.
 The access to the Western market with its high demands is also a serious motivation to attract
FDI. Products obtained by foreign participation in the production process have much easier access
to foreign markets, especially if and when they join the foreign investors’ achievements in the
country of origin. In many cases the result of such cooperation, which is intended to make
investments and joint products, can enjoy certain facilities entering the markets of the developed
countries facilities that can target different authorizations, approvals, assimilation etc.., as well as
customs and fiscal facilities or others.
3. STRATEGIES TO ATTRACT FOREIGN DIRECT INVESTMENTS (FDI) IN

ROMANIA
In Europe, where Romania makes more than half of its export and imports it is easy to
imagine what certain isolation would mean. Romania's integration into European and Euro-Atlantic
political and economic structures is not only a matter of tactical options, but first, a widely accepted
strategic problem.
Aware of the importance of this membership and Romania’s integration into the European
economic concert, in Romania a consensus was reached by all major political forces by signing the
joint declaration at Snagov, which has legitimized the accession strategy and proved the full
credibility that Romania has to enjoy in Europe and worldwide in the irreversible transition process,
to a market economy (Prelipceanu, 2006).
82
Regarding its economic relations, Romania has consistently moved towards the
development of trade links and cooperation with the Western continent.
Romania's political and economic interests are intertwined with those of the whole Europe,
by its geopolitical position, by its present and future economic importance, being at the crossroads
of the most important trade routes. When over 50% of its foreign trade is conducted in relations
with Western European states, Romania needs the European market and the latter needs Romania
(Prelipceanu, 2006).
The vast majority of foreign investors want to avoid contacts with state ownership, in
whatever form it is presented, offering instead the option of purchase. The purchase of companies,
as a form of direct capital investment abroad, implies by definition a quasi-total or full takeover of a
foreign company whether executed through direct negotiation or making the purchase of shares
which is from the beginning subordinated to the expansionist strategies of major transnational
concerns with great economic power, holding multiple channels of market information and
influence including the nationals policies of the receiving states of such investments.
Moreover, the management of some companies where the state holds the controlling stake is
not entirely free to act being constantly conditioned to a number of representatives of power, with
less ability to understand and meet specific needs of the company, but with great influence in
decision making.
The emergence of new private companies, even if they have less economic and financial
power, is also likely to attract new foreign investors, knowing that the foreign investors who want
to expand in other markets are often small and medium enterprises. A study revealed that, for the
first time in America, companies primarily interested in new investments are businesses with fewer
workers than 200 (Dunning, 993). According to that study the companies that want, for the first
time, to invest in East – European countries, represent about 20% of the potential investors, while
80% of whom are among those who have already invested in this geographical area.
It is very important that that the private sector, including even the co-operative companies or
other associations, acts as an important factor with decisive impact on Romania's macroeconomic
development.
4. THE EVOLUTION OF FOREIGN DIRECT INVESTMENT (FDI) IN ROMANIA

DURING TRANSITION
During 1992-2009 foreign investment in Romania increased, their stock reaching from 87,3
million dollars in 1990 to 41,001 million dollars at the end of 2009.
The average and relatively small foreign capital volume per firm is consistent with the
orientation of these investments, mostly directed towards sectors with greater opportunities for
rapid recovery such as trade, tourism, investment and services, food and light industry, sectors that
do not require large investments.
The evolution of FDI flows is influenced by the events occurring internationally and
nationally in the political and economic scene and by the foreign partners' confidence in a country's
development strategy.
In 2009, the most important component of foreign direct investment attracted by Romania
was "reinvested profit" (33.9% of total FDI), followed by "equity" (33.8% of total FDI) and the
component "other capital", meaning the loans granted by the mother- company to the affiliated
structures in Romania (32.2% of total FDI).
Romania's attractiveness as a destination country for foreign investors was manifested by
the number of companies with foreign participation in the new capital registered in 2009 meaning
11,719. In comparison to 2005 it is noticeable an increase of 13.9% of the foreign partners interest
to establish new companies in Romania.
Foreign investment in Romania mostly comes from the European Union (over 59% in value
and 39% in number of investors). The greater share in the value structure than in the physical
structure shows that these investors have allocated specific higher volumes in each investment, thus
83
demonstrating the reliability and the perspective security of those partners. Such conclusions are
also drawn from the analysis of the investments from North America accounting for 10% of the
investment volume and 6% of the total number of investors, while the foreign investments from
Asia and particularly from the East show small specific investment dispersed in a large number of
companies.
The structure of FDI in different fields related to the amount of companies with a foreign
participation paid-in capital during January 1991 - December 2009, places industry on the first
place with 52%, followed by professional services 21,7%, trade 14,9%, transport 7,1%, tourism
1,8% Construction 1,7% and agriculture 0,9%.
The orientation of FDI towards the industry is due to the advantages offered by Romania in
this field, such as lower land prices than in other countries in the region, developed infrastructure,
skilled and cheap workforce, the existence of production capacity and tradition in this field. In the
last two years a great boom was noticed in the auto component industry due to foreign investments.
Many companies have expressed their intention to invest or have already invested in this field: the
Japanese company Yazaki opened two auto parts factories in the Industrial Park Ploiesti the amount
of the investment being 16 million U.S.$; Draxlmaier German group, as a result of the 15 million
dollars investment opened the auto parts factory in Hunedoara and the German company Ruwel
announced its intention to make an investment involving the opening of a factory of auto parts
worth 80 million euros in the industrial park in Cluj.It is also noticeable that for the companies with
foreign capital participation the industry is a intensive area in capital and not in the number of
companies, which creates premises for the industrial sector to be characterized by the products with
a high added value and with a high degree of processing (Dragomir, 2004).
Regarding the classification of companies with foreign capital participation by the country
of origin of the investors, the most important are Netherlands, Austria, Germany, France and Italy.
5. CRITICAL ASPECTS OF FDI IN ROMANIA
Some failures claimed by the foreign investors, who also are not specific only to Romania,
but also to other economies of developing countries must be taken into consideration and should be
removed through appropriate measures.
The right to dispose of the lands on which are FDI found is a problem highly upbraided to
the Romanian legislation and as well as the Bulgarian one, especially in the cases of some 100%
foreign capital investment. The leasing term of 99 years or throughout the life of the investment is
seen as an agreeable solution of compromise. The discussions with many small and average sized
foreign investors reveal that they are not particularly interested in buying land which is an
anticipated expense with a long term recovery while leasing is a current expense, immediately noted
in costs and thus recovered in short time.
The bureaucracy in the enforcement of some laws is also upbraided not only to Romania but
also to Poland, Czech Republic and Bulgaria which especially consists of long series of research,
approval, justification and last not least the extension of activities when it comes to capital increase
by reinvesting the profits etc.
The state of economic and currency instability is also a serious impediment by the lack of
safety to the feasibility study findings especially related to investment recovery opportunity and the
guarantee of achieving the desired profit.
Romania's economic situation in recent years and the prospects that can be foreseen are
likely to eliminate the like the above concerns for the Romanian economy. According to the data
published by the National Bank of Romania in the Annual Report on the Payments Balance and the
Investment Position of Romania after the economic decline during 1991-1992, when GDP dropped
to 28.8 mild. U.S. dollars (1991) and to 19.6 Mild. U.S. dollars (1992), the growth trend appears
starting in 1993, this indicator being of 26.4 Mild. dollars in 1995 the trend being to upgrade in the
following years.
84
A propaganda with a greater support and a larger distribution to which the need to use
renowned channels through their efficiency and their reliability degree is added is just as necessary
as the mentioned measures in the law or macroeconomic, to give the FDI in Romania the effective
and beneficial impulses to the Romanian economy.
The lack of documentary material on Romania in the libraries of the economic research
institutes in Europe must quickly be remediated for studies on Romania to stop being based on
inaccurate and sometimes deliberately distorted information, by persons or institutions from the
outside that not always carry the best intentions.
Regarding the domestic capital accumulation and privatization, as priority and decisive
factors the present implemented measures having more permissive and less incentive nature were
ultimately reflected in the creation of a large number of private firms in most of the national
economy sectors.
6. ASPECTS AND PROPOSALS TO ACCELERATE THE ECONOMIC

RECOVERY
Several measures can be proposed that have also been presented in other papers or debates
and also discovered from the direct observation of some specific activities (Chiţoiu and Bran, 2004)
 The improvement of tax legislation embodied in reducing the general level of taxation is the
first condition of these perspectives. The argument often put forward by some experts that the tax
pressure in Romania is lower than other states cannot be supported by an economist who wants to
be correct. Not the tax burden is decisive, but the amount of income that remains to the contributor
for survival and for accumulation. A percentage, (being it either, 40% or 60%) which would remain
to the Romanians is not as valuable as a percentage - of 30% or 45%, remained to the Swedish or
Japanese, for example. The income tax annulment for the part that is reinvested in certain sectors is
an effective and efficient motivation. In other states practice there are many convincing examples.
Post-war West Germany has also successfully applied income tax and the results have justified that
direction.
 Another feature may be the time change in the VAT payment. Its payment when the goods are
delivered and its collection are actually a credit given to the state by the entrepreneurial. When
regarding imports this fact is even more eloquent, as the importer pays VAT at the border and then
it will be recovered over several months at the dissolution of the imported goods. When imported
goods are investments goods this not only makes the economic situation of the importer harder, but
also leads to the rise of the investment having effects on both production costs and on the
investment capacity of the Romanian investors. This leads to an importer to require relatively high
interest loans for paying VAT and then, if the goods are not immediately charged he can ask after
three months for the VAT refund related to the not sold goods (meaning the amount of fixed means
invested), which, if it is reimbursed, then this is still due for the next month, interest on the loan for
payment of the VAT paid as a cost incurred. So the entrepreneur credited the State 3 to 4 months
with VAT, without any interest while he pays the bank interest due (by 5-6% per month).
 By revising some clauses in the policies regarding income taxes and local taxes entrepreneurs
could be given more chances to develop their businesses
 An important field in the process of economic recovery and implementation of a market
economy could be monetary stability and government support in guaranteeing investment loans
than could always warrant with the investment itself. Such practice could be quite an advantage for
the Romanian investor looking for external partners and foreign investment.
 The quality of the investments made by foreign investors is an issue in which economic
research still has something to say. At a first glance a series of matters appear that require further
discussions. Naturally that from the foreign investor’s point of view any purchase of assets or real
estate represents an investment. Things get complicated when it comes to purchasing assets from
the point of view of the receiving countries national economies. The simple sale of output capacities
that will be privatized and paid for by a foreigner is considered a classic trade transaction, in which
85
a good is sold and a price is charged. The national economy reduces its material assets and receives
some money, which in the beginning is not considered an investment.
According to the current legislation these amounts can be used in any other purpose
although in accounting they can be compared to the amortization of production means and should
be, by law, intended only to restore the stock of tangible assets. But since the State is reducing its
role as primary investor - excluding economic entities of strategic importance in the state
administration, which, however, have their own funding from development projects - the proceeds
from the sale of assets in the privatization lose their identity and become sources of coverage of
other budget destinations. In such a case, the sale of assets through privatization, while attracting
foreign investment, is not be considered an investment.
This means that for a foreign investment to really fulfill its part production capacity of
material goods or services needs to be created and of course this should result in jobs and increasing
the stock of inputs.
Regarding the proceeds from the sale of assets in the privatization process, either in RON or
a foreign currency, they can and should be stored and managed separately towards their role as
sources of investment financing. This would be fully consistent with the accounting law, as well as
government decisions related to accounting that state clearly that the proceeds of asset sales, and
sales of components or parts of fixed funds annulments should turn into development sources and
investment sources to rebuild and increase the stock of used fixed funds.
Considering the above mentioned, it is suggested to establish a National Fund for
Reinvestment and Economic Development, fueled by sales of production capacity and other assets
to be privatized, either in foreign or domestic currency and intended solely for funding new
productive investment projects.This fund should also be supplied with amounts from abroad in the
form of various grants or reimbursable loans, to support the transition process. The investment
activity that took place in Germany after the Second World War thanks to the Marshall Plan may be
used a reference point. The following rules and conditions of use should be taken into consideration
(Creţoiu and Chirila, 2000):
1. The existence of viable, verified and documented projects, subject to approval by an advisory
body composed of experts and neutral parties. They must respond to the real needs of the national
economy such as creating jobs in areas affected by unemployment, production of quality
internationally competitive goods required by the domestic market and especially foreign markets,
to be represented by private entrepreneurs, especially young people, that have been trained to
manage and implement the proposed project, to join the national or regional strategic programs of
macroeconomic policy etc..
2. The existence of a moral guarantee from the investor or group of associated investors,
including material guarantees resulting from the project or from other forms of guarantee.
3. Personal contribution from the investor with his own capital, or obtained through association
with others, to ensure proper management of the capital received.
4. Keeping the investment mortgaged until the recuperation of the invested capital from the
national fund.
5. Establish a loan system which completely prevents access to cash, the loan being used only to
pay bills that accumulate during the development of the project
6. The interest rates will not be larger than the necessary needed for the administration of these
funds, without any profit.
7. The de jure administrator must be the Ministry of Finance, but controlled by a certified and
knowledgeable State authority.
8. Other conditions which ensure the use of these funds exclusively for projects submitted and
endorsed by the authorized bodies with their verification and certification.
9. The fund must be made whole again gradually upon receipt of payment rates or portions of
assets sold or loan repayment and then redirected to other productive projects.
These are just some components of a strategy designed to encourage investments and create
a solid foundation for attracting foreign investors.
86
7. CONCLUSIONS
Romania, together with other Eastern European countries should replace arbitrary rules with
strong institutions with a legal regulation that inspire confidence and respect. Good laws and
institutions to make them functional represent a good start. The target is difficult to achieve because
transition economies are still struggling with a constant tension between, on one hand, the need of a
strong government to enforce laws and impose new ones and, on the other hand, the need to restrict
government power to make room for individual rights. Market-oriented incentives must
complement laws and institutions facing the same direction.
Strong involvement related to the EU integration stimulates the need for laws and patterns
of market-oriented legislation. Romania's desire to enter the EU was fulfilled, and this motivates
and will motivate further the adoption of economic laws that meet EU requirements in areas such as
tariffs, trade and competition policy.
BIBLIOGRAPHY:
1. Andrei L.C., Economie europeană, Editura Economică, Bucharest, 2009.

2. Chiţoiu D., Bran P. (coord.), Stimularea investiţiilor internaţionale prin facilităţi
financiare valutare şi vamale, Editura ASE, Bucharest, 2004.
3. Creţoiu Gh., Chirilă M., Economie mondială, Editura Porto-Franco, Galaţi, 2000.
4. Drucker P., Societatea postcapitalistă, Editura Image, Bucharest, 1999.
5. Dragomir C., Afaceri economice internaţionale: probleme, provocări şi perspective,
Editura Expert, Bucharest, 2004.
6. Dunning J., Multinational Entreprise and the Global Economy, Edison-Wesley
Publishing Company, Wokingham, England, 1993.
7. Frois G.A., Economie politică, Editura Humanitas, Bucharest, 1998.
8. Prelipceanu R., Investiţiile străine directe şi restructurarea economiei româneşti,
Editura Lumen, Iaşi, 2006.
87
COHESION POLICY AND GREEN ECONOMY

Professor PhD. Florina BRAN
PhD. Cristina POPA
Bucharest Academy of Economic Studies, Bucharest-, Romania
florinabran@yahoo.com
Abstract :
The international literature reveal numerous debates on sustainability of EU Cohesion Policy, among this
debates another issues is reveal the absorption capacity of member state. According to the objectives of Cohesion
Policy the financial programmes will contribute to economical growth, absorption of best available technology, create
an attractive business environment and jobs. More than 30% of the regional policy budget for 2007-2013, €105 billion
will be invested in the "green economy”. The paper synthesis the main aspects of cohesion policy and analyses the
investment in green economy.
Key words: cohesion policy, green economy, recycling, waste treatment, renewable energy, EU
JEL Classification: H41, Q18
INTRODUCTION
The national and international literature already study the impact of cohesion policy to
economic growth (Kalliores, 2005; Zaman 2010; Matei, 2010; Bradley 2006, Ciupagea; 2007)
possible economic effects of structural funds analyzed on econometric models, reveal different
scenarios, some studies report a positive impact, others a non-significant one or even a negative
one.
The sustainability of the Structural and Cohesion was also subject to many study
(Wilkinson, 1997; Berger,2004; Etkins, 2008) An recent study (Ecorys, 2009), funding has been
questioned by NGOs who claim that EU funds have subsidized an energy-intensive type of
development and the danger is that the same pattern will be repeated in the New Member States in
the 2007-2013 period. According to them, EU funds could play a positive role in the fight against
climate change if systematically directed towards energy efficiency, renewable energy and low-
emission transport, which, it is claimed, is not happening.
According to the study, only 1% of funds are allocated to energy efficiency and renewable
energy, respectively in the draft Operational Programmes.
While most of the New Member States are not having problems with reaching their Kyoto
target, investments in emission-intensive infrastructure may lock in the countries on unsustainable
pathways and limit the potential to contribute to the large-scale emission reductions necessary post-
2012.
Poland, which is highlighted as a case in point, in its own EU SDS reporting mentions the
growth in emissions that is catalyzed, by the resources of the Cohesion Fund and Structural Funds
of the EU.
CONTEXT
Damages to the environment have been growing in recent decades. Every year, some 2
billion tones of waste are produced in the Member States and this figure is rising by 10% annually,
while CO2 emissions from our homes and vehicles are increasing, as is our consumption of
polluting energy. As the effects of global warming confirmed the international scientific consensus,
the new sectors of the green economy accelerated their growth worldwide.
Technological innovation is needed to shift from fossil fuels to renewable energy, recycling
and redesign industrial processes. One of the major tasks of the Union is to ensuring sustainable
development, to maintaining a high level of environmental protection, furthermore environmental
88
protection requirements must be integrated into the definition and implementation of community
policies.
The cohesion policy is currently the second largest issue in terms of budget, following the
common agricultural policy, and has grown consistently over time. The overall ambitions of the
regional policy is to increase cohesion and to “reduce disparities between the levels of development
of various regions”, enhancing economic development, increasing levels of employment, improving
environment and eliminating inequalities. Cohesion policy in all its dimensions is regarded as an
integral part of the Lisbon and Gothenburg. Furthermore, EU SDS promotes the integration of
climate change and energy objectives in the cohesion and structural funding.
COHESION POLICY OBJECTIVES
Cohesion policy has 3 major objectives, as follows:

Convergence objective concerns, first of all, those regions whose GDP is less than 75% of the
community. Within this objective it is envisaged the economic growth for the least-developed
regions, through investments in the development of long term competitiveness, employment,
sustainable development and also development of institutional capacity and public administration
efficiency.
Regional competitiveness and employment objective (15% funded in the budget for
structural funds and cohesion) - aims to regions not eligible under the Convergence objective.
Through programs funded by the European Regional Development Fund, Cohesion Policy supports
the regional to anticipate and promote economic change in industrial and rural areas by
strengthening their competitiveness and attractiveness. Under the new program financed by the
European Regional Development Commission proposes strict intervention and focus on 3 priorities:
innovation and knowledge based economy, environment and risk prevention, accessibility and
services of public interest.
European territorial cooperation objective (financed with 5% of budget for structural funds
and cohesion) - refers to: transnational cooperation; cross-border cooperation; interregional
cooperation.
The programming budget is supported by structural instruments (European Regional
Development Fund, European Social Fund and Cohesion Fund) and two complementary actions
(European Fund for Agriculture and Rural Development and the European Fisheries Fund).
Since October 2008, the Commission has proposed a series of measures to speed up the
implementation of European cohesion policy programmes for the 2007-2013 period to ensure that
all cohesion policy resources are fully mobilized to support Member State and regional recovery
efforts. One of the major objectives of European Economic Recovery Plan together with Cohesion
Policy targets investments that strengthen the EU long-term competitiveness is green technology
and energy efficiency.
As a response to the economic crisis, the cohesion policy foresees that all EU Member
States and regions would be able to get EU regional development funding for energy-efficiency and
renewable energy investments in housing.
Cohesion policy can facilitate transition to a smarter and greener economy across Europe.
By mobilizing territorial potential and complementing EU policies, cohesion policy can contribute
to maximize the impact of other EU priorities.
FINANCIAL SUPPORT FOR “GREEN ECONOMY”
With a financial envelope of over €350 billion for the period 2007-2013, cohesion policy
provides considerable support to public investment by the EU's Member States and regions.
The €105 billion dedicated to green projects and jobs is almost three times greater than the sum
allocated in the 2000-2006 budgetary period.
89
A large part of the envelope €54 billion is designed to comply with EU environmental
legislation.
25 23
20
15
10
6
4.8 4.2
5
0
Railways Clean Renewable Energy
urban energies efficiency
transport
Figure no. 1. Investment for a low carbon economy, bln. Euros

Source: European Commission (2009)
Improvement of water and waste management alone accounts for €28 billion of the total.
€48 billion of the funding has been earmarked for measures aimed at achieving EU climate
objectives and creating a low carbon economy (fig.nr.1).
According to the EC, in a difficult financial year, the investments will be an important
instrument in the long-run employment and revitalization of local economies and the enforcement of
the EU commitment to fighting climatic changes. Through the EUR 48 billion bound for the
achievement of objectives established by the EU in the limitation of the effects of climatic changes
and promotion of a less polluting economy, the cohesion policy has a substantial contribution to the
objective of reduction by 20% the emission of greenhouse gas until 2020, compared to the levels of
1990.
Romania and Bulgaria are investing the highest proportion of Cohesion Policy funds on
environment-related projects, at 45% and 42% of their allocation respectively. These investments
include environmental major projects, which also contribute to protecting and creating jobs in the EU.
Environment allocations comprise these categories:
-Eco-innovation in small and medium enterprises
-Railways
-Promotion of clean urban transport
-Renewable energy
-Energy efficiency, co-generation, energy management
-Waste management
-Water management
-Promotion of biodiversity and nature protection
-Integrated projects for urban and rural regeneration
-Other
90
United Kingdom 15%

Sw eden 10%
Finland 9%
Slovakia 33%
Slovenia 38%
Romania 44%
Portugal 24%
Poland 26%
Austria 7%
Netherlands 16%
Malta 37%
Hungary 37%
Luxembourg 12%
Lithuania 35%
Latvia 34%
Cyprus 35%
Italy 31%
Ireland 17%
France 22%
Spain 35%
Ellada 27%
Estonia 35%
Germany 16%
Denmark 6%
Czech Republic 40%
Bulgaria 41%
Belgium 13%
0% 10% 20% 30% 40% 50%
Figure no. 2. Investments in Environment Comparing to Their Total Indicative Budget

Allocations for 2007-2013
Source: http://www.energy-cities.eu/IMG/doc/MS_investments_in_environment_green_economy_plan.doc
For Romania the higher investment are for water management: 2.776.532.160 Euros and railways:
1.718.455.590 Euros.
Eco-
innovation in
Other SMEs
Integrated Railways
projects for Renewable
urban and energy
rural
Energy
regeneration
efficiency, co-
Promotion of generation,
biodiversity Water energy
and nature management management
protection Waste
management
Figure no. 3. Cohesion policy investment in environment, Romania 2007-2013, in Euros

Source: European Commission (2009)
The Cohesion Policy is also helping to create new market openings for local economies by
enabling them to seize the opportunities created by the need to tackle climate change as new
potential sources of growth.
Nearly half of the Member States (Austria, Bulgaria, the Czech Republic, France, Germany,
Hungary, Italy, Poland, Portugal, Romania, Slovakia, Slovenia and the UK) have integrated
indicators for the reduction of greenhouse gas emissions into their Cohesion Policy programmes.
France, for example, has developed a unique carbon evaluation tool to monitor CO2 emissions
produced by all projects funded with EU support. Romania included integrated indicators of
reducing greenhouse gas in national programs due to the European cohesion policy.
Promoting eco-innovation and new green jobs, especially in small and medium enterprises,
ranks high in the priorities for support for the regions. The Cohesion Policy is contributing €3
billion to the promotion of environmentally-friendly products and production processes in SMEs.
91
One of the clear aims of funding for research and innovation is to boost overall investment in green
technologies.
CONCLUSION
Cohesion policy has a key role to play in smoothing transition to a low-carbon economy and
enhancing environmental quality. Through Cohesion Policy's objective to deliver sustainable
growth, jobs and competitiveness is support green economy and the environment.
Even the cohesion policy offer opportunities for development of green economy, the success
to achieves the cohesion policy objectives is represented by capacity to absorb funds in an effective
manner. Unfortunately, for Romania Romania's capacity to absorb European Funds, has proved to
be reduced, and the comparison with other Member States at a similar moment, draw a warning,
regarding the modest place occupied by Romania, in comparison with other European countries.
Thus, in the first year of accession, according to analysis made by the Romanian National Bank, the
rate of absorption was only 21,7%, while other admitted countries in 2004, like the Czech Republic,
Poland, Slovakia, Hungary, recorded a nearly double, around 42% in the year in question. One of
the major issue identified by European Commission is incapacity to ensure co-financing for project.
REFERENCES
1. Hazel Henderson (2007) Growing the green economy – globally, Int. J. Green Economics,
Vol. 1, Nos. ¾
2. Jana Cicmanova (2009) Cohesion policy backs "green economy" for growth and long-term
jobs in Europe, http://www.energy-cities.eu/cohesion-policy-backs-green
3. Paweł Samecki (2009) Orientataion paper on future cohesion policy
4. Popa Florina (2010) Absorption capacity of Structural Funds in Romania, Studies and
Scientific Researches, Economic Edition, nr.15
5. Rojanski V, Bran Florina, Grigore Florian, Ioan Ildiko (2006) Cuantificarea dezvoltǎrii
durabile, Bucureşti, Editura Economica
6. Zaman Gheorghe (2009) Structural fund absorption: a new challenge for Romania?,
Romanian Journal of Economic Forecasting – 1/2009
7. Magnus Ekbom (2010) Catching up? A study on the effects of the European Union’s
regional policy during 2000−2006
8. COM(2009) 295 final, Sixth progress report on economic and social cohesion, Bruxells
9. European Commission (2009). Cohesion policy backs ‘green economy’ for growth and
long-term jobs in Europe. Press releases IP/09/369
10. ERNST & YOUNG (2009) Romania monthly economic review
11. Ecorys (2008) Progress on EU Sustainable Development Strategy, Bruxells, disponibil
http://ec europa eu/sustainable/
92
ASPECTS REGARDING HISTORICAL EVOLUTION OF INTERNATIONAL FINANCIAL

FLOWS
Lecturer PhD. Carmen BOGHEAN

camibog@yahoo.com
Lecturer PhD. Florin BOGHEAN
bogflorin@yahoo.com
The Faculty of Economic Sciences and Public Administration,
Abstract:
The capital, under all its forms, is probably the economic resource with the highest degree of mobility in the
economic context of the new millennium. The capital flows are nowadays common presences on international circuits and
also on national, intersectorial or intrasectorial direction. Not just the volume of the capital flows and their motion speed
are in a permanent ascendancy, but also the easiness with which they transform (direct investments, portfolio investments,
bank and non bank credits, bonds) according to the characteristics of the host environment and the interest towards the
holder’s profile.
Key words: financial globalisation, international financial flows, financial crises.
JEL Classification: D53
INTRODUCTION
If in the first half of the past century and in biggest part of the second half, the first coordinate
– the one of the national economy through inter and intrasectorial transfers- was the dominated one,
and the „stars” of international changes and flows were the merchandises and services, in the last
decades the international circulation of capitals represents the type of cross border transaction that
registers the most rapid growth.
At the same time, if in the past the capital flow was understood only as a financing form of the
current account, nowadays, the international distribution of capitals determines more and more the
exchange course and the international rates of the interest that, on its turn, influences the evolution
and the structure of the international trade.
During the last 20 years, the capitals flow met an extraordinary development, the transaction
costs diminished, and the allurement of capitals makes nowadays the object of a more and more
intense international competition. Ever since, the liberalization measures became indispensable in
engaging foreign capital, in order to ensure the integration in the international economy and promote
the development of a competitive financial sector.
1. HISTORICAL EVOLUTION OF FINANCIAL FLOWS
From the historic point of view, we can talk about for the first time about systematic and
significant international flows of capital from the second half of the XIX - th century, when more
governments and rail road companies emitted bonds with fixed interest mainly on the capital market of
Great Britain, and also on the capital markets in France and Germany.
Subsequently, at the end of the XIX-th century, the direct foreign investments, especially those
coming from the USA, began to compete from the value point of view with the portfolio investments. In
the same period, the international flows of capital exceeded as importance the commercial ones, fact
that coincided with the moment in which capitalism became a worldwide economic system.
After the end of the First World War that produced a discontinuity in the evolution of the
financial flows, in the years 1920, the combination of direct foreign investments and portfolio
investments progressed positively, being aimed especially towards the USA and Europe. The great
depression of the years 1930 made that such international investments to diminish in a significant way,
93
their place being taken by speculative capital movements that meant to carry out the evolutions of the
currency courses.
At almost one decade from the end of the Second World War, in the years 1950, the international
capital flows reappear under the form of direct foreign investments and later, of the international
financial markets. This time, the main form of the international capital flows was that of loans with
variable interests, in comparison with the previous periods when predominate the bonds with fixed
interest.
The system of Bretton-Woods induces, for a long period of time, the so called Triffin
paradox, according to which the international liquidities can only grow in conformity with the deficit
of the American external balance of payments and the weakening of the dollar. But for a short period
of time, the American capital exports evolved in a way converse towards the evolution of the
internal cycle characteristic to the USA, and that attenuated the negative repercussions at an
international level. After turning to the system of flexible exchange rates, this adjuster mechanism is
more and more weak, because of the „blow up” of the short term capital movements, but also
because of the influence the speculative operations had on the exchange courses. (Brakman, S.,
Garretsen, H., 2006)
The development of the operations specific to the international capital flows is carried out
through certain specific institutions, according to the nature of the carried out operations
(investments or loans). In the case of short or long term portfolio of investments the used institutions
are banks or stock exchanges. In the case of the international operations with short term capital
connected to the valorisation of the differences of currency, the used markets are the currency ones.
The international currency market is the biggest market in the world, its volume being able to exceed
1,5 trillion dollars per day and the main present feature of this market is the strong movement
towards Internet that is supported by all the important banks in the world. (Stolnik, B., 2000) In the
case of the direct foreign investments we can not talk about certain specific markets, but only about
specific operations developed by investors in another country than the resident one. As some
promoting agencies of the foreign investments are made of significant facilitators of the foreign
capital flows towards the receiver country, they can be considered the „equivalent” of some markets.
The internationalization (globalization) of the financial markets does not mean only the
coverage of the entire globe with a services network, but also the integration of these markets at a
global scale. In this context, capitals gain an unseen before mobility, their transfer being carried out
through pressing some computer buttons. The development of the financial markets determined and
a meaningful growth of the transactions volume that exceeded the international trade of goods and
services. If in the past the majority of the financial transactions were correlated and determined by
commercial exchanges, in the present, between the two types of flows appeared a detachment.
As part of the global financial markets, the capital flows have as source private and state
companies, and also international organizations. These organizations can come from the system of
the Organization of United Nations (The International Monetary Fund) or can be cooperation
organisms or interstate economic integration such as the European Union or the North- American
Free Trade Agreement. (Divecha, A., et al. 1999)
Of course, if in the case of the international organizations the generated capital flows have a
smaller share and are generated on the basis of certain well defined and relatively slow mechanisms,
the flows generated by the private companies have a much bigger share, and also a bigger mobility.
If to the commercial international flows (of goods and services) participate all the countries
of the world, we can not the say the same thing about the measure of applying them to the
international flows of capital. The participation to the worldwide economy through investments or
external loans of capital is characteristic only to those states that reached a high level of
development.
In the present, the transactions on the most important financial markets exceed the value of
the international trade with goods and services. Thus, many economists believe that we witness a
new phenomenon: the two sides of the worldwide economy- the real one (goods and services) and
the financial one (symbolic or nominal) tend to be less interdependent. (Levich, R.M., 2000)
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The international financial flows are the result of the capitalism development on a superior
scale. There is at least one critical dimension in which the international capital flow before 1914
differs a lot from what we see nowadays, with important implications for, periphery (countries in a
process of development). In order to see this comparison we must make the difference between the
net and gross international financial assets flows.
A gaze over data reflects the fact that the difference between net and gross was very
important in the last years, but absolutely with no importance in the globalization era before 1914.
The reason is simple. In the last part of the XIX-th century, the main financial flows were the
investments of long term capital, unidirectional. There was one exception to take into consideration:
The United States of America, where the capital inflows and outgoes were high. But in most cases,
the key creditor inflows, especially in Great Britain, but also in France and Germany, engaged to
finance other countries in order to gain more capital. Thus, they developed a one way position in
their portfolio.
In 1914, the share of the Argentinean assets in the portfolio of Great Britain was very high,
but through comparison, the Argentinean holding of British assets were minor. Thus, the XIX-th
century was under the sign of international assets diversity through the main creditor, nations such as
Great Britain. At a first approximation, the total amount of assets and the position of bond were very
close to net in that far away period.
The years 1980 and 1990 are obviously, very different. For example, The United States of
America became in this period the biggest net debtor in the world. But while being responsible for
the biggest national stocks of gross foreign bonds, The United States held also the biggest stocks of
gross foreign assets. In the period after the war and until recently, the net capital flows among
countries became smaller than before 1914, but there was bigger volume of assets in the purpose of
diversifying / sharing risk. (Obsfeld, M. Alan, M. Taylor, 2005)
In which concerns the orientation of the international financial flows, the most important
flow remains the North- North one but in the last years there must be mentioned the apparition and
intensification of the South- South flows, as a consequence of the cooperation among the Arabian
countries, exporters of oil and the developing countries, flow that, in the last period of time surpasses
as dynamics the North-North one.
The world economy can be seen as an amount of the connections between the economic
activities developed at a large scale. In the present, the way in which people from a country on the
globe obtain and spend their incomes, the way in which they make savings and transform them in
wealth are related to the people’s incomes, expenses and savings from other countries. Sporadically,
such international connections existed even in the preceding centuries but, in the contemporary
worldwide economy these connections extended their coverage area, they intensified and changed
their nature at scale with no precedent.
On the other side, the economic conditions of each country are strongly influenced by the
development of the world wide economy. This correlation is felt through the international trade,
through the world wide production and the international financial relations. Other important
connections that connect the economies of different countries in a global entity- worldwide
economy- are represented by the mobility of the labour force and the diffusion and the international
transfer of technology. Even if these connections connect each country to the world wide economy,
it must be underlined the fact that they do not produce uniform results, in consequence the economic
growth is not uniform, in each period some countries developing more than others. The direct
foreign investments became in the last years the most important source of external financing for the
developing countries and even an important financing source for the developed countries.
Many companies do not limit themselves only to the import and export of goods and services
but, they find it appropriate the forming of permanent enterprises in foreign countries. There could
be a few reasons for such an action: for ensuring the safety of deliveries, it could be more profitable
for the company to produce by itself the products than to by them from the local producers or it
could be “empire- building” (gaining the control over certain projects and initiatives on order to hold
the control) from the part of the company management. (Institute of International Finance, 2009)
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There are certain advantages of producing in other countries: cheaper production factors
(especially labour) that could facilitate the manufacturing of the product for the needs of the present
market. In the second phase, the local production replaces the exports, but there is, usually a third
phase in which the goods manufactured in a foreign factory are exported in other countries from the
region or even back in the origin country of the company.
Most developing countries have taken advantage of favourable external conditions to
implement domestic policies designed to reduce their vulnerability to financial turmoil and reversals
in capital flows. In particular, countries have reduced their external debt burdens and lengthened the
maturity structure of their debt. Several have bought back large amounts of outstanding debt, using
abundant foreign exchange reserves, and refinanced existing debt on more favourable terms. The
market for sovereign debt has evolved significantly, as governments debt turned from borrowing
externally to borrowing domestically, usually in local currency. Creditors` assessment of
creditworthiness of developing country borrowers remains positive, as reflected in spread on
emerging market bonds and bank loans, which have hovered near record lows. By these measures,
most developing countries have clearly improved their ability to deal with moderate shocks that may
accompany changes in the international credit environment.
2. FINANCIAL FLOWS IN EMERGING MARKETS
The as we see already the 1970s marked the beginning of a new era of financial
globalisation, the likes of which have not been seen since the period running up to the First World
War. By the mid-1990s, increased global liquidity, the liberalisation of trade and capital accounts,
and the search for high-yield investment opportunities caused private sector capital flows to the
developing world to vastly surpass levels of official sector development aid.
We need however to define what we understand by an emerging market. Strictly speaking
the concept as we understand it in the article is related to the countries included in JP Morgan’s
Emerging Markets Bond Index (EMBI), produced since the mid 1990s. However if we take an
historical point of view, some of the most well known emerging markets of today were quite
developed and sophisticated economies in early 1900s: Argentina for example ranked by that time
as one of the most developed countries and the United States looked by the early years of the 20th
Century as the pure prototype of an emerging economy. Even today some of the most established
OECD countries are hard to classified: Turkey, South Korea and Mexico are all emerging
economies and also OECD countries while some have been arguing that European or OECD
countries like Greece could be classified as emerging economies.
But even the notion that emerging markets are also economies that have specific
propensities to suffer economies crises is also questionable This diagnosis is in some ways less
straightforward than sometimes is assumed because it is not a priori clear whether recent crises are
more frequent or deeper than in the past, or just triggered more readily. Like in the past, serial
defaulters continue to be alive, the massive historic default of Argentina in 2001, for example,
being the fifth of a long series of defaults. Historically, they are not only occurring in emerging
markets, although during the 20th Century they became less frequent in the more advanced
economies. Sudden stops of capital flows and financial crashes abound, even if during the past
decade they remained below the historical average. Political cycles and financial crises continue to
go hand-in-hand in emerging markets and asymmetries of information continue to play an
important role. (Nieto and Santiso, 2007). The main reason is that, despite all the structural changes
since the earlier period of high capital mobility, the potential sources of cyclical variability in
capital flows remain the same: divergent macro-economic conditions in capital-exporting and
capital-importing countries, and crises in individual capital-importing countries
Curiously, emerging markets (EM) countries – the subset of developing countries most
integrated in the system of global finance – are now receiving more private capital than they can
effectively employ, making them net capital exporters to the United States. One might well expect
such abundant access to foreign capital to bode well for EM economic growth and financial
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stability. However, the long-term growth effects of financial openness for emerging markets remain
a matter of academic debate. Whatever the answer, it is clear that EM countries have often paid a
high short-term price for relying on foreign capital, as a long list of EM financial crises attests. We
can ‘think of capital flows as a medicine with occasionally horrible side effects. (Rodrik, D. 2002)
The role played by private capital markets and financial institutions in generating the
occasionally horrible side effects’ of global capital flows warrant greater attention. The prevailing
literature and policy discourse place too much blame either on the EM countries or on policy
failings of the official and multilateral sectors. Suggested reforms to the global financial system to
date have focused largely either on institutional and policy changes required of EM countries or on
international crisis-resolution procedures which would only come into play once a crisis is already
well under way (Roubini and Setser, 2004).
The modern era of financial globalisation has at least two notable features: first, the high
volatility of financial flows for EM countries and frequency of financial crises; and second, the fact
that it has largely bypassed low-income developing countries. Regarding the second point, we can
describe the curious pattern of today’s global capital flows as primarily a ‘rich–rich’ affair and
contrast it to the pre-1914 era when capital flowed mainly from rich to poor countries, and in far
greater amounts relative to saving and investment.
FDI comprises the largest share of total private flows to EM since the mid-1990s, the rest
comprising portfolio equity and debt, commercial bank lending, and other instruments such as trade
credit and derivatives. Not surprisingly, FDI has been significantly more stable than non-FDI
private capital flows: based on the Institute of International Finance’s data, the standard deviation
of annual changes in FDI inflows to EM countries from 1978 to 2005 is 0.25 versus nearly 9.0 for
non-FDI flows. (Institute of International Finance, 2006)
FDI to be significantly less volatile than bank lending or portfolio flows. Correspondingly,
FDI is widely viewed as having positive long-term productivity and growth effects for developing
countries, even among scholars who argue against the benefits of other types of capital flows.
3. CONCLUSION AND PERSPECTIVE

World growth is moderating and financial markets are signalling a turn in the financing
conditions facing the developing world. As these developments make themselves felt, 2008 is likely
to be a year of adjustment for capital flows to developing countries. After recovering from the sharp
contraction of 2001-20002, private flows weathered several episodes of global volatility and passed
through a full cycle of global monetary easing and tightening to reach a record level of 647 billion
dollars in 2007, up 17 percent from 2006. Total capital flows, including lending by official creditors,
levelled off at 5 percent of GDP in 2005-2006, just below in 5.25 percent level reached in 1995-
1997, before the East Asian crisis.
Developing countries have come to account for a large share of the growth of word output
and trade, a fact that in increasingly recognized by international investors. Their economies grew
more than 7 percent in 2007 – more than twice the 3 percent rate of growth in high-income
countries. The expansion was particularly evident in China, where output increased 10.7 percent, and
India, which grew 9.2 percent. But the strong performance was broadly based, with all developing
regions growing al least 5 percent.
With almost half the year over, it is clear that net private capital flows to emerging
economies in 2009 will be down substantially from 2008. Net flows are now projected to be about
$141 billion for the year as a whole, less than half of the $392 billion estimated for 2008, and far
below the record level of $890 billion in 2007 (The institute of International Finance, 2009). Our
new estimate for 2009 is down somewhat from the last one in January, which was for $165 billion.
Estimated flows for both 2008 and 2007 have also been revised down, however, so the underlying
change in our forecast is not that material. In a sense, this lack of a significant further downward
revision is encouraging, sine it implies a degree of stabilization in flows following a phase of sharp
deterioration, especially in the months immediately following the disorderly failure of Lehman
97
Brothers in mid-September 2008. This stabilization is indeed evident in a whole series of high-
frequency indicators, including both asset prices and available weekly and monthly data on capital
flows to emerging economies. Following a phase of net outflows between October 2008 and March
2009, flows to emerging markets appear to have improved somewhat over the past two months,
albeit to levels far below the early months of 2008 (and certainly well below those of 2007). This
recent dynamic in capital flows mirrors what we believe is happening in the broader global
economy. Following six months of alarming decline, measures of global output are now contracting
more slowly. This stabilization in turn reflects a huge degree of policy stimulus - both monetary and
fiscal - put in place across the global economy in recent months. In aggregate, global growth is
likely to resume later in 2009 and continue, albeit at a very moderate pace through 2010.
The return to positive growth seems to be happening earliest and most decisively across a
number of large emerging economies, especially in Emerging Asia and, to a lesser extent, Latin
America, which is helping bolster confidence in flows - especially portfolio equity flows - to
emerging markets. Net portfolio equity inflows are expected to strengthen by about $118 billion,
net, in 2009. In line with these relative global business cycle trends, net private capital flows to
emerging economies are projected to revive in 2010, to be about $373 billion, net. The main
turnaround is expected to come from debt-related flows, attracted, in part, by the persistence of
wide nominal interest rates differentials between emerging and mature economies.
REFERENCES
1. Brakman, S., Garretsen, H.,(2006) Nations and Firms in the Global Economy, An
introduction to International Economics and Business, Cambridge University Press.
2. Divecha, A., Drach, J., Stefek, D, (1999) Emerging markets: A Quantitative perspective,
Journal of Portfolio Management New York.
3. Levich, R. M., (2000) The importance of emerging capital markets, Working Paper, Stern
School of Business, New York University.
4. Nieto, S. and Santiso, J. and (2007), “The Usual Suspects: Investment Banks’
Recommendations and Emerging Markets,” OECD Development Centre Working Paper,
258, January.
5. Obsfeld, M., Alan M. Taylor, (2005) Globalization and Capital Markets, Working Paper,
8846.
6. Rodrik, D. (2002), ‘Who Needs Capital Account Convertibility?’, in Should the IMF Pursue
7. Capital-Account Convertibility?, Princeton Essays in International Finance 207 (Department
of Economics, Princeton University).
8. Roubini, N. and B. Setser (2004), Bailouts or Bail-ins? Responding to Financial Crises in
Emerging Economies (Washington, DC: Peterson Institute for International Economics).
9. Stolnik, B, (2000) International Investments, Fourth Edition, Addition-Wesley Publishing
Company, Reading-Massachusetts.
10. ***World Bank, Global Development Finance, (2007) The Globalization of Corporate
Finance in Developing Countries, The International Bank for Reconstruction and
Development, Washington.
11. ***Institute of International Finance, (2009) Capital Flows to Emerging Market Economies,
June 11, (available at www.iif.org). Washington, DC
98
LANDMARKS OF REGIONAL DEVELOPMENT IN THE E.U.
Assistant PhD. Student Adrian Liviu SCUTARIU

livius@seap.usv.ro
Highschool Teacher PhD. Student Lucia Hedviga PASCARIU
Cooperation Highschool Botoşani, Romania
luciapascariu@yahoo.com
Abstract:
Regional development policy strengthens the role and responsibilities of local public administration and of
regional organisms in the economical and social development of localities and developing regions, at the same time,
diminishing the implication of governmental institutions in these matters. We have in view the diminishing of present
regional imbalance, emphasizing the stimulation of balanced development and the revitalization of disadvantaged
areas (with delayed development). The main idea is that the minimization of disparities can occur only through the
regions’ gaining of competitive capacity. Furthermore, we will succinctly present the manner of creating the medium
size regions (NUTS 2) in the E.U., which can or cannot have an administrative role and differ in size. Their main part is
that of running regional politics. The Structural Funds aim at accomplishing certain objectives, among which the
convergent objective has a considerable share regarding financial allotments. The role of the member states is that of
creating Operational Programs for accessing funds, which are to be adopted by the European Commission, and once
adopted, they are to be implemented.
Keywords: regions, regional development, Structural Funds, convergence, competitiveness, cooperation.
JEL Classification: R58
1. INTRODUCTION
The creation of medium size territorial units in the European Union (named regions) has
followed the efficient absorption of community funds for regional development and the possibility
of interpreting and researching the regional statistics. On the other hand, the present tendency in the
E.U. is that of decentralizing the decisions.
With the diminishing involvement of governmental institutions, the regional development
policy strengthens the role and responsibilities of local public administration and of regional
organisms in the economic and social development of localities and development regions. This
policy is an important component of local autonomy, being oriented towards the diminishing of
existing regional disequilibrium, laying emphasis on the stimulation of balanced development and
on revitalization of disadvantaged areas (with delayed development).If, in the beginning, this policy
considered that the balancing of the development can be produced through territorial distribution of
economic growth, presently, it is considered that the minimization of disparities can be obtained
only by acquiring a competitive capacity by these regions.
The regional development policy is one of the most important and complex policies of the
European Union, a status arising from that, through its objective of reducing the existing economic
and social disparities among the various regions of Europe, it acts on some significant areas for
development, like the economic growth and the SMEs sector, transport, agriculture, urban
development, environmental protection, employment and educational training, education, equal
chances etc.
One of the short comings to which the regional policy of the E.U. could constitute a
solution, is that of an unique market in which the protectionist barriers are missing, which could
deepen the regional disparities, thus endangering the political, social and economic stability.
The measures brought by the above mentioned politics have the purpose of strengthening
the competitive capacity of poorer regions.
The existence of some large differences among the U.E. regions regarding income and
development has lead to the creation of regional policy, by which resources from rich areas are
99
transferred to the poorer ones. The aim of this policy is the modernization of disadvantaged areas,
so that they will not be left behind from the rest of the Union.
In addition, this policy is also an instrument of financial solidarity and an important
cohesion force of economic integration. Solidarity presumes bringing benefits for the less wealthy
regions and their inhabitants, and the cohesion is translated through the fact that all would have to
gain from the reduction of regional gaps.
2. THE GENERAL CONTEXT OF REGIONAL DEVELOPMENT POLICIES
Considerable differences between the prosperity levels also exist among some U.E.
countries. The most prosperous regions from the point of view of GDP/inhabitant are the urban
ones (like London, Brussels and Hamburg), and the riches country, Luxembourg is over seven
times richer than Romania and Bulgaria, the poorest member states of the U.E.
The membership to the E.U. and en efficient regional policy could bring results; for
instance, Ireland, which had at the moment of adhesion, in 1973, a GDP of 64% from the Union’s
average, presently has one of the highest GDP of the E.U. The regional policy has established as a
priority the rapid bringing of the standard of living to the community average in the adherent
countries after 2004.
The disparities among the regions can have different causes derived from the geographical
distance, social and economic changes, or a combination between the two. Among the effects of
underdevelopment we can enumerate the higher unemployment rate or the inadequate
infrastructure, and part of this state of being is also the consequence of the former centralized and
planed economy.
The transformations of regional policy can be observed in all E.U. members, and certain
administrative problems have generated the reform of the regional European policy after 2006. In
this respect, on the basis of experience and of economic results, it can be said that the realization of
the economic and social cohesion in a extended Union represents the main challenge of the
moment, next to the transformation of the European Union in “the most dynamic and competitive
economy in the world” (the Lisbon Strategy).
The relaunching of regional policy, manifested through certain economic development
policies at a regional level which are to consider all the regions of a state (not only those left
behind), will generate economic growth and competitiveness at a national level, and only partially
at regional level, with enhancing the disparities among the regions of the respective state. This kind
of approach to development regional policy is more and more present within the E.U. member
states.
The current stage (1) of research in the field of the instruments of regional policy, shows
that, from the perspective of the European expansion, it is very necessary the constitution of a new
model of regional development. Thus, if the literature dedicated to industrial regions, to clusters and
transference networks, offers a clear image over the manner in which economic regional
development is undertaken, the concept linked to the “region of knowledge” or the “region of
science” does not clarify if innovation or knowledge have a more territorial dimension rather than a
functional one, and not even on the manner in which the latter can become the object of the
strategies elaborated by local and/or regional authorities. The previous papers which have
approached the problem of instruments of regional policy showed that the target objective of
European regional policy was the realization of interregional equity at a national level, by reducing
disparities regarding income and economic growth of the regions.
The regional development policy at the level of the European Union does not reduce the role
of regional policy of each member state, it has a complementary character to the policy of every
state and functions on the principle of the partnership between the European Union and each
member state, between member states, as well as between local authorities and the different active
organizations at regional level and those existing at national level.
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The modifications and the importance of growth regarding the regional policy of the E.U.
member states, reveal the efforts which are made in the direction of reducing the existent
inequalities between the living standard of the citizens of the Union and the central stage of these
preoccupations within the national economic policy.
3. THE REGIONS IN THE E.U.
Although the majority of the European states were and still are unitary states, the concept of
“Region” as political and administrative entity has appeared relatively recent, in the context of
accepting the idea that, local authorities must freely administer the local problems. Also, there
exists in the E.U., federal states as Swiss and Germany, where federalism was the manner of
carrying out the national political project during the XIXth century In Austria, federalism was
introduced in the Republican state, through the Constitution of 1920, Belgium formed as federal
state in 1993 as a consequence of the high development of regionalism, and in Italy the existence of
regions is established in the Constitution. In countries as France and the U.K., the region has only
existed as a means of economic action of the central government. In the seventies, different reforms
emerged (in Belgium, Spain, France and Portugal) which brought regionalization into attention.
Thus, the unitary state seems to be the exception; with the integration of a new country in the E.U.
the regionalization process tends to generalize.
The regional policy has brought in view the idea of regionalization and instituting this new
territorial level of power permitted the access to new financial resources. The regions are regarded
as space or territorial level of putting into practice of regional policies and of their corresponding
programs, and their existence is viewed as a condition of accessing the resources. As a
consequence, the communitarian regional policy, sustained by structural funds, with the objective
of realizing political and social cohesion, had a decisive influence on promoting the regional idea in
Europe.
The emerging of Communitarian regional policy which has as objective the removal of
regional inequalities, has given legitimacy to regions and to those institutions which represented
their interests, leading to the definition of statistical areas for measuring the regional economical
situation and being as well a basis for the intervention criteria of the Community (the Nomenclature
of Territorial Units for Statistics, NUTS 1, 2, 3)
Presently, the decentralizing of the decision is an idea mutually acknowledged, and
regionalization has become a common tendency of the evolution of territorial organization of the
European States, the regions being the structures charged with insuring the institutional
convergence of the member states of the European Union). Although, the emerging of regions is not
a consequence of regional development policy of the E.U., the consistent funds destined for the
carrying out of its general objective (obtaining the economical and social cohesion by eliminating
and preventing the unbalances between regions) had an important contribution over regionalization,
establishing strategies, plans and regional development programs for distributing and using
resources efficiently. At the present time, the regions became, within the E.U., partners of the
European Commission in elaborating and developing of communitarian policies financed from
Structural Funds.
The Nomenclature of Territorial Units for Statistics, (NUTS) was created by the
Eurostat (the Statistics Office of the European Union) in 1981, with the aim of having a unique and
coherent scheme of the territorial repartitions in view of unifying regional statistics and making
possible the application of regional policies in the European Union.
The Nomenclature NUTS is structured on three levels, as following: NUTS-1, NUTS-2 and
NUTS-3. Each state (NUTS-0) is organized in one or more regions at NUTS-1 level, which are
divided in one or more regions NUTS-2 and in a similar manner with NUTS-3 regions. These
aspects have received a legal base and a more detailed regulation in 2001, then being established the
minimum and maximum thresholds for the dimensions of regions:
- NUTS-1: between 3 and 7 million inhabitants;
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- NUTS-2: between 800.000 and 3 million inhabitants;

- NUTS-3 : between 150.000 and 800.000 inhabitants
The delimitation of regions according to NUTS is made after the administrative criterion,
which means that certain geographical areas with administrative authority of taking political or
administrative decisions. If in a state there are no administrative units of proper size for NUTS, then
the NUTS regions will be created by joining a number of smaller existing administrative units.
Along with the administrative criterion, it is used, as previously seen, the one referring to the
number of inhabitants. As a matter of fact, it can be observed that many of the regions are non-
administrative. Up to a certain extent, this fact restricts their participation as legitimate entities from
a legal and institutional point of view to the process of making decisions; there is the danger that
certain regions remain just simple instruments of national governments or of European institutions.
The criterion regarding the number of inhabitants is just orientative; there are some NUTS 2 regions
with a population of 500.000 inhabitants (Cornwall in the U.K.) and other with almost 10 million
inhabitants (Lombardy in Italy). Thus, what is considered important is the correspondence between
the effective population and the optimal necessary of economical resources.
From the point of view of the geographical characteristics, the level of economic
development, the intensity of the social problems, the member states of the European Union
manifest a wide range of preoccupations regarding the establishment the type of regional
inequalities which the afferent policy approaches. In this context, conceptualizing regional
problems varies from one country to the other, but, in fact, three types of disparities are considered:
physical- geographical, economic and social.
1. The indicators of physical-geographical disparities primarily concentrate on the
disadvantages determined by the physical environment: peripherality, the distance from the
markets, the climate and the effects of physical disparities on the population density and on the
migrating patterns.
2. The indicators of economic disparities refer most frequently to the GDP/inhabitant, to the
structure of economic activities, infrastructure, economic perspectives. The most important
indicator of regional disparities remains the GDP/inhabitant, considered by the European
Commission as the key-criterion for determining the existence and amplitude of regional
disparities.
3. The indicators of social disparities primarily reflect the considerable importance which is
laid upon the level and occupational structure, as well as that of unemployment in the context of
regional policies. Although, the level of unemployment is strongly tied to the economic welfare of a
region, unemployment is also used as an independent indicator of estimating social disparities,
considering its impact on the individual and on society.
It can be said that the regional development policy is one of the essential elements of the
E.U. because of the role it has in assuring the general development and in realizing the economic
and social cohesion. It seeks the strengthening and consolidation of the cohesion at the level of each
country, as well as at the level of the whole European Union, using for the latter conjugated
financial contributions, on behalf of the states and of the Union.
4. THE THREE OBJECTIVES OF THE REGIONAL POLICIES
The year 2000 brings forth the unification of geographical areas and the periods of
investment programming through Structural Funding and national policies. The classification of
regions which can be eligible for accessing these funds and the allotted quantum it is made on the
basis of national indicators: the level of GDP/inhabitant and the level of unemployment, both
reported to the E.U. average. Starting with 1994, a new introductory objective of the Structural
Funding has been introduced, which permitted the eligibility of regions with a density lower than
12,5 inhabitants/km2, a necessary decision, because of the adhesion of Sweden and Finland.
In the context of the expansion of the E.U. and of the increasing importance of regional
policy during the period of 2007 – 2013, the regional expenses will have a share of 35,7% in the
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E.U. budget, that means an allotment of funds of 347,41 billion Euros. This effort concentrates on
three objectives (2): convergence (81,54%), regional competition and occupation of labor market
(15,95%), as well as European territorial cooperation (2,52%); which are grouped in what is called
the cohesion policy.
Figure 1. The Distribution of the budget of the Structural Funds according to objectives
Source: http://eufinantare.info/politica-coeziune.html
The convergence objective aims at stimulating the conditions which favors the growth and
the factors which lead to the real convergence for the Member States and the less developed
regions. The regional competition and the occupation of the labor market can be attained through a
double approach: on the one hand, through the development regions which will help the regions to
anticipate and promote economic change, and on the other hand by creating more jobs, which will
be sustained by adapting the labor force and by investing in human resources. The European
Territorial Cooperation will consolidate the cross-border one (through local and regional mutual
initiatives), the cross-national one (laying emphasis on the integrated territorial development), as
well as inter-regional cooperation (through experience exchange).
The recipients of these funds are especially the central and est.-European countries, plus the
regions from other E.U. states which have special needs. 51% of the total regional expenses
between 2007 and 2013 will be destined for the 12 countries which have adhered starting with
2004, even if they represent less than a quarter of the total E.U. population. The money comes from
three different sources, according to the nature of the assistance and the type of beneficiary: The
European Fund for Regional Development (EFRD), the European Social Fund (ESF), the Cohesion
Fund; these financial resources cover the three above mentioned objectives as we can observe in the
following figure.
Objectives Structural Funds
Convergence EFRD ESF The Cohesion Fund
Regional competition EFRD ESF
and occupation of the
labor market
European Territorial EFRD
Cooperation
Figure 2. Objectives and structural funds

Source: http://ec.europa.eu/regional_policy/policy/object/index_en.htm
103
The whole E.U. is under the incidence of one or more objectives of the Cohesion Policy.
The NUTS 2 regions whose GDP is lower than 75% from the community average, are eligible for
financing within the frame of the convergence objective. All the regions which are not under the
incidence of this objective or of the transitional assistance are eligible for financing within the
objective of regional competition and occupation of labor force. The objective European territorial
cooperation comprises: cross border cooperation (for the NUTS 3 regions along the internal borders
and some external ones too, as well as those with maritime borders separated by a distance of
maximum 150 km), cross national cooperation and interregional cooperation (for all E.U. regions).
The present rules presume that the funds must be spent in accordance with the priorities of
the European Union regarding the promotion of competition and the creation of work places (the
Lisbon Strategy). The Commission and the member states supervise that 60% of the expenses for
the Convergence of all member states and 75% of the expenses for Competition and occupying the
labor force take into consideration these priorities.
The plafonds for the co-financing rates for each objective are as follows (3):
 Convergence: between 75% and 85%;
 Competition and occupation of the labor force: between 50% and 85%;
 European Territorial Cooperation: between 75% and 85%;
 The Cohesion Fund: 85%.
The European Commission decides the annual sums allotted to each member state,
according to certain criteria, among which the most important are: the eligible population, the
national welfare, the regional welfare and the unemployment rate. At a national level, each country
establishes how these sums will be shared among regions, and according to their eligibility.
In the following figure we find the allotment of funds, according to the objectives, for each
Member State during 2007-2013.
Figure 3. The distribution of funds according to states and objectives

Sursa: http://eufinantare.info/politica-coeziune.html
104
5. STRUCTURAL AND COHESION FUNDS (STRUCTURAL INSTRUMENTS)
Structural and Cohesion Funds (FSC), or the Structural Instruments, are those
modalities of financial aid through which the European Union takes action against eliminating the
social and economic disparities between regions, with the aim of achieving social and economic
cohesion. The latter occupy the second place as a share in the budget of the European Union,
established for European politics and comprise: The European Fund for Regional Development
(EFRD), The European Social Fund (ESF) and the Cohesion Fund.
In reality, the European Union has the power of an internal market with 27 member states
with 493 million citizens, summing up 27 regions, but not all Europeans have the same advantages
and chances to succeed in socio-economic terms. The difference is rendered by the area they inhabit
– if it is a prosperous or a poor region, an expansion or a declining area, an urban or rural area, at
the periphery of the E.U or in one of its economic centers. There are significant disparities between
the E.U. member states and its regions. The first 10, the most dynamic regions of E.U., have a
Gross National Product (GNP) of over 5 times bigger than the last 10, the ones left behind in the
E.U. One region out of four has a GDP/inhabitant under 75% of the 27 E.U. average.
In this context, the regional development policy is one of the most important and complex
of the European Union, a status derived from the fact that, through his objective of reducing the
existing social and economic disparities between the various regions of Europe, operates on
significant domains for development. The European Fund of Regional Development (EFRD)
supports financially the durable economic development at local and regional level and the
diversification of economic structures in various fields as:
 Technological research and development, innovation and entrepreneurship;
 The development of electronic communication infrastructure;
 The environment, including investments linked to the supplying of water and the
management of waste, treatment of residual water, the quality of air, problems
regarding draught and pollution;
 The prevention of natural and technological risks;
 Tourist activities;
 Investment in culture, including the protection, the promotion and the preserving of
cultural legacy.
 Transportation investments;
 Energy investments;
 Investments in education, including vocational training;
 Investments in the social and health care infrastructure;
FERD has its focus on two objectives:
 The promotion of development and of structural adjusting of regions with difficulties (as
a rule, those which have the GDP/inhabitant inferior to the level of 75% of the
community average).
 The favoring of the economic and social conversion of the areas with structural
difficulties. They comprise areas which find themselves in economic and social change
phases in the industrial and services sectors, the declining rural areas, urban areas facing
difficulties and the areas dependent on fishing which find themselves in a crisis
situation.
The main objective of the European Fund of Regional Development is to consolidate the
economic and social cohesion in the European Union by diminishing regional imbalances.
EFRD can intervene in three new objectives of regional policy:
 convergence;
 regional competition and employment;
 European territorial cooperation.
105
The European Social Fund (ESF) contributes to the enhancement of the adaptability of
employment and of enterprises, the growth of the access on the labor market, the prevention of
unemployment, the prolongation of active life and the increase in the degree of participation of
women and immigrants on the labor market, supporting social inclusion of disadvantaged persons
and the fight against discrimination. ESF supports the convergence objective, as well as that of
regional competition and employment.
ESF supports the actions of the states in the following fields (4):
 The adaptation of workers and enterprises, life long educational systems, the developing
and dissemination of certain innovative manners of organizing labor;
 Improving the access to obtaining a working place for those interested in doing do, of
inactive persons, of women and immigrants;
 Social integration of disadvantaged persons and the fighting against all forms of
discrimination on the labor market;
 The consolidation of human capital by applying certain reforms of the educational
system and by the networking activities of the educational institutions.
The Cohesion Fund finances projects from the field of environment protection and cross
European transportation networks, durable development as well as improving the management of
air and road traffic, the modernization of urban transportation, the development and modernization
of international transportation.
The Cohesion Fund is destined for the Member States which have a gross national product
(GNP) per inhabitant of less than 90% of the community average, with the scope of reducing
differences between levels of economic and social development, as well as for stabilization of
economies, measures under the Convergence objective.
For the period 2007-2013, this fund has as destination, the following countries: Bulgaria,
Cyprus, Estonia, Greece, Latvia, Lithuania, Malta, Poland, Portugal, the Czech Republic, Romania,
Slovakia, Slovenia and Hungary. Also, Spain is eligible, but only on transitory basis, its
GNP/inhabitant being inferior to the average of the European Union with 15 member states.
Complementary to the actions supported with Structural Funds, there are European funds
complementary to Structural and Cohesion Funds which support investments in the field of
rural and fishing development:
 The Agricultural European Fund for Rural Development (AEFRD), which finances
investments for the increase of competition in agriculture and forestry, the protection of
the environment, the improvement of life and the diversification of economic activities
in the rural areas;
 The European Fund for Fishing (EFF), which supports durable development of the
fishing sector and of costal areas, where this sector predominates.
The Structural Instruments of the European Union help stimulate the economic growth of
the member states and lead to the reduction of disparities between regions. Yet, they do not function
on their own; the insurance of a contribution on behalf of the involved member states is needed
(mainly from public resources, but also private contributions, the latter being encouraged in most of
the cases).
The majority of the regional expenses, supported through the three Structural Funds, are
destined to regions with a GDP of under 75% of the Union’s average and their aim is to improve
their infrastructures and the development of the economic and human potential. These have as
target 17 of the 27 member states of the E.U. On the other hand, all 27 countries are eligible for
financing for the support of innovation and research, durable development and job training in the
regions left behind. A small part of this budget is meant for cross-border inter-regional cooperation
projects.
It is desired that regional policy promote economic growth and job creation through (5):
106

The increase of attractiveness of countries for investments; by improving
accessibility, by supplying quality services and maintaining the environment
potential;
 The encouragement of innovation, of the entrepreneurial spirit and of the economy
based on knowledge, by developing information and communication technologies;
 The creation of better jobs by attracting a larger number of people in different fields,
the improvement of workers’ adaptability and the increase of investment in the
human capital.
Structural Funds and the rules for their usage are decided by the European Council and by
the European Parliament on the basis of a proposition from the European Commission. Each
member state prepares a National Strategic Frame of Reference in accordance with the Strategic
Norms. This document which will be given to the Commission for evaluation defines the chosen
strategy by the respective state and proposes a list of operational programs which it desires to
implement. The Commission will validate parts of the document, as well as several operational
programs (OP). The countries and regions under the incidence of the convergence objective are
forced to allocate 60% of expenses for priorities which come from the E.U. strategy for
development and work places (the Lisbon Strategy). For the countries and regions under the
competition and employment objective, the percentage is of 75%. During 2007-2013, approximately
450 OP will be accepted by the European Commission. Once the OP are approved, the Member
States and their regions have the responsibility of implementing the programs, by selecting,
monitoring and evaluating the projects. It is here that the management authorities from each country
intervene. The Commission engages in the expenses, and will pay only the eligible ones, by
monitoring each OP.
6. CONCLUSIONS
As the years pass by, the regional development policy has gained great importance in the
E.U. Along with the diminishing of existent regional unbalances and the revitalization of
underprivileged areas, it is also taken into account the gaining of a competitive capacity by the
regions. This growing importance is also reflected by the growth of the quantum for the afferent
expenses, during 2007-2013, this having a share of over a third of the U.E. budget. The main
objectives of the Structural Funds are: the convergence objective having a considerable share
regarding the financial allotment. The criteria for eligibility are very strict, and on their basis funds
are allocated. The member states have the role of creating Operational Programs for accessing the
funds and implementing them once these have been approved by the European Commission, and
simultaneously insuring the necessary co-financing. The lessening of major differences regarding
the development of the different E.U. regions, insured by the implementation of these policies,
represents the key to a harmonious and durable development of the E.U.
ENDNOTES:
(1) Elisabeta R. Roşca (coord.) – Dezvoltarea regională în contextul integrării în Uniunea Europeană,
Editura Economică, Bucureşti, 2006, p.326.
(2) http://ec.europa.eu/regional_policy/policy/fonds/index_en.htm
(3) http://ec.europa.eu/regional_policy/policy/manage/index_en.htm
(4) http://ec.europa.eu/regional_policy/funds/fse/index_ro.htm
(5) http://europa.eu/pol/reg/index_en.htm
BIBLIOGRAPHY:
1. Antonescu, Daniela – Dezvoltarea regională în România – concept, mecanisme,
instituţii, Editura Oscar Print, Bucureşti, 2003
107
2. Constantin, D.L. (coord.) – Probleme actuale ale dezvoltării regionale în România,

Lucrările Primului Simpozion Naţional al Asociaţiei Române de Ştiinţe Regionale, 25-
26 aprilie 2001, Bucureşti, Editura Oscar Print, Bucureşti, 2002
3. Pârlog, Cornelia, Constantin, D.L. (coord.) - Dezvoltare regională şi integrare
europeană, Lucrările celui de-al Doilea Simpozion Naţional al Asociaţiei Române de
Ştiinţe Regionale, 4-5 aprilie 2002, Bucureşti, Editura Oscar Print, Bucureşti, 2003
4. Roşca, Elisabeta R. (coord.), Dezvoltarea regională în contextul integrării în Uniunea
Europeană, Coordonator Editura Economică, Bucureşti, 2006
5. Ştefan, Maria-Cristina – Dezvoltare regională şi locală, Editura Economică, Bucureşti,
2008
6. http://anaf.mfinante.ro/wps/PA_1_1_15H/static/amcsc/fond_structural/fonduri_structura
le/prezentare/Ce_sunt_Instr_Structurale.htm
7. www.ec.europa.eu/eurostat
8. http://europa.eu/pol/reg/index_en.htm
9. http://ec.europa.eu/regional_policy
10. http://eufinantare.info/politica-coeziune.html
11. www.fonduri-structurale.ro
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ASPECTS CONCERNING ECONOMIC AND FINANCIAL PERFORMANCES OF

SUBSIDIARIES OF TRANSNATIONAL COMPANIES ACTIVE IN ROMANIA
Lecturer PhD. Daniela PÎRVU

Adjunct Professor PhD. Logica BĂNICĂ
Assistant PhD. Candidate Alina HAGIU
University of Piteşti, Romania
ddanapirvu@yahoo.com, olga_banica@yahoo.com, alinahagiu@yahoo.com
Abstract:
In the contemporary period, more than ever, foreign investors seek to maximize the efficiency of their
activities. In the race for the foreign direct investment attraction , Romania has many advantages that have propelled it
on top in 2004-2008. Analysis of economic and financial performances of subsidiaries of transnational companies
active in Romania, considered as representative for their fields of activity, allowed us to formulate judgments about the
prospects of investment in the Romanian economy produced by firms with trans-borders business.
Keywords: performance, transnational companies, reasons, prospects
JEL Classification: F 23
INTRODUCTION
The globalization process of recent years has been expressed in the growth of many types of
international transactions, but especially in the expansion of the activity of multinational firms.
Transnational companies have established subsidiaries to perform activities ranging from research
and development to after-sales service, and including production of parts and components,
assembly and whole sale and retail distribution. Some firms procure parts from subsidiaries in many
countries and assemble them in a single location. Others concentrate production of parts in one
place and assemble final products in several places located close to their customers. Still others
erect an integrated plant in a low-wage country and use it to serve consumers around the globe. The
motives for foreign direct investment (FDI) are similarly diverse, but the potential for factor-cost
savings and for the realization of economies of scale seem to be among the primary inducements
(Grossman and other, 2003).
Foreign direct investment is generally attracted by several factors such as: market size and
its potential development, factor costs, especially labor cost, but also human capital (education and
skills), trade openness, infrastructure reform, price liberalization, fiscal policy, institutional
development, technological absorption capacity etc. The importance of one or other factor changes
in time. For instance, during the first years of transition in the Central and Eastern Europe countries,
political stability and macroeconomic stabilization, including institutional development, were
premises of interest for foreign investors. Along with the progress in political and economic
transformations, and especially with the progress in fulfilling the criteria of adhesion to the EU, the
comparative advantages of investing in these countries low labor cost but educated labor force
relative high growth rate and growing market potential have become the most important
determinant factors that directed the FDI flows towards this area. Re-locations were registered quite
frequently, especially in the production field of intensive goods. It is worth mentioning that certain
advantages are temporary in character (labor cost, resource availability), and may diminish in time
(Masso and other, 2007) .
The transnational corporation is – in this era of globalization – absolutely the free markets’
superior agent. Economically, corporate giants capitalize the resources of many developing
countries. In brief, transnational corporations into emerging markets generally have a number of
important effects on market host countries (Godlberg, 2004). These effects include:
 Improved allocative efficiency. This can occur when foreign investors enter into
industries with high entry barriers and then reduce local monopolistic distortions. The
presence of foreign producers may also induce higher technical efficiency: the increased
109
competitive pressure or some demonstration effect may spur local firms to more
efficient use of existing resources.
 Higher rates of technology transfer and diffusion. While there is evidence of
technological improvements from FDI, and a presumption that FDI will consequently
stimulate economic growth, the strength of these effects is disputed.
 Higher number of jobs. This effect is caused mainly by FDI type ”greenfield”.
Considering the many benefits generated by transnational companies locating in an
economy is very important the attraction of FDI in all fields. In recent years, Romania has managed
to attract a significant volume of FDI but which were located mainly in certain areas. Economic and
financial performances analysis of subsidiaries of transnational companies active in Romania can be
particularly useful in the prediction of future locations (in the Romanian economy) of FDI. This
analysis was made on the base of the information available at the National Trade Register Office for
a total of 122 non-financial representative companies (listed in the appendix), during the 2004-
2008. To obtain the necessarily processed information we designed an information system in the
Microsoft Access environment (Barbu and Bănică, 2008), flexible and easy to use, thanks to a
friendly graphical interface.
REASONS TO INVEST IN ROMANIA
In racing other countries in the region for attracting higher inflows of FDI, Romania enjoys
certain competitive advantages that encourage foreign investors to consider developing their
business here. When considering Romania as a possible location for developing their businesses,
foreign investors take a close look to the advantages provided by our country (Romanian Agency
for Foreign Investment):
 Market and Location Advantage: (1) one of the largest markets in Central and Eastern
Europe (ranking 7th, with over 21 million inhabitants); (2) European Union unique market
gateway (access to approximately 500 million consumers); (3) situated at the turning point
between EU, the Balkans and Commonwealth of Independent States, Romania is crossed by
three important pan-European transportation corridors: corridor no. IV linking Western and
Eastern Europe, corridor no. IX connecting Northern and Southern Europe and no. VII –
Danube River, facilitating inland water transportation, at the same time connecting the
Romanian Port of Constanta (the biggest Port to the Black Sea) to Northern Europe, through
the Rhine.
 Resource Advantage: (1) highly skilled labor force at competitive prices (solid
knowledge in foreign languages, technology, IT, engineering, etc); (2) rich natural
resources, including surface and underground waters, fertile agricultural land, oil and gas;
(3) high potential for tourism.
 Political Advantage: (1) stability factor in the Area - NATO membership; (2) stability
Guarantee in South Eastern Europe; (3) European Union membership.
 Economical Advantage: (1) sustainable economic growth (before the current economic
crisis); (2) decreasing inflation; (3) friendly fiscal policy (16% flat tax).
 Social Advantage: (1) agreement between Government and major unions; (2) no major
union movements.
 Legislative Advantage: similar legal provisions as in European Union.
 Other Advantages: (1) continuously improving infrastructure (commitment to improve the
highway infrastructure to European Union standards); (2) well-developed networks of
mobile telecommunications in GSM systems; (3) highly developed industrial infrastructure,
including oil and petrochemicals; (4) presence of branch offices and representatives of
various well-known international banks; (4) extensive maritime and river navigation
facilities.
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According to a study accomplished during the 2000-2005 on a group of 250 subsidiaries of

transnational companies active in Romania, the main factors that have supported their location in
our country were: (1) the advantages of market; (2) low cost and quality of labor force work (Bîrsan
and Buiga, 2008). We can infer that the foreign investment in Romania have been attracted in areas
of economic activity that requires the use of skilled labor (eg manufacturing) or offering a high
potential demand (wholesale and retail trade, financial and banking sector, post and
telecommunications).
Beginning with its strategic location and natural resources, continuing with its European
membership and international relations network, together with undeniable economic and social
advantages, Romania represents the very hot-spot for FDI in the region. The value of FDI attracted
by Romania increased significantly during the 2003-2008, as shown in the Table. 1.
Table no. 1 Foreign direct investments attracted by Romania during 2003-2008

Euro Million
Year 2003 2004 2005 2006 2007 2008
FDI value 1946 5183 5213 9059 7250 9084
Source: National Bank of Romania, Balance of Payments
In the countries of the South-East Europe (Romania, Turkey, Bulgaria, Greece, Croatia,
Serbia, Bosnia and Herzegovina and Cyprus), Romania is strongly positioned in perceptions and
real investment, being on the first position in a top made of the Ernst & Young Organization in
2008. According to this study, foreign investors who chose Romania for localization their assets
took into account the cost of labor (this factor has accounted for 26%), potential to increase of the
productivity (this factor has a weighting of 25 %), labor quality (this factor had a share of 19%).
The situation of FDI value in 2008, in a regional context (Poland, Romania, Czech
Republic, Bulgaria, Hungary, Slovakia and Slovenia) show that Romania was the second favorite
destination for foreign investors, being ahead only by Poland (National Agency for Foreign
Investment, 2008).
ECONOMIC AND FINANCIAL PERFORMANCES OF SUBSIDIARIES OF

TRANSNATIONAL COMPANIES ACTIVE IN ROMANIA
By economic activity, the bulk of FDI went to manufacturing (32.9% of total), out of which
the largest recipients were: metallurgy (7.5%), food, beverages and tobacco (5.2%), oil processing,
chemicals, rubber and plastic products (4.4%), transport means (3.6%) and cement, glassware,
ceramics (3.5%). Other activities that have attracted significant foreign direct investment are
financial intermediation and insurance, which include banking and insurance and account for
23.3% of total FDI stock, wholesale and retail trade (14%), construction and real estate (7.8%) and
telecommunications (6.5%). The information presented above are valid for 31 December 2007 and
were taken from documents of the National Bank of Romania and the National Institute of
Statistics.
Economic and financial performances of subsidiaries of transnational companies active in
Romania were analyzed using the following indicators: the total number of employees, the average
level of turnover, the average level of rates of return, the average level of net profit share in total
expenditure.
Analysis of the total number employed indicator allows us to find that subsidiaries of
transnational companies active in manufacturing have the highest number of employed workers,
followed by those working in mining and wholesale and retail trade. In 2008 was recorded the
highest number of employees (over 200,000 employees), in the wholesale and retail being observed
a significant increase compared with previous years (figure 1).
111
Figure no. 1. The evolution of total number of employees

Analysis of the average level of turnover recorded by the subsidiaries of transnational
companies active in Romania between 2004-2008 show a significant development of economic
activity in the field of wholesale and retail trade. In 2008, the companies operating in the field of
wholesale and retail trade registered an average turnover of more than 4 times higher than in 2004.
An upward trend of the turnover can be observed in all areas of economic activity, but at a slower
rate compared to that achieved in the field of wholesale and retail trade (figure 2).
Figure no. 2. The average level of turnover
112
In terms of the rates of return recorded by the subsidiaries of transnational companies active
in Romania in 2008, the field of post and telecommunications ranks first, followed by the mining
and the manufacturing. The evolution of the average profitability rate registered by the subsidiaries
of transnational companies active in Romania between 2004-2008 is oscillating in the most areas of
economic activity; it could see a significant decline in 2008, particularly in the field of
manufacturing and mining (figure 3).
Figure no. 3. The average level of rates of return
The share of net profit in the total expenditure recorded by the subsidiaries of transnational
companies active in Romania shows that companies operating in the field of post and
telecommunications get the highest financial performances. The evolution of the average net profit
share in the total expenditure is situated on a downward slope since 2008, the most affected area by
the economic crisis (whose effects were felt in our country since 2008) is the manufacturing (figure
4).
113
Figure no. 4. The average level of net profit share in total expenditure
CONCLUSIONS
The 122 subsidiaries of transnational corporations with activities in Romania (representative

in terms of their importance) provides jobs only for about 7% of persons employed in the private
sector.
During 2004-2008, the post and telecommunications were the most profitable area for
transnational corporations that have located in our country, while the amount of FDI attracted in
this area is relatively low compared with other industries. The current economic crisis was the least
felt, in terms of net profit share in total spending, by subsidiaries of transnational companies
operating in wholesale.
During the period analyzed, foreign investors were involved in a small extend in the
construction and real estate in Romania, even though he recorded a special interest from the
Romanian investors and provides a high level of net profit in total spending. The stabilization of the
housing market and the termination of the speculative actions are trends that we can provide for the
next period and which will attract, perhaps, more foreign investment in this field.
In the wholesale and retail trade, the rate of return is low, despite the high turnover that
record companies working in this field. This is an indication on the degree of saturation of the
market and lead us to believe that, in the next period, direct foreign investment in wholesale and
retail trade will be lower.
Considering the changes in FDI inflows in Romania and in Central and Eastern Europe area,
we consider that, after the economic crisis, Romania will continue receiving significantly increased
flows of foreign direct investment. Considering the economic and financial performances analysis
of subsidiaries of transnational corporations with activities in Romania, we think that foreign
investors will be interested in the services sector recorded the highest rate of return and for which
the Romanian economy has the availability of skilled labor and cheaper compared with other EU
countries.
114
REFERENCES
1. Barbu, Gh. and Bănică, L. (2008) Information Systems by examples, University of Pitesti
Publisher, pp. 138-147
2. Bîrsan, Maria and Buiga Anuț a (2008) 'FDI in Romania: evolution and main types of
large firms in the manufacturing sector', OECD Global Forum on International Investment
OECD Investment Division.
3. Grossman, Gene, Helpman, Elhanan and Szeidl, Adam (2003) 'Optimal Integration
Strategies for the Multinational Firm', Harvard Institute of Economic Research,
Discussion Paper no. 2024.
4. Linda Goldberg (2004) 'Financial FDI and Host Countries: New and Old Lessons',
National Bureau of Economic Research, Working Papers no. 10441.
5. Masso, Jaan, Varblane, Urmas and Vahter, Priit (2007) 'The Impact of Outward FDI on
Home-Country Employment in a Low-Cost Transition Economy', William Davidson
Institute, Working Papers Series wp873.
6. Ernst&Young (2008) SEE Attractiveness Survey – South East Europe: An Emergent FDI
Destination in Europe.
7. National Bank of Romania (2009) Balance of Payments.
8. Romanian Agency for Foreign Investment (2008) Progress Report.
APPENDIX
Table no. 2 The list of non-financial companies upon which was created database
ABB S.R.L. JOHNSON CONTROLS ROMANIA S.R.L.
ALCATEL - LUCENT ROMANIA S.R.L. KAUFLAND ROMANIA SOCIETATE IN
COMANDITA
ALCOA FUJIKURA S.R.L. LAFARGE CIMENT (ROMANIA) S.A.
ALRO S.A. LEAR CORPORATION ROMANIA S.R.L.
AMERICAN EUROPEAN MARKETING & LEONI WIRING SYSTEMS RO S.R.L.
ENTERPRISES S.A.
ARCELORMITTAL GALATI S.A. LG ELECTRONICS ROMANIA S.R.L.
ARTHUR D. LITTLE ROMANIA S.R.L. LISA DRAXLMAIER AUTOPART ROMANIA S.R.L.
ASKOLL ROMANIA S.R.L. LOGWIN ROAD + RAIL ROMANIA S.R.L.
ASTRAZENECA PHARMA S.R.L. LOUIS VUITTON ROMANIA S.R.L.
ATLAS TELECOM NETWORK ROMANIA S.R.L. LUKOIL ROMANIA S.R.L.
AUTO CHASSIS INTERNATIONAL ROMANIA MASTERPLAST ROMANIA S.R.L.
S.R.L.
BARLINEK ROMANIA S.A. MECHEL TARGOVISTE S.A.
BASF CONSTRUCTION CHEMICALS ROMANIA MERCEDES-BENZ ROMANIA S.R.L.
S.R.L.
BAYER PHARM S.R.L. MICHELIN ROMANIA S.A.
BHP SRL MOL ROMANIA PETROLEUM PRODUCTS S.R.L.
BMW VERTRIEBS GMBH SALZBURG MOTOROLA ROMANIA S.R.L.
SUCURSALA BUCURESTI
BRICOSTORE ROMANIA S.A. NESTLE ROMANIA S.R.L.
BRITISH AMERICAN TOBACCO (ROMANIA) NEWS OUTDOOR ROMANIA S.R.L.
TRADING S.R.L.
CARPATCEMENT HOLDING S.A. NOKIA ROMANIA S.R.L.
CARREFOUR ROMANIA S.A. NORTEL NETWORKS ROMANIA S.R.L.
CB RICHARD ELLIS EURISKO S.R.L. OMV ROMANIA MINERALOEL S.R.L.
CHEVRON LUBRICANTS ROMANIA S.R.L. ORANGE ROMANIA S.A
CITY DEVELOPMENTS S.R.L. PARMALAT ROMANIA S.A.
COCA-COLA HBC ROMANIA S.R.L. PETROM S.A.
115
COLLIERS INTERNATIONAL S.R.L. PFIZER ROMANIA S.R.L.

COSMOTE ROMANIAN MOBILE PORSCHE ROMANIA S.R.L.
TELECOMMUNICATIONS S.A.
DAEWOO-MANGALIA HEAVY INDUSTRIES S.A. PORTA KMI ROMANIA S.R.L.
DANONE - PRODUCTIE SI DISTRIBUTIE DE PREMIUM LUBRICANTS ROMANIA S.R.L.
PRODUSE ALIMENTARE SRL
DACIA AUTOMOBILE SA. PROCTER & GAMBLE MARKETING ROMANIA
S.R.L.
DELTA ELECTRONICS S.R.L. REAL HYPERMARKET ROMANIA S.R.L.
DHL INTERNATIONAL ROMANIA S.R.L. RENAULT INDUSTRIE ROUMANIE S.R.L.
DIAGEO BALKANS LIMITED LONDRA - REWE (ROMANIA) S.R.L.
SUCURSALA GHERMANESTI S.R.L.
DOW CHEMICAL ROMANIA S.R.L. ROCHE ROMANIA S.R.L.
DR. OETKER RO S.R.L. ROMANIA HYPERMARCHE S.A.
DUVENBECK LOGISTIK S.R.L. ROMTELECOM S.A
E.ON GAZ ROMANIA S.A. SAMSUNG ELECTRONICS ROMANIA S.R.L.
EKR-ELEKTROKONTAKT ROMANIA S.R.L. SANDOZ S.R.L.
ENEL ENERGIE S.A. SANOFI-AVENTIS ROMANIA S.R.L.
ERICSSON TELECOMMUNICATIONS ROMANIA SCHAEFFLER ROMANIA S.R.L.
S.R.L.
ERNST & YOUNG S.R.L. SCHIEDEL -SISTEME DE COSURI S.R.L.
EURO AUTO PLASTIC SYSTEMS S.R.L. SELGROS CASH & CARRY S.R.L.
EUROPEAN DRINKS S.A. SEWS ROMANIA S.R.L.
EUROPEAN FOOD S.A. SIEMENS AKTIENGESELLSCHAFT S.A.
FORD ROMANIA S.A. SONY ERICSSON MOBILE COMMUNICATIONS
INTERNATIONAL AB LUND S.A.
FUCHS CONDIMENTE RO S.R.L. TAKATA-PETRI ROMANIA S.R.L.
GALASSINI ROMANIA S.R.L. TEBA IASI INDUSTRY S.A.
GDF SUEZ ENERGY ROMANIA S.A. TELECOM ITALIA SPARKLE EST S.R.L.
GENERAL ELECTRIC INTERNATIONAL S.R.L. THYSSENKRUPP ELEVATOR S.R.L.
GLAXOSMITHKLINE (GSK) S.R.L. TIMKEN ROMANIA S.A.
GOLDMAN SACHS INVESTMENT S.R.L. TOTAL LUBRICANTS ROMANIA S.A.
HEINEKEN ROMANIA S.A. TOYOTA ROMANIA S.R.L.
HENNLICH S.R.L. UNILEVER SOUTH CENTRAL EUROPE S.R.L.
HERMES PHARMA S.R.L. URSUS BREWERIES S.A.
HEWLETT - PACKARD (ROMANIA) S.R.L. VAN OORD OFFSHORE B.V. SUCURSALA
NAVODARI
HITACHI POWER TOOLS ROMANIA S.R.L. VERIZON ROMANIA S.R.L.
HOLCIM (ROMANIA) S.A. VIVENDI GAMES EUROPE S.A.
HOLZINDUSTRIE SCHWEIGHOFER S.R.L. VODAFONE ROMANIA S.A.
HUTCHINSON S.R.L. VOLVO ROMANIA S.R.L.
KAUFLAND ROMANIA SRL VWS ADISS S.A.
FLEXTRONICS ROMANIA S.R.L. WIEE ROMANIA S.R.L.
INDAGRARA PRODCOM S.A. YAZAKI ROMANIA S.R.L.
ABB S.R.L. JOHNSON CONTROLS ROMANIA S.R.L.
ALCATEL - LUCENT ROMANIA S.R.L. KAUFLAND ROMANIA SOCIETATE IN
COMANDITA
ALCOA FUJIKURA S.R.L. LAFARGE CIMENT (ROMANIA) S.A.
ALRO S.A. LEAR CORPORATION ROMANIA S.R.L.
AMERICAN EUROPEAN MARKETING & LEONI WIRING SYSTEMS RO S.R.L.
ENTERPRISES S.A.
ARCELORMITTAL GALATI S.A. LG ELECTRONICS ROMANIA S.R.L.
ARTHUR D. LITTLE ROMANIA S.R.L. LISA DRAXLMAIER AUTOPART ROMANIA S.R.L.
ASKOLL ROMANIA S.R.L. LOGWIN ROAD + RAIL ROMANIA S.R.L.
ASTRAZENECA PHARMA S.R.L. LOUIS VUITTON ROMANIA S.R.L.
ATLAS TELECOM NETWORK ROMANIA S.R.L. LUKOIL ROMANIA S.R.L.
AUTO CHASSIS INTERNATIONAL ROMANIA MASTERPLAST ROMANIA S.R.L.
S.R.L.
BARLINEK ROMANIA S.A. MECHEL TARGOVISTE S.A.
BASF CONSTRUCTION CHEMICALS ROMANIA MERCEDES-BENZ ROMANIA S.R.L.
116
S.R.L.
BAYER PHARM S.R.L. MICHELIN ROMANIA S.A.
BHP SRL MOL ROMANIA PETROLEUM PRODUCTS S.R.L.
BMW VERTRIEBS GMBH SALZBURG MOTOROLA ROMANIA S.R.L.
SUCURSALA BUCURESTI
BRICOSTORE ROMANIA S.A. NESTLE ROMANIA S.R.L.
BRITISH AMERICAN TOBACCO (ROMANIA) NEWS OUTDOOR ROMANIA S.R.L.
TRADING S.R.L.
CARPATCEMENT HOLDING S.A. NOKIA ROMANIA S.R.L.
CARREFOUR ROMANIA S.A. NORTEL NETWORKS ROMANIA S.R.L.
CB RICHARD ELLIS EURISKO S.R.L. OMV ROMANIA MINERALOEL S.R.L.
CHEVRON LUBRICANTS ROMANIA S.R.L. ORANGE ROMANIA S.A
CITY DEVELOPMENTS S.R.L. PARMALAT ROMANIA S.A.
COCA-COLA HBC ROMANIA S.R.L. PETROM S.A.
COLLIERS INTERNATIONAL S.R.L. PFIZER ROMANIA S.R.L.
COSMOTE ROMANIAN MOBILE PORSCHE ROMANIA S.R.L.
TELECOMMUNICATIONS S.A.
DAEWOO-MANGALIA HEAVY INDUSTRIES S.A. PORTA KMI ROMANIA S.R.L.
DANONE - PRODUCTIE SI DISTRIBUTIE DE PREMIUM LUBRICANTS ROMANIA S.R.L.
PRODUSE ALIMENTARE SRL
DELTA ELECTRONICS S.R.L. PROCTER & GAMBLE MARKETING ROMANIA
S.R.L.
DHL INTERNATIONAL ROMANIA S.R.L. REAL HYPERMARKET ROMANIA S.R.L.
DIAGEO BALKANS LIMITED LONDRA - RENAULT INDUSTRIE ROUMANIE S.R.L.
SUCURSALA GHERMANESTI S.R.L.
DOW CHEMICAL ROMANIA S.R.L. REWE (ROMANIA) S.R.L.
DR. OETKER RO S.R.L. ROCHE ROMANIA S.R.L.
DUVENBECK LOGISTIK S.R.L. ROMANIA HYPERMARCHE S.A.
E.ON GAZ ROMANIA S.A. ROMTELECOM S.A
EKR-ELEKTROKONTAKT ROMANIA S.R.L. SAMSUNG ELECTRONICS ROMANIA S.R.L.
ENEL ENERGIE S.A. SANDOZ S.R.L.
ERICSSON TELECOMMUNICATIONS ROMANIA SANOFI-AVENTIS ROMANIA S.R.L.
S.R.L.
ERNST & YOUNG S.R.L. SCHAEFFLER ROMANIA S.R.L.
EURO AUTO PLASTIC SYSTEMS S.R.L. SCHIEDEL -SISTEME DE COSURI S.R.L.
EUROPEAN DRINKS S.A. SELGROS CASH & CARRY S.R.L.
EUROPEAN FOOD S.A. SEWS ROMANIA S.R.L.
EXXONMOBIL EXPLORATION AND SIEMENS AKTIENGESELLSCHAFT S.A.
PRODUCTION RO LIMITED NASSAU S.A.
FORD ROMANIA S.A. SONY ERICSSON MOBILE COMMUNICATIONS
INTERNATIONAL AB LUND S.A.
FUCHS CONDIMENTE RO S.R.L. TAKATA-PETRI ROMANIA S.R.L.
GALASSINI ROMANIA S.R.L. TEBA IASI INDUSTRY S.A.
GDF SUEZ ENERGY ROMANIA S.A. TELECOM ITALIA SPARKLE EST S.R.L.
GENERAL ELECTRIC INTERNATIONAL S.R.L. THYSSENKRUPP ELEVATOR S.R.L.
GLAXOSMITHKLINE (GSK) S.R.L. TIMKEN ROMANIA S.A.
GOLDMAN SACHS INVESTMENT S.R.L. TOTAL LUBRICANTS ROMANIA S.A.
HEINEKEN ROMANIA S.A. TOYOTA ROMANIA S.R.L.
HENNLICH S.R.L. UNILEVER SOUTH CENTRAL EUROPE S.R.L.
HERMES PHARMA S.R.L. URSUS BREWERIES S.A.
HEWLETT - PACKARD (ROMANIA) S.R.L. VAN OORD OFFSHORE B.V. SUCURSALA
NAVODARI
HITACHI POWER TOOLS ROMANIA S.R.L. VERIZON ROMANIA S.R.L.
HOLCIM (ROMANIA) S.A. VIVENDI GAMES EUROPE S.A.
HOLZINDUSTRIE SCHWEIGHOFER S.R.L. VODAFONE ROMANIA S.A.
HUTCHINSON S.R.L. VOLVO ROMANIA S.R.L.
KAUFLAND ROMANIA SRL VWS ADISS S.A.
FLEXTRONICS ROMANIA S.R.L. WIEE ROMANIA S.R.L.
INDAGRARA PRODCOM S.A. YAZAKI ROMANIA S.R.L.
117
THE CRISIS INFLUENCE ON THE UNEMPLOYMENT EVOLUTION
Assistant PhD. Student Gabriela-Liliana CIOBAN

Faculty of Economics and Public Administration
gabrielac@seap.usv.ro
PhD. Student Costel-Ioan CIOBAN
Archdiocese of Suceava and Rădăuţi, Suceava, Romania
“Alexandru Ioan Cuza” University of Iaşi, Romania
Doctoral School of Economics
costel.cioban@gmail.com
Abstract:
This paper aims to highlight the important role it has in the economic state of a country and thus, its
contribution to maintaining low rates of unemployment in the labor market even in crisis. Since the negative effect of
economic crisis or recession on the labor market is reflected in the fact that some employees left without work and
result in national unemployment rate increase because of higher number of registered unemployed.
Increasing the number of unemployed is explained on redundancies made by both private sector and in the
state most affected areas as textile industries, chemical, mechanical and furniture. SNI results obtained using a different
calculation methodology of the international show increased values overall unemployment rate and the number of
unemployed since the end of 2008 as a result of the economic crisis affecting our country. Therefore, it appears that the
crisis of low employment rate is the most important long-term problem of our economy. Romania should aim for 2020
to bring to fiscal work between one and two million people. Therefore, Romania needs policies that address improving
incentives to increase the supply of jobs for some special categories: young, elderly and women and for achieving these
objectives is necessary to implement retraining programs and increasing qualifications of older workers and the
unemployed.
Following increasing employment is the only sustainable solution to increase revenue (and not raising taxes)
and to limit the need for internal and external loans. I believe that the Romanian economy should keep pace with
changes at European and global economy through increased competitiveness, innovation and time workforce is highly
qualified.
Keywords: unemployment, social protection, labour market, unemployment rate, economic crisis, fiscal policy
JEL Classification: J69
INTRODUCTION
The current crisis of the world economy is passing through reveals common causes,
traditional economic of the financial crisis phenomena in general, with other non-traditional
specific.
For Romania the economic crisis is not only temporary, it is one started in financing the
current account deficit. It is more than that, a crisis of the structure, of vision and above all it is one
of ownership of reforms, a leadership crisis. Romania faces a crisis of overconsumption. In detail,
there are several causes of economic crisis in Romania, namely:
 opening the capital account too quickly;
 the strong desire of consumption, based on short-term external financing;
 pro-cyclical fiscal and budget policy based on flat and very strong growth of employees' wages,
while the economy is expanding;
 postponement of structural reforms;
 reduced absorption of structural funds;
 -unsustainable growth based on internal and external economic and financial imbalances
- non-synchronization between real and nominal economy (mismatch between profit, interest
and growth);
 -labor market distortions: brain drain, shortage of construction workforce;
- expansion of housing sector;
118
 -denying the crisis before the elections of November 2008, this led to the postponement of
implementation of the preventive measures and increasing imbalances, including the last
hundred meters.
There were also cases of cyclical crisis - perhaps a higher degree of absorption of structural
funds should be provided some protection to winning companies or the government must now
reduce its level of expenditure. Perhaps an earlier acceptance of the crisis would have warned the
last increase of salaries and pensions at the second half of 2008.
DEVELOPMENTS OF THE UNEMPLOYMENT
As a result of the economic instability, the implementation of restructuring programs of the

national economy, some as inconsistent as priority directions of action, predominantly passive
nature (until the late 90's) social protection policies for the unemployed, often inadequate for the
needs of the real economy, pressure on the supply of labor performed by persons born in the late
60s and early 70s, there was an upward trend in unemployment in our country.
I believe that the phenomenon of unemployment, having its premises in the socialist
economies failures, particularly in employment, was a permanent period of transition to market
economy, because then it is chronic and is show growth in recent economic periods. With the first
regulatory litigation, namely Law no. 1 / 1991 on social protection of unemployed persons and their
reintegration training, the unemployment began to be shown on entry to unemployment offices,
because, since 1994, it was assessed by the household survey, unemployment in meaning criteria
reflecting International Labour Office.
This unemployment picture, on years is as follows:
Table no. 1. The unemployment evolution during 1991-2010

Annual Unemployment
Year
media totally number
1991 1,8 201.875
1992 5,4 605.350
1993 9,2 1.047.260
1994 11,0 1.229.748
1995 10,0 1.111.327
1996 7,8 814.292
1997 7,5 748.982
1998 9,3 917.069
The rate of the 1999 11,4 1.118.877
unemployment
2000 11,2 1.067.206
(total) % 2001 9,0 866.498
2002 10,2 954.546
2003 7,6 689.531
2004 6,8 607.192
2005 5,8 513.721
2006 5,4 484.698
2007 4,3 386.667
2008 4,0 362.429
2009 6,3 572.974
2010 7,91 724.137
119
Unemployment rates are calculated by the Statistics National Institute
Figure no. 1. Monthly evolution of the general rate of unemployment and unemployed people
Source: www.anofm
Thus, in 1991, the average unemployment rate was 1.8% and the number of unemployed by
201,875 and in 2002 had increased to 10.2% variables, respectively 954 546 unemployed.
For the next period, the trend unemployment has been decreasing (in 2003, the average
unemployment rate was 7.6% and in 2008 fell to 4 variables,%), considered by experts in
economics as too rapid to be sustained investment, creating jobs.
As a result, the low level of unemployment is explained mostly by growth, but in the case of
Romania, is explained by the obvious action of several factors: labor gone abroad (1.5 - 2 million
people) while the majority are people who, if he had remained in the country were unemployed, the
population employed in subsistence farming that had no job and a steady income and was in a
precarious socio-economic position; employment unit engaged in economic losses that would
become unemployed if the subsidies will be stopped, early retirement decreased pressure on the
labor market but led to increasing economic dependence. [1]
SNI results obtained using a different calculation methodology of the international show
increased values overall unemployment rate and the number of unemployed by 2003. Since that
year, Romania seems to have won the fight with unemployment, even in periods of strong
restructuring.
So today marks the end of the middle decade of generally positive trend in unemployment
and the beginning of the fall, until the onset of economic and financial crisis in Romania. It appears
that the crisis in low employment rate is the most important economic issue of our time. As a result,
more than four in ten Romanian active not is working, at least not in the formal fiscal economy. The
employment rate is lower for some disadvantaged groups such as women, older persons (55-65
years) and youth (up to 24 years). Romania should aim for 2020 to bring to fiscal labor between one
and two million people (which would mean another one or two out of ten active Romanian).
I believe that Romania needs policies that address improving incentives to increase the
supply of jobs for some special categories: young, elderly and women. Such measures include more
flexible working conditions, such as part-time contracts and temporary, increased assistance for job
identification and guidance, and dedicated programs, including subsidizing jobs where necessary.
In the same tine should be removed the imbalance between the number of contributors and
beneficiaries, to increase revenues to the pension fund, financial incentives to encourage workers to
remain employed longer or to return to the labor market. To achieve these goals are implemented
retraining programs and increasing skills of older workers and the unemployed.
Rising employment is the only sustainable solution to increase revenue (and not raising taxes) and
to limit the need for internal and external loans. Public policy efforts should be geared towards
increasing employment rate (and not, as happens now, to ease personnel) solution that reduces both
the macroeconomic vulnerability and social inequality (by default, reduce the need social welfare
spending).
Analysis throughout the entire period in the labor market in Romania was characterized by
large regional disparities, with increases the unemployment in some counties.
Therefore, this unemployment development is manifested differently at regional level - there are
differences between east and west of the country.
Table no. 2. Total number of registered unemployed and unemployment rate by country and
by counties
Total no of Total no of Total no of

unemploy Unemploy unemploy Unemploy unemploy Unemploy
No County -ment -ment rate -ment -ment rate -ment -ment rate
Ș omeri (%) (%) (%)
ctr. 31.05.2010 31.05.2010 31.12.2009 31.12.2009 31.12.2008 31.12.2008
0 1 2 7,0 2 7 2 7
1 ALBA 20553 11,33 22767 12,6 12827 7,0
2 ARAD 13426 6,25 14591 6,8 6549 3,0
3 ARGES 23517 8,74 25229 9,4 13131 4,8
4 BACAU 19600 8,30 21094 8,9 12411 5,3
5 BIHOR 17072 6,01 16679 5,9 8596 3,0
6 BISTRITA 10806 8,20 11124 8,4 3614 2,8
7 BOTOSANI 10726 6,93 11231 7,3 5519 3,5
8 BRASOV 20802 8,31 21825 8,7 10655 4,3
9 BRAILA 11349 8,21 11101 8,0 6026 4,4
10 BUCURESTI 28553 2,50 26156 2,3 18274 1,7
11 BUZAU 18607 9,82 17920 9,5 10854 5,6
CARAS
12 SEVERIN 12694 9,86 13326 10,4 7698 5,8
13 CALARASI 9435 8,83 9861 9,2 5463 5,1
14 CLUJ 21366 6,20 21725 6,3 9998 2,9
15 CONSTANTA 19518 6,13 20198 6,3 9612 3,1
16 COVASNA 10425 11,11 10408 11,1 6786 7,2
17 DAMBOVITA 18362 8,74 17979 8,6 11715 5,5
18 DOLJ 35111 11,67 33643 11,2 24310 8,4
19 GALATI 23993 10,87 24555 11,1 14538 6,6
20 GIURGIU 7525 8,16 6681 7,2 4181 4,6
21 GORJ 16857 11,21 16464 10,9 10994 7,4
22 HARGHITA 13883 9,69 15125 10,6 9280 6,6
23 HUNEDOARA 21598 10,45 21819 10,6 13826 6,6
24 IALOMITA 11956 11,35 12256 11,6 5204 4,8
25 IASI 24298 7,77 22898 7,3 16905 5,4
121
26 ILFOV 4548 2,81 3899 2,4 2098 1,4

27 MARAMURES 12796 6,22 13282 6,5 7577 3,7
28 MEHEDINTI 16002 12,99 17363 14,1 11429 9,3
29 MURES 19798 7,97 19999 8,1 11607 4,7
30 NEAMT 19052 9,43 16140 8,0 8223 4,0
31 OLT 15405 8,62 15694 8,8 9463 5,2
32 PRAHOVA 28997 9,22 28321 9,0 12122 3,8
33 SATU-MARE 9423 6,06 10135 6,5 4600 3,0
34 SALAJ 9783 9,19 11164 10,5 5845 5,5
35 SIBIU 12964 6,96 15315 8,2 5794 3,1
36 SUCEAVA 19669 7,79 20101 8,0 10963 4,3
37 TELEORMAN 20843 12,37 19976 11,9 13702 8,0
38 TIMIS 14888 4,38 15114 4,4 5568 1,6
39 TULCEA 7003 7,71 8024 8,8 4005 4,4
40 VASLUI 22747 14,10 22622 14,0 16458 10,2
41 VALCEA 13871 7,78 14359 8,1 8344 4,7
42 VRANCEA 12033 7,95 11220 7,4 6677 4,4
TOTAL 701.854 7,67 709.383 7,8 403.441 4,4
Source: http://www.anofm.ro/1764_numarul-total-de-someri-inregistrati-si-rata-somajului-pe-tara-si-pe-judete-la-data-
de-31-12-2008,2009,2010
According to data from the National Agency for Employment, the number of registered
unemployed at the end of May 2010 was 701,854 thousand. Compared with December of 2009, the
number of unemployed registered at employment agencies was lower with 7.529 million people.
At the territorial level, the number of unemployed rose in 15 counties and in Bucharest. These
increases were registered in the counties of Neamt, Iasi, Dolj, Ilfov, Vrancea, Buzau, Bihar, Vaslui,
Teleorman, Prahova, Gorj, Giurgiu, Dambovita, Covasna, Braila. The number of unemployed fell
more than half the counties.
Therefore, demographic and occupational management in our country should take into
account firstly, indestructible unit of labor market mechanisms and responsible involvement of
public power, the rule of law.
So the gap between demand and oversupply of labor has decreased slightly, due to a relative
increase in employment opportunities during March to May 2010 and cooling trends of increasing
unemployment. However, the absorption of labor force remained significantly lower than pre-crisis
period.
Because of this It must be taken the decision to avoid the tendencies of non-financial firms
to reduce (or optimize) variable costs, especially wage costs such as internal and external result of
reduced domestic production through fewer employees.
CONCLUSIONS
Throughout the economy, unemployment is an important consequence of lost production.

This effect is manifested more pronounced in periods of recession. Thus reduced production, lower
income businesses, and state tax revenues decline and as the population is affected again by
reducing government transfers.
It can therefore be considered a series of solutions that could lead to the recovery of the
country's economic situation. Mainly government’s fiscal policy must change course. It can not
increase budget revenues by increasing taxes but by stimulating consumption and helping small
122
businesses. So, by reducing taxation. Failure on these proposals especially for crisis led to business
suspension or dissolution of a large number of SME’s in the past year.
In parallel with the reduction of taxation, Romania needs a stable domestic macroeconomic
environment based on low inflation and bank interest.
Also required is a solution for creating an institutional and administrative transparency with
opacity and reduced bureaucracy.
I believe that unemployment is a 'bad' office just as production is "better" social. The result
of both models applied, and the Anglo-Saxon (based on laissez-faire and market dominance), and
Europe (the welfare state, the welfare state) have proved not only limits but also dangers, namely
the potential to generate crisis and the ideal would be a third way, a market economy, but
governments provide necessary public services and where there is a supervisory "healthy" economy
and financial system.
As a result, economic efficiency required by emphasizing the three relationships: between
the process of economic growth, productivity, labor demand and the specific duration of working
hours, between labor supply and demand, between wages and inflation rate through the purchasing
power index.
1
Irena Mocanu (2009), Unemployment in Romania. Regional disparities, Romanian Statistical Review, no. 4
National Institute of Statistics, Bucharest
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15. www.mfinante.ro
16. http://www.anofm.ro/evolutia-ratei-somajului-in-perioada-1991-2010
17. http://www.anofm.ro/numarul-total-de-someri-inregistrati-si-rata-somajului-pe-tara-si-pe-
judete-la-data-de-30-06-2010
18. http://picasaweb.google.com/cristianorgonas/KhrisRo#slideshow/5400607331184848418
19. www.mediafax.ro
20. www.insse.ro
21. www.scribd.com
22. http://www.wall-street.ro/criza-economica
123
EXCEEDING THE RESTRICTION IN AGRICULTURE, ECONOMICAL SPEAKING,

AFTER ADHERING TO THE EUROPEN UNION
Professor PhD. Dorina ARDELEAN

University Vasile Goldiş, Arad, Romania
dorina_ardelean@yahoo.com
Lecturer PhD. Marius BOIŢĂ
University Vasile Goldiş Arad, Romania
cocosboyz@yahoo.com
Abstract:
If we take in consideration the profound structural discrepancies from the Romanian agriculture and rural
environment, of the extended state of severe poorness from the rural areas, as well as the budgetary restrictions, which
appear to main on the medium term, it is showed the importance of a pragmatic agricultural policy.
In the present conditions, in the process of carrying out of this unitary system of objectives- derived from
the fundamental strategic objective which aims at a significant growth of the Romanian agricultural products and
producers completion- are two major objective restrictions: the success of the Romanian agriculture within the
European Union structures and the relative limited possibilities of financial sustainment through the public resources
of the governmental action from the agricultural sector.
Keywords: agriculture, resources, capital, market, agricultural products
JEL Classification: Q 18
INTRODUCTION
In the 2007-2009 period, the Romanian agriculture benefits from a substantial financial
support from the PAC founds, namely 4,037 milliards of euro. A significant part of this founds,
60%, is meant for the rural development. The purpose of this development is the improvement of
the Romanian peasant wellbeing, which almost doesn’t exist in the Romanian village. It is given a
great attention to this policy, because our current capacity to absorb the communitarian founds is
still low.
Also, there are foresee founds for the market measurements (18%) and for direct payments
(22%).
Integration in the common agricultural policy assumes the reduction of the variance of the
agricultural products prices with at least 10%.
The growth of the investments in the agricultural sectors is one of the min advantages of the
adhesion. The existence of the cheep manpower and the current underdevelopment of the agro-
alimentary industries will attract important investments. In the last years, E.U has attracted
approximately 50% from the total worldwide volume of investments, while U.S.A. has attracted
only 25%, volume in which China isn’t included, its position being unknown.
Another positive effect of the adhesion is the growth of the products specific to our country,
interesting for a European market of 450 million consumers (such as honey, nuts, forest fruits, etc).
Through the support programs for products are introduced the quality norms of the
European Union, superior to Romanian one’s.
CONTENT
The financial support given through the common agricultural policy and the productivity
growth expected as a result of the investments will have as an effect the growth of the agricultures
incomes.
124
Through the measurements of anticipated retirement, the complementary measurements to

fluidity the landed market and the measurements of rural development it is desired that in the next
20 years the quota of population from agriculture to drop to 10%.
On the plan of the governmental action, of the agricultural policies, the competitively deficit
of the Romanian producers has been deeply as a result of a complex of circumstances and causes, of
which we consider significant the following:
 The lack of an accepted pragmatic strategy of development of the Romanian
agriculture on the medium and long term (at least in what it concerns the general coordinates) of the
whole spectrum of political force from the country. The non existence of this consens generated a
state of confusion with inevitable consequences upon the process of consolidation of the
agricultural sector.
 Forming and promoting of the agricultural policy based upon punctual and situational
broaches/solutions in the detriment of a systemic vision which would assure the taking into
consideration of the medium and long term perspective;
 Insufficient attention given (or, if in certain periods has existed in a pragmatic plan, it
was shadowed by hesitations, inconsequence, half measurement, etc) to the process of structural
adjusting of the agricultural sector, in it essential two components:
- Enterprise reform;
- Forming and developing competitive markets.
If we take in consideration the profound structural discrepancies from the Romanian
agriculture and rural environment, of the extended state of severe poorness from the rural areas, as
well as the budgetary restrictions, which appear to main on the medium term, it is showed the
importance of a pragmatic agricultural policy.
Exceeding the present state imposes- in our opinion- situated in the central of the
agricultural policy- as a fundamental strategic objective- the real and profound reorganization of the
agro-alimentary sector seen as an ensemble of interdependent economic-social processes, which
must firstly aim at: consolidating the private propriety, enthroning of the propriety sense and of
responsibility in given and administrating the resources, facilitating the concentration of the landed
and of exploitation capital in viable agricultural exploitation/enterprises (in the conditions of an
economy objectively more opened) simultaneously with the forming and development of alternative
incomes sources in the rural areas, as an essential premise to overcome the barriers from the way to
get out of the present surplus of work resources; creating a favorable economic environment for the
efficient development, on competitive grounds, of the agricultural activities, inclusively through
forming effective stimulants and conditions for savings in the rural households and the realization
of private capital disposal came from outside or from inside the agricultural sector, developing
partnerships in protection and conserving the natural environment from the rural space.
Accomplishing this fundamental strategic objective- which finality is represented by a
systemic and structural adjusting of the agro-alimentary sector, an adjusting able to fully valorizing
the agro-productive potential given by the natural resources, and on the other side, to create or to
consolidate the competitive advantages of the Romanian agriculture- it will have to be subordinated
to a coherent system of partial/derived objectives, from which we mention:
 Forming a competitive agricultural structure, constituted from a preponderantly mass of
viable exploitation/enterprises supported by an adequate infrastructure and by a functional system
of specific services;
 Creating the indispensable condition for equitable, stimulating remuneration of the
capital geared in the agro-alimentary sector- preponderant development of agriculture based on the
own resources and of the private capital attracted from within the country and from abroad;
 Stabilizing and growing the agro-alimentary production in concordance with the agro-
productive potential and the competitive advantages of Romania: co-interesting the agricultural
producers in obtaining, permanently, of a significant surplus of agro-alimentary products valuable
in the conditions of efficiency on the internal market and international markets;
 Limitation and diminishing gradually the rural environment poorness; growing the
125
agricultural incomes, developing and diversification of economic activities that generate alternative
incomes in the rural space; complex, integral development of the rural communication;
 Consolidating the capacity of support- conservation and regeneration of the rural
environment.
In the present conditions, in the process of carrying out of this unitary system of objectives-
derived from the fundamental strategic objective which aims at a significant growth of the
Romanian agricultural products and producers completion- are two major objective restrictions: the
success of the Romanian agriculture within the European Union structures and the relative limited
possibilities of financial sustainment through the public resources of the governmental action from
the agricultural sector.
On this general fund, a major problem is represented by the alternatives of preponderantly
allotted of limited budgetary resources: for the current needs of production or for the creation and
consolidation of the premises for a competitive agricultural growth (forming and developing the
fundamental determinants of dynamic competitive). It cannot be left aside neither the fact that the
orientation to a priority given to the current needs or to solving the fundamental problems of
dynamic competitive it determines the base orientation of the governmental action in what it
concerns the legislate and institutional frame.
The orientation to the current needs of the agricultural production may contribute to a fast
re-launch of the agricultural production. In the conditions of the existence of some functional
markets, this growth would have as a result of the increase of financial resources of agricultural
producers and of the state budget. Unfortunately, currently this kind of markets is missing. The
spore of production risks to not finding development in satisfactory conditions for the agricultural
producers, to not generate real stimulants for re-starting the economic activity, and in its absence
to appear new demands for budgetary resources. Obtained in the conditions of the current
agricultural structure- characterized by profound structural discrepancies and a low efficiency of
allotting/utilization of resource- the mentioned growth is more and harder to sustain. As time goes
by, of the progressive opening of the Romanian economy it is needed a bigger volume of
budgetary resources given as a form of production, stocking, commercialization (on the internal
market and the external ones) subventions of agricultural products. In the moment, in which, this
budgetary resources, more important, couldn’t be assured anymore the consequence would be
diminishing or, in extreme conditions, crashing of the agricultural growth. The treaties from
within the OMC already bring to date this moment. We are highlighting that the preference given
to the present in the detriment of the future risks to miss the Romanian agriculture of the essential
premises of a durable agricultural growth in an economy more objectively opened.
The priority given to forming the bases for dynamic competitive, without a doubt can’t be
accompanied on a short term by spectaculars results of the agricultural product growth, as well as
of the structural adjusting of the sector. Talking about this last aspect, it would be naïve to think
that the inertial forces that persist (already for too long), in the process of structural adjustment of
the Romanian agriculture (restriction and blocks in forming and developing the competitive
markets, the deformed structure of agricultural exploitation, behavioral deficiencies, blocks at
leaving the agricultural activities and not least, the modest resources that can be allotted on non
inflationist bases for sustaining the structural adjustment process) may be “annihilated”/exceeded
on a short term. The experience of the worldwide agriculture - especially of the old countries of
the European Union- convincingly attested. But, even in this conditions, every realized step in a
systemic vision (long term oriented) would bring a lasting contribution to edifying the bases for a
real agricultural growth (competitive and durable), that can sustain the process of development of
the branch in a more opened economy. In our opinion, it is worth the effort and it must be made
today, when the restrictions that are a result of the obligations assumed at international level leave
enough space to promote objectives/actions of structural adjustment specific to the present stage
of development of Romanian agriculture through budgetary sustainability.
In this context the natural question that we pose is: what should be done?
126
As a first general answer, the basic coordinates of political agricultural and rural
development principles that we suggest are:
 Moving the accent from the interventionist policies of direct stimulation of the offer
(subventions for revival of the annual production cycles, regulating the markets through financial
sustainment policies of the stabilization policies of it, export subventions, etc.) to the structural ones,
namely sustaining the forming and functioning at efficiency parameters of some agricultural
exploitation of medium dimensions through the market mechanism, the development of the
institutional frame and of the necessary infrastructure for the rural market functioning and the urgent
finalization of the privatization of the economic unities from the rural environment to which the
state is of a majority.
 Moving the accent from the exclusive agricultural policy to a real rural development
policy, with the purpose to facility the occupying of the non agricultural sector from the rural
environment, parallel with reducing the occupying in agriculture.
At the present moment, in the agricultural sector, the competitive environment is under
develop and strongly damaged in the behalf of the agricultural producers. For a wide range of agro-
alimentary products the markets continue to be segmented (the offer is mostly designed to local
markets) and without having a proper connection with the international markets. The” pale” signs
that the current markets emit don’t offer the indispensable mark for the orientation of the
production structure to the real present and future demand. This situation exercise o strong
unfavorable flow upon the agricultural production: there are missing the agricultural producers of
necessary stimulants/resources for the enlargement or intensification of the economic activity, on
one side through the lack of existence of functional channels of knowledge of demand and of
production development- especially in the case of pulverize most peasant households- and on the
other side, through the buyers “saying”, as a result of the mostly territorial presence of some
monopole position of the local wholesale dealer. In the lack of offer organization, the peasant
households don’t have the necessary straight to oppose the power of the wholesale dealer As a
result, in the case of a normal croft, frequently, the products are undervalued at the farms gate and
in numerous situations it don’t finds the development in the right time of the croft, moment in
which the agricultural producers feel acute the lack of financial resources to pay the debts (towards
the commercial banks, suppliers, etc.) and restarting the production cycle. In the lack of adequate
storing spaces or of the financial means to necessary to “rent” it, important stocks of products go
into an inevitable process of deterioration. Aren’t exceptions the situations in which a part of the
agricultural products are defalcated from their normal usage to other usages (such as the weed for
bread to animals food). All of it reduces the interest and the available resources for the production
from the agricultural sector.
CONCLUSIONS
In the case of the inputs necessary for production, the biggest difficulties are generated by
agricultural producers of low development of the services market specific (namely the mechanic
works) and of the financial markets, of the rural loans (retail banking services). For other
categories of input (such as fit-sanitarian products) the cost with obviously implication upon the
process of agricultural growth- are strongly greave by the blowing out of the demand (it attracts,
inevitably higher costs of transaction) and of the high level of the commercial adding. This lest one
is partially explained, through of protection that the dealers are obligated to assume in front of the
risk of not paying or time or even in the impossibility to recuperate the value of the products given
ob credit (a practice wide used frequently as a result of the de-capitalization of the agricultural
producers) with payment at crafting. In the lack of functional channels of development of products,
in frequent cases, the agricultural producers can’t honor their contractual obligation towards
suppliers and commercial banks.
A favorable contribution to the forming and developing of competitive markets may bring:
 Organizing the offer through developing the rural cooperation in the supplying,
127
processing and development domain of agricultural products. The appearance and developing of
modern rural cooperation in our country, in accordance with the functioning principles and the
organization modalities practices in the West-European countries is conditioned by both assuming
the Law of rural cooperation (the Law of agricultural cooperatives) and as well of the given of the
public power of financial support in the initial stage of creating the cooperatives for creating the
infrastructure of production and commercialization;
 Forming and consolidating the markets at term (forward) and of the stoke markets of
contracts at term and of other credit titles;
 Facilitating the consolidation process of some reprehensive professional and functional
association of the agricultural producers;
 Promoting an ensemble of actions/measurements of de-monopolization of demand
through forming a “critical ” of true wholesale dealers reducing the barriers of entering of the new
private operators on the market; fluidity of the cereals markets transactions and implicit of the
monetary fluxes from the agricultural producers to silos and finally, dealers and the merchandise
stoke exchange trough creating the necessary conditions to implemented the system of warehouse
certificates; developing the commercialization infrastructure, actions to promote the Romanian
products on international markets, consolidating and developing the merchandise stoke exchange,
etc.
 Actions which purpose are to enhance the markets transparency, first through forming
an informational system regarding the specific markets, dates that would be put at the agricultural
producers disposition, systematically and operative through the National Agency of Agricultural
Consultancy;
 Creating a control system of the markets under the quality standards and the control of
products origin.
We also have to mention, even tangential, the problematic of forming and developing the
financial markets in the rural environment/with impact in the rural environment, currently a major
restriction in the process of agricultural growth (in the conditions of the high degree of de-
capitalization of the agricultural producers and of the restoring possibilities to form the capital). In
order to clearing this market it would be wanted to:
 Facilitating the extension process of the coverage area of commercial banks in the rural
environment through: financing studies / projects concerning opportunities/restrictions and the
projection of the of the financial situation of the points of business which would be carried out by a
private bank in the rural environment; elaborating the appropriate technology of offering financial
services to the agricultural producers, to small and very small companies from the rural
environment; financial support (direct/indirect), in order to start a pilot filial/point of business in the
rural areas;
 Regulating the conditions that would make possible the creation of some small private
commercial banks with local coverage;
 Sustaining the forming and developing process of the mutual agricultural credit;
 Supporting the improving process of the offer and of the quality of the assurance
services (of the crop and/or of the producers incomes ), inclusive the forming and developing of the
mutual assurance system;
 Developing the leasing market for the capital goods;
 Facilitating the enhancement process of the capital fluxes in the rural environment
trough creating the regulating frame which offers the possibility to imply financial non-banking
intermediaries in the assurance of the necessary resources for the agricultural producers;
 Facilitating the process of realization of a functional system of agricultural culture based
upon on term contracts (forward) and of the financial instruments market.
128
REFERENCES:
1. Fruja Ioan, 1993 – Structuri agrare mondiale, Ed. Universitatea Tibiscus, Timişoara
2. Fruja I., Milin A.,2007 – Agricultura Regiunii de Vest – Realizări şi perspective, Ed.
Agroprint, Timişoara;
3. Gavrilescu D., Daniela Giurca (coordonatori), 2000-Economie agroalimentară, Editura
Expert, Bucureşti;
4. Lasok, D, şi Kpe Lasok, 1994- Law and Institutions of the European Union. London:
Butterworths.
129
COMPARATIVE ECONOMETRIC ANALYSIS ON THE EVOLUTION OF TOURISM

TRAFFIC IN PRAHOVA AND BRASOV COUNTIES
Professor, PhD. Marian ZAHARIA

Petroleum-Gas University, Ploiesti, Romania
marianzaharia53@gmail.com
Associate Prof. PhD. Rodica Manuela GOGONEA
manuela.gogonea@gmail.com
Abstract:
The paper analyzes the comparative development of tourist traffic in the counties of Prahova and Brasov, the
main indicators for assessing values, numbers of tourist arrivals and overnights number, being studied as econometric
time series.
The economic crisis triggered worldwide began before 2009 also in travel industry, has important effects at national
level in Romania territorial.
Studied in this context is the tendency of tourist movement in Prahova and Brasov counties, and recording
developments oscillatory growing up in 2008 and a significant decrease in the year 2009.
Conclusions of the analyzed phenomena show that the results are the effects of the emergence of financial bottlenecks
that led to a significant drop in income population and therefore in important reduction of the tourist arrivals and of
the overnight stays in these counties.
However, it is expected a revival of tourist traffic in Prahova and Brasov counties, after economic recovery of
Romania.
Key Words: regression, polynomial function, overnight stays, tourist arrivals.
JEL Classification: C10, L83
1. INTRODUCTION
Romania's economic growth in the last 10 years has led to significant positive developments
in tourism. Thus, in this decade, tourist movement had significant developments at national,
regional and county.
A particular impact in the tourist traffic and tourism activity is presented to counties Prahova
and Brasov, which allow a comparison of this view. The two counties are the main tourist
destinations for the habitants of the capital city where pollution and stress are highest. These two
counties there are at a relatively small distance from Bucharest and offer a range of ways to spend
the weekend. This context determines the inhabitants to escape out often from this city, weekend
tourism being one of the forms of tourism, with significant impact on tourist traffic down in the two
counties.
The main indicators characterizing the touristic flows are represented by the number of
tourist arrivals and the number of overnight stays in establishments of tourist reception in the
counties that are under examination.
The econometric approach of time series is formed from the empirical data provided by
local departments of statistics from Prahova and Brasov, and it is based on an essential feature of
the target in the analysis. This feature requires the explicit identification of the order of occurrence
of all observations.
Meanwhile, application of econometric methods have envisage the determination of the
trends of the phenomena analyzed by applying of mathematical functions which better reflect the
trend of each indicator that characterize the tourist flows in the two counties.
Analytical methods for analyzing the evolution of economic phenomena and processes are based on
chronogram of empirical dates series that allows choosing the best estimate of mathematical
function of overall trend of tourist flows.
130
2. A COMPARATIVE ECONOMETRIC ANALYSIS OF THE EVOLUTION OF

TOURIST ARRIVALS IN ESTABLISHMENTS OF TOURISTIC RECEPTION IN
PRAHOVA AND BRASOV COUNTIES
Number of tourist arrivals in tourist reception is the main indicator for measuring the tourist
traffic, outlining its evolution and to some extent impact of tourism on economic growth at regional
or national.
Evolution of the number of arrivals in Prahova County during 2000-2009 period, presents an
oscillatory trend with successive increases and decreases (Table 1).
Table no. 1:Tourist arrivals in establishments of touristic reception in Prahova county

(Thousand persons)
2000 2001 2002 2003 2004 2005 2006 2007 2008

327 315 306 320 329 347 371 416 417
Source: Tourism Prahova, 1998-2008 Statistical Compendium, 2009 edition, pag.4
The overall trend is reflected as an increase in tourist arrivals tn Prahova entire period of
analysis. On average this increase is set at just 33,000 visitors annually, ie an average increase of
101.02% with an average rate of 1.02%.
500
417
400 416
300 347 371
327 315 306 320 329 330
200
y = -0,3367x4 + 6,0572x3 - 32,286x2 + 58,153x + 291,58
100 R2 = 0,9564
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
thou arrivals Prahova Poly. (thou arrivals Prahova)
Figure no. 1. Evolution of tourist arrivals in Prahova County, in the period 2000-2009
A clearer picture of the evolution of the number of tourists arrivals in establishments of

tourist reception is also presented in Prahova chronogram (Chart 1). Insignificant average increase
is due to last set of values recorded in the year 2009 as a result of the economic crisis started in
2008.
Graph tourist arrivals in Prahova County, in the period 2000-2009 suggests Econometric
development trend set by adjusting the numbers of arrivals of tourists arriving using the fourth
degree polynomial, whose relationship is determined as:
y  0,3367x 4  6,0572x 3  32,286x 2  58,153x  291,58 (1)
131
Value determined coefficient ( R 2  0,9564 ) indicates that the adjustment on the fourth
degree polynomial better reflect the evolution of tourist arrivals in establishments of tourist
reception of Prahova county.
Evolution of the number of arrivals in Braşov County during 2000-2009 periods is presented
in table 2.
Table no. 2. Tourist arrivals in establishments of touristic reception in Brasov County

(Thousand persons)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
326 328 290 325 422 448 484 557 582 426
Source: Statistical Yearbooks Brasov
From Table 2 is apparent that the evolution of the number of arrivals during the period
2000-2009, shows a similar trend to that recorded in Prahova County. Minimum value of 290 000
was registered in 2002, the maximum being recorded in the late period, 557,000 in 2007 and
582,000 in 2008. In 2009 was recorded a decline compared to 2008 the number of tourist arrivals in
Brasov County with about 156,000.
The same trend is also reflected by corelograma of tourist arrivals in establishment of tourist
reception of Braşov County (Figure 2). Compared to average growth set at the county Prahova,
Brasov County register an average increase of 36,250 tourists, with 3250 visitors annually more
than in Prahova County.
700
600 582
500 557
400 448 484
422 426
300 326 328 290 325
200
y = -0,4073x4 + 6,2533x3 - 22,495x2 + 18,087x + 325,67
100
R2 = 0,9506
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
thou arrivals Braşov Poly. (thou arrivals Braşov)
Figure no. 2. Evolution of tourist arrivals in Brasov County, in the period 2000-2009
From graphic analysis of tourist arrivals in Brasov county, in the period 2000-2009 (Figure
2) we conclude that, also for this county the evolution adjusted based on the fourth degree
polynomial equation, reflects very well the tourist arrivals in tourist reception of Braşov County
( R 2  0,9506 ).
y  0,4073 x 4  6,2533 x 3  22,495 x 2  18,087 x  325,67 (2)
Studying the graphs we conclude that the trend of development is similar, a fact confirmed
by adjusting polynomial functions whose coefficients have values very close.
132
As I said, the beginning of economic crisis has significant implications in Romania, fact reflected
by the low number of tourist arrivals in 2009 establishments of tourist receptions of the two
counties analyzed.
3. COMPARATIVE ECONOMETRIC ANALYSIS OF TOURIST OVERNIGHTS IN

ESTABLISHMENTS OF TOURIST RECEPTION FROM COUNTIES PRAHOVA AND
BRASOV
Number of tourist overnight stays in establishments of tourist reception is the second

significant indicator for evaluation of tourist traffic and reflection of the impact of tourism on
economic growth at regional or national.
For both counties, Prahova and Brasov, can be noted an evolution trend of overnight stays in
a somewhat similar to the tourist arrivals.
Although still an oscillatory trend with successive increases and decreases is also registered
for the number of overnights in Prahova County, however, the 1.017 million overnights in 2009
versus 1019 in 2000 rise to an average decrease of 0.02% annually.
Evolution of overnight stays recorded for this county is more clearly reflected by
cronograma (Figure 3). In the period 2000-2003 was recorded a reduction in number of overnights,
the minimum value of 803,000 nights spent being registered in 2003. Between 2004-2008 the
demand is reviving, with the largest increase in 2007-2008 with 97,000 by innoptatari. But in 2009
starts to feel economic crisis, overlapped with the political crisis in Romania.
1200
1017
1000
1019 1063
966
800 911 894 929
857 803 831
600
400
y = -0 ,2 2 2 2 x 4 + 2 ,8 1 1 5 x 3 + 6 ,9 9 3 4 x 2 - 1 4 1 ,4 8 x + 1 1 5 0 ,3
200 R 2 = 0 ,9 6 2
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
th o u s ta y in g s o v e r n ig h t Pr a h o v a
Po ly . ( th o u s ta y in g s o v e r n ig h t Pr a h o v a )
Figure no. 3. Evolution of the overnight stays in Prahova County, in the period 2000-2009
The evolution of this indicator for Brasov county has a slightly different look with a trend
reflected by corelograma of overnight stays in establishments of tourist reception of Braşov County
(Figure 4).
Braşov, compared with an average decrease of overnight stays in the Prahova county, is
facing, the entire period of analysis, with a process of annual average increase of 0.52%,
representing an average increase of 4 780 overnights per year.
133
1400
1228
1200
1000
1055 1191
800 961 1000 934
891 885 831
600 779
400
y = - 0,8989x 4 + 14,953x 3 - 66,266x 2 + 74,519x + 870,83
200 R 2 = 0,9257
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
thou s tay ings ov er night Br aş ov
Poly . ( thou s tay ings ov er night Br aş ov )
Figure no. 4. Evolution of the overnight stays in Brasov County, in the period 2000-
2009
As tourist arrivals in the establishments of tourist reception presented in the previous

subsection, for determine the trend of overnight stays we can used the method of adjusting with a
polynomial function by four degree.
Thus, for the number of overnight stays in Prahova County, in the period 2000-2009, the
econometric trend is set by adjusting by the following function:
y  0,2222 x 4  2,8115 x 3  6,9934 x 2  141,48 x  1150,3 (3)
The adjustment based on this polynomial function, confirmed by the coefficient

( R  0,9257 ) outlines very good the trend of overnight stays in the establishments of tourist
2
reception of Prahova county.

Also, the graph of overnight stays in Brasov county, in the period 2000-2009 (Figure 4) is described
by a fourth degree polynomial function, like:
y  0,4073 x 4  6,2533 x 3  22,495 x 2  18,087 x  325,67 (4)
In this case the value determined coefficient ( R 2  0,9506 ) is even better.

Careful analysis of evolving graphs lead us to conclude that the number of overnight stays
for Prahova decreased compared to 2000 compared with that established for Brasov, which is
explained either by the poor quality of services, either through reduced budget and limited who
tourists had which prefer the Prahova destination resorts. One or more of them have led to reduce
the period of stay in tourist establishments in Prahova versus Brasov. But, from 2009 the situation is
reversed.
CONCLUSIONS
Outstanding tourism potential of the two counties and their advantage of location relatively
near the Romanian capital, Bucharest, in which focuses the most of the national workforce with the
highest financial potential, are two traits which enabled them to be compared in terms of tourist
interest.
134
If arrivals and overnight stays by 2008 depended largely on the quality of service, once with
the outbreak of the crisis, financial problems left their imprint not only on the establishment of
holiday destination as well as the weekend party.
In this context it is notable decreases recorded in 2009 handed over in 2008 for both tourists
arrivals and for their overnight stays in both counties that have undergone analysis and comparison.
Econometric methods of adjusting and setting the trend of evolution by polynomials of degree four
concluded that both the tourist arrivals and the overnight stays show their oscillatory increases till
2008 and a significant decrease since 2009.
Due to this decrease, overall, given only first and last years values were established in
average increases or decreases with lower values, which would lead us to say that our attempts and
efforts to align with European standards will be hampered by the economic crisis started in 2008.
Only Romania's exit from the crisis can offer us the perspective of tourism traffic and of the tourism
as a whole.
REFERENCES
1. Gogonea R.M, Zaharia M. – Econometrie cu aplicaţii în comerţ-turism-servicii, Editura

Universitară, Bucharest, 2008
2. Gogonea Rodica-Manuela, Zaharia Marian, Dumitru Nicoleta-Rossela Statistic and
econometric analysis of the motivationl factors on turistc behavour, Analele Universităţii
din Oradea”, seria Ştiinţe Economice, Tom XVIII 2009 - Volumul II, pag. 654-658..
3. Oprea Cristina, Zaharia Marian, Rodica-Manuela Gogonea – Analysis of the accommodation
capacity of Romania în the period 1990-2007, Journal of tourism, Special Number/2009,
Editura Universităţii Suceava, pg. 12-17.
4. Zaharia M, Gogonea R.M, – Econometrie. Elemente fundamentale, Editura Universitara,
Bucharest, 2009
5. Marian Zaharia, Rodica-Manuela Gogonea, Cristina Oprea, „Developments and
Characteristics of Net Using Of the Accommodation Capacity from the Establishments of
Tourist Reception in Romania”, Knowledge, in “Business Transformation through
Innovation and Knowledge Management: an Academic Perspective”- The 14-th IBIMA
Conference, June 23 - 24, 2010 Istanbul, Turkey,p.1827-1833.
6. Marian Zaharia, Rodica-Manuela Gogonea, Carmen Nastase The tourism’s measurement in
the view of lasting development, Articol indexat în 2009 în BDI
EconPaper,http://econpapers.repec.org/article/raujournl/v_3a2_3ay_3a2007_3ai_3a3_3ap_3
a48-59.htm
7. Marian Zaharia, Cristian Valentin Hapenciuc and Rodica-Manuela Gogonea, Analysis of the
correlation between the existing accommodation capacity and the number of tourists arrived
in Suceava county structures of touristic reception Articol indexat în 2009 în BDI
EconPaper,
http://econpapers.repec.org/article/scmrdtusv/v_3a5_3ay_3a2008_3ai_3a5_3ap_3a43-
48.htm
8. Zaharia Marian, Oprea Cristina, Rodica-Manuela Gogonea – Econometric analysis on the
evolution of the demand and offer of accommodation in camps for children under and of
school age, Journal of tourism nr.7/2009, Editura Universităţii Suceava, pg. 35-40.
9. Zaharia, Marian, Hapenciuc Cristian Valentin, Gogonea Rodica Manuela, Analysis of the
correlation between the Existing accommodation capacity and the Number of Tourists
Arrived in Suceava Country Structures of Tourist Reception in Journal of tourism - studies
and research in tourism, No.5/2008, P.43-48.
10. Zaharia Marian, Gogonea Rodica, - Tourism implication in Economic Growth. A Cybernetic
Approach”, International Journal of Computer, Communications & Control, Year 2006, vol.
1, Supplementary Issue p. 492-496.
135
IPSAS AGRICULTURE – PROBLEMS OF A START

Lecturer Cristina Silvia NISTOR
Babes Bolyai University, Faculty of Economics and Business Administration, Cluj Napoca, Romania
cristina.nistor@econ.ubbcluj.ro
Assistant Andreea CIRSTEA
Babes Bolyai University, Faculty of Economics and Business Administration, Cluj Napoca, Romania
andreea.carstea@econ.ubbcluj.ro
Diana COZMA IGHIAN
North University, Baia Mare, Romania
Abstract:
The Agriculture theme raises a lot of problems fom the point of view of its reflection in the public sector
accounting. In this context, at international level, there was need for a separate international regulation on this topic.
According to IAS 41 Agriculture, a project has been subject to public debate – Exposure Draft (ED) 36 Agriculture, by
whose modeling based on subscribed observations and proposals, to be able to build an international standardfor
public sector on the topic of agriculture. Through a positivist research, based on the combination between quantitative
and qualitative research, we analyze the impact of this proposed standard on the respondents, tracking and quantifying
the degree to which it meets the needs of specialists from different countries. The study is very topical, considering that
in the current period, at IPSASB level (International Public Sector Accounting Standards Board) there is the process of
final elaboration of the standard, taking into account the particulars brought to ED.
The study is of great importance for both the theoreticians from accounting field, who can make an image on
the research trends in this field, and the practicians who can get the answer to some problems of agriculture, whose
solution will be achieved by international standard approval.
Keywords: IPSAS, agriculture, comments, terms, debate
JEL Classification: M 40, M 41
INTRODUCTION
At international level, half of the world’s population works in agriculture. There are great
differences between the role played by agriculture in different parts of the world. In developing
countries, such as Nepal, almost 90% of the population work the land. In contrast, in industrialized
countries, like Great Britain and United States of America only about 2% of active population are
working in agriculture.
The lack of normalisation, the diversity of activities and the economic importance of the
agricultural activity contributes for the increase of existing pressures in endowing the users with the
financial information of the sector with relevant and reliable data, allowing them to know the real
financial position and evaluate the performance of the organizations (Azevedo, Graça Maria do
Carmo, 2007).
This raises the need for regulation of agriculture in public sector accounting. IPSASB
recognizes the lack of such a standard and proposes for debate the ED-ul 36 Agriculture, in March
2009 with subscribtion term for the responses, June 2009. The current period marks the progress of
the construction process of the referential, in its final form. (IFAC, 2010).
In this context, this study aims to identify the degree of acceptance of ED 36 in its current
form, identifying the themes and subjects that encourage most discussions and observations.
Starting from an overview of agriculture in the sphere of accounting regulations characteristic to
public sector, we further detail the content of the possible standard created on this topic. Through an
empirical research of the answers given by the IFAC member countries that participated to the
process of the debate of the subject, we can appreciate how the final shape of referential will require
extensive restructuring of content and form. Next, we try to interpret the position of some countries
and how they support or not this extensive process.
The topic presents a real interest, also for Romania, whose agriculture sector is in a slow
process of development. EU membership, requires continuous updating of regulations, in order to
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achieve accounting harmonization and convergencewith international regulations. Thus, after

including the referential of agriculture in IPSAS (International Public Sector Accounting
Standards), also the Romanian accounting public sector should attend to its regulations.
REVIEW OF EVOLUTION AND CONTENT OF ED 36 AGRICULTURE
The historical evolution of the creation of the international standard IPSAS on the topic of
agriculture can be synthesized as follows:
 Octomber 2008 – The IPSASB members raises the issue of accounting treatment and
presentation of information related to agricultural activity, a topic that is not covered in
other standards. The first debates about the elimination of possible duplication of content
between IPSAS appear, meaning that some specialists consider that defining the term
“government subsidies” and presentation of the requests and recommendations regarding the
booking of government subsidies in the context of agricultural activity, should not be
included in this standard. This is because IPSAS 23 “Non-exchange transactions incomes”
presents requirements and guidance regarding the booking of incomes from governmental
subsidies.
 February 2009 – A lot of issues related to definition and range of application of agricultural
products appear. IPSASB agreed that the definition should include agricultural products
subject to sale. The range of application section will include a paragraph stating that the
biological assets for service delivery are outside the range of application of the proposed
IPSAS. The IPSASB members voted in favour of issuing the ED with 17 to 0.
 March 2009 – IPSASB issues ED 36 Agriculture. The comments on the text content are
expected to IFAC's address until June 30, 2009.
 September 2009 - IPSASB analyses the answers of representatives of professional bodies
from different countries for ED 36 Agriculture. IPSASB agreed to clarify the principles of
measurement for non-exchange transactions, and the conditions for exclusion from the range
of application of IPSAS for biological assets used in providing services. They also agreed
that transitional arrangements for accounting systems that adopt for the first time the accrual
accounting should be developed.
By considering the content of ED 36 Agriculture, IPSASB wants to find answers from
expert bodies from different member countries of IFAC, with reference to the following subjects:
1. The definition of agricultural activity. The agricultural activity is managed by an entity that
deals with biological transformation of living animals or plants for sale, including
conversion to agricultural products, to additional biological goods or their preservation.
2. The biological treatment for goods during growth, degeneration, production, procreation and
for measuring initial agricultural production, at harvest. It requires measurement at fair value
minus costs of sales from initial recognition of biological assets to the point of harvest.
However, IPSAS XX (ED 36) does not deal with processing of agricultural products after
harvest, for example, processing grapes into wine or processing of wool into yarn.
3. There is a presumption that fair value can be measured reliably for a biological asset.
However, this presumption may be refused, only on initial recognition of a biological asset
for which market prices or established values are not available and for which the alternative
estimations of fair value are determined to be clearly viable. In such cases, IPSAS XX (ED
36) requires an entity to measure biological assets at their cost less accumulated depreciation
and accumulated impairment losses. Once the fair value of such biological good becomes
reliably measured, an entity measures the fair value minus cost of sales. In all cases, an
entity must evaluate the agricultural assets to the point of harvest, at its fair value less costs
of sales.
4. IPSAS XX (ED 36) requires a change in fair value less costs of sales of a biological asset be
included in the surplus or deficit of the period in which it appears. In agricultural activity, a
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change in physical attributes of a live animal or plants directly enhances or diminishes the
economic benefits. Under a transaction based on historical cost model, an entity that owns
forest plantations would not present any income until the first harvest and sale, perhaps 30
years after planting. Furthermore, an accounting model that recognizes and measures
biological growth using current fair value reported to changes in the fair value over the
period between planting and harvesting, is better supported by specific of agricultural
activities.
5. IPSAS XX (ED 36) does not establish new principles for land related to agricultural activity.
Instead, an entity follows IPSAS 16 "Investment Property" or IPSAS 17, "Tangible assets",
which is more adequate to the situation. IPSAS 16 requires that the land, subject of
investments must be evaluated at its fair value or at cost minus loss of accumulated
depreciation. Biological assets, which are physically attached to the land (eg trees in a
plantation forest) are evaluated at fair value without the cost of sales, separate of land.
IPSAS 17 requires the valuation of land to be at cost less any accumulated impairment
losses or at a revalued value.
6. IPSAS XX (ED 36) does not deal with accounting of revenue related to biological assets and
agricultural products from non-exchange transactions or related government subsidies.
IPSAS 23 "Incomes from Non-Exchange Transactions (Taxes and Transfers)" provides
requirements and guidelines for accounting for government subsidies related to agricultural
activity. IPSAS XX (ED 36) deals with the evaluation of biological assets acquired in non-
exchange transactions, both initial and subsequent recognition.
RESEARCH DESIGN
The main objective of the study is the possibility of increasing the portfolio assessment of
IPSAS by creating a new one, on agriculture. So, we formulate the following hypotheses:
H1. To create an IPSAS Agriculture is considered useful by most professional bodies of
respondent countries, members of IFAC.
H2. Defining specific notions of agriculture (eg biological assets, agricultural activities) is
clear and concise.
H3. Standard issuance will be done in the shortest time.
To validate or invalidate the formulated hypotheses, we will analyze and interpret the
answers given by respondents with reference to the six topics of discussion raised by the IPSASB
on the final form of IPSAS XX Agriculture (ED 36).
In this approach we started from a theoretical approach of the problem of the public
accounting regulations with focus on agriculture. Subsequently, through an empirical research we
will determine the degree of acceptance of the standard on three levels: on each topic questioned, on
each respondent country, and as whole. By quantifying 1 (YES) or 0 (NO) we will appreciate the
acceptance or refusal of each point (N = 6) under discussion.
Subsequently, we will motivate positive or negative responses depending on specific public
accounting system of responding countries.
The scientific research contributes to the efforts to deepen the knowledge required by
retrospective nature imposed by the realized normative research, and by the prospective nature,
given by the realized empirical research. Among the human socio science methods used in this
approach, we can specify: analysis of documents, comparative method and observation method.
RESULTS
After analysing the comments sent to IFAC by the specialized bodies of the nine respondent
countries, the following situation results (table no. 1):
138
Table no. 1. Estimation of answers
DEGREE OF
1 2 3 4 5 6 ACCEPTANCE/
SUBJECTS COUNTRY
COUNTRIES
Sounth Africa 0 1 1 1 1 0 66.7%
England 0 1 1 1 1 0 66.7%
Australia 1 1 1 1 1 1 100%
Canada 0 0 0 0 1 1 33.3%
Switzerland 1 1 1 1 1 1 100%
France 0 1 1 1 0 0 50%
Japan 0 1 1 1 1 1 83.3%
New Zeeland 0 0 0 0 1 1 33.3%
U.S.A. 0 1 0 0 1 0 33.3%
DEGREE OF
ACCEPTANCE/
SUBJECT 22.22% 66.66% 66.66% 66.66% 88.88% 55.55%
Considering the degree of interest shown by respondent countries for the topic of booking
the specic elements of agricultural domain in the public sector, we can say that the hypothesis “To
create an IPSAS Agriculture is considered useful by most professional bodies of respondent
countries, members of IFAC” is true. If we calculate an average of acceptance / total standard, it is
above 50%, which reinforces the conclusion that the need for a referential is also evident.
But there are some problems regarding the delimitation of the scope of the referential. The
main discussions occur about IPSAS 17 "Tangible assets", IPSAS 23 "Incomes from Non-Exchange
Transactions (Taxes and Transfers)”, IPSAS 12 “Inventories”. If we want correctly positioning all
the aspects, it will be neccesary the restructuring of these IPSAS, which will affect the deadline for
the new standard. But in December 2009, because of the importance of agriculture in the public
sector, a standard was issued, IPSAS 27 “Agriculture”. It is not considered the fnal form but it is a
step for issuing the final stndard. In other words, the hypothesis “Standard issuance will be done in
the shortest time” proves to be true.
In detail, the degree of acceptance of the six subjects under discussion by IPSASB is as
follows (figure no. 1):
Degree of acceptance/subject
100
80
60
40
20
0
SUBJECT 1 subject 2 SUBJECT 3 subject 4 SUBJECT 5 subject 6
Figure no. 1. Degree of acceptance/subject

As you can see, the theme with the lowest degree of acceptance is subject 1. The vast
majority of countries deemed to be insisted on clarifying specific terms of the agricultural sector for
being an uniformity in understanding and applicability in good conditions of their content. Japan
considers that this standard does not include the important biological assets that are used to provide
services, including plants and trees used for environmental protection. USA believes that there is a
clear breakdown of agricultural products.
139
Therefore we can say that the hypothesis “Defining specific notions of agriculture (eg
biological assets, agricultural activities) is clear and concise” proves to be true. Also, subject 6 has a
weight of acceptance at limit, the motivation can be given by France that suggests the confusion
between accounting of biological assets acquired from non-exchange transactions or government
subsidies and the incomes related to biological assets and agricultural products realized from non-
exchange transactions or from government subsidies. Subjects 2, 3, 4 and 5 are accepted, outlining
the idea according to which the fair value occupies a fundamental place in the evaluation of
agricultural assets, their particularities imposing this thing. Barlev and Haddad (2003) argued that
fair value accounting has the capacity to enhance the stewardship function by providing relevant
information to stakeholders, thus alleviating social conflict. The latter occurs when the
discrepancies that exist between agriculture widely practiced and that performed at a small level
(like farmers), cause discontent in terms of efficiency, quality, exploiting the possibilities of
agricultural products. The fair value sustains the interests of both parties, in realizing a correct
evaluation of agricultural assets (Elad C., 2009).
After the degree of acceptance by respondent countries to all six issues, the situation is as
follows (figure no. 2):
Degree of acceptance / Country
100
80
60
40
20
0
Sout
Aust
Swit
Fran
USA
Engl
Cana
Japa
New
and
zerla
ce
n
ralia
h Af
da
Zeel
rica
nd
and
Figure no. 2. Degree of acceptance / Country

According to the formulated motivations, three categories of countries can be remarked:
 those that are fully supporting the current form of referential IPSAS XX - Australia and
Switzerland
 those that are supporting the current form of referential IPSAS XX, but with minor
adjustments - South Africa, England, France. The comments of these countries specifically
refers to the redefinition of terms, to provide clearer evidence of the range of application of
the standard Comentariile acestor tari se refera in mod special la redefiniri a unor termeni
de specialitate, la o evidentiere mai clara a domeniului de aplicare al standardului (eg.
South Africa sustains that IPSAS should be amended to refer constantly to the sale and
transfer at all) or to a repositioning of assessment methods of agricultural assets (France
sustains the cost of production)
 those that are refusing the current content of the standard, suggesting that it should not be
taken up untill there will be a review of costs, benefits and a clear relevance of it. (New
Zeeland, USA, Canada).
CONCLUSIONS
The agricultural sector issue proves to be extremely exciting. Public accounting tries to align
to existing international standards for economic entities, but the own peculiarities make the process
very difficult. Through this study we captured some aspects of development and acceptance of the
140
new IPSAS XX Agriculture. The study has theoretical foundations and relevant practices, because
there are analysed the opinions of some accountants from countries whose accounting systems are
defining for anglo-saxon model (eg. England, Australia) and continental one (eg. France), namely
their foundation is based entirely on international standards (eg England), or specific national rules
(eg. France). The subject is not closed, because there are a lot of unclarified aspects, whose
evolution is a future research subject. Also, it will be interesting to research the opinion of
theoreticians and practitioners, namely of the specialized body CECCAR, regarding the vision of
Romanian accounting system on the provisions of ED 36. These topics will be developed in future
researches.
REFERENCES
1. Azevedo, Graça Maria do Carmo (2007), The Impact of International Accounting Stan1rd
41 'Agriculture' in the Wine Industry, available at SSRN: http://ssrn.com/abstract=975508.
2. Barlev, B. and Haddad, J.R. (2003) ‘Fair value accounting and the management of the
firm’, Critical Perspectives on Accounting, 14: 383-415.
3. Elad, Charles (2007), ‘Fair Value Accounting and Fair Trade: An Analysis of the Role of
International Accounting Standard No. 41 in Social Conflict’, Socio-Economic Review,
Vol. 5 (4):755-777, available at SSRN: http://ssrn.com/abstract=1157711 or doi:mwm013.
4. Nistor, C.S. (2009), Trecut, prezent si perspective in contabilitatea publica romaneasca,
Casa Cartii de Stiinta, Cluj Napoca.
5. www.ifac.org
6. www.ipsas.com
141
INFLUENCE OF BRAND NAME ON CONSUMER DECISION MAKING PROCESS- AN

EMPIRICAL STUDY ON CAR BUYERS.
Assistant Professor Mohammed ALAMGIR

University of Chittagong, Bangladesh, Bangladesh
Lecturer Tasnuba NASIR
University of Science and Technology Chittagong (USTC)
tasnuba2003@yahoo.com
Associate Professor Mohammad SHAMSUDDOHA
E-mail: mdsdoha@gmail.com
Associate Professor Ph.D. Alexandru NEDELEA
alexandrun@seap.usv.ro
Abstract:
In the modern society brands not only represent the product or company but also have a strong association
with perceived quality, consumers’ life style, social class, taste etc. The purpose of this paper is to create a deeper
consideration of what influence a brand name can have, when people go for purchasing, choose the products between
different brands, especially private vehicle like car. Moreover, this paper also tries to explore the relation between
brands and the consumer decision making process. This study has been conducted through literature study as well as
questionnaire administered survey. Simple random sampling procedure has been used to determine sampling frame and
size and a convenience sample of hundred respondents of different age groups, income and occupation have been
considered for the survey. The collected data were analyzed to comply with the objectives and also to draw conclusions.
From the study it is revealed that when consumer purchases a car, brand names do influence his/her choice. The study
also reveals that branded cars have a great place in consumer mind, when customers go for purchasing a car, they
prefer to purchase a well known branded car. Customers do not want to try new or unknown branded cars because they
have not much information about the lesser known brand.
Key Words: Brand, Brand name, consumer behavior, purchase decision, level of involvement
JEL Classification: M 30
INTRODUCTION
“A product is something that is made in a factory, a brand is something that is bought by a

customer. A product can be copied by a competitor, a brand is unique. A product can be quickly
outdated, a successful brand is timeless” (Quiston, 2004, p 345). This statement induces researchers
to determine the impact of brand, especially brand name on purchase decision.
The brand history tells us how the people have used the brand as a mark of identification. In
the earlier times the brand mark was used to differentiate the goods of one producer to others. Now-
a days brand is not only used for differentiation but also used to justify the purchase decision. In
this paper researchers tried to identify the influence of brand name on purchase decision.
Brand is a combination of name, symbol and design. Brands represent the customer’s
perceptions and opinion about performance of the product. The powerful brand is which resides in
the mind of the consumer. Brands differ in the amount of power and worth they have in the market
place. Some brands are usually unknown to the customers in the marketplace while on the other
hand some brands show very high degree of awareness. The brands with high awareness have a
high level of acceptability and customers do not refuse to buy such brands as they enjoy the brand
performance. Some brands commend high level of brand loyalty.
Brands also have a symbolic value which helps the people to choose the best product
according to their need and satisfaction. Usually people do not buy certain brands just for design
and requirement, but also in an attempt to enhance their self esteem in the society (Leslie and
Malcolm, 1992). Brand names present many things about a product and give number of information
about it to the customers and also tell the customer or potential buyer what the product means to
142
them. Further more it represents the customers’ convenient summary like their feelings, knowledge
and experiences with the brand. More over customer do not spend much time to do find out about
the product. When customer considers about the purchase they evaluate the product immediately by
reconstructed product from memory and cued by the brand name (Hansen and Christensen, 2003).
A brand has a value; this depends on the quality of its products in the market and the
satisfaction or content of the customer in its products and services. This provides the trust of the
customers in the brand. If customers trust a brand quality it makes a positive connection to the
brand and customers will have a reason to become a loyal to the brand. Loyalty and trust of the
customers is very important for a company because it reduces the chance of attack from competitors
(Aaker, 1996).
Brands play a very important role in the consumer decision making processes. It is really important
for companies to find out customer’s decision making process and identify the conditions, which
customers apply while making decision (Cravens and piercy, 2003). Marketers are highly concerned
to know how brand names influence the customer purchase decision. Why customers purchase a
particular brand also implies how customers decide what to buy. Customers follow the sequence of
steps in decision process to purchase a specific product. They start realizing a requirement of
product, get information, identify & evaluate alternative products and finally decide to purchase a
product from a specific brand. When customers purchase particular brand frequently, he or she uses
his or her past experience about that brand product regarding performance, quality and aesthetic
appeal (Keller,2008).
OBJECTIVES OF THE STUDY
Now a days customers have a good knowledge about the brand products, they trust the well
known brand name because branded products are offering them good quality what they expect from
the brands. Most of the customers are loyal with some specific brands. Customers have high
awareness about the known brands as compared to an unknown brand. The primary objective of
this research is to determine the influence of brand name on car purchase decision. To comply with
the primary objectives the following supportive objectives also considered.
1. To gain knowledge about consumer decision making process, especially with high
involvement products, and
2. To know about different issues related to brand and brand selection process.
3. To identify the impact of brand name on purchase decision.
LITERATURE REVIEW
This paper basically focuses on brand and the link between brand and consumer preferences.
The following flow chart shows how this paper divided and explained theories on branding and
consumer behavior.
Brand Equity Emotional Consumer Consumer

Brand Loyalty branding Behavior Decision Making
Name Awareness Brand Name Complex Decision Rules
Perceived quality Logos & Buying Social Class
Symbol Behavior Conspicuous
Dissonance consumption
reducing buying Purchase Intention
behavior
“Brand equity is a set of brand assets and liabilities linked to a brand, its name and symbol
that add to or subtract from the value provided by a product or service to a firm and/or to that firm’s
customers” (Cravens, 2003)
143
It can also be defined and explained in the following way--

“Brand equity is a set of brand assets and liabilities linked to a brand, its name and symbol
that add to or subtract from the value provided by a product or service to a firm and / or to that
firm’s customers. For assets or liabilities to underlie brand equity they must be linked to the name
and / or symbol of the brand. If the brands name or symbol should change, some or all of the assets
or liabilities could be affected and even lost, although some might be shifted to a new name and
symbol. The assets and liabilities on which brand equity is based will differ from context to context.
However, they can be usefully grouped into five categories” (Aaker, 1991, p 15).
1. Brand Loyalty
2. Name awareness
3. Perceived quality
4. Brand association
5. Propriety brand assets
Brand equity is a valuable asset for a company, which they want to, put in their brands. A
power full brand enjoys a high level of customer brand awareness and loyalty. Company can have a
competitive advantage through high brand equity. Brand equity also involves the value added of
product through customer relations and perceptions for the specific brand name.39 Brand equity
assets can be described as a way of adding or subtracting value for customers.
Brand Loyalty
Brand loyalty shows customer preferences to purchase a particular brand; customers believe
that the brand offers the enjoyable features, images, or standard of quality at the right price. This
belief and faith of the customer becomes a base for new buying habits. Initially customers will
purchase a brand for trial, after being satisfied, customers will keep on buying the product from the
certain brand. Brand loyalty represents an encouraging approach towards a brand resulting in
regular purchase of the brand over time.
“The brand loyalty of the customer base is often the core of brand equity. If customers are
indifferent to the brand and, in fact buy with respect to features, price and convince with little
concern to the brand name there is likely little equity. If on the other hand, they continue to
purchase the brand even in the face of competitors with superior features, price, and convenience,
substantial value exists in the brand and perhaps in its symbol and slogan.” (Aaker, 1991, p 39).
There are many attributes in the car which helps them creating loyal customer base and even can
influence the customers group in such a way that they are using the same brand for generations.
Name awareness
This is the second category of the brand equity. Brand name awareness plays vital role in
consumer decision making process; if customer had already heard the brand name, the customer
would feel more comfortable at the time of making decision. Customers normally do not prefer to
buy an unknown brand, especially if it an expensive product like motor car, TV, refrigerator,
apartment etc. Therefore companies’ strong brand name is a wining track as customers choose their
brand over unknown brand.
Perceived Quality
It is an essential characteristic for every brand; perceived quality defines a customer’s
perception and the product’s quality or superiority. The perceived quality provides fundamental
reason to purchase. It also influences brand integration and exclusion to consideration set before
final selection. A perceived quality provides greater beneficial opportunity of charging a premium
price. The premium raises profit and gives a resource to reinvest in the brand. Perceived quality will
enable a strong brand to extend further and will get a greater success possibility than a weak brand.
144
Perceived quality has a greater influence in a customer’s purchasing process and in brand loyalty.
This influence is very important when customers are in a condition, which makes them unable to
make an analysis of the quality. Perceived quality can be used as a helping tool when company
intends to utilize a pricing strategy with premium price and further extend a brand in several
markets (Aaker, 1991).
Emotional Branding
Usually branding starts when company designs a product with great feature and capabilities
better than what their competitors are offering. The company then has a “position” in a product
distinct category against competitors. The problem increases when neither of the groups has made
efforts to create emotional bond between the customers and the company and its product. Emotional
branding is the fine approach that clarifies the values of the company to the customers (Marken,
2003). When companies want to know what consumer feels about them, they have to build a
personal communication with the customers. This is the good way in a company can consider itself
because customer perception is very important for companies. However a company can learn a lot
by listing to its customer views. It is essential for companies to correspond by their product by
relating to their customers emotionally; otherwise product can be a product and become a brand
image in the customer’s minds. Emotional Branding also consider brand name which influence
consumers decision making process.
Brand Name
The brand name is very significant choice because some time it captures the central theme
or key association of a product in a very condensed and reasonable fashion. Brand names can be
extremely successful means of communication. Some companies assign their product with a brand
name that in reality has nothing to do with the emotional experience but is catchy and a name that
people can easily memorize. The core base of naming a brand is that it should be unique, can be
easily discriminated from other names, easy to remember and are attractive to customers (Keller,
2008).
In our opinion people have strong connection to brands and brands name. Brand name
influences the customer decision in car choice. When people intend to purchase a car, they have
many brand names to choose from, but usually people purchase a car with preference to brand name
and company reputation in market because of trust and pervious experience.
Logos and symbols

Logos and symbols have a long history which shows brand identification of the company.
There are different types of logos, which are unique from corporate names or trademarks. Logos
and symbol are easy way to recognize a product. It is a greater success if symbol and logos became
a linked in memory to corresponding brand name and product to increase brand recall. Customers
may perhaps identify definite symbols but be unable to link them any particular brand or product
(Keller). Logos helps companies to develop the brand equity through raised brand identification and
brand loyalty. Logos are very important assets, companies spend enormous time and money to
promote brand logos and symbols.
Logos and symbol are successful way to get a better place in customer mind. If customers
find something that is easily identifiable preferably in a positive way, customers feel more
comfortable with them. If there is not much difference among brands, then logos and symbols can
be a very effective way of differentiating the brands from each other.
Consumer Behavior
Consumer behavior mainly sheds light on how consumers decides to spend their various
resources like time, money etc. on various products so as to meet their needs and requirement.
Consumer behavior encompasses study of what, when, why and where the consumers will buy their
145
products. It also focuses on how often the consumers use the products. Furthermore, it also sheds
light on how the consumers evaluate the products after the purchase and the effect of evaluations on
their future purchases (Schiffman, 2005).
To give an example of how consumer behavior evolves while buying a car, he will start with
recognizing his or her need for a car. Then come the information collecting and processing stage.
After making up his mind to buy one specific brand, for instance Skoda, the consumer makes the
purchase. In the post-purchase stage, the consumer evaluates the performance of the car against the
expectations he or she had before buying the car. In this stage, the consumer is either satisfied or
dissatisfied. So, it is evident from the last example that study of consumer behavior involves lot of
things.
Complex Buying Behavior

Complex behavior can be defined when consumers are highly involved for making a
purchase decision. Complex buying behavior calls for high level of involvement on the part of the
consumer. In case of high involvement, consumers distinguish salient differences among the
competing brands. Consumers’ are highly involved in case of expensive and highly self expressive
products. The consumer engages in extensive information to search and to learn about product
category so as to be able a good purchase decision. For example, when a consumer decides to buy a
car, he seeks information about the available brands and compares his collected information about
each brand and finally makes up his mind (Kotler, 2007).
Dissonance reducing buying behavior

In case of dissonance reducing buying behavior the level of consumer involvement is also
high. Consumers typically undergo dissonance reducing buying behavior in case of costly and
infrequent purchase. In this type of consumer behavior the consumers find it difficult to
differentiate among the brands. For example, consumer buying carpet may come across of
dissonance reducing buying behavior, as carpets are usually expensive and self-expressive. In case
of carpets, consumers may deem most of the available carpet brands in the market within a certain
price range to be of the same quality. Consumers may respond primarily to a relatively better price.
After the purchase consumer might experience post purchase dissonance (after sales discomfort)
(Kotler, 2007).
Consumer Decision making

The consumer decision making process defines different steps when a consumer goes
through to purchase a product. If customer wants to make a purchase he or she takes a sequence of
steps in order to do complete this purchase. Problem recognition includes when consumer feel a
significant difference between the current state and ideal so consumer thinks there is some problem
to be solved. The problem may be small or big. In the second step, the consumer seeks information
about the product. The extent of information search relies on the level of consumer involvement. In
case of expensive products, the level of involvement is high. Conversely, in case of relatively cheap
products the level of involvement is usually low. In the third step, the consumer evaluates the
different attributes of the brands. Consumer may consider the product attributes and compare brand
products. In the final step consumer makes his choice about a product.
It’s true that a consumer may not necessarily go through all the decision making steps for
every purchase he or she makes. At times, consumer makes his or her decision automatically and
the decision may be based on heuristics or mental shortcuts. Other times, in case of high
involvement products consumer may take a long time before reaching a final purchase decision. It
depends on consumers’ importance of the products like purchase of a car or home. More over
consumers try to make an estimated brand universe on the basis of available information about the
brands, and to make an estimated the utility function on the basis of past consumption experience
(Solomon, 2006).
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Social Class
Social class is an invisible stratification of the inhabitants of the society into different groups
based on some traits of the people. Inhabitants in a society can be divided into different social
classes according to their income level, occupation, education and so forth. Social class of a person
is determined by a wide variety of set of variables including income, family background and
occupation (Solomon, 2006). A person’s social class can be defined by what he or she does with
money. The consumption choice of a person also determines the person’s position in society. Every
social class varies from each other because of having its own traits that set it apart from other class.
Social classes vary in costumes, language patterns and many other activities and preferences. This
class of consumer will possibly never buy a product on an experimental basis. Social class is very
important source to know which social class person belong. Mostly people have different preference
and choices from others (Stephens and Townsend, 2007).
Conspicuous Consumption
Conspicuous Consumption can be defined as the way of consumption by the people who
have the financial ability to afford expensive brands not only just to consume the products but also
to show off with the view to inspire envy among others. People of higher class usually go for a wide
array of status symbols for consuming conspicuously. Conspicuous consumption is related to the
person’s social class, generally the upper class consumer would purchase and display exclusive
items to show-off their wealth and power. They purchase expensive branded products like cars,
latest electronics even if it is not necessary for them to purchase (Solomon, 2007).
Purchase Intention
The purchase intention shows customers preference to purchase the product, whose image is
very close to customer. Moreover customers are well aware of certain brand name through
advertising, from their past experience or information form their friends and relatives (Teng,
2008).The intention of a consumer to purchase a particular brand can be defined as his willingness
to buy that brand. After being exposed to a TV commercial, a consumer might be interested about
the product but being just interested in a product does not mean that the consumer has the intention
to buy the product
METHODOLOGY OF THE STUDY
The Survey Method has been chosen to carry out the research. The researchers divided the whole
work mainly into two parts- secondary research and primary research. In the secondary research the
researcher has made use of the available literature and other relevant publications to find out the
theoretical framework and also to know what early research mentioned regarding selected topic.
For primary research survey method has been considered. To carry on the survey a questionnaire
administered personal-contact approach has been used. The questionnaire was pre-tested on a small
sample of 5 respondents and based on this minor changes were made to improve the clarity of the
questionnaire. The sampling procedure used for the study was simple random sampling. A
convenience sample of 100 customers of Chittagong, Bangladesh had been chosen for the research.
No restrictions were made on the age, background, sex or location. In order to analyse the data
descriptive statistics were employed. The frequency distribution had been used as a descriptive
statistical tool.
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LIMITATIONS OF THE STUDY

1. Only one city (Chittagong) of the country had been considered. Findings might vary according
to the location, income level, standard of living etc. and all of those factors had not been
considered separately.
2. Only the descriptive statistics had been used to analyse the data, no steps had been taken to use
inferential statistics. There might be some sorts of variance in the overall result if it is tested by
inferential statistical techniques.
Findings of the study
(i) Demographic Information of the respondents

The following table (table nr.1) represents the demographic information of the respondents.
The first table provides the gender information which shows that 90% of the respondents were male
and 10% respondents were female. The survey shows majority of the respondents were male and
the main reason for this is because more men drive a car than female in Bangladesh, especially in
Chittagong. Sample has been selected randomly without any bias and all the respondents are
basically car owners.
Furthermore the table provides the respondents age-group information. The first age group
(25 to 35 years) accounted for 32% and next 36 to 45-years-age-group accounted for 26%, the 46 to
55-years-age-group were 24% and the 56 to 65 years-age-group were 14% and above 65 years age
group respondents were 4%.
The table also explains the respondents’ income. Data shows that 19% respondents’ annual
income are 75,000 and 26% respondents annual income is between 76,000 to 1,25,000 and 22%
respondents earn annually between 1,26,000 to 1,75,000 and 20% respondents’ annual income is
between 1,76,000 to 2,25,000 and 13% respondents’ earning annually more than 2,26,000. All
respondents have a different brand car, matching their individual income level.
From the table (table nr. 1) it is also clear that 35% respondents are in private service and
40% respondents run their own business and 10% respondents are doctors and 10% respondents are
lawyers and 5% respondents are belong to other occupation.
Table no. 1. Demographic information of the respondents

Variables Measuring Group Frequency Percentage (%)
Male 95 95
Gender
Female 05 5
Yes 100 100
Car ownership
No 0 0
25 to 35 32 32
36 to 45 36 36
Age Group
46 to 55 24 24
56 to 65 14 14
75,000 19 19
76,000- 125,000 26 26
Income 126,000- 175,000 22 22
176,000-225,000 20 20
More than 226,000 13 13
Private Service 35 35
Own business 40 40
Occupation Doctor 10 10
Lawyer 10 10
Others 5 5
Source: Field Survey
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(ii) Ownership of specific car brand

O w n e r s h i p o f s p e c i fi c c a r b r a n d
8 0
P e r c e n t
7 0
6 0
5 0
4 0
3 0
2 0
1 0
0
T o y o ta M it s u b is h i N is s a n H o n d a S u z u k i O th e r s
Figure no. 1. Ownership of car Brand (Source: Field survey)
After having asked the respondents which brand car they own, five different brand car
names were given which include nearly all the available brands in Bangladesh market. 76% cases
replied to have Toyota brand car and 5% respondents are running Mitsubishi brand car and 3%
respondents owned Nissan brand car. 4% respondents replied to have Honda brand car and 6 %
respondents owned Suzuki brand can and 6% owned other companies branded cars. The majority of
respondents which is 76% answered to have own Toyota brand cars. This is the highest percent of
brand car user in survey.
(iii) Extent of information search:
Table no. 2. Extent of information search before buying

Frequency Percent
Extensive information search 52 52
Compared only few brands 33 33
Limited information search 12 12
No information search 3 3
Total
Source: Field survey
The above table (table nr.2) shows the extent of the information search before buying a car.
52% respondents go for extensive information search where as 33% compared only few brands
before finally making their purchase decision. The survey also reveals that 12% respondents were
engaged in limited information search before making their final choice, especially those who are
changing their old models. However, 3% respondents did not search any information before buying
a car. According to the result of the survey, it can be inferred that most potential buyers usually
engage in extensive information search.
(iv) Deciding role in purchase decision

D e c i d i n g r o l e i n p u r c h a se
60
50
p e rc e n t
40
30
20
10
0
O w n d e c is io n fa m ily d e c is io n F rie n d d e c is io n O t h e rs
Figure no. 2. Role in purchase decision (Source: Field survey)
This section tried to explore whether the purchase decision was the respondents own
individual decision or a collective decision. As we can see in the above bar diagram that the
majority of the respondents replied that when they purchased a car that was their own decision and
also a good number of respondents answered that the purchase decision was their joint family
149
decision and the lowest number of respondents replied to have consulted with their friends before
buying, this is followed by the “others” which points out that the respondents sought others namely
co-workers etc. suggestions in a very occasions before making buying decision.
(v) Most important attribute considered before buying
Table no. 3. Most important attribute for considering buying

Frequency Percent
Price of the product 28 28
Both price and quality 17 17
The brand name of the product 39 39
Design of the product 12 12
Other attributes 04 04
(Source: Field survey)
Regarding which most important aspect the respondents considered when he or she made a
purchase decision., the information depicts that the purchase decision of a potential buyer is
influenced by a number of factors namely past experience, brand, quality and price. The majority of
the respondents (39%) answered when they purchased a car they considered the well known brand
name followed by 28% respondents who considered the car price. However, 17% said they
considered both quality and price. Moreover, 7% respondents considered the car design while 4%
considered the other attributes.
(vi) Number of car brands considered

N u m b e r o f c a r b r a n d s c o n si d e r e d
50
40
p e rc e n t
30
20
10
0
O ne Tw o T h re e Four
Figure no. 3. Number of car brands considered before buying

The respondents were asked how many brands they normally consider before taking final
buying decision. The above chart shows that 46% respondents consider only one brand when they
take buying decision where as 26% respondent replied that they considered two different brands
and 17% respondents considered three brands. Only 11% respondent compared four different
brands while taking their decision to buy a car.
(vii) Consideration for lesser known brand

Table no. 4. Consideration for lesser known brand
Frequency Percent
Yes, I did 19 19
No, I did not 65 65
Yes, I did but not much 16 16
This is very interesting question to know about respondents’ viewpoint regarding lesser
known brand. The respondents have been asked whether they considered the lesser known brand
cars alongside well known brand car. It is found that more than 65% respondent answered “No, I
did not” which means the respondents mainly considered only the brands that were in their evoked
150
set. 19% respondents replied “Yes, I did” and 16% respondents answered “Yes, I did but not
much”.
(viii) Quality perception of the customers between well known brand and lesser known
brand— Branded products have better quality
Table no. 5. Branded products have better quality
Frequency Percent
Yes, I agree 69 69
No, I don’t agree 11 11
I agree, but it’s not always true 20 20
When it comes to the question regarding a branded product quality it is more interesting that
they have very strong association. The majority 69% answered “Yes, I agree” and 11% respondents
replied “No, I don’t agree” and 20% respondents views “I agree, but it’s not always true”.
(ix) Well known brand as status symbol

Table no. 6. Brands signify the status
Frequency Percent
Yes, I agree 43 43
Not necessarily 21 21
The basic intention of this option was to find out whether a well known brand car is a status
of symbol. The majority, 43% of respondents answered “Yes, I agree” and 16% respondents replied
“No, I don’t agree” and 21% respondents views that “Not necessarily” and 20% respondents “I
agree, but it’s not always true”. From the table it is clear that respondents consider brand as status
symbol.
(x) Brand and social class

Table no.7. Brands define social class
Frequency Percent
Yes, I agree 41 41
Not necessarily 19 19
Source: Field survey
Information revealed that respondents considered the branded products signify their social
class. As many as 41% respondents’ noted that “Yes, I agree” and 26% respondents replied that
“Yes, I agree but it is not always true” and 19% answered “Not necessary” and 14% respondents
“No, I don’t agree”.
(xi) Importance of brand name on product attributes
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11%
19%
46%
24%
ve ry im p o rt a n t im p o rt a n t t o s o m e e x t e n t im p o rt a n t n o t a t a ll
Figure no. 4. Importance of brand name to desired attributes

The above diagram shows that 46% respondents considered that brand name relative to
desired attribute is “Very important” and 24% respondents “Important” 19% respondent answered
“to some extent important” and 11% respondents answered “Not at all important”.
(Xii) Preferences of branded products:

Table no. 8. Preferences of branded products
Frequency Percent
Always 56 56
Frequently 17 17
Sometimes 19 19
Never 08 08
To find out whether people always go for branded products, respondents are being asked
about their perception towards branded products. The majority (56%) respondents replied that they
always prefer branded products. On the other hand, 19% respondents answered they go “some
times” and 17% expressed that they go “Frequently” and 8% answered “Never” go. The above
result indicates that majority consumers prefer to buy branded products as it is the symbol of
quality, status and reliability.
CONCLUSION
The purpose of this paper was to create a deeper consideration about the influence of brand
name on purchase especially car purchase. In order to comply with this a questionnaire
administered survey has been conducted among 100 respondents and data revealed that brand name
has strong influence on purchase decision. From the study it is clear that well known branded cars
are very famous among the people because consumers trust the brand name. This also indicates that
people often purchase well known brand cars since they are aware of the brand performance or
perhaps they have a good past experience about the brands car. This makes customer’s become
loyal with the specific brand. Brand offers superior quality of the service up to the customer’s
expectation and satisfaction. Further more, people are much attached to the branded products, as
majority of the people purchase the branded products with the belief that brands show their status
and life style in the society. The study shows that how automobile brands companies become
successful by getting close to the customers and designing their cars according to the customers
needs.
FUTURE RESEARCH SCOPE
152
This study was limited to one industry, automobile, and one city Chittagong. This theme can
be extended to other industry like consumer durables and other cities of the country. Further
research can also be conducted on a large scale with large sample size considering some more
variables relevant to the topic. This paper only considers descriptive statistical tools whereas
inferential tools cal also be applied in the further research to validate and prove the assumption.
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IMPLICATIONS OF THE EURO ADOPTION IN THE EU COUNTRIES. CASE

STUDY: SLOVAKIA vs SLOVENIA
Assistant PhD. Student Anamaria HLACIUC

”Stefan cel Mare” University of Suceava, Romania
Abstract:
The European integration process continues to amaze both its supporters and critics, this recording a too fast
rhythm for some states and too slow for others. This process of integration becomes very important for the 500 million
people directly involved but also because Europe accounts for a quarter of the world economy, half of world trade and
one third of global capital markets, the European integration influencing life of most of the non-Europeans.
The purpose of this paper is to provide an accessible presentation of the events afferent to this process to
better understand the reasons that led to the introduction of the euro, the existing theories and controversies, my
approach being based on economic principles, since the process started with the economic integration even since 1948,
when the European Organization for Economic Cooperation was established. But the economy does not mean
everything, so I will analyze also political, cultural and historical factors.
Keywords: Euro, EU countries, Slovakia, Slovenia.
JEL Classification: E00
INTRODUCTION
In June 1988, the European Council confirmed the objective of progressive realization of
Economic and Monetary Union (EMU). It also assigned to a committee chaired by Jacques Delors,
the then President of the European Commission, a mandate to study and make proposals on
concrete steps to achieve this union. From this committee were part national central bank governors
of the European Community, as Alexandre Lamfalussy, general manager at the time of the Bank for
International Settlements (BIS), Niels Thygesen, professor of economics in Denmark and Miguel
Boyer, the then President of Banco Exterior de España.
The European integration process continues to amaze both its supporters and critics, this
recording a rhythm too fast for some states and too slow for others. This process of integration
becomes very important for the 500 million people directly involved but also because Europe
accounts for a quarter of the world economy, a half of world trade and one third of global capital
markets, and how European integration influences life of most of the non-Europeans.
The purpose of this paper is to provide an accessible events for this process to better
understand the reasons that led to the introduction of the euro, the existing theories and
controversies, my approach being based on economic principles since the process started with the
economic integration even since 1948, when the European Organization for Economic Cooperation
was established. But the economy does not mean everything, so I will analyze also political, cultural
and historical factors.
Why is it important to have a single currency? The answer to this question will be given
throughout the paper, along with arguments, reasons, advantages and disadvantages of placing this
currency in the old and new member states.
HISTORY OF THE EMU
To analyze the developments before and after the single currency, there should be taken into
account the dynamics of various forms of national regulation and supervision of financial activities,
the new challenges caused by the introduction of the euro, hoping to finally manage to meet another
question that determined me to analyze and investigate this issue and that is: will the Euro be able to
become a currency used in all the world like the U.S. dollar? Why is it so important and what has
happened so far?
154
The signing of the European Constitutional Treaty by the 25 heads of state on October 29,
2004 in Rome caused to the public a new interest and enthusiasm for the creation of communities,
despite the criticism and problems encountered during the preparation of the 2003 Convention
activity. The positive outcome of the Spanish referendum in February 2005, the same correction to
the Treaty and successive approvals by Spain, Greece, Hungary, Italy, Lithuania, Slovenia, Austria,
Slovakia and Germany in the spring predicted extension of the integration process. At the end of
May 2005, the victory of the “not” from the French referendum, followed by the refusal of the
Dutch seem to have caused an irreversible process of integration crisis, the crisis confirmed by the
Heads of States and Governments of the EU on 17 June in Brussels. During the summit there was
actually made a decision for a period of reflection which relates the process of correcting the
European Constitutional Treaty on the conclusions reached in 2007, while at the same time, state
leaders failed to reach agreement on the “Financial Perspectives 2007-2013. "
Paradoxically, precisely ‘the crisis of Europe’ "brings to light (if needed), the timeliness and
importance of my topic. The treatment of this argument is actually characterized by a European
perspective, but each country's characteristics and problems arise from the complex game that
explains the process of integration.
The thorough study of the history, instruments and problems encountered so far in this
process, allows the assertion that the European crisis of 2005 is not ‘a political tsunami’, but rather
offers suggestions for lucidly managing and overcoming it. Existing literature on the early history
of European integration shows that the existence of a pause does not mean the end of the integration
process.
In this paper, “L'economia del'Union Europea”, Baldwin and Wiyplos demonstrate in the
historical and institutional part the wrong (most times) way in which this process’s objectives have
been pursued,the authors focusing on clarifying the constant reference schemes considered to be the
most appropriate, to assess and choose different alternatives, that states and citizens must confront
each day in an evolving process of integration, that is not and should not be closed.
To understand, explain and analyze the phenomena that took place and almost characterized
the history of the EU is very important to study the reference phases of the integration process,
namely:
- the first period incurred during 1945-1959 when the EU is born, in order to end the more
frequent and bloody wars of neighboring countries. In the '50s the European Coal and Steel
Community begins to unite European countries economically and politically, to ensure a lasting
peace. The six founding members were represented by: Belgium, France, Germany, Italy,
Luxembourg and the Nordic countries. But the '50s were characterized by war between Western and
Eastern Europe. Protests in Hungary against the Communist regime were resumed by the Soviet
army in 1956. The following year (1957) the Soviet Union becomes a leader in the conquest of
space, launching the first artificial satellite (Sputnik 1). Also in 1957, the Treaty of Rome
established the European Economic Community (EEC) and the Common Market.
A comprehensive description and a thorough analysis of this and of other steps will be
undertaken during the preparation of research paper:
- the 1960-1970 period represents a decade of economic growth. In the '60s we assist at the
birth of a genuine own “youthful culture” by musical groups such as the Beatles, which draws out
the teens on all lovers of music, helping to fuel a cultural revolution that will later lead the new
generation . During this period the economy recorded significant growth, because EU countries do
not apply customs duties in mutual trade. May 1968 is known for the world student movements in
Paris, for the many changes occurring in social and the behavior of “the '68 generation”.
- the 1970-1980 period - a growing community - the first enlargement. With the
endorsement of Denmark, Ireland and Great Britain on January 1st, 1973, the number of EU
Member States increased to nine. The short but very bloody Israeli conflict of October 1973
triggered many problems in Europe. The fall of the Salazar regime in Portugal in 1974 and the death
of General Franco in Spain in 1975, signaled the end of the last right-wing dictatorships in power in
Europe. The regional community policy begins to allocate significant sums to fund new jobs and
155
construction or improvement of infrastructure in poorer areas. The influence of the European

Parliament on EU activities increases and in 1979 for the first time the universal suffrage was
elected.”
- the period 1980-1989 - Europe changes its appearance (Fall of the Berlin Wall).
Following the strikes on the Danzica naval yards in the summer of 1980 the Polish Solidarity union
leader Lech Waleso become known in Europe and worldwide. In 1981 Greece became the 10th EU
member state, with Portugal and Spain joining in 1986. Also in 1986 the Single European Act was
signed, which set up a comprehensive program for six years, set in order to solve the problems that
still stood in the way of smooth trade between EU Member States, thus creating the Single Market.
A great political upheaval occurs on 9 November 1989 when the Berlin Wall is knocked down, after
28 years opening up the borders between East Germany and West Germany.
- from 1990 to1999 - a Europe without borders. The fall of communism in Central and
Eastern Europe led to a rapprochement of European citizens. In 1993, the Single Market is filled
with those, “four freedoms”: free movement of goods, services, labor and capital. The '90s are
characterized by the signing of two important treaties, namely: the EU's Maastricht Treaty (1993)
and the Treaty of Amsterdam (1999). Europeans are concerned about how it will protect the
environment, and European countries will be able to cooperate on defense and security. In 1995,
3new countries join the EU: Austria, Finland and Sweden. A small village in Luxembourg gives its
name to the agreement, Schengen “which allows citizens to travel freely between countries without
a passport”. Millions of young people begin to study abroad with financial support from the EU.
The communication process is simplified, as more people begin to use the Internet and mobile
phone.
- From 2000-present - a decade of expansion. The Euro becomes the new currency for
many Europeans. September 11, 2001 is synonymous with the war against terrorism following the
attacks suffered by Americans on the twin towers in New York and EU countries’ undertaking of
closer cooperation to combat crime. By the other 10 countries’ joining the EU in 2004, the political
boundary between Western and Eastern Europe is finally lifted, more and more citizens feel that it
is time to give Europe a new constitution. However it is not easy to find a common agreement on
the type of constitution, debates continue about the future of Europe today. On 1 January 2007 two
other Eastern European countries, Romania and Bulgaria join the EU, bringing the number of
Member States currently at 27. Remaining candidate countries are Croatia, Yugoslavia and Turkey.
THE OPTIMUM CURRENCY AREA
The theory of optimum currency areas wishes to identify more precisely the relationship
between benefits and costs and right time to enter in a monetary union. The pioneer of this theory is
Robert Mundell (1961): "The Theory of Optimum Currency Areas." What seemed a utopia in
1961 became reality in 1999. "European countries could agree on a simple act [...] could establish a
monetary authority or central bank. This is a possible solution, and perhaps is even the ideal
solution. But politically it is very difficult, almost utopian.” R. Mundell (1973).
The optimality of currency areas is defined in terms of certain properties (criteria),
including economic integration of member countries, mobility of production factors, and similarity
of production structure. According to another definition, it is optimal for a country to adopt the
monetary union if the benefits outweigh the costs associated with this decision.
There is a very extensive literature on the optimum currency areas, but all articles and books
in the field focus on how a country can ensure stability in domestic policies that have remained
available after the loss of monetary autonomy and exchange rate policy. This literature relates to
how to ensure macroeconomic balance (internal and external balance) after an asymmetric shock,
i.e. a shock affecting one country but not others. Internal balance refers to bringing in the natural
rate of unemployment and economic growth. External balance refers to balance of payments
insurance.
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THE ECONOMIC EFFECTS OF INTRODUCING THE EURO IN SLOVENIA vs

SLOVAKIA
Since the case study of my work will focus on introducing the euro in Slovenia and Slovakia
I believe that I needed to focus on these two countries.
Slovenia, one of the oldest republics that formerly constituted Yugoslavia, regained
independence in 1991 following the dissolution of the Yugoslav state. Slovenia joined the EU in
2004, was organized politically in the form of a republic. The main data characterizing this state
are: it has an area of 20,273 km3, a population of two million inhabitants, the reference currency is
the euro, and its capital is Ljubljana.
2500
2004 2005 2006 2007 2008 2009

2000
1500
ANI
PIB/locuitor
1000
500
86 87 88 88 91 87
0
1 2 3 4 5 6
Figure no. 1. GDP/person share reported in Slovenia for the year of joining the euro in 2007
Slovenia's transition to the EU: In the last months of 2002 and negotiations and final
preparations were carried out for the expansion, at least at the institutional level, of the EU to accept
a further 10 countries including Slovenia.
According to the “Profers Report 2002” of the European Committee, Slovenia has fulfilled
all the conditions known as the Copenhagen Criteria for EU membership (political criteria,
guaranteeing democracy, law and human rights, economic criteria of the functioning market
economy to be able to influence the laws of the market). Among the candidate countries in 2004,
Slovenia is ranked 2 in terms of prosperity. In 2001 GDP per capita in terms of purchasing power
reached 69% of EU average, which put Slovenia on the same level with Greece and over Portugal.
The unemployment rate in Slovenia was one of the lowest (5.7% in 2001) and the budget
deficit almost insignificant. Agriculture accounted for 4% of GDP, which could be compared with
other European countries. Most critical problems that characterized Europe at that time were
focused on relatively high inflation and low labor market flexibility. On the other hand, Slovenia
has made significant progress on harmonization and improvement of EU law, especially on the
administrative capacity. From an economic perspective, in 2001 Slovenia's exports increased from
6.6 billion euros, while imports from EU countries to 8.6 billion euros.
157
2500
2004 2005 2006 2007 2008 2009

2000
1500
ANI
PIB/locuitor
1000
500
57 60 63 67 72 72
0
1 2 3 4 5 6
Figure no. 2. GDP/person share reported in Slovakia for the year of joining the euro in 2009
In the same year the EU recorded 62% of the Slovenian exports and 68% of total imports
also from Slovenia. The euro is introduced in Slovenia in 2007, replacing the old national currency,
Slovenian Taller (ST), the exchange being 1 euro = 239.640 ST. Slovenia became the 13th EU
Member State adopting the single currency and was the first to join the Economic and Monetary
Union in Europe. Following the adoption of euro by Slovenia, the Bank of Slovenia becomes a full
member of the euro-system with the same rights and obligations as the 12 national central banks of
EU Member States that have adopted the euro.
2500
2005 2006 2007 2008
2000
ANI
1500
1000 POLITICI SOCIALE-

REDUCEREAGRADULUI DE
SARACIE
500 238 234 226 241
0
1 2 3 4
Figure no. 3. Reporting degree of poverty reduction during the years 2005-2008 in Slovenia
Slovakia joins the EU along with Slovenia on 11 January 2004. Constituted as a republic, it
is situated in Central Europe, its capital is Bratislava. Republic of Slovenia and the Czech Republic
came into being on 1 January 1993 by the division of Czechoslovakia, which since 1993 had
assumed the name Czech and Slovak Federal Republic. After joining the EU in 2004, Slovakia
adopted the euro on January 1, 2009.
2500
2005 2006 2007 2008
2000
ANI
1500
1000 788 POLITICI SOCIALE -

628 566 588 REDUCEREA GRADULUI DE
SARACIE
500
0
1 2 3 4
Figure no. 4. Reporting degree of poverty reduction during the years 2005-2008 in Slovakia
158
CONCLUSIONS
The European integration process continues to amaze both its supporters and critics, this
recording a too fast rhythm for some states and too slow for others.
This process of integration becomes very important for the 500 million people directly
involved but also because Europe accounts for a quarter of the world economy, half of world trade
and one third of global capital markets, the European integration influencing life of most of the non-
Europeans.
The purpose of this paper was to provide an accessible presentation of the events afferent to
this process to better understand the reasons that led to the introduction of the euro, the existing
theories and controversies, my approach being based on economic principles, since the process
started with the economic integration even since 1948, when the European Organization for
Economic Cooperation was established. But the economy does not mean everything, so I will
analyze also political, cultural and historical factors.
REFERENCES
1. Attkinson A. , (1999) ,” The Economic Consequences on rolling Back the Welfore State”,
MIT Press, Cambridge MA.
2. Bean C., Bentolilo S., G. Bertole, Dolado J. (1998) - ” Social Europe: one for all?” ,
Monitoring European Integration 8, Centre for Economic Policy Research London
3. Bertola G., Jimeno J.F., Marimon R., Pissarides C. (2001), ”Welfore systems and labour
markets in Europe : what convergence before and after EMU?”
in G. Bertolo, T.Boeri, G. Nicoletti, „Welfore and Employment in a United Europe, MIT
Press, Cambridge MA.
4. Blanchard O.J. , Wolferes J.(2000), „ The role of shocks and institutions in the rise of
european unemployment: the uggreagate evidence” , „Economic Journal” pg. 110
5. Burda M., Wyplosz C. (2001), „Macroeconomics” , Oxford University Press, Oxford.
6. Calmfors L. (2001) , Wages and wage-bargaining institution in the EMU- A survey of the
issue, Eempirica Journal, pg. 28
7. Checci D. , Lucifore C. (2002), „Unions and Labour market Institutions in Europe” ,
Economic Policy, No 35 , pg.361-408.
8. Delado J., Felgueroso F., Jimeno-Serrano J.F., (2000) „Trends and Driving factors in
Income Distribution and Poverty in the OECD Area”, Labour Market And Social Policy”,
Ocasional paperss No 42, OECD, Paris
9. Doveri F., Tabellini G.(2000) „Unemployment, growth and taxation in industrial countries”,
Economic Policy, Nr. 30, pg. 47-104.
10. Nickell S., (2002) „ Unemployement in Europe : Reasons And Remedies ”, www.cesifo.dc
11. Pissarades C.(1998) ,”The impact of employment tax cuts on unemployment and wages;
role of unemployment benefits and tax structure” , European Economic Reveiew, Nr.42 (1),
pg. 83-115
12. www.ue.en.int/Newsroom/LoadDoc.asp?BID=76EtDID=43659& from=&LANG=1
13. www.ue.en.int./emu/en /index.htm
14. www.euorpa.eu.int./growthandjobs/
15. www.frdb.org
159
SECTION 2
MANAGEMENT AND BUSINESS

ADMINISTRATION
160
GLOBAL CRISIS AND MICROCYCLICITY
Professor PhD. Aurel BURCIU

Abstract:
The present paperwork presents a novel perspective of a fundamental concept like business cyclicity.
Throughout the argued aspects we try to emphasize the unitary aspect of microcyclicity in business both at a micro and
macro level. On the background of global crisis, the authors discuss about a “chaotic” type of business environment,
characterized by a permanent turbulence which needs a totally different style of management; within a „turbulent
economy” the manager needs intuition and various strategies in order to survive as Kotler and Caslione say. The
discussion develops step by step on several plans and grants the perspectives of several scientists as Samuelson,
Kondratieff or Drucker. The bottom line is to present and describe the variations of cyclicity itself.
Keywords: business cyclicity, strategic management, business cycles, microeconomics, macroeconomics.
JEL Classification: D01, D04, M21, C23.
1. ABOUT GLOBAL CRISIS
The present global crisis has surprised analysts and theoreticians, mainly by magnitude and
intensity; however, its development was in a great part predictable since the period of Big
Depression in 1929-1933. In the invoked manner, Paul Krugman has an explicit statement, but also
other economists like Roberts Lucas, Joseph Stiglitz, Nouriel Roubini etc. (1)
When the lessons offered by history are ignored by political managers exits the risk that
million of people to pay a significant social price; the development of the actual global crisis
entirely reflects the previously invoked idea. In fact, beginning with the middle of 2008 and until
now we can discuss about a series of errors in the macroeconomic decisions of the principal
developed countries, beginning with USA and till the level of UE member states. Obviously the
wrong decisions made on macroeconomic level have reflected and immediately reflect upon the
business life of organizations, which means thousands of bankruptcy, dismissal, unemployment,
etc. On the background of global crisis, the authors discuss about a “chaotic” type of business
environment, characterized by a permanent turbulence which needs a totally different style of
management; within a „turbulent economy” the manager needs intuition and various strategies in
order to survive as Kotler and Caslione say.
Preceded by a breakdown of stock market speculations in the summer of 2000, the real
estate crisis, from 2008 in USA has generated a “shock wave” on the whole American economy;
this wave has spread subsequently spread extremely fast, distributing the effects we now know
about, around all occidental countries; bank bankruptcy that followed in USA, starting with the big
banks (Lehman Brothers, Fannie Mae and Freddie Mac, Goldman Sachs, Morgan Stanley)
continuing with other hundreds of financial institutions of smaller size, all needed the
directly/indirectly support of the American state, has led to social panic within almost all world
countries.
“Crisis Economics” (2) has already become a distinct subject to study within the academic
environment, and theoreticians suggest the ways throughout which the cyclicity phenomenon could
be managed/controlled in the future; we comprehend (understand without saying) that it refers to
macroeconomic cyclicity, respectively what we call business cyclicity at macroeconomic level
(CAM). Actually, the present crises may be considered, as we shall further argue, only a variant of
K4 type cycle within the wave N. Kondratieff had previewed (we may talk only about a slight
asymmetry of 5-8 years of this wave minimum). (3) The signal launched by Kondratieff in the ’30
had a major impact to the economic theory and management but its reflection into the
macroeconomic decisions was, at the most, accidental starting in the ’40 until present. However, we
believe the phenomenon of cyclicity remains present the way it was developed by Kondratieff (with
161
respect to the explicit macroeconomic perspective); further, it has a immediate correspondence also
from microeconomic perspective, meaning the management applied during n years within the
business organizations.
2. HISTORY AND ACTUALITY ABOUT CYCLICITY
The evolution in time of economic activity for a period of n years, even if it doesn’t generate
wealth/accumulation and growth, it is not linearly ascendant. On this aspect the opinions of great
economists exclusively converge. (Marx, Marshall, Schumpeter, Keneys, Samuelson, etc.) The
observation that businesses evaluate cyclically, they fluctuate cyclically, evolving successively
through different phases which may have similarities, may be retrospectively reached back in the
XIX century. (Marx, Marshall, etc.) Though, the first analyses exclusively dedicated to the subject
belong to Van Gelderen and Wesley Mitchell. In 1927, Mitchell formulates a definition of cyclicity
in business, respectively he talks about a type of fluctuations that are dealt with within the
overall/aggregate economic activities of a nation; a cycle – he says – consists of the expansion that
takes place simultaneously in most of the economic fields, followed by periods of recession,
contractions and refreshing which precede the next cycle’s expansion (4). The duration of a cycle –
considers Mitchell – outruns a year and reaches 10 to 12 years (5). Afterwards, in 1946, Arthur
Burns brings some minor additions to the mentioned definition; generally, it is even nowadays for
the practice of some research institutes (6). Once it has been unanimously defined the phenomenon
of cyclicity in business, we may raise the question: to which extent is it possible to dominate, to
control and predict it? However, there would be necessary to surpass the Great Depression of 1929-
1933 in order for economists to focus their attention upon cyclicity of economic life. The thorough
study of business cycles, as well as the first fundamental attempts to predict the phenomenon, will
remain linked to the great economist N.D. Kondratieff (7).
The thoroughgoing study of this phenomenon may be extended mainly at macroeconomic
level, because on this perspective researchers have sufficient statistical data which are comparable
for a period of n years.
Starting with the ‘40 - ’50 and until present, the number of papers on business cycles, as a
distinct subject, has increased (8). But, inclusively in Marx writings and even before, we find
analysis on this topic of Ricardo, Malthus or Say. For example, even if Marx regards the economic
crisis as contradictions of fundamental capitalism, still he sketches out a suggestive/eloquent fresco
of the cyclic process in economy. “The theory of business cycles elaborated by Marx coexisted with
the analysis of general accumulation of capital” – says Mark Blaug (9).
Without the intention of an exhaustive analysis of the issue, we are obliged to emphasize the
role that Joseph Schumpeter and his fundamental works play with regard to the theme, respectively:
Theorie der Wirtschaftlichen Entwicklung – The theory of economics’ dynamics – 1931; Business
Cycles –1939 (10). Still Schumpeter was the one that popularized within the Occidental European
countries the main works of N.D. Kondratieff (by publishing in German/English and using as basic
reference the work Business Cycles). Maybe without the help of Schumpeter, the works of
Kondratieff would have remained anonymous. And of “Kondratieff disciples” – as Drucker names
them – Jay W. Forrester was especially remarked (11).
3. SAMUELSON’S CYCLICITY
Among many other economists, including P.A. Samuelson in the Economics (1995) edition
analyzes distinctively this issue. “A business cycle – says Samuelson – is an oscillation of total
national/domestic production, income and use (work force), usually lasting between 2 and 10 years,
marked by a big expansion or contraction within the most sectors of the economy”(s.n.) (12).
According to Samuelson a complete cycle includes two main phases (13):
-recession or decreasing phase;
-expansion or increasing phase.
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At national level, the recession period is usually considered to be a period within which the
real Gross Domestic Product decreases along two consecutive semesters; meanwhile the expansion
period may develop differently regarding the duration in time. Any of the two phases manifests
itself with different intensity from one cycle to another, “the cycles model being irregular”
therefore, both as duration and intensity (14). Due to the irregular model, Samuelson compares the
business cycles with weather fluctuations (15). Though, there are a series of similarities among the
two or more cycles within the same class/category. In the case of short cycles analyzed by
Samuelson, the graphic representation is showed in figure no.1 and suggests that economic activity
has a fragmentary and sinuous evolution.
Top (apogee)
Top 
(apogee) CONTRACTION Top(apogee)
 
Base
(depression)
EXPANSION
Base
(depression)
EXPANSSION
RECESS
Figure no. 1. Successive phases of MBC, according to Samuelson
Source: Adaptation after: P. Samuelson, W. Nordhans – Economics, 15th Edition, McGraw-Hill, Inc., New York, 1995,
pg. 553. Copyright © All rights reserved.
Within the previous figure, the business cycle represented by us is from macroeconomic
perspective, respectively what we call MBC –macroeconomic business cyclicity; this differentiation
is necessary because our analysis shall further regard especially the company business cyclicity
(CBC).
There are many writings on business cyclicity; one example is the recent paper of William
Houston, entitled Riding the Business Cycle, issued in 1995. This paper, - even if, remains under
debate with respect to the causes proposed by the author to be generating the cyclic evolution – is
extremely interesting regarding the description of the six identified categories of cycles.
Among various classifications of the phenomenon of cyclicity in economics (from
macroeconomic perspective), we remind the six category classification, throughout a clearly
division that allows a precise delimitation of the six different types of cycles, respectively (16):
C 1. Very long cycles of 500 years, identified by Raymond Wheeler;
C 2. Long cycles of 180 years;
C 3. Secular cycles of 100 years;
C 4. Cycles of 50 years, Kondratieff type;
C 5. Decennial cycles of 10-20 years, Juglar type;
C 6. Short cycles of 1-10 years.
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From our perspective we appreciate that the major role is played by Kondratieff cycles
(reasoning for which we approach them thoroughly as a distinct subject), and following the other
five types of cycles will only be mentioned; all these six categories of economic cycles are included
within the MBC category of this paper.
4. KONDRATIEFF CYCLES
The 50 years cycles, Kondratieff type, are the most hotly disputed and raise may questions
among economics researchers. Was Kondratieff right or not? The great majority of those who
approached this issue incline to formulate an affirmative answer, even if as Peter Drucker, they
discuss some manifestations/happenings within the economy that contradict the “Kondratieff wave”
or, in other words, are atypical manifestations. In fact, this kind of cycle has a 45-60 years evolution
in time and was firstly studied by Van Gelderen, who in 1913 identified a long wave of 50-60 years,
thus:
-production, prices and economic activity on the whole had a substantial increase within
1850-1873;
-after 1873, the economy registers a decline and reaches the lowest level in 1890, in the
main activity sectors.
We don’t know if Nicolai Kondratieff knew or not Van Gelderen papers (17). In the ’20,
N.D. Kondratieff starts to work with the Agriculture Academy and the Institute for Economic
Research from the URSS. He was assigned to study and demonstrate the decline of capitalist
economies – according to the communist perspective at the moment. The result of Kondratieff
researches was published for the first time outside URSS in German (Die langen der Wellen des
Konjunktur, 1926), then in English The Long Waves in Economic Life, 1935) (18).
The three cycles of Kondratieff may be extrapolated/extended until nowadays, and the
resulting correspondence between the real events that already took place in the world economy and
the idealistic version of Kondratieff’s waves becomes confusing/disturbing and shows the
extraordinary visionary capacity of the Russian researcher.
It is true that at the moment, in the world economy – and we speak about the countries with
the most developed economies – a series of economic sectors or new industries have individualized
and avoid the framing of Kondratieff. In the first place we think about the information revolution
described by Toffler and/or the entrepreneurial economy of Drucker, within which the new sectors
and industries based on high level technologies have overlapped Kondratieff’s predictions on the
simple reason they couldn’t be previewed/anticipated.
As resulting from the Houston’s paper Riding the Business Cycle, in their ideal version the
Kondratieff cycles would be represented as follows:
* K1 =growth starts in 1789, the top is reached in 1814, afterwards the recess period
reaches the lowest level in 1849;
* K2 =growth starts in 1849, reaches the apogee in 1873, following is the decline until
1896;
* K3 =the cycle starts in 1896, reaches the top in 1920, and the recess phase continues
until 1939;
* K4 =the growth starts in 1939 and continues until 1971 when it reaches the top,
afterwards follows the recess phase from 1971 and until approximately 1997;
We have dwelled on the Kondratieff cycles because, if the prediction of the phenomenon is
possible mainly with a reasonable accuracy – and the example given by Kondratieff is the most
eloquent- then the study of business cyclicity offers extraordinary perspectives not only on
macroeconomic level but also on company/enterprise level. This is valid for any type of cycle, even
if essentially the manager of a company would be preoccupied about the short cycles, the decennial
cycles and the Kondratieff cycles.
164
5. OTHER TYPE OF BUSINESS CYCLES
Shortly, we shall further review the other five categories of cycles previously mentioned
(MBC type), but we shall respect the numeric order from C1 to C6 (because the Kondratieff cycle
was largely presented and obviously there are connections/correlations related to the duration of the
various cycle types):
C.1. Very long cycles of 500 years were studied for the first time by Professor Raymond
Wheeler, starting in 1934, during many years and with the support from many sources (19). R.
Wheeler considers that, basing on correct/careful interpretation of data offered by history,
archeology, geology etc., starting with 500 BC and until nowadays we can identify economic cycles
of approximately 500 years. According to Wheeler this type of cycle is generated by an alternation
of humid/dry periods with others hot/cold within regions of the globe.
C.2. In 1975, two authors namely Iben Browning and Robert Harrington publish an article in
the review Nature throughout which they describe the new long cycle in economy, identified as
lasting 179 years. According the two authors, the main cause of this cycle would be the conjunction
between Sun-Earth-Moon and the planets Jupiter and Saturn (20).
C.3. Secular cycles of 100 years were identified by the same Professor Wheeler, but also by
another researcher, respectively George Modeski; the latter offered a complete description of this
kind of cycle (21). According the two authors, the manifestation of these cycles in economy and
society would be the effect of climatic influence upon the people behavior.
But, if we accept as real the manifestation of the three types of long cycles in the economy-
respectively C1, C2, C3 –then it is compulsory to remark that a certain correlation between them it is
necessary. Due to the fact that an approximately calculation shows that:
1 C1  3 C2  5 C3.
With other words, there are joint points of the C1 minimum and C2 or C3 minimums; the
statement is valid also for the points of maximum or the tops manifested within the three types of
cycles. Simplified we may represent the previous equation as follows:
C1
C2 C2 C2
C3 C3 C3 C3 C3
C.4. Kondratieff cycles have been largely discussed above, that is why we won’t refer again
to this issue.
C.5. Decennial cycles of 10-20 years have been debated especially by the French economist
Clement Juglar, reason for which they are also called the Juglar type cycles. Clement Juglar was
preoccupied mainly by the fluctuation of prices and of interest rate in France and England; he will
identify a model that registers these fluctuations according to a relatively regulate rhythm framed
between 9-11 years (22).
C.6. Short cycles of 1-10 years, we have already analyzed them when we discussed the
appreciations made by Samuelson with reference to the cyclic evolution of businesses. Many
authors were interested in studying this type of Cycle (Martin Kokus, Chandler Wobble, Van Duijn
etc.), identifying a series of significant features of the economic activity, features that have their
165
own rhythm of evolution on the short run (23). Among these important features, the most known is
the Kitchin cycle called also Inventory Cycle, that evolves during 3 to 5 years and is generated by
the tendency of storage – un-storage goods, by manufacturers and merchants (24).
Consequence of the previous Kondratieff cycles, decennial cycles and short cycles – through
analogies with C1, C2, and C3 -and the correlation made by Wheeler -– is necessary to emphasize
certain approximately correlations. Thus, even if the manifestation of short cycles is not rigorously
framed in time by analysts, though we may consider:
3 sau 4 C6  1C5
5 sau 6 C5  1C4
or as a general rule basing upon the correlation analysis between the Kondratieff cycles, the
decennial and schort cycles:
1C4  5/6 C5  15/20 C6
In consequence, we get to the conclusion that there are joint/crossing points between the minimum
of a C4 cycle and the minimums associated to C5 or C6, this statement is obviously valid for the
point of maximum or the evolution tops of the three types of cycles. The general rule presented
above may be illustrated in the following graphic:
C4 (Kondratieff)
5/6 C5
15/20 C6
In consequence we easily deduce that the most unfavorable period that a national economic
system may cross –or, respectively, global economy- is the period when the minimum point of
Kondratieff cycle is overlapping the minimum point of one of the decennial or short cycles. For
example, The Big Depression in ’29-’33, as well as the actual global crisis started in 2008, may be
explained on this kind of overlapping between the points of minimum specific to the phenomenon
of cyclicity in the economic life. We may formulate, so, a general rule or a principle that should be
the base of macroeconomic policies:
The fundamental objective of the manager at the macroeconomic level must be the un-
synchronization of the minimum point of Kondratieff cycle with respect to the minimum points of the
other decennial and/or short cycles.
6. A PERSPECTIVE OF NATIONAL ECONOMY
Simplifying the economic reality, throughout a series of theoretic models, might entail some
risks of non-pertinence/rejection; though, there are many situations when researchers don’t have at
their disposal the intermediary solutions. As it is well known, any national economic system
functions and develops as a unitary whole (25). The description of this kind of system’s
functionality (meaning the national economy) could be described on the bases of a logic function of
this type:
E = f(N, s, , r) where:
E – national economy;
166
N – economic agents that form the national economy;

s – relationships among companies (within each economic sector; among economic sectors;
within local/regional markets; within financial circuits in the economy etc.)
 – the synergy factor that is being exploited by the system while its functioning (the system
assembly represents more than the sum of the components)
r – the residual factor includes all elements un-hold by the previous three factors.
The analysis of the national economy basing on a logic function of this type offers the advantage of
a complete description. Though, within this sort of analysis, especially for the individual analysts,
occur major obstacles related to the operation and processing of data that characterize the factors s,
 and r.
Consequently, we are constrained to proceed for a simplified approach of the national
economic system. Thus, we consider the national economy to be formed of Ni economic agents,
meaning the firms and we exclude the other elements (the industrial factor, the legislative factor, the
relationships between firms, the synergy factor, intern consumption etc.). If we note the national
economy with E, than we have:
n
E   Ni (5.1.)
i 1
But if we note with  E the manifested tendency of national economy throughout a certain period
(its cyclic evolution) then this will appear as a resultant of the cyclic evolution of the economic
agents level Ni, respectively as a resultant induced by the manifestation of CBC.
These being said, we may note:
n
 E    Ni (5.2.)
i 1
Therefore, moving from the macroeconomic perspective to the microeconomic perspective while
studying the cyclicity phenomenon imposes to recur to certain simplifications of the economic
reality; anyway, we deduce on a strictly logical/rational base that an eventual
domination/administration of cyclicity phenomenon at the level of each economic actor would
directly favor the macroeconomic cycle’s management (MBC). In the context of actual global
crisis, the reference environment of firms in their daily life has become chaotic, unpredictable and
much more difficult to manage then in the ’80. Theoretically, as Kotler and Caslione argue, in the
context of an extremely turbulent (chaotic) business environment, managers may act uninspired to
the effects induced by the global crisis; they might be tempted to recur to cutting budgets in all
directions and to improvise with respect to the firm’s cash-flow; (26) the eventual macroeconomic
decisions of this type will reflect extremely ugly upon the national economy (that means an
amplification of the crisis that a country/region experiences).
7. DRUCKER’S VIEW ABOUT STRATEGY
From our point of view, we will consider that a company’s life or business evolution runs on
a fragmented model like we have shown in figure no. 2, this model being extremely difficult to
uniformly characterize. Obviously, strategic thinking on a larger time horizon has a special place
with respect to modeling the evolution and future of a company (27).
Applying the strategic thinking in business is not automatically equivalent to a carefree
future for the company, but is very likely that the total lack of management strategies equates to
the lack of any future for the company. “We know two things about the future”, says Drucker:
-“It may not be known”
-"It will be different from what exists now and what we currently expect." (28)
167
The implications of Drucker’s apparently simple statements emphasize the fact that the
attempts of predicting the future events rarely could have success, but we have the duty to try to
anticipate “future effects of events that have already occurred, irrevocably” (29).
Therefore, we can accept the idea that cyclicity in the real economy is an irrevocable
phenomenon emphasized by economists, a phenomenon that subsidiary stimulates the existence of a
similar manifestation in the evolution of microeconomics (30).
Accepting the idea that is not possible a linear growth of a company – and even less likely
an exponential increase – we formulate some questions:
- What should managers do to prevent and mitigate the manifestation of crises events in
business running?
- What is the role of the management process in the context of such an approach?
- What factors generate the crises situations in the affairs of a company and to what extent
can they be controlled?
- What are the changes in business strategy to mitigate the crisis and to recover quickly?
- What additional difficulties arise with regard to business strategy in a completely chaotic
environment?
- In a chaotic / turbulent environment that Kotler and Caslione discuss are there only threats
or there are opportunities too?
- Will there be “winners” and “losers” at the end of the actual crises (in reference to
companies that manage to survive the crisis)?
Growth/
expansion
t0 t1 t2 t3 t4 t5 … tn-2 tn-1 tn Time

Figure no. 2. The “fragmented” evolution of a company’s business in the real economy
In our opinion, the major direction in which the business organization’s managers will focus
in the chaotic / turbulent environment (specific to the actual global crises) will be found in the cash-
flow management issue, but this component is concerned with a certain “history” of the company,
namely the manner in which the cash-flow has been managed since the boom / ascendant period in
the affairs of the company. Such an approach might prove to be insufficient or even wrong being
necessary a vision and systemic treatment for each case in the real economy; simply put, managers
shouldn’t ignore the theoretical evaluations of the environmental factors that have induced
chaoticist current business environment (31):
- Technological progress and informatics revolution ;
- Disruptive technologies and innovations;
168
- “The rise of the rest of the world”;

- Extremely high competition;
- Sovereign investments funds;
- Environment;
- Customer ability.
8. GENERAL MODEL OF CBC
In the structure of this work we have done and maintain a clear distinction between the
following phrases:
- macroeconomic business cyclicity (abbreviated by the acronym MBC);
- cyclicity of the business at the company level (abbreviated by the acronym CBC /).
Unlike the previous model, in the figure below the firm’s business development takes a
sinuous or cyclic form; in addition, we present the upwards of CBC, direction given by the average
of maximum and minimum points of the cycle (LM line at an angle α).
Growth/ LM line
expansion
t1 t2 t3 t4 t5 tn-2 tn-1 tn time

Figure no. 3. General model of CBC (sinuous evolution of a company’s business in the real
economy).
Obviously, studying the CBC remains an issue due to be predominantly in the responsibility
of management teams that lead business organizations; whereas there are millions of actors in each
country, it is hard to predict that it is possible a unitary approach on the evolution and management
theory of CBC (there are thousands of studies on the small business category approached as a type
of economic actors, but very few theoretical studies on the history of small and medium businesses).
On the other hand, we explicitly say that any thorough study of the CBC has a real chance of
success at the level of medium and large companies’ category. For these organizations, such as
medium and large size corporations (that exist in each country and induce a specific trend in the
economy for “n” years), CEO and his team have the human and financial resources to manage as a
separate objective, the issue of their own CBC study.
In the context of the current global crisis, company leaders must develop different strategies
and a different type of behavior to pass the crises and possibly to exploit some opportunities
specific to this period; Kotler and Caslione discus a particular “chaoticist” behavior necessary to be
169
built in all organization departments (production, sales, finance, marketing etc.) (32). Indeed, in
today’s global context, defined by thousands of visible or less visible interdependence, the
environment to which managers report became extremely turbulent and unstable; on the background
of turbulence and chaos, the smallest error of the decision maker will amplify any negative
consequences upon the organization (33). It is predictable, we believe, that a significant number of
business organizations, of various sizes, will experience the consequences period for 2-4 years and
will continue their own path in the business world; a question arises “what distinguishes this
business organizations from those which will register bankruptcy?” (it may be assumed that the first
category of firms had a more cautions behavior in their ascending phase of their own CBC, when
this phase overlapped to the period of growth of MBC from the national/regional economy; in
addition, it can be assumed that such firms that will survive the crisis have managed their cash-flow
in the momentum phase of CBC with much greater caution and accumulated small accounting and
extra-accounting “reserves”).
9. TOP MANAGEMENT “RESERVES” ACCUMULATION
Theoretical speaking we can make suggestions/recommendations on what attitude should

the top management adopt to dominate the business cyclicity (BC); the preventive attitude of top
management for the future remains essential; however, the manager can acquire small strategic
reserves since the expansion phase of their business cycle:
 Financial reserves -accordingly, namely create a reserve fund that can be used only when
the company is threatened with bankruptcy. Both Anglo-Saxon accounting system and the French
allow the establishment of this reserve fund, among other funds. The size of this fund and it’s year
to year increase – in the ascending phases of its own cycle – remain to be pursued as separate
targets.
 Including to the training program, gradually, all of the employees with execution
attributes and all managers. Any investment in the human factor of the company for increasing
skills and knowledge appears as a long term investment. On the quality of the human factor will
depend the final modeling of decline –recovery phases of the firm.
 Reserves relating to the improvement and modernization of the material factor used by
the company (upgrading production capacity, developing new technologies, increasing the number
of inventions and innovations, absolute amounts and a percentage allocated to R&D, the amount of
computer technology used).
 Reserves which reflect an improvement of companies’ applied management in the current
administration of their affairs (improvement of management styles, delegation of the decision
process, application of modern methods of motivating employees, improving applied management
techniques and systems, etc.).
 To support the innovation process throughout the entire expansion phase of the
CBC/CAF in order to exploit the results of this process during the next phases of the cycle.
 Improvement to the end of the expansion phase of the current assets/ fixed assets relation,
to enter the next phase of CBC/CAF with a more favorable ratio than normal activity conditions (for
example, if the normal ratio is 1/3 it will target the formation of a ratio of 2/3 towards the crisis
phase).
 The predominance of highly liquid assets in the structure of current assets towards the
final of the same expansion phase of CBC/ CAF (bonds, bills, etc.).
 Improving cash-flow since the final period of its cycle expansion (reducing lending
terms, reducing stocks, discounting some trade effects, hiring some credit lines, etc.).
 Any other reserves accumulation that reflects top management’s preventive attitude
towards the crisis and decline periods, which would inevitably have to occur in the company’s life,
after a period of business prosperity.
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10. FINAL CONCLUSIONS
In consequence of the essential debated aspects of the paper, we appreciate that we can
suggest the phrase of microcyclicity for the whole issue regarding the study, administration and
prediction of CAF (either for each economic agent, or as a unitary theoretic perspective).
By analogy with the assessments made on the possible overlap between the minimum of a
Kondratieff cycle and the minimums of some decennial/short cycles, we can formulate a reference
rule for microcyclicity. Thus, one can say that the critical points in the company’s evolution are the
moments when the CAF minimum overlaps the minimum of one or more CAM (short cycles, Kitchin
type, decennial, Juglar type and Kondratieff type).
In figure no. 4 we present graphic the situation in which one or more CBC/CAF minimum
overlap/synchronizes with a CAM type minimums; we note in this graphic the approximate
example of the short cycle analyzed by Samuelson. It is noted from the figure that the intersection
points PI2 and PI4 are the critical points in the company’s evolution during “n” years; however,
results that the intersections of the two cycle categories occurs at two times rated tCAF/CAM. Strictly
from a theoretic point of view, the optimum situation for the flattening of CBC/CAF and the non-
synchronization of the minimum points of CBC/CAF and a minimum point of MBC/CAM may be
graphically represented as in figure no.5. As we can remark in figure no.5, the junction of the two
categories of cycles is inevitable in time but it may occur through other points then the ones of
minimum (we suggested PI2–PI4 points). Also, we remark the non-synchronization of the minimum
points of MBC/CBC and their manifestation at two distinctive moments tCAM and respectively tCAF.
Therefore results that simultaneously with the flattening of CBC, the manager may target also the
achievement of a departure/space as big as possible between tCAF and tCAM.
PI 5
PI1 CBC
PI 3
PI4
A type of MBC aproximated according

Samuelson’s short cycle
PI2
tCBC/MBC tCBC/MBC
Figure no. 4. Critical points in the firm’s life
171
PI5
PI1 CBC
PI3
PI4
PI2
A type of MBC aproximated

according Samuelson’s short cycle
tCBC TMBC
Figure no. 5. – Flattening CBC and its junction with a MBC type
Follow-up to what we have shown is appropriate to formulate a last conclusion supported on

the parallel analysis and the analogy made between the two phenomena of businesses’ cyclical
evolution. Thus, to the extent that cyclical evolution at macroeconomic level is considered/treated
as an objective economic law of economic life development, in the same way we owe to consider
microcyclicity as expressing an economic objective law derivative from the first.
We appreciate that the company along the way in life is the most vulnerable and exposed to
bankruptcy in those minimum points of their own business cycle that
intersects/overlaps/synchronizes with the minimum points of one or more macroeconomic level
cycles ( from the short ones to those Kondratieff). The general rule or principle to be placed at the
base of the decision-makers managerial strategy is the following: One of the strategic objectives
must be de-synchronization of minimum points of their own company business cycle from the
minimum points of macroeconomic cycles through attaining the objective of CBC flattening; is
intended, therefore, avoiding critical points by de-synchronizing the moments in which the two
cycle categories intersect/cross.
Assuming the acceptance of the microcyclicity concept proposed, there can be suggested
various ways of deepening/analysis for the future, particularly if we give credit to the chaotic
business environment which discusses Kotler and Caslione; as far as the business environment in
the next decades will remain as turbulent as the current, especially the issue of cautious
management of the company’s cash-flow will have to be updated (this without excluding the other
company’s departments such as research, production, sales, human resources etc). Among dozens of
questions that can be formulated, we mention:
- What is the historical relationship between cash-flow and CBC evolution?
- What is the best cash-flow projection during the boom of the CBC?
172
ENDONOTES
(1) Krugman, P., The Return of Depression on Economics and the Crisis of 2008, Publishing House Publica,
2009
(2) Roubini, N., Mihmn, S., Crisis Economics: A Crash Course in the Future of Finance, Publishing House
Publica, 2010
(3) Burciu, A. MBO şi cilul afacerilor, Publishing House Economică, Bucharesti, 1999
(4) Quote of: D. Greenwald (editor) – Enciclopedia of Economics, Second Edition, McGraw-Hill, Inc., 1994,
pg. 96 and following.
(5) Idem.
(6) A. Burns – The Business Cycle in a Changing World, Columbia University Press, 1969
(7) N.D. Kondratieff – The Long Waves in Economic Life, Review of Economics Statistics UK, 1935
(8) To support the statement we selectively mention: J.J. Van Duijn – The Long Wave in Economic Life, Ed.
George Allen & Unwion, London, 1983; L.H. Dupriez – Des mouvements économiaues généraux, IRES,
Louvain, 1951; A.F. Burns – The Business Cycle in a Changing World, Columbia University Press, 1969;
S. Bober – The Economics of Cycles and Growth, John Wiley & Sons, 1968; M. Feldstein (editor) – The
Risk of Economic Crisis, University of Chicago Press, 1991; J. Cornwall – Economic Breakdown &
Recovery, Ed. M.E. Sharpe, New York, 1994; C. Freeman (editor) – Long Waves in the World Economy,
Frances Printer, London, 1984; Th. Cooley (editor) – Frontieres of Business Cycle Research, Princeton
University Press, 1995; J. Estey – Business Cycles, Prentice-Hall, 1956; J. O’Connor – The Meaning of
Crisis, Ed. Basil Blackwell, Oxford, 1987; R. Gordon – Business Fluctuations, Harper & Brathers, 1961
etc.
(9) Mark Blaug – Economic Theory in Retrospect, translation after the 4th Edition, Cambridge Press, 1990
(10) On the theme of cyclicity in economics, a central role plays the work Cycles, vol. I-II, McGraw-Hill,
London, 1939.
(11) J.W. Forrester – Industrial Dynamics, MIT Press, 1961; World Dynamics, MIT Press, 1969
(12) P. A. Samuelson, W. Nordhans – Economics, Ed. McGraw-Hill, Inc., New York, 1995, pg. 551
(13) Ibiden
(14) Ibiden
(15) Ibiden. This comparison is extremely suggestive and has profound implications; we shall encounter it with
other authors also including W. Houston.
(16) William Houston – Riding the Business Cycle, Little, Brown and Company, UK, 1995
(17) William Houston – Op. cit., pag. 152
1
(18) N.D. Kondratieff – Die langen der Wellen des Konjunctur, Archiv für Sozialwissenschaft, LVI, 1926;
The Long Waves in Economic Life, Review of Economic Statistics, UK, 1935
(19) William Houston – Op. cit., pg. 16
(20) Idem
(21) G. Modelski – Exploring Long Cycles, Publishing House Printer, London, 1987
(22) William Houston – Op. cit., pg. 179
(23) William Houston – Op. cit., pg. 185-186
(24) J. Kitchin – Cycles and Trends in Economic Factors, Review of Economic Statistics, 1923; J.J. Duijn –
The Long Wave in Economic Life, Allen, 1983
(25) I.R. Suciu, I. Plumb – Economia ramurilor, Publishing House Select, 1996
(26) Kotler, P., Caslione J. A., Chaotics. The Business of Managing and Marketing in the Age of turbulence
translation Chaotics: management şi marketing în era turbulenţei, Publishing House Publica, 2009
(27) H. Varian – Microeconomic Analysis, Third Edition, Norton, USA, 1992
(28) P. Drucker – Managing for results, William Heinemann, Ltd. London, Ed. 1968, pg. 162
(29) Idem
(30) The modern economic theory doesn’t offer almost anything coherent regarding the cyclic evolution of
businesses for the firm level, but the connection we made is obvious and bases upon the interdependency
relations between macro and microeconomics.
tradnslation Chaotics: management şi marketing în era turbulenţei, Publishing House Publica, 2009, p. 37
translation Chaotics: management şi marketing în era turbulenţei, Publishing House Publica, 2009, p. 135
(33) Idem, p. 94
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175
EVALUATION OF INTER-GENERATIONAL KNOWLEDGE TRANSFER

BY USING THE ANALYTIC HIERARCHY PROCESS (AHP)
Professor PhD. Constantin BRĂTIANU

Lecturer PhD. Adriana AGAPIE
cbratianu@yahoo.com; adriana.agapie@clicknet.ro
Abstract:
The purpose of this paper is to present some results of our research in the field of inter-generational learning
dynamics and knowledge transfer, with applications in universities. This topic is important because a university is by its
own nature a nested knowledge organization, due to a continuous flow of students and the bottom-up regeneration of
the faculty staff. Knowledge creation and knowledge loss are intertwined processes, and both of them are strongly
influenced by the age scale. A university is a multilayered knowledge organization, where the inner most layers are
represented by older professors who concentrate the fundamental structures of knowledge, and the outer layers are
represented by students in their different learning cycles. In this paper we are interested in assessing the choices done
by the academic staff, in the context of the determinant criteria and trade-offs in inter-generational knowledge transfer.
This has been done in the framework of Analytic Hierarchic Processes (AHP). We thought that this is a proper tool
since it mainly belongs to the field of decision-making with the possibility to determine vectors of priorities for the
individuals participating in the decisions under study. We considered three main criteria: attitude toward cooperation
(C1), attitude toward competition (C2), and attitude toward innovation (C3). Also, we considered as being significant
activities: working together in research grants (A1), writing papers for scientific journals (A2), and writing books (A3).
These criteria and activities have been structured into a common framework.
Keywords: analytic hierarchy process, knowledge transfer, learning dynamics, university
JEL Classification: D83; I23; J24
1. INTRODUCTION
Universities are social institutions with long life cycle. The venerable Bologna University
dates from 1088, and the famous Oxford University dates from 1187. Main activities associated
with those days universities were collecting knowledge, preserving it and passing it on. Creating
new knowledge was not a part of university’s mission. A professor was mostly a scholar and not a
researcher. Learning was a process based mostly on transferring knowledge from one generation
toward the other. In 1809, Wilhelm von Humboldt established the Berlin University, based on a
new paradigm. According to his vision, a university should approach knowledge scientifically. It
should produce knowledge, not only to re-produce it (Harayama, 1997, p.9). Today, the research
universities integrate perfectly knowledge generation with knowledge dissemination. Knowledge
production and learning processes at individual and organizational levels transform the university
into a knowledge intensive organization, which fits excellently with the new requirements of the
knowledge society. Moreover, they may become learning organizations if double-loop learning and
organizational integrators are well developed (Armstrong & Foley, 2003; Bratianu, 2007; Bratianu,
2008; Ortenblad, 2001; Stewart, 2001). Learning is a knowledge intensive process at both individual
and organizational level. It is a strong nonlinear process that integrates several activities:
perception, knowledge acquiring, dynamics of tacit and explicit knowledge, dynamics of cognitive
and emotional knowledge, structuring and re-structuring through a continuous dynamics,
knowledge storage, knowledge removal from the memory, and knowledge creation through a
conscious effort (Bratianu, 2009; Bratianu & Orzea, 2009; Fauconnier & Turner, 2002; Pinker,
2007; Lakoff & Johnson, 1999; Nonaka & Takeuchi, 1995). Organizational inter-generational
learning is a specific process for those organizations where individuals group themselves in age
layers or strata. Universities are such organizations and inter-generational learning is a natural
process. The purpose of this paper is to investigate the dynamics of inter-generational learning by
using the mathematical model of the Analytic Hierarchy Process (AHP), in the Romanian university
environment (Harker & Vargas, 1987; Liang et al., 2008; Saaty, 1994). This topic is important
176
because a university is by its own nature a nested knowledge organization, due to a continuous flow
of students and of the bottom-up regeneration of the faculty staff. Knowledge creation and
knowledge transfer are intertwined processes, and both of them are strongly influenced by the age
scale. A university is a multi-layered knowledge organization, where the inner most layers are
represented by older professors who concentrate the fundamental structures of knowledge, and the
outer layers are represented by students in their different learning cycles.
2. INTER-GENERATIONAL KNOWLEDGE TRANSFER
The problem of inter-generational learning and transfer of knowledge is generally summed

up in the framework of asymmetric information. The additions of elements from psychology into
economics of information lead to the consideration of the some explicit details in this particular
problem of asymmetric information. Among these, the most important seem to be the incentive
salience conflict (conventionally, a conflict between the relative weight in utility attached to
tempting versus no tempting goods), the temporal horizon conflict (born from the importance
attached to distant events versus temporally close one) and the asymmetric information conflict (a
conflict between the information available in different areas subsumed to the research region).The
latest developments in neuro-economics conduced to models of brain as a hierarchical organization
(Brocas & Carrilo , 2008) in which, in order to model temporal and informational conflicts an
individual is split into an impulsive/myopic agent and a cognitive/forward looking principal. Yet,
this dichotomy between impulsive (through temporal horizon conflict and asymmetric information
conflict) and reflexive behavior (expressed through incentive salience conflict) a long term object of
neuro-economics research (Thaler & Shafrin,1981; Shafrin & Thaler, 1988; Lowenstein,1996)-has
been also present in the framework of organization theory as the dichotomy between relative ability
and absolute ability. Effects of competition in educational institutions regarded as organizations
highlighted particular adverse effects in reliance on relative abilities (also referred in this
framework as relative performance) instead of absolute abilities (expressed through the
measurement of performance against objective standards). Thus, it was found that (Wang & Yang,
2003) in competitive learning game, limited rewards lead to an “ability game”, therefore
competition among students no longer motivates increased effort. On the other hand, there is a flow
of literature devoted to behavioral analysis of the impact of ageing on decision making at the level
of firms challenging mostly negative stereotypes (like seniors are less flexible and willing to
change, less willing to learn but more reliable and determined than juniors, with a lower
adaptability to change). These generalities were splinted into attitude concerning cooperation in
teams, attitudes concerning competition and attitudes toward innovation and studied through
experiments in laboratories. In this line, there are results (Hamilton et al., 2003) that show that
cooperation is a learned trait and that the insight developed over a more elderly person’s lifetime
may be particular useful in providing a good example for younger workers to emulate. In addressing
the problem of ageing versus inter-generational learning in the framework of education institutions
as organizations-like Academy of Economic Studies (ASE), Bucharest is-this paper is going to
evaluate perceptions of the academic staff toward the attitudes of cooperation in teams, competition
and innovation-dimensions that sum highly relevant for the success of modern organizations.
Opinion about attitude of cooperation in team is supposed to offer a measure for the individual’s
intangible temporal horizon conflict, opinion about attitude on competition-in a learning
environment- is offering a measure on the asymmetric information conflict of the individual, since
he has to be competitive and up to date in his field, while opinion on innovation is seen as an
indicator of the salience conflict. The importance of each of these attitudes is going to be evaluated
under particular alternatives and also weighted from the point of view of tradeoffs allowed in some
situations. Priority vectors for each of these three attitudes and alternatives will be determined for
every member of the academic staff who participated in this research through the completion of a
certain specially designed survey. This will show how the main actors in the inter-generational
transfer of knowledge see themselves or equivalent, what are their priorities in these three main
177
attitudes. Inter-generational learning in universities is most intensive through the doctoral studies.
The highest-quoted professors (obligatory PhD supervisors) are involved through doctoral school in
transmitting the most important information to the students and also the state of art of conducting
research. The decision of including a professor in this activity is looking at three professional
criterions: grants, papers and books. In evaluating accomplishments with respect of these
alternatives, some tradeoffs regarding different levels of quality are elaborated by the Romanian
Ministry of Education and by the Universities’ boards over a few sets of criteria. So, on one hand,
in considering the decision to choose in between different members to teach in doctoral school
programs, the Board of University is looking whether some obligatory criterions are compelled. On
the other hand, a particular professor,(senior lecturer, lecturer) can choose his own level of effort in
fulfilling these criterions, given the previously mentioned available tradeoffs regarding different
levels of quality (these will be presented in more detail in the next section).The choice a particular
professor is taking- in a complex interplay of its own interior conflicts and the exterior imposed
criterions-is shaping its current teaching activities and therefore future outcomes.
3. QUALITATIVE AND QUANTITATIVE CRITERIA
In order to provide the reader with some background concerning the particular determinants
for attitudes toward cooperation, competition and innovation in a Romanian University like ASE, in
the following it will be described in short the determinants of the promotion process that is currently
at place. This is strictly connected with the flow of transfer of knowledge since if one has to fulfill
some criterions it is also true the backward assertion, namely that the value of a person is the sum of
the fulfilled criterions. And this value is very concretely expressed through its wage-a tangible,
measurable variable and also through some intangible aspects, like its determinant participation in
doctoral school or supervision of Master dissertations-main channels in inter-generational learning
in the considered framework. Academic staff in ASE is professionally evaluated according to its
participation in scientific grants, number of scientific papers and books and manuals. For being
promoted to the next level (assistant, lecturer, senior lecturer, professor, and professor-PhD adviser)
the cumulated scores for the previous three alternatives need to surpass some general “cutoff
values” established by the Romanian Ministry of Education and Research and each University’s
board. For example, for someone to apply for a promotion from the position of a senior lecturer to
the position of a professor, four main criterions are considered. The first one regards its teaching
activities, relations with colleagues inside its Department, evaluations form the students and the
number of manuals edited in its specialization. The second one is looking at research activities
measured through the number of grants. A minimal number of two is required with the mention that
the candidate had to be director in at least an international one. The third criterion is looking also at
research activities measured through the number of scientific papers. Five to seven scientific articles
are requires and out of these at least four have to be published in ISI quoted journals or indexed in
reference international data bases. Also a minimal number of two books, published in selected
publishing houses, is asked- and out of these the candidate has to be the first author for at least one
of these. The last criterion looks at the so named “professional prestige” which subsumes any other
activities like international recognition given by participation at professional associations,
membership in editorial boards, distinctions and awards. Given the range of alternatives available
for a university professor, its attitude toward competition can be ranked differently whether he
chooses to apply for an international grant-with all the risks- or go for all the national competitions
and don’t bother to go internationally, or whether he is deciding to put a lot of effort into submitting
a paper to an international journal instead to take the easy way to publish a larger number of papers
into national B+ journals. A teacher’s attitude toward innovation can be different if he chooses to
spend time to develop a new theory or new empirical methods of estimations and be competitive at
an international level or he decides is better from his personal point of view to add several smaller
improvements in its professional career. His choices are also affecting the message transmitted
mostly to its doctoral students or to the ones whose Master dissertation is supervised. After all, it
178
matters if a professor is sending the message “you need to be the best” –and for this, take my
example-or the message: ”satisfying: a pretty good heuristic” (Bendor et al., 2009). This common
sense observation is supported by mathematical models of satisfying which explicitly represents
agent’s aspirations and which explores both single-person and multi-player context. In this context
satisfying has a signature performance profile in two contexts: it can induce optimal long-run
behavior in one class of problems but not in complimentary class and it generates behavior that is
sensible but not optimal. In this paper we are interested in assessing the choices done by the
academic staff, in the context of the above presented range of criterions and trade-offs. This had
been done in the framework of AHP. We thought that this is a proper tool since it mainly belongs to
the field of decision-making with the possibility to determine vectors of priorities for the individuals
participating in the decisions under study and also there is the possibility to determine individual
numerical scales-since verbal interpretations can differ from one person to another (Liang et al.,
2008). A second reason for this approach is that the latest developments in neuro economics proved
that asymmetry of information in learning can be modeled at an individual’s scale also in terms of
an hierarchic organization (Brocas & Carrilo , 2008) .
4. AHP FOR DETERMINING INDIVIDUALS VECTORS OF PRIORITIES
The framework constructed for analysis includes a hierarchy with the three criterions at top:
attitude toward cooperation (C1), attitude toward competition (C2) and attitude toward innovation
(C3) and three specific alternatives located further down the hierarchy: grants (A1), papers (A2) and
books (A3).The bottom level of this hierarchy contains possible options according to the relative
importance of the factors involved in the three previous alternatives .The analytical process includes
making judgments on pairs of elements throughout the hierarchy, one level at a time beginning at
the top, based on the respondent’s knowledge and according to theirs perceived relative importance
of the factors involved. The most heavily weighted alternative outcome in the bottom level is the
most likely one. A survey designed according with these principles was electronically distributed
among the academic staff in ASE. In order to understand how this was processed, a short
presentation of the way in which the questions were posed in this survey and processed thereafter
will follow. Numerical results and interpretations will be presented in the next section. In the
following it will be presented the general form of the survey considered and one example of answer
will be indicated on the right-side. In the next subsection it will be showed how the answers were
processed.
In the first page were asked general information about the position of the respondent in
ASE: the academic status (professor-PhD supervisor, professor, senior lecturer, lecturer, assistant or
PhD student), the Department and the affiliation to a certain Faculty. The second page was devoted
to the determination of the priority vectors of the three chosen criterions in determining the quality
of the transfer of knowledge. This was done through the formulation of questions in comparative
terms, as shown below:
1. Please, indicate on a scale from 1 to 9 (1-indifferent, 9-full agreement) to what extent you agree
with the next assertion: ”In the framework of inter-generational transfer of knowledge, attitude
toward cooperation (C1) is more important than attitude toward competition (C2). ”
with the next assertion:” In the framework of inter-generational transfer of knowledge, attitude
toward competition (C2) is more important than attitude toward innovation (C3)”
with the next assertion:” In the framework of inter-generational transfer of knowledge, attitude
toward cooperation (C1) is more important than attitude toward innovation (C3).”
179
The third page was devoted to the determination of the priority vectors of the alternatives (grants,
papers, books) taking into consideration the criterions in the above level of hierarchy. Questions
were formulated as follows:
4. With respect to the problem of inter-generational transfer of knowledge, from the point of view
of the attitude toward cooperation please indicate, on a scale from 1 to 9 (1-indifferent, 9-full
agreement) to what extent you agree with the next three assertions:
4.a. Participating in research grants (A1) is more important than writing scientific papers (A2).
4.b. Writing scientific papers (A2) is more important than writing books or manuals(A3).
4.c. Participating in research grants (A1) is more important than writing books or manuals (A3).
of the attitude toward competition please indicate, on a scale from 1 to 9 (1-indifferent, 9-full
5.b. Writing scientific papers (A2) is more important than writing books or manuals(A3).
of the attitude toward innovation please indicate, on a scale from 1 to 9 (1-indifferent, 9-full
6.b. Writing scientific papers (A2) is more important than writing books or manuals (A3).
The forth and the last page was devoted to determining the priority vectors for the alternative
schemes of equivalence regarding the alternatives in the above level of the hierarchy.
7. With respect to research grants, please indicate, on a scale from 1 to 9 (1-indifferent, 9-full
agreement) to what extent you agree with the next assertions:
7.a. Other professional objectives are more important than participation as a director or member in
CNCSIS (national) research grants.
7.b. Is more important to participate as a director or as a member on a CNCSIS (national research
grant) than elaborating/or making efforts to become a member in international research grants.
7.c. Other professional objectives are more important than to participate as a director or as a
member on a CNCSIS (national research grant) than elaborating/or making efforts to become a
member in international research grants.
8. With respect to scientific papers, please indicate, on a scale from 1 to 9 (1-indifferent, 9-full
agreement) to what extent you agree with the next assertions:
8.a It is more important to write a large number of articles publishable in national B+ journals than
writing papers publishable in national ISI journals.
8.b. It is more important to write few papers publishable in national ISI journals than taking the risk
of submitting a paper to an international ISI quoted journal.
8.c. It is more important to write a large number of articles publishable in national B+ journals than
taking the risk of submitting a paper to an international ISI quoted journal.
The last question, question 9 asked for the number of participations in national research grants,
international research grants, number of papers published in national ISI journal, number of paper
published in international ISI journals with an impact coefficient less than 1 and number of papers
published in international ISI journals with an impact coefficient greater than 1.
180
Paired comparison judgments in the AHP are applied to pairs of homogeneous elements and
summarized in a matrix of judgments. Scoring is applied to rank the three alternatives in terms of
each of the three criterions considered. Matrix of judgments is determined assuming values equal to
one on the main diagonal and also reversibility of the preferences-so that if C1 is preferred to C2 at a
corresponding absolute value of 5, the C2 will be preferred to C1 at an absolute value of 1/5, which
is 0.2. The corresponding vector of priorities is calculated in an eigenvalue formulation. The
solution is obtained by raising the matrix to a sufficiently large power, then summing over the rows
and normalizing to obtain the priority vector. The process is stopped when the difference between
components of the priority vector obtained at the k-th power and at the (k+1) power is less than
some predetermined small value. The vector of priorities is the derived scale associated with the
matrix of comparisons (Saaty, 1994). Finally, alternatives are scored by checking off their
respective ratings under each criterion and summing these ratings for all criteria. This produces a
ratio scale score for the alternative. The scores thus obtained of the alternatives can in the end be
normalized by dividing each one by their sum. For the example considered in the section above, the
pair wise comparison matrix is given in Table 1.
Table no. 1. The pair wise comparison matrix for criteria C1, C2, and C3
Absolute judgments amongst criterions C1 C2 C3
C1 1 5 6
C2 0.2 1 8
C3 0.16667 0.125 1
Table no. 2. Vector of priorities for the criteria pair wise comparisons
Vector of priorities C1 C2 C3
C1 0.768293 0.768293 0.768293
C2 0.134146 0.134146 0.134146
C3 0.097561 0.097561 0.097561
The interpretation is that, in the view of the particular person who answered the survey, in
the prevalent attitude determining inter-generational learning and knowledge transfer is
cooperation, corresponding to C1, since it has the highest value: 0.768293. Second, it comes the
necessity to be competitive, corresponding to a value of 0.134146 and the last important would be
to be innovative-in the sense presented in the section above, with a value of 0.097561 in the priority
vector. Similarly were determined the pair wise matrices of judgments of the three alternatives
(Grants-A1, Papers-A2, Books-A3) with respect to each of the previous three criterions together
with the determined values for the priority vectors .In Table 3. is given the pair wise matrix of
judgments of the three alternatives with respect to C1 and corresponding vector of priorities.
Table no. 3. Pair wise matrix of judgments activities A1, A2, and A3 with respect to C1
Absolute judgments amongst alternatives A1 A2 A3

A1, A2, A3 with respect to Criterion 1
A1 1 4 3
A2 0.25 1 4
A3 0.3333 0.25 1
181
Vector of Priorities A1 A2 A3
A1 0.61898 0.61898 0.61898
A2 0.220113 0.220113 0.220113
A3
0.160907 0.160907 0.160907
5. NUMERICAL RESULTS AND CONCLUSIONS
The survey was delivered to 4 distinct Departments of ASE and the rate of response was
30%. Out of the received answers, 17.3 % were valid answers. The priority vector of the criterions
considered to influence the inter-generational learning was calculated as an average on the
individual vectors of priority-presented in table 1. The weight of the Alternative 1 (Grants) from the
point of view of the attitude to cooperation-Criterion 1 is calculated again as the average over the
individual values in the corresponding priorities vectors, as shown in table 3. Results weighted for
all the respondents are summarized in Table 4. In order to establish the composite or global
priorities of the alternatives considered we lay out in a matrix the local priorities of the alternatives
with respect to each criterion and multiply each column of vectors by the priority of the
corresponding criterion and add across each row, which results in the composite or global priority
vector of the alternatives. Corresponding results are presented in Table 5. Similarly were
determined vectors of priority averaged over all the respondents for the trade-off criterions with
respect of grants and papers , where 1 means-other are more important, 2-is a compromise at a
national level and 3 is going international with respect to the considered alternative. The results are
presented in table 6.
Table no. 4. Synthesis in the Distributive Mode

Distributive Mode C1 C2 C3
0.693693 0.183968 0.124902

A1
0.604529 0.630678 0.638076
A2
0.246879 0.247676 0.236087
A3
0.155292 0.121646 0.128091
Table no. 5. Synthesis

Distributive Mode C1 C2 C3
A1
0.414859 0.136212 0.062385 0.613972
A2
0.169421 0.053493 0.023082 0.247196
A3
0.106569 0.026273 0.012523 0.143
Table no. 6. Synthesis for the trade-off criterions regarding Grants-A1 and Papers-A2
Distributive Mode A1 A2
1
0.694924 0.645866
2
0.175785 0.204687
3
0.129291 0.149447
182
From the point of view of the inter-generational learning in e Academy of economic Studies
from Bucharest, for the academic staff, the most important appears to be cooperation-with a weight
of 0.693693, and the most preferred channel for cooperation is through national research grants. By
looking at the results in table 5 we see that it also appears that option 1-doing something else but
grants and papers-is most preferred. So we conclude that this also checks the fact that cooperation
in the sense of something else but grants and papers are preferred channels for inter-generational
learning and knowledge transfer.
ACKNOWLEDGEMENT
We would like to acknowledge the support received from UEFISCSU Romania through
PNII research project ID_1812/2008.
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184
MOUNTING E-WASTE OF EUROPE: POLICIES, MANAGEMENT PRACTICES, AND

BUSINESS SOLUTIONS
Associate Professor PhD. Ildiko IOAN
PhD. Cristina POPA
ioanildiko@yahoo.com
Abstract:
EU is among the communities recognized for their high environmental profile. This could be surprising for an
informal recycler from Nigeria and Ghana who regularly receives out of use computers from EU member states and
lights up open fires to recover materials. Departing from this paradox the paper attempted to build up a framework for
the analysis of e-waste management options. E-waste is the fastest growing waste stream in Europe, although waste
generation in general is an important environmental concern. There are huge differences among member states,
although the hierarchies could vary a lot. The European waste policy framework is quite well developed with a strong
branch for WEEE. Nevertheless, most of WEEE is dumped in third world countries. The initiative of several
companies to build up a European Recycling Platform is an important step to improve effectiveness in e-waste
management. The widespread use of the shipment business solution is however evidence that it is still not cost
effective. The analysis of the typology and spatial patterns of waste generation, the current waste policy framework,
the main waste management practices employed in case of WEEE, and the business solutions resulted in a number of
observations. Among these, we stress the urgent need for improved data collection procedures, reporting guidelines
and development of simple and effective control tools.
Key words: e-waste, European policy, take-back system, clearing-house system, ERP, export
JEL Classification: Q53
1. INTRODUCTION
Waste generation is one of the most visible and concerning environmental effect of the
development. Its path exceeded the capacity of technical and managerial solutions for processing
toward neutralization. This is also true for the European Union (EU), although it is recognized for
its leadership in environmental matters.
Waste of electric and electronic equipment (WEEE) or e-waste is one of the major
challenges in this field because of it is among the highest growing waste type. The total of WEEE
will grow annually with an estimated 2.5 to 2.7%, reaching 12.3 million tones per year in 2020
(Sawhney et al., 2008). Total waste generation is growing with an annual rate lower than one
percent, while the annual rate of municipal waste is 2% (EEA, 2008).
The Basel Convention bans the trans-boundary shipment of hazardous waste and its
transfer to developing economies. Nevertheless, there is no restriction for computers or other
electronic devices that are functional to be exported and surveys conducted by EU institutions and
NGOs revealed that these are in fact e-waste shipments escaping legal restrains for waste
management. In other terms, there are a number of factors that transform trans-boundary e-waste
shipment in a business solution under the one of the “greenest” administration of the world.
These factors are the subject of our analysis which aims to identify and describe them by
over posing data and information coming from the latest reports on waste and especially e-waste
policies, management practices, and business solutions. In order to perform this we will start by
framing e-waste’s pattern in the European waste generation picture. Further the European policies
that inflict on waste will be “dismantled” and widespread management practices described. The
underpinning economic reasons that encourage trans-boundary shipment of e-waste among EU
Member States and to the developing world (non-OECD countries) will be given a special focus.
Finally we will conclude by outlining several strengths and drawbacks of current policy
framework.
185
2. WASTE GENERATION AND THE E-WASTE OUTLOOK
Waste is the cause for the most common environmental problems: air pollution, stream
contamination, land occupation inflicting on human health. Meanwhile waste is a channel for
resource loss by blocking down valuable materials that are less and less available worldwide.
The European economy is a highly resource intensive one, which uptakes large amounts of
raw materials, energy, and land in order to perform properly. According to the European
Environmental Agency (EEA), around one third of the materials used are turned into waste and
emissions. Each citizen produces four tones of waste per year, out of which 520 kg is household
waste entering municipal waste management systems.
As long as waste types are considered, construction and demolition is on the lead, along
with manufacturing activities. Municipal waste is also of concern since almost half of it (45%) is
still land filled (EEA, 2010). Between three and four percent lies the proportion of hazardous waste
which presents special risk for human and environmental health. In statistical records the share of
recyclable waste and discarded equipment is about 10%. This fraction is dominated by metallic
wastes, closely followed by wood wastes and paper and cardboard wastes (fig.nr.1).
Metallic
Wood
Paper and cardboard
Glass
Plastic
Discarded vehicles
Textile
Rubber
Discarded equipment
Batteries and accumulators
0 25000 50000 75000 100000

Thousands tones
Source: Eurostat
Figure no. 1. Structure of recyclable waste including discarded equipment in EU-27
E-waste falls in the discarded equipment category. Although is not very important in the
current structure of wastes the estimated annual growth rate (2.5 to 5%) is large enough to give
more and more weight to this issue in the policy debate.
186
Bulgaria
Luxembourg
Romania
Estonia
Finland
Sweden
Ireland
France
M alta
Poland
Austria
Netherlands
United Kingdom
Belgium
Greece
Germany
Spain
Portugal
Slovenia
Denmark
Slovakia
Italy
Czech Republic
Cyprus
Lithuania
Hungary
Latvia
0 5 10 15 20 25 30 35
Source: Eurostat tones/capita
Figure no. 2. Waste generation per capita in EU-27
Across Member States there are differences in waste generation patterns. The largest
amounts of waste are generated in France, Germany, and the United Kingdom and account for
39% of the total waste generated in EU. Nevertheless, the per capita amount situates these
countries in a “milder” position (fig.nr.2) testifying for their efforts towards eco-efficiency.
It is interesting to notice that Romania is among the leading countries in terms of waste
generation. Per capita waste generation puts in the third position among EU-27.
There is no specific classification in Eurostat statistics for WEEE, but considering the
existing definitions this category could be assimilated with the discarded equipment excluding
discarded vehicles and batteries and accumulators waste. On average each EU-27 citizen generates
annually 7.5 kg of discarded equipment. The range of value is comprised between 0.2
kg/capita/year in Romania and 23.6 kg/capita/year in Sweden.
187
Sweden
Portugal
Belgium
Finland
Austria
Luxembourg
Netherlands
United Kingdom
Estonia
Germany
Denmark
Italy
Lithuania
Malta
Spain
Hungary
Slovakia
Czech Republic
Slovenia
France
Greece
Poland
Bulgaria
Latvia
Cyprus
Ireland
Romania
0 5 10 15 20 25
Source: Eurostat kg/capita
Figure no. 3. Discarded equipment wastes generation per capita in EU-27
Leading positions are occupied also by Finland, Belgium, and Austria (fig.nr.3). It is
surprising to find Portugal in the second position. One possible explanation could be the changes
in recording data. This factor is reported by several authors (Ioan and Radulescu, 2008; Sawhney
et al., 2008; Nordbrand, 2009; Fischer and Davidsen, 2010) as sources of bias in the analysis of
waste, and especially e-waste management.
These figures are much higher than the total amount of discarded equipment considered
previously (3.4 million tones), but they were produced using independent surveys which could take
in account patterns that escape from official statistics. Nevertheless, the estimates for the per capita
generation of e-waste fall on similar figures as those of statistics. Thus Nordbrand (2009) gives
24.0 kg/capita/year as maximum level of e-waste generation, which is very close to the 23.6
kg/capita/year derived from Eurostat data in case of Sweden, but almost three times the average
value.
Reports on e-waste management estimate the amount generated in the EU to be of about
8.3-9.1 million tones (Nordbrand, 2009), representing around four percent of the municipal waste
(ECT/RWM, 2006).
The e-waste issue climbed on the environmental policy agenda because of several reasons.
Firstly, the amount of e-waste is expected to increase further. The annual growth rate falls
somewhere between 2.5 and 5.0 percent leading to 12.3 million tones e-waste to be generated in
2020. These figures make WEEE the fastest growing waste stream in EU.
188
Figure no. 4. E-waste roadmap in EU-27

Source: European Commission – DG Environment
Secondly, the concern is amplified by the lack of treatment capacities in EU countries. The
European Commission signals that only 33% of e-waste is treated properly, while 54% is leakage
toward third world countries and 13% is land filled (fig.nr.4). This could be also interpreted as
missing the business opportunity for EU waste industry and related employment and increased
threat for environmental health.
Thirdly, through e-waste materials with high market value are lost and should be recovered
from the countries that assume the risks of unsafe processing for lead, copper, aluminum, iron, and
gold.
3. EU POLICIES
In EU’s vision waste management should be regarded as part of a broader picture: material
use. Fact is, the fourth assessment report prepared by the EEA where is no chapter dedicated to
waste. This issue is treated as a matter of sustainable production and consumption. Departing from
this vision, the EU attempted to develop a strategy in order to arrive at fair, non-discriminatory
access to international supplies, to create a frame for the sustainable extraction of its own supplies
and to arrive at a more efficient use of materials and extensive recycling in the EU.
The European waste policy is outlined in the European Waste Framework Directive and
further detailed by types of waste and materials. The policy is largely based on the waste
management hierarchy and the principle of extended producer responsibility.
The EU also developed thematic strategies on prevention and recycling of waste and on
sustainable use of natural resources. Work is going on the development of Integrated Product
Policy which attempts to minimize the environmental impact of products during their entire
lifecycle. There are five basic principles to underpin this policy:
- reflection on the lifecycle;
- cooperation with the market;
- the involvement of all stakeholders;
- permanent improvement; and
- diverse range of policy tools.
The main policy measure concerning e-waste in EU is the WEEE Directive (Directive
2002/96/EC). This is completed by the RoHS Directive (Directive 2002/95/EC) on the restriction
of the use of certain hazardous substances in electrical and electronic equipment.
The WEEE directive already passed through a revision phase that changed the targets and
enforcement conditions. The underlying objectives of the WEEE Directive are the following:
- divert WEEE from landfills to environmentally sound re-use, recycling and other forms of
recovery;
- preserve resources - materials and energy;
- producer responsibility;
189
- harmonize national measures on the management of WEEE – common minimum

standards of treatment.
- provide for a free producer take-back scheme for consumers of end-of-life equipment;
- improve product design with a view to both preventing WEEE and to increasing its
recoverability, reusability and/or recyclability;
- provide for the establishment of collection facilities and separate collection systems of
WEEE from private households;
- provide for the establishment and financing of systems for the recovery and treatment.
For the implementation, each Member State developed compliance schemes as it is presented
in table no.1.
Table no. 1. Compliance schemes for the implementation of the WEEE Directive
Member State Compliance Schemes
Austria UFH-Emweltforum Haushalt, ERA,
ERP
Belgium Recupel
Cyprus Chamber of Commerce
Czech Republic Envidom, REMA, RETELA
Denmark EPA El Retr
Estonia EES Ringlus
Finland SERTY, Elker Oy, SELT, FLIP ry,
ICT
France Eco-systemes, ERP, Syndicat do
l’eclairage
Germany EcologyNet Europe, ERP, ProReturn
Greece Recycling of Appliances S.A.
Hungary ELECTROCORD, ElektroWaste,
Okhomat
Ireland WEEE Ireland, ERP
Italy ANIE, ecoR’it
Latvia LZE, CECED
Lithuania INFOBALT, CECED, LT
Luxembourg ECOTREL
Malta NA
Netherlands NVMP, ICT, Stickting Lightrec
Poland CECED, KIGEiT
Portugal Amb3E
Slovakia Ekolamp, Envidom, SEWA
Slovenia European Lamp Federation Take
Back
Spain Ecofimatica, Ecolect, Ecotic, Sig
Lamparas, Tragamovil
Sweden El Kretsen
UK Valpa, REPIC
Source: Savage, M. (eds.) (2006), Implementation of the Waste Electric and Electronic Equipment Directive in the EU
25, Technical Report Series, Ref: EUR 22231 EN.
The enforcement was made with several delays caused by historical amounts of e-waste,
overlapping with areas of EU legislation (hazardous waste regulations, trans-frontier shipment
regulations, health and safety related marking).
In addition to the delay in implementation, the initial form of the directive was unable to
cover issues like e-waste leakage toward third world countries, and was criticized for increasing
administrative burden on producers and lack of clarity.
The revision aims to enforce changed collection target, better enforcement, and changed
recycling/reuse target. Thus, for collection it is provisioned that 65% percent of the marketed
electric and electronic equipments in the two preceding years. For the better enforcement it is
190
envisaged the export and treatment, and the minimum monitoring requirements. All reuse targets
increase with five percent.
The RoHS Directive seeks to reduce the environmental impacts of WEEE throughout all
stages of the equipment’s lifecycle, particularly at the end-of life stage, by encouraging the end-of-
life management of the product, eco-design, life cycle thinking and extended producer
responsibility.
4. MANAGEMENT PRACTICES
Across EU there are three main types of e-waste management systems: take-back systems
(collective –model), Clearinghouse-model and European Recycling Platform (ERP).
Take-back systems. Such systems consist in a dominant national system which is
responsible for collection, recycling and financing of all (or the vast majority) of WEEE within
national boundaries. This is the general approach in the countries with established WEEE systems
in Europe. Underlying principle is that the stakeholders in the electronics' chain of commerce
should manage the end-of-life system, and that stakeholders' responsibilities should be
proportionate to their ability to implement and
affect the system.
The adoption of take-back systems is motivated by certain advantages. According to Savage
(2006), these are mainly as follows:
- Provide a predictable source of funds, pays for all returned products, adhere to principles of
environmentally sound management, provide convenient collection opportunities, and do
not place an extra financial burden on local governments;
- Uses every means possible to minimize costs employing competitive contracting for
services, working with existing businesses and organiszations, stimulating product design
improvements to lower recycling costs, encouraging an extensive collection network to
improve economies of scale etc;
The system’s drawbacks are that its design and implementation generate higher costs than
the other options and it does not encourage the reduction of e-waste amount (violating the
hierarchy principle of waste management).
The clearing-house model. The clearing house model is again a national framework in
which multiple partners (producers, recyclers, and waste organizations) can provide services. The
government ensures that there is a register of producers and defines the allocation mechanisms,
and reporting and monitoring systems.
Although the system has an important potential for cost savings, lack of experience and
data to make a good analyses and comparisons with existing collective schemes make it less
attractive. In addition, in case of smaller markets the benefits of market mechanisms are not big
enough.
The European Recycling Platform. This is an initiative undertaken by Hewlett Packard,
Sony, Electrolux and Braun to develop Pan –European compliance structures. The ERP does not
need to transport WEEE outside of the country of origin, but needs to develop pan-European
agreements with networks of providers with operations in all ERP countries. Supporters of such an
initiative regard it as an important opportunity to develop much-needed alternatives to the national
schemes, to create competition, which in turn, will stimulate efficiency and cost reductions.
The high complexity of the system and differences in national legislation are the main barriers that
prevent this system to become a powerful competitor of national systems.
5. BUSINESS SOLUTIONS
Despite increasing legal restrains EU continues to leak large amounts of e-waste. Although
it is highly difficult to monitor what Greenpeace called the “hidden flow” there is an official
recognition of the fact that many electric and electronic equipment is shipped within and outside
191
EU in order to be reused, but it ends up in unsafe land fills and open fire recycling sites with highly
polluting potential.
This reality proves the fact that there is a vision difference between government and
businesses about how waste should be managed. Some aspects are true for all types of waste, but
the issue become sharp and very visible then the flow of computers invaded third world countries
(Ghana, Nigeria, and Egypt) and China. Thus while for government the solution is the
establishment of national collective and recycling system that improve the possibilities to enclose
material loops, from a business perspective it is more profitable to export waste.
This is not surprising at all considering the lack of safety standards in waste importer
countries. What is surprising is the fact environmentally progressive communities agree to accept
the governance of economic reasons. Fact is there are many possibilities to interpret legislation
referring to e-waste, but in the framework of proactive environmental behavior it is expected that
EU is a less permeable for e-waste leakage.
The export of e-waste is difficult to be tracked down since the commodity to be traded is
not waste, but computers, TV-sets, monitoring devices, printers etc. that are still functional and
could help less developed communities to catch up with the modern world. This is the most
common philosophy to justify the export of e-waste to the third world.
The export statistics were browsed by several organizations in order to find the evidence of
waste export. The main technique applied is to compare the quantity and the value of exported
goods. Thus it was demonstrated that TV-sets were exported at a very low price compared to their
market value. The average value of color television sets exported from EU to Africa is ranging
between 28 and 64 euro. The market value of this commodity is 339 euro. This results in an
indication that the export consist of used products. According to legal provisions these products
should be functional. Nevertheless, there is not realistic to assume that a very detailed control will
be performed at any custom. A testimony of a Swedish environmental crime expert is relevant in
this respect:
“In order to know exactly what is in these shipments, you would have to physically inspect
them. In the early days we looked at everything, we opened every box to see if the content
agreed with the declaration, but this is not feasible anymore. Te trade flows are so much bigger
and processing has to be done quickly”
Martin Johansson, specialist in environmental crimes at the Swedish Customs
The size of this business solution is difficult to be estimated. Most of the authors cite trade
statistics as the main data source, but ETC/RWM stresses that the information to be derived from
such sources reflects only part of the problem.
Nordbrand (2009) reports that the “hidden flow” accounts for the larger part of the e-waste
stream (60-75%). Other figures tell a worrying story about the dynamic of exports. It is estimated
that e-waste export tripled from 1997 to 2005. ETC/RWM suggests that most registered exports
take place between member states, while exports to countries outside the union are less than 10%
and relatively stable. According to the statistics, main recipient countries are countries in Asia and
South Eastern Europe (Albania, Bulgaria, Bosnia-Herzegovina, Croatia, the Republic of
Macedonia, Romania, Turkey, Serbia and Montenegro). There is little knowledge about what is
happening in these countries – proper treatment or re-export.
6. CONCLUSIONS
Waste generation is among the most inconvenient follow ups of the modern lifestyle. The
paper highlighted several aspects of e-waste generation and management in an European
framework pursuing to find strengths and weaknesses potentially useful in the ongoing public
policy debate.
192
EU generates almost three billion tones of waste each year. The management of this huge amount
is framed by a quite well developed policy with specific directives, thematic strategies, and a wider
contextual vision on the entire material flow.
E-waste or WEEE is a relative recently concerning category because it is the fastest
growing waste stream. Although the category is addressed by specific directives, one major
problem is the leakage of 54% e-waste toward third world countries. Fact is the current legal
framework in EU makes e-waste export a very attractive business solution, despite increase in
environmental awareness and proactive environmental behavior.
Improving the policy measures to fight with illegal exports depends on a wide range of factors.
Nevertheless, considering the facts revealed in the paper’s sections, we conclude that one major
area for research and policy making is to increase clarity of definitions in such a manner that
custom controls to be simple and effective.
REFERENCES
1. Bran, F. (2002), Componenta economica a deciziilor de dezvltare economica, Bucharest,

ASE Publishing.
2. EEA (2009), Waste without borders in the EU?, Report nr.1
3. EEA (2008), Fourth assessment, Chapter 6: Sustainable production and consumption.
4. Fischer, C., Hedal, N., Carlsen, R., Doujak, K., Legg, D., Oliva, J., Sparvath, S.L.,
Viisimaa, M., Weissenbach, T., Werge, M. (2008), Transboundary shipments of waste in
the EU. Developments 1995-2005 and possible drivers, European Topic Centre on
Resource and Waste Management (ETC/RWM).
5. Fischer, C., Davidsen, C. (2010), Europe as a Recycling Society. The European
Recycling Map, European Topic Centre on Sustainable Consumption and Production.
6. Ioan, I., Rădulescu, C.V. (2008), Managerial dimension of using LCA, Quality – access
to success, nr.94.
7. Ioan, I., Rădulescu, C.V. (2008), Assisting environmental compliance, Quality – access to
success, nr. 9, pp.46-50.
8. Nordbrand, S. (2009), Out of Control: E-waste trade fows from the EU to developing
countries, SwedWatch.
9. Rojanschi, V., Bran, F. (2002), Politici si strategii de mediu, Bucharest, Economica
Publishing
10. Sawhney, P., Henzler, M., Melnitzky, S., Lung, A. (2008), Best practices for E-waste
Management in Developed Countries, Adelphi Research.
193
TWO PERSONALITIES, TWO SOLUTIONS FOR BUSINESS DEVELOPMENT IN

ROMANIA: ROBERT KIYOSAKI OR JIM COLLINS?
Professor PhD. Gheorghe NEGOESCU
“Ovidius” University, Faculty of Economic Sciences, Constanţa, Romania
negoescugl@yahoo.com
Abstract:
Romania, for that matter, all countries in the world can not overcome the financial crisis without business
development. Robert Kiyosaki believes that financial education promoted since primary school may decisively
contribute in better to the changing of business environment in a country. Jim Collins studied the activity of over 1400
U.S.A. companies during 1980-1998 and concluded that only 11 companies managed good results in financial terms
because they have been able to practice a management of excellence, based on six concepts: five level leader, first
"who" ... then "what", dealing with reality (without losing your trust), the hedgehog concept (simplicity within the
three circles), culture of discipline, technology accelerators, the flywheel and chain destiny.
The conclusion of this study is that the Romanian economic school should promote widespread economic, financial,
legal and accounting knowledge in order to encourage private sector to develop.
Robert Kiyosaki and Jim Collins are among the best writers of the world's economic literature. Both have sold over
fifty million books in over 100 countries. Principles and concepts promoted by them in the Romanian economy will
certainly trigger energies latent in each of us. In times of crisis every Romanian should gain revenue from all four
lucrative poses: employee, freelancer, owner or investor.
Keywords: financial education, good debt, bad debt, fast track, leading, hedgehog, discipline, technological
accelerators.
JEL Classification: M11, M21
INTRODUCTION
Facing with lower demand, companies from Romania and from other countries from EU,
once the crisis started, have decided to reduce production and to send some employees in
unemployed. Job security became a concern for the remaining employees, which, as a result, have
reduced their consumption, increasing trend in reduction demand. Only public investment can now
revive the economy.
In the euro area recession has increased strongly in the fourth quarter of 2008, when GDP
was compressed by 1.5% (in annual terms). This year is expected quarterly decline of more than
1%, the economy will revert to a growth phase, only in the middle of 2011’s. In some countries
such as Spain, the crisis will be even longer, growth being delayed until 2012. The sector most
affected by the financial crisis was industry, which dropped with 6% in the fourth quarter of year
2008. For this reason, countries where the sector has a major contribution in economy (such is
Germany) were fully affected.
And the countries of Central and Eastern Europe - and Romania too - have suffered the
effects, because were faced with lower demand for exports. Being highly open economies (exports
and imports occupy a major share in GDP), the contraction appeared on their main market (euro
area) could not have but negative consequences.
Obviously, this is accompanied by an increase in unemployment, which will only increase
the economic crisis. Uncertainty over jobs causes people to postpone consumption, thereby
reducing aggregate demand. And the only factor that can get euro area economy from numbness in
the is public spending. The scenario that takes place in the euro area is the same as that which
manifests itself to us. The only difference is that in Romania’s case we’re not witness to a
recession, but a sharp slowdown in economic growth, with the same effects: reduced production,
increased unemployment, reduced consumption and the economy slows. IMF program is
designed to remove the stalled economy by boosting public investment, after the model adopted by
West European countries.
194
1. ROBERT KIYOSAKI SOLUTION: BE A BANK, NOT A BANKER
Robert Toru Kiyosaki was born in 1947, is an investor, businessman and motivational
literature American author. Kiyosaki is best known through a series of motivational books "Rich
Dad, Poor Dad." He wrote 18 books which have sold in a total of 26 million copies. Although he
initially self-published, then, Warner Books, a division of Hachette Book Group USA, took over
publication of his books, they now defending as publisher Rich Dad. Three of his books, Rich Dad,
Poor Dad, Money Quadrant and Investor’s Guide were simultaneously in the top 10 best books
sold, ranking compiled by the Wall Street Journal, USA Today and The New York Times. Rich
kid, smart child, was published in 2001, the author having the desire to help parents to familiarize
children with financial concepts.
He also created the educational game "Cashflow" published in both traditional and
software version. The game knows three versions and addresses both parents and children. He
released numerous cassettes and discs of the series "Rich Dad".
In Robert Kiyosaki's view, this means that early in career we should be aware that there are four
situations in which making money ie: employee, self employed, owner and investor [1].
A P
Employee Employer
L I
Self-employed Investor
Figure no. 1. Money quadrant
The emergence of the financial crisis has created a feature based on money quadrant by
Robert Kiyosaki namely that from the outset, an employee must be a good worker and a good
investor. The peculiarity is that once the first month of employment, a graduate school should opt
for Pillar 2, private, for pension and for pillar 3, optional, if he want a soothing pension at the end
of the active part of life.
In conditions of economic crisis, financial analyst role in a company grow substantially.
According to Robert Kiyosaki, operators should exercise caution in the market of bank loans and
debt and is appropriate to divide into two categories: good and bad. In essence, good debt
liabilities are those which lead to increase in real assets and reduced real liabilities and bad debts
are those which reduce the actual asset and increases actual liability.
195
Mousetrap Fast track

Financial Statement of the Creditor’s financial
debtor - SME statement - BANK
Income Income
Costs Costs
Balance Balance
Loan
Active Passive Active Passive
Credit line
Income Income
Costs Costs
Loan
Active Loanline
Credit Passive
Passive Active
Real balance Credit line Real balance
Figure no. 2. – From „Mousetrap” to „Fast Track”
Table no. 1 – Fundamental corelations in economic cycle in financial crisis
SME Bank
Income < Costs Income > Costs
Debts < Receipts Loans <Capital
Asset accounting=Sheet liabilities Asset accounting=Sheet liabilities
Real asset < Actual liability Real asset >Actual liability
2. JIM COLLINS - BUSINESS EXCELLENCE. EVALUATION METHODOLOGY

FOR HUMAN RESOURCES
Jim Collins is probably the most read writer in the world economy. The book "Business
Excellence" was the result of efforts to analyze more than 1,400 companies included in Fortune
500 companies, from which ultimately only 11 met the criteria of excellence in business. And the
results of these research efforts have rapidly developed. In less than three years of its appearance,
the English edition of this book is already sold 1.5 million copies. And from then until now has
been translated into over 30 languages, quickly became a bestseller worldwide.
2.1. EVALUATION OF MANAGEMENT SKILLS. TOPPROFIL PRESENTATION
The model proposed by Jim Collins (Collins, Jim (2007)) on promoting excellence in
business is one of the strongest currently available on the market. TopProfil (TopProfil (2009))
instrument built in Romania is the only evidence, starting from the premises to promote business
excellence by Collins. From this point of view, using the sample may be useful in identifying
people and team performance, especially in identifying a number of strengths and areas for further
development to increase performance at work.
The data collected indicate the usefulness of proof segment of coaching and training,
enabling people and teams alike to become more competitive, by implementing the suggestions
offered by HR consultants, after the review of TopProfil [2].
196
Test validation studies show a positive correlation between the results of the test and job
performance of individuals tested, while internal consistency coefficients are found between 70
and 90, favorably securities rated appreciated by the scientific community.
Top Profile is a comprehensive assessment tools based on managerial behavior "Business
principles of excellence" identified by Jim Collins.
Operational core model

Operational core: the heart of the organization, responsible for business performance motor.
Core operational areas:
 People - people who are responsible and accountable to employees and their job duties -
creation and action capacity of the core operations;
 Processes - the processes governing the organization and structure work - thinking of all
the shares in the form of strategies, tactics and procedures;
 Technology - how the act occurs or when the organization performs the process.
In Romania there is a concept "business tuning” promoted by 4 Business Tuning Company, which
essentially consists in applying the principles of Jim Collins for a business in Romania. We
present, in short, this concept, in the figure below.
Figure no. 3. Business Tuning
2.2. JIM COLLINS PRINCIPLES
a. Principle I: The leader of level V

"Every employee of an excellent company is the leader of the V - one who manages to
build a lasting excellence in his performance and those who follow him through a paradoxical
blend of personal humility and professional will." [3]
197
b. Principle II: First "who" and then "what"

"In a company, choosing the right people is the key to the team. Most important is to
identify the size of "being" - "who am I (are we)?" - at the individual and then to the team.
Strategies and targets members / team, that "what we do" pragmatic will follow by itself as long as
the identity of members and of the team has been identified."
Managers who live mainly - Who first and then "what" - are artisans of a system built on
people's character traits and not based on their experience. They listen to their subordinates and
motivate them for maximum contribution, using rewards to retain and not to lead to work.
Not binding and does not tolerate employees unsuitable, give the best conditions for developing
the right employees with the building and shared mission, vision and values of the organization.
Managers who are in opposition to accept the compromise, tolerating inappropriate employment
candidates and employees comply with rules which they impose.
c. Powers characteristic behavior that reflects the principle of <<first" who "and then"
what” >>:
 it counts who pay not how you pay;
 rigorously decisions for people.
Skills for “it counts who pay not how you pay”:
 Do not use appropriate behavior to obtain a reward, but for attracting and retaining the right
people;
 Give more importance to the personality traits of employees in the field of education,
practical skills, specialized knowledge or work experience;
 Reject the imposition of unilateral viewpoints;
 Motivates team members to make the maximum contribution.
Skills for "rigorous decisions for people":
 When doubts rather not commit;
 When you feel the need for personal change work;
 Give the best opportunities to the best people, not burdens them;
 retain the best people;
 ensure that people's best not to worry for their job;
 Consider that: mission, vision, values, team goals are the product team leader and not
unilaterally product.
d. Principle III: Facing the reality without losing confidence

"One company actually makes an excellent anchor to transform dreams into deeds.
Keeping faith absolute success regardless of difficulties and dealing with raw facts of reality,
whatever they may be, shall finally achieve the vision of lifelong learning and concentrated
knowledge accumulated of facts."
e. Principle IV: The Hedgehog Concept

"The mission, vision and values of excellent companies are subordinated to "Hedgehog
Concept " which is defined to answer three key questions that constitute the focus of a successful
company can capitalize on opportunities:
 what can be the best in the world?
 what you deeply passionate about?
 what trigger your economic engine"
f. Principle V: Culture Course

"In a culture of excellence organization there are developing self discipline through skills-based:
 freedom of action and accountability in one setting;
 self-discipline organization members in their desire to improve processes;
 difference between discipline and dictatorship;
198
 focusing on important goals determined by the concept of hedgehogs, dropping things

wrong goals.
Organisational culture is what it is and make the organization and reflects the beliefs,
attitudes and commitments of its leaders.
 Excellent organization - innovate and show self-discipline within their Hedgehog Concept.
 Organization beginner - innovate by taking advantage of every opportunity;
 Hierarchical organization - inhibit innovation and self-discipline in harmony with the
standards required;
 Bureaucratic Organization - inhibit innovation and self-discipline through procedural
restrictions which makes thinking.
Skills characteristic behavior that reflects the principle of "Culture Discipline":
 growing freedom and responsibility in a given condition;
 distinguish between the culture of discipline and discipline tyranny;
 focusing on important goals (subordinate "Hedgehog Concept").
Skills to "foster freedom and responsibility in a given condition”:
 Build a framework for consistent system with clear rules;
 Giving people freedom of action and responsibility within the given system;
 Continuous improvement framework for system self-discipline to maintain its level.
Skills to "make the difference between discipline and tyranny culture of discipline"
 Encourage self-discipline without imposing discipline;
 Management system and not of men;
 Improved participation by encouraging employees and not on its own unilateral decisions.
Skills to "focus on important goals (subordinate" Hedgehog Concept ")"
 To say "No thanks" great opportunities that do not match "Hedgehog Concept"
 Give priority lists "do not do that" than with "what to do";
 Allocation of budgets to support activities that sustain "Hedgehog Concept"
 Make a distinction between what is important and what is urgent.
3. IMPACT OF EXCELLENCE PRINCIPLES
“We are what we repeatedly do. Excellence is not accidental but a skill action "-Aristotle
Individual Tuning
 maximize professional behavior management individually evaluated with Top Profile tool.
Each manager may choose to use "plug individual tuning" based on skills development
skills to increase individual performance excellence in management
Powers of excellence:
 behavior acquired by learning to think and act on the principles of business excellence.
Performance:
 transforming powers of excellence in results or actual visible effects and measurable to
asuumed objectives.
 Individual excellent disciplined = Disciplined individual performance x (Disciplined
thinking + Actions disciplined).
4. CONCLUSIONS
Robert Kiyosaki and Jim Collins are among the best writers of the world's economic
literature. Both books have in their books possible solutions implemented for better management,
both individually and socially. Principles and concepts promoted by them in the Romanian
economy will certainly trigger energies latent in each of us. Briefly, the solutions offered by the
two writers are: Robert Kiyosaki solution: "Be a bank, not a banker" and Jim Collins solution:
“Change the management you practice, pass from good to excellent”.
199
BIBLIOGRAPHIC REFERENCES:
[1] (Kiyosaky and Lechter , 2009)
[2]“Evaluation of the professional management behaviour”. Available on-line at
http://www.topprofil.com/resources/download/demo_raport_top_profil_echipa.pdf
[3] (Collins, 2007)
REFERENCES:
1. Collins, Jim - Business Excellence, Curtea Veche” Publishing, Bucharest, 2007

2. Kiyosaky R., Lechter S., Money quadrant: A rich dad guide for financial freedom, Curtea
Veche Publishing, Bucharest, 2009
3. Negoescu, Gheorghe - Risk Management through projects, Didactic and Pedagogic Publishing
House, Bucharest, 2003
4. Negoescu, Gheorghe - For a revolution in business management, Algorithm + Publishing,
Galati, 1997
5. Evaluation of the professional management behaviour”. Available on-line at
http://www.topprofil.com/resources/download/demo_raport_top_profil_echipa.pdf
200
BUSINESS INCUBATORS. EFFECTIVE MEANS TO SUPPORT PRIVATE INITIATIVE

PhD. Professor Dănuţ Tiberius EPURE
epure_dan@yahoo.com
Teaching Assistant Dorinela CUŞU
cusudorinela@yahoo.com
Abstract:
The Romanian Business Incubators are financed from private and public sources. The Business Incubators
financed from public funds, are part of The National and Multiannual Program of Establishment and Development of
Technological and Business Incubators in Romania (2002-2012). This Program is coordinated by The Agency of
Implementation of Projects and Programs for Small and Medium Enterprises (A.I.P.P.SME’s), and implemented by
The United Nations Development Program (P.N.U.D.), Romania. The main objective of the Program is to
develop small and medium enterprises (SMS’s) sector in Romania, by establishing Business
Incubators and by improving the efficiency of the existing Business Incubators. The small and
medium enterprises selected in the Program receive grants for the acquisition of equipments
necessary for starting their activity, and during the incubation period receive partial
reimbursement of cost with utilities and consultancy services. Part of this Program is also the
project named “Establishment and Development of Business Incubators in Romania”. This project
started in 2006 with three Business Incubators located in Alba Iulia (Alba), Brasov (Brasov) and
Sfantu Gheorghe (Covasna). These three Business Incubators where financed by the government in
partnership with U.N.D.P.. Each incubator is managed by an administrator. The first incubation
cycle started with these three incubators and it included 57 companies.
Key words: Business Incubator, small and medium enterprises (SMS’s), profit, turnover, operating costs.
JEL Classification: M 13
INTRODUCTION
Through this paper we intend to analyze the results of the Business Incubators established
through the project above mentioned. Our main interest is to observe the evolution of the
incubators, regarding the number of jobs created at the end of the first incubation cycle, the profit
and the turnover obtained. We decided to analyze this subject because we consider that in
Romania, Business Incubators are not known and therefore insufficient exploited. Our analysis is
based on information obtained from the administrators.
1. BUSINESS INCUBATOR – DEFINITIONS AND APPEARANCE OF THE

CONCEPT
The Business Incubator is a place where new firms are concentrated. The main objective of
the Business Incubator is to grow the chances of development and the survival rate of these firms,
by ensuring them the building with all the necessary utilities for their activity. In the same time, the
incubated firms receive managerial support and assistance services. The Business Incubator is an
institution which aims to create a sustainable environment to start-ups. A Business Incubator is
based on a partnership between public local authorities and the interested institution, whose
objectives are to offer a comprehensive range of professional services to start-ups in areas with
entrepreneurial potential.
The first Business Incubator appeared in 1952 in Batavia, New York and the process of
incubation became an industry in the ‘80s. In Europe the first Business Incubator appeared in
Great Britain. In Romania the first Technological Business Incubator was created in March 1992,
with the support of The Ministry of Research and The Research and Projection Institute for
201
Manufacturing Engineering. After that, in Sibiu, Braila, Timisoara and Miercurea Ciuc, there were
created four Business Incubators, with financial support from PHARE Programme and managed
by the Romanian Centre for Small and Medium Enterprises. With the disappearance of these funds
most of the 16 incubators established in the 90’s were dissolved.
A Business Incubator can play several roles: parenting role, because it sustains technical
and material the managers of incubated firms, investor, because in some cases brings equity in
exchange for services provided by the incubated companies, business club, because the incubator
searches and offers business opportunities to the incubated companies.
2. THE NATIONAL AND MULTIANNUAL PROGRAM OF ESTABLISHMENT

AND DEVELOPMENT OF TECHNOLOGICAL AND BUSINESS INCUBATORS IN
ROMANIA (2002-2012)
Indeed, Business Incubators proved to be effective means to support private initiative, and
generated confidence in both state owned sector and in the private sector leading to public-private
partnerships. Following this, The Agency of Implementation of Projects and Programs for SMS’s
(A.I.P.P.SMS’s) and The United Nations Development Program Romania (U.N.D.P.) was
established, The National and Multiannual Program of Establishment and Development of
Technological and Business Incubators in Romania. Part of this Program is also the project named
“Establishment and Development of Business Incubators in Romania”. This Project is managed by
the two entities mentioned above in partnership with local authorities.
The main objective of the Program is to develop the small and medium enterprises sector in
Romania by establishing Business Incubators and by improving the efficiency of existing Business
Incubators.
The Program Management is composed of the The Agency of Implementation of Projects
and Programs for SMS’s – the national coordinator of the Program, Territorial Office for Small
and Medium Enterprises – as the execution agency of the Program, The United Nations
Development Program – as an implementing agency of the Program and team selected for the
Program was recruited by a panel composed of U.N.D.P. representatives.
The Program Beneficiaries are the potential entrepreneurs who intend to establish a
company in accordance with the national legislation or existing companies, with at least two years
of activity at the moment of solicitation the inclusion in the incubator.
Once included in the incubator, the entrepreneurs have some obligations, for example
setting up in the first year of incubation at least three jobs and maintaining these jobs throughout
the entire period of incubation (three years), contracting with economic partners outside the
geographic area of the Business Incubator.
The small and medium enterprises selected in the Program receive grants for the
acquisition of necessary equipments for starting their activity, and during the incubation period
receive partial reimbursement of cost with utilities and consultancy services. The consultancy
services will be provided directly by the incubator’s administrator, or by specialized persons.
These services are focused on consultancy and assistance in elaborating business plans, marketing
plans, feasibility studies, applying for other grants, assistance in the process of developing, and
commercialization new products outside the geographic area of the Business Incubator, assistance
in developing national and international partnerships. Also the incubated firms receive assistance
in the recruitment process.
As I mentioned before, part of this Program is also the project named “Establishment and
Development of Business Incubators in Romania”. This project started in 2006 with three Business
Incubators located in Alba Iulia (Alba), Brasov (Brasov) and Sfantu Gheorghe (Covasna). These
three Business Incubators where financed by the government in partnership with U.N.D.P.. Each
incubator is managed by an administrator. The administrators have selected several companies
which to incubate for three years. Also these companies received trainings, consultancy, grants,
spaces for offices and production area as well as other related services for increasing the efficiency
202
of the companies.
Table no. 1. Number of employees within the incubators
Indicator Total firms No. of No. of No. of No. of

incubated employees at employees at employees at employees at
the entrance the end of the the end of the the end of the
in the first year of second year of third year of
Incubator incubator incubation incubation incubation
Alba Iulia 20 6 59 95 89
Braşov 16 67 97 100 33
Sfântu 21 18 35 60 48
Gheorghe
Total 57 91 191 255 170
Source: Reports from the administrators
3.1 THE EVOLUTION OF THE NUMBER OF EMPLOYEES WITHIN THE

INCUBATORS
The first incubation cycle at Alba Iulia, Brasov, and Sfantu Gheorghe started with 57
companies. These companies activate in different areas such as: food, wood, automotive, rubber
industry, plastics, paper/paperboard, textile, packaging industry, IT, advertising, tourism,
constructions, services (consultancy, delivery, cleaning, security and protection, catering,
gardening etc.), various forms of education, (training, driven school), telecommunication, radio
and TV.
120
95 97100
100 89
80
67
59 60
60
48
33 35
40
18
20
6
0
Alba Iulia Brasov Sfantu
Gheorghe
No. of employees at the entrance in the incubator
No. of employees at the end of the first year of

incubation
No. of employees at the end of the second year of
incubation
No. of employees at the end of the third year of
incubation
Figure no. 1. The evolution of the number of jobs created through the project
We can notice from the above chart that from entrance in the incubator until the end of the
second year of incubation, the number of jobs created by the incubated firms, recorded significant
increases.
The first year of incubation conducted to encouraging results regarding the hiring process
of incubated firms. In Alba Iulia the number of employees increased by almost 900%, in Brasov
about 45% and in Sfantu Gheorghe, the number of employees doubled from the entrance of the
firms in the incubator until the end of the first year of incubation. Positive results were recorded
also at the end of the second year of incubation, but the growth rate is slower than in the first year
of incubation. As a consequence of the economic situation, at the end of the third year of
incubation activity, we can notice from (fig no.1) a decrease in the number of employees, the most
visible slowdown, being registered in Brasov. However at the end of the first incubation cycle, the
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project lead to the following results: 170 jobs created within the 57 incubated firms, These results
allows us to affirm that the incubation cycle finished with three jobs created per company
incubated. This is an encouraging result, given the fact that 2009 was the year of layoffs in the
business environment in Romania. The areas of activity that generated the most jobs within the
incubated companies were: services (consultancy, metrology, projection, mailing, cleaning,
security and protection, technical analysis, thermal rehabilitation, organization of events,
gardening and landscaping), food, wood industry, constructions.
3.2 The Analysis of the Profit and Turnover of the Business Incubators
Table no. 2. The evolution of the turnover and profit (Lei)
At the entrance in the At the end of the first year of At the end of the second
Business incubator incubation year of incubation
Incubator
Turnover PF Turnover PF Turnover PF
Alba Iulia 833.474 207.876 8.930.211 619.931 9.676.931 565.669
Braşov 649.179 -14.099,3 11.341.236 165.960,29 13.209.189 239.367
Sfântu 818.908 102.862 3.471.839 245.753,57 4.699.891 769.430,3
Gheorghe
Table no. 3. Turnover and profit at the end of the second year of incubation per areas of
activity (Lei)
Areas of activity Turnover PF
1 Food Industry 12.167.671 755.397
2 Wood Industry 626.463 175.388
3 Automotive Industry 147.185 3.105
4 Rubber and Plastics Industry 521.310 -11.395
5 Paper/Paperboard Industry 1.187.123 90.706
6 Textile Industry 271.735 -17.861
7 Packaging Industry 474.228 282.573
8 IT 99.798 -33.898
9 Advertising 2.751.669 469.315
10 Tourism 0 0
11 Constructions 6.990.168 424.425
12 Services 6.433.033 413.688
13 Various forms of education 714.492 97.420
14 Telecommunications, Radio, TV 1.139.067 263.759
Total 33.523.942 2.912.622
Source: Reports from the administrators
From (tab. no. 2) we can observe that the total turnover of the incubated firms, has grown
visible in the first two years of incubation. The results of including the companies in the incubator
are significant after the first year of incubation when the analyzed indicative pointed out very high
values: the total turnover of the incubated firms in Alba Iulia has grown with almost 970%, the
Business Incubator from Brasov indicates the highest percentage – about 1600%, and in Sfantu
Gheorghe the total turnover of the incubated firms after a year of activity has increased with
almost 300%. The Business Incubator from Brasov has developed activities that conducted to a
constant growth of the turnover, in the two years of analysis. The progress is due to firms with
activities in areas such as: food industry, construction, services (consultancy, projection, mailing,
cleaning, security and protection, technical analysis, thermal rehabilitation, organization of events,
gardening), publicity (table 3).
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Figure no. 3. The turnover of the incubated companies at the end of the second year of
incubation per areas of activity
These entities obtained o turnover exceeding 28.000.Lei at the end of the second year of
incubation. The turnover is representing about 85% of the turnover obtained at the end of the
second year of incubation per areas of activity. (tab. no. 3 and fig. no. 3).
Figure no. 4. The general evolution of the profit per incubator
As can be seen from (tab. no. 2 and fig. no. 4), despite the fact that at the beginning of the
incubation cycle the Business Incubator from Brasov started with negative values, at the end of
the second year of activity, registered a profit per total incubated companies, of about 240.000 Lei.
The most profitable companies were the firms incubated in Sfantu Gheorghe, where the profit
increased with almost 600.000 Lei. The most profitable areas of activity were: food industry,
constructions, publicity, and services (consultancy, projection, mailing, cleaning, security and
protection, technical analysis, thermal rehabilitation, organization of events, gardening). The less
profitable areas of industry were textile industry, IT, rubber, plastics industry, as can be noticed
from (table 3 and figure 5 ).
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Figure no. 5. General evolution of the profit per areas of activity at the end of the second
year of incubation
Figure no. 6. The evolution of the operating costs

per incubator
The operating costs of the Business Incubators are composed of grants for equipments, for
establishments, utilities and specialized services, rehabilitation, for renovating the buildings were
the Business Incubator will operate, grants for workshops, seminars, travel studies, for promoting
the Business Incubators activity. From the above chart it can be noticed that these cost are higher
in the pre incubation period because in this period are involved costs for renovating the buildings.
From (fig. no. 6) we can observe that the Business Incubator from Brasov involves the highest
operating costs in the pre-incubation period, followed by the incubator located in Sfantu Gheorghe
and the incubator from Alba Iulia registered the slowest costs in the pre incubation period.
CONCLUDING REMARKS
The Business Incubator is an institution which aims to create a sustainable environment for
start-ups. The first Business Incubator appeared in 1952 in Batavia, New York.
A Business Incubator is based on a partnership between public local authorities and
interested institution. Following, The Agency of Implementation of Projects and Programs for
SMS’s (A.I.P.P.SMS’s) and The United Nations Development Program Romania (U.N.D.P.)
started The National and Multiannual Program of Establishment and Development of
Technological and Business Incubators in Romania. Part of this Program is also the project named
“Establishment and Development of Business Incubators in Romania”.
This project started in 2006 with three Business Incubators located in Alba Iulia (Alba),
Brasov (Brasov) and Sfantu Gheorghe (Covasna). These three Business Incubators where financed
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by the government in partnership with U.N.D.P.. Each incubator is managed by an administrator.

The administrators have selected several companies whom to incubate for three years. Also these
companies received trainings, consultancy, grants, spaces for offices and production area as well as
other related services for increasing the efficiency of the companies.
From the analysis conducted we’ve noticed that the total turnover of the incubated firms,
has grown during the incubation period, especially in the first two years of incubation. The most
profitable areas of activity were: food industry, constructions, publicity, and services (consultancy,
projection, mailing, cleaning, security and protection, technical analysis, thermal rehabilitation,
organization of events, gardening). The less profitable areas of industry were textile industry, IT,
rubber, plastics industry, as can be noticed from.
All three Business Incubators are a model for the business environment. These Business
Incubators have incubated in the first cycle of incubation developed through the Project
“Establishment and Development of Business Incubators in Romania “, 57 companies. These
companies realized 170 jobs at the end of the third year of incubation. Despite the current
economic situation, the owners of these 57 companies have enough commands allowing them to
cover the expenses and also to obtain profit.
BIBLIOGRAPHY
1. Dănuţ Tiberius Epure, European coordinates concerning the companies and the business
environment, Ed. Libertatea, Panciova - Novi Sad, Serbia 2007
2. Dănuţ Tiberius Epure, Stejarel Brezuleanu, Managementul proiectelor de afaceri ale
întreprinderii, Ed. Muntenia, Constanţa 2010
3. Dănuţ Tiberius Epure, Strategii de întreprindere, Ed. Muntenia, Constanţa, 2008
4. Implementation Procedure of the National and Multianual Programme of Establishment and
Development of Technological and Business Incubators (2002-2012)
5. Establishment Guide of Business Incubator in Romania, May 2010
6. www.aippimm.ro
7. www.undp.ro
8. www.portalincubatoareimm.ro
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OPTIMIZATION OF HUMAN RESOURCES FUNCTION THROUGH KNOWLEDGE

MANAGEMENT
Associate Prof. PhD. Carmen CHAŞOVSCHI1

Assistant PhD. Student Ruxandra BEJINARU2
Assistant PhD. Student Otilia BORDEIANU3
1
carmenc@seap.usv.ro
2
ruxandrab@seap.usv.ro
3
otilia@seap.usv.ro
Abstract:
Experts state that a new critical function has emerged for the HR department called as the practice of
knowledge sharing. The penetration of KM it’s happening either voluntarily or not. The responsible inside the
organization must reconsider priorities and align to business trends, employees’ necessities or society requirements and
expectations. The mission of KM is to give more credit to information, workers and the organization by extracting,
using and creating knowledge (the order has also a logic). Both KM and HRM focus on individuals/employees. Using
the research undertaken in a regional approach, we identified the perception of KM among HR executives and top
managers. We strive, starting from the results of the research to underline some improvements that can be done for both
HRM and KM functions within the companies. The mutual goal for HRM and KM is motivating the employees to work
their best with the information they have, to be innovative while doing their job and to share knowledge and
experiences without giving away the competition spirit. The paper approaches in the first part the perspectives of KM
and also its connection to HRM. The main part of the work intends to establish some common directions in order to
better integrate the cooperation of KM and HRM within the organization. The concluding remarks are bold and
optimistic as there is much more to be done.
Keywords: human resources management, knowledge management, organizational behavior, employees’

competencies;
JEL Classification: M1, O15, M12, M14.
INTRODUCTION – PERSPECTIVES OF KNOWLEDGE MANAGEMENT (KM)
Nowadays’ issue is that people create new things in a much rapid rhythm than they naturally
consume novelty. We are not indulged to get bored by a device, product or a certain activity
because we get tempted by other options. This explains why our time diminishes and the jobs we
have to do multiply.
The human mind has reached the means of satisfying its restlessness. Entrepreneurship and
creativity have always been as fuel for the engine of evolution but now they react even stronger. In
order to give consistency to our discussion we have to compare the means/instruments and the
effects. In the past, the repercussions of an innovative idea were very strong regarding people’s
reactions, appreciation and satisfaction. Today the most daring idea may become a reality in no
time, as there are various ways, multiple methods and countless instruments to make use of. The
perspective changed so much that we no longer expect for great things to happen but for new things
either better or not. People have become much more perceptive to novelty than to value. The right
way to take the advantage of this is to manage the change or as more and more scientists approach it
– the dynamics, of it. In our opinion this is a critical issue both for individual’s success and for
companies’ success.
We recur to the critical action “to manage”, whether we deal with the outside world or to the
inner side. Nowadays, everything has to be managed: finance, people, time, information,
knowledge, etc. KM is used within organizations in order to generate an added value for their
intellectual and knowledge-based assets. The procedure consists in primarily codifying what the
employees, partners and customers know (consciously and unconsciously) and secondly in sharing
that knowledge within the company among employees and even with other companies.
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Organizations confront themselves more and more with an overload of information.

Managers should seize and help their employees to manage through. It would be helpful to protect
the organization from useless information attacks as these could confuse the employees, make them
loose time in selecting the necessary or even mislead them in their actions. The responsible
managers should provide the organization with a defense system or let’s say a filter for inwards and
also outwards information. There are several tools that respond this kind of needs but they have to
be well chosen and very well customized. We have to highlight from the begging the remark that
the implementation of KM is only partially about technology.
The debate over the concept of Knowledge Management (KM) or the Management of
Knowledge is made under the aegis of the knowledge economy. [10] The founders of the neo-
classic economy Marshell, A. in 1965. Later on the adepts of this current Nonaka and Tkeuchi
(1995) have emphasized the importance of knowledge use modality. Since 1993, Peter Drucker
stated that „we find ourselves in the knowledge society, where knowledge is the main resource of
the economy, and the knowledge workers will play the central part.” The economy based on
knowledge is the one where knowledge generation and exploitation has the main role for creating
wealth. Knowledge is information processes for the purpose of understanding the phenomena that
occur within our environment. [1] –[2]
Presently, we may say that KM has passed through the initial phase, which was
characterized by operational confusion between knowledge and information. KM’s progress was
quite slow related to its significance inside the modern organization. This euphorically stage of KM
has ended with not much impressive feedback of practice due to the lack of a categorical and
sustainable definition and of an obvious differentiation among information, the management of
information and IT applications. Within this context have been many enthusiasts that interpreted
“knowledge” as they preferred it and certainly the approaches to the management of knowledge
were various. For many, the difference between the management based on knowledge and KM
remains fuzzy.
In a broader understanding KM is a set of tools, techniques, methods, approaches, ways of
working, behaviors even that are designed and used in order to help an organization to be more
effective. KM makes the difference because it focuses on the know-how, the know-who and the
way to make these work inside the organization. The critical aspects that KM searches for solving
are: how to get people to share information, how to ensure the right contexts, how to design the
conversations. The issue is not complex but broad and fuzzy. KM applies a multitude of techniques
and approaches. Weather we are talking about tools that support the networks in the organization or
the communities of practice or ways of mapping the connections all these are various. Another goal
of KM is to optimize connections throughout increasing trust. Sharing can be maximized when
people trust each other. [21]
No matter from which side we look, KM has to do with learning and efficient/prolific
learning has to do with KM. Doing things right means to learn from experiences, to learn from
theories, to learn from mistakes, to learn from shared ideas and practices, to learn from others, to
learn from within us in order to learn the best way to. The cornerstone process of KM is “learning”.
KM is about managing the dynamics of things.
The management based on knowledge has emerged in the past decade as the most
advanced section of management. KM develops within the learning organization, the most
advanced type of organization existent at micro and macro social level. [11] Examining the
specialty literature proves that KM has an American origin/source, under the name of – Artificial
Intelligence, a Japanese origin/source, regarding –the Creation/Innovation through knowledge and a
Swedish origin/source part of –the Swedish Measuring Strategy. Sveiby argues that “KM is
strangely ambiguous, extremely profound, impenetrable while its rapid expansion – and most
important- does not have a single master.” [19] The specific of KM is that links typically and
directly to organizational objectives like enhancing performance, innovating the competitive
advantage, transferring the know-how, and developing the whole system of collaboration practices.
The connection between KM and the Learning Organization (LO) is frequently approached, though
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neither of the practices comprises entirely the other. KM focuses more on knowledge’s attributes
and the channels of use and circulation.
Most frequently KM is defined as a holistic combination of measures for managing people,
processes and technology despite the common aspects, the explicit integration of HRM and KM
initiatives has seldom been examined.
FOCUS ON HUMAN RESOURCES MANAGEMENT AND KNOWLEDGE

SHARING
An important combination to be considered for the very next future is KM and HRM. The
HR role in designing a system to share employees’ knowledge is very important. The approach of
KM and HR is much complex due the fact that HR internal consultants should be leading factor in
defining the learning organization through a shared knowledge or through specific policies that
have as aim to increase the orientation to discover and share the knowledge.
In order to ensure the functionality of a KM system managers have to primarily understand
the advantages and secondly provide the cultural direction needed in the process. A Barnett’s
research concluded that employees will refuse to share knowledge and expertise unless they are
accordingly rewarded. One way managers could get an easier access to free sharing of employees’
knowledge and expertise is to get them to understand the use of it. Knowledge and experience
sharing will certainly provide benefits for them as individuals, not only as they acquire new
information but they process it and learn from it. Sharing multiplies the knowledge and expertise of
a person by as many times as how many individuals share these. This procedure increases the
chances of innovation and thus the organization’s benefits. To recognize the theoretical background
is not enough: we strive to discover how far these concepts are acknowledged and applied within
Romanian companies.
UNDERSTANDING AND USE OF THE KM IN ROMANIAN COMPANIES - A

REGIONAL APPROACH
DESCRIPTION OF RESEARCH
The analysis of KM understanding was part of a larger research undertaken within the
companies from Suceava County. The goal of the study was to identify the maturity level of Human
Resources Management at company level. On a questionnaire basis, were interviewed the human
resources managers and the general managers from 120 companies around Suceava County.
The empirical research is founded on a methodology, based on both quantitative and
qualitative information, in order to estimate first of all, the status-quo of the Human Resources
Management. Secondary, the goal was to identify if the companies (especially HR representatives)
are aware about KM content and if they mention the KM characteristics in the SWOT analysis. In a
limited area (Bucovina area, Suceava County respectively) the study was made inter alia, to identify
the causes for eventual deficiencies, and pertinent ways to contribute for improvement of KM state
of art in regional profile.
We will refer here bellow especially on the questions that refereed to KM aspects: Are
acknowledged the HR Managers and Top Managers to the Knowledge Management concept? Are
aware about KM content? Can describe at least 3 ways in which KM is applied within the
company?
The study perspective is rendered visible by the following features:

 Harmoniously twined theoretical and practical issues;
 Emphasis on practical aspects arising in research;
 Highly generalizing conclusions yielded by survey analysis;
210
 Originality in organizing selective research, rigor in applying the questionnaires in the field, and
scientific insight in data analysis.
STRUCTURE OF RESEARCH
The research was structured in three main stages:

1:Diagnostic analysis of HRM at the level of companies from Suceava County;
2:Data analysis, obtained after the SWOT analysis (human resources management
characteristics at the regional level);
3:Identification of KM key factors in HRM policies at companies’ level;
The subjects of the research were the companies from the county, with good economic
results, starting with the premise that, on the one hand realization and adaptation of an efficient
management lead the organization to performance, and, on the other, that the companies with profit
and success in activity have also a good administration of human resources. We have studied the
guide of companies „Top Bucovina 2010”, realized by the Chamber of Commerce, Industry and
Agriculture Suceava, where the companies were classified on profit and turnover criteria.
From a total of 150 companies selected, we received a positive answer from 120, number
that assured an accurate result. The distribution of companies on field of activity is presented in
figure no.1.
Wood Industry
Textile Industry
Manufacture of Machinery
3% 3% 5% 9%
4% and Technology
3%
Commerce
Furniture and wood procesing
28% 29% Food Processing

4% 9% 3%
Primary Products Industry
Tourism
Printing Services
Figure no. 1 – Distribution of interviewed companies, onITfield of activity
The part for identification of the weak points and strong points contains 49 closed questions
with 2 possibilities for answer, having the possibility to make comments/suggestions, and the
questions are structured in 6 modules: 1. General policies concerning HRM; 2. Strategic planning of
human resources; 3. Recruitment and Selection; 4. Human resources motivation; 5. Human
resources development and knowledge management.
The data has been processed and summarized, each question was included at strengths or
weaknesses (where appropriate), according to responses of all 120 companies.
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PARTICULAR ITEMS CONCERNING THE KNOWLEDGE MANAGEMENT
The main concern regarding KM that we wanted to clarify in the research was, first of all, if
the Romanian companies are aware about KM content and characteristics. Also, we supposed that
some companies have applied intuitive KM techniques, without being aware that the instruments
used can be included in this relative new field.
Among the hypothesis formulated for the maturity of HRM within interviewed companies, 3
were formulated in order to analyze the framework of knowledge management:
Hypothesis 1: The HR Managers and top managers are familiar with KM concept;
Hypothesis 2: The interviewed professionals can mention at least 3 characteristics of KM;
Hypothesis 3: The companies are applying politics that encourage the KM.
Unfortunately, the results were neither very optimistic, in what concerns HRM Maturity, nor
in KM field. Thus, it is hard to separate the conclusions, due the fact that HRM good practices are
including in most of the cases also good practices of KM.
The most important results are presented here bellow:
Hypothesis 1: The HR Managers and top managers are familiar with KM concept
From total of 120 interviewed companies, 60% have given a positive answer (72
companies). The rest of 40%, representing 48 companies answered that they are not familiar with
the concept of knowledge management. For most of respondents KM seems to be a vague notion,
which can be hardly placed in the field of economic sciences.
Hypothesis 2: The interviewed professionals can mention at least 3 characteristics of KM

Here the answers were more polarized and the distribution was disarticulated between
companies that have mentioned 3 characteristics belonging to KM and the other 40 companies that
delivered answers that were not correct. It is interesting to notice that the companies which answers
were positive to this question activate in fields that pushed them to improve the knowledge sharing
and the updating of knowledge: IT, printing and production (in R&D departments).
Hypothesis 3: The companies are applying politics that encourage the KM

All eight companies that confirm the second hypothesis have answered positive to the question “Do
you apply in day-to-day operations KM policies?” Between the examples they offered, we can
mention some, in order to have an idea about the way that they understand the KM concept: “It is
important to have a vision and to share it with the employees as destination for the company”; “We
encourage the use of information and we developed an intranet for a better information sharing”;
“For some new projects, we keep the information and we place it in an internal library, in order to
be accessed by other project managers or to be completed by volunteers that worked in different
projects.”; “Encourage people to share informal information about themselves in addition to
valuable business information”; “Utilizing focus groups for different tasks, in order to access the
knowledge of hole team, not only of task responsible”; “We encourage people to learn, through an
open space library, with books ordered by the company”
As conclusions for the research, we can observe that the most examples are referring to
communication and inter-relation within the group, achieving tasks by sharing information.
We should also mention that some of these actions are applied also by the non-respondents
to the KM specific questions, but they have not identified them to KM field, but the HRM good
practices. That means that the content of KM is applied, without a proper identification of the field
or of KM methods.
In what concerns the state of the art of HRM in regional approach, we can conclude that the
most “gaps” are declined from the following realities:
 The human resources are not appreciated as sources for competitive advantage;
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
The human resources managers have no specific studies (academic or vocational
training);
 The human resources manager do not contribute to the strategic process of decision
making related to general business aspects and the activities of HRM department are
most of them administrative;
 Human resources managers don’t have the power to influence and to implement their
initiatives;
 Top managers are not supporting the recommendations of HR managers, due some
other business priorities.
A lot of weaknesses can be connected to the lack of knowledge management approach. The
companies’ philosophy is not centered on a learning behavior. The motivation is diverse, but, some reasons
delivered by the subjects were: other preoccupations and concentration to the business objectives.
CONCLUSIONS. A NEW JOB FOR HUMAN RESOURCES DEPARTMENT – TO

TRAIN FOR KM
For the improvement of the debated situation, we think that the HR managers and HR
representatives should focus not only in the improvement of HRM Function, but, in the same time
they should implement, the KM processes. Both are connected and will improve the company’s
efficiency. Although, the sight of these advantages won’t get things happening unless the
employees are provided an assurance that means the official policy establishment and recognition of
knowledge sharing by the senior management. Unfortunately this process will still need some
additional time, due the crisis context and due the surviving policies that are applied in most
companies from Suceava Area, and from Romania too.
One step in order to apply better HR and KM policies should be to establish desired
standards and procedures. After this, the next step would be to get employees to practice and make
knowledge sharing an employee’s daily function. Another key element is the compensation and
reward system that shall appreciate and promote the employees who adopt that new behavior. The
design of a compensation and reward system should focus on promoting group performance,
knowledge sharing, and innovative thinking.
FIND
ORGANIZE
FOCUS
SHARE
KNOWLEDGE of
PEOPLE
INTELLECTUAL
ASSETS of the
organization
APPLY
ADAPT
EVALUATE
Figure no.2 Interdependency of HRM and KM

Source: adapted after –Buckman Laboratories, March 10th 1999 – “A Roadmap for the Convergence of Human
Resource Management & Knowledge Management”
213
In the new economy, namely the knowledge economy, the intangible assets dominate and
receive the greater attention of organizations as they realize that maximizing the value of
intellectual assets is more important than maximizing fixed assets. The mission of the HR executive
has to upgrade (evolve) in order to create and implement a process to maximize the intellectual
assets of an organization.
In the Knowledge Age, the Institute for KM identifies and proposes a new set of necessary
skills:
 Understand, design and apply the most important KM principles/techniques.
 Leverage the rich KM Body of Knowledge, harvest it and develop new KM strategies.
 Use powerful, proven tools and techniques to create a learning organization that
continuously improves at an ever faster rate.
 Be able to create the Knowledge Imperative - ensuring that your KM initiative is actually
funded and implemented.
 Know KM methods and methodology to sustain your learning organization.
They sustain the importance of KM inside the organization through the perspective of the following
benefits:
1) increase its speed to market through the reuse of proven resources and methods
2)reduce costly mistakes; and ensure excellent results
3) enable rapid absorption and diffusion of new ideas, allowing you to sustain a competitive
advantage
“Further, any firm doing effective KM should be known as a "learning organization" one that
continuously increases its amount and use of critical knowledge.”[22]
HRM Department should develop, additional to traditional training issues, which classically
are organized within the companies, some modules that will address the improvement of
Knowledge Management:
 What is Knowledge Management
 The Market for Knowledge Management
 Knowledge Management Roles
 Knowledge Management Technology
 Knowledge Management Within the Industry (customized for each)
 Procedures for sharing of Best Practices.
However, not even the best training program alone shall deliver the optimum results but it
represents a first step towards their accomplishment. The other instrument refers to a compensation
and reward system. Reviewing the actual policy should clarify and identify any existent barriers for
the knowledge sharing process. With respect to this necessary work skill of creating and sharing
knowledge there has emerged a new approach of the interviewing process consisting in a more
accurate identification of potential employees who will easily adapt and grow inside the
organization that aims to continuously improve work collaboration.
KM expansion can’t be happening without the support of technology and very recently of
media. For KM future’s the media plays a star role. This decade the training and development of
employees has transformed as the rise of technology enabled opportunities for training meetings
and seminars. Podcasts, teleseminars, online learning, screen capture and recording software, and
webinars provide employee development opportunities.
Many more knowledge-related topics have to be explored as challenges that are at the top of
every HR department’s list: employee engagement and retention; creating a motivating work
environment; talent management; succession planning and workforce challenges, including the
impending retirements of baby boomers and the shortage of high-skilled workers; multi-
generational differences; managing strategically/transforming HR into a strategic partner; and
competing in the global economy.
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Knowledge Management in Small and Medium Enterprises, Journal of Knowledge
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15. Rosca, I.Gh. (ed.) (2006) Societatea cunoasterii, Economica, Bucharest.
16. [Teece, D.J. (2004) Knowledge and competence as strategic assets, HOLSAPPLE,
C.W.(ed.). Handbook on knowledge management, vol. 1, pp.129-152, Springer Verlag,
Berlin.
17. Schein, E. H. (1995) Organizational and Managerial Culture as a Facilitator or Inhibitor of
Organizational Transformation, Working paper.
18. Senge, P. M. (1999) The Fifth Discipline. The Art and Practice of the Learning
Organization, Random House, London.
19. Sveiby, K.E. (2001) Knowledge Management – Lessons from the Pioneers, format
electronic.
20. www.barnettinternational .com
21. www.knowledgeableltd.com
22. www.kminstitute.org
23. www.ikmagazine.com
ABREVIATIONS
KM – knowledge management
LO – learning organization
HRM – human resources management
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SECTION 3
ACCOUNTING - FINANCES
216
THE ACCOUNTANT PROFESSION: EVOLUTION AND RUPTURES. THE

BIRTH OF THE ACCOUNTING PARADIGM
Professor Dr. Rusalim PETRIŞ

Professor Dr. Elena HLACIUC
Abstract:
The paradigm is a widely accepted mental construction that provides a community or a society with a long-
time basis, used to create an identity for itself and thus to solve problems or tasks. Paradigms understood as illustrative
researches, as real examples of formulations and solutions to scientific problems, are the basis of the scientists
agreement on the fundamentals, which distinguishes any mature scientific research. They are universally recognized
scientific achievements that for a time, problems and solutions model offer exemplary problems and solutions for a
community of practitioners. The study focuses on the accounting paradigm, offering reflections on the current size, on
the horizon of its development, including signs which may lead to the question whether we need to change the paradigm
or not.
Keywords: accountant profession, evolution, accounting paradigm, practitioners, scientific research
JEL Classification: M40
1. THE CONCEPT OF ACCOUNTANT PROFESSION
If the classical economists believed that for a company to develop economically and to
produce more it was sufficient to increase the amount of available factors, labour and capital,
nowadays it is estimated that the most important role in the economical growth is held by the
progress registered in the scientifical knowledge and technique. To the three production factors
(land, work and capital), two more can be added: the know-how and technology.
Out of all categories of productive resources, the human resources are the most important
because they create the greatest and lasting benefits for an organization. They are important for the
knowledge, abilities, skills of the people within the entity,
According to the Classification of Occupations in Romania to define the useful, income
generating work (paid in money or nature) which a person normally carries in a social and
economic entity established for this source of existence, the term "occupation" is used. As such, the
occupation means the implication of active people, who practice an activity recognized by society
as useful for themselves and their peers. In accordance with the same source, Classification of
Occupations in Romania, specialty occupation is defined as specialization (qualification) obtained
through studies.
Sometimes the profession can be an occupation, sometimes not. Thus a person who has
graduated from certain studies has a profession generated by those studies. He can work or not in
the given domain, being hired for another job and therefore having another occupation.
The creation of the concept of profession took place under the extensive and lengthy
process of labor professionalization.
By circumscribing the approach on the size of the accountant profession, as it is
understood now in Romania, we can say that it should be understood as all activities / services that
require expertise in accounting, the specialists who make /carry them, and their professional
bodies.
The activities that make up the accounting profession primarily consist of: 1) bookkeeping,
2) development, reviewing and presentation of financial statements; 3) statuary audit; 4) other
financial-accounting audit work; 5) financial-accounting management; 6) fiscal services
(consultancy, counseling and fiscal assistance); 7) studies and consultancy for enterprise creation;
8) enterprise and title evaluation; 9) other accounting and para-accounting services.
Depending on their legal status, the specialists can be classified in the accounting
profession:
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 Dependents, as employees
 Independents or self-employed accountants, providers of service components of the
accountant profession.
In terms of how self-organization of professionist activity takes place, they can carry out
their activity:
 individually;
 under associative forms according to the laws of each jurisdiction.
2. SHORT LOOKBACK IN THE HISTORY OF THE ACCOUNTANT

PROFESSION. EVOLUTION AND RUPTURES
Notes, calculations and reflections of economic - financial nature on accumulated material

assets, of the in-time modifications of the fortune held, and the ones concerning economic -
juridical relations generating settlements, designated today with the term of accounting were
inseparable accompaniers of material life development in all historical ages.
Naturally, from the oldest traces of economic notes on pictographic tablets where property is
registered, dating as long as the first temple of Uruk – more than 5000 years ago – to the nowadays
information system, made with the aid of the electronic computer, the progress in practicing this
specialized knowledge are remarkable.
The degree to which development of the accounting application has been achieved in
different historical epochs was different because diverse were also the complexity of economic life
that imposed a cognitive approach and the degree of evolution reached by the general development
of science and technology of the era and especially accumulated in the gnosiological plan
accounting.
Scientific elements of knowledge on the value movements work takes place area occur
since the days of calculations designed to reflect the unique property, pecuniary rights and liabilities
belonging to a natural or legal persons are contained in the first sistem seen in the evolution of
accounting defined today as the system of "simple bookkeeping”.
Locating in time and space the first elements which will constitute the accounting system
requires us to descend on the time axis until the dawn of civilization, to leave Europe and stop in the
semi-arid regions between the Nile and Ganges.
The first centers of civilization of mankind occurred in the upper valleys of large rivers,
where the periodic overflowing sewaged fertile mud and the water needed for the crops to
agriculture. First they appeared in Mesopotamia, the land between the Tigris and Euphrates rivers
(now Iraq), then on the Nile in Egypt, the Indus in Pakistan today, and later in China Huang He
river valleys and Chang Jiang (Yang Tze).
When, due to increased wealth, memory of temple priests has not met the demands of an
administration so complicated, they began using a system of numerical notation, and soon after they
invented writing. With the new invention, the priest was able to overcome his mortal condition and
pass down to his heirs in administration the message about the way the assets entrusted were
managed.
Everywhere, in 3rd millennium Sumer and Egypt, or in Crete before the 2nd millennium
memory the documents written are accounts or inventories, leading to the conclusion that writing
was born of the urban economy’s practical needs.
The natural trend to reduce overall efforts generated by burdens of administrating wealth
and business, combined with the idea of simplifying, led to the discovery of the calculation rules, a
code of symbols, and it was even a canon of entries in the books. All this is taught in schools. The
old schools are the scribe of Uruk (Sumer) and the Djemdet - Nasr (Akkad). The collection of
tablets discovered at Suruppak (Fara) is the exclusive account of temple and lists the subjects and
made signs used at schools in the early historical period, i.e. after the year 3000 BC (1).
In connection with the technique used in Mesopotamia is noted that even since the end of
the third millennium BC the essential elements of an account are distinguished: account name, the
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name of the interested parties, the quantities traded, and their totals. In some accounts we find the
situation at the end of the previous series, the set of positive changes other than the series of
negative variations, and the final statement. The latter, added to the negative variations, lead to the
same result as the one obtained by adding the previous situation with all the positive changes. So
the account balance is reached, known in the ancient world, in the most elaborate accountings (2).
The recording technique practiced by Egyptian scribes was more refined than that of the
Babylonians, even if here accounting was considered to be so necessary that it was taught in all
Egyptian schools (3). Synthetic accounts carried out on analytical ones were used here also.
Up close to its destruction by the Romans (149 BC), Carthage claimed an absolute
monopoly on sea trade, sinking every vessel that was not its, or whose captain could not produce a
commercial contract with Carthage. City masters were the great Phoenician merchants, owners and
priests. The Phoenicians were found to be highly skilled administrators and accountants. Their
accounting records include the systematic accounts.
Recommendations and notes on the economic rules are held not only by the law code of the
Babylonian king Hammurabi 1792-1750 BC. or 1730-1685 BC, but also in the religious literature
For the Christian community, throughout its history the Bible had an unquestionable moral
and dogmatic authority. It is not only the primary book of the Christian religion, but also part of the
Jewish. In the sacred books of the Old Testament canon, the Book of Wisdom of Jesus son of
Sirach is contained (Ecclesiastic). All Bible readers agree that this book was written between 190-
170 BC. In 132 BC, the grandson of Jesus, son of Syrah was in Alexandria. Wanting to show the
non-Judaic world that the Jews’ practical needs wisdom is not worse than the Greek philosophy, he
began to translate this work into Greek.În capitolul 42 a lucrării se fixează unele norme privind
,,grija lucrului casei,,. In Chapter 42 of the paper, he sets some rules, concerning “care for the work
around the house. One verse recommends the regular keeping of accounting: “Whatever you give,
give in size and number, and what yoy give and take, all of them write”. (cap 42, verse 9).
After the Cretan age and Achaean one, the Greek civilization met, between 1025 and 31 BC
(when it goes into the Roman period) four periods. Under specific names we meet, in this
civilization, the private accountants (logographers) or the public ones (logotes), the accounting
auditors (entemistes) and public management controllers (logiştii). Since the third century î.e.n.
Greece had Court of Auditors consisted of antigrafi, senate members elected to verify the receipts
and payments on the public household. A court of accounting auditors was founded too, called the
“College of Entemistes”
Two major books were used in trade in goods and banking, "ephemeris" and "trapedzidka
grammata. The first was a book in which the banker, trader or their scribe recorded in chronological
order all the operations. From there, they were systematized in the second register. In “trapedzidka
grammata" positive changes were separated from the negative, the evolution of an account being
presented, on account of this, on two facing pages. Nowadays, the first record would correspond to
'Journal' and the second, "Ledger". The ancient Greeks used other records also: log house and an
inventory record. In addition to papyrus scrolls and occasionally writing on pergaments, the Greeks
also used wax tablets. Tied up together, they formed a register known as the 'libelli.
As a political organization, Ancient Rome saw three forms of ruling: Royalty (753 BC-509
BC), the Republic (509 BC-31 BC) and the Empire (31 BC-476 AD). Of the 30 million people,
Europe, as the continental population in the days of Caius Iulius Caesar Octavianus Augustus (24
î.e.n.- 14 e. n) 23 million belonged to Rome. To this were added another 32 million people living in
Asian and African provinces of the empire. Cities like Alexandria, Syrian Antioihia,. Roman
Carthage, Ephesus, Caesarea, Pergamont, Nicomedia, Ostia, Lyon, Petra, Palmira, Baalbec, Trier
were each kind of a branch of the metropolis.
The functioning of the Roman administration, settlement and collection of taxes, collection
of other revenues of the state, the use of amounts entered in the exchequer could not be achieved
without a sound accounting. Keeping accounts of Rome was common use, and the Roman citizen
could not appear before the justice without his accounts, if so being regarded as negligent.
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The Silverers, or Roman bankers have played an important role in the Roman world. From
simple exchangers of currencies as they were in the year 400 BC, they began to receive the
retention of the ones seeing them more safe in their closed chests. Over time, from the deposit for
keeping this evolved to deposit to fruition. At the client's order, bankers paid beneficiaries that were
in the same locality or other localities. They practiced widely used transfer and loan documents.
The Romans’ practicality made its mark on the keeping of records and accounts.
The head of the Roman family recorded his wealth, at around 486 BC in a kind of
inventory-registry (liber patrimonium). In this book, further additions and subtractions were made,
varying with the patrimonial changes that came up in time. The current fact of his household, what
he received and gave and what he had to receive and give was noted, chronologically, in the
“Adversaria” registry. From the Adversaria were retained thos operations made verbally, to be
recorded in ,,Codecs accepti ș i et expensi”. Movements of fortune, and lending operations that
determined simple debits and creditations for people were grouped into categories in “Codecs
rationum domesticarum”.
The bankers or silverers used the: ,,Adversaria”, ,,Codecs accepti et expensi” and
,,Codecs ratione”. Based on the “Codecs rationum” register, the banker made a summary to act as
trial balance of today, set its client’s debts and claims, sent account balances verbally
communicated their content. Customers confirmed the accuracy of statements, paid the remaining
debt to the banker or agreed to report the debt on an account closing the old one.
Public accounting. During the republic, the supreme supervision over the State, the banker
made a s finances was exerted by the senate. Later, during the empire, the supreme head was the
king. As order of the Senate, the censors formed the income and expenditure budget and controlled
the way in which the income was used. The handlers of urban public money were the quaestors.
They cashed incomes and fines, mad payments, kept the income from the sale of properties
belonging to those convicted and were respinsoble with all the sums that entered and exited. The
“Tresvirii monetales” were acting as monetary supervisors. The most improtant records for public
accounting were: ,,Breviarium”, ,,Tabulae publicae”, ,,Codecs accepti et expensi” and
,,Calendarium”; introduced by Augustus, the ,,Breviarium” was maintained by later emperors.
Public areas are reported here (forests, grasslands, salines), the navy and the number of required for
military service. It was the state inventory (4). Payments and expenditures suffered were reflected in
,,Tabulae publicae”. Based on this the ,,Codecs accepti et expensi” was formed. Receipts and
payments arising reflected in the 'Tabulae publication. On this basis are developed,, et Codecs
accept expensive. Funds forming property of different cities, destined to cover expenses of festive
feasts, public performances, ceremonies bringing the sacrificial and for providing various mortgage
loans were reflected in the register called ,,Calendarium”.
As a conclusion on the appearance of antiquity, what must be remembered is that keeping
ledgers reached the highest peaks known with the Romans. Despite the extent that they reached,
however, we can not yet speak of the existence of accounts in the modern sense. The calculations
above do not comprise movements that occur in the elements of a heritage and nor the achieved
results were closely reflected. no link between the accounts was pursued, nor was reached an
organic system with interrelated accounts.
It was until the end the Middle Ages and the Renaissance for the same geographical area,
the land of Italy, to see the jump towards the systematic accounting, in order to discover the
arithmetic or even algebraic, conscious, accepted and organized link that can be established
between accounts, allowing the extension of the observation field on the results also.
The Roman Civilization, a masterpiece of rigidity with an economy fueled by robbery, with
servile labor put at hand of the victorious wars, with precious metals pumped from the hoarded
treasures of the Orient, with legal precedents built on scaffolding, which provided state sence
ensuring of stabile institutions was subjected, in the second half of the 2nd century to disintegrative
forces of erosion (5). Provinces are emancipated and wanted to live a life of their own. Gold used to
pay luxury imports and intermediates ran to the manufacturer east whose Hebrew or Syrian
merchants monopolized the big trade. Western cities weaken while the East bloomed. Once heart of
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the Empire, Rome and Italy fell. A new metropolis, the new Rome, Constantinople, materializes
this slide of the Roman world towards the East. The schism is a part of the fourth century realities.
Byzantium will continue Rome, and go on with leading the Roman agony behind its walls until
1453. The Asian steppe and nomadic invasions of the tribes to northern forests flow in waves over
the Western Roman Empire, precipitating the changes and giving a catastrophic course of events.
The invaders were driven by some fugitives stronger or more ruthless than they were. They were
milling all Roman military organization, administration and economics. From the decline of the
Roman civilization, the barbarians made a regression. Agriculture and crafts decay. Coins disappear
from circulation. Economic and technical regression is added to the administrative one. No longer
were taxes collected. A natural disaster had come to the sixth century to complete the century’s
calamity. Black plague, brought from the Orient in 543 emptied, more than half a century, Italy,
Spain and much of Gaul. Hunger was a dominant constant throughout the early Middle Ages.
The need for food explained above all the withdrawal of the rich on their estates and the
exodus of city dwellers and owners of large areas, the ruralization movement and the creation of
great feudal property, all of the population being caught in the way. Among the cities, only the ones
located on rivers used as arteries of communication resisted, relating to the importation of luxury
goods, indicative of the presence of traders who were Hebrew, or related to cities regularly visited
by pilgrim groups (Rome, Marseille, Arles, Narbonne, Orléans). Some major urban outbreaks
remain only those who serve the new residence or barbarian kings, or are bishops’ offices. Slowly
outlining from the merge of the Roman and barbarian world, in over four centuries parted from
Theodoric's death (395) the coronation of Charlemagne (800) and the western Roman Empire a new
world was intertwined in the West.
An awakening to anew life of the medieval West finally took place and, as expected, an
economic awakening happened primarily. It took place in the 10th century and was marked by a
series of crucial innovations: 1) Food acknowledged a mass-scale introduction grain, lentils and
peas; 2) The Muslim World, a world metropolis, generated in the barbarian-lead West an increased
production of raw materials (wood, iron, alloys, honey) and an increased demand for slaves; 3) The
use of the wheeled plow moldboard, the three-year crop rotation, modern system of burdening cattle
increased lucrativeness in agriculture, 4) The modest medieval commerce limited in early Middle
Ages to waterways slowly progressing along the land road gained momentum between the X-XIV
century on the roads of Mediterranean, the Atlantic and the English Channel, North and Baltic Seas,
preparing commercial expansion of modern Europe, 5) The end of invasions, settling of barbarians
in the X century, installed during the relative peace of the X century, the emergence of institutions
regulating war and periods of military and clergy sat on women, children, peasants, merchants and
cattle work sometimes under the protection of reinforced security oath by warriors.
One of the first consequences of the new conditions was to increase the population of
Europe. It has grown from 27 million in around 700 to 42 million in 1000 and passed 73 million in
1300 (6).
This leap of demographic expansion was crucial to Christianity. The eight Crusades (1096-
1270) stole the expression of this expansion. They favored the prosperity of Italian cities. Venice,
Pisa and Genoa purchased military expeditions undertaken against the Muslim Orient.
While the port cities fought each other for maritime supremacy and the monopoly of the
world commerce, the interior cities, with Florence in the lead, were preoccupied with
manufacturing.
From the early medieval period important financial records were not brought to light, but
that does not mean that the feudal economy was be deprived of accounts, or that the senior was not
interested in knowing the situation of its fiefs and productivity of its field. Economic life could not
deprive of light what ledger keeping could give. They appeared 3,000 years BC, from an objective
of necessity for knowledge, they have always accompanied the material production. But it is known
that the same causes always produce the same effects.
Ledgers discovered in Eastern Roman Empire, allowed finding the existence of a
community and to make certain comparisons to determine a possible breakthrough in the technique
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used. Such research on Zenons collapse, a new wos accounts written in the third century BC and on
two accounts drawn up in the years 245-270 AD in Heroninos lead to Professor Joseph-H.
Vlaemminck to conclude that in this half millennium there has been no record in this geographical
area of accounts that could have meant a breakthrough in technology and accounting (7).
Notes, inventories, current accounts, household accounts written in Arab, on papyruses,
were discovered in Egypt even after it falls under the Islam (650 AD.). They were the first ones
after the Greek accounts.
The Medieval West, in his early age holds much less remains in accounting proofs.
Unsteadiness times in which merchants or seniors lived did not favor keeping records for longer
period of time. That does not mean they would not be made. Let us not forget then that the
knowledge, in centuries of heavy barbarian invasion, and writing is often a rarity reserved for clergy
only. During the early medieval times, the church, pursuing its own interests never ceased to
accumulate wealth, be it from donations of the Kings and the rich, or even from the most humble,
be it a part of production achieved. This explains the fact that in the XI and XII centuries, when
Jews were no longer able to play the role of creditors, which was played until then, and when
Christian merchants did not manage to take place, the monasteries were those who assumed the role
of credit settlers. Their administration, better kept than the clergy, left written traces. Such a
document is part of an inventory of the abbey areas and royalties due from those who held land in
use drawn on the order of Irminon, abbot of Saint-Germain-des-Près in the early ninth century. The
document fragment still surviving contains descriptions of twenty-four areas, of which nineteen
were located around Paris (8).
The beginning of systematic accounting is found in Northern Italy and Flanders, where the
economic life pulse beat stronger than in any other part of Europe (9).
Flanders left only few traces of accounting in records that survived, while the evolution of
the accounting technique can be traced step by step based on the Italian account registries.
The Italian cities in the XI-XV century met the most favorable conditions. The narrow frame
of the transactions made with liquidities was widened here by establishing credit.
Facts based on trust and creditor of the debtor’s solemn commitment to bring out the
promise they made constrained accounting to improve.
From the tenth century, companies and partnerships are emerging in Italy to the thirteenth
century. The determination of income and profit spreading between the commandos and
commanders, dividends between associates, establishing the share that a shareholder wanting to
retire is entitled to, all of these imposed knowing the regular consistence of the patrimony as a
whole, periodical inventories, the amplification of the calculus apparatus.
Refinements on the form and shape of technical accounting background exerted influence on
the process in which where the trustee must give account for its principal management to the
warrant. The abundance of various senior royal coins in circulation, altering title or value, piss
inequality between them also influenced accounting calculations. Along with real money, the
account money was born. This theoretical value is determined by the sovereign side, while the real
currency depended on its weight and its title. Commodity prices were determined according to the
account and the remittance of the amount of money was made at the rate fixed by ordinance.
Cashier work was very complex and full of responsibility. Conditions favorable for the leap to the
systematic accounting were knowledge on Arab figures. In rural Italy, the first attempt to introduce
the Arab figures was achieved by the work of scholar Gerbert (940-1003) since 999, Pope Sylvester
II. Taking from the Saracens the abseil with Cora columns and rows - where numbers from 1 to 9
were represented either by the first letters of the Greek alphabet, Gerbert made its calculation rules.
The new arithmetic was spreading hard, with all the emulatorss accounts written i help, and another
effort was made from 1202 on, after merchant Leonardo da Piea wrote his work, "Liber Abaci", and
the situation was improving.
In the 15 parts of his work are: Indian figures, multiplying integers, adding, subtraction,
dividing, multiplying fractions, other operations with fractions, calculating the price of the past and
the rebate, benefit sharing between members of the rules, demanding alloys and coins, progress and
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ratios, the rules of false position (simple and double), square and cube roots, and geometry and
algebra problems (10).
3. THE CONCEPT OF PARADIGM. THE BIRTH OF THE ACCOUNTING

PARADIGM
The concept of paradigm had been made famous by the classic work of Thomas Kuhn's
"Structure of Scientific Revolutions." Th. Kuhn believes considers the paradigm as scientific
breakthrough that is manifested as a characteristic set of beliefs and preconceptions and knowledge
that can perform functions typically attributed to shared common rules. The paradigm is a
remarkable scientific achievement that a scientific community acknowledges for a time as the basis
of practice. Such an achievement requires two attributes: 1) determines the kind of problems with
sense in its areas and 2) proposes legitimate methods by which they can be addressed; the paradigm
involves a lot of standard applications of a theory (or / and a lot of repeated illustrations) and quasi-
standard of a theory in their conceptual, observational and instrumental applications.
The paradigm contains a set of options (ontological, epistemological, methodological -
instrumental) that tell how the rules will look like to the researcher. Such options shall occur as a
network of concepts, theoretical, instrumental, and common to a joint scientific community and
members to which the members of these communities are subjected. The paradigm is an
epistemological point of view, which underlies a theoretical explanation of a phenomenon, or
aspects of existence. Apparition and knowledge in a discipline are the results of maturation of this
discipline and continue to determine a new evolution in: (a)the formation and evolution of a new
development model of this discipline, (b) restoring its domain, (c) establishing a new type of
research, (d) constituting a new group of researchers, (e) establishing a new Methodological and
conceptual framework common to this professional group. In their existence, paradigms require
both scientific research and theoretical research in the field through specific ways:
The birth of the accounting paradigm. The ease of working with Arabic numerals
explains the preference of commercial and banking circles for these figures, although the
shortcoming that they can easily be forged. In the seventeenth century, only Arabic numbers are
used.
Despite the favorable environment sketched above, the shift from “scrittura doppia” (11)
was not made immediatelly and it did not come with a full structure. The road was long, extremely
complicated and went on for about three centuries.
(A) The oldest form of accounting in the Middle Ages is memorial accounting. It consists of
the chronological record of each payment and the commitment of each claim, considered as
separate businesses.
At first, no established formula was in use, the accountant making use of the narrative style,
without confusing orders. Certainly, an evolution towards more concise formulations was made.
Thus, the initial entry was followed by a clearance in order to complete with the necessary text at
the time of renting the business, then delete the account. Then, for possible court actions, here
would be mentioned the names of witnesses in the presence of which the deal is arranged,
respectively the people who are forced to go along with the debtor.
Finally, to distinguish a claim from a commitment, the expressions “release” and “wealth”
enter into common use. The whole picture on the situation of business was obtained by lecturing the
inventory, in which the credits not received and the commitments not paid appeared as followed by
blank spaces (12).
(B) In time no longer one account was open for tracking each transaction, but the same
account began to register all transactions with the same client or with the same provider (13).
Let us imagine the situation of a Venetian banker who gave a client A on two occasions 100
000 monetary units (m.u.) and 30000 m.u. and that the amounts collected in three innings were
10,000 m.u, 10,000 m.u and 5,000 m.u. In the same period, client B made two deposits of 150,000
m.u and 10,000 m.u. and was returned with 40,000 m.u and 20,000 m.u. Therefore, client B had a
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“release” account and client A had a “wealth” account. Each of the two accounts reflected the
juridical relation between the banker and his client, presented as:
Clientul A Clientul B
WEALTH RELEASE
Received 100000 Gave 150000
Gave 10000 Received 20000
Received 30000 Received 40000
Gave 10000 Gave 10000
Gave 5000
In order to be aware of the reports with each client, a series of additions and subtractions had
to be made. To facilitate these calculations, the idea to divide the account of each client was born,
so to find out on one side the original value and its increments, and the diminishments on the other
sides. As the expressions “wealth” and “release” were replaced with “debt” and “credit”, and these
notion’s sums began to be placed aside, we can imagine the customer’s accounts as:
Client A Client B
Debt Credit Debt Credit
Received 100000 10000 Gave Received 20000 150000 A dat
Received 30000 10000 Gave Received 40000 10000 A dat
5000 Gave
In conclusion
Debit = Wealth = something that is received from the banker
Credit = release = gave something to the banker
The rule is simple: He who has received something from a banker is a debtor and has to
give. The one that gave something to the banker, is called "creditor" and has to receive.
(C) Later, in the eighteenth century, new accounts appear. Debt and commitment recording
were not enough. In order to describe the owner’s patrimony, one had to know his situation at a
time, to take account of real things which he possesses (ships, buildings, materials, goods, cash,
etc.). To the debit and commitment accounts are added accounts which represent his real property,
those meaning: Buildings, Materials, Merchandise, House. Under the power of tradition, the new
accounts were called patrimony, one had wealth and release even though they did not reflect the
relationships between people anymore. To apply the rules applied to accounts that each person had,
it was considered that each account can assimilated to a person. The House was represented by the
cashiers, the Merchandise by a manager of goods, the Materials by manager for the materials and so
on. Even though they did, such a person does not exist in reality and this led to an impasse - said
Prof. D. Voina - it had to be invented by the artifice of imagination" ... The few rules applied to
accounts of people have such deep roots and judgment enveloped with such power that they
possessed not only material goods but have spread also to those expense accounts when these
accounts came up in the mechanism of accounting (14).
(D) In order to reflect the debit associated with the company to the associates, since the
eighteenth-century the account called “Raison Sociale" was created, the ancestor of the Capital
Account. It was born in the accounts of companies and not of a trader, though, after, we meet it here
referring to the owner, often receiving his name. Even since the beginning, it received the
functioning of a “release” account, reflecting in credit the obligations towards the associates for the
brought parties and in debt their diminution. The extension of this treatment also for the private
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companies – initially practiced in analogy with the accounts of the companies, later generated the
principles of the enterprise’s autonomy in relation to the owner.
It is the era that passed from the memorial accounting to the simple entry accounting.
Research on medieval Italian accounting determined that it had made use of three main registers:
Memorial (memoriale), Ledger (quaderno) and Journal (Giornale). Originally, the memorial
included, in chronological order, only operations on the assets and liabilities and then the notes
were extended from operations based on immediate intervention of money. This descriptive record
fueled the ledger; the same operations were systematized into accounts. In the mechanism of the
accounting registries, the journal entered later.
(E) Two expressions, “By” and “At" ("Per" and "a") were used to mark, in the registry,
first, that an amount will be entered in the debt of the account immediately mentioned after the
expression, and the second that the recording will be made in the account credit. Formally, they
represent the symbols of debt and credit, basically marking the pluses (+) and minuses (-) in the
matter reflected by accounting.
At this stage of development of the simple entry accounting, the ledger established the
following:
1) The situation, at a certain point, of total goods (  b ). It was the difference between the
value inscribed in the debt of the goods account (  Db ) and the one written in the credit of the
same accounts(  Cb ).
 b =  Db –  Cb
2) The situation, at a certain point, of total debts (  c ). This was established using the same
criterion, as a difference between the value written in the debt of the debt accounts (  Dc ) and the
one reflected in the credit of the same accounts (  Cc ).
(3) Situation of the debts value (  d ) is due as difference between total credit – where the
initial situation and the premiums were reflected (  Cd ) and total debt (  Dd ) where
diminishments were found.
 d =  Cd –  Dd
(4) The capital situation (K) was written, as any enterprise debt, in the account (Ck). The
result (r), benefit or loss being found using the relation:
b + c - d + K = ± r (I)
Barely in the 13th century another balance form to reach was observed by rearranging the
elements from relation (I).
b + c = d + K + r (II)
In this case, the result is a profit (p)
b + c = d + K + p (II')
or
b + c + r = d + K (III)
Where the result is a loss (p')

 b +  c + p'  d + K (III')
This balance was presented in a table named, at that moment (XIII century): the Balance.
And these results increased (if there were profits) or decreased (if there were losses) the capital. “To
225
determine the result in simple entry accounting by including four or five hundred accounts of clients
and two hundred accounts of providers was, states prof. Pierre Garnier, a long-timed work; it was
about six or seven hundred accounts to add for the debt, than to credit, and there were so many
subtractions to extract the sales, added into six or seven hundred sales into two sums, before
reaching the final subtraction” (15).
(F) The idea of seeking a mean to learn more easily, and for each step to easier know the
results of operations taken had to be born. Impressive even today, medieval large companies as
Bosignori, Traditions, Peruzzi, Medicis, etc. - with many branches and agencies are still astonishing
in the efficient manner in which they operated and were organized. Clearly they had skilled
accountants concerned with improving their methods. Working with various general ledger
accounts, they were concerned for any operation enclosed in the memorial or partially enclosed in
the formalization of the journal or to miss from the systematic ledger accounts. It was natural to go
to find, for example that when buying goods with money from the house, two records had to be
made at once, namely in the commodities account, once in debit and the second in the house on
credit. And to make it easy, with two drafting journal. The account from one of the formulations
was preceded by the word "By", the second form of expression was preceded by “At”.
The same facts were running an operation where credit intervened. Buying goods on credit
from suppliers must be recorded both in the goods account i.e. debit and the account to which the
supplier undertakes to give the purchase price of goods that had to be credited. And here, one of the
accounts was preceded by the phrase “By” and another by “At”. In case of an operation, the lack of
one expression signaled the accountant that something was wrong. In some operations the amounts
of the two accounts were not the same. He noticed however that the difference was nothing else
than the result of profit or loss, knowledge of which was so much needed and reached in simple
bookkeeping so hard. It is the first time that the calculation method using the accounts “Profit and
Loss” appears. If the sum inscribed in the account preceded by “by” was greater than that of the
account preceded by “at”, than to the latter the “profit and loss” account was added. By establishing
a balance between the sums named with “by” and “at”, that is by adding the sums in “debt” and
“credit” of the accounts mentioned, the dynamic balance of accounting equation is reached: Debt =
Credit. This equation conserves the equation of static balance – the situation equation – (I).
Din:  Db +  Dc +  Dd +  Dk +  Dp' =  Cb +  Cc +  Cd +  Ck +  Cp
with the meanings from the relations 1), 2), 3), 4) where ,,D” means Debit, and ,,C” means credit,
one gets to
 _ _
 Db   Cb
   Dc   Cc
    Cd   Dd
_ 
 Ck   
_ 
dk =|
b c d k


Cp  Dp'

r
Respecting the equality DEBIT = CREDIT and correctly establishing the accounts required
to be included in this link will become, until today, the primary concerns of accounting practice
applying double entry bookkeeping.
"... You should never put something in the release that are not put on airs at the same time.
And so you should never go to something in growing wealth, the same amount not to proceed with
the release "- established in 1494 as a rule of respect, the author of the compendium ,, Summa de
arithmatica, geometria, proportioni et propor à”, Luca Paciolo (16).
(G) n the new conditions it was possible a formal verification of the records in the ledger.
For this, a balance (bilancio) of the general ledger was prepared.
(H) Shortly thereafter the profit and loss account shall be subdivided into a 'Profit' and
another 'loss' account. The division continues for the first, into profit in nature and, for the second,
226
loss in nature. Accounts reflecting expenditures - while still occasionally following simple entry
records - now become subordinated to the "Losses” account. So, a fruitful contribution to
commercial practice was certain at the beginning of the XIV century, the systematic accounting
framework, the double entry system, potentially applicable to any business or administration of
funds, in which: accounts - which became effective creation, recording the and determining the
position and successive modifications of a category of values - gained in flexibility is built into an
organic system with links between them independence and control procedures to ensure avoidance
of errors capable of processing forms, the addition order of asset achieve separation and record the
result obtained from each transaction generating results. Since the mid-fifteenth century the natural
development of accounting stopped and stepped into a new era in which existing knowledge and
gaining of further knowledge was no longer registered by oral tradition transmitted by the guild or
by schools, but first of all in literature.
Therefore, on specific trade, the accounting paradigm was born, which allowed
organizing, based on it, scientific accounts in all types of economic entities in the pulsing life
regardless of whether they belong to commerce, industry, agriculture, transport, public
institutions, etc.
We view the paradigm as an exemplary scientific achievement, as example of concrete
formulations and solutions to scientific problems relating to all movements of cash values in a given
social and economic entity and the financial settlement of the entities or components of a national
economy or a national savings scheme where the reference entity is a party.
Interpreted in the light of current accruals accounting, what was shaped until up to the
middle of the second millennium of our era, is only a building still under construction, the oldest
sector of accounting calculation, the calculation resulted in the balance, or chronologically balance
in its most evolved form, the double entry system. Until today three sectors, account, costing,
benchmarking and predicting will increase the penetration power of the human mind to decipher the
tidy world of values expressed in money movement and economic and legal relations that generate
cash settlement. The new sectors are in the computer accounts, informational substance reaching a
certain level of development that will take over and will refine the science to the limit reached in
this specialized knowledge, which is accounting, at the mentioned stage of evolution.
ENDNOTES / REFERENCES
(1) V.Gordon Childe, Făurirea civilizaţiei, Buc., Ed. Ştiinţifică, 1966, p.190.
(2) Cf. Vlaemminck, Joseph-H, Histoire et doctrines de la comptabilité, Paris, Dunod, 1956, p.16.
(3) Cf. Demetrescu, C.G.,Istoria contabilităţii, Bucureşti, Editura Ştiinţifică, 1972, p. 31.
(4) Cf Voina, Dumitru, Faze din evoluţia contabilităţii, Cluj, 1932, p.28.
(5) A se vedea şi Jacques le Goff, Civilizaţia Occidentului medieval, Bucureşti, Editura Ştiinţifică, 1970, p. 53-83.
(6) Cf. M.K. Bennett. Citat după Jacques le Goff, op. cit., p.113.
(7) Cf. Vlaemminck, Joseph – H., Histoire et doctrines de la comptabilité, Paris, Dunod, 1956, p. 41.
(8) Cf. Jacques le Goff, Op. cit., p.103.
(9) Cf. Voina D., Incursiunea în sfera conturilor medievale, În: Analele Ştiinţifice ale Universităţii ,,Al. I. Cuza”
din Iaşi (serie nouă), sectiunea III. c. Ştiinţe economice, Tomul XVI, anul 1970, p. 153.
(10) Cf. Taton René Istoria generală a ştiinţei, vol. I, Ştiinţa antică şi medievală. De la origini la 1450,
Bucureşti, Editura Ştiinţifică, 1970, p.599.
(11) Also: ,,double accounting”, ,,dopica”, ,, double recording”.
(12) Melis, Federigo, Storia della Ragioneria, Bologne, Dott, Cesare Zufi, 1950, p.392.).
(13) Cf. Joseph – H – Vlaemminck, op. cit. p. 49.
(14) D . Voina, Procesul formării contabilităţii duble, în Buletinul Institutului politehnic din Iaşi, Serie Nouă, 1963,
p.446.
(15) P. Garnier, Op. cit., p. 16.
(16) Luca Paciolo, Tratat de contabilitate în partidă dublă (versiune românească de Prof. univ. dr. Dumitru Rusu şi
Prof. univ. dr. Ştefan Cuciureanu), Op. cit. p.119.
227
SYSTEMIC APPROACH TO THE FUNCTIONS OF PUBLIC

FINANCES - A NECESSITY FOR THE ROMANIAN ECONOMY
Professor PhD. Carmen COMANICIU

"Lucian Blaga" University of Sibiu, Faculty of Economic Sciences
Sibiu, Romania
carmen_comaniciu@yahoo.com
Junior Teaching Assistant PhD. Student Liliana BUNESCU
"Lucian Blaga" University of Sibiu, Faculty of Economic Sciences
Sibiu, Romania
liliana_sibiu@yahoo.com
Abstract:
Normal development of social and economic activity requires overall management of the economy,
coordination and synchronization of social and economic processes, under deepening complexity and diversity of these
processes and the multiplication of the interdependencies between them. This article, emphasize the need for a systemic
approach to public finance functions of Romania, having regard, on the one hand, action, relationship and mutual
influence they have with economic and social phenomena and processes, and secondly, changes that may occur in
relation to economic and social tasks of each stage. By adopting programs, governments want to achieve
macroeconomic objectives relating to: economic development, the use of labor, labor productivity growth, price
stability, increased purchasing power of currency, ensure budget balance, training and optimal allocation of public
financial resources. Achieving these goals can be achieved only through proper use of tools, the public finance are
considered most important. From general to particular, from theoretical to pragmatic issues, through this article, we
try to emphasize, that only a pragmatic approach in systemic effect for functions of public finances will lead to remove
negative effects arising from the sequential approach. Public finances are presented as a set of mechanisms for
mobilization and allocation of resources, depending on objectives, considered of general interest. An appropriate
action of the function of public finances, will cause an essential component of socio-economic life of any nation,
respectively public finances.
Keywords: functions of public finances, allocation, distribution, stabilization, public revenue, public
expenditure
JEL Classification: E 61
INTRODUCTION
The purpose of this paper is to highlight the need that all actions taken in fiscal and
budgetary policy in Romania must be based on a systemic approach to public finance functions.
The theme chosen for discussion envisage some negative effects of fiscal-budgetary measures taken
by public authorities in Romania during post-communist period, even if at the initiation of these
measures, effects are outlined as beneficial.
To achieve the goal of this paper: will be presented some theoretical aspects of public
finance functions; will identify some negative aspects of the fiscal-budgetary practice in Romania
due to the sequential approach to public finance functions; will identify opportunities to eliminate
negative effects through a systemic approach to public finance functions; will be presented the
scheme of systemic approach of public finance functions.
SOME THEORETICAL ASPECTS OF PUBLIC FINANCE FUNCTIONS
In a classical sense, public finances can be defined as a science of means by which the State
shall procure the necessary resources to cover its expenses, as well as, redistribution among citizens
of the tasks deriving of how to acquire resources.
A fundamental objective, a scope, the main functions, fundamental values, essential
characteristics, principles and laws are part of coordinates of public finances, properly called a
science (Plehn, 1900), because: "it deals with a definite and limited field of human knowledge; it
admits of an orderly arrangement of its facts and principles, and contains many laws of general
228
progress belonging exclusively to its own field; it admits of the application of scientific methods of
investigation; it foresees as well as explains a certain class of phenomena; it is generally, if not
universally, so regarded."[8]
The three major functions of public finance identified in 1959 by Musgrave, recognized in
economic studies of public finance as a "trinity" (Bennett, 1983) are: allocation function, distribution
function and stablization function. These functions are related to the interdependence of the price
mechanism, the social policy and the economic policy, being considered issues of efficiency and
effectiveness in formation and use of public financial resources, because the four major divisions of
modern public finance are public revenues, public expenditure, public debt and fiscal system. [1]
Public finances treated as economic relations occurred in the distribution of gross domestic product,
fulfill their social mission by the functions they perform (Văcărel et al., 2002): distribution function
(with two distinct phases: establishment of public funds and distribution of public funds) and
control function. [10]
If the distribution function is to mobilize a portion of gross domestic product to the state,
especially of net domestic product, and its distribution to accomplishing tasks and duties, and the
control function equivalent with controls on the distribution and redistribution of gross and net
domestic product and on processes of mobilization and economic management of financial
resources, can say that these two functions of public finance covering all processes assigned to
seven functions (Talpoş, 1997), namely: function of attracting resources; function of resource
allocation; redistributive function of net domestic product; function of stabilizing the national
economy; function of stimulating the national economy; coordination function of demand and
establishing social and economic priorities; control function. [9]
Public finances are often the subject of debate (Brezeanu and Marinescu, 1998) on the role
of public authorities in a market economy, on the effectiveness of their multiple interventions, and
on the level of compulsory levies. [2]
In this respect, specialized authority of central government, with legal personality,
subordinated to the Romanian Government, applying strategy and program of governance in public
finance is the Ministry of Finance. Having synthetic role, the Ministry of Finance contributes to
exercise general management of public finances through many functions (Government Decision
34/22.01.2009): strategy function; regulatory and synthesis function; representation function;
forecasting function; budget and fiscal outlook function; administration state revenue function;
administration resource performed by the Treasury function; public debt management function;
coordination of financial assistance grants function; financial management function; function of
coordinating relations with the European Union budget; function of authority for coordination of
structural instruments; function of public internal financial control; function of organization and
performance of internal audit public entities; function of property record that is State public sector;
function to combat tax evasion; function of uniform control and legal compliance of public
finances; function of authority with skills in policy and customs legislation; support function. [12]
To achieve its functions, Ministry of Finance duties are based on ”keywords”, such as:
achievement, administration, analysis, application, appointment, approval, centralization, collection,
contraction, coordination, debate, development, distribution, elaboration, establishment, evaluation,
exercise, forecasting, formulation, guarantee, implementation, initiation, insurance, management,
monitoring, negotiation,notice, notification, ongoing, participation, promotion, proposal,
prosecution, regulation, representation, resolution, reunification, running, support, training, transfer.
We specified a panel of functions and keywords related to the Ministry of Public Finance tasks,
with the purpose to highlight the link with the main functions of public finance, because the
implementation of fiscal-budgetary policy measures in Romania generated a series of negative
effects.
When the interdependence between fiscal policy and budget policy is approached, also is
taken into account their functions.
Thus, the construction of any tax system (Brezeanu, 1999) must ensure proper action of the three
functions: function of financing public expenditure - which pursues the objective of budget
229
performance; function of redistributing income and wealth - which pursues the objective of equity;
function of stabilizing economic activity or the correction of imbalances - which pursues the
objective of efficiency. [3]
Appropriate action benefits of the three functions of public finance (allocation function,
distribution function, stablization function) for budget policy (Latigo, 2001) are reflected in public
budget sustainability, composition of public revenues and public expenditures and effectiveness in
delivering public services. [6]
SOME NEGATIVE ASPECTS OF THE FISCAL-BUDGETARY PRACTICE IN

ROMANIA, DUE TO THE SEQUENTIAL APPROACH OF FUNCTIONS OF PUBLIC
FINANCES
The role of public finances is inextricably linked to the maintenance of the financial
mechanism. Taking into account the complex structure of the financial mechanism, public finances
have influence in: ensure the functioning of the financial system; establishment and use of financial
levers to influence economic activities; use modern methods of administrative management;
establish the institutional framework to act, on the one hand, as public authority, and secondly, as
producer and consumer of goods and services; establish the legal framework through laws, rulings
and other regulations; exactly compliance of legal provisions.
In Romania, sequential approach of the functions of public finances determined fiscal-
budgetary measures with negative effect, even if they target one or more functions of public
finance. We try to identify such measures, specifying the measure, the corresponding function and
performance:
a) By Government Emergency Ordinance no. 163/13.10.2000 to reduce arrears to state
budget, legal persons have benefited from the cancellation or reduction for penalties related
outstanding tax obligations. Full payment of outstanding debts until october 31, 2000 entailed a full
cancellation of delay increases. If the outstanding debts have been paid until november 30, 2000,
delay increases were reduced by 60%, and if they were paid until december 15, 2000, the reduction
was 45%.[11]
Public finance functions in correspondence with this ordinance were the function of
attracting resources and the function of stimulating the national economy. Application of this
ordinance led to violation of one of the principles of taxation, respectively nondiscrimination
principle, because tax incentives were granted only taxpayers that are part of bad payers, which
subsequently led a change adversely in the behavior of taxpayers regarding tax obligations.
b) Law no. 72/1996 on public finances submits a separate chapter on development, approval,
execution and completion execution of state budget. According to this law “creation and use of
funds belonging to state, outside the budget are prohibited”.[15] Although this law endorsed in full
the functions of public finances, it shows that during 1997-2000 certain tax liabilities occurring
after Budget Law that year. Thus, the State Budget Law for 1997 have not included the following
taxes: health insurance fund; national film fund; stamp duty for appeals and complaints; fees for
issuing documents under the ship. In 1998, the taxes perceived in violation of Law of public
finances was: taxation of foreign persons in Romania; special fund for civil aviation; authorization
fee for sale of alcohol, tobacco and coffee; rates for services provided by the National Office for
Cadastre, Geodesy and Cartography. Number of tax obligations without being included in the State
Budget Law for 1999 has increased by: maintenance contribution; national solidarity fund; national
solidarity fund in metallurgy; special fund for technology risk reduction in industrial machinery and
equipment; fund reform; rates for services provided by the Romanian Railway Authority; rates for
specific services rendered by Civil Navigation Inspectorate; extrajudicial stamp fee. For 2000 State
Budget Law has not included: rates for access to the National Register of legal persons without
patrimonial purpose; environment fund.
c) Under Law no. 42/18.12.1990 is achieved honor and memory perpetuation to those who
have sacrificed their lives for the revolution, appreciation and gratitude for those who were
230
wounded in fighting, appreciation to the direct participants in actions for the revolution,
appreciation to the descendants of the heroes of the revolution. In terms of financial and fiscal,
descendants of the heroes-martyrs of the revolution, wounded, and disability pensioners who have
lost all or part of work capacity in the fight for revolution, has a series of compensation and tax
incentives.[14] The provisions of this law are considered two of the functions of public finances,
respectively function of stimulating the national economy and function of socio-economic
prioritization. Inappropriate action of the control function of public finance, determined that is not
accurately known the real number of beneficiaries of tax incentives under this law, after 20 years.
According to data presented, there are a total of 10 lists of persons eligible for Law 42/1990. Each
list has a different number of persons, namely: List of official monitors – 51.576 persons;
Presidential List – 25.449 persons; List of files from State Secretariat for Revolutionaries’ Problems
of December 1989 (SSPR) – 66.566 persons; List of files submitted for approval from SSPR to the
Parliamentary Commission for Revolutionaries in December 1989 (CPRD) – 14.935 persons; List
of approved files of CPDR – 14.017 persons; List of certified law 341 – 25.069 persons; List with
the same number of certificates issued by many names - 761 persons; List the various court
processes – 1.206 persons; List of acquired rights – 5.454 persons; Various lists – 3.124
persons.[16]
d) In terms of social considerations, peoples with disability have many tax incentives.
According to statistics, the number of disabled persons increased in Romania, from 74.000 persons
in 1992 to 437.024 persons in 2002, which is an increase of almost six times.[17] On September 30,
2009, according to data from the National Authority for Disabled Persons, the number of disabled
persons was 669.523 persons, which represented 3,11% of the population. [18] Same functions of
public finance have been considered for this measure, function of socio-economic prioritization and
function of stimulating the national economy. But the data presented, leads us to ask questions such
as: Criteria for inclusion in the category of persons with disabilities are well established or are very
”elastic”? Independence of expert committees operating in the county level favoring or not favoring
the inclusion in the categorz of person with disabilities? The case assessment process is conducted
properly? What is the action of control function?
e) The process for declaring some romanian areas as disadvantaged areas was seen as a
source of economic recovery and souce of jobs. Attracting investors to these areas could be
achieved only through tax incentives, such reduction in tax obligations. Many investors have shown
interest in the facility for disadvantaged areas, but it appears that the impact on infrastructure and
living standards in these areas not increased as expected. Why? Because the ability of certain
entrepreneurs for obtaining the LFA investor certificate has not led to investment in that area, but
generated circumvent tax. What is the explanation for those companies that have benefited from
facilities three or four times times their investments made? According to data from the Ministry of
Development and Prognosis, in late 2000, in three of the seven regions that were deprived areas,
share facilities far exceeded the value of investments. Facilities volume in relation to capital
invested, represent 140% in the South East Zone, 120% in South Zone and 104% in Center Zone.
Once again, it can be argued that control function of public finance not exercised properly. [19]
f) Micro or macro fiscal decisions are closely related to the function of attracting resources. Their
action should take into account the structure of taxpayers, because it is possible that a measure of
fiscal policy which aimed to increase tax revenues, leading to their reduction. An example for this is
the introduction in Romania, since may 1, 2009 of minimum tax, according to the portion of total
income corresponding previous fiscal year.[10] In 2009, the introduction of this form of taxation led
to significant changes in the structure of taxpayers. "Following the introduction of the minimum
tax, the number of authorized individuals registered to National Trade Register in the first five
months of year 2009 was 26.254, up 32,6% over the same period last year ... Number of firms that
entered into insolvency in the first five months of year 2009 increased by 60.5% from 6.035 to
9.687". [20]
Negative aspects could go on ... We will try to present schematically the systemic approach
of public finance functions, to eliminate these negative effects.
231
THE SCHEME OF SYSTEMIC APPROACH OF PUBLIC FINANCE FUNCTIONS
Any company can be likened to a small forest.(Inamori, 1998) If those who "live" in this
forest are happy, little forest will thrive. Society can be considered the big forest, surrounding
businesses, a kind of cycle that is based on the industry. In the natural rhythm of the cycle of this
great forest, employees, investors and consumers should be happy, to "live together", to coexist in a
global society.[4]
The scope and role of public finances is understandable only to the extent that ensure a real
partnership between the state and taxpayers. In relation to corporate taxpayers, must be provided the
link between governance, taxation and investment climate, (Phillips and Sandall, 2009), based on
three directions: (a) Good governance provides a good tax system - an efficient administration, trust
in government and political stability are key elements for creating an equitable and efficient tax
system, which is capable to generate economic development; (b) An optimal tax system generates
good governance - state capacity to collect and manage taxes effectively, promote the general
economic prosperity; (c) Governance and tax system constitute investment climate -
disproportionate distribution of tax burdens, inefficient and unfair tax reforms, tax reductions and
exemptions granted by political criteria, are just some of the elements that may discourage
investment and participation in the formal economy.[7]
The action of resource allocation function, leads us into the sphere of public expenditure.
Between state expenditure and individuals expenditure are both similarities and differences.
(Hunter, 1921) The public expenditures are similar to the private ones, both have to do with the
giving up of money. Major differences between state expenditure and individual expenditure refer
to the following: state expenditures cover a greater range; for expenditure, the state can not compare
the cost of service with the value of service; state expenditure measure its needs and not be limited
to income levels. [5]
Presentation of these issues, and identify adverse effects of sequential approach to public
finances functions requires scrolling through eight steps that can be represented schematically as:
232
Economic phenomena and processes
Distribution Control
function function
function of attracting resources
function of allocation resources
redistributive function of net

domestic product
function of stabilizing the

national economy
function of stimulating the

national economy
coordination function of
demand and establishing social
and economic priorities
Economic and social tasks
Figure no. 1. A systemic approach to public finance functions
The eight steps leading to a systemic approach to public finance functions are: (1)
identification of economic phenomena according by society development level; (2) establishing
social and economic tasks resulting from the manifestations of these phenomena or processes; (3)
finding fiscal-budgetary solutions to achieve tasks; (4) establishing correspondences between tasks
and solutions; (5) identify the functions of public finances in direct and benefit correlation with the
chosen solution; (6) analyze the impact of solutions chosen over the other functions of public
finance under indirect correspondence; (7) waiver of those solutions which have been identified in
the previous step with possible negative effects and can not be avoided; (8) implementing solutions
and start action of control function.
The key feature of this approach to public finance functions is that, between distribution
function and control function do not exist relationship of subordination, but there is cross
compliance, each function offering to other function an field for manifestation.
CONCLUSIONS
Without claiming a comprehensive approach, through this article, we wanted to emphasize

the very important role of public finance functions in socio-economic life of a nation. Since,
mobilization of monetary resources generated by the distribution process of gross domestic product
is completed by creating funds for economic and social macrosystem, we considered appropriate to
identify the best approach of public finances functions, which in our opinion is the systemic
approach.
Using traditional instruments of scientific research, based on analysis and synthesis,
induction and deduction, general and particular, we tried to achieve relevant analysis on these
complex phenomena in the sphere of public finances.
233
REFERENCES
1. Bennett R. J. "The geography of public finance. Welfare under Fiscal Federalism and
Local Government Finance", University Paperback edition published in 1983, British
Library Cataloguing in Publication Data, pp. 33-34, http://books.google.ro
2. Brezeanu P., Marinescu I., "Finan
"România de Mâine", Bucharest, 1998, pp.5
3. Brezeanu P. "Fiscalitate. Concepte. Metode. Practici", Publishing Economică, Bucharest,
1999, pp. 41
4. Inamori K., "Oameni & Profit. O filosofie economică pentru secolul XXI", Publishing
Economică, Bucharest, 1998, pp. 65-69
5. Hunter M.H., "Outlines of Public Finance", Publisher Harper & Brothers, 1921,
http://chestofbooks.com/finance/economics/Outlines-Of-Public-Finance/
6. Latigo A.A.R., "A Background Paper on Engendering Budgetary Policy and Processes.
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234
ESTIMATING THE COST-VALUE RELATIONSHIP USING INSTRUMENTS

OF MANAGEMENT ACCOUNTANCY
Professor PhD. Iuliana GEORGESCU

Professor PhD. Dorina BUDUGAN
PhD. Student Laura CRETU
Alexandru Ioan Cuza University of Iaşi, Romania
Abstract:
According to the Declaration of the International Federation of Accountants (IFAC, 1998), in the management
accounting evolution the period after 1995 is characterized by the interest in creating or producing value through
efficacious and efficient use of resources using the techniques whuch analyze the value inductors for the customer and
shareholders, through institutional innovation. In this context, the concern is to eliminate "non-value added activities",
that were characteristic for higher prices without increasing value for the customer. Awareness of this fact was
followed by a general mobilization to cover the development of integrative tools and models designed to manage costs
and value together, put them in bundles and carry out arbitrage between these two categories of elements: "the stakes is
to optimize the enterprise supply by adapting the capital that it invests at the same level that is the customer value of the
product".
Starting from the definition of value, we intend to begin to explore the concept of customer value and, in particular, we
will try to see if it differs from the price paid by the customer. Then we highlight the complexity of the concept of
customer, multiple customers and unstable customers, because this is the fact that makes measuring and ranking the
values that they perceive to be difficult, or in any case, relative. In the second part of the article we will look on the
problematic relationship between cost and value. To do this we will analyze the main management accounting methods
proposed to build this relationship, especially insisting on the target costing method and activity-based costing method.
Key words: cost, value, management accounting, customer, method
INTRODUCTION
An analysis of the evolution of management accountancy highlights the presence of several

stages. Thus, during the first stage (before 1950), the interest paid to the estimation of costs and to
the financial control was obvious, under the condition of applying the estimating techniques for
budgets, the accountancy of complete costs. During the second stage (until 1965), the interest
moved onto the reduction of resources used in the activity of a company, using the analysis of
processes and cost management techniques. As it can be implied, during the first two stages, the
performance of a company, especially the production results, were estimated on terms of the
financial results (deviations from the standard costs were the main indicator in the monitoring of the
production activity), whereas during the third stage, the estimation of the performance of the real
processes is integrated in monitoring systems. Recent trends in management accountancy highlight
the change from the accountancy based on costs to an accountancy based on value.
WHAT IS VALUE FROM THE ECONOMICAL POINT OF VIEW?
The definitions of value can be found in fields such as sciences, arts, economy and
philosophy. We shall not consider the definitions from sciences, arts or philosophy, but the ones
from economy as they can help us better understand the value of any asset or service for the
customer.
We have classified the definitions of value into two categories:
 definitions given by the traditional economists and
 neo-classical theories on value.
Economist Adam Smith gives the following definition for value: „the word value has two
different meanings: sometimes it expresses the utility of some particular object and, sometimes, the
power of purchasing other goods which the possession of that object conveys”. The first meaning
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refers to the value in use, whereas the second to the value in exchange. For Marx utility is the
fundamental part of value, but it is reduced only to labour.
The value in exchange is, thus, “the price for which a commodity is exchanged for another”.
The value in use is given by the “utility of a commodity estimated either in an objective and general
manner, or in a subjective manner, consequently variable from one person to another. Hence, the
value in utility relates to needs, while the value in exchange requires relating to another commodity.
Whoever might handle the matter, Smith or Marx, utility motivates the economic productive
activity and represents the fundamental part of value, although its magnitude is determined by cost,
which allows an objective estimation.
For Jevons, considered the founder of the neo-classical school or the marginalist school of
economy, value does not count on costs, but on demand. It is determined by the marginal utility of
the commodity. Thus, for the supporters of the neo-classical theory, the value in utility depends on
the user, on the situation in which he is, on his preferences and it consequently has a subjective
character.
The first question which might me asked when talking about the management of the cost-
value relationship is whether we know if we refer to the value in exchange or to the value in utility.
Actually, if we note the definition of value in utility given by the traditional economists, we could
consider that value equals the costs and the interest in research is excluded by itself. It seems that
we should take into account the value in exchange, if we want our research to be meaningful, value
which is expressed in monetary terms and could be equalled to price.
WHAT IS VALUE FOR THE CUSTOMER?
During the last two centuries, the term value has been used more and more often in the
business environment and the idea of creating value for the shareholder was greatly stressed.
Nevertheless, the popularity of the term did not come along with a clear explanation of its meaning
and it is still ambiguous, especially when people use the word value without mentioning whether it
refers to the value for the shareholder or the value for the other parties involved: employees,
customers, suppliers, other groups.
In order to acquire a full and adequate perspective on the critical areas in the activity of a
company, Robert S. Kaplan and David P. Morgan (1992) favour the necessity to take into
consideration several approaches for the notion of value, namely: the financial perspective
(equivalent to the value for the shareholders), the customer’s perspective (equivalent to the value
for the customers), the internal perspective and the learning perspective.
Leaving aside the value for the shareholder and the discussion about a possible convergence
of values for the different parties interested in the situation of a given entity, we shall focus on the
customer perspective and value. Actually, the researchers specialized in management accountancy
refer to it when they want to establish a relationship between the costs generated by the products
offered to the customers and the value created by the manufacturer for the same customers.
As the importance and understanding of the customer needs acquires a more and more active
role in any business stages and the strategies of many companies focus especially on customer
behaviour and the way in which customers operate, the definition of value from the customer
perspective is of high interest.
During the last decade, the customer has become the ”centre” of the business, starting a real
revolution in the planning activities of any business, a revolution which has its roots in the concept
of creating value for the customer. Creating value for the customer was and has been in the center
of the marketing strategies of many companies.
The customer, as it is defined by the literature in the field, is that person or entity which
benefits from the product or the service provided by a company. The consumer is defined as the
one who obtains goods and services for his own use, not to be resold or used in production.
Consumers are similar to a catalyst in the chain of value; their act of buying launches the flow of
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activity of a company. Their demands and decision criteria are quite numerous and the cunstomer’s
methods of alloting value could be formal or informal.
The value created for the customers, in its most rudimentary form, is the difference between
the benefit acquired after consumption and the cost associated to the same product. Nevertheless,
nowadays consumers are much more educated and informed due to the information technologies
and consequently they tend to buy only those products which deserve the costs required for their
acquisition. In most cases, as presented in the literature in the field, the consumers’ perceptions on
price and value are considered the decisive factors in their behaviour.
The importance of the analysis of value created for the customer is continuously growing, as
the profit comes more and more from the creation and strenghtening of the relationship with
customers. The interest in the value created for the customer forces the management accountancy to
analyse not only the simple production costs, but also the price of the merchandise or of the service,
the maintenance costs, the research and development costs or the costs of elimination from
production.
Bradley T. Gale (1994; p.XX) proposes a model for defining the value perceived by the
customers as an adjustment of the price of each product or service depending on their quality,
determined by the customers’ opinion about the product or a service in relation to that of the
competitors.
The authors M. Larry Shillito and David J. DeMarle (1992; p. 11-14) bring powerful
arguments for value as a function of time. The moment a product enters a market, it has a strong
influence on the value perceived by the customer. In order to add more clarity to what we
understand by price, this characteristic should be defined again as property cost (maintenance cost
and withdrawal from the market).
In short, we could define the customer-perceived value as the price established by the
customer for a certain product or service depending on (a) the utility of the product in satisfying a
certain need, (b) the relative importance of the necessity to be satisfied, (c) availability of the
product when it is needed and (d) the property cost.
In many situations, the value created for the customer is confused with the price paid for the
products/service. The added-value is not estimated in contract terms, but the supplier must discover
it and make it known to the customers, in order to gain their trust.
TARGET COSTING
Managing the cost-value relationship is rather a new field in accounting research, although it
is known that during the 1980s the success of the Japanese companies was based on the solution
found for this issue. A great number of studies which synthesize the Japonese practices in
management accountancy ( Cooper 1995, Kato 1993, Tani 1995) rank target costing as one of the
methods which can establish a relationship between cost and value created for the customer.
Target costing is an approach used in management accountancy which helps in designing
products so that the lowest price possible could be reached, thus giving the opportunity of creating a
product according to the customers’ needs and demands at a target cost. The method of target
costing is greatly based on value engineering, offering an interdisciplinary examination of the
factors which affect the product cost with the purpose of finding a way to reach the standards of
quality and reliability for a target cost (Cooper 1995; p.352). We mention among the techniques
used in value engineering and implicitly in marketing, quality function deployment (QFD), down
analysis, quality and reliability testing, functional analysis and parametric cost estimation.
We consider target costing is a method which can establish a relationship between cost,
decided on internal level and price, decided on the market, on an external level. In order to support
our statement, we quote De Ronge (2000): “the production cost of the future product, named target
cost, is a priori determined and it is the result of the selling price imposed on the market and the
level of profit imposed by the long-term strategy of the company”. As a consequence, the definition
of customer value accepted by target costing is explicitly the selling price.
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In his paper Horvarth (1995; p.76-77) considers that the optimum solution in cost
management and value would be obtained by applying the proportionality between costs and value
while referring to target costing he claims that “its purpose is to generate a sum of costs from all
parts of the product corresponding to the value given by the consumer”. Thus, target costing
becomes an efficient tool in maintaining the customer-created value, while costs are reduced.
Even though many researchers consider that target costing is a method of cutting costs, we
shall try to present an example which would highlight that this approach is also based on creating
value.
A factory producing furniture raw material signs a long-term contract with a manufacturer
of furniture for supermarkets. For this contract, the Marketing Department agreed on a very low
selling price. Thus, in order to obtain the greatest profit from this contract, there was created a cross
functional team with the mission to understand the customer needs and to find the production means
and methods and marketing strategies to create more value for the customer and diminish the costs.
One of the customer’s requests was to deliver boards of minimum 4m in length. This detail
was an impediment to the fulfilment of the contract obligations by the supplier as its position as
supplier for the local manufacturers made it difficult to offer every time a stock of boards of
minimum 4m.
The first solution to this problem was that the manufacturer could create a new product with
the length of 4m and to work especially for this customer. But, following the managerial
decision to adopt the target costing method, the marketing team had several meetings with the
customer in order to adapt the characteristics of the products and the company services to the
customer needs. The results of the discussions were the following:
 the customer is content with the just-in-time deliveries of the board kits, as the
manufacturing costs are reduced;
 the customer pays a higher price, as he receives kits instead of boards;
 many of the leftovers can be used by the supplier in sales, their cost being almost null.
This way, the customer reduced the costs of the stocks (the boards are no longer kept in
stock), for the materials and leftovers and the production time was also reduced, while the
manufacturer increased his incomes as a consequence of the higher price for the already cut kits.
In conclusion, the contribution of a target-costing approach in the management of the cost –
value relationship could be the following:
 on global level, it allows the link of the estimated selling price for any product to its price on
the market; we notice in this case that the notion of value is identified to that of the price;
 on analytical level, it contributes to the establishment of certain costs for the product parts,
attributes or functions, but there should be taken into account the fact that the parts should
be carefully created, so that the sum of costs would not have any relationship with the value
perceived by the customer.
ACTIVITY BASED COSTING
During the last years, there have been developed new approaches so that the information
offered by management accountancy could answer to the continuously changing demands of
management. Thus, in order to avoid the traditional hypotheses based on standard costs and the
analysis of the variations, there has been developed the Activity Based Costing (ABC) method,
which determines the costs of the resources for the activities it undertakes, offering a new vision on
costs.
As a consequence, the relationship between activities and costs is made clear by the two
fundamental principles of ABC, namely:
1. products “consume” activities, in other words, products require activities. The costs of the
activities are transferred to the product corresponding to the cost generators or creators;
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2. activities (not products) consume resources or values which represent productive factors,
actually corresponding to the quantified expression of the monetary terms of these resources or
productive factors consumed by the activities.
In case the relationship between costs and value is unsure, the other two relationships, which
link the activities to costs and the activities to value, are the object of some causal links. So, “going
through the activities” we could link costs to value.
The activity could be defined as a specific mission or a group of tasks of the same type
undertaken in order to bring more value to the product manufacturing. (Oprea C., Carstea Gh; p.
261). If we were to resume to the two ABC principles, regardless of the dimension of the company,
we would have an unlimited set of activities and we could choose some of them. But the activities
thus identified might be more or less useful to identify the product cost, to make decisions or to
create value. Thus, in 1991, Lebas, after he had divided the company on account of activities, he
proposed the separation of value added activities from the non value added activities. Even more,
Mevellec, in 2000, brings together the value added activities which are similar into processes.
Starting from the premise and using the ABC method, Chauvey and Naro (2004) admit that it is
possible to link costs to value added for the customer, using activities and processes.
The value added activities are those activities which add value to the product or service for
which the customer is willing to pay. Thus, all the activities necessary to manufacture a product or
to improve its quality and reliability are value added activities. On the other hand, the non value
added activities are those activities which do not contribute with any kind of value to the final
product and are those activities for which the customer is not really willing to pay. Piling up
products and useless inspections on the production line are examples of activities which do not
create added value. These activities should be eliminated as much as possible.
Any ABC system offers information on the consumption of resources on products as well as
on customers. This information has the role to help management in decision making as regards the
design of the products, production technology, prices and range of products, decisions which might
have a long-term influence on the relationship of the company with its customers. We mention
here, as a competition advantage of this method the fact that the ABC method makes possible the
identification of profitability for each customer, by the separate estimation of two costs: cost per
product and cost per customer. Subtracting these costs from the selling price we obtain the profit
per customer, but also the corresponding position of products and services.
CONCLUSIONS
From the theoretical point of view, the answer to the question “Could management
accountancy control the relationship between cost and value?” is an affirmative one. But from the
practical point of view this thing seems difficult to accomplish as, traditionally, the management
accountant focuses on costs, in other words, on the internal management of the company, while the
management of customer value supposes being open to the market, even more, it requires an
expansion of the centres of interest and fields of activity. Management accountants are often
accused for not “creating value”, for hindering the other positions in creating value, for being
focused on cost reduction, but they can often find in the management accountancy tools for the
control of the cost – value relationship the means to stand for themselves and join even closer for
the strategic plans of the company.
A thorough knowledge of the studies made by marketing specialists would make possible a
better use of their results in the company strategies to develop new products. For exemple,
understanding the fact that these values are not only marginal, but they are adding and multiplying
and so on, could have an influence on the development of the target cost approach.
The creation of value starts from the customer. All activities that the companies are doing
for quality should focus on customer needs and demands. But they cannot be aware of their future
needs, therefore companies have to anticipate, innovate and create new values for original products,
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services and processes. It is vital to understand the value made available for the customers by the
company, at present as well as in the future.
REFERENCES
1. Chauvey J.N, Naro G. (2004), Les apports de l’ABC à l’analyse stratégique : les enseignements
d’une recherche-intervention, Finance Contrôle Strategié, 7 (3): 63-89
2. Cooper R. (1988), The Rise of Activity Based Costing, Journal of Cost Management, Summer,
2 (2): 45-54
3. Cooper, R. (1995). When Lean Enterprises Collide: Competing Through Confrontation. Boston:
Harvard Business School Press.
4. Gale B. T.(1994), Managing Customer Value: Creating Quality and Service That Customers
Can See, The Free Press, New York
5. Johnson H. T., Kaplan R. S. (1987), Relevance Lost: The Rise and Fall of Management
Accounting, HBS Press, Boston
6. Kaplan R. S., Norton D. P. (1992), The Balanced Scorecard – Measures That Drive
Performance, Harvard Business Review, January-February, p. 71-73
7. Kato, Y. (1993). Target costing support systems: Lessons from leading Japanese companies.
Management Accounting Research. 4 (1): 33-48.
8. Lebas M. (1991), Comptabilité analytique basée sur les activités, analyse et gestion des
activités, Revue Française de Comptabilité, (226): 47-63
9. Mévellec P. (2000), Comptabilité par activités. In Encyclopédie de Comptabilité, Contrôle de
Gestion et Audit, (Eds Collasse B.), Economica
10. Oprea C. (2003), Carstea Gh., Contabilitatea de gestiune si calculatia costurilor, Editura Atlas,
Bucureşti
11. Shillito M. L., DeMarle D.J. (1992), Value: Its Measurement, Design, and Management, John
Wiley & Sons, Inc., New York
12. Tani, T. (1995). Interactive control in target cost management. Management Accounting
Research. 6 (4): 399-414.
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THE ANALYSIS ON THE PREPARATION DEGREE OF THE EASTERN EUROPE

BLOCK STATES TO ADOPT THE UNIQUE CURRENCY
Lecturer PhD. Student Anisoara Niculina APETRI

anisoarad@seap.usv.ro
Profesor PhD. Gheorghe SANDU
sandug@seap.usv.ro
Lecturer PhD. Irina Stefana CIBOTARIU
irinac@seap.usv.ro
Abstract:
The entry ticket for the Economic and Monetary Union and for adopting the single currency is obtained when
an EU member country achieves the five nominal convergence criteria stipulated in the Maastricht Treaty. Since the
launching of the euro on 1 January 1999 by 11 European Union member states, another five countries joined theeuro.
Out of the 27 EU countries currently only 16 Member States have adopted the euro at most recent case in this regard is
Slovakia on 1 January 2009. This means that 11 states have not yet adopted the euro and are fully participating in the
third stage of the economic and monetary union. The idea of this paper appeared amid the advance preparation of the
Eastern block countries in the European Union to the admission to a higher stage of integration. After analyzing the
status of compliance with the convergence criteria of the Eastern bloc countries in the EU, of Romania in particular, we
came to the conclusion that Romania does not comply with any of the criteria for adopting the single European
currency, with all the progress made in terms of European integration, so it is shown that efforts must be intensified
in order to achieve a high degree of sustainable convergence. This effort is aimed at making and maintaining price
stability in a sustainable manner, as well as reducing the large deficits incurred during the financial and economic
crises, in some Member States and to achieve and maintain an optimal level of the public finances.
Keywords: Monetary Union, nominal convergence criteria, inflation, budget deficit, public debts, real
convergence,
JEL Classification: E 42
INTRODUCTION
The currency revolution, embodied by the euro, involves more than the elimination of
national currencies and distributing colorful banknotes and coins throughout Europe. It entails the
unification of the common market of goods and services of the European Union, major structural
changes in countries characterized by reckless fiscal and monetary policy, and the reorganization of
some of the most advanced industrialized economies of the world. The process of the admission of
Eastern Europeans in the European Union and subsequently in the euro area, raised a number of
questions relating to the compliance with the convergence criteria for the Economic and Monetary
Union.
In the analysis of the status of compliance with the convergence criteria, the sustainability is
of critical importance. Adopting the euro is an irrevocable process; therefore the convergence
process should be done in a sustainable manner, not only within a certain time. In order to achieve a
high degree of sustainable convergence, the efforts of all countries surveyed have increased
significantly. This effort is aimed at achieving and maintaining price stability needed in a
sustainable manner, as well as reducing the large deficits incurred during the financial and
economic crisis in some Member States and to achieve and maintain an optimal level of public
finances. This paper presents an analysis of the criteria for nominal and real convergence for a part
of thr central and eastern European countries, focusing in particular on the case of Romania.
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1. ANALYSIS OF NOMINAL CONVERGENCE
1.1. Sustainable price stability criterion. According to this criterion, the inflation rate
should not exceed 1.5% average of the three countries with the lowest inflation rates. This criterion
involves a high degree of monetary policies convergence. It is important for the inflation rates to
converge within a union, because states that have a higher inflation than others suffer a loss of
competitiveness that can not be corrected through devaluation (Toma, 2004). Also, for the benefits
of the Single Market, the Member States must meet the requirement relating to price stability.
Considered as a condition for exchange rate stability, price stability allows the euro single currency
to emerge as the strongest currency against other currencies.
Table no. 1. Inflation rate (%)
Country / year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Bulgaria 10,3 7,4 5,8 2,3 6,1 6,0 7,4 7,6 12,0 2,5
Poland 10,1 5,3 1,9 0,7 3,6 2,2 1,3 2,6 4,2 4,0
Czech Republic 3,9 4,5 1,4 -0,1 2,6 1,6 2,1 3,0 6,3 0,6
Romania 45,7 34,5 22,5 15,3 11,9 9,1 6,6 4,9 7,9 5,6
Slovakia 12,2 7,2 3,5 8,4 7,5 2,8 4,3 1,9 3,9 0,9
Hungaria 10,0 9,1 5,2 4,7 6,8 3,5 4,0 7,9 6,0 4,0
EU-15/ EU-27 1,9 2,2 2,1 2,0 2,2 2,2 2,2 2,3 3,7 1,0
First three states with 1,2 1,6 1,4 1,2 1,1 1,4 1,6 1,8 2,6 0,1
smallest inflation
average
Entry criterion 2,7 3,1 2,9 2,7 2,6 2,9 3,1 3,3 4,1 1,6
Source: CEB, NBR, Eurostat database
Along with Bulgaria, Romania is an EU member state that records a relatively high level of
inflation compared with other members. Not fulfilling this criterion by Romania means, in fact, the
Romanian economy macroeconomic stabilization process’s lack of sustainability (Socol, 2008).
Retrospective analyses show that in Romania, consumer price inflation has been placed on a clear
downward trend, although showing in the reference period a very high level, namely 45.7%.
Disinflation experienced in the context of strong real GDP growth, which exceeded the 5.0% level
in almost every year since 2001. Disinflation has occurred against the backdrop of accelerated labor
income, which exceeded 20% over several years.
242
Inflatia (%)
50
45
40
35
30
25
20
15
10
5
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Anul
România Criteriul de intrare
Figure no. 1. Evolution of the average annual change in the HICP of Romania
compared to the euro zone entry criteria
Source: ECB, the central bank, the Eurostat database
The year 2004 was the first year with inflation expressed by a single digit in the period after
1990, the inflation rate in December being 9.3%. If by the end of 2004 the NBR managed to
significantly reduce the inflation rate, 2005 was marked by the slowdown in disinflation (Socol,
2008). Thus, the inflation target was exceeded by 1%, reaching an average rate of inflation 9.1%.
The next year meant the continuation of the disinflation process, at the end of it reaching a target of
4.87%. The annual inflation rate accelerated to around 4% in January-July 2007 period to 8.7% in
March 2008. In 2009 the average annual inflation rate for Romania was at 5.6%, considerably
higher compared to reference value of 1.6% corresponding to the criterion on price stability. In
April 2009 Romania had the highest annual rate of inflation in the European Union, 6.5%, while the
annual rate in the euro area remained unchanged in April 2009, at the record level of 0.6% and in
the European Union decreasing slightly, to 1.2% from 1.3% the previous month, according to
revised estimates published by the European Statistics Office. The Central Bank's monetary policy
strategy is direct inflation targeting. Given that the Romanian economy is undergoing a process of
disinflation - the pace of inflation over the medium term sustainable and compatible with the
quantitative definition of price stability is not yet reached. The inflation evolution over the past
decade must be considered in the context of a robust growth of GDP by mid-2008, followed by a
sharp decline in economic activity (Toma, 2004) in the international financial crisis.
1.2. Budget deficit criterion. According to this criterion, the government deficits of the
Member States of the Union who wish to adopt the single currency can not exceed 3% of gross
domestic product. Controlling the budget deficit was imposed in order to avoid situations in which
states have no way out other financial than inflation, which could compromise the credibility of
monetary union.
Table no. 2. Budget deficit (-) / surplus (+) to GDP (%)
Country/year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Bulgaria -0,3 0,6 -0,8 -0,3 1,6 1,9 3,0 3,4 1,8 -3,9
Poland -3,0 -3,7 -3,3 -4,5 -4,8 -4,3 -3,9 -1,9 -3,7 -7,1
Czech -3,7 -5,9 -6,8 -6,6 -3,0 -3,6 -2,6 -1,6 -2,7 -5,9
Republic
Romania -3,6 -3,5 -2,0 -2,0 -1,4 -1,4 -1,9 -2,3 -5,4 -8,3
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Slovakia -12,3 -6,6 -7,8 -2,8 -2,4 -2,8 -3,5 -2,2 -2,3 -6,8
Hungaria -3,0 -3,5 -8,9 -7,2 -6,4 -7,8 -9,2 -5,0 -3,8 -4,0
EU-15/ EU-27 0,6 -1,4 -2,5 -3,1 -2,9 -2,5 -1,4 -0,8 -2,3 -6,8
Entry criterion -3,0 -3,0 -3,0 -3,0 -3,0 -3,0 -3,0 -3,0 -3,0 -3,0
Source: Marius Marinas, Economic convergence, Economic Publishing House, Bucharest, 2008; the Eurostat
database
Compared with the states analyzed, Romania is after Bulgaria in the budget deficit values
obtained during 2000-2009. This indicator has seen a downward trend until 2005, when it amounted
to -1.4%. In 2006, the budget deficit rose to 1.9% of GDP, and this upward trend has continued
until today. Thus, in 2007, Romania registered a budget deficit of 2.5% of GDP, lower than the
reference value of 3%. Although the European Commission has forecast an increase in the deficit to
2.9% in 2008, the budget deficit has doubled. For Romania to maintain a share of the deficit below
the reference value and meet the medium-term objective set out in the Stability and Growth Pact it
was necessary to continue fiscal consolidation. In regard to other fiscal indicators, in 2006 and 2007
the magnitude deficit in GDP did not exceed public investment.
Anul
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-1
-2
-3
-4
-5
-6
-7
-8
-9
Deficit bugetar
Romania Criteriul de intrare
Figure no. 2. The evolution of Romania's budget deficit compared to the eurozone
entry
criteria
Source: Eurostat database
In 2009, Romania registered a budget deficit of 8.3% of GDP, far higher than the reference
value of 3%. So our country is subject to EU Council decision on existence of excessive deficit. In
respect of other tax indicators, the deficit ratio exceeded the share of public investment in GDP in
2009 and expected a similar situation in 2010. Romania also faces serious risks in terms of
sustainability of public finances. We can say that the slow pace of consolidation of public finances
sustainable in Romania has high costs and long-term average. The sharp increase in pensions, the
unwise wage policy, the avalanche of populist legislative initiatives in parliament, and the
inconsistent fiscal policy represent elements that have favored the consolidation of a serious
imbalance in public finances. To prevent deterioration of economic and financial situation, the
Romanian authorities have requested and negotiated a financial package on two years in March
2009, with the IMF, the European Community and other international financial institutions (World
Bank, EIB, EBRD) worth 19.95 billion euro.
1.3. The public debt criterion. According to this criterion, the debt can not exceed 60% of
gross domestic product. When a State resorts to borrowing, to cover budget deficit, for the
repayment thy should obtain a primary surplus by cutting spending and increasing revenue (Toma,
2004). Otherwise, the debt grows more and with it the annual amounts to be repaid. On the other
244
hand, a government might be tempted to use the money issue to cover the debt. The Maastricht
Treaty prohibits the issuance of money that aims to reduce the actual debt because of its inflationary
nature.
Table no. 3. Gross public debt to GDP (%)
Country/year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Bulgaria 74,3 67,3 54,0 46,3 37,9 29,2 22,7 18,2 14,1 14,8
Poland 36,8 36,7 42,2 47,1 45,7 47,1 47,6 45,2 47,2 51
Czech Republic 18,2 25,3 28,8 29,8 30,4 29,8 29,4 28,7 30,0 35,4
Romania 22,5 25,7 23,3 21,3 18,8 15,8 12,4 13,0 13,6 23,0
Slovakia 49,9 48,7 43,3 42,6 41,4 34,4 30,4 29,4 29,2 35,7
Hungaria 55,0 52,0 56,6 58,4 59,1 61,8 65,6 65,9 72,9 78,3
EU-15/ EU-27 61,9 61,0 61,4 63,3 63,8 62,9 61,7 59 61,6 73,6
Entry criterion 60,0 60,0 60,0 60,0 60,0 60,0 60,0 60,0 60,0 60,0
According to the information in the table above, we can say that Romania is the state which
recorded the lowest levels of public debt to GDP among all the states analyzed.
In early 1990, Romania's external debt paid in full and had to receive from Iraq claims worth
$ 2.5 billion, debt that was partially canceled and the rest rescheduled (Socol, 2008). In addition, it
had reserves of approximately 1 billion euros. This was the result of irrational economic policies of
forcing exports and the exaggerated amputation of imports. Subsequently, the discrepancy between
the mechanism of resource allocation and economic performance, the adjustment forced "tense" of
the economy balance, have led to serious discrepancies in the system and gave the economy a
"normal" state of "stable disequilibrium" (Brezeanu, 2007) .
Retrospective analyses for Romania indicate that the gross government debt recorded a
relatively downward trend until 2006, when it obtained the lowest value, namely 12.4%. 2007
marked the increase of this indicator’s value from 13% to 23% today.
Figure no. 3. The structure of government debt in Romania

Source: Ministry of Public Finance
Currently, Romania's public debt level is below 25% of GDP, well below the 60% ceiling
set by the Maastricht Treaty. Thus, at the end of 2008 the government debt calculated according to
EU methodology represented 13.6% of GDP, while in late 2009, amid the deepening international
245
financial crisis and deepening recession in Romania, this indicator was 23.0% of GDP, of which
domestic debt 11.7% and 11.3% external. For Romania, the financing necessary to complete the
internal resources generated external debt which stood within sustainable parameters over the
period analyzed. Since debt service in coming years will reach peak levels, and concrete results in
the Romanian economy are not yet comparable to the objectives of reform programs, the integration
of external debt management and the internal indebt strategy is imposed within the macroeconomic
policies developed by decision makers (Brezeanu, 2007).
1.4. The interest convergence criterion. According to this criterion, long-term interest rates
can not exceed by more than 2% the average of the three countries with lowest inflation. This
criterion addresses two key issues: interest rate, which is determined by market supply and demand
and the anticipated rate of inflation (Toma, 2004). The convergence of long-term interest rates
means the convergence of expected inflation rates, the latter in turn reflecting the fact that the
monetary policies of different countries have reached a level of homogenous credibility.
Table no. 4. Nominal long term interest rates (%) (calculated for 10-years maturity bonds)
Country/year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Bulgaria - - - 6,4 5,3 3,8 4,2 4,8 5,4 7,2
Poland - 10,7 7,3 5,7 6,9 5,2 5,2 5,5 6,0 6,1
Czech Republic - 6,3 4,9 4,1 4,8 3,5 3,8 4,3 4,6 4,8
Romania - - - - - 6,7 7,2 7,1 7,7 9,6

Slovakia - 8,0 6,9 4,9 5,0 3,5 4,4 4,5 4,7 4,7
Hungaria - 7,9 7,0 6,8 8,2 6,6 7,1 6,7 8,2 9,1
EU-15/ EU-27 1,2 1,6 1,4 1,2 1,1 1,4 1,6 1,8 2,6 0,1
Criteriul de intrare 3,2 3,6 3,4 3,2 3,1 3,1 3,6 3,8 4,6 2,01
Looking back, the nominal long term interest of Romania has seen a descending path. Thus,
this rate increased from 6.7% in 2005 to 9.6% in 2009. Referring to the same period, we can say
that long-term interest rates in Romania have soared in the context of high levels of investor
aversion to risk and uncertainties relating to economic prospects. During the period April 2007 -
March 2008, long-term interest rates stood at an average of 7.1%, a benchmark higher than the
interest rate criterion, of 4, 6%. In the second half of 2009 long-term interest rates were located on
average at 9.4%, significantly higher than the reference value corresponding to the interest rate
convergence criterion. In recent years, long-term interest rates in Romania have soared in the
context of high levels of investor aversion to risk and uncertainty surrounding the economic
outlook. Recently, these indicators have registered a downward trend but continued to place
relatively high, and the associated long-term interest rate bonds issued by the Romanian state was
7.1% in March 2010. Creating an environment conducive to the sustainable convergence in
Romania requires, among other things, a stability-oriented monetary policy and strict
implementation of consolidation plans. As a result of the Romania’s integration into the European
Union deepening, the country's rating is likely to be high, and our country will be able to emerge on
the public markets and private external capital bonds with a maturity of ten at a rate of interest that
meet the criteria set by the Treaty of Maastricht (Socol, 2008).
246
Rata dobanzii (%)

0,12
0,1
0,08
0,06
0,04
0,02
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Anul
Romania Bulgaria Valoarea de referinta
Figure 4. Evolution rate compared to the reference value for Romania and Bulgaria
2. ANALYSIS OF ROMANIA’S REAL CONVERGENCE
The analysis of the Romanian economy’s real convergence with the European model may
begin with the analysis of known GDP per capita at purchasing power parity. In 2008, Romania
has recorded a 42.5% value afferent to this indicator related to the EU average. In addition, this
value is lower than that obtained by the Czech Republic (82) but higher than the figure recorded in
Bulgaria (39%). A year later, the GDP per capita at purchasing power parity standard (PPS) in our
country stood at 45% of the EU average, Romania occupying the second lowest in the EU, ahead of
Bulgaria, where GDP per capita expressed in PPS was 41% of the EU.
The literature shows that successful real convergence of a state depends on the evolution of
labor productivity. Thus, increasing wage growth causes economic growth and increasing living
standards. An average growth rate of labor productivity per person employed of 10% per year can
be an engine of a quickly sustainable catching-up process. In 2007, the average labor productivity
increased by 11% over the previous year. In 2008, Romania was the second lowest among the EU
Member States; the productivity per person employed was 43%.
Another index of real convergence of our country is to increase business investment as a
share of GDP. It is necessary that this indicator to be correlated with labor productivity growth. In
essence, increasing business investment shows the GDP weight that the private sector uses for
investments. For Romania, this indicator’s recorded values are higher than the EU average. This
underlines the high potential of the Romanian private sector development, especially through
technology transfer, know-how, management techniques, made by foreign direct investment (Socol,
2008).
Table 5. Business investments
State/year 2003 2004 2005 2006 2007
Bulgaria 16,6 17,6 20,0 21,8 25
Romania 18,2 18,9 19,3 22,8 n.a.

Hungaria 18,6 18,9 18,8 17,3 17,3
EU-15 / EU-27 17,1 17,3 17,8 18,2 n.a.
247
The FDI in the Romanian economy and the attraction of the largest possible European funds
could solve some of the structural problems of the national economy. For example, foreign direct
investment based on the transfer of technology increases the speed of convergence. They are a
stable source of financing the current account deficit. Romania's advantages in attracting investment
of this type refer to: domestic market size, proximity, level of taxation, the unit cost of labor, low
political risk and the importance given to the privatization process. FDI flows have been attracted
mainly by the low cost of labor and did not significantly affect the structure of the Romanian
economy. These were mainly related to the privatization process.
Also, specialists in macroeconomics recommended the states in transition to develop their
infrastructure for the catching-up process to be quick. As regards our country, public investment in
recent years have increased yearly, aware that economic modernization means the highways,
telecommunication networks, adequate public utilities, etc. (Socol, 2008). At present, Romania
ranks last in Europe in terms of kilometers of highway built. The total length of highways at the end
of 2009 amounted to 303 km.
In regard to the structural and cohesion funds granted by the European Union, they represent
one of the main ways of financing investment projects in infrastructure. According to the EU
financial perspective, the funds allocated to Romania in 2007-2013 amounted to 19 billion euros
(Socol, 2008). Although disposing of these funds, the capacity of their absorption by Romania is
extremely low. Low absorption capacity can be attributed to lack of eligible projects, institutional
mechanisms and financing opportunities. Perhaps the most important constraint in accessing the
European funds is the complete co financing of European projects while respecting the nominal
convergence criteria on budget deficits in the same time. With a budget deficit of 8.3% and a share
of budgetary revenue in GDP of 32.1% in 2009, it will be very hard for Romania to co-finance any
part of the European project of modernization.
A final indicator that it should be noted is the structure of the Romanian economy sectors.
Between 2000-2007, it was not as substantially modified. Although agriculture's contribution to
GDP dropped in the range of reference, this reduction is not significant. Relatively low share of
services in GDP is a determining factor in terms of structural differences compared to the European
Union. Analyzing the composition, there is a weak development of services to businesses, public
services, tourism.
Table 6 Evolution of the national economy sectors, in relation to GDP (modifications

compared to the previous year)
Sector / year 2007 2008 2009*

Industry 5,4 1,9 -4,3
Agriculture -15,3 21,9 -2
Constructions 33,9 26,1 -18,9
Services 7 5,4 -5,6
* National Forecast Commission estimates
Source: Convergence Programme issued by the Romanian government
To achieve rapid real convergence with EU countries, Romania is supposed to stimulate

labor productivity growth at a higher rate than the exchange rate appreciation against the euro and
should apply a mix of measures to attract foreign direct investment. Also, structural and cohesion
funds must be given to the regions near the center, in the form of concentric circles outward in order
to improve cohesion.
CONCLUSIONS
In conclusion, our country does not fulfill any of the criteria that would enable it to adopt the
European single currency. Also, the Convergence Report adopted by the European Commission in
248
May 2010 highlighted that Romania does not comply with any criteria in order to adopt the single
European currency with all the progress made in terms of European integration. The document
analyzes developments of the Romanian economy and finds that the Romanian authorities have not
achieved sufficient progress for the euro. Creating an environment conducive to sustainable
convergence in Romania requires, among other things, a stability-oriented monetary policy and
strict implementation of consolidation plans. However, Romania faces with numerous challenges in
terms of economic policies.
Although authorities have announced that they would like the changeover to take place in
2015, this is not possible since the instability of prices and exchange rates, budget deficit and long-
term convergence of interest and legal framework for entering the race disqualify Romania in the
euro area. BNR Governor Mugur Isarescu said recently that it is best for Romania to adopt euro
slightly later than the original schedule, but to do this step before being ready. Romania does not
seem interested at the moment in the accession to Euroland in 2015 as it was expected, a reasonable
time horizon being 2018, say sources in the financial system since costs of the adoption of the euro
would now be higher than the benefits.
REFERENCES
1. Brezeanu, P., (2007)Finanţe europene, Ed. C.H. Beck, Bucureşti

2. Mongelli, F.P (2008), European economic and monetary integration and the optimum
currency area theory, European Commision, Burssel,
3. Popescu, Gh (2007), Economie europeană, Ed. Economică, Bucureşti
4. Socol, A.. G., (2009),Macroeconomia integrării monetare europene. Cazul României, Ed.
Economică, Bucureşti
5. Toma, R., (2004)Euro, moneda unică: între naţional şi internaţional, Ed. Continent, Sibiu
6. Programul de convergenţă 2009-2012 emis de Ministerul Finanţelor Publice
7. Raport de convergenţă mai 2008
8. Raport de convergenţă mai 2010
9. Sustainability Repport 2009
10. www.wall-street.ro
11. www.financiarul.ro
12. www.ziare.com
13. www.money.ro
249
RATIO BETWEEN ACCOUNTING PRINCIPLES AND INTERIM FINANCIAL

REPORTING
Assistant PhD. Student Claudia-Elena GRIGORAS-ICHIM

“Stefan cel Mare” University of Suceava, Faculty of Economics and Public Administration
claudiag@seap.usv.ro
Abstract:
In economic and financial communication, the common language is represented by accounting rules which
consent the process of converting the operations afferent to economic development in figures (the situation of the one
which prepares the interim financial reports) and a process to convert figures in economic transactions (the situation of
the one using the interim financial reports). Therefore arises necessarily the “accounting standardization process”
involving a complex of rules capable to uniform the criteria that are based on the representation and interpretation of
values from the interim financial reports. These rules, either general or specific, can be derived from the accounting
practice or may be established by legislation.
Key words: interim financial reports, accounting principles, accounting normalisation
Is already consolidated and known the role of interim financial reports as the main
communication tool of economic-financial type, designed to provide to a broad range of
stakeholders (investors, financiers, customers, suppliers, etc.) the “minimal knowledge”, so that this
subjects can meet their information and decision requirements. Any form of communication
included, therefore the one of the interim financial reports, is subject to the use of the same
language by a subject issuer and the recipient. In economic - financial communication, the common
language is represented by accounting rules that consent the converting process of operations
afferent to economic development in figures (situation of the one preparing the interim financial
reports) and a process to convert figures in economic transactions (situation of the one using the
interim financial reports). Therefore is necessary the “accounting standardization process” which
involves a complex of rules capable to uniform the criteria that are based on representation and
interpretation of values from interim financial reports. These rules, whether general or specific, can
be derived from accounting practice or may be established through legislation (1). In the first case
speaks about “normalisation of accounting practices” specific to Anglo-Saxon countries: it has no
reference normative system, being influenced by operational practice. Accounting rules that define
procedures of economic evidence devolves from best practices active and fully recognized by
accounting professionals, coming coded by authoritative professional bodies, with respect to the
best economic-financial doctrines. An example of generally accepted accounting principles are
those which are meet in American reality - coded by FASB (Financial Accounting Standards
Boards), issued by entities and professional associations as AICPA (American Institute of Certified
Public Accounting). Such principles are applied through an accredited recognition from
professional accountants and from a continuous assessment of their validity in relation to the
specific problems arising continuously, presenting a high flexibility (2). In the second case it speaks
of “accounting / legal regulated normalisation” - characteristic of our country, where the legislator's
duty is to accounting rules of general nature in order to define the minimal aspects of economic-
financial communication. The drafting of the interim financial reports is presented through a set of
rules and refers only to “normalisation” of schemes and structure of interim financial reports or
values presented in financial reports. This fact involves a reduced flexibility of such an accounts
regulatory system, which is avoiding the possibility to support rapid changes that can devolve from
the necessities to solve new accounting problems, putting into question the awarding of the
regulating role in matter of accounting to Romanian legislature. We consider that this is about a quit
technical matter, pragmatic and extremely complex (preparation and drafting of the interim
financial reports). Because the interim financial reports may explain the function of information
vector of various categories of stakeholders of the entity's financial-economic activity, they need to
be clear and credible, meaning to be able to properly represent the economic, financial and
250
patrimonial situation of the entity. It is obvious that such a representative capacity of interim
financial reports can be harmed by more subjective components and the uncertainty that
characterizes the drafting of documents, so it is important the auditors role that have the task to
express an opinion regarding their reliability, which is for users of interim financial reports “a
guarantee of quality” of information from the interim financial reports (3).
Administrative Checking and

policy control
function
Financial Economic- Destination

reporting financial and use of
activity resources
Reporting related to:

General - programs
information - patrimonial financial
situation
- economic evolution
- social results – etc.
Figure no. 1. Purpose of financial reporting

Source: Impact of IAS/IFRS standards over evolution of financial reports. Case study at Telecom Italia (Grosu V.,
2009)
Audit of interim financial reports is mandatory for all companies traded at Stock Market or
RADAQ. Auditor, having the duty to express an opinion regarding the degree of approximation of
interim financial reporting against economic reality, is interposed between the emitting entity and
stakeholders, in order to strengthen the information contained by them.
The existence of a set of accounting principles, rules or practices of recognizing and
evaluating the economic transactions and representation of values from interim financial reports,
requires the role of “terms of conventional confrontation”, from which the auditor may inform to
express his opinion (4). In fact, the interim financial reports can be “certified” only if they
correspond as form and content to some reference determined standards, from which the views
expressed by the auditor would be impregnated by an excessive discretion. Accounting principles
explains their usefulness only for auditors, easing their work and limiting their discretion in
evaluating the credibility of interim financial reports, and also for those who draw and prepare the
interim financial reports and for each category of users of accounting information. For the first
ones, these principles facilitate the process of converting economic structures in numbers, their
compliance being motivated to obtain some positive opinions from the auditor that uses these
principles as standards in order to assign credibility to interim financial reporting; in contrast, for
those who prepare interim financial reports, accounting principles facilitate the conversion of
figures in economic structures, reducing the interpretive uncertainty and increasing for them the
thrust of auditor’s opinion, switches to the same principles. In general, each language is especially
effective since is broadcasted, more clear and unequivocal in expression of concepts that need to be
communicated, and the more effective the more easily learned. Effectiveness and efficiency of
251
accounting principles, as language of economic - financial communications, are subordinated to the

presence of the following requirements.
1) General acceptance (of accounting principles) meets more the effectiveness objective of
economic - financial communication. It does not identify with disseminating accounting principles,
but rather with broad recognition from the subjects interested in economic - financial
communications, of principles to regulate certain specific accounting issues. General acceptance of
accounting principles, in this case, is not only a requirement of these principles, but a consequence
of the role that accounting principles are called to place. Widespread use of a principle is significant
according to the positive view that it receives in practice and because it is reflected “generally
accepted”. General acceptance of accounting principles can be distinguished in a previous and
posterior acceptance, compared with the whole process of principle forming.
“Previous” acceptance refers to the moment when the principle is reformulated. Even if it is
drawn by equidistant bodies against the interests of those that prepare the interim financial reports
and those requiring information contained in it, during the formation of an accounting principle
should be called upon to express all categories of stakeholders of economic-financial information
(accountants, lenders, academics and other users) in order to access the consensus, criticisms and
suggestions. In this situation, before the principle is used, it has already obtained the acceptance of
some variations users, called to contribute (with different titles) to its formation.
“Posterior” acceptance, instead, refers to the successive moment of publication the principle and in
particular is reflected in its current usage of those who prepare the interim financial reports and who
have to communicate the economic performance of the entity and the auditors that have to review
the communication process.
2) Credibility concerns to the reliability of information contained in interim financial
reports. One principle is more credible as constitutes a better approximation (highlighting) of the
secondary economic reality derived due to its application in interim financial reports. For this to
occur, it is necessary that accounting principles to comply with the best accounting theory that
defines the relevant information in order to meet users requirements for interim financial reports
and follows to reduce the elements of uncertainty in drafting such a document.
3) Objectivity refers to "unequivocal” accounting principles, clear in their own formulation
and in the impossibility of their distorted application, which could confuse users of interim financial
reports. Objectivity “must be characterized by two fundamental aspects: a reduction or even
absence of accounting treatments that can switch between them, but also clarity of principle’s
content. The first aspect is needed to provide comparability in time and space of interim financial
reports; the second facilitating the application of principle, becomes extremely relevant, especially
for the auditor, since the absence of principle ambiguity confirms the role of standard base on which
the auditor can form a professional opinion.
4) Analytical character refers to the degree of detail that characterizes the accounting
principle; it is closely connected with the objectivity character, because as the principle is more
detailed, the specifications hat are made based of accounting rules will have less ambiguity.
Analytical aspect may also refer to “selective application of the principles on productive sector or
sector size”.
5) Applicability - meets in a greater measure the efficiency objective because it follows an
easier adoption and verification of accounting principles, representing a saving of resources
regarding the drafting of the interim financial reports and for auditors. In fact, one principle may
reveal valid when the benefits derived from adoption to exceed the costs.
252
Management
organs
Reporting
system
framework
Entity Internal
personnel control
structure
Accounting
principles
Control
organs
Juridical
frame
Figure no. 2. Accounting principles and users of interim financial reports

Source: Impact of IAS/IFRS standards over evolution of financial reports. Case study at Telecom Italia (Grosu V.,
2009)
So-called features listed above can be often conflicting with each other, so that accounting
principles should be the fruit of a valid compromise. Can take place, also, a contrast between
objectivity and credibility; if we understand the objectivity as an absence of alternative accounting
solutions, this can damage the credibility; more example - if, because of the rigorous appearance of
objectivity, would be accepted for coded assessment methods only the assessment based on cost,
would greatly harm the natural representation of control methods, which, in turn is obtained by
evaluating them through accounting value criterion (5).
Often can appear a contrast between the reliability and applicability, the simple rules, easy
to apply, not always can contribute to an emphasis consistent with the reality. An example may be
the criteria for determination of depreciation allowance: mathematical calculation of the constant
depreciation rate is certainly easy to do, but do not always reflect the actually “consumption rate” of
a property during the course of the production process (6).
ENDNOTES
(1) Dumitrescu Diana, The Internal Audit, „Conferinta Internationla Economia Romaniei post-aderare 2 ani in UE,
ZEC 2008, Resita 21-22 noiembrie 2008”, Resita, 2008, p. 10.
(2) Megan O., Hategan C., Ineovan F., International Accounting standards: the best recipe, „Economia si
managementul transformarii”, Timisoara, 2002, p.6.
(3) Quaqlui A., Levoluzione dei principi contabili di direvazione professionale, Pisa Il Borghetto, 1998, paragraph
2.1.
(4) Laura D. Richman – Compliance and Ethics Programs Under the Federal Sentencing Guidelines After the
Supreme Court Booker Decision, Reprinted w permission from March 2005 edition of the Wall Street Lawyer.
(5) Luciano Marchi – Revizione aziendali e sisteme di controlla interno, Giuffre Editura Milano, 2004.
(6) Marasca S., Le valutazioni nel bilancio di esercizio, Torino, Giappichelli, 1999, p. 138; Marchi L., Allegrini
M., Levaluzione dei principi contabile in Italia, Revizione contabile, nr. 50, 2003, p.59
253
BIBLIOGRAPHY
1. Dumitrescu Diana, The Internal Audit, „Conferinta Internationla Economia Romaniei post-
aderare 2 ani in UE, ZEC 2008, Resita 21-22 noiembrie 2008”, Resita, 2008
2. Grosu V., Impactul standardelor IAS/IFRS Asupra evolutiei raportarilor financiare. Studiu
de caz la Telecom Italia, Timisoara, 2009
3. Laura D. Richman, Compliance and Ethics Programs Under the Federal Sentencing
Guidelines After the Supreme Court Booker Decision, Reprinted w permission from March
2005 edition of the Wall Street Lawyer
4. Luciano Marchi, Revizione aziendali e sisteme di controlla interno, Giuffre Editura Milano,
2004
5. Marasca S., Le valutazioni nel bilancio di esercizio, Torino, Giappichelli, 1999
6. Marchi L., Allegrini M., Levaluzione dei principi contabile in Italia, Revizione contabile,
nr. 50, 2003
7. Megan O., Hategan C., Ineovan F., International Accounting standards: the best recipe,
„Economia si managementul transformarii”, Timisoara, 2002
8. Quaqlui A., Levoluzione dei principi contabili di direvazione professionale, Pisa Il
Borghetto, 1998, paragraph 2.1
254
THE MANAGEMENT OF THE FINANCIAL AND NON-FINANCIAL IMPLICATIONS

OF THE SALARIES GROWTH
Assistant PhD. Student Irina CHIRITA
Economic Sciences and Public Administration Faculty
irinachirita@seap.usv.ro
Assistant PhD. Student Raluca ZOLTAN
Economic Sciences and Public Administration Faculty
ralucaz@seap.usv.ro
Abstract:
The present paper is trying to point out the importance of the firm’s management (of the economical entity)
throughout the administration of the financial and non-financial implications of the salaries growth in reaching its
success.
It is well known that a successful management doesn’t mean only an efficient financial administration, but also
paying special attention to the non-financial elements implied by the leadership of a work group, more exactly the
administration of the human resources.
The present paper is trying to structure best as possible the two sides (financial and non-financial), regarded
through the cost perspective, which is that of the administrative accountancy, from the perspective of the human
resources management, at the level of the employee’s motivation, but also of the perspective of top management and at
the level of managerial decision.
The finality of the paper is to point out the convergence of the two directions towards successfully reaching the
objectives that any economical entity has established and desires to fulfill, and also to correlate the financial aspects
regarding salaries growth with their non-financial effects, reflected at the level of a single individual, of a group of
individuals, compartment, division, etc. so that in the end these salaries growths can be benefic on a long term basis.
Key words: salaries growth, financial stimulants, motivational effects, salary politic, evaluations of the
performances
JEL Classification: A10 , G20 , M10, M40 , M50 , O10
INTRODUCTION – SHORT DESCRIPTION OF THE WORK GRATIFICATION
In the economical theory and practice, the problem of the work gratification holds a place of
great importance. Being connected by the relationships related to the employment, use and payment
of the work as a production factor, it captures strongly and continuously the attention, because the
way in which the gratification is made depends on the assurance with subsidiary means of a
significant part of the planet’s population.
Just as much, but from a different position, the way in which the gratification is made
captures the syndicates and patronages attention, and, as well, that of the public authorities.
The specialty literature defines in a relative way the employee’s gratification, and that is
“the total amount of the material and monetary incomes, of the easement and advantages, present
and future ones, determined directly or indirectly by the quality of employee and the activity ran by
him”.
People do not work just for the reward or the salary. Usually there is an entire package of
remuneration and it should be assembled mainly from the motivational intentions. The task of the
package follows two tendencies that must be over came; first of all, it should be able to attract the
right candidates for the organizations mission and to allow the successful development of the
recruitment and selection processes, attracting adequate candidates being a competitive process.
The second tendency is to maintain the employees in their current jobs and encourage them to stay
in the organization.
The problem regarding financial stimulants is one of the most important, because they are so
easy to offer and afterwards actually stopping to motivate. On the other side, money is a great
motivator, and the way to put them into practice makes the difference. This difference is
concretized through the package of rewards cumulated with payments – no matter how they are
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combined, that motivate the personnel in a way which offers him satisfaction – and the payments
designed to concentrate people’s attention on the effort they put in for.
Etymologically speaking, the term of “salary” is from the Latin word “salarium” meaning
the amount of money paid to the (roman) soldiers so that they could supply salt for their food. This
suggests also the fact that the salary is given out to the persons depending on others through a
juridical or economical bond, state which is available today as well, when the salary is the amount
of money paid to someone for the service provided by the work factor and is destined to maintain
the salary labor. Salary has appeared on a certain stage of the merchandise production development,
being tide up to the beginnings of the capitalist economical system, when the man, free from a
juridical point of view, but not having production goods and natural resources, has appealed to
renting his own work force to the owners of the other factors of production, which are land and
capital.
1. THE MANAGEMENT OF THE FINANCIAL IMPLICATIONS OF THE

SALARIES GROWTH
1. 1. Salary structures
Salaries represent the price of the work force, as well as the monetary expression of that part
from the national income which is destined to individual, direct consumption of the employee’s,
according to the work they put in. Every economical entity establishes through the collective work
contract its own system of payments, formed from the following structural elements: the fare
system, the pay rise system, the forms of gratification, the forms of giving our prizes and others.
Considering these elements, when negotiating with the employees, they establish the terms of the
individual work contract, which contains the individual salary.
The individual salary is established starting from the minimum salary per hour established
on a national scale, for an average time of work of 170 hours a month, thus:
S = No. hours * fare/hour
The fare system will therefore define payments hourly fares, daily and monthly ones, which
will find an equivalent in hourly, daily and monthly salaries.
The monthly individual salaries established through individual working contracts must be
bigger than the minimum fare salary established at the national level. The patrimonial units that use
hired personnel can use the following forms of gratification: salaries according to the volume of
production, salaries based on percentage from the incomes gained or from the production obtained,
salaries according to the time worked.
Salaries according to the volume of production regards the volume of the actions executed
or of the products obtained and can be determined individually, or collective, if in the realization of
a certain number of actions or quantity of products, efforts are put in by a team of specialists in
different fields.
Salaries according to the time worked usually apply to those that work in offices, where in a
certain number of hours they must do the volume of work anticipated in working norms and
personnel normative.
Salaries based on percentage from the incomes gained or from the production obtained can
apply in companies which obtain products of strict necessity, especially in units of agricultural
production.
At present, the social legislation states different social benefits which depend on the
minimum guaranteed brut salary established on a national level, and they are:
 Redundancy payment;
 First relocating bonus for the unemployed which get jobs in a city located at a bigger
distance than 50 kilometers than their stabile home;
 The relocating bonus for the unemployed which get jobs in a different city, reason for
which they are changing their dwelling place;
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 Subventions given to the employees for finding jobs inside some programs with the
purpose of temporarily occupying the work force and executing some activities in the interest of the
local community;
 Subventions given to the employers which hire for undefined periods of time graduates
of some institutions;
 Health insurance for pregnant women, who can benefit from it free of charge if their
income is below the guaranteed brut salary established on a national level;
 Pension assurance and other social rights as long as in their working card aren’t
registered any payment rights, and they take into consideration the level of the minimum brut salary
in the economy.
All of these gratification forms, as well as the benefits associated to them (as are the social
ones) are taken into account by the management of the organizations according to their profile
(production, services, distribution, outlet a.s.o.) in such a way that they insure the financial balance
of the companies. Of course, this activity is very complex and must implicate a collaboration
between the personnel management and the top management, as well as between management
structures and financial responsible (accountants, financial directors), according to the current
legislation and the situation on the labor market.
1.2. The salaries growth transposed into the financial plan
A significant percentage inside the gratification of the direct labor is taken by some special
rewards and different easements given to the personnel. The introduction of these instruments was
determined by the necessity of accomplishing a directly as possible relationship between the effort
put in by every single employee and the level of reward, with the purpose of increasing the
performance.
As method of organizational stimulation (it includes the whole working group, based on the
financial results of the enterprise), the cast of one share from the profit obtained is used on a large
scale inside the autochthon companies, and they aim to connect better the value of the stimulant
with that of the turn over, therefore:
 The distribution of the profit during the year, when employees can be given periodically
– trimester or semester – certain bonuses which size depend on the rate of overcoming the
scheduled turn over;
 The distribution of the profits at the end of the year. Based on the accountancy’s final
calculation regarding the size of the net profit obtained by the firm, o certain percentage is destined
to stimulating the entire personnel at the end of the year as bonuses, often comparable to the size of
the monthly average salary of the current period.
Regarding the participation to the capital of the firm, the possibilities of buying shares in the
company by own employees may bring advantages to the manager (who is increasing his capital),
as well as the personnel, which at the end of the year can gain dividends, or in a favorable
conjuncture can place them onto the specific market (for example, exchange market). Through this,
his goal, as a shareholder at the company where he works, is for its economical performances to
grow, which will lead to increasing implication and loyalty and as well of the individual
performances.
Even though acknowledged as a successful gratification of work, almost without exception,
the participation to the benefits of the firm has stopped to be regarded as a “bate” for employees
given out by the employer to increase his profits, and on the other side fewer are the companies that
will give the employees more than 10% from their salaries as bonuses in participating to the
benefits of the firm. The size of this percentage depends, in any company, on the importance that
the work or the capital holds in the economical activity. For example, in the firms that sell services,
the importance of the capital is smaller, the accent being the quality of the employee, the level of
professional training and his abilities to communicate with the customers. Also, the more the field is
specialized, the more maintaining the personnel with a high professional training is more important.
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Regarding the positive consequences of the use by different companies of the profit
participation stimulation method, is necessary to pinpoint that besides a simple productivity
increase, which is most of the time hard to quantificate, intervene also the maintaining of good
relationships between workers and patronage, as well as the fact that it tends to favors the
employees tendency to save up. But in perspective, it can assure avoidance of high employee’s
fluctuations, a situation which is unwanted because it brings extra costs.
In terms of the employees participation to the capital (co-partnership) we show, that ever
since 1910 C.Gide claimed that it has appeared because of the necessity to modify the relative and
hybrid character of the participation system, half employee, half “patronage’s goodness” ,
transforming it into a real association and it was believed that “the solution could be found by
creating some work shares which could be attributed to the worker in terms which would also bring
him the same rights as it did to the capitalist share holders”.
The shares can be gained by the employees in three ways:
 By changing the rightful sums from the title “participation to profit” into shares;
 Through buys (with or without facilities);
 Through free allocation of shares, according to certain merit.
2. THE MANAGEMENT NON-FINANCIAL IMPLICATIONS OF THE SALARIES

GROWTH
2.1. From salary to economical performance
A component of the general politic of the firm, the salary politic of the company represents
the sum of the initial and practical measures of the human resources management meant to govern
the relationships between employees and reaching the organizational objectives. This characterizes
a certain “style” of the company, a certain manner of approaching and solving the salary problems:
two firms can have the same objectives, but their concrete ways of getting them fulfilled can be
different.
The salaries politic, in the part strictly regarding the salaries, can be conceived tightly,
projecting only the income from salaries (which is what we meat under the name of direct salaries
costs), as well as it could be conceived widely including the indirect incomes as well, often called
accessories or complementary salaries: paid vacation, sick days, social assurance, services and
social aid. Because, the last of them are so diverse and have constant growth, as a percentage in the
total cost of the working force, they are considered as components of the incomes that the
employees receive and are part of the salary politic, defining it along side with other aspect that
govern the occupation, the hiring and releasing regime, licenses.
So, the salary politic can’t be identified with the salary or the payments politic, because it
includes other non-monetary elements that have a wide range.
Two types of variables can influence the practices and the salary politic of the firm and they
are:
 The variables that relate to the outside of the firm like: the level of economical growth of
the country, the economical conjuncture, the evolution of the prices and of the incomes, the
situation of the sectors of the work market, the relationship between the social partners, the
enterprise’s sector of activity;
 The variables that relate to the inside of the firm like: the size and the organizational
structure of the firm, the intern social politic, the image the company wants to have, the type of
technology used, the characteristics of the work force.
The specialty literature reveals the fact that the salary politic of the firm is also influenced
by other factors like: the general economical climate, the planned rate of the recovery of
investments compared to that of forms in the same sector; the influence of the government decisions
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(legislation, taxation), the effects of the group working contracts and of the negotiations lead in
closing them.
A salary politic is considered optimal when it can assure a balance between the following
three components:
 The financial balance of the firm, which determines the global sum of the salaries and its
possibilities to evolve;
 The external balance with the work market, which influences the quality of the recruited
personnel and the capacity to hold on to the qualified personnel;
 The internal equity, which diffuses a feeling of justice among different employees and
everyone’s preoccupation towards improving their performances;
Therefore expressed, the result of an optimal salary politic will always be a balanced system
of remuneration, based on the following elements;
 The level of the salaries, with its implication on the financial balance of the company, in
most cases, the payment of the salaries being the most important financial engagement for the
company. The level of the salaries must result from the general politic of the company and even
more from the analysis made over the future of the personnel administration;
 The outside competitiveness: the companies that propose remunerations below the level
on the work market will have difficulties in recruiting and a great fluctuation of the personnel on
job positions;
 The internal balance, which must provide;
 A feeling of justice and balance among the employees regarding their responsibilities;
 Has got to have an exciting character which will encourage every employee to improve
his performances.
The economical stability of a company is affected when a component of its system of
remuneration is of balanced; for example, offering salaries below the level of the work market will
determine difficulties in hiring and on the long run “the exodus” of the employees.
Within an efficient salary politic, adjusting to practice of an optimal remuneration system
implies the accurate definition of certain variables, as:
 The level of the salaries and their most likely evolution;
 The level of the salaries on every job position and the down size of the “abnormal”
differences;
 Determining the remuneration of the job position and of that which regards the
individuals;
 Determining a system of promotions and salary rise according to the experience,
qualification and performance.
2.2. The motivational effects of the salaries
The specialty literature reveals the fact that diverse form of gratification, practiced today on
firm level, affects the personnel in different proportions on a relatively small scale.
In the following we will mention each form of gratification and they are: fix payment,
according to the individual agreement, payments according to the global agreement, and payments
on a daily pre-established base, global schemes of payments on organizational level, participation to
profits, gratifications according to merits.
Regarding the fix payment, it assures only the necessary motivation for reaching a certain
level of performance. This is because every employee is getting according to this system a fixed
sum per hour, week or month. If the goal is to raise the quality over its level, it takes a stimulant,
meaning a bigger salary. The alternative systems, especially those based on individual performance,
have the goal to provide this stimulant. Fix payment doesn’t offer the motivation for putting in an
extra effort, because there isn’t a correlation between reward and effort.
Individual agreements are capable to offer a strong motivation in putting in an
supplementary effort. There is a very strong correlation between the individual earnings and the
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level of effort put in. This correlation depends on the managers’ ability to assure an undisturbed
flux.
The global agreement can offer small groups a certain motivation in making a
supplementary effort, if it visible the correlation between the individual efforts and the results of the
group. Is not an efficient motivational factor inside big groups, when it is difficult to correlate the
individual effort to the group’s results. The intensity of these correlations can be determined by
outside factors, which cannot be controlled by the implicated persons (the team-mate’s effort).
Payments on a daily pre-established base give the stimulants necessary to maintain an
established level of performance, but not the motivation to over come it. People can be un-
motivated in making supplementary efforts once the objective in this kind of gratification system is
reached.
Global payment schemes on an organizational level represent low motivational factors. The
connection between the effort and the reward is reduced. The level of the earnings is strongly
determined by factors which are in the hands of the individual workers (the market’s tendencies,
inflation, management’s efficiency).
Participation to profits is a weak motivational factor. The time between making the effort
and receiving the reward is to long for the connection between these to be efficient. The level of the
reward is, in this case, the object of some external influences, which the employee cannot control.
Gratification according to merits is also, a pretty weak motivational factor. There is not a
clear relationship between the effort put in and the level of reward other than if the gratification
according to merits is integrated with the performance evaluation system. The grading is made
according to a wide range of criteria, from which some can be intangible and impossible to
transform by supplementing the effort. The level of the reward is determined by a series of factors
which cannot be controlled by the person in case (we are talking about subjectivism in the
evaluation by the managers).
An analysis of the relationship between the salary politic and the personnel motivation for
work, on the background of the characteristics of the transition from the centralized to the market
economy, reveals the following aspects:
 The inappropriate use of the salary as a motivating factor, in the sense in which some
public companies and commercial societies that have the monopole on the market have lead a “high
salaries” politic with negative effects not only on motivational plan, but also in that of the activity’s
efficiency;
 The presence of under motivation due to a gratification that even affects the assurance of
the primary necessities satisfaction for the employee and his family, which are alimentation,
habiting place and equipments; the situation has been degraded by the progressive weakening of the
buying capacity of the employee, as well as the sensitive modifications in the pattern and
consumption behavior of the population which have led to the tightening of the internal market of
consumption goods and equipment;
 The deterioration of the relationship between the minimum wage and the medium one
shows some major disadvantages, especially for the personnel in the light industry, agriculture,
tourism, services and from the budgetary sector, who is situated below in terms of salary incomes;
 Loss of interest towards work (also) because of the social salary;
 A severe politic of taxation of the salaries in the conditions of a quantitative comparison
of the potential contributable, with direct effect onto reducing the net salary, of tightening the
consumption of wide ranges of population, the erosion of the households capacity to save up.
We also have to add the diminishing of the work efficiency of the personnel, the growth of
their instability and absenteeism, it amplifies the phenomenon of clandestinely work and they won’t
be able to improve exclusively by adjusting their salary politic, unless they won’t solve property
related issues, of free competition, as well as those of correction, participation and socialization of
the salaries.
In a significant segment of autochthon companies, the salary politics exaggerate in
calculating the salary as element of the costs, the management constantly aiming to minimize it
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from competitive and profitability reasons, all, in the disadvantage of the personnel’s necessities
and fundamental purposes, and leading towards the sacrifice of its cohesion and stability.
We mention that the last situation is favored by the specific conjuncture of the past years
when it has been registered an appreciable exceeding of work force in almost, with small
exceptions, all of the professional categories. The study of the salary politic has leaded us to the
conclusion that any proposal of improving them must take into consideration the following:
 Creating the necessary environment so that an equitable part from the added value is
redirected toward the employees;
 Clarifying their collective philosophy;
 Stimulating gratification of performance;
 Optimizing the relationship between internal and external equity, between individual and
collective equity;
 Flexibility in the reward system;
 Optimizing the salary’s structure.
2.3. The importance of the employee’s performances evaluation
The evaluations of the performances were underappreciated years in a row because this task
isn’t seen as a unique motivational opportunity, the only moment when the employee is enjoying
his boss’s full attention. Even though there are numerous reasons for which the evaluations (ones on
trimester or semester) are avoided (first of all, because the assumption of lack of time), time and the
efforts from the manager for this king of recapitulation will transmit the employee a clear and
concise message.
Therefore, when this kind of meeting takes place face to face, the employees must receive
the entire attention of the evaluator, to feel that they are important and that their opinion matters.
Ideal it would be for the evaluation forms to make a distinction between the zone interests, and not
be limited to identifying an interest zone – for example, cooperation – and offers the manager space
to write down a sentence or two about the employee’s efforts from that perspective. The comments
– especially the negative ones – should be taken as examples. Thus, the diverse causes that leads to
the unfulfilling of the employee’s tasks can be identified (the manager can take adequate measures
to the employee’s problems), and on the other side, the non-financial motivation of the employee’s
is assured, through the privilege that is given to them to state their opinion about their work, work
environment, group activities etc. Also, they can find out, for example, why a salary increase is
postponed in spite of the good performances: it is the manager’s duty to inform them about the
changes in the market situation with consequences on the firm’s objectives and strategies, which
can require high financial resources. Thus, the employee’s loyalty is assured, also their support in
the development of the organization, in the measure in which they are aware of the direction
towards which the management is taking the organization.
In spite of the bad reputation they have, performance evaluations are wanted by the
employees, because they need a legitimate and well though feedback regarding their efforts.
Although, apparently, it’s an activity that requires a high consumption of the manager’s time and
that it doesn’t bring immediate results, the performance evaluation can supply precious information
to the top management in elaborating decisions, whether they are on short, medium or long term.
CONCLUSIONS
Once we joined the European Union, even though some autochthon companies have
understood that they cannot be competitive on a market where multinational companies have
opened affiliations and branch offices in which they apply an entire “arsenal” of personnel
motivating methods and efficient salary politics, the most of the Romanian firms have staid the
same, respectively considering the salaries as elements of costs that can be diminished just as any
other production cost. The consequences on the long run are evidently: the lack of qualified
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personnel and the “migration” of the existing one to other companies that offers them better
possibilities to make use of their knowledge with more advantageous salary conditions. Finally, the
drastic comedowns of the firm’s profitability that apply a faulty management of the personnel are
imminent and unavoidable.
REFERENCES
1. Bostan, I. (2005) – Mangementul recompensei, Ed. Universităţii “Ştefan cel Mare”,

Suceava
2. Bojian, O. (1999) – Contabilitatea întreprinderilor. Teorie, aplicaţii, actualizări, Ed.
Economică, Bucureşti
3. Cornescu, V. & Mihăilescu, I. & Stanciu, S. (2003) – Managementul organizaţiei, Ed.
ALLBECK, Bucureşti
4. Dumitriu, C.G. (2005) – Contabilitatea de gestiune şi evaluarea perfomanţelor, Editura
Universităţii, Bucureşti
5. Mark Eppler (2007) – Capcanele managementului, Ed. Polirom, Iaşi
6. Forsyth, P. (2007) – Cum să motivezi oamenii, Ed. Rentrop & Straton, Bucureşti
7. Hennien von Greuning (2006) – Standarde internaţionale de raportare financiară,
Institutul Irecson, Bucureşti
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SECTION 4
LAW AND PUBLIC ADMINISTRATION
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RECENT BENCHMARKS ON WAGES IN THE NATIONAL PUBLIC SYSTEM***
Lecturer PhD. Alunica MORARIU

,,Ştefan cel Mare” University of Suceava, Romania
morariua@seap.usv.ro
Abstract:
With the formulation of requirements by the International Monetary Fund and the European Union to
flexibilize employment and dismissal procedures in Romania, the wage law has undergone major changes. The
continuous wage reform in our country is imposed, among other things, as the effect of reducing the budget revenues, of
the increase of budgetary staff or because the enforcement of wages law in 2010 failed for causes such as: the rapid
development of the law at the IMF pressure; the identification of some gaps after its entry into force; the usage of a
small sample of budget functions resulting in the inability to achieve employments in some institutions; the existence of
different salaries in different ministries on similar functions; the elimination or inclusion of increases in wages at the
expense of providing incentives that led to the maintenance of wage disparities.
In all those presented, we propose to conduct an analysis of a unitary wage system of the staff paid from
public funds which undergoes substantial changes after less than a year since the entry into force of the uniform law of
wages.
Keywords: staff, payroll, public funds, wage reform, management
JEL Classification: H83, M12, H62
INTRODUCTION
In the sphere of activity of the Romanian budgetary environment, for the time worked, the
staff is rewarded through various levers of pay, being known that the main method of reward is the
wage. Under Article 155 of the Labour Code, the salary includes the basic salary, the allowances,
the bonuses and other benefits.
In the specialty literature, the basic wage is defined as “the main and fixed part of the total
salary, to be paid to each employee, taking into account the professional qualification and training
and the professional skills. It constitutes a benchmark according to which other rights of employees
are calculated, such as, for example, various allowances and bonuses”.
According to art. 41 of the National Collective Work Contract for the years 2007-2010, the
contracting parties agree that, during the period which we referred to, to act for the inclusion of
bonuses in the basic salary, to represent the remuneration for their work and the workplace
conditions, so that the basic salary has a majority importance in the salary. Bonuses are granted only
in workplaces where they are not included in the basic salary.
Minimum increases to be granted under the contract are:
a) for particular, difficult, dangerous or embarrassing working conditions, 10% of the basic
salary;
b) for noxious working conditions, 10% of the minimum wage negotiated at the unit level;
c) for overtime hours and for hours worked on free days and on public holidays which were
not properly compensated with paid free hours, is granted a bonus of 100% of the basic salary;
d) for work experience, minimum 5% for 3 years of ancientness and maximum 25% for an
ancientness of over 20 years, of the basic salary;
e) for night work, 25% of the basic salary;
f) for the exercise of another function may be given a bonus of up to 50% of the basic salary
of the replaced function; the cases in which it is applied and the amount are established through
negotiations for the national collective working contracts at the branch level, groups of businesses
or establishments.
Increases in point a) and b) are not included in the basic salary and are granted no more after
the normalization of working conditions.
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Through the collective working contract at branch level, groups of businesses and
establishments, can be also negotiated other types of bonuses (bonus for isolation, increase for the
use of a foreign language, if it is not included in job duties, etc.).
The same collective contract, through art. 42 regulates the issue of additions to the basic
salary. These include:
a) addition of agreement;
b) awards granted from the prize fund, calculated at a rate of minimum 1.5% of the payroll
per month and cumulated;
c) other benefits, agreed to the level of businesses and institutions.
d) share of profit distributed to employees, which is up to 10% for companies and up to 5%
for autonomous administrations;
e) meal vouchers, gift vouchers, childcare vouchers and other similar instruments granted
under the law and understanding of the parties.
Terms of differentiation, reduction or cancellation of participation in the incentive fund of
profits or in the prize fund, as well as the period for which employees are granted the share profit,
which may not be longer than one year, shall be determined by the collective working contract at
the unit level and, where appropriate, institution.
Multiple causes make the budgetary employers and not only, pay attention to the manner of
granting the salaries with more or fewer pluses to the basic salary, the list of bonuses remaining
open according to special laws and labour codes.
BENCHMARKS OF THE PAYROLL POLICIES IN THE ROMANIAN

BUDGETARY ENVIRONMENT
The Agreement of Romania with the IMF in 2009, has meant a commitment to debt of 12.95
billion of euros, and along with money from the European Union, World Bank and EBRD,
Romania’s foreign borrowing amounted to 19.95 billion of euros, without being taken into account
other debts. The funds received the destination of BNR and Romanian Treasury accounts.
Officially, the money that were directed to the Ministry of Finance, had intended to cover
the budget deficit and the other half were destined for the monetary policy coordinated by the
central bank.
In the context of the indebtedness degree, the Government has pledged to introduce
measures to further reduce the wage bill, including a freeze on all wages, excepting the minimum
wages. The commitment to further reduce staff costs was included in the letter of intent to the IMF
agreement.
Thus, when formulating the requirements for the International Monetary Fund and the
European Union, to flexiblize the hiring and dismissal procedures in Romania, the wage law
undergoes major changes.
The presented situation and other causes, as they are shown (in Fig. 1), are leading to wage
austerity policies in the Romanian budgetary environment.
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Figure no. 1. Cause-and-effect Ishikawa Diagram – on wage policies in the Romanian

budgetary environment
Regarding the Management of public environment, it is characterized by limited

performance if we consider the management of private organizations which feel negatively
affected by delays in implementation of coherent strategies or by the poor implementation of a
sustainable action plan.
On the other hand, the dismissal of numerous members of management teams working in
state institutions, as a result of the effects of the legislation concerning the decentralized
institutions and the appointment of managerial staff on political criteria, may represent stopping
the application of an institutional strategy that leads to its final abandonment. The frequent
repetition of this phenomenon and giving up some strategic action plans can not bring any added
value to the Romanian public structures in short term but neither on long term. Disregarding the
formulation and implementation of long-term strategies and the financial impact of designated
persons’ action or inaction, the performance will be entitled to a delay.
The human resource, the most valuable organizational resource, poorly managed or
unreasonable in relation to performance, excessive from a numerical perspective, in some
organizations or improved without reference to training needs where improvement can be
achieved, is another main issue underlying the budgetary pay reform.
The state budget
For 2010, the Government has engaged in negotiations with the IMF to reduce public
spending by cutting salaries by 25% and by increasing revenues by raising VAT from 19% to
24%, to fit in a deficit of 6.8% of GDP.
In the first five months, the revenues of the consolidated general budget were reduced by
1.6% to 64.2 billion lei, in terms of revenues declining by 7.8% in VAT, 6.4% in the income tax,
2.7% in the profit tax and 4.4% for CAS’s. Thus, the deficit climbed to 16.7 billion lei, namely
3.1% of GDP.
On the other hand, the Head of the International Monetary Fund (IMF) mission in
Romania considers that the macroeconomic indicators for the third quarter “look good” and the
budget deficit agreed for 2011 is 4.4% and can not be changed.
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In Romania, the Law is excessively modified through emergency procedures, and from
another perspective, the preferential legislation on the wages of certain categories of budgetaries,
led to an additional need for the development of new wage policies in the budgetary
environment. Thus, after an application of salary reductions by Law 330/2009 and after the wage
reduction by 25%, is expected to be approved and implemented a new uniform bill on the
unitary salaries of the staff paid from public funds.
The main effects of the global economic crisis on Romania are identified first by
stagnation or kickback of the economic growth and on the other hand, by reducing direct
investments. They determined Romania to access more or less advantageous credits in the
context of reducing the state budget revenues. On the other hand, the IMF considers that the
austerity measures can affect the economic growth and may determine the rise of the
unemployment rate.
Amid those presented, in 2009, the compliance of framework-agreements with the
European Commission and the International Monetary Fund has been provided by Law
329/2009, still in force, governing among others the measures to reduce the staff expenses in
the budgetary system and the arrangements for exercising the addition of pensions from the
public pension system and the systems that are not integrated to the public system with the
wages or, where applicable, related to salaries, according to the law, resulting from carrying on a
professional activity in an individual employment contract, employment report or on the basis of
appointment notice, in the central or local authorities and public institutions, regardless of the
financing and subordination method, as well as in the autonomous administrations, national
corporations, national companies and trading companies in which the state or an administrative-
territorial unit is the sole or majority shareholder, but also measures on the financial-budgetary
discipline in the autonomous administrations, national corporations, national companies and
trading companies in which the state or an administrative-territorial unit is the sole or majority
shareholder, as well as in their subsidiaries.
“The austerity of budgetary wages” is also regulated by Law 330/2009 which is based on
principles such as:
a) the unitary nature, in that it regulates the pay system of all staff categories in the
public sector, by taking into account the wage rights established by special legislative acts in the
wages system governed by law 330/2009;
b) the rule of law, in that wage rights are established only by judicial rules having the
force of laws;
c) taking into account increases, wage increases, the general or special allowances and
other salary rights, recognized or established by the entry into force of Law 330/2009, by court
orders, acts of collective negotiation and by other means, being found at an acceptable level,
according to these principles, in the gross salary or, where appropriate, in the basic salary, in the
basic function pay or in the monthly employment pay;
d) equity and consistency, by creating equal opportunities and equal remuneration for
work of equal value based on uniform principles and rules concerning the establishment and
providing of wages and of other entitlements such as wages of public sector employees;
e) financial sustainability, by establishing wage increases according to special annual
laws, so that the share of the gross domestic product of staff expenses related to public sector
employees is gradually reduced to a sustainable level.
The Framework Law on the uniform wages of the staff paid from public funds aims at:
a) harmonizing the salary system of staff from the public sector with the importance,
responsibility, complexity of activity and level of education required for the activity;
b) establishing the basic wage, the remunerations of basic functions and of monthly
benefits of employment as the main element of the wage, by including in it, as appropriate,
bonuses, increases and allowances with general nature;
267
c) making the hierarchy of basic functions, of monthly employment allowances, among

fields of activity, and in the same area, depending on the complexity and importance of their
operations, based on the following criteria:
- level of education and skills;
- the social importance of the work;
- complexity and diversity of activities;
- accountability and impact of decisions;
- exposure to risk factors;
- incompatibilities and conflicts of interests;
- the difficulty of specific activities;
- the conditions of acceptance on the function;
d) transparency of the mechanism for establishing the basic wage, the salaries for basic
functions and for monthly benefits of employment, as well as of other salary rights;
e) compatibility of the decentralization process with the principles provided by law;
f) the differentiation of basic salaries, of salaries for basic functions and for monthly
benefits of employment and on the level to which the activity is accomplished: central, territorial
and local.
Because the Unified Wage Law, in implementation, has side effects, it will be changed
completely and we will no longer take account of the reference salary in 2009, but of the reduced
ones of 2010, and, every year, will be given a special law to determine the level of salaries.
Thus, under the new draft law on wages, the difference between the lowest and highest
salary will be from 1 to 15. Budgetaries would be divided into 55 classes depending on
responsibilities of their functions, of the work accomplished, its quantity and quality, but also its
importance for the society.
From 1 January 2011 to December 31 2012, the public wages and ranking system will be
reformed and simplified through a bill providing for:
- reducing the number of positions in the public sector;
- the gradual transition to nominal wages;
- improving hierarchies within budget areas and the systems of degrees, gradations and
wage levels.
CONCLUSIONS
The continuous salary reform from our country is one of the effects of diminishing the
budgetary revenues, of increasing the number of staff in the budgetary environment or because
the enforcement of wage law in 2010 failed from various causes, such as: the rapid development
of the law under pressure from the IMF; the identification of some gaps after its entry into force;
the usage of a small sample of budget functions resulting in the inability to achieve employments
in some institutions; the existence of different salaries in different ministries, for similar
functions; the elimination or inclusion of increases in salaries at the expense of providing
incentives that led to the maintenance of wage disparities.
ENDNOTES
1
http://www.sfin.ro/articol_9558
2
www.bursa-financiara.ro
3
www.mediafax.ro
4
The fiscal-budgetary strategy during 2011-2013 of the Government of Romania
268
BIBLIOGRAPHY
1. The unique collective working contract at the national level for 2007-2010, no.
2895/29.11.2006
2. The fiscal-budgetary strategy during 2011-2013 of the Government of Romania
3. Law 330/2009 – The Framework Law on the unitary wages of staff paid from public
funds
4. Law 329/2009 on the reorganization of public authorities and institutions, the
rationalization of public expenses, support of business environment and compliance
with the framework agreements with the European Commission and the International
Monetary Fund
5. Law 53/2003 on the Labour Code
6. www.bursa-financiara.ro/
7. www.mediafax.ro
8. http://www.sfin.ro/articol_9558
NOTE:
*** This work was supported by CNCSIS-UEFISCSU, project number 25/28.07.2010, PN

II-RU 681 code/ 2010). Paper conceived within the Project Interdisciplinary research on
human resource development in local public administration in the context of the
administrative reform. Comparative study (CIP-DRU-APL).
269
MEDIATION IN COMMERCIAL CONFLICTS
PhD. student Marcela SLUSARCIUC

marcelaslusarciuc@yahoo.com
Abstract:
Mediation is an used procedure among the commercial dispute resolution in the United States and many
other common law jurisdictions. On the other side, the state of development of the alternative dispute resolution and
mediation in continental Europe is not even and has not such a wide experience as the United States. The European
Union rules provide a framework for Member States to set their own legal paths and institutions in order to
promote and efficiently use this way of solving conflicts. Encouraging the use of mediation facilitates the resolution
of disputes and helps to avoid the worry, time and cost associated with court-based litigation, in this way citizens
are enabled to secure their legal rights in an efficient way.
Keywords: commercial dispute, mediation, conflict, European Union directives, alternative dispute
resolution
JEL Classification: K41, K49
1. INTRODUCTION
Alternative Dispute Resolution (ADR) refers to processes and techniques of resolving

disputes that fall outside of the judicial process (formal litigation – court). Some courts now
require some parties to utilize ADR of some type, usually mediation, before permitting the
parties' cases to be trialed. ADR is generally classified into at least four subtypes: negotiation,
mediation, collaborative law, and arbitration. Sometimes a fifth type, conciliation, is included as
well.
ADR is useful in a wide range of conflicts, such as commercial disputes, professional liability
cases, personal injury matters, insurance problems and family and divorce matters.
It is proved that disputes can be solved without going to court. If somebody is in dispute
with a firm, a tradesperson, the employer, even a member of the family, in the own country or
abroad and is unable to settle the dispute by themselves, they can go to court, of course, but they
can also consider alternative dispute resolution techniques such as mediation.
The use of mediators in business is fragmented and uneven and it could have more
meanings. For example in the United States, where the mediation is more developed than in
Europe, the usage of it has a wide diversity. If one defines a mediator broadly as a third person
who helps the parties negotiate an agreement, then their use in deal-making is fairly extensive.
Their use in deal-managing seems to be growing, particularly in the international construction
industry, but in deal-mending, where the parties to a transaction are embroiled in a genuine
conflict, the use of mediators is relatively rare. In all three types of negotiations, mediators
participate only because the parties have specifically sought them out and invited them into the
process. It is extremely rare for persons to volunteer their services as mediators in business
transactions. In all cases, mediators in business are private individuals, rather than organizations,
institutions, or governmental officials. Institutions such as the Chambers of Commerce only
facilitate the search for an appropriate mediator or conciliator. They do not themselves
participate in mediation. Once on the job, the mediator works independently of these
organizations, is not their representative, and does not operate under their direction.
Like any mediation, effective business mediation requires three things: disputant
motivation, mediator opportunity, and mediator resources, including skills. No mediation can
take place unless the parties to the business conflict want or at least acquiesce in the presence of
a mediator. In the case of a broken deal, at least one of the parties will lack motivation so long as
it believes that it can obtain compensation or secure enforcement of its version of the deal in the
270
courts or in commercial arbitration. In short, that party does not see the failure to mend a deal
through mediation as an absolute loss. So long as it considers litigation or arbitration as an
acceptable alternative to a mediated agreement, it will have little motivation to accept the
presence of a mediator. Unfortunately, most of the time, one of the parties to a business dispute
does in fact believe that it will gain more in litigation or arbitration than it could through the
services of a mediator.
Mediators have an opportunity to mediate business disputes only if both parties invite
them into the process. Parties to business transactions can enhance mediator opportunity by
agreeing at the time they make their contract to use third persons, a mediator. To a certain extent,
the low degree of disputant motivation to use mediators in business disputes is also caused by
the general lack of knowledge by businesses and their lawyers of the potential value of
mediation and their belief that mediation will be used by one of the parties merely to stall and
delay the inevitability of a law suit or arbitration case.
To be effective, mediators in commercial, like mediators in other domains, must possess
certain resources, including skills. The essence of their resources resides in their ability to
influence the parties to arrive at an agreement. Mediators in business transactions derive their
power to influence the parties from various factors. Unlike some mediators in the political arena,
business negotiators generally have no coercive power. The basis of their power first and
foremost resides in their expertise. Mediators may also have power because of their relationships
with the disputants. This referent power is particularly present in deal-making mediation in
international business.
Encouraging the use of mediation facilitates the resolution of disputes and helps to avoid
the worry, time and cost associated with court-based litigation, thus enabling firms to secure
their legal rights in an efficient way.
In common law jurisdictions it is common practice to include in commercial contracts a
reference to mediation prior to initiating arbitration. Only after the failure of mediation the
parties are able to move on to litigation or arbitration in a designated forum. Some sophisticated
clauses call first for negotiations at the chief executive level before mediation can take place.
The intention is to create a dispute resolution process that explores in a structured manner the
possibility of a negotiated solution before a formal adjudicatory process, like arbitration or
litigation, can begin.
2. THE PROVISIONS OF THE EUROPEAN DIRECTIVE ON MEDIATION ON

COMMERCIAL MATTERS
In May 2000 the Council adopted conclusions on alternative methods of settling disputes
under civil and commercial law, stating that the establishment of basic principles in this area is
an essential step towards enabling the appropriate development and operation of extrajudicial
procedures for the settlement of disputes in civil and commercial matters so as to simplify and
improve access to justice.
In April 2002 the Commission presented a Green Paper on alternative dispute resolution
in civil and commercial law, taking stock of the existing situation as concerns alternative dispute
resolution methods in the European Union and initiating widespread consultations with Member
States and interested parties on possible measures to promote the use of mediation.
The objective of this Directive 2008/52/EC is to facilitate access to alternative dispute resolution
and to promote the amicable settlement of disputes by encouraging the use of mediation and by
ensuring a balanced relationship between mediation and judicial proceedings.
The Mediation Directive applies to cross-border disputes in civil and commercial
matters. The provisions of this Directive should apply only to mediation in cross-border
disputes, but nothing should prevent Member States from applying such provisions also to
internal mediation processes. It covers disputes in which at least one of the parties is domiciled
in a Member State other than that of any other party on the date on which they agree to use
271
mediation or on the date mediation is ordered by a court. The principal objective of this legal
instrument is to encourage the recourse to mediation in the Member States.
For this the directive contains five substantive rules:
- It obliges each Member State to encourage the training of mediators and to ensure high quality
of mediation.
- It gives every judge the right to invite the parties to a dispute to try mediation first if she/he
considers it appropriate given the circumstances of the case.
- It provides that agreements resulting from mediation can be rendered enforceable if both
parties so request. This can be achieved, for example, by way of approval by a court or
certification by a public notary.
- It ensures that mediation takes place in an atmosphere of confidentiality. It provides that the
mediator cannot be obliged to give evidence in court about what took place during mediation in
a future dispute between the parties to that mediation.
- It guarantees that the parties will not lose their possibility to go to court as a result of the time
spent in mediation: the time limits for bringing an action before the court are suspended during
mediation. Member States have until 21 May 2011 to comply with the provisions of the
Directive.
Mediation can provide a cost-effective and quick extrajudicial resolution of disputes in
commercial matters through processes tailored to the needs of the parties. Agreements resulting
from mediation are more likely to be complied with voluntarily and are more likely to preserve
an amicable and sustainable relationship between the parties. These benefits become even more
pronounced in situations displaying cross-border elements.
This Directive should apply to cases where a court refers parties to mediation or in which
national law prescribes mediation. Furthermore, in so far as a judge may act as a mediator under
national law, this Directive should also apply to mediation conducted by a judge who is not
responsible for any judicial proceedings relating to the matter or matters in dispute.
The mediation provided for in the Directive should be a voluntary process in the sense
that the parties are themselves in charge of the process and may organise it as they wish and
terminate it at any time. However, it should be possible under national law for the courts to set
time-limits for a mediation process. Moreover, the courts should be able to draw the parties’
attention to the possibility of mediation whenever this is appropriate.
Member States should define such mechanisms, which may include having recourse to
market-based solutions, and should not be required to provide any funding in that respect. The
mechanisms should aim at preserving the flexibility of the mediation process and the autonomy
of the parties, and at ensuring that mediation is conducted in an effective, impartial and
competent way. Mediators should be made aware of the existence of the European Code of
Conduct for Mediators which should also be made available to the general public on the Internet.
Mediation should not be regarded as a poorer alternative to judicial proceedings in the
sense that compliance with agreements resulting from mediation would depend on the good will
of the parties. Member States should therefore ensure that the parties to a written agreement
resulting from mediation can have the content of their agreement made enforceable. It should
only be possible for a Member State to refuse to make an agreement enforceable if the content is
contrary to its law, including its private international law, or if its law does not provide for the
enforceability of the content of the specific agreement. This could be the case if the obligation
specified in the agreement was by its nature unenforceable.
The content of an agreement resulting from mediation which has been made enforceable
in a Member State should be recognised and declared enforceable in the other Member States in
accordance with applicable Community or national law.
Confidentiality in the mediation process is important and this Directive should therefore
provide for a minimum degree of compatibility of civil procedural rules with regard to how to
protect the confidentiality of mediation in any commercial judicial proceedings or arbitration.
272
In order to encourage the parties to use mediation, Member States should ensure that
their rules on limitation and prescription periods do not prevent the parties from going to court or
to arbitration if their mediation attempt fails. Member States should encourage the provision of
information to the general public on how to contact mediators and organisations providing
mediation services. They should also encourage legal practitioners to inform their clients of the
possibility of mediation.
Member States shall encourage, by any means which they consider appropriate, the
development of, and adherence to, voluntary codes of conduct by mediators and organisations
providing mediation services, as well as other effective quality control mechanisms concerning
the provision of mediation services. Member States shall encourage the initial and further
training of mediators in order to ensure that the mediation is conducted in an effective, impartial
and competent way in relation to the parties.
A court before which an action is brought may, when appropriate and having regard to all
the circumstances of the case, invite the parties to use mediation in order to settle the dispute.
The court may also invite the parties to attend an information session on the use of mediation if
such sessions are held and are easily available.
Member States shall ensure that it is possible for the parties, or for one of them with the
explicit consent of the others, to request that the content of a written agreement resulting from
mediation be made enforceable. The content of such an agreement shall be made enforceable
unless, in the case in question, either the content of that agreement is contrary to the law of the
Member State where the request is made or the law of that Member State does not provide for its
enforceability. The content of the agreement may be made enforceable by a court or other
competent authority in a judgment or decision or in an authentic instrument in accordance with
the law of the Member State where the request is made.
Given that mediation is intended to take place in a manner which respects confidentiality,
Member States shall ensure that, unless the parties agree otherwise, neither mediators nor those
involved in the administration of the mediation process shall be compelled to give evidence in
civil and commercial judicial proceedings or arbitration regarding information arising out of or
in connection with a mediation process, except:
(a) where this is necessary for overriding considerations of public policy of the Member State
concerned, in particular when required to ensure the protection of the best interests of children or
to prevent harm to the physical or psychological integrity of a person; or
(b) where disclosure of the content of the agreement resulting from mediation is necessary in
order to implement or enforce that agreement.
Member States shall ensure that parties who choose mediation in an attempt to settle a
dispute are not subsequently prevented from initiating judicial proceedings or arbitration in
relation to that dispute by the expiry of limitation or prescription periods during the mediation
process.
Member States shall encourage, by any means which they consider appropriate, the
availability to the general public, in particular on the Internet, of information on how to contact
mediators and organisations providing mediation services.
Not later than 21 May 2016, the Commission shall submit to the European Parliament,
the Council and the European Economic and Social Committee a report on the application of this
Directive. The report shall consider the development of mediation throughout the European
Union and the impact of this Directive in the Member States.
Member States shall bring into force the laws, regulations, and administrative provisions
necessary to comply with this Directive before 21 May 2011.
273
3. PICTURE OF PRACTICING MEDIATION IN COMMERCIAL CONFLICTS

IN EUROPE
Mediation is at varying stages of development in Member States. There are some

Member States with comprehensive legislation or procedural rules on mediation. In others,
legislative bodies have shown little interest in regulating mediation. However, there are Member
States with a solid mediation culture, which rely mostly on self-regulation.
More and more disputes are being brought to court. As a result, this has meant not only
longer waiting periods for disputes to be resolved, but it has also pushed up legal costs to such
levels that they can often be disproportionate to the value of the dispute.
Mediation is in most cases faster and, therefore, usually cheaper than ordinary court
proceedings. This is especially true in countries where the court system has substantial backlogs
and the average court proceeding takes several years.
This is why, despite the diversity in areas and methods of mediation throughout the
European Union, there is an increasing interest for these means of resolving disputes as an
alternative to judicial decisions.
The term „mediation” does not have the same significance in continental Europe as it
does in the United States and the United Kingdom. This can now be expected to change given
the EC’s Proposed European Directive.
Some European jurisdictions have longstanding procedures intended to facilitate the
settlement of civil and commercial disputes, which are often called „conciliation” procedures.
Many lawyers consider this term more or less interchangeable with mediation, but in fact
conciliation has a history in Europe that differs substantially from the modern U.S. concept of
mediation.
A procedure closer to mediation, most of the times framed by law in commercial disputes
is conciliation.
The experience of conciliation at the International Chamber of Commerce (ICC) in Paris
is illustrative of the different attitudes. The ICC is an international arbitral institution, although
since its inception in 1923, it has also provided conciliation services. Prior to World War II, 80%
of the cases submitted to the ICC were settled by conciliation. However, in more recent decades,
conciliation has fallen into disuse. In November 1994, ICC secretary-General Eric Schwartz
reported that since the ICC Rules of Optional Conciliation entered into force on January 1, 1988,
fewer „than 60 requests for conciliation (as opposed to more than 2,000 requests for arbitration)
[were] received by the ICC.” The Secretary-General went on to describe some features of the
few cases that actually proceeded to conciliation:
In practice ICC conciliation proceedings have until now tended to take the form of mini-
arbitrations, the main differences being that relatively short deadlines have been fixed for
submissions, and the „hearing” has been conducted as a discussion culminating in a settlement
proposal.
In some cases, the settlement proposals of the conciliator have been submitted to the
parties in writing with an analysis of the relevant facts and law, much in the manner of an
arbitration award. These features-formality, legality, an adversarial mentality, evidence and
hearings-differ fundamentally from the U.S. conception of mediation as a consensual process in
which the mediator assists the parties in exploring their wider interests (rather than just their
rights) in search of opportunities to create value and reach a collaborative „win-win” outcome
that is not dictated by rules of law or precedents.
Spain provides a good European example of established experience with conciliation and
lack of experience with mediation. For a long time in Spain there was a requirement to attend a
compulsory conciliation hearing prior to continuing with litigation. Many Spanish commentators
complained that the conciliation process was useless. Parties to a dispute went through it as a
mere formality in order to be able to continue with their litigation. The major overhaul of
Spanish civil procedure in 2000 retained a weak obligation to make an effort at conciliation at
274
the parties’ first appearance before the judge, but made no mention of „mediation.” Few
arbitration institutions in Spain offer mediation services, and of those that do, the practice is to
select mediators from the list of arbitrators. The result is that Spain has a moribund practice of
conciliation. Since it has taken virtually no steps towards developing a mediation culture in the
modern sense, there is little understanding there of the techniques of mediation.
Since the mid-1990s, there have also been some private initiatives to encourage
mediation in continental Europe. The Centre de Mediation et d’Arbitrage de Paris (CMAP) and
the Netherlands Mediation Institute were both established in 1995. In 1996 the CPR Institute for
Dispute Resolution, which recently changed its name to the International Institute for Conflict
Resolution and Prevention, published Model European Mediation Procedures, and in 2004
initiated a European Business Mediation Congress. The ICC replaced its 1988 Rules of Optional
Conciliation with the ADR Rules effective July 1, 2001, which cover a range of dispute
resolution techniques, including mediation, neutral evaluation, mini-trial, and other settlement
techniques or combination of techniques agreed by the parties. The American Arbitration
Association has opened an office of the International Centre for Dispute Resolution in Dublin,
Ireland, which offers international arbitration and mediation services. In addition, the World
Intellectual Property Organization (WIPO) Arbitration and Mediation Center in Geneva has been
actively promoting mediation for international dispute resolution, and regularly offers
workshops for mediators with distinguished U.S. teachers. WIPO’s mediation caseload is larger
than its arbitration caseload, mediation predominating due to its success in eliminating the need
for arbitration.”
4. TODAY FRAMEWORK FOR MEDIATION IN COMMERCIAL CONFLICTS

IN ROMANIA
Law 192/2006 provided the legislative framework for the introduction of mediation,
within which the mediation profession operates.
The Mediation Council, established by Law 192/2006 on mediation, is responsible for
supervising mediation in Romania. It is an autonomous legal entity which acts in the public
interest and has its headquarters in Bucharest. The members of the Mediation Council are
elected by the mediators and approved by the Ministry of Justice of Romania.
The main responsibilities of the Mediation Council are to adopt decisions in the following
areas:
 To set the training standards in the field of mediation, on the basis of best international
practice and to supervise their adherence by the professionals;
 To authorise mediators and to maintain and update the List of Mediators;
 To approve the training curricula for mediators;
 To adopt the Ethical and Deontological Code for authorised mediators, as well as the
regulations regarding their disciplinary liability;
 To adopt regulation on the organisation and functioning of the Mediation Council;
 To initiate proposals to amend or to correlate legislation on mediation.
The Mediation Council has established the National Register of Mediator’s Professional
Associations. This Register lists the non-governmental organizations which promote mediation
and represent mediators’ professional interests.
In accordance with Article 12 of Law 192/2006, authorised mediators are registered in
the “Panel of Mediators” managed by the Mediation Council and published in the Romanian
Official Journal, Part I. The “Panel of Mediators” is also available from the official websites of
the Mediation Council and of the Ministry of Justice. The list of authorised mediators contains
information on:
 Their membership to professional associations,
 The institution from which they graduated,
275
 The mediation training programme they followed,

 Foreign languages in which they are able to conduct mediation services,
 Their contact details.
The companies interested in resolving their dispute through mediation can contact a mediator
within 1 month of the date of publication of the “panel (list) of mediators” on the premises of the
courts and on the website of the Ministry of Justice. The Mediation Council is legally obliged to
regularly update – at least once a year – the Panel (List) of mediators, and to communicate
updates to the courts, to local government authorities, and to the Ministry of Justice.
Article 2 of Law 192/2006 allows parties to seek mediation in disputes relating to civil,
including commercial matters, penal matters, family matters and other fields of law subject
to the legal provisions. Consumer disputes, and other disputes subject to renounceable
rights, can also be resolved using mediation. However, matters relating to personal rights and to
non-renounceable rights cannot be the subject of mediation.
Recourses to mediation is voluntary. There is no obligation for parties to look for mediation
services, and they may opt out of mediation at any stage. In other words, parties are free to seek
other means of dispute resolution at any point: court proceedings, arbitration. Interested parties
may contact a mediator before coming to court, and also during court proceedings.
However, various national legal provisions in the field of mediation oblige judges, in certain
cases, to inform parties of the possibility of opting for mediation and the advantages of
doing so. In other cases, a number of financial incentives are offered to parties who choose
mediation or other alternative dispute resolution proceedings.
The Mediation Council website is the main source of information about mediation in Romania.
Mediation is not free of charge; the level of payment is subject to agreement between a private
mediator and the parties. Currently no legal or financial support to provide mediation services is
available from local or national authorities.
An agreement resulting from mediation can be enforced by a notary or by a judge if the
mediation process started during a juridical trial.
Dynamic of commercial litigations in Romania

No. of litigations
1000000
900000 897071
800000
700000
629100 653719
600000
500000
400000
300000 250577
172332
200000 185530 248902
100000
46439 103637
44913
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Year
276
5. CONCLUSIONS
The magnitude, complexity, and duration of business transactions creates a substantial and
continuing risk of conflict. The commercial arbitration, the primary dispute settlement mechanism
designed for international business, has proven itself to be expensive, destructive, time consuming,
and in some cases lacking in finality. Mediation of varying types offers international business
executives a possible attractive alternative, an alternative that they should explore at the time they
negotiate their transactions. They might include in their contracts from the outset mechanisms such
as dispute advisors to help in the problem of deal management, and they might also commit
themselves to try mediation or conciliation before they take the usually irrevocable step of
submitting their disputes to arbitration.
The following activities can be useful in order to promote and increase the importance of
mediation in commercial disputes:
1. The development of a network of mediators who support the goal of advancing the field and the
professional practice of commercial mediation.
2. The implementation of projects in different regions that endorse the principles of mediation
(impartiality, confidentiality, rule of consensus, interest based process design) and dialogue
processes. This includes the facilitation of communication between parties through the mediator,
the support of and moderation during the negotiation process, the holding of roundtable discussions
and the joint search for solutions to a specific conflict.
3. The design and implementation of training which can provide for a more peaceful business
conflict culture.
4. The cooperation with state and non-state actors in the community with the goal of effectively
implementing mediation and dialog processes.
Mediation is a good short term and long term investment for a number of reasons:
 Reduced time to dispute resolution;
 Reduced cost to dispute resolution;
 Business relationships maintain or improve as disputes are settled amicably;
 Helps educate parties in avoiding disputes by making them more familiar with the obstacles
to resolution, i.e., knowing what to avoid in future.
REFERENCES
1. Ignat Claudiu, Sustac Zeno, Danilet Cristi, Ghid de mediere, Editura Universitara,
Bucuresti, 2009
2. Pancescu Flavius George, Legea medierii – Comentarii si explicatii, Editura C.H. Beck,
Bucuresti, 2008
3. Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008
on certain aspects of mediation in civil and commercial matters, Official Journal of the
European Union
4. Law 192/2006 about mediation and organizing the mediator profession
5. Law 370/2009 for modifying Law 192/2006
6. Salacuse Jeswald W., Braker Henry J., Mediation in International Business, article
7. Cairns, David JA, Mediating International Commercial Disputes: Differences in U.S.
and European Approaches, Dispute Resolution Journal, Aug-Oct 2005,
findarticles.com/p/articles/mi_qa3923/is_200508/ai_n15704693
8. statistici.insse.ro/shop/index.jsp?page=tempo3&lang=ro&ind=JUS108A
9. e-justice.europa.eu
CURRENT GUIDELINES IN THE FIELD

OF ADMINISTRATIVE CONTRACTS
Lect. PhD. Liana-Teodora PASCARIU

University „Ştefan cel Mare” Suceava, Romania
liap@seap.usv.ro
Abstract:
In recent years, especially in Europe, it has been noted the tendency of uniformity and common
conceptualization of the rules referring to the birth, amendment, execution or termination of contracts, ultimately
leading to the emergence of new branches of Community law, contract law.
This study examines whether these European concerns have implications in relation to administrative
contracts, if we can talk about a European administrative contracts law or if the experts’ concerns have focused only
on the field of civil contracts. Our conclusion is that we can talk at this point of similar rules in the European
administrative contracts field, and in Romania as in the European Union, public procurement contracts especially have
been a constant concern of the legislature in recent years.
Key words: administrative contracts, codification of contract law, European contract law, new guidelines
JEL Classification: K12, K39
INTRODUCTION
Twist on contracts in general, at European level, has started from the discovery of a number
of three parameters (Patulea, Stancu, 2008) considered essential, which led to the current
developments in this area:
o socio-economic development of society and its legal framework;
o globalization, internationalization of legal relations obligation;
o structural change of the regulatory framework of contractual legal relations obligation.
Among many initiatives in this field I will remember some more significant, since the work
of European Contract Law Commission, chaired by Professor Ole Lando, amid the necessity of a
Community draft convention on the law applicable to contractual and non-contractual obligations.
The project was discussed at the International Conference on Copengaha 1974. More recently there
have been noted the contributions of Giuseppe Gandolfi, who proposed that in the coding approach
of contracts to start from the Italian Civil Code (Gandolfi, 1992), the “Common Care of European
Private Law” project, initiated by Mauro Bussani and Ugo Mattei and the group study which aimed
to trace the outline on which to engage European wide debates regarding the opportunity of a
European Civil Code (Bussani, Mattei, 2007).
Certainly, the actions at Community level to harmonize national systems have been made
cautious, by means of directives, inspired by a sense of current market dynamism (Pătulea, Stancu,
2008), focusing primarily on areas such as consumers protection, competition, electronic
commerce, vicious products. It was adopted a number of seven directives on consumer protection
matters incidental contractual technique, between1985-1999 and a total of 5 general directives on
contract law harmonization. It has been noted and a blur of effects of the Directive in relation to
Regulation, starting most likely from the need of following the principle of legal certainty, the
directive approaching the regulation through the degree of detail and specificity. The involvement
of European institutions in the codification of contract law has culminated with the adoption by the
European Parliament of the resolution on 3 September 2008 on the common reference for European
contract law (published in Romanian in Official Journal of the European Union on http://eur-
lex.europa.eu dated 4/12/2009), in which it is suggested that if the future shape of the frame of
reference is that of an optional instrument, this should be limited to those areas where the
Community legislature has been active and likely to be active in the near future, or are closely
related to contract law and any optional instrument should have the basic common framework. It is
also considered that in all cases should be assurances that the selection process will not endanger
the whole coherence of the optional instrument and regardless the future form of Common Frame of
Reference of contracts, measures should be instituted to ensure its regularly updating, to respond to
changes and developments on the national level of contract law.
The problem of interest here is to determine whether these European concerns have
implications in relation to administrative contracts, if we can talk about an administratively
European contract law or experts’ concerns have focused only on the sphere of civil contracts.
CONTENT
Many of the current trends in European contract field are currently only theoretical;
however, in this matter, although law specialists are not necessarily advocate for a common
European body of administrative contracts - so difficult in many ways - we can speak of common
rules and similar principles. One of the main problems of harmonization, as well as in private law
of contracts, is finding a bridge between the two great systems of law, the Roman-Germanic and the
common law system. I consider that it is possible a concerted action by European institutions in
order to standardize administrative and contract law and I motivate this by the fact that matters is
the area per excellence of the action of community legislation on public procurement, where the
adopted directives led to the harmonization of the national law of EU Member States.
Internal regulations, in particular reported on the conclusion of the administrative contract
or its legal system, were adopted by the lack of general rules of administrative contract in Romania
and even had the basis of Community regulations, whose transposition is mandatory for Member
States, as it is the case of G.E.O. no. 34/2006, which transposes 2004/18/EC Directive on the
coordination of procurement procedures for works, supplies and services contracts, 2004/17/EC
Directive coordinating the procurement procedures applied by entities operating in the water,
energy, transport and postal services (published in the Official Journal of the European Union no. L.
134 of 30 April 2004), 1989/665/CEE Directive coordinating the laws, regulations and
administrative provisions relating to the application of review procedures concerning the award of
contracts for supply and works (published in the Official Journal of the European Communities
no. L. 395 of December 30, 1989), and 1992/13/CEE Directive coordinating the laws, regulations
and administrative provisions relating to the application of Community rules on procurement
procedures of entities operating in the water, energy, transportation and telecommunications
(published in the Official Journal of the European Communities no. L 76 of March 23, 1992).
The procedure for awarding public procurement contract in Romania has been a constant
concern of the legislature in recent years, based on the need for clear procedures in spending public
money and reaching at an effective and transparent competition between economical operators in
order to achieve a more efficient administration of public property assets. One key element in the
EU integration process, with impact on all other areas of interest for the communitarian acquit for
"Internal Market", was the development of a system of efficient and credible public
procurement. The previously system, established by GEO no. 60/2001, had serious deficiencies,
observed over time, both in terms of effective deployment of procedure and in terms of efficient
appeal of documents disposed during this proceeding.
As a member country of the European Union, Romania has assumed the implementation of
Community law, which requires adoption of measures under the transposition into its own national
legal system, with respect to deadlines, conformity and correct application. European Directives,
which require the establishment of some Community rules to be followed by some of the Member
States or by all, must be implemented in their national legislation, the Member States being free to
decide how they will do so (Florescu, 2009).
In order to improve the legislative framework of public procurement, the Romanian
government issued Emergency Ordinance no. 34/2006, concerning the award of public
procurement, of public works concession contracts and services concession contracts. Through this
legislative act the dispositions of Directive no. 18/2004/CE and Directive no. 89/665/EEC (in terms
of procurement in the "classic” sector) and the dispositions of Directive no. 17/2004/CE and
Directive no. 92/13/EEC (relating to “utility" business acquisitions) are being transposed into the
national legislation.
In the Romanian Government meeting of 7 March 2009 major changes to rules on public
procurement were adopted by emergency ordinance, undertaken by the government program at the
end of 2008 (published in Romanian Official Journal no. 156/12.03.2009). The adoption of the
Ordinance has not been without criticism, focusing in particular that the project of the normative act
has not been subdued to the procedure of information and public debate.
Only three months after the coming into application of the Government Emergency
Ordinance no. 19/2009, a number of discrepancies between some provisions of this emergency
decree with Directive 2007/66/EC of the European Parliament and the law Council of 11 December
2007 have been noted. This was likely to give rise to infringement proceedings by Romania of
the Community law, according to art. 226 European Community Treaty, and to generate further
financial adjustments to contracts financed from the Community funds. Under these circumstances,
a new legislative amendment was required, as the Government Emergency Ordinance no. 72/2009.
The need of amending the public procurement legal framework has thus resulted from the
adoption, at the Community level, of Directive no. 2007/66/EC of the European Parliament and the
Council of 11 December 2007 of amending Directives No. 89/665/EEC and no. 92/13/EEC
regarding the improvement of the effectiveness of review procedures concerning the award of
public contracts, but also the assuming, by Romania, of the action plan developed from the issues
raised by the European Commission in the evaluation of the Lisbon Strategy implementation at the
EU Member States level and the euro area, published on January 28, 2009.
Sure, especially after 2006, with substantial changes to national legal framework of public
procurement, and field experts have tried to find solutions through relevant research, to the
problems arisen in practice, in conjunction with the competence of the public procurement contract,
procedures award, conclusion, execution or annulment of these types of contracts, solutions that had
to be similar with the European ones.
Corroborating the provisions of GEO no. with the Law 34/2006 554/2004, in finding that
procurement contracts, it applies legal regime of administrative law, both in terms of the contract
award and to conclude on issues, performance, annulations or its appealing in court.
Doctrine, the opinion that we concur (Albu, 2007), assimilates the legal regime of
administrative law established by Law 554/2004 and administrative proceedings held by public
authorities and makes award contracts concerning the management and use of state’s private
domain and of administrative-territorial units.
We can therefore say that this type of contract, by reference to the administrative contract,
represents the specific difference while the administrative contract is the proximate type. In this
context, the public procurement contract, in the no 34/2006 GEO sense as it was originally drafted
had a double law subordination having to comply with both the legal regime established by the law
of administrative court and the legal regime established by public procurement legislation
(Niculeasa, 2007). With the substantial change of Ordinance by GEO19/2009 and GEO No.
72/2009, the procurement contract would apply its own legal proceedings, other than the
administrative litigation law, procedure whose rules are detailed specified by new articles of the
Ordinance concerning procurements. Applying the legal regime of administrative law in public
procurements almost in all European states, leads to the conclusion that it’s possible to have a
European administrative contracts law based on similar legislations.
A European contract law in this matter, I think it should also lead to rethinking of traditional
applicable principles, not by denying the existing classical principles, but by adapting and adopting
new principles, determined by socio-economic changes in the contemporary world. In addition to
classical principles, arising from the creative process of law achieved by the European Court of
Justice, which, starting from Algera Decision and so far, has developed a rich jurisprudence in the
middle of which are found: the principle of proportionality, the principle of government by law,
legal certainty, protection of legitimate claims, non-discrimination, right to a hearing in the
decision-making of administrative procedures, equal conditions of access to administrative courts,

non-contractual responsibility of government, etc., new principles have emerged, at least at the
level of theorization of law. In the Case of Algera, July 12, 1957, the European Court of Justice
ruled that "no provision in the constituent treaties do not prevent litigation, will have to consider
legislation, doctrine and jurisprudence of the States in the dispute" (Kakouris, 1994).
It was rightly held that the European Court of Justice may generate general principles to
govern a European administrative law (Alexandru, coordinator, 2007). The above statement is
based on possible actions to be taken to form the European law of contract, actions in two ways:
first, the scholarly way, that of doctrine of works produced in the international conferences of
experts, and secondly, the way of European institutional mechanisms, achieved by harmonizing the
legal rules using unification laws through regulations and directives (Stancu, 2008).
Insisting on the first way, there have been identified in recent doctrine (Stancu, 2009,) three
principles that complement the legal framework of contracts and can print a new vision including in
administrative contracts, especially those in public procurement. These principles are: the principle
of consistency (his involves reducing the contradictory terms by the judge through a coherent
interpretation that actually translates a first subtle common will), the principle of sustainability
(which is regarded as the economic imperative - emphasis on the contract, considered as an asset to
be maintained in a sustainable and efficient economic environment, and as a moral imperative -
contract quality requirement is a contractual relationship founded on mutual trust of
moral contractual action today) and the principle of rebalancing the economy contract (this
principle is based on the factors leading to "upset" the economy contract and requires that a contract
must be executed under its economy, interpreting the concept of "economy" coming back to the
judge who will decide whether the parties must return to the negotiation table or it is required the
annulment of the contract).
Partly, they are grafted on the general principles contained in the Romanian public
procurement legislation, implemented by European directives: non-discrimination, equal treatment,
mutual recognition, transparency, proportionality, efficiency of use of public funds, accountability
(registered in art. 2) - listed only in O.U.G. no. 34/2006 as amended and explained in art. 13 of
O.U.G. no. 54/2006 (transparency - providing all interested parties the information on the procedure
for awarding the concession; equal treatment – applying, in a non-discriminatory manner, by public
authority, the criteria for awarding the concession contract; proportionality - requires that any
measures established by public authority must be necessary and appropriate to the nature of the
contract, non-discrimination - application by the public authority of the same rules, regardless of
the nationality of the participants in the procedure for awarding the concession contract, with the
conditions laid down in agreements and conventions to which Romania is party; open competition -
ensuring the conditions by public authority that any participant from the awarding process has the
right to become operator under the law, of the conventions and international agreements to which
Romania is a party).
Reflecting the new guidelines to the field of contracts, we find it also in the Romanian
legislation - the Civil Code published, but inapplicable - stating specifically on two principles that
have previously found the consecration law, but have not been enacted yet unequivocally : freedom
of contract (article 1169: "The parties are free to conclude any contracts and determine their
contents, to the extent required by law, public order and morals”; article 1183. par. 1: “The parties
have free initiation, conduct and breaking of negotiations and they cannot be held responsible for
their failure" and good faith (article 14: "Natural and legal persons involved in civil legal relations
must exercise their rights and perform its obligations in good faith in accordance with public order
and morals. Good faith is presumed until proven otherwise”; art. 1170: "The parties must act in
good faith both in the negotiation and conclusion of the contract and throughout its execution. They
can not eliminate or limit this obligation”; article 1183. par. 3: “The party initiating, continuing or
breaking negotiations, contrary to good faith, is liable for the damage caused to the other party. To
establish this damage it will be taken into account the expenses incurred in the negotiations, the
waiver by either party to the other bids and any similar circumstance").
The problem of interest here is whether these principles can find their foundation in matters
of administrative contracts, regarding that private interest is concerned primarily with rules
invoked. I consider that any reason does not prevent adapting the principals to the specific
administrative contract, consisting of negotiated clauses and regulatory terms, as long as satisfying
the public interest prevails. Furthermore, freedom of contract and good faith protect the pre
conclusion and execution of contracts, taking into consideration including the possibility of
attracting pre-contractual civil liability (Puie, 2009).
CONCLUSIONS
We agree with the proposal (Săraru, 2009) that future legal regulations include, in addition
to the above principles, legislating the priority of public interest before the private one, with the
express confirmation of the principles of transparency, impartiality and public access to the contents
of the contract administration, which may not materialize unless by their inclusion in a future
Administrative Procedure Code.
It is also important to consider the credentials Administration indicating that the regulatory
rule arising from public interest powers outlined in detail in French legal literature (Foillard, 2008):
o power steering and control of the Administration;
o power to unilaterally change the contract;
o direct sanctioning power of co-contractor;
o unilateral termination power.
Another essential prerogative reserved for administration derives from the possibility for it,
to impose sanctions directly to the co-contractor, as opposed to private law where non-compliance
by one party cannot be found than before a court. In public law, the government can impose from
the financial penalties (late payment), to coercive sanctions (entrusting the contract to third party,
the performance benefit on behalf of the contractor that refused to do so, on its expense) or even
annulment of the contract.
All these factors, which should add explicit provisions concerning liability and its kinds,
require the conclusion that the administrative contract law is far from being homogenized and the
burden of codification returning first of all to the doctrine, which should inspire future legislature to
adopt a code of administrative procedure in line with national realities but also with the changes of
contemporary European law.
REFERENCES
1. E. Albu, (2007), “Administrative Contracts. Procurement and Administrative Court’’, The

Judicial Courier (1): 66
2. Alexandru, Ioan (coordinator), Cărăuşan, Mihaela, Gorjan, Ilie, Ivanoff, Ivan Vasile,
Manda, 3. Cezar Corneliu, Nicu, Alina-Livia, Rădulescu, Crina, Săraru, Cătălin Silviu
(2007) Administrative Law in the European Union, Lumina Lex, Bucharest: 283.
Florescu, Lucian, (2009), Infringement Proceedings, http://lucianflorescu. legaladviser.ro
/wp/2009 /06/05/Infringment Proceedings Communities.
3. Foillard, Phillippe, (2008), Droit administratif, Editure Paradigme, 13e ed., Paris: 241-242.
4. Gandolfi, Giuseppe, (1992), For a European code of contracts, Civil Law Quarterly
Review.
5. Kakouris, C.N., (1994) Use of the Comparative Method by the Court of Justice of the
European Communities, School of Law. Pace International Law Review.
6. Bussani, Mauro, Mattei, Ugo (2007), “The Common Fund for European Private Law”,
Quarterly Review of Comparative Law.
7. Niculeasa, Madalin, (2007), Public Procurement Law. Comments and explanations,
Bucharest, CH Beck Publishing: 34-36.
8. Patulea, Vasile, Stancu, George, (2008), Contract Law, C. H. Beck Publishing, Bucharest:
368 - 452.
9. Puie, Oliviu, (2009), “Principles governing the matter of administrative contracts in prior
phases, the conclusion and execution of the contract. Administrative award procedures”,
The Romanian Pandects (9): 32.
10. Săraru, Silviu Catalin, (2009), Administrative Contracts. Regulators. Doctrine. Law,
C.H. Beck Publishing, Bucharest: 245-250.
11. Stancu, Gheorghe, (2008), Influences the overall legal system on contract law, The Law
Journal, (10): 37.
12. Stancu, Gheorghe, (2009), Contributions to the doctrine in the new orientation of contract
law, The Law Journal, (6): 90-110.
THE ROLE OF NGOs IN EUROPEAN GOVERNANCE
Lecturer PhD. student Ciprian UNGUREANU

ciprianu@seap.usv.ro
Lecturer PhD student Nicoleta IONESCU FLOREA
dumitritai@seap.usv.ro
Lecturer PhD. student Gabriela NEGRU
gabrielan@seap.usv.ro
Abstract:
The partnership between the European Commission and non-governmental organisations from various fields
has significantly improved in the past few years. Diversity best defines the NGO sector, as it features organisations with
a wide variety of objectives. Therefore, the strengthening of the relationship between these organisations and the
European Commission could help achieve those objectives and benefit both parties. Thus, in order to do that,
discussions must never cease, as these negotiations complete the institutional process of drafting European policies.
Keywords: NGO, European Commission, programme management, government, resources.
JEL Classifiaction: L31
INTRODUCTION
Over the last two decades, the partnership between the European Commission and NGOs
has expanded on all fronts. This intensification has covered a range of issues, from policy dialogue
and policy delivery, to project and programme management, both within the EU and in its partner
countries. It results from a number of interwoven factors, related both to changes and developments
within the EU institutions themselves, as well as to developments within the NGO Community. As
the European Commission has acquired additional responsibilities in a number of new policy areas,
this has been matched by an ever-increasing number of NGOs operating within and outside Europe
and a widening in the scope of their work. This trend can be seen in the increasing number of
national NGOs creating or joining European associations and networks often based in Brussels.
With the enlargement of the EU on the not too distant horizon, and the increased public scrutiny of
EU affairs, there is no reason to believe that this process will slow down, rather the contrary(1).
Although the Commission’s current practice clearly proves its willingness to maintain and
strengthen its partnership with NGOs, the structures and procedures involved have not kept up with
this. The Commission has therefore contributed substantially to matching the support of the
members of the European public given to NGOs and thus highlighting the continued importance of
high levels of public support for the role of NGOs. However, the complexity of EC policies as well
as the growing number of regulations and funding sources (budget lines) coupled with recent
financial security problems have created a great deal of uncertainty for NGOs about co-operation
with the Commission. Both the Commission and the NGOs wish to put the relationship on a new
footing.
1. THE ROLE OF NGOS IN EUROPEAN ADMINISTRATIVE SYSTEM
The context to this initiative is recognition on the NGO side that many policy areas are now
being decided at European level as well as the increase in funding available to NGOs from the
European Union. A new Commission committed to change and reform, means the time is right for a
new initiative(2).
The Commission has recently launched a far-reaching process of administrative reform
which includes among its aims a more service-oriented behaviour and an improvement in the
management culture of the Institution. A greater effort will be made to increase transparency and
accountability to principal interlocutors as well as improving efficiency for instance by speeding up

payments to all beneficiaries. The purpose of this paper is two-fold. First of all, it aims to give an
overview of the existing relationships between the Commission and NGOs including some current
problems. Secondly, it aims to suggest possible ways to develop these relationships by considering
the measures needed to improve and strengthen the existing relationship between the Commission
and the NGOs(3).
The NGO-sector has often been described as extremely diverse, heterogeneous and
populated by organisations with hugely varied goals, structure and motivations. It is therefore not
an easy task to find a common definition of the term "non-governmental organisation". It cannot be
based on a legal definition given the wide variations in laws relating to NGO activities, according to
which an NGO may have, for instance, the legal status of a charity, non-profit association or a
foundation(4). The term "NGO" can nevertheless be used as shorthand to refer to a range of
organisations that normally share the following characteristic: NGOs are not created to generate
personal profit. Although they may have paid employees and engage in revenue-generating
activities they do not distribute profits or surpluses to members or management; NGOs are
voluntary. This means that they are formed voluntarily and that there is usually an element of
voluntary participation in the organisation; NGOs are distinguished from informal or ad hoc groups
by having some degree of formal or institutional existence. Usually, NGOs have formal statutes or
other governing document setting out their mission, objectives and scope. They are accountable to
their members and donors; Operational NGOs contribute to the delivery of services (such as in the
field of welfare), whereas the primary aim of advocacy NGOs is to influence the policies of public
authorities and public opinion in general. In a broader sense, trade unions and business or
professional organisations might also be considered to be non-governmental organizations(5). The
present document, however, deals primarily with organisations active in the so-called "Third
Sector", i.e. in the nongovernmental and non-economic field. Nevertheless it goes without saying
that the approach to consultation processes proposed in this document should be used as a model for
other categories of organisations, in so far as these consultations do not take place under a specific
framework.
Increasingly NGOs are recognised as a significant component of civil society and as
providing valuable support for a democratic system of government. Governments and international
organisations are taking more notice of them and involving them in the policy- and decision-making
process. This is of particular relevance in the context of enlargement(6). According to the so-called
Copenhagen criteria, membership in the EU requires that the candidate country has achieved
stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and
protection of minorities. NGOs can make an important contribution to the development of
democracy and civil society in the candidate countries. Developing and consolidating democracy is
also the Community’s general policy objective in its co-operation with developing countries and
goes therefore far beyond the enlargement process. Partnerships with local NGOs in developing
countries are particularly significant in this regard. The role of NGOs in representing the views to
the European Institutions of specific groups of citizens (such as people with disabilities, ethnic
minorities) or on specific issues (such as the environment, animal welfare, world trade). In
particular, many NGOs have an ability to reach the poorest and most disadvantaged and to provide
a voice for those not sufficiently heard through other channels. In the European context, NGOs
perform this role not only in relation to the Commission, but also the European Parliament, the
Economic and Social Committee, the Committee of the Regions and the Council. Their
involvement in policy shaping and policy implementation helps to win public acceptance for the
EU. In some cases, they can act as a balance to the activities and opinions of other interests in
society(7).
2. THE RELATIONSHIP BETWEEN COMMISSION AND NGOS
The specific expertise that NGOs can contribute to policy discussions. Through their links at
local, regional, national and European level, NGOs can provide expert input for EU policymaking.
In particular, they can provide feedback on the success or otherwise of specific policies thereby
contributing to the Commission’s task of defining and implementing policies by fully taking into
account its overall public policy responsibility. The specific expertise that NGOs can contribute to
managing, monitoring and evaluating projects financed by the EU(8). The contribution of NGOs is
particularly important in tackling social exclusion and discrimination, protecting the natural
environment, and the provision of humanitarian and development aid. The expertise and dedication
of NGO staff and their willingness to work under difficult operational conditions mean that NGOs
are vital partners for the Commission both within the EU and beyond. By encouraging national
NGOs to work together to achieve common goals, the European NGO networks are making an
important contribution to the formation of a "European public opinion" usually seen as a pre-
requisite to the establishment of a true European political entity. At the same time this also
contributes to promoting European integration in a practical way and often at grassroots level.
Moreover, the ability of European NGO associations and networks to channel and focus the views
of the various national NGOs is very useful for the Commission. Therefore, strengthening the
relationship between the Commission and NGOs can help both parties to be more successful in
achieving their respective goals. At the same time, the Commission will need to recognise and
support the development and independence of the NGO sector. The various aspects of the
Commission’s current relationship with NGOs can be summarized as follows:
 Fostering the development of civil dialogue and civil society at the European level
and the strengthening of civil society as an objective in co-operation programmes with nonmember
countries;
 NGOs as information relays. European NGOs and their networks and national
members, can serve as additional channels for the Commission to ensure that information on the
European Union and EU policies reaches a wide audience of people concerned by and affected by
its policies;
 Funding of NGO-led activities, within the Community and abroad, which are
coherent with and contribute to the implementation of EC policies. These programmes are
characterized by a high degree of NGO ownership of the actions financed;
NGOs as actors implementing Community programmes and projects, in particular in the
field of non-member countries co-operation. In these cases, NGOs have been chosen as partners
because of their specificity coupled with their expertise and technical capacity. The following
problems are listed here as examples of areas where co-operation between the Commission and
NGOs could usefully be improved(9).
Co-operation with NGOs is organised by policy areas (environment, social affairs,
humanitarian and development aid, trade etc) implying considerable differences in the relationship
between NGOs and the Commission from one sector to another with regard to access to
information, the way dialogue and consultation is organised and the availability of core-funding.
While recognising the specificity of different sectors, most NGOs feel that there should be a greater
effort at a coherent Commission-wide approach.
There is a lack of sufficient information for NGOs in particular on funding and financial
procedures. Better guidance on application procedures and more comprehensible application forms
would be much appreciated. The NGO sector is a dynamic one which is constantly evolving.
Commission departments often find it difficult to follow this evolution. In particular they lack
adequate information on the various NGOs with which they come into contact. Internal
Commission procedures are often complex. Although the NGOs have on the whole welcomed the
Commission’s Vade-mecum on Grant Management as providing clear rules, they are concerned that
emphasis on financial rigor will place an increasing burden on NGOs applying for funding(10).
As part of its overall policy on transparency, the Commission should provide better
information for NGOs and improve communication with them as a means of building a true
partnership. Some of the consequences of the current situation are considerable delays in handling
applications, ill-adapted procedures particularly for dealing with small projects and a breakdown in
confidence. Whilst for its part the Commission recognises that it must improve and strengthen its
relationship with NGOs, the NGOs themselves must also recognise their own responsibilities in
making that relationship work. Each side should be able to acknowledge and take into account the
priorities and realities of the other. This does not, of course, exclude frank discussions or even
differences of opinion.
In the area of policy dialogue, the Commission has to discharge its inter-institutional
responsibilities in this area, as well as offering, within these boundaries, dialogue and consultation
to the NGOs as representatives of civil society. The NGO Community must recognise and take into
account this formal institutional set-up. Other obligations might relate to representativity, proper
communication of information to member organisations and respecting the confidentiality of
Community information where required. Regarding funding, the NGOs must accept, for example,
that there will always be a legitimate need for the Commission to impose certain conditions and
controls to safeguard community funds. NGOs have a duty to demonstrate that they have the
expertise, management systems and internal quality control systems appropriate to the work they
are undertaking in behalf of the Commission. Dialogue and consultation between NGOs and the
Commission have to be seen in the framework of the democratic decision-making process of the
European institutions. Many European institutions, and in particular the European Parliament, the
Economic and Social Committee, and the Committee of the Regions have a strong tradition of close
contacts with NGOs. The specific value of these consultations derives notably from the
Commission’s right of initiative. Timely consultation with all stakeholders at an early stage of
policy-shaping is increasingly part of the Commission’s practice of consulting widely, in particular
before proposing legislation, to improve policy design and to increase efficacy. It should be noted
that in June 1998, the European Community signed the UN/ECE Convention on Access to
Information, Public Participation in Decision-Making and Access to Justice in Environmental
Matters, the so-called "Aarhus Convention". By signing the Convention, the European Community
demonstrated its commitment at international level to increased transparency and openness as well
as to ensuring adequate consultation of the public in the process of shaping EC environmental
policy. Ratification by the EC of the The Environment Directorate General also organises a twice-
yearly "EU and Candidate Countries NGO Dialogue on Accession". A good example of the value
of a horizontal approach was the seminar which was hosted by the Commission in November 1998
to present the Vade-mecum on grant management to some 200 representatives of Brussels-based
NGOs. Representatives of four NGO "families" (environment, social affairs, development aid and
human rights) participated actively in the seminar. Representatives of the same four NGO
"families" are in regular contact with the Grant Management Network on the implementation of the
Vade-mecum. The steering group sees the current informal co-operation as useful and wishes it to
continue. Where there is a political/formal commitment to consult an NGO or grouping of NGOs on
a particular issue, during the decision-making process. Also, where NGOs participate as members
or observers in advisory groups / consultative committees with defined procedures. It is important
for NGOs and groupings of NGOs to be democratic and transparent as regards their membership
and claims to representativeness (11). In this context, the European Commission encourages
organisations to work together in common associations and networks at the European level since
such organisations considerably facilitate the efficiency of the consultation process. However, for
the consultation process to take place via such associations and networks, these organisations need
to ensure that their structures are representative, in particular regarding their roots in the different
Member States of the European Union.
The Commission adheres to the principle of open government, and therefore feels it
necessary to establish a number of clear guiding principles to ensure that systematic and regular
consultations with NGOs are also meaningful, efficient and conducted in a transparent manner. In
order to be mutually beneficial, dialogue and consultations require first and foremost proper
planning and a high level of commitment by all participants throughout the process. The
Commission therefore wishes to develop a framework of principles for creating a more structured
dialogue with NGOs. This process should lead to a set of recommendations identifying best practice
in consultation, which would be addressed to all Commission departments. The following issues
could be considered in this context, though they remain open to further debate with the
Commission’s NGO partners, whose own views on the best ways to improve the dialogue with the
Commission will be important: how best to define the scope and nature of the dialogue or
consultation and to ensuring adequate publicity; how to provide adequate background information
in good time so that NGOs can consult their own members properly (thereby helping to ensure the
quality and representativeness of the NGO input), and in a language and style accessible to the
NGO audience; how best to bring the opinions voiced by the NGOs to the attention of the relevant
Commission department/officials and to ensure, where possible, that NGOs receive appropriate
feedback on how their contributions and opinions have affected the eventual policy decision,
thereby making the relationship a real dialogue; what are the most appropriate means (the Internet,
(e-mail) mailing lists and newsletters) to give wide publicity to the whole consultation process; how
to set jointly the agenda of any consultation process. The need for adequate Commission resources
(staff) in order to provide the necessary assistance in the organisation, running and the follow-up of
any dialogue consultation procedure, whether eliciting NGO views on a Green Paper or a
Discussion Paper, or the organisation of meetings; How best to select the NGOs to be included in
the various consultation processes In some sectors the Commission’s should have its own objective
and pre-established criteria and reasons for selecting the NGOs for the purpose of dialogue or
consultation procedures. These could include the following:
- Their structure and membership.
- The transparency of their organisation and the way they work.
- Previous participation in committees and working groups.
- Their track record as regards competence to advise in a specific field.
- Their capacity to work as a catalyst for exchange of information and opinions between the
Commission and the citizens. It should be borne in mind that selection by the Commission of its
interlocutors according to such criteria may not be feasible or appropriate in each area of
Commission’s activities. Self selection by the NGO Community, through the appointment of
representatives and the setting up of networks or platforms can be a useful alternative. In practice
greater transparency means providing more information on how the Commission selects and has
selected its partners for regular consultation, what consultative groups exist, their composition and
some details about the NGOs participating. Where it is the NGO community that nominates
interlocutors for dialogue with the Commission, the NGO associations and networks should provide
information on the criteria and reasons for selecting these NGOs.
CONCLUSIONS
The Commission recognises the need to establish a more coherent approach to its relations
with NGOs by maintaining and building on existing "good practice" in different sectors. The
European Union has a supranational governance structure, which means it is able to make
decisions without the unanimous agreement of national governments. To address the criticism
concerning its democratic deficit, the different EU institutions have included NGOs in the policy
making process. With their expertise and representative member base, NGOs can provide valuable
input and help legitimize the decision-making process within the EU. NGOs have played an
important role in developing European policy. Since the early 1990's, they have built coalitions with
national and regional governments, industry, other interest groups and members of the European
parliament as well as the European Commission. Lobbying generally favors big NGOs with enough
resources to provide robust facts and scientifically based evidence in their advocacy work.
ENDNOTES:
(1) Porter, Gareth. 2000. Global Environmental Politics. Boulder, CO: Westview Press.
(2) European Commission (1993), An Open and Structured Dialogue between the Commission and Special
Interest Groups, Brussels.
(3) Doyle M. – Sambanis N. (2000), International Peacebuilding: A Theoretical and Quantitative Analysis, in
“The American Political Science Review”
(4) European Commission (2000), The Commission and the non-governmental organizations: building a
stronger partnership
(5) European Council (2008), Presidency Report on ESDP, 10415/08, 16 June 2006. Wallace H. – Wallace W.
(1996), Policy-making in the European Union, Oxford, Oxford Univ. Press.
(6) Nichols, Philip. 1996. “Extension of Standing in World Trade Organization Disputes to Nongovernment
Parties.” University of Pennsylvania Journal of International Economic Law
(7) Bulmer S. J, (1983), Domestic Politics and European Community Policy-Making, in “Journal of Common
Market Studies”
(8) Attinà Fulvio (2007), The European Security Partnership: a comparative analysis, in Foradori P., Rosa P.,
and Scartezzini R., eds. (2007), Managing multi-level foreign policy. The EU in international affairs, Lanham,
Lexington Books.
(9) European Council (2008), Presidency Report on ESDP, 10415/08, 16 June 2006. Wallace H. – Wallace W.
(1996), Policy-making in the European Union, Oxford, Oxford Univ. Press.
(10) European Commission (2001), Towards a reinforced culture of consultation and dialogue - General
principles and minimum standards for consultation of interested parties by the Commission, Brussels
(11) Wallace H. – Wallace W. (1996), Policy-making in the European Union, Oxford, Oxford Univ. Press.
BIBLIOGRAPHY
1. Attinà Fulvio (2007), The European Security Partnership: a comparative analysis, in

Foradori P., Rosa P., and Scartezzini R., eds. (2007), Managing multi-level foreign policy.
The EU in international affairs, Lanham, Lexington Books
2. Bulmer S. J, (1983), Domestic Politics and European Community Policy-Making, in
“Journal of Common Market Studies”
3. Doyle M. – Sambanis N. (2000), International Peacebuilding: A Theoretical and
Quantitative Analysis, in “The American Political Science Review”
4. European Commission (1993), An Open and Structured Dialogue between the
Commission and Special Interest Groups, Brussels.
5. European Commission (2001), Towards a reinforced culture of consultation and dialogue
- General principles and minimum standards for consultation of interested parties by the
Commission, Brussels
6. European Commission (2000), The Commission and the non-governmental organizations:
building a stronger partnership
7. European Commission (2001), White Paper on European Governance, Bruxelles, COM
(2001) 428 def., 5.8.2001.
8. European Council (2008), Presidency Report on ESDP, 10415/08, 16 June 2006.
9. Wallace H. – Wallace W. (1996), Policy-making in the European Union, Oxford, Oxford
Univ. Press.
THE APPLICATION OF THE LEGALITY PRINCIPLE IN THE ADMINISTRATIVE

ACTIVITY IN THE EUROPEAN UNION COUNTRIES
Lecturer PhD. Student Dumitriţa FLOREA (IONESCU)

University”Ştefan cel Mare” Suceava,Romania
dumitritai@seap.uv.ro
Junior Assistant Alina LARION
University”Ştefan cel Mare” Suceava, Romania
lariona@seap.usv.ro
Abstract:
The state must be govern by the law. The state must established with precision the limits of it’s competences
likeness the law, as respect the citizens liberties, it mustn’t action more than come under it’s legal competence.
An essential characteristic of the state govern by the law is the principle of the legality of the administration
activity, which, with the organizational division of the power of state in three component elements, has like scope the
guaranty of the citizen liberty to direct intervention of the state.
The develop of the equality principles of the peior persons and of those of the legal safety, as the protection of
the individual rights by the independent courts, play a major role in the completion of the state obedience to the law’s
sovereignty.
This develop led to a quasi-total obedience of the administration to the law, which at it’s turn, it’s submit to the
constitutional law. There is an agreement between the European states – despite of theirs different historical
development – regarding with which constitute the basic principles of the safeguard of the peior person’s liberty, and
regarding the fundamental rules for the democratic exercise of the power of the state.
Regarding the various organisms of the European Union, these are empowered to action only in the specific
designated spheres, which are establish in the formal stipulations and precise defined. Much more than that, they had
at their disposal an complete system of the rights protection, in which The European Justice Court represent the central
element. Therefore, there is an unity of the views of the member states up there that the concept of the state govern by
the law in the most general terms was accomplish, in the sense that any exercise of the executive power must
discretionary and limited by the law.
Key-words: public administration, administrative law, compared law, state of right, legality principle,
administrative deed.
JEL Classification: N40, Y20
INTRODUCTION
Approaching by a systematic vision, the specific nature of the activity of the public
administration it’s unfold through the agency of many institutional forms which constitute an
institutional gearing, which organization principles vary in accordance with the problems pose, by
the external pressure and by own preoccupations, but which suppose the integration in the social,
politic and economic medium existing too with multiple differentiations in time and space [1].
Therefore, in a generalization acceptation, the administrative system of an state or of an
union states, can be define like an coherent assembly of structures, institutions and interdependent
settlements, through it’s materialize the activity of public administration, like an real process.
CHAPTER I THE EUROPEAN ADMINISTRATIVE COMPARATIVE LAW
The comparative law studies was undertake until now especially in the private law domain,
in the largest acceptation. This fact is the most remarkable when some remind themselves that the
historical routs of the comparative law are “stuck” in the public law and that the assignation toward
“the younger” states had an incontestable role for the first and exercise and go on to exercise even
today an considerable influence on the those behind.
The motive of this unidirectional orientation of the comparative law toward the problems of
the civil law it can constitute first of all the fact that the practical need of call it in help it’s
concentrate above all in the private law domain. The commercials and personals relationships
which outrun the national borders are in the traditional ways more appropriate and more develop
between the individuals citizens than between national administrations or between the citizens of an
state and the administration from another state [2].
In the administrative law case particularly should also add that this is an new domain of the
law, which it’s develop in the European states only during the 19-th century, when it’s arrive at
“state of law” notion. Since then, the obligations and the authority of the administration across
citizens it’s continuous develop; in deed, in such measure, that the relationships between citizens
and administration had quantitative equalize the volume of the legal relationships between citizens
themselves. On background of an influence in a continuous growing of the westerly civilization and
of an moral, economic and even legal standard, in the different states by the mutual exchange of
goods and ideas, it’s hard to imagine that the administrative law remain much longer ”untouched”
by the comparative law.
The state of law represent the public power govern by the own laws inclusive by the
international settlements and agreements hereupon that state are apart.
The democratic state of law is govern by the laws that it’s identify through the will of the
nation representatives choice by free will, characterize by the separation of the power in state, the
political pluralism, by a largest scale of rights, freedoms and inviolabilities recognize to the own
citizens, inclusive the real guaranty of those on the substance of an rigorously examination of those
observance in a violation case, including from the authorities part destined to defend them.
In a state of law the authorities activate only in the limit of legal competences attribute, any
action – deed or juridical fact or lawlessly – accomplish without legal frame is invalid, illicit and, in
consequence, if it’s violate rights or legitimate personals or public
interests, involve the juridical responsibility, under different forms, on the side of the guilty ones
[3].
CHAPTER II THE LEGALITY PRINCIPLE IN THE ADMINISTRATIVE

ACTIVITY. THE APPLICATION OF THE PRINCIPLE IN SOME COUNTRIES OF THE
EUROPEAN UNION
An essential characteristic of the state of law is the action of the legality principle
conforming which all the law subjects, physical or juridical persons, citizens or strangers, private
person or officials, authorities or non-government organizations must to observe the law in their
relationships, inclusive all the others juridical deeds and measures found by the law applicable the
social records in which it’s found.
Of course, in any democratic state, the legality is not only a simple duty, fundamental or
constitutional law, but also a fundamental principle of law which it’s find again at the base of all
settlements operation, of all norms which has to be observe, that deed accrue, equal way everybody.
The necessity of the observe of law in a democratic state is also an objective requirement and also
an subjective one [4].
Under objective aspect the necessity of the observe of the law it’s appear like a general
requirement or collective one from the moment of the law promote the general interest, everybody
common or the majority of the population.
Under subjective aspect the necessity or the observe of the law it’s manifest at individual
level, through the acknowledgement of the own interests, well-known in the settlement which
interested the person in the acceptation of the benefit of the protection which dispose in that way
when the laws or interests are violated.
That why any violation of the law must seen not only like a simple deviation from the
general interest, but also like a harm, resort, and also of the personal interest reverberating in
common interest.
The legality has certain fundamental requirements which consist in:
 The hierarchy of the normative deeds, headed by the Constitution having supreme
juridical force, and going on with the law having a upper force all the other settlements and
finishing up with the last individual deed of achieving of the law, base on the law and applied of an
induced subject;
 The unity and the oneness of the law, visa it equable application on all the country
territory and in the same way absolutely equal to all those founded in the same juridical situation,
meaning the unitary juridical treatment, indiscriminate;
 The legality and the opportunity suppose an application of the law, differential in the
permitted frame by it, varying with the place, time, person or the situation which is visa, meaning
the actuality of the measure taken which correspond better with the concrete conditions offer in the
process of the individualization of the law application, therefore any measure disposed by the
authorities to be as legal and as adequate [5];
 The observance of the citizens rights and freedoms, of the established and guarantee
inviolabilities, therefore any violation of them, including from the authorities side, to be approbate
through efficient juridical resources, which come under exertion of the applicant of the law, the free
access to justice, the steady procedurals and processual guaranties, in viewing of the re-
establishment of the violated legality;
 The order of the state or of the duty which impose the application alongside the law,
especially to the civil servants of the administration, of all the settlements and hierarchic orders
with legal character [6], the receptivity toward the addressed applications, the settled on time and in
the adequate way of these, in the conditions of the transparency, with minimum of the formalities,
eliminating the bureaucratize and the unavailing procedures.
In the public administration case the principle of the legality proceed entirely as on the
juridical activities of that as of those destitute of such effects.
In this acceptation it’s remark the fact that:
 The public authorities are found, organized and function in the ground of law, either in
direct way, immediate, either indirectly way;
 The duty of this organs it’s establish all in the ground of law which it’s circumscribe the
sphere of ability in which act;
 The deeds and, in generally, the ready measures are anticipate all by the law.
The edification of state of democratic law are mean both the real equality of the fellows
ahead the law, but also the legal protection of their rights, like a juridical guaranty measure offer by
the jurisdictions invest with the duty of the solve of the violation of this rights, inclusive the
specialize judicial instance.
By the state of arbitrator type, above the conflicts with mediator role, for the beginning of
the modern democracy, at the state and, especially, at his administration amenable to the
Constitution supremacy and the superiority of the law, but also the compulsoriness of the execution
of the judicial resolution which it’s determine to reestablish the legality and the defection rights, it’s
unwind a progressive evolution unanimous accepted by the European states beyond the national
historical personal and natural evolutions [7].
France
In this country the system of the administrative law powerful centralized through the
competence of the governmental authorities and the unitary character of state is marked by the
legality principle, the executive having to act according to the law or the right, respective the
Constitution, the treaties, the regulations.
Of course, thanks to semipresidential character of the form of government, the central
normative competences, and implicit, the action of the legality principle it’s manifest and,
respective, it’s exercise in different way.
Indeed, the Parliament according to the Constitution, has a limited legislative power (art, 34)
and rigorously delimit against the executive, this rearward having a large sphere of the normative
duties, as the chief of state through the decrees, and the executive through the regulations and even
legislative competences through the agency of governmental ordinances [8].
Though, the discretionary powers which dispose the executive are implicit restricted by the
fundamental principles of right emerge on Constitution and the international treaties, - and the
common law right has no important role in this sense, - the treaties which had an anterior role
against the national legislation (art. 50).
Lastly, the administration must to respect the community law of the European Union, with
direct effects and superior against the internal law.
The assurance of the legality of the administration papers it’s accomplish procedural through
the recourse for the excess of power within the demand, the reclamations, the intimations it’s can
based on the formal or procedural deficiencies, other violations of the law, the discretionary power
abuse and even absence of the competence.
Under institutionally aspect, the guaranty of the legality in the administration, it’s
jurisdictional assured through the administrative courts, headed by the State Council, which had,
long ways time, a decisive role in the limitation of the executive powers in this reports with the
citizen and in the his subordination against the Constitution and the laws.
Italy
The legality principle is unanimous accepted like a basic rule which govern the
administration functions, although the interpretations are numerous in this acceptation starting from
the constitutional text (art. 97) concordant which “the public institutions are organized accordingly
through the deeds emit by Parliament to assure the fairly performance and the fairness of the
administration.
First of all, this principle impose to the executive of the district and the province the duty to
comply both the law and the general principles of law.
Secondly, though, the administration may to turn from the foresights which visa the liberty
and the property of the citizen, but only than has through the law, such possibility express devote,
like, for example, the cases of necessity, the emergency cases or the siege cases [9].
Greece
The Constitution characterize the state like being constitutional, reason for that even the
administration is lead by the same principle of legality which mean the subordination both to the
law and to the ordinances of the executive.
Much more, the chief of state himself, the President, which is also the chief of the executive,
dispose only by the authority conferred by the Constitution and the laws.
Still, the activity of the Greek administration is govern not only by the express principles of
the laws, but by those generals unwritten of the law, arising tacit through the settlements or
detached from those.
The procedure of tackle of the administrative decisions is inspired on the French legislation,
for the power excess cases consisting on law breaking, the absence of the competence, the vises of
form or procedurals, the authority abuses.
Portugal
The Constitution from 1974 has dedicate through the legality principle behind the radical
political evolution post dictatorial, using the phrase as “the democratic legality” created as an
compromise between the concepts of “the socialist legality” specific to socialist Eastern Europe, in
that epoch, and that on “constitutional state” utilized in Western Europe.
Further, the recension from 1982 of the fundamental law introduce the collocation of “the
democratic constitutional state”.
Of course, the hole public administration in front with the government it’s subordinate to the
written law, but unlike the legislation and the juridical system of others European states, the
executive has an proper legislative competence, different from those of Parliament, exercised
through the settlements by primary nature and not derived by law [10].
Though the administrative intervention on the domains of the fundamentals rights or which
could affect those rights, ask, yet, the legitimation through a parliamentary deed.
Spain
The Constitution from 1978 establish the government form specific to the parliamentary
monarchy within of the constitutional social-democratic state like a political regime.
In the definition of this government form the public authorities are submissive to the
Constitution and to the general juridical system.
The definitive elements of the constitutional state consist in the legality principles, in the
legal rules hierarchy, of the public character of the juridical rules, the unretroactivity of the
sanctions, the legal or juridical certainty, the responsibility and the veto on the arbitrary action of
the public authorities (art. 9 from Constitution).
Although the government exercise, as a rule, the executive base function, though has the
power too to emit the settlements, the attributes which must to exercise them according to the
Constitution and the laws (art. 97).
The restriction brings from the executive to the citizen’s rights and the freedoms had,
though, the need of an written law.
Luxembourg and Belgium

The Grand Duke exercise, according to the Constitution(art. 33), the executive power
consisting in the emit of the deeds of the application of the laws, respectively, of the decrees and the
ordinances, which in no way, can not be used to the correction (or the change) of the laws or for the
prevention of them execution.
The general principles of the laws constrain the administration to the execution of the law in
which sense, are devoted to the principle of the hearing, those of the equal treatment in the matter of
the public tax or of the access to the benefits.
The principles of the French administration influence in the strong way the Luxembourg
legislation, from the viewpoint of the errors and the abuses from the executive activity.
In Belgium the public administration is highly placed to the law in the sense that it must
ensure the application of this having the power according by the law.
But, the legality principle cause that the executive actions to be legal and, in the extent that
they are in accordance with the decisions of the superior authorities, under juridical hierarchy of the
rule of law cause by their juridical forces in terms of the effects produced.
Although the Constitution not establish an juridical regime regarding the control of the
constitutional laws, the judiciary organisms not having the power to decide in this sense and the
deed emit by the Parliament not have an penalty in case of unconstitutional, though the Courts,
under the fundamentals laws (art. 107), are obliged to reject the settlements of the provinces and
the municipalities against the law.
Much more, any interested person can ask the Council of the State the revocation of the
administrative decisions defective the law [11].
On the other hand, the legality principle presume the rule that not even an administrative
authority can not adopt the previsions contrary to the proper generals settlements, couldn’t derogate
through the individuals deeds from the proper norms.
Germany
The Constitution (art. 20/3) oblige the executive to exercise his attributions according to the
fundamental law and to the other laws, but under the conditions of the compliance of the
fundamentals rights.
From here the constitutional of the legality principle of the executive activity in terms of the
state primate and the request of the law’s compliance like an deed emit by the Parliament in the
respectively domain of the administrative action.
The primate of the law, like a deed emit by the Parliament, ensure the superiority of this
initial source on other secondary source and derivative from the regulatory, from the ordinances
type, from other administrative deeds, those from behind must being in according with the firsts.
The particularly problems, regarding the administrative settlements, in case it’s based on the
law, doesn’t arise in the executive practice.
Though, it’s put the problem in what domains reserved to the legislative are that exclusively
competence and in what measure the unreserved parliament domains can accrue to the normative
competence of the executive.
The solution choose by the German Constitution (art. 80/1), differ from this of the French
legislative, is particularly restrictive in sense that the executive ordinances must rely only to the
statuary authority clear defined, the administration couldn’t act through the own settlements in the
absence of an normative parliamentary deed which authorize it in this sense [12].
In case of the publics services administration it’s set similarly the problem of the legal base
of those benefits in relation to citizens rights exercise or beneficiary of those services, especially in
case of arbitrary decision of rejection of this, in the sense of determination to the degree of
particularization of the parliament settlement to the administrative normative or individual
application.
The Federal Constitutional Court appreciated, in this sense, that the need of primary
legislation and the nature of the legislative deed are imposed by the importance of the problem in
case for the citizens, in which sense as the fundamentals rights are more threatening or as the
measures which follow to be emit are yield to cause bigger effects on them as more precise and
more restrictive must to be the authorize of the deeds emit by the parliament.
About the constraints impose to the administration regarding it’s legal measures these are
imposed by the generals principles of the law and the matter of the rights and the fundamentals
liberties which limited explicit and implicit, the liberty of the executive action (art. 1/3 from the
Constitution) both in scope of the public law as in that of the private law.
An administrative deed for to be wholly legal must to fulfill the next conditions:
 The issue of the deed must to be realize by the executive competent authority;
 The deed must be emit in according to the legal procedure established;
 The deed must be emit in the form asked by the law;
 The deed must to correspond through it’s content to the legal stipulation (not having no
defect of substance);
If one of these requests is not fulfill the administrative deed is illegal thanks to the improper
application of the legal rules existing (the Decision no. 13,28(31) of the Constitutional Federal
Court) [13].
CONCLUSIONS
The public law it’s characterize through a multitude of a specific features, which cannot be
meet in the same measure or in the same combination in other domains of the law.
The settlement scope of the public law it’s extend both on the structure and on the tasks of
the power of state and on the relationship between the state as o owner and the individual citizens.
Through the nature of the things, the immense domains of the public law are determined
more less through a substantial inherent legality than through the political desire of change from the
forces which holds temporary the power.
The generals principles of the compared law govern the methodology of the comparisons
from inside of the public law. It will be wrong to consider that exist a comparative method specific
to the public law but one or two specific features must be taken in consider, when ever the public
law is the subject of the comparative investigation.
NOTES:
[1] M.Preda, The administrativ law, Ed. Lumina Lex, Bucureşti, 2006;
[2] V.Prisăcaru, „The administrative law treaty”, ed. a III-a, Luminalet, Bucureşti, 2002
[3] Corneliu Manda, The administrative law – elementary treaty, Ed. Lumina Lex, Bucureşti, 2007
[4] I. Ceterchi, M. Luburici, "The general theory of the state and law", Tipografia Universalităţii, Bucureşti, 1983
[5] Augustin Fuerea, The european Comunitary law, Ed. All Beck, Bucureşti, 2003
[6] I. Alexandru, The european administrative law, Ed. Lumina Lex, Bucureşti, 2005
[7] I.Alexandru, The administrative law in European Union. The comparative administrative law. The
administrative law of the European Union, Ed. Lumina Lex, Bucureşti, 2007
[8] Dana Apostol Tofan, The administrative European institutions, C.H. Beck, Bucureşti, 2006
[9] Liviu Coman Kund, The administrative european systems, Casa de Presă şi Editură „Tribuna”, Sibiu, 2003
[10] Ioan Alexandru, The administrative law in European Union. The comparative administrative law. The
administrative law of the European Union, Ed. Lumina Lex, Bucureşti, 2007
[11] Dumitru Mazilu, The European integration, Comunitary law and european institutions, Ed. Lumina Lex,
Bucureşti, 2004
[12] Ioan Alexandru, The european administrative law, Ed. Lumina Lex, Bucureşti, 2005
[13] I.Alxandru, The administrative law in European Union. The comparative administrative law. The
administrative law of the European Union, Ed. Lumina Lex, Bucureşti,2007
BIBLIOGRAPHY
1. Augustin Fuerea, The European Union Institutions, Ed. Universul Juridic, Bucureşti,
2002;
2. Augustin Fuerea, The european Comunitary law, Ed. All Beck, Bucureşti, 2003;
3. Corneliu Manda, The administrative law – elementary treaty, Ed. Lumina Lex, Bucureşti,
2007;
4. Dana Apostol Tofan, The administrative European institutions, C.H. Beck, Bucureşti,
2006
5. Dumitru Mazilu, The European integration, Comunitary law and european institutions,
Ed. Lumina Lex, Bucureşti, 2004;
6. Ioan Alexandru, The european administrative law, Ed. Lumina Lex, Bucureşti, 2005;
7. Ioan Alexandru, The administrative law in European Union. The comparative
administrative law. The administrative law of the European Union, Ed. Lumina Lex,
Bucureşti, 2007;
8. Liviu Coman Kund, The administrative european systems, Casa de Presă şi Editură
„Tribuna”, Sibiu, 2003
9. Mircea Preda, The administrative law, Ed. Lumina Lex, Bucureşti, 2006;
BOOK REVIEW
INSTITUTIONAL ECONOMISTS’ TERRITORY

Professor PhD. Ionel BOSTAN
In the paper entitled Repere în economia instituţională (published by the Economică

publishing house, Bucharest, 2010, 336 pages), its author, the famous exponent of the school of
economics of Iaşi, Professor Ion Pohoaţă, explains what unites the new institutionalists in a
common paradigm. At the same time, where appropriate, he also finds what separates them. Firstly,
he observes that a common paradigm may be the result either of a reaction of detachment, until the
separation from a school or schools and tendencies of established and recognized thought, or of an
integrative synthesis of ideas belonging to different ideational spaces, united however by a
catalysing vein.
The most fertile, in the identification of the place of new institutional economics (NIE) in
the thematic area of contemporary economic science, seems to be, by far, its positioning regarding
the internal geometry and the epistemological base of the neoclassical school. Then he states that
the contemporary neoclassical school, to which NIE refers, no longer enjoys the perfect unity of
views and the methodological homogeneity of the old neo-classicism. Although there was a series
of internal changes, the heterodoxy did not affect the foundations of the high values on which relies
the neoclassicism. “The hard core”, as well as most of the “protective shell” (lakatosian terms used
in the analysis of the scientific revolution) remained intact. The natural order, the private property,
the freedom of undertaking actions, the free market, the individual ascendancy which is detrimental
to the collective interest, the competition and efficiency refer to the “hard core”. To these is added
the “protective shell”: subjectivism and relativism in assessing values, the a la marge judgement
principle (marginal productivity, marginal cost, etc.), the scarcity of production factors, the
exogenous supply of factors, the concern for balance, the essentially static analysis environment,
placed at the micro level, pure and perfect competition, complete information, profit or satisfaction
maximization, consumer or producer surplus, uniformity and interchangeability of exchange values,
human needs and perfectly divisible and rankable utilities of goods, perfect rationality,
mathematized economy, comparative analysis between real, empirical situations and ideal
conditions etc.
In the author’s opinion, the key concept that imposed NIE on the scene of the economic
theory is not the institution, but the cost of transaction. The old institutionalists used in a pioneering
manner the explanatory power of what is called institution. Not identifying a split between the old
and the new institutionalism, and since the institution offers names both for the old and for the new
branch of the thinking tendency had in view by Professor Pohoaţă, we find the explanation for the
reason why we start from here, from the institution. A solid concept about the institution belongs to
D. North, who establishes the standard definition: “In a society, institutions are the rules of the
game or, more conventionally, they are the constraints created by people to shape human
interaction”.
Bringing into discussion M. Aoki, the author sees he provides the most representative
theoretical development of the institution in terms of game theory and the predominantly
endogenous character of its motivation. According to him, “an institution is a system of shared
beliefs that are self-supporting in the way the game is played. In its substance, it is a synthetic
representation of striking and invariable properties of a particular equilibrium situation, that
almost all agents in a field consider important in terms of their strategic individual choice and that
is, in its turn, reproduced by their actual choices in a constantly evolving environment.”
A considerable space is devoted in the book to approaches regarding the essential features
of institutions: endogeneity, captured by the terms “self-supporting” and “reproduced”; the nature
of condensed information, the consistency concerning the continuous changes of the environment;
universality, multiplicity.
When referring to the theory of economic dynamics in institutionalist version, Professor
Pohoaţă uses a compression in the northian synthetic sentence, as a motto, quoted in the paper: “in
the process of economic growth, institutions matter” (to the extent that all or almost all is explained
and attributed to them). He also notices that institutionalists do not invent a new theory of the
growth. They do not issue such a claim, but are justified to say that their approach, compared to the
classical and especially the neoclassical one, has its necessary dose of specificity for offering and
bearing the school brand, which originates in the integration of institutions in the intimate,
explanatory and prospective structure of the growth theory. So, the author in question tried to
follow them on such a well-defined path. That is, a route “of dynamics and not of the economic
growth, just to resonate with their own philosophy: the dynamics is a two-way road; its route could
mean rising, but also declining; and in their approach, institutionalists are interested in both of
them.”
The understanding of the whole construct made by Professor Pohoaţă is facilitated by “ The
summary sketch of the development in an institutionalist version”, otherwise very successful, in
which we find the approach of all factors and relationships by which they are connected to one
another, in the process whose final objective is the economic dynamics. Institutionalist economists’
scientific works (R.H. Coase, A. Alchian, H. Demsety, D.C. North, O.E. Williamson, R. Nelson,
S.G. Winter, M.C. Jensen, M. Aoki, E. Brousseau, G. Hodgson, C. Menard, S . Pejovich) - many of
them holders of the Nobel Prize for Economics - are carefully analyzed/summarized in the first part
of the book.
Let us add that, finally, when dealing with evolutionism and institutionalism, Professor Ion
Pohoaţă devotes several pages to Nicolae Georgescu-Roegen’s contributions. His opinions clearly
lead the author towards the lamarckian (not towards the Darwinian) version of the evolution on
development. Thus, he claims it is essential for us to discern between true and false needs, not to
squander scarce resources, to learn to live in harmony with the nature..., which ultimately will lead
to an increased quality of life dimension.
Ion POHOAŢĂ (born on January 13, 1951, Fălticeni) is Professor of Economics at the “Al.
I. Cuza” University of Iaşi, Director of the (FEAA) Doctoral School and President of the CNATDU
(MECTS) Commission for confirmation of the Doctor title and of the IOSUD quality. Favorite
areas: Economic doctrines, Economic epistemology, Institutional economics, Sustainable

development. He is PhD Director in the Economic field. He published 11 books at publishers in the
country and abroad, as well as over 120 articles and studies in scientifically traded journals and
volumes. He was project manager in 7 grants and member of the research teams in eight contracts
obtained through open competition.
INSTRUCTIUNI UTILE PENTRU AUTORI / AUTHOR GUIDELINES
RO
Revista The Annals of the Stefan cel Mare University of Suceava. Fascicle of The Faculty of
Economics and Public Administration primeste articole, din toate domeniile economice, pe cele 5
sectiuni:
 Economie, comert, servicii
 Management si administrarea afacerilor
 Contabilitate-finante
 Statistica, informatica si matematica
 Drept si administratie publica
Este recomandabil ca lucrarile sa fie bine structurate astfel încât sa asigure claritatea continutului precum si
esenta temei tratate. Toate articolele trebuie sa prezinte cercetari originale care nu au mai fost publicate sau
trimise spre publicare în alta parte. Lucrarile prezentate la conferinte sunt acceptate cu conditia ca ele sa nu
fi fost publicate în întregime in volumul conferintei. Lucrarile vor fi redactate în întregime în limba engleza.
Lucrarile vor fi recenzate in sistem blind review.
Titlul lucrarii
Se va scrie cu Times New Roman, caracter 12, bold, centrat în partea de sus a paginii, si se va scrie cu
majuscule.
Autorii lucrarii
Numele lor se va scrie la un rând după titlul lucrării, centrat, precizându-se: titlul stiintific,
universitatea/instituţia, localitatea, ţara si e-mailul. Se va folosi Times New Roman, caracter 10, cu litere
mici.
Rezumatul lucrarii
Rezumatul se va scrie după autori, lăsând un rând liber înainte; trebuie sa cuprinda informatii suficiente
pentru ca cititorii sa poata aprecia natura si semnificatia subiectului, caracterul adecvat al metodei de
cercetare, rezultatele si concluziile lucrarii. Rezumatul nu este o introducere, acesta prezinta în sinteza
rezultatele esentiale ale cercetarii. Rezumatul se va scrie cu Times New Roman, caracter 10, italic, justify.
Este necesar ca el sa aiba un numar de 200-250 de cuvinte, spatiate la un rând.
Cuvinte cheie
Selectati 5-6 cuvinte cheie (cuvinte sau expresii) care surprind esenta lucrarii. Enumerati acesti termeni în
ordinea descrescatoare a importantei lor. Acestia se vor scrie cu Times New Roman, caracter 10, la un rând
liber după rezumat.
Clasificare JEL
Se va trece unul sau mai multe coduri JEL, in care lucrarea poate fi inclusa din perspectiva subiectului
abordat. Lista cu coduri o gasiti la adresa: http://www.aeaweb.org/journal/jel_class_system.html
Introducerea
Pentru introducere, formulati scopul lucrarii, motivatia temei alese si explicati pe scurt modul de abordare si
argumentele necesare. Înainte de introducere se lasă 2 rânduri libere.
Continutul lucrarii
Organizati corpul lucrarii utilizând titluri si subtitluri pentru a accentua atât continutul cât si claritatea acesteia.
Titlurile şi subtitlurile se vor scrie cu litere mari, 12, bold, aliniate la stânga. Se va lăsa un rând liber înainte şi
unul după. Trebuie avute în vedere urmatoarele:
 terminologia recunoscuta a domeniului pentru a descrie orice subiecte sau proceduri
experimentale folosite pentru colectarea si analiza datelor;
 includerea metodelor detaliate, astfel încât cititorii sa poata urmari prezentarea materialului;
 formularea rezultatelor în mod clar si succint;
 evidentierea rezultatelor cercetarii si impactul acestora, atât global cât si specific.
Textul lucrarii se va scrie cu Times New Roman, caracter 12, spatiat la un rând. Tabelele si figurile sa fie
dimensionate si plasate în corpul lucrarii asa cum doresc autorii sa apara în revista. Trebuie avut grija ca
acestea sa se încadreze pe o singura pagina. Continutul lor se va scrie cu Times New Roman, caracter 10,
iar titlul coloanelor tabelelor se va scrie cu Times New Roman, caracter 10, bold.
Titlul si numarul tabelelor vor fi pozitionate deasupra acestora, iar titlul si numarul figurilor, sub acestea.
Atunci când este cazul se va mentiona si sursa. Numarul tabelelor si figurilor va fi amplasat în corpul textului,
într-o paranteza, acolo unde se fac referiri la ele, de exemplu: (fig. nr. 1); (tabel nr. 1)
Graficele trebuie sa fie clar executate astfel încât sa ofere copii alb-negru cât mai lizibile. Numerotati toate
ecuatiile si formulele folosite plasând numerele lor în paranteze, în dreapta acestora.
Explicati abrevierile si acronimele prima data când apar în corpul textului, chiar daca au fost definite în
rezumat.
Nu folositi note de subsol, dar sunt permise note la finalul lucrarii (endnotes), situate înaintea bibliografiei.
Ele se vor scrie cu Times New Roman, caracter 10, italic.

Concluzii
Concluziile pot recapitula punctele principale ale lucrarii, dar nu trebuie sa reproduca rezumatul. Ele pot
cuprinde aspecte legate de importanta lucrarii sau pot oferi sugestii referitoare la aplicatii ale acesteia sau
directii de extindere a cercetarilor.
Bibliografie
Referintele bibliografice, din introducere sau corpul lucrarii, se fac prezentându-se, într-o paranteza, în
ordine, numele autorului si anul aparitiei lucrarii, de exemplu: (James, 1984); (Collins si Fermont, 1977 -
când sunt doi autori).); (Collins si altii, 1988 - când sunt trei sau mai multi autori).
De asemenea, trimiterile bibliografice, din textul lucrarii se numeroteaza cu cifre arabe [1], iar când sunt mai
multe trimiteri se va scrie [1] - [2].
Lista bibliografica, de la sfârsitul lucrarii, se va scrie în ordine alfabetica, dupa numele autorului,
numerotându-se. Când anumite studii, lucrari, articole sunt publicate în volum, atunci se va mentiona
numarul acestuia si paginile.
Precizari importante
 Articolele trebuie sa aiba 6-10 pagini, pe formatul A4, marginile stanga, dreapta, sus, jos: 2 cm.
 Lucrarile trimise trebuie sa fie formatate în Word cu extensia doc.
 Articolele care nu respecta aceste instructiuni vor fi respinse inainte de a fi date la peer review.
Vă rugăm manifestaţi foarte mare grijă pentru corectitudinea traducerii în limba engleză.
Vă rugăm să trimiteţi şi varianta în limba română a art icolului, necesară pentru controlul ştiinţific. Veţi primi
un răspuns în urma procesului de recenzare.
Lucrarile se vor trimite pe adresa: cercetare@seap.usv.ro , menţionând la subject secţiunea pentru care
optaţi (ECS, MAF, CF, SIM, APD); exemplu: “articol ECS”. Termenele limită vor fi afişate pe site.
Pentru alte detalii sau noutăţi vă rugam urmăriţi site-ul revistei: www.seap.usv.ro/annals .
EN
The Annals of the Stefan cel Mare University of Suceava. Fascicle of The Faculty of Economics and
Public Administration, welcomes theoretical and empirical articles, from all economic fields, according to
the 5 sections:
 Economy, trade, services
 Management and business administration
 Accounting-finance
 Statisitics, data processing (informatics) and mathematics
 Law and public administration
It is expected that manuscripts will be organized in such a manner that maximize both the substance and
clarity of the document. All articles should report original research that has not been published or submitted
for publication elsewhere. Papers presented at conferences are accepted, provided that they have not been
published in full in Conference Proceedings. The papers will be all written in English. The papers will be
checked in blind review system.
Paper Title
Must be in 12-point bold type, Times New Roman, centered across the top of the page and will be writen in
uppercase.
Paper Authors
Author’s names will be written under the paper title after a blank line, centered across the page, single
spaced specifing: title, university/institution affiliation, country and e-mail address. It must be written in 10
point type, Times New Roman in lowercase.
Paper Abstract
It will be written after authors leaving a blank line before. The abstract must include sufficient information for
readers to judge the nature and significance of the topic, the adequacy of the investigative strategy, the
nature of the results and the conclusions. An abstract is not an introduction, it summarizes the substantive
results of the work. The abstract will be written in 10 point type italic, Times New Roman, justify. It must have
200 to 250 words, single spaced type.
Keywords
Select 5 to 6 keywords (words or expresions) that capture the essence of your paper. List the words in
decreasing order of importance. All the key terms must be translated in English and attached to your
abstract. It will be written in 10 point type, Times New Roman, after abstract leaving a blank line before.
JEL Classification
Please put one or several JEL codes, according to the subject of your paper. The codes can be found here:
http://www.aeaweb.org/journal/jel_class_system.html
Introduction
For introduction, state the purpose of the work, the motivation of the chosen theme and, briefly explain your
approach and the necessary arguments.Before introduction please let 2 blank lines.
Paper Content
Organize the body of the paper using titles and subtitles to emphasize both content and clarity. The titles
and subtitles will be written in caps, 12, bold, left aligned. Please let a blank line before and one after.
Consider the following:
 the accepted terminology of the field to describe any subjects or experimental procedures used
to gather and analyze data;
 include detailed methods, so readers could be able to follow the investigation;
 state the results clearly and succinctly;
 the implications of the findings and minutely discuss the impact of the results, both globally and
specifically.
Typeface must be 12-point Times New Roman type single spaced. Tables and figures should be sized and
placed in the body of the paper just as the authors want them printed in the journal. Care should be taken so
that tables and figures could be on one page. The tables contents will be written in 10 point type, Times New
Roman and the heading of the tables will be in 10 point type bold, Times New Roman.
The titles and numbers will be positioned above the table and the title and number of the figures bellow.
When it is needed, the source will be mentioned. The number of the tables and figures are to be positioned
in the body of the text, in a paranthesis, wherever they are mentioned, for example: (fig. nr.1), (table nr. 1).
The graphs must be executed clearly so as to give clear black and white copies. Number all the equations
and formulas used positioning the numbers in paranthesis on their right side.
Define abbreviations and acronyms the first time they are used in the text, even after they had already been
defined in the abstract.
Avoid the use of footnotes, but endnotes are encouraged at the end of the paper before the references.
Endnotes must be in 10 point, Times New Roman, bold type.
Conclusions
Conclusions may review the main points of the paper, do not replicate the abstract as the conclusion. A
conclusion might elaborate on the importance of the work or suggest applications and extensions and
extensions of the research.
References
Related to in-text referencing cite the name of the author(s) and year of publication (James, 1984), (Collins
and Fremont, 1977 – for two authors) and (Collins et al., 1988 – for three authors). Also, references in the
articles will be numbered with [1] and if there are more than one reference with, [1] – [2].
Sources should be in alphabetical order by author’s last name, the list being numbered. When certain
studies, research, articles are published in a volume, the volume numbers and pages will be specified.
Important Specifications
 The articles must be at least 6 to 10 pages long in the style A4 sheet, margins left, right, top,
bottom: 2 cm.
 Submitted documents must be in PC-formatted Word (.doc) file.
 The articles that don't respect specified guidelines will be rejected before they are sent to peer
review.
The manuscripts should be submitted to: cercetare@seap.usv.ro , mentioning at subject the section that
your paper fits (ECS, MAF, CF, SIM, APD) ; example: “article ECS”. The deadlines will be posted on our
website. For other details or news, please check our site: www.seap.usv.ro/annals .
PENTRU COMENZI VA RUGAM SA NE CONTACTATI PE ADRESA DE E -MAIL A REVISTEI MENTIONATA

ANTERIOR.
FOR ORDERS, PLEASE CONTACT US BY E -MAIL AT THE ADDRESS MENTIONED BEFORE.

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ISSN 2066-575X www.seap.usv.

THE ANNALS OF THE

Editor-in-chief: Carmen NĂSTASE

Angela ALBU, „Ştefan cel Mare” University of Suceava, Romania

SECTION 1 - ECONOMY, TRADE, SERVICES .................................................................................................................................. 7

ROMANIAN ILLEGAL MARKETS IN THE CONTEXT OF THE CURRENT MACROECONOMIC

ASPECTS REGARDING HISTORICAL EVOLUTION OF INTERNATIONAL FINANCIAL FLOWS.................. 93

SECTION 2 - MANAGEMENT AND BUSINESS ADMINISTRATION ............................................................................... 160

GLOBAL CRISIS AND MICROCYCLICITY .................................................................................................................................... 161

MOUNTING E-WASTE OF EUROPE: POLICIES, MANAGEMENT PRACTICES, AND BUSINESS

SECTION 3 - ACCOUNTING - FINANCES ........................................................................................................................................ 216

THE ACCOUNTANT PROFESSION: EVOLUTION AND RUPTURES. THE BIRTH OF THE

SECTION 4 - LAW AND PUBLIC ADMINISTRATION .............................................................................................................. 263

RECENT BENCHMARKS ON WAGES IN THE NATIONAL PUBLIC SYSTEM*** ................................................. 264

CURRENT GUIDELINES IN THE FIELD OF ADMINISTRATIVE CONTRACTS ..................................................... 278

BOOK REVIEW ................................................................................................................................................................................................ 297

INSTRUCTIUNI UTILE PENTRU AUTORI / AUTHOR GUIDELINES............................................................................. 301

ECONOMY, TRADE, SERVICES

ROMANIAN ILLEGAL MARKETS IN THE CONTEXT OF THE CURRENT

Scientific Researcher PhD. Irina CAUNIC

JEL Classification: E26

1. THE ILLICIT TRAFFICKING IN DRUGS OR PSYCHOTROPIC SUBSTANCES

Table no. 1. Prices on the drug markets in Romania

Name Retail Price Wholesale Price

2. TRAFFICKING IN HUMAN BEINGS

4. R 4 S-V Oltenia 168 12.7%

Routes The average costs s in

3. Europe - Australasia 7,400

4. Africa - Europe 6,533

5. Europe – America 6,389

6. America - Europe 4,528

7. Europe - Europe 2,708

Table no. 4. Contraband cigarettes markets in the European Union

Markets Contraband % of fees

6. Cech Republic 5,000.0 21.3

THE IMPACT OF MOBILE GOVERNMENT IN ORGANIZATIONS: PROMISES AND

Ph. D. Professor Mircea GEORGESCU

Keywords: E-government, m-government, e-trust, mobile technologies

JEL Classification: H11, O33, O 38

Table no. 1. Evolutionary approaches to e-government assessment: an overview

E-Government Additional Technological and Organizational Sophistication

Political  Political participation;

E-GOVERNMENT VERSUS M-GOVERNMENT

Leadership processes Traditional vs E-

Figure no. 1. Organizational and citizen changes for successful M-Government

Figure no. 2. Internet conectivity versus Mobile conectivity

Figure no. 3. Key questions when designing mobile government

Figure no. 4. Government success In ICT promotion

Table no.2. Benefits associated with the implementation of m-government

Benefits for the public sector Benefits for the citizen

In order to foster a successful implementation of m-government, the following key success

1. Almazan-Sandoval, R., Gil-Garcia, R. (2006), E-Government Portals in Mexico, in

2. Antovski, Lj., Gusev, M., (2003), M-Government Framework, at

SOCIAL POLICY AND SOCIAL WELLFARE IN SLOVAK REPUBLIC

Key words: social policy, social insurance, levies to insurance funds

JEL Classification: H55

HISTORICAL DEVELOPMENT OF SOCIAL WELFARE

Mercantilism (15. – 16. century)

LIBERAL MODELS INTERVENCIONALISTIC

Nekonzervative economy (70.s – 20.th century)

4. MODERN SOCIAL STATE

Figure no. 1 . The models of social development character in the state

SOCIAL POLICY OF SLOVAK REPUBLIC