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Area: 238,391 sq. km. (approx. size of Oregon)
Population: 21.7 million (2002)
Annual Inflation: 14.5 (2003 est. - annual % change in CPI)
Population Growth Rate: -2.8% (2002)
Gross Domestic Product (GDP): US $57 billion (Purchasing power parity, 2003 est.)
Life Expectancy: male ? 68 years; female - 75 years (2002)
GDP Per Capita: $2,120 (2002)
Infant Mortality: 17.3 deaths/1,000 live births (2002)
Real Annual GDP Growth: 4.5% (2003 est.)

U.S. STRATEGIC INTERESTS

Romania is at the heart of America?s foreign policy goals in Central and Eastern Europe (CEE). The largest country in Southeast Europe, it has a large, well-educated population and substantial natural resources. It has the potential to become a political and economic model in this troubled region. Even before its November 2002 invitation to join NATO, Romania was an active partner in Balkan peacekeeping and had begun to develop "niche" military capabilities needed by the evolving Alliance. The bilateral strategic partnership is growing, with U.S. and Romanian soldiers now serving together in Afghanistan and Iraq. Anchored by President Bush?s visit to Bucharest in November 2002, U.S.-Romanian relations are stronger than at any time in history. The U.S. is now Romania?s fourth largest foreign investor. Romania has welcomed U.S. help to develop its economy and to strengthen its democracy and the rule of law -- goals as important for the Romanian people as they are for the country?s aspirations to join NATO and the EU. Unfortunately, while the pace of change has been commendable in the past few years, almost a decade was lost after the 1989 revolution, as political elites pursued an unsure and stop-and-go reform process, putting Romania behind some of its neighbors.

OVERVIEW OF U.S. GOVERNMENT ASSISTANCE

The Government of Romania (GOR), NGOs, small businesses, and the donor community recognize that USG assistance is an essential, flexible means to intervene in "real-time" to achieve lasting reforms. Such reforms strengthen key institutions and increase Romania?s capacity to compete successfully in the global economy. The U.S. provides critical technical assistance, without which there would be serious delays in Romania?s transition to a secure, democratic country, with a full market economy -- a state that can assume its full roles in NATO and the EU.

In FY 2003, the U.S. Government (USG) provided an estimated $60.85 million in assistance to Romania:

• $8.90 million in democratic reform programs (including Public Diplomacy exchange programs);

• $20.65 million in economic and social-sector reform programs;

• $31.30 million in security, regional stability, and law enforcement programs; and

• U.S. Defense Department excess humanitarian commodities valued at $2.25 million.

U.S. ASSISTANCE PRIORITIES

Democratic Reform Programs

Fighting corruption and advancing the rule of law are key Embassy goals that support the U.S. national interest in strengthening Romania?s democracy. Progress in these areas is essential for attaining other strategic goals. At U.S. initiative and with U.S. assistance, Romania created an anti-corruption prosecutor?s office; is strengthening the independence of the Superior Council of Magistrates; and is drafting new laws to regulate conflicts of interest, tighten public financial disclosure requirements, and provide for freedom of information. The U.S. is strengthening these institutions and practices. Moreover, by providing ethics training for judges and court staff, USG assistance is promoting greater independence, integrity, and transparency in the judiciary.

USG-funded programs assist local governments to improve the delivery of services, strengthen financial management, increase local government responsiveness to constituents? needs, and open decision-making to citizen participation. The U.S. is helping civil society organizations so that they can monitor and improve local government performance. To further decentralization, U.S. experts are recommending changes in legislation governing local governments. The program is promoting more effective citizen participation in local politics to increase the accountability of local political parties.

With the Romanian and American Chambers of Commerce, the U.S. is promoting corporate philanthropy in order to create a "culture of giving" and volunteerism, while at the same time encouraging resident companies to become more involved in solving local community problems. Finally, democracy programs promote the rights of ethnic minorities, particularly the Hungarian and Roma communities, and help to ensure that the lessons of the Holocaust are not forgotten. U.S. programs also press for expanded opportunities for Romanian youth through active civic involvement.

Economic and Social Sector Reform Programs

Completing the privatization of Romania?s state-owned companies and improving its troubled business climate can make the economy more competitive and increase U.S. trade and investment. The economy is in its fourth straight year of growth. Sustaining, or even accelerating, that growth is a challenge that must be met to reduce the still high poverty rate and to increase the public?s faith in the political and economic choices made since the 1989 Revolution. The U.S. is working with the IMF and the World Bank to press for faster, more transparent privatization, especially in the energy sector. The U.S. is also pushing for a better business climate -- one with less red tape and corruption, and more legislative consultation and predictability -- in which local businesses, particularly small businesses, and U.S. trade and investments can thrive.

U.S. assistance to the financial markets supports insurance reform, the introduction of mortgage-backed securities and mortgage bonds, and the improvement of company listing and corporate governance rules for the stock exchanges. Anti-money-laundering and other fraud-detecting measures at the National Securities Commission, Anti-Corruption Prosecutor?s Office, and the National Bank of Romania are being improved. In agriculture, U.S. programs focus on forming water user?s associations to facilitate the privatization of state-owned irrigation systems, reforming subsidies, improving food sanitation standards, and drafting legislation for a market information system that will make Romanian agriculture more competitive. Assistance is also being provided to the National Water Authority to improve water management, enabling Romania to move closer to the EU?s requirements.

Strengthening the competitiveness of private companies is an important goal of U.S. programs. New financial instruments are being developed to provide long-term capital and encourage new companies to list shares, issue bonds, and trade debt instruments. Micro-lending organizations are being established in seven poor counties. Additional capital funds for micro-lending in these counties will be leveraged from the GOR and World Bank. The U.S. is providing assistance to new service centers for agricultural exports and clusters of high-value agricultural producers. Business associations, chambers of commerce, and government agencies are being helped to improve their services for small businesses. The U.S. is spearheading development of a specialized Arbitration Chamber of the National Securities Commission and the improvement of the National Bank of Romania?s supervision functions. Five telecenters are being established in impoverished, rural communities to implement the Universal Services Obligations of phone companies and promote economic growth.

In the social sector, USG assistance focuses on child welfare, family and reproductive health, and infectious disease services. Such assistance is helping to close the worst state-run children?s homes and increasing the community child welfare services provided by NGOs, partnering with local governments. U.S. assistance is sponsoring comprehensive services for family planning, safe motherhood and sexually transmitted diseases, (including HIV/AIDS), breast and cervical cancer, and domestic violence. Activities in each area will improve policies, legislation, and quality of services; train a professional cadre in child welfare and reproductive health; and educate the public and decision-makers.

Security, Regional Stability, and Law Enforcement Programs

Romania?s strategic location near the Balkans, access to the Black Sea, and impending NATO membership increase its importance to U.S. national security. Romania is an active partner for stability in the Balkans, with troops serving in Kosovo (KFOR) and Bosnia (SFOR). It plays a key role in the Georgia Train and Equip program and contributes directly to the fight against terrorism in Afghanistan and Iraq, with troops serving in both countries. The U.S. is helping to restructure Romania?s military and to develop new airlift and "niche" capabilities that can contribute to NATO?s evolving new missions. This program is being pursued in close cooperation with USNATO and EUCOM -- the more so in view of Romania?s November 2002 invitation to join NATO. The U.S. is assisting the GOR to improve its relations with neighboring states, particularly those along NATO?s new frontier to the north and east. Apart from resolving outstanding disputes, improved relations can lead to increased success against cross-border criminal activity and set examples for democratic and free market behavior in the region.

Post-September 11, America?s border security interests clearly require that Romania strengthen its law enforcement and anti-terrorism capabilities. The U.S. is training police and prosecutors in new investigative techniques and in tracing money flows (a capability needed in the fight against corruption as well). The U.S. is also working to improve coordination among law enforcement agencies, both within Romania and among state members of the Bucharest-based Southeast European Cooperative Initiative (SECI) Center, in order to enhance Romania?s ability to control cyber-crime and trafficking in humans and narcotics.

SECTORAL ASSESSMENTS

Democratic Reform

Romania?s elections ever since 1990 have been free and fair. Nevertheless, confidence in democracy is undercut by endemic corruption, continuing high levels of poverty, and a lack of accountability among office holders. Civil society remains weak, with little influence on public policy or opinion. Partially as a legacy of communism, the concept of citizenship -- including the responsibility of constituent involvement -- has yet to take root among much of the population. This is exacerbated by a "party list" system for parliamentary elections, eliminating any real tie between national-level office holders and their constituents. In recent elections, a large number of disaffected voters turned to an extremist and xenophobic party, which offers no practical solutions to the country's problems. Despite progress on some fronts, significant challenges remain. The central government is transferring responsibility for many services to local governments, without providing necessary fiscal and management resources. Unfunded mandates in utilities, education, social welfare, and health care are a pressing problem. There appear to be no coherent plans for decentralization, roadmap, or analysis of the impact of decentralization on local governments. Too little attention has been given to the efficient use of local resources, the need to establish community priorities, and the means to enhance local service delivery.

USG assistance is building on successful projects in decentralization, social service delivery, advocacy and citizen participation, civic education, alternative dispute resolution, community development, and political party development. All the programs increase citizen participation in local decisions and policies and improve the delivery, effectiveness, and accountability of public services. Expanding the give-and-take between NGOs and local branches of political parties is at the heart of another project, which helps local party members to develop issue-focused platforms. Judicial independence and integrity remain problems in Romania, fueling public cynicism toward democratic institutions and discouraging investors. The U.S. judicial anti-corruption program supports the implementation of codes of conduct for judges and court staff, and strengthens the independence of the judiciary.

USG assistance in FY 2003 contributed directly to better democratic governance. Fifty U.S.-assisted civil society organizations (CSOs)now participate in strategic planning, implementation, and oversight activities with local authorities. Thirty-one CSOs work with 134 local governments on priority projects identified by citizens. Ten political party branches are communicating more effectively with local CSOs and actively promote democratic reforms within national parties. CSOs advocate local government reforms that address citizen concerns, such as the lack of shelters for domestic violence victims, dearth of medical personnel in villages, and need for transparent local budgeting. They also work with local governments on procedures for allocating local government funds to CSOs, and to increase the capacity of small, rural authorities to manage development funds. In one program, USG assistance of $2.7 million has leveraged another $3.2 million from private U.S. sources, Romanian NGOs, and local governments for partnership in Romania. As a result of the civics education program, over 600 teachers are employing a new civics text and curriculum in their classes. USG assistance has supported an Alternate Dispute Resolution pilot program in a large city, and a cadre of 20 lawyers now is using mediation to resolve civil cases more rapidly and cheaply than by taking them to court.

In 2004, USG assistance will continue to focus on advancing reform, supporting civil society, and strengthening interaction between citizens and local government and political officials. In 2003, the local media and public focused increasingly on corruption, pressing the government to address the issue more directly. This presents the USG a new opportunity -- through training and other support -- to help ensure that current anti-corruption legislation is implemented and press for further needed measures. Romania will hold crucial presidential, parliamentary, and local elections in 2004. Already the Embassy has initiated an aggressive public outreach program targeting key audiences to encourage voters to become educated on the issues and vote wisely.

Economic and Social Sector Reform

Ceausescu's policies left Romania the poorest country in East Central Europe at the fall of communism in 1989. Until 2000, Romania?s economic progress was hampered by slow privatization and stop-and-start economic reform. Under the current government, the macro-economy has made substantial progress:

• The economy completed four years of solid growth in 2003, with 4.5 percent expected growth for the year, despite a serious drought;
• Inflation has declined from 40.7 percent in 2000, to an anticipated 14.5 percent for 2003; and
• Most major privatizations have been completed, with the significant exception of the energy sector.

Over 67 percent of Romania?s GDP is now produced by private companies. Completing privatization of state-owned commercial assets is a high GOR priority. In October, Romania completed its November 2001 IMF Stand-By Agreement -- after six failures, the first successful conclusion of an IMF accord in Romania?s history.

Since 1999, foreign direct investment (FDI) in Romania has been just over $1 billion annually, continuing a steady upward trend, except for a small dip in 2002. This contrasts with Romania?s neighbors, where foreign investment has dropped off markedly is the last few years. The pace of U.S. direct investments in Romania has slowed over the last three years, however, and totaled about $700 million in October 2003. The U.S. is Romania?s fourth largest foreign investor (behind the Netherlands, Germany, and France) at current exchange rates. Corruption, red tape, and Romania?s slow economic reforms are limiting investment. The U.S. is pressing the GOR to improve the business climate in order to attract more investors. Needed steps include expedited attention to investor problems; elimination of burdensome license and permit requirements; reduced time to obtain licenses; revisions in the fiscal and labor codes; lower taxes for small businesses; improved responsiveness to intellectual property concerns; and a range of measures to counter corruption.

The U.S. provides assistance in four key economic areas: reform of the legal and regulatory environment for businesses; backing for organizations and government agencies that support business; increasing the competitiveness of private enterprises; and privatization of state-owned commercial companies.

U.S. advisors continued to address key legal constraints to business development. For example, they drafted a new Fiscal Code and developed anti-money laundering procedures that are now being used at the National Bank and the National Securities Commission. U.S. programs helped to finalize the legislation governing the electronic commerce and the universal service obligations of the telephone companies, and also draft regulations standardizing computer network protocols. A new mortgage law was passed, with USG assistance, and the legal framework for the secondary mortgage market is being developed. With U.S. support, the GOR budget has been made more transparent through the production of the first "Budget-in-Brief," which has been distributed to all members of Parliament, the Ministries, and the press.

U.S. assistance with the Warehouse Receipts Law leveraged $200,000 from the World Bank (WB) to develop an Indemnity Fund to support the implementation of the warehouse receipt program. The enactment of that law increased the confidence of banks in lending to farmers. For example, the EBRD signed an agreement with the Romanian Bank for Development, committing $40 million in loans to agricultural traders against warehouse receipts. USG assistance with agricultural legislation facilitated WB approval of an $80 million loan for the rehabilitation of state-owned irrigation systems and their transfer to private farmers.

With U.S. assistance, the GOR increased its ability to manage Romania?s water resources. As a result of a USG-funded feasibility study and the subsequent pilot project for a water monitoring and decision support system, the GOR approved the sovereign guarantee for a $46 million loan from U.S. EXIM Bank to expand the water monitoring system nation wide. The contract for the national program has been signed with Lockheed Martin, and implementation has started in the Somes-Tisza river basin. Under the Stability Pact and USG-funded Regional Infrastructure Program, the Ministry of Public Administration and county and municipal officials developed a program to rehabilitate small and medium town infrastructures. Based upon two pilot projects, the GOR and EU have provided $48 million for a rehabilitation program in more than 200 communities with six million inhabitants.

With USG assistance, the GOR has taken important steps toward privatizing the electricity generating industry and the state-owned irrigation systems. The U.S. program has played an important role in developing the Ministry of Industry and Resources? privatization strategy for electricity and a "road map" for developing the power sector over the next decade. Created with U.S. assistance, 87 water users? associations have signed protocols transferring state-owned irrigation equipment to the private farmers in the associations.

The competitiveness of some small businesses increased during FY 2003, with USG assistance. A U.S.-funded project provided small businesses with loans totaling $1.7 million. These loans were used for investments in new technology and business development. Grants of $340,000 made to agricultural producers for new equipment leveraged another $460,000 from the producers for the projects. The U.S. helped to create Romania?s first private residential mortgage company and attracted $27 million of lending capital from private sources. The mortgages for houses are expanding business for private construction companies.

In FY 2004, work will continue on the structural reforms that are crucial to building the competitive market economy necessary for successful EU integration. The USG will also assess its agricultural assistance in order to focus more precisely on reforms that will move rural farmers more rapidly away from small-plot susbsistence agriculture toward market-oriented, niche crops and increased exports. A poor economy may weaken democracy, producing a fertile breeding ground for extremist political parties. By strengthening and supporting the development of the private sector in the coming years, USG assistance will play a crucial role in ensuring the irreversibility of Romania?s market reforms.

The health and child welfare situation in Romania remains fragile. Life expectancy at birth is 71 years, one of the lowest levels in Europe. Romania?s infant mortality, under-five mortality, and maternal mortality are among the highest in Europe. Indeed, maternal mortality rates were six times the EU average, in 2000. Romania has the largest number of pediatric AIDs cases in Europe, and more than 34,000 children still live in state-run institutions. Romania?s nascent community services, which care for 60,000 children, will require considerable assistance to mature into an effective, sustainable system.

While these statistics remain negative, Romania is moving in the right direction. In FY 2003, USG assistance helped directly in reducing the number of children in institutional care by 8,550 (17 percent); closing 43 institutions with over 50 children each, creating over 200 alternative community services; the drafting of legislation to govern standards for adoption; and implementation of life skills training for youth, child welfare case management, and procedures to follow up on child abuse and neglect cases. The U.S. has obtained over $3 million from business and local public services, and another $6 million from governmental programs to close institutions for disabled children, programs that are being conducted for the first time through NGOs. The U.S. has helped the GOR to develop and implement a national reproductive health strategy. USG programs are integrating reproductive health services into 1,740 primary care clinics, three-quarters of which are in rural areas. Mayors from all of Romania?s 41 counties have been trained in child welfare services. Four national campaigns about unwanted pregnancy, reproductive health services, early detection of breast cancer, prevention of HIV/AIDS, sexually transmitted infections, and the fight against stigma and discrimination were held. Three targeted campaigns for hard-to-reach populations, including Roma and those at high risk of HIV/AIDS, were completed.

This good news is an incomplete story, however. The child welfare system still lacks adequate community preventive services, day care centers, maternal shelters, and specialized support services for children with special needs or for youth who leave institutions. The U.S. is the only major donor supporting decentralizing the child welfare system to the community level. Information about children in the system is still incomplete and unreliable. The U.S. is assisting the development of an efficient national child tracking system to provide dependable information on which to base decisions affecting children. The prevalence of HIV/AIDS continues to rise, and without a sustained prevention program, the rate will accelerate with the growing number of infections in high-risk groups. Romania received a $38 million grant from the Global Fund to Fight AIDS, Tuberculosis, and Malaria, and the U.S. is assisting key stakeholders to develop a strategy for program implementation.

Romania is drafting new legislation to regulate the child welfare system and adoption. During FY 2004, once a law on adoptions has passed, USG assistance will facilitate implementation procedures that stress permanent solutions for every child as the ultimate goal of the child protection system. Romanian legislation on health financing is still weak and is conducive to waste and inefficiency. The system requires a switch from an over-emphasis on hospital care and specialized services to one in which basic health services are provided in the least-cost primary care setting. In 2004, the U.S. will continue to have a leading role in reforming health financing through policy support and the development of standards and protocols for women?s health care.

Security, Regional Stability, and Law Enforcement

Romania?s location makes it particularly relevant to U.S. security goals in a potentially volatile region. U.S. assistance has helped the GOR to implement an aggressive military reform program to prepare Romania for NATO integration. Activities have included the provision of an advisory team to support military restructuring, English language training for officers and NCOs, and deployment of Romanian troops with NATO forces. The U.S. has supported cooperation among Southeast European Cooperative Initiative (SECI) states to address regional problems and encouraged Romania to resolve bilateral issues with Moldova, Ukraine, and Russia. The U.S. has financed a wide range of military equipment, regional diplomatic training programs, and exchanges with Moldova and Ukraine to familiarize them with NATO requirements. The number of military personnel declared "deployable in support of NATO Collective Defense" has risen by 400, with slightly over 1,600 being deployed in FY 2003. Romania has also signed a treaty with Russia dealing with post-Cold War relations, and the headquarters of the Southeast Europe Peacekeeping Brigade has been rotated successfully to Romania.

In law enforcement, the Department of State, Bureau of International Narcotics and Law Enforcement Affairs (INL) administers SEED funding in support of three projects: Department of Justice, Office of Overseas Prosecutorial Development, Assistance and Training (DOJ/OPDAT) Resident Legal Advisor (RLA); Cyber Crimes; and Counter-Narcotics Assistance. USG support to the SECI Center continues, which increasingly is becoming a focus for effective regional cooperation. In addition to serving as a operational and intelligence center for combating organized crime, SECI now includes regional task forces to combat trafficking in persons, narcotics smuggling, commercial fraud, and terrorism. The effective working of Romania?s multi-agency National Focal Point also is an indicator that it is ahead of the curve in the region with regard to interagency law enforcement cooperation. With U.S. support, Romania has passed new cyber-crime laws and recently expanded the number of police officers dedicated to drug and cyber-crime violations. Cooperation between U.S. and Romanian agencies in combating these crimes is excellent.

The RLA provided U.S.-funded surveillance equipment to increase the National Anti-Corruption Office?s capacity to investigate cases within the police and other government offices. The equipment was put to immediate use and led to the arrest of 45 police officers involved in the theft and illegal sale of petroleum products. The U.S. Rule of Law program has successfully tested in eight courts case assignment software that is being turned over to the Ministry of Justice for nationwide distribution and implementation. The National Magistrates? Institute has created, with USG assistance, a judicial ethics handbook and reference materials for use in training programs.

Cyber-crime has a direct impact on U.S. businesses, in both the U.S. and Romania, and Romania is one of the top five countries of origin for computer hacking and fraudulent Internet transactions. Criminal organizations in Romania routinely bilk American merchants and individuals out of money and products through computer fraud and intrusions. Assistance from a U.S. cyber-crime team to the Romanian Directorate for Combating Organized Crime and the Romanian Information Service (SRI) has led to marked progress in the fight against cyber-crime. In FY 2003, 85 people were investigated for Internet fraud and 15 groups dismantled. Because of the cyber-criminals? capabilities and Romania?s lack of law enforcement resources, many U.S. companies will not ship products there. In counter-narcotics, last year Romanian police shut down 144 narcotics groups and investigated more than 900 people.U.S. assistance to the Romanian Police Academies will help to create a more professional police force.

At present, 12 officers are working in the Human Trafficking Task Force in Bucharest, and 50 other specialized officers work in the regions. USG assistance is also providing small grants to NGO-police partnerships for anti-trafficking awareness campaigns, and is facilitating the work of NGOs that rehabilitate and re-integrate returned victims of trafficking into Romanian communities.

In FY 2004, the U.S. will continue to support the development of Romania?s strategic lift capability, with emphasis on the C-130 program. The U.S. defense reform advisory team will remain in the Ministry of Defense. Programs will focus increasingly on anti-terrorism training and on building the capabilities of Special Forces. Efforts to develop a Western-style NCO corps will continue, as will support for the development of English language training centers for defense personnel. The program will review current institutional capabilities and will seek to strengthen the skills of instructors to develop and sustain effective police training. The U.S. also will focus on building connectivity and cooperation among agencies, with common computer systems and databases, to increase their effectiveness. The training of border control and export officials and support U.S.-based technical training in the use of CBW and radiation detection equipment will continue. The U.S. will fund the purchase and distribution of tool and detection kits for use at ports of entry. The Rule of Law program and assistance to the National Ant-Corruption will continue. The U.S. will assess, with the Romanian Prosecutor General?s Office, the feasibility of the victim/witness program for trafficking-in-persons cases. U.S. experts will continue to assist in the investigation of organized crime, money laundering, and terrorism.

Humanitarian Assistance

There were no natural disasters during the year that required emergency humanitarian assistance funds from the Embassy. The Department of Defense (DOD) implements a variety of humanitarian and civic assistance programs that complement its military assistance. In FY 2003, medical clinics, preparedness centers, and children?s residential homes were refurbished and anti-hepatic vaccines provided for residents in Tulcea and Botosani counties.

COUNTRY PERFORMANCE MEASURES

Ratings based on a 1 to 5 scale, with 5 representing the most advanced.
Sources: EBRD, Transition Report 2003 (November 2003); Freedom House, Freedom in the World 2003 (2003); and (various years).

Economic Structure and Human Development in Romania, 1991-2002

The Human Capital Index is based on an average rating of four variables scored on a 1 to 10 scale: per capita income; secondary school enrollment; health, as measured by life expectancy and under-5 mortality; and public policy, as measured by public expenditure on health and education as % of GDP. World Bank, World Development Indicators 2003 (2003) AND UNICEF, Social Monitor 2003 (2003).

MEASURES OF PROGRAM EFFECTIVENESS IN FY 2003

DEMOCRATIC REFORM

Performance Indicator: Legislative changes to combat corruption.

FY 2003 Results: Target partially achieved. The Anticorruption Law (no. 161/19.04.2003) includes measures to ensure transparency in the civil service and interactions by civil servants with private citizens. It also regulates public officials? conflicts of interest and assets disclosure. It amends existing measures regarding corruption, ministerial accountability, and tax dodging. Parliament passed a law, in January 2003, regarding political party and electoral campaign financing. The law stipulates legal sources for political party and electoral campaign financing and maximum electoral expenditures for categories of candidates.

The draft of the new criminal code was completed, after consultations with civic groups, magistrates, and the media. It is being debated in Parliament. The Criminal Procedure Code was amended to make significant changes in the administration of justice. The legislature formulated and citizens endorsed the amendments by a significant margin in a nationwide referendum in October. Law 360/2002 was amended to allow the use of undercover police officers and informants to prevent and fight against corruption, organized crime, and terrorism. The Code of Ethics for Police Officers was drafted; the National Office for Witness Protection has become operational; and, offices have been established in each county to allow dialogue and cooperation between police forces and civil society.

Performance Indicator: Structural changes to combat corruption.

FY 2003 Results: Target partially achieved. The National Anti-Corruption Prosecutor?s Office (PNA) has 90 percent of its staff. It made good progress, investigating over 2,200 corruption cases by October 1, 2003. The PNA has made judicious use of technical assistance and training programs. Furthermore, under provisions of an emergency ordinance, the PNA will be attached to the Supreme Court of Justice, as a prosecutor?s office specialized in combating corruption offences. The country appeared ready to vote, early in FY 2004, in favor of constitutional revisions to include the creation of a more independent Supreme Council of Magistrates. The Customs Department has not yet initiated a formal internal review of its organization and personnel structure. However, the entire Customs Department was realigned under the National Control Authority (along with most other regulatory agencies) and re-named the National Customs Authority. The National Control Authority itself now reports directly to the Prime Minister?s office, a reorganization whose implications remain unclear. The number of e-procurement tenders reached nearly 200,000 by the end of the year, far exceeding the 50,000 goal.

ECONOMIC AND SOCIAL REFORM

Performance Indicator: Accelerated economic reform.

FY 2003 Results: Target partially achieved. The Privatization Ministry (APAPS) completed over 90 percent of the privatizations in its portfolio. The IMF program was completed, but follow-on negotiations were not. The first three privatizations in the energy sector were announced, but none concluded. The Foreign Investment Agency (ARIS) continued to operate as an investment-promotion agency rather than a one-stop shop for tackling investor concerns.

Performance Indicator: Rate of change in U.S. exports to Romania compared with rate of change of GDP.

FY 2003 Results: Target partially achieved. Growth of U.S. exports to Romania through September 2003 was 3.27 percent, which lagged behind the GDP growth. Local U.S. subsidiaries developed some market sectors -- e.g., consumer products, IT, and machine tools -- but European competitors still dominate most market sectors. U.S.-Romanian tariff discussions began, and the GOR made some minor reductions.

Performance Indicator: Child Institutionalization Rate (number of children living in state-run institutions per 100,000 children).

FY 2003 Results: Target achieved. There was a steady decline in the number of abandoned children in institutions over the past decade -- from over 100,000 to just over 31,000 -- and the number of institutions to be closed has exceeded the target. This has been accompanied by increase in community care services. During the past year alone, 8,000 more children were receiving alternative community services than the year before, bringing the total number receiving community services to more than 65,000.

SECURITY, REGIONAL STABILITY, AND LAW ENFORCEMENT

Performance Indicator: International law enforcement cooperation.

FY 2003 Results: Target achieved. SECI-Interpol coordination continued in FY 2003. Operation Mirage 2003 was conducted in Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Macedonia, Greece, Hungary, Moldova, Romania, Slovenia, Serbia and Montenegro, and Ukraine. Between January and October 2003, 499 criminal procedures were started. So far there have been 139 prosecutions, 14 convictions, and 2,175 administrative procedures applied (interdictions, expulsions, and fines). Several cases are still before the courts. Regional links to fight trans-border crime been established through the SECI Anti-Terrorism Task force, headed by Turkey. The Task Force is focusing on small arms and light weapons, as well as weapons of mass destruction.

Performance Indicator: Improvements in regional relations.

FY 2003 Results: Target achieved. At the end of the fiscal year, the treaty with Russia had been negotiated and was scheduled for signing early in FY 2004.

FY 2003 Support For East European Democracy (SEED)
Funds Budgeted for Assistance To:

Romania (In millions $, as of 12/31/03)

USAID - Democratic Reform $7.50
USAID - Private Sector $11.65
USAID - Social Sector Reform $8.25
USAID Total: $27.40

State - ECA Exchange Programs $0.55
State - EUR Public Diplomacy $0.60
State - IIP Public Diplomacy $0.05
State - INL Law Enforcement Activities $0.95
U.S. Department of State Total: $2.15

U.S. Department of Treasury - Advisors $0.95
Other Agencies Total: $0.95

GRAND TOTAL: $30.50