Abstract
Poverty reduction is not a formal, overarching objective of the Government of Romania (GOR) or its development donor community. The situation is compounded by the absence of the concept of partnership between the GOR and international donors. Despite recent progress, economic growth has been hamstrung by poorly conceived privatization of state farms and of state-owned industrial and energy enterprises. This factor has contributed to low productivity, weak competitiveness, high labor redundancy, and high costs of energy and other utilities. The country's legal and regulatory environment remains thin in areas ranging from business to environment to social issues. Weak governance in the legislative and judicial branches complicates matters further. USAID Romania's 1996-2001 programs emphasized economic growth. Over half of the mission's portfolio was allocated to indirect interventions to enable economic growth, especially in the areas of financial markets, agriculture, micro- and small/medium-sized enterprises, the environment, and energy sector restructuring. One-third of the portfolio was devoted to programs in democracy and governance and in social services. USAID's democracy and governance programs are also indirect interventions: they address local government capacity building and civil society organization development. Social service reform programs highlight child welfare and health issues, blending direct service delivery with indirect actions aimed at strengthening policymaking and building capacity to deliver local social services. The rest of the portfolio is allocated to cross-cutting programs such as training. USAID Romania does not explicitly target poverty reduction, though the mission views the evolving poverty trends in the country as a gauge of program success. Its assistance strategy for FY2002-07 recognizes the connection between increasing poverty and escalating political volatility and social problems. As a senior officer observed, failure to address the issue of poverty in Romania will jeopardize the very success of the country's transition. Key issues for future poverty reduction programming are as follows: (1) Lack of coordination on poverty reduction at the central level of government increases the difficulty of coordinating donor initiatives around this theme, even though donors are concerned about rising poverty rates. (2) A program economist is needed if the mission is to enable market and political economy analysis of policy choices in the economic growth, democracy and governance, and social service sectors. (3) Funding directives may result in resource allocations that exceed the mission's capacity to program effectively. (4) In lower middle-income countries such as Romania, a more targeted pro-poor focus is needed to track the poverty impact of economic growth, governance, and social service programs and to counter rising concerns induced by looming, post-transition poverty rates.