THE ANNALS OF THE ŞTEFAN CEL MARE UNIVERSITY OF … VOL.9,NR.SPECIAL,2009 fulltext.pdf · The Annals of The "Ştefan cel Mare" University of Suceava. Fascicle of The Faculty of Econom

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THE ANNALS OF THE "ŞTEFAN CEL MARE"

UNIVERSITY OF SUCEAVA. FASCICLE OF THE FACULTY OF

ECONOMICS AND PUBLIC ADMINISTRATION

VOLUME 9, SPECIAL NUMBER, 2009

Editura Universităţii Suceava

The Annals of The "Ştefan cel Mare" University of Suceava. Fascicle of The Faculty of Economics and Public Administration Vol. 9, Special Number, 2009

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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:

Faculty of Economics and Public Administration „Ştefan cel Mare” University of Suceava Str. Universităţii nr. 13, Corp H, Camera H108 720229 SUCEAVA, ROMANIA Phone: (+40) 230 216147 int. 294 E-mail: [email protected] Journal web site: www.seap.usv.ro/annals Faculty web site: www.seap.usv.ro University web site: www.usv.ro


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CONTENT

SECTION 1 - ECONOMY, TRADE, SERVICES......................................................................................................... 7 ARGUMENTS THAT COMBAT LEGAL NEO-REALISM IN TERMS OF LEGAL INTERPRETATION........ 9

Lecturer PhD. Claudia ANDRIŢOI PhD. Student Ec.Paulescu Ioan ANTON University Eftimie Murgu, Resita, Romania

PRIORITIES FOR SUSTAINABLE DEVELOPMENT TO THE THIRD MILENIUM START ......................... 15 Lecturer PhD. Gabriela BUŞAN Ec. Viorel Daniel CRĂCIUNESCU Constantin Brancusi University, Targu Jiu, Romania

CLIMATE CHANGE AND ADAPTATION POSSIBILITIES OF THE TOURIST DESTINATIONS................ 22 Constanţa ENEA Georgiana TANASOIU Constantin Brancusi University, Targu Jiu, Romania

THE PRODUCERS`LIABILITY FOR THE PRESENT DAMAGE AND FOR THE FUTURE ONE, CAUSED BY THE DEFECT OF THE PRODUCT ..................................................................................................................... 28

Assoc. Prof. Ph.D. Nicolae GRĂDINARU „Constantin Brancoveanu” University Pitesti, Rm.Valcea, Romania

A REVIEW OF EMPIRICAL STUDIES ON THE OPPORTUNENESS OF EX-COMMUNIST STATES’ JOINING THE EURO AREA....................................................................................................................................... 33

Lecturer Ph.d. Vasile-Liviu ICHIM “Ştefan Lupaşcu” Institute of European Studies – Iaşi, Romania

MODERNIZATION OF LOGISTIC SYSTEMS OF THE FIRMS WITHIN THE CONTEXT OF GLOBAL ECONOMY..................................................................................................................................................................... 39

Lecturer Phd. Mihaela Loredana LĂPĂDUŞI Professor Phd Constantin CĂRUNTU “Constantin Brâncuşi” University, Tg-Jiu, Romania

BRIEF CONSIDERATIONS WITH REGARD TO THE SPECIAL REGIME OF THE V.A.T. FOR TOURISM AGENCIES ..................................................................................................................................................................... 46

Lecturer PhD. Florin TUDOR University „Dunarea de Jos”, Galati, Romania

THE CLASIFICATION OF INSTITUTIONS AND THEIR IMPACT ON ECONOMIC DEVELOPMENT ..... 53 PhD. Student Ana Iolanda VODĂ “AL. I. Cuza” University, Iasi, Romania

BRIEF CONSIDERATION OF THE IMPACT “OF THE REGIONAL DEVELOPMENT POLICY” ON TOURISM IN ROMANIA............................................................................................................................................. 60

Lecturer PhD. Elise Nicoleta VÂLCU University of Piteşti, Romania

SUSTAINABLE DEVELOPMENT AND SUSTAINABLE TOURISM IN THE EUROPEAN UNION............ 606 Lecturer PhD. Elise Nicoleta VÂLCU University of Piteşti, Romania

SECTION 2 - MANAGEMENT AND BUSINESS ADMINISTRATION................................................................. 71 CRITICAL ANALYSIS OF THE EXTREME PROGRAMMING (XP) PROJECT MANAGEMENT METHODOLOGY IN THE INFORMATION TECHNOLOGY FIELD................................................................. 72

Senior Lecturer PhD Ionel NĂFTĂNĂILĂ PhD Candidate Ivona ORZEA Academy of Economic Studies Bucharest, Romania

CONSIDERATIONS ABOUT COUNSELLING PROCESSESS IN ROMANIA. A COMPARATIVE PERSPECTIVE .............................................................................................................................................................. 81

Associate Prof. PhD. Carmen CHASOVSCHI University “Stefan cel Mare”, Suceava, Romania

THE FINANCIAL LEVIATHAN................................................................................................................................. 88 Ph. D. Tiberiu BRĂILEAN Ph. D. Student Aurelian Petruş PLOPEANU “Alexandru Ioan Cuza” University


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BOARD PANEL - TOOL USED IN THE SUBSTANTIATION OF DECISIONS TAKEN BY THE MANAGEMENT OF COMPANIES CONDUCTING THEIR BUSINESS IN THE TRANSPORTATION AND THERMAL ENERGY DISTRIBUTION FIELD........................................................................................................ 94

Lecturer Nicoleta Cristina MATEI Romanian-American University, Bucharest, Romania

PRESENT REQUIREMENTS CONCERNING TOTAL QUALITY MANAGEMENT ON SPHERE OF SERVICES .................................................................................................................................................................... 100

Associate Professor Doctor Amalia Venera TODORUŢ Associate Professor Doctor Cecilia Irina RĂBONŢU University „Constantin Brâncuşi” Târgu-Jiu, România

RISK ANALYSIS OF A BUSINESS ENTITY FOR ENVOROMENT PROTECTION ....................................... 106 Ph.D. Associate Professor Neculina CHEBAC Ph.D. Lecturer Cristina Mihaela ONICA Dunarea de Jos University, Galati, Romania

THE IMPACT OF THE ECONOMY BASED ON KNOWLEDGE ON MODERN ORGANIZATIONS .......... 115 Assistant Ph.D. Student Simona BUTA Professor PhD. Ghiorghi PRISĂCARU ”Ştefan cel Mare” University of Suceava, Romania

SIGNIFICANT FOREIGN DIRECT INVESTMENT (FDI) IN ECONOMICS .................................................... 125 PhD. Simona Mihaela POPOVICI University "Alexandru Ioan Cuza", Iasi, Romania

INVESTOR’S BEHAVI0R ON THE ROMANIAN CAPITAL MARKET ............................................................ 131 PhD Lecturer Flavia BARNA West University from Timişoara, Romania PhD Lecturer Dan DANULETIU University 1st of December 1918, Alba Iulia, Romania PhD Student Ovidiu MURA West University from Timişoara, Romania

SOCIAL RESPONSIBILITY AND THE IMPORTANCE OF GOOD EMPLOYER–EMPLOYEE RELATIONS................................................................................................................................................................. 137

PhD. Student Victoria-Mihaela BRÎNZEA University of Pitesti, Pitesti, Romania

THE “NEW ECONOMY” AND THE BUSINESS CYCLES................................................................................... 147 Assistant PhD. Student Mihaela IFRIM „Al. I. Cuza” University, Iaşi, România

COUNTERFEITING, A PRECISE TARGET IN A LONG - TIME BATTLE...................................................... 154 PhD. Assistant Emilia PASCU Christian University Dimitrie Cantemir, Bucharest, Romania

BUSINESS INTELLIGENCE SOLUTIONS FOR HUMAN RESOURCE MANAGEMENT ............................. 162 Lecturer PhD. Luminiţa ŞERBĂNESCU University of Piteşti, Romania

SECTION 3 - ACCOUNTING - FINANCES............................................................................................................. 169 THE DIVIDEND – COST ELEMENT OF CAPITAL CONTRIBUTION FOR THE SHAREHOLDERSHIP . 170

Lecturer Ph.D. Irina –Ştefana CIBOTARIU University Stefan cel Mare, Suceava, Romania

THE MAINCOORDINATES OF THE BUDGET – FISCAL POLICY IN ROMANIA ON THE TIME HORIZON 2009-2012................................................................................................................................................... 178

Lecturer PhD Student Anisoara Niculina APETRI Profesor PhD Gheorghe SANDU University "Stefan cel Mare” Suceava, Romania

THE RELEVANCE OF THE INFORMATION GIVEN BY COSTS IN DECISION GROUNDING PROCESS184 Lecturer PhD Candidate Simona Elena DRAGOMIRESCU Lecturer PhD Candidate Daniela Cristina SOLOMON University of Bacău, Bacău, Romania

FINANCING OF CAPITALIZATION AND GROSS FORMING OF PERMANENT CAPITAL IN ROMANIAN ECONOMY ........................................................................................................................................... 190

Lecturer PhD Dragoş ILIE “Spiru Haret” University of Craiova, Romania


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ONLINE TRANSMISSION OF FISCAL DECLARATIONS AND ANNUAL FINANCIAL STATEMENTS – A COMPONENT OF E-GOVERNMENT..................................................................................................................... 198

Lecturer Alin ISAC Lecturer Claudia ISAC University of Petrosani, Romania

THE COLLECTIVE INVESTMENT FUNDS - A ROMANIAN AND EUROPEAN PERSPECTIVE............... 204 Lecturer PhD. Cosmina Mădălina POP Assistant Professor Victoria BOGDAN University of Oradea, Oradea, Romania

THE ANALYSYS OF ANTI-CRISIS FISCAL MEASURES AND THEIR IMPLICATIONS ............................ 212 Ph.D. Elena TOMA “Alexandru Ioan Cuza” University, Iasi, Romania

ANALYSIS OF THE MARKERS WHICH COULD HAVE SIGNIFICANT INFLUENCE OVER THE POTENTIAL EXPOSURE OF THE BANK.............................................................................................................. 221

PhD. Marin ŢOLE Lecturer Nicoleta Cristina MATEI Romanian-American University, Bucharest, Romania

ENLARGING ON THE USE OF FINANCIAL-ACCOUNTING INFORMATION IN THE ECONOMIC DECISION MAKING PROCESS............................................................................................................................... 230

University Lecturer Ph.D. Alice Emilia ŢÎNŢĂ Romanian-American University, Bucharest, Romania

REFELCTIONS ON THE (RE)POSITIONING OF THE FINANCIAL ADMINISTRATION CONTROL...... 236 Ph D Professor Titus ASLĂU Ph D Lecturer Lavinia Denisia CUC “Aurel Vlaicu University”, Arad, Romania

LEGAL ASPECTS IN CONDUCTING A JUDICIAL ACCOUNTING EXPERTISE ......................................... 241 Lecturer Constantin CUCOŞEL North University of Baia Mare, Baia Mare, Romania

SECTION 4 - STATISTICS, DATA PROCESSING (INFORMATICS) AND MATHEMATICS....................... 248 SIMULATION OF THE RELATIONSHIP BETWEEN PRICES AND AVERAGE REVENUE OF THE POPULATION USING GENETIC ALGORITHMS............................................................................................... 249

Assistant Ph.D. Student Ionut BALAN „Ştefan cel Mare” University of Suceava, Romania

SECTION 5 - LAW AND PUBLIC ADMINISTRATION........................................................................................ 256 THE INTEGRATION OF LOCAL ADMINISTRATION IN THE ROMANIAN PUBLIC AND ECONOMIC SPACE........................................................................................................................................................................... 257

Phd. Lect. Ec. Gheorghe CRIŞAN Tibiscus University of Timisoara, Romania Phd. Student. Ec. Lia Ioana CRIŞAN Counselor for European Affairs, The Prefect’ Institution Timiş County, Romania

THE ORIGINS, EVOLUTION AND EMERGENCE OF THE HABEAS CORPUS GUARANTEE IN THE ROMANIAN POLITICO-LEGAL LITERATURE BEFORE THE ROMANIAN CONSTITUTION OF 1991 (I)266

PhD Lecturer Lucian-Sorin STĂNESCU “Ştefan Cel Mare” State University of Suceava, Romania

COURT OF JUSTICE OF THE EUROPEAN UNION VS. THE TREATY OF LISBON ................................... 275 Lecturer Ph.D. Răzvan VIORESCU “Stefan cel Mare” University of Suceava, Romania

THE LOCAL BUDGETARY PROCESS AND THE SOCIAL-CULTURAL DEVELOPMENT OF THE TERRITORIAL ADMINISTRATIVE UNITIES...................................................................................................... 279

Lecturer PhD. Student Cristinel ICHIM “Stefan cel Mare” University of Suceava, Romania

ACCESS METHODS CONCERNING THE CONSTITUTIONAL CONTROL OF THE CONSTITUTIONAL COURT.......................................................................................................................................................................... 287

Lecturer, PhD Candidate Gabriela NEMTOI “Stefan cel Mare” University of Suceava, Romania


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THE APPLICATION OF THE LEGALITY PRINCIPLE IN THE ADMINISTRATIVE ACTIVITY IN THE EUROPEAN UNION COUNTRIES........................................................................................................................... 294

Lecturer PhD. Student Dumitriţa FLOREA (IONESCU) Assistant Alina LARION “Ştefan cel Mare” Univeristy of Suceava, Romania

DETERMINATIONS ON IMPROVING TRAINING OF CIVIL SERVANTS AT EU AND NATIONAL LEVEL301 University assistant Gabriela RÎŞCA University assistant Petronela ZAHARIA "Ştefan cel Mare" University of Suceava, Romania

INSTRUCTIUNI UTILE PENTRU AUTORI / AUTHOR GUIDELINES............................................................. 307


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SECTION 1

ECONOMY, TRADE, SERVICES


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ARGUMENTS THAT COMBAT LEGAL NEO-REALISM IN TERMS OF LEGAL INTERPRETATION

Lecturer PhD. Claudia ANDRIŢOI

University Eftimie Murgu, Resita, Romania [email protected]

PhD. Student Ec.Paulescu Ioan ANTON University Eftimie Murgu, Resita, Romania

[email protected]

Abstract A theory of law must especially to determine conceptual its subject. To clarify the essence of legal neo-realism

it is appropriate to establish the meaning and scope of such notions. Law in general is a result of society evolving in the several thousands of years when it appeared. So is that right now law works with concepts and institutions, with definitions and principles fixed on time. Lawyers, in turn, use a unique language, spell and "translate" the laws for everyone, language transmitted from generation to generation and constantly enriched with new and new attributes. To clarify these things, the legal interpretation comes to lead the steps of those who want to figure out the tricks of law and to familiarize them with the legal requirements. In order to analyze the arguments that combat legal neo-realism in terms of legal matters interpretation, the legal rules that constitute the legal system should be investigated in a scientific manner, seeking in the meantime the principles on which is based this approach: rationality, objectivity, neutrality, hypothesis testing under with a rigorous and open methodology, so as to confirm the followed negative response (Pfersmann and Tims, 2001). This view is not shared by the devotees of natural law, that paradoxical are connected to ideas of a school whose doctrine is part of the required scientific empiricist movement. Based on these differences a suite of pro and against arguments is built to the analyzed mentioned theories in interpreting legal matters.

Keywords: methodological rigor, decoding law, art law-making, legal neo-realism, argumentative constraints. JEL Classification: K1, K33.

INTRODUCTION

The law is an area of particular interest and decoding of this concept is a complex and difficult process, around this gravitate the law knowledge itself. The complexity of law and also the knowledge of this phenomenon is due to the fact that the law reveals to us in various expressions. makes appeal to abstraction, targeting to overcome these abstractions to ensure on a satisfactory and possible manner the harmony of the social body. Law also reveals the immediate knowledge and the mediated knowledge, existing only through its relations with other fields of knowledge such as: philosophy, human sciences, semantics, Hermeneutics, legal logic, reasoning, serving them as a meeting point.

Not least, the law reveals action, the one who is carried out of who invents or discovers the rule, leading to interpretation, rank, application. And here is also noted that from the Roman lawyer to the English casuist or to the master in robe, each had, over time, the role and weight in relation to law and its evolution. They are not limited to conflicts that arise in life, society, law logic is not considered only at the level of the social pathology cases. The efficiency of action is related to the functioning of complex psycho-social mechanisms, which the legislature must give satisfaction, setting by rules of law, types of behavior deemed useful both in terms of social and individual.

Law, also as other areas of social, does not explain himself, but is explained by the law science. In the literature it is assessed that law as a science (i.e. as an explanation of the reality law facts) has two functions:

a) explanatory function, informative; b) regulatory function - consisting in arguments of practical solutions for legal problems

and providing the action directives. Also, the need of law is not acting unless people living on group or, more precisely, that

"social being", as Aristotle said, tend to live in society and be involved in social relationships. This


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has led to the emergence more or less rapidly of the idea of law. Thus, one can say that the process of forming the law, a long and highly complexity process should be surprised in its dynamics.

1. INVESTIGATION PRINCIPLES OF THE AUTHENTIC MEANING OF

JURIDICAL NORMS USED IN LEGAL METHODOLOGY The methodology is defined as the most general system of principles of investigation,

derived from the more general objective laws. (Popa, 2005). The method is a methodological principle (private method) or some technical process some (individual method). A method in the true sense of the word must be determined by the subject of scientific research itself in order to correspond to the laws.

Among the various methodological steps - general, private, individual - complex relationships are established, in which aspects can be distinguished characteristic of the link between general and particular, of part and the whole, of process and moment, etc.

A good knowledge, explanation and interpretation of law (of legal phenomenon) requires an appropriate methodology under which to undertake a scientific understanding of the mechanism of law social action, of his functions, of the substance of its content and form, of its multiple relationships with society. So therefore, by methods we understand a series of intellectual operations (which may consist of principles, rules) that are used to achieve one or more objectives concerning the knowledge of a phenomenon. For this purpose, may be used certain technical processes, which are supporting tools for the methods and should not be confused with them.

The study of research methods in legal science, of their Heuristic value for discovering new knowledge, is due to law theory (Rosenfeld, 2000). This however does not eliminate the possibility that other branches of law science to contribute to improving the legal and analyzing methodology in their investigations area. Concerns on defining the legal methodology and of analyzing the law scientific research methods are presented in the legal literature. Legal methodology may occur as a science about law science, (and Răducanu Popa, 1983) that reveals aspects of the most important and passionate, like: how a man of science works, the rules of science, its character.

In Romanian law, one of the outstanding lawyers of the XXth century Mircea Manolescu, defined legal methodology as "the discipline that deals with the logical problems, of problems of locating the truth in law science". He indicated also that "we need to distinguish between legal logic and judiciary logic, because there are some which show a puzzle, for the terminology of "legal" opposed to "judiciary", although each understood that "legal" is about law and "judiciary" is in connection with litigation (Manolescu, 1993).

Based on the same distinction, it is spoken of legal logic and judiciary logic, the legal methodology representing a system of those relative invariant factors in a sufficiently large number of methods, factors that have as object reports, relations, links that are established between different methods in the process of legal knowledge phenomenon. The factors of relative invariant in a sufficiently large number of methods are in this case principles, rules or methodological criteria that form the legal interpretation content. Reports, relations, links that are established between the different methods, either before, during or after completion of scientific research are related to legal interpretation (Popescu, 2002). This object is not made by the methods themselves, but by the multiple reports of these relationships.

Since the methods differ as degree of abstraction, as area of application, as degree of precision that they can provide to scientific research, it is warranted to develop a legal methodology as a set of rules for selection, cooperation and appreciation of the benefits and possible disadvantage of applying different methods (Popescu and Iliescu, 1979). Noteworthy is the fact that the analysis of the research methods system of legal phenomenon do not want in any way to be a "value rating", meaning that it can not be generalize the value with respect to one another. However, methodological extremism must be fought (Ceterchi and Craiovean, 1993). It requires close collaboration, a combination of research methods, as everyone has vocation to realize universality, so it is appropriate to mention the Epistemology intake reflection on science, bringing


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into question a discourse on the normative systems of descriptive statements. Therefore, this method shows criteria of validity and finds obstacles in the way of carrying out the truth. Epistemology has an important role in checking the authentic sense, fully caring out its exigency, seeking for the foundation concepts of interpretation that are subject to the procedure. The methodology achieved the exact opposite, with the main objective the description of the normative statements (Regis, 2007).

Other authors, such as Ihering, Stammler, Schwinge or Sauer argue that methodology is about the guiding principles of scientific knowledge, operations, processes, techniques of such knowledge. Legal logic is part of legal methodology and interpretation that deals with the sources, i.e. a way of thinking, logic par excellence, which deals with legal establishment. Legal logic is a precise discipline by its established object and useful by its results. By legal logical we understand the theory of sources or the idea of the law source. In the legal logic are covered: mythology or ideas, lega sociology and nomology or construction.

The legal logic is concerned about the way of interpreting and implementing the legal standard. Legal logic must exist to any legal practitioner of law, whether a lawyer, prosecutor or judge.

Legal arts are those that concern the formulation and interpretation of legal rules but also the law-making art, administration art and art of judging. Legal Arts are two ways:

a) fundamental, such as the formulation and legal interpretation or creation of legal rule and

b) complex, such as law-making art, administration art or the art of judging. Legal technique is a complex activity complex for drafting and formulation of legal rules. Legal technique has clear, precise rules that are to be taken into account in drafting the rules. 2. COHERENCE ISSUES ENCOUNTERED IN THE THEORIES FORWARDED IN

LEGAL THEORY

The realistic theory of the law appears as a consequence of the criticism made of pure theory, which proposes an alternative explanatory conception, therefore giving a convincing answer to the problems raised in terms of interpretation.

In addition to these theories (realist theory of law, pure theory of law) must take into account the constraints in argumentative theory (ATT) (Troper, 2000) and legal theory of state (TJE). They concern the relationship between the system of principles and the legal concepts that make the general theory of one hand, and on the other hand underlines the general structure of the legal system that is based on the theory that to get a goal there is only one possibility recognized by law and this is linked to legal reasoning (Pfersmann, 2000).

We may conclude that the legal state theory is only an application of argumentative constraints theory, both assuming concepts of law realistic theory. But this opinion may be subject to immanent criticism because it is impossible to concentrate the whole science of law around a single theory this being the scope of the realistic theory of interpretation, to demonstrate that any other conception is pure ideology.

Starting from its own premise, they can claim the fact that multiple inconsistencies in the formulation are foreseen, which lead to the necessity of formulating a positive solution for the legal interpretation by limiting the study to a particular theory, with a different architecture, and examining its consistency within system in relation to a contrasting theory, as pure theory of law (Mihai, 2003).

I can not say in a radical way the fact that pure theory of law represents a success and realistic theory a failure, this problem remains open, as far as still trying to find the best interpretations to the pure theory of law, which allows understanding law in a realistic manner.

Realistic theory of interpretation results from a refined combination of three positions: empiricism, volunteering and determination principle who claims that any rule has a determined object and a circumscribed action. Some elements are introduced without proving their


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effectiveness as primitive elements and others are circumscribed as a consequence, without distinction between these items to be done in an explicit and systematic way. Moreover the realistic theory raises some problems of coherence.

Although it was called "the realistic theory of interpretation" of its initiators, it is not in my view a theory of legal interpretation, but one general theory of law, since it considers a semantic analysis of legal texts in the interpretation process as impossible to be interpreted. According to this theory the meaning of words is determined by the law enforcement.

In the realistic theory of interpretation the following elements should be identified: 1. an observable empirical reality driven by the general empiricism;

2. its meanings are expressed through statements that represent observable linguistic elements which shows semantic empiricism;

3. a legal rule represents the significance of a statement, expressing an act of will and at the same time, requiring, permitting, prohibiting a specific action as a result of semantic-normative volunteering;

4. law ontology that requires that a legal rule is a rule that must be "justified" in society and legal order is a system of legal rules that is, consequently, a system of "justification"; 5. interpretation is the attribution meanings to a part of legal statements in accordance with the principles of interpretation, which is the efficiency interpretation thesis; 6. realistic theory concerns only the interpretation of law under the principle of specificity;

7. some interpretations have taken effect in the legal order under the interpretative effectiveness principle. This is the authentic interpretation;

8. the interpreting result is verified with the landmark of doctrinal interpretation; 9. describing acts of authentic interpretation is the law science;

10. the legal texts are "indeterminable" according to the principle of indeterminable text, which means that there is no text that may not have a discovered sense of the text and it must be interpreted even if it is obscure (Jouanjan, 2000). Subject of interpretation is not a legal rule but the legal text which may contain several rules, among them, the interpreter must choose which one will apply.

11. a prescriptive statement has meaning only if it is determined in accordance with the principle of normative determining;

12. there is no doctrinal interpretation, in accordance with the terms of legal scepticism; 13. interpretation is an act of will, not an act of knowledge as a result of interpretative

volunteering theory; 14. any interpretation is assessing; 15. the legal rules are resulting solely from the authentic interpretation, under the

interpretative realism theory; 16. the superior bodies that apply the law (usually the court of last resort are being

considered general rules creative organs) are those that determine in a definitive manner the meaning of texts as a consequence of the organic authentic interpretation principle;

17. the decisions of these superior bodies are required to be observed by their addressees, the consequence of effectiveness decision-making;

18. legal rules can be considered legal facts - strictly reductionism. It is important to show the consequences of the realistic theory of interpretation to

understand how it operates, because this theory has as epistemological foundations the general empiricism but also the semantic one, which it admits but without demonstrating their usefulness (Vălimărescu, 1999). But the general empiricism is not specified in terms of methodology. Therefore, we conclude that we are dealing with an empiricist theory which does not give any indication of these concrete items. We admit, however, at least provisionally, the effectiveness of this theory subject to explain the elements referred to by close methods.

The statements relating to the "constitution", "laws", "regulations" or other types of general and abstract rules can not achieve scientific value, but they may be, at best, the subject of a science such as legal dogmatic, because the law makes reference to final decisions in a given case (Michael,


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2000). This view shared by the advocates of the realistic theory of legal interpretation is subject to immanent criticism, thus giving rise to a problem common to all legal systems, referring mainly to radical and refined solutions, building on contradictory premises that do not allow deduction of the desired outcome.

In any legal order we meet the two phenomena that the law theory must explain: on one hand the texts that state general and abstract rules and, on the other hand, the decisions given by judicial bodies, concerning concrete cases. Therefore we see so very often that it is difficult to establish a relationship between a rule or legal text and the cases that to be its application. It is often difficult to establish a relationship between the rule and the cases that are claiming to be just the application of the rule.

Thus, the following types of solutions may be proposed, some practical, other theoretical having as a departure point two totally opposite meanings. Practical solutions are based on the idea that the courts apply general rules based on legal and moral beliefs and they should not be otherwise because the law is "close to life" (Pfersmann, 2002). This explanation is obviously difficult to accept because it is based on a double confusion between law and morality and between law and factuality. It does not explain anything because it does not foresee from far what would be the function of the general rules and we should not be satisfied with the argument of establishing the institutional bodies framework over the imposition of a limited number of legitimate action. It was difficult, however, to accept that such a concept could be integrated into a sense of the idea of democracy as a legal system - which includes at least one of its elements - general rules - which imply that the implementation of the rules of law to show concretely what they provide and not in an unpredictable manner (Rabault, 1997).

Finally, the militancy that supports this theory which we qualified by the phrase "euphemism of judicial activism" is closely related to law practice opinion that acclaims it and can not welcome criticism without a huddle. This enthusiasm is facing opposition to all those who claim, for reasons more or less equivalent, contrary principles, proclaiming the fact that these decisions only promote injustice (Frydman, 2007).

CONCLUSIONS The theoretical solutions are based on the attempt to explain them in a strictly legal manner,

but borrowing two completely opposite ways: some make a "realistic" response, others a "normative" response. Some leads to the legal character of general rules with applicability in case-law, others consider these decisions as a legal dependent phenomena arising in consequence from a strict delimitation of parameters for this dependency in connect with the specific data to each legal system.

For those who share this explanation, the initial issue is only the original version of the general rules of punishment. Each position involves advantages and disadvantages. Realism has the merit to ally to the analysis of acts that are governing in a final manner the conflicts but at the same time determines as unable to explain their intra-legal justification. Normative instead gives intelligibility. Explanation of legal order evolution through concrete remains their priority task and law theory challenge the theory.

In contemporary French landscape the most representative school of thought is that who designed the realistic theory of interpretation. Considered to be a n original summary of a Kelsens’s empiricist tradition, it states the inexistence of law as a normative object ad as a consequence postulates the inexistence a fortiori of legal scientific activity. This theory only confirms the existence of a disciplinary study object - judicial decisions and authentic interpretations according to the principles of interpretation and a second object – dogmatic (Kelsen, 2000).

Realistic theory of legal interpretation gives the legal system a radically vision different from that which vehicle within the traditional doctrine, arguing the return of jusnaturalism to progressive or conservative. Its great originality lies in that it opposes in a rigorous manner to the theory of pure law, thus insisting on keeping the essence in critical theory. It brings into light the


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analytical on the single pertinent thing, which is in the conception of theory supporters the legal interpretation. This theory used in the most offensive manner the analysis of legal language in relation to doctrinal dogmatism.

Realistic theory of interpretation is at the same time, the fiercest criticism ever made of pure theory. She tries to denounce such argumentative "weaknesses" demonstrating this by conclusions arising from immanent reconstruction of theory. Therefore it paradoxically contributes to the formation of a thinking efficient current on Kelsen’s heritage in France and in a more general manner to analytical epistemology of law.

BIBLIOGRAPHY

1. Ceterchi, I. Craiovan, Introducere în teoria generală a dreptului, Ed. ALL, Bucharest, 1993

2. Frydman, B. Le sens des lois, Deuxieme edition, Ed. Bruylant, LGDJ, Paris, 2007. 3. Jouanjan, O. Théories réalistes du droit , în Dossiers. Presses Universitaires de

Strasbourg, 2000, p. 54-56, 304 4. Kelsen H., Doctrina Pură a Dreptului, Editura Humanitas Bucharest, 2000 5. Manolescu, M., Ştiinţa dreptului şi artele juridice, Ed. Continent XXI, Bucharest, 1993 6. Mihai, Gh., Fundamentele dreptului: argumentare şi interpretare în drept. Bucharest:

Editura, Lumina Lex, 2000 7. Mihai, Gh., Fundamentele dreptului, vol.I-II,Ed. All Beck, Bucharest, 2003. 8. Pfersmann O., Critique de la théorie des contraintes juridiques, Actes du Colloque

international consacré aux contraintes juridiques à Paris, octobre 2000, p.57. 9. Pfersmann, O., Contre le néo-réalisme juridique. Pour un débat sur l’interprétation,

Revue Française de Droit Constitutionnel, Presses Universitaires de France 2002/2 - n° 50, p.281-302

10. Pfersamnn, O., Timsit G., Raisonnement juridique et interpretation, Publications de la Sorbonne, Paris, 2001

11. Popa N., Teoria generală a dreptului, Ed. All Beck, Bucharest 2005, p. 21. 12. Popa, N. Răducanu, A., Quelques considerations sur la notion de la méthodologie

juridique, Bucharest University Annals, seria Drept, nr. 2/1983 13. Popescu, S., Iliescu, D., Problemele actuale ale metodologiei juridice, Ed. Ştiinţifică şi

Enciclopedică, Bucharest, 1979 14. Popescu, S., Teoria generală a dreptului, Bucharest, Editura Lumina Lex, 2000. 15. RABAULT H., L’Interprétation des normes : l’objectivité de la méthode herméneutique,

Paris, L’Harmattan, 1997. 16. Regis, D., Curs de mediologie generală, European Institute, Universitaria Collection

Bucharest 2007. 17. Rosenfeld M., Les interpretations justes, Bruylant, LGDJ, Paris, 2000 18. Troper, M., Les contraintes argumentatives, Actes du Colloque international consacré

aux contraintes juridiques à Paris, octobre 2000, p.35 19. Vălimărescu, A., Tratat de enciclopedia dreptului. Bucharest, Editura Lumina Lex,

1999


15

PRIORITIES FOR SUSTAINABLE DEVELOPMENT TO THE THIRD MILENIUM START

Lecturer PhD. Gabriela BUŞAN

Constantin Brancusi University, Targu Jiu, Romania, [email protected]

Ec. Viorel Daniel CRĂCIUNESCU Constantin Brancusi University, Targu Jiu, Romania

[email protected]

Abstract: Improving of overall economic situation and social environment can be achieved by adopting a sustainable

development, focusing on improving quality of men's life and environmental health. In the conditions of worsening crisis of the environment and natural resources is trying to adapt the economic system of competitive market economy and the conditions necessary to ensure an environment able to support sustainable economic development.

We should note that the transition to sustainable development requires action at all levels, local, regional, national and international. Understanding, support and involvement of strong local and regional level government, business, civil society at the individual level are therefore of fundamental importance for achieving sustainable development. Global responsibility requires each country to be aware of the impact it has on the rest of the world. The global responsibility also stresses that sustainability assessments are more significant when they are conducted in a global context, rather than in a regional or national level.

Keywords: sustainable development, present, future, shared commitment, collective responsibility, respect for human beings and the environment. JEL Codes: A10, O11, O13, Q01, Q56 INTRODUCTION:

The work related to a theme addressed more often by contemporary science, on the relationship between the economy and natural environment. Capacity to sustain of the environment in relation to the requirements of sustainable development differs from one country to another and from one region to another region of the world. I embraced the idea that sustainable economic development of Romania must be supported by the environment conditions.

The concept of sustainable development is a test for the coexistence between environmental protection and economic development in a global optical and a long-term optic. Development in a long time is a new word for the older idea and of good omen, that there is no viable economy without natural resources and no management of these resources without economic rationality.

According to this, the mechanisms of economic and market studies represent the management tools if they become properly oriented and placed. After all, the very economic analysis and theory of externalities is one that shows us that the market does not take into account in "a spontaneous" manner the ecological sphere.

The international dimension of sustainable development put the following problem: the policy impact assessment of a country must take account of consequences over the rest of the world? Whatever it is, remains to be put in place the mechanism for taking into account the global aspects of sustainable development, in particular the financial transfers between developed countries and developing countries.

The timing framework of sustainable development is very important Acordingly to Pearce[7], “sustainable development is loyalty to the future”. We could devise a "sustainability a la Pearce" after which a generation would not be able to increase its welfare at the expense of other generations.Acordingly to Tietenberg[13], if a project maximizes present value of benefits, but entails losses for future generations, should be part of a share of profits obtained in a compensation fund "between generations”.

Pezzey[8] sunderlines the difficulties of such problems: how to define and identify the projects or programs, the criteria that determine the character "unacceptable" the projects in terms


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of future generations? How to have into account the many projects undertaken by the private sector?

Pearce[7] stresses that the phenomena of non-changing, irreversibility and uncertainty requires maintaining a "minimum security natural stock" or more, applying a "principle of precautious”, after which the total stock of environmental resources should not diminish over time.

C. Henry[6] stresses that the interests of future generations involves an ethical imperative in the economic calculation. For this, he expected the application "principle co-proprietorship" which leads to environmental co-proprietorship between present and future generations. This principle requires the implementation of institutional mechanisms: the standard choice, the price of natural resources, the choice of update rate. Thus, the application of economic calculation is a necessary condition but not sufficient of sustainable development: we have an “institutional mediator”, guardian of the ethical imperative of co-proprietorship of the environment, safeguard the solidarity between generations.

In general, the minimum requirements for achieving sustainable development include: resizing of economic growth, given a more equitable distribution of resources and

enhancing the quality side of production; eliminate poverty in terms of satisfying the essential needs for jobs, food, energy,

water, housing and health; conserve and enhance the natural resources; ensuring population growth to an acceptable level (reduction of uncontrolled population

growth); maintaining the ecosystem diversity; monitoring the impact of economic development on the environment; reorienting technology and the control of risks; decentralization forms of governance; increase the participation in decision-making and unify the decisions on the

environment and economy; In conclusion, it is accepted that without protection of the environment is impossible to

make progress. Damage caused to nature and health undermines the foundations of health in the future productivity and vice versa, without economic growth are difficult to be procured the resources necessary to protect the environment.

Summit in Johannesburg has provided continuity of ideas and positions held in previous conferences, particularly those in Stockholm in 1972, and Rio de Janeiro in 1992, but at the same time, was a firm commitment of all people on world in sustainable development.

Representatives of all peoples in the world, meeting at the World Summit for Sustainable Development in Johannesburg have reaffirmed their commitment to sustainable development; have undertaken to make the world more human, more carefully and more respectful to the dignity of each; and have taken collective responsibility to make progress at local, national, regional and global economic development, social development and environmental interdependence and complementary pillars of sustainable development; they realized that humanity is at a crossroads, and were united in a responsible manner by a positive need to necessity to conceive a pragmatic plan of a high clear, leading to the elimination of poverty and foster the human development[11].

THREATS TO SUSTAINABLE DEVELOPMENT The globalization process stimulates the fast development of globalization, economic and

financial paths, propagated the universal values and approaching companies between them, by providing multiplied opportunities for economic and social benefits. On the other hand, in the absence of appropriate policies, globalization process may lead to some adverse effects, real challenges to the States the world, such as global warming, pollution, damage to biodiversity and desertification, global inequity of distribution of benefits between rich and poor countries and


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deepening disparities, deleting specific culture, proliferation of weapons of mass destruction, cross-border crime or terrorism.

By accepting these issues, the international community has recognized that one of the major problems of the current period is to find ways by which the positive effects of globalization to be maximized as possible and turn over all countries and peoples, while the potential adverse effects should be eliminated or reduced to a minimum level. At present the world passes through a difficult phase in its history, which threatens mankind with an ecological catastrophe. Strategies for sustainable development at the beginning of the millennium should focus on eliminating the causes that determine the irrational use of human and material resources. Currently, the main threats to sustainable development are[5]:

increased poverty, which continues to affect one in five persons in developing countries, disease, cell family overdimension, criminal and drug use is increasing in many countries; the average income of the richest 20 countries it exceeds 37 times of the poorest 20 countries[1].

political instability, which lead sometimes violent conflict, hamper economic and social progress in many countries and regions. After 1990, issues of international peace and security have undergone extensive changes from the Cold War period, making necessary new approaches and new solutions, which requires strengthening the international institutional mechanisms and capacities of the international community to respond to threats quickly and effectively. Concepts rarely used in the past are now increasingly circulated, operations such as conflict prevention, peace and peacekeeping, rehabilitation and post-conflict peace-building.

continuing deterioration of the environment, there is a depletion of natural resources (soil erosion, deforestation, destruction of habitats and biodiversity, depletion of fisheries resources, decline and depletion within 25-30 years of global oil resources) and pollution phenomena in most countries; environmental damage nimicirea subject to many species of plants and animals, leading to disturbance of equilibrium of nature, which substantially restricts the ability of human survival.

threat of climate change ( tropical ciclons, floods, droughts and heat waves in some parts of the world), developing countries are most vulnerable to the effects of climate change worldwide, even if they contribute only minimally to the problem. Emissions of greenhouse gases may cause increases in average temperature on Earth. This can affect, in turn, the level of rainfall and wind direction can change the weather and can lead to rising of sea levels. Changes of such magnitude could have a devastating effect on natural ecosystems and on human society.

demographic increasing stresses these trends, even if the consumer of population matters more than the number of inhabitants. According to a U.S. study in the second half of the century will have a broad human movement from third countries to the rich countries, in 2050, the world will live 9.3 billion people compared to how many there are 6.3 billion today.

HIV / AIDS virus and other very serious diseases that undermine production capacities of countries and weaken social relations, leading to increased social disorder.

marginalize, many countries fighting against the effects caused by economic growth without force, a burdensome external debt, against corruption, violent conflict and social insecurity.

These changes adversely affect human health, life period, have a negative impact on economic development. All this demonstrates that human society has reached a critical level, after which irreversible processes may follow that would jeopardize the existence of mankind. To avoid this bleak prospects and to ensure survival and prosperity of humanity, more and more representatives of the society come to believe that it is necessary that the issues of environmental protection and economic development to be solved in conjunction mutual interests of the whole human society and the contemporary generation to come.


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SUSTAINABLE DEVELOPMENT OBJECTIVES AND WAYS OF THEIR REALIZED

Objectives of sustainable development proposed in the Summit in Johannesburg, accompanied by appropriate measures, seek the great contempt of our time, namely: the elimination of poverty; changing the mode of consumption; changing systems of production un-viable, protection and management of natural resources with development economic and social improvement of health; strengthening institutional mechanisms for achieving sustainable development at national and regional level.

These objectives are formulated on the background of the role requirements of mandatory prerequisites, without which the sustainable development is inconceivable Are taking into account[9]: ensuring peace, security and stability, respect for human rights, fundamental freedoms, cultural diversity, promote dialogue and cooperation between civilizations and peoples of the planet and ensure the universality of human dignity, etc., all these in order to achieve union in a effort designed to save the planet and promote human development. Economic and social objectives must be defined in terms of time and priorities of national development because of what is sustainable in a given time or in a particular country by a certain level of development may be unsustainable in another era or another country in a given stage of development[2]. This observation links the nature of the development process, expressing two significant aspects: the appearance of regional or local level, which refers to the area which is located in the country for the establishment and development strategy, the group to which belong (developed countries or developing countries) and temporal aspect, which refers to the stage reached in economic development and degree of vulnerability of the economy as a result of the imbalance factors for development.

An important condition for achieving sustainable development is the simultaneous progress in several dimensions. To do this, economic policy, environmental policy, investment, research-development policy, employment, education, health etc. are designed to match the objections and actions under certain priorities[4].

Another condition, in fact related to the before condition, refers to adapting the concept of sustainable development to the specific conditions of each country. Each country has its own needs for economic growth, national characteristics and demographic features of the natural environment, namely a space built. Meaning of sustainable development is given just by the endogenous model of reconciliation between man and nature. This does not exclude, of course, the need for collaboration and cooperation (such as; enhancing the environmental management and implementation of national policies to increase demand for clean technologies that will accelerate technology transfer and technological cooperation). Concrete ways of commission of these objectives is considered as representative the followings[3]:

pollution control, resource management and broader considerations on the quality of life; creating effective institutional framework for the formulation and implementation of

policies of the environmental protection; promoting technological progress in favor of organic growth "ecological"; the need to make regulatory instruments to become more efficient and less costly; a more widespread economic instruments, which reflects more accurately the relative

scarcity, in order to provide market signals regarding environmental protection; changing trends in production and consumption in order to maintain stock of rare

resources and reduce pollution; a greater use of proactive strategies in formulating and implementing policies for

environmental protection; the development of integrated strategies, both in the environment sector of the medium,

and between this sector and other sectors of the economy;


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a more detailed analysis of the links between environment and economy as a way to develop indicators of environmental protection tend to measure progress and environmental protection

Since the pollution, like other processes, such as poverty, can not be isolated within the national borders, sustainable development has become a strategic goal for the entire humanity. I believe that the eco-awareness will resolve many conflicts today. Situations of potential conflict between environmental protection and economic growth or between industrial and developing countries, between generations, present and future have other causes. The debate will continue long time in the future.

Council of the European Union adopted on the 6 June 2006 renewed Strategy for Sustainable Development, for an enlarged Europe. It is designed document in a unified strategic vision and consistent with the overall objective of continuous improvement of quality of life for future generations by creating through sustainable communities capable of manage and use resources effectively and to exploit the potential for ecological and social innovation of economy to ensure prosperity, environmental protection and social cohesion. Key objectives proposed under this Strategy are :

environmental protection, by measures enabling the decoupling of economic growth of the negative impact on the environment;

equity and social cohesion, respecting fundamental rights, cultural diversity, equal oportunities and combating discrimination of any kind;

economic prosperity by promoting knowledge, innovation and competitiveness to ensure high standards of living;

fulfilment of international performance of the European Union in promoting democratic institutions in the service of peace, security and freedom of the principles and practices of sustainable development worldwide.

The transition to sustainable development marks entry of mankind in the environment medium in which development must take risks or even removed. To do this, it is necessary to change how people perceive a number of elements of life that they live. Through education, culture and science, people can overcome a perceptionl threshold, which means that to observe, to judge and act for the long term better, is heading towards a new moral frontier, which shows that the problem should be seen in the development of interdependence in space and time. Overcoming a perceptual threshold has a indispensable prerequisite information, so as to human communities aware of threats to their planează before such disasters to occur.

Sustainable development implies a new code of values to be realized in a general process of transition towards a sustainable society in which people can be attracted by new ways of life tidy and awareness of what can happen if they not change the manner of life[10].

Sustainable development may be the solution of all conflicts of conciliation provided by the condition that unanimous interests to converge towards human development. It is necessary that through the individual and collective efforts to ensure the transition from ideas to concrete facts, for sustainable development to be done really.

OBJECTIVES AND PRIORITIES OF SUSTAINABLE DEVELOPMENT IN

ROMANIA

In our country, sustainable development pursuing objectives of economic, social and environmental stability.

Economic objectives include two broad categories: objectives concerning economic activities in the domestic and objectives relating to external economic relations. In the first category fall objectives concerning global economic results: GDP or per capita income; objectives with direct consequence on sustainable development: investment and capital formation and the use of their global supply of goods and services, movement of money, budget execution , distribution of income, public debt and objectives related of scientific research and technological innovation.


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A second category of objectives includes activities generated by the external economic relations: foreign trade, capital movements which are found in the external balance of payments, foreign investment, etc.. Also among the objectives concerning the activities and objectives are set the objectives that relate to quality of goods and services prospects and their competitive ability in the domestic market and abroad.

The use of the social objectives of human resources and employment, education, training, information, training, health, leisure time use, equity and social assistance, etc.

Environmental objectives are the concrete objectives of environmental protection and nature conservation, to ensure biological diversity and sustainable use of non-renewable resources.

National Strategy for Long Period Development of Romania[12] starts from the premise that the achievement of accelerated growth and long-term in all three key components is the key to the gradual reduction in a short time the gaps that separate Romania from the EU average medium in terms of quality of life which ensure a real cohesion, both nationally and within the frame of European Union.

A prerequisite condition for achieving the objectives of sustainable development is the implementation of appropriate combinations of consistent macroeconomic policies, which ensure the sustainability of material resources and energy used for growth. Financing the strictly need investments to modernize and increase the competitiveness of productive sectors and services and infrastructure, capacity and improvement continued employment in accordance with the requirements of technical progress and technology.

To achieve its sustainable development, Romania needs, in addition to funds allocated by them itself, by significant investment and assistance. Scarcity of resources, which may occur from the preparation of strategies and development programs, or to appear along the way, raises the question of providing the necessary resources, even calling on external source.

Romania is not only a country with a natural capital and varied resources, but a credible partner for combination with other countries or international companies, although some weaknesses persist in the economic, institutional and social frame. Encourage partnerships between the public and private sector, of foreign capital and local, the optimum uptake, in accordance with the arrangements prepared of funds from the European Union and financial institutions and international economic is one of the guidelines of the National Strategy for Development of Romania.

CONCLUSIONS: I believe that sustainable development includes economic growth, but not at any price. Each

country has situations that can sacrifice the environment for a short term gain but long-term costs are usually higher than when working from the top as they should. The goal of sustainable development is a better quality of life of everyone, now and for future generations. Under this concept, environment, economic growth and social cohesion can and must go hand in hand. This vision can become reality with the policies relating to economic, social and environmental issues, finding the best balance between them and identify winning situations for everyone whenever possible.

REFERENCES: 1. ***World Bank – World Development Report; 2. Bran, F., Relationship economy-environment to the start of the third milenium, ASE

Bucharest Publishing House, 2002; 3. Brooks, W., Report of the National Committee of Science and Technology for

Development, Vienna, 1989; 4. Cămăşoiu, C., Economy and nature defy, Economic Publishing House, Bucharest, 1996; 5. Frone, S., Long period development strategy, Economic Tribune, no. 21, 2003;


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6. Henry, C., Eficacité économique et impératif éthique, Revue Économique, 1990; 7. Pearce, D., Markandya, A., Blueprint for a Green Economy, Earthan Publication,

London, 1989; 8. Pezzey, J., Economic Analysis of Sustainable Growth and Sustainable Development,

Washington, 1989; 9. Pohoaţă, I., Economic philosophy and sustainable development policy, Economic

Publishing House, Bucharest, 2003; 10. Popescu, C., Ciucur D., Băbeanu M., Popescu I.,,The balance of referral, Efficient

Publishing House, Bucharest, 1998; 11.*** ”Raport du [1] Sommet mondial pour le developpment durable”, Johannesburg, 26

aout – 4 sept. 2002 (www.Johannesburgsumit.org); 12. ***National Strategy for Sustainable Development of Romania, Horizons 2013-2020-

2030; Document approved by Government Decision no. 2460 of 12.11.2008, published in the Official Gazette no. 824 of 8.12.2008, Bucharest, 2008;

13. Tietenberg, T.H., Environmental and Natural Resources Economics, Illinois, 1984.


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CLIMATE CHANGE AND ADAPTATION POSSIBILITIES OF THE TOURIST DESTINATIONS

Constanţa ENEA

Georgiana TANASOIU University “Constantin Brancuşi” Tg-Jiu, Romania

[email protected]

Abstract: In recent years have been collected more evidence showing major changes in terrestrial climate of the last

century compared to pre-industrial period, which led experts from intergovernmental GIEC declare that "the climate warming is a reality." Due to the extremely close relationship that the environment and climate, tourism is considered a sector of the economy extremely sensitive to climate change. Regional manifestations of climate change are very important for tourist destinations and tourist and requires an adjustment of overall main sectors that form the tourism sector.

For tourism, climate change, not a phenomenon that will occur in an uncertain future, for various impacts are going to manifest in various destinations worldwide and climate change already exercised an influence in decision making in the tourism sector.

Keywords: Tourism, climate change, economic impact JEL Classification: M16

INTRODUCTION Representatives of tourism should not remain passive before the weather changes. They

exist and they would already have to respond and try to adapt to new environmental conditions. In the past years were gathered more and more proves which certify the major changes of

Earth’s climate. After analyzing this century’s climate in comparison with the climate from the pre-industrial period, the inter-governmental experts from GIEC declared that the warming of the climatic system is a reality. The comparative analysis of the annual average temperature between 1850-1899 and 2001-2005 shows an increase of it with 76 ˚C. The raising of the temperature is mostly caused by people’s activities, activities which raised the concentration of gases with a greenhouse effect (GES).The raising of the average temperature had an impact upon the ice field, also it led to the warming of the oceans and to the raising of the seas level with approximately 3,1 mm/year between 1993-2003.

It has been recorded, on all continents, a biological reaction of the ecosystems and of different species of animals and plants. According to GIES the rhythm of climatic changes will accelerate due to the raise of GES emissions. This will lead to a raise of the oceans’ water temperature with 1,8-4,0 ˚C by the end of the XXI century. These climatic changes will be different from region to region. It’s likely that heat, heat waves will be more frequent; future tropical cyclones will be more violent, with richer rainfalls and stronger winds. The regions that will be affected by these climatic changes are numerous. The fact that in these regions are many important resorts leads to some measures regarding natural catastrophes. GIEC came to the conclusion that climatic changes will affect many countries that are now developing. In present the costs for reducing GES emissions are small in comparison with the costs that will appear after a major climatic change.

Because of the close relation between the environment and the climate, tourism is considered as an economical sector very sensible to climate changes. Regional changes of clime are very important for people when they choose their holiday destination.

For tourism climatic changes are not a phenomenon which will appear sometimes in the far future. These climatic changes are about to appear in some worldwide destinations and they have a big influence on the touristic sector.


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Another aspect we have to consider is the way in which tourism contributes to releasing GES in the atmosphere. These emissions may come from transportation or other activities done for the best accommodation of tourists. Tourism must make a visible effort to reduce these GES emissions. The International Community admitted, in the Discussions at Vienna regarding climatic changes in 2007, that, by the middle of this century, these emissions must decrease to a level far inferior to those registered in 2000.

The main problem the touristic sector is facing is the introduction of a coherent political strategy which will allow the dissociation of the massive growth of tourism, dissociation which will be done through an increase use of energy and the raise of GES emissions if tourism can contribute to the cutting down of poverty and will play a major part in fulfilling The Millennial Objectives for development set by ONU. The Conference from Djerba, 2003 (the first international conference dealing with the climate and tourism changes) was a waking sign for realizing the effects that climate changes have upon tourism. The declaration from Djerba set a base for future research and decisions related to the ways we can reduce global warming.

Many companies and associations from the touristic sector have already adopted some measures, this way establishing, by their own choice, some objectives to reduce GES emission. They participate to a series of campaigns promoting the problems that climatic changes cause and they sustain the introduction of laws which refer to the problem of climatic changes.

THE IMPACT AND THE ACCOMMODATION OF TOURISTIC DESTINATIONS.

The touristic sector and touristic destinations are very sensible to the various climate changes: clime establishes the length and quality of touristic season and it plays a major part in choosing the destination for our holiday. Climate has big influences upon a large number of natural resources which are points of touristic interest. Some of these are snowing conditions, the productivity and biodiversity of fauna and flora, the level and quality of waters and others.

Scientists have identified four main categories of impacts caused by climate changes and which can have consequences to the competitivity and tenacity of touristic resorts.

Direct climate impact. Climate is a natural resource for tourism, but only as long as it contributes to a longer life

for the resort, determines the length of the touristic season, the usage of cooling devices (air conditioning) or producing artificial snow.

The changes in the length and quality of touristic seasons depending on climate (like balneary or winter sports holidays) may have considerable implications regarding the resorts hierarchy, their competitivity and also their profits. These changes in clime may lead to serious prejudice to the general and touristic infrastructure, special needs to prepare for emergency situations, the raising of the amount of money spent on working services (insurances, water and energy reserves in case of emergency, eviction) and in case commercial activities are suspended.

It is very likely that we will witness a movement of the clime favorable for tourism to a higher latitude or altitude while a series of very popular resorts today (The Mediterranean Basin for balneary tourism) will face a deterioration of their services. There are also proofs that some resorts famous for their winter sports done on natural snow, will be facing some serious problems. Even if they use artificial snow, we will be witnessing a cutting down of the sky industry in The European Alps, North America’s east and west mountains, in Australia and Japan and the impacts forecasted for these resorts are very different.

The indirect impact of the climate’s change. Because environment’s conditions are a basic resource for tourism, a great number of

environmental changes caused by climate will have a powerful impact upon touristic destinations


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worldwide as well as local. The changes in water supplies, the loose of biodiversity, prejudices brought to landscapes, agriculture damages, raised natural risks, shores’ erosion, the high number of diseases will have an impact, at different level each, upon tourism. Opposed to direct climate changes which can have good effects, indirect impacts have a higher probability to have negative effects. Mountain resorts, insular resorts and the ones on the coast are considered to be extremely sensible to environment’s changes caused by climate. UNESCO has identified some sites of the Worldwide Patrimony, which are very important touristic destinations and which are extremely vulnerable to these changes:

- Venice, which is affected by the raise of the sea level; - The Great Coral Barrier which will suffer after coral’s disappearance; - The Chan Chan archeological zone from Peru which will face flooding and erosion caused by

the exacerbation on the El Nino phenomenon; - The Waterton National Park of Icebergs where it is recorded a glacial rebuff.

Even if, after the Conference from Djerba, there were done important steps in the understanding of climate’s changes impact upon touristic destinations, there still are important regions from Africa, The Caribbean, South America, Middle Orient and a large part of East Asia which haven’t been studied.

The impact of the remission policy upon tourists’ movement. National or international policy for the remission of global warming – including policies for

reducing GES emission – is risking affecting tourists’ flow. They will be seen in higher transportation costs, as a negative effect, but could also contribute to a change of behavior towards the environment, determining the tourists to change the structure of their voyages (for example, by choosing means of transport less polluting or by choosing closer destinations). The destinations which are further away from tourists’ provider countries are risking being the most affected and countries from SE Asia, Caribbean, Australia or New Zeeland showed interested by the fact that the policies for reducing emissions could affect not only their tourism but their whole economy. These policies will be a chance for the means of transport with a low carbon emission, like busses and trains, and will allow the redevelopment of the resorts closer to the tourists’ provider countries.

The indirect impact of the society’s change. It is estimated that climatic changes will represent a risk for future raise of the economy and

also for the political stability of some countries. Stern Review considers that a global warming with only 1˚C will be advantageous for world’s PIB, but a bigger raise will have a negative impact upon world’s economy. For the national and international security, the climatic change is considered a risk which will get higher if the worst scenario will accomplish. These kinds of risk were identified in many regions where tourism is important for local and national economy.

Tourists, especially international ones, avoid destinations from countries unstable from a political point of view or which have social problems. This way the touristic request is low for places where personal security is endangered by climatic changes. The decline of tourism due to security problems can only lead to a degradation of economical performances of the touristic resorts and this way it becomes an obstacle for the country’s development. We should remember that tourism for a shorter distance is less vulnerable to the world’s social context.


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Adjustment strategies for mountain resorts

ADJUSTMENT TO THE DESTINATIONS

Every company and touristic resorts must adjust to the weather changes in order to minimize the risks coming from them and to benefit from the new opportunities as well as they can and for as long as possible. From all the parts involved into tourisms, the ones with the highest ability to adjust are tourists (they depend only of three main resources: money, information and time) who can benefit of some kind of freedom in choosing the resorts affected by weather changes or to change their travelling period in order to avoid unfavorable weather conditions. The services’ providers from touristic resorts (hotel-keepers, leisure centers, casinos and others) have a lower capacity of adjustment; the big travelling agencies which do not own the infrastructure endowments from the resorts are by far easier to adjust than the others, they just cut off from the catalogue the destination which was affected by climate’s change and they can simply add another touristic resort which has great potential for development under the new weather conditions.

The dynamic nature of the touristic industry and its ability to face a large number of major shocks was proven by the challenges it dealt with at the beginning of the millennium: SRAS, terrorist attacks or tsunami in The Indian Ocean in 2004. We must not consider this capacity as being worldwide present; it is different from a sector to another, from a resort to another or from a company to another.

While trying to adapt, the touristic sector used a large number of measurements depending on the climate’s variability. These measures regarded different fields of activity, from the technological one to those of transaction, education, policy or behavior. Many research activities focused upon the effect climate’s change has upon resorts or upon special touristic sectors like the ones for winter sports.

Alternatives to ski tourism

technical others

Ski tourism maintenance

snow cannons

the arrangement of present slopes

projects for slopes at higher

altitudes

cooperation

prices modulation

touristic societies at 2

levels

diversity exploitation of activities in other

seasons


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ADJUSTMENT STRATEGIES FOR MOUNTAIN RESORTS AND FOR WINTER SPORTS

The most popular solution to solve the lack of snow on slopes proved to be snow cannons. The advantages shown by this strategy are numerous, the ski season becomes longer and with more snow, especially when this is needed most during winter holidays, the more compact structure of the artificial snow leads to a longer time of melting.

The disadvantages are numerous too and they must be taken into consideration. Some of these are: foreign tourists hold back in choosing to ski in resorts which have snow only on slopes; the lack of water in high mountain resorts, the big spending of water (1mc of water for 2mc of snow); the big amount of electrical energy needed (35 kwh/mc); the high price for equipments, the negative ecological impact.

The arrangement of current slopes necessitates some special measurements: avoiding places exposed to wind in order to avoid the fast degradation of the snow bed, avoiding discontinuities on slopes and creating shadow places.

Another solution is to arrange slopes at higher altitudes. This solution minimizes the risks caused by temperature’s raise and it also makes less important the use of snow cannons. On the other hand, this solution makes worse some of the environment’s problems.

Cooperation is a team work strategy used to avoid competition between societies which work in the field of skiing. This strategy offers a better coordination for investments’ strategies. Also it allows an economical merging of the companies in order to fulfill changes on the market and also to temper the competition. A good example for this is the association of the small family resorts from Perrine Mountains which have the same price list. In this way they succeeded to increase the incomes from mechanical transport devices with 45% in the last 5 years.

Maintaining two levels in the touristic sector: top resorts have a various and attractive offer of services with a very good snow –bed; on the other hand, smaller resorts with a smaller offer have less perspectives for development. Tourism’s representatives estimate that smaller resorts play a more important role in promoting winter sports like skiing and from local economical reasons it is very important to keep them.

The diversity consists of post skiing activities, concerts, shows, sporting activities like climbing, traveling. A possible idea would be space diversity: creating activities in the field of skiing, like game fields. These types of activities can be classified in the following categories: sport, leisure, health, development and culture.

In many ski resorts it was registered significant raises of tourists after the introduction of pools, skating places, restaurants and night clubs. At Crans Montana skiing is only 35 % of the resort’s activities. In the arrangement process we must take into consideration weather conditions: average temperature in a year, raining and others.

Activities from outside the season must be best exploited and they should represent a big preoccupation for those in the field of mountain tourism because the climate will get warmer, the air will be fresher in the mountains than at the seaside and the landscapes are wonderful. All these have a big importance for rural, ecological, adventure, urban and cultural tourism.

CONCLUSIONS.

Tourism’s representatives must not remain passive in front of weather’s changes. They are already reacting and are trying to adapt to the new environment conditions. The previous winters with a less quantity of snow showed that weather’s warming does not determine their economical activity but they represent a fundamental element and a general condition.


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REFERENCES:

1. Dorine Tauxe 2006, articol, - Villages de montagne et réchauffement climatique :quel avenir touristique?, Sierre.

2. Jean-Paul Ceron 2007, articol - Tourisme et changement climatique, CIRED, 3. Philippe Ambrosi and Pierre Courtois 12, 375-386 (2004), articol, - Impacts du

changement climatique et modélisation intégrée, la part de l'arbitraire, Natures Sciences Sociétés

4. Raphaël Billé 2007, articol - Tourisme et changement climatique en Méditerranée, Plan Bleu, Centre d'Activités Régionales,

5. PNUE 2006, – Vers un tourisme durable, Paris


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THE PRODUCERS`LIABILITY FOR THE PRESENT DAMAGE AND FOR THE FUTURE ONE, CAUSED BY THE DEFECT OF THE PRODUCT

Assoc. Prof. Ph.D. Nicolae GRĂDINARU

„Constantin Brancoveanu” University Pitesti, Romania Faculty of Management Marketing Business Affaires Rm.Valcea, Romania

[email protected]

Abstract The liability without fault of the producer represents the only means of appropriate settlement of the problem,

specific to an age characterized by technological progress and by a fair allocation of the risks inherent to the modern technology production and it is applicable only to the movable goods that have been industrially produced.

The liability without fault is applicable only to the movable goods that have been industrially produced, therefore, the liability for agricultural products and game must be excluded, except the case in which these products have been subject to an industrial processing which could be the cause of the products’ defects, the liability also exists in the case of movable property used in the construction works of buildings or incorporated into the real estate assets.

The Directive no. 85/374/EEC of 25 July 1985 concerning the producer’s liability for defective products establishes some principles in the field, which are to be undertaken in different national legal systems and be applicable to legal relationships arising between producers and the people harmed as a result of the flaws of the products in circulation.

Key-words: liability, transposition, competition, damage, producer. JEL: K 10, K 13.

1. INTRODUCTION

By the legal relationships between producers and the injured or harmed persons by the defective products in circulation, the civil liability for the damages resulting from such products, as well as the right to legal action to repair the damages, are covered by the Law no. 240/2004 (1), one tries to increase the consumers’ protection, clearly establishing the situations and the way of engagement of the producers’ liability.

The law transposed into the Romanian legislation the Directive no. 85/374/EEC of 25 July 1985 concerning the producer’s liability for defective products (2).

This Directive establishes some principles in the field, which are to be undertaken in different national legal systems and be applicable to legal relationships arising between producers and the people harmed as a result of the flaws of the products in circulation.

2. GENERAL CONSIDERATIONS

The need of the transposition for the Directive no. 85/374/EEC of 25 July 1985 concerning the producer’s liability for defective products in the context of joining the European Union arises from the elimination of differences that may affect the competition and the movement of products on the market, and there are different degrees of consumer’s protection against the damage generated by these products.

It is necessary to establish the producer’s liability for the damage caused by the faulty character of his/her products, since the existing inconsistencies between the legislations may distort the competition, may affect the free movement of goods within the market in the Union and may cause a different degree of the consumer’s protection against the damages caused to health and to his/her property by a defective product.

The producer’s liability without fault is the only appropriate means of solving the problem, specific to an age characterized by technological progress and by a fair allocation of the risks inherent to the modern technology production and it is applicable only to the movable goods that have been industrially produced.


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The liability without fault applies only to movable goods that have been industrially produced, therefore, the liability for agricultural products and game must be excluded, except the case in which these products have been subject to an industrial processing which could be the cause of the products’ defects, the liability also exists in the case of movable property used in the construction works of buildings or incorporated into the real estate assets.

There is also liability concerning the importers of products in the European Community, as well as concerning the people who present themselves as producers by marking the name, the trademark or other distinctive sign or who supply a product whose manufacturer can not be identified, since, in situations in which more people are responsible for causing a damage, the consumer’s protection requires that the injured party may ask for the entire repair of the damage of any of them.

The consumer’s protection requires that all the producers involved in the production process be held liable in so far as the end product, a component part of it or the raw material supplied by them was faulty.

By producer (3) we understand: a) the producer of the end product of a raw material or component parts of the product; b) any person who presents himself/herself as a producer, by placing his/her name on the

product, trademark or other distinctive sign; c) any other person who imports a product in Romania for sale, rental, purchase or other

form of alienation within his/her own marketing activity in the company, is considered its producer and is liable to the same extent as the producer;

d) any other person who import a product from the European Union for sale, rental, purchase or any other form of alienation within his/her own marketing activity in the company, is considered its producer and is liable to the same extent as the producer;

In case the manufacturer of a product can not be identified, each supplier of the respective product will be treated as a producer, if he does not communicate to the injured consumer, within a reasonable time period, the identification data of the manufacturer or of the person who supplied the product; this provision is valid for an imported product, if the product does not indicate the identity of the importer stipulated in c) or d), even if the name of the manufacturer is mentioned.

The product is any movable good, even if it is embedded in another movable or immobile good, but, for this reason, the liability for agricultural products and game must be excluded, except the case in which these products have been subject to industrial processing which could be the cause of the products’ defects.

The liability also exists for the movable property used in the construction works of buildings or incorporated into the real estate assets (4).

By product we also understand electricity. According to Article 1 of the Directive “The producer is liable for damage caused by a

defect of his/her product.” To produce damage the product must be defective; that is to say that the product does not

provide the security which the person is entitled to expect, taking into account all the circumstances, including:

a) the presentation of the product; b) all the foreseeable uses of the product; c) the date of placing in circulation of the product. In order to protect the physical welfare and the consumer’s goods, the defect of a product

should not be determined on the basis of the product’s non-compliance for use, but on the basis of the lack of safety which people can expect. Safety is assessed as excluding any misuse of the product which in these circumstances would be irrational.

A product can not be considered defective only because, subsequently, a similar improved product was placed in circulation (5).

The provisions of Law No. 240/2004 do not preclude the application of the legal provisions concerning the moral damages.


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3. THE CONDITIONS OF THE PRODUCERS’ LIABILITY

The producer’s liability arises from his/her quality, being the most entitled to assess the risks of the products that he/she puts into circulation, establishing the necessary measures to diminish them. Thus, the necessity that for the producers to be directly liable for the damages caused appears as a normal one.

The producer is responsible for the present and the future damage, caused by its product’s defect.

A first condition is the existence of the present and future damage. The producer’s liability for the present and the future damage caused by a product’s defect,

is not limited in the situation in which the damage is determined, cumulatively, by the product’s defect and by the action or omission of a third person. Thus, the producer will be responsible for the present and the future damage, even in the situation in which this is the cumulative result of the product’s defect with an action or omission of a third person.

The action or omission of a third person is without prejudice to the producer’s right to promote legal actions against a third party. This means that if two or more persons are liable for the same damage, their liability is joint, without prejudice to the provisions of the municipal law concerning the recourse action.

If more people are liable for the damage, they are jointly liable. By damage we understand: a) the damage caused by the death or injury of a person’s body integrity or health; b) the deterioration or destruction of any property, other than the defective product,

provided that the respective property be normally intended for private use or consumption and be used by the injured person for personal use or consumption, and its value be higher than 200 lei;

c) the deterioration or damage or destruction of any property, other than the defective product, provided that the respective property be normally intended for private use or consumption and be used by the injured person for personal use or consumption, and its value be higher than the equivalent in lei of 500 euros.

Since consumer protection requires compensation in case of death and bodily injuries, as well as the compensation for the material damages, nonetheless, this compensation should be limited to the objects for private use or for private consumption and should be subject to deduction of a minimum limit in a fixed amount to avoid an excessive number of disputes.

The Romanian legislation is correlated with the existing legal regime in the Member States of the European Union and it provides the cases in which the producers may be exonerated from liability for the damage created by the placement into circulation of the defective products, which are limitedly listed, clearly establishing the limits of the producer’s liability, for the value threshold set at 200 lei, and, respectively, for the equivalent in lei of 500 euro.

This liability of the producer is engaged for the damage or destruction of any property, other than the defective product, but in relation to the latter.

The provisions of Law no. 240/2004 shall not apply to the damages resulting from nuclear accidents (7) since the liability for the nuclear damages is subject, in all Member States, to specific rules appropriate for this type of damage.

Another condition for the engagement of the producer’s civil liability, the injured person must prove the damage, the defect and the causality relationship between the defect and the damage(8).

Consumer protection requires that the producer’s liability should not be affected by acts or omissions of other people who have contributed to the infliction of the damage, however, the fault of the injured party can be taken into consideration in order to reduce or eliminate this liability. A fair distribution of risks between the injured person and the producer presupposes that the latter should be exempted from liability if he/she can prove the existence of some circumstances that exonerate him/her from the liability.

The producer is exonerated from liability, if he/she proves one of the following:


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a) that he/she is not the one who put the product into circulation; b) depending on the circumstances, the defect that generated the damage did not exist on the

date on which the product was put into circulation or it has occurred subsequent to the product’s placement into circulation, for causes not imputable to him/her;

c) the product was not manufactured to be sold or for any other form of distribution for the economic purposes of the producer and it was not manufactured or distributed within his/her professional activity;

d) the defect is due to the compliance with some mandatory conditions, imposed by the regulations issued by the competent authorities;

e) the level of scientific and technical knowledge at the time of the product’s placement into circulation did not allow the detection of the defect in question;

f) the defect is due to the consumer’s non-observance of the instructions for use provided in the technical documents accompanying the product, demonstrated by the technical expertise in the field.

The producer of components is exonerated from liability if he/she proves that the defect is attributable to the erroneous design of the ensemble in which it was mounted or of the instructions given by the producer to the product for the consumer.

The producer’s liability may be limited or removed by the court of justice, if the damage is caused both by the defect of the product and by the fault of the injured or harmed person or of another person for whom he/she is held liable.

The injured person may be entitled to compensation based on contractual liability or on extra-contractual liability, different from that provided by the Directive and the Law no. 240/2004. Thus, the Law no. 240/2004 does not exclude the possibility of an injured or harmed person to claim compensation under contractual or extra-contractual liability or under another special liability regime, existing at the date of the law’s coming into force.

The insurance companies have the right of recourse against the producer, for amounts of money paid to the injured people.

For the purposes of effective consumer protection, no derogation is allowed by contractual clause from the producer’s liability to the injured party. The contractual stipulations can not limit or exonerate the producer of the liability held for the placement into circulation of such products; any contractual clauses of limitation or exoneration from liability of the producers are attacked by an absolute nullity.

4. THE RIGHT TO LEGAL ACTION TO REDRESS THE DAMAGE

The right to legal action to redress the damage is prescriptive, the term of uniform prescription of the action for compensation must be both in the interest of the injured person and of the producer, considering that, in time, the products will eventually wear out, the safety standards become more rigorous, and the science and technology make progress, therefore, it would not be fair that the producer be liable for an unlimited period of tome for the defects of his/her products, his/her liability must stop after a certain period of time.

The right to legal action to redress the damage is prescriptive, it is prescribed within 3 years, the term starts from the date on which the plaintiff became or should have become aware of the existence of the damage, of the defect and of the identity of the producer, and the legal action to redress the damage cannot be introduced after the expiration of 10 years from the date on which the producer put the respective product into circulation.

It is thus set as a reasonable term in which the injured person may address the court of justice for the legal redress of the damage, namely 3 years from the date on which the plaintiff became or should have become aware of the existence of the damage, of the defect and of the identity of the producer, but not later than the end of 10 years from the date on which the producer put the product into circulation, provided that the damage had occurred within a 10-year period (8).


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The action for the legal redress of the damage caused represents the competence of the court of justice in whose territorial range the damage has occurred, the head office is situated or, according to each case, where the defendant’s domicile is.

In order to solve these cases the provisions of the Law no. 240/2004 are completed with the provisions of the Civil Code and of the Code of Civil Procedure.

5. CONCLUSIONS

The need of the transposition for the Directive no. 85/374/EEC arises from the elimination of differences that may affect the competition and the movement of products on the market.

The existing inconsistencies between the legislations may distort the competition, may affect the free movement of goods within the market in the Union and may cause a different degree of the consumer’s protection against the damages caused to health and to his/her property by a defective product, so it is necessary to establish the producer’s liability for the damage caused by the faulty character of his/her products.

NOTES / BIBLIOGRAPHY 1. Law no. 240/2004 concerning the liability of producers for the damages resulting from defective products has been republished in the Official Gazette no.313 of 22.04.2008. 2.Directive no. 85/374/EEC of 25 July 1985 concerning the producer’s liability, published in the Official Journal of the European Communities (OJEC) no. L210 of 7 August 1985, as amended and supplemented by the Directive no. 1.999/34/CE of the European Parliament and of the Council, published in the Official Journal of the European Communities (OJEC), no. L141 of 4 June 1999. 3.According to article 2 of the Directive, “product” means any movable good, with the exception of primary agricultural products and game, even if they are incorporated in another movable or immovable good. “Primary agricultural products” represent the products of soil, of stock farms and of fisheries, except the products that have been subject to an initial processing. The term “product” also refers to electricity. 4. Article 6 of the Directive stipulates that “A product is defective when it does not provide the security which a person may expect, taking into account all the circumstances, including: (a) the presentation of the product; (b) the use for which the product is rationally designated; (c) the date placing in circulation of the product. A product can not be considered broken for the simple reason that a better product was put into circulation subsequently. Article 9 of the Directive stipulates that in the meaning stipulated by Article 1, “damage” represents: (a) the damage caused by death or body injuries; (b) the damage or destruction of any property, other than the defective product, with a minimum limit of 500 ECU, provided that the property: (i) be normally intended for private use or consumption and (ii) be used by the injured person mostly for his/her own use or for private consumption. The present article is without prejudice to the provisions of the municipal law relating to the moral damages.” 5. Law no. 703/2001 on civil liability for nuclear damage, published in the Official Gazette no. 818/19.12.2001. GD no. 894/2003 to approve the rules for implementing the provisions of Law no. 703/2001 on civil liability for damage, published in the Official Gazette no. 588/19.08.2003. 6. Article 4 of the Directive, “The injured party must prove the damage, the defect and the causality relationship between the defect and the damage.” 7. Article 11 of the Directive “Member States stipulate in their legislation that the rights conferred to the injured person on the basis of the present directive sum up at the expiry of a period of ten years from the date on which the producer put into circulation the product that caused the damage, except the case in which the injured person initiated during this period, a legal procedure against the producer.”


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A REVIEW OF EMPIRICAL STUDIES ON THE OPPORTUNENESS OF EX-COMMUNIST STATES’ JOINING THE EURO AREA

Lecturer Ph.D. Vasile-Liviu ICHIM

“Ştefan Lupaşcu” Institute of European Studies – Iaşi, Romania [email protected]

Abstract The empirical studies analyzing the relevance of the theory on the optimal monetary areas for the ex-

communist states reach different conclusions, estimating the economic convergence on the basis of various factors: economic structure, intensity of trade linkages, exchange rate volatility, size of the national economy, foreign direct investment, and exports structure based on products and from a geographical point of view. As for the business cycle correlation between the old and the new EU members, these studies led to contradictory results, but the relevance itself of this criterion concerning the lack of asymmetric shocks is being questioned. In a monetary union, on the one hand, the business cycle synchronization makes the single monetary policy work efficiently and on the other hand, the asymmetry of the economic shocks makes the single currency more stable. Starting from the results of the study conducted by Bayoumi and Eichengreen in order to establish the Optimum Currency Area indices and taking into account the size of the countries included in this analysis, we reach the conclusion that the size of a national economy is an important indicator in establishing the degree of monetary optimality of a certain region, influencing in inverse ratio the monetary optimality of the region. The larger a country is, the lower economic convergence is in comparison with a group of states, because of the extremely diversified production, that in its turn will lead to a lower level of economic openness.

Keywords: EU/euro area, Optimum Currency Area, economic openness, business cycles, real convergence,

economic shocks

JEL Classification: F36, F41

INTRODUCTION

The enlargement of the euro area included also some East European states. Slovenia was the first country to join the eurozone on the 1st of January 2007, followed by Cyprus and Malta on the 1st of January 2008. On the 1st of January 2009, Slovakia was the sixteenth state that joined this monetary area.

For the Central and East European states, adopting the euro as they meet the Maastricht nominal convergence criteria is an obligation imposed by their accession to the EU. This is an important decision considering the effects of joining a monetary area on the national macro-economic policies.

Thus, assessing the ex-communist states’ opportunity to join the euro area has a special significance. Therefore, it is necessary to analyze the criteria pertaining to the optimum currency area (OCA) theory based on statistical data.

1. ASPECTS REVEALED BY EMPIRICAL STUDIES

Some empirical studies examine the relevance of the OCA theory for the countries facing transition to the market economy, as the ones conducted by T. Bayoumi and B. Eichengreen (1997), L. Boone and M. Maurel (1998), J. Fidrmuc and I. Korhonen (2001), R. Schweickert (2001), J. Horváth (2001) or L. Komárek, Z. Čech and R. Horváth (2003).

The opportuneness of adopting the single European currency in the ex-communist states is assessed according to their level of real economic convergence in comparison with the euro area economy. Intraindustry trade (significantly influencing the business cycle correlation), the foreign direct investment, the exports structure based on products and considered from a geographical point of view, all these are crucial for economic convergence (Fidrmuc, 2001).

As for the business cycle correlation between the old and the new EU members, the empirical studies led to contradictory results.


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L. Boone and M. Maurel (1998) reach the conclusion that the business cycles in the transition economies are correlated with the EU cycles, starting from the fact that most of the production variation in transition economies can be explained by the production variation in Germany or the EU.

J. Fidrmuc and I. Korhonen (2001) identify a tighter business cycle correlation among Hungary, Estonia and the EU, and a looser correlation between the Czech Republic and the EU.

In contrast with these results, J. Horváth (2001) proves that the shocks between the transition economies and the EU are largely asymmetric, the correlation of shocks determined by supply and demand between the transition economies and the economies of the four large European states being an exception; consequently the adoption of the euro would imply relatively high costs.

However, as regards the structural convergence, Slovenia, Hungary, Estonia and the Czech Republic register the best results, while Romania and Bulgaria are at the opposite end.

In another study, R. Schweickert (2001) compares the transition economies with a reference group made up of Spain, Portugal and Greece, taking into account the Maastricht criteria, the institutional development, the development level of capital markets and the optimum currency area criteria. He reaches the conclusion that by adopting the euro the transition economies will benefit more than the reference group from the point of view of the OCA theory, but not from the point of view of other indicators.

L. Komárek, Z. Čech and R. Horváth (2003) use the Bayoumi-Eichengreen model of the exchange rate variability in order to discuss the relevance of the OCA theory to the choice of exchange rate regime in relation to the Czech Republic and the eurozone, considering as interesting „not the search for the optimal exchange rate regime, but the search for the optimal variability of the exchange rate.”

Taking into account the variables influencing this choice, as shock symmetry, intensity of trade linkages, degree of dissimilarity of exports and economic openness, they estimate the OCA indices for the Czech Republic (in the context of the ex-communist states’ accession to the euro area) and for industrial countries an effort to estimate the benefit-cost ratio of adopting a common currency between two countries. We must mention the fact that they follow the approach suggesting that the OCA criteria are to a large extent exogenous rather than endogenous.

L. Komárek, Z. Čech and R. Horváth reach the conclusion that economy of the Czech Republic does not structurally differ any more than the eurozone member countries differ from one another and, consequently, he ascertains that costs of adopting the euro in the Czech Republic should be comparable to those costs within the eurozone countries, concluding that if the eurozone is sustainable, the accession of the Czech economy should not change it.

Also, they show that the ranking of the economies suitable for forming a monetary union stayed the same in the 1980s and in the 1990s.

This empirical estimation also provides no evidence for the views that emphasize the seemingly striking difference between the core and periphery of the European Union.

The OCA indices estimated by L. Komárek, Z. Čech and R. Horváth for the 1990s, comparable with the early rankings of Bayoumi and Eichengreen (1987) on data from 1960s to1980s, are reported in Table 1.

The indices can be interpreted as follows: the lower is the OCA index of a state in comparison with Germany, the higher is the optimality degree of both, and lower the costs of single currency adoption.

It is ascertained that, from a point of view of the structural characteristics, Germany, Belgium, Netherlands and Austria are the most suitable to form a monetary union. According to the calculated indicators, this group can be joined by Ireland, which has an economy convergent enough with these four national economies, although this country has relatively high asymmetric shocks with most of the EU countries, partially caused by the high growth rates in Ireland.

Portugal does not have high OCA indices and therefore can join the above-mentioned group. This conclusion suggests that there is no evidence of a sorting-out of the EU countries at the core and the periphery.


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Table 1. OCA indices in European states versus Germany (1990s) State OCA indices

Belgium 0.004 Netherlands 0.009 Austria 0.013 Ireland 0.013 Switzerland 0.019 Czech Republic 0.019 Denmark 0.022 Portugal 0.023 Sweden 0.024 France 0.024 Italy 0.024 Norway 0.025 Finland 0.025 UK 0.025 Spain 0.027

Source: Komárek et al. (2003)

The results for Germany vis-à-vis France imply that euro adoption may be relatively costly, according to OCA theory.

As for the Great Britain, due to the high OCA indices and the large economy, not only compared with Germany, but also with other EU states, it is not recommended that the UK join the euro area immediately after its creation (Komárek et al. 2003). Practically, this separation into states with convergent economies characterized by symmetric shocks and states characterized by asymmetric shocks leads to the idea of a two-speed European Monetary Union.

2. RELEVANCE OF THE SIZE OF A NATIONAL ECONOMY IN ESTIMATING

THE OPPORTUNENESS OF ADOPTING THE SINGLE CURRENCY

We believe that the size of a state, established by means of the Gross Domestic Product (GDP) and population, influences in inverse ratio the optimality of a monetary area. If we preserve the descending order of optimality established first by Bayoumi and Eichengreen and then acknowledged by the Czech authors of the study we refer to for the group of states taken into account, and if we introduce in this analysis the population and the GDP (Table 2), we can observe that four of the seven states for which the euro adoption may be relatively costly are, after Germany, the largest EU member states, from the point of view of population and GDP, that is the Great Britain, France, Italy and Spain.

Considering this, we can suppose that, as a result of using the Bayoumi-Eichengreen model in the case of the transition economies, Poland and Romania would fall on the lowest positions; in other words, we can predict that, especially because of the great number of inhabitants and the relatively large area (that can lead to a even greater diversity of production) the costs of the euro adoption in Poland and Romania would be higher than in most of the other ex-communist states. This explains why the last four states that have adopted the euro – Slovenia, Cyprus, Malta, and Slovakia – belong to the category of small states.


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Table 2. Population and GDP in 1996 in states for which the OCA indices were calculated State Population

(millions of persons) GDP

(billions of euros at the current market value) Germany 81.8 1,922 Belgium 10.1 217 Netherlands 15.5 329 Austria 8.0 186 Ireland 3.6 58 Switzerland 7.1 239 Czech Republic 10.3 48 Denmark 5.3 145 Portugal 10.0 93 Sweden 8.8 215 France 57.9 1,240 Italy 56.8 992 Norway 4.4 125 Finland 5.1 101 Great Britain 58.1 940 Spain 39.4 490

Source: Eurostat (2007)

Population is relevant from the point of view of the monetary optimality especially in Europe where the historical and political circumstances led to various types of national economy structures. This remark is important because there are empirical proves that there are pairs of large states acknowledged to form optimum currency areas, for example the USA and Canada or Australia and New Zeeland.

On the other hand, the greater is a national economy – from the point of view of the GDP, the size of goods and service markets, the financial markets, the labor markets – the higher is the production diversity, and the lower the degree of economic openness, mainly due to the high internal demand, so that, on the whole, the need to turn to international trade diminishes.

This is why the EU, Japan and the United States are closed economies, with a level of economic openness under 25%.

The data in Table 3 acknowledge this. The ex-communist states have a high level of economic openness, over 100%, except for the largest states of the analyzed group: Poland, with around 80%, and Romania, with 83%.

The relation between the size of a state and its economic openness is also confirmed in the case of Great Britain, Italy and France, countries that in 2004 had an economic openness level [1] of about 53%. But, in this case, we also deal with an effect of the core-periphery type economic relations. If we add Spain, with 55%, and Greece, with 50%, this seems to justify Bayoumi’s and Eichengreen’s classification of the European (core states, characterized by a higher level of economic integrity – Germany, Belgium, Netherlands, Austria, Ireland, Switzerland, the Czech Republic, Denmark –, and periphery states – Sweden, France, Italy, Norway, Finland, Great Britain and Spain –, Portugal being considered at the border between these two economic blocks).

Considering the criterion of economic openness, the ex-communist states can be included in the core states group that register rather high values, as for example 71% in Germany, 84% in Sweden, 125% in Holland or 165% in Belgium.


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Table 3. The level of economic openness of the ex-communist states in 2004 Import of goods and

services Export of goods and

services Level of economic openness State

GDP (%) GDP (%) GDP (%)

Estonia 86 78 164

Slovakia 79 77 156 Czech Republic 72 72 144

Hungary 68 64 132

Bulgaria 69 58 127

Slovenia 61 60 121

Lithuania 61 54 115

Latvia 60 44 104

Romania 46 37 83

Poland 41 39 80 Source: the author’s calculations based on data from World Bank (2006)

CONCLUSIONS

Due to the great structural and development differences between the ex-communist states’

economies and the euro area economy, we can righteously discuss, not the problem of optimality, but the monetary area functionality. But the Central and East European states’ accession to the EU is estimated to intensify the trade exchanges between the old and the new EU members, to accelerate the European trade integration and to lead to a higher business cycle correlation and, at the same time, a better synchronization of the economic shocks.

However, the business cycle synchronization of the transition economies with those in the euro area is not necessarily profitable – the ex-communist states’ GDP growth should to be maintained as long as possible on an ascending curve and at the highest levels, no matter whether the EMU sometimes faces recession, stagnation or economic growth, in order to reduce the “catching-up” period.

On the other hand, we do not believe that we should use as a criterion the symmetric response to shocks in order to estimate the ex-communist states’ opportuneness to join the euro area, as long as these states are in the process of structural reform that implies multiple changes whose effects are not always accurately foreseen and controlled, often being adopted stop-and-go policies that lead to t economic instability.

We also consider that the size of a national economy is very important in estimating the opportuneness of joining a monetary area, but it must be examined in the context of the other additional OCA theory criteria.

As a whole, the euro area is not an optimal monetary area, and all the less the European Union. The differences between nominal and real convergence must be carefully examined, the violations of the Maastricht criteria being an additional proof of the ongoing difficulties in ensuring the real convergence. It is important for the states that will join the EMU to know the criteria needed to assess an optimal currency area and the economic and social realities specific to each country, according to which they can decide the macro-economic policy mix and decide when to adopt the single European currency.

ENDNOTES

[1] The author’s calculations based on data from World Bank (2006).


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REFERENCES

1. Bayoumi, T. and Eichengreen, B. (1997): “Optimum Currency Areas and Exchange Rate Volatility: Theory and Evidence Compared”. In Cohen, B. (ed.): International Trade and Finance, New Frontiers for Research: Essays in Honor of Peter B. Kenen, Cambridge: Cambridge University Press.

2. Boone, L., and Maurel, M. (1998): „Economic Convergence of the CEECs with the EU”, CEPR Discussion Papers 2018.

3. Eurostat (2007): Europe in figures. Eurostat yearbook 2006-07, Luxembourg. 4. Fidrmuc, J. (2001): “The Endogeneity of the Optimum Currency Area Criteria, Intraindustry

Trade and EMU Enlargement”, Discussion Paper No. 14, Institute for Economies in Transition (BOFIT), Bank of Finland.

5. Fidrmuc, J., and Korhonen, I. (2001): “Optimal Currency Area between the EU and Accession Countries: The Status Quo”, Discussion Paper No. 14, Institute for Economies in Transition (BOFIT), Bank of Finland.

6. Horváth, J. (2001): “Supply and Demand Shocks in Europe: Large 4-EU Members, Visegrad-5 and Baltic-3 Countries”, Central European University mimeo.

7. Horváth, J. (2002): “The Optimum Currency Area Theory: A Review”, Central European University Mimeo.

8. Komárek, L., Čech Z., and Horváth, R. (2003): „Optimum Currency Area Indices – How Close is the Czech Republic to the Eurozone”, Working Paper Series, No. 10, Czech National Bank.

9. Schweickert, R. (2001): “Assessing the Advantages of EMU-Enlargement for the EU and the Accession Countries: A Comparative Indicator Approach”, Kiel Working Paper No. 1080.

10. World Bank (2006): World Development Indicators 2006, Washington, D.C., 2006, UNDP online, http:/hdr.undp.org/statistics/data.


39

MODERNIZATION OF LOGISTIC SYSTEMS OF THE FIRMS WITHIN THE CONTEXT OF GLOBAL ECONOMY

Lecturer PhD. Mihaela Loredana LĂPĂDUŞI

“Constantin Brâncuşi” University, Faculty of Economics, Tg-Jiu, Romania, [email protected]

Professor PhD Constantin CĂRUNTU “Constantin Brâncuşi” University, Faculty of Economics,

Tg-Jiu, Romania, [email protected]

Abstract Modern technology, especially the technology based on computer science and automation offer the modern

companies strategic resources to build the competition advantage. One of the best examples to obtain the competition advantage by using the automation systems in the case of logistic activities is given by the European, American and Japanese firms who on the background of using electronics and cybernetics in demands, the regional distribution managers have tried to satisfy the requirements of some regional clients. The leading teams in the above mentioned states noticed the potential of this method and offered the necessary support and development funds to implement them at the level of the companies. The experience of modern firms, organizations and institutions in the domain of logistics has demonstrated that there is greater and greater discrepancy between the possibilities offered by the modern technologies and their effective utilization by the companies. Many managers do not have the necessary expertise and experience in the management of the modern technology and that why they have difficulties when they have to connect the new strategic possibilities and the activity of their company.

Key words: logistic system, competition advantage, modern technology, the logistic value. JEL Classification: F23 – Multinational firms; International business, L23 – Organisation of Production, O31

– Innovation and Invention : Process and Incentives.

INTRODUCTION The aim of this paper is focused on importance of logistics within the firms with

international activity through intimate relation of conditioning with the two pillars of the resistance structure of the Economic System and that is: Total Quality Control (TQC), supply just in time (JIT) to which the essential functions of innovation and management are added. Very many times, the firms, organizations and institutions use the modern technology to improve an aspect of its activity, without taking into account the whole effect. The technology is efficiently utilized in the logistic system of the firm only when a distinct positive effect is obtained in my opinion; when the implementation of technology is analyzed, the negative and positive effects on different parts of the firm, its channels of distribution and its clients have to be combined so that cogent positive results should be ensured.

Automation of the technologies Automation of the most varied technologies began to penetrate on the background of

electronics and cybernetics in the 5th decade of the 20th century, first in the domain of automation of the processes of permanent production especially in iron and steel industry, metallurgic, chemical, petrol and plastic materials industry. This category of processes was automated with the help of the electronic automation systems with standardized signal, within which the measurement devices, translators and regulators were and still are electronic. The moment the anti-firedamp solutions were discovered and applied, first in mining industry then in other domains in which for different reasons the danger of explosion exists, the systems of pneumatic automation where the support of setting signal was the compressed air, were replaced with electronic systems with standardized system, where the setting signal is electric.[7]

This automation modality, which is the first stage of developing the concept, is what was called “rigid automation” or cabled and it is applicable to some processes with invariant activity; of course it is not adequate to meet the requirements of most of the processes and especially those with


40

a discreet structure characteristic for example to the weapons system, respectively the military complex.

Under these circumstances, the “programmed automation” was developed or the “flexible automation”, where computer science is very important. Nowadays there is a tendency towards complex automation, where in the hierarchical structures interfere automated devices, electronic computers of process and especially numerical computers and systems of robots. The degree of advance of the robots is emphasized in dividing them into six classes corresponding to the Japanese norms (Japan being the outpost of utilizing the technology of robots): manual manipulator, fixed sequences robot, variable sequences robot, play-back robot, digital remote program robot, artificial intelligence robot.

At present, the efforts are channeled towards developing the robots with artificial intelligence. The robots have special domain as: metal and plastic materials processing (including their manufacturing), machine building (especially of high series, and car building), and electro-technical industry with the tendency of being used in all the industrial domains. Also the flexible systems of production are introduced on a large scale and they represent an integrated complex automation solution including flexible cells of manufacture, a robots system, specialized systems of transport and loading-unloading (designated generically automated warehouses), with the task of transferring the pieces and processing sub-assemblies, respectively for assembling from one robot to another within the robotized system, as well as the electronic calculus system that guides the entire complex of flexible system of production.

The complex automation does not stop at the production activity allowed to the flexible systems of fabrication, but it is extended on the activities of conceiving, design and engineering as well as the relations with the clients and internal and foreign suppliers thus on the supply-sale and marketing, that is the logistic systems, too.

A short presentation of the above mentioned is illustrated in the following scheme:

Figure no.1 – The general scheme of the integrated computer production system including the external logistic systems (suppliers, clients)

Source: TICOVSCHI V., Educaţia şi formarea pentru excelenţă – premise pentru implementarea metatehnologiilor, comunicare prezentată la cel de-al 6-lea Forum est-vest, Chemnitz, 2003


41

In the above figure the abbreviations have the following meanings: 1.Conveyor 2. Machines with numerical command 3. Processing and finishing (welding, dying) 4. Robots 5. Manipulator 6. Assembling 7. Tests, quality control L – Logistic SFF – Flexible systems of fabrication DA – Automation design PO – Operation processing FAC – Computer assisted fabrication PI – Information processing PCTAC – constructive design and computer assisted technology PAC – Computer assisted design LAN – Local networks; WAN – Large area networks PIC – Computer integrated production IAC – Computer assisted integration.

The explosive evolution of automation was supported by the microprocessors technology

over-highly integrated, which through their great flexibility and calculus capacity find their applicability in the most varied domains: depositing, distribution, automated transport (both individual vehicles and collective transport by railway, road and air), storage, wrapping and so on. [7]

Technological system (ST) Concerning the synthetic approach of the complex automation problem, some theoretical

considerations may be stated. Any system, including the technological system (ST), including the foreign trade may be described as it follows:

S =Y X ,׀A where: Y – A multitude of outputs X – A multitude of inputs A – A structure of transformation Concerning the transforming structure A, some special mentions are necessary. Firstly, the structure A is complex and consists of a multitude of operators (all the activities

of the system, including the specific knowledge of the considered system); for a working position, the structure A includes the transforming activities performed by the machine tools, the assembly of elements defining materials or pieces for processing, the level of the human agent know how participating to the process of production and so on.

Secondly, the structure A is considered to include the condition of the system, without defining it explicitly.

The technologic system S =Y X ,׀A as a cybernetic system has to satisfy simultaneously the following conditions:

( ) )(1

tSUtS i

ni

i

=

− - the condition of reunion;

Ai(t)⊂ A(t) - the condition of preserving the transforming structure; Si =xi , yi ,/ Ai x1, x2, … xj⊂X y1, y2, ... yi⊂Y t1<t<t2 as long as T = t1-t2 şi T∈(0,+∞)


42

Considering that xi = f(t) şi yi = f(t), so functions of time, the following categories of systems may be distinguished:

• systems with an independent structure of time: A(t) = A(to) = Ct ;

• systems with a structure depending on time: A(t) ≠ A(to); • evolving systems, for which: A(ti) = ΩA(ti-k); where: Ω is an operator reflecting the developing of status quo or the system’s regression. The general block scheme and irreducible scheme of the technologic system ST rendered in

figure no. 2 consists of two fundamental structures, the effecter scheme SE and the leading structure CS to whom a multitude SE of operating effecters SE=eiis added and a multitude CS of leading operators CS=cp.

Figure no. 2 - The general block scheme and irreducible scheme of the technologic system

Suorce: SAMARU M., STOICA M., Eficienţa economică a investiţiilor în logistica asigurării materialelor, Ed. ASE, Bucureşti, 2006

The multitude of effecters of the technologic system consists in:

)(),...,(),...(;,...,, 211 tftftffffSE nk

nk

mk=

where: • k

nk

mk fff ,...,,1 - are operators which depend on and are associated with the

performances of the technology, as the machines productivity, processing precession, feasibility, stability in tension and frequency variations, the available tools and devices, the self-adaptation capacities of the installments and so on.

Important is the fact that neglecting the processes of physical and moral usage, the same operators do not depend on time, their values being constant in a relatively long

period, altering as a principle only in case of perfection, respectively the replacement of that technology.

• )(),...,(),...( 21 tftftf n - are operators that depend on and are associated with the human agents, whose performances within the process of production are determined by know-how, psychophysical capacity, biorhythm, motivation and so on.

These operators are dependent on time. As for the structure of the leading operators:

)(),...,(),...( 21 tctctcCS p= Taking into account that the operators associated to automated command have to be placed

among the operators afferent to technology, so independent from time, we may conclude that the operators of the leading structure, reflecting human activities and performances are intensely dependent on time and introduce delay constants in the functioning of the technologic system.

Time dependence is increased with the complexity of the hierarchical complexity of the technologic system; the information techniques consists of support systems for decision, expert systems and information systems, systems in real time is in the position to reduce the dependency on time of this category of operators.


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In the following scheme the administration of the chain as a means of creating the added value is presented:

Trading, storage, selling ... Intermediate retailers,

owners of store…

Division of lots, taking over the

orders, transportation, cashing the

money

Intermediate

wholesale dealers,

warehouses...

Change of place of the bulk

goods...

Transportation

Testing the market,

advertisement, promotion,

planning, control...

Marketing

Investments, planning,

processing, quality, obtaining...

Production

Added value:

Do we manage to

administrate

correspondingly for

each client?

Material supply

Figure no.3 Added value of the logistic chain

Who offers the service? What does anyone do? Source: JOHN L., Managementul logisticii şi distribuţiei, Ed. Teora, Bucureşti, 2001

The figure no.3 shows us the stages run through by a product, beginning with purchasing the

raw materials and to its own purchasing by the consumer; two problems arise: who offers the service and what the attribution of the two parties are? The logistic managers have to identify the activities that create the added value and all the more allow a differentiation among the products obtained by their firm compared to those of the competitors.

This figure has a degree of generalization sufficiently high to represent the functioning of the logistic system, including the way in which adding the value to the logistic value, the way to store and distribute the atomized merchandise are accomplished, being evident the areas of action of the human factor.

Thus the guiding idea of complex automation results and that is that of increasing the importance of the contribution of the operators independent of time to the process of logistic activity, to the increase of the independence of the human factor on the technologic system, this being oriented especially towards the conception areas.

Retail price

(RP)

Standard price (SP) Discount

Production price (goods,

products)


44

The logistic system and the logistics processes In the sense of the above mentioned and with the aim of displaying de prior assertion we

shall show some interesting mentioning that refer to considered logistics processes much more complete and thus deserving more attention.

Along their entire trajectory the firms with international activity of ensuring the logistic activities, are built in interface processes and in elements of the economic processes. These aspects deserve to be taken into consideration in conceiving some logistic systems (SL), in re-designing the existent ones, as well as in implementing their improving strategy.

Conceptually, a logistic system (given the fact that in conformity with the general theory of the systems, subsystem are, in turn, systems and the fact that the present paper often uses the term logistic system (SL), and other times logistic subsystem (SSL) does not represent a conceptual or terminological inconstancy; the former term is utilized when SL is approached as a distinct and self-sufficient entity whereas the latter one is utilized when SL is approached within a wider context of the economic system(SE) whose intrinsic component is obvious; in the same sense other subsystems of SE are considered systems when they are regarded independently within the more general mentioned context and it is defined through the technical and management subsystems which mainly through manipulation, convey and storage ensure through a correct programming the position in time and space of the flux of goods and services meant to the clients. [2]

As a consequence, logistics has an object SL and aims at dimensioning and correlate the fluxes of information and individuals serving to deliver the physical goods, in the range of necessary goods in due time and at the required place so that the concluding of the objectives in condition of optimum efficiency should be ensured.

Considering that the logistic system as consisting of interconnected subsystems, acting on the logistic activities in a dynamic environment as well as on other subsystems as those of conception, design, programming-launching, watching, staff, supply, distribution SSL may be defined as the interface between SST and SSM. This version leads to the requirement that should not limit the concerns of logistics to the processes of manipulation, conveyance, afferent MTD storage and SST exclusively, but to extend these concerns to logistic attributes referring to – SST upstream – to provisioning and – downstream distribution. [2]

This vision impose dividing the logistic system in special SL to satisfy functions like transportation both domestic and international, reception and distribution, raising, positioning and heaping, manipulation, protection and transmission of the orders and performing the deliveries, conveyance of the orders and performing the deliveries. All the more dividing the SL may be performed at the same time with its basic subsystems respectively: transportation, supply, distribution, staff and so on, in which case special attention is focused on the informational aspects; anyway we may also speak about the logistic of informational system.

A structural, architectural, relational and functional analysis of SL under the circumstance of the above mentioned is welcomed though it seems to be difficult to perform. Logistics has been principally concentrated on the study of material fluxes, MTD and of their associated physical activities. The efficient functioning of the economic system does not supposes only the contribution of substance and energy in conformity with the necessities under standardized quality conditions (pressure, frequency) and actual, real, complete and relevant information on the necessary time and place.

CONCLUSIONS

This prism through which the sphere of activity of logistics is extended, which is placed on

the line of the concept total support for economic processes and which in fact accomplishes the transformation of primary elements, which are depositing, storage, distributing and information suppose a new way of structuring SL. In this sense, the informational system may be considered ST – SL as a support of the management system.


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As it was concluded previously when the desire that in the economic systems, the operators-effecters (of execution) and also the decisional ones should become independent from the human factor, the same desire should be searched for and realized in the case of SL. Thus the constants of delaying the time specific to the action of human factor, may be eliminated, so in a certain sense, functioning independent of time through the optimal solution of just in time supply, which at least, theoretically eliminates the administrations of stocks (both in the case of provisioning from suppliers and in case of the distribution to the clients) surpassing even the solution of automated shops assisted by the computer.

Thus the logistic activity within the firms within international activities shows that the design strategy currently experimented in the domain of systems based on the concurrent approach.

BIBLIOGRAPHY

1. BĂLAN C., Logistica: funcţie integratoare şi factor de competitivitate, ediţia a II a revăzută şi adăugită, Editura Uranus, Bucureşti, 2004;

2. GATTORA J., Managementul logisticii şi distribuţiei, Editura Teora, Bucureşti, 2002; 3. JOHN, L., Managementul logistici şi distribuţiei, Editura Teora, Bucureşti, 2001; 4. PORTER M., Avantajul competitiv, Editura Teora, Bucureşti, 2001; 5. ROŞU-HAMZESCU I., Mediul de afaceri internaţional, Editura Universitaria, Craiova,

2006; 6. SAMARU M., STOICA M., Eficienţa economică a investiţiilor în logistica asigurării

materialelor, Ed. ASE, Bucureşti, 2006; 7. TICOVSCHI V., Educaţia şi formarea pentru excelenţă - premise pentru implementarea

metatehnologiilor, comunicare prezentată la cel de-al 6-lea Forum Est-Vest, Chemnitz, 2003.


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BRIEF CONSIDERATIONS WITH REGARD TO THE SPECIAL REGIME OF THE V.A.T. FOR TOURISM AGENCIES

Lecturer PhD. Florin TUDOR

University „Dunarea de Jos” – Faculty of Law Romania, Galati, [email protected]

Abstract: In case a tourist package or a trip sold by a Romanian tourism agency consists in deploying the services on

Romanian territory, there can be applied the normal taxation regime, in which case the agency can deduct the VAT paid to the service providers and apply the VAT to its client at the total price. The share to be applied would be applicable for each distinct good or service.

According to the current fiscal provisions, a tourist agency can choose the normal taxation regime, provided that such services take place in Romania and the traveler is not a natural person. If the tourist agency resells the tourist services that deploy in another country, the deduction of the VAT applied by the providers of such services would raise a problem; either the tourism agency should register in purpose of VAT in the country, or it should request the reimbursement of VAT through the procedure provided by the 6th Directive with regard to VAT, if the other country is a member state. Moreover, the tourism agency will also be bound to apply the VAT from that country to the sums due by the tourist and that is why it should register in purpose of VAT in that country.

Without exhausting the subject, with the purpose of delimiting the normal taxation regime from the special regime of the VAT for the tourism agencies, we want to give a correct approach to the new fiscal principles in matter of VAT with regard to the tourism agencies.

Keywords: normal taxation regime, reimbursement of VAT, deduction of VAT applied by the provider, VAT deductible for acquisitions, taxation basis for the unique service, special taxation regime, exemption

JEL Classification: K34 INTRODUCTION The need for a special regime with regard to the VAT for the activities of the tourism

agencies consists in the fact that, in the last years, the tourism agencies acquire more and more services in Romania and in the communitarian space for their clients, in their own name. Due to the complete tourism services put at the disposal of the tourists by the tourism agencies, in practice, there have occurred problems in the exemption, reimbursement and deductibility of VAT. More and more often, the Romanian courts are vested with solving such disputes, but most of the times, in view of solving some very complex aspects in matter of VAT, they appeal to the European norms and to the jurisprudence of the Court of Justice of the European Community.

Our action aims at a detailed study on the primary and connected legislation from the EU and from Romania, the guiding decisions of the Direction for taxes and Customs union (DG TAXUD), the European Commission and the Ministry of Public Finances, the decisions of the communitarian and Romanian courts.

1. GENERAL ASPECTS REGARDING THE SPECIAL REGIME FOR TOURISM AGENCIES

The special regime proposes: a) the accommodation services and other tourist facilities are taxed, in principle, in the country where they are used or consumed. By applying the special regime, the VAT paid by the tourism agencies to the service providers cannot be recovered. Thus, the VAT cannot be recovered as deductible tax for acquisitions, nor reimbursed in a Member state based on the procedure of reimbursement from the 6th Directive (Minea and Costas, 2008); b) the services actually provided by the tourism agency are taxed, in principle, in the country in which the tourism agency deploys its economic activity and from which the agency assures the service. This is made by modifying the rules regarding the location of the provision, so that the


47

tourism agency’s services are considered to take place in the Member state in which it has a stable office or where the agency is established and from which it provides the service; c) it is avoided the registration in purpose of VAT of tourism agencies at least in each Member state in which they organize tours, which would obviously impose excessive costs for the compliance with the obligations regarding the VAT.

According to the provisions of art. 1521 paragraph (2) from the Fiscal Code, if a tourism agency acts in its name in the direct benefit of the traveller and uses goods deliveries and service supplies made by other persons, all the operations made by a tourism agency in connection with a trip are considered as a unique service provided by the tourism agency in the benefit of the traveller (Bufan and Minea, 2008).

In fact, the tourism agency buys tourism services from thirds (hotels, transport companies etc.) and resells them most often as „service packages”. „The unique service” made by the tourism agency in this case consists in fact in the works the tourism agency must make in order to organize a trip for the tourist, following to negotiate and buy from thirds – in Romania or abroad – various services and goods to be used during the trip, to combine the various components of the trip in a “package”, to make bookings, to solve the transport issue, to prepare other documents.

According to the provisions of art.1521, paragraph (3) from the Fiscal Code, the unique service provided in paragraph (2) takes place in Romania if provided through a tourism agency established or with a stable office in Romania and for this reason is taxed in Romania as long as the goods deliveries and service supplies made by thirds and used by the tourism agency take place on the Community territory. Indeed, art. 1521 paragraph (5) from the Fiscal Code provides that, if the goods deliveries and service supplies, made in the direct benefit of the client, are made outside the Community, the unique service of the tourism agency is considered as being a service provided by an intermediary and is exempt of taxes.

In the conditions of art.1521 paragraph (4) from the Fiscal Code, the taxation base of the unique service provided in paragraph (2) is made up of the profit margin, without tax, which is determined as the difference between the total sum to be paid by the traveler, without tax, and the tourism agency’s costs, including taxes, afferent to the deliveries and supplies in the direct benefit of the traveler, if such deliveries and supplies are made by other persons, while, according to art. 1521 paragraph (6) from the Fiscal Code, the tourism agency is not entitled to the deduction or reimbursement of the tax invoiced to the taxable persons for the goods deliveries and services supplies in the direct benefit of the traveler and used by the tourism agency for the supply of the unique service.

2. THE APPLICABILITY OF THE SPECIAL REGIME. TYPES OF SERVICES SUPPLIED

In the sense of the application of art.1521 paragraph (1) from the Fiscal Code, by tourism

agencies we mean any person which, either in one’s own name, or as agent, intermediates, provides information or engages to supply to the persons traveling, individually or in groups, traveling services, including accommodation in hotel, host houses, hostels, holiday houses and other spaces used for accommodation, transport by air, land or by sea, journeys and other tourist services. The tourism agencies also include the tour operators [1].

The main types of services provided by a tourism agency to tourists are: Usually, a tourism agency provides these services through one of the following modalities:

a) in one’s own name and using one’s means; b) as, intermediary, respectively in the name and in the account of other persons; c) as commissioner, respectively in one’s own name but in the account of other person. In this case there is applied the special regime established by art.1521 from the Fiscal Code.

The VAT regime for a tourism agency established in Romania and which performs its activity in Romania, is the following:


48

a) if the tourism agency acts in one’s own name, provides the services using its own means, there are applied the normal VAT rules; b) if the tourism agency acts as intermediary for another person organizing tourist services, the agency will apply VAT only for the commission or (except when there is applied an exemption or when the service provided by the tourism agency is considered as taking place outside Romania ); c) if the tourism agency acts as commissioner, there is applied the special regime for tourism agencies, respectively VAT applied at the margin of profit.

3. THE PLACE OF SERVICE According to art. 1521 paragraph (3) from the Fiscal Code the unique service provided in

paragraph (2) takes place in Romania if provided through a tourism agency established having a stable office in Romania. If it can be considered as margin applied by the tourism agency for the various components of a tourist package represents the unique service provided by the tourism agency, there can be said that such provision relocates in Romania the place of provision of the unique service provided by the tourism agency applying the special regime, if that agency is established or has a stable office in Romania and provides the service in that office from Romania.

In lack of this provision, when a tourism agency, in one’s own name, but on the account of other persons, intervenes in the goods deliveries or service supplies constituting elements of a package of tourist arrangements, according to the Fiscal Code, it is considered that the tourism agency received and supplied such goods and provided such services itself. The location for each delivery or supply would depend by the nature of the respective delivery or supply. In practice, most of the services are generally included in a tourist package and take place in the location of the provision, namely where the real estate property is situated or where the transport takes place.

In the event when a tourism agency that establishes or has a stable office in Romania, sells a tourist package to a tourist and there applies the special regime for tourism agencies, the respective transactions take place as follows: a) the accommodation provider invoices the accommodation services to the tourism agency, by attributing the VAT applicable in the country where it is provided the accommodation; b) the same rules apply to the transport, entertainment services etc. making part of the tourist package; c) the tourism agency pays VAT to the providers, but it cannot deduct it (even if it is registered in purposes of VAT in the country where the service takes place) or request its reimbursement on the basis of the 6th Directive if the other country is a Member state; d) the tourism agency applies to the tourist a sum composed of the following: 1. the price, VAT included paid to the external providers for all the services making part of the tourist package; 2. its margin of profit for the entire package, which is in fact the price for “the unique service” considered to be provided on basis of the special regime; 3. VAT due in Romania calculated for its margin of profit if the tourist package takes place entirely or partially on the Community territory; 4. there will not be applied a VAT in Romania for its margin of profit if the tourist package takes place entirely outside the Community territory (because in this case the unique service is exempt).

4. TAXATION BASIS In the conditions of art.1521 paragraph (4) from the Fiscal Code, the taxation basis for the

unique service is made up of the margin of profit, without taxes, which is determined as the difference between the total sum to be paid by the traveler, without taxes and the costs of the tourism agency, including taxes, afferent to the goods deliveries and service supplies in the direct benefit of the traveler, if such deliveries and supplies are executed by other taxable persons.


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According to pct. 63 from the methodological norms, paragraph (3) in relation with art.1521 paragraph (4) from the Fiscal Code: a) the total sum to be paid by the traveler represents the sum obtained or which will be obtained by the tourism agency from the traveler or from a third party for the unique service, including the subsidies directly related to such service, the taxes, fees, accessory charges, such as commissions and insurances, but without containing the sums provided in art. 137 paragraph (3) from the Fiscal Code; b) the costs of the tourism agency for the goods deliveries and service supplies in the direct benefit of the traveler represent the price, including the value added tax, invoiced by the suppliers of the specific operations, such as transport, hotel, catering services and other charges, such as the insurance of the transport means used, visa taxes, per diem and accommodation for the driver, road taxes, parking taxes, fuel, except the general charges of the agency, included in the unique service.

The sums indicated in art. 137 paragraph (3) from the Fiscal Code are the following: a) discounts, commissions, returns and other price reductions awarded by the suppliers directly to the clients and invoices on the tax eligibility date; b) the sums representing damage-interests established through definitive judicial sentence, penalties and any other sums requested for the total or partial unfulfillment of the contractual obligations, if perceived above the prices and/or rates negotiated. There are not excluded from the taxation basis any sums which, in fact, represent the equivalent for the goods delivered or services supplied; c) the interests perceived after the delivery or supply date for delayed payments; d) the value of the packagings circulating among the merchandise suppliers and clients, through exchange, without invoicing; e) the sums paid by the supplier or by the provider in the client’s account and which are later deducted or sums received on behalf and in the account of another person;

Consequently, the exclusion of the sums mentioned in art. 137 paragraph (3) from the Fiscal Code must be detracted from the effective taxation base.

5. THE APPLICABLE VAT RATE

According to the provisions of art.1521 paragraph (4) from the Fiscal Code, the taxation base for the unique service granted by a tourism agency applying the special regime is made up of the margin of profit, exclusive taxes. The margin of profit is the difference between the total net price invoiced to the client for the package, VAT (paid in Romania) and the costs incurred by the tourism agency, with any VAT (paid abroad or in Romania), for the deliveries and supplies assured by thirds in the direct benefit of the tourist.

The standard VAT rate of 19% applies at the taxation base, if the goods and services acquired are to be used on the Community territory. Thus, the share from the unique service related to the goods/services acquisition made in third countries is exempt.

In practice, the total net price invoiced to the tourist for the package (the net sum paid by the tourist or the trip price) includes, among others, the following elements: the prices indicated in the catalogue, the price of any additional arrangements within a trip (e.g. theatres, visiting tours of tourist objectives etc.); booking tax, telephone, telex, fax taxes, visa taxes, minus: discounts, reductions, etc. awarded.

On the other hand, the trip price does not include: tourist taxes and trip annulment taxes. The cost incurred by the tourism agency for the deliveries and supplies assured by third

parties in the direct benefit of the tourist represents the cost for the goods delivered and services supplied by a third in the direct benefit of the tourist, and they usually contain: a) transport towards various destinations; b) accommodation and meals; c) services supplied by independent tourism guides; d) arrangements within the trip (e.g. theatre, opera visits etc.); and e) insurance costs in case of annulment .


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The following must not be considered as goods/services acquisitions afferent to the trip: a) e intermediation costs (unless used in the direct benefit of the tourist); b) catalogue costs; c) office rent, electricity, birotics; and d) equipment acquisition .

6. EXEMPTION According to art.1521 paragraph (5) from the Fiscal Code if the goods delivered and the

services supplied made in the direct benefit of the client are executed outside the Community, the unique service of the tourism agency is considered as a service provided by an intermediary and is exempt from the tax.

If the goods deliveries and service supplies made in the direct benefit of the client are executed both inside and outside the Community, it is considered exempt only the part of the unique service provided by the tourism agency afferent to the operations made outside the Community.

In the basis of this provision, the unique service of the tourism agency is exempt as long as the goods deliveries and service supplies in the benefit of the client take place outside the community territory.

In order to benefit from the exemption, the tourism agency is bound to justify the favorable treatment with evidences registered in the accounting registries [2].

The part from the taxation base exempt and the part taxed in Romania must be calculated by dividing the taxation base in the same proportion between the effective supply costs from the Community territory and the effective costs outside the Community.

7. MIXED TOURISM SERVICES The mixed tourism services supplied take place when a tourism agency, simultaneously and

for a unique price provides its own services (using its own hotels, buses, guides etc.) taxable in Romania and uses tourism services acquisitions, that is the services of a third. The regime of the margin of profit applies only if the tourism agency uses the tourism services acquired. Consequently, the price paid by the tourist must first be divided intro a share covering its own services (to which there will be applied the normal VAT regime) and a share for third parties (to which there will be applied the special regime of taxation on the margin of profit). In this purpose, the services supplied by thirds can be calculated as the total sum of the price paid to such parties (VAT included) by the tourism agency. To this sum there will be added a percentage from that sum corresponding to the normal or average margin of profit the tourism agency usually applied for the tourism packages. This sum is then subtracted from the total sum invoiced to the tourist, obtaining thus the taxation base for its own services.

8. THE OPTION FOR THE APPLICATION OF THE NORMAL VAT REGIME

According to the provisions of art. 1521, paragraph (7) from the Fiscal Code, the tourism

agency can also choose to apply the normal taxation regime for the operations provided in paragraph (2), with the following exceptions, for which a special regime taxation is required: a) when the traveler is a natural person; b) in the event the traveling services and the components for which the operation location is considered to be outside Romania.

Consequently, the tourism agency can choose the normal VAT regime only when it sells tourist packages to taxable persons and provided that such services do not contain elements with place of operation outside Romania.


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The option of the tourism agency to apply the normal taxation regime awarded through art.1521 is limited to the tourism packages sold by the tourism agency to a taxable person, provided that such services do not include elements with place of operation outside Romania, but on the Community territory. In such situations, we may speak only of a VAT payable in Romania, the tourism agency exercising the option following to pay the different components from other taxable person, paying the VAT due in Romania, deduct it and then apply the Romanian VAT to the price invoiced to the taxable person (which will obviously include its margin of profit). Occasionally, the tourism agency may have to share the total price if, for certain components, different taxes apply. In this case, the profit of the agency will have to be distributed proportionally with the sums afferent to the services subject to the respective shares.

CONCLUSIONS Within the special regime, all the transactions made by a tourism agency for a trip are

considered as the unique service provided to the tourist. This type of service made by the tourism agency consists in fact in the services the tourism agency must undertake in order to organize a trip for the traveler. These services include negotiation and acquisitions from third persons – in Romania or abroad – of various services and goods which are to be used during the trip, combining several trip components into a single “tourist package”, bookings, executing and coordinating the transport arrangements, preparing the accommodation vouchers and other documents etc.

The unique service of the tourism agency is considered as taking place in the country in which the tourism agency is established or has a stable office (from where the service is provided) and for this reason it is subject to the VAT applicable in that country. In this sense, it does not matter where is the tourist to travel or where will he use the services provided within the trip, as long as the services deploy on the Community territory.

If the tourist arrangements contain services that take place or are considered to take place both inside and outside the Community, the share from the unique service related to the operations outside the Community is exempt, with right to deduction.

Through this regime, all the deliveries and supplies are subject to VAT in the country in which they are used, consumed or beneficiated from, while the (unique) service provided by the tourism agency is taxed in the country from which the tourism agency provides the respective service only if the tourist arrangements subject to the regime are used, consumed or beneficiated from on the Community territory.

In other words, for the supplied acquired through the tourism agency, the tourist pays the VAT as follows: a) VAT from the country in which the trip takes place and where such provisions are subject to VAT; b) the tax from the country in which the tourism agency is established for “the unique service” provided by the respective delegate, except when the service provided by the tourism agency is related to tourist arrangements applied outside the communitarian territory.

Consequently, if the tourism agency is established or has a stable office in Romania and applies the special regime, the VAT is due in Romania for the margin of the delegate, as long as the services are used, consumed or beneficiated from within the European Union territory.

BIBLIOGRAPHICAL REFERENCES

[1] See CJE, the reunited causes C-308/96 and C-94/97,T.P. Madgett and R.M.Baldwin acting on behalf of Howden Court Htel, published in Culegere 1998, p.1-6229) apud Radu Bufan and Mircea Stefan Minea, The Fiscal Code commented, Editura Wolters Kluwer, Bucharest, 2008, p.917 [2] See the decision of the Superior Court of Justice no. 2971/2001 in Madalin Irinel Niculeasa, the Fiscal Code annotated, Editura Rentrop & Starton, Bucharest, 2007, p.493


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BIBLIOGRAPHY:

1. Radu Bufan and Mircea Stefan Minea, The Fiscal code - commented, Editura Wolters Kluwer, Bucharest, 2008 2. Mircea Stefan Minea and Cosmin Flavius Costas, The public finances law, vol.II, Fiscal law, Editura Wolters Kluwer, Bucharest, 2008 3. Madalin Irinel Niculeasa, The Fiscal Code - annotated, Editura Rentrop & Starton, Bucharest, 2007 4. Directive 2006/112/CE of the Council, as of 28 November 2006 regarding the common system of the value added tax, published in JOCE no. L.347/2006 5. Directive 77/388/CE of the Council, as of 17 May 1977 (the 6th Directive) regarding the harmonization of the legislations of the member states with regard to the tax on turnover – the common system regarding the value added tax published in JOCE no. L.145/1977 6. The VAT guide issued by the Ministry of Public Finances, in force upon Romania’s accession to the European Union 7. The Romanian fiscal code, adopted by the Law no. 571/2003, as amended and modified, published in MOf. No.927/2003


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THE CLASIFICATION OF INSTITUTIONS AND THEIR IMPACT ON ECONOMIC DEVELOPMENT

PhD. Student Ana Iolanda VODĂ Faculty of Economics and Business Administration,

Department of Economics “AL. I. Cuza” University, Iasi, Romania

[email protected]

Abstract There is a simple case which combines different lines of thought of the institutional economy: institutions

matter. If this hypothesis is considered to be central, transaction costs economics, property rights economics are part of institutional economics, as well as in public choice theory's approaches and constitutional economy. Regardless of how they are defined institutions are correlated with economic growth, wealth, welfare, etc. More and more authors in the literature involve institutional factors in explain the gap between the developed and developing countries.

Keywords: institutions, institutional analises, development, informal, formal JEL Classification: B52, B25, B0

INTRODUCTION

Thinking about the theory of endogenous growth it seems to be clear that the institutions can influence the development in long run but it is equally clear that this approach doesn’t split the effects on the economic performances influenced by different types of institutions. However, using this type of approach allows to begin a preliminary distinction between the probable externalities, the policies decisions and the role of institutional structures. In this way becomes feasible to point out any complementarities affecting on the development processes, indeed it is more simple to underline the influence a particular type of institutions on the development than to specify their joint effect on the economic performmances.

1. CLASSIFICATION OF INSTITUTIONS

In order to understand institutions first we consider being necessary to classify them. There

are numerous classifications of institutions in the literature, the most relevant being the one proposed by J. Jutting (2003) – Table 1.

Table 1 INSTITUTIONS

Formal Level 1 Economic Informal Level 2 Political Level 3 Law Level 4 Social

THE DEGREE OF FORMALY

THE AREA OF ANALYSIS

DIFFERENT LEVELS OF HIERACLY


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1. According to the degree of formalization (North, 1990) we have: • Formal institutions; • Informal institutions; • The mode of rule implementation.

Formal rules are represented by constitutions, laws, property rights, rules, conventions, etc., they are purposely created and compelling. Informal rules consist of extensions, elaborations and changes in time to formal rules, habits, customs, traditions. Many of the ‘rules of game’ that guide political behavior are not found in the written or formal rules, but, rather, in informal constrains (beginning with legislative norms) which often had a strong and systematic influence on incentives. North (1990) considers individual action to be guided mainly by informal constrains, even if, in general, the reality is observed from a formal institution’s point of view. Similar ideas appear also in the works of Helmke and Levitsky (2004), who argue that many of the results that presented interest to institutionalists were not adequately explained through formal institutions. The efficiency of formal institutions is relatively easy to determine using different official indicators, such as: Business Environment Risk Intelligence (BERI), International Country Risk Guide (ICRG), Control Risks Groups (CRG), Standard and Poor’s (DRI), The Economist Intelligence Unit (EIU), Political Economic Risk Consultancy (PRC) and Political Risk Service (PRS), etc. because institutional framework comprises informal as well as formal institutions, we are able to appreciate that it’s level of quality is a testament, up to a certain degree, of the quality of institutional system. With regard to institution efficiency, its calculation remains a dilemma. There are numerous classifications of informal institutions in the literature; however we will take a closer look to the one proposed by Helmke and Levitsky (2003), summarized in the next table:

Table 2. A Typology of Informal Institutions

EFECTIVE FORMAL INSTITUTIONS

INEFFECTIVE FORMAL INSTITUTIONS

Compatible goals

Complementary

Substitutive

Conflicting goals

Accomodating

Competing

Complementary formal institutions. The left side of the table corresponds to informal

institutions which coexist with efficient formal ones. Informal institutions, generally, cover unexpected contingencies in formal institutions facilitating the pursuit of individual ends within formal rules. Often, this determines an increase in efficiency. Complementary informal institutions comprise the multitude of norms, routines and operational procedures, which allow firms and public organizations to function efficiently. Accomodating informal institutions are created by ‘actors’ that do not accept the effects generated by formal institutions (the effects not being viable practically), however due to different reasons for which the change of rules cannot be attained. When formal institutions are inefficient, informal institutions:

a) Can play the role of substitute institutions (specific to Latin-American countries) replacing state institutions by offering mechanisms of coordination, implementation and litigation solving;

b) Are in a predominantly divergent relationship, the first eliminating the last. Clienteles, corruption, political clans are just some of the examples of competing informal institutions which affect the performance of formal institutions.

Complementary informal institutions as well as the accommodating ones are specific to industrialized countries (although they can also be found in developed countries such as Costa Rica, Chile, etc.), countries with a stable institutional framework. Substitutive and competing informal


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institutions are characteristic to former Soviet Union and developing countries, where the institutional framework is unstable and lacking.

Using the ranking criterion, Williamson (2000) proposed an alternative classification of institutions as shown in the following table:

Table 3. A Hierarchy Based Classification Scheme for Institutions Level Exemples Frequency of change Effect Institutions related to the social structure of the society (Level 1)

Mainly informal institutions such as traditions, social norms, customs. Exogenous.

Very long horizan (100 and 1000 years) but may change also in time of stock/crises.

Define the way a society conducts itself.

Institutions related to the rules of the game (Level 2)

Mainly formal rules defining property rigths and the judiciary sistem. Exogenous and enogenous.

Long horizan (10 to 100 years).

Define the overall institutional environment.

Institutions related to the paly of the game (Level 3)

Rules defining the governance private structure of a country and contractual relationships, e.g. business contracts, ordering. Enogenous.

Mid-term horizon (1 to 10 years).

Leads to the building of organizations.

Institutions related to allocation mechanisms (Level 4)

Rules related to resource allocation, e.g. capital flow controls; trade flow regimes; social security systems. Enogenous.

Short term horizon and continous.

Ajustment to prices and outputs, incentive alignments.

Williamson proposes a classification based on ranks. These ranks are not completely different – or independent – they are rather interconnected. The superior level imposes constrains on the lower levels, and the feedback is from bottom the top (Jutting, 2003). First level institutions are localized at the level of social structure. Social norms, customs, traditions etc. are localized at this level. These institutions, date back centuries ago, are in general, informal and can be viewed as exogenous to the economic system. This level is vitally important for the peoples of developing countries, where the other levels (2-4) have been only partially established and/or are not fully operational. Even if, in principle, these institutions are far from being static and may change in response to new opportunities or economic crisis, the road to change at this level is somewhat slow or, in some cases, non-existent. The rationale of these institutions is to define the way in which society sustains itself. Most of the transactions are influenced by expectations, which, in turn, are based on beliefs and personal identities. Even if there is no formal enforcement, the adhesion to informal institutions is often extremely important. The disrespect of certain values, traditions and norms can lead to economic and social sanctions. Second level institutions are connected to the rules of economic game, social, etc. Their main purpose is to define and sustain property rights. Most of them are formal institutions such as conventions and laws, but there are also examples of informal institutions, for example, the rules that govern access to natural resources, which are compelling but not written down and, as such, can be included in this category. In contrast with First Level institutions, the temporary horizon of a possible change is shorter. However, this can take anywhere from 10 to 100 years. Along with the rules of play, in the ‘williamsonian sense’, the way the game is played is of equal importance. In order to define and enforce property rights, it is needed a legal system for defining the contractual laws and assurance of their adherence. Third level institutions are the ones linked to governance. These institutions are able to create, rank and reshape incentives, thus creating the governance structure of a society and contributing to the creation of specific organizations such as local and national governments, public agencies, NGOs, etc. The time horizon for the changing and restructuring of transactions among governing structures is estimated to span from several years to a decade. Even if this level is


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influenced by the former ones, the different channels of feedback and the connections between them are not yet fully clarified. Fourth level institutions define the measure in which adjustments are made through prices or quantities and determine the mechanism of resource allocation. Examples of this type of institution are the rules that are easy to change and have an impact on the resource allocation, employment, social security system, etc.

2. Depending on the domain of analysis, institutions can be grouped in four categories:

• Economic institutions (rules that define the production, allocation and distribution of goods and services, etc.);

• Political institutions (rules that define the limits of power and determine the way in which political power changes: constitution, election laws, etc.);

• Legal institutions (the juridical system, defining and using property rights, etc); • Social institutions (rules concerning the access to education, health and social security

systems). Within economic institutions, the majority of authors place, typically, the rules that define the processes of production, allocation and distribution of goods and services, including markets. Studies on political institutions utilize mainly variables that underline details referring to elections, election rules, and types of political systems, composition of government and opposition, measures of political stability. Terry M. Moe (1995) considers that political institutions serve two very distinct purposes. On one hand these help solve problems related to collective action and, in particular, issues linked to assuming responsibilities and decision implementation, which allows, as a result, to different actors of the political scene to cooperate in order to receive gains from commercial activities. On the other, political institutions are also instruments of compulsion and redistribution. They are, often, structural means by which political battle winners attend to their own interests, often in prejudice of the losers. Without institutions organized political life would not exist. Let us try to imagine a world in which there are no rules that govern political or social behavior. In this hobbesian hell a model of social or political establishment could never exist (North, 1990). Institutionalists are those who theoretically analyze institutions and their impact on behavior and results. Institutions influence politics because they: 1) decide who is able to get involved in the political arena; 2) influences different actors and their political strategies; and 3) influences what these actors consider to be possible as well as desirable (in other words, their preferences) (Sven, 2001). Studies on laws and institutions refer to the type of legal system, defining and guaranteeing property rights and their origins. Studies on social institutions cover, usually, rules of access to health, education and social security and govern relations between economic actors. Highlighting the four categories of institutions is challenging enough for two reasons (Oprea and Işan, 2006):

a) In every institutional domain, formal and informal rules coexist with the mechanism of their implementation, and an indistinct approach omits the potential for change and, because of this, produces an incomplete and superficial picture of the impact of institutional structure on social performance;

b) The domains of analysis do not work apart, not even theoretically, they are interconnected and influence each other. For example, one of the economic institutions paramount for major firms – corporative governance – cannot be conceived outside the study of political and juridical institutions. Probably, the latter motive makes more adequate the study of institutional order for performance analysis of social systems than the study of the category of institutions on domains.

As long as the state is perceived as being conceptually distinct from society, there are two types of institutions: a) ‘external institutions’; b) ‘internal institutions’ (because support is gathered within society). Voigt and Engerer propose another classification of institutions:


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Tabel 4. Types of institutions Kind of rule Kind of enforcement Type of instituion Convention Self-enforcing Type 1- Internal Etichal rule Self commitment of the actor Type 2- Internal Customs Via informal societal control Type 3- Internal Private rule Organized private enforcement Type 4- Internal State law Organized state enforcement External

Among the five types of institutions, four internal types can be distinguished according to the mechanism of support. Among the examples of external institutions there are laws, decrees, ordinances and others. Some of the authors extended the concept of convention to rules that imply a certain volume of conflict and are, consequently, games in which players have different motivations. As long as unilateral defection does not yet bring advantages to players, they self sustain. Conventions are called Type 1 institutions. Ethical rules are the second form of internal institutions. Individuals may internalize cooperation strategy as ‘appropriate’. Hence, players internalize specific institutions in such a manner that they try to intrinsically comply with them, even if they conflict with personal interests.

Internally supported institutions are called Type 2 institutions. Although the first two methods of support are rooted in the framework of the game or the actor itself, there are methods of support that are based on other actors. Support through society is one such method.

An unspecified variety of individuals monitors rule compliance through spontaneous control. This is the third type of support – a possible example being the sanctioning of non-abidance to rules by informing others about this type of behavior in order to impair on the reputation of the person in question. Rules that are obeyed through unorganized social control are called Type 3 institutions. Private organized support can, for example, be based on private courts of arbitration which observe conformation to private rules. The support of such rules by a private organization is called Type 4 institutions.

2. DEVELOPMENT AND ECONOMIC GROWTH DEPEND ON INSTITUTIONAL SYSTEM

In his Distinguished Lecture on Economics in Government, Mancur Olson (1996) poses the

question why some nations are rich and others poor. He considers the usual suspects, such as differences in access to the world's stock of productive knowledge, differential access to capital markets, differences in the ratio of population to land or natural resources, differences in the quality of marketable human capital, and the like. He dismisses them as unconvincing, only to continue:"The only remaining plausible explanation is that the great differences in the wealth of nations are mainly due to differences in the quality of their institutions and economic policies." (Voigt, Engerer, 1996:138)

According to Rosenberg (1986), "growth is a form of change and change involves innovation”. Regardless of how they are defined institutions are correlated with economic growth, wealth, welfare, etc. For example, North believes that these differences in performance between countries are due to the development and specificity of institutions. Institutions exist, says Douglass North, because of the uncertainty involved in human interaction; they are constraints divided to structure that interaction. Institutions have different consequences on growth; some economies develop institutions that produce growth and progress, while others produce stagnation. Initially North is interested in the nature of institutions and explains the role of transaction and production costs of the development.


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3. CONCLUSIONS: Institutional economics observes regularities from the systemic level as being supported through positive feedback which partly influences microeconomic elements. Therefore, the latter is considered given. Ironically, by assuming individuals are implicit, the project of micro foundations from orthodox economics should consequently assume that, usually, each individual is identical in order to make the analysis possible. By contrast, institutionalism points not towards supra-individual objectivity, or the uniformity of individual agents, but towards the concept of socio-economic order, which derives from uniformity at the micro level. Institutionalism act on the basis of ‘conventional’ macroeconomic system data and attempts to determine the fundamental structures of the system which may explain these results. This further requires both qualitative and quantitative analyses.

There is a simple case which combines different lines of thought of the institutional economy: institutions matter. Development and growth depend on the institutional system. These increases will not occur overnight. Delay analysis of institutional changes and income changes suggest that a period of five to ten years is necessary for the effects of institutional improvements to materialize. Initially, the positive effects observed on growth are minimal. Given the narrow time horizon considered by most policy makers, such delays could create conflicts between the political need for short-term results and a strong economy. On the historical literature of growth highlighted the importance of inputs in the productive processes, however, both quality and productivity of inputs will be influenced by institutional environment.

BIBLIOGRAPHY:

1. Aligică Paul Dragoş, Limitele teoriei economice şi redefinirea frontierelor disciplinare, Editura Politeia, SNSPA, Bucureşti, 2002

2. DiMaggio P., Powel Walter, The New Institutionalism in Organizational Analysis, University of Chicago Press, Chicago, 1991

3. Hall Peter A., Rosemary C.R. Taylor, Political Science and the Three New Institutionalisms, Political Studies, Vol.44, No.5, Cambridge, 1996, pp.936-957 at http://www.mpifg.de/pu/mpifg_dp/dp96-6.pdf

4. Helmke Gretchen, Levitsky Steven, Informal Institutions and comparative politics: a research agenda, Working Paper 307, september, 2003, at http://nd.edu/~kellogg/publications/workingpapers/WPS/307.pdf

5. Hindess Barry, Political Choice and Social Structure: An Analysis of Actors, Interests and Rationality, Aldershot: Edward Elgar, England, 1989

6. Hodgson Geoffrey M., What Are Institutions, Journal of Economic Issues, Vol. XL, No. 1, March, 2006, at http://www.geoffrey hodgson.info/user/image/whatareinstitutions.pdf

7. Hodgson Geoffrey, Institutional Economic Theory: The Old versus the New, pp. 194-213, at http://books.google.com/books?id=3R3QN4Cf_MC&pg=PA155&dq=Hodgson+Geoffrey,+Institutional+Economic+Theory:+The+Old+versus+the+New&hl=ro#PPA155,M1

8. Jütting Johanes, Institutions and Development: A Critical Review, Working Paper No. 210, OECD Development Centre, 2003, at http://titania.sourceoecd.org/vl=13742969/cl=14/nw=1/rpsv/cgibin/wppdf?file=5lgsjhvj780v.pdf

9. Krätke S., A regulationist approach to regional studies, Environment and Planning A, Vol.31, No.4, Berlin, 1999,

10. Neale W.C., Institutions, Journal of Economic Issues, Vol.21, No.3, 1987 11. North D., A Transaction Cost Theory of Politics, Journal of Theoretical Politics, Vol.2,

No.4, 1990 12. North D., Economic development in historical perspective: the Western world, in The

Wealth of Nations in the 20th Century, 1990


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13. North D., Institutions, Journal of Economic Perspectives, Vol. 5, 1991 14. North D., Institutions, Institutional Change and Economic Performance, Cambridge

University Press, Cambridge, 1990 15. North Douglass C., Economic Performance through Time, American Economic Review,

Vol. 84, No. 3, June, 1994 16. Oprea Dumitru, Işan Vasile, „Construcţia” instituţională a învăţământului superior din

România, paper publisted in the conference volume Efectele economico-sociale ale aderării României la Uniunea Europeană, Ed. Sedcom Libris, Iaşi, 2006,

17. Parsons, T., The structure of social action, Vol.I, New York Free Press, New York, 1967 18. Saeed Parto, Economic Activity and Institutions at

http://129.3.20.41/eps/othr/papers/0303/0303001.pdf 19. Scott W. Richard, Institutions and Organizations, 2nd Edition, Thousand Oaks, CA: Sage,

2001, pp. 1-216 at http://books.google.com/books?hl=ro&lr=&id=kpDUHoaNhqYC&oi=fnd&pg=PR9&dq=53.%09Scott+W.+Richard,+Institutions+and+Organizations&ots=6j5LwqVh3J&sig=hBAZJAnB6_hdfm-Cvifgh9jELwk

20. Sven Steinmo, The New Institutionalism, in Barry Clark and Joe Foweraker, (eds.), The Encyclopedia of Democratic Thought, Routlege, London, July, 2001 at http://stripe.colorado.edu/~steinmo/foweracker.pdf

21. Voigt Stefan, Engerer Hella, Institutions and Transition – Possible Policy Implications of the New Institutional Economics, at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=294384

22. Young O. R., International Governance: Protecting the Environment in a Stateless Society, Cornell University Press, Ithaca, 1994,

23. Young, O. R., The Institutional Dimensions of Environmental Change: Fit, Interplay, and Scale, The MIT Press, Cambridge, 2002


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BRIEF CONSIDERATION OF THE IMPACT “OF THE REGIONAL DEVELOPMENT POLICY” ON TOURISM IN ROMANIA

Lecturer PhD. Elise Nicoleta VÂLCU

University of Piteşti, Romania [email protected]

Abstract By applying, the policy of the regional development is to boost and diversify economic activities, stimulating

investments in the private sector, contribution to reducing unemployment and improving living standards. To be implemented the regional development policies were established eight development regions (North East, South East, South Muntenia, South West Oltenia, West, North West, Center and Bucharest-Ilfov).

Regional Operational Program is one of the European funding programs that support the development of Romania after its accession to the European Union. Regional tourism is a component of the Regional Operational Program. Priority measures for 2007-2013, which may be taken in the promotion of regional tourism, are the conservation of natural, historical and cultural heritage, the development, diversification and promotion of tourist offer, the creation, development, modernization of the tourism recovery for sustainable natural resources and increased quality services in tourism. Tourism has an important role in increasing employment and is a support for developing the business environment for SMEs. Financial support by the EU will serve mainly to increase the quality of the tourist offer, thereby wishing to improve the image of the regions as tourist destinations, with a partially exploited tourism potential. A basic condition for the development of tourism is to promote tourist attractions that generate demand in tourist destinations and increasing tourism have an essential role in realizing gains from tourism activities. Improving services in tourism will lead to increased competitiveness of this sector, resulting in a greater tourism demand and an increased demand for labor.

Key words: regional operational program, regional tourism, legal regulations JEL Qualification: K33

I. INTRODUCTION This paper aims to present the priorities for regional tourism development for 2007-2013

being exposed as positive elements incorporated in and "the minus" in the area on which action must be taken especially.

Policies of regional development are carried out in accordance with the general objectives and priorities of development of Romania and the EU in economic and social cohesion. The Strategy of Tourism Development is included in the regional development strategy for the period 2007-2013, with the overall aim to increase the competitiveness of the tourism sector through the modernization and development of infrastructure and tourism services, including investment in the creation of new tourist attractions.

The Regional Operational Program covers the main areas, called “Priority Axes”. The “Priority Axis” dedicated to tourism is broadly the same for all the development regions focusing on issues concerning: (a) Sustainable recovery and restoration of cultural heritage, (b) Promotion of tourism offer (c) Infrastructure development and modernization of tourism for the growth of the quality services in tourism.

Tourism is expected to become one of the economic sectors most important internationally, against the backdrop of globalization and the generalized economic development.

On the European market, tourism meets explosive growth, the number of tourists growing exponentially in the last 20 years. Destinations goals are clear, especially in Southern Europe - France, Italy, Spain and Greece. Types of tourism offered are especially given by the cultural tourism, historical and relaxation. Tourism makes an important share in GDP of these countries. Moreover, also in Romania have been a growing number of foreign tourists. It should be noted however that the number of departures of Romanian visitors abroad is greater than the arrivals of


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foreign visitors in Romania, which leads to a negative tourism balance. For Romania, in 2008, most foreign tourists were tourists from Europe (82%), America (8%) and Asia (8%).

II. STRATEGIC DIRECTION 2007-2013 ON TOURISM DEVELOPMENT Legally, Law no. 315/2004 regulates the Romanian regional development(1). To be applied the policy development were established eight development regions

throughout the country. The development regions(2) are areas that include the territories of the counties and of Bucharest, formed on the basis of agreements concluded between the county councils and, where appropriate, the General Council of Bucharest, are not administrative-territorial units, nor they have a legal personality. Development regions are the framework for the design, implementation and evaluation of regional development policies and collecting specific statistical data, in accordance with the European regulations issued by EUROSTAT for the second level of the territorial classification NUTS 2, existing in the European Union(3).

Regional policy development(4) is the body of government policies developed by central public administration bodies, the local public administration authorities and regional bodies specialized with the consultancy of the socioeconomic partners involved in order to ensure economic growth and social and balanced development of certain geographical areas established in development regions, the improvement of Romania's international competitiveness and reducing social and economic disparities between Romania and EU Member States.

The basic objectives of regional development policy in Romania are: a) The reduction of existing regional imbalances by stimulating balanced development, accelerated recovery of the delays in the economic and social areas less developed, due to historical, geographical, economic, social, political circumstances, and the prevention of new imbalances; b) The correlation of regional policies at the regional government level by stimulating initiatives and by building local and regional resources in order to a durable economic, social and of their cultural development; c) Interregional, domestic and international cooperation, including in the Euro regions and regions participating in the development of European structures and organizations that promote economic development and social and institutions, in order to realize projects of common interest, in accordance with the international agreements to which Romania is party.

For the period 2007-2013 in Romania was developed the National Strategic Reference Framework, which identifies key priorities and strategic directions of development that will be implemented through the National Development Plan.

The National Development Plan 2007-2013 is a document of strategic planning and multi-annual financial programming, developed in a broader partnership framework, which focuses and stimulates economic and social development of the country, in accordance with the principles of the Cohesion Policy of the European Union. Development priorities identified in the NDP are materialized in the Sectorial and Regional Operational Programs. Regional Operational Program implements the National Strategy of Regional Development of the NDP, contributing, along with other operational programs (OP), to achieve the general objective of the National Strategic Framework of Reference, and the reduction of economic and social disparities in the development between Romania and the media of development in EU Member States.

By the Government Decision No. 402/2004, the former Minister of European Integration, currently Ministry of Development, Public Works and Housing has been appointed as the Managing Authority for Regional Operational Program 2007-2013, with the responsibility of the management and implementation of financial assistance allocated to this program. Managing Authority for Regional Operational Program was established in MDPWH, according to GD No. 243/2006. At regional level, have been designated as Intermediate Bodies for the Regional Operational Program the eight regional development agencies, according to commitments made in Chapter 21 of the negotiations between Romania and the European Union, namely "Regional policy and coordination of structural instruments".


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The strategic objective of the Regional Operational Program 2007-2013 is to support economic and social development, territorially balanced and sustainable regions of Romania, depending on their needs and specific resources, focusing on urban growth poles, improving infrastructure and basic infrastructure business to make Romania's regions, especially of the left behind, more attractive places to live, visit, invest and work.

The total budget of approximately 4.4 billion Euro earmarked for 2007-2013 ROP will be used to support balanced and sustainable development of regions of Romania. 84% of the budget is the funding for one of the Structural Funds from the European Union and the European Regional Development Fund and the remainder comes from the Romanian public funds (14%) and private (2%). The essential aim of this funding program is to create economic opportunities and development in all areas of our country, especially in poorer areas. Allocation of funds by region of development was such to achieve the objective of the Regional Operational Program for supporting a balanced development of all regions of Romania.

Regional Operational Program covers the main areas, called “Priority Axes”. The “Priority Axis” dedicated to tourism is broadly the same for all the development regions focusing on issues concerning: (a) Sustainable recovery and restoration of cultural heritage; (b) Improving the business environment of the regional tourism and promoting regional tourism offer; (c) Increased quality in tourism and the creation of regional tourism products.

The segment of the “Preservation of the natural, historical and cultural heritage” aims as objectives increasing the attractiveness of tourist regions through rehabilitation and modernization of infrastructure, increasing revenues from tourism by improving sporting and entertainment in tourist areas.

“Development of the business in the regional tourism” has set itself as objective the development of entrepreneurship in tourism and growth of the performances of the enterprises that operates in the tourism field. Measures to be considered are:

(i) Sustaining the business environment by supporting entrepreneurship in tourism (supply of services, entrepreneurship and IT); support of innovation in tourism companies, creating networks of communication, improve business activities, based on common services; promotional activities, advertising to make known new offers (products) tourist; new areas attracted in the tourist circuit; promoting traditional economic activities in rural areas such as handicrafts.

(ii)Sustaining the traditional tourism offer and development of tourism promotion by conducting the following types of activities. It will be co-financed activities designed to develop and strengthen the domestic tourism by supporting the promotion of tourism and marketing activities specific to contribute to increasing tourist traffic and the number of tourists. Provide infrastructure support for promotion and tourist information in the country and the collection and delivery from and to tourists and tourism entrepreneurs of tourism information.It is wanted the stimulation of tourism related activities, which may increase the attractiveness of tourism, making the holiday more pleasant. Mainly it is about encouraging the exhibition of popular art fairs and handicrafts, cultural folkloric traditional spectacles and religious events of the tourist areas. It will support national participation in national and international tourism fairs. Will be supported the next type of activities: mountain bike, descending on the fast mountain rivers by boat, paragliding, green tourism. Supporting and revitalizing traditional artistic crafts, promotion and support of, cultural and educational tourism activities.

(iii) Sustain the diversification of internal tourist offers the range and development of niche tourism competitiveness and other alternative forms of tourism by: Construct/expand tourist facilities (niche facilities, sports and business centers), creating new facilities for the development of new products or creating new offers; Initiation of new tourist products in attractive tourist areas; Hotel offer regional diversification by increasing the number of structures for higher degree of accommodation; Promote tourism development, creating and promoting regional tourism brands and tourism areas.


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As regards to the promotion of the “Quality growth in tourism services and the creation of regional tourism products” have been established the following objectives:

• increase the competitiveness of tourism companies on a national European market open with high standards of performance;

• forming a square unit of tourist services through marketing and regional reservation;

• increasing the attractiveness of tourism regions by upgrading and rehabilitation of the infrastructure;

• the increase of tourism revenues. The following measures are to be taken:

(i)Increasing the quality of services through the creation or expansion and rehabilitation of structures for recreational tourism with related utilities, such as: pools, beaches, kineto-therapy pools, land of golf, mini golf, tennis, paint-ball, riding, tourist railways on the narrow gauge, in areas of mountain and hill, arranging tourist ports, including wharfs located on recreational lakes, arrangement of tracks for cycling, the arrangement of new ski runs (including the construction of cable transport facilities for persons, installation of equipment for artificial snow production, installation of equipment for night lighting of the ski slopes).

(ii) The rehabilitation, upgrading and expansion of accommodation facilities structures with the appropriate utilities may be financed in the sector the accommodation structures like apartments or rented rooms in family homes or buildings with other destination; pensions with less than 10 rooms in rural areas, agro-tourist pensions..

(iii)Improving the services provided by tourism, this sector is concretized through the training of tour guides and tourism managers, professional staff in tourism, development of management of protected areas and mountain rescue.

III. COMPETITIVENESS IN TOURISM Analysis of competitiveness in tourism is based on a series of 8 indices: the index price competitiveness, human tourism index (measures the degree of human development in terms of tourism), the index of infrastructure, environmental index, technology index, the index of human resources, the opening index and the social index. The value of these indices on a scale from zero to 100 shows the performance of each country compared with other countries. Zero would characterize the country less competitive, and 100 the most competitive country. Sources of data for these indicators are in large part the development indicators developed by the World Bank and UN reports and the WTTC. Romania is more competitive compared to some neighboring countries in prices, the environment, openness to trade and tourism and social area. Index of competitiveness is low on technology, human resources and infrastructure. Romanian tourism industry motors are in fact several segments that work well: rural, mountain and spa tourism, circuit and event tourism. In relation to the potential existing in our country and comparing to other Central and Eastern Europe countries, Romania is still present on modest economic performance of the tourism industry in the medium term this disadvantage being maintained.

Competition in recent years has become fierce, Romania losing a part of the internal and external tourists to other markets such as Greece, Turkey and Bulgaria because the offer is more diversified, the purchasing power has increased and have developed reports price-quality much better.

According to studies compiled in the World Tourism Organization, based on information and market analysis conducted in the major tourist generating flows in Europe and in surveys taken among foreign tourists visiting Romania, Romanian tourism offer is characterized by the following aspects:a) All types of programs offered by Romania face a stiff competition on Western European markets; b) Competing destinations offer a wide range of facilities for all categories of tourists; c) The Romanian offer is relatively limited, confined to a few resorts, and in these, only a few hotels; d) The offered services are lower than from competing destinations like


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Bulgaria, Turkey, Greece or Cyprus; e) Entertainment is not up to the supply of other destinations; f) Technical and road infrastructure is inadequate; g) The lack of superior comfort hotel in the big cities and tourist resorts of international interest.

World Bank notes that Romania has amended the laws giving companies incentives and a stable framework, which will lead to an economic growth over the medium term, due to service and tourism.

IV. CONCLUSIONS We believe that elements, which should be taken into account in the future to the

“normalization” of the Romanian tourism at an international level, but also to promote tourist destinations would be:

(a) Low level of cooperation between airline operators and regular travel agencies (b) Low participation on exhibitions, meetings, seminars of tourism (c) Lack of regional tourism marketing and regional tourism structures (d) Little information centers, both in rural and urban edge (e) Early marketing for tourist areas, (the need for panels placed in front of historical

monuments such as information boards in parks, web sites for presentation of the attractive areas, brochures, advertising leaflets etc.)

(f) The weak promotion of niche tourism (tourism for hunting and sport fishing, sports or leisure tourism, scientific tourism, etc.).

(g) The need for development and modernization of transport infrastructure, which will help to increase the economic competitiveness of the regions and will allow tourist development of new activities on the domestic market. Thus, at present, the tourist regions do not have a system of highways, which make the traffic to be directed to other areas.

At the national level, the general objectives for tourism development for 2007-2013 are(5): a) Create a diversified and competitive tourism offer by supporting the development

of the domestic and international investments, which lead to increment of the tourism activity and the tourist traffic;

b) Stimulate the development of quality tourism offer which will allow the increment of incomes - in lei and foreign currency, the contribution of the tourism sector to the GDP and net income of the population as well as the increase of the absorption of labor force;

c) Creating the conditions for integrating the Romanian tourism in the European and world development trends etc.

The specific objectives of the national tourism strategy are: a) Increase the number of foreign tourists by 10% annually b) Increase the contribution of tourism to GDP in the period 2007-2013 up to 6% c) Increase the annual number of Romanian tourists with 5%; d) Create a number of more than 350 thousand jobs in the tourism sector in the period 2007-

2013.

FOOTNOTES

(1) Published in the Official Gazette, Ist Part, no. 577 of June 29 2004. (2)Regional Development Council is the regional deliberative body, without legal personality, which is

designed and functions on partnership principles to every Development Region for the purpose of coordinating the activities of design and monitoring resulting from regional development policies. RDC has the following main functions: coordinate and support the development of regional partnerships, coordinates media activities at a regional level of the policies and objectives, programs financed by the European Union and those for use at the regional funds ensuring transparency and correct information, fast and in time for the citizens, especially entrepreneurs, analyzes and approves the strategy and regional development programs, supports the development in partnership of the National Development Plan, approves development projects, selected at the regional level, in accordance with the criteria, priorities and methodology developed by the national institution responsible for the regional development, along with specialized regional bodies, transmits to the National Regional Development Council, for funding approval, the


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portfolio of projects that apply for a selection procedure at a national level; approves the criteria, priorities, allocating and destinations of the resources of the Fund for regional development and aims the use of these funds, approves the status of the organization and functioning of the agency for regional development, its organization and activity reports drawn biannual by the RDA;

(3)See in this regard, Article 6 Para 2 of Law No. 315 of 28 June 2004 on regional development in Romania (4) See Article 2 of Law No. 315 of 28 June 2004 on regional development in Romania (5) The Romanian Tourism Strategy for 2007-2013.

BIBLIOGRAPHY

1. Law No. 315 of 28 June 2004 on regional development in Romania 2. The Romanian Tourism Strategy for 2007-2013.


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SUSTAINABLE DEVELOPMENT AND SUSTAINABLE TOURISM IN THE EUROPEAN UNION

Lecturer PhD. Elise Nicoleta VÂLCU

University of Piteşti, Romania [email protected]

Abstract: Sustainable development is the great challenge of this century. In conditions of resource depletion, pollution,

and emphasis of population growth, many experts consider that the very survival of the human race depends on the extent to which it becomes reality. The concept of sustainable development designates all forms and methods of socio-economic development, whose foundation is primarily to ensure a balance between these systems and socio-economic elements of natural capital. Sustainability for tourism as for other industries has three independent aspects: economic, socio-cultural and environmental. Sustainable development implies permanence, which means that sustainable tourism involves an optimal use of resources (including biological diversity), minimization of the negative economic impact, socio-cultural and ecological benefits, and maximization of the local communities’ benefits, national economies and on the nature preservation.

Sustainable development has become an objective of the European Union. Cooperation for sustainable development should be a concern for both the EU and Member States. Community policy for sustainable development must be complementary to policies carried out by Member States.

Key words: European Union, sustainable development, sustainable tourism JEL Classification: K 33

I. INTRODUCTION The Brundtland Report, WCED release, titled "Our Common Future" gives a definition of

the sustainable development (“sustainable development”) so, the “Sustainable development is one that seeks to present needs without compromising the ability of future generations to meet their own needs”.

Sustainable tourism means the ability of the destination to remain competitive against all bugs, to attract and retain visitors, to remain unique in terms of culture and be in a permanent balance with the ambient. Concepts like “sustainable tourism” and “sustainable development” are relatively recent, having origins in recommendations of the UN Conference on Environment and Development entitled “Environment and Development”, held in Rio de Janeiro in June 1992. It was raised for discussion the future protection of nature and support of a less destructive industrialization, finding ways of replace the intensive economic development with sustainable development. Since the relationship between tourism - environment is very close and with implications in two-ways, the tourism should be involved in sustainable development.

II. SUSTAINABLE DEVELOPMENT AT THE EUROPEAN UNION’S LEVEL Sustainable development aims and tries to find a stable theoretical framework for decision-

making in any situation in which is found a given type of human-environment, whether environmental, economic or social. Although sustainable development was meant initially to be a solution to the ecological crisis caused by intense industrial exploitation of resources and continuous environmental degradation, today the concept of quality of life has expanded in its complexity under the economic and social aspect.

The place of tourism in sustainable development is given by its role as an industry that sells the physical and human as its own products. Tourism is one of the industries to be involved in sustainable development as an industry of resources, dependent of the natural gifts and general legacies of each society. Tourism sells these resources as part of its product, while shares some resources with other users, including the local population.


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Sustainable development has become a target and the European Union (1), since 1997, when it was included in the Maastricht Treaty, and in 2001, at the Summit on Goteborg was adopted the “Strategy for Sustainable Development of the European Union”, to which it has been added an external dimension in Barcelona in 2002.

In 2005, the European Commission has started a revision process of the “Strategy for Sustainable Development”, a process which included several stages.

Thus, in February 2005, the Commission published an initial critical and evaluation to progress made in 2001 and revealed a number of future directions to follow. There has been highlighted a number of directions of non-sustainable development with negative effects, such as climate change, public health threats, increased poverty and social exclusion, depletion of natural resources and biodiversity damage. In June 2005, Heads of State and Government in the European Union adopted a declaration on the guiding principles of sustainable development, which claimed that the renewed Agenda of Lisbon is an essential component of the all-inclusive objective of sustainable development.

On 13 December 2005, after consulting with several institutions and individuals involved, the Commission presented a proposal for revision. The focus was on 6 priorities such as the climate change, health, social exclusion, transportation, natural resources and poverty and were identified the ways to be followed to solve these problems. In June 2006 was adopted the “Sustainable Development Strategy for an enlarged European Union”, based on the strategy from Goteborg and resulted from the process started since 2004.

The European Commission has drawn on 19 October 2007 a Communication on the Agenda for a sustainable and competitive European tourism (2) The Commission has explicitly recognized that “the main focus of growth and employment must be accompanied by the promotion of social objectives and targets in environmental issues” and announced the preparation of an European Agenda 21 for tourism on the basis of the results of the Group for sustainable tourism (GST), listed in the report “Actions for a more sustainable European tourism”, published in February 2007. Some of these challenges are very similar to the problems encountered in another strategy of the Union, meaning the Lisbon Agenda.

Although the European Union has established that sustainable development is the all-inclusive principle of all EU policies, in reality the economic competitiveness issue has come to dominate the political agenda. The three pillars of the Lisbon Strategy (economic competitiveness, social inclusion and protecting of the environment) were compared with three children, of which one - economic competitiveness - needs more attention. In this process, the “Strategy for Sustainable Development” is sometimes reduced to only the medium pillar - of the Lisbon Strategy. Several European commissioners have stated on various occasions, concerning these issues, that the EU needs primarily an economic growth before it can act to protect the environment or the implementation of policies of social protection.

The purpose of the renewed Strategy is to act to improve further the quality of life for present generations but also for the future. Nevertheless, this cannot be obtained only in the communities capable of utilizing resources rationally and efficiently and to develop the ecological potential of the economy, ensuring prosperity, environmental protection and social cohesion.

The renewed Strategy for Sustainable Development concerns all over Europe and therefore proposes ways to improve cooperation with the government and other decision makers, with NGOs and citizens, entities that must unite their efforts for sustainable development. The cooperation for a sustainable development should be the concern for the European Union and the Member States.

Community policy of sustainable development must be complementary to policies carried out by Member States.


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III. SUSTAINABLE TOURISM – BASIC COMPONENT OF THE SUSTAINABLE DEVELOPMENT

Tourism has become one of the major sectors of the world economies and one of the most important components of international trade. Until 2020, the World Tourism Organization (WTO) predicts 1.6 billion international tourist arrivals and receipts from international tourism up to 2 trillion dollars. It is estimated also that the national tourism will be 10 times greater than international tourism. The international and national tourism are in a fast development in countries that are rapidly developing.

Tourism industry has adopted the concept of sustainable development formulating the concept of sustainable tourism, which, according to the publication of the World Tourism Organization, tourism 2010, develops the idea of satisfying the needs of present tourists and the tourism industry and at the same time, protecting the environment and opportunities for the future. It has to meet the, entire economic, social, and aesthetic, of leisure, etc. needs of tourists, maintaining the ecological integrity and biological diversity, cultural and all systems supporting life.

WTO conceives, develops a sustainable tourism for the needs of tourists and their destinations, maintaining and improving future opportunities, achievable goals by managing all resources, meet the needs of economic, aesthetic and social protection and cultural integrity of ecosystems, biodiversity and systems to support life. This concept was a small impact on the macroeconomic level, recommending the concept of ecotourism in protected areas, but is also known as green tourism or gentle in rural areas.

Through joint activity between IUNP – International Union of Nature Preservation, WWF - World Federation for Protection of Nature, PNABE - European Federation of National and Natural Parks, since 1991 was defined the concept of sustainable tourism development: the development of all forms of tourism, tourism management and marketing that respects the integrity of natural, social and economic environment, ensuring the exploitation of natural and cultural resources for the future generations. From this definition results that any form of tourism should respect the principles of sustainable development, from eco-tourism, green tourism and rural tourism until the business or the motorcar tourism(3).

The goal of achieving a sustainable tourism(4) must be subordinated to national and regional plans for economic and social development. Actions may cover goals for economic (income growth, diversification and integration of activities, control, zoning and potentiating development), social areas (poverty and improving income unequal distribution, protection of indigenous socio-cultural heritage, participation and involvement of local communities), or green areas (protection of the functions of ecosystems, conservation and sustainable use of biodiversity)(5).

Some prefer to talk about sustainable development of tourism, rather than on sustainable tourism, from at least two main reasons: one is that to ensure a sustainable tourism, it should be integrated into all aspects of development and the second is that some components of tourism - such as flights at great distances may not be sustainable in with the present technologies, even with the use of the best practices.

Tourism has a positive impact and significantly contributes, directly or indirectly to economic development zones, countries and regions of tourist attraction. The most important positive contribution relates to currency, the revenue contributions to the state, creating opportunities for business and employment. Sustainable tourism should be based on a close cooperation between tourism industry and other sectors such as agriculture, forestry and environmental management, but this is not always achieved.

Sustainable tourism development must be addressed since its stages of design and construction of tourist equipment to avoid conflicts with the environment, with the local community, with other economic sectors and continued in the stage of development of business


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tourism, which can control the environmental effects by the bodies and determine strategies to resolve the deficiencies of a suitable environmental equipment of the tourism facilities.

Sustainable tourism development meets the needs of present tourists and host regions, while protecting and enhancing the chances and opportunities for the future. It is seen as a way of managing all resources in such a way that the needs of economic, social and aesthetic to be fully satisfied, while maintaining the cultural integrity, essential ecological dimensions, biological diversity and the life(6).

Objectives, principles and requirements of the development of sustainable tourism are found in the forms of tourism such as ecotourism, rural tourism and cultural tourism. These forms show that tourism is not only a positive and dynamic factor of development, but also a practical storage solution for the untainted environment.

The impact of tourism on the environment involves analyzing the relationship tourist - tourism resource - the tourist product, which is operated by simply visiting a tourist objective, to ensure the package of tourist services and activities designed to highlight the objective.

Management and ensure sustainability of tourism involves the mastery of ecological and socio-economic development and use of indicators of environmental touristic quality and tourism markets. To ensure sustainability of tourism is monitored its impact on the environment and its economic and socio-cultural effects in relation with the local community.

The effects of tourism development on the resources or the environment and local communities can be classified into negative, positive, short term and long term. The negative effects occur when the planning, management and tourism development are inadequate with the local communities and public authorities’ interests.

In the sustainable tourism are included all forms of tourism, which, in their development and practice are based on ecological principles, i.e. without disturbing or destroying the natural and built environment, historical and cultural heritage, but to protect, conserve and to improve or enhance them.

IV. OBJECTIVES RELATED TO THE SUSTAINABILITY OF THE EUROPEAN TOURISM STRATEGY ACCORDING TO THE STRATEGY OF THE EUROPEAN COMMISSION The already existing community framework for the development of economic, social and environmental policies based on the Strategy of sustainable development is the adequate context to achieve the objectives of this “agenda”(7) These objectives should guide the stakeholders in the European tourism policies and their actions. In order to achieve these objectives, must be addressed a number of challenges specific to the tourism area. These include mainly the preservation and sustainable management of natural and cultural resources, the minimization of the resource’s use and pollution in the tourist destinations, including the production of waste, managing the change in the interest of community welfare, the reduction of the seasonality of demand, environmental impact study involved by the local tourism transportation, creating a tourism accessible to all without discrimination and improve the quality of jobs in the tourism sector, addressing, also in the Commission's policy on migration, the issue of employment of third-country nationals whose residence is legal.

Ensuring safety and security of tourists and local communities in tourist areas is another challenge and a prerequisite for successful development of tourism. To achieve a competitive and sustainable tourism, the Commission invites all “actors” to respect the following principles: A) A comprehensive and integrated approach; B) Planning and developing of tourism should take into account all impacts that it has. Furthermore, tourism should be well balanced and integrated within the activities that have an impact on society and the environment; C) “Long-term planning - Sustainable development" refers to the protection of the needs of future generations and this generation but also the ability to support actions in time;D) Finding an appropriate pace for development issues at an EU level taking into account the resources and needs of the host states; E)


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Involving all stakeholders, so that a sustainable approach requires broad and committed participation in decision making and implementation by all parties concerned with the results; F) The use of the best available knowledge. In this respect, policies and actions at a Union level should be developed based on the best and latest available knowledge.

Action held within the shared competence of the European Union and Member States is very important the respect of the principle of subsidiary and the use of a vertical from the base to top approach, involving those stakeholders who have jurisdiction and power to act and contribute voluntarily to the implementation of the Agenda.

V. CONCLUSIONS The goal of a sustainable tourism must be subordinated to national plans and regional,

economic and social development. Actions may cover for economic (income growth, diversification and integration of activities, controlling, zoning and potentiating development), social (poverty and improving income unequal distribution, protection of indigenous social and cultural heritage, participation and involvement of local communities), or environmental (function and protection of the ecotourism, preservation and sustainable use of biodiversity) goals.

Some prefer to talk about sustainable development of tourism, rather than a sustainable tourism, the first referring to all aspects of development, and the other to some aspects and components of tourism - such as flights at great distances that can only not sustainable in terms of the current technologies, even with the use of the best practices.

The “Lisbon Agenda” pursues to strengthen the sustainable tourism component of the sustainable development at EU level, being targeted as a voluntary and continuous process. It should be encouraged by all stakeholders in tourism in Europe at various levels of government, local authorities, organizations for managing destinations, regions, Member States and the European Commission, businesses, tourists and any other body that can stimulate, support and influence tourism.

FOOTNOTES (1) E. Vâlcu, Introducere în dreptul comunitar material, Sitech Publishing-House, Craiova, 2009, p. 242-244. (2) E. Vâlcu, Introducere în dreptul comunitar material, Sitech Publishing-House, Craiova, 2009, p. 241. (3M. )Ioncică, (coordinatorE.C. Petrescu, D.Popescu, Strategii de dezvoltare a sectorului terţiar, Uranus Publishing-House, Bucharest, 2004, p. 168. (4) Jamieson, Walter, Noble ALIX - A Manual for Sustainable Tourism Destination Management, CUC-UEM, Project, AIT, 2000, www.gdrc.org/nem/eco-tour/etour-ptinciples.html (accesed on 2 May 2008). (5) G. StănciulescU - Managementul turismului durabil în centrele urbane, Economic Publishing-House, Bucharest, 2004, p.14-15. (6) G.Stănciulescu - Managementul turismului durabil în centrele urbane, Economic Publishing-House, Bucharest, 2004, p. 19. (7) As I have mentioned in the article, the objectives are economic prosperity, equality and social cohesion, environmental and culture protection

BIBLIOGRAPHY: 1. Elise Vâlcu, Introducere în dreptul comunitar material, Sitech Publishing-House, Craiova, 2009 2. Stănciulescu, Gabriela - Managementul turismului durabil în centrele urbane, Economic Publishing-House, Bucharest, 2004 3. Maria Ioncică,(coordonator), Eva-Cristina Petrescu, Delia Popescu, Strategii de dezvoltare a sectorului terţiar, Uranus Publishing-House, Buncharest, 2004


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SECTION 2

MANAGEMENT AND BUSINESS

ADMINISTRATION


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CRITICAL ANALYSIS OF THE EXTREME PROGRAMMING (XP) PROJECT MANAGEMENT METHODOLOGY IN THE INFORMATION TECHNOLOGY FIELD

Senior Lecturer PhD Ionel NĂFTĂNĂILĂ

Academy of Economic Studies Bucharest, Romania [email protected]

PhD Candidate Ivona ORZEA Academy of Economic Studies Bucharest, Romania

[email protected]

Abstract: Extreme Programming represents a modern Project Management methodology, being a part of AGILE

methodologies. The present paper has the purpose of making a critical analysis of the Extreme Programming (XP) from the point of view of advantages and disadvantages that it implies, both from a theoretical and practical approach. From the theoretical point of view the paper will present the main contributions in the Extreme Programming literature, analyzing in the same time the main characteristics of this methodology. From the practical point of view, making a synthesis and analysis of the main scientific papers in the field published, the paper addresses to project managers that apply XP in projects. The research methodology is an analytical one, using the theoretical study of the main contributions in literature referring to Extreme Programming, and the study of “the best practices” in the field.

Key words: Extreme Programming, Agile Software Development, Project Management methodologies, Project Management in Information Technology.

JEL Classification: M10, M15, O32, O33

INTRODUCTION Literature is rife with examples of successful projects that attracted the success of a

company, or conversely, the failure of a project entailing the bankruptcy of the organization that carried it (Charette, 2005) (Whittaker & Voas, 2002) (Jones, 1995). Therefore, minimizing risk and approaching projects in a more structured manner become critical factors of success. By using an appropriate methodology project managers increase the likelihood of delivering what their customer want in terms of restrictions on time and budget.

In the context of tightening the socio-economic conditions as an effect of the present economic crisis we can extrapolate that in some situations the success or the failure depends on companies’ abilities to deliver the products and services on time.

As a result, the study of project management in Information Technology is an important subject in this situation, any scientific contribution in this are has the potential to improve the effectiveness and efficiency of organizations in this area, related to the 3 basic restrictions: financial restrictions, time restrictions and project coverage.

The so called “agile” methods and principles have come to the attention of the scientific community, concerned with the software development, only in recent years. Although the basic principles of these methodologies can be identified since ’60 (Larman & Basil, 2003), their further development started only in the ‘90s. Meanwhile, a series of methods have been developed, including Extreme Programming. Even though there are a series of books written on this topic (Beck, 2000) (Succi & Marchesi, 2000) (Newkirk & Martin, 2001), and a series of articles reporting the success obtained by using XP (Schuh, 2001), there is an obvious need for basic research in the field. Successes reported are only in isolated cases and the number of empirical studies that deal with this subject is very limited.

The paper has two main directions of contribution to literature: From the practical point of view the paper reviews the major contributions of literature

referring to project management in Information Technology, and, in particular, to the set of genetic practices called Extreme Programming. It is also presented a critical analysis of this methodology, both from a theoretical point of view and from the point of view of the results from practice.


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From the practical point of view the paper intends to help project managers in the filed of Information Technology by providing them primarily an analysis of the XP methodology to help them improve success rate of projects they run, and secondly an instrument enabling them to streamline the teams , working in conditions of judicious use of financial recourses.

GENERAL METHODOLOGICAL ASPECTS Extreme Programming is a process of software development for small and medium-sized

projects (up to 15 programmers). This process is designed to manage projects in an environment that, throughout the software development, is constantly changing. The basic idea is to keep the system as simple as possible, by projecting the current problems of the project, and by generalizing the design only when this is absolutely necessary (Beck, 2000). This strategy differs from the classical one, where the design changes are managed by its generalization. Clearly, with a general design of the system the changes can be easily introduced, and they influence only a small apart of the overall system. The generalization strategy does not resist when the demand for flexibility is high - it is difficult to design a system and take into consideration future problems, when these are not even known or predicted.

There are four core values that are found in all Extreme Programming (Paulk, 2001). Their aim is to reduce the impact of change, inherent in the project:

• The first value of XP is communication. When conditions change, or when certain information must be distributed to the entire team, quality communication is essential. The activities encourage communication between programmers, between clients and programmers and between managers and programmers.

• Simplicity is the next core value of XP. By keeping the system and the documentation as simple as possible, not only short term costs are reduced, but the system becomes easier to change and maintain. Simplicity and communication have a very close relationship – the more it is communicated, and this communication has a better quality, the more precisely it is identified what must be done.

• Feed-back, next core value, gives information about the current stage of the system. Without feedback there is no learning and evolution within a project.

• The last value of XP is courage. This may seem an inappropriate term in this context, but it is indeed needed a lot of courage to give up a source code already written and restart the design and programming process, or to test new ideas. Without the necessary courage dose, in the sense of predisposition to assume risks and responsibilities, the improvement and adaptation of the system, the essential philosophy of XP, will stop.

Extreme Programming proposes as central paradigm of programming team activity the fact that the development should be focused on the actual writing of the source code, approach that is radically different from the traditional methodologies based on extensive documentation, priory analysis and centralized management (Mackenzie & Monk, 2004).

Writing source code is obviously the most important work in XP - without writing a source code the informational system cannot be realized. The source code can also communicate very much from the functionality of the system, without developing additional documentation. Correctly structured code can communicate the intentions of the programmer, the algorithms and can emphasize the possibilities for further expansion. If the project team succeeds in using the code in this way, the project documentation will decrease considerably, and thus important funds will be saved each time the code must be updated.

If certain functionally of the system cannot be practically demonstrated, in XP philosophy this means that that does not exist – has not been yet achieved. The problem is that most of the times the development team does not have the time to demonstrate each functionality of the system every time this is re-built. The solution to this problem is automatic testing. Testing represents an important activity in XP because it keeps the system for a longer period of time and because of the fact that test implementation increases the confidence of the development team. Programmers will


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not have to focus on the question “will it work properly this code?”, and try to document all the dependencies that appear. Research in the field (Janzen & Saidian, 2006) shows that the actual writing of a code combined with testing, in a project, requires less time and fewer resources than writing code without testing, thereby positively influencing the final outcome.

Another important activity in XP is listening. Programmers should listen to customers and to each other. This leads to an increase in communication and in this way any change reaches very fast those that need to know about it – which reduces considerably development time and increases change.

Writing the code, designing, testing and maybe listening are described by most of the development processes, but XP represents a deferent perspective. This section of the paper will outline how Extreme Programming works.

The first thing that it is done when a new project arises is planning (Hedin, Bendix, & Magnusson, 2003). Although it is not specified each activity, it is made a general plan. The effort to keep the plan updated is important when the premises of the project change during its development.

The planning job is divided among the technical staff and the non-technical staff from the team, the latter category supports the strategic decisions, such as the coverage of the project, functionalities priorities or the content of each release. The technical staff supports the non-technical one through estimations of various jobs, through analysis of the consequences and through decisions regarding the development processes. In this way, the power between the two groups is combined: non-technical staff is appropriate to understand customers’ demands while technical staff for development.

When making the planning the challenge is to maintain the iteration short, but not too short- every iteration must increase the value of the system by improving the design and/or adding new functionalities. Keeping iterations short increases the level of feed-back, which allows a change of direction earlier in the development process.

In the same time customers are kept informed on the process, because they have access to the successive releases of the system, which gives the development team important suggestions on the future directions of improvement. Early collection of feed-back from the customers is very important because usually the changes made to the system are cheaper in the incipient stages of development.

Developers should have an overview of the system that they build – this increases the ownership and identification with the system (Beck, 200). Understanding the overall goal of the system is reinforced by a metaphor – a one sentence description of the project. For example “the system is a program of wage records”. For simple and small systems the metaphor can replace architecture description, but his thing should be carefully used because these metaphors don’t contain descriptions of the links between subsystems.

Once a plan and a metaphor have been established, can be initiated the design work. Design sessions are as short as possible to obtain a quick feed-back and to start generating a release. On the other hand XP’s strategy: to solve immediate problems, the future is hard to predict and as such should be expected until they become imminent, is contrary to the generally accepted rules in software development. Classical procedure is to produce a design that is more general than necessary or, in other words, to predict the future. Development in a dynamic environment leads, in most of the cases, to a more advanced design than necessary, thus implying a series of additional costs for rebuilding certain parts of the system and for introduction of new facilities. XP therefore proposes the development of the system to solve only immediate problems without introducing unnecessary complexity in the system, and having permanently in mind the redistribution of factors for the code already written, when the case (Lindstrom & Jeffries, 2004).

Testing is used in XP to prove correctness of programs – a feature that can not be tested does not exist according to XP philosophy. Testing should be automated; otherwise it will consume too many resources because the test cases are run not only on a new release, but after every change. To shorten development time, test cases are written by the programmers using specialized tools. For example, developing unit tests in C# can be used a number of classes such as NUnit or MbUnit


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(Flowers, 2005). The perspectives on testing differ to some extent from most of the processes of software development. The common opinion is that testing should be done by a separate team, because the testing department does not poses knowledge of the code, and thus they will try things that the developers consider obvious or which are not taken into account. In XP this way of working is impossible because of frequent changes. If code and test cases are maintained by different people, this would result in inconsistencies between those persons or organizations, and employment of unnecessary troubleshooting. Another way to solve this problem would be expanding the documentation, but this would violate the proposed values of XP: simple solutions and quick feedback. XP tries to resolve this problem by rather performing a bi-univoque correlation between a programmer and a code portion. Each team member should be familiar with all code, so that an arbitrary task can be allocated to any programmer. When a developer starts working on an assignment, the first thing he does is to update the test cases. If working on a software code that was originally developed by others, test cases will be reviewed, and when are discovered new aspects not previously treated, further test cases will be developed

XP also has a slightly different view on the functional tests (e.g. testing of the whole system). These tests are written by the customer, of course with the assistance of the development team. This procedure provides the customer information about the current stage of the project, and also increases customer confidence in the proper functioning of the system, once put into service. Before adding a new feature, each programmer wonders if there is a way of changing the system to simplify as much as possible that addition to the system, also after the implementation of a feature, the programmer wonders the same thing: Could I add this functionality in a more simple way? If there had been an easier way, and most often there is, the code will be restructured. This code restructuring is also called refactoring (Fowler, Beck, Gilicze, Nagy, & Vlaskovitz, 1999). Refactoring has to do with making revisions of the code, and for example may refer to adding or deleting a feature or an attribute, by adding an intermediate class in a hierarchy of classes, or renaming a method. It is important to note that a refactoring should be done only if there is a substantial simplification of work in the future, and to avoid unwanted situations of code duplication.

The designing activities resemble many times brainstorming sessions, where a lot of people contribute to a concept or an idea. In XP, only part of the design is made in the design sessions, the rest is done in front of the computer. This approach may lead to neglecting some design aspects. By introducing the concept of collective ownership - everyone is allowed to modify any portion of code, increasing the likelihood of simplifying the code. Collective ownership does not mean lack of ownership, in which one does not assume responsibility for the code, in which the complexity increases rapidly and the system becomes unstable and difficult to maintain. Practice in the classical processes of software development, is to use the concept of individual ownership, in which one person is responsible for a certain area code, and if someone needs to change the area code, must obtain the holder’s approval. The advantage of collective ownership is that both the speed of development and software’s reliability increases very much, because everyone has the right to change the code (Paulk, 2001). Allowing code changes can become a dangerous practice; therefore, it is controlled using common procedures.

Considering the fact that in XP project documentation is not created, documentation having the meaning of a document describing the objects of a system, must be taken several decisions when writing code - it is nevertheless difficult for the long term and short term objectives to be in full agreement. So XP introduced the concept of pair programming. Pair programming means that all code is written by pairs of programmers – a partner is writing the actual task code, and the other is considering the application’s long-term, more strategic aspects. The pairs are dynamic - when the task for which they were formed is closed, a new team is formed. In this way, information is disseminated very quickly and very efficiently.

When the design is not well documented, another problem appears: when various parts of the system are developed in parallel, problems can arise when they are integrated. XP uses continuous integration to check regularly if developed subsystems can work together. If some errors


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occur, it is easy for them to be found by the team of programmers, and therefore, by frequent integrations the team can significantly reduce the time to fix errors.

PLANNING AN XP PROJECT Planning of a project is done in two phases - a high-level planning, and a detail one for

every iteration. High-level planning aims to determine the functionalities that will be made in the immediate future, and is usually performed together with the customer. When iteration starts, a more detailed plan is prepared by the development team.

Planning activity planning lasts throughout the project, and process in the background. When the plan has been drawn, the project should be continuously monitored - if the reality does not follow the plan, it should be revised. Planning in XP goes through three phases:

• Exploration – activities for the next phase are identified • Employment - things discovered during the exploration phase can not be put into

practice because of restrictions that are invariable. These are removed and the remaining activities are arranged in order of importance.

• Coordination - the project is monitored in order to uncover any problems that could lead to targets failures for iteration, for the release or for the project. When problems arise, the project plan is amended accordingly. Planning is cyclical - when development has reached the second half of the plan a new phase of exploration must start.

Planning activities throughout the phases depend on the type of planning that will be done. In high-level planning, planning in the first phase begins with writing a so-called user script or user story. In the next phase, the scenarios are sorted according to importance and risks. After these are selected the scenarios that will be included in the plan and deadlines will be estimated. It is very likely that new scenario to be discovered during development, due to external factors (such as the client) or due to internal factors (technical issues to be addressed).

CHANGE MANAGEMET IN EXTREME PROGRAMMING Classical vision of costs of introducing change in a system is that they grow exponentially in

time. The ratio between the cost of solving problems when they are in the process of determining the requirements and the phase the system is in production may reach values of 1 to 1000, meaning that for each monetary unit spent in the initial phase up to 1000 units may be spent after the monetary system was launched in production. With this curve, we could argue that XP projects, through their constant refactoring cost are not profitable. But XP handles this potential problem by flattening the cost curve, by using modern programming practices and appropriate programming. Using object oriented technology, and using templates is easier to create a design that is simpler and easier to be understood. XP practices reduce even more the curve by keeping design and therefore the number of lines of code to a minimum. Thus, unpredictable changes may be more easily managed.

Equally, the test batteries reduce the time to fix the problems. Since these tests will be easy to run, it will happen soon, in the context in which both developers from the pair will easily remember what changes were made in code and where exactly. After several such iterations, developers will learn how to design code and how to write it so to be easily modified (Beck, 2000). In a traditional way the specialists in the field of Information Technology seek to design systems to address also predicted problems. What happens but if changes occur very frequently? What happens if today’s specifications are radically different from tomorrow’s specifications?

The dynamic business environment forces the design of software so as to solve the current problems and when future problems arise they will be addressed at that time. Implementing a simple solution in the first phase of development allows the team to learn more about the system that will be developed. When this solution works, it can be generalized in the desired direction. This working method provides optimum load for the project, performing only the work that is absolutely


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necessary. Unfortunately, sometimes, when a new functionality is added, it is discovered that is necessary more work than initially expected. This is a sign of bad design, and therefore the need to enter into a phase of refactoring, as explained above. It is preferable that this refactoring to run over a short period of time, in small steps, thus achieving feedback constantly for running work.

TESTING IN XP Most of the staff involved in the development of large systems knows how difficult can be

the testing stage. The fact that most programmers regard testing as a boring part of the creative process does not help in the naming of those who are part of the test. Therefore XP integrates the development and testing teams. Strategy based on a single team simplifies tests maintains - when these two tasks are performed by separate teams, will emerge discrepancies between the code and test cases.

Extensive testing exists only in theory – one can never check all possible combinations, even in very simple applications. Number of such testing is limited. The question is what should be tested and what not. XP provides some guidance in this regard. Test cases are created in one of the following situations:

• The method’s interface is unclear • The interface is clear but implementation will be complicated • There is an unusual circumstance in which the code should work. • When a problem is found in the code. In this situation the test cases are written to

isolate the problem. • When refactoring must be done, but lacks a clear vision on how the code should

behave. XP also specifies general rules for the design of test cases. First, there should be no

dependencies between test cases, because if one fails, the rest will fail as a result of these dependencies. The tester will receive a message that there are serious problems with the current release, and in reality only one test failed. Moreover, dependencies complicate maintenance tests. Tests should only return messages of success/failure, and nothing more, as any additional information is difficult to manage when many tests are run very often, but should be, of course, a way to identify what has not worked as expected.

Testing is not an end in itself, but an instrumentation to delimit the time the program works. If developers make tests, they should be simple; otherwise they will avoid it with the first opportunity (Karlström, 2001).

CRITICAL ANALYSIS OF XP METHODOLOGY THE ADVANTAGES OF USING XP

The novelty brought by XP is not on behalf of the activities or in their sequence, they are

found in most processes of software development. XP helps to improve the methodologies of software development, through the way activities are interrelated. This major problem met by all software developers, namely the change of the environment, and therefore continuous change of requirements is, if not eradicated, at least reduced considerably.

Traditional development methodologies are designed only to respond to the unpredictability of the internal and development environment at the beginning of a cycle of improvement. Recent approaches, such as the Boehm spiral methodology (Boehm, anchoring the Software Process, 1996) and its variants are still limited in their ability to respond to changing requirements once the project has started.

XP methodology, on the other hand, is designed to be flexible throughout the project. It provides control mechanisms for release planning, and variables management as the project progresses. This allows organizations to modify the project deliverables and results at any given time, thus delivering the best result. XP releases developers so that they can handle the realization


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of ingenious solutions throughout the project, when the learning curve and change of environment is no longer a problem so big that at first. Thus, relatively small teams of developers can share tacit knowledge about development processes.

DISADVANTAGES OF USING XP

XP is appropriate for some types of projects, and not recommended for others. One type of project where XP is not suitable is the critical safety systems, where change and refactoring costs are too high. To minimize changes, design of these cases should be done with a lot of attention. Another type of project that has an exponential cost curve is one that is based on old code - in which the methods and techniques proposed by XP can not be applied.

Fast feed-back is a crucial factor in XP. Some environments do not allow feed-back - XP should not be used in those cases. Large compilation time does not allow developers to run test cases and to integrate the code too often. In some cases, it is almost impossible to test software. An example of this type of situation is to run the system on a very expensive car which is in production, and which must be stopped for testing.

Some customers require strict specifications of the requirements (and sometimes even the design specifications of system architecture) before writing the code can begin. In those projects the change is no longer possible after requirements acceptance, so XP is not the best choice. As XP’s popularity grows, ever more development teams will attempt to adopt this methodology, sometimes without a clear understanding of the implications. The almost automatic consequences is the application of the XP practices that require less discipline than in classical methodologies (such as writing the code without the original design, and documentation reduced to a minimum), but non-application of XP practices involves iron discipline (such as unit-testing, continuous integration, pair programming and collective ownership of code). There are reports of some situations when management decided to limit the initial design, trying to apply XP and seeing in it a way to save development funds, but on the other hand denied the team of developers to make refactoring when it was necessary, considering refactoring as adding costs to the code that is already running (Stephens, 2003).

There is also the danger for developers to believe that do not work well in pairs and as a consequence they declare prematurely as over a certain functionality to no longer need to spend time pair programming. The consequence is insufficiently tested applications, with databases incorrectly structured and possible defects in the major operation.

It is important to note that, although there are relatively large numbers of materials (scientific articles, textbooks and so on); they are primarily addressed to researchers and academics, rather than practitioners in this field. In other words, for one to understand and apply correctly and efficiently Extreme Programming, that person must cover a large number of materials and to devote a large amount of time for research. In practice, project managers read some materials, understand basic concepts, but very often can not apply them as they are proposed by their authors. Moreover, there are cases where, although they understand the concepts presented and can apply them, project managers consider that some of them are difficult to implement in their particular case and choose not to implement them (Bailey, Ashworth, & Wallace, 2002) . There are also studies (Bossavit, 2002) that examine the impact of organizational culture on XP projects, and conclude that this factor is essential for success. In previous research (Năftănăilă I., 2007) can be identified a number of other potential weaknesses of Agile methodologies (among which are XP methodologies), such as customer involvement in the project, and the continuous need of fast customer feed-back, difficulty to estimate the time and dead-line in a new project with a new team, or the need to train project stakeholders so that they correctly understand how the project is coordinated and the way the performance indicators are calculated.


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CONCLUSIONS AND FURTHER RESEARCH SUGGESTIONS Extreme Programming is therefore a methodology that was developed to be flexible and

easy to use, especially in the light of changes that occur in the development of information products. Characteristics make this methodology very suitable for software development projects where the requirements will change rapidly, or where the requirements are unclear.

XP methodology is suitable for several types of software, such as in-house, made or performed under contract or to be sold on the market, as long as the recipient has sufficient time available to provide fast and consistent feedback.

There are disadvantages of the method exposed in the paper, such as the continuous dependence of feed-back from the customer, the danger of relinquishing the necessary rigor in developing software because superficial understanding of XP concepts, or the reluctance which some experienced show towards XP.

Scientific research in the field of Extreme Programming, in particular, but also in AGILE methodologies, in general, is primarily of qualitative nature. The case studies presented support the usefulness of scientific methodology and the efficiency increase it determines; for the advantages of using XP to be fully confirmed, it is needed empirical quantitative research. As a result, a potential future research direction is given by the empirical demonstration of the advantages of using XP. Within the studied literature sources can be found situations in which Extreme Programming or projects that were conducted using Extreme Programming have failed. As a result, a second direction of research is the study of factors for successful implementation of Extreme Programming in organizations developing information systems.

BIBLIOGRAPHY:

1. Bailey, P., Ashworth, N., & Wallace, N. (2002). Challenges for Stakeholders in Adopting

XP. Proc. 3rd International Conference on eXtreme Programming and Agile Processes in Software Engineering-XP2002, (pp. 86-89).

2. Beck, K. (2000). Extreme Programming Explained: Embrace change. Reading, MA: Addison-Wesley Longman.

3. Boehm, B. (1996). Anchoring the Software Process. IEEE Software , 73-82. 4. Bossavit, L. (2002). The Unbearable Lightness of Programming: A Tale of Two Cultures.

Cutter IT Journal , 15 (9), 5-11. 5. Charette, R. N. (2005, 09). Why Software Fails. Retrieved 3 14, 2007, from IEEE Spectrum:

http://www.spectrum.ieee.org/sep05/1685 6. Flowers, J. (2005, 07 18). Unit testing in .Net projects. Retrieved 02 09, 2009, from

windowsdevcenter.com: http://www.ondotnet.com/pub/a/dotnet/2005/07/18/unittesting_2005.html

7. Fowler, M., Beck, K., Gilicze, B., Nagy, D., & Vlaskovitz, D. (1999). Refactoring: improving the design of existing code. Boston, MA, USA: Addison-Wesley Longman Publishing Co., Inc.

8. Hedin, G., Bendix, L., & Magnusson, B. (2003). Introducing software engineering by means of extreme programming. Proceedings of the 25th International Conference on Software Engineering, (pp. 586-593).

9. Janzen, D., & Saiedian, H. (2006). On the Influence of Test-Driven Development on Software Design. 19th Conference on Software Engineering Education & Training (CSEET'06) , 141-148.

10. Jones, C. (1995, 3). Patterns of large software systems: failure and success. Computer , pp. 86-87.

11. Karlström, D. (2001). Introducing Extreme Programming–An Experience Report. First Swedish Conference on Software Engineering Research and Practise. Ronneby, Sweden.


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12. Larman, C., & Basili, V. R. (2003). Iterative and incremental development: a brief history. IEEE Software , 20, 47-56.

13. Lindstrom, L., & Jeffries, R. (2004). Extreme Programming and Agile Software Development Methodologies. Information Systems Management , 21 (3), 41-52.

14. MacKenzie, A., & Monk, S. (2004). From Cards to Code: How Extreme Programming Re-Embodies Programming as a Collective Practice. Computer Supported Cooperative Work (CSCW) , 13 (1).

15. Năftănăilă, I. (2007, 10 31). Ph. D Thesis. Direcţii de Dezvoltare a Managementului Proiectelor în Domeniul Tehnologiei Informaţiilor . Bucharest.

16. Newkirk, J., & Martin, R. (2001). Extreme Programming in Practice. Addison-Wesley. 17. Paulk, M. (2001). Extreme Programming from a CMM Perspective. IEEE Software , 18 (6),

19-26. 18. Schuh, P. (2001). Recovery, Redemption, and Extreme Programming. IEEE Software , 18,

34-41. 19. Stephens, M. (2003, 01 26). The Case Against Extreme Programming. Retrieved 02 12,

2009, from Software Reality: http://www.softwarereality.com/lifecycle/xp/case_against_xp.jsp

20. Succi, G., & Marchesi, M. (2000). Extreme Programming Examined: Selected Papers from the XP 2000 conference. XP 2000 conference. Cagliari, Italy.

21. Voas, J. M., & Whittaker, J. A. (2002). 50 years of software: key principles for quality. IT Professional , 28-35.


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CONSIDERATIONS ABOUT COUNSELLING PROCESSESS IN ROMANIA. A COMPARATIVE PERSPECTIVE

Associate Prof. PhD. Carmen CHASOVSCHI

University “Stefan cel Mare”, Faculty of Economics and Public Administration, Suceava, Romania [email protected]

Abstract: In a labour market in continuing change, career counselling is still a “green field” in many countries, if not at

theoretical level, then in what implementation and functionality of organizations concerns. These countries from SEE Area, now, after 20 years from the soft revolutions, are not isolated anymore, and can take over good practices from some countries that have structures – public or private – that are offering career orientation services through their professionals. Such know-how transfer can lead to an earlier implementation of safe and successful programs, in all specialized institutions.

The present paper presents in a comparative approach some aspects concerning the implementation of career counselling and orientation in Romania. The first steps of the research were done in the frame of a Leonardo da Vinci Project that investigated the “health” of career counselling in Spain, France, Hungary, Italy and Romania. Later on, through a longitudinal study, we tried to identify the differences between these countries, and to isolate some causes that have lead in Romania to formalism in implementation and to a use, in most of the cases, of “out to date” techniques and procedures.

Keywords: career counselling in Romania, life-long learning, work orientation, human resources management JEL Classification: E24, J24, J60 1. INTRODUCTION Career counselling is nowadays an important task in modern societies that are taking

responsibilities concerning their labour force. To help the people to find a job is now a common responsibility – of the jobseeker and of the labour agencies that are trying to find the right match for them. We mention in some works* previously to which, the Human Resources Management in Romania was revealing a gap regarding the implementation of HRM techniques, comparing to modern societies. We mention in some works before (1) that Romania had in Human Resources Management a gap in implementation of HRM techniques, compared to modern societies. Due to the revolutionary change in economic theory that emerged after 1989, we have the same situation is in the field of career counselling.

Career Guidance should help different types of people able to work, to find a job or to select the career according to their choice and interest. Career counselling is in the most advanced countries being increasingly stressed as an integral part of education. In order to secure the right job, the right career choice is foremost in the minds of every job seeker with /without professional qualifications.

The present paper tries to clarify some aspects concerning career counselling in Romania, starting with the hypothesis that there is a delay on implementation of modern career counselling techniques and procedures, that a high level of formalism in counselling processes continues in some organizations, that there is not enough well trained personnel and there is a lack of work procedures that normally should lead to a better counselling process. Some inputs in the present paper were given by the analysis done in the frame of LdV Project “Counselling – Certified Professionals and Processes”, implemented by Lecce Prefecture, Italy, project within which the University of Suceava was partner too. The main objectives of the project were: To become known the definition of Counsellor’ activity and the relative competences; To elaborate an “Operative book of Counsellor “, which is adaptable to different kind of

beneficiaries. The book will be a shared operative means, which all the involved partners tested and validated. It has to be used by all the Counsellors and it will be joined with an” Operative book for the development of human resources”.

The diffusion of the counselling concept focused on the users.


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We have developed in the paper some inputs from the analysis of current situation in the member-countries, we will identify the problems existing in Romania, in a comparative approach with other countries, and finally, we will try to formulate some recommendation by giving an example for a project fact sheet for a centre for career orientation, CERCA Centre, that can respond to the identified needs.

2. GENERAL ASSUMPTIONS CONCERNING CAREER COUNSELLING TODAY

Despite the fact that career counselling and guidance involves face-to-face interaction and interaction through telephone, letters, or internet, the most important of all is the one-to-one interaction. A career counsellor deals with people who are not only trying to find a job for the first time, but also with people making career decisions and choices or coping with changes like- choice of subjects, career changes.

Career orientation of labour force (un-employees, students a.o.) plays a very important role in the development of individual identity, influencing the self esteem and the results that the person will deliver to the work place. A good orientation process influences later on the quality of work, the motivation of the person and the quality of induction in the work community.

What is the career orientation? The following assumptions describe some important points and underlie the trait-factor conception of vocational development:

• Vocational development is largely a cognitive process in which the individual uses reasoning to arrive at his decision

• Occupational choice is a single event • There is a single right goal for everyone making decisions about work. • A single type of person works in each job. • There is an occupational choice available to each individual.

The professional working in career orientation should have abilities but also aptitudes to socialize and to be trusted by the “clients’.

Only an administrative interaction with the person conciliated is not enough. Nowadays, it is highly needed for a career counsellor to have different kind of competences. We will present some of them further on:

COUNSELLING ABILITIES

→ Good skills in communications → Good relational skills,

o With the subjects o With other counsellors

→ Conflict resolution skills (conflict management) → Active listening skills → To gain client trust and support → Empathy → Evaluation skills → Problem solving → Open (available) to personnel/professional development → To gain support from decisional factors in the organization → To gain involved the external stakeholders (local&national level)

PROFESSIONAL SKILLS:

→ Psychological knowledge → Basic knowledge concerning statistic methods and languages → ICT Skills


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PERSONAL SKILLS: → Stress resistant → Tolerant → Patient → No stereotypes and prejudices → Does not discriminate → Inner coherence → Consistency and consequent behaviour → Effort resistant → Assertive → Capacity to give / receive feed back

TO RESPECT ETHIC STANDARDS

→ Confidentiality → Autonomy → Respect the clients and the colleagues → Mentality

TO ASSUME RESPONSIBILITY AND INITIATIVE TO ASSIST THE CLIENTS IN OPTIMAL DECISION MAKING (Ability to facilitate decisional procedures) TO MONITOR AND ASSURE THE COUCHING OF THE CLIENTS TO USE COUNSELING TOOLS TO BETTER ORGANIZE THE COUNSELING ENVIRONMENT TO ORGANIZE FOLLOW UP MEETINGS WITH THE CLIENTS.

3. SOME CONSIDERATIONS ABOUT CAREER COUNSELLING IN EUROPE AND SOME RECOMMENDATION FOR COUNSELLING IN ROMANIA

A general study of counselling processes and professionals was done in the frame of the project Leonardo da Vinci, where partners from Romania, France, Italy, Hungary and Spain cooperated in order to identify common aspects, differences, but in the same time some good practices that can be spread out in other countries from EU. The partner from Romania was the Faculty of Economics and Public Administration, University “Stefan cel Mare” from Suceava. As result of working groups there was a broad diagnosis of the counselling in the partner countries.

As first input, we conclude that in all countries, the career counselling is different as legislation and implementation. The national systems are formed from disparate sub-systems that are including: services in schools, in tertiary education, in public employment services, and in the private and voluntary sectors.

Two words that can characterize the counselling activity are “proactive” and “soft”. We will try to explain in the next paragraphs these assumptions.

Until the ‘80s or beginning of ‘90s too, the career guidance was more a “passive” task. Or, the beneficiaries of the process were passive parts in the process: they are already in stand by, waiting for solutions that can offer them a perspective in the future. This approach is already gone in the most modern countries, where the beneficiary, the “client” is an active factor within the process. Is not the case of Romania, the main interest of the workers – or young people – is to


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return to their job as quick as possible, or to find a job as soon as possible after the bachelor exam. Important changes are in Romania, due to the fact that a part from the labour force is temporary or for long time gone to foreign countries, trying to find there a work possibility. Only few are investing in their after-school or after-work time in order to improve their skills, abilities in different training programme, according to the changes in the needs of the labour market. That means, in Romania the process should be composed of 2 parts, moving one towards each other (the “client” and the “career counselling body”). The counselling services should be viewed as active tools, and individuals should try actively to use them. In order to gain such performance, we should have:

- reliable specialists - modern counselling methodology, that involves the “client” in counselling process, finding

the proper motivation for the job-profile - a code of professionals - certified procedures or processes - code of ethics - the need of the individual should be in the centre, not the occupational offer.

The “needs” mentioned above were identified in the workgroups of the LdV project. In order to identify better the gaps and the objectives for the improvement of career counselling in partner countries, there were formed different working groups: "Employment and economic Development", "Training and Development of the human capital", “Integration, Parity and Quality of life", "Training and Development of the human capital" and "Integration, Parity and Quality of life."

Further on, the researches showed some priorities that emerged from all workgroups in the LdV project, as priority common objectives of career orientation, for all countries:

- Coming back of the firms from the foreign countries (Italy, France); - Politicians' orientation towards the culture of the maximum productivity and active

participation of the local Public Administrations (all countries); - More occupation through more cooperation among the social institutions (all countries); - Integration (integration among social groups); - Promotion of the company culture, more incentives for entrepreneurs and small; artisans

and lowering of the contributions and fiscal taxes; - Incentives for the low economically developed territories; - Use of the European Community financings; - Development of the female entrepreneurial class; - Flexibility accompanied by greater safeguarding of the workers' rights; - Reform of the social security cushions; - Lowering of the scholastic abandonment through personalized formative courses;

- Need for the partners to work together in order to point out the needs of the local, national and cross border labour markets;

- Correspondence between the quality of planning and training. The identification of such objectives, alone, is unfortunately not enough. Operational plans

are needed, and strategies able to assure the implementation of above mentioned objectives. Some alternatives were also mentioned in the working group: new laws, that can assure a legal compliance for best practices in EU countries; Counsellor in the job centres, schools, universities and for the disadvantaged; More efficient childcare facilities; More flexibility at work; Integration of the low salaries; Indemnity of family; Training of special figures for the job market (qualification and re-qualification); Reform of the scholastic system and institution with the involvement of the companies; Counsellor’s training (motivation and special competences); Reform of the Training system (taking care of the workers and firm's needs); Attention to the weak subjects: women, people from non European countries and the disabled; Politics of support to the families; More opportunities to choose your own job; More communication among school, training and employment centres.


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The actions necessary to improve the concrete situation in territory are the following ones: - Territorial centres for the promotion and the Business creation of the immigrants; - Demolition of the barriers of communication; - Public universities more open to the foreigners; - Recognition of the competences acquired abroad; - Counsellor in the job centres, schools, universities and for the disadvantaged; - Counselling services; - E-learning; - Integration school/work; - New personalized courses in order to prevent the abandoning of schools and new

motivating systems for workers through the use of new technologies; - Assistance in the start-up and in the management of the firms (women and immigrants); - Creation of training schools networks - Job Centre: it communicates the professional figures the Labour Market needs to the

training schools; - Effective implementation of some laws; - Necessity to recover some traditional professional figures in synergy with the new

technologies; - Job centre operating on the social and economic development; - Integration / interaction among social groups with particular attention to the weak subjects; - Increase of the employment through incentives to the enterprises, the development of

Business creation and a well organized political activity; - Effective realization of the European Community programs and more collaboration among

the state members with increase of the working and formative mobility; - Strengthening of the job centres and the orientation centres through the creation of

networks public/private; - Increase in value of the formal and informal competences (certification). - Increase of the salaries and diminution of the public expense through political choices

directed to the productivity. The authors of the most voted ideas have reported the own hypotheses in plenary and, later,

the components of all groups have identified, through a special questionnaire, the first 6 ideas. About the preferences expressed by the groups for the 15 ideas, the group "Employment

and economic Development" has chosen the proposals of the group "Training and Development of the human capital"; the group "Integration, Parity and Quality of Life" has fairly divided the preferences on the ideas proposed by the other two groups; the group "Training and Development of the human capital" has almost exclusively voted the idea of the group "Integration, Parity and Quality of life." For the implementation of selected ideas, it is needed a fact sheet for each, in order to assure a first input for future projects that can be financed by ESF – European Social Funds. In order to exemplify, we will develop such a fact sheet for one of selected idea “C.E.R.C.A – Centre of resources, competences and abilities in Career Counselling (Table 1).

Fact Sheet Project CERCA – Centre of resources, competences and abilities: Table 1

C.E.R.C.A. – Centre of resources, competences and abilities–Training and development of human resources in Counselling Centres What Who With what

resources Evaluation

Creation of a task force in order to find out the companies’ real needs Centre for the evaluation of the

Public and private institutions Professional

Funds of the European Community, regions and provinces (R.O.P Funds,

Long term duration Creation of new places of work: strong employment impact. Companies follow their workers from the


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Such project can respond to a real problem: The high rate of failure on the labour process of young graduates and of employees who had a long period of inactivity (in their reintegration process). Such problem was caused by the quick speed of the changes on the labour market, but also by the difference between self perception of the subjects & the real level of their competencies and abilities according to the real need of the enterprises.

The objectives are to evaluate the real state and level of the competencies & abilities of the Human Resources on the Labour Market, to reduce the gap between the level of the request & the offer on the market, to adapt the HR unoccupied or young graduates to the need on the market.

Such project could be implemented by educational Centres in cooperation with public & private structure (Universities, Institutes and other training organizations).

A level of feasibility has been attributed to the ideas through a structured questionnaire. The 58% of the participants believe that the feasibility of these ideas needs a radical change.

5. CONCLUSIONS We can assume that the implementation of such ideas, will rise some opponents and

obstacles: the consent among the different institutions involved; resistance to change; low territorial relationship for the definition of common objectives; resistance to competences transfer; average/long period of training (scarce appeal among the young people); local corporate bodies; scarce integration among the territorial institutions and firms' wariness; socio - cultural resistances and the retrieval of the resources; financings; resources finding, change of mentality; mentality and methodology; the lack of networks for the development. More than 50% of the participants in the project believed that above all, the Public Administrations should intervene to do what is necessary to reach a suitable development of the orientation services. It would be necessary to intervene - according to the opinion of all participants- first locally, then nationally and finally on the whole European territory. The actors of the change would be the local corporate bodies in primes, then the firms, the school, the training societies, the unemployed citizens, the experts, the labour unions and finally those who work in companies.

NOTES:

(1 ) Chasovschi, Carmen – Research about human resources management in territorial profile, EDP Bucuresti 2006

actual competences and skills that the clients already have Identification through testing of potential for future development of additional skills and abilities Planning of training curricula that will respond to the need of the local and regional market Training Final evaluation “Final profile” as a Occupational Passport of the beneficiary Future promotion to the companies who have vacancies that fit to the “Final profile”.

Associations Social actors Universities and schools Companies on the local and regional market

European Social Fund a.o.) Companies and privates

beginning to the end of their working life cycle Flexibility: creation of professional figures that the Labour market really needs Sharing: networks among the different actors


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BIBLIOGRAPHY

1. Bezanson, L., O'Reilly, E. (2002) Making waves: connecting career development with

public policy: volume 2. Ottawa: Canadian Career Development Foundation 2. Cochran, L. - Career counseling: a narrative approach, 1997 3. Hiebert, B., Bezanson, L. Making waves: career development and public policy: the

International Symposium 1999: papers, proceedings and strategies. Ottawa: Canadian Career Development Foundation, 2000.

4. Kidd, Jennifer M. - Understanding Career Counselling. Theory, research and practice 5. Sultana, R.G. Guidance policies in the knowledge society: trends, challenges and

responses across Europe: a Cedefop synthesis report. Thessaloniki: Cedefop, 2003 6. Watts, A.G.; Fretwell, D. Public policies for career development: policy strategies for

designing career information and guidance systems in middle-income and transition economies. Washington, DC: World Bank, 2003.

7. Rethinking human capital. In Education policy analysis, chapter 5, p. 117-133. Paris: OECD, 2002. Available from Internet: http://www1.oecd.org/publications/e-book/9602041E.PDF

8. OECD, 2004, Paris, Career guidance and public policy: bridging the gap. 9. “Counselling – Certified Professionals and Processes”, work documents of Leonardo

da Vinci Project, implemented by Provincia di Lecce, Italy


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THE FINANCIAL LEVIATHAN Ph. D. Tiberiu BRĂILEAN

“Alexandru Ioan Cuza” University Faculty of Economics and Business Administration (FEAA), Iaşi, Romania

[email protected] Ph. D. Student Aurelian Petruş PLOPEANU

“Alexandru Ioan Cuza” University Faculty of Economics and Business Administration (FEAA), Iaşi, Romania

[email protected]

Abstract The U.S. mortgage and the subprime loans melt down has produced a real estate recession. The american real

estate crisis started an irrational fear towards financial markets. The global financial system has became vulnerable and fragile, also the financial errors decided to be global and to be spread all over the world in a contageous effect. The economic depression is the result of the lack of liquidity and the crisis affects the banking sector, but also the extrabanking activity. The domino principle strikes again and again. The financial institutions can’t answer promptly to these new issues, their agenda isn’t upgraded with the new global financial innovations, so they are unstabled and unsecured. The speed and complexity of these financial new terms and instruments are becoming structural problems and may provoke unbeatable crisis. The financial Leviathan proves that the monetarism orthodoxy is overfulfilled and so it creates financial currency blocks in full global world.

Key words: subprime loan, domino principle, markets, equilibrium, monetarism Jel Classification: F3, G0, L8 INTRODUCTION

The financial markets are being affected by a new major seism that will certainly trouble the rise, the holding and the great economical equilibria at a global level. The statement, approximately in these terms, belongs to John Lipsky, general deputy manager of the International Monetary Fund. As we have anticipated in a previous article, the crisis set out in the United States as a consequence of the estate market failure, encumbered by numerous credits granted without power of discernment. The floodgates of credit burst open, feeding a speculative rise that seemed to justify the whole process. The result was the so-called subprime mortgages: loans to aspiring owners with no credit record or creditworthiness, typified by “ninja” loans (no income, no job, no asset). If this is the case, a champagne on the house, that is on the creditor…

THE GLOBAL FINANCIAL CRISIS, INSTRUMENTS AND MECHANISMS

In order for us to understand the proportions of the phenomenon, we need to say that only for the most risky part of the loans, called “subprime” (loans offered to individuals who do not qualify for the prime rate, subprime borrowers are often turned away because of their low credit ratings or because they have a reasonable possibility of defaulting on the debt repayment; these subprime loans are packed in bonds and then were sold on the secondary financial market to different speculative investing funds with bigger capital risk) in the language of economics, the debts have reached 1,300 billion dollars, which is a significant amount. Two or even three millions of Americans are forced to sell their houses.

„In august 2007, The New York Times reported how one woman had seen her mortgage rate rise from 6.3% in 2005 to 11.25%, and her monthly repayments from $414 to $691, more than she could afford to pay. She was one of the 14% of subprime borrowers who defaulted in the first quarter of 2007”.[1]

Therefore the American estate market has effervesced extending the risks on the world market too, changing for the worse the accommodation crisis and feeding the speculation. The Federal System of Resources has given the signal for the lowering of usuries, which can prevent


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credits from inflaming but it can also encourage the relapse of this irresponsible financial innovators, up to a point when we don’t know yet wether he behaves like a fireman or a pyromaniac.

Meanwhile, oil has risen to 82 dollars per barrel, a new historical record in that time. Is there a new world crisis coming up? The globalisation supporters call the reality of mondialisation/regionalisation/integration “damaged, but happy” (Delhommais, 2007). By all means the financial market is at the present moment in a serious state of regaining the lost sense, brushing untimely between the efficient market paradigm (Eugene Fama) and the one with a more efficient supervision/regulation. A lot of toxins have occurred in the system. The slump of the market has prejudiced the banks, thus it affects the credits so the investments lower, the consumption diminishes, the increase and employments are also affected.

Hyman Minsky talks about a real ‘blindness in front of disaster’ (Minsky, 1986) [1]. It is as in the former times of our famous Caritas. More and more families were needed to go along with the basis of the game in order to provide the liquidities for the first to arrive. At the beginning it was easy, especially because people were already excited at the view of the stocks’ lowering in the Internet field and was looking for other investments, but then it became harder and harder. The buyers took the market by storm, debts couldn’t be paid anymore, and the prizes ran over stock and block.

Whenever a bank has problems with recovering the debts, there appear the hedge funds, ready to take over even the most risky securities, with growth perspectives, which cover the potential losses caused by the value decrease of other shares, bonds. These are also the most lucrative and a business runs as long as there are buyers. In this way, the consequences of a credit that isn’t notable are dissipated towards a multitude of investors each of them assuming a small part of the initial risk. The transaction has the power to transform the bank loans into financial assets (like negociable securities with high liquidity and low risks) and it seemed to solve the global finances circle’s quadrature by using value titles derived from other value titles. This made it seem like the issue did not exist anymore.

Nevertheless, this irrational exuberance has led to the greatest illusion from the monetary history. The conventional financial institution structure of the edifice was weakened to such an extent that it has become, totally, by a large and alarmingly vulnerable. And at the central banks almost nothing was done in order to make things right. Lots of debtors and few banks have already reached the bottom of the sack, while at the same time new titles are being announced on the market, that artificially increase the companies’ turnover, and the rating agencies will just write down the events as if they were normal, as if they had to do with real values, keeping this way alive the fantasies of the market. In fact, it is hard to shout that the domino system is unscrupulous and lack of subjunctive background, because from this imperfect paradigm it survives and develops a whole of institutional and organisational values pattern. When the decline starts, the agencies also pull the signal alarm, so stirring up trouble and inducing the crisis in the investor’s perspective. Instead of being anticyclical, their behaviour is procyclical.

And it seems that the crisis has just started. 2005 and 2006 were the most beautiful years of the estate tall tale we have talked about. The debts keep accumulating, and the ‘dynamical’ speculative funds keep accumulating huge profits with by-products. The great issue is that finances have become global par excellence, and the financial errors are being globalized, the whole world being reached by the American estate frenzy and getting contaminated with distrust. This way, everything is linked with one another.

Actually, the crisis is a cash one. The equilibrium of the by-product market cannot be but a virtual one. A needle is enough and the balloon blows up. Everyone wants to sell their titles, but now who is going to buy them? The fear and the irrational exuberance dominates the market, the stocks evaporate, their price tending towards absolute zero, all the markets and their compartments getting contagious. Let’s remember how the Mexican crisis (the Mexican peso crisis) in 1994-1995 affected, firstly, a part of Latin America (Chile, Paraguay, Uruguay, Brazilia şi Argentina). The „tequila effect” was spreading with a big speed, the effects couldn’t be anticipated yet (Paul


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Krugman, 2009). In the second round, in 1996, Thailand and Indonesia were affected (there were internal causes as well), the shock wave affecting the whole Asia, and then Russia and so on and so forth throughout a totally remarkable contagious effect.

The crisis does not only affect the extra-banking market, but - as we have already said - it also affects the banking one. The banks’ administration funds are stuffed with by-products, the solvency rates are precarious, rating agencies decrease their evaluations. The solution: the reduction of the credits granted at the level of personal assets. In this way, the enterprises and the employees are the institutional actors without fault.

The ‘heroes’ of global finances are asking for the central banks’ help, a help that they so despise during time of prosperity. Ben Bernanke, the president of the American Federal System of Resources is criticized for being ‘too intellectual’ and does not understand a thing, while the ex president, Alan Greenspan, is sorely missed, because he was not entangling himself in useless studies, but was reducing the interests’ rates without giving it a second thought.

Unfortunately the solutions are not local anymore, and not only the responsible ones are to be punished. The effects have coagulated, and the risk is systemic. The domino principle strikes again. For years together, reckless investors have been encouraged to walk further and further into the virtual, overcoming the critical threshold, so that the public authorities and average citizens are simply taken hostages and one doesn’t know who is going to make a cat’s paw of them.

The international financial system set up at Bretton Woods does not work anymore. Its collapse started ever since 1971, ever since the famous announcement of President Richard Nixon, followed by over a hundred crises that seem endless. The financial speculation has become the main activity within the system. The daily amount of exchange transactions on the financial-monetary world markets has increased during the last decades for thousands of times, reaching an equivalent value with the cumulative capital of the first one hundred American banks.

Key-institutions of the system, such as the International Monetary Fund and the World Bank are undergoing a serious crisis. For instance, after the year of 2003, the loans granted by the Fund have reduced from over 70 billion dollars a year to less than 20 billion, especially as a consequence of the doubling in this period of the oil, natural gases, non-ferrous metals and other strategic resources’ prices, held by traditional debtors who had their treasury filled all of a sudden, giving up to the collaboration with the Fund. The most spectacular case in this sense is Russia, that has reimbursed in record time the historical debts, but it is not going to be the only one for a long time. China, India, Brazil, Chile, the OPEC countries and so on and so forth are practically rewriting the geo-economical world map. Meanwhile, the American shortages are becoming worse, and the dollar is continuously losing ground. The American coinage has depreciated with 28% in four years’ time only towards Euro.

Such elements are analysed by Gerry J. Schinasi, an alarmist work that presents the disturbances of the International Monetary Fond from within, determined by the fact that the so called ‘Washingtonian consensus’ does not correspond to the new realities, that liberalization-privatization-deregulation foreseen have become old-fashioned, with all the benefits that they have brought on an economic plan. What has remained and menaces is the inconstancy and the uncertainty potential these politics carry with them, weakening the system and generating countless and difficult to avoid risks. Therefore, the main problem consists of the financial innovations’ explosion at a global level, the extreme mobility and volatility of financial markets, the author concluding that the ‘national financial systems are more and more vulnerable facing an increased systemic risk and a growing number of financial crises’.

After the financial downfall of Argentina (1999), the greatest payment ceasing in history, the emergent countries have benefited from a significant growth of prices at the main raw materials. This has brought them important benefits, contributing, ever since the year of 2003, to their possession of 37% from the total foreign investments performed in under way development countries, to the prejudice of rich countries. By all means, the main beneficiary has also been, in this case, China. At the same time, the American commercial and budgetary deficit is reaching extreme cotes, up to almost 9,000 billion dollars.


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The famous hedge funds have known a drastic ascent, in number of approximately 10,000, out of which 4/5 is located in the Cayman Isles. Only 400 of such speculative funds are truly active, but they hold stocks of almost 1,500 billion dollars, and their daily turnover with global by-products reaches 6,000 billion dollars, which is half of the American Gross Domestic Product. The operations with global by-products are extremely dangerous, showing a genuine “financial magic” that brings significant incomes. Enron and other large corporations used them a lot and they have led first to ecstasy, then to bankruptcy. Lots of these products only exist virtually, in cyberspace, and their main purpose is to avoid fiscal systems.

The issues are structural, although almost surrealistic, and somehow inherent because of the speed and the complexity of these financial operations. When leaving his job, Alan Greenspan, the ex president of the American Federal System of Resources declared himself ‘really shocked’ by this situation. Measures were being taken only starting with this year, but it is very difficult to act, the employed amounts being truly considerable. Practically, the necessary data does not exist, and the governments and central banks cannot know reality as such. In the new era of global finances one moves about with closed eyes.

All these are elements that foresee a major crisis, nowadays institutions being clearly unable to face up with them. The anarchy dominates not only the markets, but also the political and the world of university, which practically do not succeed to decipher the way in which this finances world works. We are floating in pure mystery. The only certainty is that the system is changing, but the consequences of this transformation are unpredictable. The system has become unpredictable, its architecture, length and functioning being made according to unknown laws, or simply at random. Any regulations intended by now have proved to be inefficient. Because “Credit market innovations have expanded opportunities for many households. Markets can overshoot, but, ultimately, market forces also work to rein in excesses. For some, the self-correcting pullback may seem too late and too severe. But I believe that, in the long run, markets are better than regulators at allocating credit”[2].

Hence a new monster was born, a global financial Leviathan, dominated by the behaviours in the terms of different financial engineering, arrangemens and intricate transactions by which it is difficult to discern who are the debtor and the creditor. The economic crisis is the output of a complex of factors, which include mainly: errors of the monetary policy, the distortion of the incentives for economic agents and the pathology of regulating financial-banking policy. New instruments are being continuously invented. The governments have limited power to action, so do the central bankers. The promoters of this full of contradictions paradigm of the unregulated financial derivatives are to be looked for on the Wall Street. They have produced unknown financial turbulences even for them, opening a Pandora’s Box, the negative results and the crisis’ risks being socialised.

The international monetary system, so as it has been configured in the last 35 years, is becoming torn and new ideological finances are already talked about, given the new economic, politic, military and technologic realities. It seems that the extension in the ‘virtual’ of the economic system meant, to a great extent, speculation, fraud, financial-accounting disorders, and a comeback to reality is taking place, a pretty harsh reality, for many this meaning bankruptcy, stock collapses, huge losses and so on and so forth.

The evolutions are difficult to anticipate further on, and the discretion is maximal, discretion which has accompanied as a matter of fact the monetary phenomenon from all times. As an example, Alan Greenspan, the ex president of the American Federal system of Resources was saying at the end of a press conference: ‘If you have understood, that means I have not made myself clear’. Also, he was recently warning that ‘the international geo-politic situation is now the main obstacle on the way of growth’. On account of it and thanks to the American deficits, to the greatest extent, the hegemony of the dollar has come to an end, to this also contributing the scandals from the American co-operative system and ‘Bush factor in economy’ (George Soros), as well as the relative exhaustion of the new IT and C economies’ resources, that have doped for over 15 years the American growth and not only. In spite of the structural data favourable to the American economy


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(growth, occupation, inflation, and innovation), lots of capitals are leaving dollar, so that no American official can afford to exaggerate as in older times with the formula: ‘The dollar is our coin and your problem’.

This dollar’s power of devolution is only partially recovered by the euro (‘our coin and your problem’, as the European would say), partially by the yen and yuan, the rest heading towards refuge-coins (the pound, the Swiss frank) and especially towards gold, the price of which reaches record values for the last 30 years, which represents a sign of crisis. Another mirror in which the crisis is being affected is the price of oil that reaches such record values. The world’s stocks exchange is fussing overwhelmed with pessimism. Hard times are waiting for us…

As for us, the course of our coin faithfully reflects the evolution of the report between the two main currencies on an international plan, which is a sign that the internal financial market has stabilised itself, in a relatively way, of course. Through the maintaining of the course in the past few years, at a low fluctuation level, it can be said that we now have a better coin than our real economy, the monetary macro-stabilisation offering a favourable frame and an interesting attractiveness (see the case of Austrian bonds recently launched in Romanian lei).

Under the conditions of the inflation mechanisms’ alteration, of the competition hardening at a global level, of the new technologies infusion, it can be said that the monetary orthodoxy is being overwhelmed becoming even a source of anti-productivity. The international monetary anarchy causes for the small economies to relate their coin to the one of the most important commercial partners (the European Union in our case), resulting the creation of currency blocks, which essentially changes the management of the global economy.

From all the economy’s components, the financial monetary system is the most internationalized. From a governed one (G-SMI) specific to the Bretton-Woods period, we established a new system directed by the market (P-SMI) characterised by:

• the internationalization of the financial portfolios; • the reduction of the banks’ importance towards the markets, concerning the

role of financial intermediary; • the increase of the market’s part in stabilising the exchange courses, as a

consequence of the significantly superior growth of financial transactions as opposed to the commercial ones;

• a great instability and volatility of the markets, a velocity unprecedented of the capitals, a lot of speculation (‘an irrational euphoria’, as Greenspan called it);

• the concentration of the markets, with important contamination effects; • a greater pressing over the states concerning the exchange course, the growth

of external constraint in general and the disciplining of states by the markets; • the lack of the international institutions capable to administrate the new

evolutions and the failing in the multilateral coordination of the international liquidities; • serious problems regarding regulation and administration of the international

loans and so on and so forth. After the collapse of the fixed courses system a ‘non-system’ of flexible courses has been

installed (Gilpin, 2004), and now even this one asks to be reformed. The international monetary issues are no longer governed by rules or understandings, at least not officially. What actually works is a system of the reference point, ‘the monetary trident’ dollar-euro-yen making great cooperation efforts, in search of a new compromise. We are assisting, at the same time, at a triumph of the central banks over the governments, a real ‘casino of economy’ based on speculations, virtual values that create a monetary-financial loop more and more detached from the real economy, flock effects, manias, panics and financial collapses.


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CONCLUSION The reformation, the redesign and the offer of a new identity (sense) to the system become

the imperatives of future actions of the decision makers. But unfortunately, there isn’t anyone to turn the desiderata or facts into reality. Some propose the comeback to the gold standard, others- on the contrary- to the total freedom of markets (Milton Freedman). The reformation of the International Monetary Fund and of the World Bank are also asked for, the creation of an international central bank, of an institution to guarantee the credits, of an unique coin (George Soros, J. Williamson) etc. This would practically mean the instauration of a global capitalism, or maybe, of another economical and social system. However it will look like, that is hard to say.

BIBLIOGRAPHY

1. http://mondediplo.com/2007/09/02finance 2. http://www.federalreserve.gov/newsevents/speech/bernanke20070517a.htm 3. Delhommais, Pierre-Antoine, “Une mondialisation heureuse mais heurtée”, Le Monde,

Paris, 9 august 2007 4. Gilpin, Robert, The Challenge of Global Capitalism: The World Economy in the 21st

Century, Iasi, Polirom, 2004 5. Krugman, Paul, The Return of Depression on Economics and the Crisis of 2008,

Bucharest: Publica, 2009 6. Minsky, Hyman P, Stabilising an Unstable Economy, Yale University Press, 1986 7. Schinasi, Gerry J., Safeguarding Financial Stability: Theory and practice, FMI, New

York, 2006


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BOARD PANEL - TOOL USED IN THE SUBSTANTIATION OF DECISIONS TAKEN BY THE MANAGEMENT OF COMPANIES CONDUCTING THEIR BUSINESS IN THE

TRANSPORTATION AND THERMAL ENERGY DISTRIBUTION FIELD


[email protected]

Abstract The present paper focuses on the concept of board panel, its importance in decision making by managers of a

patrimony unit, issues to be considered when preparing it. It shall also specify the documents and reports which can be drafted using the data summarized and provided by board panels and their behavior within a company. It shows users of the information contained in the board panel, but the activities and the departments whose data can be processed for the preparation thereof.

The second part of the paper presents the particularities of the board panel system made by a company which operates in the field of transportation and distribution of thermal energy, the components of the respective reports, the advantages of their use and limits triggered by the complexity of the information thereon.

Keywords: board panel, instrument of company management, report, users of the information from the board panel, activity in the field of transportation and distribution of thermal energy

JEL Classification: M41

INTRODUCTION

The reason to be of any company is to obtain profits, and conduct a profitable business. This is possible only if the organization’s managers know the economic situation at a time. In other words, they should have more accurate, complete and timely data for making decisions to increase the economic performance of the respective company.

The need for information of the management members may be covered by the use of a board panel system, because they collect data from the lowest level of the organization, process them and they finally get to managers. Thus, they can have an overview of all activities and how each contributes to achieving the economic outcome. Therefore, the present work approaches issues relating to the board panel as a tool of companies’ management, particularly those conducting their activity in the field of transportation and distribution of thermal energy, which are facing at present, with a decrease in sales due to climate warming, decrease of heat consumption trigged by mounting cost counters, decrease of the number of clients – economic agents, and moreover, the managers of such companies need a complete and timely information to take measures to improve work efficiency.

1.THE CONCEPT OF BOARD PANEL AS TOOL FOR THE COMPANY’S MANAGEMENT

The board panel of an entity’s management, in a narrow sense, represents a coherent set of data, essential for the organization's management; such data should reflect the "updated" the main events of the production process, the economic health of the organization. These data usually are very different: technical, technological, economic, financial and social. Even if data from the board panel reflect only certain parts of reality, their knowledge should enable the formation of a general image regarding the management issues covered by the leadership of an organization.

A board panel is a report that, to attain its purpose, namely to serve the leadership to ground their decisions, must meet multiple conditions: to contain synthetic, physical and economic data gather from the process, to reflect the reality at a given moment, to contain historical and plan data to make comparisons and to have a form which allows easy highlight of special situations.


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If we take into account only these aspects related to the achievement of a management board panel, we could understand the difficulties implied by such management tool. Therefore, the advantages of its existence are obvious for making daily decisions.

Given that at the level of an economic unit, on the vertical hierarchical structure, there is a single level of management, there are different information needs of different managers. Therefore, each level of management needs its own board panel. Moreover, on the horizontal hierarchical structure, the entity’s managers, performing different functions, need specific data, which reflect the activities under their responsibility. These observations lead to the conclusion that, in fact, in an organization there must be several board panels, each with its recipient, with its characteristics. Obviously, the data representing the information foundation of various board panels must be the same because to ensure the consistency of the entire information system, regardless of which management is addressed.

The existence of a board panel of the company's leadership endorsees the following aspects: • The management’s board panel is a tool of management rather than a component of classic

information system. • The board panel is a concept on which the data moving inside the trader are collected,

processed, summarized and sent to management for information purposes, with a certain frequency, as basis for decisions, on short, medium and long term.

• In fact, the board panel, expressed at singular, is a report composed of a complex structure of data for informing the management.

• The data sources for the management’s panel board are usually those that normally feed the existing information system of the property unit.

• The presentation form of the data in a board panel is closely linked to the requirements of information of a person, operator who is on a certain level of management hierarchy, the change of that person will inevitably lead to the changing of the data presentation in the board panel planned for the respective managerial level.

• The degree of detail of data from the board panel (as well as their accuracy), is determined by information needs expressed by each individual manager, whom they are addressed, the level of detail and data presentation form cannot be left to discretion of any person other than the manager, even if that person is highly qualified.

• Because the board panel receives data from the lowest level of the organization, where they are generated, and by processing and aggregation, they reach the highest level of leadership in order to ground their decisions, to develop the board panel there are used only names of unique data, that must be understood equally by persons involved;

• The data used in the board panel must have a name, a single definition, and they are placed in a data structure rigorously specified in accordance with technical regulations and legal provisions in force. A board panel is a mechanism which produces:

• Current situation accounts; • production of reports; • audit reports; • notes for management information; • records of achievements for a certain period of time; • analysis documents of the department’s activity; • strategies; • plans, programs; • reports.

Moreover, the board panel contains data from all these documents, which run inside the trader; the data are structured and presented so that they reflect more accurately the status at a given moment of each activity in progress. These are the production, technical, commercial, administrative, financial, managerial activities, related to investments, ancillary activities, related to human resources, control, etc.


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It may be noted that the organization level, the board panel takes three different fundamental forms of manifestation, as follows:

1. The board panel for team members is a tool of the company management that serves its leadership and is created by specialists in information circuits, at the request and with immediate attendance of managers.

2. The board panel, for its designers, is a concept of organization and use of data necessary to ground decisions underlying the design for management tool.

3. The board panel, for those who have the responsibility to implement it and keep it running, is a mechanism, developed according to the aforementioned concept and it is composed of several types of resources involved in achieving the fundamental purpose: to inform the management correctly and appropriately.

These three forms of manifestation of the boar panel systems are determined by the position of the three factors responsible for achieving and maintaining its operation. Managers who are its rightful users, the designers who establish the principles and requirements of the latter, and finally but not least, all staff who provides the necessary data, process them and make them available to managers.

2. FEATURES OF THE BOARD PANEL SYSTEMS USED IN THE DECISION-

MAKING PROCESS OF THE ENTITIES OPERATING IN THE FIELD OF TRANSPORTATION AND DISTRIBUTION OF THERMAL ENERGY

The board panel exists in the form of reports containing several key figures, which describe

the state of their field of activity, it exists in the form of regular telephone notifications, which arrive regularly in the hierarchical chain, in the form of some written notes or current official reports of which managers extract, according to their rules, the information they need for daily decision making, the intuition of each manager playing a determining role.

At the level of responsibility center in the property unit, with a budget, a budgetary control is permanently carried out by the budget responsible to calculate deviations and determine corrective measures, if necessary, so that by the end of the financial year to not exceed the proposed budget. Therefore, the responsibility of each center is holding an information system for tracking budgetary performance in an extra-accounting way, by drafting budgetary reports, which are subsequently compared with actual expenditure recorded in the accounts management.

This can be seen as a scheme of data structure in Figure 2.1. The first level presents data of the current month and the aggregate, both in three forms: planned data, achieved data and differences. Only data from the accomplishments come from circuits for data collection of current readings; the panned data are historical data and derive from early recordings, with the development of the department’s plan. The differences result from processing, i.e., by subtracting from the values achieved of what was planned.

Achievements - the only represented on the scheme - are divided into three: expenses, revenues and results of department activities, i.e., the difference between revenue and expenditure. This difference is, in fact, the gross profit of the department, which is the most synthetic element of assessing the activity of a department. Data on costs and revenues are collected from documents circulating in the information system of the department and they determine the functional compartments of the department.

As regards the expenditure, they are divided in two categories: costs of raw materials and operating expenses. This separation, we believe that is justified because it was necessary to separate the costs of which the company cannot act, due to the way of determining the costs of raw materials. The operating costs remain the only ones on which, to some extent, the trader may act through technical and organizational measures. Moreover, these operating costs represent the value added that department staff brings to the services they render to its customers and reflects the efforts of all staff, including the managers’ efforts to the department's achievements.


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For reasons imposed by the current system reporting, the raw materials are divided into thermal energy, purchased cold water, technologic fuel and other charges related to their delivery from suppliers. It seems interesting the need to divide on types of customers the purchased thermal heat, when it had been more naturally for this distribution to be made for sold thermal energy.

Fig. 2.1. Budgetary performance of the department

Departments also use as document for management activities, additionally to the budgetary

performance analyzed above, another tool of managerial accountancy – board panel, namely the income and expenditure situation, which may be seen in Figures 2.2. and 2.3. Because of its complexity, we have used two formats A4, the first to represent the general structure of the board panel and the second to continue only the revenue branch.

Studying carefully these two components of the board panel system of the distribution department, we may notice that they contain the same database, with insignificant differences to define the data structure of the board panel. However, the arrangement of data calculated is slightly different, probably as per the information needs of the department managers, corresponding to the time they were made. It is worth mentioning the presence of the two components of the board panel, different names for data for the same database.

Another remark that can be done on the two situations is that both are very complex: they contain a huge volume of data, are designed on four levels of representation, have a high degree of detail, present simultaneously the current and plan data, try to show everything on a single sheet of paper.

The most relevant board panel used by the management company uses data from budgetary performances and revenue and expenditure budgets of the respective centers of responsibility. An example of such board panel includes data on income from sales, other income related to the transportation and distribution of thermal energy, costs that make up the cost of transportation and distribution of thermal energy and the outcome (gross margin) of that center of responsibility. The board panels are drafted for each branch, department or section on monthly basis.


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Fig. 2.2. – Income and expenses on the department level, monthly report

Fig. 2.3. Income and expenses on the department level, monthly report

Without detailing the information from the figure 2.1., we will review the components of

operating expenses from the department level. Firstly, you can see the cost of electricity, under its two forms - active and reactive; then the current cost of materials used by the department personnel, depreciations, repairs and services rendered by third parties, other expenses, staff costs internal benefits of the department coming from other sections of the company. The revenue of the


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department mainly arises, as can be seen in the figure above, from thermal energy and hot water sold to customers.

The deviations are due to controllable causes which may be influenced by decisions of management or of uncontrollable causes, which cannot be influenced by decisions of a person in charge.

Deviations from the budgeted amounts are favorable or unfavorable. For example, exceeding the budgeted consumption of electricity or direct labor are negative deviations from the budget as they exceed the planned forecasts. Favorable deviations are generated both by values achieved under the budget, such as: achievement of material consumption and expenditure on services rendered by third parties lower than budgeted, and actual values over the budgeted forecasts as revenue in the event of income arising from penalties.

In principle, any deviation from a budgeted action is the result of two factors: price and quantity. Usually, the people in charge for budgets tend to exert greater control over variations in quantity and lower control over small variations in price.

CONCLUSIONS

The board panel is presented under the form of a report which comprises information regarding the general activities carried out by a company and based on which mangers are able to make decisions in order to improve the performance of the respective companies, in other words – the board panel is a management tool.

The system of board panels used in companies conducting their activities in the field of transportation and distribution of thermal energy is composed of reports drafted for each center of responsibility based on the data from budgetary performances and income and expense budgets and for this reason they comprise markers regarding the incomes from the activity, the expenses representing the costs of transportation and distribution of thermal energy, the result or gross margin. They are very complex and they are conceived on four levels of data presentation, and the data’s arrangement on a page complies with the need of information of managers, they are highly detailed and display concomitantly current and plan data. Some of their disadvantages may be: use of different data names for, obviously, the same database and the desire to present all data on one page, although such information is numerous and complex.

BIBLIOGRAPHY

1. Albu N., Albu C., Instrumente de management al performanţei, Ed. Economică, Bucureşti,

2003 2. Banker, K. Young – Management accounting, Prentice Hall, New Jersey, 2000 3. H. Bouchin – Compabilité de gestion , Dalloz, 2000 4. Philipe Lorino, Méthodes et practiques de la performance. Le pilotage par le processus et

les compétences, Éditions d’Organisation, Paris, 2001 5. R.Demestère, Ph. Lorino, N. Mottis – Contrôle de gestion et pilotage, Nathan, 1997 6. Ristea M, Dumitru C.G. , Contabilitatea în managementul întreprinderii, Ed. Tribuna

Economică, Bucureşti, 2005


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PRESENT REQUIREMENTS CONCERNING TOTAL QUALITY MANAGEMENT ON SPHERE OF SERVICES

Associate Professor Doctor Amalia Venera TODORUŢ University „Constantin Brâncuşi” Târgu-Jiu, Romania,

[email protected] Associate Professor Doctor Cecilia Irina RĂBONŢU University „Constantin Brâncuşi” Târgu-Jiu, România

[email protected]

Abstract The paper/thesis aims to address new requirements on total quality management services in the area due the fact that implementation of total quality management ensure a number of advantages to organizations providing services materialized in the following issues: improving the profitability and competitiveness, improving efficiency of organizational structures, improving consumer satisfaction . I argued the need for implementing TQM in the service organizations level and I have presented a pattern in three phases that represents a framework for continuous improvement. It looked also the manners to approach the performance of service quality: reactive and proactive. Key words: total quality management, quality, service, customers, performance improvement JEL Classification : M10

INTRODUCTION

In the contemporary economy conditions the total quality management implement is an issue on which depends the survival of any organization. The main arguments supporting this claim are: - increasing competition degree in the business world, both to nationally and internationally level, in which the quality plays the essential factor ; - growing trend for consumers to change their preference for one company or another, depending on the quality of services offered at affordable costs. - deepening economic crisis in the context of globalization of markets.

Total Quality Management presents a strong long-term strategy which results in an improvement of the quality of products or services, and leadership ability to meet customer needs and at the same time, create conditions to increase the labor productivity and hence the profit.

TQM is also a management system of an organization, focused on quality Q, based on the participation of all members P, which aims to ensure the success S of long-term L, through customer S satisfaction and obtaining benefits for all members of organization M and society S. [2]

So TQM is a function of : TQM=f(Q,P,S,L,S,M, S) “This journey to completion “[4] is both a step toward excellence, and gives an aura of

luxury and special status. In the TQM concept, the customers are the most important asset of the company, which

must be multiplied and maintained to ensure the survival of the company. The advantages of introducing TQM, which aims to achieve total quality base are the following: - increase the percentage of loyal customers; - increase the profits and hence the competitiveness; - reduction of complaints by ensuring quality; - increasing the shares; - reducing costs by reducing losses; - increasing the involvement and satisfaction degree of employees; - decreased the moving of employees; - attracting new customers;

TQM implementation requires that organizations first develop appropriate strategies to achieve through specific methods, a change in culture and infrastructure and introduce methods and


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techniques by which to mobilize and motivate all employees in order to contribute to the achievement of policy objectives and quality organization and continues improvement of it. [3]

TQM is first, the continuous improvement of products / services, processes and quality system to add value through creative customer perception and participation of the entirely staff to this effort.

MODEL /PATTERN FOR CONTINUOUS IMPROVEMENT OF SERVICE'S QUALITY

One of the ways to attract customers to the service organization is the design and implementation of emotional relationships, based on specific issues, different from the competition and which to be perceived by customers.

Therefore TQM specialists say that the only way to succeed in the fight competitive and market penetration is taken into account all aspects of the broader meaning of the word, so not only those relating to quality of product / service.

In research conducted in several organizations providing services it prepared a pattern in three stages, which is a general framework for continuous improvement of quality. [5

Stages of this pattern are such as: 1. Awareness organization employees in order to start creating a favorable business

environment designed to improve the quality of services; 2. Coordinating all activities of the continuous improvement of quality and seeking new

ways to improve; 3. Developing continuity of the process to continue improvement

Figure.no.1. Stages of the model of continue improvement in service units Phase of awareness consists of employees' attention increase over issues of quality and

reality in the development of programs designed to increase the quality such as: limiting failures, reducing the number of complaints made by customers, limiting losses of customers, increasing customer satisfaction, etc.

The phase of coordination becomes mandatory because the necessity to choose of the most important activities in order to determine the main objectives to reach for quality improvement and achieving of higher quality programs. It is therefore necessary to coordinate activities related directly or indirectly to quality. Stage of development (continuity) is to elaborate a program - long-term framework, which provides for achieving quality and application of methods and techniques for the identification of new activities, to which should be given special attention. A special importance to the service organizations level is to determine ways to continue improvement on the three stages.

Thus, in the first stage of awareness are needed activities of train staff in quality and stimulate the need for improvement by finding answers to the following questions: how can quality be something concrete for the organization and especially in special situations?, is important quality concept as the economic report in affairs of the organization?; which are the general concepts of TQM?

Regarding TQM concepts should know and understand the following issues: - the level of customer satisfaction; - eliminating defects, disruption of inconsistencies;

Awareness Coordination Development


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- knowledge of consumer psychology, the motivation for buying; - limiting the variation in making judgments, the changes in behavior; - understanding the whole process of TQM

Thus, taking into account the internal sizes, also the external sizes to the ongoing quality improve, and each employee of organization must participate in this process.

Managers should adopt a new style of leadership for directing and supporting employees in order to promote the phenomenon of change in responsibilities.

In the second stage, employees expect more feedback on the results of the activities related to quality becoming less clear.

At this stage, managers must explain to employees why can not be resolved all issues and that it must choose the most important ones in the organization.

One of the tools that are used to establish priority activities in the field of quality is assessing the cost and quality.

The organizations applying long-term strategy to achieve the parameters of quality choose also other reference standards such as the criteria for winning quality prizes: Prize Committee, Malcolm Baldrige Award (USA), Deming Prize (Japan) and Juran Award (Romania).

Using these benchmarks can appreciate the progress reached in comparison with the "ideal" of "excellence" in order to be granted awards.

In the third stage is necessary to conduct systematic research for new shares in order to improve further the business, assuming that the entire process is kept under control and is conducted by the principles which guarantee a special quality

For organizations that have introduced the quality management are very useful method Motorola and the method belonging to Kano teacher.

Method Motorola shares domestic activities in 3 categories: a) unstructured activities made ad hoc; b) structured activities taking place on non-routine (unusual); c) structured activities, of routine (normal).

The activities in the third category are predictable, can be planned that the work can be improved, and staff can be prepared, trained accordingly.

Activities arising spontaneously can not be anticipated, this way being difficult to establish working procedures.

Therefore, the only way left is training employees to develop skills in order to cope with situations unforeseen.

Method belonging to professor Kano classifies activities to improve the quality of the effects made outside, on customers:

a) activities designed to satisfy the dissatisfied persons; b) activities designed to thank her customers; c) activities designed to impress the customers.

This knowledge allows categorized as factors whose action varies by type of consumers to whom it is addressed, to which the impact is different.

For example, in the case of no satisfied customers, they expect a certain level of quality. So, if it reaches the quality level, it does not automatically lead to dissatisfaction from the client, because he simply expected it.

Customers in the second category have a positive attitude towards the organization when it attaches attention due attention to the factors.

There are situations when customer satisfaction is very obvious, they are pleased with the quality service and are surprised by the activities that triggered surprise and customers are in rapture. Customers are faced with the quality which they do not expect.


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EVALUATION OF QUALITY OF SERVICE

A basic requirement for doing business in this millennium is to increase the capacity to collect, measure and analyze data using a well developed information system in place, which to base taking decisions. Information system should link between performance of service quality and results of business. Intelligent information is the dominant feature of the future.

There are two approaches manners to performance quality services: - reactive, after the service; - pro-active, based on prevention, before enforcement of the service. Currently, many organizations rely solely on reactive measures: - the number of errors in 100 transactions; - the number of customer complaints over a certain period of time. The pro-active approaches represent the performance indicators based on the future provision and prevention. Indicators are proactive, provide customer satisfaction. Examples of pro-active: - the quality of design; - the quality education and training, etc.

To establish customer satisfaction, should to identify and classify features as expressed in tangible and intangible. The first instrument is used to keep lists of the employees and managers with features that they consider that part of customer satisfaction.

Another tool for analyzing and defining characteristics of quality appreciated by the customer is Quality House. This has a matrix in which each row is a requirement or a need for customer, and each column is a technical requirement in terms of organization.

Customer requirements are considered "WHAT”, and the manner how will organization fulfill from technically point of view these desires are call “HOW” links. So Quality House is a bridge between the “WHAT” and the "HOW."

The matrix of relations identifies the quality characteristics required by the client. Quality House is an excellent way of transforming customer needs and desires of the final characteristics of the beneficiary customer. Quality House helps correlation of marketing function (EC) with technical and operational functions (HOW). Quality House is the core of method QFD (Quality Function Deployment) which is used, mainly to the quality of planning.

HOW (performance requirements)

WHAT (customer demands)

Mental accessibility

Kind receive

Counseling qualified

Reduced waiting time

High yeld

Information about the markets for real

estate values


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Information about filing trends

Accessibility Information

- strong influnce; - negative influence;

Fig.2. Example of a quality house in the quality of investment activity consulting Processing [1]

Evaluation criteria of customer perception and which represents the 10 dimensions of

service quality are: security and confidence, warmth, competence, affordability, accessibility, courtesy, communication, reliability, security, understanding / knowing the customer (empathy); tangible attributes.

It notes that only the total quality of the process is the key to customer satisfaction, creating customer value and customer fidelity.

TQM is the most important type of management in order to achieve customer satisfaction and profitability of a company. Total quality management is performed under general principles that have applicability on services areas. These principles are expressed in such:

- the quality should be perceived by customers, so it starts from the needs and expectations and ends with the perception thereof; - quality is not on a product, service, but must be found in any company; - total quality requires the involvement of all employees; shall be removed barriers between departments and employees working as a team to meet customers; - quality involves collaboration with the quality partners , thus attracting suppliers and distributors of quality; - quality can always be improved by the method "reporting their performance to those of the most powerful competitors trying to catch up and overcome them”; -improving the quality is permanent, but sometimes requires passing over certain stages; - the quality costs nothing extra, but involves the elimination from the start of conformity, so "things are made right the first time and every time" with efficient equipment and solutions;

The quality depends, first, by employee training, management training and a culture of the company, which gives flexibility, speed and initiative in action.

CONCLUSIONS The paper/thesis tries to invoke the need to implement the total quality management at the

service in a world characterized by an increasingly sophisticated demand, in which the competition takes rough/hard forms and in the context of an economic crisis ever closer and threatening. During the work was focused on the need to continue improving, and is offering a model in three stages, and the arrangements for evaluating the quality of service, offering as an example the "Quality Home".

Total quality management is the solution for organizations providing services to increase competitiveness and to strengthen the market position and requires an integrative approach to their activities and their relationships with the market

Each organization can create their own form, a distinct personality on the market centering on programs to improve the quality which are based on two objectives: improving the production process and satisfy customer requirements, but the techniques and methods of execution are often different from one organization to another.


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REFERENCES: 1. Bruhn M., Orientation towards the client-base of a successful business, Economic Publishing House, Bucharest, 2001, page 41. 2. Falniţă E, Total Quality Management, Mirton Publishing House, Timisoara, 2007, page 55. 3.Ioniţă I, Quality management and engineering of value, ASE Publishing House, Bucharest, 2008, page 50 4. Postavaru M, Total quality management, MATRIXROM Publishing House, Bucharest, 1998, page2. 5. I Stanciu, Total Quality Management, University Book Publishing House, Bucharest, 2003, page 339-340.


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RISK ANALYSIS OF A BUSINESS ENTITY FOR ENVOROMENT PROTECTION

Ph.D. Associate Professor Neculina CHEBAC Danubius University, Galati, Romania

[email protected] Ph.D. Lecturer Cristina Mihaela ONICA

Dunarea de Jos University, Galati, Romania [email protected]

Abstract The discriminate analysis was resorted to, by means of which the financial characteristics of some companies

that went bankrupt and some profitable companies. Socio-economic phenomena are influenced by numerous factors essential and accidental those are related to each other by many ties, intensities and meanings. The score function is a linear function of several variables, which are weighted by certain medium coefficients, established by the smallest squares method, based on the observations made on the companies analysed and grouped into two types. In my work, I achieved an analysis of the bankruptcy risk and I tried to adjust Altman and Conan & Holder score functions to the existing realities in Romania.

Analysis of profitability of an enterprise can not only analyze the correlation with risk analysis. Risk is defined as the probability of producing an event, under pressure, from various factors, which may represent potential harm to which they expose an enterprise.

Exposure to risk of loss consists of the additional expenditure that supports enterprise, which shows that the risk is linked to company profitability. Shareholders and investors assume a risk by investing in an asset only in exchange for remuneration proportionate to the risk assumed.

The risk of bankruptcy involves the introduction of a function that can be estimated probability that a firm's losses and, be unable to honor its contracts with customers, pay suppliers and banks to repay loans.

This risk is opposed to the likelihood of profit and growth is a matter of company profitability, in terms of risk assumed.

Keywords: scoring method, risk of bankruptcy, insolvency, profitability, discriminate analysis Jel Classification: C52, D81, M41

1. INTRODUCTION

Degradation in the situation of a company, it is no longer due to debt-law stipulate in this case reorganization or liquidation of the company.

It can detect firms in difficulty according to the following criteria: Over debt – no debt maturing the company can face; Insolvency-asset company is not sufficient to pay debts.

The risk of bankruptcy may be considered in light of the essential decision regarding making process by: rates method, scoring method. This result expresses the volatility of economic and operating conditions can be examined from two viewpoints: the company as social- economic organization - intention lively social growth assets (property

of the shareholders) and the corresponding payment of production factors (risk of bankruptcy); financial investors from abroad ,interested in achieving the best investment, in terms of a

financial market with various sectors and profitability and different degrees of risk (portfolio risk).

2. CASE STUDY-SONYX S.A. GALATZI, THE COMPANY’S PROFILE

Founded in 1994 and with the field research, design and production of equipment and

installations for environmental protection, the company succeeded in a relatively short time to develop flexible technology, high efficiency and energy yield infested waters for the purification of hydrocarbons. Based on experience over 20 years in the area of team research and collaboration with a talented team of engineers and automatism system and the University "Dunarea de Jos" Galati and research institutes, the company managed to achieve range of products of high


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performance, adaptable to a multitude of uses, either equipment or incorporated in complex installations, together with other complementary equipment manufacturers.

The quality management system implemented according to ISO 9001 to ensure full identification of user needs and adapt to the highest degree offered a solution to meet these requirements with a high level of quality.

The activity of the company is making equipment and installations for the separation-filtration for separation of hydrocarbons in polluted waters.

3. THE BANKRUPTCY RISK ANALYSIS 3.1. CONAN AND HODLER MODEL

Conan and Hodler model is a model that determines the likelihood of a company to come

out of bankruptcy. This model was developed based on a sample of 200 French industrial companies [1]. The model is based on the following score function:

Z = -0.16R1-0.22R2+0.87R3+0.10R4-0.24R5, where: R1= Assets (excluding inventory) / Total assets; R2= Permanent equity / Total liabilities; R3= Financial expenses / CA; R4= Personal Expenses / VA; R5= EBE / Total liabilities; Z= score. Function Interpretation of Z score: • Z=0,210 is equivalent to a probability of failure of 100%; • Z=-0,068 means a probability of failure of 50%; • Z=-0,164 means a probability of failure of 10%;

Table no. 1 CONAN AND HOLDER MODEL

NO. INDICATORS 2005 2006 2007 2008 COEF.

1 Assets 1260 989 1280 1328

2 Permanent equity 3602 3329 3591 1683

3 CA 8682 7214 7388 7688

4 Financial expenses 2001 242 233 642

5 Personal Expenses 3045 748 937 1758

6 Total liabilities 9637 947 1324 2929

7 VA 7542 1272 1362 1191

8 EBE 7358 420 322 -866

9 Total assets 2819 3914 4215 4001

10 R1 0.046551 0.060194 0.053405 0.101061 -0.16

11 R2 0.23732 0.348932 0.274745 0.333424 -0.22


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12 R3 0.230477 0.239552 0.098899 0.249528 0.87

13 R4 0.403739 0.484223 0.806949 5.838726 0.1

14 R5 0.763516 0.508165 0.355234 0.389821 -0.24

15 Z -0.00201 0.048477 0.012492 0.61788

For 2005 the probability of bankruptcy is greater than 50%. In 2006 and 2007 the probability of bankruptcy increase over 2005 but less than 100%. In 2008 the probability of a crash is 100%, so bankruptcy is imminent. 3.2. ALTMAN MODEL 3 WITH 5 VARIABLES

Due to the recession in recent years in Western Europe bankruptcies recorded an unprecedented rate. Thus in 1991, in the UK have been 4200 of bankruptcies, with 24% more in 1990. Camellia Minetos's view, studies predicted damage and cessation of activities, have focused mainly on the examination of companies that have given bankruptcy, seeking to distinguish the characteristics of both financial and non-financial assets, which led to this result. Professor Altman has used information obtained from studying a broad sample of companies, both among those who were bankrupt, and those who survived. He found that analysis based on several variables, by using five indicators, allowed providing 75% of bankruptcies two years before production. Prestigious economic analysts have tried to develop the capacity of the original prediction model. Taffler in Western Europe, Kah and Killough have created “z” models analysis with a greater capacity to forecast. Altman’s “Z” model has the following form:

Z = 3, 3 * Profit before tax / total assets +1* sales / total assets +0,6* exchange capitalization / book value of loans +1,4* Reinvested earnings / total assets +1,2* assets /

total assets Qualitative interpretation of the result, Z function, proposed by Altman, was:[2]

• If z< 1,8 , company is almost bankrupt; • If z=1,8;3 , company is in a difficult situation and must be carefully work them; • If z>3, company is profitable and therefore, banker can be trusted in society.

Table no. 2 Altman Model 3 with 5 variables 2005 2006 2007 2008 COEF.

R1 Profit before tax / total assets 0.251627 0.564577 0.40986 0.158263 3.3

R2 CA/Total assets 0.312089 0.438058 0.751177 0.783621 1

R3 Exchange capitalization / book value of loans 0.141743 0.070872 -1.41743 -0.9922 0.6

R4 Reinvested earnings / total assets 0.21568 0.11 0 0 1.4

R5 Assets / Total assets

0.283871 0.409126 0.328151 0.434484 1.2


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Z 1.870099 2.988637 1.647035 1.231949

For 2005 and 2006 the company is in a difficult situation and should be followed carefully and in its 2007 and 2008 the company is close to bankruptcy. 3.3. METHOD CREDIT MEN

This method involves assigning a global rate, taking into account: [3] • Quality staff and its management (40% weighting); • Economic prospects (20% weighting); • Financial performance (40%). Financial performance is assessed using synthetic N rates:

N=a1R1+a2R2+ a3R3+ a4R4+ a5R5 The enterprise has a perfectly consistent with the reference rate will be: N=a1+a2+a3+a4+a5

Table no. 3 METHOD CREDIT MEN RI FORMULA AI (%)

R1 Current assets / Short Term Debt 25

R2 Equity /Liabilities and long-term 25

R3 Equity / Fixed net values 25

R4 Annual Sales / Inventories 25

R5 Sales / Customer 25

All rates are set so that their growth always means an improvement and reducing their damage. Therefore:

• N> 100 is a "better" than the model situation; • N <100 is "worse" than the model situation.

Table no. 4 Calculation methodology

RI FORMULA 2006 2007 2008 AI (%)

R1 Current assets / Short

Term Debt

0,871 0,573 0,689 25

R2 Equity /Liabilities and

long-term

0,9923 0,954 0,616 25

R3 Equity / Fixed net values 0,9238 0,7572 0,2370 25


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R4 Annual Sales /

Inventories

0.2547 0.7961 0.83065 25

R5 Sales/Customer 1.5330 4.3753 2.75475 25

N 114.37 186.39 128.185

It is noted that N> 100 in all three years analyzed, so the company is "better" than the model.

3.4. COLLENGUES MODEL The model was developed based on a sample of SMEs as follows: [4]

• 35 bankrupt companies; • 35 healthy businesses.

The author proposes two functions simultaneously: Z1=4,9830*R1+60,066*R2-11,8348*R3

Z2=4,6159*R1-22*R4-1,9623*R5 , where:

R1= Personnel expenses / value added; R2= Financial expenses / turnover; R3= Working capital / total balance sheet; R4= Operating result / turnover; R5= Working capital / stock. The author proposes a simple classification rule: [5]

• Z1>5,455 produces a bankrupt; • Z2<5,455 that society is healthy; • Z2>3,0744 means that the company is bankrupt; • Z2<3, 0744 means that the company is healthy.

Table no. 5 Collengues Model

Z12006=

16.66184117; Z12007= 8.86290087; Z1 = 2008 = 21.84725534; Z1>5,455;

Z22006= -3.089147165; Z22007 = 2.99140878; Z2 = 2008 = 5.664497031;

RI FORMULA 2006 2007 2008

R1 Personnel expenses /VA 0.508526 0.83083 0.89461

R2 Financial expenses /CA 0.239527 0.098894 0.24951

R3 FR/ Total balance sheet 0.021933 0.102857 -0.20299

R4 Operating result /CA 0.241505 0.004957 -0.01547

R5 FR/Stock 0.062856 0.374339 -0.60884


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Z22006, Z22007 < 3, 0744; Z2 = 2008 >3, 0744.

Looking only to Z1 we find that for three years Z1 is higher than 5455 so the method is, bankrupt. Calculating Z2 and see that Z22006, Z22007< 3, 0744 and Z2 = 2008 >3, 0744. This means that the company is healthy in 2006 and 2007 and bankrupt in 2008. Cumulating Z1 and Z2 shows that the firm is bankrupt in the analyzed three years.

3.5. TEST “R”[6]

Table no. 6 Presenting risk factors RISCK FACTORS DRAFT 2008

1 Oversized business volume over the existing

possibilities (uncontrolled expansion)

15 -

2 Inadequate capital structure 15 15

3 Inadequate capitalization (small profits reinvested) 15 15

4 Investment projects in execution, too large or too many 15 15

Total possible risks 60 45

The threshold of danger 15 Danger

Table no. 7 Presenting risk symptoms

3.6. “I” FUNCTION Economist Paul Ivanciu, on studies conducted on over 50 different companies of various sizes and sectors in the country, propose a new scoring function, called "function I" responding to the best requirements and significance of the national economy.

I=0,333*R1+5,555*R2+0,0333*R3+0,71429R4+1,333*R5+4*R6-1,66032 [7]

SIMPTOME DE RISC DRAFT 2008

1 Financial signals (making late payments, growth stocks,

etc.).

5 5

2 "Creative" accounting (presentation of data analysis

unasserted by records, "the arrangement of flags", etc...)

5 -

3 Non financial signals (Poor quality declines, failure to

contract terms)

3 3

4 Other signals (resignation of the staff especially the staff of

management, legal action, on the negative rumors)

2 2

Total possible symptoms 15 10


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Table no. 8. Presentation of “I” Function model NO. VALUE CHARACTERISTICS PROBABILITY OF

BANKRUPTCY (%)

1 I<0 Imminent bankruptcy 81-100

2 0<I<1,5 High risk of bankruptcy 64-81

3 1,5<I<3,0 Area of uncertainty 46-64

4 3,0<I<4,5 Medium risk of bankruptcy 29-46

5 4,5<I<6,0 Low risk of bankruptcy 12-29

6 I>6,0 Very low risk of bankruptcy 0-12

Table no. 9 Calculation methodology NO. INDICATORS SYMBOL FORMULA COEFFICIENT

1 Total income unbreakable Tiu - -

2 Total active corrected Tac - -

3 CAF CAF - -

4 Total claims Tc - -

5 Total debts Td - -

6 Availability Av. - -

7 Short Term Debts Std - -

8 Working capital Wc - -

9 R1 - Tiu/Tac 0,333

10 R2 - Caf/Tiu 5,555

11 R3 - Tiu/Tc 0,0333

12 R4 - CAF/Td 0,71429

13 R5 - (Cr+Av)/Std 1,333


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Table no. 10 Model result on analyzed company NO. INDICATOR SYMBOL FORMULA 2006 2007 2008 COEFF.

1 Total income

unbreakable

Tiu - 6692080 6473698 6347402 -

2 Total active

corrected

Tac - 36050470 36531628 40540030 -

3 CAF CAF - 175.506 133.422 -

1.708.752

-

4 Total Claims Tc - 98 292 303 -

5 Total Debs Td - 947 1324 2929 -

6 Availability Av. - 63 73 96 -

7 Short Term Debts Std - 505 624 2317 -

8 Working capital Wc - 96.448 181.784 -

1.578.694

-

9 R1 - Tiu/Tac 0.088881

7

0.218745 0.276949 0,333

10 R2 - Caf/Tiu 0.235982

9

-0.27475 -1.059868 5,555

11 R3 - Tiu/Tc 1.533011

2

4.375299 2.7547511 0,0333

12 R4 - CAF/Td 0.043022

8

-0.10238 -0.338919 0,71429

13 R5 - (D+Av)/Std 1.167909

1

0.187120

4

1.020213 1,333

14 R6 - Wc/Ats 0.021932

8

0.102857

3

-

0.2029925

4

I2006= +1.406497;

I2007 = -2.380285;


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I2008 = -7.058042.

For 2006 function shows that the company has a high risk of bankruptcy. For 2007 and 2008 function shows that the company is in a state of imminent bankruptcy.

CONCLUSIONS

The risk of bankruptcy has been and is in attention of managers and owners out of funds. Managers are interested for the smooth running of the production cycle and investors are interested in recovery of loans and related interest. Many financial organizations and researchers have been concerned with developing methods for prediction of the risk of bankruptcy. The technique used is discriminatory statistical analysis of financial characteristics (calculated using the rates) with operating companies and the normal difficulties of economic and financial management. Most risk analysis of bankruptcy, are based on a score depending on which is roughly determined whether a company will go bankrupt or have bad economic results in immediately period following the analysis (no more than two years). [8] As a result of their specific functions weighted score based on Western methods which have not given satisfaction for Romanian companies. Such companies analyzed by two different methods, leading to contradictory results: one method provides an imminent risk and another method a maximum profitability. Financial equilibrium is an imperative on going for any trader in the sense that the maintenance of solvency is a restriction that must be currently undertaking. Any payment obligations of the disorder generate damage and require urgent correction.

REFERENCES: 1. Hondler M., Loeg J., Portier G., Le score de l’entreprise, Nouvelles Editions Fiduciaires, 1989, p. 136 2. Altman E.I., Financial Ratios, Discriminated Analysis and Prediction of Corporate Bankruptcy, Journal of Finance, Sept. 1968 or Stancu Ion, Financial management of the economic operator, “Economical” Publishing House, Bucharest, 1993,p.96 3. Niculescu M., Methods of risk analysis, Review Finance - Credit – Accounting, no.5-6, 1992, p.13-15. 4. Mereuţã C., Diagnostic analysis of companies in transitional economies, “Technical” Publishing House, Bucharest, 1993, p.106. 5. Georgescu N., Considerations on the company's financial analysis, based on rates, IIROVAL Bulletin, 3/1999, p.10-15. 6. Niculescu M., Economic -Financial Analysis, C. Brancoveanu Faculty, Bucharest, 1993, p.121. 7. Chebac N., Accounting information in decision making and decision analysis, “Alma” Publishing House, Galatzi, 2002, p.190. 8. Onica M, Business analysis, “Europlus” Publishing House, Galatzi, 2009, p.116.


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THE IMPACT OF THE ECONOMY BASED ON KNOWLEDGE ON MODERN ORGANIZATIONS

Assistant Ph.D. Student Simona BUTA

[email protected] Professor PhD. Ghiorghi PRISĂCARU

”Ştefan cel Mare” University of Suceava, Romania

Abstract: The work consists in explaining the microeconomic perspective (the approach) of the economy based on knowledge; and here we refer closely to the structural and economic changes produced at the level of the modern organizations. In the first part of the work I made a short presentation of the changes produced in the last two-three decades, changes which created a reality in which the old life style and the technical industrial production manner find less and less place; determining the knowledge and the information as resources, is at the basis of this reality called economy based on knowledge. The indistinguishable passing from an economy based on material resources to an economy based on knowledge had and will have a series of consequences which aren’t yet sufficiently clear. But it is obvious that there are not only positive effects, but also negative effects, and as regards the organization the effects are remarkable. The second part of the work tries precisely to concentrate on the main genetic mutations generated by the economy based on knowledge at the microeconomic level. At the microeconomic level, the changes take place mostly in the organizational structures and algorithms. The explosion of the computer networks and the Internet impose that certain intermediate levels between chiefs and subordinates be forced to disappear; in this direction will probably make for in future, the structure/the shape of the organization charts of all the modern organizations; this means the decentralization of the organizational structures (or the federalization of the great corporations).

Key words: economy based on knowledge, knowledge, network-type organization, e-business, human resource

JEL classification: M21, L22, D 83, O32

1. INTRODUCTION The motivation for the theme chosen for this work is constituted by the present context, where the global businesses take place, to the importance of the information and communication technologies in managing a modern organization. In the economy based on knowledge, the knowledge is non-rival and it can be common to millions of people, it is intangible and non-linear, in the sense that minor ideas can lead to amazing results (1); it is at the same time relational and possible to be divided in a collegial manner, in hundreds of contexts and patterns (2). Although a total analysis of this historical-economical phenomenon isn’t possible in a limited space of my work, the application of a perspective on the impact which the knowledge economy has in the modern organizations is a favourite method of investigation. The work is based on a vertical approach from a microeconomic perspective – the semination of the information and of the scientific knowledge – constituting a theoretical frame concerning some aspects related to the economy based on knowledge and its impact on the modern organizations.

2. GENERAL ASPECTS REGARDING THE ECONOMY BASED ON KNOWLEDGE The changes produced slowly, but firmly, from the last two-three decades, created a reality in which the old life style and technical industrial production manner find less and less space. An indistinguishable passing from an economy based on material resources to an economy based on knowledge has been realized (3). Both the modalities of organization of the productive systems or the social patterns and the name of the society we got familiar with are contested.


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Now, a new economy is obviously about to appear, an economy based on knowledge and ideas, an economy of the knowledge, in which the key-factor of the prosperity and of the creation of jobs is constituted by the degree of implementation of the new concepts, of the ideas of innovation and of technology in all the economic sectors. A new type of economy became established under the phrase economy based on knowledge. We can define the economy based on knowledge as being the economy which surpassed the development limit beyond which the knowledge represents the key resource (4). What makes this knowledge such an important resource? There are a lot of factors which have this as a consequence, the most important being: the progress registered in IT&C (5), the growth of the development speed of the new technologies, the competition at a global level, the market liberalization, the continuous change of the demand determined by the growth of the number of persons with medium and big incomes (who develop a sophisticated demand, of good quality products), the increase of the life quality importance. The economy of the knowledge, specific to the post-capitalist society, is defined by the following features (6): 1. The supremacy of the a-corporate values. The value of a company from the industrial economy is given, firstly, by material, corporate elements from the patrimony. Instead, the value of a company from the economy of the knowledge is determined by the capacity to get, disseminate and put good use to the knowledge and to the information. As consequence, the value of the company is given by the knowledge, the ideas and the information possessed by the employees from the organization; the employees become the main active of the company, because only they can get and process the knowledge. According to a study about the USA economy and the accounting value of the companies from the USA, it results that in the ‘70’s, the attainable/accounting values had approximately 95% from the market value of the companies, and now this percent decreased to 25% (7). 2. The disintegration of the markets. The products and the services become more and more adapted to the specific needs of some niches or even “particles” of the market. The disintegration of the markets involves the disintegration of the marketing, process which displaces the economy from homogeneity and non-differentiation towards extreme heterogeneity. The buyers acquire a greater power of influence over the sellers, because they have information from multiple sources, and they are able to analyse comparatively more quickly; they gather in various associations, other types of institutions meant to protect their interests and which, directly or by means of mass-media, exerts a permanent pressure on the producers (8). Products and services become more personalized eve when they are manufactured/offered in great series (for example, the customer can select and order a certain type of car); a product/service becomes available everywhere and the e-business type affairs extend exponentially (9). 3. Modifying the nature of the labour. The routine, repetitive and programmable labour declines in favour of the creative, non-repetitive labour, which tackles new tasks. The employees gradually become the most valuable active of an organization or of a country, and the competition between the companies means the competition between groups of persons with a certain qualification, knowledge, capacity of learning, innovation, motivation of work in the organization, loyalty etc. (10). According to Buckingham and Coffman, nowadays, the grater part of the value of a company consists in its employees’ brains (11). The analysts estimate that the so-called knowledge worker, associated to the economy of the knowledge, needs four types of abilities, that is (12): - The exploitation of its own knowledge basis, accumulated through education and experience - The combination and the processing of the information/the knowledge, including the resort to IT, for bringing new complex knowledge - The accumulation of new knowledge and its sharing with other employees - The continuous learning from the own experience with the help of the data base offered by the computer networks.


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Source: Adapted from World Bank (1998/99), World Development Report–Knowledge for Development, New York:

Oxford University Press. 4. The innovation is the key to success. The survival of the companies isn’t possible anymore

without ensuring some constant fluxes of innovations addressed to all the aspects of their functioning. The innovation continues the permanent assimilation of the new, means changes. The orientation towards changes becomes a law. Especially in the high domains, the annual number of innovations/inventions increases, and the period of realizing and spreading an innovation permanently reduces; for example, the extended realization and spreading of some well-known inventions needed 10 decades for the exploitation of the steam motor, 4 decades for the electricity, 3 decades for the computers and 5 years for the Internet (13). No matter the object of activity or the dimension of a company, the Research and Development component must stay in the view of the top-management, and the process of innovation must constitute a characteristic of the organizational culture (14).

Types of Innovative Business Strategies

Production and Efficiency Practices Human Resources Management Practices

Product/Service Quality-related Practices

Business re-engineering Performance-based pay Total quality management (TQM)

Downsizing Flexible job design and employee involvement

Total quality management (TQM)

Flexible work arrangement Developing employee’s skills Improving coordination with customers/suppliers

Decrease in the degree of centralization

Greater integration among functional areas

Source: OECD (2000) 5. The return to “the reduced scale”. The differentiation of the products involves the

differentiation of the processes, and this excludes the scale economies so desired in the industrial production. But “the reduced scale” gives a high economic value. Big doesn’t necessarily mean


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good, and little isn’t anymore synonym with weak and non-competitive. In the new economy based on knowledge, we can notice, at the product level, the following changes:

The shortening of the product life. For being competitive, the companies are forced to launch new products on the market all the time. This means that the “conception, production, put good use, abandon” cycle is more and more restricted. The benefits are for the companies which can promote the novelty; therefore they are for the powerful companies, which can sustain complex research programs.

The products will be cheaper and more competitive. Their quality will be better, but the product life will be established by the design (and not by the materials used). The limitation of the product life means the abandoning of the idea of repair and its substitution with the reliability concept. This means the products will be guaranteed to resist a certain period of time without repairs (because it is impossible to maintain a stock of pieces of exchange for each of the products manufactured yearly).

However, the products which will have a longer life (where we will probably need repairs), will be realised modularly. Thus, they will look different, according to the fashion of that year; will be manufactured using concepts which will be maintained a great number of years.

The value of high-technologies products will tend to increase to the simple, basic products’ detriment. This means the activities that involve the technical progress to a smaller extent, like: the agriculture, the metal, energy, fuel production, will become less and less efficient.

A greater number of products will involve the intelligent technology. The mobile communication systems, the micro-computers, the multimedia systems will be involved in products used at home, in cars, toys etc. The products of the future will be completely push button, robotic, and the physical work will be gradually substituted. On the other hand, the quantity of knowledge needed in order to function normally in the society will considerably increase.

The newest tendency of the informational society is represented by the idea of “communication” between different products. An example would be the refrigerator which automatically orders the products which have been consumed at the supermarket or the computer which informs directly from the TV screen that an important e-mail has been received.

6. The “deregulation” of the organization. The orientation towards the change and innovation doesn’t allow anymore maintaining of some fixed organizational gearing on great periods of time. The decisional decentralization, no-standardization of the labour procedures, no-formalization of the organizational relationships, the increasing importance of the informal communication will constitute the organizational frame able to ensure the creativity, the reactivity and the flexibility of the business organizations.

Due to the competition, which is more and more powerful, the big companies will form international conglomerates (corporations). These will divide the risk of identifying, producing and launching the new technologies. The strategic partnerships between these very big companies will make, at a local level, the little companies to be disadvantaged compared to the branches of the multinational companies. The competence will move from the local market to a much higher level, to the international one.

For reducing the costs, the multinational companies have already started the moving of the productive activities in the poor areas, where the labour force is cheap. They kept in the technologically advanced countries only the conception and design activities. Thus, they spread branches in many countries, using the local opportunities regarding the informational, natural, human, legislative resources in order to get a competitive advantage.

The multinational companies will try, on the other hand, to eliminate from their structure the unprofitable activities. During the passing of time and during the increase of the decentralization process, the corporations will become more “brands” than what we call today companies. In other words, they will be organizations which will produce “brand goods”, at a certain quality, and the great majority of the company activities, from conception, promotion, to launching the products on the market will be subcontracted.


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7. The integration of economic systems. The increasing interdependence of the elements which constitute the economic systems leads to a prolonged integration of them. The efficient coordination of the integrated business systems claims instead, bigger and bigger volumes of information and a redoubtable capacity of processing the information. The economic growth at the company and national economy level is more and more significantly based on networking constructions, the top management accepting that it is mutually favourable to share the knowledge, to exploit them in common etc (15). The successful companies organize themselves in simple networks or Holon networks, which offers them a step forward in the global competition (16). In other words, the rough competition from the business world doesn’t exclude the cooperation on the same market, under the reserve of generating an advantage for the common customers; to the extent in which it favours the reduction of costs, almost any formula of collaboration/strategy becomes nowadays admissible (17).

8. The computerising of the business infrastructure. The informational systems represent the basis of some vast and extended partnership networks, many of them extended to the global scale.

Due to the informational revolution, the majority of transactions would be developed on-line, the business meetings would be substituted by video-conferences and certain employees will be able to work from home, to a terminal united through Internet to a “virtual” headquarters. John Saunders (manager of Langborough University Business School, editor of the Journal of Research in Marketing) considers that all the five Fs of the future companies will be: Focus (the company will have as main task the customer’s satisfaction), Fast (the company will have to be very adaptable, permanently innovating), Flexible (the organization of the company must be as flexible as possible), Flatten (the organization will be as near as possible to the network type one), Fun (the company will be interested in the employees’ satisfaction at their workplaces).

9. The acceleration of the rhythm of transactions and of the economic operations. The economy of great speeds substitutes the economy of the large scale. The time turns into a critic variable, each temporal period worth more than the previous one. The competence between the companies is based on time, more exactly on the quickness of reactions, and the slow, sequential, gradual approaches are substituted by “simultaneous approaches”.

3. MUTATIONS DETERMINED BY THE ECONOMY BASED ON KNOWLEDGE

AT THE ORGANIZATIONAL LEVEL According to A. Toffler, “each epoch generates an organizational form adequate to its

rhythm”. The organizations of the industrial era are provoked by the emergent model of the knowledge era organizations.

The post-capitalist society, and implicitly the economy based on knowledge, which is in a continuous dynamic, makes the organizations of any type to adapt them to an environment which is in a continuous change.

For surviving to the accelerated rhythm of change of the economy based on knowledge, the organizations will have firstly to find new and more flexible organizational forms. John Naisbitt, in his work “Mega tendencies”, talks about the need to abandon the hierarchies in favour of the communication networks, which will have as consequence the passing from the bureaucratic organizations, with a hierarchical structure, to those which are horizontally structured (18). The network-type organization supposes the substituting of the relationships of control and of vertical communication with lateral relationships. Secondly, the organizations will have to be able to adapt themselves and to be in a continuous transformation, in accordance with the evolutions of the environment and of the individual needs. Thirdly, they will be created around the problems which must be solved. These problems will be solved by groups of persons with different qualifications; we talk here about management teams. A team is a group where the members influence themselves mutually, in order to reach a common goal; not all the groups from the organization are teams, but all the teams are groups; “the translation” from group to team imposes that the members of the group help one another voluntarily for accomplishing an objective of the company (19). Fourthly,


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the managers will play only a role of connection links, with the capacity to understand the scientific language, without the pretension to know and to direct the whole activity. Fifthly, the management of the groups of specialists will be realizes mostly in an “organic” manner, rather than in a “mechanical” one, the groups constituting themselves according to the problems which emerge, and the command is for the most capable to solve the problems, not for those who have a certain rank. The people will not differentiate by rank or roles, but in function of their capacities and their professional qualification. This means that the bureaucratic type vertical differentiation will be substituted by a functional and flexible one.

The conclusion is that the temporary, adaptable systems, constituted by specialists centred on solving the problems and coordinated by the connection links will gradually substitute the classic organizations.

Operating in an economy of the knowledge, based on the informational and telecommunication technologies, imposes to the organization to adopt new models of businesses (e-business, e-commerce, e-banking etc) which radically change their efficiency, in the sense of reducing the costs, including the transactional ones. E-business (electronic-business) is a captious term which describes the manner in which an organization uses electronic links, more precisely computer networks like the Internet or other type, by means of which the employees, the managers, the consumers, the customers, the suppliers and the partners are permanently connected (20). The recourse to e-business has been induced by the economy of the knowledge, due to the fantastic advantages offered by this instrument in the daily management, in the communication and the connecting of persons, I shortening the distances in time and space (21).

One of the variants of the e-business affairs is the e-commerce type one, with various forms of application (22):

- Business to consumer (B2C), like the transactions from www.amazon.com; - Business to business (B2B), by which are made transactions between companies through

EDI (Electronic Data Interchange); - Consumer to consumer (C2C), like the transactions on www.ebay.com.

In the new economy based on knowledge, the more and more powerful competition makes that the great companies form international conglomerates (corporations). They will divide the risk of identifying, producing and launching new technologies. The strategic partnerships between these very big organizations will make that, at a local level, the small companies be disadvantaged in comparison with the branches of the multinational companies. The competition will move from the local market on a much higher level, the international one.

Figures 1, show the fractions of firms that introduce new organizational practices for ICT-investing firms and non-ICT investing firms.


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Source: OECD (2000) The incidence of production and efficiency practices is much higher in firms that invest in

ICT than is the case for non-ICT investing firms. For example, 35 percent of the firms that invest in ICT report introducing flexible work arrangement, compared with 20 percent of non-ICT investing firms. It appears that ICT allowed significant organizational innovations in the areas of business re-engineering, flexible work arrangement, outsourcing and greater integration among different functional areas (figure 1).

As regards the human resources without which the organizations could not exist, it is confirmed more and more frequently the idea that the harsh fight between the multinational companies is reduced to the competition between the human resources of which disposes each organization, between the training and preparing methods for the employees, between the methods of exploiting the knowledge as a particular resource. In other words, the phrase “the value of a company lies in its employees’ brains” tends to become an independent postulate (23). The CEO attitude and the attitude of its team regarding this postulate will materialize in certain types of policies and strategies for imposing the company in the economy of knowledge (24). Also, for reducing the costs, the multinational companies have already started the moving of the productive activities in the poor areas, where the labour force is cheap. They kept in the technologically advanced countries only the conception and design activities. Thus, they spread branches in many countries, using the local opportunities regarding the informational, natural, human, legislative resources in order to get a competitive advantage. The extension of the employees’ polyvalence, the quality improving, the increase of the research-development effort, the information processing gradually substitutes the reduction of the costs of production and the increase of the productivity of the direct “work”, as main objectives of the administration of the company (25).

Figures 2 show the fractions of firms that introduce HRM Practices for ICT-investing firms and non-ICT investing firms.


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Source: OECD (2000) Incidence of HRM practices is much higher among ICT-investing firms than in non-ICT

investing firms. Firms investing in ICT are more prone to use profit sharing plans, individual incentive systems and merit pay. Information sharing with employees, job rotation and multi-skilling, and increased employee involvement/participation schemes are found to complement investment in ICT. The link between formal job-related training and classroom training and investment in ICT are particularly strong (figure 2).


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4. CONCLUSIONS The economy based on knowledge which has already influenced each person’s life,

implicitly the successful companies, changed and will change the organization and the management of the organizations. In the newly created context, the knowledge became accessible to all the employees, which makes this resource the basis of the success in the future organizations (26). The harsh fight between the multinational companies is reduced to the competition between the human resources of which disposes each organization, between the training and preparing methods for the employees, between the methods of exploiting the knowledge as a particular resource.

The key feature of the modern organization in the economy of the knowledge will be the substitution of the pyramidal traditional hierarchy by a horizontal hierarchy. This means that the teamwork, the collaboration and the cooperation’s between employees will be a primordial element.

The new information technologies have a strong impact on the manner in which we get our information, we communicate and we tackle the businesses. The new aptitudes which accompany these technical, intellectual and social technologies become essential for the work, the life and the active participation in a economy of knowledge.

In the economy of knowledge, the managers/the leaders must think of new and innovating ways of tackling the development, for answering to independent challenges, which surpass the cultural and geographical boundaries, like the creation of economic systems which function in the benefit of the poor ones, aspects related to the degradation of the environment etc.

NOTES:

(1) Burciu, A., - Introducere în management, Editura Economică, Bucureşti, 2008, p.299 (2) Toffler, A., Toffler, H. – Revolutionary Wealth, USA, 2006; traducere în limba romănă

Avuţia în mişcare, Editura Antet, 2006, p.95 şi următoarele (3) Fukuyama, F. - State Building Governance and World Order in teh 21st Century, 2004,

traducere în limba română Construcţia statelor – Ordinea mondială în secolul XXI, Editura Antet, 2004, p.127

(4) Houghton, J., Sheehan, P., - A Primer on Knowledge Economy (5) IT&C - Information and Communication Technology (Tehnologia Informaţiei şi a

Comunicării) (6) Niculescu, N., - Economia bazată pe cunoaştere – Noua economie, Revista Economie

teoretică şi aplicată nr. 1/2006, p. 50 (7) Burciu, A.,ş.a., -Introducere în management, Editura Economică, Bucureşti, 2008, p.117 (8) Drucker, P., – Managing the Non-Profit Organization, Harper – Collins, New York, 1990;

The Pension Fund Revolution, Harper & Row Publishers, 1976; The New Society, Harper & Row Publishers, 1950

(9) Nicolescu, O., Plumb, I., ş.a. - Abordări moderne în managementul şi economia organizaţiei, vol. I - Management general al organizaţiei, Editura Economică, 2003

(10) Coffman, C., Molina, G., - Follow this Path, Gallup Organization, Warner Books, USA, 2002

(11) Buckingham, M., Coffman, C., - First Break All the Rules, The Gallup Organization, 1999; traducere Manager contra curentului, Editura Allfa, 2005

(12) Cooper, C. L. ş.a. - The Blackwell Encyclopedia of Management, vol. VII, 2nd edition, edited by G.B.Davis, Blackwell Publishing, USA, 2005, p. 200

(13) Nicolescu, O., Plumb, I., ş.a. - Abordări moderne în managementul şi economia organizaţiei, vol. I - Management general al organizaţiei, Editura Economică, 2003

(14) Burciu, A., - Introducere în management, Editura Economică, Bucureşti, 2008, p. 118 (15)Anderson, S., ş.a. - Business: The Ultimate Resource, Bloomsbury Publishing Plc, London,

2002


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(16) Cooper, C., (editor) - The Blackwell Encyclopedia of Management, vol. VII, 2nd edition, edited by G.B.Davis, Blackwell Publishing, USA, 2005

(17) Drucker, P., - Men, Ideas and Politics, Harper & Row Publishers, New York, 1971; The Age of Discontinuity, Harper & Row Publishers, New York, 1968

(18) Naisbitt, John, - Megatendinţe, Bucureşti, Editura Politică, 1989 (19) Certo, S. C. – Managementul modern – diversitatea, calitatea, etica şi mediul global, Ed.

Teora, Bucureşti 2002, p. 509 (20) Burciu, A. – Introducere în management, Editura Economică, Bucureşti, 2008. p.89 (21)Anderson, S. ş.a. – Business: The Ultimate Resource, Bloomsbury Publishing Plc, London,

2002 (22) Cooper, C.L. (editor) – The Blackwell Encyclopedia of Management, vol. VII, 2nd edition,

edited by G.B.Davis, Blackwell Publishing, USA, 2005, p. 96 şi următoarele (23) Burciu, A., - Introducere în management, Editura Economică, Bucureşti, 2008 (24) Buckingham, M. C. Coffman – First Break All the Rules: What the World's Greatest

Managers do Differently, Gallup Organization, 1999 (25) Lorino, P. (1991), Le controle de gestion stratégique, Dunod, Paris, p. 88 (26) Drucker, P. – Management challenges for the 21th Century, Harper-Collins, 1999

BIBLIOGRAPHY

1. ANDERSON, S. (2002), ş.a. - Business: The Ultimate Resource, Bloomsbury Publishing Plc, London

2. BUCKINGHAM, M., COFFMAN, C. (1999, traducere 2005) - First Break All the Rules, The Gallup Organization, 1999; traducere Manager contra curentului, Editura Allfa.

3. BURCIU, A.(2008) - Introducere în management, Editura Economică, Bucureşti 4. CERTO, S. C. (2002) – Managementul modern – diversitatea, calitatea, etica şi mediul

global, Ed. Teora, Bucureşti 5. COFFMAN, C., MOLINA, G. (2002) - Follow this Path, Gallup Organization, Warner

Books, USA 6. COOPER, C.L. (editor) (2005) – The Blackwell Encyclopedia of Management, vol. VII, 2nd

edition, edited by G.B.Davis, Blackwell Publishing, USA 7. DRUCKER, P. (1999) – Management challenges for the 21th Century, Harper-Collins 8. DRUCKER, P.(1990) – Managing the Non-Profit Organization, Harper – Collins, New

York, 1990; The Pension Fund Revolution, Harper & Row Publishers, 1976; The New Society, Harper & Row Publishers, 1950

9. DRUCKER, P. (1971) - Men, Ideas and Politics, Harper & Row Publishers, New York, 1971; The Age of Discontinuity, Harper & Row Publishers, New York.

10. FUKUYAMA, F. (2004) - State Building Governance and World Order in teh 21st Century, 2004, traducere în limba română Construcţia statelor – Ordinea mondială în secolul XXI, Editura Antet

11. HOUGHTON, J., SHEEHAN, P. (2000) - A Primer on Knowledge Economy 12. LORINO, P. (1991) - Le controle de gestion stratégique, Dunod, Paris 13. NAISBITT, J. (1989) - Megatendinţe, Bucureşti, Editura Politică. 14. NICOLESCU, O., PLUMB, I., ş.a. (2003) - Abordări moderne în managementul şi

economia organizaţiei, vol. I - Management general al organizaţiei, Editura Economică 15. NICULESCU, N. (2006) - Economia bazată pe cunoaştere – Noua economie, revista

Economie teoretica si aplicata nr. 1/2006 16. TOFFLER, A., TOFFLER H. (2006) – Revolutionary Wealth, USA, 2006; traducere în

limba romănă Avuţia în mişcare, Editura Antet. 17. *** OECD (2000) – A New Economy?: The Changing Role of Innovation and Information

Technology in Growth , DSTI/IND/STP/ICCP, Final, Paris.


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SIGNIFICANT FOREIGN DIRECT INVESTMENT (FDI) IN ECONOMICS

PhD. Simona Mihaela POPOVICI University "Alexandru Ioan Cuza" Faculty of Economics and Business Administration, Iasi, Romania

Email: [email protected]

Abstract: Investments in development are essential to any economic system (business, civil organization or public

institution, sector, national economy, etc..). Through them ensures the creation, consolidation, reclamation, improvement and growth of any of the system. Regarding foreign direct investment in recent years has been a pretty big interest worldwide in attracting foreign capital, some countries managed to attract higher foreign direct investment, other foreign investment portfolio, and only a small countries have attracted foreign capital in both forms. Flows of foreign direct investment were directed towards those countries which have shown interest to receive them by creating appropriate conditions, the existence of a liberal trade regime, a payment system aligned with international standards and a system of exchange liberal favors attracting foreign investment, governments must seek to build a favorable climate for business, for example, a low corporation tax and granting foreign investors the facilities, but especially by removing barriers to investors.

Keywords: foreign direct investment, know-how, investment flows, globalization, multinational firms mergers; JEL Classification: P45

1. INTRODUCTION For better integration into the international economy, restructuring and reform process of the

Romanian economy require significant flows of foreign investment in both directions (both as recipient country and issuing) required by the growing globalization of production processes.

Foreign investment, whether direct or indirect are and will be the engine of economic growth.

In what follows we intend to explore the possibility factor to influence political decision-making through appropriate management of multinational firms to sanitation investments to our country as an important factor in the decision to invest overseas is the economic and political-legal in the country host.

2. EVOLUTION OF DIRECT FOREIGN INVESTMENTS IN ROMANIA

During 1990-2001, foreign direct investment in Romania reached 7.3 billion dollars (of

which about 2 billion dollars in privatization) but the level found far from the real potential of the economy and the situation reported in neighboring countries: Poland (39 billion dollars), Hungary (21.5 billion dollars), and Czech Republic (12.5 billion dollars). This differentiation can be explained by the position of decision-makers from foreign direct investment in the countries mentioned, which was different both in content and consistency and that the major entry of foreign capital in these economies were particularly partial privatization of public utilities, some airlines and some state banks.

Year 1992 was the year that multinational companies have entered for the first time in Romania in the very large number. Well-known names as Shell, Amoco, Enterprise Oil, which have invested in mining and exploitation of mining resources, and Siemens, Alcatel telecommunications, Coca-Cola and Pepsi in the beverage, Colgate-Palmolive in the cosmetics industry, Coopers & Lybrand, Ernst & Young Wasserstein & Perella in consulting, accounting and financial services have entered the Romanian market in that year.

In essence, in Romania to 1996 there was a legislative framework and even attractive to foreign investment, but the privatization offer was very low and not included virtually all public utilities or banks for the period 1997-2000 to assist the situation is reversed, and legislative and


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institutional framework has become extremely unstable, but the tender for privatization has considerably decreased.

Immediately after the 2000 elections the promotion of foreign direct investment was distributed among several institutions lacking an adequate budget, a situation completely different from the rest of the countries in transition.

In 2003, the registration of stagnation in the economic world, manifested initially in the U.S. and the European Union and later expanded globally, the countries of Eastern Europe and South East have seen a sustained increase in flows of foreign direct investment. Moreover the expansion of the European Union, benefits Romania, facilities and foreign investors is some of the reasons that our country has witnessed the highest value of the volume of foreign direct investment attracted, as shown by the statistics provided banks national of the countries of the region. According to data supplied by the central bank in 2003, the foreign direct investment was 1.6 billion dollars over the same period in 2002, when the flow of foreign investment has been worth 1.1 billion dollars.

Improving the business environment was reflected in changing the ratings given to our country by the major agencies, and the location of Romania under the "FDI Confidence Index, conducted by American consulting company A.T.Kearney, ranked 29 in a 64 countries, instead of climbing the 49 held by our country in 2002.

2004 for Romania, a significant increase in the volume of direct foreign investment attracted, 1990 totaling approximately 13 billion. Thus the ranking of countries of Central and Eastern Europe, our country has managed to get Poland, probably due to the difficulties imposed on the States in November after EU accession and the attitude of expectation of investment to the venture markets. According to statistics, BNR indicates a total flow of foreign direct investment attracted to the year 2004, amounting to 4 billion euros with a growth of over 111% over 2003.

Increase in foreign direct investment in Romania in 2004 is explained by the recording in December, the privatization of Petrom, the largest privatization in Romania, but also increases the capital made by foreign investors to: Automobile Dacia (automotive) Ispat Sidex (metallurgy), Mivchelin (auto-components industry tires) Carpatcement (building materials industry), Unilever (industry of consumer products), a new type of investment firms greeenfield: Holzindustrie Schweighofer (wood processing ), Saint-Gobain (glass industry), YKK accessories (the garments industry), Medisystem Hospital (private hospital) and the type Brownfield such as Anchor (commercial), SA Wheels Auto (auto components industry-tire).

Period 2005-2008 can be regarded as a period with the largest investment in the history of modern Romania.

Romania already has two years of participation in the single European market and produced in this period the best results, located in the first place not only in terms of growth but - even more important for the future - and in terms of the dynamics of investment.

In the period 2005-2008 foreign investments in Romania were more than 35 billion euros, or over 2 times more than in the period 1991-2004.

3. STRUCTURE ON THE FIELDS OF ACTIVITY FOREIGN DIRECT

INVESTMENT If you analyze the structure fields to the capital subscribed by companies with foreign

capital, we see that the total capital subscribed by companies with foreign capital registered in the period 1991-2003, 54.4% s invested in industry, 16.6% in trade and 15.8% in professional services, average annual investment is 803 million dollars. The most attractive of the areas in which they were committed investments, telecommunications, drew in 2003 24 projects, amounting to 440 million dollars, representing 19.23% of the total money invested. The following positions were energy industry investment worth 338 million dollars, representing 14.8% and steel industry investment worth 185 million dollars about 8.12% of total investment.


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In 2004 according to data provided by the National Office of Trade Register, it is notable industry with 58.7%, professional services with 18.4%, wholesale and retail trade was 4.6% and 10.5%, transport 6.1%, tourism by 0.2%, construction 0.6% and agriculture by 0.9%.

Priority targeting foreign investors to the industry due to the benefits of Romania in this area of land at a reduced price compared to other countries in the region, access to good infrastructure, cheap labor and skilled in this area and the existing production capacities.

Within the industrial sector, particularly in a boom period last had a foreign investment in the auto components industry. Concretely, according to data supplied by the Chamber of Commerce and Industry in 2004, several companies have completed or have expressed an intention to carry out investment projects in this field.

In the standings after foreign investors subscribed capital in 2004, the first ranked group OMV of Austria in the oil industry, which has acquired 51% of Petrom SA shares through the purchase of 33.34% of share capital and input additional equity participation up to 51% in second place followed by French group Renault in the automotive industry and the third position in the telecommunications company Inquam.

The volume of direct investment in Romania reached a record level in 2005, about 6 billion, which included money derived from the privatization of Romanian Commercial Bank.

This year foreign companies have preferred industry areas such as cars and auto components, electrical, electronic and electrical industry, construction materials, shopping outlets, textile, wood processing, energy production from alternative sources.

Improving the business environment, the introduction of flat tax and the positive attitude of foreign partners to Romania led to a volume of attracting foreign direct investment worth 9.1 billion Euro in 2006.

Value record from 2006 to 9082 billion Euros, up by 74.24% compared to same period the previous year (5213 million Euros), includes the sum of 2.2 billion euros, representing a takeover by Erste Bank 36.8% stake BCR.

This year, the fierce competition in attracting foreign investment in the region of Central and Eastern Europe, Romania has a well-place two with a value of 9.1 billion euros.

The fields on the capital subscribed by companies with foreign capital to remain constant compared with previous years, first in your foreign partners are the industry 50.6%, followed by professional services (26%), trade (13%), transport (6.4%). The least attractive areas for foreign partners are: construction (1.6%), tourism (1.5%) and agriculture, which still unexploited potential certify them.

In 2007, foreign direct investment attracted by Romania were raised to the value of 7,076 billion euros, under conditions in which there have been significant amounts of privatization.

With this performance in attracting foreign direct investment, Romania ranks the first in southeastern Europe and place 2 in the Central and Eastern Europe, after Poland (15.4 billion euros) countries with tradition in this area as Hungary and the Czech Republic.

The value of direct investment in 2008 was 9024 billion, up 24% compared with 2007, but in future it is estimated that the financial crisis fund foreign direct investment will decrease in comparison with the previous period have been recorded increases.

3. COMPATIBILITY GUIDELINE STRATEGIC INVESTORS A FOREIGN

COUNTRY INTERESTS Multinational companies have entered Romania in 1990 and so far have only partially

satisfied the interests of our country, the investments being made towards traditional sectors with low added value. Thus we question whether the strategies adopted by foreign firms on the Romanian market are in accordance with our interest.

How the main entrance of foreign investments in Romania so far has been through mergers and acquisitions, most associated with the privatization of Romanian enterprises in particular, the method of direct sales.


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Important to note is that foreign investors were involved in a small part of all privatizations, but the amounts invested by them is 97% of the total estimated market. Romanian privatized many mergers and acquisitions were an effective way of restructuring to improve management and to attract know-how and financial capital is important. However a part of such investments were not successful for one or other of the parties as a result of a number of factors among which we mention: market conditions, unfriendly, unfair competition, pressure shown by trade unions, the Communist mentality of origin of former state enterprises.

Foreign investors' preference for this mode of implantation on the Romanian market finds its explanation in the high level of corruption that allows various arrangements with government officials facilitated by the local partner. Studies show that when the investor to ensure control over technology, it will choose a partner from a most corrupt country for the achievement of joint ventures.

Instead mergers and acquisitions made by foreign investors with private companies in Romania have proved to be more effective. Their strong position was due to consolidation in a market becoming more competitive all the more local, high qualification of the workforce, reduced staff costs and economic and political risk low.

The most active sectors of the industry in terms of mergers and acquisitions have been manufacturing, telecommunications, financial services and food and beverages.

Of the total mergers and acquisitions on the Romanian market, foreign investors were responsible for 76%, revealing that Romanian companies prefer to potential strategic partners with top financial firms, which can help to cope with competition becoming more products west.

Foreign direct investment in our country for greenfield type were also an important, but the amounts raised were modest compared to potential investors and in comparison with investments in other countries in the region.

However, the role of foreign direct investment in the development of Romanian economy is undeniable. Concluded that flows of foreign direct investment affect the competitiveness of Romanian economy not only to the companies and receivers through the allocation of resources throughout the economy.

Flows of foreign direct investment were so important and their role in economic restructuring, even if it is still small.

As a conclusion we can say that in the national economy, competitiveness is dependent on the foreign investment by attracting and channeling them to particular economic sectors with high added value and higher degree of processing and the tertiary sector to generate training effort in the Romanian economy.

4. STRENGTHS OF OUR POLICY ATTRACTS FOREIGN COMPANIES Factors which may trigger the behavior management of foreign firms for sizing of

investment in our country are presented in what follows. 1) First, Romania is one of the largest outlets in Central and Eastern Europe (over 22 million

people being the second after Poland), with an attractive position allowing easy access to countries of former USSR, from Middle East and North Africa, being at the crossroads of three possible transport corridors European corridor 4 for motor vehicles and railways (Berlin-Prague-Buudapesta-Arad-Bucharest-Constanta-Instambul-Thessaloniki), corridor no. 7 riparian corridor (Constanţa-Basarabi-Main-Danube-Rhine) and corridor no. 9 for motor vehicles and railways (Helsinki-Moscova/Kiev-Odesa-Bucureşti-Constanţa-Alexandropolis).

2) In the second row, we have well-developed networks of mobile telecommunications, labor cheap and well equipped with good technical knowledge, IT and engineering, natural resources, including agricultural land extremely fertile, oil and natural gas.

3) Thirdly, our tourism potential, although still poorly exploited, it is important and promising prospects.

4) Fourth Romania is a member of NATO and EU integration.


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These factors can however be driven by a proper management to the macroeconomic level, by improving policies to attract foreign investors. In this case, the Romanian Agency for Foreign Investments conducts an activity to promote sustainable business opportunities and attracting foreign capital into the economy by producing promotional materials and organizing promotional results are visible in the figures referred to recently attracted investment.

Activity promotion focuses on two areas: - developing policies to attract foreign investment and year-conducting promotional activities designed to attract foreign investors.

In the first case is achieved annual portfolio of priority projects proposed by the economic ministries are promoted through the website of the Agency and editing of CDs distributed during participation in international events and meetings with potential foreign investors, have been popularized successful foreign investments have organized press conferences with foreign investors for the presentation of investment projects.

Promotional activity designed to attract foreign investors lies in the development of promotional materials and presentation necessary to conduct activities for promotion and presentation necessary to conduct an effective and professional promotion, which were distributed directly to foreign investors and transmitted to the foreign embassies in Romania and the offices of the economic Romania embassies abroad, to be distributed to foreign companies interested.

To attract more foreign investment in strategic sectors, the Romanian government seeks a greater awareness among local authorities and business associates on the importance of the increasingly high and outsourcing industrial dislocation production, stimulate local authorities to learn from Models of good practice marketing territorial when preparing their bid and promote regional economic business environment both internally and externally and the potential investors, local attitudes and pro-active public-private partnership to attract multinational companies to delocalize in Romania part of the operations of the value chain, stimulating the formation of clusters of SME suppliers around strategic investment in the automotive industry, building machinery, equipment, chemical.

Following a brief analysis on the evolution of flows of foreign direct investments to Romania, but also by other countries in transition to market economy in the period 1990-2008 is notable for several features of the investment climate: the flows of foreign direct investment to were targeted to those countries which have shown interest to receive them by creating appropriate conditions, the existence of a liberal trade regime, a payment system aligned with international standards and a liberal foreign exchange favors attracting foreign investment; Governments should aim to build a favorable climate for business, for example, a low corporation tax and granting foreign investors the facilities, but especially by removing barriers to investors mandatory use of local components or export a rate of production, restrictions on buying land in the use of foreign experts in the check business, etc.)

5. CONCLUSIONS Once integrated into the EU, Romania has become more attractive in terms of foreign

investments can and because, in comparison with its neighbors, is not yet sufficiently exploited (in the positive sense), the economy is not sufficiently mature yet non-specialized but with great potential to meet the corporate world.

Impact of Romania began to feel lately with increasing foreign investments that led to their creation of new structures of production, enabling the manufacture of finished products with higher added value and quality, according to EU standards

Valuing opportunities offered by the presence of foreign capital depends on the essential quality of their actions, undertaken in the economic, legislative, political and social entities and their performances: private authorities, institutions, economic organizations, social, cultural, the whole population . This means that for a policy voting pro - active in relation to foreign investment, Romania must promote the same time and actions to stimulate and strengthen capital, to create and develop their comparative advantages, which to use through their own investment


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abroad. Romania can to ensure the consolidation and growth in line with its potential actual boosting the policies promoted as many local companies (such as new members of the European Union) to engage in international relations the new complex, in accordance with the interdependent involved in economic globalization.

BIBLIOGRPHY: 1. Bari,I., Globalizare şi probleme globale, Editura Economică, Bucureşti, 2001; 2. Bari, I., Transnaţionalele şi investiţiile străine, TE nr.45, 2002; 3. Brăilean, T., Globalizarea, Editura Institutul European, Iaşi, 2004; 4. Bonciu, F., Atragerea şi monitorizarea investiţiilor străine directe, Editura Ştiinţifică,

Bucureşti 1997. 5. Prelipceanu, R., Investiţiile străine directe si restructurarea economiei româneşti în

contextul integrării europene , Editura Lumen,2006, Bucureşti; 6. Svetlana T. Marinova, Marin A. Marinov, Foreign Direct Investment in Central and

Eastern Europe, Ashgate Publishing, 2003; 7. Zait, D., Evaluarea şi gestiunea investiţiilor directe, Editura Sedcom Libris, Iaşi,2008; 8. www.arisinvest.ro


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INVESTOR’S BEHAVI0R ON THE ROMANIAN CAPITAL MARKET

PhD Lecturer Flavia BARNA

West University from Timişoara, Faculty of Economics and Business Administration, Romania [email protected]

PhD Lecturer Dan DANULETIU University 1st of December 1918, Alba Iulia, Romania, [email protected]

PhD Student Ovidiu MURA West University from Timişoara, Faculty of Economics and Business Administration, Romania

[email protected] Abstract: The investors’ psychological training in order to accept taking chances on the capital market is one of the

most important determinants of success. Information, with its many forms (TV, rumors etc.) is the essential element in performing the financial operations. The collective behavior has also a strong influence over decision making, since we already know that humans are social beings, rarely capable of analyzing the reality with the help of their own mind. The objective of this paper is to provide a compact theoretical framework regarding the investor’s behavior and to provide some empirical evidences about the Romanian capital market. The main output of the paper consists in the thesis that the capital market can sometimes be quite irrational and that there are psychological causes that bring a new approach over the way traditional literature used to present the rational behavior.

Key words: investor behavior, risk profile, capital market. JEL Classification: G11, G12, G14

1. INTRODUCTION

In every human activity, success depends directly on the effort layer. As for investments, the effort is caused by the informing activity, the identification of investing opportunities, and the study of the capital market’s mechanisms and the establishing of your own investing strategy.

One of the most important determinants of success on the capital market is the investors’ psychological training in order to accept taking chances and to be able to make decisions in stress conditions. The capital market investor has to be able to think selectively, to accept a certain level of his loss and to avoid the pressure of the other investors’ behavior.

In this paper, we’ll analyze the importance of information for the investors’ behavior on the capital market, the risk profile’s influence over the investing decision and the way these aspects have reflected themselves at the Bucharest Stock Exchange.

2. EMPIRICAL EVIDENCE

The existence of the investing behavior has been first spotted on the speculating markets.

Studies of Scharfstein and Stein (1990) talk about this type of behavior for the managers of the investment funds; Grinblatt (1995) emphasizes the same kind of behavior for the managers of the mutual funds; Trueman (1994) and Welch (1996) emphasize identical elements of the same behavior in the predictions made by the financial analysts.

The capital market’s evolutions are influenced by the existence of information. Information is an extremely rare good, essential when making financial operations. By having information when everybody else doesn’t, you may achieve substantial gains. There are many examples of people who got rich due to information that they held before anyone else did. Nowadays, with the informational technology development, it’s been getting harder and harder to keep an information. A relevant information for the market is part of the price and only the first who triggers the operation based on the information, becomes the sole beneficiary of it’s using effects. Accessing the information generates interesting psychological effects.


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The first effect affecting the capital market is the rumor, such as: news about the opinion of certain personalities, about wars, social disturbing, natural hazards, and secret alliances between listed companies etc. This type of information may sometimes be considered truthful; it is transmitted with extraordinary speed through a greedy environment that has o low capacity of analyzing the message and a high desire to obtain the information before everyone else. Though it is not sustained by evidence, rumor flies with incredible speed, nullifying the person’s rationality and making him panic; he worries about the opportunities that were probably lost to the others, because he didn’t act at the right time. Rumors depend on the capital market’s opacity or transparency.

An individual can hardly administer the huge amount of information he’s being bombarded with and that exceed his capacity of rational analysis. The supplement of information does not always generate a surplus of psychological comfort and a higher efficiency of the investment. Nevertheless, the huge amount of information available in real time creates the impression of understanding and controlling the micro variations of the capital market. But only the capital market’s specialists can understand and use the capital market’s micro variations, succeeding this way to anticipate the other investors’ actions.

On one hand, the investor is constantly seeking for information and on the other hand he is incapable of processing infinite number of information he’s being bombarded with. This investor’s difficulty triggers a mental saving process and also an information selecting and simplifying process, conditioned by his own expectations. The financial instruments that have brought satisfaction in the past are most often positively valued.

The behavior and opinions of capital market’s investors have an essential influence on the individual’s behavior and opinions, especially during an uncertainty period. In the small size investor’s case, the fear of a loss can substitute their rationality.

Andreassen and Kraus (1990) noticed that, when exogenous prices fluctuate modestly on an experimental market, the subjects buy when prices are decreasing and sell when prices are increasing. When a trend appears, the subjects are no longer following the previous pattern, but the trend. This reflects itself also on the real markets. Different empirical studies conclude that the assets’ prices are more or less sensitive to novelties. Cutler, Poterba and Simmons (1991) studied different markets between the years of 1960-1988.

Jegadeesh and Titman’s researches suggest a late reaction model: during a given period, the winning stocks’ income surpasses the loser stocks’ income. De Bondt and Thaler show that the situation is reversing itself on long term.

Kaminsky and Schmukler (1999) studied the investors’ reaction to news during the Asian crisis (1997-1998). They observed the first twenty daily fluctuations and concluded that their causes aren’t political or economical news. Kaminsky and Schmukler also deduced that the course’s fluctuation is stronger as the crisis gets bigger and during times like these, the stocks’ price is more influenced by the negative than the positive news.

Resembling with the primitive behavior, when seeing everyone around running, the first impulse is to follow them, the investors’ behavior can cause a real mass hysteria and the individual’s personality completely vanishes (you can talk about primary emotionality). These extreme forms may lead to destructive results and to the stock exchange’s collapse. (Ghosh and Ray, 2002).

While economists studied individual’s psychology, social psychology didn’t receive such attention. The conversation is essential in broadcasting the popular ideas about financial markets (Shiller, 2000). In an individual investors study, Shiller noticed that almost every investor who had recently purchased stocks, have drawn attention through direct interactive communication. Humans have a limited attention and tend to focus on the ideas and the facts that are brought by conversation, rituals and symbols. As a result, the cultural element becomes determinant for behavior.


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On the capital markets, information is transmitted in cascade, causing a large dimensions group behavior. Shiller believes that a certain level of the market’s quotations isn’t the result of single made valuations, but rather the result of collective behavior.

The collective behavior is caused by the fact that individuals decide not to waste time and energy in order to identify the real market value of an instrument; they give up this way on the possibility to produce an independent impact on that instrument and adapt to the trend. This type of behavior contradicts the expected utility theory: one investor’s behavior is independent from the others’ choices, because it has it’s own utility function. This way, the collective investing behavior is more likely to be influenced by the information trade between the individuals.

When uncertain, the individual’s opinions tend to be strongly influenced by the group’s behavior and opinions. The market is therefore influenced by a group behavior that is different from the sum of individual behaviors.

The collective compliance of the investors is counterproductive, because the uncertainty makes the investors look for market information in the media (profile newspapers, TV shows), without checking the exacted and quality of received information. It matters more who says it and not what it is being said. This happens because there is a need of identifying a leader, a market „guru”, whose behavior can be imitated.

These leaders are so worshiped that they tend to become „gods” in the collective imaginary. The mortals, incapable of making their own choices, expect the „gods” to always make the right decisions. An example this way is Warren Buffet, who through his opinions moves the beverage’s world. His declarations are seen as an anticipation of the future because, being in front, he’s thought to hold information that mortal don’t.

Often, the investors’ losses are caused by their subjective decisions. The reason why problems occur on the stock exchange is that they are addicted to the other investors. Thus, the investors often give up their own strategies and prefer following the path that the others have chosen. According to behavioral finance, the less an investor knows, the easier is for him to be affected by the „group mentality”. The less experience investors have, the sooner they panic.

On the capital market, you can identify two actions caused by the „group mentality”: - Panic buying: when investors notice the increase of a stock’s price, they buy the stock

without waiting and hope to achieve substantial profits. The investors don’t rely their portfolio selection on fundamental analysis, but on the market’s or the group’s opinion about those stocks.

- Panic selling: the speculative bubble that caused the price’s increase breaks, and the investors try to minimize there loses by selling the stocks they owe. The selling pressure emphasizes the descending trend.

The halo effect (Nisbett and Wilson) leads to the extent of the favorable valuation made by an individual over a good or a person, starting from just one essential characteristic. On an efficient market, the fact that a stock is considered to have an increasing potential doesn’t protect the investor from future efficiency adjustments. If the investors extend their favorable valuation in a wrong way, the stocks will bow overestimated (Shefrin and Statman).

The danger of linear thinking regarding the investments is determined by the overreacted attention given to the investment’s short-term performances.

3. ROMANIAN CAPITAL MARKET STRATEGIES BASED ON INVESTORS’

BEHAVIOR

The Romanian capital market is an emergent one and the investors’ behavior is influenced by the information’s transparency and also by the investors’ feeling. A project dated December 2007 made by Prognosis.ro (Omnistock) showed that over 90% of the investors were expecting increases for 2008. Although many analysts discuss about investors’ feeling index, there isn’t a measure unit for it. We mustn’t lose from sight the fact that knowing about our own feelings and expectations is an act of responsibility towards our own investments; the knowledge of market’s feeling can prove to be a real support in making investment decisions.


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Generally, small size investors have a linear thinking. This paper is trying to establish just that, by using the example of an investor who applies a stock exchange index investing strategy. We will use the BET Index, which reflects the evolution of the first 10 most transitioned stocks from the Ist category of Bucharest Stock Exchange.

Fig. no. 1 – BET Index’s evolution

During 1998 – 2008, BET ’s trend was ascending. The world financial crisis has reversed the trend by the end of 2008. How should have been the behavior of an investor who wants to achieve a market’s medium return equal with BET ’s return?

The investor’s behavior depends on the risk profile. Therefore, a cautious investor should have reduced his stock reserves by the beginning of 2007 and he should have achieved flat income instruments. Such an approach would have cut the losses, which were 77% (the decrease percentage of BET in 2008).

An investor with a high appetite for risk should have initiated short positions on derivatives during 2007-2008, winning from the decrease of the stocks. This would have been an appropriate strategy during the last year.

But how much would have gained an investor that would have applied a „buy-and-hold” strategy during 1998-2008? Table no. 1 presents the medium cumulated return of BET Index.

If an investor placed an amount of money at the beginning of 1998 and the investing period would have been for a year, the investment return would have been -64%. The return for ten years would have been 327%. The return for eleven years would have been 0%.

An appropriate behavior would have been to achieve a portfolio at the beginning of 2001 and to keep it until 2008. This would have determined a total gain of 348% (considering the loss from 2008).

Table no. 1. The medium cumulated return of BET Index

Years/The portfolio keeping period 1 2 3 4 5 6 7 8 9 10 111998 -64% -74% -78% -75% -48% -30% 61% 125% 227% 327% 0%1999 -28% -39% -30% 43% 92% 344% 521% 800% 1077% 175% 2000 -15% -3% 98% 166% 515% 761% 1147% 1530% 281% 2001 14% 133% 213% 623% 912% 1366% 1816% 348% 2002 105% 175% 535% 789% 1188% 1583% 293% 2003 34% 210% 334% 529% 722% 92% 2004 131% 223% 368% 512% 43%


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2005 40% 103% 165% -38% 2006 45% 89% -56% 2007 31% -69% 2008 -77%

Source: www.kmarket.ro

Generally, information about stock’s medium annual return has a greater impact over the investors’ behavior. Thus, in the previous example, if an investor would have selected a „shadow” portfolio of BET Index in 2001 and he would have kept it until 2008, he would have had a total return of 348%, or a medium annual return of 44%.

Of course, after a 77% decrease of BET index in 2008, most of the short term investors recorded great losses, losses that could have canceled all the gains from the previous years.

Which were the performances of the long-term investors? The ones who invested during 1999-2004 at Bucharest Stock Exchange and would have kept it until 2008, would have recorded extraordinary performances: a medium annual return of +18%/year for the investor who placed his money at the beginning of 1999, +31%/year for the investor from 2000, +44%/year for the investor from 2001, + 42%/year for the one from 2002, +15%/year for the one from 2003 and +9%/year for the one from 2004.

4. CONCLUSIONS

The evolutions of the capital markets depend on both economical and psychological

determinants. The informational efficiency has a strong impact on investors’ behavior. The capital market can be irrational, but also react quickly to the events. During certain

periods, prices can fluctuate because of the financial situation and the investors’ interests, oscillating between mass hysteria and indifference. The individual investors’ attempts to be rational may sometimes appear irrational.

The macro economical predictions are usually incomplete and so they have no value for the small size investors, especially when the economical evolution is influenced by tiny details that no one could have foreseen.

The financial academicals world seems to have found an answer for this individual investors’ behavior dilemma. So, there are psychological causes that bring a new approach over the way financial traditional literature used to present the infester’s rational behavior.

REFERENCES

1. Andreassen P. B., Kraus, S. J., 1990, Judgemental extrapolation and the salience of change, Journal of Forecasting 9, 347–372.

2. Cutler D. M., Poterba J. M., Summers, L. H., 1989, What moves stock prices? Journal of Portfolio Management 15, 4–12.

3. Cutler D. M., Poterba J. M., Summers, L. H., 1990, Speculative dynamics and the role of feedback traders, American Economic Review 80, 63–68.

4. Cutler D. M., Poterba J. M., Summers, L. H., 1991, Speculative dynamics, Review of Economic Studies 58, 529–546.

5. Daniel K., Hirshleifer D., Subrahmanyam, A., 1998, Investor psychology and security market under- and overreactions, Journal of Finance 53, 1839–1886

6. Daniel K., Hirshleifer D., Teoh S. H., 2001, Investor psychology in capital markets: Evidence and policy implications, Working paper, Ohio State University.

7. De Bondt W.F.M., Thaler R.H., 1985, “Does the stock market overreact?” Journal of Finance, 40, 793-805.


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8. De Bondt W.F.M., Thaler R.H., 1987. “Further evidence on investor overreaction and stock market seasonality”, Journal of Finance, 42, 557-581.

9. Grinblatt M., Keloharju M., 2000, The investment behavior and performance of various investor types: A study of Finland’s unique data set, Journal of Financial Economics 55, 43–67.

10. Grinblatt M., Keloharju M., 2001, How distance, language, and culture influence stockholdings and trades, Journal of Finance 56, 1053–1073.

11. Grinblatt M., Keloharju M., 2001, What makes investors trade? Journal of Finance 56, 589–616.

12. Grinblatt M., Titman S., Wermers, R., 1995, Momentum investment strategies, portfolio performance, and herding: A study of mutual fund behavior, American Economic Review 85, 1088–1105.

13. Jegadeesh N., 1990. “Evidence of predictable behaviour of security returns”, Journal of Finance 45, 881-898.

14. Jegadeesh N., Titman S., 1995, “Overreaction, delayed reaction, and contrarian profits”, Review of Financial Studies, 8, 973-993.

15. Kahneman D., Tversky A., 1973, On the psychology of prediction, Psychological Review 80, 237–25l.

16. Kahneman D., Tversky A., 1979, Prospect theory: An analysis of decision under risk, Econometrica 47, 263–291.

17. Kahneman D., Tversky A., 1982, The psychology of preferences, Scientific American 246, 160–173.

18. Kahneman D., Tversky A., 1996, On the reality of cognitive illusions: A reply to Gigerenzer’s critique, Psychological Review 103, 582–591.

19. Nisbett, R. E., Wilson, T. D., 1977, Telling more than we can know: Verbal reports on mental processes, Psychological Review 84, 231–259.

20. Poterba J., Summers, H.L., 1988, “Mean reversion in stock prices: evidence and implications”, Journal of Financial Economics, 22, 27-59.

21. Scharfstein D., Stein J., 1990, Herd Behavior and Investment, The American Economic Review, June 1990

22. Shefrin, H., Statman, M., 1994, Behavioral capital asset pricing theory, Journal of Financial and Quantitative Analysis 29, 323–349.

23. Shiller R. J., 2000, Conversation, information, and herd behavior, American Economic Review 85, 181–185.

24. Shiller R. J., 2000, Irrational Exuberance ~Princeton University Press.


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SOCIAL RESPONSIBILITY AND THE IMPORTANCE OF GOOD EMPLOYER–EMPLOYEE RELATIONS

PhD. Student Victoria-Mihaela BRÎNZEA

University of Pitesti, Pitesti, Romania [email protected]

Abstract: The current society expects that companies to pool their economic-financial power in service of social and

environmental objectives, demonstrating that they are good corporate citizens. Each company can identify a set of problems in society that it can successfully resolve.

If in the past companies focused almost entirely on profit and development in the XXI century, they must also convince their stakeholders that are viable in the long term.

For over the past two decades, CSR has evolved from an abstract and bizarre concept, disapproved by the management committees of several companies in a way of thinking and daily activity, both in the business world, and in society in a useful tool in the debate and finding solutions for a multitude of social problems. Some factors catalyze the spread of the concept are: the revolutions of information technologies, globalization process, strengthen consumer rights and the increase of public confidence towards the free market institutions.

The paper summarizes the main features of CSR in the current business environment emphasizing the main drivers of the human resource management considering the trends of the CSR. The conclusions focus on the major shifts in the employee-employer relationship considering the way business ethics shape the knowledge economy today.

Keywords: responsibility, corporate social responsibility, ethics, empathy, equity, competitiveness. JEL classification: M12, M14

1. INTRODUCTION The purpose of this paper is to identify the main aspects of corporate social responsibility in

the business environment. It also provides what is considered to be the key drivers in employer–employee relations and the benefits to good employer–employee relations for each individual within the employment relationship. Thus, it indicates a shift in business ethics as it relates to the employers relationship to the employee within a work environment.

We all want to shake our heads and say, ‘‘Not now, not this generation. We are the most educated, most talented, and most diverse workforce on the planet; prejudice cannot exist here.’’ It does exist, but not only in the more formal way we commonly think of. Prejudice also takes the form of discrimination due to socioeconomic class, where those in authority look down on their subordinates. This way is more subtle, but nonetheless hurtful.

2. WHAT IS EMPLOYER SOCIAL RESPONSIBILITY, AND WHY DO ORGANIZATIONS SO DESPERATELY NEED IT?

In the business world, the primary responsibility of companies over the centuries has been to

obtain profit and increase their value, Milton Fridman, Nobel Prize winner, saying: "Social responsibility of a business is to increase its profits. Over time, with the increase of the complexity of their activities and their higher impact on society and environment, companies were required to adopt an ethical behavior and to take increased social and environmental responsibilities.

In the last two decades, business ethics and corporate social responsibility (CSR) have become topics of major interest to specialists in the fields of management, Marketing, Sociology, philosophy and communication. In most countries, duties and responsibilities of companies are set by national and international law. Today’s Companies are faced with expectations of increasingly large part of society and its stakeholders (shareholders, employees, suppliers, consumers, NGOs, etc.).

For the answer, we must first look at the definition of responsible, and what it means to have responsibility:


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Responsible(fr. responsable) - (About a person) responsible for one thing, a fact, responsible, person who is entrusted with a position of leadership, which has a load of responsibility, which has been entrusted with responsibility; head. Responsibility (fr. responsabilité) - the obligation to answer, to be judge, to be aware of obligations to society. The definition of corporate social responsibility (CSR) amended by the European

Commission is: “A concept whereby companies integrate social and environmental concerns in their

business operations and in their interaction with their stakeholders on a voluntary basis”. This definition puts in evidence the following:

CSR covers social and environmental issues, in spite of the English term corporate social responsibility;

CSR is not or should not be separate from business strategy and operations, it must integrate social and environmental concerns into business strategy and operations;

CSR is a voluntary concept; an important aspect of CSR is how enterprises interact with their internal and external

stakeholders (employees, customers, neighbors, non-governmental organizations, public authorities, etc.)

Annually, the countries and companies are ranked according to their initiatives in the field of CSR:

Table no. 1 No. Year 2008 Year 2007

1. Vodafone BP

2. General Electric Barclays

3. HSBC ENI

4. France Telecom HSBC Holdings

5. HBOS Vodafone

6. Nokia Royal Dutch/Shell Group

7. EDF Peugeot

8. GDF Suez HBOS

9. BP Chevron

10. Royal Dutch/Shell DaimlerChrysler

Source: Accountability Rating 2007 and 2008


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In order to take this a step further, corporate social responsibility (CSR), according to the Chartered Institute of Personnel and Development (CIPD), ‘‘…covers all aspects of corporate governance. It is about how companies conduct their business in an ethical way, taking account of their impact economically, socially, environmentally, and in terms of human rights.’’ They go on to elaborate further on employer–employee relations: CSR also includes relationships with employees and customers. It inevitably involves working in partnership with other organizations or groups. It can be seen as a form of strategic management, encouraging the organization to scan the horizon and think laterally about how its relationships will contribute long-term to its bottom line in a constantly changing world.

Figure no. 1

Source: http://europa.eu.int/comm/enterprise/csr/ms_sme_projects.htm According to a study conduct by Bocconi University team over 395 italian enterprises,

companies’ attention to CSR issues and adoption of CSR behavior seem quite high. The majority of the interviewees (84%) declared that they were involved and active in the area of CSR. In addition, for 62% of the firms the involvement in socially responsible activities is regular and related to business strategy. In detail, according to the questionnaires collected the initiatives most frequently realized are: training activities (89%), safeguarding employees’ health (82%), initiatives in favor of the local community (72%), support of cultural activities (70%) and control of product safety and environmental impact (more then 62%). On the other hand, these companies are not heavily engaged in the following activities: on-site child care facilities (only 2%), participation in fair trade (4%), equal opportunities policies (13%) and programs for protected categories (15%).

With regard to the concrete tools and activities implemented by companies to promote CSR, respondents are involved either with internal programs, or with external (Table 2).

Table no. 2 Activities implemented to promote CSR

Activity Percentage Donation (ad hoc in cash or kind) 50,6 Direct investment 47,1 Sponsorship (regular and continuous) 74,7 Adoption of management systems 42,5 Adoption of code of conduct 34,5 Employee involvement programmes 82,8 Corporate campaigning 20,7 Participation in CSR programmes 16 No answer/Do not know 0

CSR

Employees

Society

Complex approaches

Environment

Market


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As a wide range of definitions have been given to CSR, one survey question was structured in order to discover top managers’ perception of the CSR concept: ‘‘In your opinion, which dimensions does CRS include?’’ The results are reported in Table 3.

Evidence indicates that CSR is considered a very broad concept, encompassing many different dimensions. However some aspects seem to be more linked to corporate responsibility than others: employee safety, environmental protection, respect of ethical principles and human rights, company reputation, adoption of conduct codes, transparency, attention to the quality of life and promotion of local community initiatives. Out of the remaining choices, philanthropy and marketing were those perceived as least relevant to the subject of the survey.

As for the reasons that pushed a company to adopt socially responsible behavior, the most frequent advantages indicated are: benefits to company image (90%), opportunity to improve relations with the local community (76%) and specific motivations of Top Management (56%). Meanwhile surprisingly only one company (1%) indicated pressures from clients and suppliers and from NGOs as a relevant reason to promote socially responsible initiatives.

Table no. 3 Dimensions of CSR companie’s opinions (%)

Strongly agree with

Somewhat agree with

Neutral Somewhat disagree

with

Strongly disagree

with

No answer/ do not know

Respect of ethical principles 54,55 39,77 1,14 1,14 0 3,41 Codes of conduct 36,36 50 6,82 1,14 0 5,68 Quality of life 34,09 56,82 7,95 0 0 1,14 Transparency 36,36 47,73 10,23 2,27 0 3,41 Marketing 12,54 39,77 26,14 9,09 3,41 9,09 Clients and suppliers selection 22,73 45,45 17,05 6,82 1,14 6,82 Company reputation 42,05 43,18 9,09 1,14 0 4,54 Local community initiatives 28,41 56,82 5,68 4,55 1,14 3,41 Philathropy 6,82 26,14 30,68 14,77 4,55 17,05 Human rights 43,13 40,91 9,09 1,14 2,27 3,41 Equal opportunity 27,27 45,45 22,73 0 0 4,55 Employee safety 73,86 23,86 1,14 1,14 0 0 Environmental protection 60,23 38,64 0 0 0 1,14

3. HUMAN RESOURCES AND CORPORATE SOCIAL RESPONSIBILITY Current and prospective workers are a stakeholder grouping that is embraced by U.S. firms

and other global organizations. The corporations provide CSR messages that concentrate on the importance of employee development and advancement for the good of the individual as well as the success of the organization. Additionally, they discuss the importance of diversity among their workforces and suppliers as another key to improving their ability to serve the marketplace. However, only U.S.- based firms extend the discussion of diversity to include a commitment to work-life balance as a way to attract and retain employees. Those firms also are more likely to discuss the issue of employee safety from a protection-from-injury perspective.

The global firm Siemens demonstrates how organizations concentrate attention on continuous improvement of employees for their own good and so that the company may compete more vigorously in the marketplace. This particular statement also provides operational details regarding the approach utilized.

Learning is the key to continuous improvement. It keeps our employees fit for their present and future activities. And it keeps Siemens fit for competition. By making sure our people are equipped to adapt to today’s and tomorrow’s rapidly changing work environment, we protect not only their career opportunities, but also our ability to compete effectively as a company. Our professional training staff continually updates training programs and materials. The focus is on innovative learning methods and technology, including autonomous learning with multimedia


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computer support and teletutoring, workshops and computer networks for virtual teamwork in business-oriented projects.

While the global corporation Shell defines diversity as “all the ways in which we differ”, most organizations concentrate on issues of gender and race. Within this context, the same guiding principle exists for diversity as for employee development – its inclusion advances the individual/group as well as the ability of the firm to compete effectively. The first CSR message below is a general statement by UBS (a global firm) that explicitly acknowledges the importance of a diverse workforce to serving an increasingly diverse customer base. The second CSR message broadens this philosophy to the incorporation of the same values in the U.S.- based Pepsi’s selection of suppliers.

A diverse workforce increases the ability to deal with diverse clients and reach out to new investors by providing innovative solutions and services of a superior quality and value. Diversity also forms an important part of developing a strong and compelling corporate culture in the workplace.

The steadily increasing business with minority and women-owned firms has improved our company’s supplier base. It has also helped to strengthen the suppliers’ firms as well as the minority community infrastructure with regard to such benefits as employment, training, role- modeling, buying from other minority and woman-owned businesses, and supporting community organizations.

When it comes to business, minority and majority goals are more alike than different. It’s up to us to reaffirm those bonds and to act on them in ways that benefit us all.

One way in which U.S.-based firms manifest their promise to nurture a diverse workforce is through the creation of programs that help employees balance their commitment to work and family. These CSR messages have a strong gender orientation, and, as the following statement from the U.S.-based Johnson and Johnson reveals, they may contain considerable specificity as to how these goals are accomplished.

Johnson and Johnson’s Balancing Work and Family Program reflect our Credo commitment to help employees manage work and family life. This effort offers advantages to employees and to the Company, which is able to attract, recruit and retain the most talented employees and offer them a host of benefits.

In many parts of the world, a growing female employee population and more diverse workforce place increasing demands on our employees’ home and work lives. Our Work and Family Program helps to address these demands.

In the U.S., we offer a broad and flexible leave policy for family care matters, resource and referral programs for child care and elder care services, adoption benefits, and other forms of assistance. In addition, we have six on-site child development centers with a capacity of more than 900, serving over 500 children of employees in New Jersey and Pennsylvania.

Various other work and family programs support our employees’ needs at our international affiliates. These programs grow out of our fundamental commitment to help our employees fulfill family and work obligations.

Our employees make valuable contributions to the success of our business. By recognizing and supporting the needs of our working mothers, fathers, and all our employees, we are investing in our own future.

U.S.-based organizations also focus more explicitly on safeguarding employees from harm at work than other global firms. Whether this emphasis is fostered by legal obligations or other considerations, such concerns primarily extend to job-related injuries and workplace violence, as the following exemplars from Phillips and UPS (respectively) demonstrate.

Health, Environment & Safety protection is a line responsibility that extends to all levels of management. All employees and contractors are to perform their work in accordance with this policy. UPS is committed to a safe work environment and prohibits all types of workplace violence, including physical assaults, threatening comments, intimidation and the intentional destruction of any company property, employee property, or merchandise.


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Management theory suggests that CSR can have a positive impact on human resource performance. According to Cochran (2007), a firm with good employee relations can improve employee motivation. Additionally, good employee relations may be an important argument for firms in attracting new staff members.

3.1. CSR AS A LEVER FOR ATTRACTING, MOTIVATING AND RETAINING EMPLOYEES

Case studies illustrate the positive impacts of CSR from a human resource perspective.

Brown and Grayson describe how the values of founders and employees can play an important role in the growth and commercial success of a smaller enterprise (Brown and Grayson, 2008). Montgomery and Ramus (2003) show that MBAs from European and American business schools pay attention to CSR aspects such as employee relationship, environmental sustainability, stakeholder relations, and ethical corporation behavior when making decisions about where to work. More than 90% of the persons interviewed were willing to forget financial benefits in order to work for an organization with a better reputation for corporate social responsibility and ethics.

Turban and Greening (1997) provide evidence that a firm’s performance in terms of CSR may provide a competitive advantage in attracting senior managers.

Representatives from large companies comment that potential new recruits now often ask questions about CSR-related issues in interviews. Large companies realize that they increasingly need to be able to demonstrate strong CSR credentials in order to attract the right candidates.

4. KEYS TO EMPLOYEE–EMPLOYER RELATIONS All current companies are seeking excellence: this means the recognition, market position,

quality certification. To achieve this level you need a driver, a true leader. The link between achieving excellence and leadership is shown in Figure no. 1:

Figure no. 2 - The Model of Diamond leader

Source: Koestenbaum, P., Leader - the hidden face of excellence, Ed. Curtea Veche, Bucarest, 2006

One of the strategically pillars of Diamond model is ethics. Leader ethics involves firstly adopting a correct and morale position, both in privacy and in the workplace. Leader ethics starts from the following consideration: people matter. People matter when they are searched for employment, they matters when people have problems, when they work, when they want to grow in

Vision

Reality

Courage

Ethics

Excellency


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terms of value. If people matter, then the leader is in their job and tries to make this a reality and not just a saying posted at the entrance to the company.

Daniel Goleman wrote an article, for the Harvard Business Review that discussed the term ‘‘Emotional Intelligence’’ in regards to leadership. The model included, ‘‘Self-awareness, self regulation, motivation, empathy, and social skill’’.

Although all the factors are important in making a great leader, the two which stand out are empathy and social skill as it relates to employment relationships. Empathy is, “The ability to understand the emotional make-up of other people, and the skill in treating people according to their emotional reactions’’. This is extremely important because employees want to work for a company that understands them and their needs, listen to their problems, and is not overly judgmental. They seek a dialogue with employers, and want to collaborate on issues.

According to Goleman social skill is, ‘‘Proficiency in managing relationships and building networks, and ability to find common ground and build rapport’’.

Table no. 4 Outline for a New Social Contract between Employers and Employees

Employer Expectations of Employees Employee Ecpectations of Employers

Performance to the best of one’s ability Fair pay and benefits proportionate to contribution to

company succes

Commitment tot the objectives of the firm Security tied to fortunes of the company and ability to

perform

Participation (suggestions) Respect, recognition and participation

Willingness to train to improve productivity Opportunities for growth

Ethical and honest behavior Access to timely information and openness by candid

leaders

Safe and healthy workplace

Joint Expectations

Employees are value-adding resources, not merely costs to be cut

Employee and employer must focus on customer needs and desires.

Source: Sims R. Ronald, „Ethics and corporate social responsibility: why giants fall”, Praeger Publishers, 2003, p.271. Sirota, Mischkind, and Meltzer concur with Goleman et al.’s analysis, ‘‘Workers have basic

human needs that management can and should work to address. Creating an environment in which these needs are met results not just in satisfied employees, but enthusiastic employees’’.

Second, Sirota et al. did a study of the employer–employee relationship, and published their results. They reported that it was important to ‘‘give employees what they want’’ because it often aligns with what organizations want as well.

Sirota et al. (2005) point to the way employers react to employees on some issues as the cause for the breakdown of the employment relationship. For example, they contend that the myth that employees have a natural ‘‘resistance to change’’ is false. Organizations believe employees


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resist all change, whether it is positive or negative to them and the organization. Sirota et al. contend that, ‘‘….people resist changes that they see as harmful to them or the organization, but they gladly welcome changes that they see as helpful’’.

Sirota et al.continue by saying organizations believe employees resist change, and because of this they act negatively toward the employee. This causes a further deterioration of the relationship.

Sirota et al. also points out the three main goals of employees at work, and how employers reactions against these natural goals are detrimental to the employer–employee relationship, they are:

Equity: To be treated justly in relation to the basic conditions of employment (especially pay, benefits, job security, and respectful treatment);

Achievement: To take pride in one’s accomplishments by doing things that matter and doing them well; to receive recognition for one’s accomplishments; to take pride in the organization’s accomplishments;

Camaraderie: To have warm, interesting, and cooperative relations with others in the workplace. It can be shown that giving employees more of what they want could help the employment relationship for both sides.

5. BENEFITS TO GOOD EMPLOYER–EMPLOYEE RELATIONS Employees are a central stakeholder of the firm. To the extent that the organization fosters a

feeling of commitment and loyalty within its workforce, the firm benefits. Employees are proud to work for organizations with an ethical reputation, a sense that carries over into the quality of work that is produced.

There are many causal-related benefits for companies ensuring their employees are happy and healthy at work:

Employee retention reduces costs associated with advertising for and training new staff, as well as lost productivity as they gain experience in their new positions. Workers are six times more likely to stay in their jobs when they believe their company acts with integrity, according to Walker Information, a research company that measures employee satisfaction and loyalty at the workplace. But when workers mistrust their bosses’ decision and feel ashamed of their firm’s behavior, four out of five workers feel trapped at work and say they are likely to leave their jobs soon.

Increased employee safety leads to reduced amounts of lost time and productivity due to injuries. At Intel, good citizenship…includes careful attention to employee – so much that CEO Craig Barrett insists he be sent an e-mail report within 24 hours any time one of his firm’s 800.000 employees loses a single day of work to injury.

An effective employee share-ownership scheme ensures that the workers’, managers’

and owners’ interests are more closely aligned and that employees will feel more committed to generating positive outcomes for the company as a whole.

Many scholars are pointing out that an increase in employee satisfaction equals increased business success. Redington concurs: “In the end, companies need to engage with CSR because it offers a better way of doing business. High and sustainable level of business performance has to be based on effective community.’’

In most cases of CSR projects for local communities it seeks to direct employees and companies that have initiated the project because they are part of these communities. It is therefore natural that they be consulted and involved in the selection and conduct a draft CSR. Involvement leads to loyalty. Social actions of a company develop an emotional connection between the employee and the company where they works. Through the voluntary activities employees can assimilate more quickly the aim and the objectives of a social campaign. Moreover,


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they feel that pay attention to and involved in such projects leads to better understand the company values the work and increase loyalty.

”Human resource has sophisticated: valuable people rather choose to work in a company seen as responsible and involved in CSR programs”, recognizes Mona Nicolici, CSR & Corporate Internal Communication Manager in the company Petrom.

The most significant reason the organization should want to improve and build upon employer–employee relations is the simple fact that it is ‘‘the right thing to do.’’ No person or organization should ever treat someone with decency and respect, because they want something, but that is exactly what is being done sometime.

6. CONCLUSIONS For companies the advantages deriving from participation in the CSR system are:

increased corporate trust and reputation, improving the relationships of the participating companies with different stakeholder categories;

better market positioning in relation to the increased demand for ethical products (goods and services);

easier access of companies to the financial markets and especially to ethical, environment and sustainability oriented funds operating according to Socially Responsible Investing (SRI) principles;

possible fiscal, economic and administrative incentives, which the Government could introduce in order to reward socially responsible companies.

aids the company effectiveness in attracting employees, because potential employees often choose to apply to choose companies whose values and social commitment they respect.

a stronger team, because having shared values and shared activities helps develop cohesiveness and commitment among all the employees and management. Nick Starritt, managing director of Sirota Survey Intelligence, Europe, said: “Businesses

that recognise the importance of social responsibility often have employees who tend to be more satisfied with their jobs, adopt similar values, and become more committed to achieving success within the industry.”

The corporations provide CSR messages that concentrate on the importance of employee development and advancement for the good of the individual as well as the success of the organization. Additionally, they discuss the importance of diversity among their workforces and suppliers as another key to improving their ability to serve the marketplace.

The evidence suggests an important positive relationship between CSR and competitiveness in terms of human resource management, although for some companies the additional costs might still outweigh the benefits at least in the short term.

CSR activities in general and the workplace dimension of CSR in particular have proved to be an attractive feature of a company’s presentation when recruiting and retaining employees. Companies that favor a diverse workforce can benefit from a wider pool of talent. The link between CSR practice and human capital seems to be relevant for enterprises of all sizes.

BIBLIOGRAPHY

1. Cochran, P.L., 2007, “The Evolution of Corporate Social Responsibility”, Business Horizons 50. 2. Goleman, D., 2004, “What Makes a Leader?”, Harvard Business Review 82(1). 3. Grayson, D. and A. Hodges, 2004, “Corporate Social Opportunity! Seven Steps to Make Corporate Social Responsibility Work for Your Business” Greenleaf Publishing, UK. 4. Karnes Roger Eugene, 2008, “A Change in Business Ethics: The Impact on Employer–Employee Relations”, Journal of Business Ethics.


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5. Montgomery, D.B. and C.A. Ramus, 2003, “Corporate Social Responsibility. Reputation Effects on MBA Job Choice”, Stanford Graduate School of Business Research Paper No. 1805, Stanford. 6. Mourkogiannis N., 2005, “The Realist’s Guide to Moral Purpose” . 7. New Rules for Business Success, The Corporate Citizen 2006, Boston College Center for Corporate Citizenship, Issue 1/2006, www.bcccc.net 8. Redington, I.: 2005, “CIPD – Making CSR Happen: The Contribution of People Management”, 9. Singer, P., 2006, Treaty of Ethics, Ed. Polirom, Iaşi. 10. Sims R. Ronald, 2003, „Ethics and corporate social responsibility: why giants fall”, Praeger Publishers. 11. Sirota, D., L. A. Mischkind and M. I. Meltzer: 2005, “The Enthusiastic Employee: How Companies Profit by Giving Workers What They Want” (Pearson Education, Inc., Upper Saddle River, NJ). 12. Tencati Antonia et al., 2004, “New Tools to Foste Corporate Socially Responsible Behavior”, Journal of Business Ethics 53. 13. Turban, D.B. and D.W. Greening, 1997, “Corporate Social Performance and Organizational Attractiveness to Prospective Employees”, Academy of Management Journal 40. 14. Ţală Mădălina Lavinia, 2008, “Leader’s Ethics – a condition of business success”, Amfiteatrul Economic, Nr. 23. 15. www.accountabilityrating.com 16. http://ec.europa.eu/enterprise/csr/index_en.htm 17. http://ec.europa.eu/enterprise/csr/documents/csrreportv002.pdf 18. www.financialdirector.ro 19. www.cipd.co.uk 20. www.strategy-business.com/media


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THE “NEW ECONOMY” AND THE BUSINESS CYCLES

Assistant PhD. Student Mihaela IFRIM „Al. I. Cuza” University, Faculty of Economics and Business Administration, Iaşi, România

[email protected]

Abstract: In the last years a lot was said and written about the “new economy”, term that almost emulated

„globalization” in the range of neologisms. This was partly because the performances of the United States economy from the ‘90s, which made many analysts to believe they were in the front of a new era, one of an endless prosperity. The “new economy”, which was based especially on the informational technologies, was considered the miracle of a continuous growth, uninterrupted by cyclical declines. Its enthusiasts believed in the elimination of the business cycle from the reality of the informational economy, the cycle representing only a relic from the manufacturing past. But despite of this, the economy proved to follow the same old rules about expansion and recession, and even the optimism which is specific to every growth period follows itself the same cyclical rules. The two most important crises of the last decade, the one from 2000 and the one which begun in 2008 demonstrates that the economy respects the same old rules of boom and burst and that the “new economy” was only a long expansion which fully benefited by technological innovations.

Key words: „new economy”; informational technologies; economic growth; business cycle; dot.com crisis;

housing crisis Jel Classification: E 30

1. INTRODUCTION

The economic expansion of the United States of America in the ‘90s was characterized by an unprecedented length, strong growth of the national production and of the Gross Domestic Product (GDP) per capita, productivity growth, massive investments and low inflation. These results was most of the time explained because of globalization, of stronger international competition, lower costs and a growing productivity associated with all these. But a greater accent was put on the role of the technological innovation which in the ’90s materialized in lower prices and growing efficiency of the computers, mobile phones and Internet, in the appearance of new goods and services, innovation of the financial markets, new methods of payment, reduced costs, improved quality and efficiency associated with the use of all these technologies. The economic results of the ‘90s, concretized in the longer expansion of the last century, sustained the growth and the performance capacity of the knowledge society. The idealists sustained with fervor the continuity of these results, the capacity of the „new economy” to maintain itself on a permanently growth trend, safe from decline, from cyclical fluctuations. It was said even that the business cycle disappeared, that recessions belong to the past of the manufactured economy, and not to the present of the informational economy. Having all these, is raised the question if a “new economy” whose realities eliminated the cyclical fluctuations really existed or there was only an expansion which ended, naturally, with a decline?

2. THE „NEW ECONOMY”AND THE ECONOMIC GROWTH The accelerated economic growth of the United States in the second part of the ’90s

involved growing productivity and slower cyclical adjustments. The supporters [1] of the new economy indicated the spreading of capitalism and deregulation as being responsible for the more efficient use of resources and accelerating production growth. In the same time, the informational technologies transformed the economy by their important contribution to the productivity growth, prices lowering and salaries rise. Moreover, these technologies permitted the knowledge in real time of the consumers’ needs and the adaptation in response of the productive capacities, eliminating most of the inventories and their powerful cyclical characteristic.


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We can see in the figure below the way labor productivity in the United States evolved and its big values starting with the middle of the ’90s.

Figure 1. The evolution of the labor productivity in the U.S.A. between 1948-2007 Source: [2]

The growth of the national production, of the employment rate, of the financial assets value

meant first more faith in the capacity of the economy to continue on the same trend. The end of the ’90s represented a period of generalized optimism, of consume and investments euphoria.

But underestimating risks is itself a cyclical phenomenon. During long expansions, like the one from the ’90s, optimism spreads as the memories of the last recessions disappeared. Every period of economic boom and prosperity in the history of the United States generated the faith in the elimination of business cycle and in the existence of a new economy. The expansion of the ‘20s determined the economists of that time to believe that the new founded Federal Reserve System could stabilize the national production and that the economy entered a new era, one of continuous prosperity. In the ‘60s the same expansion made the American Department for Commerce to change the name of its publication from Business Cycle Digest to Business Conditions Digest [3], the policies inspired by Keynes being considered a way toward economic stability.

The same thing happened with the expansion of the ‘90s, when the adepts of the “new economy” sustained no more and no less than the disappearance of the business cycles and the uninterrupted growth. This vision was sustained by a series of articles in journals as Business Week or Challenge written by authors like Michael Mandel, Kevin Stiroh or Steven Shepard. The faith in the capacity of the new technologies to stimulate productivity and in the capacity of the macroeconomic policies to fine rule the economy contributed to a stronger feeling between the “new economy” adepts that there will be no more recession like the ones experienced in the past.

In a world where economical and physical security seemed a certainty it was easy to believe that the good times will continue. For sure, the investments boom contributed to economic growth. In the same time the falling of the imports prices caused by the Asian recession which began after 1997 contributed to maintaining a low inflation. These coupled with the removal of cycles caused by inventories, through the management of the distribution channel based on informational technologies, and the ability of the Federal Reserve System to intervene through monetary and fiscal policies suggested that the economy was less cyclical than before.

The risks of a recession seemed so low that the business cycle – this „curse” [4] of the capitalism seemed to be eradicated. But this was the greatest disillusion of the “new economy” of the ’90s.

3. THE DOT.COM CRISIS

There is a strong linkage in the ’90s between the informational technologies and the

financial markets. The top companies from IT experienced strong growth of their stock exchange


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values, which meant huge profits for Yahoo, Amazon, eBay (dot.com companies). The prices of these stocks rose more than one hundred times. The value of American On Line stocks raised by eight hundreds time from 1992. In this process of establishing a market value, a major role was played by expectations, anticipations regarding the value of these companies on the long run. In fact, the investors bet “on the technological revolution” [5]. And estimating that the first producers and beneficiaries of the new technologies will be among the winners wasn’t seen absolute as a speculation.

The investors start dreaming of becoming rich after night. The companies made huge investments in their own production capacities, being sure that the economy will continue to grow. For individuals, bigger salaries, more working places and the faith in the capital market contributed to a false impression of financial security.

These expectations were stimulated also by media, in many articles [6] being written that the stocks values were long below their potential, this being exactly that the investors wanted to heard. In 1998 market capitalization represented 50% from GDP, in 2000 it raised at 150%, this number representing 25% from the Americans assets [7].

Even if accentuated the earnings in terms of productivity growth because of the use of informational technologies associated with the “new economy”, Alan Greenspan draw the attention since 1997 [8] about the risks of superheating the capital market. Despite the relative stabilization of the economy, it didn’t exist any prove that the business cycle disappeared. Moreover, it could occurred the risk of an „irrational exuberance”, specific to every period of prosperity, which could easily turn on a prolonged recession. The optimism of a long term economic growth meant increasing participants on the financial markets, being the risk of an exaggerated growth of the stocks values. As Alan Greenspan drew the attention, history is full of „new era” which proved to be mirages, had recommending greater caution.

Despite authorities’ warnings, the euphoria seemed to enclose the American market in a real irrational exuberance. This was helped also by the international events which seemed to support risks diminishing. The Cold War ended and capitalism was triumphant. Because of globalization and of the adoption of American model by many nations, the threats from outside seemed to be lower.

At the end of the ‘90s the informational technologies represented almost one half from the capital investments. The trust in the disappearance of the business cycle as well as the availability of cheap financing sources for the investments in IT caused the assumption of a reduced risk. The last expansion of the IT investments was caused by the Y2K panic [9]. The approaching of the year 2000 and the fear of the informatics systems fail determined many companies to make major investments in informational technologies. The money injection made by the Federal Reserve System in the weeks before the New Year 2000 caused the vertiginous growth of the IT companies stocks values. But the year 2000 didn’t produced the indicated problems, thus most of the informational companies were supra armed for a war which didn’t take place. The innovation fever before passing to the year 2000 affected the investments for the next period and for an economy based on the new technologies that signified a deceleration.

The value of the dot.com stocks fall down on 10 Mach 2000 and until the same month of the year 2001 the Nasdaq Index diminished by 60% and Dow Jones with 12%. On the American market almost 4.600 billions dollars were loss which meant the equivalent of 50% from the United States GDP.

So there is a cyclical evolution story that seemed familiar. The market adjustment had been produced because of an exaggerated growth of a speculative financial balloon. Most of the „dot.com” companies failed in applying their own business model. The business to consumer electronic commerce underestimated the costs and the complexity of the physical deliveries and despite all assurances regarding the credit cards security, the consumers didn’t proved very glad in offering their personal data online. Despite the promise of a full free access, much information is offered for a fee, many users avoiding then if not direct interested.


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Many investors in dot.com stocks were banks and institutions which bought during the boom despite the prudence that could be dictated normally by creditors’ protection. When the market gave signals of weaknesses, most of the investors didn’t afford to wait and withdrew their money, contributing to the IT stocks depreciation. The dot.com crisis demonstrated to the ones who didn’t believe anymore in the business cycle existence that they were wrong. The novelty consists in the correlation between the capital market fluctuations and the business cycle. There is a convergence of the financial cycles, innovation cycles and business cycles which load each other in every phase, ascending or descending.

The innovation race didn’t end with the first crisis of the “new economy”. Contrary, the year 2001 was the turning point for a new period of economic boom, the American productivity maintaining a high growing rate.

Thus we conclude that the turbulences from the beginning of the New Millennium didn’t mean the end of the “new economy” in the sense of diminishing the American economy capacity to grow by innovation. The fall of the informational technologies companies stocks meant only a necessary correction for a too abrupt raise, not totally based on the real economy facts. Practically, the monetary economy rose in a rhythm not sustained by the real economy because of a generally optimism, of some too big expectations regarding the capacity of innovation. The decline of the year 2000 was only a part of a cyclical evolution, naturally in a capitalist economy. Even for the ones who continue to believe in the virtues of the “new economy”, the business cycle reality becomes an indubitable one. Moreover, the actual world crisis, which began in the United States, is one more prove that the business cycle won.

4. REAL ESTATE CRISIS The American investors’ exuberance didn’t end in 2001. The fact that the economic

fluctuations in the first years of the new millennium has been transformed in a slightly recession, surmounted by the increasing rates and the high productivity, has been contributed in rehabilitating the high spirits in the markets. Therefore, the race for a better life has been oriented this time towards the real estate market. The dream of every American to own a house causes the real estate transactions an accelerated increasing trend.

The acquisition of a house requires, most of the times, a mortgage loan contracted form a bank or another financial institution. The harsh competition on a market with a huge potential has determined the financial institutions to seek new and innovative ways to acquires more and more clients. Some of the financial institutions have chosen to finance a category of population which other banks, in normal conditions, wouldn’t grant them a mortgage loan. It’s about the ‘subprime’ category, due to the incapacity of proving adequate income sources or because they had a bad loan track record. Of course, because of the risks, these loans have been granted with an increased risk-premium, meaning increased interest rates, much higher than in normal market conditions.

The aspect which again has been omitted is the fact that each market expansion is followed in the end by a contraction. Thus, the ones who bought houses by high interest rate mortgage loans have renounced to repay the borrowed money by the fact that the value of the houses has decreased. The lenders have faced an extended situation of defaults becoming the owners of ‘paper houses’. The accelerate depreciation of these assets doubled by the contraction of the real estate market has turned in a serious problems for the lending institutions which had to appeal for refinancing. Securing the mortgage debt is the method by which a mortgage bank or institution is refinanced by selling the debt on capital market through so called mortgage bonds. The issuance of these bonds is done by grouping similar mortgage debts. An important role in this process is carried out by the rating agencies which assess each package of bonds, the main buyers of these bonds being pension and investment funds, insurance funds or banks. When the price of estates has decreased, many sub-prime debtors have renounced to repay the borrowed money and therefore the bonds backed up by


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the mortgages debts has decreased in value. When investors started to sell these bonds, the panic was created and the prices had a strong decline

September 2008 was the month when many banks and financial institutions faced significant losses due to strong decline of real estate market. Because many debts has not been recovered led to incapacity of payments. And when we’re talking of billions of dollars, a strong interdependence between these institutions, we can have a clear image of a domino game, when pieces are falling down one by one.

Excessive risk assuming has determined the top 5 American investment banks to reach an increased level of debt, and the decreasing value of the assets had determined the incapacity of debt repayment. In September 2008 Lehman Brother faces bankruptcy. Bear Stearns and Merril Lynch are bought by JP Morgan, respectively Bank of America. The collapse of the three financial institutions stands as a proof for instability and the deepness of the disequilibrium. The other two financial institutions, Morgan Stanley and Goldman Sachs, had chosen to become commercial banks being forced to comply with more strictly regulations. [9].

The financial crisis of United States and the unprecedented governmental measures for saving the market fall has been transmitted in the real economy, with an effect in GDP decrease. But the contagion effect has gone further, the strong interdependence of global financial markets making the E.U. to announce in short time entering the recession.

The actual crisis in the U.S. has been mostly determined by the excessive assuming of the debts higher than the one which could be ensured by the existent financing sources. The population has indebted excessively because everything could be bought by credit. The American’s houses had become, by mortgaging, a facile source to obtain money for current consumption. The banks made efforts to sell loans and after that to resell these loans in order to obtain more money for lending activity. Although the credit is the essence of the capitalism, hiding the debt after complex financial instruments couldn’t work without end.

Thus, on the amplitude of the crisis had contributed, beside the exuberance of the individuals to enrich, the more and more sophisticated ways to reach this desiderate. The innovative and more complex character of the financial instruments, creation of the “new economy”, has proved to be a fragile one on a market in which the excessive risk assuming, moral hazard and exaggerated optimism are being periodically penalized, after the old cyclical laws of the economy.

5. CONCLUSIONS Informational technologies, economic efficiency, high productivity – appanage of the “new

economy” imprinted for sure new trajectories to the developed capitalist countries, but they neither dismissed the business cycles nor abolished inflation or unemployment. Nevertheless, new industries developed and the old ones experienced important technological and organizational transformation, the workers’ skills improved, the technical content of the goods rose, the labor productivity and the national production faced significant growth. But the business cycle remain a constant characteristic of the capitalist economies, it continuing to exist despite the informational flux being at the corporations’ disposal in mini seconds. No one of the empirical or theoretical claim of the “new economy” - technological revolution, productivity growth, profits growth etc., is evidences against business cycle. Moreover, the descending phases of the business cycle appeared most of the time because of disconnecting financial economy from real economy. The capital market had engaged in exchange speculations mirage a great number of investors, thus the financial economy couldn’t reflect anymore the reality of the production of goods and services.

The recession from 2001, in big part being determined just by the informational technologies, proved even to those who still doubted that business cycle is a companion of the capitalist economies. But the maintenance of the cyclical evolution, even if contradict the “new economy” vision of an uninterrupted growth, is not a proof that this economy didn’t existed. The “new economy” did exist in the conditions that every evolution of the economic systems represents a breaking from an old reality and the beginning of a „new era”. From this point of view the


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economy of the ‘90s was for sure a new one. However, we shouldn’t forget that the economic laws remain the same and the ones who believe they could break them will be sooner or later punished. Even if we speak about the exuberance of the investments in the first line IT companies‘stocks in the ’90s or about the last years real-estate investments, the economy’s evolution remained the same, with climbing and descending. The expansions always end with a recession, as recessions always make passage toward new expansions.

6. REFERENCES [1] Among the “new economy” supporters are Steven Shepard, Michael Mandel, Dale Jorgenson, Kevin

Stiroh, Alan Greenspan, Stephen Oliner, Daniel Sichel [2] Bureau of Labour Statistics www.bls.gov [3] John Bradford DeLong; Introduction to the Symposium on Business Cycles; http://www.j-bradford-

delong.net/Comments/bcsymposium_intro.html [4] Lakshman Achuthan; Anirvan Banerji; Beating the Business Cycle: How to Predict and Profit from

Turning Points in the Economy; Economic Cycle Research Institute, 2004, pag. 51 [5] Castells, Manuel; The Internet Galaxy: Reflections on the Internet, Business, and Society; Oxford

University Press, 2003 [6] Business Week is one of the publications which sustained the idea of a „new economy”, an economy with

a continuous prosperity [7]Tiberiu Brăilean; Noua economie. Sfârşitul certitudinilor; Institutul European, Iaşi, 2001; pag. 124 [8] Alan Greenspan; The Federal Reserve's Semiannual Monetary Policy Report Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate; 26 of February; 1997

[9] Y2K – abbreviation used for the hypothetical software problem of passing to the year 2000. The abbreviation combines the letters „Y” from „year” and „K” from the Greek kilo - thousand, thus Y2K represent the year 2000. There was a speculation about the computerized programs which were going to stop functioning or will generate erroneous results because the years were stated by the last two digits and thus the year 2000 could be interpreted as the year 1900.

[10] Stephen Labaton; The Reckoning – Agency’s ’04 Rule Let Banks Pile Up New Debt; New York Times; 2 October 2008

7. BIBLIOGRAPHY

1. Achuthan, Lakshman; Banerji, Anirvan; Beating the Business Cycle: How to Predict and

Profit from Turning Points in the Economy; Economic Cycle Research Institute, 2004 2. Atkinson, Robert D.; The Past and Future of America’s Economy: Long Waves of

Innovation that Power Cycles of Growth; Edward Elgar Publishing; 2004 3. Ellis, Luci. The housing meltdown: Why did it happen in the United States?; Bank for

International Settlements Working Papers nr. 259; September 2008 4. Blinder, Alan S.; The Speed Limit: Fact and Fancy in the Growth Debate; American

Prospect; nr. 34; 1997; pag. 57-62 5. Brăilean, Tiberiu; Noua economie. Sfârşitul certitudinilor; Institutul European, Iaşi, 2001 6. Dăianu Daniel; Cât de nouă este „Noua Economie”?; Centrul Român pentru Politici

Economice; Paper nr. 24; July, 2000 7. DeLong, John Bradford; How “New” is Today’s Economy?; 15 July; 1998; http://www.j-

bradford-delong.net/Comments/How_New.html 8. DeLong, John Bradford; Introduction to the Symposium on Business Cycles; 12 of

December 1998; http://www.j-bradford-delong.net/Comments/bcsymposium_intro.html 9. Eichengreen, Barry; Bordo, Michael D.; Crises Now and Then: What Lessons from the

Last Era of Financial Globalization; National Bureau of Economic Research Working Paper nr. 8716; 2002

10. Gokhale, Jagadeesh; Long-Term Implications of the Financial Crisis; 14 of October 2008, Cato.org; http://www.cato.org/pub_display.php?pub_id=9726

11. Gordon, Robert J.; Was the Economy of the 1990s a New One?; Presentation for CBO New Economy Briefing; 6 June 2000


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12. Greenspan, Alan; Technological Innovation and the Economy; White House Conference on the New Economy; Washington, D.C.; 5 April; 2000

13. Greenspan, Alan; The Federal Reserve's semiannual Monetary Policy Report Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate; 26 February; 1997

14. Jorgenson, Dale W.; Ho, Mun S.; Stiroh, Kevin J.; Will the U.S. Productivity Resurgence Continue?; Federal Reserve Bank of New York Current Issues in Economics and Finance; vol. 10, nr. 13; 2004

15. Jorgenson, Dale W.; Stiroh, Kevin J.; Raising the Speed Limit: U.S. Economic Growth in the Information Age; Brooking Papers on Economic Activity, 2000

16. Labaton, Stephen; The Reckoning – Agency’s ’04 Rule Let Banks Pile Up New Debt; New York Times; 2 October 2008

17. Landefeld, J. Steven; Fraumeni, Barbara M.; Measuring the New Economy”; Bureau of Economic Analysis; Advisory Committee Meeting; 5 May 2000

18. Mandel Michael J.; The New Business Cycle; BusinessWeek; 31 March 1997 19. Mandel, Michael J.; The Triumph of the New Economy; BusinessWeek; 30 December

1996 20. Oliner, Stephen D.; Sichel, Daniel E.; Information Technology and Productivity: Where

Are We Now and Where Are We Going?; Federal Reserve Bank; 2002 21. Oliner, Stephen D.; Sichel, Daniel E.; The Resurgence of Growth in the Late 1990s: Is

Information Technology the Story?; Federal Reserve Bank; 2000 22. Shepard, Steven; The New Economy: What it really means?; BusinessWeek, 17

November 1997 23. Stiglitz, Joseph; The Roaring Nineties; The Atlantic, October 2002 24. Stiroh, Kevin; Is there a new economy?; Challenge; August 1999 25.*** “The New Economy in Historic Perspective”; National Bureau of Economic

Research Digest, December 2000 26. Bureau of Labour Statistics www.bls.gov


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COUNTERFEITING, A PRECISE TARGET IN A LONG - TIME BATTLE

PhD. Assistant Emilia PASCU

Christian University Dimitrie Cantemir Faculty of Touristic and Commercial Management

Bucharest, Romania [email protected]

Abstract: Currently, the world is in the full process of evolution based on knowledge. In the new economy that puts an

emphasis on the importance the information the smooth progress and capital accumulation, the information requires access to everything that represents it and thus becomes an enabling tool for counterfeit products.

But information ensures access to everything it represents and becomes a favored instrument for fraudulent work of counterfeiting.

Counterfeiting already represent a scourge that affects more and more domains of activity, putting in danger not only economical activities, but also consumer’s health and safety. Among products that are more likely to be counterfeited we can identify alimentary products, drugs, automobiles, IT, electronics and house appliances, music, movies, cigarettes, textiles, cosmetics, toys, games, software etc. After integration in the European Union, Romania must follow the rules imposed and to fight against counterfeiting and intellectual theft. The disappearance of frontiers allowed adulterators to bring counterfeited product in most markets that in many situations generated real economical and social catastrophes through the decline of local industries.

In order to reduce substantially the international commerce with counterfeited products and to destroy transnational networks involved in this commerce, a series of measures for protection is needed at national and international level.

Key words: intellectual theft, counterfeiting, types of counterfeiting, motivations of acquiring counterfeited products, proportion of the phenomenon, consumer.

Classification JEL: A10, A13, D18.

INTRODUCTION

This article is meant to make the great mass conscious on one side, but also the producers and the distributers of counterfeited products, on the other hand, in what concerns the serious consequences of the phenomenon of counterfeiting. The proportion of the phenomenon must be a signal mark so necessary in a society in which the scourge of piracy is present in all the social levels, scourge that influence us and it surely interests us all.

The massive developments of the production of consumer goods lead to the orientation of certain structures to the activity of forgery/counterfeiting of these, with the tendency of amplification because of globalizing.

These actions appeared because of the increase of the turnover at global level, for different groups of products.

The major changes after 1989 in Romania, as part of political and economical evolution in Central and South-East Europe led to the removal of commercial barriers, to the intensification of commercial trades and liberalization of goods trade. One of the most important problems of the Romanian society after 1990 is counterfeiting of every products or values coming from countries from Middle or Far East. (Enescu and Frisch, 1999)[3]

In order to situate better the problem of counterfeiting, some legal aspects of this global scourge must be presented.

In a top of the commerce with counterfeited products, Romania is on place 17, after Thailand and Kuwait, China placing first (Raducanu, 2002) [6]. The prejudices of the great companies, at global and European level are huge, counterfeiting bringing losses to European companies between 400 and 800 millions euro on the internal market and 2 millions euro outside the borders of UE. According to some recent data (Public Ministry, 2008) [10], the annual rate of


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increase of the number of counterfeited products confiscated at the borders of countries members of UE reached 300%.

The harmful phenomenon of counterfeiting is unfortunately increasing, affecting almost all the domains of products, bringing material and moral prejudices to the holders of the rights of intellectual property.

Having in mind the scale of the phenomenon we can talk about a globalization of counterfeiting and piracy that affects like a plague, all the states’ economy. Counterfeiting represents an extremely dangerous phenomenon that affects seriously the functioning of the System of Intellectual Property, stopping technological competition and the transfer of technology, necessary in the development of the economy.

In order to reduce substantial the international commerce with counterfeited products and to destroy the transnational networks involves in this commerce measures of counterwork are needed at national and international level (Petrescu and Sârbu, 2004) [5]. It can be said that there is no product that not to represent a target for counterfeiting, especially those that are sold with high prices and under prestigious marks (Părăian and Pascu, 2008) [7], reason why every country in the world developed and institutional and legislative system, in order to reduce to minimum the effects of this phenomenon.

LEGISLATIVE ASPECTS REGARDING COUNTERFEITING The legislation from Romania (Law 64/91 regarding the patent for invention) [2] defines

counterfeiting as “the creation, use or circulation without right of an object of an invention patent or any other violation of the rights given by law” if these violations were made after the date of publishing of the request for an invention patent. For the caused prejudices the holder has the right to compensations and can request the court to confiscate or destroy the counterfeited products, including the materials and the equipments that served directly to commit the crime of counterfeiting.

Studies and statistics made by organisms interested in studying the phenomenon of counterfeiting shows a special development of economical technology that allows more and more the theft of intellectual property through counterfeiting and piracy.

The intellectual property can be interpreted as a product of the intellect that represents the property of an individual or of an organization. Later on, these can share this right freely, or can control its use in certain ways.

The protection of products, of intellectual property generally encourages the investments, stimulates the economical growth of a country through the fact that implies the creation of new work places and new domains of activity, but also the improving life conditions.

The harmful effects of counterfeited products over a holder mark are endless. First, we can refer to a parasitic approach to known brands, to degradation of their image, when their name is being used on products of inferior quality or in any way for the selling of their own products. The exploitation of somebody else’s reputation is an unfaithful practice which manifests through actions that target the transfer of the favorable image created by the reputation of some brands over their own products or services.

Those who use practice this kind of acts use, in the context of commercialization and publicity of their services, expressions like:”as”, “like product X”, “way”, “style”, “brand”, “taste”, “following the recipe” or other similar mentions (Dima and Pamfilie, 2004) [1].

In other words, they try to drawn over their products advantages of the quality guarantees of known brands. These kinds of actions are punished by Law 11/1990 in what concerns the fight against unfaithful competition, but also other special laws.

Counterfeited products reach different consumers from various directions and sometime we find them in unexpected places. These can be the goods, including their packing, on which it was applied, without authorization, a commercial mark identical with the commercial mark registered for the same type of products or which can’t be distinguished through its essential aspects by that


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specific commercial mark, and, because of this, it brings prejudice to the mark’ holder rights, according communitarian law and national law.

The ongoing study revealed the following (Pascu E., 2009)[4]:

Picture no 1 Elements of "support" for counterfeiting

Law, national and European issues set the following people who contribute to extension of

the spread of counterfeiting. A person who:

holds with commercial purpose counterfeited merchandise; uses in commercial purpose counterfeited services; was found while using counterfeited services at commercial scale; provides services used in activities of counterfeiting, in commercial

purpose; is severely punished according to the procedures in force at the same time is required to disclose the origin and distribution networks of goods or services which infringe industrial property right protected.

THE SCALE OF THE PHENOMENON OF COUNTERFEITING Generally, counterfeiting has a double impact: social and economic. From economic point

of view, counterfeiting of products or “the crime of 21st century (Viefhues and others, 2004) [9], how it was named this henomenon, have serious consequences for the rightful holders of intellectual property rights as for the affected states, in what concerns the financial losses these register, counterfeiting representing a connection with vast criminality. Because of this, putting on market counterfeited products, as for other goods that violates a right of intellectual property, causes considerable damages to producers, sellers and rights holders who respect the law (the Regulation of the Council (EC) Nr.1383/2003-12-03) [8]. Nevertheless, the number of counterfeited products identified is increasing, as showing in picture 2.

In France, The Union of the Producers for International Protection of Industrial and Artistical Property says that falsifying of luxury product (among them the perfumes) is a very serious problem, responsable for the following types of damages:

damages brought to the image of the companies the products of which

are counterfeited;


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damages brought by the diminishing of sales of luxury products the counterfeiting of which invades the market and are being sold at low prices;

damages directly made by sapping the market position of a brand; the sell of products of inferior quality by using the name of a prestigious mark can bring irreversible prejudices;

suplementary expenses that the companies the products of which are counterfeited have to support in the fight against it.

From social point of view these affect the good functioning of society and in some cases endanger the health and safety of consumers, if we remember the fact that counterfeited drugs represent 7% from the rating from global pharmaceutical industry. It is alarming the development of counterfeiting in the domain of medical products and personal hygiene that are an attempt on consumers’ health and safety.

A counterfeited medicine, for the treatment of health problems of the patients contains substances different from the original recipee, that replace its active substances. In this way it doesn’t endanger directly and immediately the safety of the patient, but on long term it determines suplimentary costs and rising risks.

The harmful effects of the commerce with counterfeited products are very well known, and those who produce or sell this kind of products bring prejudice to protected rights and seriously endanger the health and safety of consumers and also cheat and sometimes endanger consumer’s health and safety.

Because of the increased profits obtained on account of inappreciable expenses, counterfeited products represent a serious threat to national industry and the safety of consumers through products of consumption: appliances, electronics, toys, textiles, shoes, perfumes/cosmetics, and the eradication of this phenomenon being an international concern.

So that, from year to year, the quantity of counterfeited products that are confiscated is alarmingly increasing. In the European Union in 2004 there were confiscated 103 millions of counterfeited and pirated products, representing a growth of over 12% comparing 2003 and of 1000% in relation with 1998, the estimation regarding the commerce with counterfeited products indicating an annual figure of 500 billions euro. Estimations show that in 2006 the commerce with counterfeited products represented 10% from the volume of global commerce, in comparison with 5% in 2000. In 2008 in community’s customs there were intercepted over 250 millions of counterfeited products, implying 35935 cases. These numbers are extremely worrying if we compare with those registered in 2006 when there ere confiscated 75 millions articles, implying 26000 cases.


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Picture no. 2 The number of cases of counterfeited products registered by the community customs

For a better understanding of the spreading of the phenomenon we must analyse the factors that favour the activity of counterfeiting and the motivation of buying counterfeited goods by consumers.

FACTORS THAT FAVOUR COUNTERFEITING

The counterfeiting of products continues to be favoured by a series of factors, among which: the desire and possibility of obtaining illicit gains; technical difficulties in identifying and establishing fast the way and

the degree of forgery; the ease of making forgery from technical point of view, because of

the technical evolution, the diversification of material resource and the modern system of packing;

the outsource of the production of some goods from the home country of some great companies from other countries, where the force labour is cheaper; the producers of this country sell a part of the products made under their own label;

important differences between high request and low offer for certain products;

the insufficient level of technical and technological rules, in the laws regarding the quality of products, which facilitate the cover of forgery;

the defective organizing, inefficient activity and lack of control in different compartments of work, in what concerns the production and the circulation of goods;

The action of these factors differs depending on the specific of the counterfeited products,

on the ways and on the stage of their technical-economic circulation when the forgery takes place. In order to remove the action of the last two factors it is necessary to implement the system

of quality, according to the stipulations from the ISO standards series 9000/2000. Previously mentioned study shows that in many cases consumers to know they have a

counterfeit product to buy for reasons yet to emerge from the graphic:

cosmetics

drugs

The biggest catch in December

clothing


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Picture nr. 3 Reasons for purchasing counterfeit

Resuming different ways of studying the phenomenon of counterfeiting it was made the

following classification of consumers who buy counterfeited product, with or without knowledge:

buyers who can’t make the distinction between counterfeited and original product;

buyers who search willingly counterfeited products, attracted by the bargain of low prices;

buyers who recognize forgeries and counterfeited product and still buy them because of the good way in which they were made and of the desire of having products belonging to certain brands;

tourists that buy products specific to the geographical area where they are, because of the low amount of time they have and because they are attracted of the low prices, without realizing they are counterfeited;

people who buy in a hurry the necessary products, being tempted by certain brands they are not used with and of the packing made through modern ways, which determine them to decide quickly to buy it, later on realizing they bought a forgery.

In Romania, studying public opinion on counterfeit products in a scientific research showed

that every day, knowing whether or not we are in the vicinity of inferior quality products, which sometimes voluntarily some of the reasons consumers buy them up said. These products are part of the kind which are highlighted in the following graphic for a better overview. Consumer perception is real that is better to consider when you wish to be taken some steps towards it, because they are the first recipients of poor quality and sometimes harmful counterfeit products.


160

Picture nr. 4 Counterfeit products in Romania

To protect consumers against the use of counterfeit products in the information campaign is

ongoing, but not active enough and not permanent role. A national campaign has positive effect STOP piracy is a official site (www.stoppirateria.ro) [11]. This campaign, initiated in late 2008 and proposed to bring to public attention online all information relating to strengthening institutional capacity to protect intellectual and industrial property rights, with more detail supporting active consumers, that news, dictionary terms but also the presentation of concrete cases handled by partner institutions. This campaign is supported by: the Ministry of Public Service will coordinate the work in the field of intellectual property rights, the General Inspectorate of Romanian Police, General Inspectorate of Border Police, National Customs Authority, the Romanian Copyright Office, State Office for Inventions and Trademarks. The initiative is noticeable but not strong involvement and consumer to be able to refuse and not counterfeit products to buy and more than that, to denounce people and places where such products exist, the current situation will take quite long.

CONCLUSIONS

Taking into account the elements mentioned above it is clear that the phenomenon of

counterfeiting is spreading very fast and the only way to stop its rising evolution is a powerful awareness of the producers and buyers equally.

The prejudices brought by the phenomenon of counterfeiting of goods to the companies that produce the original merchandise and hold the right over the marks, to the state through tax evasion and to the consumers who buy them, to those who not only that cannot satisfy the necessities, but can endanger their health and security, determined the creation of some organisms which to apply a system of fighting against counterfeiting.

That’s why, the first measure of protection stands in a new attitude of the producers for packing, taking into account, except their function of protecting the merchandise and of promoting the sales, also, that of protecting of good’s authenticity, especially in the case of brands.

The packing producers try to prevent counterfeiting and to protect original products, finding different solutions:


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special ink (of grating together with an invisible code, heat sensible ink that changes colour when it overcomes a certain value established for the compliance of frigorific chain, UV ink etc);

new techniques of printing using holograms; biotechnologies (system based on a biopolymer inserted in the label, a

mobile pencil and a mobile reader for identification of products); RFID labelling systems.

Thus, as consumers it is better to give a higher importance to the products we buy, to the

place where we buy from and not last, to the personal safety, knowing that a brand certifies the quality of the product, its concordance with certain regulated requests and with the networks of distribution.

Therefore the next time when we are shopping it’s better to analyse carefully when we are offered a Rolex, a Wrangler pair of jeans or an Adidas gym suit (probably counterfeited) in order not to contribute to law violation, increasing the illegal incomes of forgers and the diminishing of personal incomes buying something we don’t want.

BIBLIOGRAPHY:

1. Dima D., Pamfilie R., Merceologia şi expertiza mărfurilor alimentare de export-import, ed.

ASE, 2004 2. Law nr. 64/11 October 1991 regarding invention patent; 3. Enescu L., Frisch C., Managing Intellectual Property, Fighting against counterfeiting in

Romania, London, Sep 1999. pg. 49, 4. Pascu E., Protecting consumers against the use of counterfeit products Romania, Final Report

Doctoral School of ASE, Bucharest, June 2009 5. Petrescu V, Sârbu R., Export-import commodity expertise, ed. ASE, Bucharest,2004 6. Părăian E., Pascu E., Expertiza mărfurilor, ed. Pro Universitaria, Bucharest, 200 7. Răducanu I, Falsificarea mărfurilor industriale, ed. ASE, Bucharest, 2002. 8. The Regulation of the Council (CE) Nr.1383/2003-12-03, regarding actions of border

checking directed against goods suspected of bringing prejudice of some rights of intellectual property and the measures that must be taken against goods that violated these rights

9. Viefhues, M., Linklaters Oppenhoff & Rädler, Counterfeiting and Organized Crime, International Trademark Association, Special Report of Counterfeiting, September 2004

10. www.mpublic.ro 11. www.stoppirateria.ro


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BUSINESS INTELLIGENCE SOLUTIONS FOR HUMAN RESOURCE MANAGEMENT

Lecturer PhD. Luminiţa ŞERBĂNESCU University of Piteşti, Romania

[email protected]

Abstract Business intelligence solutions have witnessed an unprecedented growth over the last decade and the

companies that offer them known periods of spectacular increase even during recession periods. The optimization and automation of a process by the means of a BI solution contributes to the reduction of operational costs. A BI application offers a quick and clear image of the whole activity, of the cost overrun and allows taking corrective measures in due course. Being aware of the importance of human resources and of their good management, one of the managers’ priorities is to choose a system of human resource management as complex as possible to optimize work in the process of personnel management. In this article I have presented a BI solution implemented by the means of QlikView application that is used for human resource administration. Since there are many advantages to outsourcing the services within human resources I have taken as an example a company that offers this type of services to many client companies. The reports and the analyses obtained lead to an increase in the efficiency and profitability of the work carried by the employees of the customer company, through a better use of the existent competencies, taking into account the achieved progresses and through an efficient use of the financial resources dedicated to improving the work of the personnel. The BI solution presented here offers the managers a complete image of the resources, costs and personnel performance at the level of the whole organization as well as the data they need, when they need it, in order to make the best decisions regarding the company personnel.

Key words: business intelligence, QlikView, human resource management, outsourcing, reports, analyses

Classification (JEL): M12

1. INTRODUCTION Business intelligence (BI) is a powerful instrument that the companies can use to improve the organizational performance offering valuable information for all the parties involved in the business. BI has become such a comprising concept that we must take a few minutes to revise it. Firstly, BI includes disciplines that are connected to each other, yet divided. Thus BI can be divided into four basic zones -7:

1. Data integration refers to the modality that allows data from different business processes, programs, platforms and systems to be assimilated so as to create consistent information that can be trusted an easily used.

2. Data management means creating a central deposit to stock data in a form and location that makes them more accessible to the analysis engine.

3. Analysis is a term used for mining, modeling and optimizing data to estimate the tendencies that will be communicated to the decision makers.

4. Reporting allows final users to see and show the results in a personalized form. BI comes with a tempting offer under the form of a platform meant to bring together and to interrogate information in due time helping users to anticipate changes and to act accordingly. BI integrated systems offer data extraction, data analysis removes irrelevant information, the risk management and offers support for managing decisions at high speed and with almost perfect relevance-1. Business is run through IT systems within BI and do not depend on the computer department. An essential facility of BY is their ability to connect simultaneously and coherently to more data sources, that can be different operational systems (accountancy, ERP, CRM, SCM, etc.), market research results, activity and access logs or anything that is relevant for the beneficiary company, usually structured information, in different formats, from text files to structures stocked in the data basis.


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To exemplify I will consider a company that is concerned with the human resource management for five client companies since there is a tendency to outsource services in the case of small and medium-sized companies. The consensus at the managerial level is essential during the implementation phase as it has to ensure the handing in of the data basis and of all the important information in order to start the project. Human resource domain is becoming more and more important for companies. Starting with recruitment, training and the observation of each employee’s evolution, the applications of human resource management play a strategic part in the improvement in the efficiency of HR department. Service outsourcing is a solution preferred by many Romanian companies, especially since Romania became part of the European Union and foreign companies are more and more interested in opening a branch in Romania-4. You can never hold all the competencies within an organization. That is why more and more companies prefer to focus on the main business, outsourcing the services. The financial benefits rise, according to specialized studies, up to 30% reduction, through eliminating the costs paid on salary taxes, on recruitment and training-6. The advantages of HR outsourcing are -2:

1. It allows the company to focus on the main activities by outsourcing time consuming activities of the human resource function;

2. The possibility to easily follow the expenses on certain administrative activities that take a lot of time and resources;

3. Reducing the risks connected to the correct put into practice of the legislative changes, as a result of using the services offered by companies specialized and accredited in the human resource domain;

4. Investments in salary calculation software, its upgrading are not necessary any more since the service provider is responsible for this aspect and shares the costs with more beneficiary companies;

5. The increase in productivity and the simplification of the process of salary earner personnel;

6. Saving time and money; 7. Ensuring confidentiality for administrated data and information; 8. Constant flexibility according with the client company requests by generating

statements and reports in the format requested by the parties.

2. THE MAKING OF THE BI SOLUTION FOR HR In order to implement a BI solution specific to human resource management I used the QlikView application, a complete and powerful Business Intelligence and data analysis software package that offers a better modality to deal with the business data-5. QlikView uses a revolutionary technology, the connects data in the computer’s memory to make sophisticated analyses easier to implement, to use and to upkeep and ensures a quicker and easier access to detailed business data. The interactive visual interface is easy to understand and use by the final users. With just a few clicks the users can create and surf intuitively through the most advanced types of analysis. All the objects of an analysis are dynamically inter-connected – a single click on a certain feature of an object this can be adapted as criterion for other objects of an analysis. What is more, detailed information is given. There can be created all kinds of reports that can be distributed only through physical and verbal means (e.g. mail or web sites). The simplest operation that can be easily done with QlikView is the calculation page „Filter”. This allows the visualization of more information at the same time. The operations that can be done on this page are:

- Simple or multiple selections: for example, if we select a certain department we can visualize information on the salary earners and their positions, about the budget groups, on the


164

number of days for holiday or for sick leave, the number of the salary earners’ training days, on the number of hours worked over a certain period of time.

- Search: for example, if we want to search for a certain person to find out information about the company where s/he works, the standard wage, the net salary, the gross salary, the bonus, the number of days taken off for holiday, the number of days for sick leave, the number of training days the corresponding object is selected and the name of the salary earner is introduced. As the letters are being introduced all the salary earners whose names contain the respective values are selected (see fig. 1).

Figure 1. Filter page

Figure 1 shows the way in which a multiple selection is done to choose a time period, i.e.

three months and the salary earner named „Popescu Ion 1”. It can be noticed that all the recordings corresponding to the given selection criterion have been selected at the same time. A very important element in building calculation pages is represented by the features that are chosen as representative. Thus I have used: time, department names, salary earners’ positions, the budget groups, etc. These can be selected and modified on each page and they can be combined by defining groups. We are going to build some calculation pages with the aid of QlikView applications, pages that allow us to conduct a complex analysis of the human resource management of the five client companies. Data is modified for tests, but real data ratio is preserved. The reports are varied and are obtained either by changing the type of charts or with the help of the multiple selection criteria: the time period, data on salary earners and salaries, on departments and the existent positions. The reports may take the form of a table or chart and can be visualized and printed directly from the application, by the means of a web-site, or can be exported to excel for further processing. Part of the reports projected for the analysis of the human resources of the client companies are shown below: 1. Instrument panel – contains three types of charts that show, for all the five companies, with a view to carrying out comparison and analysis, situations referring to (see fig. 2):

- The employee fluctuation for each company over a five month period. This report also shows, if the features are changed, the number of sick leave days taken, the number of training days, the number of extra work hours and the bonus give to the employees;

- The total cost spent by each company on human resources as well as the gross cost for taxation;


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- The observation on the salary earners’ activity taking into account the number of sick leave days taken, the number of training days, the number of extra work hours and the total number of employees in the five client companies per month.

Figure 2. Instrument panel

2. The analysis of net and gross salary for each department of the client companies. The report shows the number of employees in each department, the standard wage, the gross salary and average gross salary, the net salary and the average net salary, the bonus, the average number of sick leave days or holidays taken per employee and the average number of training days per employee. It can be easily noticed the differences between the different categories of salary earners and the differences between the same departments of different companies. The percentage of employees in selection total compared to the percentage of income per category show the way in which the income is distributed between the departments. For a complete image of one company this should be selected and the percentage calculations are made automatically.


166

Figure 3. The analysis of net and gross salary

3. The analysis of extra work hours done by each company per month (see fig. 4).

The average of total expenses, the average number of extra hours, and the value of the extra hours per employee are calculated for each company. The last column shows the ratio of the value of the extra work hours to the total expenses of the department. The features of this report can be modified and thus the total expenses per department, per salary earner or per budget group can be carried out.

Figure 4. The analysis of extra hours

4. The net salary per employee. The chart points out the average value of the standard salary, of the net salary and of the gross salary and the total cost for each company over a four month period. To compare certain functions, months, etc the data will be selected on the „Filter” page. A bigger difference between the standard and gross salary is given by the type of payment in the company.


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Figure 5. The average salary per employee

CONCLUSION

A good administration of the human capital allows the company not only to cut down in the management costs but also to increase in individual efficiency. The final aim should be to place the salary earner at the centre of the company strategy and their integration in the totality of traditional functions for human resource management. The implementation of a BI solution in human resource administration influences the business process, both from financial and operational point of view, and offers the informational support for financial analysis, predictions and decision making in according the salary rights to the personnel. Even though human resource administration services have been outsourced, the manager of the client company has online access (account and password) to all the reports projected for his company by the provider company. At the same time it receives a fast feedback from the service provider company through the analysis conducted by this on salaries, extra work hours the number of days taken off for the same position in different companies. By using BI in the administration of human resources the client company has the following advantage:

- Integrated administration of all information regarding the employees; - Saving time in calculating the salary rights and getting various statements required by

the legislation in force; - Diminishing the efforts of the salary department in calculating salaries; - The possibility to run “what if” simulations regarding the evolution of the salary funds

and of the taxes paid by the company for a proper budget allocation; - The preservation of the history of the employee’s activity and of the material benefits

he was given; - Observing the employees’ activity: holidays, sick leaves, clocking; - Data security and protection; - Fast access to different actions and information.


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BIBLIOGRAPHY

1.Baxter, Andrew (2005), “Business Intelligence needs smarter handling”, http://www.gartner.com.

2.Outsourcing: Un nou vocabular(2008), Computerworld Romania, nr. 6/2008. 3.Computerworld Executive Briefings (2004), “Get smart about Business Intelligence”,

http://www.computerworld.com. 4.http://business-edu.ro/Resurse-Umane 5.http://www.qlikview.com 6.http://www.wall-street.ro/articol/IT-C-Tehnologie 7.Irene Barrall, Christine Johnson, Tonya Trappe and Graham Tullis, Intelligent Business,

http://www.intelligent-Business.org 8.QWT Business Intelligence – Enterprise Script, QlikTech International, 2005 9.QWT Business Intelligence – Professional Layout, QlikTech International, 2005 10. Thompson, Olin (2004), “Business Intelligence Success, Lessons Learned”,

http://www.technologyevaluation.com.


169

SECTION 3

ACCOUNTING - FINANCES


170

THE DIVIDEND – COST ELEMENT OF CAPITAL CONTRIBUTION FOR THE SHAREHOLDERSHIP

Lecturer Ph.D. Irina –Ştefana CIBOTARIU

University Stefan cel Mare, Faculty of Economic Sciences and Public Administration, Suceava, Romania, [email protected]

Abstract: If we refer to the dividend – as element of capital contribution of the shareholders, we have to compulsory take

into consideration the problem of capital’s cost involvements. Thanks to the fact that own funds do not have a fix income, because the dividends that will be distributed depend upon the measure of net achieved profit and of the dividend politics of the enterprise; determination of own funds cost represent a complex task, that behaves different methods of computing. For this present paper, we succinctly presented some models of evaluation for the dividends and involvements generated by these within the process of economical development. The topic approached presents interest by the fact that dividend, as notion, is highly related to the economic category - the profit. Without profit, we cannot approach the problem of dividend and for this reason, we approached this theme. Meantime, series of theories appeared and developed as concerns the dividend, which established the basis of certain politics related, politics that are approached considering the point of view of different evaluation models of the own capital cost, approached in this paper: the model of dividends discounted that includes many particular situations, (the model of zero increasing, the model of over-normal or inconsistent increasing, the model of profits capitalization, the model of Bates) and CAPM model (Capital Asset Pricing Model). As conclusion, after short analysis of these models, one may say the these emphasize the complexity of determining the capital cost by means of dividend, this being considered both cost and financing source.

Key-words: capital, cost, financing source, dividend, share; JEL Classification: G32, F37; INTRODUCTION The motivation of chosen theme would be that theories concerning the dividend and

dividend politics allow us to see a dual character of the dividend: of cost, in conditions where is allotted, but as financing source, when this is retained by the economic entity. Considering that the cost of capital, on general way, is identified by its present value of future flows of income, results that dividend represents the main element of its. The problem can be related to how much the enterpriser had to pay for the mobilized capital from the shareholders? or How much costs the capital that the enterpriser have invested? Firstly, the specialty literature identifies the cost of own capital with the profit part allotted as dividend. Secondly, we take into consideration the opportunity cost. These aspects emphasize the complexity of determining the cost of own capital for the economic entities, without which the economic process might not accordingly carry out.

Presenting the concept of dividend represents a necessity of gnoseologic point of view. Starting from the dual character of dividend: cost and financing source, we consider that presenting the different models of evaluating and appreciation is imposed, as well as involvements generated within the process of economic and social development.

THE MODEL OF DISCOUNTED PRESENT DIVIDENDS The model of discounted present dividends is considered to be the traditional model of

evaluating the own capital of the cost, which is based upon discounted present of dividends, without taking into consideration the risk. We mention that by discounting present of values we understand the operation by which an expenditure or income within a year in process of carrying out an activity is recomputed in monetary units from a year with zero reference.

According to this model, the price or the present rate of a share is equal with the discounted value of flows on future liquidities that this generates on dividends and the price of cumulative reselling.


171

A simplified variant is pointed out by the model Gordon-Shapiro, as follows: the price of a stock holding at moment 0, 1, …, n is and actuarial price and is formed from discounting the future flows (dividends and selling price).

( ) rP

rDP t +

++

=1

11

100

(1)

( ) rP

rD

P t ++

+=

1122

11 (2)

where: P0 (t0) and P1(t1) represent the price of stock holdings at the two moments t0 and t1; D1 and D2 – dividends at the two moments, r - rate of profitableness required (asked) by the investor. Starting from the two relations (11) and (12), we notice that:

( ) ( ) ( )22

221

22

100 1111

111 r

Pr

Dr

Dr

rP

rD

rDP t

++

++

+=

++

+++

+=

(3) and generalizing, it results that:

( ) ( ) ( )nn

n

ii

it r

Pr

DP

n ++

+= ∑

= 1110

(4)

Since ( )0

1→

+ nn

rP

it results that

( ) ( )∑= +

=n

ii

it r

DP

n1

0 1 (5) meaning that value of a commune stock is the sum of all future payments of dividends

discounted, no matter the horizon of the investment. In practice, is hardly to estimate this thing, because the investor has to foresee the future dividends towards infinite. The model Gordon-Shapiro assumes that dividends will increase with a constant rate in the following years (indicated by g), which is smaller that the rate of profitableness asked by the investors (r) or the rate of investment coming adopted by these. In conditions where the amounts distributed under form of dividends are increasing with this yearly constant rate (g), we may write:

Di = D0(1+g)i (6) because: D1=D0(l+g); D2 = D1 (l+g) => D2 =D0(l+g)(l+g) => D2 = D0(1+g)2 ….Di=Di-1(1+g)i. As matter of fact, the actual value of a stock holding will be:

( )( )

( )( ) ∑∑∑

===⎟⎠⎞

⎜⎝⎛

++

=⇒++

=⇒+

+=

n

i

in

ii

in

ii

i

rgDP

rgDP

rgD

P1

001

001

00 1

111

11

(7)

The sum ∑=

⎟⎠⎞

⎜⎝⎛

++n

i

i

rg

1 11

represents the geometrical progression with i terms, where i ∞→ of

rate ⎟⎠⎞

⎜⎝⎛

++

rg

11

, with the first term equal to ⎟⎠⎞

⎜⎝⎛

++

rg

11

In these conditions


172

( )⎥⎥⎦

⎤

⎢⎢⎣

⎡⎟⎠⎞

⎜⎝⎛

++

−−+

=

++

−

⎟⎠⎞

⎜⎝⎛

++

−⋅

++

=∞→∞→

i

i

rg

grgD

rgrg

rgDP

111

1lim

111

111

11lim 0

1010

Because i ∞→ , 0

11

→⎟⎠⎞

⎜⎝⎛

++ i

rg

and

( )gr

DPgr

gDP

−=⇒

−+

= 10

00

1

(8)

where D1 represents the first dividend to be distributed. In situation where the dividend from present year was distributed, then:

grDDP−

+= 100

(9) Rate of profitableness asked by the shareholders (r) defines the constraint of remuneration

that weighs over the enterprise and allows it to determine the cost of capital. At the same time, it corresponds to the rate of minimal efficiency that stimulates the owner of liquid capital to buy the stock, and the effective stockholder to not sell it. This rate depends upon the size of aimed dividend, and this of the size of future year profit, and the decision of stockholders. Of course the fact that future year flows of profit are intensive, in the way that no one can guarantee the sizes of profit or of the profit will exist or not. The actual price of the stock (Po) is depending upon the future size of the dividends (D), but also of the certain rate of capitalization, identified with the rate of efficiency, asked by the stockholders (r). Maybe this aspect determined Gordon-Shapiro to start from the hypothesis that an year rate of profit (g) is constant and is defined as product of the accumulation profit rate (b), also constant and the mean rate of the net profitableness for the new investments (In), considered also constant (g = b x In) (10).

The cost of own capital within structure of given capitals is determined from equation (9),

extracting r ⎟⎟⎠

⎞⎜⎜⎝

⎛== g

PD

r0

1

At the same time, we ask – what do dividend represent? For the enterpriser, this is a

promise, which once accomplished becomes “a cost” of his/her business (company), and for the investor a profit form, as effect generated by the opportunity of the investment. In situation where the investor and stockholder is the same person, the dividend, in certain measure, is an implicit cost (the theory of pockets).

The model of discounted dividends behaves many particular situations, treated in specialty literature, meaning: the model of zero increasing for dividends, the model of over-normal or inconsistent increasing, the model of capitalization for the profits and the model of Bates. The model of zero increasing

According to this model, it assumed that there is no increasing of dividends, but these will remain constant. As result, D1 = D2 = ... Di = D and

rDP =0

(11) and

0PDr =

(12)

Because ( )∞→

+= ∑

=

ncu 11

0

n

ii

i

rD

P


173

r represents the cost of capital, equal to the fraction between constant dividend and the price of stock holding. In practice, a constant dividend is atypical, and for most of situations it becomes variable. The model over-normal or inconsistent increasing

In the model Gordon-Shapiro, it started from the hypothesis that r > g, but in practice the things are not the same, considering the fact that a company can know for a start period of time, related to a new activity, a rate of increasing abnormally or over-normal high. Within an economy with a perfect competition frame, these rates of increasing cannot be infinitely maintained. The model of discounted dividends can be adapted so that to express the value of stocks, with over-normal increasing. The initial time of a new activity (or any activity, which knows an over-normal increasing) is treated separately, and the assumption of a constant increasing is applied to a maturity phase of the development.

For instance, it is assumed that an over-normal increasing is expected for the first years (n-1), in year (n) coming a normal dividend, and in year (n+1), the dividends are expected to increase with a constant year rate (g). The model of profits capitalization

For the enterprises quoted to stock exchange, their evaluation is made under the form of stock exchange capitalization (V); depending of the number of stocks issued (Na) and the price of stocks (Po), therefore:

0xPNV a= (13) On its turn, the current price of the stock is established by multiplying the net current profit

on stock (PNA) and the capitalization coefficient of profits (PER -PRICE/Earning Ratio, meaning the rate Price/Incomes), the last one being named also as stock exchange multiplication:

Po - PNA x PER (14)

with aNPNPNA =

(15) where PN = total net income.

PNAP

PER 0= (16)

shows the amount that an investor has to pay in the view of achieving a monetary unit form the profits of issuing company.

Relation Po = PNA x PER of establishing the stock price of the stock holdings is named within specialty literature the model of profits capitalization. This evaluation model of the company can be presented as particular case of the model Gordon-Shapiro, where

ggr

DP +=

−=

0

110 P

Dr and , (rate of own capital cost totalizing the stock efficiency and the

rate of year increasing for the dividend). If we perform over the Gordon-Shapiro model, two modifications will appear: - dividend of next exercise is depending upon the profit on foreseen stock holding and the

rate of distributing the dividend, therefore D1’ (1+b)PNA1, where (1 - b) = rate of distribution for the net profit for dividends; b = rate of capitalization for the net profit of self financing.

- year constant rate of increasing the dividend, upon the rate of capitalization and financial profitableness come to the stockholders, therefore: g=b x Rf

Replacing in model of Gordon-Shapiro, it results:


174

PNAgbP

−−

=11

0 (17)

grbPER

−−

=1 (18)

Formula (18) shows that for a politics of distribution well foreseen, and a rate of profitableness expected by the stock holders to be fixed (the rate of own capital cost), more the year increasing rate of the dividend is higher more the PER is higher. As PER is relatively high, the stock is more expensive, maybe not over evaluated, situation where its selling is imposed. Also, more the efficiency of a stock is higher, more the PER is reduced. If we take into consideration the determining factors of the dividend increasing rate (g), the calculation formula of PER is:

fbxRrbPER

−−

=1 (19)

This relation emphasizes the measuring factors of PER: the rate of self financing (b); the

rate of financial profitableness (Rf) for the company’ stockholders (meaning the capacity of a

company to issue the net profit by own capitals of its activity,pr

nf C

PR = ) rate of own capital cost r

(that totalizing the properly profitableness and risk bonus). Depending of the size of these parameters, two particular situations can be emphasized: a) b - 0, meaning the company does not reinvest anything form its net profit, the increasing

is null (g = b; Rf = 0) and therefore PER = r1 or r =

PER1 , meaning the inverse of PER is identical

to the rate of own capital cost. b) r = Rf, meaning the rate of profitableness, expected by the stockholders, identical with

the rate of financial profitableness, rightful for the stockholders.

( ) PER1rsau ,1

111

rbrb

bxRrbPER

f

=−−

=−−

=

situation where the investments carried out by the company do not contribute on value

creation. On both situations, one may talk about an identity between the rate of own capital cost and the inverse of PER.

In developed countries, with active value stock exchanges, the enterprises that apply to stock exchange use the specific discounting rate, meaning the inverted coefficient of stock exchange capitalization.

The model of Bates

The model of Bates has as objective the providing of a relationship between PER at moment (0) and PER at moment (n), assuming a constant increasing rate to this interval.

The hypotheses of the model are: a) profits are increasing with a constant rate (g) until the moment (n); (b) the rate of distribution for the net profit for dividends is constant.

( ) ( )in

n

ii

i

rP

rD

P+

++

= ∑= 111

0 (20)

where Pn – the price of stock at the moment (n). The cost of own capitals refers to the total of own capitals, no matter their origin, meaning

that external (by capital contribution) or internal (by capitalization of a part of the profit remained


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after taxation). Taking into consideration that the stock price is one of the calculation elements for the capital cost, within financial practice, two relations are used, meaning:

- stock exchange capitalization = the number of stocks issued x current price of the stock; - dividend efficiency = dividend on stocks/current price of the stock. In order to estimate the profits accumulated, more models are carrying out: CAPM model

(Capital Asset Pricing Model); the model based upon efficiency of debenture plus the risk bonus; the model of approaching upon basis of cash discounted present value of flows (DCF approach - discounted cash flows).

Many times, we are facing situations with the impossibility of foreseeing the result for a phenomenon. If in situations where this happens, two different essential categories are performed. The first includes those processes that consist on using a known mechanism in variable initial conditions. The result of effect cannot be foreseen, although the mechanism is known. This is the risk.

The second category includes situations where the individual effect cannot be foreseen and the mechanism is not entirely known. Generally, we can found out from here the results of the few observations from past. A known procedure that would have had success ten times and of failing twice is an non security example. On most situations, we don’t even know that the procedure of which we are interested is very new; therefore we base upon the past observations of another procedure, similar at certain point. On risk, but not on uncertainty, we can define the possibility of the effect.

THE CAPM MODEL ( CAPITAL ASSET PRICING MODEL)

CAPM model are based on same hypothesis as the modern theory of the portfolio (whose

fundament was developed by Harry Markowitz, starting from the observation that portfolios formed by shares more risking can be adjoining so that the portfolio resulted as whole to have a reduced risk comparing to the risk of each single component), except a supplementary hypothesis, meaning that existence of risk asset, therefore an asset for which the future cash flows are certainly known. The hypothesis refers directly to the possibility of investors of being able to loan and take credits in “unlimited values to the rate without risk of the rate of interest”; in reality, an asset is hard to be identified without risk, because any asset being on the market has attached a risk level. Even the governments, which mainly can take into consideration the currency issue in order to respect the obligations, can confront with different problems in the moment of reimbursement for the service of due. Within a political and economical steady environment, the state standards are the nearest to the definition given to the asset without risk. But, we can identify series of reasons that make unsatisfying this approach, meaning: the nominal income can be different relating to the real income, due to inflation and oscillations for the market rate of interest.

The financial theory considers that best mean of specifying the rate without risk of the income is that of taking into consideration the rate of interest to state standards on short term, with dates of payment of three and six months.

The CAPM model was established in 1960 by the American W. Sharpe, laureate of the Nobel Prize. He gave a concrete form of the general concept for the mutual direct relationship between risk and profitableness. He postulates a linear positive relationship between the income expected from a diversified portfolio of assets (therefore by investor) and the systematic risk of that portfolio measured by a parameter (β).

„Capital Asset Pricing Model” (CAPM) of the Model of Evaluating the Financial Assets is characterized by three steps:

Step1 – estimating the rate of profitableness for zero level degree (RCF) for a period taken into consideration;

Step 2- estimating the coefficient (β) of the respective real value and using it as risk index of the real value;


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Coefficient β of share “represents the sensitivity of share to variations of market assembly” Step 3 – estimating the rate of profitableness expected by market for the mean share (RM); Step 4 – estimating the rate of profitableness required for the company’s shares (r), where: r = RCF + β(RM-RCF) (21) (RM - RCF) meaning the risk bonus applied to a mean share and (β) the index of risk level of

certain share. The quality of model, in accordance to certain opinions comes from the easiness with which

this can be applied for practicing. A company that thinks to a new investment of capital needs the standard value to which it has to relate. Analyzing the profit brought by the capital shares of similar companies, the company can estimate as sensitive as possible the anticipated income towards market flows. This observation helps, on its turn, on estimating the anticipated efficiency on market assembly.

We have to notice that this model involved high controversies between economists as result of fact that: a) there is no financial asset lacked completely of risk; b) the market includes not only the shares, debentures and all kind of titles quoted to the stock exchange, but also all the properties between the size β and the size of income.

After the studies accomplished within field, a series of “actions against” towards the model, respectively : 1) theory is not checked by practice; 2) beta is a weak performer on short and sometimes on long time; 3) beta estimated coefficients are not steady in time; 4) the impossibility of observing the market income; 5) beta is not a good predictor of future incomes.

We are interested by r, because it represents the cost of capital. If the model Gordon-Shapiro does not take into consideration the risk, the CAPM model gives to the risk phenomenon an importance. The manner of approaching of the risk is original as result of the fact that efficient market is taken into consideration within existence point of view, and an asset without risk, therefore an asset for which the cash future flows are certainly known.

The main conclusions of Sharpe consist in fact that: a) the investors characterized by aversion towards risk have to diversify the investments; b) investors don’t have to wait rewards in order to support that specific risk. The specific risk (attached to the portfolio as result of its characteristics), can be reduced to each company until elimination by means of diversification, the only relevant consideration on determining the risk bonus is the risk that cannot be eliminated by forming portfolios. If supporting the specific risk would not be rewarded, the intelligent investors would include in portfolio titles with high risk specific levels, in order to diversify, hoping to enjoy of disproportioned incomes. As this thing is accomplished, the value of these assets would grow and their incomes will be reduced, until only the systematic risks would be compensated, the financial assets having different levels of systematic risk (of market).

CONCLUSIONS The models presented take into consideration the same set of hypothesis: the perfect market

considering the competition point of view, integral financing form own funds, the absence of taxation, the increasing performed upon basis of reinvesting the net profit. With all these points, using the models passes towards the advantages afferent to rigid hypothesis. As conclusion, we appreciate the models presented are not theoretical and practical insignificant, they could be a mark for the enterprises quoted to stock exchange.

BIBLIOGRAPHY:

1. Cibotariu, Irina-Ştefana, Finanţele întreprinderii, Didactică şi Pedagogică Publishing House, Bucureşti, 2008;

2. Cistelecan, L.M., Economia, eficienţa şi finanţarea investiţiilor, Editura Economică, Bucureşti, 2002;

3. Gavrilaş, Gh., Costul capitalului, Editura Economică, Bucureşti, 2007;


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4. Gordon, M.I., Shapiro, C., Capital Equipament Analyses; The Requind Rate of Profit, Mangement Science, vol. 3, 1956;

5. Hlaciuc, E., Mihalciuc, Camelia Cătălina, Organizarea contabilităţii financiare a entităţilor economice: abordări teoretice şi aplicative conforme cu prevederile OMFP 2374/2007 şi Standardele Internaţionale de Contabilitate, Editura Didactică şi Pedagogică, Bucuresti, 2008;

6. Mihalciuc Camelia, Hlaciuc Elena, The characterists of the financial instruments, Sesiunea Internatională de Comunicari Ştiintifice – “Integrarea Europeana – noi provocari pentru economia României”, editia a IV-a, Revista “Analele Universitatii din Oradea – Seria Ştiinte Economice, Tom XVII”, volumul III – Finances, banks and accountancy, 2008;

7. Munteanu, C., Horobeţ, A., Finanţe transnaţionale, Editura All Beck, Bucureşti, 2005; 8. Tudose., M.B., Gestiunea capitalurilor întreprinderii – optimizarea structurii financiare,

Editura Economică, Bucureşti, 2006; 9. Vasile, I., Gestiunea financiară a întreprinderii, Editura Meteor Press, Bucureşti, 2002;


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THE MAINCOORDINATES OF THE BUDGET – FISCAL POLICY IN ROMANIA ON THE TIME HORIZON 2009-2012

Lecturer PhD Student Anisoara Niculina APETRI

University "Stefan cel Mare” Suceava, Faculty of Economic Studies and Public Administration, Romania [email protected]

Profesor PhD Gheorghe SANDU University "Stefan cel Mare” Suceava, Faculty of Economic Studies and Public Administration, Romania

[email protected] Abstract In this paper the authors are trying to outline aspects regarding the budget fiscal policy applied in our

country, to the followed coordinates and objectives trough this policy in the year 2009, as well as the orientations of the fiscal and budgeting policies in the next period, meaning 20010-2012. After the study we concluded that as well trough the objectives set to be reached as well as trough the guidelines proposed in the fiscal budget policy for the next period, they aim to ,in particular, maintain the budget deficit and public debts within the limits imposed by the Maastricht Treaty to include the our country in the euro area, as well as the participation in strengthening macroeconomic stability as a source of sustainable economic development.

Key words: fiscal policy, budget policy, nominal convergence, budgetary revenues, budget expenditure,

budget deficit, debt policy

JEL Clasification: H30, H61, H62, H63 INTRODUCTION The actual economical context as well as the necessity of implementing policies and

programs which to contribute to the strengthening of the macroeconomic stability as a source of sustainable economic development and obeying the criteria of nominal convergence as is the case Romania, both in developed countries and in emerging and developing means countries, the main reasons for this study for the authors, on the details of fiscal budget policy in Romania. The paper treats issues relating to fiscal-budgetary policy to be applied in 2009, and the guidelines on the time horizon 2010-2012.

The conclusion disengaged in the research is that the stability, sustainability, fundamental sectors finance to a sustainable economic growth and macro-economic risks recovery, are the main pillars on which the budget was built on average time period. To achieve these objectives, the Government has based itself on maintaining the principles of tax policy started in 2005 and strength ening them, aspects which will offer Romania a competitive position worldwide in terms of attractiveness of the business environment, ensuring the premises of a durable economical growth.

1. THE MAIN COORDINATES OF THE BUDGET-FISCAL POLICY IN THE

YEAR 2009 The budget fiscal policy promoted by the Romanian government in the year 2008, as well as

in the 2004-2008 period, projected closely to the macro economical policy started in this time horizon, has continued to support the consolidation of the macro economical stability, as a source of sustainable economical growth.

The strategic objective of the budget fiscal policy in 2009 is the real convergence of the Romanian economy to the European Union’s economy, which implies the consolidation of the macro economical balances and division of the growth benefices to all citizens. The internal and external macro economical frame in which the Romanian economy will evolve in the year 2009 may be characterized trough the following aspects:

Continuing and strengthening positive trends of the main macroeconomic aggregates, which have proved robust, sustainable and long lasting.


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Less predictable evolution of the international frame, because of persistent tension in financial markets, slowing U.S. economic growth, the existence of inflationary pressures, relatively small changes in the forecasted growth of the European Union

Careful surveillance of macroeconomic variables in order to avoid derays such as the level of the current account deficit (estimated at 12.2% of GDP in 2009) and inflation and wage growth over productivity growth.

Risks arising from lack of surveillance of some macro economical variables could cause the reassessment of economic policies, to maintain macroeconomic equilibrium in the admissible limits and achieving the criteria for real and nominal convergence.

The main coordinates of the budget and fiscal policy in the year 2009 are: Main coordinated policy in fiscal year 2009 budget is:

will continue to have a role in the economic¬macro stabilization being maintained within prudent limits to reduce external deficits and to support the process of disinflation;

tax stability, fiscal consolidation¬ in the sense that there will be no significant change likely to affect the general consolidated budget revenues;

a deficit of consolidated general¬ budget of 2% of GDP, in line with macroeconomic objectives, which shows that the Government of Romania has to meet the Maastricht criteria and to avoid the danger of an excessive deficit;

accelerate the adjustment towards the- budget deficit over the medium term, predicting a budget deficit of 0.9% of GDP for 2012;

continuing the policy of allocating public funds in terms of priorities: human capital policies (education, health), the Common Agricultural Policy, cohesion policy, research development;

will continue the structural reforms to increase the employment rate, the productivity level, acceleration of the reforms in the educational and health systems, transforming the agriculture in a durable growth activity, consolidate the administrative capacity, in order to increase the growth potential and the external competitiveness. The structural reforms will be accomplished in the context of the European structural reforms started, in the terms in which the internal action priorities are the responsibility of all economical, political and social factors.

conditions for strengthening the functioning and absorption of structural instruments, resource from which Romania will benefit from the European Union to achieve the objective of sustainable growth.

Key indicators will know next budget development: BUDGETARY REVENUES will continue the trend of the previous period due to

favorable cyclical position of the economy and improvement of the budget revenue collection being at 38.3% of gross domestic product, up 1.8 percentage points compared to 2008.

BUDGET EXPENDITURE for 2009 will hold 40.4% of GDP, with significant allocations to social assistance to support the pension system, as well as capital expenditure, which reach 5.9% of gross domestic product and reflect the fact that public funds are directed to support economic growth.

the BUDGET DEFICIT projection for the year 2009 will be 2% of GDP, consistent with achieving medium-term target assumed trough the Convergence Program.

DEBT POLICY has to maintain its sustainable limits and ensure the resources necessary for financing budget deficits and public debt service payments at a cost as low and acceptable level of risk. Thus, in the following period, the public debt will have a controlled growth so as to remain within sustainable limits, in accordance with the criteria established by the Maastricht Treaty, 60% of gross domestic product.


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THE OBJECTIVES OF THE FISCAL POLICY IN THYE YEAR 2009

The objective of economic growth based on investment and increasing labor productivity imposed stages of reforming the tax system in the period 2005-2008 to meet the principles of neutrality, consistency and correct behavior of taxpayers towards tax obligations.

The main coordinates of the budget fiscal policy in 2009 is based on stability in the sense that they are not considered significant changes and can be considered a continuation of the period 2005 -2008, a period characterized by fiscal loosening. Thus, since 1 January 2009 the main changes to the tax implications on business are:

diminishing tax base for calculating tax, by providing an additional deduction for research and development, and regarding the income tax, it is to encourage contributions to private pension funds, increasing the amount of deductible contributions to establish the base for calculating income tax from salaries, aa well as simplifying the system of personal deductions to indididuals who derive income from wages in the basic function;

increased the recovery of tax loss from 5 to 7 years for tax loss carried out since 2009; Share of taxation of dividends received by the Romanian legal persons resident in EU

Member States and EFTA countries declined from 16% to 10%. For non-residents from non-EU tax rate on dividends will continue to remain at 16%. Regarding local taxes it is aimed to initiate a radical reform of the institutional system of local government regarding property assessment and taxation, a profound change in the way of addressing the principles of equity which are governing the placing of tax burdens on property, with an significant adjustment of the legislation in the field;

in the field of excises one must follow exactly the principles of Community law, including the scope and rates of excise duty, having regarded the obligation of Member States to achieve the minimum requirement of those shares. Legislative changes to VAT on the line in 2009 have continued the transposition into national law EU Directives;

Interest relief for debt instruments and income from trading securities and bonds issued by the administrative territorial units, the tax treatment will stimulate the development of primary and secondary State titles;

Increasing the amount of deductible contributions to establish the base for calculating income from wages made in the basic function, representing contributions to optional pension funds made under the Law of optional pensions nr.204/2006, combined employee and employer from 400 Euros per year currently , at 800 Euros annually.

Increasing the amount of deductible contributions from expenses for the first voluntary health insurance, combined employee and employer, from 400 Euros annually now to 500 Euros annually. THE OBJECTIVES OF BUDGETARY POLICY IN THE YEAR 2009

Budgetary policy in 2009, made in the context of the relationship with other economic fiscal and monetary policies, to keep the Romanian economy on the trend of positive developments recorded in the period 2004-2008, has the following objectives:

potentate the stability and growth on long term to allow all citizens to take advantage of the benefits of development;

is a prudent policy, built on a flexible basis to meet the approach of the European budget and contribute to meeting the commitments Romania has as an European Union Member State;

A budget deficit of 2% of GDP consistent with the objective of convergence in the medium term.

The main objectives of budgetary policy for 2009 can be summarized as follows: Establish priority programs to eliminate structural disruption of education, health,

research and development (supported areas and re-launched trough the Lisbon Strategy), infrastructure, social protection and agricultural development;


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care for retirees has been a continuous concern of the Government, because it was one of the commitments of the Governation Program. Thus, from 1 January 2009 pension point value is increased to 763.7 lei. Support for this increase is given by: economic growth expected in 2009 to 6%, improving revenue collection budget;

priority ensure amounts to finance eligible projects to be financed from European funds and the contribution of Romania to the Community budget, in term of a deficit below 3% of gross domestic product;

Increased economic and financial discipline in the ministries and government agencies, and units subordinated to them, aiming at the efficient allocation, out of funds to the budget, strengthen mechanisms of control of public expenditure, increased accountability and performance management, eliminating disruption reported, identify and monitor risks.

2. BUDGET FISCAL POLICY ON THE TIME REFERENCE HORIZONT 2009-

2012

A central goal set at Lisbon in 2000 to transform the European Union by 2010 into the most competitive and dynamic economy was a major challenge for the Romanian Government, which has engaged in serious compliance in the re-launch of the Lisbon agenda, to identify national priorities needed in continuing reforms and reducing economic disparities and social media from the EU Member States. In this sense, strategic programmatic documents developed by Romania such as, the National Development Plan 2007-2013, the National Program of Reforms 2007-2010, National Reference Framework 2007-2013, the Sustainable Development Strategy by 2025, define priorities and strategies that our country should follow on medium and long term, as the starting point for the entire fiscal budget strategy defined for the horizon of reference.

On the horizon of reference 2009-2012 fiscal budget policy is characterized by two defining features:

will be one of the key priorities to ensure economic growth and development, as well as preparing Romania for the changeover to the euro;

will focus on performance and judicious combination of measures to relax the tax base by extending the tax based on the principle of equal tax treatment.

In table 1 and Figure 1 we can be observe estimates of key indicators for the 2010-2012 budgets: For a detailed analysis of budgetary revenue sources of income as well as expenditure by category of expenditure recommend consulting the source mentioned table 1

Table no.1 Incomes, expenditures and general consolidated budget deficit - % from GDP-

Estimates Budget index 2010 2011 2012

Incomes 36,00 34,7 33,8 Expenditures 37,5 35,8 34,6 Deficit -1,6 -1,1 -0,9

Source: Report on the macroeconomic situation for 2009 and its projection for the years 2010-2012

In taxation, the main direction of policy on medium term is based on maintaining and improving flat collection capacity. The categories of taxes and the hypotheses under consideration are:

the tax shall have regard to maintenance, in general, at the present level of tax rate and the maintenance of tax facilities for the research and development domain;

in the income tax the intention is to maintain the current rate of taxation; in the area of social security contributions after a substantial reduction of 10 percentage

points over the period 2005-2008 the rate of social security contributions, their level will remain unchanged for the period 2009-2011;


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in the excise area they will increase excise duty on certain un-harmonized excisable products respectively by 2011, and for harmonized excisable products such as coffee, gold jewelry and / or platinum, the crystal items duty will continue to decrease gradually to eliminate them in 2010;

in the area of value added tax does not anticipate major changes in its structure; in local taxes will act to increase local autonomy in the administration of property taxes.

To achieve this goal there are proposed implementation measures for taxation at the market value of real estate.

Share of the main indicators in the 2010-2012 budget

-10

0

10

20

30

40

2010 2011 2012

Years

% fr

om D

GP

Incomes

ExpendituresDeficit

Chart no. 1 Share of the main indicators in the 2010-2012 budget

On medium term expenditure budget will be directed to financing priority sectors that are

the basis of sustainable economic growth, namely: education, health, research and development, infrastructure, social protection and not least of all the development of agriculture.

However, in order to improve the economic structure of public expenditure, the focus will be on financing investment projects in nature so that national resources by the cumulative contribution of European funds to reduce the infrastructure deficit towards EU standards.

Budget deficit will be mainly from internal sources and in addition the external sources. As debt instruments will be used to issue certificates of treasury and government bonds of benchmark, but it is considering and launching new programs on the market if conditions on capital markets will be favorable. Other sources of funding are the revenues from privatization, which according to the GEO nr.113/2006 establishing National Development Fund will be used for financing state budget deficit.

In 2010, but also during 2011-2012 it will pursue the objectives referred to in the strategy government debt management in order to maintain the sustainable limits of government debt levels and provide necessary funding sources and budget deficits of resources for payment of service debt at a cost as low a level of acceptable risk in the development of securities market rules.

Public debt will have a controlled growth so that the level should be maintained within reasonable limits, given that public debt dynamics will continue in coming years, to be positive, even if in relatively moderate rates because it will be an important factor supporting economic growth.

Between 2010-2012, the government debt will remain at levels between 3,3-5,1 billion, in 2010 it will redeem the issue launched in 2003, worth € 700 million.

CONCLUSIONS In conclusion, the stability, sustainability, finance of fundamental sectors for economic

growth and sustainable economic recovery risks, are the principal pillars on which to build the budget in the medium term.


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In this context, the specific objective in the medium term is to adjust general budget to a target deficit of less than 1% of GDP, which will provide sufficient security to avoid overcoming the limit imposed by the European Union.

To achieve these objectives, the Government is based on maintaining the principles of policy taxation started in 2005 and strengthen aspects which will offer Romania a competitive position worldwide in terms of attractiveness of the business environment, ensuring the premises of a sustainable economic development.

Setting the project budget for 2009 and prospects for 2010-2012 are to strengthen predictability, stability and transparency of fiscal-budgetary policy, priority objectives to support the objectives of convergence and improve the quality of public spending, which is defined by several major, coordinated:

formulation of a stability budget, the consolidation and economic development; budget modern European invoice, based on policies and priorities, set up programs and

projects to ensure that the commitments resulting from Romania's accession to the European Union; a budget to allow multi-continuity of public policies already funded in the earlier

years. The draft budget for 2009, with the projection coordinates budgetary period 2010-2012, was

constructed so as to ensure a sound and sustainable macroeconomic stability and attractiveness of the business environment, accessing funds and grants to provide quality public services, all in the context of real and nominal convergence with the European Union.

In this context, Romania will become a Member State with a share, which will act according to union practices and the communautaire acquis and will be able to influence decisions of community in an open, positive, towards building consensus and unity of action at Europe.

BIBLIOGRAPHY: 1. Belean Pavel, (2007), The public budget and the public treasures in Romania, Publishing

House Economica, Bucharest 2. Manolescu Gheorghe, (1997)Budget – the economic and financial aproach, Publishing

House Economica, Bucharest 3. Mosteanu Tatiana.coord. (2008), Budget and public treasures , Publishing House

Universitara, Bucharest 4. Legea nr. 571/2003 privind Codul fiscal cu modificările ulterioare, publicată în

Monitorul Oficial nr. 927 din 23 decembrie 2003; 5. Raport privind situaţia macroeconomică pentru anul 2009 şi proiecţia acesteia pe anii

2010-2012 6. www.bnr.ro – Rapoarte de stabilitate financiară, 2007, 2008 7. www.mfinanţe.ro


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THE RELEVANCE OF THE INFORMATION GIVEN BY COSTS IN DECISION GROUNDING PROCESS

Lecturer PhD Candidate Simona Elena DRAGOMIRESCU

University of Bacău, Bacău, România [email protected]

Lecturer PhD Candidate Daniela Cristina SOLOMON University of Bacău, Bacău, Romania

[email protected]

Abstract: The identification of relevant costs for an enterprise in a certain accounting period and a certain volume of

activity it is not at all en easy mission. The notion of pertinence is a subjective one and differs from an enterprise to another, according to its specific. Every type of cost is more or less adapted in formulating a solution to accountancy problems. For a certain accountancy problem, it is to be imposed the choice of that type of cost that allows the obtaining of the best solution. In specific literature, costs are categorized in four ranges: sunk costs, opportunity costs, incremental costs and out-of-pocket costs.

Fulfilling different functions in the enterprises under the quality of indicator, cost plays an important part in decision optimizing. In this order of ideas, the famous professor Henry Bouquin (Bouquin , 2004, p. 69) underlined that in order to take a decision four information regarding costs are important, namely: (a) what costs are affected by the decision that is to be made? (b) what do you have to give up to if you chose a solution or another (does to decide means to give up)? (c) how will behave the costs that involved the options taken under consideration after the decision taking? Which is the logic, what lows will it follow? (d) how can you action on it?

Key words: relevant costs, irrelevant costs, opportunity costs, incremental costs JEL Classification: M41 - Accounting

Costs, instruments of management control, may play an important role in enterprise’s piloting if it fulfils the condition of reflecting on the highest level the reality from the enterprise.

The cost’s purpose of supporting in options and economic decisions’ grounding, is fulfilled both in plan’s elaboration phase (being a criterion in choosing the optimal plan variant) and during the exercise. In this sense, the quantification of work consumption, the comparison in money expression of the obtained results with the made expenses, of the effects with efforts, targeting the assurance of maximum economic efficiency is imposed. Therefore, by production cost not only the effectuated expenses are known but also how efficient every money was spent.

The knowing of production cost of each product is important in the process of sale also, because the enterprise will also follow mainly the recovering of production factors consumed in order to continue the production process.

In order to fulfill its purpose, the production cost as economic indicator and means of synthetic measuring of expenses that are realized at the level of enterprise for production’s obtaining and displacement, has to be scientific calculated, assuring it preciseness, relevance and promptness.

RELEVANT COSTS

Every type of cost is more or less adapted in formulating a solution for accountancy problems. For a specific accountancy problem, the choice of the certain type of cost is imposed, the one allowing the obtaining of the best solutions.

Regarded as informational system, the management control has to inform the decision system suggesting a cost as good as possible adapted to the management problems that have to be solved. This is the adopted cost, which the accountant may associate to a decisional context and that bears the name of relevant cost (cost useful for a certain decision)


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The notion of pertinence is a subjective one and differs from an enterprise to another, with regard to their specific. Its use may be limited in rapport to two series of problems:

the accountancy’s systematic control „aposteriori” the decision taking.

For accountancy’s systematic control „aposteriori” the pertinent costs, according to Louis Dubrulle and Roger Servan, may be appreciated with regard to four criteria:

(a) the evolution of production factors’ prices; (b) activity level; (c) the exploitation efficiency; (d) the responsibility identification.

Table no. 1 The analysis of costs pertinence

Evaluation criteria Complete costs Direct

costing Specific costs Rational Reproach

Prices evolution

All the methods may take under consideration the prices evolution impact. The issued problem is not the option (choice) for a certain cost calculation method, but the introduction of an analysis frame that would allow the evaluation of the prices’ variation impact (detailed specification of cost elements, the centers choice and reproach quotients).

Activity level

The method is not pertinent. There is no distinction made between the fix expenses and the variable ones.

There is a distinction made between the fix expenses and the variable ones, but there is no determination of underactivities costs or of the bonuses from overavctivity.

The method offers all necessary elements.

Exploitation efficiency

The different calculation costs methods offer similar means. In this case also is important firstly the analysis frame (the detailed specification of cost elements, the centers choice and reproach quotients).

Responsibility identification

Even though under the conditions of defining the responsibility centers, the problem would be that all the expenses appear together, inclusive the structure expenses over which the responsible persons may not take action. Moreover, the general expenses are distributed sort of arbitrary over the main activity centers, aspect that leads to a dilution of responsibility.

Only the variable expenses are held, the ones over which the responsible parsons may take action.

It presents the same advantage as in the case of variable costs. Another advantage is the fact that even the fix specific expenses may often be controlled by the responsible ones.

The method allows all the possible analysis, the responsible persons being able to measure clearly the variation activity consequences, that, sometimes, they can even control.

Source: Dubrulle L, Servan R. - „Comptabilité analytique de gestion”, Dumond, Paris, 1990, pag. 25 The process of decision taking supposes:

the identification of possible events, of possible solutions; the evaluation of consequences for every solution according to different events; the choice for a solution that assures the best degree of satisfaction taking under

consideration the followed objectives in a prognostic horizon on short of even longer term.


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Not all the information given by costs is the most relevant for a particular decision business decision. A schematization of costs taken under consideration in grounding decisions is presented in figure nr. 1.

Figure nr. 27. The relevance of the information grounded by costs

Figure no. 1 The relevance of the information given by costs Source: Williams J.R., Haka S.F., Bettner M.S. - “Financial &Managerial Accounting. The Basis for Business

Decisions” 13th ed., McGraw-Hill / Irwin, 2005, p. 874 Identifying all of the information relevant given by costs for to a particular business decision

is a challenging task, because relevance is a broad concept. The process requires an understanding of quantitative and qualitative information, a grasp of legal issues, sensitivity to ethical concerns, and an ability to discern fact from opinion. All business decisions involve choosing among alternative courses of action. The only information relevant to a decision is that which varies among the possible courses of action being considered. Costs, according to the scheme suggested by Williams J.R., Haka S.F. and Bettner M.S., are split in four categories:

sunk costs, opportunity costs, incremental costs out-of-pocket costs.

Sunk costs represents the not relevant costs, because reflect the irrecoverable expenses that

are already made, as a consequence “have not importance for the future” (Bouquin, 2004, p. 71). The name of sunk costs it resides from the fact that there have already been “sacrificed” in an activity already developed. It may be useful to managers when, by confronting it to the anterior previsions, the study of their behaviour is desired.

Information given by costs

Historical Current Future - oriented

Decision focused judgment

Sunk costs

Not relevant

Opportunity costs

Incremental costs

Out-of-pocket costs

Relevant information


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Unlike the sunk costs, that cannot be changed by future decisions, the concept of “out-of-

pocket costs” it is often used to describe ”costs that have not yet been incurred and that may vary among the possible coursesof action” (Williams and others, 2005, p. 875-877). Therefore, there are considered relevant in most business decision.

The case of future expenses it is always more delicate because it has to be identified those expenses which, even though unmade, are impossible to be avoided and changed.

Opportunity costs are those generated by the opportunities sacrificed after taking a certain

decision, should be taken under consideration when adopting all decisions regarding the firm’s resource engagement, while the incremental or marginal costs represents the supplementary costs generated by the realization of a supplementary production unit.

It should be mentioned that the best cost is not necessary the one having a plus of quality,

but the one appearing at the moment, place and with the precision that the user desires. As a consequence, a good costs calculation system has to reach a compromise between the costs of data measure and the cost of errors caused by an imprecise calculation, in such a way that the total cost of information to be the lowest. Also, the management control system should not measure up to the tiniest detail because it would suppose to be very expensive and to consume a lot of time.

OPPORTUNITY COST

Oriented mostly towards a “domination” of costs optic, the management accountancy strives to neglect the opportunity cost. This represents “the lack of winning resulted by the giving up that an imprecise choice involves” (Lassègue , 1988) or, in other words, “the value that may be obtained from another orientation of resources” (Coll , 2001). The realization of a certain volume of production may be realized under different economic, technique etc. conditions, aspect that leads to different costs. The famous French professor Henry Bouquin stated that “any decision constitutes a sacrifice and any sacrifice represents an opportunity cost” (Bouquin, 2004, p. 76).

Nowadays, managers try more and more to integrate the opportunity cost in accountancy analysis problem. If by this means that the best lost or sacrificed opportunity is measured, when taking a decision implies the giving up of alternative solutions, it is obvious that in all situations managers will orientate towards decisions that lead to minimum costs.

Any decision determines “the giving up either to resources that it consumes or to another solution taken under consideration for resources use” (Bouquin, 2004, p. 75).

Therefore, under the situation of choosing between more options, the opportunity cost may be considered the difference between the average generated by an action plan and the superior one that the best decision would generate. From an economic point of view, the opportunity cost may be interpreted as bellow:

“lack of winning” that results from the fact that the responsible did not take the best decision;

the certain information’s price: the decider, if it knew certainly the consequences of its decision, would have taken the best solution. There are also authors that regard the opportunity costs as “benefit that could have been

obtained by pursuing an alternative course of action” (Williams and others, 2005, p. 876) or “benefit obtained from choosing a certain variant” (Steliac, 2006).


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INCREMENTAL COST The use of incremental cost in management accountancy allows “the study of all types of

expenses, according to activity fluctuation, in order to appreciate its incidence on the global result” (Budugan and others, 2007, p. 411).

The appeal to this instrument helps to formulation of some answers to certain accountancy problems, such as:

on which price a supplementary order may be accepted? if this order is accepted, how can the result be maximized in this case?

The incremental cost represents the total expenses increase (∆CT) trained by consumption increase of production factors to increase the production with an unit (∆Q), the calculation relation being: Cm = ∆CT / ∆Q. In specific literature, cost is also defined as “difference between the ensemble of fabrication expenses necessary to a given production and the sum of necessary expenses for the same volume of production, plus or minus an unit” (Mikol and others, 1991, p. 105). On short term, if the production increases without supplementary investments, with the same technical endowment, the incremental cost will contain just variable costs (the fix costs were reproached to the first fabricated units). This manner of approaching incremental cost is possible only if: there exist availabilities in using the production capacities, variable costs are strictly proportional with fabricated quantities, and the incremental cost corresponds to the prices of the elements contained in the last additional unit. From here it resides: the incremental cost is the variation of total cost.

The use for a short time period of incremental cost as instrument of knowledge for preparing the accountancy decision should be correlated with new reasoning, based on prognostic studies concerning the evolution of production factors market and of fabricated products. The incremental cost constitutes un efficient instrument of determining an optimum accountancy limit especially in the field of prices and tariffs. The incremental reasoning is a pertinent one every time when the enterprise should bring changes to a given situation: the launching of a series of new products, the opportunity of accepting a supplementary command or investment. (Epuran and others, 1999, p. 60) In all situations where the incremental cost is inferior to the sale price and therefore inferior to incremental income awaited from a certain command, then the decision of “accepted command” will always be taken.

As a consequence, in searching the equilibrium on short term, the incremental cost will be one of the analyzed indicators – for instance the report between the “sale price/incremental cost” - , while the balance on long term will be described by the report “sale price/average unitary cost”.

CONCLUSIONS

The importance of the information given by cost to managers results from at least there

reasons: Managers may decide the acquisition, production or abandoning of a product with regard to

the cost level; cost may become the basis in prices building; by the cost analysis the product’s improvement needs, of design or of the whole process of

production may be identified. The costs should make the object of optimizing function and control function. The costs

optimization supposes a “complex of activities through which the most advantageous compromise between the performances, terms and costs are realized”. In other words, all the costs reduction means are looked for, especially through amelioration of products/services/works projecting, processes amelioration and organizing.


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But in order to realize a pertinent cost optimization pattern a correct cost “measure” it is imposed. By control function, the real costs are followed in such manner that would not abate from the determinant standards (norms), preliminary, by optimization process. In traditional practice, costs control supposes the comparison of real complete cost (effective, post-calculated) to a standard complete cost (estimated, pre-calculated).

But the present economical environment, characterized by markets globalization, technological progresses, fast, numerous, dispersed, unpredictable time and space evolutions that make the information insecure, the calculation complexity for determining the complete cost increased. Some of the enterprises gave up to this practice adopting other method, more adapted to the economic environment requires. Others have adopted a series of indicators by which will measure the performances directly, for instance, by balanced scorecard, than indirectly through costs.

Moreover, the costs structure mainly changed, the direct costs average decreasing in the favour of the indirect ones. As a consequence, the distribution of indirect costs using as repatriation measure direct cost will lose any relevance. Also, indirect costs become more technical costs resulted from quality, studies, sustenance, methods etc. Under these conditions, the choice of cost calculation method becomes difficult. But no matter the applied methods, management control should allow the developing of activity and decision taking in such a way that the enterprises would attain their goals. And the cost is an essential instrument of control accountancy that, determined as correctly as possible will reflect reality, sustain the managers in enterprises piloting.

BIBLIOGRAPHY:

1. Bouquin H. - „Contabilitate de gestiune” (traducerea şi studiul introductiv Neculai Tabără), Editura Tipo Moldova, Iaşi, 2004;

2. Budugan D., Georgescu I., Berheci I., Beţianu L. în „Contabilitate de gestiune”, Editura CECCAR, Bucureşti, 2007;

3. Coll J.C.M. - „Economia de piaţă. Avantaje şi dezavantaje”, 2001, Universitatea din Málaga de pe EUMEDNET - Enciclopedia y Biblioteca Virtual de las Ciencias Sociales, Económicas y Jurídicas pe http://www.eumed.net/ecorom/index.htm ;

4. Epuran M., Băbăiţă V., Grosu C. - „Contabilitate şi control de gestiune”, Editura Economică, 1999;

5. Kaplan R.S., Atkinson A.A. - „Advanced Management Accounting”, 3rd edition, Prentice Hall International, 1998;

6. Lassègue P. - „Gestion de l’entreprise et comptabilité”, Dallez, 1988; 7. Marian L. - „Managementul proiectelor” pe

http://www.orizont.net/clubRO/crmd/carti/cartemarian ; 8. Mikol A. ş.a. - „Comptabilité analytique et contrôle de gestion”, Dunod, Paris, 1991;. 9. Steliac N. - “Considerations for Establishing the Production Strategy of the Account of

Gross Margin and Opportunity Costs”, AMIS, 2006; 10. Williams J.R., Haka S.F., Bettner M.S. - “Financial &Managerial Accounting. The Basis

for Business Decisions” 13th ed., McGraw-Hill / Irwin, 2005.


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FINANCING OF CAPITALIZATION AND GROSS FORMING OF PERMANENT CAPITAL IN ROMANIAN ECONOMY

Lecturer PhD Dragoş ILIE

“Spiru Haret” University of Craiova, Romania [email protected]

Abstract: Undercapitalization and undercrediting of the national economy in the period of transition to the market

economy necessarily requires the strengthening of the role of credit as a genuine factor of growth and increase of the productive capitals. The financing of the capitalization process becomes more valuable in the present stage of our country development, imposing itself as an objective need. It is thus compulsive to define a new concept in the speciality literature, namely the concept of “durable crediting” according to which the credit must have as a main goal the capitalization of the national economy which, in its turn could constitute an essential condition for a durable future crediting.

Key words: durable crediting, capitalization, gross forming of permanent capital, added value, JEL Classification: E22, E44, E51

1. INTRODUCTION

The understanding and defining of capitalization concept first of all must subdue from the capital reproducibility, that is from the from the capital property to be reproducible under the conditions of getting an added value. Only under the conditions of getting an added value the notion of capitalization can be defined, starting from the process of the accumulation of a part from the added value and afterwards destined for the creation of new capitals.

The capital accumulated and used meant for the thinkers in the economic field the starting point in the tendency of demonstrating the force and the wealth of the society through time. In A. Smith’s conception (1967) the nation wealth depends on the labour used productively, which on its turn, it is very connected to the capital dimension, advanced and accumulated. The increase of labour productivity as well as the wealth growth depend on accumulated means, goods and values used as capital. The accumulation of capital means for A. Smith a law of progress from two reasons: first of all the labour productivity is bigger because of the permanent capital using and secondly the country wealth growth means in advantage in the external relations with other countries.

Many connections and chains of the process of capital growth found their reflection in specific notions: coefficient of capital, multiplier, accelerator, coefficient of elasticity, etc. Promoting a more dynamic vision of economy, more sophisticated and more realistic, Sir Roy F. Harrod (1948) substantiated the coefficient of capital as a parameter reflecting the capital efficiency. In the same conception, Evsey D. Domar (1957) introduced the parameter of investments marginal efficiency in order to determine what produce or income is got on the unit of additional invested capital.

The principle of multiplier shows the influence of investments upon income. Thus, the investments growth determines the growth of production and income that afterwards impels the growth of future investments. The accelerator principle expresses and measures the income growth upon investments under the impulse of stimulating effect of the consumption. The model multiplicator-accelerator was also found out in Paul A. Samuelson’s work (1939). In Spiru Haret’ s novel (1969) the capital enjoys a privileged place as an economic factor. The capital, in Spiru Haret’s conception, means a social force that nobody ignores it to which nobody contests its power, because all the people feel its effects. It is a force that shows itself in another form or another, everywhere in all the times, in wild societies as well as in the most civilized ones. It is a universal force because it has its source in the most common instinct of each alive species, the instinct of self preservation.


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At the moment the syntagm of capital is very ample and it is not by far closed. The concept that shows a particular interest from the economic point of view is that of capitalization understood as a growth process of productive capitals as a result of making investments, the investments being the main way of growing capital on a long term (Stancu, 2002).

2. DURABLE CREDITING – A CONCEPT FOR IIIrd MILLENIUM

Dinger and Jurgen (2007) made an empiric analysis on banks in the countries of Central and East Europe, inclusively in Romania coming to the conclusion that it is urgently required their massive re-capitalization. The World Bank (2006) performed a study on 100 countries regarding the impact of credits on the national economies. Brown and Zehnder (2006) raised the problem of credit effects on financial markets and loans supporting a relation between the borrowers and the banks which contributes to the increase of performances.

The financial and banking institutions confrontation with new risks but also the deepening of existing ones mean the starting point in elaborating new international regulations regarding the capital suitability (Bemink et al.,2007), (Chernobai et al.2007) these being doubled by a e management suitable at the organizations level in the process of crediting.

The new concept of durable crediting (Ilie, 2005) implies that in the process of the Romanian economy crediting should simultaneously be followed three aspects: the increase of capitals of credited economic agents and of crediting banks, the increase of credit portfolios and the environment protection.

Analyzing the quality of credits portfolio during 1994-2007 it is observed a turning point represented by years 1998 and 1999 (fig. no. 2.1. and fig. no.2.2).

Beginning on 1994 up to 1998 the category of “Lose” credits has continuously been rising from 10.93% in 1994 up to 50.8% from the total of credits in the national economy in 1998.

Fig.no.2.1. Evolution of “Lose” credits in comparison with the total of credits – millions of RON

Source: The yearly report of R.N.B., 2003, www.bnr.ro, p.268, Monthly bulletin of R.N.B. 2004

0

5000

10000

15000

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25000

30000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

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0100000200000300000400000500000600000

2004 2005 2006 2007

Total creditsLose

Fig.no.2.2. Evolution of “Lose” credits in comparison with the total of credits – millions of RON

Source: Monthly bulletins of R.N.B. 2004, 2005, 2006 ,2007, 2008

From fig. no.2.1 it is clearly seen the rising trend of “Lose” credits in the total of credits up to 1998 and their afterwards decrease. The increase up to 1994 is the graver in this period that the volume of credits in real terms has seen non-significant evolutions in the sense of increase, the economy being sub-credited. If the economy is sub-credited and the volume of non-performance credits increase, the effect of the capitals increase is negative, leading to the national economy de-capitalization. Up to 1999 have been registered the most banking bankruptcies, the de-capitalization being one of the causes. Thus, the de-capitalization at the banks level was generated by the following causes:

- create specific provisions of credit risk and interest, - increase the expenditures concerning the interests for attracted sources which had to

replace the unprofitable placements, - drop of population faith in bank in the circumstances when a nonperforming loan had been

advertised, - aggravation of the bank image on the international environments in the circumstance when

the nonperforming loans resulted from the performance of certain guarantee letters or present for acceptance of certain financial bills,

- aging of credits portfolio which deprived the banks of the possibility to credit a group of economic agents from more profitable areas and on the basis of which the banks could have created further strategies,

- reduce the credit resources which generate profit, being known the fact that in practice, the cost of a nonperforming loan is covered from running a bigger volume of performing credits,

- artificially register certain incomes from interests, subjected to taxation, - dropping of forecasted liquidities, because of non-payment of interests at maturity Beginning on 1999 the “Lose” credits began decreasing as the amount in the total of credits

getting in 2007 to represent only 2.5% of the total of granted loans. The regulations introduced in 2002 by the Romanian National Bank (RNB) began having an effect even in 1998 taking into account that bankers had had information about the RNB intentions and they adopted a much cautious crediting policy.

Beginning on 1999 the volume of “Standard” credits began rising substantially getting to 97.24%of the total of credits granted in 2002, following a descendent evolution during 2003 – 2007, the percentage in 2007 being 46.42% of the total of credits(fig. no.2.3. and fig. no.2.4.).


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Fig.no.2.3. “Standard” credits evolution comparing to the total of credits – millions of RON (Source: The yearly report of R.N.B., 2003, www.bnr.ro, p.268, Monthly bulletins of R.N.B. 2004, 2005, 2006 , 2007, 2008)

Fig.no.2.4. Evolution of credits of “Standard” and “Lose” credits comparing to the period 1994 – 2007 millions of RON (Source: The yearly report of R.N.B., 2003, www.bnr.ro, p.268, Monthly bulletins of R.N.B. 2004, 2005, 2006 , 2007, 2008)

The positive evolution of credits portfolio quality of the national economy had favourable effects on banking capitalization for its increase. Also, the improving of credits portfolio quality has a direct impact on the insolvency rate of the banking system and the proper capital rate. The insolvency rate reached the level of 12.07% in 2007 but the proper capital rate the level of 6.78% in 2007. The report between the non-paid debts and the proper capital was 2.63 in 2007.

The quality of crediting process has means a major aspect in the process of banking capitalization. The more performance the credits portfolio is the more pregnant and on long-term the process of capitalization develops.

3. THE RELATION BETWEEN THE CAPITALIZATION AND THE GROSS FORMING OF PERMANENT CAPITAL

A pertinent analysis of the relation between the capitalization and the gross forming of the

permanent capital must start from the gross added value respectively from the goods value surplus or the services performed at the level of the national economy beyond the goods value services consumed for their creation and. This is because the gross added value convey in the process of capitalization the measure of the capital used to produce its cost. If this capacity is put into practice by positive values of the added value then it can be the base for afterwards forming of the permanent capital (fig. no.3.1).

0200000400000600000800000

1000000120000014000001600000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Total creditsStandard

01000020000300004000050000600007000080000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

StandardLose


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Fig.3.1. The weight of the gross added value in the gross domestic product during 1992-2007. Source: Statistic annual of Romania chap. 11 annex 11.6.; Statistic monthly bulletin no.3/2008, pg. 137-138

In order to see what is the potential of the main activities in the national economy in gross

forming of the permanent capital it is necessary the analysis of the gross added weight on the main activities in the gross domestic product (fig.no.3.2).

Fig.no.3.2.The weight of the added value in the main activities of the gross domestic product

during 1998-2005 Source: Statistic annual of Romania 2006 chap. 11

In this period the gross added value in the industry has the greatest weight in the gross domestic product with 24.6 percents in 2005, followed by transport, storage and communication with 10.26 percents, trade with 10.07 percents, agriculture, hunting and forestry with 8.45 percents and building with 8.45 percents. Taking into account the above mentioned, the industry is by far on the first stage regarding the potential in gross forming of the permanent capital in the Romanian economy, agriculture, trade, and transport having a tendency of equalization in this respect. The weight of added value in the gross domestic product in agriculture is small taking into account the agricultural and human potential of our country. In the future this potential must be exploited better in the first stage generating the initial capital necessary for the production activities development on new basis and afterwards for a better forming of permanent capital in the process of capitalization.

In order to emphasis better the sources from which the gross forming of permanent capital starts it is necessary to analyze the gross exploitation surplus beginning with the gross added value and subtracting the indirect taxes and expenses for the labour remuneration (fig. no.3.3).

98,1

92,7

92,3

92,3 93

,5

92,04

88,69

88,04 88

,49 89,3

89,38

88,78 89

,25

88,31

88,27 88

,85

828486889092949698

100

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

0

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30

1998 1999 2000 2001 2002 2003 2004 2005agriculture, hunting, and forestryindustrybuildingtradetransport, storage and communication


195

Fig.no.3.3 The weight of exploitation gross surplus in the gross added value during 1992-2004

Source: Statistic annual of Romania chap. 11 annex 11.6

These weights are small from the gross forming of the permanent capital. This state was because of the existence of big taxes and the evolution of expenses for the human capital remuneration in the respective period. The obtaining of certain small gross surpluses of exploitation accompanied by a policy that did not encourage the accumulation of the permanent capital was the cause of the non-interest in the process of capitalization at the level of the national economy.

The gross forming of the permanent capital at the level of the national economy is based on two main sources as follows: the gross economy that is the main part of the available gross income which was not used for the final consumption being destined for the accumulation of physical or financial shares and the banking credit. At the level of 2004 from the total amount of available gross income of 256482.0 million lei being under the level of gross forming of the permanent capital which was of 53850.3 million lei. The graphic representation of the date becomes suggestive regarding the evolution of the gross economy and the forming of the permanent capital on three periods 1990-1994 (fig. no.3.4), 1995-1999 (fig. no.3.5) and 2000-2004 (fig. no.3.6).

Fig. no.3.4 The evolution of the gross economy and the gross formation of the permanent capital during 1990-1994 Billions current prices


44,37 49

,79 56,19

56,3359

,7657

,958

,43 65,87

54,5 59

,23

50,1454

,89 55,79 57

,959

,07

010203040506070

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

The weight of exploitationgross surplus in the grossadded value

02000

400060008000

100001200014000

1990 1991 1992 1993 1994

the gross economy

the gross formation of thepermanent capital


196

Fig. no.3.5 The evolution of the gross economy and the gross formation of the permanent capital during 1995-1999 Billions current prices


Fig. no.3.6 The evolution of the gross economy and the gross formation of the permanent capital during 2000-2004 Millions of RON current prices


During 1990-1994 the gross economy exceeded in point of value the gross formation of the permanent capital. During 1995-2004 it was under the gross formation of the permanent capital meaning that it has required at a bigger extent the funding by banking credit for the gross forming of permanent capital at least for the difference between them and gross economy. This tendency will be intensified in the future, the banking credit for investments playing an important role in the acceleration of gross forming of permanent capital.

4 CONCLUSIONS The scientific importance of the durable crediting concept derives from the advantages which the durable crediting has upon the banking capitalization and upon the capitalization of economic agents. On one hand in accordance with the RBG regulations issued on the basis of international regulations banks cannot grant credits only assuming risks proportional to their capitals. On the other hand the economic agents have access to funding proportional to their own capitals because the banks establish methods of rating that limits crediting proportional to the economic agent capitals. The financing limitation according to the capitals size, nonobservance of the therapy based on credits but also the weak implication on financial markets and banking financial institutions in the Romanian economy capitalization process meant elements which impeded the economic growth and implicitly the more rapid development of our country after 1989.

Thus, the durable crediting is the ideal solution to finance the national economy accelerating the fund infusion in economy parallel to capitalization growth, improvement of credits portfolio quality and the environment protection.

0

20000

40000

60000

80000

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1995 1996 1997 1998 1999

the gross economy


0

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2000 2001 2002 2003 2004

the gross economy



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BIBLIOGRAPHY 1. Bemink H, Jon D, Charles G, (2007), The Future of Banking Regulation; The Basel II Acord, Blackwell Publishing, Melbourn 2. Brown, Martin and Christian Zehnder, (2006), Credit Reporting, Relationship Banking and Loan Repayment Swiss National Bank Working Paper No 2006-3 3. Chernobai S. Ana, Syetlozar T. Rachev, Frank J. Fabozzi, (2007), Operational Risk: A Guide to Basel II Capital Requirements, Models, and Analysis, Wiley Publishing 4. Dinger, Valeriya, and Jurgen von Hagen, (2007), Does Interbank Borrowing Reduce Bank Risk, Journal of Money Credit and Banking, Ohio State Univ. Press 5. Domar, Evsey, (1957), Essays in the Theory of Economic Growth, Oxford University Press, New York 6. Haret, Spiru, (1969), Mecanica Sociala, Editura Stiintifica, Bucuresti 7. Harrod, Roy, (1948), Towards a Dynamic Economics. Some Recent Developments of Economic Theory and their Application to Policy, MacMillan, London 8. Ilie, D., (2005), Creditarea Durabila, Editura Sitech, Craiova 9. Samuelson, P., (1939), Interaction Between the Multiplier Analysis and the Principle of Acceleration, The MIT Press, Cambridge, vol 21, No.2, pp 75-78. 10. Smith, A., (1967), Avutia natiunilor, cercetare asupra naturii si cauzelor ei, Editura Academiei Romane, Bucuresti 11. Stancu, I., (2002), Finante, Editura Economica, Bucuresti 12. World Bank, (2006), Doing Business in 2007: How to Reform, Oxford University Press, Oxford


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ONLINE TRANSMISSION OF FISCAL DECLARATIONS AND ANNUAL FINANCIAL STATEMENTS – A COMPONENT OF E-GOVERNMENT

Lecturer Alin ISAC

University of Petrosani, Romania, [email protected] Lecturer Claudia ISAC

University of Petrosani, Romania, [email protected]

Abstract: In administration, information technology represents a field with major implications in its functioning and the

re-configuration of the computer infrastructure is responsible for a series of efficient changes concerning the development of the administrative process. Thus, our paper tries to determine the importance of Business to Government relation in increasing the flexibility of IT solutions used at the level of companies and especially in the financial accounting activity, starting from the necessity to implement the e-Government system in Romania. While revealing the company’s IT system and the financial accounting subsystem we also pointed out the stages of the accounting activities regarding the filling out of statistical reports such as fiscal declarations and annual financial statements. Creating and using a SICPU system (Computer System for Collecting, Processing and Tracking Fiscal Declarations and Annual Financial Reports) which is going to be used by county financial administrations is a requisite and our paper brings out, on the one hand, the technological components needed by the company in order to send information, the stages of sending information towards SICPU and the hardware component, the users’ interfaces and the types of transfers, on the other hand. In the end of the paper we have highlighted the main advantages of implementing computer systems for colleting, processing and tracking fiscal declarations and annual financial statements for both economic units and the institutions interested in gathering and analyzing this data.

Key words: e-Government, SICPU system (Computer System for Collecting, Processing and Tracking Fiscal Declarations and Annual Financial Reports), financial accounting information system, electronic data interchange, user interface, Internet connections.

JEL Classify: L86 - Information and Internet Services; Computer Software, G38 - Government Policy and Regulation, M41 - Accounting

I. INTRODUCTION

During the first decade of the 21st century, from informational point of view, the Romanian public administration underwent a full process of e-Government implementation based on a modern computer infrastructure and a coherent set of applications, data bases and services which provide access to information and information management.

In order to understand the role and the place held by e-Government processes in implementing modern public strategies, it is important that these processes, which in Romania [1], started in an empiric form together with the development of technologies based on the Internet, be approached step by step. Even though these technologies spread more slowly in our country and some of them took place or take place simultaneously as compared to other European countries [6], we can identify the following stages: creating sites for public institutions and providing public information for those who are interested; unidirectional supply of specific forms which can be downloaded and filled out off-line, in traditional form and then submitted to those institutions; bidirectional interaction stage which has just begun in Romania and it should materialize in downloading forms, filling them out and sending them on-line after a user’s authentication process.

In this context, the following paper argues once more for the need to restructure the information technology used in the relations between economic agents and public institutions, especially financial administrations. The increasing complexity of activities within the public administration, the implementation of developed informational infrastructure and the training of employees from public institutions show the fact that it is important to create new and distributed forms of managing information based on modern activity management systems (C2G, B2G). For the improvement of the business information system, one of the most important relations is the B2G relation, which could eliminate the inconveniences caused by the submission of fiscal declarations


199

and of annual financial statements in traditional form, that is to say printed out and stored on various technical supports.

II. ACCOUNTING-FINANCIAL INFORMATION SYSTEM

One of the components of the information systems which tend to hold an important place in modern companies is information procedures. Information procedures represent the total of elements which help establish the ways of gathering, registering, sending and processing a set of information through, presenting the operations that must be performed and their sequence, informational support, formulae, methods and means of processing used information [5].

Through procedures we can initially determine the storage mediums, that is to say the materials used for registering/storing information and their characteristics; then, the sequence of data processing operations is determined. Within the IT system, the means of gathering, registering, sending and processing information are considered its technical support. The number, the structure and the technical performances of processing information influence significantly the functional performances of economic IT systems. These performances are dependent on creating, classifying and managing data bases. Due to the fact that data bases are the ones that supply “raw material” for the decisions made within the company, in order to create a data base it is necessary to analyze the economic system and the conditions which must be met by the corresponding information, the volume of data needed to be uploaded in he data base, as well as the possibilities of using and maintaining them.

New digital technologies provide easy and ready access, easy and ready storage and sending of information. An important field of activity within a company which cannot function without a reliable computer-based information system and without a complex data base is the financial accounting department. Financial accounting IT systems have a complex structure, generated by the multitude of computerized activities and sub-activities, as well as by the need to ensure independent computerized processing of information or through a network.

In this context, it is necessary to grant the financial accounting system an appropriate place among the basic components of the company’s IT system, defined as the set of interdependent elements oriented towards gathering, processing, storing, analyzing and sending information regarding the state and the circulation of patrimony.

In order to design a general accounting information system we must start from the most important element, that is to say from the chart of accounts which includes the following activities: making entries in registers, listing the state of accounts in the general ledger; operations for closing the financial period (registering capital depreciation, regulating VAT accounts, closing expenditure and income accounts in order to determine the result of the exercise, etc.), drawing up the trial balance, drawing up final financial accounting reports from the end of the financial period, preparing the system for opening the next financial period.

The main objective of using this information system is that the phases of processing financial accounting data are compressed and they take place at the same time with the help of the computer-based information system. In this context, the most important part is played by users who must ensure stability of documentation and the resources in various forms of the information system -product, who must save and store data or processing products, so that the information can later be processed through the same computer network and who must provide a system security plan regarding confidentiality and data security.

Thus, within this computerized society, the financial accounting activity cannot possibly be functional without using specific software, due to its multiple advantages: integrated control of the patrimony, drawing up financial accounting reports, complete and unitary management of the financial flow of primary documents, reducing time for obtaining the expected results, eliminating errors which may occur when handling a large amount of information, real time accessing of the cashflow and forecasting it, providing confidentiality and security of the data used, applications easy to operate and which have attractive interfaces.


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III. ONLINE SENDING SYSTEM OF FISCAL DECLARATIONS AND ANNUAL FINANCIAL STATEMENTS

The purpose of accounting operations materializes in summarizing the data in reports, such as annual financial reports which include, basically the balance sheet, the profit and loss account and other annexes, and it can be obtained from the general ledger, from the trial analytical and synthetic balances and registers.

These financial reports must be drawn up by economic units and sent to local financial administrations annually and bi-annually, together with the declarations regarding payments towards the state budget, the social insurance budget and the unemployment budget. In this respect, in order to eliminate the route between economic units and these institutions it is important to create Internet connections which are able to collect all this data [4].

The first compulsory condition for sending these financial declarations on-line is the Internet connection through one of these variants: dial-up connection – it implies the existence of a modem installed on the computer and of a telephone line for connecting the computer to an Internet provider; ISDN connection (Integrated Services Digital Network) and ASDL connection (Asymmetric Subscriber Digital Line) which provide high speed internet connections, better than common telephone connections; cable TV and DSS connections (Digital Satellite Systems) supplied by companies which offer beside cable TV services, access to the Internet using the same cable and special modem.

Thus, with the help of the Internet the data should be electronically transferred from an application that runs on a computer to the application that runs on another computer, located at a certain distance, without being printed out or manually stored on a magnetic support.

Figure no. 1

Fiscal information online sending systems


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After the electronic processing of the accounting information in summarizing reports such as the trial balance, the ledger or other financial books, the information is uploaded in the fiscal declarations found on the site of the National Agency of Fiscal Administration; then they are sent to the SICPU system (Computer System for Collecting, Processing and Tracking Fiscal Declarations and Annual Financial Statements).

IV. PROCESSING FISCAL DECLARATIONS AND ANNUAL FINANCIAL

STATEMENTS For this process, the information must be stored and transmitted in a structured form, which

follows a certain standard or protocol agreed upon by the two parties involved, so that it can be interpreted. The most common technical representation is EDI software which supervises the operations used when transferring electronic data.

From the point of view concerning the method of transferring financial accounting information to financial administration, has the following components:

a) the communication interface between trading partners: the company and SICPU; its role is to establish connections with county financial administrations;

b) the conversion software which transforms a local message, fiscal declarations and annual financial reports, in our case, into standard EDI messages and vice-versa. Since the content and the format of these documents can be modified, all converters must have the function that helps them open these files and process them.

c) the application interface works in two cases: if the EDI converter is installed on the same computer with the software used for filling out and sending the declarations, it is assimilated with a temporary storage file; if EDI messages are transmitted between two personal computers, there is an internal communication protocol that uses a stable connection. Following the above components we identify the next steps for sending online declarations

using SICPU:

1. create a “DecF” folder on the computer of the economic agent which contains separate subfolders for each of the following declarations: - Declaration 100 – Declaration regarding payments to the state budget - Declaration 101 - Declaration regarding profit tax - Declaration 102 – Declaration regarding payments to social insurances and special fund

budget - Declaration 103 – declaration regarding excises - Declaration 120 – Deduction on excises - Declaration 300 – Deduction on VAT (Value Added Tax) - Declaration 301 – Special deduction regarding VAT - Declaration 390 – recapitulative Declaration regarding intra-community supplies/acquisition

of goods - Declaration 710 – Rectifying declaration - SFA (AFR) – Annual Financial Reports

2. Download, fill out and send the company’s identifying form from the SICPU portal. 3. Generating the fiscal declaration forms and the annual financial reports with the help of the

application used by the company; saving the data in the subfolders created in the first step. 4. Converting the saved data in the previous stage using EDI software. 5. Connecting to SICPU portal and sending the EDI files. 6. Checking the information received/reply and confirming the submission of online declarations


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7. Corroborating the data with the report of payments made by the company and generating demands for payment which will be communicated online to both the company and the fiscal unit where it is registered.

8. Centralizing the information with a view to draw up national statistic reports.

create a “DecF” folder

Download company’s

identifying form

Fiscal declaration forms

Converting using EDI software

Sending the EDI files to SICPU

Checking and confirming

Corroborating the data

Centralizing the information

Figure no.2

Steps using SICPU

CONCLUSIONS As an European country Romania is required to align the objectives of the Lisbon strategy

and the i2010 initiative "An European Information Society for economic growth and employment" [7] in which one of the priorities is to promote an information society through a comprehensive set of services "e-government" citizen-oriented and the business environment. In this context taking online tax returns and annual financial statements is an important step for streamlining the relationship between state institutions and economic agents and to eliminate bureaucracy from the system. On the other hand the generalization of information systems for collecting, processing and


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tracking of various information about the economic agent and the creation of interrelations databases is an easy tool for obtaining information and interaction with government services.

Thus, trends that are evident for the time period immediately following have the jump from static web to a dynamic and interactive web development methodologies to target and streamline internal processes to determine efficiency and shared services, standards for consistent use of information technologies and communication services transform classical oriented program in e-Government services integrated and not least the education and training of citizens of a culture based information [2] - [3].

REFERENCES

1. Colesca S.E. - Internet in Public Administration, Economic Publishing House, Bucharest, 2002;

2. Frissen Valerie, Jeremy Millard, ş.a. (2007), The future of e-Government: an exploration of ICT-driven models of e-Government for the EU in 2020, EUR – Scientific and Technical Research;

3. Ioniţă A., Tendencies and New Instrumets for E-Government Applications in Knowlegde Society, Quality Review, no 7-8/2008;

4. Isac A. – Web Technologies, Universitas Publishing House, Petrosani, 2008; 5. Zaharie, D., Rosca, I., Information Systems Object Programming,. Dual Tech Publishing

House, Bucharest, 2002; 6. http://epp.eurostat.ec.europa.eu/tgm;http://ec.europa.eu/information_society/eeurope/i2010; 7. http://europa.eu.int/ISPO/infosoc/backg/bangeman.html.


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THE COLLECTIVE INVESTMENT FUNDS - A ROMANIAN AND EUROPEAN PERSPECTIVE

Lecturer PhD. Cosmina Mădălina POP

University of Oradea, Faculty of Economics, Oradea, Romania [email protected]

Assistant Professor Victoria BOGDAN University of Oradea, Faculty of Economics, Oradea, Romania

[email protected]

Abstract: The paper aims to realize a general image of the collective investment funds acting on the Romanian and

European capital markets. Collective investment funds, classified in open-end funds (mutual funds or UCITS – Undertaking for Collective Investment in Transferable Securities) and closed-end funds (or Non UCITS) offer the investors the advantage of direct access on capital and monetary markets with less money, effort and risks. Further we have analyzed the regulations that operate the Romanian and European funds market, the size of Romanian funds market compared to other countries in the region in detailed statistical data and also the growing potential.

Keywords: collective investment funds, UCITS, Non-UCITS, European funds market

JEL Classification: F21, G15

1. INTRODUCTION

The collective investment funds can be defined as investment companies that gather the assets of individual and institutional investors and collectively invest these in stocks, bonds and/or money market instruments. The collective investment funds represent an important saving and investment instrument for individuals and companies, by offering the investors direct access to the stock-exchanges and the monetary markets with less effort, money and risks than the direct investments.

These funds are classified in two major categories: • undertakings for collective investment in transferable securities – UCITS (open-end

investment funds and investment companies). An open-ended fund, also known as mutual fund continuously offers new fund shares to the public, using the resulted cash to invest in portfolios of stocks, bonds and other securities. These investment companies redeem the outstanding shares at any time, upon demand, at a price determined by the current value of the funds’ net assets, known as the net asset value (NAV).

• other collective investment undertakings – Non UCITS (closed-end investment funds and closed-end investment companies). The closed-end funds issue a limited number of share or units in an initial public offering, share that are later on traded on an exchange, or directly through the fund.

According to the investment policy, European Fund and Asset Management Association (EFAMA) class the open-end funds in four main categories:

• equity funds (66% permanent minimum exposure of portfolio); • fix income instruments funds (with a portfolio made up of bonds, maximum weight of

shares 10%); • monetary market instruments funds (with a portfolio made up of fix income instruments

and money market instruments, with a maximum period of one year); • diversified funds (with a portfolio consisting in different classes of financial

instruments). Within the last decades we have witness the expansion of the mutual fund industry, mostly

because of the world-wide proliferation of the investments opportunities. The cause? Most countries have continued to liberalize their capital markets and to reduce the trade and investment


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barriers, the increasing middle class in both mature and emerging markets, and also the privatization of pension systems in emerging markets has sustained the growing mutual funds sales.

Ong and Sy (2004) pointed out that the expansion of the global mutual funds industry within the last decades has been characterized by growth in both mature and emerging markets. This has certainly a major contribution to the local securities markets’ development of in emerging market economies, which in turn, has been an important vehicle in attracting investment inflows from overseas funds. The main concern is represented by the possibility that large foreign investors could break the stability of local capital markets in the event of market crisis, with systemic implications for the real economy. Therefore, the local investors own an important market share, but a significant influence belongs to the foreign funds. The study has observed that European mutual funds appear to play a much bigger role in emerging markets than their U.S. counterparts.

2. REGULATION ASPECTS CONCERNING EUROPEAN AND LOCAL MARKET

In 1985 the European Union Directives adopted the Undertakings for Collective Investment in Transferable Securities – UCITS - or Council Directive No. 85/611/EEC of 20 December 1985, which aim was to allow the collective investment funds to operate freely throughout the European Union based on a single licence issued by the authorities of a member state. This way the collective investment funds would be able to invest in transferable securities wherever in Europe. Hinting the European Union’s goal, to have a single market for financial services in Europe, the uniformity of legislation regarding the collective investment funds was seen as a step forward in this direction. But in practice, most of the European Union countries have imposed additional regulatory requirements, which represented important obstacles for free operation funds and cross-border marketing of UCITS. Moreover, the limited permitted investments for UCITS settled by regulation negatively affected the marketing possibilities of a UCITS. As a result, the Directive was amended by Council Directive No. 88/220/EEC of 22 March 1988.

In the early 1990s proposal was developed in order to amend the 1985 Directive and to bring into consonance the variety of laws throughout the Europe. The result was the draft of UCITS II directive known as Directive No. 95/26/EC of 29 June 1995.

1998 come with a new proposal of EU Commission to amend the 1985 Directive; this one was drafted in two parts -a product proposal and a service provider proposal. These proposals were finally adopted in December 2001 (UCITS III) and consits of the following two directives:

• Directive No. 2001/107/EC of 21 January 2002 of the European Parliament and of the Council (the “Management Directive”) trying to assure the collective investment funds to operate freely throughout the EU, widen the activitiies they are allowed to undertake and introduces new concepts as, simplified prospectus.

• Directive No. 2001/108/EC of 21 January 2002 of the European Parliament and of the Council (the “Product Directive”) which goal is to eliminate the obstacles that restricted the collective investment funds barriers to the cross-border marketing and to offer a wider variaty of financial intruments. This regulation makes possible to establisf money market funds, derivatives funds, index-traking funds or funds of funds as UCITS.

This way the UCITS Directive created a common regulatory frame for all entities from Member States based on the following principles: diversification of the portfolio on the risk spreading principle; continuous issuance and compensation of participation titles; multiple levels of supervision: depository, financial auditor, qualified authority; the role of the depository as custodian of the financial instruments from the portfolio; high level of transparency/disclosure through regular reports; a simplified prospectus, as a means to facilitate the distribution; free distribution in all the Member States based on the authorization delivered by the Home Member State; supervision carried on by the competent authority from the Home Member State.

In Romanian regulations for the first time the aspects of collective investment funds have been stipulated in Law of capital market no. 297/ 2004, which divides these funds into UCITS and Non UCITS. The act brings in harmony the Romanian legislation regarding collective investment


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funds with Directive no. 85/611/CEE for coordination of legal and administrative documents regarding certain undertakings for collective investment in transferable securities.

Consequently, the process of alignment to the European regulation has covered the period 2004-2005, when a new authorisation for the collective investment undertakings was needed in order to respond to the UCITS Directive’s requirements.

According to the new regulations, the Romanian UCITS funds can invest both on the regulated markets of member states an of non-member states. The larger the investments are, more Romanian products are issued, and most of them specialized on geographic areas or economic sectors. Even if many investors have preferred direct investments on the Bucharest Stock Exchange, encouraged by the continuously growing trend, the actual crises affecting the international and domestic markets will have a deep impact on investor’s future behaviour.

An important segment of the funds’ market is represented by the other collective investment undertakings (AOPC or Non-UCITS). In fact, every EU member has its own Non-UCITS system, the national regulatory framework is customized according to the market tradition and to the domestic investors’ demand.

The changes of the regulation in 2004 represented the starting point in order to set up a Non-UCITS system similar to the European mature markets. According to these new rules, the resources are collected both through public offer or private call. Consequently, Non-UCITS funds become an attractive investment instrument for the investors interested in assuming greater risks. Because of their permissive investment policy, Non-UCITS funds may actively be involved in the management decisions of the companies in the portfolio and elaborate the long-term investment strategies, with potential high efficiency. By elaborating such strategies, a low level of investment liquidity in Non-UCITS fund can appear, but the flexible regulation allows them to fix compensation data.

Through the issued regulation, new Non-UCITS funds were created, being classified accordingly to their investment policy: diversified, permissive, for qualified investors, restrictive, moderate, guaranteed, and specialized in the multiple classes of financial instruments. This way the Romanian National Securities Commission (CNVM) promotes the development of a healthy collective investment undertakings market.

3. SIZE AND STRUCTURE OF ROMANIAN AND EUROPEAN INVESTMENT FUNDS MARKET

The investment companies play a central role on the emergent capital market, because of their goal - the transfer of the public property to private property, an essential element in the development of a healthy market economy. Throughout Europe almost 8 trillion euro are invested in collective investment funds and more than 78% are UCITS as the figure no. 1 reveals.

Figure no. 1 The structure of European collective investment funds at the end of 2007

(Net Assets in mio euro) Source: www.efama.org

Taking as criteria the weight of European invesment funds (UCITS and Non-UCITS) by

country, it is easy to notice that 56.60% of the total number of European funds are owned by three

78.26%

21.74%

UCITS Market

Non-UCITS Market


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contries: France with 23.13%, Luxembourg with 21.72% and Germany with 11.75%. Countries as Czech Republic, Greece, Hungary, Poland, Portugal, Romania, Slovakia, Slovenia or Turkey number less than one percent in total European funds, therefore they were considered as others in the figure below.

Denmark, 1.50%

Finland, 1.01%

Belgium, 3.54%

Germany, 11.75%

United Kingdom, 5.29%

Luxembourg, 21.72%

Norway, 1.00%Netherlands, 1.00%

Ireland, 9.34%

Italy, 2.49%

Liechtenstein, 1.04%

France, 23.13%

Austria, 4.55%

others, 4.19%

Switzerland, 1.56%

Sweden, 1.05%

Spain, 5.83%

Figure no. 2

The weight of European investment funds by country at the end of 2007 Source: www.efama.org

Figure no 3 point out the large number of investment funds and net assets (in mil Euro) held

by countries like France, Luxembourg, Germany or Ireland compared to Romania, Slovakia, Slovenia or other emergent market.

0

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Figure no. 3

The European Investment Funds Market (UCITS and Non-UCITS): the geographical breakdown of funds' number and net assets at the end of 2007

Source: www.efama.org

All the data presented in the above figures are processed from the table no 1, that offer accurate and detailed information about the European UCITS and Non-UCITS by number and net assets, both in EUR and USD.


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Table no. 1

Total net assets of the European investment fund industry, End of 2007 Overall Fund Industry UCITS Market Non-UCITS Market

Net assets Net assets Net assets

Number

of funds in mil

euro

in mil

USD

Number

of funds in mil

Euro

in mil

USD

Number

of funds in mil

Euro

in mil

USD

Austria 2,327 165,584 243,756 1,545 111,386 163,971 782 54,198 79,785

Belgium 1,812 126,494 186,212 1,778 120,398 177,238 34 6,095 8,973

Czech

Republic 94 6,101 8,981 92 6,056 8,915 2 45 66

Denmark 769 132,224 194,646 500 71,480 105,225 269 60,744 89,421

Finland 516 66,000 97,159 379 55,116 81,136 137 10,884 16,023

France 11,834 1,508,300 2,220,368 8,243 1,351,600 1,989,690 3,591 156,700 230,678

Germany 6,013 1,040,937 1,532,364 1,743 266,062 391,670 4,270 774,875 1,140,694

Greece 270 22,912 33,728 260 21,685 31,922 10 1,227 1,807

Hungary 321 12,571 18,506 271 9,811 14,443 50 2,760 4,064

Ireland 4,780 806,768 1,187,643 2,898 646,268 951,371 1,882 160,500 236,272

Italy 1,276 339,669 500,027 924 285,094 419,687 352 54,576 80,341

Liechtenstein 531 20,452 30,107 442 18,682 27,501 89 1,770 2,606

Luxembourg 11,115 2,059,395 3,031,635 8,782 1,823,969 2,685,065 2,333 235,426 346,571

Netherlands 514 91,088 134,090 450 77,387 113,921 64 13,701 20,169

Norway 511 50,749 74,708 511 50,749 74,708 0 0 0

Poland 338 36,926 54,359 192 30,975 45,598 146 5,951 8,761

Portugal 495 36,212 53,307 212 21,703 31,950 283 14,508 21,358

Romania 48 316 466 41 266 391 7 51 75


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Slovakia 116 3,936 5,795 70 3,788 5,576 46 149 219

Slovenia 116 4,134 6,085 109 2,905 4,277 7 1,228 1,808

Spain 2,982 278,796 410,416 2,940 269,366 396,534 42 9,430 13,882

Sweden 538 139,380 205,182 522 136,429 200,837 16 2,951 4,344

Switzerland 798 159,853 235,319 583 119,748 176,282 215 40,104 59,037

Turkey 345 18,104 26,651 297 15,365 22,618 48 2,739 4,032

United

Kingdom 2,707 796,954 1,173,196 2,295 685,016 1,008,412 412 111,938 164,784

Europe1 51,166 7,923,855 11,664,707 36,079 6,201,304 9,128,940 15,087 1,722,551 2,535,767

1 Data for Russia are not included in the table. Source: www.efama.org

The table above points out the very low number of investment funds in Romania at the end of 2007. A more detailed analysis shows that this number has been increased year by year since 2000 without reaching a significant value, as it can be observed in the figure no. 4. The reason for this slow increase of investment funds is considered the Romanian investors habit to invest their liquidities in commercial deposits (risk averse investors) or directly on the capital market due to the low initial values of the shares traded and historical maximum year by year (risk lover investors). We consider that the actual capital market crises will be an important increasing factor at the time the Romanian investors will rethink their investment strategy.

0

10

20

30

40

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60

2000 2001 2002 2003 2004 2005 2006 2007 2008

Non-UCITS UCITS Figure no. 4

The evolution of Romanian investment funds by number between 2000 and August 2008 Source: www.aaf.ro

In order to realize a more precise comparison of Romanian investment funds versus the

other emerging (Central and East European countries) or developed countries (West European countries) we have preceded to the calculation of net assets of investment funds in Gross Domestic Product. We were surprised to observe that our country is situated on the last position among all European countries with less than 1% investment funds’ assets in GDP. This indicates us a huge


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growing potential for the next years in Romania compared to the other emerging markets from the area.

Table no. 2

The weight of total net assets of the European investment fund industry in GDP at the end of 2007

Country Net assets in mil USD

GDP in mil USD

Total assets/GDP (%) in 2007

Austria 243,756 377,028 64.65% Belgium 186,212 448,560 41.51% Czech Republic 8,981 168,142 5.34% Denmark 194,646 308,093 63.18% Finland 97,159 246,020 39.49% France 2,220,368 2,562,288 86.66% Germany 1,532,364 3,297,233 46.47% Greece 33,728 360,031 9.37% Hungary 18,506 138,182 13.39% Ireland 1,187,643 254,970 465.80% Italy 500,027 2,107,481 23.73% Liechtenstein 30,107 3,500 860.20% Luxembourg 3,031,635 47,942 6,323.55% Netherlands 134,090 754,203 17.78% Norway 74,708 381,951 19.56% Poland 54,359 420,321 12.93% Portugal 53,307 220,241 24.20% Romania 466 165,980 0.28% Slovakia 5,795 74,932 7.73% Slovenia 6,085 45,451 13.39% Spain 410,416 1,429,226 28.72% Sweden 205,182 444,443 46.17% Switzerland 235,319 415,516 56.63% Turkey 26,651 657,091 4.06% United Kingdom 1,173,196 2,727,806 43.01%

Source: World Bank (GDP), CIA World Factbook (Liechtenstein GDP), EFAMA (Fund Assets) 4. CONCLUSIONS AND FURTHER RESEARCH The paper intents to research how popular are the investment funds throughout the European

and Romanian investors and these were accurately revealed by the figures and tables realized. We also studied the regulation that operate the Romanian market and how much was this harmonized with the European laws, but also the growing potential of each country indicated by the weight of investment funds’ net assets in GDP. These data pointed out that Romania is the country with the highest growing potential.

Our further research will try to identify which factor significantly contributes to the investment funds’ popularity among investors, but also, how much will benefit the Romanian investment funds from the actual capital market crises.


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REFERENCES

1. Ong, L. and Sy, A.N.R., The Role of Mature Market Mutual Funds in Emerging Markets: Myth or Mayhem? (July 2004). IMF Working Paper No. 04/133, available at SSRN: http://ssrn.com/abstract=588244

2. Council Directive of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (85/611/EEC)

3. Commission Recommendation 2004/383/EC of 27 April 2004 on the use of financial derivative instruments for undertakings for collective investment in transferable securities (UCITS)

4. Anghelache, Gabriela, Pãunescu, Cosmin, Romanian National Securities Commission Perspectives of Collective Investment Undertakings Market, Economie teoretica si aplicata nr. 3 / 2008 (520), http://www.ectap.ro/articol.php?id=293&rid=35

5. CIA World Factbook, available at https://www.cia.gov/library/publications/the-world-factbook/

6. www.efama.org 7. www.aaf.ro 8. www.worldbank.org


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THE ANALYSYS OF ANTI-CRISIS FISCAL MEASURES AND THEIR IMPLICATIONS

Ph.D. Elena TOMA

“Alexandru Ioan Cuza” University, Faculty of Economics and Business Administration, Iasi, Romania,

[email protected]

Abstract: The purpose of this writing is, in fact, the analyze of the fiscal policy’s effectiveness in order to combat the

negative phenomena which characterizes the periods of economical crisis: the fall of the actual production, unemployment and inflation. We are trying to make a fine analysis of the concepts and the phenomena which give the characteristics of the fiscal anti-crisis policy’s effectiveness. We estimate the effectiveness of the fiscal measures only in comparison to other financial policies (monetary policy and budget policy) and by making an analyze of the effects produced by taking fiscal policy decisions in a normative analysis. We reached a final conclusion upon the fiscal policy by examining the theoretical and the practical research so far. So, on the one hand, the fiscal policy in order to achieve its goal must be combined with the other macroeconomic policies and on the other hand, the fiscal policy used to reduce the massive fiscal pressures has low results in what concerns the stimulation of investments and aggregate supply. An active budgetary policy which includes public investment spending can correct the macroeconomic imbalances (both on the market of goods and services and on the market of labor) on short and on long-term only with the condition of respecting certain limits of the budget’s deficit and of the public debt, when it comes to times of recession and economic crisis. More than that, this kind of policy in combination with certain tax incentives which stimulate the investments in the private environment can produce positive effects upon the gross domestic product and employment.

Key words: fiscal policy, tax, public expenditure, economic crisis, the fiscal multiplier phenomenon JEL Classification: H21, H30

1. INTRODUCTION

We would like to discuss a matter which appears in the context of the economical crisis which already affected the majority of the world’s economies, a phenomenon with a great impact upon the social and economical activities. In this period, the attention of the economic actors, including the economic and population agents, is directed to governments as having possible solutions to combat this negative phenomenon which occurred. The measures taken by the executive power didn’t take time in appearing, but the question still remains: “Which of the measures taken by the government have a real opportunity to reach their goal, and if they do that, which are the economical and social effects?”

Among the instruments envisaged by the government, we identify those which are the subject of the fiscal policy, along with the budgetary policy. The analysis taken into consideration is considered, in particular, the targeted segment of the fiscal policy, though a complete and a correct approach can only be made in relation to the other components of the financial policy of the State, with which we relate, if necessary. In addition, in the present context, the phenomenon of financial integration has been widespread, it is appropriate to indicate that fiscal policy is included in the set of powers of the Member States of the European Union as a symbol of state sovereignty; not the same thing happened with monetary policy which is centrally realized, at the Euro level, by the European Central Bank.

From the methodological point of view, our approach is mainly qualitative in nature, it is based on interpretation, naturalistic explanation, understanding and comprehension.

2. CONCEPTUAL DELIMITATION

The approach envisaged by the title of the paper requires some conceptual clarification on

the concepts used throughout the paper. Given the choice, we first need to clarify, in concept, the concept of fiscal policy, as reflected in literature.


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Fiscal policy is defined as all the measures, actions and instruments that determine the sources, sampling methods and income of public funds as a component of the financial policy of the state.

The concept of fiscal policy is often presented with different shades, the accent being most of the times on its side which refers to the tax promoted by a state or another.

There are different opinions which state that the notion of fiscal policy can not be conceived only by linking the procurement’s procedures of resources available to state and the destinations given to these resources, in the performance of the functions and the tasks given to it. Thus, according to this view(1), fiscal policy includes all regulations regarding the establishment and levying of taxes, materializing the options of the state in terms of taxes and the decisions of the public spending.

Also, a full understanding of such concepts can only be made by reference to other parts of the state financial policy and, in particular in relation to budgetary policy, the latter being defined as an expression of sizing the state spendings through specific actions and instruments.

To remove this difference of tone in addressing the conceptual notion of fiscal policy, the literature often encounters the notion of fiscal-budgetary policy, as a result of interdependence between the two and the association is obvious.

Also it must specify the significance of the concept of recession, which, according to the dictionary definition, means "the general decline of economic activity and economic growth, characterized by unemployment, devaluation, inflation, lowering the standard of living." The recession characterized the initial phase of a crisis and is less serious than the economic crisis, which defines a long stagnation of production, unemployment, inflation, etc. In economic terms we talk of recession when GDP fell two consecutive quarters.

In what follows, we point the analysis on the measures taken by governments in respect of taxes, as the central element of all this.

3. THE ROLE OF TAX POLICY IN COMBATING THE ECONOMIC CRISIS

In periods of economic crisis, the economy faces a number of negative phenomena such as

unemployment, low aggregate demand, reducing exports, monetary instability, phenomena that induce negative effects on economic and social area. The State is required to anihilize them, and it has a number of instruments, in which fiscal policy plays an important role.

Fiscal policy falls within the category of economic policy adjustment type and it is used, in a short term, in order to maintain the balance or for the general economic equilibrium return which was destabilized mechanism.

Though fiscal policy can be used in the structural policies with positive effects on the economy, both for medium and long term. We use the fiscal policy in order to correct the two major economic imbalances: inflation and unemployment, known in economic terms as the spread recesionist respectively, the spread inflationary.

To eliminate the spread recesionist respectively to increase aggregate demand, the state will work to reduce taxes, while to reduce inflationary spread is done the other way around, and increase taxes.

In terms of achieving and maintaining the economic balance we generally know two positions:

1. the neoclassicism, which believes that the overall balance is achieved automatically, on long-term by full employment (only natural unemployment), the game of free market forces (perfect flexibility of prices and wages), the variable order offer being aggregated. This theory recommends state intervention through monetary policy.

2. the keynesianism, who believes that the overall balance does not occur by itself, requiring the intervention of systematic and permanent state. In addition it considers the overall balance should be pursued in the short term and it is not at full employment of labor (but


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underemployment / unemployment in conditions), the command variable is the aggregate demand. The state must intervene through fiscal policy.

The contemporary theory of nonintervention is the monetarism (also a demand-side theory), which believes that the state should monitor the aggregate demand exclusive control of monetary economics and contemporary version of the theory is interventionist theory of supply (a supply-side theory), which requires intervention in the matter of taxation, especially for the producers. However, the monetarist current supports the intervention of taxes, but in the sense of reduction during the recession and increment of the tax rate during the boom.

From the historical perspective, the West got out the Keynes’s thinking for over two decades, after the “30 glorious years”, where the illustrious thinker thesis have dominated the economic policies of many governments. In the last two-three decades, the economic policy of many countries has been inspired by the neoliberal doctrine, focusing on monetary policy and a more modest tax-policy budget. Moreover, in the last decade we outline a "third path" taken by governments in the economic policies promoted as a result of influences exerted by the work of American economist Anthony Giddens, “The Third Way and its Critics”. Solving the economic problems facing the world economy appears a mijax between the two diametrically opposite currents, the keynesism and the neoliberalism. The impact was to reduce the excesive production of the income tax and to generally lower the tax wedge, supporting the negative influence on economic development caused by excessive taxation of labor and capital. Moreover, according to OECD statistics, there is a certain trend of reducing the fiscal pressure in the majority of the world, one reason being the desire of public authorities to create an attractive environment for potential foreign investors, under conditions of financial increasingly aside’s globalization, in the last years.

The phenomenon of globalization manifested in the entire world and integration phenomenon expressed in the European states, represent a new order in the facts of the international economy, with profound implications in the economies of each state. All these phenomena are being used in order to iduce major changes in economic and social, at both macroeconomic and microeconomic level, fiscal policy being in the phase of taking new challenges.

4. THE ANALYSIS OF THE TAX POLICY IN TERMS OF FINAL RESULT

Before moving to the analysis of actual results induced by the fiscal policy on the economy,

it is necessary to make a foray in what the public interest means; our analysis wouldn’t be correct if we cannot define the public interest notion.

The conceptual approach to the public interest notion was made by Beth J. and continued by JS Mill, in the utilitarianism current, being “the action producing the greatest good for the greatest number of people”(2). Measuring the public interest lies in meeting the total utility of all individuals in the society; this way, any policy which is able to increase the total social utility would be of public interest. The applicability of the methods of measuring public interest in experiencing practical problems especially in terms of measuring utility.

Another approach to the public interest is made by the Italian economist Vilfredo Pareto, in which he states that an individual's interests are advanced without any injury to another individual, and so the public interest is served.

According to the principle of Pareto, it all leads leads to results like win-win, but in reality, few economic policies are of this kind. In addition to this finding, economists Kaldor and Hicks, formulate a principle which wears their names, in which a governmental action is in the public interest if earnings or benefits resulting from this action are greater than costs or losses arising.

The analysis of the effectiveness of fiscal policy through the finality of its achievement can be compared with other financial policies: budget policy that money.

As regards the analysis of the effectiveness of fiscal policy compared to that of the budget, the comparative phenomenon regarding the tax multiplier of the public spending could provide a result but not completely. Regarding the tax multiplier, the state may be reducing tax revenue by an amount or reduce the marginal rate of taxation, both tax measures leading to increase national


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income, and the fiscal multiplier shows the increase in national income reduced by one tax revenues and the increase in national income with a reduction of marginal tax rate.

To reach the tax multiplier formula for the budget, use the following system of relations on the budget balance(Corduneanu, 1999):

Y = C + I + G (1) C= C0 + cYd 0<C<1 (2) Yd = Y – T +R (3) T= T0 + tY 0≤t ≤1 (4) I= I0 (5) G = G0 (6) R = R0 (7)

Where:

- Y = aggregate supply; - C = consumption; - I = investments; - G = government spending; - C0 = autonomous consumption; - Yd =disposable income; - T = direct taxes; - R = social transfers ; - c =marginal propensity to consume; - t = marginal direct tax rate; - The 5, 6 and 7 relations imply that the investment variables, public expenditure and social

transfers are exogenous. Through a series of replacements in successive equations, we arrive at the following relationship:

Y = _____1____ x (C0 –cT0 + cR0 +I0 + G0) (8) 1 – c (1 – t)

The 8 relation shows the government may act on the economy through taxes, social transfers and public spending.

Where fiscal policy is taken as a a decision to reduce tax levies, the other exogenous variables remain unchanged, and with an amount ΔT, fiscal multiplier becomes(3):

ΔY_ = ____-c ____ ΔT 1 – c (1 – t) (9)

When there is a reduction of marginal tax rate, t = Δt / ΔY, fiscal multiplier becomes (under the same conditions caeteris paribus):

ΔY = ____-cY___ Δt 1 – c (1 – t) (10)

To highlight the influence of international economic relations (international trade and

international financial relations), we insert it into the macro baseline exports (E) considered in relation to exogenous income, E = A good imports (M) whose evolution is influenced by income, and consequently M = Mo + mY (where m is the marginal inclination to import).

Following the same procedure we can express the multipliers in the open economy: ΔY = ____-c ______ = _ -c_ _

ΔTo 1 – c (1 – t) + m s + ct + m (11)

ΔY = ____-cY ______ = _ -cY_ _ (12) ΔTo 1 – c (1 – t) + m s + ct + m

By comparison, the spending multiplier is: ΔY = ____1 ______ = _ 1 _ _ (13)

ΔGo 1 – c (1 – t) + m s + ct + m


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Comparing the two relations 11 and 13, observed that the tax multiplier is less than a spending multiplier:

-c < 1_________ 1 - c(1-t) + m 1 – c (1- t) +m (14)

From the above relationship we observe a decision of the budgetary policy of consistent recession, and that a growth of public expenditure is better in principle than a decision-oriented fiscal policy the same purpose.

Comparison fiscal policy - monetary policy in terms of efficiency, can be generally based on the following findings: compared with monetary policy, fiscal policy has a certain inertia in the sense that a tax measure is being felt over a period of time which is greater than would be a monetary one.

In addition, there are theorists who argue that adjustment policies make the fluctuations unstable and increase stability or reduce economic fluctuations. There were made three key arguments in this regard:

• Discretionary policies are characterized by a double shift, one imbalance being between the occurrence and timing of taking the measure of the government and the other between the decision time and time of effect;

• These policies have not instrumental finesse - the product is always disproportionate in relation to the necessary (non-charge of fine tuning), leading to retention, amplifying or introduction of new disturbances;

• The discretionary policy can be blocked by the anticipation of the rational economic agent, since it is a public policy.

Regarding the debate between those who mainly support the monetary policy and those who argue mainly fiscal policy and, in general the keynesiens, can be addressed through design IS - LM slopes of the various hypotheses for the two curves. The monetarists consider the request for money as being not an elastic one, and therefore aggregate income does not change an increase in public spending, the only effect of an increase is in the interest of rates. Keynes's followers argue that the currency demand curve is elastic with respect to interest rate, while the level of interest has a significant role on the demand for investment, therefore has IS curve is almost vertical; a broad money growth leads to an insignificant increase income approved.(4)

Moreover, economists dispute between the followers of Keynes and the monetarist economists act with regard to the item on which the state, promoted by economic policies must focus. If Keynes were devotees of the aggregate demand, as an element on which economic policies can exert influence to correct economic imbalances, the monetarists have to offer in aggregate, as the basic element in influencing the economy, in a sense desired by the authorities. They thus formed two economic schools which have different guidelines and solutions to resolve the macroeconomic problems, which may face the world Member economies: the doctrine of economic growth demand (“Demand-Side Economics”) and offer economic doctrine (“Supply-Side Economics”).

Stimulating aggregate demand in order to increase, lead to beneficial results on the economy: increasing aggregate demand produces an increase in aggregate supply induced with positive implications on the level of employment and national income. Fiscal policy, in this case, uses a variant expansionary by lowering the taxes.In the kenesyan, fiscal policy of "tax cut" is based on an analysis of the macroeconomic dynamics of demand and seeks to act on economic behaviour by reducing fiscal pressure in order to achieve a budget deficit, able to generate an increase in aggregate demand, similar to the one produced by the growth of public spending. As a parenthesis, the school's economic growth aggregate demand (demand-side economics) is based on the phenomenon multiplier (tax expenditures and the costs of transfer) and the budget deficit, generated either by reducing taxes or increasing public spending on global demand.


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Stimulation of supply can be done also by an expansionary fiscal policy, in order to reduce fiscal pressure on the economic level, by reducing tax rates increasing supply of labor, moving towards consumption savings and investment and, ultimately, stimulates production and growth.

The fiscal policy which is being used in order to reduce fiscal pressure is to be found in both doctrines, both supply and demand dynamics; they depend on the type of tax used and on the content and scale. Morover, fiscal keynesian policy of "tax cut” is based on the budget deficit, as essential, while the fiscal policy of "tax cut" pure (source of neoliberal) supports the need to restore budget balance.

The controversy between the two economic currents lead to for and against opinions: the neoliberals, supporters of the theory of supply, critical to the effectiveness of the keynesian’s policy influence has as its main argument on the adverse consequences of price inflation; the second solid argument, is the effect of crowding-out, induced budget deficits financed by domestic borrowing, and it states that it leads to an increased interest on the money market, with negative impact on private investment. However, these keynesistes and neokeynesiste theses have mostly been abandoned, their place being taken by the neoliberal these, which has dominated the economic policies of the world in the last two-three decades.

Issues highlighted above are theoretical; analysis of fiscal policy in terms of effectiveness may be based on practical results obtained by the impact of fiscal measures on macroeconomic imbalances.

Theory advocates "supply side economics" argue that the abatement of the taxes should cover the following areas:

1. stimulating capital formation, by: • Accelerated depreciation of fixed assets; • Reduction of the profit tax paid by operators; • Reducing the rate of taxation of capital gains;

2. stimulate savings as the main source of investment by reducing taxes on dividends and interest, having as their main argument the inevitable taxation through the consumed income tax ;

3. stimulation to increase employment by reducing the rates of taxation on the personal income; 4. encouraging technological progress through the tax credit for research - development

(through deductions in calculating the tax). Supporters of the theory of supply states that through legislation and implementation of such

measures mentioned above are solved both the problem of recession and unemployment and the inflation.

Given Arthur Laffer's theory, that higher tax rates lead to reduced tax revenue of the budget, the neoliberal economists have argued with heat reducing taxes; moreover, that their success with the time’s politicians, so that in the'80s in the U.S.A and Britain witness a strong reduction of taxes, unprecedented, during the gouverning of Reagan and Thacher. Expected effects were the increased savings and investment, the tax base and thereby the promoting of a balanced budget.

But the experiment of supply, as called in the U.S. A., led to negative results. There was no perceptible increase in the rate of personal savings or in the level of employment. Moreover, Laffer's thesis that the income will increase along with the lowering taxes was proven false; y contrast, federal revenues have declined leading to an unprecedented deficit (Samuelson şi Nordhaus, 2000), which was just considered the "apple of discord" between the keynesists and monetarists.

Effects of reducing taxes can be significant especially if programs are placed in the overall economic reform, that to maximize the positive effects. Whereas there is no single way to implement tax reforms, but various alternative strategies, which range from reducing the overall tax and to change the tax structure, are obtained in each case different effects. In this regard have been conducted various studies aimed at identifying the potential effects of certain tax reform on the real economy.


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A study by the European Commission services, made at EU level, based on Quest model simulations , has led to the following conclusions:

Table 1: The long – term effects of reducing taxes by 1 % of GDP

GDP Employment Investments

Reduction of income tax,

corporate tax and VAT

0.54 0.54 1.28

Reduction of the income and

corporate tax

0.65 0.57 1.88

Reduction of income tax 0.81 0.97 1.24

The transfer of fiscal burden from

income tax to VAT, without

compensation of transfer incomes

0.66 0.82 0.73

The transfer of fiscal burden from

income tax to VAT, with

compensation of transfer incomes

0.37 0.48 0.32

Source: Brezeanu Petre şi alţii, Fiscalitate europeană, Editura Economică, Bucureşti, 2005, pag. 247

The effects of reducing taxes depend on whether or not accompanied by spending

reductions. It may be noted that a tax reduction of 1% of GDP would increase GDP by 0.5-0.8% within 10 years and an increase in employment with 0.5-1%, which would mean a reduction in the deficit by 0.5% over the same interval. A decrease in taxes without corresponding spending reductions will lead to a deterioration but to balance budget: according to the simulation, reducing taxes by 1% of GDP, without a corresponding decrease of expenditure will increase the deficit by 0.75% of GDP, which means that tax reforms are auto-financed only a proportion of 25%. It is noted that reducing corporation tax with the income tax and VAT, with a percentage point draws a GDP growth of 0.54% less than if it only reduces the tax on salaries (0.65 %). This reduction has an impact on employability, resulting in growth with 0.54% if all three reduce taxes, and 0.57% if they reduce the income and corporate tax.(1% increase in employment of 1.5 million=jobs).

The strongest effect on investment occurs when the reduced income and corporate tax, working explicable by higher disposable income left to individuals and businesses, which creates prerequisites for making savings and investment.

A possible alternative to reduce taxes is to transfer the tax burden from taxes on labor factor in indirect taxes. However, the size of the positive effects obtained by the transfer of tax burden depends on complementary policies directed to those who receive welfare and unemployment benefits. A reduction of labor taxes by 1% of GDP, combined with a similar increase of the VAT would increase employment by 0.7% in the long term, if the beneficiaries would not be compensated for their loss of income, otherwise contrary, the effect would be reduced by half.

Regarding concrete anticrisis measures of most governments of the world are focused on reducing tax rates, particularly in income from employment. These measures may or not be


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accompanied by educing tax rates of profit for operators. Some governments use it as a measure of anti-crisis in order to boost economic and non-taxation profits reinvested. Next, we propose a detailed analysis of each measure considered from several points of view.

The temporary reduce of tax rates to income obtained from work (so is the tax on wages and on the mandatory contributions) can have positive effects on the economy in two directions: a decrease of liabilities which leads to an increase in disposable income (which is omitted both to the and the employer) and the additional income can be directed, primarily for consumption, leading to increased aggregate demand. Depending on the elasticity of supply, the demand adapts on it; if additional income is saved, the effect on aggregate supply is ineffective; if the additional income demands capital goods, the positive effect is maxim, entailing an increase in aggregate supply, with the possibility of increasing employment.

If the reduction in taxes leads to additional savings income, the anti-crisis measure is not effective; moreover, in the times of economic trouble interferes the psychological factor: the population becomes more cautious considering the monthly consumption, in other words, there is a real prerequisite for the additional income to be spent, as it hoped the government. Where additional income is spent entirely, it is likely to increase aggregate demand to produce an increase in price (bid request to adjust prices and not by quantity) and both the negative impact on the prices and the tax reduction will be as high as possible. Moreover, the trader will not make investments under conditions of uncertainty and pessimistic perspectives on the market because he will rather “put everything on hold”.

The tax is the main instrument for regulating the economy, at the disposal of the state, from the fiscal policy point of view. Moreover, the possibility of exercising some influence by the state through this type of tax can be considered one of the arguments in favor of maintaining this tax, which may very well be replaced with income tax.

In the case where there the reinvested profits is not taxable, the tax does not produce its immediate effect, because there is a lag time between the adoption of the measure and the actual implementation (if adjustment tax is at the end of the fiscal year, meaning after approximately one year from adopting the tax measure). This measure could be beneficial on medium and long term, if it remains in force for a number of years (it is known that the investment is carried out over a period which is longer than one year). In this case, there are factors which limit the effects of that tax measures: tax evasion. In a country where the economy is significant, the taxpayer is more interested in not paying income tax at all than to enjoy the tax reduction provided by the state, to make investments. Furthermore, for the Member Economies of Eastern Europe, former communist states, tax evasion is a major hindrance to economic development, because the tax system in the course of adaptation and improvement, has some design deficiencies and sometimes allows the practice of tax evasion. Referring to the measures proposed by Keynes in order to tackle the macroeconomic imbalances, the French author Alain Cotta underlines the stimulating effects of these instruments proposed by Keynes meet an impediment: tax evasion (Cotta, 2005).

Also through the corporate tax, the state can foster innovation through research, primarily as a means of increasing labor productivity. If the measure is included in a broader plan to stimulate the research activity and it is combined with other non-tax effects on the economy, it could be significant. Moreover, Stephen Munday (Munday, 1996) shows that investment in research is the main factor of sustainable economic growth and explains the differences between developed economies and developing countries.

If the recipients do not use and receive correctly the followings: protecting and encouraging certain economic activities, investment, productivity growth, it can lead to contrary effects like the lack of competitiveness on foreign markets, tax evasion, the apparent establishment of companies and the disappearance of small businesses. Taking the place of the occurrence of the value growth will remain only the the cost of tax incentives which “will return as a boomerang on the budget and on the the functionality of all subjects in the economy by increasing fiscal pressure” (Corduneanu, 1999).


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We don’t have to forget to play the repercussions of the phenomenon of tax, on the effectiveness of fiscal measures. Traders may transfer the tax burden on the consumer end, and the degree of transfer may vary depending on the characteristics of market goods and services on which it activates. To the extent that the trader can transfer the tax burden, the fiscal policy effectiveness of using this fiscal tool (corporate tax) is reduced considerably.

5. CONCLUSIONS

This analysis questions the effectiveness of fiscal policy in fighting against the recession

and the economic crisis. Though, there is a certain fact: fiscal policy can not address to economic crisis, the only one exception being in combination with other economic policies and it only takes place if the policies are designed as not to wipe out each other, and if their effects are circumscribed to the same objective. The most safe action is the budgetary policy on correcting macroeconomic imbalances through the use of public investment expenditures, with direct and immediate action on GDP and the employment of labor, although there are some drawbacks in what concerns the financing of public loans of those expenses.

Moreover, the fiscal policy loses its freedom because of the phenomenon of European integration, which require some financial discipline, prohibits the discriminatory tax incentives and requires the neutrality of increasing the taxes. All these reduce the area of government action. Both the OECD and the European Commission advocate a tax policy which does not interfere, where the fiscal variables are their tax duty automatic stabilizers, without needing to interfere through the various tax incentives.(5)

NOTES (1) see Filip Ghe şi altii - Finanţe publice, Editura Junimea, Iasi, 2002, p. 43-44 (2) see Corduneanu Carmen - Sistemul fiscal in ştiinta finantelor, Editura Economică, Bucuresti, 1998 p. 409 (3) see Jurac Nemec şi Wright Glen, Finante publice, Editura Ars Longa, Bucureşti, 2004, p. 36-38 (4) see Vacărel Iulian şi alţii - Finante publice, Editura Didactica si Pedagogica, Bucureşti, 2006, p. 629 (5) see Revista Euroconsultanţă, nr. 11/2008, pag 74-75 BIBLIOGRAPHY: 1. Brezeanu Petre şi Simon Ilie - Fiscalitate europeană, Editura Economică, Bucureşti, 2005 2. Corduneanu, Carmen - Sistemul fiscal in ştiinta finantelor, Editura Economică, Bucuresti, 1998 3. Cotta Alain şi Calvet Coralie - Les quatre piliers de la science economique, Editura Fayard,

2005 4. Filip Ghe şi altii - Finanţe publice, Editura Junimea, Iasi, 2002, 5. Giddens Anthony – A treia cale şi criticii ei, Ed. Polirom, Iaşi, 2001 6. Nemec Jurac şi Wright Glen, Finante publice, Editura Ars Longa, Bucureşti, 2004 7. Lowenthal, Paul, Economie et finances publiques, editura De Boeck&Larcier, Paris, 1996 8. Munday, Stephan – Idei de avangardă în economie, Editura Codesc, Bucureşti, 1996 9. Samuelson Paul A., Nordhaus William D., Economie politică, Ed. Teora, Bucureşti, 2000 10. Văcarel Iulian (coord.) - Finanţe publice, Editura Didactică şi Pedagogică, Bucureşti, 2006 11. Revista Euroconsultanţa, nr.11/ 2008


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ANALYSIS OF THE MARKERS WHICH COULD HAVE SIGNIFICANT INFLUENCE OVER THE POTENTIAL EXPOSURE OF THE BANK

PhD. Marin ŢOLE

Romanian-American University, Bucharest, Romania [email protected]


[email protected]

Abstract: The paper focuses in particular on the analysis of basic whose development can cause potential exposure of

the bank. Also, it highlights the need to improve the process of risk management in the Romanian banking system. We have analyzed the evolution of income, expenses and profit whose fluctuating trend would lead to major

risks if the management of capital flows hadn’t been prudent and carefully made. Also, the examined rates have fluctuating values, being related to the development of assets and liabilities

during the period 2005 to 2007. Measures taken for prudent management aim at increasing both the debt, but also moneys and liabilities, so the bank could avoid major risks in addition to other factors, and potential exposure should be as low.

The perusal of revenue trends, expenses, taxes, liabilities, claims, deposits, assets, etc. proves that risk management requires solid knowledge in the management of capital flows in order for the bank exposure to avoid becoming potential.

The analysis highlights the vulnerability, but also the strengths of the banking system during certain periods of activity development. Measures to be taken by the bank manager for the bank's strategy to be performing, should comply with the principle related to the decrease of likelihood of risk occurrence and its potential exposure. Keywords: Banking risk payment system, credit system, potential exposure, intermediate financial asset, profit

Jel Classification: M19

The paper aims to identify the risks in a banking entity, the arrangements made to avoid threats and financial crisis in the long term. Given the importance of the impact of the banking system on economic consequences, it should behave prudentially, undertaking minimum risks, through an assimilation of performing and viable strategy, without potential exposure. Our analysis highlights the policies used by the assessed bank to minimize the likelihood of risk occurrence.

The forecast of the financial crisis, which will lead by default to the banks’ successive fall, has helped us to develop the present case study. The study is a response on how to avoid major risk factors that have direct or collateral influence on bank bankruptcy.

We have designed the analysis of bank risk by comparing, in their development, the main markers of the balance sheet and profit and loss account of S.C. "Omega" S.A. and we have also built the financial standing markers of the analyzed bank.

REASONS REGARDING THE CASE STUDY ON BANK RISK ANALYSIS

The constantly changing environment, where banks operate, generates new business opportunities, but they also involve increasing and more complex risks which, on their turn, represent a challenge, both real and threatening for the traditional approaches of the bank management. In view of the great importance that the banking sector has for any national economy – by means of the vital functions that it performs, namely: the payment system, credit system of the real economy or communication vehicle for domestic monetary policy - regulation and prudential surveillance of the main components of the banking system becomes the basis and, at the same time, the prerequisite for ensuring and maintaining economic and financial health of a country.

The Neo-liberalism excessively practiced in the financial-banking field at the end of the past decade in most European Union countries comes to confirm the consequences that the lack of proper regulations can generate and trigger on the banking system. Thus, the chain of bankruptcies


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triggered at the level of European financial-banking had consequences not only nationally, but it spread rapidly in Europe as a result of the inter-dependences between various European financial systems (effect known as the „domino effect ").

The direct consequences of this phenomenon were found in the decreased confidence of population and economic agents in the national banking systems and in the perpetuance, on long term, of this crisis. Being aware of the great importance which the implementation of a solid and transparent legal framework plays in regaining the trust in the banking system, the international authorities, having knowledge in the surveillance of the bank prudency, had some clear trends for action. We list hereby few of them: Basel I Agreement, the European Directive on the adequacy of capital and the Basel II Agreement.

The new provisions pay close attention to the necessity of determining appropriate level of capitalization of financial institutions as a function of the aggregate risks to which they are exposed in the conduct of their activities. Moreover, these regulations equally pursued to establish a convergence in the prudential supervision field in order to ensure a transparent and competitive environment for all banks operating worldwide. The ultimate goal was to improve the policies on the banking risk management and adapt them to the realities of a financial world characterized by a high degree of uncertainty and a great volatility of capital flows.

In this context, the present paper will focus on the analysis of the economic-financial results of the institution under investigation concerning the necessity and appropriateness of risk management in the banking sector. The risk management aims to ensure the protection of customers, shareholders and creditors of a bank, by defining a degree of bank capitalization. The "economic capital" - namely the level of capital needed to cover normal losses over the average estimate - is a good indicator of the necessary funds for ensuring an optimal level of protection.

Through its function as active financial agent that it performs in the economy, the bank is subject to a mixture of risks whose identification is the first step towards adopting measures to prevent and decrease risks. A performing bank strategy must include both risk management programs and procedures which actually concern to minimize the occurrence of such risks and the bank’s potential exposure. The main objective of these policies is to minimize losses or additional expenses incurred by the bank and the main object of the bank activity is to achieve a higher return for shareholders.

Not always the general objective and the a sector’s objective agree; under certain circumstances, the cost of implementing and operating the procedures aimed at managing risks might be higher than the potential exposure to risk. Therefore, it seems that these programs should be selected according to criteria of efficiency. Moreover, the bank management objectives are to maximize profitability, minimize exposure to risk and compliance with banking regulations in force.

The bank risk is an important component of both management and strategy of a bank. As a rule, the bank seeks maximizing its profit and at the time tries to maintain risk at an

acceptable level. In conducting its activity, the bank can only accept profitable exposure to risk and does not undertake any individual or cumulative risk which cannot be measured or whose consequences could prejudice the bank and its position in the market.

The Bank monitors permanently the risk and all positions in the balance sheet, in particular liquidity risk, credit risk, interest rate risk and currency risk. With regard to derivatives, no such product is launched without the approval of the bank, based on a profound analysis of the risk elements.

Outside the main risks listed above, the bank aims to monitor and other categories of risk, such as: • Balance risks: the risk of accounts, profitability risk, partner risk, country risk, the risk of

solvency index, the risk balance sheet structure; • Risks of off-balance sheet factors: letters of credit, guarantees, forward contracts, swaps, etc; • Other risks: the competition risk, trend risk, strategy risk, personnel risk; investment risk.


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In terms of a fair management, the increase of operations in two large areas - traditional services and new services - should have a synergistic effect. However, the losses incurred by some shareholders and income volatility result into the decrease of the banks’ market value and this makes the concern for additional capital extremely expensive.

ECONOMIC-FINANCIAL ANALYSIS OF S.C. „OMEGA” S.A. While analyzing the banking risks, great importance is given to their quantification, on the

basis of a system of specific markers that allow static and dynamic assessment of risks by reporting to international standards or the bank’s own historical experience.

Measuring risks is directly related to income measuring, whereas for a profit, a bank must take risks. Consequently, risk markers gain more significance in a general context of assessment of bank profitability and its competitiveness on the market, the final objective of bank management, consisting, in fact, of maximizing the revenue of the shareholders adjusted to risk influence.

For better illustration we try applying this model of analysis, based on the balance sheet and financial statements of SC "OMEGA" S.A. in the past three years. Table no. 1 – Absolute development of main economic-financial markers u.m.

Markers 2005 2006 2007 Income 534.303.159 3.250.262.545 1.537.057.036 Expenses 362.962.102 3.115.869.077 1.276.934.276 Gross profit 171.341.057 134.393.468 260.122.760 Table no. 2 – Relative development of main economic-financial markers % Markers I -2007/2006 I - 2007/2005 I - 2006/2005 Income 47,29 287,85 608 Expenses 40,96 352 860 Gross profit 1,93 1,52 0,78

Figure no.1 – Development of income and expense in the period under investigation

1 2 3 Expense 2005-2007

Income 2005-20070

500000000 100000000015000000002000000000 2500000000 30000000003500000000

Development of income and expense

Expense 2005-2007 Income 2005-2007

Cheltuieli 2005-2007 362962102 3115869077 1276934276

Venituri 2005-2007 534303159 3250262545 1537057036

1 2 3


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Figure no.2 – Development of gross profit

We notice a trend of major fluctuation of income and expense (table no. 1), but the gross

profit, especially in the period 2006-200, recorded a constant increase (table no. 2).

Table no. 3 – Analysis of the patrimony size and structure u.m. Markers 2005 2006 2007

Assets 3.178.979.280 8.819.101.550 12.868.742.706

Fixed assets 159.326.206 315.571.749 1.072.401.275

- intangible assets 5.493.274 31.271.555 26.476.360

- tangible assets 135.876.634 140.182.382 215.080.572

- financial assets 17.956.298 144.117.812 830.844.343

Current assets 3.005.791.882 8.439.489.957 1.1671.187.129

- available 717.186.617 2.466.486.565 3.196.422.334

- debts 2.288.605.265 5.973.003.392 8.474.764.795

Accrual accounts 13.861.192 64.039.844 125.154.302

Passive 3.178.979.274 8.819.101.550 12.868.742.706

Own capital 419.949.808 1.060.873.575 1.540.482.652

- registered capital 186.981.931 339.967.145 379.109.245

- capital premiums - 199.022.366 386.550.688

- reserves 178.223.238 257.471.942 294.931.812

- retained earnings 54.744.639 264.412.122 479.890.907

- profit 60.968.282 113.367.706 208.434.779

- appropriated profit -60.968.282 -113.367.706 -208.434.779

Provisions for risks and expenses 2.315.151 2.000.000 75.073.592

Debts 2.696.500.204 7.589.627.849 10.908.154.179

0

50000000

100000000

150000000

200000000

250000000

300000000

Development of gross profit

2005 2006 2007

2005 171341057

2006 134393468

2007 260122760

Gross profit


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- loans and similar debts 2.679.619.120 7.227.060.113 6.529.187.264

- suppliers and similar accounts 16.881.084 36.111.036 3.995.632.357

- other debts - 326.456.700 383.334.558

Accruals 60.214.111 166.600.126 345.032.283

Figure no. 3 – Development of total assets during the period under investigation

The constant increase of the assets may be noticed (table no. 3)

Figure no. 4 – Development of debts and current funds related to total assets

This increase in assets is primarily due to increase in the number of customers, which led to

an increase of the current funds by deposits, but also to the increase of the liabilities by means of the development of the credit sale department (table no. 3).

Table no. 4 – Liability structure

% Markers 2005 2006 2007

Liability 100.00 100.00 100.00 Own capitals 13.21 12.03 11.97 - registered capital 44.52 32.05 24.61 - capital premiums 0.00 1.00 2.00 - reserves 42.44 24.27 19.15

Development of debts and current funds related to total assets

0

5000000000

10000000000

15000000000

20000000000

25000000000

30000000000

1 2 3

Period 2005 - 2007

Total assetsCurrent fundsDebts

2005

2006

2007

0

2000000000

4000000000

6000000000

8000000000

10000000000

12000000000

14000000000

Development of total assets

2005

2006

2007

2005 3178979280

2006 8819101550

2007 12868742706

Total assets


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- retained earnings 13.04 24.92 31.15 - profit 14.52 10.69 13.53 - appropriated profit -14.52 -10.69 -13.53 Provisions for risks and expenses 0.07 0.02 0.58 Debts 84.82 86.06 84.76 - loans and similar debts 99.37 95.22 59.86 - suppliers and similar accounts 0.63 0.48 36.63 - other debts 0.00 1.00 2.00 Accruals 1.89 1.89 2.68

Figure no. 5 – Volume of loans within total liabilities in 2007

The loans’ volume recorded high values due to credits contracted at the man bank (table no.

4). Table no. 5 –Development of financial standing markers

u.m.2)

Marker 2005 2006 2007 Gross profit 171.836.437 134.393.468 260.122.760 Turn-over 534.303.159 3.250.262.545 1.537.057.036 Profit margin % 32,16 % 4,13 % 16,92 %

Table no. 6 – Analysis of financial standing markers u.m.

Marker 2005 2006 2007 Net profit 60.968.282 113.367.706 208.434.779 Registered capital 186.981.931 339.967.145 379.109.245 Profitability margin of registered capital %

32,61 % 33,35 % 54,98 %

We notice a considerable increase in the rate of profits (table no. 5), due to the turnover increase. Furthermore, the profitability of the registered capital records a constant increase due to capital increase (table no. 6).

Volume of loans within total liabilities in 2007

Loans 59%

Liabilities 4%

Credits

37%

loans

credits

liabilities


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Table no. 7 – Development of financial autonomy margin u.m.

Marker 2005 2006 2007 Own capital 419.949.808 1.060.873.575 1.540.482.652 Total liability 3.178.979.280 8.819.101.550 12.868.742.706 Margin of global financial autonomy 13,21 % 12,03 % 11,97 %

Figure no. 6 – Development of global financial autonomy

The light decrease of the global financial autonomy (table no. 7) is generated by the constant increase of debts and loans. Table no. 8 – Development of indebtedness degree’s elements

u.m. Marker 2005 2006 2007

Total liabilities 2.696.500.204 7.589.627.849 10.908.154.179 Total assets 3.178.979.280 8.819.101.550 12.868.742.706 Indebtedness 84,82 % 86,06 % 84,76 %

Figure no.9 – Development of indebtedness degree

The indebtedness degree records high values, characteristic to financial institutions, but its

values are constant in the period under investigation (table no. 8).

84.8286.06

84.76

70

75

80

85

90

95

100

Development of indebtedness degree

200520062007

2005 84.82

2006 86.06

2007 84.76

Indebtedeness degree %

13.2112.03 11.97

1

3

5

7

9

11

13

15

Development of global financial autonomy

200520062007

2005 13.21

2006 12.03

2007 11.97

Global financial autonomy


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CONCLUSIONS BASED ON RESULTS’ ANALYSIS

The fluctuating development of revenues and expenses during the period 2005 - 2007 did not prevent the constant growth of the bank’s gross profits to 260.1 million um (151.8% over 2005 and 193.5% 2006).

The quality of bank assets remains at a healthy level with a risk cost of 0.7 percentage points below market level. The bank’s total assets at the end of 2007 reached 12.8 billion um, up 145.9% compared with the end of 2006 and 407.9% over 2005.

Appropriations in balance at the end of 2007 increased by 404.6% over 2005 and 143.7% over 2006, up to 10.9 billion um.

Also, the bank’s availability and debts increased at the end of 2007 to 11.6 billion, with 386.6% more than in 2005 and 138.1 compared to 2006.

Rates, some experiencing major fluctuations, sometimes linear (profit rate 32.16% in 2005, 4.13% in 2006 and 16.92% in 2007, profitability margin of registered capital 32.61% in 2005, 33.35% in 2006 and 54.98% in 2007, the autonomy margin of global financial 13.21% in 2005, 12.03% in 2006 and 11.97% in 2007) highlight the need for prudent management of banking operations, but also the bank’s vulnerability with high risk. The slight decrease of the global financial autonomy is due to the increase of debts and loans, especially.

SWOT ANALYSIS – INSTRUMENT FOR PERFORMING MANAGEMENT Strengths S.C. "OMEGA" S.A. conducted by the end of 2007 activities with a low risk and can undertake

an increased risk up to a moderate level, necessary to attract new customers, to launch new products or to enter new market segments;

Strict control of operating costs determining a cost/income ratio of about 50%; The bank's capital marker is constantly over the 8% limit established by the NBR regulations; The distribution network (hypothetically, 120 branches and agencies) cover very well the

capital and the main cities of the country is divided into Corporate and Retail, thus rendering specific services to each segment;

Support from shareholders, being the largest bank in the euro area, which plans to develop the business in Romania, in particular, and other countries of Central and Eastern Europe.

Weaknesses A period of transition after the merger of several banks needed to align management methods,

banking forms and reporting systems between S.C. "OMEGA" S.A. and the rest of the group. Erase of the initial brands of the banks - parties of the merger; Costs of the products are not adjusted to the Romanian economy;

Opportunities Low degree of banking agency in Romania; Low degree of sophisticated products, as existing on the market, especially in the field of

current account services; The new requirements under the Basel II Agreement provides a larger opportunity for the

development of a system focused on the efficient management of risks in their daily activity; Holding membership will positively influence the access to additional financing sources such as

subordinated debts on long and medium term, increase of own capitals, etc. Threats • Increased competition – lots of banks fight for reaching the critical mass; • Constant decrease of interest rate.

In conclusion, because the banking risks are a source of unforeseen expenses, their proper management can stabilize revenues in time, having the role of a shock damper. At the same time, strengthening the banking operations can be achieved only through effective communication with financial markets and implementation of appropriate programs for the management of banking


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risks. If the bank risk management and global management system are effective, then the bank will be successful. 1) u. m. – monetary units 2) Data taken from the profit and loss account

BIBLIOGRAPHY 1. Bessis, J. -Risk Management in Banking, 2nd Edition, Ed. Wiley & Co, 2004. 2. Bogdan, Ioan – “Management financiar”, Editura Universitară, Bucureşti, 2004. 3. Santomero, A. - Commercial Bank Risk Management: an Analysis of the Process, Wharton

Financial Institutions Center, 1997. 4. Tudorache, Dumitru – “Monedă, bănci, credit”, Editura Universitară, Bucureşti, 2007. 5. Ţole, Marin – “Analiza economico-financiară: metode, tehnici şi studii de caz”, Editura

ProUniversitară, Bucureşti, 2006.


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ENLARGING ON THE USE OF FINANCIAL-ACCOUNTING INFORMATION IN THE ECONOMIC DECISION MAKING PROCESS

University Lecturer Ph.D. Alice Emilia ŢÎNŢĂ

Universitatea Româno Americană, Bucureşti, România [email protected]

Abstract: The financial statement of a company is affected by its economic resources, by the financial structure, cash,

solvency and its ability to adjust to changes within the environment in which it operates. The accounting information on the economic resources, which the company controls and its ability to modify the resources, is useful in order to predict the capacity of the company to generate liquid assets and their equivalents in the future.

The accounting information regarding the financial structure is useful in order to predict the costs of the future loans and to predict the way the profit and the treasury flows will be split between interested parties inside the company. The information is useful to predict the company success in obtaining new financing.

Concretely, the financial activity contributes to run the economic activity from the capital Unit by establishing the economic decision from the financial point of view and by direct intervention of the financial activity to start and to accomplish the enterprise system self adjustment within the framework of the effective production process. Keywords: users, decision, accounting information

Cod JEL: M41 – Accounting

INTRODUCTION

“The accounting must be the model which effects the internal and external image of the unit

capital, depending on the users’ needs accounting-financial information. The usefulness of the financial-accounting information is the criterion which validates the accounting pattern and it represents the basis of the establishment in the process of economic decision making”

The Financial-Accounting activity, using methods, instruments and high informational value of its information is an important factor in running capital units. The financial-accounting activity has important qualities which aims at direct use of financial resources as an efficient economic instrument in running the economic activity within the enterprise. In this way, the enterprise financial resources improvement by setting up into the financial-accounting practice of incomes and expenses budget and new instrument for financial allocation determines the intensive use of the economic-financial levers in running the economic activity.

Concretely, the financial activity contributes to run the economic activity from the capital Unit by establishing the economic decision from the financial point of view and by direct intervention of the financial activity to start and to accomplish the enterprise system self adjustment within the framework of the effective production process.

The adoption of any economic decision is based on the fund of financial-accounting information referring to the requisite of resources, available sources, future financial results, financial indicators of economic efficiency and so on. Any investigated project, feasible from the technical and economic point of view, cannot be accepted if the financial-accounting information indicate disadvantageous consequences regarding its adoption and its fruition.

The accounting information, through its content and its particular informational value, render briefly, the status and the behavior of each element of the economic production structure, as well as the general effect situation of the enterprise. Therefore, the ascertainment the accounting information regarding the present situation of the enterprise represents the first contribution of the financial activities to the adoption of the general objectives to the development of the enterprise.


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1. ESTABLISHMENT OF THE ECONOMIC DECISION The adoption of strategic economic decision presumes the completion of several

establishment steps within the framework of decision making process, such as: information, international analysis and summary of possible solutions. 1. Informing is the step in which was accomplished the examination of the sources of information. In order to achieve the informing required by the economic decision substantiation, the financial-accounting activity must contribute to the information stock concerning the internal situation of the enterprise and the external environment requests. In order for the manager to make economic strategic decisions to achieve the objectives of the unit it is necessary to be fully aware of the of the capital unit status, either in comparison with other enterprises operating in the same field, or in comparison with the previous periods of time. This thing is possible by making a Financial diagnosis of the enterprise.

The main source of information, the accountancy contributes to prepare the decisions made by the enterprise management and its partners. The information used this way, is mainly supplied by the accounting management, which constitutes the main source of information in running and managing the activities. However, the financial accountancy, summarized in the annual financial statements, still supplies managers with necessary information to maintain the business connections with third parties, the selection of the investment plans and the selection of the financial resources. The estimate of a business value has no incidence on bookkeeping records, but the truthful image that the accountancy offers, becomes one of the reference point for users, both by applying the capital estimate methods of the enterprise and those of ascertain its output. The Forth Norm of the European Union states precisely, in Section 7, named “Estimation Rules” the principles and rules of estimation and registration of capital elements of the enterprise in the annual accounts. The Accounting information allows to the investors, present or potential shareholders to express a valuable judgment concerning past, present and future events, providing this way the basis for confirmation or invalidation of initial forecasts. An investor must be able to select from the published financial statements, the elements which allows him to decide the increase, the withdrawal or the cut of his investment. The capital unit management, interested in knowing the real situation of the enterprise , wishes before making strategic decisions to get an answer to a series of questions, such as :

• “Is the enterprise viable?” The balance-sheet allows the appraisal of profitableness if it is initiated a rating of current assets according to the strict criterion of cash increasing and a rating of current liabilities according to the increasing collectibility. By this, we mean the capital approach of the enterprise.

• “Which are the performances of the enterprise?” In order to esteem the performances obtained by an enterprise, one should compare the utilized means to the obtained results pointed out by the result indicators, especially, by the management of intermediate balance.

• “What is the development stage of the enterprise?” It should be known how much the activity of the enterprise grew within the period of observation.

• “ What sort of risks is the enterprise subject to?” One of the objectives pursued by the diagnosis is to estimate the risk of bankruptcy, as a consequence to payment freeze. Obviously, there will be also analyzed other risks which can affect the enterprise: restocking discontinuity risk, the shrinking and losing the markets etc. Following the answers to the questions previously presented, the capital unit management

should be able to conclude over the strong points and weak points of the enterprise and to make the right decision. 2. Informational Analysis is based on adequate methods and patterns to investigated phenomena and they ensure the information acquirement related to the adoption and to the fulfillment of the capital unit objectives. Each social-economic structure has a fundamental objective to which is the motivation of its entire activity operation. In most cases, the main objective is to maximize profit, but moreover there might


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appear more objectives, such as: surviving, economic increase, improving the connection between the participants to the enterprise activities etc. At the same time, each enterprise has specific financial objectives: financial balance, financial profitableness, flexibility, increasing the effectiveness in using the factors of production etc. “The estimating criteria to analyze the percentage in reaching the goals and the objectives are absolute measures, such as: the circulating capital, the net treasury, the turnover, the self financing capacity, the margin of variable expenses, or relative measurements, such as: indebted rate(lever), profitableness rate and profitableness threshold, etc. 3 Summary of possible solutions is the step that allows the achievement of possible solutions which could be taken into consideration at the adoption of the economic decision making. On condition that the financial-accounting activity provides complete and accurate information, then, the core of possible solutions will include among the consequences, information concerning the financial funds, favorable financial results and the efficiency of financial indicators.

The adoption of the strategic economic decision presumes the selection of the best solution from the multitude of possible solutions.

The financial-accounting activity has a particular contribution to the effective achievement of the strategic economic decision. Thus, the implementation of the economic decision within the economic structure of the capital unit is achievable only if previously were made strategic financial decisions, based on clear and complete financial-accounting information, decisions that allowed the foundation, the maintenance and the development of the structural elements of the enterprise.

2. ECONOMIC DECISION OF SELF-ADJUSTING

The organization of capital units as social-economic units based on functioning autonomy

allows them to act like an open system in the domestic economy, system that is characterized by self regulation under the influence of external environment. The financial activity contributes to set and to make the self-adjusting economic decision of the enterprise according to the social-economic development requirements that the market demands to the economic unit.

The financial self-adjustment is extremely complex, depending, in the first place, on the way of setting and achieving the strategic decisions. Thus, in the content of self adjusting financial-strategic decision there will be included the objective influences raised by the economic processes of the external environment, as well as the influences raised by economic-financial self management of the enterprise.

If the self-financing decision making regards its own results which are engaged in other financial commitments, the self adjusting will directly depend on the principles and abilities of the management of the capital unit. The self adjusting financial decision could have a content which presumes a certain distribution, achieved on the basis of financial-accounting information in order to finance some economic-social activities, or one imposing the payment of all financial commitments.

If the self- adjustment is based on self-financing, is taken into consideration the analysis of the self-adjusting capacity which is made of the aggregate of the internal sources generated by the enterprise activity, necessary to self finance and to ensure the capacity of distributing dividends to the shareholders. The main role of the self-financing capacity is to allow the enterprise to maintain and develop the technical-productive potential, to remunerate the investors and to ensure the loans refund. In essence, the self-financing capacity represents an indicator of financial independence of the enterprise, reflecting a real or potential reserves flow, which depends on both profitableness of the enterprise and investment policy adopted by the management.

The complex process of economic decision making and the accomplishment of the economic decision emphasized some possibilities to improve the financial and accounting practice within the capital units, the financial-accounting information field, information analysis and financial indicators. It also was pointed out the very important role carried out by the financial-accounting activity as an economic instrument in managing the processes from the economic units.


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3. FINANCIAL-ACCOUNTING INFORMATION FEATURES AND ITS LIMITS

In compliance with the Law of Accountancy :“… the autonomous corporations, trading companies, joint units, associations and other legal, and also natural persons who are traders, are due to organize themselves and to manage their own accountancy…”.

On the basis of financial-accounting information contained in the Financial Statements, there are made decisions regarding:

• Acquiring, Keeping or Selling a part of the Capital • Controlling the administration or managers’ accounts • Estimating the capacity of the company to remunerate the employees with salaries or with

advantages • Setting the fiscal policy • Setting the profits and dividends

Many users rely on these statements as the main source of financial information and as a consequence, the information is prepared and presented to satisfy the needs of these users.

The objective of the financial statements is to provide financial-accounting information on the balance and the evolution of the financial activity, which can be useful to a wide range of users.

The information regarding the cash and solvency is useful to predict the capacity of the company to honor its financial commitments. The liquid asset is the availability of treasury in the near future, after taking into consideration the financial commitments during that period of time. Solvency is the availability of treasury in the long run to satisfy the financial commitments when they reach the due date.

The information concerning the performance of a company, including its profitableness, is traceable in the profit and loss account and they are necessary to evaluate the potential changes of the economic resources which can be used in the future. These financial-accounting information are useful to predict the capacity of the company to generate treasury flows on the basis of existing resources as well as to estimate the effectiveness which allows the company to use the additional resources.

The information regarding the financial statement is provided by the balance-sheet and they are useful to determine the investment and financial activity during a certain period of time.

All this financial-accounting information is necessary to the users in order to make decisions, assuming that the company maintains continuity and it will be operative in a predictable future.

Qualitative features of financial-accounting information, which make this useful to analysts are: intelligibility, appropriateness, reliability, possibility of comparison.

Intelligibility One of the essential qualities of information is to be understood immediately and quite

easily by users. In order to reach this purpose, the users must have reasonable knowledge regarding the economic and accounting activity.

Appropriateness In order to be useful, the accounting information must be useful from the perspective of the needs to make the decisions. The information is appropriate when it influences the users’ economic decisions and it helps them to evaluate the past, present and future events. In this way, the information on the structure and present value of the current assets is important for users because they can predict the capacity of the company to take advantage of the opportunities, including the ability to react in front of disadvantageous statements. The information on the financial statement and the past performance is frequently used to make predictions in other fields in which the users have interests. Hereby, salary and dividend payments, price changes of mobile values, the ability of the company to complete their commitments before deadline must be taking into consideration.

Significant Importance:


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The appropriateness of the accounting information is influenced by its importance and nature. The information is important when the omissions or the inaccuracy could influence the economic decisions that users make.

Reliability In order to be useful, the accounting information must be reliable, that is to be error free and

without important omissions. The users can rely on the fact that it truthfully reflects the company image. The financial-accounting information frequently has up to a certain extent a low fidelity reflection, but there is no intention to gloss over the reality. This fact is due to certain inherent difficulties in the identifying the economic-financial transactions or in creating and applying the appraisal techniques.

Superiority of the contain over the form If the information must faithfully represent the transactions, it is necessary for it to be

recorded and presented in accordance with the economic reality and not only with their legal content.

Neutrality In order to be reliable, the accounting information contained in the documents must be

neutral, that is not to influence the decision process in order to obtain a preconceived result. Prudence Prudence means to take into consideration up to a certain extent, all necessary precautions in

order to prepare the assessments under the uncertain conditions. The prudence allows the creation of stock or excessive commissions, deliberately overrating the current assets and income on the one hand and on the other hand, underestimating liabilities and expenses.

Possibility of Comparison The users must be able to compare the financial-accounting information of a company in

order to identify its trends and performances. Thus, the appraisal and the introduction into the financial effect of the transactions and similar events, must be done in a consistent way for one company and for different companies.

Limits concerning the financial-accounting information: The financial-accounting information arise a series of limits which restrict its feature and

which influence the users in making the decision. Among these limits, I mention:

a) Restrictions/Limits to the appropriateness and the reliability: “The information might lose its appropriateness, if it is belated. The management might search for balance between the relative advantages of certain terms and sufficient reliability. In order to obtain the balance between the appropriateness and the reliability the main ground should be the satisfaction of the users’ needs within the decision process.”

b) Limits to relevance: The information regarding the financial statement and the past performances is frequently used as a prediction basis to the financial statement and future predictions, as well as to make predictions in high interest areas for the users. The relevance of an information is also influenced by its importance. The importance is esteemed that the consequences of its omission or inaccuracy might have or the economic decisions the users make on the basis of the financial statements.

The significant size as well as the relevance structure, is esteemed depending on the element or error, the particular judgment of the omission or inaccuracy. Consequently, the significant size leads to separation threshold. In other words, it does not represent a main quality which the accounting information must have in order to be useful.


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CONCLUSIONS

In case that the financial activity is not organized on the basis of a correct and total knowledge of the financial-accounting information, its reflection extent will not include some financial reports necessary to develop and to achieve the enterprise performances.

In the financial activity, the main role is held by the financial-accounting information, because it is important to study the evolution of its financial structure and different indicators during its management period, in order to have a through knowledge of the financial situation of an enterprise. An ordinary examination/analysis of the financial statements provides only an image of the financial-economic situation at one time but also, as consequence it appears static. In the enterprise management, the examination of successive financial information is necessary, which ensures a real support to future forecasts and actions.

BIBLIOGRAPHY:

1. N. Feleaga, I Ionascu “ Treatise of financial accountancy-Accountancy as social game”, Volume I, Economic Publishing House, Bucharest 1998.

2. Ion Ionascu, “Epistemology of Accountancy”, Economic Publishing House, 1997 3. N. Tabara, E. Horomnea, C. Toma: “ Annual accounts in the decision-making process”,

Tipo-Moldova Publishing Hourse, Iasi, 2001. 4. “International Accounting Standards”, Economic Publishing House, Bucharest, 2002.


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REFELCTIONS ON THE (RE)POSITIONING OF THE FINANCIAL ADMINISTRATION CONTROL

Ph D Professor Titus ASLĂU

“Aurel Vlaicu University”, Arad, România, [email protected] Ph D Lecturer Lavinia Denisia CUC

“Aurel Vlaicu University”, Arad, România, [email protected]

Abstract: The financial administration control offers the managing staff the possibility to decide on the entrusted

methods and means and to direct its action in order to reach the objectives that were set out according to the main interests of each company. The objectives are set down by taking into consideration both managing and operative functions. However, the desired results are obtained only after a certain period of time, during which there may occur changes of the initial context within which the objectives and action plans were drawn up. In this case the readjustment of the financial administration control within the managerial control structure becomes an essential condition for successfully reaching the established targets. A condition as such comes from the description of the desired outcome, of the indicators that will be used to assess it and the necessary means to obtain it. The objectives also have to express the agreement reached between hierarchic levels on dialogue grounds, thus ensuring the harmonization of the collective interests with those that determine the functioning of the enterprise. A very important part in this dialogue is played by the instrumental panel and also by the other devices of the financial administration control, which will have to be readjusted in a proper manner according to the changes occurred within the economic and business environment.

Key words: financial administration control, managing and operative functions, performance, instrumental

panel. JEL Classification: M41 Accounting, M42 Auditing INTRODUCTION The purpose of this study is to present the financial administration control and the way in

which it permanently readjusts to the enterprise priorities, which are determined by the changes that occur within the environment in which its activity is carried on. In order to better understand the purpose of the financial administration control adjustment, I considered as being necessary to appeal to reference books form the Romanian and foreign literature in this domain, to comparative analyses and examination of certain financial administration control practices that are associated to the characteristics of a few periods that are important for the economic evolution. The fact that within the Romanian companies the concept of financial administration control is not very well know, makes this debate even more useful and thus the study we prose fully illustrates its purpose.

The main purpose of the organizational control systems is to ensure the piloting capacity of enterprises and the efficient administration of material, financial and human resources.

In order to analyze the position and the role played by the financial administration control, it is necessary to present first, a few aspects that are relevant for the social and economic premises which determined its emergence and evolution. Moreover, a debate about its repositioning has to contain references regarding the competitive environment and the economic circumstances, because they give a certain intensity and visibility to its contribution in solving the specific problems of different entities in a certain time span. An overall look in order to emphasize important moments in the financial administration control setting up, cannot highlight the exact date of its implementation. However its emergence as a distinct concept can be directly connected with the beginning of accountancy conceptualization and later on with the first initiatives and attempts to study and theorize costs. Thus, positioning the control within the financial administration structural parts, it can be stated that its existence is determined by the need to increase economic efficiency and enterprise performance. The financial administration control seen as a method to improve the performance of a company is in fact, a new concept. [ 1 ].


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In order to reach its objective, the financial administration control has to adjust permanently to the evolution of priorities and enterprise organization.

All the organizations have to take into consideration that the environment in which they unfold their activity is becoming more and more changeable and unstable. Under these circumstances all the efforts focused on applying modern and flexible organizational principles in order to increase and diversify the offer, would materialize under the form of a success measurable in performance terms. Therefore, the basic concepts of the financial administration control that are sixty-seventy years old and which were strongly influenced by the Taylor model for the developing of industrial enterprises should be adjusted to the present requirements of the economic and business environment.

In the beginning the financial administration control was focused on solving general, short-term economic or financial problems, such as budgetary management. Nowadays the situation is different, because the measurement of financial and economical indicators is not something that belongs exclusively to the industrial domain, but also to other domains such as services, transports, agriculture and others.

The purpose of this paper is not to examine in detail the characteristics of the so-called classic financial administration control, designed according to the development pattern and characteristics of the Taylor-type enterprises. However it is necessary to mention certain aspects, without considering them critics brought to the respective system.

At the time, this concept determined a certain philosophy in the financial administration control, having a huge influence upon everything, starting with the analytical representation concerning the distribution and the responsibility determination within an organization and ending with the organizational and production problem solving methods. Moreover a clear distinction was made between those who “thought” and those who “executed” within a company. Due to this approach the financial administration control lost contact with reality and ceased to search for the adequate instruments in order to solve the administration problems. Thus, the organization internal criteria were over evaluated to the detriment of enterprise efficiency increase, which was the only one capable of responding to the clients’ more refined requests. There are specialists in the domain, who consider this attitude as something like the emphasizing of objectives balkanization, thus making impossible any kind of synthetic outlook over the essential problems of an enterprise.For this reason the information financial administration systems became much more difficult to understand thus facilitating the outcome of certain anomalies that influenced performance. [ 2 ].

As time passed by, the financial administration control turned into an administrative element loosing its initial aim of sustaining decisions that were to be taken for the benefit of the entire enterprise. This was owed to the fact that a great importance was given to the financial administration control devices, which measured results by considering only the financial elements and by disregarding anticipation as a fundamental measure for connecting the enterprise to the surrounding realities. Moreover it is important to mention that the data processing systems increased the complexity of financial administration control devices by producing and delivering a huge amount of data and information that were not all relevant. Therefore at a certain point, it was felt the need to put into practice some administration devices that would better appreciate if the obtained results were in accordance with the needs that emerged from the reality of the economic environment.

It is important to remind the fact that the set expenditures were mainly destined for structure expenses and buying up of annuities which had as an immediate effect a focus on activities for increasing the variable profit. The efforts were not always focused on reducing the expenses for manual labour or on negotiating the purchasing prices of materials and raw materials because the purpose was to avoid the possible conflicts with the employees and the suppliers. Only later was accepted the idea that set expenses as well could be reduced through measures that were part of a unit package and which also referred to the adjustment of changeable expenses.

In the ’70s, because of the aspects presented above, the financial administration control turned into a complicated and rigid process that was not capable to offer the necessary support for


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decision making. Different structures that were the direct outcome of enterprises that had lost control over the administration financial control based on financial aspects, started to develop a system of performance supervision based on physic indicators. Therefore a huge discrepancy appeared between the information delivered to the managers by the data processing systems and the realities of the internal processes that the financial administration had lost control of. All these brought into debate the necessity to reposition the financial administration control. Furthermore other changing factors started to have an increasing influence. Among these we can enumerate:

the demands of the new competitive environment that asked for a greater variety in offers, superior quality of products and services associated with these; to this it has to be added the globalization phenomenon whose first consequence was the appearance of more competitors on the market and it also increased the efforts for gaining other competitive advantages;

the adjustment of enterprise organization to the new, complex, economic environment, which involved a more decisive orientation towards flexibility and quality and a great concern for reducing production costs and for having a rapid response to the market requirements;

the exponential complexity increase in the production process and financial administration as a consequence of the need to adjust enterprises to strictly comply with the delivery terms and the frequent change in the clients’ demands.

These circumstances determine important changes in the internal structure of an organization. Among these the following can be mentioned: more investments, adjustment of internal processes, increase of expenses in the distribution and handling areas, and others. The Japanese model is appreciated as being one of the best solutions for the new economic environment. [ 3 ].

This model is based on the principle of the so-called five zeros that is applied throughout the whole process, from the production to the commercialization point: zero time for changing the devices, with the help of which the enterprise adjusts to the demands; zero defects, attained through the improvement of each production stage; zero unscheduled break of machinery, attained through a permanent adequate maintenance; zero waiting term, if the delivery date required by the client is inferior to the production time; zero stock, this being the outcome of applying the rules of the previous zeros.

The new model of enterprise functioning also involves an increased concern for reducing the designing period and for increasing the production assortment through promoting innovation, development of research activities, reliability and improvement of functions that support the economic process.

The above presented circumstances determined the financial administration control reorientation, which had to adjust to the new conditions by eliminating the barrier between the functions to which it mainly addressed and the production activities. Moreover it had to take into consideration the staff’s creativity and also promote transversal action plans throughout the whole order-purchase-production-delivery-development process of the new products required on the market. The principles that will determine the functioning of the financial administration control will have to be adjusted to the new formula of organizing enterprise activity. This new principles involve the following aspects:

a new administration language based on both financial and non-financial indicators; increase of cross communication in the detriment of the typical hierarchic

communication; piloting system insertion for all people in charge, disregarding their hierarchic position,

by applying the so-called method of multi-objectives; increasing the efficiency of the administration devices through their simplification.

It is very well known the fact that the financial administration control is based on the reliability and proper functioning of data processing constructions; therefore it is necessary for the later to be revised and adjusted to the new conditions created by the decentralization initiative and


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by the applying of the cross principle in both activity and communication. One can observe that the new configuration has a global vision on enterprise functioning as well as a secondary vision that refers to the initiatives taken at the level of decentralized structures.

Having reached this point it is important to make a specification; thus in the above lines it has been approached the idea of using financial and non-financial indicators for analyzing performances. However it is important to point out that we are actually discussing about a specific modern concept that belongs to a very important and well known administration device- the instrumental panel. This device takes over a limited number of administration indicators that are absolutely necessary for the almost instant managers’ information, even though, sometimes these indicators are not quite precise.

The instrumental panel is a device that is being given an increasing importance, especially due to the adjustment process undergone by the financial administration control. Therefore it is of extreme importance to present the following explanations:

the construction of an instrumental panel useful to all people in charge has to take into consideration the standardization of indicators content, which is necessary to ensure the transparency within each hierarchy;

the instrumental panel presentation is done by each person in charge as it is common to all functions in order to ease communication and dialogue based on the data and information provided by this device;

the instrumental panel content can differ according to the addressed organizational structure;

however, the content has to be almost similar for the people who are in charge of similar functions.

The instrumental panel construction is done on a unique date base that is necessary for ensuring the internal transparency of the organization. The data in the instrumental panel can be accessed by following certain limitations that are imposed by confidentiality rules as it is stipulated in the internal procedures drawn up by the top managing staff. The classifying of the instrumental panel information in different categories ensures a synthetically vision of reality and induces instant cooperative attitudes among the people in charge, and which are determined by the dialogue based on this device. The data and information flux that daily supplies the instrumental panel is assured by a data base that incorporates results compared to the predictions drawn up according to a cycle that has been previously presented. An instrumental panel can be presented in various ways. However, considering the fact that it is a device for symmetric presentation, it will mainly contain figures and graphs without a detailed explanation of deviations. The abundance of indicators may turn this device into something useless and unimportant. Both the presentation and the content of the instrumental panel have to ease and facilitate its usage. This paper will not contain a detailed account on the way in which the informational elements in an instrumental panel are presented; however a brief description would be very useful. In an instrumental panel are presented only the anomalies referring to the key points of the respective activity. For example in the general orientation instrumental panel it is important to point out the treasury and the product sales anomalies. On the other hand, an anomaly that refers to a workshop consumes and expenses and which is not a key point within the enterprise, it is not relevant for this management level. The ratios estimation can be done either by considering the accountancy information expressed in terms of value or the data measured in physical units. These relations between important parts involved in the structure and functioning of an enterprise are very different and therefore can be interpreted in different manners. Most of times, the interpretation of such a relation is a very difficult process if one does not take into consideration another ratio that rounds the first. They are useful for the instrumental panel only if they facilitate relevant comparisons in a very simple and clear numerical presentation. The instrumental panel is much more useful for the


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managing staff, if it contains ratios for short term financial administration control and not structure ratios that are useful for the medium and long tem financial administration control. The instrumental panels can also be presented under the form of graphs, which are independent schemes of the figures expressed by anomalies and ratios. Graphs are widely use in enterprises. The graphs that are used as instrumental panels in the financial administration control system vary a lot, from the simplest ones that are used in order to analyze anomalies, to those that have a strip or rectangular form, and to the most complex ones that have a circular or a spiral form. Out of the numerous graphs that can be used, one has to use those that are the most essential and representative for the indicator that is analyzed. As I have previously highlighted, the importance of cross communication has increased in the detriment of the traditional dialogue that was used in the typical hierarchic structures. The financial administration control changed its direction and for this reason it needed new types of relations that involve the relocation of administration devices within the process topography, in order to observe the company performances. For the communication process all devices are important; however for the carrying out of this study I considered as being relevant the position of the instrumental panel, whose main characteristics have been presented in the above lines. Last but not least it is very important to emphasize the fact that the new dialogue vision has to be definitively implemented within companies and this implies multiple relocations of the entire device package that is used by the financial administration control.

CONCLUSIONS:

The reflection on the financial administration control was determined by a series of social and economic factors, the readjustment of the financial administration analysis and covering domains, the failure of certain financial or economic theories and practices, which had their contribution in triggering out the present world-wide economic crisis and by some inefficient formulae that were used for organizing the activities within different companies. There is no doubt that the theme brought into discussion is far from being exhausted. Therefore it is necessary to point out that within the financial administration good practices, there are still numerous solutions that can led to a positive outcome, if they are explained, understood and put into practice.

NOTES: (Aslău, 2001) (Guedj şi alţii, 2004) (Guedj şi alţii, 2004) BIBLIOGRAPHY:

1. Aslău, T., Controlul de gestiune dincolo de aparenţe, 2001, Economica Publishing

House, Bucureşti 2. Aslău, T., Controlul de gestiune, 2007, UAV Publishing House, Arad 3. Coucoureux, M., Cuyaubere, T., Muller, J., Controle de gestion, 2007, Nathan

Publishing House, Paris 4. Demeestere, R., Lorino, Ph., Mottis, N., Controle de gestion et pilotage de

l’entreprise,2e edition, 2004, Dunod, Paris 5. Ionaşcu, I., Filip, A.,T., Mihai, S., Control de gestiune, 2003, Economica Publishing

House, Bucureşti 6. Guedj., N., (coordonator)- Le controle de gestion-Poru ameliorer la performance de

l’entreprise, 2004, Editions d’Organisation, Paris


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LEGAL ASPECTS IN CONDUCTING A JUDICIAL ACCOUNTING EXPERTISE

Lecturer Constantin CUCOŞEL

North University of Baia Mare, Faculty of Science, Baia Mare, Romania [email protected]

Abstract: Accounting expertise reports are drawn up by professionals who are legally authorised to retrace a given

economic and/or financial operation, based on their analyses of documents, data and information provided by accounting records. In Romania, these professionals are represented by active accounting experts belonging to the Body of Expert and Licensed Accountants of Romania (CECCAR).

In 2009 the Law no. 178/2009 brought about several changes in drawing up judicial accounting expertise reports, in particular in that which concerns submitting the expertise report and settling the expenses incurred by conducting the expertise; that is why the hereby paper attempts to describe such changes, as compared to the previous legal provisions, so that the paper may be truly helpful to professionals of this field, as well as to clients who request judicial accounting expertise reports.

Also, the paper describes the procedure for ordering a judicial accounting expertise as well as the procedures for reimbursing the expenses generated when conducting this type of works.

Key words: judicial accounting expertise, expertise report, jurisdictional bodies, local office, fee. JEL Classification: K, M INTRODUCTION The paper aims to discuss the main legal previsions governing the way a judicial accounting

expertise is conducted, the procedure for ordering the expertise and for drawing up and submitting the expertise report, as well as for settling the fee and all other expenses incurred by conducting the judicial accounting expertise.

When writing this paper I made use of the existing regulations in this field, in particular the CECCAR professional norm no. 35, as well as the legal provisions of the Government Order no. 2/2000 and of the Law no. 178/2009, which brought several amendments in that which concerns conducting a judicial accounting expertise.

1. THE FRAMEWORK OF ACCOUNTING EXPERTISE REPORTS The basic activity of accounting experts is that of drawing-up accounting expertise reports,

requested by legal bodies or physical persons or legal entities in compliance with the law, such as: amiable expertise reports (by request), judicial expertise reports for civil cases, criminal cases, or labour law cases, management expertise reports, financial and accounting expertise reports, etc.

The means for ensuring professional regulation for the activity of conducting expertises were established by the CECCAR through the Norm and notes of the delegation concerning accounting expertise. According to the professional CECCAR norms, the accounting expertise report is a substantiation tool used in solving certain cases that require strictly specialized knowledge from people who are trained as accounting experts.

The judicial accounting expertise – is regulated through the Code of civil procedure, the

Code of criminal procedure and other special laws. Accounting expertise reports are used as evidence in court cases. They can be submitted ex officio or they may be accepted at any stage of the trial, upon request from the parties involved. The main purpose of judicial accounting expertise reports is to contribute to establishing the factual truth and the correct solving of litigations or cases undergoing investigation or trial.


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The conclusions of the expertise report cannot be taken for granted automatically by the legal body that has requested or accepted this report. The legal body must freely assess the substantiating power of the accounting expertise report based on its conscience and the existing laws; consequently, the conclusions of the expertise may be accepted or rejected depending on its scientific level, its quality and the degree to which it fits together with the rest of the evidence submitted in the case that is undergoing investigation or trial.

Judicial and extra-judicial accounting expertises are regulated through the following: - legal norms – the core of the existing legal regulations on judicial and extra-judicial accounting expertises stands in the Government Order no. 65/1994 on organizing the activity of accounting expertise and licensed accountants [14]; according to this law, conducting judicial and non-judicial accounting expertises is the exclusive right of accounting experts, who have legally acquired the status of accounting experts as per the provisions of the G.O. no. 65/1994; they draw up accounting expertise reports upon request from legal bodies, physical persons or legal entities, according to the law. Accounting experts may practice their profession either individually or within trading companies, according to the law. Judicial and extra-judicial accounting expertises cannot be conducted by licensed accountants, whether high-school graduates or university graduates, or by other kinds of professionals; the reports drawn up by such categories may be named Accounting expertise reports and they are compliant with the relevant methodology, but they are merely considered specialized reports, and are not deemed accounting expertise reports from a legal point of view; - procedural norms – the core of procedural regulations on choosing and appointing accounting experts, as well as on the procedure for conducting accounting expertises, in particular judicial ones, lays in the Code of civil and criminal procedure. They do not regulate accounting expertises in particular; the procedural regulations with regards to expertise, to the extent to which they do not refer to other types of expertise (coroner’s expertise, graphological expertise, etc.), are also applicable to judicial accounting expertises. The segment of common law that deals with expertises as means of legal substantiation is the Code of civil procedure [9]; to set clear certain factual circumstances, the court may ask for an expert opinion, with such experts being appointed either ex officio or upon request from the parties; a Ruling is issued to establish the aspects that will be the object of the expertise and the deadline for conducting the expertise; the deadline is established so as to ensure that the expert submits his report at least 5 days prior to the date established for the hearing in court; if the parties fail to agree on appointing the experts, the latter are appointed by court, through random selection during a public meeting, out of a list drawn up by the legal expertise office; again, the ruling is the document that establishes the payments for these experts. The Code of civil procedure [10] also includes procedural regulations opposable to the judicial accounting expertise, used in criminal trials; - professional norms – the core of professional regulations on judicial and extra-judicial accounting expertises stands in:

a) The Organizational and Operational Rules of the Body of Expert and Licensed Accounts of Romania [12] – which provides that accounting experts, when practicing their profession, are authorised to conduct accounting expertises ordered by legal bodies or requested by physical or legal persons, such as : amiable expertises (by request), financial and accounting expertises, arbitration in civil cases or management expertises;

b) The CECCAR professional norm no. 35 on accounting expertises[11] which provides that expertises may be conducted only by professionals who have acquired the status of accounting experts as per the legal provisions and who are registered in the Record of the Body of Expert and Licensed Accountants of Romania, meaning that they have been dully re-authorised.

2. THE PROCEDURE FOR ORDERING JUDICIAL ACCOUNTING EXPERTISES Judicial accounting expertises are requested by the bodies that investigate the cases

submitted to criminal trials: the Police Department, Prosecutor’s Office, court houses for civil or


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criminal cases, and the defendants or other parties involved in the trial; that is why the accounting expert must submit, for the case, a set of expertise reports, so that each party involved in the trial may receive a copy.

Ordering judicial accounting expertises is the exclusive right of bodies entitled by the law to submit the evidence of the expertise. The expert can only be appointed by the body legally entitled to request the submission of the expertise as evidence.

a) contacting and appointing accounting experts in civil cases Article 202 of the Code of civil procedure [9] provides that: ”Experts will be appointed by

the court if the parties can’t agree on appointing them. The act of appointment will also establish the payment for the experts.” As it follows from this, the civil procedure allows the parties to contact the accounting experts directly, and may propose their appointment to the court. Regardless of whether the parties in the civil cases reach an agreement or not in that which concerns the name of an expert (or several), his actual appointment (or their appointment) is made through a meeting act that must include at least the following paragraphs:

(1) a paragraph that presents the name of the accounting expert or experts, appointed ex officio and/or upon request from the parties;

(2) a paragraph that describes the aims (the questions) that the accounting expert or experts must answer to;

(3) a paragraph that establishes the deadline (date) for submitting the accounting expertise report;

(4) the fee (pay) established for the accounting expert or experts; this is usually established after the court has discussed the issue with the parties involved.

If any of these paragraphs is missing in the meeting act, the accounting expert is not only entitled, but also obliged by his professionalism to request from the court to include the missing paragraphs in the meeting act.

b) contacting and appointing accounting experts in criminal cases The right of appointing the accounting expert belongs to the criminal prosecution agent or to the court house, but each of the parties may request that an accounting expert recommended by that party is allowed to participate in conducting the accounting expertise. In criminal cases, the presence of the accounting expert, on the date of his appointment, is compulsory. The criminal prosecution agent or the court house, when deciding on an expertise, establishes a date for hearing both the parties and the accounting expert, if the latter was chosen either by the criminal prosecution agent or by the courthouse.

At the established date, both the parties and the chosen accounting expert are informed on the aim of the expertise and notified that they have the right to make comments with regards to these questions and request that they be modified or completed. The parties are also informed that they have the right to request that an accounting expert be appointed for each, based on their individual recommendations, and that he be granted the right to participate at the expertise. After examining the objections and requests brought forward by the expert, the criminal prosecution agent or the court house informs the expert on the deadline for completing the expertise report and notifies him whether the parties will also participate in conducting the expertise. The procedural document for appointing the accounting expert or experts is the order issued by the criminal prosecution agent or the Prosecutor’s Offices belonging to the court houses; such orders include a device that nominates the people involved and the charges being investigated, plus at least four other paragraphs:

(1) the name of the appointed accounting expert or experts; (2) the aims (questions) of the accounting expertise; (3) the deadline (date) for submitting the accounting expertise report; (4) the fee (payment) for the accounting expert or experts.


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The aims (questions) that the appointed accounting expert or experts must address need to be concise, unequivocal, and mustn’t request a legal classification for the facts undergoing trial. This applies to all types of expertise reports, whether submitted for civil cases or criminal cases. The deadline (period) for conducting the expertise and establishing the date for the submission of the judicial accounting expertise report. The legal body that requests that an accounting expertise be conducted must also establish, through a Meeting act (when dealing with civil cases) and through an Order (when dealing with criminal cases), the deadline (duration) for conducting the accounting expertise and the date for submitting the accounting expertise report.

The deadline for conducting the judicial accounting expertise is negotiated between the legal body that requested the expertise and the appointed accounting expert and depends on the expert’s professionalism.

The payment for accounting experts must have a remunerative character. The legal body that requests the accounting expertise and appoints the accounting expert must also establish his payment. The principles on the subject are found in article 202 of the Code of Civil procedure [9], which provides that the Appointment ruling must also set forth the payment for the experts. But the existing procedural regulations (both civil and criminal ones) do not describe the means for establishing the payment for accounting experts. The Body of Expert and Licensed Accountants of Romania has issued the “Rules on the discipline of fees and benefits and criteria for the reimbursement of expenses for the professional performances of accounting experts and licensed accountants” and it approved the “Professional Fees” – through the Decision of the National Conference of 2001. According to article 2 of this “Professional Fees” document, in exchange for the activity he conducts for his client, the accounting expert is entitled to compensations for:

a) reimbursing the expenses incurred by travelling and accommodation; b) indemnities, c) fees. This excerpt from the “Professional Fees” is applicable regardless of whether the

accounting expert is appointed ex officio or upon recommendation from the parties involved in the trial. If the legal body and/or parties involved in the trial refuse to accept these fees, the accounting expert is entitled to refuse to conduct the judicial accounting expertise. Complying with the “Professional Fees” is a must for the accounting expert. Failure to comply with these obligations imposed by the CECCAR may incur disciplinary sanctions from the CECCAR or even criminal sanctions for unfair competition (if the expert works for excessively low fees) or for bribe (if the expert works for excessively high fees). Article 213 of the Code of civil procedure [9] mentions that: “The experts who will request or accept more than the established payment will be charged with accepting bribe. Upon request from the experts, taking into account the work involved, the court house will be allowed to increase their due payment through a ruling issued with parties cited”. With the code of civil procedure [9] being the core of the matter, article 213 is also valid for criminal cases. If, in a given instance, the aims (questions) expressed by the legal body are of a different kind, respectively justified opinions and consultancy, assessment of goods and rights, company assessments, assessments for departments and patrimonies, etc., the accounting expert is entitled to request that the professional fees be summed up. In the case of judicial accounting expertise reports, both accounting experts appointed ex officio and those appointed upon recommendation from the parties must submit the accounting expertise report at the legal body that ordered the accounting expertise, where all those who are interested in it, including the parties involved in the trial, may have access to it. This explicitly results from the provisions of article 122, paragraph 3, of the Code of criminal procedure [10], according to which: “The expertise report must be submitted at the criminal prosecution agent or


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the court house that ordered the expertise”. But the Code of civil procedure [9] also (article 109, paragraph 1) provides that: “The expert must submit the report at least 5 days prior to the date established for the trial”. As it follows from this, the accounting expertise report must be submitted to the court house that requested it, respectively added to the case file. The purpose of this procedure is to avoid that the contents and conclusions of the judicial accounting expertise report be communicated (notified) preferentially to some of its users.

3. LEGAL PROVISIONS ON JUDICIAL ACCOUNTING EXPERTISE REPORTS

The Government Order no. 2/2000 on organizing the activity of judicial and extra-judicial technical expertise [16] includes several provisions concerning the status of judicial technical expert, procedural rules on the judicial technical expertise, organizing the activity of extra-judicial technical expertise, as well as the attributions of the Central office for judicial technical expertises and of the local offices for judicial technical and accounting expertises. The provisions of article 15-23 of the G.O. no. 2/2000 [16] also apply to the judicial accounting expertise. According to these provisions, if the expert must travel to another place than that of his domicile, in order to conduct the expertise, he is entitled to having reimbursed the expensed incurred by travelling and accommodation and also to payment of a daily allowance as per the norms regulating these rights for employees of public institutions. The amount established as temporary fee and the advance payment for travelling expenses, whenever that is the case, must be submitted within 5 days of the appointment of the expert by the party who was allowed to request expertise, in the special account of the local office for technical and accounting expertises, opened up to that purpose. The expertise reports, along with a fee assessment note and list of reimbursement payments for travelling, accommodation, daily allowance and other expenses incurred by the expertise, if that is the case, must be submitted at the local office for judicial technical and accounting expertises, in order to be sent to the body that requested the expertise. The final fee is established by the body that ordered the expertise, depending on the complexity of the report, the amount of work performed and the professional or scientific degree of the expert or specialist.

The local office for judicial technical and accounting expertises ensures the delivery of the expertise reports and lists of reimbursements for the payments incurred by conducting the judicial expertise, it verifies and endorses the list of reimbursements that, along with the expertise reports, it forwards to the bodies that requested the judicial expertise.

The payment of the fee and reimbursement of other expenses, whenever that is the case, due for the expert or specialist, are to be made exclusively through the local office for judicial technical and accounting expertises. The Law no. 178/2009 for modifying and completing the Government Order no. 2/2000 on organizing the activity of judicial and extra-judicial technical expertise [14] brought forth several changes, some of which concern the judicial accounting expertise, and they are as follows:

a) The expertise report along with the fee assessment note and list of reimbursement payment for travelling, accommodation, daily allowances or other expenses incurred by conducting the expertise, if there are any, must be submitted to the relevant jurisdictional body that authorised the expertise;

b) After establishing the final fee, as well as, if required, the amount of travelling and accommodation expenses, daily allowance or other expenses incurred by the expertise, the jurisdictional body notifies the local office of expertise to proceed with the payment;

c) The local office for judicial technical and accounting expertises pays the due fees to the judicial technical experts, specialists, and accounting experts, as well as the amounts


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representing travelling and accommodation expenses, daily allowances or other expenses incurred by the expertise, after their total amount is communicated by the jurisdictional body that authorised the expertise.

CONCLUSIONS The changes presented in this paper were aimed at simplifying the procedures for submitting

judicial accounting expertise reports and receiving reimbursements for the expenses incurred by them, with the main role being assigned to the jurisdictional body that authorised the expertise.

The nominal list of judicial experts, with their identification data, and classified by specialization, (including that of accounting expertise), and by district, respectively the capital, Bucharest, organized by address of domicile, is published on the web site of the Ministry of Justice and Citizenship Freedoms (www.just.ro), so that any physical person or legal entities may have access to this list and contact directly the accounting expert whose professional services he wishes to engage.

BIBLIOGRAPHY 1. Mircea Boulescu, Marcel Ghiţă - Control financiar şi expertiză contabilă, Editura

Eficient, Bucureşti, 1996 2. Mircea Boulescu, Marcel Ghiţă - Expertiza contabilă, Editura Didactică şi Pedagogică,

Bucureşti, 2001 3. Constantin Cucoşel – Control financiar şi fiscal. Expertiză contabilă, Editura

Universităţii de Nord, Baia Mare, 2008 4. Ion Florea, Ionela-Corina Macovei, Radu Florea, Maria Berheci – Introducere în

expertiza contabilă şi auditul financiar, Editura CECCAR, Bucureşti, 2005 5. CECCAR – Normele profesionale aprobate de Consiliul Superior al CECCAR prin

Hotărârea nr. 39 din 21 noiembrie 2000 şi 42 din 11 august 2001, Ediţia a II-a revăzută şi adăugită, Editura CECCAR, Bucureşti, 2001

6. CECCAR – Ghid pentru aplicarea Normei profesionale nr. 35/2001 privind expertizele contabile, Editura CECCAR, Bucureşti, 2003

7. CECCAR – Cartea expertului contabil şi a contabilului autorizat, Culegere de acte normative şi reglementări ale profesiei elaborate de C.E.C.C.A.R. în perioada 1994-2004, Ediţia a IV-a, revizuită şi adăugită, Editura CECCAR, Bucureşti, 2004

8. CECCAR - Expertiza contabilă – norme profesionale, Editura CECCAR, Bucureşti, 2002

9. Codul de procedură civilă, cu modificările aduse de O.U.G. nr. 138/2000 şi O.U.G. nr. 59/2001, Editura All Beck, Bucureşti, 2001

10. Codul de procedură penală, cu modificările aduse de O.U.G. nr. 207/2000 şi O.U.G. nr. 295/2000, Editura Rosetti, Bucureşti, 2000

11. Corpul Experţilor Contabili şi Contabililor Autorizaţi din România, Standardul profesional nr. 35 Expertizele contabile – Ghid de aplicare- Ediţia a II-a, revizuită şi adăugită, Editura CECCAR, Bucureşti, 2007

12. Regulamentul de organizare şi funcţionare a Corpului Experţilor Contabili şi Contabililor Autorizaţi din România, aprobat prin Hotărârea Conferinţei naţionale a experţilor contabili şi contabililor autorizaţi din România nr. 1/1995, republicat în Monitorul Oficial al României, Partea I, nr. 153 din 28 martie 2001, modificat şi completat prin Hotărârea Consiliului Superior al CECCAR nr. 08/90 din 14 mai 2008, publicată în Monitorul Oficial nr. 466 din 23 iunie 2008

13. Legislaţia privind experţii contabili şi contabilii autorizaţi, Editura All Beck, Bucureşti, 2005


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14. Legea nr. 178/2009 pentru modificarea şi completarea Ordonanţei Guvernului nr. 2/2000 privind organizarea activităţii de expertiză tehnică judiciară şi extrajudiciară, publicată în Monitorul Oficial nr. 335 din 20 mai 2009

15. Ordonanţa Guvernului nr. 65/1994 privind organizarea activităţii de expertiză contabilă şi a contabililor autorizaţi, republicată în Monitorul Oficial nr. 13 din 8 ianuarie 2008

16. Ordonanţa Guvernului nr. 2/2000 privind organizarea activităţii de expertiză tehnică judiciară şi extrajudiciară, publicată în Monitorul Oficial nr. 26 din 25 ianuarie 2000

17. www.just.ro


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SECTION 4

STATISTICS, DATA PROCESSING

(INFORMATICS) AND MATHEMATICS


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SIMULATION OF THE RELATIONSHIP BETWEEN PRICES AND AVERAGE REVENUE OF THE POPULATION USING GENETIC ALGORITHMS

Assistant Ph.D. Student Ionut BALAN

„Ştefan cel Mare” University of Suceava, Romania [email protected]

Abstract: In this paper we want to achieve a simulation of the evolution of the relationship between average net revenue

from wages and the prices of different categories of products from Romania during 1990-2007. For this simulation we used a technique of artificial intelligence (AI), an area of IT used spreadingly in the complex economic processing. This technique is inspired by biology, bearing the name of Genetic Algorithms (GA). We resorted to this method because some statistical methods are difficult to use and for our conditions they provide inadequate results. The start year of the study is considered 1991, year which represents start of crisis in Romania with multiple political, legal and economic changes. This crisis will be highlighted in our study, by listing the main reasons that have caused it. Average annual revenue in the period studied is a dependent variable, while prices for six categories of products are considered independent variables. In order to compare data from different time periods, all values are expressed in RON. These real data have been shaped using genetic algorithms, making it possible to observe the evolution of the studied indicator and correlate him with the indicator acquired in 1991.

Keywords: genetic algorithms, price, average revenue, simulation, generation, chromosomes JEL Classification: C60

1. INTRODUCTION

A model is, simply, a simplified representation of a process, a system. Although it is not

necessarily composed of equations (there is ricardian model), is no less true that, at present, construction of models made frequent recourse to mathematical formalization: one model appears as a set of equations, being a simplified construction of an economic system which is used mainly to show the reciprocal action, chaining, the interdependence of certain phenomena [1].

The realization of experiments with computer, which involves the construction of mathematical models describing the behavior of a real system, in this case economic, in a given period is called simulation. Most times it does not provide exact solutions, being close to optimal, but is considered an effective research technique for complex economic problems (which are impossible to study using mathematical-economic models for optimization). The essence of modelling method consists of replacing the real system, perceived by human senses, through a model more accessible to study.

Processed data in this study are average net revenue from salary and six categories of annual average prices. Prices have been chosen for the basic categories of products. These products are fuels, electricity, gas, vegetables-fruits, breading products, and milk. They occupy a significant percentage in the private consumption of people with incomes close to the average net revenue.

This paper is structured over five chapters: Introduction, Genetic algorithms, Computer system simulation, Results obtained and Conclusions. The second chapter provides a description of genetic algorithms, their main features, the structure of such an algorithm, operators used, and certain features. By going through this chapter we can understand their action on the problem studied and detach the main advantages offered by them.

In the third chapter we describe the operation executed by the proposed system to solve the problem. Here are presented the technical characteristics of the system, the input data necessary to obtain a corresponding result, as well as which of the individuals is the final result.

In the fourth chapter are presented results obtained and interpretations necessary, this chapter being followed by conclusions of this study. All values obtained are compared with those of 1991. If this year has unitary value, then if the prices taken into account will increase regard to this year with a higher percentage than the growing of the revenue from wages then, for those years we


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have subunitary values and if the prices increase is less than the increase of the revenue we have values greater then 1. From the results of this study we observe in which period the population had higher real incomes than in the base year and in which period these revenues were much lower than in 1991.

2. GENETIC ALGORITHMS Artificial Intelligence (AI) may be considered the informatic domain which has the main

goal to design certain systems whose features are assigned commonly to human intelligence: human language understanding, learning, reasoning, problem solving, theorem demonstrating, etc[2].

Genetic algorithms represent an important class of search and optimization method. A genetic algorithm represents a transposition in programming of biological’s principles. This thing requires the processing of a significant set of data, which requires many resources.

Genetic algorithms differ from traditional search techniques in several ways: the optimization is done by extracting the new points in the search space, as well as by

exploring the information of the points founded; they have the property to be parallelized. The effect is equivalent to a search of multiple

solutions in the space available, without testing all values of this area; they are algorithms whose solutions are obtained by the application of specific operators

on values generated randomly; they acting simultaneously on multiple solutions.

The structure of a genetic algorithm is described by the following steps: Step 1. Generating the initial population. The initial population is a set of data that

underpins the achievement of the final result. The data that compose this population are generated randomly and after the application of the specific operators of the genetic algorithms, the initial population is improved with higher speed in the first steps of the algorithm, obtaining after all an optimal variant that is taken as final result.

Step 2. Assessing individuals. The genetic algorithm selects individuals from a population depending on their performance. Performances are calculated on a fitness minimize or maximize function. The individuals selected will represent the new population, an intermediate population, subject to further processing, their chromosomes representing the "parents" of a new generation.

Step 3. Application of genetic operators. After the assignment of a score to each chromosome, the best of them are exposed to the genetic operators. Among the most used genetic operators are mutation and crossover. Depending on the problem studied may occur and other operators such as inversion operator, reordering operator, etc.

Step 4. Selecting people who will leave the system. In the case of genetic algorithms, over the “n” generations the population size remains the same. By applying some genetic operators, new individuals appear, individuals who may have a much better score than individuals existing in the initial population. To maintain the most efficient individuals from the entire data set is recourse to the elimination of the worst chromosome from the initial population of each generation.

Step 5. The 2,3,4 steps described above is repeated to satisfy the criterion of optimality or to run a certain number of generations.


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Fig. 1.The structure of genetic algorithm

The structure represented in figure no. 1 is a general representation for the genetic

algorithm, therefore the programmer will have to adapt this model as needed. To do this he must know the role of each term to obtain the final result.

In the first step is generated the initial population. Population is a set of possible solutions to the problem. For example, if we get the minimum of a function f: Rm → R, then each object x belonging to Rm can be a possible solution. Likewise, any subset P of R may represent the population that is subject to processing.

Individuals, called chromosomes, represent components of the population. From the definition of the population, result that “x”, as a point of Rm set, is an individual (chromosome).

The offspring of a generation are individuals obtained by the application of some genetic operators on the explored population. These operators differ depending on the problem studied. Among the most used operator is the crossover operator which, from the parents X and Y:

(x1, x2,..., xk , xk+1,..., x m) (y1, y2,..., yk , yk+1,..., y m),

may leads to obtaining the following offspring: (x1, x2,..., xk , yk+1,..., y m) (y1, y2,..., yk , xk+1,..., x m).

In the example above we can see that the crossing point was in position k +1. The genetic operators determine variation in chromosomes structure. They can be applied to

the population in a random manner, or according to certain criteria, the modelled problem having a great influence in their selection. In addition to the crossover operator, another common operator, used in genetic algorithms is mutation. This operator leads to the survivors by changing the position of certain genes in some “parents” chromosomes. Thus if the “parent” chromosome has the following form:

(x1, x2, ......, xk, xk+1,......, xm) the successors may take the form: (xk, x2, ......, x1, xk+1,......, xm)


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All these genetic operators may be used in different ways, each of them may have different actions on the final outcome, they being elected as needed.

The selection of the population which is subject to the processing represent the operation with which certain individuals are chosen as parents to generate survivors. The best individuals from the population are selected, taking into account the fitness function used.

The finality is determined by the goal. The algorithm can stop after a certain number of steps or when an error threshold is reached.

In the implementation of a genetic algorithm we must take into account the following features [3]:

1. The genetic algorithms are a class of probabilistic algorithms, which combine elements of directed search and random search. They conducted to a nearly optimal balance between exploration of space states and exploitation of the best solutions found.

2. The genetic algorithms are more robust than other existing method such as directed search algorithms and classical optimization algorithms.

3. The search methods based on genetic algorithms are characterized by the fact that they maintain a population of potential solutions. Classical search methods operate at one time on a single point in the search space.

4. Typically, the genetic algorithms work with a codification of the elements from the problem states space and they don’t act directly on elements of this space.

5. The genetic algorithms use performance functions obtained through simple transformations of the objective function. It is not necessary that the objective function to be derived. There are not required any special properties of convexity for the objective function.

6. The genetic algorithms are simple to use. 7. The genetic algorithms can find optimal (or nearly optimal) solutions with a high

probability. Among the properties that offer to this type of algorithms an advantage over other

algorithms is parallelization. The most effective parallelization method is based on the migration of the population (insular algorithms), a method that divides the initial population into a number of subpopulations, usually of equal size, which evolve, isolated one from other, a number of generations. At certain times there is a possibility that some individuals to migrate from one population to another. The implementations have given good results when the best individuals from the subpopulations were encouraged to migrate. From researches that was performed has shown that [4] the sequential genetic algorithm, with a population size equal to the sum of subpopulations dimensions fails to obtain solutions as good as for the algorithm based on migration.

3. COMPUTER SYSTEM SIMULATION The developed system requires some data on input and provide on output some coefficients

used in the simulation of the relationship between revenue of certain category of people and the prices of certain categories of products and services with high significance level for those categories of people.

The first stage of the genetic algorithm consists in population initialization. This boot is made for a population consists of 120 chromosomes, each chromosome having 7 genes. The first 6 genes of each chromosome are generated randomly, while the seventh gene is obtained by calculation. The values used for calculation of the seventh gene of each chromosome are those 6 genes generated randomly, as well as the revenue and prices taken into account in a given period of time.

The following steps of the algorithm will be repeated for a number of times, until the results are considered satisfactory for the simulated problem. In our case there are used 500 generations, a value considered sufficient for this problem. After different tests has been noted that if it exceeds


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this number of generations, the differences between the fitness function for the two generations are very small.

Because we have a small number of genes in the composition of an individual I felt that we could renounce the crossover operator, the convergence of the algorithm being possible by application of mutations to the original chromosomes. Considering the population of a generation, 50% of its chromosomes will be taken into account for any genetic mutations. The mutations are applied only for first 6 components in each individual, the seventh being calculated according to the 6 obtained.

To ensure a rapid convergence of this algorithm and efficient individuals for genetic operations is recommended to order the population depending on the values of the seventh gene in each generation.

At each step the most effective chromosomes of the old population will be kept for regeneration, and the less efficient chromosomes will be replaced with efficient chromosomes derived from genetic processing.

The input data will be stored in a file with 12 lines and 7 columns. Those 12 lines represent the corresponding value for the months from a year, while the first 6 columns represent the prices taken into account, and the seventh column the considered revenue from wages.

The best chromosome, in terms of the fitness function, will be considered final result, this value representing the absolute value obtained from the difference between the actual income and the amount estimated by the model developed.

4. RESULTS OBTAINED To solve the problem proposed we considered a base to comparing the results obtained later.

In our case, the base are the revenues recorded in 1991. With the proposed system it was made a model for this year with an error of about 6%. The values of real income, as well as the estimated values for the average revenue for population, calculated on the basis of prices are represented graphically in Figure 2.

Revenue variation in 1991

0

0,2

0,4

0,6

0,8

1

1,2

1,4

ian feb mar apr mai iun iul aug sep oct nov dec

Real revenueEstimated revenue

Fig.2. Real and estimated revenue variation in 1991

Because the error of the estimation of the revenue is quite small we used this model for the

revenue estimation throughout the period considered (1992-2007). In the present study, both prices and revenues use the same currency (RON). Figure 2 notes

that the average of the wages on the Romanian national economy was 0.4 RON in January, reaching


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a level of 1.2 RON in December of that year (1991). Also, the average of prices for the years studied were expressed in the same currency, prices calculated by using the price indices for the period.

Having on disposition the achieved model, considering 1991 like a base-year, the revenues calculated using the prices between 1991 and 2007 are presented in Table 1.

Table 1. The real, calculated and estimated revenue variation Real

revenue Calculated

revenue Estimated revenue

(based on 1991) Year

2,014 5,931833 0,34031 1992 5,9717 20,72754 0,267914 1993

14,1951 35,40379 0,443083 1994 21,1373 43,4619 0,626797 1995 32,1169 67,39764 0,602639 1996 63,2086 170,4965 0,39002 1997 104,2274 243,7258 0,494622 1998 152,2878 390,0971 0,423933 1999 213,9138 601,6287 0,365248 2000

302 803,3396 0,398782 2001 379 955,4174 0,435274 2002 484 1123,38 0,501126 2003 599 1358,13 0,522362 2004 746 1451,865 0,699645 2005 866 1522,41 0,873382 2006 1042 1645,788 1,142469 2007

Source:[4]-[8] The evolution of the estimated revenue may be highlighted graphically by Figure 3.

Fig.3. The estimated revenue evolution between 1991-2007

You can see that in the period between 1992 and 2006 the average of net revenue per

resident was lower than the amount taken by him in 1991. Moreover, on this graphical representation we can see the crisis moments encountered at this indicator. Thus in 1993, 1997, 2000 we are dealing with a local minimum of this function in 1993 with the global minimum on the entire range studied.

Unacceptable development during 1991-1993 is, primarily, due to low correlation between


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average level of income and the prices for categories studied. Thus, if revenues have increased approximately 8 times during this period, prices have a accelerated variation, with increases ranging between 24 and 68 times. All these crises were due, firstly, to the incompetence of political governance in the country and, secondly, political changes in that time. It notes that since 2000, the average of net incomes have begun to rise relative to prices, reaching in 2007 a higher level than in 1991.

5. CONCLUSIONS The analysis of certain phenomena evolution is not doable, or even impossible using

classical methods. That would be one of the reasons for the appeal to the artificial intelligence techniques to solve such problems. In addition to genetic algorithms, used in this study, other mechanisms of artificial intelligence are often used: neural networks, intelligent agents, etc. These technologies do not always offer the best solutions, but a lot of them approximate this solution, being considered ideal in the simulation of certain phenomena whose evolution is too complex. In addition to describing the behavior of certain indicators, these intelligent instruments can be used to forecast phenomena, based on the information from the past of that phenomenon and other phenomena that are related to the phenomenon studied. In next work, using these artificial instruments, we will try to simulate the relationship between the different social categories incomes and market prices, in same time, trying to forecast the evolution of this relationship, taking into account the information available, the periods were achieved growth, recession and stagnation of this relation.

BIBIOGRAFIE:

1. Abraham-Frois, G., Ėconomie Politique, versiunea în limba română, Editura Humanitas, 1994

2. Dumitrescu, D., Principiile inteligenţei artificiale, Ed. Albastră, 2002 3. Dumitrescu, D., Algoritmi genetici şi strategii evolutive- apucaţii în Inteligenţa Artificială

şi în domenii conexe, Ed. Albastră, 2006 4. http://www.ac.tuiasi.ro/ro/library/cursICweb/pdf/CursIC_GA_1bweb.pdf 5. http://www.financiarul.ro/2008/09/30/salariul-mediu-net-a-crescut-in-2007-cu-peste-20/ 6. http://www.pensiiprahova.ro/print.php?pg=info-sal&id=54&culoare=print 7. http://www.prefecturacv.ro/sedinte/Materiale_sedinta_Colegiu_Pref_26_09_2008.pdf 8. Statistical yearbook (1991-2008)


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SECTION 5

LAW AND PUBLIC ADMINISTRATION


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THE INTEGRATION OF LOCAL ADMINISTRATION IN THE ROMANIAN PUBLIC AND ECONOMIC SPACE

Phd. Lect. Ec. Gheorghe CRIŞAN

Tibiscus University of Timisoara, Romania [email protected]

Phd. Student. Ec. Lia Ioana CRIŞAN Counselor for European Affairs, The Prefect’ Institution Timiş County, Romania

[email protected]

Abstract: The convergence of the Romanian government to the European public space requires a permanent effort of

adaptation, which should make use of constructive constituents specific to our country and to apply them the characteristics of modern and efficient administrations.

Continuous changes of expectations and the interests of citizens requires, however, that the public administration (and especially the local one) to continuously reform, which increases the difficulty of this process, which requires a flexible upper of public management.

It is important, however, that - despite these difficulties - the process to be done in a legal and organizational framework, on solid and firm coordinates, based on modern European principles, without affecting a specific area of city administration.

This paper tries to x-ray this state of facts and proposes some interesting approaches related to the mechanisms of integration of local public administration- LPA in this space.

This way, analyzing the organization and functioning of the public sector, the paper stresses the changes occurring in this area following the more pronounced implementation in the administration of the 3 E principle (economy, efficiency and effectiveness), on the background of an intense manifestation of local autonomy and financial decentralization.

The authors note and highlight the phenomena o "slipping" of the public sector towards the private sector, due to the emergence of competition and the need for efficiency and effectiveness in the use of public financial resources, which resizes the mode of action and responsibility for public management, decreasing this way the political connotations.

Keywords: local administration, convergence, reform, integration, competition JEL Classification: H 83

INTRODUCTION To a better understanding of the need for reform, but also its specific in our country, we

show some distinct features of the Romanian public administration, and thus defining the starting point of this process, but also the variables that may develop to standards imposed by the convergence with European space.

We find, however, that these changes are relatively limited and subject to a continuous change and adaptation of the public interest, as a response to changes and mutations that occurred, especially during this period, in the external environment (especially the economic and social one).

For the relevance of this analysis, we considered it appropriate to move the center of gravity of our public space to the local level, where we found in a concrete image, with a high amplitude, of the effects of the administration’ acts.

At this level, the government’s actions - imposed by convergence with the EU - have a greater stability and remanence and provide a certain level of inter - operability with similar structures in other countries and abroad.

What becomes very important in terms of extending the New Public Management is the emphasis of the economic aspects of the activity of local authorities and the emergence of competition, situation in which convergence implies, implicitly, more competitive territorial-administrative units - distinct ATU, at the level of internal and European affairs market, private and public.


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We made a new approach of this as a result of previous studies (Crisan, 2007 A), and as a result of our own experience, gained in the activity of strategic planning, of economic and social development and local public sector modernization, conducted at the level of the specific agency- and at the level of the group of administrative reform at the level of Timis county.

CONTENTS

The process of accession of the candidate countries had various developments, which led, by default, to the differentiation of type and level of support provided by EU.

This process was (and is) essential affected not only by their own development level but also by the gaps of each country towards European standards, and also by the political will to assume some major changes, regardless the effects they generates.

Compared with other member states, Romania and Bulgaria had the disadvantage that - there is already a "matrix of integration, with benchmarks already established - they had to move only to" imposed exercises "and to acquire, without reservation, all the chapters of the Accession program.(Crişan, 2008, pp 189-199).

Especially as some Romanian experts noted (Matei and Matei, 2000, p.23), the idea of partial adoption of Community rules has been excluded from the beginning by the Council of Europe (CE): "A partial adoption of the acquis, without solving the basic problem, whose solution would only be postponed, could create new difficulties, which would be even more considerable”.

Paradoxically, these difficulties were (and are) much more visible within the only area in which Europe has not imposed firm standards, in the area of the organization and functioning of the public administration, where each country had the discretion to build by itself the necessary mechanisms in order to manage its own process of modernization.

It was a liberty that generated a high responsibility, because in this area, the gap to the European states is as high as in other areas.

In addition, the absence of firm guidelines (which can then be transformed into clear targets, assumed and consistently pursued), accompanied by lack of government experience, and also by the impossibility of using success models (imposed or worldwide viable) generated difficulties in addressing it.

Even though if, at least theoretically, there was a point of support, the existence and functioning in the Member States of a series of common principles of public administration (as a favorable prerequisite for the functioning of the "European Administrative Space" - EAS), the extent to which they may influence the transformation of the public sector from the local level is questionable.

Also, even if this would have been possible, the absorption of EAS cannot be an imperative, but a fundamental benchmark for the direction of the efforts of harmonization with the national legal framework and the case studies.

In these circumstances, it is interesting to see how we can overlap Romanian Space Administration - in which we try to integrate, within certain limits, the local government - over the European Administrative Space.

To be able to integrate it “in corpore” we must see how unitary this local public sector is. The first observation it is based on an assessment of a reputable Romanian specialist (Preda,

1992, p. 124), who is stressing the elective character and the functioning of the local authorities under the administrative-territorial units, as the normative fundamental act stresses.

Or just this process of creation - trough a constitutional rule –of the authorities of the local government gives them, in our opinion (Crisan, 2007 B, pp. 24-38), the guarantee for stability, since they are created by the constituent power (as was the case of the new communes and cities-) and can not be removed except by them.

It is noted that the rules for the creation of the LPA are just manifestations of their subordination of the idea of state unity, because they exist only if they are recognized by the legal order.


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In fact, the fundamental law, defined clearly also the LPA authorities invested with prerogatives of public power (at the county level and at the municipalities and cities level).

On this basis, they may represent territorial-administrative units - in their capacity as legal entities - that have full capacity, have heritage and initiative in all matters of local public administration.

In this respect, in order to address the local aspects LPA authorities have a territory, a heritage, a general power and a population (community) on which it exercises the public power (and under which can deliver unilateral legal acts).

For this, the law recognizes them - within certain limits and certain areas of activity - even the competence to exercise regulatory power in determining the direction of establishing own measures for a good functioning of the local services, city administration or enforcement of the legal framework.

In contrast, other specialists (Costea, 2000, pp. 31-33) insists that the public administration is subject to public law (satisfying task of implementing and developing), it is hierarchized and ordined, paid, civil and egalitarian, is formalized, written, bureaucrat, has a continuity character, requires specific knowledge and is organized horizontally and vertically.

Overall, we believe that the concept of public administration can have two meanings - an ensemble of administrative authorities (or bodies) that apply law, and that of activity of law enforcement (in the public power regime), to meet general interests of the society.

Particularly interesting is the appreciation of foreign observers (Council of Europe, 2002, p. 5), which - compared public sectors of other countries with ours- they believe that in our country, there are 3 levels of public administration, a central one and two infra-national, - a territorial state administration (with the transfer of power to local state constituencies) and a local function of self-governance (decentralization to territorial local authorities).

In fact, according to Romanian law, public administration is carried out by government authorities of the state (which conduct an administration of state nature) and authorities of different LPA (local communities chosen by universal suffrage, equal, direct, secret and freely expressed) by which the local autonomy of ATU is realized.

It should be noted, however, that although authorities listed as LPA, at the county level only receives just mediated (or indirect) local interest.

They are, according to the law, administrative people, and, according to some specialists (Plumb, 2004, p. 37) - that they "are human mass organizations (groups) deliberately formed to achieve certain goals" - we can call them, generically, as "public organizations" (the cover phrase to other structures that use public money in the interests of the community).

In the same logic, we can appreciate that any organized (or authorized) administrative activity by an administrative person - in order to meet the social needs of common interest - is a public service.

To better understand the limits within they can act on reforming them, we mentioned the 3 forms of manifestation of the general principles of administrative organization - administrative centralization, administrative deconcentration and decentralization (which implies the right of a local organization / public collectivity to manage itself through their own means).

Applying these principles does not affect, however, the character of unitary and indivisible state of Romania.

Specific LPA remains, however, the principle of local autonomy, which provides the right and effective capacity of authorities at this level to solve and manage - within the legal framework and in the name and mass interests represented - all public aspects, regardless of the level of appearance (legislative, decision-making, economic, managerial, etc.)..

In a broader sense, internationally applicable, the local autonomy can (Givesius, 1991, p. 17) be assimilated also to the right to self-administration, which aims (eg in Germany), and the right over staff, the right to auto-organization (the to establish its own structure of government), the right to plan, to issue laws, to fund and administer.


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To exercise these powers and the local autonomy, the APL authorities need resources and, under law, may establish and collect local taxes, and to develop and approve budgets for revenues and expenditures of ATU.

Although one is conditioned by the other, it is necessary a certain division between autonomy and decentralization, which, after some opinions (Teodorescu, 1935, p. 286) is that autonomy is a right, while decentralization is a system involving autonomy.

Opinion that is not shared, however by most experts, that define decentralization as the transfer of duties of central power (the state) to other persons within the jurisdiction of public law (who, thus, benefit by a certain autonomy from it).

Since decentralization is ensured also by citizens - through participation in local public affairs, in electing their representatives and controlling their decisions - there is a feedback that decentralization is democracy applied in the administration and, therefore, the local elections is a privilege and a criterion of evaluation of it.

On the other hand, decentralization must be seen also through the prism of services and by ensuring the transfer of functions of specialized central public administration authorities (CPA) in the ministries concerned to the services located in ATU, invested with legal personality and autonomous organization (who were assigned from the competent public authorities of which were broken, own bodies and distinct heritage).

Not least, decentralization must be seen as an important factor in the smooth functioning of LPA, whereas it ensures operational decision, in close correlation with the needs and expectations of citizens, but adapted to local conditions and circumstances.

Preda sees (op. cit., P.127) that an essential feature of the organization and operation of LPA is the "reglementation of a single level of the administrative authorities and cutting off of the hierarchy, centralization, and even administrative ward, with a major importance to resolving local affairs and citizens interests."

Which means by default - especially in terms of local autonomy and decentralization - that the local government levels are the actions of a unit, in line with the will and aspirations of its community development.

And how the legislature has provided for the establishment of rules applicable to all local public authorities - the unitary choice mode, the same throughout the country, authorities and the LPA and their establishing as part of their ATU etc.

There are strong arguments to really consider local government as a whole, suggesting an easier integration in the Romanian public space.

Uniformly seen at the local level, public administration has the main task of satisfying the interests of the citizens, viewed from its double perspective of - as the "financier" (taxpayer) of it, but also as the main beneficiary of his actions.

The takeover of this "burden by LPA" is based on the principle of subsidiary ¸ that exercises the tasks in this direction, that incumbes to the authorities that are closer to the citizen.

Therefore, by extrapolation, we can consider that the reform process of APL becomes, in essence, the process of modernization of the relationship with the citizen.

In this sense, the LPA authorities must know very well the expectations and priorities of citizens, both at individual and community level, in order to channel their resources and efforts in this direction.

Accordingly to this, the first requirement of the modernization of APL is to find the most efficient, quick and simple ways of consulting with community members in terms of increased transparency, especially in the use of public funds.

Citizen - in his quality as taxpayer and elector - should know (and can check) whether public money is managed effectively (and in his interest), under the given mandate (mandate by which he transferred to local representatives the decision right in public matters).

From another perspective, the administration itself should be concerned that the taken decisions are known, in the highest degree, by the community, in order to be later applied - just in time and with maximum efficiency.


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A measured efficiency, this time, not only in the degree of citizen involvement, but also to the extent that expectations are met, in which problems find a solution and, especially, the "costs" that are involved.

Concern for the use of resource shows a different perspective also to the requirement of respecting the principle of openness and transparency.

In the present context, the participation - in various forms and degrees of involvement – of the civil society in decision making / management of government should be materialized in influencing the decisions taken (after a prior knowledge of the motivations that were the basis for them), depending on the interests pursued .

The attitude of civil society must become an active one, doubling the representative democracy of designation of local elected representatives with a permanent more responsible involvement, generating some pressure on policy makers.

In fact, people should not forget the status of shareholder in the state wealth, which obliges him to responsabilize and not to remain passive in the way it is managed.

For the state (central administration) has no way to intervene, since - under the right to transfer into the decision on which issues is he able to find the best resolution - has left the local government the right and obligation to manage effectively within the mandated limits in most public aspects.

In response, local government must, in his turn, take responsibility for how they honor the trust of the citizen and the state and, especially, how they use the available resources.

Given that the state leaves on the basis of autonomy, resources and decisions in the "hands" of local authorities, it is normal for public organization (or person) that can and should be forced to justify their own actions, assuming automatically also the consequences they generate.

In fact, assuming responsibility means, sine die, also the obligation to render an account - before the legal authorities - for their efforts and, consequently, to "pay" for any irregularities (not just those strictly related to violations of the law !).

Only under these conditions, the factors responsible for the LPA will be interested themselves, not to mistake and to self-improve, and the parties will be more careful with the selection and promotion of persons proposed for positions of responsibility.

We appreciate, however, that this responsibility is not just a simple concept in theory, it should materialize and concentrate in a complex of formal procedures - known and well defined - made and assumed by the representatives of the LPA.

To this end, the need for supervision / monitoring, and control exercised by various bodies is essential for tracking compliance with the procedures - the rules stipulated by general or specific reglementations - and to honor the public interest (and the individual).

Beyond these requirements, we consider it as important - the feeling of responsibility to the public administration - and to develop and manifest otherwise than determined by the obligation stipulated in various laws.

Institutions and supervisory mechanisms have different forms - the judicial courts, public institutions of the public ministry, officials with special powers, various committees, structures of civil society, media etc..

Regardless of the form and manner of action, you must understand that they are designed for the correct observance of the law, to ensure transparency, accountability, effectiveness and efficiency and that their goals are not punitive, but to protect public and private interest, to improve the quality of decision-making process and to enhance the legitimacy of public administration.

On the other hand, precisely this diversity of means for monitoring and control suggests, in fact, the importance granted to this by the government in modern democratic societies.

Unfortunately, however, from our point of view, this permanent examination of the administrative work (and decisions) still seeks - priority (and often even exclusively) - only the respect of legality and less (or no) the appropriateness of each approach.


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Our opinion is just that opportunity compliance may be taking the words - by the administration – of the principles of efficiency and effectiveness, but seen, as a new separate dimension – the accountability.

Recognition of efficiency as an important value (accordingly to the theoretical guidelines given later) is a consequence of the existence at the administration level of a certain state of affairs, namely the transformation of public institutions in services producer.

Accepting such an approach is, however, with acuity, the problem of achieving public administration performance and quality as a prerequisite for achieving efficiency and ensuring the best possible combination of inputs and results.

By achieving this goal it is ensured implicitly the achieving of administrative efficiency in the sense that performances, obtained in the respective approaches are oriented primordially towards proposed goals, and the community issues are resolved in accordance with general expectations and interests.

And here lies the importance of decentralization and local autonomy... For that, in their absence, we can not "put on one's back" an ineffective administration, or

failing to solve community problems. Thing already seen by some experts (Nicola, 2003, pp 95-96) which noted that - in their

absence and in the establishment of monopolies - the "public services market can become, in fact, a" non-market" ,void of competition.

Which could be explained (and accepted) only as long as the rationale to public services would remain strictly serving the public interest generally and the providing units should be considered as some organizations - oriented to achieve the target proposed - that consumes a part of public budgets resources ...

Therefore, management of these organizations should be reformed and the public take more into account, the diversification and enhance of the community needs by the flagging ability to meet their finance and the new state of customer of the citizen.

Or, in this state, is justified his claim that, based on its financial contributions to the creation of common property, he can ask the account - service provider - for the performance achieved.

Which can cause and exacerbate (Vlăsceanu, 1999, p. 57) financial responsibility towards the use of public money.

Responsabilizing organizations on public funds budget management is essential not only in terms of legal issues but also on the level of efficiency of expenditures

There's even assessments that is preferable to achieve a balance between efficiency and effectiveness of services, considering that, while efficiency is important, efficacity is essential.

In these circumstances, we are tempted to subscribe to the opinion that the distinction between enterprise and institution begins to fade out , because - as the public organization suffers a more pronounced process of "marketing – it can no longer make a distinction between them on the net criterion of the nature of the work performed (productive, and non-productive).

Starting from this, we support the idea that it is justified the gradual trend of transformation - by different methods - of public organizations into private structures (even if the shareholders are predominantly public!), who have another way of action, other objectives and others that benefit from another type of management.

It absolutely normal, which is, in fact, one of the emergence of competition in the public administration (in particular, the local), with beneficial effects in various areas - quality of services, decentralization and local autonomy, participation in the business community life etc. - And even transforming the management of public services in a specific business management.

Moreover, laws specific to European governments make reference (and often even explicitly) to the need to strengthen - to express the respect of the legal framework - the principle of the "3 E" (economy, efficiency and effectiveness).

Requirement which appears, however, for many public managers, quite difficult to achieve and to accept.


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Undoubtedly, these elements can be analyzed only in the context of ensuring the right to ATU’ s own resources, which they may (and should) use according to their functions, and only insofar proportional to the powers and responsibilities assumed.

The gradually replacement of deconcentration with decentralization through the transfer of more APL skills in provision of public services - even doubled by the provision of adequate financial resources - is likely, however, to "strangle" its activity, whereas the ability of administrative authorities remains at this level, however, limited.

In such situations, a solution suggested by the current legal framework is the cooperation and association with other public authorities in the country (and abroad), that developed into associations of inter-community development, partnerships of public-private partnership (PPP) or, within certain limits, metropolitan areas.

At the present moment, local and county councils may decide on their participation, with capital goods - in the name and in the interests of local communities – at the establishment of companies or setting up of public education services.

It must be ensured that all these steps in a specific process of real decentralization, the state interests are represented and protected, and the participation (and even involvement) of the Prefect - as representative of the Government - to be active, not only to ensure the respect of legality but also to coordinate activities and to link the interests of various public entities involved in the process.

How to achieve the quality of this goal depends on the social comfort the community members, the political representatives should allow access to dignities to various professionals in administration (giving up to seek solutions that only satisfy personal or group interests).

As guarantor of legality, the Prefect should, according to specialists, concentrate in the future on 3 major directions (Profiroiu and Profiroiu, 2006, pp 9-11) - the protection of vital bases of the Romanian society, preserving social cohesion the national territory, and modernization of the administration.

Undoubtedly, however, if this set of organizations - which use available community resources to serve the general interest - would not be endowed with necessary legal authority, the administration could not conduct this complex of activities.

We see that the authority - as an instrument of management, which enables decisions - is bound by power that can influence or change the actions or concepts of others.

Therefore, it must exist, be closely related to the factors of power and especially representative to the community in whose name exercises its powers.

In these circumstances, modernizing LPA must begin with the modernization the concept of authority and the professionalizing of those who put it into practice.

We will not insist, however, on the potential conflicts of authority which may arise between different representatives of power.

We find, however, that authority is closely related to the powers which the law gives them, and any delegation of authority - between the various participants in the decision - must take account of this.

On the other hand, although they are divided into 4 categories of powers – related to the own staff and the public services of local interest, heritage, budget, taxation and loans and, ultimately, to the external environment - decision-making powers of Local Council must be correlated with the frequency of decisions and, especially, with their effects.

Or, in this respect, we find that for the major powers with strong economic connotations linked to the budget or the common heritage - which are part of strategic decisions - it is necessary a significant authority decision, made on behalf of and for the general interest.

As a consequence, as any act of exercising the authority implies by default to take responsibility before the law and obviously before the community, it is increasingly clear that local economic development must become a leading concern of the administration.

This applies in the process of custody of public services by various operators, in particular from the private sector, especially when the mayor, who is "gifted" with executive authority, has to


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implement Council decisions and to decide unilaterally, a series of measures to manage current community affairs.

Ensuring, in the quality of public authority, the functions of representation, execution and main credits ordinator, by the mayor, he shall, automatically play also the role of executive manager, with many functions (economic or financial management of local services, etc..) limited only by the Council and the public interest.

Therefore, we appreciate that in such circumstances, at the level of the Mayor’s Institution (or President of the County Council) could be statuated - after the private environment model - the functioning of an executive management team (whose roles to be distributed according to the categories of tasks with which the authority is empowered individual).

The team could also include a number of advisers - administrator / manager public, euro-counselor, controller, coaching, ethics adviser, adviser on issues of modernization or image etc. - to provide services and to help achieve performance and lessons, provided in a managerial contract.

To note that, to ensure a certain continuity and stability in the management of this team, it could be formed - as happens in other administrations - both from people who are employed on the exactly period of time as of the local elected, and career civil servants, obviously with a high level of competence.

This way, before the "avalanche" of new skills in strategic management level (Local Council / County Council) and the executive management (Mayor / Chairman), the major interest should be in the delimitation of these activities from the political aspects and in the professionalization of them.

What should determine, implicitly, also the emergence of mutations in the thinking of the electorate, but also in the system of mandating the right decision from him, to the local elected.

CONCLUSIONS We see therefore that, in the current conditions, APL becomes more than a partner to the

business environment, and it transforms into an active participant in the process of sustainable development, becoming just one of the significant financiers of this process.

What determines its modernization in the direction of continuous approaching to the management and to the action mode from the private sector, by using its instruments and redefining its targets.

In these circumstances, the integration of the local public sector in the Romanian administrative space should be examined from another perspective, namely on how the local economy integrates in the system of the national market economy.

Through such an approach, the process of reforming the administration becomes easier. Thus, as an effect of adopting the acquis communautaire, the Romanian economy shows

relatively uniform characteristics, regardless of the level at which it manifests. Therefore, we can finally argue that the extension and the application at the administration

level, of the principle of the 3 E is a favorable prerequisite for a faster and more efficient process of reforming and modernizing the public sector.

REFERENCES: 1. Council of Europe, Information Report on local and regional democracy in Romania, the

document Congress of Local and Regional Authorities of Europe, Strasbourg, 2002; 2. Margareta, Costea, Introduction to Public Administration, Economica Publishing House,

Bucharest, 2000; 3. 3. Crisan, Gh., The Decalogue of the Local Public Administration Reform, Orizonturi

Universitare Publishing House, Timişoara, 2007 A; 4. Crisan, Gh., The Public Management in the context of the Administration Reform,

Orizonturi Universitare Publishing House, Timişoara, 2007 B;


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5. Gheorghe Crisan, Romania and the European Administrative Space, Studia Universitatis Vasile Goldis, Part I, Vasile Goldis University Press, Arad, 2008;

6. Givesius, W. - Guide of the communa policy, Publishing JHW Dietz Nacvhf GmbH Bonn, 1991;

7. Matei, Lucica, Matei, A., Acquis communautaire and the Public Administration, Economica Publishing House, Bucharest, 2000;

8. Nicola, I. - Management of Local Public Services, All Beck Publishing House, Bucharest, 2003;

9. Plumb, I., Reingineria of services, ASE Publishing House , Bucharest, 2004; 10. Popa, E., Local autonomy in Romania, All Beck Publishing House, Bucharest, 1999; 11. Preda, M., Administrative Law - Issues of the public administration, AMIVA Publishing

House, Bucharest, 1992; 12. Profiroiu, M., Alina, Profiroiu, The need of modernization to Prefect’s Institution in

Romania, The Economy and Local Administration, no. 10, 2006; 13. Teodorescu, A. - Treaty of the administrative law, Volume II, Bucharest, Minerva

Publishing House, 1935; 14. Mihaela, Vlăsceanu – The organizations and organizational culture, Trei Publishing

House, Bucureşti, 1999.


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THE ORIGINS, EVOLUTION AND EMERGENCE OF THE HABEAS CORPUS GUARANTEE IN THE ROMANIAN POLITICO-LEGAL LITERATURE BEFORE THE

ROMANIAN CONSTITUTION OF 1991 (I)

PhD Lecturer Lucian-Sorin STĂNESCU “Ştefan Cel Mare” State University of Suceava, Romania

[email protected]

Motto: “The preventive custody was, is and will always be a means of government and an instrument of punishment in the hands of those who, not having the justice on their side, have the power instead. The abuse is the power’s fatality: through it power grows, through it power crashes.” D. V. Barnoschi, 1922

Summary: This study aims at investigating, in its five parts, the origins, evolution and avatars of the most important

constitutional and legal individual guarantee, and also the way in which it has been presented in the Romanian political-legal literature. The first part shows, from the perspective of a typological analysis, the historical and legal circumstances in which the legal institution of “Habeas Corpus” appeared, its development in the Anglo-American world and its reception in the “Declaration of the Rights of Man and of the Citizen” from 1789.

Key words: Magna Charta Libertatum, The Habeas Corpus Act, individual freedom, custody, procedure,

rights. JEL Classification: K14 INTRODUCTION

The almost 800-years old political and legal actuality of the principle of individual freedom,

one of the most important pillars of the modern Euro-Atlantic constitutionalism, suggested to us the utility of a diachronic approach to its original use, its complex evolution and its reception in the pre-constitutional Romanian literature, as well as in our constitutional and procedural-penal doctrine.

The origins and evolution of the Habeas Corpus guarantee: from Magna Charta Libertatum (1215) to the Declaration of the Rights of Man and of the Citizen (1789)

FROM MAGNA CHARTA LIBERTATUM TO THE HABEAS CORPUS ACT

The first constitutional mention of the right to individual freedom (1) can be found in the 39th article of the Magna Charta Libertatum (1215): „No freemen shall not be stopped, imprisoned, deprived of his property, placed outside the law or exiled, except the express provision of the Law authorizes it.” Taking into account only the constitutional side of this act, Paul Negulescu limited himself to giving an incomplete translation of the original text, even though the entire text sounded like this: „Nullus liber homo capiatur, vel imprisonetur, aut dissaisiatur, aut utlagetur, out exuletur, aut aliquo modo destruatur, nee super eum ibimus, nee super eum mit-temus, nisi per legale judicium parium suorum vel per legem terrae” (2). A better adapted translation would be: „No freemen shall be arrested or imprisoned, or deprived of his property, or placed outside the law or exiled or in any way injured, nor will we go upon him nor send upon him, except by the lawful judgment of his peers or by the law of the country.” (3)

In this context, the invocation of the “law of the country” shows, even if indirectly, on the one hand the existence of the freeman’s right not to be deprived of his liberty and, on the other, the


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existence of a judicial procedure of acknowledgement of that right, as a part of the old unwritten Anglo-Saxon right (common law), that were judicially established through Magna Charta Libertatum (4). The Common Law, spread throughout the provinces of the Kingdom beginning with 1166 by the itinerant judges of King Henry II, managed to unite the nation “in respect of some protective rules that are above the King himself”.(5) Concomitantly, the tradition of freemen taking part in the judgment of various conflicts among the inhabitants of the community in the county’s court (Shir gemote) and in the local court (Hundred gemote), whose assemblies were held with a certain frequency and following a certain procedure, dates back to the Anglo-Saxon era (6). Moreover, this text introduces, in an archaic form, the term known today as the lawfulness principle for cases of restriction of the individual freedom, which cannot be just and legal unless based on a rule of law, pre-existent and impartially interpreted (7). In this case, the pre-existent law rule is the law of the country – a law of customary nature. We should add that all the courts with local jurisdiction, such as the Court Leet, the counties and the hundreds, were subordinated, until the times of King Henry III, to the main ordinary courts of law belonging of the King: the Court of King’s Banch, the Court of Common Pleas and the Court of Exchequer. The Court of Chancery, which was considered autonomous, was founded in the 14th century under the administration of the Lord Chancellor. It had the competence to judge the cases terminated by the other courts, the solutions of which were attacked by the unsatisfied parties. (8)

The first documentary attestation of the recognition request of this subjective right, via a judicial order, habeas corpus ad subjiciendum, issued in view of the judicial verification of the legality of restricting a confined person’s freedom (9), is mentioned by William Blackstone, as dating from 1305, during the reign of King Edward I. (10) The name of this writ is of Medieval Latin origins and represents the shortening of the royal command given to the custodian of a prisoner or convicted to present him physically in front of a judicial court, together with the act issued for this purpose and the justification of imprisonment. The meaning of the word habeas, used in the volitive-subjunctive mood, hints at the necessity of observing the procedure.(11)

This procedure became known under the title The Great Writ and had, at first, the significance of a convocation, made through a judicial order, of a prisoner’s or a detainee’s custodian (usually a prison official), with the purpose of bringing the former in front of a tribunal (or, in the early Anglo-Saxon era, in front of the community leader, who was judicially competent and who acted de facto as a magistrate having jurisdiction (12) over protecting the rights of the community’s members). The custodian had the competence to verify the grounds for restricting the person’s freedom and the legality of his imprisonment, in the name of the king, in accordance with the latter’s right to question “why the freedom of any of his subjects is restricted, no matter where this might happen” (13). The King’s Writs regarding the summoning of a person in front of a court were emitted by the Chancellery; this procedure is in use to the present day. (14)

In this minimal version, the contents of this law, justly called proto-procedural, since there was no other set of judicial rules to refer to, except the ones imposed by Magna Charta Libertatum, refer to the temporary releasing from prison of a detainee, at his request or at that of a court of law, with the purpose of publicly bringing to his knowledge the accusations made against him, within a judicial procedure, but without the involvement of other procedural laws (15) – that is, without any complementary judicial procedures.

In the course of time, the English law practice also developed other forms of the Habeas corpus Writ, which created penal rules in matters of restriction of the right to liberty and permitted the association with other penal laws, within a complex of judicial guarantees regarding the individual freedom. There are mentions of the following versions:

• Habeas corpus ad deliberandum et recipiendum, an order issued to bring the defendant in front of a court, with the object of deliberating upon and giving the defendant a decision;

• Habeas corpus ad faciendum et recipiendum, also known as habeas corpus cum causa, an order issued by a superior court to the custodian of a prisoner or a detainee held by order of an inferior court, through which the custodian had to bring the prisoner,


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together with the reason for his imprisonment, so he would receive a decision from the superior court and accomplish it;

• Habeas corpus ad prosequendum, an order which requests the bringing of the prisoner so he can be accused in front of the court;

• Habeas corpus ad respondendum, an order which requests the return of the defendant in court, in order to respond to a new procedure;

• Habeas corpus ad satisfaciendum, an order that requests the custodian of a prisoner to bring the latter back in front of the court, so he can execute a sentence; and

• Habeas corpus ad testificandum, an order which implies the renewed bringing of the defendant in front of the court, so he can testify. (16)

Another (controversial) version of the famous writ is the Capias writ, used with a similar procedural function in the early stages of this judicial institution, when “the sheriff or the prefect arrests the defendant and detains him in a safe place for a few days before he brings him in front of the Court.” (17)

The transformations suffered by the Habeas corpus judicial institution, as the result of the unconscious force of the constitutional law (18), and the increase of the court’s role in the examination of all the aspects of the procedure of limiting one’s freedom, are easy to read into the following example: “Victoria, by the Grace of God, of the United Kingdom of Great Britain and Ireland Queen, Defender of the Faith… We command you that you have the body of C.C. W. detained in our prison under your custody, as it is said, together with the day and cause of his being taken and detained, by whatsoever name he may be called or known, in our Court before us, at Westminster, on the i8th day of January next, to undergo and receive all and singular such matters and things which our said Court shall then and there consider of him in this behalf; and have there then this Writ..” (19) The jurisprudence imposed by the different forms of application of the Habeas corpus judicial writs was legalized by the English Parliament in 1679 under the name of Habeas corpus Act. Constitutionally, the Habeas corpus Act represents a new Pact between the King and the People, as represented by the Parliament. It stipulates, essentially, the fact that „no one can be arrested and brought in front of a judge without a written order of the judicial authorities”. (20) The judicial importance of this law is yet much more complex, as it sets up, in a coherent corpus, a set of norms of penal procedure meant to ensure the efficiency of practicing the right to individual freedom, as well as the procedure to be followed in front of a court, which underlines its value of procedural guarantee of individual freedom. In this respect, Albert Venn Dicey writes: „ The proclamation in a constitution or charter of the right to personal freedom, or indeed of any other right, gives of itself but slight security that the right has more than a nominal existence, and students who wish to know how far the right to freedom of person is in reality part of the law of the constitution must consider both what is the meaning of the right and, a matter of even more consequence, what are the legal methods by which its exercise is secured.” (21) In the preamble to the Act, the law is defined as “An act for the better securing the liberty of the subject”. It specifies the application range in criminal matters and in cases in which subjects spent a long time in prison, thus being abusively harassed. (22) This historic act of the English Parliament empowered the courts to issue Habeas corpus writs even at times when they were not in session, and it established the obligation for the executive authorities to bring the prisoner, within three days of receiving such a judicial ordinance, in front of the court or the judge that had issued the writ, depending on the quality of the person detained and on the material and territorial competences of the judicial authorities (the Lord Chancellor, the Lord Keeper of the Great Seal of England or the judges or barons of the court which had issued the order), together with the justification of the causes for the individual’s restraint or imprisonment. The law also establishes two cases of extension of the 3-day deadline to produce the prisoner in court, namely to 10 days if the detainee is at a distance of 20-100 miles from the court, and to 20 days, if the distance is longer than 100 miles.


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For the uniformity of all Habeas corpus judicial writs, rules are provided about their marking with the words „Per statutum tricesimo primo Caroli secundi Regis” (“by decision of Charles II, the 30th King”) and their signing by the person issuing them. Several new judiciary institutions are legalized and will be part of the Habeas corpus procedure; namely:

• the appeal against the measure of preventive arrest (“... shall be lawful for such a person or persons confined or detained, or for anyone on his or their behalf, to appeal or to complain to the Lord Chancellor or Lord Guardian or any of His Majesty’s judges of any of the Tribunals...”), the officers or the prisoners’ guards having the obligation to bring the detainees in court together with the Habeas corpus writ issued to them and the legal justification for restricting their freedom; and

• the provisional release on bail (“... and then, two days after the party will be brought in front of them, the respective Lord Chancellor or a judge in front of whom the prisoner be brought as mentioned above, will free the prisoner, taking their deposit with one or more guarantees, in any amount at their discretion, considering the quality of the prisoner and the nature of the offense, to make sure that he will present himself at the next session in front of King’s Court at the next term…”) (23)

It is remarkable that imprisoned people have the opportunity to be represented or assisted by another person (section 3), who may place the complaint against the preventive arrest; the term “guardian” is used in section 20, even though only in connection with the defense of those who took such a measure within an action brought forth against violations of this law. Equally important are the proclamation of the “non bis in idem” principle in section 6 of the Act (“No person released under a habeas corpus can be imprisoned again for the same fault.”) and, on the other hand, the penalties specified by the law for the officials violating its dispositions. Thus, the officers’ refusal to issue and to hand the prisoner, within six hours, copies of the orders of imprisonment and detention or to submit his petition of liberation to a competent Court was fined between 100 and 200 pounds, depending on the number of refusals (section 5), and “if someone will send back to prison, knowingly, a released person…, he shall be sentenced to a fine of 500 pounds in favor of the injured party” (section 6).

Chronologically and doctrinally speaking, the Habeas corpus Act is adopted between Thomas Hobbes’ Leviathan or the matter, form and power of an ecclesiastical and civil state (1651), in the very year of Hobbes’ death, 1679, and the Two Treaties on Government (1689) by John Locke. The premises of the two thinkers are the same, namely, the natural state and the social pact (24), but only Locke can be viewed as a precursor in the paradigm of modern constitutionalism, “characterized by the intention to elude a part of the positive law as a will of rulers, in favor of the protection of citizens’ rights.”(25) The historical origins of the social pact in England and the social and political uproars caused by this issue, of which John Locke was a contemporary, explains the teleological meaning of his contractual theory, according to which individuals have established public power through a consensual act of will, in order to achieve specific purposes, and “The State is no longer a mere expression of power or of the arbitrary, but it must, by its nature, seek to guarantee individual rights.”(26)

THE AMERICAN HABEAS CORPUS VS. THE DECLARATION OF THE RIGHTS

OF MAN AND CITIZEN The propagation of the English constitutionalism (27) towards the “Declaration of the Rights

of Man and Citizen” of the French National Assembly on August 26th, 1789, via the Bills of Rights of the American States and the United States Constitution of 1787, has followed a generally known path, the end product being, however, the result of an integrating phenomenon characterized by the “great mutation of the spirits in the 18th century.” (28)

The emergence of the habeas corpus judicial institution in the great bills of rights and national constitutions of the late 18th century and first half of the 19th century requires a typological


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analysis of this phenomenon, due to its specific legal nature and its reception within those fundamental acts, from the perspective of the large law traditions to which they belong.

Generally speaking, the characteristic feature of English constitutional acts is that they don’t proclaim universally valid principles regarding individual freedoms, but rather respond to various abuses by the authorities “by including in their content specific and detailed rules of procedures specific to the English pragmatism” (29), as can be read into the saying „Remedies precede rights”. (30) In this regard, A. V. Dicey shows that “The whole history of the writ of habeas corpus illustrates the predominant attention paid under the English constitution to "remedies," that is, to modes of procedure by which to secure respect for a legal right, and by which to turn a merely nominal into an effective or real right.” (31) Seen from this perspective, not even the American bills of rights apply the distinction (dominant in France) between stating the rights and guaranteeing them. They proclaim the existence of rights, but without neglecting “the remedy”, i.e. the legal procedure to follow in view of their recognition by judicial manner. (32) Consequently, the legal institution Habeas corpus has been defined as “a procedure to which one has an irrefutable right”. (33) The procedural nature of the habeas corpus writs is emphasized by Albert Venn Dicey: “The Habeas corpus Acts are essentially procedure Acts, and simply aim at improving the legal mechanism by means of which the acknowledged right to personal freedom may be enforced”.(34)

The content of this procedure has received new additions and has been continuously in line with the evolution of the idea of freedom and with the democratic rules for the development of the criminal proceedings, the result being a complex of procedural guarantees for the individual liberty. In the Anglo-American succession of constitutional ideas, the habeas corpus was adopted naturally, along with other legal institutions belonging to the common law and to the English jurisprudence law (35), although not without some difficulties due to controversies on the issue of full or partial extension of English law over the legislation of the American colonies (36). The habeas corpus was completed, along the way, with other procedural safeguards, which were to become principles of the criminal procedure. The fact is that, in 1692, the Massachusetts Colony Council adopted a disposition according to which no levy should be imposed without the consent of the General Court (that disposition had deep roots in the Magna Charta Libertatum and in the Petition of Right of 1628), as well as a statement entitled “An Act for a Better Insurance of the Subject’s Liberty and for the Prevention of Illegal Imprisonment” (37), which equated the appropriation and application of the famous English constitutional law.

84 years later, Article 8 of the overture to the U. S. Declaration of Independence (July 4th, 1776), the Virginia Bill of Rights of June 12th, 1776, states that “In any trial for capital crimes or other crimes, any man is entitled to ask about the cause and nature of the allegations brought against him, to seek confrontation with the accusers and their witnesses, to bring or require that witnesses be brought in his favor or anything else that may be favorable to him, to request a prompt procedure by an impartial Jury in the vicinity, without whose unanimous consent he cannot be condemned. Nobody can be obliged to bring evidence against him and no man shall be deprived of his liberty except through a trial by his peers, under the laws of the country”. (38) Easily detected in this text are, besides the judicial control provided by the habeas corpus proceedings on any form of deprivation of a person’s liberty, the presence of the defendant’s rights to be informed immediately about the nature of the allegations made against him and not to incriminate himself, as well as the principles of officialism and of contradictoriness of the criminal trial. Until then, the habeas corpus procedure aimed primarily at eliminating the arbitrariness in the sphere of preventive arrests made by various executive authorities, by checking the legal conditions and the issuing of the preventive arrest warrant only by a court; however, we now witness for the first time the introduction of firm and formal conditions necessary to support such procedural measures based on “sufficient evidence” and on the “detailed description of places, persons or things covered by the order or request,” according to section 12 of the same Bill. (39)

One by one, all the Bills of the founding states of the U.S.A. adopt the guarantee of the habeas corpus, developing the procedural framework within which the latter must take place, as well as its association with other important procedural rights. Thus, the Bill of Rights of the


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Residents of Pennsylvania (September 1776), as well as the Bill of Rights of Delaware (September 1776) foresee, in addition to the guarantee of individual freedom, as formulated in Magna Charta Libertatum, and in addition to the previous statement, the rights to be heard and to receive an advisor (lawyer). (40) The Bill of the Rights of Maryland (November 1776) adds the defendant’s right to receive a copy of the complaint or of the allegations made against him “in a time short enough” in order for him to prepare the defense (41).

The U. S. Constitution even included, in its second article, section 9, the provision that “The privilege of the Habeas Corpus Act will not be suspended except in cases of rebellion or public safety hazard” (42), which proves the importance given to this law by the Founding Fathers, in relation with other individual rights included in the Bill of Rights. (43) Given the fact that all the constitutions of the new states had been preceded by bills of rights proclaiming fundamental principles and guarantying the human rights, the Federal Constitution used the same procedure, especially since the adoption of the Bill of Rights, containing the first eight amendments, smoothed the way to its adoption by all the 13 founding states. (44)

The 4th (searches and seizure), 5th (accusations and property), 6th (judging in criminal trials), 7th (trials by juries) and 8th (bail, fines, punishment) Amendments form a minimal set of rules and procedural safeguards, the first of them being the most important, as far as we are concerned, because it states for the first time “the citizens’ rights to have their persons guaranteed”, in other words the principle of people’s safety, which will henceforth be permanently associated with the principle of individual freedom in constitutional acts and in the criminal procedure codes.

On the other hand, the French Declaration of the Rights of Man and of the Citizen integrated the provisions of the criminal law and criminal procedural law in a wider perspective, that of defining the main natural rights, which essentially distinguishes it from the American bills of rights. Quoting Boutmy, who synthesized the American-French conceptual differences as follows: “the Frenchman shows us what the law must do; the American makes us see, on the contrary, what the law should not be (…). What the Frenchman aims at doing is a statement of the principles necessary for all people’s education; what the American aims at doing is showing the list of cases in which the law can be challenged in front of the Supreme Court of the State.”, Stephane Rials appreciates more the French normative conception, which aspires at the opening and the construction of a better future with the law as an epicenter, describing the same differences as follows: “they (the Americans) would rather build rationally a perfect power starting from human rights, than be contented with the outfit of the human rights against a necessarily imperfect power. Within such a dynamic, the problem of the prudential guarantee of human rights in front of the imperfect law is replaced by that of their implementation, under the form of citizens’ rights, through a perfect law.” (45)

Most wishes of the American citizens, precursory to the Bill of Rights, requested the consecration of a large number of rights, highly esteemed being the civil liberty, the freedom of the press and that of property, “demanding, even though they do not use this exact formula, a form of habeas corpus”. (46) Other claims referred to the right of defense and the principle of proportional sentences.

If, in view of the English constitution, “the right to personal freedom means, in essence, a person’s right not to be subjected to imprisonment, arrest or other physical constraints, in any way without a legal justification” (47), the traditional concern being that of finding the best remedies, i.e. those “procedural ways that ensure the respect for a legal right and through which that turns, from a mere nominal right, into a real, effective one” (48), the French revolutionary vision of the year 1789, as stated in the fourth article of the Declaration, defines freedom as the social measure of the manifestations of all natural rights, its limit being only the law, which “is to be allowed to do whatever does not harm others. Thus, the practicing of the natural rights of each man has no limits, other than those which guarantee the other members of society the same rights. These limits can only be determined by law.” (49)

Once defined, freedom receives its procedural guarantees in the 7th, 8th and 9th articles of the Declaration, by the more or less explicit formulation of some of the most important principles of


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law. The 7th article actually reproduces the habeas corpus guarantee („no man may be accused, arrested, or detained except in cases established by law and in the forms prescribed by it”). The rest of the text speaks about the principle of the supremacy of the law and its equal and unitary nature, by restraining the abuses of those asked to carry it out and the obligation of any citizen lawfully summoned or arrested to comply immediately.

The principles of proportional punishment and of non-retroactivity of the law are stated in the 8th Article (“The law must only establish strictly and evidently necessary punishments and no one can be punished except by the virtue of a law established and promulgated before the offense and legally applicable.”), whereas the 9th Article proclaims the principle of presumption of innocence and the exceptional nature of the preventive arrest measure: “Every person is presumed innocent until pronounced guilty, if the arrest is considered indispensable, any act of coercion except those necessary for his detention must be severely punished by the law.”

CONCLUSIONS From a historical and legal perspective, we may note that the legal institution Habeas

Corpus has gone from the constitutional proclamation and doctrinal delimitation of the individual freedom to the building of a system of procedural guarantees of individual safety in a process of association with other important procedural rights, which in the end were to build the foundation of the great Bills of Rights from the second half of the 18th century, until today.

Therefore, we can say that the habeas corpus guarantee recognizes and verifies, within the framework of compulsory judicial proceedings, the observance of the right to personal liberty and security of the person arrested or detained, as well as his/her procedural rights (i.e. the right to know the nature of the allegations made against him/her, the right to be defended, the right to refrain from incriminating themselves, the right to a fair and public trial, the right to pursue an appeal against the preventive or restrictive deprivation of liberty, the right to be released on bail), and makes it the task of the state authorities to handle the procedural obligations correlative to these rights, to bring, within a definite and undeniable span of time, any person detained, together with the supporting evidence for the real causes which led to his/her deprivation of liberty, before a judge, who must decide upon the legality and soundness of the arrest or possession, after hearing the person out and starting from the absolute legal presumption of innocence.

The sanctions for the non-observance of these obligations or the groundlessness of the reasons which determined the deprivation or restriction of freedom consist in the revocation of the measures taken against the respective person and his/her immediate release, associated with the opening of legal channels for the obtaining of material compensations by the person deprived of liberty without justification.

NOTES

1. P. Negulescu, G. Alexianu, Tratat de drept public, Casa Şcoalelor, Bucureşti, 1942, p. 117. 2. A. V. Dicey, Introduction to the study of the Law of the Constitution, (LF. Ed.), 1915, at:

http://www.constitution.org/cmt/avd/law_con.htm 3. O. Predescu, M. Udroiu, Convenţia europeană a drepturilor omului şi dreptul procesual penal român, C. H.

Beck, Bucureşti, 2007, p. 7. 4. J. D. Robertson, Habeas Corpus. The most extraordinary writ, at: http://habeascorpus.net/asp/ 5. A. Maurois, Istoria Angliei, Ed. Politică, Bucureşti, 1970, p. 160. 6. Gh. Gheorghe, Separaţia puterilor în stat. Teorie şi realitate, Ed. Ştiinţifică şi Enciclopedică, Bucureşti, 1976,

p. 80. 7. V. Duculescu, Protecţia juridică a drepturilor omului – mijloace interne şi internaţionale, Lumina Lex,

Bucureşti, 1998, p. 24. 8. Gh. Gheorghe, op. cit., p. 82. 9. http://www.merriam-webster.com/dictionary 10. http://en.wikipedia.org/wiki/Habeas_corpus 11. Idem. 12. W. F. Duker, A constitutional history of habeas corpus, Greenwood Press, 1980, p. 13.


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13. J. D. Robertson, op. cit. 14. Gh. Gheorghe, op .cit., p. 83. 15. L. May, Habeas Corpus and Global Justice, at: http://publicethicsradio.files.wordpress.com/2008/10/habeas-

corpus-and-global-justice.pdf 16. http://en.wikipedia.org/wiki/Habeas_corpus 17. W. F. Duker, op. cit., p. 20. 18. Idem, p. 12. 19. A. V. Dicey, op. cit. 20. P. Negulescu, G. Alexianu, op. cit., p. 117. 21. A. V. Dicey, op. cit. 22. http://www.constitution.org/eng/habcorpa.htm 23. See in this respect the entire text of the Habeas Corpus Act, in English, at:

www.constitution.org/eng/habcorpa.htm 24. G. del Vecchio, Lecţii de filosofie juridică, Europa Nova, sine anno, p. 91. 25. F. Farago, Teoria politică modernă. Hobbes şi Locke, in: Jacqueline Russ (coord.), Istoria filosofiei (II.

Inventarea lumii moderne), Univers Enciclopedic, Bucureşti, 2000, p. 278. 26. G. del Vecchio, op. cit., p. 93. 27. P. Negulescu, G. Alexianu, op. cit., p. 109. 28. St. Rials, Declaraţia drepturilor omului şi ale cetăţeanului, Polirom, Iaşi, 2002, p. 265. 29. C. Bîrsan, Convenţia europeană a drepturilor omului. Comentariu pe articole. Vol. I. Drepturi şi libertăţi, C.

H. Beck, Bucureşti, 2005, p. 22. 30. St. Rials, op. cit., p. 268. 31. A. V. Dicey, op. cit. 32. Idem. 33. J. D. Robertson, op. cit. 34. A. V. Dicey, op. cit. 35. J. D. Robertson, op. cit. 36. W. F. Duker, op. cit., p. 99. 37. Idem, ibidem. 38. St. Rials, op. cit., p. 373. 39. See in this respect the 12th section of the Virginia Bill of Rights (1776): “Each Warrant will be considered

offensive and oppressive if issued without sufficient evidence and if the order or request adressed to the Officer of the State to investigate suspected places, to arrest one or more persons or to seize goods do not include a nomination or a detailed description of places, persons or things covered by the order or request; it will never emit things as those mentioned above”, in: St. Rials, op. cit., p. 373.

40. See in this respect the stipulations of the 9th and 10th articles in the Pennsylvania Bill of Rights and those of the 12th – 17th articles in the Delaware Bill of Rights, in: Idem, p. 377-379.

41. See in this respect the stipulations of 19th – 23rd articles of the Maryland Bill of Rights, in: Idem, p. 383-384. 42. V. Duculescu, C. Călinoiu, G. Duculescu, Drept constituţional comparat, Lumina Lex, Bucureşti, 1999, p.

2003. 43. J. D. Robertson, op. cit. 44. V. Duculescu, C. Călinoiu, G. Duculescu, op. cit., p. 63-66. 45. Idem, p. 275-276. 46. Idem, p. 82-83. 47. A. V. Dicey, op. cit. 48. Idem, ibidem. 49. St. Rials, op. cit., p. 14.

BIBLIOGRAPHY

1. Books:

1. C. Bîrsan, Convenţia europeană a drepturilor omului. Comentariu pe articole. Vol. I. Drepturi şi libertăţi, C. H. Beck, Bucureşti, 2005

2. V. Duculescu, Protecţia juridică a drepturilor omului – mijloace interne şi internaţionale, new, revised and abridged edition, Lumina Lex, Bucureşti, 1998

3. V. Duculescu, C. Călinoiu, G. Duculescu, Drept constituţional comparat. Vol. II, second, revised and abridged edition, Lumina Lex, Bucureşti, 1999

4. W. F. Duker, A constitutional history of habeas corpus, Greenwood Press, 1980 5. F. Farago, Teoria politică modernă. Hobbes şi Locke, in: Jacqueline Russ (coord.), Istoria

filosofiei (II. Inventarea lumii moderne), Univers Enciclopedic, Bucureşti, 2000


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6. Gh. Gheorghe, Separaţia puterilor în stat. Teorie şi realitate, Ed. Ştiinţifică şi Enciclopedică, Bucureşti, 1976

7. A. Maurois, Istoria Angliei. Vol. I, Ed. Politică, Bucureşti, 1970 8. P. Negulescu, G. Alexianu, Tratat de drept public. Tomul I, Casa Şcoalelor, Bucureşti, 1942 9. O. Predescu, M. Udroiu, Convenţia europeană a drepturilor omului şi dreptul procesual

penal român, C. H. Beck, Bucureşti, 2007 10. St. Rials, Declaraţia drepturilor omului şi ale cetăţeanului, Polirom, Iaşi, 2002 11. G. del Vecchio, Lecţii de filosofie juridică, Europa Nova, sine anno

2. On-line sources:

12. V. Dicey, Introduction to the study of the Law of the Constitution, (LF. Ed.), 1915, at: http://www.constitution.org/cmt/avd/law_con.htm

13. L. May, Habeas Corpus and Global Justice, at: http://publicethicsradio.files.wordpress.com/2008/10/habeas-corpus-and-global-justice.pdf

14. J. D. Robertson, Habeas Corpus. The most extraordinary writ, at: http://habeascorpus.net/asp/

15. www.constitution.org/eng/habcorpa.htm 16. http://en.wikipedia.org/wiki/Habeas_corpus 17. http://www.merriam-webster.com/dictionary


275

COURT OF JUSTICE OF THE EUROPEAN UNION VS. THE TREATY OF LISBON

Lecturer Ph.D. Răzvan VIORESCU “Stefan cel Mare” University of Suceava, Romania

[email protected]

Abstract The Treaty of Lisbon, which was signed on 13 December 2007 by the 27 Heads of State or Government of

the Member States of the Union, comes into force on 1 December 2009. It amends the two fundamental treaties - the Treaty on European Union (TEU) and the Treaty establishing the European Community, with the latter to be known in future as the ‘Treaty on the Functioning of the European Union' (TFEU).(1) The Treaty of Lisbon makes changes to the organisation and jurisdiction of the Court of Justice of the European Union.

Keywords: Treaty of Lisbon, Court of Justice of the European Union, freedom, security and justice, Charter of Fundamental Rights of the European Union

JEL: K39 1. INTRODUCTION The European Union, which will henceforth have legal personality, will replace the

European Community. Accordingly, under the Treaty of Lisbon, the 'pillar' structure will disappear and the Union will have a new institutional framework. As a result, in common with the institutions to be renamed, the whole court system of the European Union will be known as the Court of Justice of the European Union, (2) comprising three courts: the Court of Justice, the General Court and the Civil Service Tribunal.

2. NEW REGULATION IN THE ORGANISATION OF THE COURT AND THE

APPOINTMENT OF ITS MEMBERS With regard to the creation of specialised courts, the Treaty of Lisbon maintains some

existing provisions but introduces certain changes in relation to procedures for the creation of such courts, namely that, from now on, they will be created in accordance with the ordinary legislative procedure (that is to say by co-decision with a qualified majority) rather than, as hitherto, by unanimity.

It follows from the Treaty of Lisbon that a request for amendment of the Statute of the Court of Justice of the European Union (3) will be deemed to be a 'draft legislative act' (4) and must be subject to the ordinary legislative procedure. By contrast, the rules on the Judges and Advocates General and the language arrangements of the Court will remain subject to the unanimity rule.

With regard to the arrangements for the appointment of Members of the Court, the Treaty of Lisbon preserves the existing provisions in so far as Judges are appointed by common accord of the Governments of the Member States for six years, but from now on they will be appointed after consultation of a panel responsible for giving an opinion on candidates' suitability to perform the duties of Judge and Advocate General of the Court of Justice and the General Court. This panel will comprise seven persons chosen from among former members of the two Courts, members of national supreme courts and lawyers of recognised competence, one of whom will be proposed by the European Parliament. Acting on the initiative of the President of the Court of Justice, the Council will adopt decisions establishing the panel's operating rules and appointing its members.

With regard to Advocates General, there is provision under a declaration for their number to be increased from 8 to 11 on a request by the Court of Justice.(5)


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3. NEW CHANGES IN RELATION TO THE JURISDICTION OF THE COURT OF JUSTICE OF THE EUROPEAN UNION AREAS

The pillar structure introduced by the Maastricht Treaty will disappear. That being the

case, the jurisdiction of the Court of Justice of the European Union will extend to the law of the European Union, unless the Treaties provide otherwise.(6)

Thus, the Court of Justice will acquire general jurisdiction to give preliminary rulings in the area of freedom, security and justice, as a result of the disappearance of the pillars and the repeal by the Treaty of Lisbon of Articles 35 EU and 68 EC which imposed restrictions on the jurisdiction of the Court of Justice.

First, as regards police and judicial cooperation in criminal matters,(7) the jurisdiction of the Court of Justice to give preliminary rulings will become binding and will no longer be subject to a declaration by each Member State recognising that jurisdiction and specifying the national courts that may request a preliminary ruling. Under the Treaty of Lisbon, the field of police and criminal justice will become part of the general law, and any court or tribunal will be able to request a preliminary ruling from the Court of Justice. Transitional provisions nevertheless provide that that full jurisdiction will not apply until five years after the entry into force of the Treaty of Lisbon.(7)

Second, as regards visas, asylum, immigration and other policies related to free movement of persons(8) (in particular, judicial cooperation in civil matters, recognition and enforcement of judgments), any national court or tribunal - no longer just the higher courts - will now be able to request preliminary rulings, and the Court will have jurisdiction to rule on measures taken on grounds of public policy in connection with cross-border controls. Consequently, the Court of Justice will have general jurisdiction in this area from the date of entry into force of the Treaty of Lisbon.

In addition, the Charter of Fundamental Rights of the European Union (9) will have the same legal value as the Treaties.(10) It will form part of the body of constitutional rules and principles by reference to which the Court of Justice can adjudicate. However, the Charter cannot be invoked against the United Kingdom or Poland, which are covered by a derogation,(11) the effect of which is that the Charter will not extend the ability of the Court of Justice or of any court or tribunal of those two Member States to find that laws, regulations or administrative provisions, practices or action are inconsistent with the fundamental rights or principles that it reaffirms. The Heads of State and of Governments have, moreover, agreed to extend that derogation to the Czech Republic in the future.(12)

Although the pillar concept will disappear with the Treaty of Lisbon, the common foreign and security policy (CFSP), under Title V of the EU Treaty (13), remains subject to special rules and specific procedures. Accordingly, the Court of Justice will not have jurisdiction (14) to monitor provisions relating to that policy or acts adopted on the basis of those provisions, subject to two exceptions, namely:

a. the Court will have jurisdiction to monitor the delimitation of the Union's competences and the CFSP, the implementation of which must not affect the exercise of the Union's competences or the powers of the institutions in respect of the exercise of the exclusive and shared competences of the Union;(15)

b. it will have jurisdiction over actions for annulment brought against decisions providing for restrictive measures against natural or legal persons adopted by the Council in connection, for example, with combating terrorism (freezing of assets).(16)

3. PROCEDURES The preliminary ruling procedure will be extended to acts of European Union bodies,

offices or agencies,(17) which will thus be incorporated into the law of the Union which can be interpreted, and the validity of which can be reviewed by the Court of Justice at the request of


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national courts or tribunals, enabling those courts or tribunals, for example, to ascertain whether their national legislation is in conformity with European Union law.

The Treaty of Lisbon introduces a provision requiring the Court of Justice to act with the minimum of delay if a question referred for a preliminary ruling is raised in a case pending before any court or tribunal of a Member State with regard to a person in custody.(18) Reference is thus made in the body of the Treaty itself to the urgent preliminary ruling procedure (PPU), which came into effect on 1 March 2008, and which applies to the area of freedom, security and justice.

Under the Treaty of Lisbon the Court of Justice may also review acts of the European Council, which the Treaty recognizes as a separate institution. New provisions(19) state that the Court of Justice may, at the request of the Member State concerned, decide on the legality of an act adopted by the European Council or by the Council where a clear risk has been identified of serious infringement by that Member State of certain values (20) (respect for human dignity, respect for human rights, etc).(21)

Similarly, the Court of Justice will have jurisdiction under the same conditions in actions brought by the Court of Auditors, by the European Central Bank and, from now on, by the Committee of the Regions for the purpose of protecting their prerogatives.

The Treaty of Lisbon eases the conditions for the admissibility of actions brought by individuals (natural or legal persons) against decisions of the institutions, bodies, offices or agencies of the European Union. Individuals may bring proceedings against a regulatory act if they are directly affected by it and if it does not entail implementing measures. Consequently, individuals will no longer have to show that they are individually concerned by the act in question.(22)

In the review of compliance with the principle of subsidiarity, it will be possible for a Member State to bring before the Court of Justice an action from a national Parliament or one of its chambers for annulment of a legislative act on grounds of infringement of the principle of subsidiarity. The action must be formally lodged by the Government of a State but may also simply be 'notified' by that Government, the true author of the action being the national Parliament or a chamber thereof.(22) Similarly, the Committee of the Regions will be able to invoke an infringement of those principles, provided the acts in question are acts on which it is required to be consulted.

In addition, the Treaty of Lisbon speeds up the system of pecuniary sanctions (lump sum and/or penalty payment) in the event of non-compliance with a judgment establishing a failure to fulfill obligations.(23) It also enables the Court of Justice to impose pecuniary sanctions, once the initial judgment establishing a failure to fulfill obligations has been given, in the event of a failure to notify to the Commission national measures transposing a directive.(24)

4. CONCLUSION Lastly, after five years, the Commission will be able to bring actions for failure to fulfill

obligations in relation to measures concerning police cooperation and judicial cooperation in criminal matters adopted before the entry into force of the Treaty of Lisbon.

NOTES

(1) Only the European Atomic Energy Community or 'Euratom' will remain (Protocol No 1 amending the Protocols annexed to the Treaty on European Union, to the Treaty establishing the European Community and/or to the Treaty establishing the European Atomic Energy Community).

(2) Article 19 TEU. (3) The Statute of the Court of Justice of the European Union appears in Protocol No 3. (4) Protocol No 2 on the application of the principles of subsidiarity and proportionality. (5) Declaration No 38 on Article 252 TFEU of the Treaty on the Functioning of the European Union regarding

the number of Advocates General in the Court of Justice. (6) Article19TEU. (7) Formerly Title VI of the EU Treaty.


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(8) Article 10 of Protocol No 36 on transitional provisions. It is provided that, as a transitional measure, the powers of the Court of Justice are to remain the same with respect to acts in the field of police cooperation and judicial cooperation in criminal matters which have been adopted before the entry into force of the Treaty of Lisbon. This transitional measure is to cease to have effect five years after the date of entry into force of the Treaty of Lisbon.

(9) Formerly Title IV of the EC Treaty. (10) Furthermore, Article 6(2) TEU provides that the Union shall accede to the European Convention for the Protection of Human Rights and Fundamental Freedoms. Such accession shall not affect the Union's competences as defined in the Treaties. Protocol No 8 states that the accession agreement is to specify, in particular, the specific arrangements for the Union's possible participation in the control bodies of the European Convention [and] the mechanisms necessary to ensure that proceedings by non-Member States and individual applications are correctly addressed to Member States and/or the Union as appropriate'. This accession 'shall not affect the competences of the Union or the powers of its institutions'. (11) Article 6(1) TEU. (12) Protocol No 30 annexed to the TFEU on the application of the Charter of Fundamental Rights of the European Union to Poland and to the United Kingdom. (13) Conclusions of the European Council of 29 and 30 October 2009 state that Protocol No 30 will apply to the Czech (14) Article 24 TEU. (15) Article 275 TFEU. (16) Article 40 TEU (17) Article 275 TFEU. (18) Article 267 TFEU. (19) Article 267 TFEU. (20) Article 269 TFEU. (21) Article 2 TEU. (22) Such proceedings must be brought within one month from the date of that determination and the Court of Justice must rule within one month from the date of the request. (23) Article 263 TFEU. (24) The Maastricht Treaty introduced the principle of subsidiarity. Article 5 of the EC Treaty defines it in these terms: 'in areas which do not fall within its exclusive competence, the Community shall take action, in accordance with the principle of subsidiarity, only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community'. Another principle closely associated with it is the principle of proportionality, by which any action by the Community shall not go beyond what is necessary to achieve the objectives of this Treaty.

BIBLIOGRAFY 1. Treaty of Lisbon 2. Charter of Fundamental Rights of the European Union 3. European Convention for the Protection of Human Rights and Fundamental Freedoms 4. Protocol No 30 annexed to the TFEU on the application of the Charter of Fundamental Rights of the European Union 5. Maastricht Treaty


279

THE LOCAL BUDGETARY PROCESS AND THE SOCIAL-CULTURAL DEVELOPMENT OF THE TERRITORIAL ADMINISTRATIVE UNITIES

Lecturer PhD. Student Cristinel ICHIM

“Stefan cel Mare” University of Suceava, Romania [email protected]

Abstract:

The local public expenses for the social-cultural actions have an important economical and social role, their evolution being a consequence of the economic development of the country, and their volume is imposed by the demographic factor. The interdependence of the expenses’ elements for social-cultural actions is indirectly conceived as an effect in the economic growth as follows: on one hand, the growth of the teaching at all levels accompanied by adequate measures concerning the improvement of all the other social-cultural actions have effect upon the economic growth, and, on the other hand, the aggregate effect of the investments in human resources leads to the growth of the PIB, which constitutes the basis for the allocation of some bigger sums for social-cultural actions. An important aspect of the local budgetary process having a positive impact on the social-cultural evolution of the local community is represented by the improvement of the funding demands’ substantiation of the social-cultural actions. Then, the realisation of the social-cultural development strategies of the local communities represents a necessity in what concerns the evaluation of the existent situation, of the evolution of the main indicators and also for the identifications of the most appropriate directions of development of the localities according to the general frame of the European society. The social-cultural development of the localities can be stimulated also by attracting funds from the funding European programs for objectives of this kind. Also, as a support to the social-cultural development of the administrative-territorial unities come the provisions of the present Fiscal Code which stipulates a series of exemption from taxes and local taxes of the buildings and lands having this destination or for some activities organized with humanitarian purposes.

Key words: local budget, local budgetary process, public expenses, culture, development, development strategy

JEL Classification: E60, H72, H83

1. INTRODUCTION

Within this paper I have proposed to emphasize the connexion that exists between the improvement of the administration action of the local resources by means of the local budgetary process and of When they elaborate and they execute the local budgets, the local authorities use a diversity of financial instruments for the social and cultural development of the communities. Taking into account the current economic situation and the limited resources, the main solutions with direct impact upon the economical and social-cultural development are: - The allocation of fiscal facilities - The usage of the funding programs from European funds - Solutions based on the usage of the property on buildings and on public property lands. - The promotion of the private public partnership - Good and rigorous substantiation of the social-cultural expenses from the local budgets.

2. THE LOCAL BUDGETARY PROCESS AND THE LOCAL DEVELOPMENT

The local development is realised through the management of the local public administration in which a main role is represented by the elaboration and the execution of local budgets. The progress of the community is assured by the capacity of the local leaders to adopt the most appropriate decisions depending on the new economic and social conditions. As a manager, the local public administration must know very well the human, intellectual and financial resources of the community in order to achieve the proposed aims.


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The local budgetary process is in a close connexion with the economic and social-cultural development of the territorial administrative unities because this implies the cashing of the budgetary incomes on which depend the local authorities to supply the local services to the citizens or to supply these services by a third party such as: the supply with water, common transportation, sanitation, public lighting, warning and extinction of fires, protection and security of the citizen, sanitary assistance. Also, by executing the expenses, the local public administration creates and maintains a local climate favourable to citizens and local economic agents so as they thrive, but it also stimulates the creation and the extension of economic agents, having a direct impact on the citizens by increasing the personal incomes and by creating new jobs. The access of the population in schools, hospitals and stores is also assured, and the existence of some local public services of high quality increase the attraction of that particular area both for the citizens and for the economic agents willing to settle in that area. As a part of the local general budget of a country, local budgets accomplish a complex role, which comes mainly from the general role of the state budget. Thus, the local budget accomplishes the financial role of the resources mobilization and of their local redistribution depending on the tasks that correspond to each administrative-territorial unity. Highly connected with the financial role is the economic one, due to the fact that in this way a more accentuated correlation is realised between the decisions of realising public expenses and the real cost of the resources implied in this. Taking into consideration that the local administration has a series of economical tasks - realising the local infrastructure, the extension of the water supply networks, the assurance of public lighting, the organisation of public transportation and the management of the local subordinated unities we can assume that the funding of these local resources expediencies assure a more efficient management of the resources and eliminate the bureaucratic hierarchy. Likewise, the theoretic presumption of the expenses efficiency is associated with the possibility of changing the due, taxes, and the citizens and the economic agent’s contributions, depending on the advantages of which each and every one benefits from the public unities. Such a correlation cannot be realised accurately in practice but the evaluation of the local community needs can be done easily, the expenses realised in the benefit of their satisfaction being covered by the effort of the local community and of the allocations received from the central budget. The local development can be interpreted as a qualitative (socio-cultural) but also as a quantitative (economic) phenomenon. The social-cultural component of the local development aims at creating an equity climate, by fighting against poverty and by promoting the individual identity in a large diversity. Likewise, the development has in mind to eliminate the discrimination between the generations, mainly by giving a high importance to underprivileged categories.[1] Generally speaking, we can talk about the human development and the reinforcement of individual capacities through education, adhesion to ethic values and social development which concerns social and cultural relations, the participation of the citizens to the decisional process within the public authorities. The economic growth will be associa ted with the development, only when there is a structural modification in the socio-economical system, meaning that it will improve the quality of life and of the environment, it will preserve the cultural patrimony, it will imply the community when solving the common problems and when commonly valorising the benefits. An important role comes to the local budgetary process from a socio-cultural point of view. In this way, the substantiation of the social-cultural expenses, whose funding is in the hands of the local administration must be taken into consideration and improved. Local budgets highly contribute to funding the cultural activities, but also the social ones, such as: the insurance of the social lodging for those who have very small incomes, according social assistance, protecting health by the network of regional hospitals, insurance of the public order and of public wealth. The public expenses for social-cultural actions have an economic and social role, their evolution being a consequence of the economic development of the country, and their volume is imposed by the demographic factor. The interdependence of the expenses elements for social-cultural actions is indirectly conceived as an effect in the economic growth as follows: on one hand, the growth of the teaching at all levels accompanied by adequate measures concerning the


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improvement of all the other social-cultural actions has effect upon the economic growth, and, on the other hand, the aggregate effect of the investments in human resources leads to the growth of the PIB, which constitutes the basis for the allocation of some bigger sums for social-cultural actions.

3. THE IMPROVEMENT OF THE SUBSTANTIATION OF THE SOCIAL ACTIONS FUNDING DEMANDS

An important aspect of the local budgetary process with a positive impact upon the social-cultural evolution of the local community is constituted by the improvement of the substantiation of the social action funding demands. These expenses are covered by public or private sources (budgetary funds and the incomes realized by the social-cultural institutions). The budgetary expenses for the pre-university teaching, starting with 2001 are financed by local budgets of the communes, cities, towns, respectively the sectors of Bucharest which detain the educational unities, from the split sums from some state budget incomes and other local budget incomes. Special education is financed by the budgets coming from the County Board and Bucharest. We must mention that the lands and buildings in which the state pre-university educational unities unfold their activity are a part of the public domain of the territorial-administrative unities, and those in which the special educational unities function, belong to the public domain of the county. A special importance is represented by the financial planning of the expenses for the education, the determination of their annual level, of the sources of funding and especially of their distribution and usage. The sizing of these expenses is made according to a series of specific elements regarding the educational contingents (children, pupils, students) registered that particular educational year but also to the unitary cost for each educational form and unity. In order to realize some objectives of the social politics regarding the cultural, artistic services, the local authorities give a large sum of their financial resources for the organization and functioning of some institutions specialized in these domains such as the institutions of art, culture, cultural patrimony and artistic bands. The financial resources allocated to culture and art, altogether with those for education contribute to the increase of the human capital quality (the realisation and the improvement of the cultural level, the education of taste and moral and ethic ideals, raising the degree of civilisation and education, contribute to the creation of human personality). Therefore, these financial resources belong to the investment in human resources, having an ulterior and indirect effect, influencing in a positive manner the economical and social activity bringing contribution to the economic growth. The activity developed by these institutions can be materialised in certain material goods having a spiritual value or can take the form of some cultural artistic services. Cultural artistic activities are financed by the state budget or by the local budgets depending on their subordination, be it in totality or partially, by allocating subsidies for the completion of personal incomes. The calculation, the analysis and the pursuit of some specific indicators of the actions of art and culture such as the libraries, culture houses, museums, theatres, the readers number, visitors, spectators, permit the formulation of some appreciations and conclusions regarding the correlation between their dynamics and the dynamic of the allocated financial resources. Funding the expenses of the art and culture institutions is realised by:

a) The budgetary funding for the sustenance and working of the respective institutions and the budget payment of eventual realised incomes.

b) The auto funding of some cultural artistic activities, respectively the keeping of the realised incomes in order to cover some exact expenses and the receipt for the completion of some budget subsidies.

c) The integral auto-funding of the institutions which have sufficient incomes to ensure their expenses.


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The tendency manifested in this domain concerns two aspects: resizing the expenses, concomitantly with the correct re-evaluation of the incomes, so that the completion subsidies allocated by the budget be much more rigorously determined; the second aspect refers to the incentive of the culture and art institutions in the development of some activities which produce incomes, without affecting the quality of the cultural act. For each person, as for the entire collectivity, health means one of the most important factors which ensure the development of life and of the activity. The public expenses for health are allocated to the support and to the functioning of the sanitary institutions. For the correct substantiation of the health expenses level, numerous indicators are taken into consideration, at the level of each administrative territorial unity, such as: the number of medical dispensaries, hospitals, the number of beds from hospitals, of sanatoriums, the medium number of days spent in a hospital bed. A special importance in the expenses for health is given to the indicators which concern the medium annual expenses for the support of the commune dispensary and its working per territorial habitant, the medium daily expense of food per bed from county hospitals, sanatoriums as well as the expense for the sustenance and working of the cars which serve these sanitary unities. The health expenses present a growth tendency as a consequence of the amplification of the necessity to protect health as an effect of the structure of the population, of the accentuation of risk factors, of the increase of medical benefits. Offering social assistance represents another important side of social politics of the state. Social assistance refers mainly to helping old people, handicap person, the disabled, and other helpless persons who do not benefit of high incomes and support. As forms of means of social assistance we mention the help for the old persons who do not have incomes or other socially rejected persons who imply financial help or the sustenance offered in special homes for old, disabled and handicapped persons. Within the expenses for social assistance are allocated funds for old people homes, handicapped hospital homes, soup chicken, and centres for minors and family placement. For the substantiation of the level of these expenses within a local budget we must take into account the following indicators:

- The number of people who do not have incomes, for whom a sum of money is established by law and it is given half-yearly

- The medium number of those who benefit of assistance in an old people home and the medium expense for the assistant

- The medium number of handicapped people and the medium expense.

4. DEVELOPMENT STRATEGIES AND FUND ATTRACTION FROM THE EUROPEAN FUNDING PROGRAMS

From the point of view of the evaluation of the existent situation and of the evolution of the main indicators, the realisation of the social-cultural development strategies of the local communities represents a necessity for the identification of the most appropriate directions of development of the localities, according to the general frame of the European society. At the level of the North- East region the Strategy of regional development was elaborated and has in its structure objectives and directions of intervention in the social cultural area. Thus, within the 1 Priority, “Infrastructure and environment” Measure 1.6 Rehabilitation and development of the educational, social and health infrastructure and Measure 1.7 Establishment of social assistance centres will be financed. The actions which will be financed in order to accomplish the objectives of the two measures are:

- The rehabilitation and the development of the educational infrastructure - The restoration of the educational infrastructure of trade and technical vocational schools.


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- The rehabilitation of the spaces designated to trade schools and the reintegration of those who received other destinations

- The rehabilitation and the development of health infrastructure - The development of the infrastructure associated to social services - Alternative systems as a support for children and adults in difficulty - The improvement of the conditions for the people exposed to risk situations, by modernizing

and rehabilitating the existent centres. - Offering home social assistance - The establishment of social assistance centres

Likewise, the 5Th priority the development of human resources and social services within the development strategy in the north east Region contains measures regarding the social cultural development of the region. The actions which will be taken in the region in 2007-2013 aim at: - The development of abilities and skills both for the graduates who enter the labour market and for those already employed - Specific forming actions concerning the increase of the professional performances of human resources afferent to the local and regional business environment. - The supply of training for the disadvantaged and socially rejected categories concerning the growth of the degree of social inclusion and of the development of abilities and competences for their integration on the labour market. - The improvement of the quality of the educational system from the secondary and high-school education - The orientation and the training of students for qualifications demanded by the labour market through the School of Arts and Trades. -the improvements of the quality of human resources within the education through continue training activities - The development of the partnership school-family -the creation of specialized services for home care - The creation of alternative services of protection of all disadvantaged categories -the enhancement of the collaboration between the specialized public institutions and the ONG sector which activate in the protection and social assistance domain. The social cultural development of the localities can also be boosted by funds attraction and European funding programs for the objectives of this kind. Due to the funding programs ran by ADR north east over 5000 jobs have been created and other 3000 people have trained and qualified themselves. Until now, with the help of the Regional Development Agency the North East Region has beneficiated of over 118 projects of infrastructure development, social services development and educational, vocational and technical system development. In this context it is relevant to show that recently the National Authority for the Protection of Child Rights has launched the project “Communitarian services of preventing the separation of the child from his family” continuing the series of activities designed to the implementation of the national strategy in the domain of protection and promotion of the child rights. Financed according to the Loan Concord between Romania and the Development bank of the European National Board, ratified by HG Nr.9281 from 2007, the project represents one of the interventions of ANPCD for the decentralisation of social services for child protection at the level of local community. The general objective of the project is represented by the development of a network of communitarian services such as daily services in towns, counties and communes concerning the prevention of child separation from his family as well as the development of local stuff structure by training some people to accomplish the demands imposed through the standards regarding child protection. In order to receive funding for communitarian services, only the County Boards, and the Local Boards of towns, counties, communes and the sectors of Bucharest can ask for funds, respecting the conditions presented in the Manual of Implementation of the project, posted on the internet page of ANPCD. The funding will be attributed within a contest of


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subprojects from which the winners could receive 80000 euro for the establishment of a daily service. Starting with 2008, to develop the social services system, several programs can offer the direct access to funds:

- The regional operational program – “the Improvement of the social infrastructure”, the major domain of intervention 3.2 – Rehabilitation/modernisation/development and equipment of social services infrastructure

- The sectorial operational program – “The development of human resources”- “priority Axe 6 – The promotion of social inclusion”.

Suceava has ran in partnership with the Parish “St. Friday” a project entitled “Daily Social Centre St. Friday”, co-funded by the European Union through Phare Programme 2001 – Economic and Social Cohesion, Investment Scheme in Social Services , Romania, North-East Region. This project has gained a grant funding of 133 594 Euro. The objectives of this project were:

- The establishment of the Daily social centre St. Friday, necessary for the solving of all urgent cases appeared in Suceava, having a favourable impact to the development and implementation of social assistance system

- Developing the capacity of social assistance in Suceava, the creation of communitarian services for the vulnerable groups from Suceava, children and old people in need.

- The diminishing of poverty by according daily social assistance for approximately 20-23 children and the tuning of free medical consults for approximately 8 people per day, approximately 160 old people per month, 40% being effectuated at the old person’s house.

- Daily social centre supports children from families with a minimum wage, offering services of semi-boarding school, realised by people qualified in this way.

- The diminishing of unemployment by creating 7 new jobs for the unemployed people - Strengthening the capacity of local administration to create efficient partnerships with the

church and social society for the implementation of these undertaking of the social services. The purpose of this project has been materialised in a daily social centre with consulting rooms, where there is stuff specialised in social assistance, psycho-pedagogy, a competent team made up of a dentistry, a lab medical assistant, a generalist medical assistant who serves for free the people with minimum wages or without any income.

5. BENEFITS GIVEN BY THE FISCAL CODE As a support to the social-cultural development of the administrative-territorial unities come the provisions of the present Fiscal Code which stipulates a series of exemption from taxes and local taxes of the buildings and lands having this destination or for some activities organized with humanitarian purposes. Thus, the buildings which do not have taxes are:

- The buildings considered historical architectural and archaeological monuments, museums, memorial houses, excepting the rooms which are used for economical activities

- The buildings which due to the destination represent cult houses, belonging to religious cults, their components being officially recognized in Romania, excepting the rooms which are used for economical activities.

- The buildings which represents the patrimony of the state unities, confessional or particular of the educational institutions authorized for a limited period of time or accredited, excepting the rooms which are used for economical activities

- The buildings of the public sanitary unities, excepting the rooms which are used for economical activities

- The funeral buildings from the graveyards and crematories - The buildings from industrial, scientific and technologic parks - The buildings which constitute the patrimony of the Romanian Academy, excepting the

rooms which are used for economical activities


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- The buildings which are used for social –humanitarian activities by the associates, foundations and cults according to the local board decision.

The lands that do not pay taxes for the field are: the lands on which the buildings are settled for the surface on which the building is set on, the lands belonging to the religious cults recognised by the law, the graveyards lands, the pre-university and university educational institutions lands, authorised for a determined period of time or accredited, the lands which are administrated, owned or used by public institutions and other lands. Likewise, the show taxes do not apply for the shows organized with humanitarian purposes. The social and cultural progress of the local collectivity is ensured by the combination of the factors which were analysed above, as well as by the capacity of the local leaders to adopt the best decisions depending on the new economic and social conditions. As a leader, the local public administration must know very well the human, intellectual and cultural resources of the community in order to achieve the proposed objective.

6. CONCLUSION

The modern society demands like the public authorities to adapt quickly to the mutations which are happening on the market. Connected to a dynamic environment, the public institutions have the obligation to detect its signals and to react as fast and efficient which presupposes the elaboration of a development politics according to the market’s demands. Such politics are expressed through the formulation of a set of strategic objectives, of some concordant strategies and of an ensemble of tactics (concrete measures) which are in a relation of interdependence. The progress of the community is ensured by the capacity of the leaders to adopt the best decisions depending on the new economic and social conditions. As a leader, the local public administration must know very well the human, intellectual and financial resources of the community in order to realise the proposed objectives. To support the social cultural development, the local public administration assumes a series of tasks:

- They administrate the local development projects - They ensure the management of the local budget process - They support a favourable climate for the citizens and for the local economic agents

The local authorities use in the mechanism of elaboration and execution of the local budgets a diversity of financial instruments for the local social-cultural development. Due to the current economic situation and the limited resources, the main solutions having a direct impact on the social-cultural development are:

- The allocation of fiscal benefits - The usage of the financial programs from European funds - The promotion of the private public partnership - An optimal substantiation of the expenses from local budgets regarding social-cultural

actions - The usage of the local development strategies

On the other hand, there are critics according to which the local administrations shouldn’t have any part in the funding of the social-cultural development. We must say that the local governments have access to few instruments than central governments. But, if the central government has development responsibilities, this can also be the case of the local administration.

BIBLIOGRAPHY

1. Dincă Dragoş, Public services and local development, Lumina Lex Publishing house, Bucharest, 2008

2. Iuhas Valeriu, The regional economic development – economic and social implications, Emia Publishing house, Deva, 2004


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3. Roşca Elisabeta (coordinating), The regional development in the context of the integration in the European Union, Economic Publishing house, Bucharest, 2006

4. Voinea Gheorghe, Local Finance, Junimea Publishing house, Iaşi, 2002 5. *** Law nr. 500/2002 of the public finance, published in the Official Monitor nr. 597 from

13 August 2002 6. *** Law nr. 571/2003 regarding the Fiscal Code with the ulterior modifications, published

in the Official Monitor, nr. 927 from 23 December 2003 7. ***Law nr. 273/2007 of the local public finance published in the Official Monitor nr. 618

from 18 July 2006 with the ulterior modifications 8. *** www.adrnordest.ro


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ACCESS METHODS CONCERNING THE CONSTITUTIONAL CONTROL OF THE CONSTITUTIONAL COURT

Lecturer, PhD Candidate Gabriela NEMTOI

Faculty of Economic Sciences and Public Administration “Ştefan cel Mare” University of Suceava, Romania

[email protected]

Abstract: The study concerning the laws’ constitutionality represents the reason of constitutional warranty on judicial

standards, which governs a democratic state. The supremacy of constitution is only a principle, which has to be doubled by establishing a mechanism creating consistency to it. In order to assure the supremacy of constitution, the doctrine and constitutional practice have created efficient judicial institutions, the control of laws’ constitutionality by the competency of Constitutional Court.

On carrying out the constitutional control, interpretation of Constitution and of laws in correlation between them is imposed, where this interpretation can be done by means of these two control systems approached by the Constitutional Court. Placing the laws’ constitutionality control within parameters of professionalism avoids the risk of intervention in governing, the official of competent public authority.

Keywords: Judicial system, constitutional control, Constitutional Court, Objection of non-constitutionality, the exception of non-constitutionality.

JEL Classification: K19

INTRODUCTION

The Romanian judicial system has continuously known modifications within context of knowledge and improvement of the Romanian society evolution of the last years. Within this context of opening towards a judicial frame completely democratic, expressing the constitutional control of laws creates the existential reason of Constitutional Court.

The Constitutional Court represents a capitalization of European traditions and democratic traditions of Romania, framing by structure empowerments and procedures within specific Romanian constitutional system. The possibility of intervention for the Constitutional Court is the warranty of expressing the parliamentary opposition, in a direct manner on correcting certain decisions.

Appearance of Constitution as fundamental law, characterized by supremacy and placing it on top of judicial hierarchy, correlated to situations of contravening by laws of its rules, has imposed the institution of constitutionality control, and the control function has imposed finding the authority, the state or politic body, to whom this function has to be entrusted towards performing. Therefore, the Constitutional Court is invested by art.146 of Constitution with the attribution of control “over the laws’ constitutionality”.

The Constitutional Court, by exerting the control function only defines indirectly the concept of constitutionality. Controlling the law constitutionality consists on checking the constitutional legitimacy of these. The control of constitutionality observed from all points of view – the general control of applying the Constitution, the control of distributing the competences within authorities and especially the jurisdictional control of the laws’ constitutionality, being developed by means of two systems of a posterior concrete control and a priori abstract control.

According to those mentioned, the paper aims by its structure the development of these two systems of control for laws’ constitutionality, upon basis of normative acts that support the judicial frame of this phenomenon.

The modifications of Constitution, being reviewed since 2003, create a wide palette on eliminating the legislative errors, by more efficient reexamination of disposals declared non-constitutional by the Parliament, and bringing into accord with decisions given by the Constitutional Court.


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I.1. THE SYSTEMS CONCERNING THE CONSTITUTIONAL CONTROL OF THE LAWS.

The constitutional control of laws is according to specialists [1] (M. Lepădătescu, 1974), “the assembly of normative disposals that regulate the checking activity of the laws conformity and other normative acts with disposals of constitutional fundamental Law”. In this way, the Constitution in cooperation with the normative act, which regulates the organization and functioning of institution invested with jurisdiction prerogatives, represent the judicial fundament of identifying the legality and non-legality of laws.

The conformity of a law with constitutional dispositions can be determined upon basis of two systems:

a) the control performed by a political body; b) the control performed by jurisdictional body; c) the control performed by political-jurisdictional body.

The first system a, b, refers to a preventive control or precursory towards entering into force of the law [art. 146 lit. a, of Constitution], and c, represents the subsequent control towards entering into force of law with concrete character [art.146 of Constitution]. Besides these control forms, the specialty literature analyses also the control by referendum, the people having the right of appreciate the constitutionality of laws, but which involves certain risks. Among these, we can issue the hypothesis of a high absenteeism of laws, which brings towards the inefficiency of this type of control.

The constitutional control represents a general requirement that is expressly drawn up within Constitution reviewed of Romania, under the form of temporal conflict of laws.[2], (Cristian Ionescu, 2008).

The control of laws’ constitutionality is in essence the checking of constitutional legitimacy of this. The control of constitutionality seen from its all points of view – general control of applying the Constitution, the control of competences distribution among authorities, the jurisdictional control of the law constitutionality, generates suppression of idea “supremacy of laws and parliament sovereignty and consolidates direct applicability of Constitution”[3], (I.Muraru, Nasty Marian Vlădoiu ..., 2009).

To the constitutionality control are submitted other acts also, the regulations of Parliament, ordinances of Government etc. Starting from the existence of the two control systems, one may consider that vocation and obligation of Constitutional Court is that of guaranteeing the supremacy of Constitution, as one of the conditions sine qua non of the democratic right state.

As conclusion, one may say that constitutional control can be accomplished in abstraco and a posteriori, as fundamental warranty of Constitutional supremacy.

A posteriori variant represents the form of assuring the access of persons to jurisdiction of Constitutional Court, access that can be accomplished by action over the appeal, on exception manner or the exception of non-constitutionality, observed towards judging instances and solved by the Constitutional Court.

The exception of non-constitutionality and observing the non-constitutionality are active means, by which the control of laws’ constitutionality is started, a posteriori concrete control and a priori abstract control. In this way, the exception of non-constitutionality represents a consecrated mean in order to protect the fundamental rights, and observing the non-constitutionality is established as manner of protecting the political minority related to the most, on institutionalization process. [4] (I.Deleanu, 2003).

The control of laws’ constitutionality is essential for the Constitutional Court, because it defines the reason of existence for this body, being able to synthesize among the general characteristics those particular, depending upon a given situation, objection of non-constitutionality


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(a priori control), exception of non-constitutionality (a posteriori control) and the control of parliament regulations.

I.2. APPREHENDING THE NON-CONSTITUTIONALITY (OBJECTION OF NON-

CONSTITUTIONALITY).

The objection of non-constitutionality is consecrated within Constitution of 1991, by presence of art. 145, alin.1, transforming in present into Constitution reviewed in art.146 alin.1, designating the action by which the Constitutional Court is apprehended within the control of previous control of law promulgation.

The Constitution of 1991 regulates the objection of non-constitutionality, being able to be invoked by the President of Romania, president of one the two Parliament Chambers, the Government, the Supreme Justice Court, at least 50 deputies or 25 senators. In this way, the President of Romania can formulate the objection, after the law was communicated to him and submitted to promulgation, the other subjects being able to invoke the apprehending and previously to law promulgation. The objection can also be formulated, even if according to art.77 alin.2 of Constitution, the President of Romania required the reexamination of law. (I.Muraru, and others, 2009). The practice outdistanced an hypothesis, according to whom in situation where disposals that make the object of reexamination requirement for the law are different of those that make the object of apprehending the non constitutionality, the two procedures being carried out in parallel, without being in competition. In situation where they coincide, the parliament procedure as concerns the reexamination requirement and the control procedure of law constitutionality, a confused situation is created, the decision of Court being able to remain without the object; after reexamination, the law can support the modification that it might have brought to Constitutional Court. In this situation, the rational solution would have consisted in suspending the control procedure of constitutionality, until the moment where reexamination procedure ends for the Parliament law, as result of asking made by President of Romania.

By art.145 alin.1 of Constitution of 1991, the situation of non-constitutionality observed by Constitutional Court, but being sent to Parliament for reexamination, can eliminate the objection of non-constitutionality; it is observed that if this is adopted by majority of at least two thirds of the number of each Chamber, promulgation of law within this context is becoming compulsory, even if the decision of Constitutional Court established the non-constitutionality of this law.

After reviewing the Constitution, some modifications were published, related to the V Title of Constitution, which regulates the control practiced by the Constitutional Court.

Firstly, one renounced at the concept of “objection of non-constitutionality”, art.146 alin.1, using the notion of “apprehending”, just in order to determine the manner of investment of constitutional jurisdiction with the control of constitutionality of laws. According to art.146, alin. a), the Constitutional Court “(…) pronounces over the laws’ constitutionality, before their promulgation, on apprehending of President of Romania, of one of the presidents of the two Chambers, of Government, of the High Court of Cassation and Justice, of the People’s Lawyer to a number of at least 50 deputies or at least 25 senators, and ex officio, over the initiatives of reviewing the Constitution”

Within a similar formula, by art.15 alin.1 and 2, of Law no.47/1992 republished, concerning organization and functioning of Constitutional Court, it is put into light:”The Constitutional Court pronounces over the constitutionality of the laws before their promulgation, on apprehending of President of Romania, of one of the presidents of the two Chambers, of Government, of the High Court of Cassation and Justice, of the People’s Lawyer to a number of at least 50 deputies or at least 25 senators. In order to exercise the right of apprehending of Constitutional Court, with 5 days before of being sent towards promulgation, the law is communicated to the Government, to High Court of Cassation and Justice and also to People’s Lawyer and is submitted to general secretariat of Deputies Chamber and of Senate. In situation where the emergency procedure was adopted, the term is of two days”.


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The analysis of these two normative acts, which support the apprehending of non-constitutionality, proves that right of apprehending right of the Court is affected by an uncertain date with extinctive effect, where the term is not susceptible. In this way, the date is not susceptible of interrupting or suspending, therefore the promulgation can be affected by a decadence date, foresee by art.77 in Constitution “(1) Law is sent towards promulgation to the President of Romania. Promulgation of Law is made within most 20 days from receiving. (2) Before promulgation, the President can ask from Parliament once the reexamination of Law. (3) If the President asked the reexamination of law or if checking its constitutionality was asked, promulgation of law in at most 10 days from the receiving of law adopted after reexamination or from receiving the decision of Constitutional Court, by which the constitutionality was confirmed”, to whom performing is related to right of President of Romania of promulgating the law, this entering into force upon basis of Court decision.

The constitutional right of the President of Romania of apprehending the Court according to art.146 alit. a) Constitution reviewed is started from the date of receiving the law adopted of Parliament towards promulgation, without concretely taking into consideration the possibility of President on exerting the veto right, upon basis of art. 77 alin.1 Constitution. The term of 10 days is necessary and enough for the president in order to apprehend the Constitutional Court, concerning the constitutionality of legal provision of the law reexamined previous by Parliament, as result of decision of non-constitutionality, pronounced by the Court. (C. Ionescu, 2001).

From the synthesis discussed, it results that President of Romania can formulate an objection only after the law was communicated towards promulgation, when the other subjects of the right of apprehending the Court can invoke it and previous, within the protection term of 5 or 2 days, depending upon situation. As consequence, the term of promulgation is that foreseen at art.77 of Constitution of 10 days from receiving by the President of Romania of the law reexamined by the Parliament.

The procedure of reexamination is a legislative procedure complementary to that usual and has no facultative character, so that art.147 alin2 of Constitution foresees that law declared non-constitutional is sent to Parliament “towards reexamination”, this having the obligation of reexamination of respective disposals for their conforming with the decision of Constitutional Court. The Parliament has the quality of pronouncing over the law project that was invested with, being apprehended as public authority. The Parliament is obliged by exerting its constitutional competence. By sending the law towards reexamination, the Parliament that is refusing to apprehending as result of adopting the law is again apprehended, so that initial apprehending, which is aiming the adopting of law, will again reactivate.

The procedure of reexamination is contrary to the quality of Constitutional Court of unique authorization, of constitutional jurisdiction, being indirectly distributed with the quality of Parliament.

The reexamination has the significance of consequent realization of constitutional principle, of art.61 alin1 of Constitution, according to which the Parliament is the only lawgiver authority of the state. After reexamination, the law is the expression of exclusive wish of the lawgiver, mentioning that it has the constitutional obligation of conforming to decision disposals of Constitutional Court. In situation if the procedure of reexamination had not existed, the decision of Constitutional Court would have had the significance of a definitive veto.

The law thus adopted is characterized by: a) can be adopted only in situation where within reexamination procedure, established by

art.147 alin2 Constitution, b) most necessary for adopting the law is that foreseen by Constitution, (depending upon

type, if the law is organic or ordinary law), c) can be subsequent modified or abrogated, in accordance to usual legislative procedure

(I.Muraru and others, 2009).


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The system of constitutional law emphasizes the apprehending of non-constitutionality as a necessary methodology in order to start the constitutionality control within limits established by judicial frame.

When Constitutional Court would ascertain non-constitutionality of other disposals as compared to apprehending, it might not pronounce over these, because it is within exterior of its competence limits, those established by Constitution. To pronounce over other legal disposals, different of those apprehended, means the self-apprehending of ex officio, the Court doesn’t have the competence of self-apprehending on ex officio over a text of law. [5], (Decision no.6/1993 as concerns the constitutionality of law no.58/1992 with regard to correlating the wages foreseen in law no.53/1991).

I.3. THE EXCEPTION OF NON-CONSTITUTIONALITY The exception of non-constitutionality represents a constitutional warranty of rights and

freedom given to citizens, in order to protect them against certain attempts of lawgiver, by establishing certain non-constitutional rules. On this way, through the exception of non-constitutionality, the Constitutional Court fully carries out the part of guarantor of Constitution supremacy; in this way, the warranty of accomplishing the rights and fundamental freedoms of citizens is also aimed, more precisely the access of citizens to constitutional justice, in order to protect the rights and freedoms [6] (I.Muraru, 2002).

Within the specialty doctrine, the exception of non-constitutionality is defined as “incident appeared within the development of a process towards the judging instance, consisting on contesting the constitutional legitimacy of legal foresee, by a law or ordinance, of which the judging of cause depends upon (I.Muraru, 2002)”. By the fact that the object of cause of a legal disposal of which solving the cause depends, the exception of non-constitutionality is characterized as being background protection, but it represents a specific mean of constitutional jurisdiction, as concerns the constitutionality control, within the civil or penal process.

The practice and specialty literature brings into contrary discussions the procedure of solving and the effects of decision, to the exception of non-constitutionality, as technical process mean specific to civil and penal activity. It is considered that the exception of non-constitutionality belongs to legal tool of constitutional right, in order to practice the constitutionality right. The character of non-constitutionality exception of legal tool for the constitutional right is put into consideration as related to exception, as mean of control to laws’ constitutionality. Within specialty literature, prof. V.M.Ciobanu issued the hypothesis according to whom the exception of non-constitutionality cannot be framed without serious reserves within category of process exceptions, but this represents significant similarities with the process exceptions (V.M.Ciobanu, 1996 ).

Taken into consideration from another point of view, the exception of non-constitutionality is considered as procedural background exception, being directly connected to the right alleged and where situation of its admission makes unnecessary any background examination of the activity. From this opinion, the fact that exception of non-constitutionality is similar to background protections within civil process, but tough it is different from it by the fact that does not relates to the cause’s background, but only apprehends the impossibility that this can be deduced to judgment due to non-conformity with constitutional disposals .[8] (P.Florea, 1998).

The exception of non-constitutionality has its own place, within the system of process exception of Romanian right, it becoming a specific mean of exerting the control of laws’ constitutionality, being grounded on the control idea of laws. By its mean, the a posteriori concrete control is accomplished and assures in the same time the indirect access of people’s constitutional justice.

According to opinion of I.Muraru, “although the constitutionality control was thought as essential objective control, the exception of non-constitutionality adding this character of control with the subjective interest of protecting the individual rights”.


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As consequence concerning the process right point of view, the exception of non-constitutionality is the joint between specific means of protection from the process right and the specific tool of the constitutional right.

The exception of non-constitutionality is characterized by: a) is an exception of public order, being invoked by parts of process, and also by the Public

Minister or of instance ex-officio. (As consequence, being an exception of public level, this cannot be covered or to be renounced, representing the situation when availability principle cannot be applied, after the Court was informed);

b) is a separating exception, under process form, its admittance by the Court could lead towards the rejection of action, without its fund had been examined;

c) is a pertinent, meaning the law whose non-constitutionality is invoked in order to determine the manner of solving the cause, but in this way, it represents a protection method, by which the parties can protect the legitimate rights and interests, but in the same time, an efficient instrument in order to assure the supremacy of Constitution within the entire national normative system;

d) the exception of non-constitutionality uses within solving procedure of public right, being able to put into function an exclusive and imperative incompetence of public authorities, intended by the constituent, meaning the Constitutional Court;

e) the Constitutional Court is the only competent authority on exclusivity, which might solve the exception of non-constitutionality. The two elements, the exception of non-constitutionality and the objection of non-

constitutionality or informing about non-constitutionality represent the two situations, by which certain legislative errors can be regulated. They have a common object, meaning the constitutional legitimacy of law as judicial act of the Parliament. Also, both forms of control have upon their basis an informing act, where the Constitutional Court might be in the impossibility of pronouncing ex-officio.

According to art.146 lit d of Constitution, the Constitutional Court decides over the exceptions brought in front of instances of judging or commercial arbitrage, as concerns the non-constitutionality of a law or ordinance or of certain disposal from a law, or from an ordinance in force, of which solving the cause depends upon.

The two forms of control are different by the fact that a priori control is an abstract control over the laws’ constitutionality, and a posteriori control, control that solves the exceptions of non-constitutionality being a concrete and jurisdictional control, related to an act of applying the law, fact that involves relationship between parties being into process, whom interest was injured by a norm, considered to be non-constitutional.

CONCLUSIONS:

The control of laws’ constitutionality in any democratic state is a necessary warranty of applying in life the constitutional principles and norms, of carrying them into practice, of accomplishing the citizens’ rights and freedoms.

This control also aims towards guaranteeing the performing of state powers separation, respecting the competencies that are offered to certain specialized bodies. It is natural that within this context, concordance of laws with fundamental law, the Constitution to represent an essential condition of accomplishing the objectives of right state, but in the same time of guaranteeing the conformity of entire normative method. To basic provisions registered in Title V of the Constitution, many important ascertainments by Lawno.47/1992 as concerns the organization and functioning of Constitutional Court, as competent body on exerting the control over laws’ constitutionality.

Therefore, the Constitutional Court is according to its organization law, the unique authority of constitutional jurisdiction existing in Romania, it becoming independent of any public authority and only complying to Constitution, in order to guarantee the constitutional supremacy.


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BIBLIOGRAPHY:

[1] V. Lepădătescu, „Teoria generală a controlului constituţionalităţii legilor” Ed., E.D.P., Bucureşti, 1974, p.143-176,

[2], Cristian Ionescu, „Tratat de drept constituţional contemporat, Ed a-2- a, Ed., C.H.Beck, Bucureşti, 2008, p. 216-221,

[3], I.Muraru, Nasty Marian Vlădoiu şi alţii, „Contencios Constituţional, Ed.,Hamangiu, 2009, p.215-218.

[4] I.Deleanu, Instituţii şi proceduri constituţionale tratat, Ed.Servo -Sat, Bucureşti, 2003, p. 226).

[5], (Decizia nr6/1993 cu privire la constituţionalitatea legii nr.58/1992 cu privire la corelarea salariilor prevăzute în legea nr.53/1991,

[6] I.Muraru, şi alţi , Interpretarea Constituţiei doctrină şi Practica , Ed. Lumina Lex,2002, p.231.

[7] V.M.Ciobanu, 1996 Tratat teoretic şi practic de procedură civilă. Teoria generală, ed. Naţional , Buc, 1996, p.131.

[8] P.Florea, Neconstituţionalitatea.Excepţia de neconstituţionalitate în procesul civil, ed. Scripta, buc, 1998, p.100


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THE APPLICATION OF THE LEGALITY PRINCIPLE IN THE ADMINISTRATIVE ACTIVITY IN THE EUROPEAN UNION COUNTRIES

Lecturer PhD. Student Dumitriţa FLOREA (IONESCU)

“Ştefan cel Mare” Univeristy of Suceava, Romania [email protected]

Assistant Alina LARION “Ştefan cel Mare” Univeristy of Suceava, Romania

[email protected]

Summary 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.

1. 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


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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].

2. 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


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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].


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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


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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.


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Germany The Constitution (art. 20/3) obliges 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.


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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.

NOTE:

[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 administrativ law, Ed. Lumina Lex, Bucureşti, 2006;


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DETERMINATIONS ON IMPROVING TRAINING OF CIVIL SERVANTS AT EU AND NATIONAL LEVEL

University assistant Gabriela RÎŞCA

"Ştefan cel Mare" University of Suceava, Romania Faculty of Economics and Public Administration

[email protected] University assistant Petronela ZAHARIA

"Ştefan cel Mare" University of Suceava, Romania Faculty of Economics and Public Administration

[email protected]

Abstract The alignment of the national administration to the European values, in the context in which this is an essential requirement in the process of integration can be achieved by strengthening public administration and raising it to a modern level. However, this achievement is possible only by taking into consideration the persons vested with the exercise of public functions. Therefore, to increase the quality of the public servant, their training and improvement in agreement with the EU, but under the conditions existing at the national level should be considered. The current European context requires taking strategic decisions in order to improve efficiency and performance in public administration, therefore specialization and improvement being fundamental elements of the public administration reform. Moreover, without doubt, the public administration in our country will work in optimal conditions and will meet in the interests of public an efficient manner, if public officials are trained, competent and able to meet the requirements of the accession to the European Union. This can be ensured by a constant preparation which would allow civil servants to maintain a permanent contact with the innovations in their field of activity. Analyzing the issue of continue improvement of the public servants, we must keep in mind that it ensures the achievement at a higher level of quality education and more operational of their tasks, the result of instruction and training of civil servants work reflecting improved efficiency in public administration .

Keywords: European integration, public administration, civil servant, professional, continuing education Classification JEL: H83 – Public Administration

INTRODUCTION Under the circumstances of the alignment of the public administration in our country to the requirements of the European integration process, the aim of this paper is to debate the topic of professional improvement of the civil servant. Before analyzing the content and significance of the institution of professional improvement of civil servants, some clarifications are required on their formation and training. According to the majority opinion expressed in the literature in this field, which we rally to as well, formation and improvement are components of the process of professional training. It is believed that improvement can be regarded as a part of formation, consisting of the accumulation of knowledge in the field of someone’s main profession. We can say that the professional formation and improvement overlap, often being difficult to assess whether certain activities are formation or improvement. Both at European and national level, particular attention should be given to continuing professional education of civil servants in the context in which they must exercise the public function which they were invested with in the service of citizens. Moreover, the primary role of a public servant in the operational implementation of the legislative framework for public administration should be emphasized, a respect in which the professionalism of the public servant decisively influences the efficient implementation of the regulations in the field. The achievement of a fair administrative act meeting the needs of the public under adequate conditions demands the creation and development of a body of professional civil servants, based on merit and performance-oriented. In such context, we find it necessary to rigorously treat the provisions related to professional improvement of civil servants, given the fact that their continuous formation is of special importance for the quality of the administrative work carried out.


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At the level of public administration it was sought to reinforce the idea that an effective strategy to support professional improvement of civil servants (1) itself derives from the need to optimize the public administration, the operation in a transparent framework that ensures maximum efficiency in the management of public interests. The strategy of continuing education of civil servants constitutes a coherent course of action necessary to create a public administration capable of providing connection to European valences, an essential requirement and decisive in reforming the national administration. In this context, it appears to be indispensable to optimize the quality of the staff that serves the public in the sense of their professionalization, i.e. to improve the training of civil servants in the exercise of their function. Therefore, with the objective of providing quality public services, public administration, both local and central, should correspond to a high degree of professionalism. There is also the conviction that formation is essential for adaptation to normative-political problems arising and especially for alignment to the global context, fostering the establishment of more operative relations with the administrative communities, and requiring highly qualified preparation of civil servants.

EVOLUTION OF THE CONCEPT OF CONTINUING EDUCATION Being defined as an activity that enables individuals to develop their knowledge throughout their life and to improve their living conditions (2), the term "continuing education" has been dealt with by the literature in the field since the ‘70s. Thus, in France, continuing education has been considered part of the permanent education since 1971. This presupposes the adaptation of the employees to changes caused by the evolution of technology and working conditions, fostering social promotion and, at the same time, through easier access to various levels of professional qualification, continuing education helps cultural, economic and social development. In the UK, the Advisory Committee for Vocational and Adult Education proposed in 1982, replacing the term "adult education" with "continuing education". Abolishing the distinction between education and training has led to the creation of an integrated system of "continuing education" that is used to indicate the size of the professional education of adults. In Greece, starting with the ‘80s, continuing education and adult education are concepts that have almost always been connected to each other. By continuing education it is understood any type of organized and long instruction which has as aim to provide appropriate training requirements of persons who possess a basic education. This has a double purpose, first, adult professional improvement and, on the other hand, their active participation in social development, economic and cultural development. In Austria, continuing education means primarily instruction "centered on the learner", operating on the principle of professionalization and orientation towards the educational needs of the subjects, which characterizes continuing education. Looking at the significance of continuing education in the educational systems of different European countries, we find that it comes after initial education and is concerned with the acquisition and updating of professional knowledge and skills. Is is addressed to adult persons who have a job in order to develop and improve their professional skills, the role of continuing education being evident through its relation with the place of work, which justifies the need for professional improvement (3).

CONSIDERATIONS ON THE RIGHT OF THE EUROPEAN CIVIL SERVANTS TO IMPROVE THEIR PROFESSIONAL EDUCATION The status of our country of full member of the European Union requires that in the field of national public administration should be a harmonization of values, attitudes and behavior of the specialist in public administration with those at European level. In this regard, connecting the


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alignment of the national public administration to the European requirements implies, besides the amendments to be made in its structure, improving the professional training of persons vested with the exercise of public functions. Therefore, starting with the fact that public interest must be given priority in the administrative activity and citizens must be satisfied with the services that are available, professional training of public officials has a special significance in the civil service. To the person that was invested in the public function it is essential to continue, in a permanent way, the training activity. According to article 24 (8) (96) of the European Community Staff Regulations, the latter "facilitates the further training of officials to the extent that it is compatible with the proper functioning of services and in accordance with the interests of the officials". Since 1980, by a document entitled "Program for Social Progress" were formulated the objectives in the field of continuing professional education, uninterrupted since investment in the public function until the end, namely: education transformation, of the professional becoming of the Europeans official in one of the fundamental elements of management, ensuring through improvement of the prerequisites necessary to promotion as well as the achievement of a policy of equal opportunities through continuing education, particularly targeting organized actions in favour of women. (4) In the practice of the European Court of Justice it was held that the term "continuing education" has a broader scope, incorporating the forms of instruction and education, including university studies. Also, the Court of Justice decided that general education is distinct from continuing education and remains in the national jurisdiction of states. The issue of education and continuing education of civil servants is quite difficult to approach in a uniform manner, given that each Member State has its own specific education. In Europe, a special significance is given to the College of Europe in Bruges in Belgium which offers through its the three programs of study namely law, political economy and administration, the possibility of training civil servants. College of Europe is more than a program of study abroad, offering a rich multi-cultural experience and an outlined European spirit, a spirit that Europe needs today. It is focused on postgraduate studies in the legal, economic, political, administrative and interdisciplinary fields, providing, in addition to a postgraduate diploma, a thorough pre-vocational training for the modern European citizens. (5) An issue which raises discussions at European level is the recognition of diplomas obtained in other states. In order to solve such a problem, Directive of 21 December 1998 on the general system of recognition of higher-education diplomas awarded for professional training lasting at least three years was adopted. (6) This general system of recognition of diplomas of higher education strengthens the European citizen’s right to use their professional skills in any member state and at the same time recognizes the right of citizens to acquire such knowledge wherever he wants. Facilitating free movement of persons within the Community, this system responds to the expectations of the European citizens who have higher education diplomas awarded for professional training in a Member State other than that they wish to work in. Regarding the ways in which study conditions are met, two situations can be identified. A first situation exists when the function that is to be occupied exclusively requires training equivalent in duration, in which case, making proof of similar training, there are not big issues, the candidate being asked to submit the translated diploma as a proof that she has attended education for the number of years required by the public function she has applied for. The second situation regards the fact that civil service employment requires special qualifications, raising some issues in that it is necessary to check the two degrees to determine whether they reveal a similar preparation, if the length and content are comparable, or if necessary to undertake an internship to complete. (7)


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DETAILS ON THE PROFESSIONAL IMPROVEMENT OF CIVIL SERVANTS AT NATIONAL LEVEL The legislation of the professional improvement of public servants can be found especially in one in Law no. 188/1999 on the Statute of civil servants (8), Section 3 being entirely devoted to this matter. Along with Law no. 188/1999, provisions concerning the training and further training of civil servants can be found in Government Decision no. 1066/2008 for the approval of the rules on the professional training of civil servants (9). Thus, according to article 3 paragraph 1 letter i) improvement means “the professional training of civil servants for the development of those competencies and skills required for improving the quality of results obtained in the exercise of powers defined, held in an organized framework for a relatively short time, restricted to target groups defined broadly, based on self assessment, assessment and recognition of the need for training as a rule, and treating a unitary thematic, subsequent to a specific activity field”. The Status of civil servants establishes for them “the right and duty to continuously improve their skills and professional training” (article 50). Thus we can notice the establishment of the dual nature of professional improvement, this being equally a right but also a duty of civil servants. Whereas in the juridical reality there are no legal rights and obligations independent of one another and since each law is a correlative obligation and each obligation gives rise in turn to a right, the legislature wanted to consecrate for the public servant the right and corresponding obligation to improve. It is worth noting that, first of all, the public servants themselves are concerned with the improvement of their professional training, thus making it possible to be promoted in the public position (10) they have. The public authority or institution in which they exercise their function is also interested in further training of public servants, thus ensuring an effective and operational performance of the duties and responsibilities involved in the public function. According to paragraph 1 of article 51 of Law no. 188/1999, the authorities and public institutions are required to include in their own annual budget the necessary amount of money to cover the expenses for professional further training of civil servants organized on the initiative or interest of the public authority or institution. The right and duty of the public servants to improve their training includes granting the due payment rights. It should be mentioned that these rights can be granted to the the civil servants who attend a form of continuing education only in certain cases. Thus, the legal text establishes two situations in which the public servants who attend a type of professional improvement are entitled to receive their due payment rights. A first situation is that the types of professional improvement are organized on the initiative or interest of the institution or public authority (article 51 paragraph 2 letter a). It is necessary to emphasize that the authority or institution cannot take the initiative to organize a form of improvement that is not in its interest (11). The second situation covered by article 51 paragraph 1 letter b of Law no. 188/1999 refers to forms of professional improvement attended at the initiative of a public servant, with the authority or public institution manager’s agreement. In this case, we have to mention the fact that the institution or the public institution in which the civil servants exercise their function is the only able to approve the completion of professional training, given the fact that any unauthorized absence from work, assuming that there is no assent from the manager, entails disciplinary punishment of the public servants concerned. Therefore, only in these two instances civil servants benefit their due salary for the period in which they attend forms of professional refresher training. According to paragraph 3 of article 51 of the Status of civil servants, where the length of the professional training exceeds 90 days in a calendar year, held in the country or abroad, financed from the state or local budget, public officials will have to commit in writing that will work in public administration for a period of between 2 and 5 years, calculated from the end of the programs in proportion to the number of days of professional training, if for that program another period is not provided.


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Civil servants who attended forms of professional training and whose service is terminated by agreement of the parties recorded in writing, by removal from public office, by resignation, when the public servants were convicted by a final court decision to a punishment which deprives them of liberty for a crime against humanity, against the State or against the authority, concerning their job or in connection with their job, which prevents the administration of justice, of false or acts of corruption or crimes committed with intention, following the ban on exercising the function or for professional incompetence before the expiry of the period provided shall be liable to repay the value of expenses received during the training course, as well as, where applicable, the salary received during the improvement, calculated according to the law, in proportion to the period remaining until the expiry of the period. (12) According to article 51 paragraph 5 of Law no. 188/1999, exception to the above-mentioned case is the public servant who no longer holds a public position for reasons which are not dependent on him. The Status of civil servants also provides that people who have attended a form of training, but failed to complete it for personal reasons, are obliged to reimburse to the authority or public institution the expenses incurred for improvement as well as the salary received during improvement calculated in accordance with the law if the latter were incurred by the authority or institution concerned. Regarding the contents of the phrase "professional improvement", to clarify its meaning, article 52 of Law no. 188/1999 provides that "university or doctoral studies are not forms of professional improvement and cannot be financed from the state budget”, a point which public officials need to know. The Status of civil servants established by article 53 states the obligation of public authorities and institutions to communicate annually to the National Agency of Civil Servants the plan of further training of their civil servants, and the funds provided in the annual budget to cover the occasional expenses incurred in the forms of further training of civil servants, organized at the initiative or interest of the public authority or institution concerned.

CONCLUSIONS At the end of our scientific attempt it is necessary to emphasize the fact that further professional training of public officials must be addressed and regulated as a crucial element in the reform of public administration, this becoming a more and more intense concern of the decision-makers in the administrative system, taking into account that at the basis of any concept of reform must be a plan to improve the staff. Moreover, aligning the national administration to the European administrative valences requires the formation of public servants with appropriate training, able to meet all the tasks, functions and powers involved by the exercise of public function which they were invested with in conditions of maximum efficiency. Undoubtedly, since the professional training of public officials is reflected in the quality of services offered to the citizens, every public position may be occupied only by a competent public officer to conduct public services in the interest of the citizens at the level and of the nature required by the latter. In other words, there is no public position that does not require any type of refresher training other than that done in educational institutions, training which is to be completed in the labor process through the active participation of the public servants in their education and improvement, which are absolutely necessary to achieve efficiency in carrying out administrative activities.

NOTES:

(1) In order to implement a strategy for continuing education of civil servants a number of objectives should be taken into account, such as: creating a body of professional civil servants, the application of methods, procedures and techniques characteristic of modern public management, implementation of modern information and communication technologies, and involvement of key actors in the continuing education of public servants.


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(2) This definition of the concept of continuing education has been done by the United Nations Educational, Scientific and Cultural Organization (UNESCO), the expression being used as a synonym for adult education or their training.

(3) Franco Bochicchio, Gli esperti della formazione, Profili interpretativi di una professione emergente, Amaltea Edizione, Italia, 2006, p. 50

(4) Verginia Vedinaş, Constanţa Călinoiu, Statutul funcţionarului public european, Ediţia a II-a, Editura Universul Juridic, Bucureşti, 2007, p. 70

(5) http://www.coleurop.be (6) Council Directive no. 89/48/CEE (7) Verginia Vedinaş, Constanţa Călinoiu, op.cit., p. 72-73 (8) Republished under article 3 of Law no. 251/2006 amending and completing Law no. 188/1999 on the Status of

civil servants. (9) Published in the Official Gazette, Part I, no. 665 of 24 September 2008. (10) Mircea Preda, Drept administrativ, Partea generală, Ediţia a III-a, Editura Lumina Lex, Bucureşti, 2004, p.

121 (11) Virginia Vedinaş, Law no. 188/1999 on the Status of civil servants, commented, Issue III, Editura Lumina Lex,

Bucureşti, 2004, p. 102 (12) Dumitru Brezoianu, Mariana Oprican, Administraţia publică în România, Editura C.H. Beck, Bucureşti, 2008,

p. 385

BIBLIOGRAPHY:

1. Franco Bochicchio, Gli esperti della formazione, Profili interpretativi di una professione emergente, Amaltea Edizione, Italia, 2006

2. Dumitru Brezoianu, Mariana Oprican, Administraţia publică în România, Editura C.H. Beck, Bucureşti, 2008 3. Mircea Preda, Drept administrativ, Partea generală, Ediţia a III-a, Editura Lumina Lex, Bucureşti, 2004 4. Verginia Vedinaş, Constanţa Călinoiu, Statutul funcţionarului public european, Ediţia a II-a,

Editura Universul Juridic, Bucureşti, 2007 5. Verginia Vedinaş, Legea nr.188/1999 privind Statutul funcţionarilor publici, comentată,

Ediţia a III-a, Editura Lumina Lex, Bucureşti, 2004 6. *** Council Directive no. 89/48/CEE of 21 December 1998 regarding the general system of

recognition of higher-education diplomas awarded for training lasting at least three years 7. *** Government Decision no. 1066/2008 for approving the rules on the training of civil servants 8. *** Law 188/1999 on the Status of civil servants 9. *** Staff of the European Communities Status, adopted by Regulation (EC, EURATOM) no.

723/2004 of 22 March 2004, published in Official Journal no. L 124 of 27 April 2004 10. *** http://www.coleurop.be


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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.


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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: [email protected] , 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.


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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: [email protected] , 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 visit: www.seap.usv.ro/annals . 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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