Government launches mining restructuring strategy

Download article in original language : RO0405102FRO.DOC

In April 2004, the Romanian government adopted a restructuring strategy for the mining sector for the 2004-10 period. It envisages that 48,000 jobs out of 68,000 in the industry will be cut, accompanied by financial assistance, job creation measures and retirement. Trade unions have given a muted response to the strategy, with many miners already seeking to leave the industry.

On 21 April 2004, the government adopted Decision no. 615, approving a strategy for the mining sector for the 2004-10 period. The strategy aims to ensure the continuation of a current project supported by the World Bank, by modernising potentially profitable mines, closing non-profitable ones and transferring surplus workers to other activities.

The implementation of the strategy will require financial resources of more than USD 2.2 billion, of which USD 1.2 billion is required during 2004-6. Starting from 2004, the Ministry of Economy and Commerce (Ministerul Economiei şi Comerţului, MEC) aims to close or 'mothball' 30 mines through its own efforts, while another 20 mines are to be closed or mothballed with the support of the World Bank (USD 13 million for the closures and USD 20 million for social and environmental protection).

The strategy

The official public document on the 2004-10 mining sector strategy has three main aspects, covering: the development and current state of the mining sector; the main objectives of the strategy; and the policy instruments and resources necessary for the accomplishment of the main objectives.

Development and current position

At the beginning of the 1990s, over 350,000 people were directly employed in the Romanian mining industry, while a further 700,000 depended indirectly on mining activities. Over-employment and the excessive size of the industry generated, over 1990-2002, public expenditure of over USD 5.2 billion, of which USD 3.4 billion went on subsidies, USD 250 million on social transfers and USD 1.6 billion on capital expenses. To these amounts, lost production worth almost USD 1.3 billion can be added.

Reorganisation measures undertaken over 1990-2002 generated new difficulties: economic recession in mining areas; increased social problems and poverty; and the unsatisfactory economic performances for the 12 mining companies and societies. Of these mining entities, four are in the coal industry (two state-owned companies, a state-owned society and a commercial one); six are in metal ore (two state-owned companies and four commercial societies); one in uranium (a state-owned company); and one in salt mining (a state-owned society).

At present Romania has 77 functioning mines, 43 quarries and 23 processing factories. There are made up of: 12 mines and two factories for hard coal; 23 mines and 38 quarries for lignite; 36 mines, three quarries and 14 factories for ore; and six mines, two quarries and seven factories for salt.

At the end of 2002, these units employed 68,800 people, with an average annual productivity of USD 8,120 per person (in comparison with USD 4,840 in 1997 and USD 6,610 in 2000). The average annual net wage per employee in the mining sector was USD 2,547, meaning an average monthly income of USD 212.

In 2002, of the total workforce:

  • 61.6% worked in the coal sector (34.9% in lignite and 26.7% in hard coal), 34.5% in ore extraction; and 3.9% in salt mining;
  • 14.7% were women;
  • blue-collar workers accounted for 88.5%, of whom 25,000 (36.3%) worked underground;
  • only 8% of were graduates of tertiary level education, while 46.4% had completed secondary education and 45% had only specific occupational training for operative and auxiliary workers; and
  • 40.6% were aged under 35, 44.8% were aged 36-45 and 14.5% were over 45.

Main objectives

The main objectives of the strategy are:

  • the performance of mining activities on a commercial basis appropriate to a free market;
  • the reduction of government involvement in the mining sector and the promotion of private initiative;
  • ensuring environmental protection to European Union standards; and
  • tackling the social problems generated by closing the non-profitable activities.

Instruments and resources

The core policy instruments for achieving the above objectives are focused on:

  • limiting the role of the state exclusively to regulating, controlling and collecting taxes;
  • creating the institutional framework necessary for implementing and monitoring the policy actions that are planned for reorganising the sector,
  • promoting the policies aimed at eliminating financial losses by restructuring production capacities and technologies, closing the non-viable mines and financially reorganising companies, whilst making use of the existing assets, infrastructure and land to promote the economic reconstruction of the affected areas and a safe environment; and
  • implementing social protection policies for the workers affected by the restructuring process.

Social impact of the strategy

A total of 155 localities in mining areas currently depend on the sector for over 50% of their incomes. The restructuring process directly affects the social and economic status of more than 68,000 workers, rising to 150,000 if those working in connected and collateral branches are added. If each of these employees is responsible for the maintenance of two or three other people, then it can be assumed that some 600,000-700,000 people, more than 50,000 of whom are young people, will be confronted with major difficulties over the next five-six years.

It is foreseen that by 2010 only around 20,000 employees will remain in the sector. Therefore, the strategy provides for:

  • social protection measures for approximately 48,000 people who already redundant or will become so during 2002-10. Of these, 15,000 are to receive supplementary incomes, 9,000 will retire, 21,000 will be found new employment, 15,000 will be considered chronically unemployed (being in a very weak position on the labour market) and receive compensatory wages, while 3,000 are to start their own business;
  • the creation of approximately 31,500 new jobs in the medium term, of which 17,000 will be temporary jobs (lasting two-three years) in infrastructure development projects; and
  • social assistance for the most disadvantaged groups, such as older people with low incomes, people whose training or age makes them unsuitable for work in emerging sectors, people with disabilities and children with no means of support.

Trade union reactions

The mining sector strategy is the result of the consultation and participation involving all interested parties inside and outside the mining areas - including representatives of the most disadvantaged groups, local communities, regional authorities, governmental institutions, nongovernmental organisations and World Bank experts.

During a dispute in early 2004 over a new collective agreement for the mining industry (RO0402102F), the trade unions' list of claims included the publication of the national strategy in the Official Gazette. However, the unions did not greet the publication of the strategy in April with any great interest. The leader of the Federation of Mining Unions of Valea Jiului (Federaţia Sindicatelor Miniere din Valea Jiului) stated that: 'This is the strategy of the government members. They would have closed the mines anyway, with or without the strategy. Now there is at least a staged plan, so we know what it is going to happen.' So far the unions have not expressed any particular new concerns in connection with the announced redundancies, but they are concerned with the decline and the lack of prospects for the mining profession: 'Everybody knows what working in mines means. Young people nowadays dream about other things: computers, offices. It will be hard to find mine workers.'

Commentary

The arduous nature of work in the mining sector, as well as the extremely low level of wages, tends to push miners to volunteer for redundancies in order to obtain the compensation, which is extremely tempting, at least in the short term. That is why at present the number of applications for redundancy appears to exceed the number of job losses proposed by the government for 2004. Nevertheless, the implementation of the new strategy remains an extremely difficult and expensive process, because of the high costs for public and even private funding sources. For this purpose, access to the European Union structural funds as well as their proper allocation to supplement national funding will remain a priority for the future. (Luminiţa Chivu, Institute of National Economy)

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment