Social Economy in Romania. An overview

1
Social Economy in Romania.An overview

Valentin Burada Civil Society Development
Foundation
Gdynia 25 June 2008
2
General Context

• Lack of mutual trust within the Romanian society
• Non-functional subsidiarity
• Top-down definition of regions
• Lack of local resources
• Lack of true local initiative - donor-driven
  behavior
• Trade unions perceived as politicized/corrupt

3
Main actors

• Cooperatives (cooperative societies credit
  cooperatives agricultural cooperatives)
• Mutual Organizations (Mutual Help Houses - CAR,
  Pensioner Mutual Help Houses)
• Nongovernmental Organizations
• Direct Economic Activities
• Externalization of public interest services
  (Social services, Medical services, Education and
  Professional Training Services)

4
Cooperatives

• In 2004 there were 2129 active cooperatives 50
  in commerce and services 25 in handcraft
• 0,1 of the total workforce was employed within
  cooperatives (including agricultural
  cooperatives)
• In 2005 - Law no.1/2005 regarding the
  organization and functioning of cooperatives
• gt In 2007 - 38,177 members
• Example
• in 2004 Cooperatia de consum included 1,513
  organizations in 2,688 communes, 13,000 villages
  and 230 towns
• in 2007 Cooperatia de consum 1,073
  organizations mainly in the rural areas, of which
  1.009 are associated in the 41 county Unions

5
Social Economy in Romania Challenges
(Cooperatives)

• Weak cooperative movement strong resistance to
  the idea of agricultural cooperatives and even
  agricultural associations
• Other cooperatives deligitimized as being heirs
  of former communist cooperatives
• Strong influence and control by cooperative
  central structures (FEDERALCOOP, CREDITCOOP and
  CENTROCOOP) - at stakes the properties of
  former communist cooperatives
• Credit cooperatives discredited by fraud and
  bankrupcy in the 2000s (e.g. Banca Populara,
  2001)

6
NGOs as emerging social economy actors in Romania

• NGOs are the most important actors in social and
  community development in Romania
• The specific of service provider NGOs places them
  in a closer position to the concept of social
  enterprise
• Profit is not their main goal
• Members have equal rights
• Flexibility and Innovation
• Voluntary participation of members and their
  involvement in the provided services

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Organizatii neguvernamentale

• Social Services
• Health Services
• Education
• Employment

8
NGOs as emerging social economy actors in Romania

• NGOs are the most important private actors on the
  social service market in Romania

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Social services (1)

• Financing of social services provided by NGOs is
  done largely through grants from international
  and private donors
• There are very few cases where social services
  are paid by the beneficiaries. This type of
  services are considered as direct economic
  activities and are subject to taxation. As an
  exception, they are tax exempt from profit tax if
  they are provided by the orgaization to its
  members, in exchange for a fee or other type of
  contributions.

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Social services (2)

• Forms of social contracting
• Grants (Law 350/2005)
• Public tenders (OUG 34/2006)
• Service contracts (OG 68/2003)
• Public-private partnerships (OG 68/2003)
• Subsidies (Legea 34/1998)

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Social service in Romania Challenges

• The externalization system is overregulated (4
  totally different instruments of social
  contracting)
• Financial allocation is not based on a local
  strategy regarding social needs
• The financing of social assistance system is
  centralized (70)
• Focus on social benefits and not on social
  services
• Financing of services for children remains
  prioritary

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Health services

• Law 95/2006 regarding reform in the health field
  mentions NGOs as eligible entities to provide
  private emergency health care services as well as
  private hospital services within private health
  units.
• In practice very few NGO providers palliative
  care and home care for elderly (combines social
  services and health services problematic
  funding)

13
Education

• NGOs can establish education units accredited by
  the Ministry of Education or local School
  Inspectorates.
• in 2004/2005 there were 62 private units of upper
  education, with 155,000 students (25 of the
  total) and 4,000 employees (40 of the total)
• 50,000 beneficiaries in the pre-universitary
  private education system.

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Employment

• Law 84/1995 NGOs can organize trainings for
  qualification, professional specialization and
  professional reconversion.
• In 2005 ¼ of the registered such training
  programmes registered at national level were
  offered by NGOs, professional associations,
  profesional associations, trade unions and
  student associations
• Trainings are funded from public sources, Phare,
  donors and own resources

15
Economic activities

• Romanian law allows NGOs to develop economic
  activities, yet it limits their scope to the main
  objective/mission of the organization (Art. 48,
  OG 26/2000).
• For economic activities with no relations to the
  main objective/mission of the organization, NGOs
  can establish an economic enterprise as entity
  distinct from the organization.
• NGOs are exempt from profit tax on economic
  activities amounting up to 15,000 Euro in a
  fiscal year, but not above 10 of the total
  revenues exempted from profit tax
• For the revenues exceeding this level the 16
  tax

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Economic dimension of NGOs
17
Revenues of NGO service providers
1
Venit.din cotizatii
1
12
15
Venituri din donatii
0
Venituri din sponsorizari
2
1
Venituri din dobanzi
0
Venituri din dividenente
Venituri din cote-parti primite potrivit
statutului
Ajutoare si imprumuturi nerambursabile
din surse externe
Subventii primite de la buget
22
17
Alte venituri din activitatile fara scop
patrimonial - total (rd.11 la 17)
Venituri din despagubiri
Venituri din diferente de curs valutar
Venituri din reclama si publicitate
Venituri pentru care se datoreaza impozit
7
pe spectacole
4
Venituri din valorificarea bunurilor
11
4
1
2
Venituri din taxele de inregistrare
Subventii primite de la buget
Alte venituri
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Social Economy in Romania Challenges (NGOs)

• Grant seeking opportunism
• Unsustainable job creation
• Lack of community involvement and ownership
• Civil society or social economy organizations are
  often seen as parallel to the (emerging) welfare
  state
• Positive approach places to outsource state
  provision of services and assistance
• Negative approach rivals to state provision

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• CIVIL SOCIETY DEVELOPMENT FOUNDATION /
• FUNDATIA pentru DEZVOLTAREA SOCIETATII CIVILE
• Splaiul Independentei nr. 2k, et. 4 sector 3,
  Bucuresti, RomâniaTel 4-021-310-0177  Fax
  4-021-310-0180
• valentin.burada_at_fdsc.ro
• www.fdsc.ro