Eastern Europe for sale is how The Wall Street Journal describes the region and the “aggressive” privatization strategies of many countries, including Romania. The article mentions the upcoming Romanian Post and the rail freight national company CFR Marfa privatizations and deems the region generally as a bargain basement for investors.

“An entire region is trying to unload everything from national railroads to postal services,” reads the article, referring to the planned Romanian privatizations. According to The Wall Street Journal, these opportunities are attracting investors, who are shying away from more established markets in Western Europe in the current economic climate. “I see a pickup of interest, increased interest from family offices and fund of funds,” says Harvey Sawikin, founder and portfolio manager of Firebird Management, a New York-based fund that focuses on Eastern Europe, quoted by The Wall Street Journal.

The generally low economic base of the region following the fall of communism and the impact of the global financial crisis are referred to, but the market “is highly diversified, with a domestic-demand economy and a strong exporting base. And the presence of low-cost labor makes the countries attractive manufacturing locations for companies in Western Europe.”

The situation for investors has changed in recent years, according to The Wall Street Journal. Describing the investment climate before, Simon Mandel from Auerbach Grayson, a New York broker-dealer that specializes in emerging and frontier markets, said, “Weak fundamentals, inflated valuations and anemic growth rates—there wasn't much reason to pay attention to them,” quoted by The Wall Street Journal.

The situation has improved but not all the drawbacks have disappeared, many countries in the region are still struggling to attain growth and the pace of privatizations is often slow, according to The Wall Street Journal. The article does not mention the recent privatization history in Romania, but it would serve as an example. The country's agreement with the the International Monetary Fund has been extended, mainly to allow time for planned and promised privatizations to be concluded.

However, the region is attracting capital, according to The Wall Street Journal, “a EUR 750 million, 10-year bond issued by the Romanian government was also oversubscribed by more than four times.”

The region is winning favor over Western Europe with investors, according to The Wall Street Journal. “For many, the region just seems like a better deal than Western Europe. Still gripped in various euro battles, a lot of traditional European options still scare off investors, and analysts think more companies will want to take advantage of Eastern Europe's cheap labor.” The Wall Street Journal also quotes Austrian bank Erste Group, which has a strong regional presence, including in Romania via ownership of BCR, the country's largest lender by assets. Half the debt and double the growth is found in the region, compared to Western Europe.

Read The Wall Street Journal article For Sale: Eastern Europe.

editor@romania-insider.com